Q2 2024 The Hanover Insurance Group Inc Earnings Call

Operator: Good day and welcome to the Hanover Insurance Group second quarter earnings conference call. My name is Bessie, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode.

Operator: Good day and welcome to the Hanover Insurance Group that can quarter earnings conference calls.

Betsy: Good day and welcome to the Hanover Insurance Group second quarter earnings conference call. My name is Betsy and I'll be your operator for today's call.

Operator: My name is Betsy, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the start key followed by zero.

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Oksana Lukasheva: I would now like to turn the conference over to Oksana Lukasheva. Please go ahead.

Speaker Change: I would now like to turn the conference over to Oksana Lukasheva. Please go ahead.

Oksana Lukasheva: Thank you, operator.

Oksana Lukasheva: Thank you, operator. Good morning, and thank you for joining us for our quarterly conference call. We will begin today's call with prepared remarks from Jack Roche, our President and Chief Executive Officer, and Jeff Farber, our Chief Financial Officer. Available to answer your questions after our prepared remarks are Dick Lavey, President of Agency Markets, and Bryan Salvatore, President of Specialty Lines. Before I turn the call over to Jack, let me note that our earnings press release, financial supplement, and a complete slide presentation for today's call are available in the investor section of our website at www.hanover.com.

Oksana Lukasheva: Good morning, and thank you for joining us for our quarterly conference call. We will begin today's call with prepared remarks from Jack Roach, our President and Chief Executive Officer, and Jeff Farber, our Chief Financial Officer. Available to answer your questions after our prepared remarks are D. Flavie, president of Agency Markets, and Brian Salvatore, president of Specialty Lines.

Oksana Lukasheva: We will begin today's call with prepared remarks from Jack Roche, our President and Chief Executive Officer, and Jeff Farber, our Chief Financial Officer. Available to answer your questions after our prepared remarks are <expletive> Lavey, President of Agency Markets, and Bryan Salvatore, President of Specialty Lines. Before I turn the call over to Jack, let me note that our earnings press release, financial supplement, and a complete slide presentation for today's call are available in the Investor section of our website at www.hanover.com. After the presentation, we will answer questions in the Q&A session.

Oksana Lukasheva: Before I turn the call over to Jack, let me note that our earnings press release, financial supplement, and a complete slide presentation for today's call are available in the investor section of our website at www.heanover.com. After the presentation, we will answer questions in the Q&A session.

Oksana Lukasheva: After the presentation, we will answer questions during the Q&A. Our prepared remarks and responses to your questions today, other than statements of historical fact, include forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995.

Oksana Lukasheva: Our prepared remarks and responses to your questions today, other than statements of historical fact, include forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. These statements can relate to, among other things, our outlook, reserve position, economic conditions, and related effects, including economic inflation, potential recessionary impact, as well as other risks and uncertainties such as severe weather, catastrophes, and social inflation that could affect the company's performance and or cause actual results to defer materially from those anticipated. We caution you with respect to reliance on forward-looking statements, and in this respect, to refer you to the forward-looking statement section and our press release, the presentation deck, and our filings with the SEC.

Oksana Lukasheva: These statements can relate to, among other things, our outlook, reserve position, economic conditions, and related effects, including economic inflation, potential recessionary impacts, as well as other risks and uncertainties, such as severe weather, catastrophes, and social inflation that could affect the company's performance and or cause actual results to differ materially from those anticipated. We caution you with respect to reliance on forward-looking statements and, in this respect, refer you to the forward-looking statement section in our press release, the presentation deck, and our filings with the SEC.

Oksana Lukasheva: Today's discussion will also reference certain non-GAAP financial measures, such as operating income and accident-year loss and combined ratios excluding catastrophes, among others. Reconciliation of these non-GAAP financial measures to the closest GAAP measure on a can be found in the press release, the slide presentation, or the financial supplement, which are posted on our website, as I mentioned earlier. With those comments, I will turn the call over to Oksana.

Oksana Lukasheva: Today's discussion will also reference certain non-GAAP financial measures, such as operating income and accident-year loss and combined ratios, excluding catastrophes, among others. The reconciliation of these non-GAAP financial measures to the closest GAAP measure on a historical basis can be found in the press release, the slight presentation, or the financial supplement, which are posted on our website, as I mentioned earlier.

