Pablo Singzon

Pablo Singzon asked Trevor Baldwin to elaborate on his seemingly bearish view on open market personal lines insurance compared to embedded solutions, specifically whether he believes digital AI agents will be able to quote and buy policies independently, with insurers providing direct quotes, similar to the controlled environment of Baldwin's embedded platforms.

Answer

Trevor Baldwin, CEO of Baldwin Group, clarified that he wouldn't go so far as to say he's bearish, but acknowledged that 35% of the personal lines market already price shops directly. He questioned whether AI-driven comparison platforms would replace direct insurer websites, noting insurers' sensitivity to quote-to-bind ratios and data costs. Mr. Baldwin strongly believes embedded distribution is a significant net winner, as it offers convenience, choice, and a trusted partner ecosystem within natural workflows, reducing the compulsion for consumers to seek third-party chatbot platforms.

Pablo Singzon asked about Trevor Baldwin's perspective on open market personal lines insurance, specifically if digital AI agents could facilitate direct quoting and buying, similar to embedded solutions but in a less controlled environment.

Answer

Trevor Baldwin (CEO, Baldwin Group) clarified he wasn't bearish but noted 35% of personal lines already price shop directly. He questioned insurers' willingness to open quoting algorithms to AI chatbots due to risks and costs. He strongly believes embedded distribution is a significant part of the future, citing the Fairway Mortgage partnership as proof, offering choice, speed, and confidence within trusted partner ecosystems.

Pablo Singzon from J.P. Morgan asked for an update on the employee benefits business, the drivers of the IAS segment's outlook for the second half, and whether the strong new business velocity seen in Q2 is expected to continue.

Answer

CEO Trevor Baldwin noted that while the employee benefits business continues to see modest rate dynamics, it is driving meaningful growth by winning new clients. For the IAS outlook, he explained the forecast normalizes for a one-time exposure benefit seen in Q2, anticipating an underlying negative rate trend to persist. While not explicitly forecasting outsized results, he expects continued top-of-industry sales velocity, consistent with the company's historical performance in the high-teens to low-20s percentage range.

Pablo Singzon of J.P. Morgan asked for an update on the employee benefits business and requested more detail on the IAS segment's outlook, reconciling strong Q2 new business with the negative forecast for rate and exposure.

Answer

CEO Trevor Baldwin stated that the employee benefits business continues to see modest rate and exposure dynamics but is driving growth through new client wins. For IAS, he explained that Q2 benefited from an unanticipated exposure increase from large energy clients. Normalizing for that, the negative outlook for the second half is based on property rate deceleration and slowing construction starts. He expects sales velocity to remain consistent with past performance.

Pablo Singzon asked for Gordy Bunch's views on why insurers might be hesitant to participate in price comparison platforms, especially given the perceived AI threat, and if this dynamic could change even with more intelligent AI platforms.

Answer

Gordy Bunch, Founder, Chairman, and CEO of TWFG, explained that historical SEO-derived comparison sites often acted as lead generators, resulting in poor customer experiences, high acquisition costs, and higher loss ratios for carriers, which TWFG avoided. He noted that while AI search is evolving, customers often still seek local advisors for complex transactions. Mr. Bunch highlighted that major carriers like Progressive and Geico are investing in independent agencies, recognizing that customer buying behavior shifts towards local advice as insurance needs become more complex over a lifetime. He also pointed out consumer hesitancy to input sensitive data for accurate online quotes and the inherent fragmentation of the property insurance market due to risk management, limiting single carriers' ability to serve all customers through online funnels.

Pablo Singzon asked about the MGA channel's disproportionately high commission income growth relative to premium and expense growth, and TWFG's approach to cost reduction or investment programs compared to industry peers.

Answer

Gordy Bunch, CEO, Chairman, and Director, TWFG, attributed the MGA's strong margin accretion to a new Florida property program where TWFG acts as an exclusive TPA MGA, generating TPA revenue without corresponding commission expense on earnouts, with normalization expected as policies renew. Regarding investments, he stated that TWFG's technology operations are structured outside the public company, allowing capital investments there without burdening the public entity, resulting in a subtly different investment approach than peers.

Pablo Singzon questioned the MGA channel's strong performance, noting 19% premium growth but significantly faster commission income growth (56%) and lower commission expense growth (27%), resulting in a highly margin-accretive quarter. He asked for an explanation of these trends. He also inquired if TWFG anticipates similar significant cost reduction or investment programs as other public brokers, and how it addresses potential concerns about underinvestment.

