Michael Phillips

Michael Phillips from Oppenheimer inquired about the gross written premium numbers for Q4 2025 and Q4 2024, specifically excluding Citizens policies. He also sought clarification on CEO Paresh Patel's comment about sellers viewing 2025 as an 'average year' despite a lack of catastrophic events, and asked for commentary on the overall net expense ratio trend, particularly its significant decrease in Q4.

Answer

CFO Mark Harmsworth provided the total gross written premiums for Q4 2025 as $333 million but did not have the exact Citizens exclusion number readily available, offering to follow up. CEO Paresh Patel clarified that the disconnect in M&A valuations stems from sellers potentially viewing 2025's strong, cat-free results as repeatable, while buyers factor in the historical likelihood of hurricanes, making it hard to model such a scenario. Harmsworth explained that the lower net expense ratio in Q4 was due to accounting related to bonuses, with a considerable portion paid in restricted shares expensed over three to four years. He suggested that the expense ratios from Q2 and Q3 would be a better estimate for future quarters.

Michael Phillips from Oppenheimer requested HCI Group's gross written premium numbers for Q4, excluding Citizens' policies. He sought clarification on the CEO's comment about sellers viewing 2025 as an 'average year' despite a lack of catastrophic events. Additionally, he asked for commentary on the outlook for the overall net expense ratio, given its significant decrease in Q4.

Answer

Mark Harmsworth, CFO, stated that gross written premiums in Q4 were $333 million but did not have the specific number excluding Citizens' policies readily available, offering to follow up. Paresh Patel, Chairman and CEO, clarified that the disconnect in M&A pricing stems from sellers viewing 2025 as repeatable for years, assuming no hurricanes, while buyers find this hard to model, leading to different valuations. Mr. Harmsworth explained that the lower net expense ratio in Q4 was due to accounting for bonuses paid in restricted shares, which are expensed over a 3-4 year period. He suggested that the expense ratios from Q2 and Q3 would be a more accurate estimate for future quarters.

Michael Phillips of Oppenheimer & Co. Inc. asked about the potential benefits for Homeowners Choice from its independence from Exeo, the current pricing environment in the condo business, and sought confirmation on reserve adjustments since Q4.

Answer

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.

Michael Phillips of Oppenheimer & Co. Inc. asked about the strategic alternatives considered for the Exzeo separation, whether the platform's advantages differ for admitted versus non-admitted carriers, recent rate movements in the Florida property market, and the competitive dynamics driving premium trends in the commercial condo business.

Answer

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.

Michael Phillips inquired about the drivers behind the favorable prior-period loss development, the size of the total addressable market (TAM) for the Axio technology platform, and sought clarification on the normalized combined ratio outlook for 2025.

Answer

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.

Michael Phillips asked about the strategy behind not raising rates in Florida, its potential impact on margins, and the company's long-term growth strategy beyond the Citizens depopulation program, including potential expansion outside of Florida.

Answer

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.

Michael Phillips from Oppenheimer & Co. Inc asked about the extent to which IGI walked away from long-tail business in Q4 2025 due to unmet profitability hurdles, and the potential impact on top-line growth. He also inquired about the future stability of G&A expenses following recent hires and system build-outs, and whether IGI has observed project delays in its construction and infrastructure business, similar to trends in the US.

Answer

President and CEO Waleed Jabsheh explained that most of the 'walking away' from long-tail business, which has been on a downward trajectory for over three years, has largely concluded, with indications of a leveling off in rate reductions. He anticipates a more stable, potentially positive trajectory for the long-tail portfolio after Q1 and Q2 2026, as new business replaces the runoff of the non-renewed PI portfolio. Regarding G&A, Mr. Jabsheh expects more stability, noting that while GBP strengthening could impact USD-reported expenses, future HR growth would be focused on underwriting. He clarified that IGI has not seen construction projects being pulled, only natural delays in finalization, which is typical for large-scale infrastructure and data center projects.