Speaker Change: and our filings with the FCC. Today's discussion will also reference certain non-GAAP financial measures.

Jack Roach: With those comments, I will turn the call over to Jack. Thank you, Oxana. Good morning, everyone, and thank you for joining our call. I'm pleased to report our second quarter results demonstrate the strength and diversification of our business, our financial discipline, and our ability to execute in a dynamic market environment. Despite significant catastrophe activity, we delivered strong earnings, with a 9% operating return on equity in the quarter and a 12% operating ROE through the first half of this year. Our performance reflects strong execution on two critical priorities. First, Ex-CAT margin enhancement: We significantly improved our underlying margins in personal lines and delivered consistent, strong profitability in core commercial and specialty in the quarter.

John Roche: Good morning, everyone, and thank you for joining our call. I'm pleased to report that our second quarter results demonstrate the strength and diversification of our business, our financial discipline, and our ability to execute in a dynamic market environment. Despite significant catastrophe activity, we delivered strong earnings with a 9% operating return on equity in the quarter and a 12% operating ROE through the first half of this year. Our performance reflects strong execution on two critical priorities. First XCAT Margin Enhancement

Jack Roche: I'm pleased to report our second quarter results demonstrate the strength and diversification of our business, our financial discipline, and our ability to execute in a dynamic market environment.

John Roche: We significantly improved our underlying margins and personal lines and delivered consistent, strong profitability in core commercial and specialty in the. This focus on profitability yielded outstanding results, as demonstrated by an XCAT combined ratio of 88.5% compared to 92.8% year over year, and second, the progress and execution of our catastrophe mitigation. Although severe convective storms in the Midwest and South Central U.S. made the second quarter more challenging than anticipated, we continue to have a high level of confidence that our proactive approach to managing catastrophe exposure will clearly bear fruit. In personal lines, our actions to address convective storm exposure are well underway.

Speaker Change: First, Xcat Margin Enhancement.

Jack Roche: We significantly improved our underlying margins and personal lines and delivered consistent strong profitability in core commercial and specialty in the quarter.

Jack Roach: This focus on profitability yielded outstanding results, as demonstrated by an Ex-CAT combined ratio of 88.5% compared to 92.8% year-over-year. And second, the progress in execution of our catastrophe mitigation actions. Although severe convective storms in the Midwest and South Central U.S. made the second quarter more challenging than anticipated. We continue to have a high level of confidence that our proactive approach to managing catastrophe exposure will clearly bear fruit. In personal lines, our actions to address convective storm exposure are well underway. We remain optimistic about the rapidly growing impact of increased all parallel deductibles and the introduction of when inhaled deductibles on our CACC claims intake and ultimately lost severity.

John Roche: We remain optimistic about the rapidly growing impact of increased all-peril deductibles and the introduction of wind and hail deductibles on our CAT claims intake and, ultimately, loss severity. As a reminder, these terms and conditions changes only began impacting renewals in April of this year. We expect, as a higher proportion of the book of business is rolled under these terms, the impact will dramatically increase in each of the next few quarters. Additionally, we are anticipating that close to two-thirds of our homeowners business in the Midwest will have wind and hail deductibles applied to the policy by the end of 2024. And the vast majority of the book will have the desired deductibles, both all perils and wind and hail, ahead of the spring storm season.

Jack Roach: As a reminder, these terms and addition changes only began impacting renewals in April of this year. We expect as a higher proportion of the book of business is rolled under these terms, the impact will dramatically increase in each of the next few quarters. Additionally, we are anticipating that close to two-thirds of our homeowners business in the Midwest will have when inhaled deductibles applied to the policy by the end of 2024. And the vast majority of the book will have the desired deductibles, both all parallel and when inhale ahead of the spring storm season. The current effect of property and CAD actions in core commercial is more significant after several quarters of increasing deductibles in pricing, as well as risk-specific PML pricing and risk prevention initiatives.

