Maxwell Fritscher

Maxwell Fritscher inquired about the free cash generation outlook for 2026, specifically how the year-end cash balance is expected to compare to the $160 million reported. He also asked about opportunities for AI in distribution.

Answer

CFO Patrick McClymont stated that 2026 cash conversion should be similar to 2025, with CapEx consistent and primarily IT-related, and cash flow close to D&A. He advised using Adjusted EBITDA guidance for cash flow projections. CEO McKeel Hagerty explained that AI is being piloted in marketing for lead and demand generation, and will help personalize service and sift through data for car lovers, especially as newer vehicles enter the target zone.

Maxwell Fritscher asked about the outlook for free cash generation in 2026 and how the year-end cash balance is expected to compare to the $160 million reported. He also followed up on the AI discussion, asking if there are opportunities on the distribution front from AI.

Answer

CFO Patrick McClymont advised expecting similar cash conversion in 2026 to 2025, with CapEx remaining consistent, primarily focused on IT and the new platform. He suggested starting with the Adjusted EBITDA guidance and assuming similar cash flow conversion. CEO McKeel Hagerty stated that AI is being piloted in marketing for lead and demand generation, though fully AI-driven distribution channels are not currently a primary focus. He believes AI will be instrumental in more granularly identifying car lovers and target vehicles, especially as newer enthusiast vehicles enter the market.

Maxwell Fritscher of Truist inquired about recent consumer shopping behavior and whether Hagerty sees this as a continuing tailwind for 2025. He also asked if the potential effects of tariffs are already incorporated into current pricing.

Answer

CEO McKeel Hagerty noted that while shopping behavior is seasonal and can be affected by events like wildfires, transactional volume has been strong and is expected to ramp up. CFO Patrick McClymont clarified that potential tariff impacts are not pre-emptively included in pricing, as any changes would require regulatory approval based on demonstrated cost impacts, which is a long-cycle process.

Maxwell Fritscher asked for an update on a 'pivot in portfolio' in the other liability line mentioned last quarter and inquired about the monthly pricing trend in that line. He also asked about any stabilization or incremental pressure in property pricing.

Answer

CEO Rob Berkley did not recall the specific 'pivot' comment and suggested taking it offline. He stated that they do not typically break out pricing detail by product line but are comfortable with the market opportunity on the liability side. For property, he noted 'more than incremental pressure' on larger account property (not a significant part of their business) but still sees opportunity in smaller property accounts.

Maxwell Fritscher inquired about the status of a previously mentioned 'pivot' in the other liability portfolio and the monthly pricing trends in that line, and also asked about any stabilization or incremental pressure in property pricing.

Answer

CEO Rob Berkley did not recall the specific 'pivot' in other liability and offered to follow up offline. He stated that the company generally does not break out monthly pricing detail by product line but feels comfortable with the current market opportunity and pricing on the liability side. For property, he noted 'more than incremental pressure' on larger accounts but still sees opportunities in smaller property accounts.

Maxwell Fritscher asked about the direct-to-consumer (DTC) channel's conversion rate of leads to sales, comparing it historically and to recent experience, and how it relates to advertising spend.

Answer

Co-CEO Matthew Darden explained that recent technology and process improvements have significantly increased the DTC conversion ratio by allowing the company to issue more policies from customer inquiries without changing risk profiles, especially for cases where follow-up was previously difficult. This improved conversion has made advertising spend more profitable across the entire organization (agency and DTC), enabling increased marketing spend and lead volume, which in turn drives sales growth in both channels.

Maxwell Fritscher inquired about the conversion rate of leads to sales in Globe Life's Direct-to-Consumer channel, asking how it compares historically and if the current elevated rate is a recent improvement or consistent with past high conversions.

Answer

Matthew Darden, Co-CEO, explained that recent technology and process improvements have significantly increased the conversion ratio in the Direct-to-Consumer channel. These improvements allow Globe Life to issue more policies from customer inquiries, even with follow-up questions or data-related medical information, without changing the risk profile. This elevated conversion is a recent, one-time adjustment upward. Darden added that improved enterprise-wide conversion allows for increased advertising spend, driving sales growth in both direct-to-consumer and agency channels.