Michael Phillips from Oppenheimer & Co. Inc asked about the extent to which IGI walked away from long-tail business in Q4 2025 compared to earlier in the year, and the expected impact on the top line. He also questioned if G&A expense pressures from new hires and system build-outs are concluded, and whether IGI is experiencing delays in construction and infrastructure projects similar to those seen in the U.S. market.

Answer

Waleed Jabsheh, President and CEO, explained that most of the strategic non-renewals in the long-tail segment have already occurred over the past three years, with expectations of a market bottoming out in 2026. He noted that the impact of the non-renewed PI binder will continue to affect Q1 and Q2 2026 top-line figures, but new business is being written to stabilize the portfolio. Jabsheh anticipates more stability in G&A expenses, though currency fluctuations remain a factor, and emphasized that any future HR growth would be strategic for underwriting new opportunities. Regarding construction, he confirmed that while large projects naturally involve lengthy finalization processes, IGI has not seen projects being pulled, indicating a positive outlook for this growth area.

Michael Phillips of Oppenheimer & Co. Inc. requested a breakdown of the 20-point combined ratio deterioration, the impact of foreign exchange, and the drivers of the current accident year loss ratio. He also asked about the outlook for the reinsurance and aviation markets.

Answer

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.

Michael Phillips asked about IGI's strategy for balancing top-line growth with its strong underwriting margins, the impact of California wildfires on its business appetite, and its view on using MGAs in a competitive market.

Answer

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.

Michael Phillips asked about the captive division, specifically if there were any anomalies or signs of a continued slowdown in demand given the softening P&C market. He also inquired about any updates on recoveries related to California wildfires and PG&E lawsuits.

Answer

Chairman and CEO Andrew Robinson acknowledged that while captives have been structural share gainers, the current pricing backdrop can influence the impetus for companies to move from guaranteed cost to captive markets. He suggested this influence might be what Michael Phillips is observing. Regarding California wildfires, Robinson stated that Skyward had very little loss exposure, and recoveries were very good, making the impact immaterial to their P&L.

Michael Phillips inquired about the demand for the captive division and any observed slowdown, given the softening pricing cycle in the broader P&C market. He also asked for an update on potential recoveries from California wildfire suits related to PG&E.

Answer

Andrew Robinson, Chairman and CEO, acknowledged that while captives have been structural share gainers, the current pricing backdrop can influence the impetus for moving into a captive market. He noted that most clients choose captives for long-term strategic reasons. Regarding California wildfires, he stated that Skyward had very little loss exposure, and recoveries were very good, not material enough to impact the P&L.

Michael Phillips of Oppenheimer & Co. Inc. questioned the reason for the significant improvement in the commercial auto accident year loss pick, given management's recent cautionary tone. He also asked about the source of volatility in the strategic investments line.

Answer

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.

Michael Phillips sought to clarify the timeline for returning to growth in the Industry Solutions segment, the extent of cuts in Commercial Auto, and whether the 'extra emergence' in liability reserves mentioned previously had continued.

Answer

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.

Michael Phillips from Oppenheimer inquired about the 19% decline in gross premiums, the stabilization of the rate environment, and the company's premium orders, specifically asking how the current quarter's performance aligned with previous expectations of a rebound after an intentional slowdown. He also asked about the potential impact of continued gross premium slowdown on 2026 earned revenue guidance and the reasons behind the recent increase in the G&A ratio.

Answer

President and CEO Bennett Bradford Martz explained that premiums rebounded nearly 60% quarter-over-quarter, attributing the prior slowdown to managing exposures for reinsurance targets. He acknowledged a challenging market and selective underwriting, expressing confidence in 2026 earned revenue guidance despite potential written premium volatility. Martz also noted efforts to align expenses with revenues and secure favorable reinsurance renewals to protect margins. Regarding the G&A ratio, he mentioned payroll tax credits in the first half of the year caused artificial reductions, with Q3 and Q4 reflecting the true run rate, but no other notable drivers.

Michael Phillips inquired about the 19% year-over-year decline in gross premiums, the stabilization of the rate environment at 13%, and whether the expected rebound in premium orders materialized given the prior quarter's intentional slowdown for exposure limitations.