John Roche: The current effect of property and CAD actions in core commercial is more significant after several quarters of increasing deductibles in pricing, as well as risk-specific PML pricing and risk prevention initiatives. As a result, our modeled catloads are significantly reduced in the middle market, especially in states exposed to convective storms, and 75% of the most vulnerable middle market accounts have been addressed through underwriting actions or censored deployment. Our second quarter results also reflect our commitment to balanced and thoughtful growth.

Jack Roche: The current effect of property and CAD actions in core commercial is more significant after several quarters of increasing deductibles in pricing, as well as risk-specific PML pricing and risk prevention initiatives.

Jack Roach: As a result, our modeled CAT loads are significantly reduced in middle market, especially in states exposed to convective storms. And 75% of the most vulnerable middle market accounts have been addressed through underwriting actions or center deployment. Our second quarter results also reflect our commitment to balanced and thoughtful growth. We grew written premiums by 5.1% in the second quarter, up 2.8 points from the first quarter of this year, and we expect growth to increase sequentially each quarter for the remainder of the year as we elevate our new business and renewal retention in areas where profitability is strongest and where we'll benefit from continued diversification.

Jack Roche: Our second quarter results also reflect our commitment to balanced and thoughtful growth.

John Roche: We grew written premiums by 5.1% in the second quarter, up 2.8 points from the first quarter of this year, and we expect growth to increase sequentially each quarter for the remainder of the year as we increase our new business and renewal retention in areas where profitability is strongest and where we'll benefit from continued diversification. Now let's look at the second quarter performance of our business segments in more detail, starting with special... Specialty achieved top-line growth of 8.2%, 3.4 points higher than in the first quarter of the year, helped by strong retention and accelerated double-digit new business growth.

Jack Roche: We grew written premiums by 5.1% in the second quarter, up 2.8 points from the first quarter of this year, and we expect growth to increase sequentially each quarter for the remainder of the year as we elevate our new business and renewal retention in areas where profitability is strongest.

Jack Roach: Now let's look at the second quarter performance of our business segments in more detail, starting with Specialty. Specialty achieved pop line growth of 8.2%, 3.4 points higher than in the first quarter of the year, helped by strong retention and accelerated double-digit new business growth. Retention remains strong at 83%, with continued renewal pricing momentum of 11.7%, further reinforcing the specialty segments' integral role with our agents as a key element in our value proposition. The specialty market in our target markets remained strong. We achieved double-digit growth across multiple lines, including surety, marine, industrial property, health care, and management liability.

Jack Roche: and where we'll benefit from continued diversification.

John Roche: Retention remains strong at 83% with continued renewal pricing momentum of 11.7%, further reinforcing the specialty segment's integral role with our agents as a key element in our value proposition. The specialty market and our target markets remain strong. We achieved double-digit growth across multiple lines, including surety, marine, industrial property, health care, and management liability. Our excess and surplus lines business also grew double-digits in the second quarter.

Jack Roach: Our excess and surplus lines business also grew double digits in the second quarter. The E&S market remains very attractive as freedom of rate and form allows us to capture opportunities at good margins while helping us further diversify our portfolio with respect to catastrophe risk. In marine, we are pursuing growth initiatives by expanding our portfolio geographically and by class of business to further limit us from concentration-related cap and market volatility. Across most of our specialty portfolio, we continue to expand distribution points, including substantially growing the wholesale channel to capture broader market opportunities. In addition to broadening our portfolio of specialty offerings, we are accelerating key technology investments as well to ensure we are optimally positioned to compete in the evolving digital environment and help agents create efficiencies, particularly with their smaller specialty policies.

John Roche: The E&S market remains very attractive as freedom of rate and form allows us to capture opportunities at good margins, while helping us further diversify our portfolio with respect to catastrophe risk. In Marine, we are pursuing growth initiatives by expanding our portfolio geographically and by class of business, to further limit us from concentration-related cap and market volatility. Across most of our Specialty Portfolio, we continue to expand distribution points, including substantially growing the Wholesale Channel, to capture broader market opportunities.

Jack Roche: The E&S market remains very attractive as freedom of rate and form allow us to capture opportunities at good margins.

Jack Roche: Across most of our specialty portfolio, we continue to expand distribution points, including substantially growing the wholesale channel, to capture broader market opportunities.