Answer

Gordy Bunch, CEO, Chairman, and Director, attributed the MGA's strong margin to a new Florida property program launched in Q2, which includes an exclusive TPA revenue stream for an earnout with no corresponding commission expense. He expects normalization as policies renew. Regarding investments, Mr. Bunch stated that TWFG's technology operations are structured outside the public company, allowing capital investments there without burdening the public entity, leading to a "subtly different" investment approach compared to peers.

Pablo Singzon asked for a longer-term perspective on organic growth, questioning how the growth curve might look as pricing moderates and whether this moderation could offset new business gains. He also questioned the reaffirmed revenue guidance, noting it implies a significant M&A contribution in the second half of the year, and inquired about the valuation multiples for recent acquisitions.

Answer

CEO Gordy Bunch expressed confidence in achieving double-digit organic growth, reaffirming the 11-14% full-year guidance. He explained that while moderating rates affect renewal premiums, this is counteracted by stronger new business growth as carriers open up capacity. Regarding M&A, Bunch confirmed the back-half weighted revenue contribution is due to the timing of deal closures throughout Q2, which will be more accretive in H2. On valuations, he stated that multiples vary by asset but are generally aligned with the company's internal M&A model, declining to provide specific figures.

Pablo Singzon from JPMorgan Chase & Co. inquired about whether Q1 expenses were fully loaded with public company costs, the sustainability of the 88% premium retention rate, the incremental expenses required for expansion, and the potential need for future spending on agent recruiting.

Answer

Richard Bunch, an executive at TWFG, clarified that public company costs are not yet fully loaded and will increase over time to meet future compliance needs. He expressed confidence in the 88% premium retention level, calling it a historical average that balances client retention with new business opportunities in a softening market. Bunch explained that onboarding new agents leverages existing infrastructure, making it a low-CapEx activity. He also noted that while TWFG plans to expand recruiting resources, it is not expected to be significantly margin dilutive, as they have already added field managers who will transition to recruiting roles.

Representing Pablo Singzon of JPMorgan Chase & Co., Judson asked for clarification on whether the minimal contribution from new agencies in 2024 was related to premium or profitability. He also inquired about the drivers of elevated Q4 capital expenditures and how that compares to a normal run-rate.

Answer

Executive Richard Bunch clarified that new agencies, starting from scratch, did not contribute significantly to premium in 2024. He explained that the elevated Q4 CapEx was a one-time event driven by the relocation of the company's home office for the first time in 20 years. He anticipates lower CapEx in 2025, with spending focused on expanding facilities in the Philippines and investing in technology and automation.

Pablo Singzon asked for more detail on the future run rate for G&A expenses, whether high new agent growth could negatively impact retention rates, and the reason for the difference between GAAP and adjusted net income tax expense.

Answer

CFO Janice Zwinggi and Executive Richard Bunch clarified that G&A will increase due to both higher professional fees and an anticipated $1.0-$1.2 million in annual salary expense from new hires. Richard Bunch explained that new agent business is classified as 'new business' and does not affect the premium retention calculation, which is based on the prior year's book. Janice Zwinggi noted the tax difference is because tax is only applied to the Public Company's pro-rata share of income, not the LLC partnership income.

Pablo Singzon from JPMorgan Chase & Co. asked about the specific contribution of product mix to the 1.8-point actual loss ratio uptick in 2025 and how this might impact the 2026 loss ratio. He also sought clarification on whether expected increases in loss ratio and acquisition expense would be fully or partially offset by a lower operating expense ratio, impacting the overall combined ratio.

Answer

Brad Mulcahey, CFO, indicated that a precise number for mix contribution to the loss ratio uptick for 2026 was not yet available, but acknowledged that casualty's growing proportion and internal mix within casualty (primary vs. excess) play a role. He stated that Bowhead aims to achieve the lowest possible expense ratio independently of the loss ratio, hoping for an offset if the loss ratio trends up, with older, lower-loss-pick accident years rolling off contributing to the mid-to-high 60s target for the loss ratio.

Pablo Singzon questioned the contribution of product mix to the 1.8 actual loss ratio uptick in 2025 and how mix impacts might be framed for 2026. He also asked if a lower expense ratio is expected to fully or partially offset potential increases in the loss ratio and acquisition expense, impacting the combined ratio.