Answer

President and CEO Bennett Bradford Martz clarified that quarter-over-quarter premiums rebounded by almost 60%, acknowledging that restarting operations takes time. He emphasized successfully hitting average annual loss targets for Q3 2025 and managing exposures. Martz noted a challenging market where the company walks away from risks not meeting return hurdles, expecting some volatility in written premiums but confidence in earned premiums and 2026 revenue guidance. Regarding the G&A ratio, Martz stated that Q3 and Q4 represent a true current run rate, with H1 2025 having distortions from payroll tax credits.

Michael Phillips asked about SiriusPoint's 2026 market outlook, specifically regarding the insurance segment's combined ratio run rate and the trend for the attritional loss ratio. He also inquired about the 2025 fee income, the contribution from Armada, and the 2026 projections including recent acquisitions. Finally, he questioned the sustainability of Surety business growth, particularly from government infrastructure and data centers.

Answer

CEO Scott Egan and CFO James McKinney confirmed that the 91.7% combined ratio for insurance is a good run rate for 2026, with potential for a 0.5-point shift due to mix. They emphasized the ability to reallocate capital to less correlated lines and the insulation provided by specialist MGA partnerships. For fee income, they clarified that Armada contributed approximately $26 million in 2025, with a 2026 guidance of around $30 million, and a target of $40 million+ EBITDA when new acquisitions are fully integrated (expected post-2026). Regarding Surety, they stated that minimal business came from data centers or government infrastructure, viewing the current growth as sustainable and still in the 'early innings' of its build-out.

Michael Phillips (Oppenheimer) inquired about SiriusPoint's outlook for 2026 market conditions, specifically regarding the sustainability of current profitability levels, the projected run rate for the insurance segment's combined ratio (91.7-91.8%), and the expected trend for the attritional loss ratio (60.8%) in the insurance segment. He also asked for clarification on 2025 fee income, the contribution from Armada, and the anticipated impact of recent acquisitions (Assist America, World Nomads) on 2026 fee income. Lastly, Phillips questioned the sustainability of Surety business growth over the next two years, particularly its reliance on government infrastructure and data center projects in 2025.

Answer

CEO Scott Egan acknowledged tougher market conditions in some areas like property cat (5% of premium) but highlighted the ability to reallocate capital to less correlated lines (A&H, surety) and the insulating effect of specialist MGA partnerships. He confirmed the 91.7% combined ratio as a good indicative run rate for insurance in 2026, with CFO James McKinney adding a potential ±0.5 point variation due to mix. Regarding fee income, CFO McKinney stated Armada contributed approximately $26 million to 2025's fee income. CEO Egan clarified that the 2026 guidance of $30 million EBITDA for IMG does not materially include the new acquisitions, which are expected to contribute to a target of $40 million+ EBITDA when fully integrated, primarily in 2027. For Surety, CEO Egan and CFO McKinney indicated minimal contribution from data centers and government infrastructure, viewing the growth as sustainable and in the early stages of build-out for SiriusPoint.

Michael Phillips of Oppenheimer & Co. Inc. inquired about the impact of new MGA programs on gross and net premium growth over the next 18 months, the non-cyclical growth drivers in the insurance segment beyond A&H, and the strategic differences between MGAs in London versus the U.S.

Answer

CEO Scott Egan explained that the company's strategy is to "lean into net" premium retention as MGA partnerships season and demonstrate performance, creating a growth tailwind. He identified A&H as a key "volatility shock absorber" and highlighted other specialty areas like surety and marine as growth opportunities, while being cautious on casualty. Regarding London, he noted that recent growth is the result of a strategic decision to reinvest in that market, leveraging their Lloyd's syndicate and company paper to attract new MGA partners. CFO Jim McKinney added that new partnerships provide a tailwind for both gross and net growth, though not in a linear fashion.

