Tracy Benguigui

Tracy Benguigui from Wolfe Research asked if Unum Group's Q4 statutory reserve review would consider the same experience-side and strategic update factors as the GAAP review, or only a subset. She also inquired if medical advances like GLP-1 drugs influenced the morbidity improvement assumption adjustments.

Answer

CFO Steve Zabel confirmed that all GAAP changes have already been factored into their view of statutory results as of 9/30, with booking in Q4. Regarding morbidity improvement, Zabel stated they cannot directly link it to specific medical advances like GLP-1s, attributing the assumption removal to increased modeling uncertainty post-COVID. CEO Rick McKenney added that such medical advances are not factored in until their direct impact on the block is observed.

Tracy Benguigui asked if Unum's fourth-quarter statutory reserve review would consider similar factors (experience and strategic updates) as the GAAP review, or only a subset. She also inquired if the morbidity improvement assumption changes reflected medical advances like GLP-1 drugs.

Answer

Chief Financial Officer Steve Zabel confirmed that Unum has already evaluated every GAAP change for its statutory work and understands the results, which will be booked in the fourth quarter. Regarding morbidity improvement, Mr. Zabel stated that Unum cannot draw a direct link between specific causes like GLP-1s and the assumption. The decision to remove the assumption was primarily due to increased modeling uncertainty post-COVID, as the trend hadn't fully re-emerged. President and CEO Rick McKenney added that Unum waits to see actual impacts on its block before factoring in such medical advances.

Tracy Benguiat posed a macro question, asking for an educated guess on how much reinsurance dedicated capital (out of approximately $800 billion) would need to exit the industry to achieve equilibrium, given that supply currently outweighs demand. She also asked how the trend of property business being underwritten, shared, and layered (rather than through facultative reinsurance) impacts RenaissanceRe's opportunity set and relative pricing.

Answer

President and CEO Kevin O'Donnell suggested that the market is relatively close to balance, indicated by the forecast 10% rate reduction, and doesn't believe a specific 'X billion dollars' needs to leave the market. He emphasized that it's more about the perception of risk and comfort level for deployment. EVP and Chief Underwriting Officer David Marra explained that the shared and layered business, particularly cat-exposed E&S, is seeing increased competition but is a minority portion of their book. He noted that favorable development from strong terms and conditions supports the book's performance.

Tracy Benguiat posed a macro question, asking for an educated guess on how much reinsurance dedicated capital (out of approximately $800 billion) would need to exit the industry to achieve equilibrium, given that supply currently outweighs demand. She also asked how the trend of property business being underwritten, shared, and layered (rather than through facultative reinsurance) impacts RenaissanceRe's opportunity set and relative pricing.

Answer

President and CEO Kevin O'Donnell suggested that the market is relatively close to balance, indicated by the forecast 10% rate reduction, and doesn't believe a specific 'X billion dollars' needs to leave the market. He emphasized that it's more about the perception of risk and comfort level for deployment. EVP and Chief Underwriting Officer David Marra explained that the shared and layered business, particularly cat-exposed E&S, is seeing increased competition but is a minority portion of their book. He noted that favorable development from strong terms and conditions supports the book's performance.

Tracy Benguigui asked about the importance of Arch Capital maintaining its AA- S&P rating, particularly concerning the associated requirement to hold AAA capital, and whether the company would consider reducing capital and reverting to an A+ rating. She also sought clarification on which specific casualty lines, beyond professional lines, Arch finds attractive for growth, such as GL, commercial auto, or excess liability.

Answer

CFO Francois Morin stated that while the AA- rating is not critical, it is an advantage, especially in Europe and for certain mortgage-related transactions (CRT/SRT). He clarified that the AAA capital level is not new for Arch, as they were already at that level, and their capital position remains very strong. CEO Nicolas Papadopoulo added that the rating has been helpful for MI, CRT, and SRT, where buyers are sensitive to ratings. Mr. Morin confirmed that the trade-off of holding incremental capital for a higher rating is constantly evaluated. Mr. Papadopoulo identified E&S casualty, including excess liability (excluding heavy auto focus), national accounts, and construction (with workers' comp and general liability components) as attractive growth areas.

Tracy Benguigui asked about the importance of Arch Capital maintaining its new S&P AA- rating, considering the associated AAA capital requirements, and whether the company would consider reducing capital to revert to an A+ rating. She also sought clarification on specific attractive casualty lines for growth, beyond professional lines, such as GL, commercial auto, and excess liability.

Answer

François Morin (EVP, CFO, and Treasurer) stated that while not critical, the AA- rating is an advantage, particularly in Europe and for MI/CRT/SRT transactions. He clarified that the AAA capital level was not new for Arch. Regarding capital reduction, he noted it's a constant trade-off but, given the current strong capital position and internal capital generation, Arch is in a good spot. Nicolas Papadopoulo (CEO) identified opportunities in E&S casualty, including excess liability, and franchise-sensitive businesses like national accounts and construction, which are casualty-led with heavy workers' comp and general liability components.

Tracy Benguigui asked about the breadth of the search for an ADC partner and details on the fronting carriers, given that Longtail Re is a non-rated reinsurer.

Answer

Jim Williamson, President and CEO, and Mark Kociancic, EVP and CFO, confirmed a comprehensive search with Gallagher Re, highlighting the use of two rated fronting carriers (State National and MS Transverse) to mitigate counterparty credit risk, and a pre-existing relationship with Stoneridge Asset Management.

Tracy Benguigui inquired about the industry's excess capital, potential competitive pressures from growth-focused peers, and catalysts for a pricing turnaround. She also asked for details on auto exposure reduction versus pricing.

Answer

Rob Berkley, President and CEO, stated W. R. Berkley focuses on risk-adjusted returns and is prepared to shrink business if competition becomes irrational, leveraging its diversified market participation for resilience. Regarding auto, he confirmed meaningful exposure reduction but did not provide specific figures, noting some market participants misjudge loss costs.

Tracy Benguigui inquired about the industry-wide phenomenon of excess capital, potential competitor behavior, and catalysts that could turn pricing around. She also followed up on auto growth, exposure reduction, and pricing.

Answer

Rob Berkley (President and CEO) stated W. R. Berkley focuses on its own value proposition and is prepared to shrink business if competitors become irrational, leveraging its broad offering for resilience. Regarding auto, he confirmed the company is meaningfully reducing exposure and taking rate, but specific details are not publicly disclosed, noting some market participants misjudge loss costs.

Tracy Benguigui asked about the drivers of favorable loss experience in bodily injury and vehicle coverages within Personal Auto. She also questioned if Travelers' excess capital position surpasses its stated buyback targets and if concurrent deployment of capital for technology and/or M&A is expected.

Answer

Michael Klein, EVP and President of Personal Insurance, attributed the favorable loss experience in Personal Auto to a combination of favorable frequency and continued moderation in severity across bodily injury and physical damage coverages. Dan Frey, EVP and CFO, reiterated Travelers' capital management philosophy: deploy excess capital for technology investments and M&A first, then return it to shareholders via dividends and buybacks, confirming no change to this long-standing approach.