Robert Farnam • Boenning & Scattergood

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President, CEO & Director Meryl Golden explained that the second event retention is $9 million and that a reinstatement premium applies to the first layer of the catastrophe tower. She stated that the geographic expansion is not expected to materially impact the expense ratio as the foundational teams and products are already in place. Regarding the Amgard transaction, she clarified that the total expected premium of $25-35 million remains the same, but it will be spread more evenly over three years rather than being front-loaded, due to Kingstone's higher rate levels compared to Amgard's.

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President and CEO Meryl Golden explained that the higher fire losses were a random, small-scale event within the legacy product and were offset by lower catastrophe losses, thus not requiring a guidance update. On capital management, she noted the board actively discusses restoring the dividend but does not foresee share buybacks due to growth opportunities. She acknowledged Kingstone's pricing is higher than AmGUARD's but stated this is factored into premium estimates. Lastly, she confirmed that a retained search firm is actively interviewing candidates for the CFO position.

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Executive Meryl Golden explained that growth will stem from persistent hard market conditions, as few competitors write coastal policies. She noted that while the company is exploring expansion into other catastrophe-exposed states, the immediate focus remains on New York. Golden stated a goal to reduce the expense ratio by another percentage point in 2025 and characterized Q1 2025 weather as having no material catastrophe events despite being colder than the prior year.

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Executive Meryl Golden confirmed that the 2025 guidance assumes a roughly 6% catastrophe load, reflecting a return to a long-term average, and targets a 28% expense ratio, expecting a decrease due to higher earned premiums. She described the growth as unprecedented but well-managed, noting high conversion rates suggest competitive pricing. Golden identified the third exiting competitor as a Berkshire Hathaway company and highlighted that the 'Select' product's superior performance stems from its by-peril rating model and use of insurance scores, which differ significantly from the legacy product.

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CFO Brian Hertzman stated that AFG is not currently seeing or expecting changes in workers' comp claim patterns related to worker documentation status. He explained that the modest adverse development in the casualty group was driven by increased severity in social inflation-exposed lines like E&S, spread across multiple accident years, not concentrated in a single period.

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President & CEO Katherine Antonello confirmed that CT claim frequency is controlled in other states because the laws are narrowly defined, unlike in California. She also affirmed that the company has not seen any difference in CT claim trends within its appetite expansion classes, noting those classes are performing favorably overall. Finally, she clarified that the Q3 reserve study will be an internal one, with an external actuarial study typically occurring in the fourth quarter.

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CFO Michael Paquette detailed a strategic shift where the company used a Federal Home Loan Bank letter of credit to meet California deposit requirements, liberating lower-yielding assets. These were sold and reinvested into residential mortgage-backed securities yielding near 6%, which will boost future net investment income. CEO Katherine Antonello clarified that the shift into higher-hazard groups is a thoughtful expansion and also a result of an NCCI remapping, emphasizing a 'cherry-picking' approach to risk. Paquette added that the favorable development was predominantly from accident years 2020 and prior.

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CEO & President G. Janelle Frost confirmed that the caseload per adjuster remains unchanged and low, at under 50 claims on average. She acknowledged that continued declines in market loss costs are putting pressure on the 71% accident year loss ratio. EVP & CFO Anastasios Omiridis addressed capital management, noting the Board reauthorized a $25 million share repurchase program and that a special dividend is still anticipated given capital sufficiency. Regarding the expense ratio, Omiridis stated the company expects the full-year ratio to align with historical ranges, without providing a specific long-term target.

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President and CEO G. Frost stated that the company's growth strategy is focused on penetrating markets where it already operates, not adding new classes of business, noting that over 80% of in-force policies remain in high-hazard groups. Regarding claim duration, Frost explained that for accident years prior to 2019, 99% of reported claims are closed. She attributed this rapid closure rate to their 'good old-fashioned claim adjusting' and maintaining low caseloads of less than 50 claims per adjuster.

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Executive Kevin Shook explained that while overall average medical costs have moderated, down about 3%, underlying drivers remain challenging. He cited rising unit costs, particularly in Pennsylvania where the fee schedule is up 14-15% over three years, along with increased utilization and an aging workforce. President and CEO Edward Rand added that while Pennsylvania is impactful, these inflationary trends are being observed across the company's entire footprint.

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Executive Kevin Shook explained that upfront insurtech costs were minimal and benefits are hard to quantify yet but are expected to be significant. He anticipates Clara will improve medical outcomes and severity prediction. Despite headwinds from rate declines, he expects the workers' comp loss ratio to continue to improve, noting it was already down 4 points from six months prior.

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