John Roche: In addition to broadening our portfolio of specialty offerings, we are accelerating key technology investments as well to ensure we are optimally positioned to compete in the evolving digital environment and help agents create efficiencies, particularly with their smaller specialty policies. These investments should result in significantly improved quote turnaround times and allow us to capture more of the robust new business opportunities in the market. More broadly, our technology investments have positively impacted all of our businesses. We deploy digital APIs to work with our distribution.

Jack Roach: These investments should result in significantly improve, quote, turnaround times and allow us to capture more of the robust new business opportunities in the market. More broadly, our technology investments have positively impacted all of our businesses. We deploy digital APIs to work with our distribution. We use advanced analytics for pricing sophistication and risk selection, and we have targeted generative AI use cases to achieve operational efficiencies.

John Roche: We use advanced analytics for pricing sophistication and risk selection, and we have targeted generative AI use cases to achieve operational efficiency. Turning to core commercial, this segment also delivered strong performance this quarter, achieving solid net written premium growth of 5.5%, driven primarily by an 8.5% increase in small commercial. We remain very optimistic about opportunities in small commercial, with accelerated new business growth to be driven by several key initiatives. These include the continued build-out of our TAP sales platform with the roll-out of our workers' compensation product in the first half of next year, the expansion of virtual sales capabilities across all states, and Deeper Market Share Penetration with our best agents. Additionally, we are very pleased with the pricing, class, geographic mix, and quality of new business and renewals, as the TAP sales platform includes enhanced capabilities for pricing sophistication and product expansion.

Jack Roche: We deploy digital APIs to work with our distribution. We use advanced analytics for pricing sophistication and risk selection. And we have targeted generative AI use cases to achieve operational efficiencies.

Jack Roach: Turning to core commercial, this segment also delivered strong performance this quarter, achieving solid net written premium growth of 5.5%, driven primarily by an 8.5% increase in small commercial. We remain very optimistic about opportunities in small commercial, with accelerated new business growth to be driven by several key initiatives. These include the continued build out of our tap sales platform with the rollout of our workers' compensation product in the first half of next year, the expansion of virtual sales capabilities across all states, and deeper market share penetration with our best agents. Additionally, we are very pleased with the pricing, class, geographic mix, and quality of new business and renewals as the tap sales platform includes enhanced capabilities for pricing sophistication and product expansion.

Jack Roche: Turning to core commercial, this segment also delivered strong performance this quarter, achieving solid net written premium growth of 5.5%, driven primarily by an 8.5% increase in small commercial.

Jack Roche: These include the continued buildout of our TAP sales platform with the rollout of our workers' compensation product in the first half of next year, the expansion of virtual sales capabilities across all states, and deeper market share penetration with our best agents.

Jack Roach: While focusing on small commercial growth, we are simultaneously implementing profitability and property improvement initiatives in the middle market, including the catastrophe management work I referenced earlier. Although middle market growth remained low at 1%, it showed sequential improvement, and we have executed very well on the key margin and cat management initiatives. As we near the end of our portfolio optimization, we expect to elevate our growth in middle market beginning in the fourth quarter. Looking ahead, the commercial lines market is expected to remain firm and disciplined for the remainder of this year and into 2025, supported by challenging liability trends.

John Roche: While focusing on small commercial growth, we are simultaneously implementing profitability and property improvement initiatives in the middle market, including the catastrophe management work I referenced earlier. Although middle market growth remained low at 1%, it showed sequential improvement, and we have executed very well on the key margin and cap management initiatives as we near the end of our portfolio optimization. We expect to elevate our growth and middle market beginning in the fourth quarter. Looking ahead, the commercial lines market is expected to remain firm and disciplined for the remainder of this year and into 2025, supported by challenging liability.

Jack Roche: While focusing on small commercial growth, we are simultaneously implementing profitability and property improvement initiatives in middle market, including the catastrophe management work I referenced earlier.

Jack Roche: Looking ahead, the commercial lines market is expected to remain firm and disciplined for the remainder of this year and into 2025, supported by challenging liability trends.