Michael Phillips of Oppenheimer & Co. Inc. inquired about the top-line impact of new MGA programs over the next 18 months, the non-cyclical growth drivers in the Insurance segment beyond A&H, and the key differences between MGAs in London versus the U.S.

Answer

CEO Scott Egan explained that new programs provide a "tailwind" for growth, with the company increasing its net retention as it gains confidence in a partnership's performance over time. Egan identified A&H as a key "volatility shock absorber" and highlighted other specialty growth areas like surety and marine, while noting caution in casualty. He also described the growth in London as a result of a strategic decision to reinvest in the market and leverage the company's Lloyd's syndicate and own paper to attract MGA partners. CFO Jim McKinney added that strategic partnerships in North America are also expected to provide a stable tailwind for growth.

Michael Phillips of Oppenheimer & Co. Inc. asked about the top-line impact of new MGA programs over the next 18 months, the non-cyclical growth drivers within the Insurance segment like A&H, and the key differences between London-based and U.S.-based MGAs.

Answer

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.

Michael Phillips asked about the impact of new MGA programs on premium growth, the non-cyclical growth drivers within the insurance segment like A&H, and the differences between London and US MGAs.

Answer

The company takes a cautious, program-by-program approach to new MGA business, increasing net retention as partnerships mature, which provides a tailwind for growth. A&H is a key non-cyclical growth driver and volatility dampener, allowing for selective risk-taking in other specialty areas while being cautious on casualty. The growth in London is a result of strategic investment and leveraging their own paper and group expertise to win new MGA business in that market.

Michael Phillips asked about the commercial property division's significant decline in Q4, inquiring if it was a change from previous stabilization and what caused the harder drop. He also sought details on the percentage of commercial auto within excess casualty and current trends in commercial auto rates and loss trends.

Answer

Stuart Winston, Chief Underwriter, attributed the commercial property deceleration to an influx from London and MGAs in November/December. Michael Kehoe, Chairman and CEO, expects stabilization after the next couple of quarters. Stuart Winston clarified that commercial auto is a small percentage of their excess casualty book and a minor portion of excess wheels.

Michael Phillips asked about the significant decline in the commercial property division's performance in Q4, inquiring if this was a change from previous expectations of stabilization and the underlying causes. He also asked about the proportion of commercial auto within Kinsale's commercial casualty and excess casualty books, and related loss trends.

Answer

Chief Underwriter Stuart Winston attributed the commercial property deceleration to an influx of competition from London and MGAs in November and December. Chairman and CEO Michael Kehoe expects stabilization in the next couple of quarters. Stuart Winston clarified that commercial auto is a small percentage of the excess casualty book, with no primary auto and only a small portion of excess wheels.

Michael Phillips from Oppenheimer asked if there were any changes in assumptions within the construction liability segment that impacted the current year loss pick. He also inquired about the excess casualty segment, specifically regarding growth opportunities and observed loss trends.

Answer

Michael Kehoe, CEO and Chairman, stated there were no specific changes in construction liability assumptions, noting that quarterly loss reserve reviews are complex across many lines and accident years. He affirmed confidence in the quarter's loss performance. Stuart Winston, EVP and Chief Underwriting Officer, addressed excess casualty, indicating good opportunities and strong rates, particularly in lead or first $10 million placements, despite some market pressure at higher excess attachment points where Kinsale typically does not operate.

Michael Phillips requested more detail on the 'mixed but positive' casualty pricing, particularly for the excess casualty book, and asked about loss trends and geographic factors in the construction business.

Answer

President & COO Brian Haney clarified that in casualty, longer-tail lines like construction and excess casualty are seeing higher rate increases, while other lines like products liability are on the lower end. For construction, he identified California as a past area of high loss development that prompted adjustments, noting the company has since pivoted its geographic focus and is growing outside that state.

Inquired about the drivers for more conservative actuarial assumptions in construction liability, potential changes to upcoming casualty treaty renewals, and asked for the commercial property combined ratio.

Answer

The conservative reserving for construction is a reaction to observed adverse loss development in prior years, not a proactive stance on tariffs. Management indicated they might increase their net retention on casualty treaties, consistent with past practice as the company grows. They declined to provide the specific combined ratio for the commercial property division.

