Michael Phillips • Oppenheimer & Co. Inc.

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Paresh Patel, Chairman & CEO, explained that separating from Exeo allows the insurance business to focus on pure-play opportunities in the volatile P&C market. He also confirmed that the commercial residential (condo) market remains soft, which was anticipated and is not a significant issue for HCI. CFO Mark Harmsworth confirmed there have been no reserve adjustments since the favorable one in Q4.

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Chairman and CEO Paresh Patel stated that a spin-off was chosen over an IPO because Exzeo does not need to raise capital, and this structure maximizes tax-free value for shareholders. He also confirmed the platform's benefits are equivalent for both admitted and E&S carriers. Regarding the market, Patel noted no significant recent rate changes. CFO Mark Harmsworth clarified that commercial written premiums were not down, as the year-over-year comparison was skewed by the accounting for a large policy assumption in the prior year's first quarter.

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CFO Mark Harmsworth attributed the favorable development to better-than-expected underlying trends, including lower lawsuit frequency and severity, rather than prior catastrophes. CEO Paresh Patel defined the TAM for the Axio platform as the entire $140 billion U.S. homeowners insurance market, where HCI currently has a small share. Mark Harmsworth then clarified that the 2025 combined ratio is expected to be in the mid-60s for the first half before normalizing to around 75% in the second half due to the timing of reinsurance and commission costs on new business.

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Executive Paresh Patel stated that the decision to hold rates steady is to provide stability for policyholders after a difficult storm season, prioritizing long-term relationships over short-term margin optimization. He positioned HCI's long-term strategy as leveraging its proven, climate-adaptive risk selection and underwriting model, which has demonstrated resilience in Florida and could be deployed for growth opportunities nationwide where the highest return on equity can be achieved.

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CEO Scott Egan and CFO Jim McKinney explained that new MGA programs are seasoned before the company increases its net risk retention, creating a tailwind for both gross and net premium growth. Egan identified the Accident & Health (A&H) business as a key non-cyclical growth driver and a "volatility shock absorber" for the portfolio. He also noted that growth in London MGAs is a result of a strategic reinvestment in their London operations, leveraging their Lloyd's syndicate and company paper to attract new partners.

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CEO Scott Egan and CFO Jim McKinney explained that new MGA programs provide a tailwind for growth, with net retention increasing as partnerships season and demonstrate performance. Egan highlighted Accident & Health (A&H) as a key "volatility shock absorber" and noted opportunities in other specialties like surety and environmental, while remaining cautious on casualty. He also described the growth in London MGAs as a result of a strategic reinvestment in their London operations, which is now attracting more business.

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President & CEO Stephen Spray clarified that commercial lines pricing remains strong at the high end of mid-single digits and is believed to be outpacing loss costs, supported by 13.5 years of underwriting profit. On reserves, EVP & CFO Michael Sewell detailed the movements by accident year, noting favorability in 2024 but strengthening in older years, emphasizing a consistent and prudent reserving process.

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President & CEO Stephen Spray clarified that commercial lines pricing moderated slightly but remains strong and is believed to be outpacing loss costs, highlighting 13.5 consecutive years of underwriting profit. EVP & CFO Michael Sewell defended the reserve releases by detailing the consistent, balanced process across accident years, noting favorable development in 2024 was offset by strengthening in older years. Mr. Spray added that the company has a 30+ year track record of overall favorable development.

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CFO Mike Sewell confirmed that commercial casualty had minimal favorable development ($1 million) and that lower emergence on known claims was mainly from property. Sewell also stated that approximately 65% of the gross claims from the California wildfires have been paid. CEO Steve Spray added that the company is closely monitoring potential tariff impacts and feels prepared to respond given its prudent reserving history and sophisticated pricing tools.

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President and CEO Steve Spray stated that the reinsurance market is healthy and Cincinnati Re will 'stay the course' as wildfire losses were within expectations. Regarding the umbrella claims, Mr. Spray advised against focusing on a single quarter due to the line's inherent volatility and confirmed the company sees no concerning trends in its personal lines umbrella book.

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EVP and CFO Mike Sewell explained that the higher loss pick is a result of prudent reserving amid industry uncertainty and some higher case incurred losses driven by severity, not frequency. He confirmed additions to IBNR. President and CEO Steve Spray added that strong pricing is supported by uncertainty around social inflation and that the company's sophisticated pricing tools provide a runway for more rate.

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President and CEO Waleed Jabsheh explained that foreign exchange movements accounted for a significant portion of the combined ratio change, with the true underlying deterioration being closer to 6-7 points when comparing Q1 2025 to Q1 2024 on a like-for-like basis. He attributed the higher current accident year loss ratio to catastrophe events and large risk losses in the reinsurance and short-tail segments. He added that while the reinsurance market is softening, rates remain adequate for selective growth, and IGI's disciplined aviation book is performing well despite broader market challenges.

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President and CEO Waleed Jabsheh emphasized that IGI prioritizes bottom-line profitability over aggressive growth, stating he would prefer an 80% combined ratio on a $700 million book over a 90% ratio on a $1 billion book. He noted that if market dislocation from events like the California wildfires leads to better pricing, IGI would aggressively pursue those opportunities. Regarding MGAs, Jabsheh explained that IGI only partners with them when they are accretive and offer differentiation in geography or business dynamics, a strategy that remains consistent regardless of market conditions.