Answer

Bradley Mulcahy, CFO, indicated that a precise number for 2026 mix impact is not yet available, as loss picks are reviewed quarterly, and mix within casualty (primary vs. excess) also plays a role. He clarified that Bowhead aims for the lowest possible expense ratio independently of the loss ratio, expecting some offset if the loss ratio trends up, with older accident years rolling off influencing the mid-to-high 60s loss ratio target.

Pablo Singzon asked about the contribution of business mix to the 1.8 point loss ratio uptick in 2025 and how mix impacts might be framed for 2026, and sought perspective on the combined ratio outlook, particularly the interplay between potential loss ratio increases and expense ratio offsets.

Answer

CFO Brad Mulcahey indicated that a precise number for mix contribution to the loss ratio uptick for 2026 is not yet available, noting that casualty's growing proportion and internal mix within casualty make it complex. Regarding the combined ratio, Mr. Mulcahey stated that Bowhead aims for the lowest possible expense ratio independently of the loss ratio, expecting some offset if the loss ratio trends up due to older, lower-loss-pick accident years rolling off, targeting a mid-to-high 60s loss ratio.

Pablo Singzon of JPMorgan Chase & Co. asked about the timing of the annual loss reserve assumption review and how current experience compares to last year's assumptions. He also questioned the narrow spread between the new money yield and the portfolio yield.

Answer

CFO Brad Mulcahey explained that the formal annual reserve review with external actuaries occurs in Q4, which is when loss picks are typically adjusted based on updated industry data. Regarding the investment portfolio, he noted the narrow 10 bps spread between the new money yield (4.8%) and portfolio yield (4.7%) reflects the success of repositioning the portfolio into longer-duration, higher-yielding assets over the past year. He stated they will not 'get fancy' to chase higher yields.

Pablo Singzon from JPMorgan Chase & Co. inquired about strategies to improve broker adoption for the Baleen platform, sought clarity on the 20% premium growth outlook, and asked about the expected impact of the higher AmFam ceding fee.

Answer

CEO Stephen Sills described expanding Baleen's distribution as requiring significant direct engagement with wholesale brokers but expressed confidence in second-half growth. CFO Brad Mulcahey positioned the 20% growth target as a comfortable medium-to-long-term guidepost, noting tough comparables in H2. He also explained the higher ceding fee will be earned gradually starting in Q2 and is factored into the low-30s full-year expense ratio guidance.

Pablo Singzon of JPMorgan Chase & Co. sought to clarify if the net impact of Q4 loss changes was positive, questioned the future trajectory of the loss ratio, and asked if expense leverage would offset the rising fronting fee and acquisition costs.

Answer

CFO Brad Mulcahey confirmed the net impact of the Q4 loss changes was positive. He clarified that the 2025 loss ratio increase would be driven more by the roll-off of older, lower-loss-pick years than by portfolio mix. He also expressed confidence that G&A expense leverage from the business scaling would offset the modest incremental increase in the fronting fee and other acquisition costs.

Pablo Singzon from JPMorgan Chase & Co. inquired about the potential to optimize investment portfolio yields, given that new money yields match the book yield, and asked for the percentage of floating-rate assets.

Answer

Chief Financial Officer Brad Mulcahey responded that there is potential to increase yield by extending duration, as the current 2.2 years is at the low end of their 2-3 year target. He also noted that new money yields have recently risen above the book yield, creating opportunity. Mulcahey did not have the specific percentage of floating-rate assets but stated the amount is likely small.

Pablo Singzon asked if Ategrity has observed any evidence of large insurance companies entering and competing in the small commercial E&S markets where Ategrity operates. He also sought clarification on the Q1 2026 growth guidance relative to the broader E&S market.

Answer

Justin Cohen, CEO, stated that Ategrity has not experienced pressure or seen new large players competing in their specific small commercial E&S markets, noting Ategrity's continued traction. Regarding guidance, Mr. Cohen clarified that their Q1 2026 growth rate is projected to be 20 percentage points above the E&S market, which they estimate to be in the mid to high single digits.

Pablo Singzon asked if Ategrity is seeing evidence of large insurance companies with established platforms entering the small commercial E&S markets where Ategrity competes. He also sought clarification on the Q1 2026 growth guidance relative to the E&S market.