Jack Roach: While we continue to closely monitor liability trends and proactively work to manage through the environment, we remain highly confident in the strength of our reserves and discipline in our loss ratio. over the past several years. We have dedicated significant effort to analyzing the expected trajectory of liability severity and its potential impact on our operations. This proactive approach led us to adopt a more defensive posture, both in terms of strengthening our balance sheet and refining our underwriting practices. And from where we stand today, we believe our current liability profile is very well positioned to navigate social inflation challenges.

John Roche: While we continue to closely monitor liability trends and proactively work to manage through the environment, we remain highly confident in the strength of our reserves and disciplined in our loss ratio picks. For the past several years, we have dedicated significant effort to analyzing the expected trajectory of liability severity and its potential impact on our operations. This proactive approach led us to adopt a more defensive posture, both in terms of strengthening our balance sheet and refining our underwriting process, and from where we stand today, we believe our current liability profile is very well positioned to navigate social inflation challenges.

Jack Roche: Over the past several years, we have dedicated significant effort to analyzing the expected trajectory of liability severity and its potential impact on our operations.

Jack Roach: Our strategy includes maintaining lower limits, reducing risk in large metro areas and difficult geographies, reducing premises liability exposure, and refraining from writing standalone excess umbrella policies. Additionally, we have implemented rate increases above our prudent lost trend assumptions, maintain a low reinsurance attachment point, and have a lower reserve duration, which is inherent in a small account size book of business. These tactical decisions have collectively enhanced our resilience in the face of evolving market conditions. As we look ahead, we remain committed to navigating the evolving liability environment with vigilance and agility.

John Roche: Our strategy includes maintaining lower limits, reducing risk in large metro areas and difficult geographies, reducing premises liability exposure, and refraining from writing stand-alone excess umbrella policies. Additionally, we have implemented rate increases above our prudent loss trend assumptions, maintain a low reinsurance attachment point, and have a lower reserve duration, which is inherent in a small account-sized book of business. These tactical decisions have collectively enhanced our resilience in the face of evolving market conditions. As we look ahead, we remain committed to navigating the evolving liability environment with vigilance and agility.

Jack Roche: Additionally, we have implemented rate increases above our prudent loss trend assumptions, maintain a low reinsurance attachment point, and have a lower reserve duration, which is inherent in a small account size book of business.

Jack Roach: Turning to personal lines, we delivered tremendous year-over-year improvement of 7.6 points in our XCAT current accident-year loss ratio, reflecting the outstanding execution of our margin recapture initiatives. Personal lines net-written premiums grew 3.3% in the quarter, in line with expectations. Although we continue to project segment growth in the low single digits in 2024, we expect to see the pace accelerate slightly in the second half of this year. Higher all parallel deductibles and new wind and hail deductibles are being applied to new business and renewals in all targeted states judiciously and on schedule. We continue to operate in a hard market across our geographies, especially in homeowners, and believe this will continue at least for the foreseeable future, as many of our peers continue to file for higher rate increases, as well as terms and conditions changes.

John Roche: Turning to personal lines, we delivered tremendous year-over-year improvement of 7.6 points in our XCAT current accident year loss ratio, reflecting the outstanding execution of our Margin Recapture Initiative. Persoline's net written premiums grew 3.3% in the quarter, in line with expectations.

Jack Roche: Persoline's net written premiums grew 3.3% in the quarter, in line with expectations.

John Roche: Although we continue to project segment growth in the low single digits in 2024, we expect to see the pace accelerate slightly in the second half of this year. Higher all peril deductibles and new wind and hail deductibles are being applied to new business and renewals in all targeted states judiciously and on schedule. We continue to operate in a hard market across our geographies, especially for homeowners, and believe this will continue at least for the foreseeable future, as many of our peers continue to file for higher rate increases, as well as terms and conditions changes.

Jack Roche: Although we continue to project segment growth in the low single digits in 2024, we expect to see the pace accelerate slightly in the second half of this year.

Jack Roche: We continue to operate in a hard market across our geographies, especially in homeowners, and believe this will continue at least for the foreseeable future, as many of our peers continue to file for higher rate increases, as well as terms and conditions changes.

Jack Roach: We are seeing a number of carriers starting to follow our actions, particularly in the Midwest, and we have continued support from our agent partners. The elevated catastrophe experience across the industry reinforces the importance of our terms and conditions changes, as well as the more aggressive approach based on specific underwriting metrics, such as quality of roof score.