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CEO Andrew Robinson explained the improved commercial auto loss pick was due to a better business mix, significant rate increases, and most critically, a dramatic reduction in claims frequency, which he noted was down over 50% for the 2024 accident year versus five years prior. He also confirmed that volatility in the investment line is driven by the alternative investments, specifically the Arena-managed opportunistic fixed income portfolio.

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CEO Andrew Robinson projected about two more quarters of adjustments in Commercial Auto, with exposure reduction continuing through Q1 2025. He specified that inflation concerns are primarily driven by bodily injury in auto. Regarding reserves, he clarified that the emergence seen last quarter did not repeat, and while some buffers have eroded, the overall reserve position remains conservative and has not turned negative.

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COO Jenni Klobnak confirmed that increased severity in personal umbrella has persisted for years and is being addressed via rate increases, higher attachment points, and slowing growth in problematic areas. CEO Craig Kliethermes added that slowing new business growth could improve the book's loss ratio over time. CFO Todd Bryant noted the Casualty segment's underlying loss ratio increased 1.5 points, mainly due to auto, reflecting a cautious reserving stance. Regarding transportation, Ms. Klobnak stated the evaluation of accounts is a continuous process and 'the job is never done'.

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CFO Todd Bryant clarified that the casualty reserve additions were split evenly between personal umbrella and transportation, with an assumed loss trend of 10-11% for auto-related exposures. COO Jen Klobnak noted that while she couldn't provide a specific percentage, the non-renewed large transportation accounts represent a larger portion of premium than policy count. President and CEO Craig Kliethermes explained that RLI is a minority owner in Prime, viewing it as a good long-term investment, but has reduced its quota share participation. He also stated Prime's California homeowners business is not part of RLI's treaty.

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CFO Todd Bryant explained that the extended reporting patterns affect both older and more recent accident years, particularly in excess liability where claim finality is slower. President and CEO Craig Kliethermes added that while reporting patterns may not be longer, the time to final resolution is extending. COO Jen Klobnak noted that for their construction-focused excess liability book, they have not seen significant changes in trend, with more pressure observed in auto-related lines.

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CEO John J. Marchioni confirmed that the 8.5% casualty loss trend view is unchanged, with GL severity driving a 9% trend. He explained the improvement in Commercial Auto's loss pick is due to multi-year rate increases outpacing trends and better performance in the physical damage component. He added that while there is some "rate fatigue," there has been no significant recent pushback on pricing.

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CEO John J. Marchioni stated that the company's view on casualty loss trends remains unchanged, with GL trends around 9%, applied to a higher 2024 loss ratio base. He attributed the commercial auto improvement to multiple years of strong rate increases outpacing elevated loss trends, especially in auto physical damage. Marchioni noted that while there is some rate fatigue, there has not been significant pushback on pricing, as the company communicates that litigation abuse is the root cause of rising costs.

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John J. Marchioni, Chairman, President & CEO, clarified that Selective's reserving process has grown more detailed over time and consistently includes a risk margin above the actuarial best estimate. He explained the 8.5% casualty trend is an all-in figure, while the previously mentioned 9% trend is specific to GL. Marchioni confirmed the reserve charge was predominantly in primary GL, especially for the 2023 accident year.

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John J. Marchioni, Chairman, President & CEO, explained that commercial auto loss trends, while elevated, have been more stable and persistent for a longer period than the more recent severity emergence in GL. He highlighted that strong, consistent pricing in commercial auto (10.9% in Q3) differentiates it from GL. Anthony David Harnett, SVP & Chief Accounting Officer, clarified that the current year reserve action for commercial auto was $5 million, not $10 million.

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CEO John J. Marchioni explained that commercial auto loss trends have persisted for longer and have been met with stronger, more consistent pricing compared to the more recent severity emergence in GL. He expressed confidence that social inflation is an industry-wide trend, citing external factors and broad industry data. SVP & Chief Accounting Officer Tony Harnett clarified the current accident year commercial auto reserve action was $5 million.

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John J. Marchioni, Chairman, President & CEO, responded that while Selective may be an early mover on pricing, he expects the industry to follow due to recognized loss trends. He affirmed the company's conviction to achieve necessary pricing, even if it impacts retention. Marchioni asserted that the severity trends are a widespread industry phenomenon, not a Selective-specific issue, noting that Selective's portfolio avoids some of the most litigious states that drive nuclear verdicts.

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Greg Toczydlowski, President of Business Insurance, stated that Commercial Auto's top-line growth is primarily driven by renewal premium change (rate and exposure). Michael Klein, President of Personal Insurance, described the competitive landscape in Personal Auto as 'fairly consistent,' noting that Travelers' new business was up 6% year-over-year and hit a fourth-quarter record.

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Chairman and CEO Alan Schnitzer stated that concern levels haven't necessarily increased, but pricing needs to keep up with positive loss trends. Jeff Klenk, President of Bond & Specialty, gave no specific loss trend update for management liability but noted that while earned pricing impacted the combined ratio, returns remain excellent.

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