Maxwell Fritscher of Truist Securities asked about the workers' compensation line's contribution to favorable development and whether there were emerging signs of medical inflation pressure. He also questioned if the Q2 current accident year loss pick is a good run rate for the second half of the year.

Answer

CFO Brian Costanzo confirmed that the workers' comp line has seen gradual favorable development and that medical inflation is a key watch area. Simon Wilson, CEO of Markel Insurance, added that the new organizational structure allows for closer monitoring of inflation and rates. Costanzo also affirmed that the Q2 current accident year loss ratio represents a good run rate for the remainder of the year, reflecting the positive impact of recent underwriting actions.

Maxwell Fritscher asked for color on the origination pipeline, including the mix of new versus incumbent borrowers and any notable deal terms. He also inquired about visibility into more borrowers transitioning from PIK to cash-pay interest.

Answer

An executive from the team responded that the pipeline remains consistent, with over half of Q1 deal flow coming from existing borrowers through add-ons and refinancings, and Q2 is trending similarly. Regarding PIK income, the executive noted that five borrowers transitioned to full cash pay in Q1 and that the company has visibility into others doing the same, expecting the overall PIK level to remain consistent and range-bound.

Speaking for Mark Hughes, Maxwell Fritscher asked if FSK anticipates a material difference in deal activity in the upper middle market versus the core and lower middle markets, given persistent economic uncertainty.

Answer

Chief Investment Officer & Co-President Daniel Pietrzak suggested that activity for larger companies could be more muted as it relies more heavily on an active M&A market. However, he noted that FSK benefits from a large base of incumbent portfolio companies, which provides a consistent and valuable source of repeat opportunities, even if broader market activity slows.

Maxwell Fritscher of Truist Securities asked how FSK's portfolio is positioned relative to macroeconomic dynamics like executive orders and tariffs, and how the mix of incumbent versus new borrowers might trend as M&A activity increases.

Answer

Chief Investment Officer Daniel Pietrzak explained that the firm has been proactively analyzing the portfolio for risks related to tariffs and government policies, noting that while the overall exposure is not large, it could be material for individual names. He stated that as M&A activity increases, the percentage of new investments from incumbency would naturally trend down, but emphasized that the incumbency advantage in both origination and diligence remains a key strength for a large platform like FSK.

Maxwell Fritscher of Truist Securities, calling for Mark Hughes, asked if the BSL market's recent pullback has improved competitive dynamics in the core middle market. He also inquired about the current pipeline's mix of new versus incumbent borrowers and the lagged effect of base rate changes on portfolio yield.

Answer

CEO Kenneth Kencel explained that market volatility gives scaled core middle market lenders like NCDL an advantage, allowing them to step into the void left by the BSL market and finance larger, high-quality companies. He anticipates seeing more A+ credits and expects spreads to widen. Kencel also noted the deal pipeline remains strong, skewing larger and focusing on non-tariff-impacted businesses. CFO Shai Vichness addressed the final point, confirming a roughly one-quarter lag for base rate changes to filter through the portfolio's asset yields.

Maxwell Fritscher of Truist Securities asked if the current macroeconomic backdrop has altered the credit evaluation process for new deals and inquired about any common themes among the quarter's large repayments.

Answer

Co-CEO Brad Marshall stated that while underwriting standards are unchanged, the firm was more cautious in Q1, passing on more deals and underwriting less economic growth. CFO Teddy Desloge explained there was no single theme for repayments; they included refinancings in the securitization market and sales to strategic buyers. He expects repayment volumes to be muted in the near term due to market volatility and low M&A activity.

Maxwell Fritscher inquired about the competitive landscape in the upper end of the market, particularly from broadly syndicated loans (BSLs) and other direct lenders, and whether dynamics have changed recently.

Answer

Co-Chief Executive Officer Brad Marshall confirmed that the public BSL market has "come roaring back," increasing competition and leading to some repayments of larger deals. In response, he said BXSL has skewed more toward the upper-middle market where it sees better relative value and can differentiate with its scale and brand, noting that new private credit entrants tend to compete more in the smaller end of the market.

