Michael Zaremski

Michael Zaremski asked if potential legislative changes in certain states, particularly regarding affordability and tort reform, could materially alter Allstate's strategy or the industry's course.

Answer

Thomas J. Wilson (CEO, Allstate Corporation) highlighted tort reform as a 'blow for freedom for consumers,' citing Florida, Louisiana, and Georgia as states making positive moves. He believes politicians are increasingly recognizing the need to address underlying costs to improve affordability, rather than focusing on 'excess profits,' which could lead to significant legislative changes.

Michael Zaremski asked about the progress of Allstate's auto claims process improvements, using a 'baseball inning' analogy, and whether the benefits are proprietary or if the industry will eventually catch up, especially with AI's role. He also inquired about potential legislative changes in certain states that could materially alter industry strategy beyond short-term 'noise,' particularly concerning affordability.

Answer

CFO Jesse Edward Merten placed Allstate in the 'middle innings' of its claims improvement journey, emphasizing the proprietary nature of their best-in-class claims organization and the future benefits of AI-enabled technologies. CEO Thomas J. Wilson described claims management as an ongoing process of adapting to external changes (e.g., attorneys, car parts costs) and highlighted the importance of strong capabilities, data, and discipline. Regarding legislative changes, Mr. Wilson identified tort reform as a significant factor for consumers, noting that states like Florida, Louisiana, and Georgia are making progress in addressing litigation to reduce insurance costs, indicating that politicians are increasingly focused on long-term affordability solutions.

Michael Zaremski of BMO Capital Markets questioned the future scale of the direct-to-consumer channel and whether its growth would necessitate a significant increase in advertising spend. He also asked if Allstate's strong homeowners growth is due to a favorable competitive environment where others are playing catch-up.

Answer

Tom Wilson, Chairman, President & CEO, stated the direct channel will grow as large as customer demand dictates and clarified that marketing spend, which was up in the first half, supports all channels. On homeowners, Mr. Wilson asserted that Allstate is 'really, really good' at the business and expects its competitive advantage to persist. Mario Rizzo, President of Property-Liability, added that despite increased competition, Allstate's superior capabilities, new products, and high bundling rates will continue to drive effective growth.

Michael Zaremski sought details on future plans to lower the expense ratio beyond current achievements and asked if the recent California wildfires would cause Allstate to further retrench from the state.

Answer

Executive Jesse Merten confirmed plans to further reduce expenses through digitization, leveraging new technology, and lowering distribution costs, stating they are about 60% of the way through the initiative. CEO Thomas Wilson addressed the California question, clarifying that Allstate has had no growth aspirations in California homeowners insurance since 2007 and has been actively reducing its exposure for over a decade. He does not anticipate this long-standing strategy will change.

Michael Zaremski asked about the catastrophe losses in 2025, which were around $800 million, and whether a 'normal' year would entail double that level, considering Everest's mixed positioning.

Answer

Jim Williamson, President and CEO, characterized 2025 as an 'expected' or 'new normal' year for industry losses, estimated between $110 billion and $130 billion, and stated that Everest's CAT performance aligned with this backdrop. He noted that Q4 was not elevated globally, with significant events in Latin America, the Caribbean, Australia, and Southeast Asia. He does not anticipate a dramatic change in Everest's approach to CAT load, though the retail divestiture will impact the earned premium denominator. Michael Zaremski also commented on the potential for Everest to execute billions more in buybacks than consensus estimates, given the shrinking top line and proceeds from the AIG deal, and asked if more specific guidance on buybacks would be provided. Mark Kociancic, EVP and CFO, agreed that strong fundamentals support increased buybacks, suggesting an elevated payout ratio for 2026. He confirmed a strong commitment to buybacks, especially as expected benefits from the transaction are unlocked, and stated that Everest will communicate more as the year progresses, while acknowledging ongoing risks.

Michael Zaremski of BMO Capital Markets followed up on the insurance expense ratio, asking about the casualty book's growth outlook after the 'one renewal' strategy concludes. He also asked if the recent charge for the Russia/Ukraine aviation court decision is now fully resolved.

Answer

Jim Williamson, President & CEO, stated that the casualty remediation will finish in Q3, after which they are 'open for business' for well-priced accounts, though the focus remains on profitability over top-line growth. Regarding the aviation loss, Williamson confirmed that, barring unexpected legal shifts, the issue is 'done and dusted' as they took a conservative approach to the provision once legal clarity was available. He clarified it was unrelated to prior casualty reserving actions.

Michael Zaremski sought clarification on the cadence of reserve reviews versus loss trend assumption updates and asked if share repurchases were funded by Federal Home Loan Bank (FHLB) borrowings.

Answer

CEO Jim Williamson clarified that deep-dive reserve studies are annual, while loss trend assumptions are reviewed more frequently (quarterly). CFO Mark Kociancic stated that FHLB borrowings are a separate spread trade for investment income and are not used to fund share buybacks, which are paid for out of excess capital.

On behalf of Michael Zaremski of BMO, an analyst asked for quantification of the loss ratio difference between non-renewed and retained business in both the insurance and reinsurance casualty books.

Answer

CFO Mark Kociancic noted that for insurance, the exited 'Other' segment had a triple-digit loss ratio, with other non-renewed business varying but some in the 100-120% range. President and CEO Jim Williamson explained that for reinsurance, the performance gap was less severe as the book was higher quality to begin with; exits were driven by more nuanced underwriting concerns like a cedent's ability to keep up with loss trends, rather than major performance deltas.

Michael Zaremski of BMO Capital Markets inquired about the impact of the accident year 2024 reserve strengthening on the go-forward core loss ratio and whether the expense ratio would be elevated due to significant non-renewals in the casualty business.

Answer

Executive James Williamson stated the starting point for the insurance combined ratio is around 100, with the company intending to sustain casualty loss picks at current levels until underwriting actions are proven. He noted that growth in short-tail and international business will provide a tailwind. Executive Mark Kociancic confirmed a 'stickier' expense ratio is expected in 2025 due to premium reductions in U.S. casualty, but noted the go-forward book's composition will improve as remediated business runs off.

Michael Zaremski sought clarification on the future impact of Bermuda tax credits on the expense ratio in 2027 and the continued utilization of the Deferred Tax Asset (DTA). He also asked about the accelerating rates in excess casualty, particularly the close to 20% increases reported by Marsh, and whether this indicates a broader industry trend or underlying issue.

Answer

Bob Qutub, Executive Vice President and CFO, confirmed the DTA would continue to be used in 2026 unless the law changes, and the tax credit benefit would increase to 90 basis points in 2026 and full impact in 2027, reducing net spend. David Marra, Executive Vice President and Group Chief Underwriting Officer, explained that excess casualty rates are accelerating in response to rising loss trends, with higher layers seeing greater increases, alongside increased investment in claims handling by insurers.

Michael Zaremski sought clarity on the future impact of Bermuda tax credits on the expense ratio in 2027 and the continued use of the Bermuda deferred tax asset (DTA). He also asked about the acceleration of excess casualty rates, as indicated by the Marsh pricing gauge, and whether it signals a broader industry trend.

Answer

Bob Qutub, EVP and CFO, confirmed the DTA is a matter of Bermuda law and will be used in 2026. He stated the operating expense benefit from tax credits will increase to ~90 basis points in 2026 and reach full impact in 2027, but the company intends to invest in infrastructure rather than spend the credits. David Marra, EVP and Group Chief Underwriting Officer, explained that excess casualty rates are accelerating due to rising loss trends, with higher layers seeing more significant rate increases, alongside increased investment in claims handling by carriers.

Michael Zaremski of BMO Capital Markets probed the durability of RenaissanceRe's ability to achieve better-than-market pricing, citing the 80% of Florida premium written on private terms, and asked about the market impact of Florida's tort reform.

Answer

President & CEO Kevin O'Donnell and EVP & Group Chief Underwriting Officer David Marra described their ability to secure private terms as a sustainable advantage stemming from scale, risk selection, and deep client relationships, while noting 80% is on the high end of execution. On tort reform, O'Donnell stated the benefits are more significant for primary carriers and that some of the benefit is already being competed away through rate reductions.

Michael Zaremski asked for views on the Florida property market, specifically whether recent legislative reforms are positively impacting the loss curve, and inquired about the appropriate go-forward tax rate to model for the company.

Answer

EVP & Group Chief Underwriting Officer David Marra confirmed the Florida reforms have had a positive impact, but noted it's still early to see the full effect, leading to a cautiously optimistic view. CEO Kevin O'Donnell added the benefits are currently more visible in attritional losses. CFO Bob Qutub advised that modeling a tax rate 'just above 15%' is appropriate to account for income from higher-tax jurisdictions outside of Bermuda.

Michael Zaremski found it counterintuitive that the company was raising its prospective loss pick for casualty if underlying trends are improving, and asked about the strong prior-year development in property, questioning if the company's reserving has become more conservative.

Answer

CEO Kevin O'Donnell explained that raising the current year loss pick reflects a prudent "buffer of concern" for market uncertainty, which could reverse into favorable development if positive trends persist. CFO Bob Qutub stated that the property development reflects the natural refinement of estimates over time. O'Donnell added that their reserving process hasn't changed, but the $50 billion wildfire loss estimate has higher-than-usual variability due to the recency of the event.

Michael Zaremski asked if the mid-to-upper 90s combined ratio guidance for Casualty & Specialty contemplates improvements in ceding commissions and continued material rate increases. He also sought to confirm if the reason for not taking a prior-year reserve charge is that RenRe's book is more conservatively reserved, providing a cushion against higher trends.

