Mike Zaremski

Mike Zaremski asked about the potential top-line impact of the new reinsurance program, particularly on personal lines. He also questioned if anything is changing in workers' compensation given increasing next-year bookings despite consistent reserve releases. Finally, he sought insights into the commercial lines competitive environment, asking if industry pricing moderation has stabilized and about Cincinnati Financial's 'offense' strategy.

Answer

CFO Mike Sewell clarified that the catastrophe reinsurance program applies to both commercial and personal lines, noting its significant benefit to personal lines in 2025. CEO Steve Spray added that the program's overall rate decreased by 7% despite additional coverage. For workers' compensation, Sewell highlighted consistent favorable reserve development ($20 million in Q4, $65 million for the year), primarily from prior accident years. Spray noted the company's cautious approach due to the rate environment and limited presence in monopolistic states. Regarding competition, Spray affirmed Cincinnati Financial is 'on full offense' through product and agency expansion, but not by compromising risk selection or cutting rates. He opined that casualty lines pricing should not continue to face pressure due to loss cost headwinds, and the company will prioritize risk-adjusted returns.

Mike Zaremski from BMO Capital Markets first asked about the potential top-line impact of the new reinsurance program, particularly on personal lines. He then inquired about the increasing current accident year booking for workers' compensation and any underlying changes, despite consistent reserve releases. Finally, he sought the company's perspective on the commercial lines competitive environment and whether industry pricing moderation is stabilizing.

Answer

Executive Vice President and CFO Mike Sewell clarified that the catastrophe reinsurance program benefits both commercial and personal lines, noting its significant impact on personal lines in 2025, and that the overall program rate decreased by 7% despite increased coverage. Regarding workers' compensation, Mr. Sewell highlighted consistent favorable reserve development, while President and CEO Steve Spray explained their cautious approach due to the rate environment and the line's smaller impact on the overall commercial book. Mr. Spray affirmed the company is 'playing full offense' through product expansion and agency growth, but not by sacrificing underwriting discipline or cutting rates. He expressed skepticism that casualty pricing would continue to moderate given loss cost headwinds.

Mike Zaremski asked about the underlying loss ratio trend in the reinsurance segment, noting it's nudging higher, and whether this trend should continue into 2026 given expected downward rate pressure. He also inquired about other items that could free up more capital, such as the mortgage segment releasing regulatory capital. Finally, he sought additional context on Nicolas Papadopoulo's statement that North America rates are keeping pace with trend while international rates are slightly below, especially considering US lawsuit inflation.

Answer

CEO Nicolas Papadopoulo confirmed that reinsurance margins are under pressure due to pricing and increasing ceding commissions, expecting the underlying loss ratio to nudge higher, but emphasized Arch Capital's diversified platform. CFO François Morin stated no material difference is expected in capital release from the mortgage segment, noting MI capital has been distributed, and that 2026 should be a continuation of 2025 regarding capital management. Nicolas Papadopoulo clarified his remarks are based on Arch Capital's portfolio, with North American casualty rates (a long-term focus) being above trend, offsetting short-term lines.

Mike Zaremski asked for Arch Capital's view on a normalized loss ratio for its mortgage business, considering its historical outperformance and the current market cycle. He also sought an update on inorganic opportunities, specifically regarding U.S. small commercial, and Arch's perspective on the growth and impact of the MGA marketplace on the industry.

Answer

CFO Francois Morin reiterated a normalized loss ratio in the 20% range across the cycle for the mortgage business, emphasizing that home prices are the key driver of performance. He noted strong home prices, supported by lack of inventory, as the reason for outperformance and expects continued strong performance, though it might inch up slightly over time. CEO Nicolas Papadopoulo added that underwriting remains excellent, with improving FICO distributions. Mr. Morin stated that while the wish list for M&A is long (including middle market and other areas), Arch won't hold excess capital solely for potential M&A, highlighting their strong balance sheet and flexibility. Mr. Papadopoulo expressed a bearish view on the MGA model, citing historical underperformance, lack of incentive alignment, and delayed information to carriers, questioning its long-term outcome.

Mike Zaremski asked about Arch Capital's view on a normalized loss ratio for the mortgage business, considering recent historical performance and the impact of home prices. He also sought an update on inorganic growth opportunities, specifically regarding U.S. small commercial, and management's perspective on the growth and impact of the MGA marketplace.

Answer

François Morin (EVP, CFO, and Treasurer) reiterated a normalized mortgage loss ratio in the 20% range across the cycle, emphasizing that strong home prices, supported by lack of inventory, continue to drive outperformance. Nicolas Papadopoulo (CEO) added that underwriting remains excellent with improving FICO distributions. François Morin stated that while the M&A wish list is long, Arch won't hold excess capital solely for potential transactions, noting the strong balance sheet and flexibility. Nicolas Papadopoulo expressed a bearish view on the MGA marketplace, citing historical issues with incentive alignment and information delays, questioning its long-term outcome.