Answer

Justin Cohen, CEO, stated that Ategrity has not experienced pressure or seen new large players in their competitive markets, noting the company's own traction. Regarding guidance, Mr. Cohen clarified that the company's guidance is deliberately set as a growth rate above the E&S market, which they benchmark at mid to high single digits, rather than forecasting the overall market.

Pablo Singzon from JPMorgan Chase & Co. asked about the impact of softening economic indicators on client health and Ategrity's capacity to process increasing submission volumes.

Answer

CEO Justin Cohen noted no material change in client health overall, while President and Chief Underwriting Officer Chris Schenk highlighted the 'disappearance' of low-premium 'nano accounts' and increased coverage focus among mid-sized clients due to lending and regulatory changes. Management confirmed efficient operations for high submission volumes, attributing it to front-loaded investments and streamlined quoting processes.

Pablo Singzon asked if Ategrity has observed any changes in the economic health of its end clients given softening employment and small business optimism, and whether the company can efficiently process and quote increased submission volumes without bottlenecks.

Answer

Justin Cohen (CEO) reported no direct material change in client economic health, though it varies by vertical, and confirmed efficient operations due to front-loaded investments and conservative underwriting. Chris Schenk (President and Chief Underwriting Officer) noted a disappearance of 'nano accounts' and streamlined quoting processes handling high submission volumes at lower relative cost.

Pablo Singzon asked for a perspective on 'same-store sales' growth to distinguish between existing business and new initiatives, and questioned which small business end markets are of most concern amid potential economic headwinds and tariffs.

Answer

CEO Justin Cohen explained that new initiatives accounted for nearly half of the quarter's growth, offering a proxy for organic performance. President & CUO Chris Schenk noted the difficulty in separating the two, as initiatives like Project Heartland boost legacy verticals. Cohen also highlighted the defensive nature of Ategrity's portfolio, citing multifamily and non-profits as resilient sectors.

Pablo Singzon from JPMorgan asked if the expectation for low double-digit core revenue growth in the first half of 2026 should be considered representative of the midpoint for the full-year guidance, noting a steep trajectory would be needed for mid-teens growth. He also inquired about the national rollout plan for Digital Agent 2.0, specifically outside of partnerships, and how Goosehead measures if the business generated from it is incremental rather than business agents would have generated anyway.

Answer

CFO and COO Mark Jones Jr. stated that Goosehead expects acceleration in the second half of 2026, driven by headcount growth across all three distribution channels, more partnerships coming online, and continued improvements in client retention. He reiterated Goosehead's philosophy of providing honest guidance. Regarding Digital Agent 2.0, Mark Jones Jr. explained that policies bound so far are largely from monoline home clients adding auto policies, which is incremental business for agents. President and CEO Mark Miller added that the focus is currently on expanding auto and home carrier connections in Texas, with a plan to replicate the model in other states based on carrier interest and market demand, not a full 50-state blitz.

Pablo Singzon asked if the low double-digit core revenue growth expectation for the first half of 2026 represents a realistic midpoint for guidance, implying a steep acceleration in the second half. He also inquired about the national rollout plan for Digital Agent 2.0 (excluding partnerships) and the ability to measure incremental business generated by it.

Answer

CFO and COO Mark Jones Jr. confirmed expectations for acceleration in the second half of 2026, driven by headcount growth across all distribution channels, more partnerships coming online, and continued improvements in client retention, reiterating their philosophy of honest guidance. Regarding Digital Agent 2.0, Mark Jones Jr. stated that policies bound are often incremental, such as monoline home clients adding auto policies with no additional agent effort. He plans a broader rollout to additional geographies, prioritizing based on carrier demand and partner overlap, rather than an immediate 50-state blitz. President and CEO Mark Miller added that the current focus is on Texas for auto and home carriers, with replication in other states to follow.

Pablo Singzon of JPMorgan Chase & Co. asked about the potential impact of tariffs on the business, current new business demand trends, and the long-term expectations for client and premium retention rates.

Answer

President & CEO Mark Miller and CFO Mark Jones Jr. do not expect tariffs to materially impact their business. They noted that while lead flow per referral partner is down due to the housing market, the company is adding new partners to maintain overall lead volume. Long-term, they believe client retention can return to its historical high of 89% or better, with premium retention then settling at a level reflecting that plus normalized price increases.

Pablo Singzon asked if the recent quarterly G&A expense run rate is sustainable and sought to clarify the drivers behind the decelerating benefit of pricing on premium growth, particularly the dynamics between auto and home insurance rates.