Answer

An executive confirmed the guidance for 2025 includes assumptions for additional loss trend and rate increases, and if rates accelerate further, it would be positive. CFO Robert Qutub affirmed the conservative reserving posture, explaining that during the 2020-2021 hard market, the company did not reduce its loss picks as much as rate improvements might have suggested, creating a buffer. He also cited their slow-to-recognize-good-news development curves as a key part of their process.

Michael Zaremski with BMO Capital Markets sought clarification on the M&A divestitures and other figures in the Q4 2025 press release, specifically regarding life sales and deferred revenue assumption changes, and how to model these in future periods. He also asked if the historical dynamic of organic growth decoupling from falling pricing (remaining positive) would hold in the current 'tale of two markets' with soft property and hard casualty.

Answer

Doug Howell (CFO) explained that the quarterly noise from life sales and deferred revenue assumption changes nets down to a very small annual EBITDA impact (around $25 million for the year), suggesting it's a quarterly, not annual, discussion. J. Patrick Gallagher, Jr. (Chairman and CEO) confirmed that the decoupling dynamic is expected to continue, as Gallagher's role is to mitigate premium increases, and clients opt for risk retention when rates rise. He noted the current market features 'cycles within cycles,' with property softening and casualty remaining firm.

Michael Zaremski sought clarification on breaking out M&A divestitures and other items, specifically life sales and assumption changes, for future modeling. He also inquired how the current 'tale of two markets' (soft property, hard casualty) impacts organic growth, considering historical decoupling trends.

Answer

CFO Doug Howell suggested taking the detailed breakdown of life sales and assumption changes offline, noting their full-year impact on EBITDA is minor ($25 million on $4.8 billion total EBITDA). Chairman and CEO J. Patrick Gallagher, Jr. explained that Gallagher's role is to mitigate premium increases, leading to growth in alternative markets when rates rise. He highlighted 'cycles within cycles' across different lines (D&O, Workers' Comp, Property, Casualty) and anticipated similar decoupling trends. Mr. Howell clarified that overall property pricing is down 4-5%, not a drastic 20% decline.

Michael Zaremski sought clarification on a 1-point timing benefit in Brokerage organic growth and asked about the widening gap between overall organic growth and the Renewal Premium Change (RPC) metric, also inquiring about the AssuredPartners data request timeline.

Answer

CFO Douglas Howell clarified that a $26 million item from the prior year was a non-operational accounting gross-up and is separate from the current timing benefit. J. Gallagher, an executive, explained the gap between organic growth and RPC is due to the company's evolution, including more large-account, fee-based business and improved sales tools. He added that the data request for the AssuredPartners deal is extensive for both parties.

Michael Zaremski of BMO Capital Markets inquired about the expected cadence of organic growth in 2025 for the Brokerage segment, particularly regarding Q1 seasonality and the impact of reinsurance pricing. He also asked about the potential to optimize fiduciary investment income following the AssuredPartners acquisition and the timeline for realizing those gains.

Answer

CFO Douglas Howell explained that while reinsurance pricing has changed, clients are purchasing more coverage, maintaining total spend. He noted that Q1 typically sees stronger reinsurance-driven organic growth, though this is partly offset by health and welfare renewals. Regarding fiduciary income, Mr. Howell confirmed that AssuredPartners presents a significant optimization opportunity, similar to Gallagher's own past consolidation efforts, and estimated the process would be completed within 18 months.

Michael Zaremski asked about the drivers of the sequential organic growth uplift in the Brokerage segment, the spike in fiduciary investment income, the outlook for casualty pricing, and the revenue contribution from the lumpy life insurance business.

Answer

CFO Douglas Howell explained that about one point of the Q4 organic growth uplift is from life insurance sales catching up, with underlying business trends stable around 7.5%. He attributed investment income fluctuations to the premium funding business. Executive J. Gallagher and CFO Douglas Howell both noted continued pricing strength in casualty lines like Umbrella. Howell specified the lumpy life insurance business is approximately a $125 million operation.

Michael Zaremski sought clarification on the 'flattish underlying margins' commentary, asking if it includes contingents and investment income, and if it's driven by Accession synergies. He also asked for confirmation that the $23 million in lost revenue from departing employees represents the total expected impact, rather than a number that will significantly build over time.

Answer

R. Andrew Watts, CFO, clarified that if the impact of lower investment income is isolated, the rest of the business is projected to be flat, which is considered a strong performance despite lower contingents. J. Powell Brown, CEO, stated that the $23 million is the amount 'taken at the present time,' acknowledging that future retention could be impacted, but it is a relatively small number for the overall organization. Mr. Watts added that the company might call out the materiality of this impact quarterly as it plays out over several quarters.

Michael Zaremski asked for clarification on the definition of 'underlying margins expected to be flattish' for 2026, specifically if it includes contingents and investment income, and if Accession synergies are the primary driver. He also sought confirmation on whether the $23 million in lost revenue from employee departures represents the total expected impact.

Answer

R. Andrew Watts, Chief Financial Officer, clarified that 'underlying margins expected to be flattish' means that if the impact of lower investment income is isolated, the remainder of the business would be flat, which is considered a strong performance given other factors. J. Powell Brown, President and Chief Executive Officer, stated that the $23 million is the amount taken at the present time, but acknowledged that retention could be impacted going forward, and the full extent of the impact will play out over the next year or so. Mr. Watts added that the company might call out materiality on a quarterly basis.

Michael Zaremski of BMO Capital Markets questioned the rapid pace of organic growth deceleration, asking if it was more than a classic market softening, and inquired about the long-term margin outlook in a lower-growth environment.

Answer

President, CEO & Director J. Powell Brown described the market behavior as a 'classic cycle,' noting the speed of the property rate decline was the surprising element, not the decline itself. EVP, CFO & Treasurer R. Andrew Watts added that there is no change to long-term margin guidance, as the company's diversified model and potential for higher contingent commissions provide a buffer.

Michael Zaremski inquired about the potential headwind from declining cat property pricing on the Programs segment's organic growth for the remainder of the year and whether rising employee benefits costs contributed to Q1 retail organic growth.

Answer

Executive R. Watts clarified that the Programs segment's growth moderation is not solely due to cat property rates, citing leveling growth in the lender-placed business and captives as contributing factors. He also warned that Q4 Programs organic growth could be near zero due to a tough comparison with prior-year hurricane claims revenue. Executive J. Powell Brown added that the company was pleased with retail's organic growth, which was in line with expectations, and that the employee benefits business has varied revenue recognition models affecting timing.

Michael Zaremski asked about the structural or secular drivers behind the Programs segment's exceptional growth and also inquired about pricing trends in the casualty insurance market.

Answer

J. Powell Brown, an executive, attributed the Programs segment's success to the large and growing nature of the program space and the company's position as the largest delegated underwriting authority. On casualty, he noted seeing continued pricing discipline and upward rate pressure across primary, excess, admitted, and non-admitted lines, which he expects to continue.

Michael Zaremsky asked about Travelers' expected organic headcount growth or shrinkage for 2026, given the extensive technology initiatives. He also inquired about the sequential pricing trend in commercial casualty lines, excluding workers' compensation.

Answer

Alan Schnitzer, Chairman and CEO, declined to provide specific headcount projections but noted that premium per employee has increased and is expected to continue rising due to productivity gains. Greg Toczydlowski, President of Business Insurance, specified that renewal premium change for umbrella was in double digits, while General Liability (GL) was in the mid-single digits.

Michael Zaremski of BMO Capital Markets asked about the drivers of accelerating price increases in home insurance and whether the trend was company-specific or industry-wide. He also inquired about the current state of social inflation.

Answer

Michael Klein, President of Personal Insurance, explained the pricing acceleration was driven by increasing insured limits to match rising replacement costs, a broad industry trend, on top of continued rate increases. Alan Schnitzer, Chairman and CEO, commented on social inflation, stating it is 'alive and well' and impacting the industry, but the levels observed are consistent with the company's expectations.

Michael Zaremski questioned the drivers behind the commercial lines reserve releases and inquired about current pricing trends in the workers' compensation line.

Answer

CFO Dan Frey attributed the favorable development primarily to better-than-expected results in workers' compensation, while cautioning that prior year development (PYD) is not a run-rate item. Chairman and CEO Alan Schnitzer described workers' comp pricing as 'largely stable,' with slightly negative pure renewal rates offset by positive exposure changes.

Michael Zaremski asked if any one-time items benefited the Business Insurance underlying loss ratio and inquired about the extent of changes to terms and conditions, such as deductibles, in Personal Lines.

Answer

CFO Dan Frey confirmed the Business Insurance result was a 'pretty clean' quarter with no significant one-time items. Michael Klein, President of Personal Insurance, affirmed that Travelers is actively making meaningful changes to property terms, including using percentage-based deductibles in catastrophe-exposed areas.

Michael Zaremski asked about the durability of property reserve releases, requesting insight into the percentage of reserves in IBNR and its comparison to a year ago. He also inquired about the encouraging signs in aviation, asking what changed from the previous quarter and how far current prices are from meeting Fidelis's underwriting hurdles.

Answer

Group Managing Director Jonny Strickle explained that reserve setting has been consistent, with increasing strength in the underlying underwriting portfolio driving prior year development (PYD), primarily in the first two quarters. CEO Dan Burrows stated that aviation remains the most challenged part of the portfolio due to a competitive landscape and a lack of market correction despite recent losses. He noted some improvement in hull and liabilities but emphasized caution and discipline in selecting opportunities that meet risk-return metrics.

Michael Zaremski asked for clarification on what 'recoveries' meant in the context of the California wildfire losses, questioned if strong 'construction' growth referred to U.S. property, and inquired about the scale of 'loss impacted accounts' expected to see rate increases.