Maxwell Fritscher of Truist Securities, on for Mark Hughes, asked if the increasingly risk-off stance from banks could negatively impact the liability side of TSLX's balance sheet.

Answer

CEO Joshua Easterly stated there would be no negative impact. He highlighted the firm's proactive balance sheet management, including a recent credit facility amendment and an opportunistic bond issuance that pre-funded a maturity. He noted the balance sheet is in 'really, really good' shape and is liability-sensitive, which is beneficial in a declining rate environment. CFO Ian Simmonds and the team were credited for their excellent work.

Speaking for Mark Hughes, Maxwell Fritscher of Truist Securities asked about the expected mix of incumbent versus new borrowers in 2025 and the driver behind the large sequential increase in average new commitment size.

Answer

CEO Joshua Easterly responded that the origination mix will depend on market opportunities, though they prefer to reinvest in existing portfolio companies. He clarified that the increase in average commitment size was not due to a single large outlier, noting the TRP deal was $54 million and the median size was around $40 million.

Speaking for Mark Hughes, Maxwell Fritscher asked about the expected mix of incumbent versus new borrowers in 2025 and the reason for the large sequential increase in average new commitment size.

Answer

CEO Joshua Easterly stated that the mix of incumbent and new borrowers will depend on market opportunities, though they always prefer to deploy more capital with existing, known portfolio companies. He clarified that the average commitment size was not skewed by a single large deal like TRP Energy, with the median commitment being around $40 million.

Maxwell Fritscher of Truist Securities asked if elevated mortality was continuing into Q2 and requested color on the drivers of outflows at AllianceBernstein outside the U.S.

Answer

CFO Robin Raju stated it was too early to comment on April mortality but reiterated that the pending life reinsurance transaction is designed to eliminate this volatility. Onur Erzan, Head of AB's Global Client Group, attributed international outflows to pressure on the Asian taxable fixed income business due to rate uncertainty, which was offset by other regional strengths.

Maxwell Fritscher from Truist Financial Corporation asked about the growth outlook for the E&S (Excess and Surplus) business as rate adequacy is achieved in admitted markets. He also questioned which specific geographies, beyond Florida, the company finds attractive for reopening to new business.

Answer

CEO Ernesto Garateix explained that the E&S product is used strategically to adapt to market dynamics on a state-by-state basis. Executive Kirk Lusk added that California business is entirely E&S and has been the main driver of its growth. Lusk also clarified that the plan to reopen territories for new business applies to the company's entire footprint, including the Northeast and Southeast, not just Florida.

Maxwell Fritscher of Truist Securities inquired about the renewal pricing trends in Workers' Compensation, the competitive landscape in the physicians business, and the drivers behind the reserve gains in the Medical Professional Liability back book.

Answer

Executive Kevin Shook clarified that Workers' Comp renewal rates were +2.3% for the quarter, heavily influenced by a single large account; without it, rates were -0.5%. President and CEO Edward Rand noted no significant changes in the competitive environment from mutual companies and explained that favorable reserve development stems from closing older claims at levels better than anticipated.

Maxwell Fritscher, on for Mark Hughes, asked for an update on how mortgage activity is trending thus far in the fourth quarter.

Answer

President and CEO Adam Pollitzer provided a broader market outlook rather than intra-quarter guidance. He stated that National MI expects the new business opportunity in 2025 to be similar to the strong environment of 2024, which is pacing towards roughly $285 billion in industry NIW. He cited resilient home prices, larger loan sizes, and affordability constraints as key drivers of sustained demand for private mortgage insurance.

Maxwell Fritscher, on for Mark Hughes, asked about the margin contribution from the HVAC on-demand business and whether the trend of lower-than-expected HVAC service requests was continuing into Q3.

Answer

CFO Jessica Ross confirmed an $11 million year-over-year revenue increase from new HVAC sales. CEO Bill Cobb added that while its margin is lower than the core warranty business, the focus is on the total P&L. Ross attributed lower Q2 service requests to higher trade service fees and the new HVAC program converting requests into sales. Management declined to comment on Q3 trends, stating they are incorporated into the full-year guidance.