John Roche: We are seeing a number of carriers starting to follow our actions, particularly in the Midwest, and we have continued support from our agent partners. The elevated catastrophe experience across the industry reinforces the importance of our terms and conditions changes, as well as the more aggressive approach based on specific underwriting metrics, such as quality of roosting. In conclusion, our strong second quarter and year-to-date performance serves as compelling evidence that we are on the path to meaningfully improved financial outcomes.

Jack Roche: The elevated catastrophe experience across the industry reinforces the importance of our terms and conditions changes, as well as the more aggressive approach based on specific underwriting metrics, such as quality of roof score.

Jack Roach: In conclusion, our strong second quarter and year-to-date performance serves as compelling evidence that we are on the path to meaningfully improved financial outcomes. While the industry landscape remains dynamic, with increasing liability trends and more frequent severe weather events, we are confident in our ability to navigate these complexities. Our distinctive strategy is a key advantage, positioning us to capitalize on emerging opportunities in the current market. Our flexibility and agility allow us to pivot quickly in response to changing conditions and to maintain our competitive edge. With this formidable foundation in place, combined with our inherent strengths and talented team, we are exceptionally well positioned for future success.

Jack Roche: In conclusion, our strong second quarter and year-to-date performance serves as compelling evidence that we are on the path to meaningfully improved financial outcomes.

John Roche: While the industry landscape remains dynamic, with increasing liability trends and more frequent severe weather events, we are confident in our ability to navigate these complexities. Our distinctive strategy is a key advantage, positioning us to capitalize on emerging opportunities in the current market. Our flexibility and agility allow us to pivot quickly in response to changing conditions and maintain our competitive edge. With this formidable foundation in place, combined with our inherent strengths and talented team, we are exceptionally well positioned for future success. With that, I'll turn the call over to Jeff. Thank you, Jack. And good morning, everyone.

Jack Roche: While the industry landscape remains dynamic, with increasing liability trends and more frequent severe weather events, we are confident in our ability to navigate these complexities.

Jack Roche: Our flexibility and agility allow us to pivot quickly in response to changing conditions and to maintain our competitive edge.

Jack Roche: With this formidable foundation in place, combined with our inherent strengths and talented team, we are exceptionally well positioned for future success.

Jack Roach: with that.

Jeff Farber: I'll turn the call over to Jeff. Thank you, Jack, and good morning, everyone. We are pleased to report strong performance in light of catastrophe losses while demonstrating significant enterprise-wide XCAT margin improvement. Notably, all three of our business segments achieved underlying loss ratio improvements year over year, surpassing our projections. We're observing stable property loss trends and maintaining discipline over liability activity, which positions us well for continued growth and improved profitability. Our combined ratio for the second quarter was 99.2%, which included 10.7 points of catastrophe losses. Largely the result of severe convective storm activity in personal lines.

Jeffrey Farber: We are pleased to report strong performance in light of catastrophe losses while demonstrating significant enterprise-wide XCAT margin improvement. Notably, all three of our business segments achieved underlying loss ratio improvements year over year, surpassing our projections. We're observing stable property loss trends and maintaining discipline over liability activity, which positions us well for continued growth and improved profitability. Our combined ratio for the second quarter was 99.2%, which included 10.7 points of catastrophe losses, largely the result of severe convective storm activity in personal life.

Jack Roche: Thank you, Jack, and good morning, everyone. We are pleased to report strong performance in light of catastrophe losses while demonstrating significant enterprise-wide XCAT margin improvement.

Speaker Change: We're observing stable property loss trends and maintaining discipline over liability activity, which positions us well for continued growth and improved profitability.

Jeff Farber: It's worth noting that 10.7 points included 1.4 points of favorable catastrophe prior year development. Much of it relating to commercial lines events that are at least 18 months old. XCAT prior year development was favorable by 17.4 million in the quarter, paced by broad-based property favorability and specialty personal lines and core commercial. In core commercial, all the major lines of business developed favorably. We experienced healthy favorability in most property coverages, and we took the opportunity to position our reserves more defensively in liability lines in response to industry headlines as well as our own experience in certain pockets of our core commercial business.

