Pablo Singzon • J.P. Morgan

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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.

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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.

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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.

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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.

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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.

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CEO Trevor Baldwin stated that the employee benefits business continues to see modest rate dynamics but is driving meaningful growth through new client wins. For IAS, he explained that Q2's positive rate impact was skewed by large, unanticipated energy client renewals. Normalizing for this reveals underlying negative property rate trends, which informs the second-half forecast. He reiterated that the company expects to maintain its top-tier sales velocity.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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