Michael Phillips inquired about current loss trends in Kinsale's General Liability (GL) and commercial umbrella/excess books. He also asked for a specific breakdown of the California wildfire loss.

Answer

CEO Michael Kehoe did not provide specific trend data but stated they likely align with the industry. President and COO Brian Haney emphasized that margins in the GL and umbrella books are 'really strong' and that Kinsale's reserve development has been consistently better than the industry's. Regarding the wildfire, Michael Kehoe clarified the loss was '100% Palisades.'

Michael Phillips asked about the commercial casualty line, specifically regarding ongoing uncertainty, legal system abuse, and the impact of a softer pricing market on the company's confidence in 2026 performance. He also inquired about the applicability and benefits of Cincinnati Financial's tech investments, particularly for accurate pricing in personal versus commercial lines.

Answer

CEO Steve Spray acknowledged increased competitiveness in commercial pricing during Q4, driven by commercial property, but emphasized persistent loss cost headwinds in casualty. He expressed confidence that 2026 rates would exceed loss costs (except workers' compensation) due to sophisticated pricing tools and risk segmentation. Spray confirmed that tech investments and advanced pricing apply to both commercial and personal lines, noting exponential improvements, especially in commercial lines, and crucial benefits for personal auto, contributing to an improving ex-cat accident year in personal lines.

Michael Phillips from Oppenheimer inquired about the commercial casualty line's performance, specifically the 2025 combined ratio and confidence in 2026 figures given industry pricing softness and legal system abuse. He also asked about the impact of technology investments on pricing accuracy across personal and commercial lines.

Answer

President and CEO Steve Spray addressed the commercial casualty line, noting increased competition in Q4, particularly in commercial property, but emphasized persistent loss cost headwinds in casualty. He expressed confidence that 2026 rates would exceed loss costs in most lines and highlighted the company's use of sophisticated pricing tools for risk segmentation. Regarding technology investments, Mr. Spray confirmed their application to both commercial and personal lines, attributing significant improvements in underwriting results to advanced pricing sophistication and segmentation, especially in personal auto.

Michael Phillips with Oppenheimer inquired about Cincinnati Financial's commercial auto prior year development (PYD) charges, specifically how to reconcile ongoing charges with decreasing current picks. He also asked about any worrisome trends in large commercial line losses.

Answer

President and CEO Steve Spray addressed the overall reserve approach, highlighting 30+ years of favorable development and current profitability in commercial auto for 2025. He noted the company's focus on small to mid-market package underwriting, avoiding heavy auto fleet business. EVP and CFO Mike Sewell added that $7 million of the $10 million unfavorable development was from older accident years (2019-2020) and that total commercial auto reserves approach $1 billion. Regarding large losses, Mike Sewell stated that while current year large losses were slightly higher ($34 million) due to commercial property and homeowner, there was no unexpected concentration by risk, geography, or agency, attributing it to normal quarterly volatility.

Michael Phillips of Oppenheimer & Co. Inc. asked about the nuanced commentary on commercial lines renewal pricing, questioning if the shift to mid-single-digit increases implies margin pressure. He also sought assurance on the timing of recent reserve releases for general liability.

Answer

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.

Michael Phillips of Oppenheimer & Co. Inc. asked for clarification on commercial lines renewal pricing commentary and its implications for margin expansion, and also questioned the prudence of recent reserve releases in general liability.

Answer

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.

Michael Phillips of Oppenheimer & Co. Inc. inquired about the specifics of reserve movements, particularly in commercial casualty, and asked about the status of open claims from the California wildfires and the potential impact of tariffs on the business.

Answer

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.

Michael Phillips asked for an outlook on the reinsurance sector following the California wildfires, how Cincinnati Re would respond, and the potential impact on 2025 premiums. He also inquired about a specific dollar increase in personal lines umbrella claims.

Answer

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.