Mike Zarembski asked for directional insights into the non-cat property benefit in homeowners' insurance to understand the run rate, and the 'North Star' for personal lines growth in the current competitive environment. He also sought clarification on what drove reinstatement premiums (CAT or casualty) and the company's view on lawsuit inflation trends in the U.S.

Answer

CFO Jeff Farber was reluctant to isolate the non-cat property benefit due to multiple factors but suggested the full-year 47.5% loss ratio might need to increase slightly. COO and President of Agency Markets Dick Lavey outlined the personal lines 'North Star' as being the best market for preferred accounts in the IA channel, aiming for thoughtful growth, diversification, and expansion into prestige accounts, targeting mid-single-digit growth. Jeff Farber clarified that reinstatement premiums were related to large property loss exposure in the property per risk program, not catastrophes. CEO Jack Roche noted that liability severity trends are maturing, possibly leveling out, and emphasized Hanover's prudent reserving and claim strategies to manage the litigious environment.

Mike Zaremski asked about the directional non-CAT property benefit in homeowners, the 'North Star' for Personal Lines PIF growth, the drivers of reinstatement premiums, and the company's view on lawsuit inflation trends. He also followed up on the impact of the recent winter storm on Q1 2026 CAT estimates.

Answer

CFO Jeff Farber was reluctant to quantify the non-CAT property benefit due to multiple factors but suggested the full-year 47.5% loss ratio might need to increase. COO and President of Agency Markets Dick Lavey stated the Personal Lines 'North Star' is to be the best market for preferred accounts in the IA channel, targeting mid-single-digit growth. Jeff Farber clarified reinstatement premiums were for large property loss exposure, not CAT. President and CEO Jack Roche believes liability severity trends are 'pretty mature' and possibly leveling out, emphasizing prudent reserving. Jeff Farber confirmed Winter Storm Fern was the main Q1 CAT event, with no change to the 6.1% Q1 CAT estimate.

Mike Zaremski of BMO Capital Markets asked for details on the Q3 catastrophe load guidance, the competitive landscape in commercial lines, and the outlook for net investment income, including current reinvestment rates.

Answer

EVP & CFO Jeffrey Farber confirmed the 6.8% Q3 cat load, attributing improvements to actions in both personal and commercial lines. President & CEO John Roche and EVP & COO Richard Lavey stated that while property pricing is competitive, liability lines are firming, and their diversified portfolio provides resilience. Farber added that the reinvestment rate is around 5% or the low 5s.

Mike Zaremski asked for a directional sizing of the favorable non-cat property experience for the quarter and full year, and a broader perspective on whether the AI revolution will make technology a much bigger differentiator, potentially leading to M&A or greater industry consolidation.

Answer

CEO Christopher Swift estimated the full-year non-cat property experience was probably one point ahead of expectations. CFO Beth Bombara added that the property book has been performing very well. Swift believes AI is a game-changer, making scale matter for multi-year investments in workflows and customer experiences. He suggested a 'have and have not' scenario could emerge, similar to the life insurance industry's consolidation, potentially driving M&A in P&C.

Mike Zaremski asked for directional sizing of the favorable non-cat property experience for the quarter and full year. He also inquired about whether the AI revolution and technology adoption would cause technology to be a much bigger differentiator than in the past, potentially leading to M&A or greater industry differentiation.

Answer

CEO Christopher Swift estimated the full-year non-cat property experience was probably 1 point ahead of expectations. CFO Beth Bombara added that the property book has been performing very well. Christopher Swift affirmed that technology is a game-changer, and scale matters for multi-year investments in workflows and customer experiences. He suggested a 'have and have not' scenario similar to the life insurance industry, where top players control a large share. A. Morris Tooker, Head of Business Insurance, added that for small and middle business, technology is a game-changer that will set a new bar for serving agents and brokers.

Mike Zaremski asked about the opportunity for consolidation in the small commercial space and whether The Hartford's growing market share (currently less than 5%) could lead to friction with agency partners. He also sought high-level insights on pricing power in small to mid-commercial, questioning if the industry's healthy ROEs are overshadowing elevated loss cost trends and influencing the forward trajectory of pricing.

Answer

President Mo Tooker stated that The Hartford's small business market share is less than 5%, so no friction with agency partners has been felt, highlighting positive feedback on technology, efficiency, consistent appetite, and service capabilities. Chairman and CEO Christopher Swift acknowledged healthy industry ROEs but emphasized that the insurance business involves long-term risk and variability in loss cost trends, requiring prudent pricing. He stressed the goal of maintaining margins and keeping pace with loss cost trends, noting that lines like workers' compensation are lead products for account rounding.