Answer

CFO Allan Decleir clarified that 'recoveries' referred to outwards reinsurance, not subrogation. CEO Dan Burrows specified that the 'construction' growth was in the Marine line (e.g., military vessels, cruise ships), not U.S. property construction. Regarding loss-impacted accounts, Burrows noted that appropriate adjustments are being made for covers affected by recent events but did not quantify the scale as midyear renewals are ongoing.

Michael Zaremski asked for commentary on the competitive environment, particularly in property lines, and how pricing is determined in the bespoke segment given its growth.

Answer

CEO Dan Burrows highlighted that Fidelis's lead market position allows it to achieve differentiated rates and terms, citing a 111% RPI for the full year. Chief Actuarial Officer Jonny Strickle added that bespoke pricing is evaluated on a deal-by-deal basis against profitability hurdles, with pricing supported by the value proposition of providing capital relief or facilitating transactions for clients.

Michael Zaremski requested more color on the private share repurchase from ADIA's subsidiary, Platinum Ivy, and asked if any repurchases were made on the open market. He also asked if the slowdown in Aviation GPW was related to the Russia-Ukraine conflict.

Answer

CFO Allan Decleir described the repurchase from Platinum Ivy as a mutually beneficial and accretive transaction, confirming that some open market purchases also occurred. Chief Actuarial Officer Jonathan Strickle clarified that the aviation slowdown was due to general market dynamics where anticipated rate increases did not materialize, not the Russia-Ukraine conflict.

Michael Zaremski inquired about American Financial Group's capital management strategy, specifically the absence of significant share buybacks in the quarter despite a special dividend, and asked for commentary on the P&C operating environment regarding pricing trends relative to loss cost trends, particularly in social inflation-exposed lines.

Answer

Co-CEO Craig Lindner explained that share repurchases are typically pursued when the stock trades at a significant discount, and the company retains dry powder for future opportunities. Co-CEO Carl Lindner clarified that AFG's 5% overall price increase still exceeds their prospective loss ratio trends due to a diverse business mix, including benign workers' compensation trends. He noted that while some loss ratio trends improved, others, especially in social inflation-exposed businesses, required careful pricing. He highlighted a slight decline in pricing in the specialty financial group's lender-priced property business due to strong prior margins, and expressed satisfaction with an 8% price increase in specialty casualty (excluding workers' comp) and a modest increase in workers' comp, led by California.

Michael Zaremski inquired about American Financial Group's capital management strategy, specifically the absence of material share buybacks in the quarter despite prior repurchases and similar valuations. He also asked for clarification on the P&C operating environment, questioning how a 5% pricing increase (with and without workers' comp) could exceed prospective loss trends when many estimate trends above 5%. Additionally, he sought insight into pricing acceleration and loss cost trends in social inflation-exposed lines, noting a potential upward bias in specialty casualty's underlying loss ratio.

Answer

Craig Lindner, Co-CEO, explained that American Financial Group's history shows active repurchases occur when the stock trades at a significant discount, and they retain dry powder for such opportunities. Carl Lindner, Co-CEO, clarified that their 5% overall price increase does exceed *their* prospective loss ratio trends, attributing this to a diverse business mix including workers' comp with benign trends. He added that loss ratio trends are adjusted quarterly, with no significant overall changes recently, though some businesses improved and others increased slightly. Carl Lindner highlighted a slight pricing decline in specialty financial's lender-priced property due to strong prior margins, but expressed satisfaction with 8% pricing in specialty casualty (excluding comp) and modest increases in workers' comp, particularly in California, where an 11% increase is expected.

Michael Zaremski inquired about the growth drivers and market dynamics of the lender-placed business, and also asked for an update on remediation actions and pricing adequacy in social inflation-exposed lines like commercial auto, housing, and daycare.

Answer

Co-CEO Carl Lindner III explained that the lender-placed business benefits from economic weakness and competitor disruption, with growth also aided by a shift to replacement cost valuation. Regarding social inflation lines, he noted that non-renewals of housing accounts are complete and daycare accounts will be finished by year-end. He also confirmed that pricing in commercial auto is up 15% and that the company is well-positioned to meet its targeted returns.

Michael Zaremski inquired about the growth drivers and market share of the lender-placed business within Specialty Financial. He also asked for an update on remediation actions in social inflation-exposed lines like housing and daycare, and later followed up on the level of year-to-date reserve releases relative to full-year guidance.

Answer

Co-CEO Carl Lindner III detailed that the lender-placed business benefits from economic weakness, competitor disruption, and a shift to replacement cost valuation. He confirmed remediation in housing accounts is nearly complete, with daycare non-renewals finishing by year-end. CFO Brian Hertzman later addressed the follow-up, stating that the lower level of favorable reserve development was anticipated and in line with their full-year expectations.

Michael Zaremski asked about the growth drivers and market share dynamics of the lender-placed business, the status of remediation actions in social inflation-exposed lines like commercial auto and social services, and whether the year-to-date reserve release ratio was in line with the company's full-year guidance.

Answer

Co-CEO Carl Lindner III explained that the lender-placed business benefits from economic weakness and market disruption, with growth also driven by a shift to replacement cost valuation. He detailed that non-renewals in certain housing accounts are complete, with daycare non-renewals finishing by year-end. He also noted strong pricing in commercial auto. CFO Brian Hertzman added that while the drivers may have differed from initial expectations, the lower level of favorable reserve development year-to-date was generally in line with what was contemplated in the company's guidance.

In a follow-up question, Michael Zaremski of BMO Capital Markets asked if the year-to-date level of favorable reserve releases, which was down significantly year-over-year, was in line with the assumptions backing the company's full-year 2025 EPS guidance.

Answer

CFO Brian Hertzman confirmed that the lower level of favorable development was anticipated and communicated when guidance was initially provided. He noted that while the specific drivers may have differed from initial expectations, the overall result is within the range of what the company had planned for, and therefore, is considered 'pretty much in line' with their guidance assumptions.

Michael Zaremski inquired about the growth drivers for the lender-placed business, including market dynamics and market share gains. He also asked for an update on remediation actions in social inflation-exposed lines like housing and daycare, and whether recent reserve releases align with the company's full-year guidance.

Answer

Co-CEO Carl Lindner III explained that the lender-placed business benefits from economic weakness and market disruptions, with growth also driven by a shift to replacement cost valuation. He detailed that non-renewals in housing accounts are mostly complete, with daycare actions finishing by year-end. CFO Brian Hertzman added that while the drivers may differ, the overall level of reserve development is in line with what was contemplated in their annual guidance.

Michael Zaremski inquired about the drivers behind the changes in the expense ratio, the composition of the quarter's catastrophe losses, and the company's long-term perspective on balancing premium growth with profitability in the current market cycle.

Answer

CFO Brian Hertzman attributed the higher expense ratio to a business mix shift towards financial institutions and planned investments in IT and data analytics. He also confirmed that California wildfire losses were at the low end of the expected range with minimal other cat events. Co-CEO Carl Lindner added that the moderated premium growth reflects a disciplined long-term strategy, citing competitive pressures, headwinds in workers' comp, and the strategic non-renewal of underperforming accounts in social inflation-exposed lines.

Michael Zaremski inquired about American Financial Group's approach to IBNR reserves amid rising social inflation, the outlook for its alternative investment portfolio, and the competitive pricing environment in its Property & Casualty segments.

Answer

CFO Brian Hertzman explained that reserving is a nuanced, business-by-business process, making a simple IBNR comparison difficult, but confirmed they react quickly to new loss information. Co-CEO Craig Lindner expressed long-term optimism for the multifamily portfolio, expecting new supply to be absorbed by late 2025, and noted a recent uptick in buyer interest. Co-CEO Carl Lindner confirmed a strong pricing environment, highlighting a 12% rate increase in commercial auto liability and double-digit increases in other social inflation-exposed lines.

Michael Zaremski asked if the healthy interest income levels seen in the quarter represented a sustainable run rate and sought further clarification on whether the 'project-based placements' mentioned in Risk and Broking were primarily non-recurring or one-time revenue.

Answer

Andrew Krasner, CFO, noted that interest income is influenced by cash balances across jurisdictions and varying interest rates by geography, implying some variability. Lucy Clarke, President of Risk and Broking, confirmed that project-based placements do mean one-time revenue, but emphasized that a combination of recurring and one-time work is a normal part of growth in their specialty business, with increased contributions from multi-year projects in the quarter.

Michael Zaremski asked if the healthy interest income levels were a sustainable run rate and sought clarification on whether 'project-based placements' in the Risk and Broking segment were non-recurring or one-time revenue.

Answer

Andrew Krasner, CFO, noted that interest income is influenced by geographic cash balances and varying interest rates, implying some variability. Lucy Clarke, President of Risk and Broking, confirmed that 'project-based placements' refer to one-time revenue, which is a normal component of specialty business growth, with increased contributions observed in the quarter.

Requested more detail on the opportunity areas for the reinsurance joint venture and any shareable terms regarding financial commitments or buyout options. He also asked for more color on the potential for a more favorable tax rate.

Answer

The company declined to share specific terms of the JV agreement but noted the structure provides flexibility to deploy capital and that there is potential for WTW to wholly own the asset in the future. Regarding taxes, the company is always seeking efficiencies, and with the global implementation of Pillar 2 still in progress, there could be a slight upside to the current tax rate guidance.

Michael Zaremski from BMO asked about the potential for future investment portfolio rebalancing if equity markets continue to strengthen, and whether Cincinnati Financial's view of excess capital has changed. He also questioned the commercial competitive environment, specifically if pricing deceleration will continue and if current loss cost trends might prevent a typical soft cycle.