Answer

CFO Mark Jones Jr. indicated that the Q1 G&A growth rate was lower than what should be expected for the rest of the year, as technology investments will increase spending before driving long-term efficiencies. He also confirmed that auto insurance rates are flattening while home rates remain elevated, viewing the overall moderation in pricing as a net positive for client retention.

Pablo Singzon asked how Goosehead operates as more homeowners business moves to the E&S market, specifically regarding potential commission leakage, and inquired about the current magnitude of homeowners insurance price increases.

Answer

CFO Mark Jones Jr. acknowledged that E&S commission rates are lower but stated that Goosehead does not expect this to be a long-term market shift and will maintain its focus on its core business. He confirmed that homeowners pricing increases are likely higher than the overall book average, which is reflected in the gap between policies-in-force growth and premium growth.

Pablo Singzon asked about the duration of the homeowners insurance pricing cycle and the trajectory of G&A expenses following a quarter of very low growth.

Answer

CFO Mark Jones Jr. explained that the business is naturally hedged: when pricing normalizes, the company benefits from higher client retention and contingent commissions. Regarding expenses, he noted that while the 2% G&A growth in Q3 was the result of disciplined spending, it is not a new run-rate. However, he reiterated the commitment to have G&A and compensation grow slower than revenue on an annual basis to drive margin expansion.

Pablo Singzon asked if Kinsale was considering increasing reinsurance retentions to capture more premium economics, given the slowing growth. He also inquired about the slowdown in growth for Kinsale's book excluding large accounts (from 22% in 2024 to 13% in 2025), asking if it was primarily due to pricing or submission flow, and for an attribution breakdown.

Answer

Chairman and CEO Michael Kehoe confirmed that Kinsale reviews and adjusts reinsurance retentions annually to manage volatility, with the renewal process for their 6/1 program starting soon. Regarding the slowdown in growth for the ex-large account book, Michael Kehoe attributed it mostly to increased competition, which necessitates more cautious, disciplined underwriting. He noted a slight decrease in submission flow (9% ex-commercial property, down from mid-teens two years prior) but emphasized that 13% growth in this segment remains strong compared to broader market trends, highlighting the competitiveness of Kinsale's model.

Pablo Singzon asked if other public E&S insurers were taking market share from Kinsale and if competition from traditional markets/MGAs was increasing in small commercial E&S. He also questioned how Kinsale leverages its expense advantage in the current market, specifically regarding ROE targets.

Answer

Michael Kehoe, Chairman and CEO, expressed bullishness on Kinsale's opportunity, emphasizing strong margins, market share growth, and disciplined underwriting despite a competitive environment and a unique correction in one large division. He stated Kinsale manages each product line to a low 20s ROE or greater with conservative loss reserves, historically outperforming targets while prioritizing profitability.

Pablo Singzon from JPMorgan Chase & Co. asked about the outlook for other underwriting expenses over the next one to two years, given slowed premium growth, and whether Kinsale aims to manage this line to trail premium growth or if new opportunities might lead to some degradation. He also questioned if Kinsale would consider trading some of its expense ratio advantage for higher premiums and underwriting income, and if the company is satisfied with its current configuration of pricing, profitability, and volume. Finally, he asked if reinsurance retention could increase again in the next couple of years.

Answer

Michael Kehoe, CEO and Chairman, stated that other underwriting expenses are expected to gradually decline over time due to continuous efforts in efficiency and productivity gains through technology. He emphasized that Kinsale's strategy is to be as efficient as possible to offer competitively priced policies while protecting margins, and he does not see an advantageous trade-off in deliberately raising costs to become less competitive. Regarding reinsurance retention, Mr. Kehoe indicated that the current quarter's figures are the best guide, acknowledging that retention has changed many times over the years, consistent with the company's growth, and could move again based on business mix.

Pablo Singzon asked about the trajectory of other underwriting expenses given slowed premium growth, whether Kinsale would trade some expense ratio advantage for higher premiums, and if reinsurance retention could increase again in the next couple of years.

Answer

Michael Kehoe, CEO and Chairman, expects a gradual decline in other underwriting expenses due to productivity gains and technology. He stated that Kinsale would not deliberately raise costs to become less competitive, as their strategy focuses on efficiency and protecting margins. Regarding reinsurance retention, Michael Kehoe said the current quarter's figures are the best guide, but retention has historically changed over the years consistent with business growth.

