Rob Cox

Rob Cox asked about observations from the renewal of the MCE book, specifically on the delegated and non-delegated sides, and the progress of non-renewals in the programs book. He also sought Arch Capital's thoughts on the current credit environment, including any areas they are leaning into or out of, given noise in private credit.

Answer

Nicolas Papadopoulo (CEO) expressed satisfaction with the MCE acquisition, noting the stickiness of the business and the value of acquired property expertise. He stated that remediation of the delegated (MGA) side is proceeding as expected, with the impact of non-renewals likely to be seen in 2026. François Morin (EVP, CFO, and Treasurer) advised caution in the credit environment, distinguishing USMI borrowers from subprime auto risks. He affirmed comfort with current credit exposure, which is well-understood and monitored. Nicolas Papadopoulo added that COFAS, a short-term credit business, is adept at managing exposure to weaker credits.

Rob Cox asked for an update on loss trend assumptions for major lines of business, particularly liability trends, and if any assumptions were touched up this quarter. He also inquired about the exposure-related component of the 5.2% all-in pricing (or 7.3% ex-comp), asking how it has been trending versus the pure renewal rate and its contribution.

Answer

Chairman and CEO Christopher Swift reiterated that liability trends remain elevated, as reflected in pricing, and emphasized that The Hartford feels it is on top of loss cost trends, particularly ex-workers' compensation. President Mo Tooker added that trends are relatively stable, with teams actively keeping rates above loss costs in liability lines. Regarding pricing components, Christopher Swift stated that the exposure-related portion was 1.8% in the quarter, consistently representing about 25% of the 7.3% ex-comp rate, with 75% being pure rate.

Rob Cox from Goldman Sachs asked about The Hartford's loss trend assumptions for its major lines of business, specifically if any were adjusted this quarter, and sought clarification on the exposure-related component of the all-in pricing versus the pure renewal rate.

Answer

Chairman and CEO Chris Swift reiterated that liability trends remain elevated, but The Hartford feels 'on top' of loss cost trends, excluding workers' compensation, with stable comp severity trends. President Mo Tooker added that teams are actively keeping rates above loss costs in liability lines. Regarding pricing components, Mr. Swift clarified that the exposure-related portion contributed 1.8% this quarter, maintaining a consistent breakdown of approximately 75% from pure rate and 25% from exposure for the 7.3% ex-comp rate.

Rob Cox sought clarification on the retail segment's margin comments, specifically if there was a benefit from AssuredPartners' seasonality, and asked about the performance and market factors of international businesses, particularly in the UK, relative to the U.S.

Answer

CEO Powell Brown confirmed that the retail segment's margin saw a positive benefit from AssuredPartners' seasonality, a negative headwind from Quintus, and a positive contribution from underlying business management. Regarding international operations, he stated that UK performance is not dissimilar to the U.S., but noted slower GDP growth and continued rate decrease pressure, with liability rates being lower due to a less active plaintiff's bar.

Rob Cox inquired about the performance of Brown & Brown's international businesses, particularly in the U.K., relative to the U.S., and the prevailing market factors.

Answer

Powell Brown, President and CEO, stated that U.K. performance is not dissimilar to the U.S., but with slower GDP growth and rate decrease pressure. He noted that liability rates are lower due to less plaintiff's bar activity.

Rob Cox asked about catastrophe losses in the insurance segment, inquiring if there were specific geographies or large losses, or if it was a result of growth in short-tail lines. He also followed up on homeowners market opportunities and Berkley One's performance.

Answer

Rob Berkley (President and CEO) attributed cat losses to frequency with modest severity and increased exposure from leaning into the property market, advising against over-interpretation. He described Berkley One as a successful, growing business (over $500 million) that is deepening its presence in existing states rather than expanding into high-cat exposure areas like California.

Rob Cox inquired about catastrophe losses in the insurance segment, comparing them to peers and asking if specific geographies, large losses, or growth in short-tail lines were contributing factors. He also asked about opportunities in the homeowners market and Berkley One's performance.

Answer

Rob Berkley, President and CEO, attributed CAT losses to frequency with modest severity and increased exposure from leaning into the property market, advising against over-interpretation. He praised Berkley One's success as a $500M+ business, growing by deepening presence in existing states rather than expanding into high-CAT exposure areas like California.

Rob Cox asked about the deceleration of pricing in international geographies compared to the U.S., and if Marsh McLennan is more sensitive to pricing fluctuations in certain regions. He also inquired if the Thrive program, combined with the current environment, presents an opportunity for above-average margin expansion, or if it primarily helps maintain similar levels of margin expansion amidst potentially slowing organic growth.

Answer

President and CEO John Doyle noted the competitive market due to strong insurer ROEs and an uneven economy, emphasizing the long-term mismatch between price and loss cost inflation. Martin South, CEO of Marsh, detailed strong international growth (5% in Q3, 6% YTD underlying), with notable performance in Asia-Pacific, EMEA, and Latin America, despite slightly lower rates internationally, particularly in the Pacific. Mr. South stated that rate fluctuations do not overwhelmingly impact revenue. Mr. Doyle affirmed that Thrive would support future margin expansion, building on 18 consecutive years of margin growth, and is a critical focus for the leadership team, leveraging technology, automation, and talent optimization.

Rob Cox followed up on the Thrive program, asking if it, combined with the current environment, presents an opportunity for above-average margin expansion or if it primarily helps maintain past levels of margin expansion amidst potentially slowing organic growth.

Answer

John Doyle, President and CEO of Marsh McLennan, stated that Thrive would 'help support margin expansion into the future.' He highlighted the benefits of integrating operations and technology, leveraging lower-cost capability centers, and deploying AI. He reaffirmed the company's track record of 18 consecutive years of margin expansion through various economic and P&C cycles, indicating that Thrive will be an important element in continuing this trend.

Rob Cox of Goldman Sachs asked about the drivers behind the increased tax rate guidance to 19% and its potential persistence into 2026. He also inquired about the anticipated pace of execution for the new share repurchase authorization.

Answer

CFO Alan Declare confirmed the higher 2025 tax rate is due to a greater proportion of profits being generated in higher-tax jurisdictions like the UK. He noted it was too early to guide for 2026. Regarding buybacks, Declare described a multi-factored approach where capital is first prioritized for reinvestment in the business, followed by reinsurance and then shareholder returns, making the pace dependent on market conditions and opportunities.

Rob Cox noted pressure on new business and retention in the Select (small commercial) business and asked for help in sizing the company's annual expected catastrophe load.

Answer

Greg Toczydlowski, President of Business Insurance, explained that the retention dip in Select was intentional, resulting from optimizing the book for severe convective storm risk. Chairman and CEO Alan Schnitzer did not provide explicit cat load guidance but noted that recent heavy cat years are being weighed more heavily in their planning.