Answer

Chief Investment Officer Steve Seloria explained that while the previous rebalancing was driven by external factors like elections and tax changes, future trimming would likely be more at the individual security and industry level, adhering to investment policy. EVP and CFO Mike Sewell stated that the capital management philosophy has not changed, prioritizing investment in the business, dividends, and buybacks, while remaining well within regulatory parameters. President and CEO Steve Spray described the commercial market as competitive but rational and stable, citing ongoing loss headwinds from severe convective storms, cat losses, and legal system abuse. He emphasized Cincinnati's risk-by-risk underwriting approach, which has led to 13 consecutive years of underwriting profit in commercial lines, and that pressure on average net rates reflects improved price adequacy and segmentation.

Michael Zaremski of BMO Capital Markets inquired about the drivers of the lower-than-expected expense ratio and its future run rate. He also asked about the higher loss pick for workers' compensation, ongoing pressures in commercial auto, and the competitive dynamics in the property market, particularly for the SME segment versus the Lloyd's market.

Answer

EVP & CFO Michael Sewell attributed the improved expense ratio to premium growth outpacing expenses and stated the goal is to consistently stay below 30%. President & CEO Stephen Spray addressed commercial lines, citing a prudent approach for workers' comp and noting that social inflation is pressuring commercial auto, though recent accident years look good. He also contrasted the competitive large-property market with the stable rate environment in CINF's core small-to-middle market package business.

Michael Zaremski of BMO Capital Markets inquired about the sustainability of the low expense ratio, the drivers behind higher loss picks in workers' comp and commercial auto, and the competitive dynamics in the property market, particularly for SME business.

Answer

EVP & CFO Michael Sewell explained the expense ratio benefited from premium growth outpacing expenses and stated the ongoing goal is to get below 30%. President & CEO Stephen Spray attributed the workers' comp pick to prudence and cited social inflation for commercial auto pressures. He also noted that while the large-account property market is competitive, Cincinnati's risk-by-risk underwriting approach insulates its core SME business from broad market softening.

Mike Zaremski of BMO Capital Markets asked about the company's ability to react to tariff-driven inflation given its 3-year commercial policies, its reinsurance strategy following significant Q1 catastrophe losses, and the growth outlook for Personal Lines. He also followed up on a large loss in 'other personal lines'.

Answer

CEO Steve Spray explained that 75% of commercial lines premiums are adjusted annually and that even 3-year policies have annual exposure adjustments, allowing for responsiveness. He stated there are no current plans to purchase additional reinsurance as the existing program was reinstated. On Personal Lines, he noted growth faces tougher year-over-year comparisons but remains strong, though the company is more conservative in California post-wildfires. He also clarified a large inland marine (watercraft) claim drove the 'other personal lines' loss ratio.

Speaking for Michael Zaremski of BMO Capital Markets, an analyst asked about the loss cost inflation trends in commercial casualty, whether trends were a reaction to contractor industry exposure, and about the potential to adjust the pick for workers' compensation given recent reserve releases.

Answer

President and CEO Steve Spray stated that on a prospective basis, pricing is exceeding loss costs in all major lines except workers' compensation. He noted that social inflation is seen more in umbrella and commercial auto rather than their specific construction book. Regarding workers' comp, Mr. Spray acknowledged the favorable results but said any change to their actuarial view is under discussion with no new updates.

Michael Zaremski asked if the company is 'playing offense' in commercial casualty by conservatively booking higher loss picks. He also questioned the rationale for the large equity portfolio sell-down and the drivers of growth acceleration in the Excess and Surplus (E&S) lines segment.

Answer

President and CEO Steve Spray confirmed the company is 'definitely playing offense' across all segments, enabled by its strong capital position and sophisticated pricing. Regarding the portfolio, Spray stated no change in philosophy, and CIO Steve Soloria added it was opportunistic portfolio management. On E&S growth, Spray noted they are 'just scratching the surface' by expanding expertise, products, and agency relationships.

Michael Zaremski asked for color on the broader casualty property market, including sequential deceleration in premium growth, pricing, and MGA competitiveness, and whether Kinsale would consider rethinking its compensation model (not paying profit-sharing commissions) in competitive times.

Answer

Michael Kehoe, CEO and Chairman, and Stuart Winston, EVP and Chief Underwriting Officer, explained that casualty business varies by division, with moderate competition but strong segments like excess casualty, social services, and allied health. Michael Kehoe noted the competitive period, with Kinsale's growth rate normalizing from 40% to high single digits, reiterating 10-20% as a long-term estimate. He also clarified that Kinsale's model of controlling underwriting means they are not considering profit-sharing commissions, which are typically associated with delegated underwriting.

Michael Zaremski from BMO Capital Markets asked for color on the broader casualty property market, including sequential deceleration in premium growth, pricing trends, and the competitiveness of MGAs. He further probed whether the casualty market is becoming less competitive or if increasing competition continues to impact the top line. Lastly, he asked if Kinsale would consider rethinking its strategy of not paying profit-sharing commissions to broker partners, especially in competitive times.

Answer

Michael Kehoe, CEO and Chairman, noted variability across Kinsale's diverse casualty underwriting divisions. Stuart Winston, EVP and Chief Underwriting Officer, described moderate competition in long-tail casualty, with strong segments like excess casualty, social services, allied health, premises liability, general casualty, and entertainment. Mr. Kehoe acknowledged a very competitive period, with Kinsale's growth rate moderating from 40% to high single digits, reiterating a 10-20% long-term growth potential. He highlighted the company's competitive business strategy and cost advantage. Regarding profit-sharing commissions, Mr. Kehoe explained they are typically associated with delegated underwriting, which is not Kinsale's model, as the company controls its underwriting and offers broad risk appetite, thus not considering a change.

An analyst on behalf of Michael Zaremski questioned Kinsale's 10-20% long-term growth target amid recent sub-10% growth and inquired about the drivers of underlying margin improvement despite negative rate trends.

Answer

Chairman & CEO Michael Kehoe affirmed the 10-20% growth target as a long-term cycle average, acknowledging near-term competitive headwinds, particularly in commercial property. He noted that excluding this division, growth was in the mid-teens. Regarding margins, Mr. Kehoe explained that improvement is driven by strong performance in short-tail lines like property, which offsets a cautious reserving stance on long-tail casualty lines due to inflation.

Michael Zaremski inquired about the impact of large shared account property pricing on growth, the competitive landscape for small commercial casualty, and the strategy of trading high profit margins for accelerated growth. He also followed up on employee growth trends and the implied loss cost trend given Kinsale's consistent reserve releases.

Answer

CEO Michael Kehoe confirmed that while larger layered property deals face pressure, small property is growing with positive rates. He noted casualty rate changes vary by line, with strength in construction and auto but more aggressive pricing in management liability. President and COO Brian Haney added that the company has not exhausted its ability to selectively lower rates to drive growth. Regarding operations, Michael Kehoe stated that productivity, measured by premium per employee, continues to improve annually and that the company's loss trend assumptions remain conservative in the high single-digits, despite favorable reserve development.

A representative for Michael Zaremski of BMO Capital Markets inquired if the 3% rate increase was above loss trends and which business lines were the primary drivers. They also asked for a comparison of Hurricane Milton exposure to Hurricane Ian and the outlook for the property business mix into 2025.

Answer

Executive Michael Kehoe clarified that the 3% rate is a book-wide average, with some casualty lines seeing double-digit increases while certain highly profitable segments may see rate cuts to drive growth. He explained the Milton loss was more modest than Ian due to corrective underwriting actions in personal lines. He also noted that while competition is increasing for larger property accounts, the small business property segment continues to grow strongly.

Michael Zaremski asked about quantifying the impact of auto and home pricing deceleration and the shift to lower-cost states on KPIs, whether any major geographies are nearing capacity for franchise growth, the macro overlay for next year's KPI trajectory, and the income statement impact of joint ventures with mortgage participants.

Answer

Mark Jones (CFO and COO) explained that premium retention vs. client retention indicates price increases on existing books, while policies in force vs. premium growth reflects geographic dispersion. He stated no saturation in any market, emphasizing vast growth opportunities. Mark Jones expects continued price stabilization and improving revenue retention next year. He added that mortgage joint ventures will primarily materialize through new business royalties and improved franchise productivity, eventually contributing to renewal royalty fees.

Michael Zaremski asked for quantification of the impact of decelerating auto and home pricing and the geographic shift to lower-cost states on Goosehead's KPIs. He also inquired if any major geographies are nearing capacity for franchise growth, and sought a macro overlay for the expected upward trajectory in KPIs next year. Finally, he asked for quantification of the income statement impact from joint ventures with mortgage participants.

Answer

Mark Jones (CFO and COO) explained that premium retention (93%) versus client retention (85%) indicates an 8% year-over-year price increase on existing policies, while policies in force growth (13%) versus premium growth (15%) reflects the impact of geographic dispersion. He stated no markets are near saturation, with ample growth opportunity. For next year, he expects continued price stabilization and improved revenue retention as client retention improves. He noted that mortgage servicer partnerships, largely structured as franchise agreements, will primarily materialize through new business royalties and improved franchise productivity, leading to higher producers per franchise.

Michael Zaremski from BMO Capital Markets asked for clarification on the drivers of the current dynamic between revenue and premium growth, whether new partnerships are included in guidance, and for an update on the commission rate outlook.

Answer

CFO Mark Jones Jr. and President & CEO Mark Miller stated the dynamic is driven by an intentional shift to lower-premium states and leveling premium growth rates. They confirmed new partnerships like Baird and Warner are not yet baked into guidance. The outlook on commission rates is more optimistic than the prior quarter, with admitted carriers re-entering markets and the auto insurance market described as 'wide open'.

