Mitchell Rubin

Mitch Rubin inquired about the underlying loss trend in the transportation portfolio, asking for quantification and the level of rate increases RLI believes will be required in 2026 to maintain rate adequacy. He also asked for additional detail on how technology investments have impacted underwriting performance, specifically submission-to-bind ratios in transactional surety.

Answer

Craig Kliethermes (President and CEO) stated that RLI anticipates continuing to seek double-digit rate increases (10-15%) in auto businesses due to elevated severity trends since COVID, emphasizing that RLI will get smaller if it cannot cover trend. Jen Klobnak (COO) detailed technology investments in three main areas: improving customer experience by simplifying application questions and modernizing systems (e.g., Insurity upgrade for surety bonds), driving efficiencies through AI and automation (e.g., summarizing submissions/claims, updating loss runs), and enhancing the feedback loop between underwriting, claims, and analytics with granular, daily data and dashboards for better decision-making.

Mitch Rubin asked about the underlying loss trend in the transportation portfolio, the required rate increases for 2026, and how RLI's technology investments have impacted underwriting performance, particularly submission-to-bind ratios in transactional surety.

Answer

Craig Kliethermes (President and CEO) stated RLI anticipates continuing double-digit rate increases (10-15%) in auto businesses due to elevated severity trends since COVID, and will reduce volume if rates don't cover the trend. Jen Klobnak (COO) detailed technology investments in three areas: improving customer experience (simplified applications, modern systems like Surety upgrades), enhancing efficiencies (AI, automation for administrative tasks), and strengthening the feedback loop (data infrastructure, granular dashboards for underwriting and claims decisions).

Mitch Rubin asked for an update on California's progress with carrier participation and the potential impact of a full panel of carriers. He also inquired about further room for improvement in managing non-advertisement costs, or if most incremental leverage would come from technology investments.

Answer

Jayme Mendal (CEO, EverQuote) reported California is steadily ramping, a top three to five state in Q3, with meaningful upside, hoping for a steady-state environment in 2026. Joseph Sanborn (CFO, EverQuote) stated they continuously seek efficiency, with headcount up 10% but operating costs flat year-over-year due to technology investments (e.g., AI, copilots) driving productivity and automation, which will be a primary source of leverage.

Mitchell Rubin of Raymond James, on behalf of Greg Peters, asked for color on the revenue trend in the home insurance vertical and inquired about the expected quarterly cadence of the new share repurchase program.

Answer

CFO Joseph Sanborn highlighted the home vertical's strong Q2 performance, with 23% year-over-year growth, attributing it to a more stable underwriting environment. He also explained that the new share repurchase program will be executed opportunistically based on market conditions and does not have a pre-planned quarterly cadence.

Mitch Rubin, on behalf of Greg Peters, inquired about the 2025 free cash flow outlook and the impact of the vacated FCC rule on cash operating expenses.

Answer

CFO Joseph Sanborn stated that adjusted EBITDA remains a good proxy for operating cash flow and expects this to continue in 2025. He clarified the FCC rule change does not directly impact cash operating expenses, which are expected to increase modestly in the second half of the year to fund strategic investments while maintaining current EBITDA margin levels.

Mitchell Rubin of Raymond James, on behalf of Greg Peters, requested additional details on the favorable reserve development during the quarter. He also asked about the expansion into insuring homes with older roofs and how that strategy impacts the company's view on Probable Maximum Loss (PML).

Answer

President Jon Ritchie clarified that the favorable reserve development was driven by prior accident years, with non-catastrophe losses coming in lower than anticipated. Regarding older roofs, he explained that while they carry a higher PML than new roofs, the premium collected compensates for the increased risk. Founder and CEO Bob Ritchie added that with over 80% of the current portfolio consisting of new roofs, the impact to the overall PML from this expansion will be well-balanced and is priced accordingly.

Mitchell Rubin of Raymond James asked for additional details on the quarter's favorable reserve development and how the expansion into insuring homes with older roofs is impacting the company's view on Probable Maximum Losses (PMLs).

Answer

President Jon Ritchie explained that the favorable development stemmed from prior accident years' non-catastrophe losses performing better than anticipated. Regarding older roofs, Jon Ritchie and Founder & CEO Bob Ritchie acknowledged that while older roofs have a higher PML, the premium collected compensates for the risk, and the impact is well-balanced given that over 80% of the current portfolio consists of new roofs.