Pablo Singzon asked about the potential for further price drops in commercial property, the ROE level that might trigger increased capital returns, and the composition of reserve releases between property and casualty lines.

Answer

Chairman & CEO Michael Kehoe stated the company has no special insight on future property pricing but noted the intense competition is concentrated in the commercial property division. On capital, he expects ROEs in the low-to-mid-20s and said capital allocation is reviewed annually. Regarding reserves, he reiterated a conservative stance, with good news disproportionately coming from short-tail property lines while being slower to release reserves on long-tail casualty.

Asked about underwriting appetite in large commercial property given price declines, the trend of pricing in that segment, positive signals in the casualty market, and the seasonal premium split for large commercial property.

Answer

Management stated their underwriting appetite has not changed, but lower premiums are a function of rates being down about 20% and reduced submissions. The casualty market remains favorable, with potential for further improvement if the fronting market corrects. For large commercial property, the premium split is roughly 60% in the first half and 40% in the second half, with Q2 being about 35%.

Pablo Singzon asked about the strategy of trading price for growth, specifically whether it involves cross-subsidization between lines. He also requested a breakdown of prior year development, including construction defect reserves, and the outlook for the attritional loss ratio.

Answer

President and COO Brian Haney stated that the company does not cross-subsidize, as every division must meet profitability targets; pricing is sharpened only in specific, high-margin divisions. CEO Michael Kehoe noted that favorable property results contributed to development and that while construction reserves are conservative due to past inflation, underwriting changes give them confidence in recent accident years. He suggested the flat rate environment should inform assumptions about the future attritional loss ratio.

Pablo Singzon of JPMorgan asked if the current high-teens growth rate is a new normal or if it could fall below the long-term target, similar to 2015-2016. He also inquired about policy retention trends, the process for adjusting casualty loss picks, and the rationale for choosing share buybacks over special dividends.

Answer

Executive Michael Kehoe reiterated that 10-20% is a good long-term growth estimate, though quarterly results can vary. He stated policy retention is stable around two-thirds. The reserve review is a rigorous quarterly process. The buyback was chosen because management believes in the stock's long-term value and durable competitive advantages, making it a good use of capital for long-term holders, despite its high P/E multiple.

Pablo Singzon asked about the expected contribution of higher crop retention to earnings in 2026 compared to 2025, and whether the assumed 10% reduction in reinsurance costs is on a risk-adjusted basis or absolute dollars.

Answer

Chris Uchida (CFO) explained that crop, while lower margin, provides stable earnings with a combined ratio in the low 90s, estimating an additional $8 million in pre-tax income for every $100 million and 10 points of retention. Mac Armstrong (CEO) clarified that the 10% reduction in reinsurance costs is on a risk-adjusted basis, assuming like-for-like exposure.

Pablo Singzon inquired about the expected earnings contribution from the higher crop retention in 2026 compared to 2025, and sought clarification on whether the assumed 10% reduction in reinsurance costs was on a risk-adjusted basis or absolute dollars.

Answer

Chris Uchida, Chief Financial Officer, explained that crop, while lower margin, offers stable earnings with a combined ratio in the low 90s, contributing approximately $8 million pre-tax for every $100 million and 10 points retained. Mac Armstrong, Chairman and Chief Executive Officer, confirmed the 10% reduction in reinsurance costs is on a risk-adjusted basis, assuming like-for-like exposure and modest growth in earthquake business.

Pablo Singzon of J.P. Morgan asked about the relative impact of different business lines on underwriting income, given their reinsurance structures. He also requested a qualitative growth outlook for the Inland Marine and other property segment for the remainder of the year.

Answer

CEO Mac Armstrong explained that property lines have more immediate leverage on underwriting income than nascent, quota-share-heavy casualty lines. CFO Chris Uchida highlighted that the favorable reinsurance renewal will boost the net earned premium ratio into 2026. For Inland Marine, Armstrong expressed confidence in sustained growth, driven by geographic expansion, new talent, and opportunities in builders risk and flood.

Pablo Singzon of J.P. Morgan asked which business lines have the most immediate impact on underwriting income given their reinsurance structures, and requested a qualitative growth outlook for the Inland Marine and Other Property segment.