Michael Zaremski asked about the drivers of the Core Revenue to premium ratio, productivity trends for new franchises, potential seasonality impacts on Q1 premium growth, and the rationale for highlighting the liquidity of franchise agencies.

Answer

CFO Mark Jones Jr. attributed the revenue/premium ratio to the mix of corporate versus franchise business. He noted new franchise productivity remains strong and that Q1 premium growth was affected by fewer business days. He and CEO Mark Miller explained that franchise liquidity and consolidation are signs of a maturing, healthy system where stronger agencies acquire smaller ones, rather than a sign of failure.

Michael Zaremski asked for clarity on the corporate agent growth outlook, the reason for the wide revenue guidance range, the materiality of new mortgage servicer partnerships, and any potential Q1 impact from California wildfires.

Answer

CEO Mark Miller noted corporate hiring slowed slightly to manage absorptive capacity but remains a focus. CFO Mark Jones Jr. attributed the guidance range to the uncertain timing of client retention recovery versus slowing price increases. He described the mortgage servicer channel as not yet 'massively material' but growing in importance. He also confirmed the California wildfires would not materially impact Q1 results.

Michael Zaremski asked about the wide full-year revenue guidance range, the drivers of the implied revenue-to-premium ratio improvement in Q4, and the sustainability of recent corporate agent growth.

Answer

CFO Mark Jones Jr. attributed the wide guidance to volatility in product availability and, crucially, contingent commissions, which have a binary impact and are not finalized until late in the year. He noted these contingents also drive the revenue-to-premium ratio. CEO Mark Miller and CFO Mark Jones Jr. confirmed that the strong corporate agent hiring is a result of a scaled-up recruiting engine and is expected to be repeatable, limited mainly by the capacity to manage and train new hires.

Michael Zaremski asked about the E&S market's deceleration, competitiveness, and policy growth versus pricing growth, questioning if policy growth would shift back to the primary market if pricing moderates. He also inquired about the 10-digit excess capital figure from rating agency models and its historical context.

Answer

Rob Berkley (President and CEO) differentiated E&S property (volatile) from E&S liability (more stable), noting W. R. Berkley's E&S focus is primarily liability, making it less impacted by property erosion. He expects E&S opportunities to increasingly favor liability due to social inflation. Regarding capital, he confirmed significant cushion and stated the current capital headroom, from a ratio perspective, is historically high.

Michael Zaremski asked about the E&S market, specifically the deceleration, increased competitiveness, and whether policy growth might shift back to the primary market. He also inquired about W. R. Berkley's excess capital relative to rating agency models.

Answer

Rob Berkley, President and CEO, distinguished between E&S property (spiking then declining) and liability (gradual hardening), noting W. R. Berkley is primarily a liability player in E&S. He confirmed significant, historically high capital cushion, stating the company manages for owners, not solely rating agencies.

Michael Zaremski from BMO Capital Markets asked for updates on the Mitsui stake, the potential impact of medical inflation, and the reasoning behind the change in the definition of operating earnings.

Answer

President & CEO W. Robert Berkley, Jr. stated he had no new information on the Mitsui stake and confirmed the company has performed sensitivity analysis on potential medical inflation impacts. EVP & CFO Richard Baio explained the operating earnings definition was changed to reduce volatility from foreign currency fluctuations, aligning with how analysts typically model the company.

Michael Zaremski of BMO Capital Markets asked for an update on the Mitsui stake, the potential impact of medical inflation, and the rationale for redefining operating earnings.

Answer

President & CEO W. Robert Berkley, Jr. stated he had no new information on the Mitsui stake and noted the company has performed sensitivity analysis on medical inflation risks. EVP & CFO Richard Baio explained the operating earnings definition was changed to exclude volatile foreign currency gains and losses for a more straightforward view of performance.

Michael Zaremski asked for the company's view on workers' compensation profitability in a potential recession, the current pricing adequacy in other liability occurrence, and if the potential impact of tariffs on commercial property could be quantified.

Answer

Executive W. Berkley acknowledged that while wage inflation has been a tailwind for workers' comp, it can cut both ways against medical cost inflation, and noted growth is focused on specialty comp. On other liability, he said the company has kept up with trends but will wait to see if market discipline creates opportunities. He reiterated that it is premature to quantify the tariff impact, as the situation remains a moving target, but confirmed it would drive up loss costs if implemented as advertised.

Michael Zaremski of BMO Capital Markets asked for an update on the outlook for workers' compensation, given its strong profitability and reserve releases. He also questioned if the faster growth in E&S is positively impacting the company's overall combined ratio and whether the company is seeing any pricing deceleration in the E&S casualty market.

Answer

W. Robert Berkley, Jr. (Executive) candidly admitted to misassessing the persistence of negative frequency trends and the benefit of wage inflation in workers' comp but remains concerned about long-term medical cost trends. He confirmed the company is growing in specialized comp. He expressed confidence that all growth areas should positively impact the combined ratio but cautioned against getting ahead on recognizing margin improvement due to the long-tail nature of the business. He stated he does not see pricing momentum eroding in E&S casualty, though property is a different story.

Michael Zaremski from BMO Capital Markets asked for a definition of the company's non-admitted market business, specifically if it includes Lloyd's, and questioned the potential to be more aggressive in social inflation-exposed lines like excess casualty.

Answer

Executive W. Berkley confirmed that a meaningful percentage of their non-admitted business is written through Lloyd's and is largely U.S.-centric and focused on smaller accounts. He affirmed there is significant opportunity for more rate in the excess and umbrella space and that the company is executing on it, while reiterating that their focus remains primarily on smaller accounts rather than the large account business often highlighted in market indices.

Michael Zaremski inquired about the drivers behind the strong Q2 profit margins, specifically the lower-than-expected commission expense ratio and its sustainability. He also asked for details on the changing dynamics of organic growth, the impact of regional rate softening, competition in the E&S home insurance market on the MGA business, and the outlook for new branch location growth in a more stable pricing environment.

Answer

CEO Gordy Bunch and CFO Janice Zwinggi attributed the margin improvement primarily to corporate store acquisitions, which carry no commission expense, and better-than-modeled operating margins on those locations. Bunch clarified that the organic growth moderation reflects a softening personal lines market with increased carrier capacity, leading to lower renewal premiums but more new business opportunities. He noted their core property MGA program is admitted, not E&S, and its growth was self-constrained in Q2 ahead of reinsurance renewals but is expected to resume. Regarding branch growth, Bunch emphasized a focus on quality of talent over quantity, noting that increased carrier capacity makes the platform more attractive to recruits.

Michael Zaremski of BMO Capital Markets asked why organic growth guidance isn't higher given strong branch growth, inquired about the Texas homeowners market, the impact of higher deductibles, and how a monoline carrier like GEICO can succeed in the independent agent channel.

Answer

Richard Bunch, an executive at TWFG, cautioned against using store count for forecasting, as many new agents are still restricted by prior agreements. He described the Texas property market as favorable and noted that 2% deductibles are already standard. He explained that the IA channel has long 'bundled' products from different carriers, and TWFG's MGA program offers companion discounts that make it easy to pair a GEICO auto policy with their own property product, creating a competitive advantage.

Speaking on behalf of Michael Zaremski, an analyst asked about the sustainability of recent agency growth, the drivers behind contingent commission trends, and the expected run rate for stock-based compensation following the IPO.

Answer

Executive Richard Bunch detailed that while Q2 and Q3 agency growth was above historical averages due to specific market events and IPO visibility, he expects continued, albeit more moderate, above-average growth. He explained that contingent commissions are normalizing upwards as carrier loss ratios improve but remain below historical peaks. For stock compensation, he noted the current expense is from IPO RSU amortization and that a ~$4 million annual figure used in analyst models remains a good placeholder pending board approvals.

Michael Zaremski inquired about the Property & Casualty segment's performance, asking if the favorable catastrophe loss experience in Q2 could lead to lower future cat load guidance. He also questioned the outlook for policy-in-force growth in auto, given pricing actions and retention trends, and asked for the new money yield on the investment portfolio.

Answer

EVP & CFO Ryan Greenier explained that while Q2 cat losses were favorable, the company maintains its full-year guidance based on a five-year historical average due to Q3 volatility. President & CEO Marita Zuraitis added that underwriting actions to reduce property volatility are working as planned. EVP & COO Stephen McAnena noted that auto policies-in-force are stabilizing and expected to grow, supported by increased leads and agent productivity. Finally, CFO Ryan Greenier stated the core portfolio's new money yield was 5.79% for the quarter.

Michael Zaremski asked about the Property & Casualty segment, questioning if the long-term catastrophe loss guidance could decrease given recent favorable results and underwriting changes. He also inquired about the outlook for policy-in-force growth in auto, the current pricing cycle, and later asked for the specific new money yield in the investment portfolio.

Answer

EVP & CFO Ryan Greenier explained that the company is maintaining its $90 million full-year catastrophe loss guidance based on a 5-year historical average due to third-quarter volatility. President & CEO Marita Zuraitis confirmed that underwriting actions are working as planned and the underlying business is performing well. EVP & COO Stephen McAnena noted that auto policies-in-force are stabilizing and expected to grow, driven by moderating rate increases, lead generation, and agent productivity. Finally, Mr. Greenier provided the new money yield of 5.79% for the core fixed maturity portfolio.

Michael Zaremski of BMO Capital Markets inquired about the Property & Casualty segment, questioning if the long-term catastrophe loss guidance could decrease due to underwriting changes. He also asked about the outlook for policy count growth in auto, focusing on retention and pricing cycles, and later requested the specific new money yield for the investment portfolio.