Jeffrey Farber: It's worth noting that 10.7 points included 1.4 points of favorable catastrophe prior year development, much of it relating to commercial lines events that are at least 18 months old. XCAT prior year development was favorable by $17.4 million in the quarter, paced by broad-based property favorability and specialty, personal lines, and core commercial. In core commercial, all the major lines of business developed favorably.

Jack Roche: largely the result of severe convective storm activity in personal lines.

Jack Roche: It's worth noting that 10.7 points included 1.4 points of favorable catastrophe prior year development, much of it relating to commercial lines events that are at least 18 months old.

Jeffrey Farber: We experienced healthy favorability in most property coverages, and we took the opportunity to position our reserves more defensively in liability lines, in response to industry headlines, as well as our own experience in certain pockets of our core commercial business. Our financial discipline, reserve prudence, and proactive risk selection and underwriting allow us to effectively manage liability trends. As Jack mentioned, our previous actions relating to geographic, industry, limit, and other underwriting choices have significantly advantaged the portfolio.

Jack Roche: We experienced healthy favorability in most property coverages, and we took the opportunity to position our reserves more defensively in liability lines, in response to industry headlines, as well as our own experience in certain pockets of our core commercial business.

Jeff Farber: Our financial discipline, reserve prudence, and proactive risk selection and underwriting allow us to effectively manage liability trends. As Jack mentioned, our previous actions relating to geographic industry, limit, and other underwriting choices have significantly advanced the portfolio. Our liability severity assumptions have been and continue to be very prudent, while we benefited from significant frequency reductions in recent years relative to pre-pandemic trends. In specialty, favorable prior year reserve development was 11.3 million or 3.4 points, primarily driven by lower than expected losses in our professional and executive lines claims-made business. In personal lines, overall prior year development was favorable by 4 million, with property favorability primarily an auto, offsetting unfavorability in the umbrella line reported in home and other.

Speaker Change: Our financial discipline, reserve prudence, and proactive risk selection and underwriting allow us to effectively manage liability trends.

Jack Roche: As Jack mentioned, our previous actions relating to geographic, industry, limit, and other underwriting choices have significantly advantaged the portfolio.

Jeffrey Farber: Our liability severity assumptions have been and continue to be very prudent, while we benefited from significant frequency reductions in recent years relative to pre-pandemic trends. In specialty, favorable prior year reserve development was $11.3 million or 3.4 points, primarily driven by lower than expected losses in our professional and executive lines, claims-made business. In personal lines, overall prior year development was favorable by 4 million, with property favorability primarily in auto, offsetting unfavorability in the umbrella line reported in home and other.

Jack Roche: Our liability severity assumptions have been, and continue to be, very prudent, while we benefited from significant frequency reductions in recent years relative to pre-pandemic trends.

Jeff Farber: We continue to experience pressure related to elevated personal umbrella losses stemming from auto bodily injury coverage, which we are addressing by increasing our prior year loss expectations, current year picks, and achieving higher personal umbrella rates in virtually all states. Our team continues to prudently manage expenses. The expense ratio for the quarter told 30.8% in line with our expectations. The year-over-year increase of 20 basis points primarily reflected talent and technology investments in our specialty segment. as well as increased variable compensation. We remain on track to achieve our expense ratio guidance of 30.7% for the full year.

Jeffrey Farber: We continue to experience pressure related to elevated personal umbrella loss stemming from auto bodily injury coverage, which we are addressing by increasing our prior year loss expectation. Current Year Picks and Achieving Higher Personal Umbrella Rates in Virtually All States. Our team continues to prudently manage expense. The expense ratio for the quarter totaled 30.8%, in line with our expectations.

Speaker Change: We continue to experience pressure related to elevated personal umbrella losses.

Jack Roche: Stemming from auto bodily injury coverage, which we are addressing by increasing our prior year loss expectations, current year picks, and achieving higher personal umbrella rates in virtually all states.

Speaker Change: Our team continues to prudently manage expenses.

Jack Roche: The expense ratio for the quarter totaled 30.8% in line with our expectations.