Michael Phillips asked about the drivers behind the increase in the commercial casualty current accident year loss pick, questioning if it was due to paid activity versus IBNR, and also inquired about the strong premium growth in the segment.

Answer

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.

Michael Phillips inquired about adjustments to current year loss picks for personal auto bodily injury severity and the Core Commercial actual loss ratio, as well as how The Hanover approaches agency partners in a softening pricing environment.

Answer

CFO Jeff Farber confirmed personal auto liability picks were raised in Q4 and noted Core Commercial auto was quiet this quarter, but IBNR reserves for 2023-2025 had been increased throughout the year. President and CEO Jack Roche explained that dialogue with top agents is accelerating, focusing on strategic and operational aspects. COO and President of Agency Markets Dick Lavey added that they adjust their talk track to help agents understand economics, trends, and the benefits of bundled accounts with common effective dates, leveraging data.

Michael Phillips inquired about adjustments to current year auto bodily injury (BI) severity, particularly in personal auto, and the absence of similar activity in core commercial for the quarter. He also asked about The Hanover's strategy for engaging agency partners in a potentially softening market, specifically regarding communication and messaging changes.

Answer

CFO Jeff Farber confirmed personal auto liability picks were raised in Q4 due to BI severity, noting core commercial auto was quiet this quarter but IBNR reserves were increased for 2023-2025 throughout the year. CEO Jack Roche stated that dialogue with top agency partners is accelerating, driven by their strategic focus and evolving operating models. COO and President of Agency Markets Dick Lavey added that Hanover adjusts its activity and messaging to help agents understand market trends, economics, and the benefits of bundled accounts with common effective dates, leveraging data as a 'superpower'.

Michael Phillips of Oppenheimer & Co. Inc. inquired about the rate environment in the Specialty segment, the recent commercial auto reserve charge, and trends in personal auto bodily injury severity.

Answer

President & CEO John Roche and EVP & President - Specialty Bryan Salvatore explained that the Specialty portfolio's diversification and focus on lower middle market and small business provide resilience against pricing volatility. EVP & CFO Jeffrey Farber clarified the commercial auto charge was a minor, prudent IBNR adjustment in a small business line and that commentary on bodily injury severity was driven by prudence amid favorable frequency trends.

Michael Phillips asked for confirmation on the competitive pricing environment in small commercial, sought clarity on whether accelerating liability pricing expectations were for umbrella only or all casualty lines, and inquired about the rationale for recent commercial auto reserve additions.

Answer

President and CEO John "Jack" C. Roche and COO Richard Lavey confirmed they were adjusting new business pricing in small commercial to regain growth momentum after being slow to react to increased competition. CFO Jeffrey Farber clarified that the expectation for firming prices applies to all casualty lines, not just umbrella. Farber also explained that the commercial auto reserve additions for recent accident years were minor, prudent adjustments based on a few individual cases and not indicative of a broader trend.

Michael Phillips asked if recent reserving actions change the outlook for the Core Commercial loss ratio and requested more quantitative details on the commercial umbrella book.

Answer

CFO Jeff Farber confirmed the expectation for Core Commercial loss ratio improvement in 2025, driven by property. President of Agency Markets, Dick Lavey, provided specifics on the commercial umbrella book, noting it constitutes about 7% of the overall commercial portfolio, the company no longer writes it on a monoline basis, and it is achieving rate increases of 14%, with plans to push that higher.

Michael Phillips of Oppenheimer & Co. Inc. asked for details on the drivers of potential Core Commercial loss ratio improvement in 2025, the reasons for the premium decline in Commercial Multi-Peril (CMP), and the company's outlook on share repurchases.

Answer

CFO Jeffrey Farber and President and CEO John "Jack" C. Roche explained that while property pricing needs are slowing, liability pricing is increasing, and their strong position on insurance-to-value provides a competitive advantage. President of Agency Markets Richard "Dick" Lavey confirmed the CMP premium trend was due to underwriting actions in the middle market and expects a return to mid-single-digit growth. Regarding capital, Farber stated the company is "likely to be back to capital management sooner rather than later" after the conclusion of the wind season.