Mike Zaremski from BMO Capital Markets asked about opportunities for consolidation in the small commercial space and whether The Hartford's growing market share might create friction with agency partners. He also sought insights on the forward trajectory of pricing power in small to mid-commercial, considering the industry's healthy ROEs versus elevated loss cost trends.

Answer

President Mo Tooker stated that The Hartford's small business market share is less than 5%, and no friction has been felt with agency partners. He highlighted the company's superior technology, consistent appetite, and service capabilities as key differentiators driving continued market share gains. Chairman and CEO Chris Swift discussed the industry's healthy ROEs in the context of risk-taking and variability in loss cost trends, emphasizing The Hartford's focus on maintaining margins and keeping pace with loss cost trends to deliver fair returns for shareholders. He also noted the strategic importance of workers' compensation as a lead product for account rounding.

Mike Zaremski asked, based on Rob Berkley's experience with past cycles, if he has seen a cycle where casualty pricing decelerates despite social inflation, with ROEs eroding off high levels. He also sought clarification on 'meeting the customer where they wish to be met,' asking if it referred to direct-to-consumer or different types of business with traditional brokers.

Answer

CEO Rob Berkley stated they are not currently seeing signs of casualty pricing deceleration for General Liability or excess and umbrella, though auto liability remains problematic. He clarified that the relationship between carriers and distribution has evolved, and customer behavior is shifting towards convenience and self-serve. WR Berkley serves customers through wholesale, retail, direct-to-customer, and new ventures like Berkley Embedded, adapting to customer preferences without undermining partners.

Mike Zaremski asked if the current competitive environment in casualty pricing, despite social inflation, is a familiar cycle where pricing decelerates before real pain, and sought more color on W. R. Berkley's strategy for meeting customers through various distribution channels.

Answer

CEO Rob Berkley stated that while GL and excess/umbrella are not showing signs of irrational deceleration, auto liability remains problematic. He elaborated on distribution, noting the evolving relationship between carriers and traditional distribution, and emphasized meeting customers 'where, when, and how they wish to be met' through wholesale, retail, direct-to-customer, and new ventures like Berkley Embedded, prioritizing convenience over price for many customers.

Mike Zaremsky asked about Travelers' expected organic headcount growth or shrinkage for the year, given the technology initiatives. He also inquired about the sequential change or trend in casualty commercial pricing, specifically non-workers' compensation lines.

Answer

Alan Schnitzer (Chairman and CEO, Travelers) declined to project specific headcount numbers but noted that premium per employee is increasing due to productivity and efficiency initiatives and is expected to continue rising. Greg Toczydlowski (President of Business Insurance, Travelers) stated that umbrella renewal premium change was double-digit, and General Liability (GL) was running in the mid-single digits.

Mike Zaremski inquired about Travelers' view on loss cost inflation, asking if it has changed or is flattening, given reserve release and loss ratio trends. He also asked about Homeowners RPC trends, terms and conditions changes, and whether the consensus 95% combined ratio target is appropriate given Auto's profitability.

Answer

Dan Frey, EVP and CFO, stated that net favorable prior year development (PYD) continued despite an asbestos charge, but PYD doesn't set a trend. He noted that loss trend hasn't moved dramatically and has been stable for a while. Michael Klein, EVP and President of Personal Insurance, explained that Homeowners RPC remains elevated due to aligning insured limits with replacement costs, expecting it to drop to single digits in early 2026. He declined to disclose target combined ratios by line but expressed satisfaction with underlying combined ratio improvements.

Mike Zaremski with BMO inquired about the negative trend in personal auto premiums per policy, seeking to understand if it's driven by Florida rate reductions, policyholder switching, or other factors. He also asked about Progressive's capital management framework, specifically regarding share buybacks versus special dividends.

Answer

Tricia Griffith, President and CEO, attributed the negative average written premium to rate decreases and competitive segment changes, noting the significant impact of Florida's legislative changes. On capital management, she outlined three uses for excess capital: growth, share buybacks (especially when stock is undervalued, and to offset stock compensation), and potential dividends, which are discussed with the Board. John Sauerland, CFO, elaborated on regulatory and contingency capital layers.

Mike Zaremski questioned the negative trend in personal auto premiums per policy, seeking clarification on whether this is due to Florida rate reductions, policyholder switching, or other factors, and also inquired about Progressive's capital management framework, particularly regarding share buybacks.

Answer

President and CEO Tricia Griffith attributed the premium per policy trend to rate decreases, following significant increases in 2023-2024, and the Florida situation, which involves ongoing accrual revisions and planned rate reductions. She commended Florida's House Bill 837 for its positive impact on the state's insurance market. Regarding capital, Griffith stated that excess capital is prioritized for growth, then share buybacks when the stock is below intrinsic value, and finally, dividends, with ongoing board discussions. She clarified that the company is always cognizant of stock valuation and takes action when appropriate.