Answer

Mac Armstrong, Chairman, CEO & Founder, clarified that property lines have a more direct impact on underwriting income, while casualty, being heavily reinsured via quota shares, has a less immediate effect. He noted this provides future leverage. For Inland Marine, he listed multiple growth drivers including geographic expansion, new talent, and the flood partnership that will sustain strong growth. Chris Uchida, CFO, added that the favorable reinsurance renewal will benefit the net earned premium ratio through 2026.

Pablo Singzon asked about the relative impact of different business lines on underwriting income, contrasting mature lines like earthquake with heavily reinsured new lines like casualty. He also requested a qualitative growth outlook for the Inland Marine and Other Property segment.

Answer

CEO Mac Armstrong explained that property lines currently have more leverage on underwriting income, while casualty's contribution is moderated by high quota-share reinsurance cessions appropriate for a nascent book. CFO Chris Uchida highlighted that favorable reinsurance renewals will boost the net earned premium ratio. For Inland Marine, Armstrong listed multiple growth drivers, including geographic expansion, new talent, and new partnerships, to sustain strong growth.

Pablo Singzon of JPMorgan Chase & Co. asked about the drivers of the higher attritional loss ratio and its future trend, potential pressure points in the raised earnings outlook, and the proportion of the inland marine book exposed to the competitive excess national property market.

Answer

Executive T. Uchida explained the attritional loss ratio will peak near 40% in Q3 due to crop seasonality, settling in the low 30s for the year. Chairman and CEO Mac Armstrong expressed confidence that diverse growth vectors can offset commercial property headwinds. Armstrong and President Jon Christianson clarified the inland marine book is well-balanced and not over-indexed to the large account excess national property sector.

Pablo Singzon asked if the incremental reinsurance limit purchased in June would align with earthquake premium growth, questioned the duration of excess growth in Casualty and Inland Marine, and sought to quantify the incremental underwriting income from increased crop participation.

Answer

CEO Mac Armstrong confirmed the reinsurance limit increase would be consistent with the mid-to-high teens earthquake growth. He projected Casualty would be the fastest-growing line after Crop, while Inland Marine would grow faster than earthquake. Executive T. Uchida provided the components to calculate the crop income impact: a business with a low-90s combined ratio on ~$200M of premium, with Palomar's participation increasing from 5% to 30%, noting the underwriting margin gained is roughly triple the low single-digit ceding fee given up.

Pablo Singzon asked for specific guidance on how quickly the attritional loss ratio is expected to increase as the business mix shifts. He also inquired about the growth drivers for residential earthquake, the influence of the E&S market migration, and the investments Palomar is making in non-underwriting functions like claims to support its diversification.

Answer

Chris Uchida, executive, projected the attritional loss ratio would increase by 3-4 points by the end of 2025, likely landing in the 26-28% range. Mac Armstrong, Chairman and CEO, attributed residential earthquake growth to dislocation in the California homeowners market and changes at the CEA, which drives business to Palomar. He also highlighted the recent hiring of Althea Garvey as Chief Claims Officer as a key investment to build out in-house claims capabilities, particularly for the growing casualty book, signaling further investments in this area in 2025.

Pablo Singzon asked CFO Allan Decleir to quantify the impact of the longer earnings pattern for asset-backed business on Net Premiums Earned (NPE) this quarter, seeking to understand the potential drag in upcoming quarters and when it might become a tailwind. He also posed a hypothetical question about Fidelis's performance in a more normal storm season, given that Q3 was light on catastrophes, to gauge how much the actual period helped or detracted from a normal quarter.

Answer

CFO Allan Decleir clarified that year-to-date NPE growth of 7% aligns with 8% gross premiums written, suggesting the year-to-date trend is a better indicator for future earning patterns, while acknowledging quarter-to-quarter fluctuations due to business mix. Group Managing Director Jonny Strickle explained that Fidelis combines large losses with catastrophe losses, and while the insurance pillar's cat impact was slightly better than normal, the reinsurance segment had a 'fantastically low loss ratio' due to a light cat quarter, which significantly boosted the combined ratio. He noted that even with a more normal cat level, results would still be well within long-term guided levels.

Pablo Singzon asked CFO Allan Decleir to quantify the impact of a longer earnings pattern for asset-backed business on net premiums earned (NPE) this quarter, seeking to understand the potential drag in upcoming quarters. He also inquired about how Fidelis's performance would have differed in a more normal storm season, given the light catastrophe quarter for the industry.