Michael Phillips inquired about the improvement in the casualty loss ratio, specifically how much was due to mix shift away from the Transportation book, and the implications of last year's reserve additions for future favorable development given account cancellations. He also asked about potential expense ratio pressure in the property segment due to the softening market.

Answer

Jen Klobnak (COO) explained that the improvement was due to not needing to take similar reserving actions as the previous year for auto-related coverages, noting a significant decrease in new claim counts for transportation. Aaron Diefenthaler (CFO) added that lower levels of favorable development were seen in casualty, with ongoing challenges in auto-related exposures but to a lesser extent. Jen Klobnak also addressed property expenses, stating that while talent was added during the hard market, submission counts remain high, requiring continued investment in supporting producers despite challenging terms and conditions.

Michael Phillips asked about the improvement in the casualty loss ratio, specifically if it was due to a mix shift away from the Transportation book, and the implications of last year's reserve additions for future favorable development. He also inquired about potential 'trimming of fat' on the property side given the current soft market.

Answer

Jen Klobnak (COO) and Aaron Diefenthaler (CFO) explained that the casualty loss ratio improvement was partly due to RLI pulling back from auto-related coverages and not needing similar reserve actions as the prior year, noting a significant decrease in new claim counts for Transportation. Jen Klobnak addressed the property side, stating that while talent was added during the hard market, some retirements are anticipated, and continued investment is necessary due to high submission counts despite challenging terms.

Michael Phillips from Oppenheimer inquired about the impact of RLI's increased attachment points in the personal umbrella book on margins, specifically in California and Florida, and the current status of these changes. He also asked about the drivers behind the significant 17% rate increase in personal umbrella this quarter compared to previous periods, and sought clarification on standard markets pulling back in the Northeast regarding casualty auto exposure.

Answer

Jen Klobnak, Chief Operating Officer, explained that higher attachment points (e.g., $500,000) were implemented over a year ago in California and recently in Florida and seven other large states, noting early signs of improving loss trends. She clarified that the 17% rate increase was influenced by substantial state-specific filings, particularly Florida's, becoming effective this quarter. Regarding auto exposure, Ms. Klobnak stated that some Northeast markets covering artisan contractors have pulled back, creating opportunities for RLI's ENS Casualty group on the excess side.

Michael Phillips asked about the impact of raised attachment points in the personal umbrella book on margins, particularly in California and Florida, and the status of implementation in Florida. He also inquired about the significant 17% rate increase in personal umbrella this quarter compared to 9% last quarter, and sought clarification on standard markets pulling back in the Northeast regarding auto exposure.

Answer

Jen Klobnak, Chief Operating Officer, explained that higher attachment points (e.g., $500,000 from $250,000) were implemented in California over a year ago, Florida early this year, and seven additional larger states in September. She noted improving loss trends due to these changes and better underlying claims staff. The substantial 17% rate increase was attributed to specific state filings coming online, with Florida's significant rate change being effective this quarter. Regarding auto exposure, Klobnak clarified that standard markets pulling back in the Northeast referred to those covering artisan contractors, creating opportunities for RLI's ENS Casualty group on the excess side.

Michael Phillips of Oppenheimer asked for an update on the personal umbrella auto book, focusing on loss frequency and severity trends, and questioned if RLI has completed its non-renewal actions for large transportation accounts.

Answer

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'.

Michael Phillips inquired about the specifics of the current accident year casualty reserve additions, asking for a breakdown between transportation and personal umbrella, the severity trends in those lines, and the size of the large transportation accounts being non-renewed. He also asked about the long-term strategic view of the Prime investment and its potential exposure to California wildfires.

Answer

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.

Michael Phillips sought clarification on the extended reporting patterns in the Casualty segment, asking if they relate to older or recent accident years, and inquired about current severity trends in the commercial excess book compared to previous years.

Answer

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.

Michael Phillips with Oppenheimer asked about the expected impact on core loss ratios from American Integrity's strategy to underwrite middle-aged homes, and how the company's homeowners market experience translates to its new commercial residential product, including market hardness differences between condo and HOA subsectors.