Answer

EVP & CFO Ryan Greenier explained that despite favorable Q2 results, the company is maintaining its $90 million full-year catastrophe loss guidance based on a five-year average, citing historical Q3 volatility. President & CEO Marita Zuraitis affirmed this prudent approach and noted that underwriting actions are performing as expected. EVP & COO Stephen McAnena addressed growth, stating that auto policies in force are stabilizing and expected to grow, supported by moderating rates, stabilizing retention, and strong new business momentum from lead generation and distribution growth. Ryan Greenier later specified the new money yield was 5.79% for the quarter.

Michael Zaremski of BMO Capital Markets inquired about the Property & Casualty segment, asking if the long-term catastrophe load guidance might decrease given recent performance and policy changes. He also questioned the drivers for future auto policy growth and asked for the new money yield on the investment portfolio.

Answer

CEO Marita Zuraitis, CFO Ryan Greenier, and COO Stephen McAnena responded. Ryan Greenier explained that while Q2 catastrophe losses were favorable, the company is maintaining its $90 million full-year guidance based on a 5-year historical average due to potential Q3 volatility. Stephen McAnena noted that auto policies in force (PIF) are stabilizing and expected to grow, driven by moderating rate increases, improving retention, and new business momentum from increased leads and agent productivity. Ryan Greenier specified the core portfolio's new money yield was 5.79% for the quarter.

Michael Zaremski of BMO Capital Markets asked about the Property & Casualty segment's long-term catastrophe load outlook, the drivers for policy growth in auto, and for a quantification of the investment portfolio's new money yield.

Answer

CEO Marita Zuraitis and CFO Ryan Greenier explained that despite favorable Q2 results, the full-year catastrophe loss guidance of $90 million remains prudent due to historical third-quarter volatility. They noted underwriting actions are performing as expected. On growth, Zuraitis and EVP & COO Stephen McAnena highlighted that policy-in-force is stabilizing and expected to grow, driven by moderating rate actions, strong retention, and increased new business from lead generation and distribution expansion. Greenier specified the quarter's new money yield for the core fixed maturity portfolio was 5.79%.

Dan, on behalf of Michael Zaremski from BMO Capital Markets, asked about the growth drivers and MGA competition for the Hamilton Select business. He also inquired about the outlook for Bermuda casualty growth following the AM Best upgrade, the sustainability of the recent share repurchase pace, and the drivers of the total company underwriting expense ratio.

Answer

CEO Pina Albo explained that Hamilton Select's strong growth is driven by a healthy flow of business in attractive lines like excess casualty and small business, with all underwriting done in-house, not through MGAs. She noted the company is ahead of its casualty growth target from the rating upgrade but expects more moderate growth ahead. CFO Craig Howie stated that the share repurchase pace is opportunistic, dependent on the stock's valuation, and will be managed diligently during wind season. He attributed the expense ratio changes to business mix and profit commissions, while highlighting continued improvement in the other underwriting expense ratio.

Michael Zaremski from BMO Capital Markets inquired about the loss trend assumptions in the casualty line of business, the drivers for the higher-than-expected underlying loss ratio, and the quantification of reinstatement premiums. He also asked follow-up questions about the short window for share buybacks and the frequency of performance updates from the Two Sigma Hamilton Fund.

Answer

CEO Giuseppina Albo highlighted the positive market response to the A.M. Best upgrade, noting attractive, double-digit pricing in casualty that keeps pace with trends. She emphasized a highly selective client approach. CFO Craig Howie explained that the attritional loss ratio was in line with expectations, influenced by a business mix shift towards casualty and pro rata business. He advised using the full-year 2024 loss ratio as a guide, quantified net reinstatement premiums at $17 million, explained the short buyback window was a timing issue that will be resolved, and confirmed Two Sigma returns are provided monthly.

Michael Zaremski of BMO Capital Markets inquired about the casualty line of business, specifically the loss trend assumptions being applied by Hamilton and its cedents in light of social inflation. He also asked for clarification on the higher-than-expected underlying attritional loss ratio, the amount of reinstatement premiums, the reason for the short share buyback window, and the frequency of receiving Two Sigma investment return data.

Answer

CEO Pina Albo stated that market conditions for casualty are attractive, with pricing in the low to mid-teens keeping pace with trends. She emphasized Hamilton's selective approach, focusing on clients with strong underwriting cultures and significant net retention, a strategy enabled by the recent A.M. Best upgrade which contributed $40 million in new premium in Q1. CFO Craig Howie addressed the loss ratio, explaining it was in line with expectations due to a business mix shift towards casualty and pro rata business, and advised using the full-year 2024 ratio as a guide. He quantified net reinstatement premiums at $17 million, explained the short buyback window was due to a post-IPO board meeting schedule that will be accelerated going forward, and confirmed Two Sigma returns are received monthly.

Asked about the breadth of competition in the London market, the outlook for ceding commissions in reinsurance, and whether Hamilton can capitalize on its underweight position in U.S. casualty to grow.

Answer

Increased competition in London extends beyond cyber to D&O and large property placements. Market discipline is expected to hold, with pressure on casualty ceding commissions likely. Hamilton is actively and selectively growing its casualty reinsurance book ('playing offense'), taking advantage of its recent rating upgrade and the pullback of competitors.

Michael Zaremski from BMO Capital Markets asked for more detail on where increased competition from the London market is being felt beyond cyber and whether reinsurers like Hamilton could push for lower ceding commissions on casualty business.

Answer

Pina Albo, Group CEO, identified increased competition in London for cyber, D&O, and large global property placements, but noted property rates remain adequate. Regarding casualty reinsurance, she affirmed that concerns over social inflation will support attractive insurance pricing and put downward pressure on ceding commissions. She also stated that Hamilton is 'playing offense' and selectively growing its casualty reinsurance book, capitalizing on opportunities as peers pull back.

Michael Zaremski of BMO Capital Markets asked about the expected cadence of expense ratio improvement and the dynamics of the E&S marketplace, particularly the high submission growth at Lexington.

Answer

Chairman & CEO Peter Zaffino and EVP & CFO Keith Walsh explained that the expense ratio improvement is not linear and that the 'noise' from parent cost pushdowns, which impacted H1, will dissipate in H2. They highlighted that underlying operating leverage is positive. Regarding the E&S market, Mr. Zaffino stated that contrary to some expectations, AIG is not seeing business flow back to retail from E&S. He attributed the strong Lexington submission growth to the evolving role of wholesale brokers and sees continued growth opportunities by improving bind ratios.

Michael Zaremski asked for insights into AIG's Gen AI transformation, questioning the cost of entry, data readiness process, and AIG's competitive position. He also followed up on North America commercial pricing, asking if AIG is seeing property-driven pricing declines similar to competitors.

Answer

Peter Zaffino, Chairman and CEO, explained that AIG's AI adoption is built on a multi-year foundation of process digitization and data quality improvements, and is now moving from pilots to live implementation. He, along with executives Donald Bailey and Jon Hancock, addressed pricing, stating that while property faces headwinds, AIG's technical pricing remains strong, casualty rates are robust, and the company's flight to quality and reinsurance strategy provide advantages over broad market trends.

Michael Zaremski of BMO questioned the General Insurance expense ratio, which has been running higher than expected, and asked for more specific guidance on its future trajectory. He also followed up on the casualty market, asking if AIG is seeing an acceleration in pricing and if it's an area where the company is looking to be more offensive.

Answer

Chairman and CEO Peter Zaffino clarified that the expense ratio reflects a strategic shift to a leaner parent company, with business segments absorbing nearly $200 million in expenses previously held in "other operations." He expects ratios to improve through 2025. On casualty, Zaffino confirmed AIG sees significant opportunities, citing a strong rate environment with double-digit increases in areas like retail excess casualty that are outpacing loss cost trends. He affirmed AIG's intent to be an "industry leader" in the space while remaining cautious.

Michael Zaremski of BMO Capital Markets asked for more detail on the favorable conversion from the 8.9 product model mentioned in the shareholder letter, as it wasn't apparent in 10-Q metrics. He also sought clarity on whether consumer shopping levels remain materially above normal.

Answer

Pat Callahan, President - Personal Lines, noted that many variables are at play during model rollouts, including simultaneous rate changes. An executive added that new models improve competitiveness at the preferred end, creating more growth runway. Tricia Griffith, CEO, President & Director, confirmed that shopping levels remain high and that they still consider it a hard market, suggesting consumer behavior may have permanently shifted.

Michael Zaremski questioned auto loss costs, asking why severity wasn't noted as being higher due to a mix shift towards preferred customers, who typically have more expensive cars. He also asked for Progressive's long-term view on the severity trend.

Answer

CEO Susan Griffith acknowledged that preferred customers have more coverage but noted several factors affect frequency. On severity, she stated Progressive is in line with competitors, with some noise in the data from prior-year salvage recoveries. For the long-term, Griffith said the company reacts to data as it emerges, highlighting that the most significant severity pressure has been on the bodily injury side due to social inflation, which they model for.

Michael Zaremski questioned Progressive's optimism for 'an even better 2025,' citing moderating pricing tailwinds and the potential for frequency trends to mean-revert. He also asked about policy growth seasonality for Q1 2025.

Answer

CEO Susan Griffith expressed confidence in Progressive's pricing position, noting a shift toward smaller, targeted rate adjustments. She highlighted the record 2024 results, including 21% premium growth and an 88.8% combined ratio, as a position of strength. Griffith confirmed Q1 is typically a strong shopping season and pointed to January's 18% policies-in-force increase as evidence of continued growth momentum.

Michael Zaremski asked if the shift to preferred customers has a severity offset and if competitors' large home insurance books create a competitive advantage for Progressive in auto.