Mike Zarembski asked about the estimated impact of lumpy life sales on next year's organic growth outlook. He also questioned what other levers, beyond renewal premium changes, will drive strong organic growth next year, and if there are other 'Assureds' or similar roll-up opportunities available for M&A.

Answer

CFO Douglas K. Howell expects 2026 to be more favorable for lumpy life sales due to potential rate drops or stabilization, which could fuel demand. He explained that the 'opt-in' era for coverages and underinsured values will drive growth, along with Gallagher's value proposition. Chairman and CEO J. Patrick Gallagher, Jr. confirmed that many other 'Assureds' and independent firms exist, and Gallagher would consider other large opportunities while continuing its tuck-in strategy.

Mike Zaremski asked about the trends for the lender-placed business beyond Q4, given its past rapid growth and current highlight as a tough comparable.

Answer

Powell Brown, President and CEO, confirmed it's a great business with strong organic growth but is now growing less quickly due to past growth and competition. Andrew Watts, CFO, added that growth isn't from increased lender-placed ratios (indicating economic health) and that long sales cycles lead to revenue bursts.

Mike Zaremski inquired about the Thrive program's cost-to-savings ratio, noting the $500 million in costs for $400 million in savings as favorable compared to peers. He asked for details on why this ratio is so efficient and how much of past savings have historically been reinvested into the business. He also asked if the U.S. RIS segment's organic growth should be expected to continue its current trend, given economic uncertainty, talent-related headlines, and decelerating pricing.

Answer

President and CEO John Doyle and CFO Mark McGivney explained that the favorable cost-to-savings ratio for the Thrive program is due to building on existing work, particularly in leveraging low-cost locations and simplifying the organization, with most costs related to severance and work transition. Mr. McGivney confirmed a high degree of confidence in the estimates and that the majority of savings would flow to the bottom line. Mr. Doyle addressed U.S. RIS organic growth, noting a bit of hesitancy from larger U.S. clients due to an uneven economy and trade uncertainties, but expressed overall satisfaction with Marsh's 4% growth in the quarter and 5% year-to-date, despite pricing pressures. He also clarified that recent talent headlines had no material impact on the company's overall performance.

Mike Zaremski followed up on expectations for U.S. organic growth, particularly on the Risk and Insurance Services (RIS) side, given economic uncertainty, recent talent-related headlines, and likely decelerating pricing, asking if the current trend line should be expected for the near term.

Answer

John Doyle, President and CEO of Marsh McLennan, stated that the talent headlines had no material impact on the overall company. He acknowledged some hesitancy from larger U.S. clients due to economic uncertainty but expressed satisfaction with the company's overall growth, including Marsh's 4% underlying growth in the quarter. He emphasized that despite pricing pressures and a potentially slowing economy, the rising 'cost of risk' (e.g., extreme weather, liability, healthcare) ensures resilient demand for Marsh McLennan's services.

Mike Zaremski asked why Allstate doesn't trade off some of its high expected ROE for more sustainable organic growth by writing business at a slightly worse combined ratio, given that growth is a key focus.

Answer

Thomas Wilson (executive) responded directly, stating, 'we think can do both.' He explained that Allstate has historically operated with a superior combined ratio while remaining competitive and pointed to a competitor that successfully achieves both strong growth and profitability. Wilson believes executing on growth is the primary way to unlock a higher valuation multiple for the company.

Representing Mike Zaremski of BMO Capital Markets, Charlie asked about the key variables behind the wide 11-16% organic growth guidance for 2025. He also sought clarification on the impact of delayed public company costs on the EBITDA margin outlook, the nature of contingent commission calculations, and the expected timeline for new agent consolidation.

Answer

Executive Richard Bunch explained the organic growth range is influenced by potential rate volatility in auto insurance and capacity constraints in property markets like California. For EBITDA margins, he noted 2024 only included half a year of public company costs and that the 2025 guidance is conservative, not fully factoring in potentially higher contingent commissions. He detailed that contingent commission calculations are complex and vary by carrier, making them hard to forecast. Finally, he anticipates new agent consolidation will largely resolve during 2025.

Mike Zaremski of BMO Capital Markets questioned why casualty pricing was accelerating to 12% if loss costs are well below that level and attempted to ask about future guidance for the Life Insurance business.

Answer

Chairman and CEO Evan G. Greenberg explained that the 12% pricing increase is a blended result across a diverse portfolio; while most of the book is adequately priced, certain areas require accelerated rates to achieve adequacy. He cut off the second question, reiterating that his comment on the 2024 life income target was a one-time clarification and not a precedent for future guidance.