Answer

Jon Ritchie, President of American Integrity Insurance Group, stated that middle-aged homes are expected to perform in line with expectations, though potentially not to the same extent as new construction, but the company is comfortable with projected loss costs. Bob Ritchie, Founder and CEO, assured that the commercial residential product involved 18 months of preparation, emphasizing a measured, profitable approach leveraging existing expertise. Jon Ritchie added that the market for garden-style HOAs remains hard but offers attractive pricing opportunities due to scarce capacity in Florida.

Michael Phillips asked about the expected impacts on core loss ratios from American Integrity's strategy to underwrite middle-aged roof homes and how the company's experience in the homeowners market translates to its new commercial residential product.

Answer

Jon Ritchie, President of American Integrity Insurance Group, stated that middle-aged homes are expected to perform in line with expectations, though not to the same extent as new construction due to loss costs, but the company is comfortable with the premium collected. Bob Ritchie, Founder and CEO, assured that the commercial product launch involved 18 months of study, development, and staffing, emphasizing a measured, profitable approach not focused on dramatic top-line growth, with guarded distribution. Jon Ritchie further clarified that the commercial HOA market remains challenging with scarce competition, but pricing for targeted garden-style HOAs is considered appropriate and attractive.

Michael Phillips asked how Progressive balances maintaining rate stability for customers against reacting quickly to tariffs, questioning if the company would let margins absorb the impact to fuel growth. He also inquired about the shift from 12-month to 6-month policies in the agency channel.

Answer

CEO Susan Griffith described it as a constant balancing act, where decisions are made at a state and product level to optimize growth, profitability, and stability. She clarified that the shift to 6-month policies in the agency channel is an intentional move for platinum agents to provide convenience when bundling auto with 12-month property policies.

Michael Phillips questioned the drivers behind bodily injury (BI) liability trends and requested an update on policy reductions in catastrophe-exposed homeowners states.

Answer

CEO Susan Griffith attributed higher BI severity to large losses and attorney-represented claims, linking it to social inflation. On homeowners, she outlined a comprehensive de-risking plan including rate hikes, improved segmentation, exiting certain coverages, and mandatory wind/hail deductibles.

Michael Phillips from Oppenheimer & Co. Inc. inquired about casualty loss trends, particularly for General Liability and Commercial Auto, and whether the company is facing pricing pushback from agents or clients amid the current macroeconomic environment.

Answer

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.

Michael Phillips inquired about casualty loss trends, particularly for General Liability (GL), and the drivers behind the lower loss pick in commercial auto. He also asked about potential pricing pushback from agents and clients due to the macroeconomic environment.

Answer

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.

Michael Phillips asked about Selective's reserving methods, the 2025 casualty loss trend assumption, and the breakdown of the General Liability (GL) reserve charge between primary and excess lines.

Answer

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.

Michael Phillips asked for clarification on commercial auto reserve additions and sought reassurance on the company's comfort level with these reserves, questioning if the social inflation seen in General Liability (GL) could spread more significantly to commercial auto.

Answer

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.

Michael Phillips asked for clarification on commercial auto reserve additions and sought assurance on the potential for social inflation impacts to spread from General Liability (GL) to commercial auto, questioning if Selective's experience is a microcosm or an industry-wide trend.

Answer

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.

Michael Phillips of Morgan Stanley inquired about Selective's commercial renewal pricing, questioning if its upward trend differs from competitors and seeking assurance on the company's ability to maintain this trajectory without harming retention. He also asked for perspective on whether the general liability reserve issues are specific to Selective or indicative of a broader industry problem.

Answer

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.

Michael Phillips asked for a breakdown of Commercial Auto growth between rate and policy count and inquired about the competitive environment in Personal Auto.

Answer

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.

Michael Phillips asked if accelerating BI casualty rates, despite strong margins, imply a heightened concern over uncertainties compared to a year ago. He also requested an update on loss trends in management liability.

Answer

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.