Answer

CEO Susan Griffith stated there is no significant severity offset, as preferred customers are a good rate-to-risk match. Regarding competition, she noted the market is complex, and Progressive is focused on its own strategy of prudently growing its profitable bundle, whether on its own paper or with partners.

Michael Zaremski of BMO Capital Markets inquired about trends in premium per vehicle amid market softness and asked about specific initiatives designed to increase the number of vehicles per policy.

Answer

CEO McKeel Hagerty acknowledged that while vehicle valuations are 'soft to flat,' they remain stable. CFO Patrick McClymont added that average premium is in line with expectations and competition in their niche is normal. Hagerty then highlighted the launch of the 'Enthusiast Plus' program as the key initiative to expand the addressable market and say 'yes' more often to newer enthusiast vehicles, which is expected to carry higher average premiums and potentially increase vehicles per policy over time.

Michael Zaremski of BMO Capital Markets asked about the long-term outlook for property organic growth, questioning if the baseline for future years should be lowered due to current declines. He also inquired about the M&A pipeline and the company's capacity for deals given its current leverage.

Answer

CEO Timothy Turner expressed optimism that the property rate decline is a short-term challenge, given underlying loss trends, though CFO Janice Hamilton clarified this optimism is not reflected in current guidance. On M&A, Hamilton noted that despite leverage at 3.5x, the company has ample capacity for deals. Founder & Executive Chairman Patrick Ryan confirmed the M&A pipeline remains robust with both tuck-in and large opportunities, viewing it as a key driver of future organic growth.

Michael Zaremski asked about potential seasonality in the 2025 organic growth outlook and sought clarification on whether the planned investments are more people-focused or technology-focused.

Answer

CFO Janice Hamilton confirmed that seasonality would be consistent with past years, noting Q2 would be a tough property comp. Executive Patrick Ryan elaborated on the tough Q4 2023 comp but reiterated long-term bullishness on property. CEO Tim Turner explained that investments are a mix, but efficiency gains from new technology and systems will primarily impact compensation expenses over time, helping them reach the 35% margin target.

Michael Zaremski sought to quantify the contribution of panel consolidation to organic growth. He also asked if the company was seeing a real-time stabilization in property pricing despite some conflicting market data, and whether any new seasonality should be considered for Q4 given the portfolio's evolution.

Answer

An executive explained that while panel consolidation is difficult to measure precisely, it is a significant part of new business wins and represents a major future opportunity. They confirmed seeing evidence of property market stabilization in recent weeks, with pricing moving into a 'minus 5% to plus 5%' range. Finally, the executive stated there has been no material change to the company's historical seasonality, with Q4 remaining the largest quarter for revenue.

Michael Zaremski from BMO Capital Markets asked for more details on the alignment and structure of Skyward's relationships with MGAs in which it holds an ownership stake. He also sought clarification on pricing commentary that excluded global property and inquired about headcount growth expectations.

Answer

CEO Andrew Robinson described the MGA relationships as deeply strategic and not transactional, highlighting a 20% stake in a key partner that comprises a significant portion of the division's premium. He confirmed that excluding global property from pricing metrics was new, noting that global property net rates were down high-single-digits. Robinson also pointed to improved operating leverage and productivity gains from technology and AI, which influences their headcount strategy.

Michael Zaremski asked for the size of the Agriculture book and its exposure to the U.S. crop season, and also inquired about any notable reserve movements during the quarter.

Answer

CEO Andrew Robinson noted the Agriculture book was about $30 million last year and is now considerably larger, with U.S. multi-peril crop being a smaller portion of the global book. He confirmed it's a good crop year but stated Skyward has not yet adjusted its conservative loss picks. Both he and CFO Mark Haushill confirmed it was a 'very quiet quarter' for reserves with no notable puts or adds.

Michael Zaremski asked about the expected ROEs in property catastrophe reinsurance, particularly in Florida, the strategy for growing in the SME marketplace, and the outlook for the mortgage insurance business.

Answer

CEO Nicolas Papadopoulo stated that property cat ROEs remain very attractive, with pricing firm in lower layers despite competition on higher layers. He and CFO & Treasurer François Morin clarified the SME strategy is focused on the mid-market via the recent acquisition, not small business. Morin added that the mortgage insurance outlook is stable, as the portfolio was constructed to be resilient in the current housing environment.

Michael Zaremski inquired about Arch's catastrophe load guidance given the increased deployment of capacity into catastrophe lines and asked for more detail on the competitive pressures within the London specialty market.

Answer

CFO François Morin stated that the full-year cat load guidance of 7-8 points should remain relatively stable. Executive Nicolas Alain Papadopoulo added that the Florida outlook is flattish but presents growth opportunities. Regarding London, he explained that competition has increased due to competitors' expanding appetite in lines like terror and marine, and less business flowing in from local international markets.

Michael Zaremski of BMO Capital Markets asked about the drivers for the increased catastrophe load guidance, the current casualty and general liability environment, and the potential for changes to the Bermuda Deferred Tax Asset (DTA).

Answer

Executive François Morin explained that the higher 7-8% cat load is driven by the MidCorp acquisition's property-heavy book, not just recent wildfire losses. He affirmed comfort with casualty reserves, noting that while initial loss picks are being prudently increased due to uncertainty, it is not a reaction to adverse development. Regarding the DTA, Morin noted that while OECD guidance might limit future realization, Arch is currently following unchanged Bermuda law.

Michael Zaremski from BMO Capital Markets questioned the company's loss assumptions for Hurricanes Helene and Milton, the reasons for the recent CEO transition, and whether any strategic shifts are forthcoming under new leadership.

Answer

Executive François Morin provided an industry loss estimate of $12-14 billion for Helene and around $30 billion for Milton, with Arch's share expected to be proportional. CEO Nicolas Alain Papadopoulo stated the CEO change was a personal decision by his predecessor and not performance-related. He assured investors that the strategy remains unchanged, emphasizing a "business as usual" approach.

Michael Zaremski of BMO Capital Markets asked about the investment portfolio, specifically why the annualized yield ex-LPs has remained flat despite a much higher reinvestment yield. He also inquired about policy retention trends and targets in Small Business and Middle Market.

Answer

Chairman & CEO Christopher Swift confirmed no change in investment philosophy. CFO Beth Costello clarified that the overall yield has been pressured by lower yields on variable rate securities. On retention, President A. Morris Tooker stated that current levels in the mid-80s for Small Business are on plan, and the incrementally lower retention in Middle Market is also as expected.

Michael Zaremski of BMO Capital Markets asked about the outlook for pricing in social inflation-exposed casualty lines and the drivers behind the strong growth and market share gains in the E&S business.

Answer

CEO Christopher Swift reiterated that social inflation remains a persistent problem. Executive Adin Tooker added that GL and excess lines pricing remains strong and in excess of trend. Regarding E&S, Tooker explained their strategy involves applying successful small business technology to the wholesale market and strategically expanding relationships. In Global Specialty, growth is driven by building out non-construction lines on the back of strong existing wholesale partnerships.

Michael Zaremski of BMO Capital Markets sought more detail on general liability trends, asking if they were concentrated in specific areas like account size. He also asked whether the disciplined commercial pricing environment is being driven more by loss trends than by the benefit of higher investment income.

Answer

CEO Christopher Swift and executive Adin Tooker clarified that increased attorney representation is a broad issue not concentrated by account size. On pricing, Swift stated the environment is "principally driven by loss trends," not investment income, as the company focuses on maintaining its strong underwriting margins. Tooker added that navigating the difficult environment requires sophisticated tools and disciplined underwriting choices.

Michael Zaremski from BMO Capital Markets asked to quantify the portion of commercial loss trend from social inflation and sought a prospective view on the large account property market's pricing cycle.

Answer

Chairman & CEO Evan Greenberg responded that while it's difficult to isolate the impact of litigation finance, they can measure the economic effects of state-specific liability laws. On large account property, he described it as a capital-driven trading market, stating that while economics will eventually force a correction in response to losses, the timing is uncertain and depends on catastrophe activity.

Michael Zaremski from BMO Capital Markets asked to quantify the impact of litigation finance on commercial loss trends and sought an outlook for the large account property market given recent price declines.

Answer

Chairman & CEO Evan Greenberg stated that quantifying litigation finance's impact is difficult, but they can measure the effect of state-specific liability laws. On large account property, he described it as a capital-driven trading business that is currently on the edge of underpricing. He believes economics will eventually force a correction in response to losses, but the timing is uncertain.

Michael Zaremski questioned the outlook for double-digit EPS growth, seeking clarity on Chubb's view of catastrophe inflation. He also asked for commentary on North America commercial lines, specifically regarding social inflation and the quarter's strong reserve releases.

Answer

Chairman and CEO Evan G. Greenberg explained that while he cannot predict inflation or FX, the company continuously updates its view of catastrophe risk by peril and is not focused on quarter-to-quarter volatility. Regarding reserve releases, he noted that the quarter involved a review of a smaller cohort of portfolios and cautioned investors against focusing too narrowly on North America, emphasizing the significant contribution of Chubb's global operations.

Michael Zaremski followed up on the secular changes in the U.S. middle market, asking if Chubb's advantages reduce the need for M&A, and also inquired about the recent increase in equities in the investment portfolio.

Answer

Chairman and CEO Evan G. Greenberg reiterated that the company's focus in the small and middle market is organic growth, with any inorganic moves being purely opportunistic. CFO Peter Enns clarified the increase in equities was a GAAP reclassification of ~$5 billion of investment-grade corporates into a fund for efficiency, not a change in underlying investment strategy.

Michael Zaremski from BMO Capital Markets inquired about the primary drivers for organic growth in the Risk and Insurance Services (RIS) segment, asking if nominal GDP is the main factor. He also asked about the company's confidence in managing profit margins amidst current uncertainties.