Answer

CFO Allan Decleir noted that year-to-date NPE growth aligns with gross premiums written growth, indicating that the year-to-date trend is a better indicator for earning patterns, despite some quarterly noise from business mix. Group Managing Director Jonny Strickle clarified that Fidelis combines large losses with CAT losses, including fire and man-made marine events. He stated that while reinsurance had a great quarter due to light CAT experience, the insurance segment's CAT was only slightly better than normal, and even with normal CAT levels, results would remain in line with long-term guided levels.

Pablo Singzon of JPMorgan Chase & Co. asked about the timeline for property reserves to mature to gauge future release potential and inquired about an update on outwards reinsurance recoveries mentioned in the press release.

Answer

CFO Alan Declare and Group Managing Director Johnny Strickle responded. Strickle explained that as a short-tail writer, prior year development is driven by actual loss emergence rather than changes in assumptions. He also clarified that the reinsurance recovery update was a non-P&L reallocation between pillars due to the structure of aggregate covers, and the overall loss estimate for the California wildfires had actually decreased.

Pablo Singzon requested the dollar amount of reserves held for the remaining Russia-Ukraine claims and the potential release from a favorable outcome. He also asked whether Property premium growth in 2025 is expected to be above or below the company's overall 10% growth target.

Answer

Group Managing Director Jonathan Strickle declined to provide specific reserve figures, citing the confidential nature of ongoing legal and settlement discussions, but highlighted the company's progress in derisking the exposure. On growth, CEO Dan Burrows did not provide a specific figure for the Property book but stated they see an opportunity for it to grow 'in line with our overall growth prospects for the year,' emphasizing flexibility between D&F and treaty markets.

Pablo Singzon sought to clarify if the aviation reserve addition was driven by both higher probabilities and claim payouts, and if it covered both settled and unsettled exposures. He also requested an update on the intellectual property book.

Answer

Chief Actuarial Officer Jonny Strickle confirmed the majority of the Q4 reserve increase was due to derisking through settlements, though the model for the remaining exposure was also updated. CFO Allan Decleir reported no material development in the intellectual property book, which is performing as expected. Jonny Strickle added the book is in runoff through ~2027 with fewer than five deals outstanding.

Pablo Singzon inquired about the lower G&A expense in the quarter, asking if it was unusual and what the future outlook is for this line item. He also asked if commentary on renewal timing implied a pickup in Gross Premiums Written (GPW) in Q4.

Answer

CFO Allan Decleir explained that G&A has stabilized and the current quarter's level represents a normal run rate, plus or minus inflation. Regarding GPW, Decleir clarified there's no specific implication for a Q4 pickup, noting that lumpiness in the Bespoke and Specialty segments can cause timing shifts. CEO Dan Burrows added that the overall growth trend remains positive.

Pablo Singzon of JPMorgan Chase & Co. inquired about the margin profile of the Marketplace business, the drivers of the low loss ratio, and the quarterly phasing of the $20 million in strategic annual expenses.

Answer

CFO Patrick McClymont explained that live auctions drove strong Marketplace contribution margins of 30-35%. He noted the low Q1 loss ratio reflects seasonal booking to a full-year target, with actual experience being lower. Regarding the $20 million in strategic spend, McClymont, with confirmation from Executive Jason Koval, stated it would be incurred ratably, with about 15% in Q1 and a gradual ramp-up through the year.

Pablo Singzon from JPMorgan Chase & Co. asked for clarification on how expense savings from the technology migration will phase in after 2025. He also questioned the key drivers behind the company's ambitious goal to double its policy count by 2030.

Answer

CFO Patrick McClymont explained that the elevated 2025 investments will not simply drop off but will create operating leverage as revenue accelerates in 2026 and 2027. He detailed that the significant policy growth will be driven by the State Farm partnership conversion, the new Enthusiast Plus product for modern vehicles, core business growth, and the assumption of new future partnerships.

Pablo Singzon of JPMorgan Chase & Co. inquired about the sustainability of Hagerty's expense control, the factors behind the higher underlying loss ratio, and the company's strategy for recouping hurricane-related losses through future pricing.

Answer

CFO Patrick McClymont explained that Hagerty expects continued margin expansion over time despite near-term investments in key initiatives like State Farm and a technology transformation. He clarified that the Q3 underlying loss ratio of 44% is within the normal historical range and not a cause for concern. Regarding hurricane losses, McClymont stated that a catastrophe load is already built into pricing, and the company will adjust rates as needed based on updated modeling, feathering in changes over time.