Answer

President & CEO John Doyle agreed that nominal GDP is a key factor for RIS growth but noted current headwinds from slowing U.S. economic activity, deferred projects, and declining P&C pricing. He affirmed the company's confidence in managing profitability, citing extensive scenario planning and reiterating the outlook for an 18th consecutive year of margin expansion.

Michael Zaremski of BMO Capital Markets inquired whether nominal GDP is the primary driver for the Risk & Insurance Services (RIS) segment's organic growth, more so than pricing. He also asked if management remains confident in its ability to manage profit margins despite macro uncertainties.

Answer

President & CEO John Doyle agreed with the characterization of RIS growth drivers, noting that a defensive posture from US businesses, along with declining P&C pricing and lower fiduciary income, are current headwinds. He affirmed confidence in managing the business for margin expansion, stating that the company's performance is tracking with expectations and that they consistently scenario-plan for various economic conditions.

Michael Zaremski inquired about Marsh McLennan's expense management playbook amid macro uncertainty and asked for an outlook on global property insurance rates, which have been decelerating.

Answer

President and CEO John Doyle confirmed the company models downside scenarios and has levers to pull, such as reducing discretionary spending and slowing hiring, without damaging long-term growth. On pricing, Doyle, along with Marsh CEO Martin South and Guy Carpenter CEO Dean Klisura, noted that softer property rates were expected and provide client relief. South detailed the index decline, while Klisura described a competitive reinsurance market with ample capacity, leading to rate decreases for non-loss impacted property cat programs.

Michael Zaremski revisited the 'mid-single-digit' growth guidance, pressing for reasons behind the subtle change from 'or greater' and suggesting the softening large account pricing index might be a factor. He also asked about the drivers behind the flat year-over-year capital deployment guidance of $4.5 billion for 2025.

Answer

CEO John Doyle reiterated not to over-read the guidance change, identifying fiduciary income as the primary headwind, not P&C pricing, which has a more limited impact. CFO Mark McGivney explained that deploying $4.5 billion in 2025 is a strong outlook, representing a normal year of capital allocation after a record $12 billion deployment in 2024, demonstrating the company's financial flexibility and strong cash generation.

Michael Zaremski questioned how the Marsh pricing index, which turned negative, is impacting Marsh's organic growth. He also sought more detail on the U.S. excess casualty market, where rates increased approximately 20%.

Answer

President and CEO John Doyle explained that the link between the pricing index and revenue is not direct, as client buying habits also play a role, and noted the index is skewed toward large accounts. On casualty, Martin South, CEO of Marsh, confirmed the 21% rate increase in the excess book and stated that while they are not seeing capacity dislocations, there has been a significant movement of business to the E&S market, where Marsh is a major participant.

Michael Zaremski asked about the drivers of the declining contribution margin, the impact of the click/call/lead mix, whether the Q2 guide included conservatism for tariffs, and for an update on the FTC inquiry timeline.

Answer

Executive Patrick Thompson explained the company focuses on 'take rate' (contribution as a % of transaction value), which is decreasing due to a higher mix of lower-take-rate P&C business and natural compression with larger publishers. Executive Steven Yi attributed the Q1 beat to carrier conservatism wearing off. Regarding the FTC matter, both executives stated they could not comment on the timeline while in active discussions.

Michael Zaremski asked about the drivers of favorable frequency in home insurance, requested specific figures for casualty loss trend assumptions, and sought clarification on whether the catastrophe load guidance includes prior year development.

Answer

President and CEO John "Jack" C. Roche and COO Richard Lavey attributed favorable home insurance frequency to the widespread implementation of higher deductibles, which discourages smaller claims. CFO Jeffrey Farber declined to provide a single casualty loss trend number, citing significant variation by business line, but confirmed trends have moved meaningfully higher. Farber also clarified that the company's catastrophe load guidance does not assume any prior year development.

An associate for Michael Zaremski asked about the portion of the homeowners' loss ratio attributable to hail and severe convective storms, the impact of higher deductibles, and the company's strategic view on policy count in the Midwest.

Answer

President of Agency Markets, Dick Lavey, noted deductibles have risen 3.5x to 5x, significantly reducing small claim frequency. President and CEO John 'Jack' C. Roche added that the goal is not a specific policy count but managing property micro-concentrations against earnings volatility, with the expectation of returning to a more balanced growth posture by 2026.

Michael Zaremski from BMO Capital Markets inquired about the rationale for higher liability loss picks in Core Commercial, trends in reserve releases, the company's exposure to the contractors segment, the competitive pricing environment, and sought clarification on the full-year ex-CAT combined ratio guidance.

Answer

CFO Jeffrey Farber clarified the higher Core Commercial loss ratio was mainly due to a comparison against an unusually favorable prior-year quarter, with only a small increase in liability loss picks. He noted favorable reserve development across all major Core Commercial lines. President and CEO John "Jack" C. Roche and President of Agency Markets Richard "Dick" Lavey explained their contractors book is a modest portion of the portfolio. On pricing, management noted a flattening in property but an increase in liability rates. Farber confirmed they expect to beat the original 90-91% ex-CAT combined ratio guidance for the year.

Mike Zaremski of BMO Capital Markets questioned the pronounced seasonality in Q1 results, the conservative loss pick for Workers' Compensation, and the potential impact of tariffs on commercial property loss costs.

Answer

CEO John J. Marchioni explained that Q1 seasonality is driven by non-cat property and is in line with historical patterns. He justified the Workers' Comp loss pick by citing negative rate pressure, flat frequency assumptions, and medical severity inflation. Regarding tariffs, he stated the impact is manageable due to mitigants like the labor vs. material cost split and domestic sourcing, estimating a low single-digit overall impact.

Michael Zaremski questioned the pronounced seasonality in the Q1 underlying combined ratio, the conservative loss pick for workers' compensation, the potential impact of tariffs on commercial property, and reserve development in commercial lines.

Answer

CEO John J. Marchioni explained that the Q1 seasonality is normal and driven by non-cat property losses, accounting for about 1 point of the variance from full-year guidance. He justified the workers' comp loss pick by citing negative earned rates and flat frequency assumptions against medical severity inflation. Marchioni assessed the impact of potential tariffs as manageable due to mitigants like labor costs and domestic material sourcing. He also confirmed no notable prior year reserve development in commercial lines for the quarter.

Michael Zaremski inquired if the new CFO, Patrick Brennan, influenced the recent commercial auto reserve actions. He also asked if the strong underlying loss ratio in Standard Commercial Lines should be normalized for lower non-cat property losses, and if flood claim handling fees would continue into Q4.

Answer

John J. Marchioni, Chairman, President & CEO, affirmed that Selective's reserving process is a long-standing, collaborative effort and was not fundamentally changed by the new CFO's arrival. Both Marchioni and Anthony David Harnett, SVP & Chief Accounting Officer, agreed that while pricing helped the underlying ratio, non-cat property losses were volatile and averaging them over time is prudent. They also stated that the bulk of the flood claim fees were contained within Q3.

Michael Zaremski inquired about the influence of new CFO Patrick Brennan on the recent commercial auto reserve actions. He also asked about the sustainability of the strong Standard Commercial Lines underlying loss ratio and whether flood claim handling fees would continue into Q4.

Answer

CEO John J. Marchioni affirmed that while new CFO Patrick Brennan's experience is valuable, the reserve process is a long-standing, collaborative effort and the recent actions were consistent with this established process. Both Marchioni and SVP & Chief Accounting Officer Tony Harnett advised against run-rating the quarter's strong non-cat property results, expecting a return to more normal levels. They also indicated the bulk of Hurricane Helene-related flood fees were recognized in Q3.

Michael Zaremski of BMO Capital Markets asked for context on the 9% general liability (GL) loss trend assumption relative to history, questioned if the recent reserve charge was a comprehensive "kitchen sink" event, and sought to understand why commercial auto reserves did not require similar strengthening. He also asked about the rationale for sequential quarterly reserve additions and inquired about the catastrophe loss trend assumption.

Answer

John J. Marchioni, Chairman, President & CEO, explained the 9% GL trend is severity-driven and applied to a higher starting point based on recent experience. He differentiated commercial auto by noting it was impacted by severity trends earlier, has a shorter tail, and has benefited from stronger pricing for a much longer period. He described the reserve actions as a prudent response to adverse emergence over two consecutive quarters. Regarding catastrophes, he stated their assumption has already increased to 5.5% and that recent pressure has been more pronounced in personal lines.

Speaking on behalf of Michael Zaremski, an analyst asked if the tax rate guidance includes OECD Pillar 2 impacts and questioned the key puts and takes for the double-digit free cash flow growth forecast in 2025.

Answer

CFO Edmund Reese confirmed the 19.5%-20.5% tax rate guidance contemplates all currently known policy changes, including Pillar 2. For free cash flow, Reese cited operating income growth, working capital improvements, a ~$300M contribution from NFP, and lower one-time costs as key drivers. CEO Gregory Case reiterated the commitment to double-digit FCF growth from 2023 to 2026.

Michael Zaremski sought to understand the components of organic growth acceleration and asked about the progress and future updates regarding revenue synergies from the NFP acquisition.

Answer

CFO Edmund Reese clarified that organic growth continues to be driven primarily by strong net new business, consistent with historical trends, rather than market impact. Regarding NFP, Reese and President Eric Andersen expressed high confidence in meeting synergy targets, noting they are tracking ahead on EPS accretion. Andersen provided examples of cross-selling Aon's analytical tools to NFP clients, while CEO Gregory Case highlighted that the 'independent and connected' model is also attracting new M&A targets and talent.