Jeffrey Farber: The year-over-year increase of 20 basis points primarily reflected talent and technology investments in our specialty segment, as well as increased variable compensation. We remain on track to achieve our expense ratio guidance of 30.7% for the full year. Now I'll turn to our segment XCAT underwriting ratios and loss trends, starting with personal lines. This business generated an excellent XCAT combined ratio of 89.5% for the second quarter, a 10.5 point improvement from the prior year period. Margin recapture initiatives in both auto and home and other drove a 7.6 point improvement in the underlying current accident year loss ratio. The auto current accident year loss ratio, excluding catastrophes, improved 9 points to 70.1%.

Jack Roche: We remain on track to achieve our expense ratio guidance of 30.7% for the full year.

Jeff Farber: Now I'll turn to our segment XCAT underwriting ratios and loss trends, starting with personal lines. This business generated an excellent XCAT combined ratio of 89.5% for the second quarter, a 10.5-point improvement from the prior year period. Marginery capture initiatives in both auto and home and other drove a 7.6 point improvement in the underlying current accent year loss ratio. The auto current accent year loss ratio, excluding catastrophes, improved 9 points to 70.1%. The comparison was somewhat impacted by elevated loss picks in the second quarter last year, which subsequently developed favorably by 1.7 points. The vast majority of the improvement, however, is the result of earning in double digit price increases and, to a lesser extent, lower than expected auto loss frequency.

Speaker Change: Now I'll turn to our segment, XCAT, Underwriting Ratios and Loss Trends, starting with Personal Lines.

Jack Roche: This business generated an excellent XCAT combined ratio of 89.5% for the second quarter. A 10.5 point improvement from the prior year period.

Speaker Change: Margin recapture initiatives in both auto and home and other drove a 7.6 point improvement in the underlying current accident year loss ratio. The auto current accident year loss ratio excluding catastrophes improved nine points to 70.1 percent.

Jeffrey Farber: The comparison was somewhat impacted by elevated loss picks in the second quarter last year, which subsequently developed favorably by 1.7 points. The vast majority of the improvement, however, is the result of earnings from double-digit price increases and, to a lesser extent, lower-than-expected auto-loss frequency. Collision loss severity has stabilized as costs have leveled for parts and used vehicles, and labor cost inflation has reduced. However, although bodily injury frequency remains well below pre-COVID levels, severity continues to be elevated due to a higher proportion of large catastrophic claims, including pedestrian, bicycle, and motorcycle hits, and also high-speed crash deaths.

Jeff Farber: Collision loss severity has stabilized as costs have leveled for parts and used vehicles, and labor cost inflation has reduced. Although bodily injury frequency remains well below pre-COVID levels, severity continues to be elevated due to a higher proportion of large catastrophic claims, including pedestrian, bicycle, and motorcycle hits, and also high-speed crashes. As of the second quarter, we have achieved target returns on an earned basis in personal auto. Homeowners and other current accent year loss ratio improved meaningfully in the quarter to 57.5%. Reflecting earned rate increases well above contemporary loss trends as well as normalization of large losses as compared to a higher than usual level of large losses in the second quarter of 2023.

Jack Roche: Severity continues to be elevated due to a higher proportion of large catastrophic claims including pedestrian, bicycle, and motorcycle hits, and also high-speed crashes.

Jeffrey Farber: As of the second quarter, we have achieved target returns on an earned basis in personal audit. Homeowners and other current accident year loss ratios improved meaningfully in the quarter to 57.5%, reflecting earned rate increases well above contemporary loss trends, as well as normalization of large losses as compared to a higher-than-usual level of large losses in the second quarter of 2023. Our other initiatives, including more frequent home inspections and underwriting restrictions in specific pockets of our book of business, are also helping to improve our XCAT home results. We continue to see the benefit of earned pricing substantially building in the homeowner's portfolio.

Jack Roche: As of the second quarter, we have achieved target returns on an earned basis in personal auto.

Speaker Change: homeowners and other current accident year loss ratio improved meaningfully in the quarter to 57.5 percent reflecting earned rate increases well above contemporary loss trends

Speaker Change: as well as normalization of large losses as compared to a higher than usual level of large losses in the second quarter of 2023.

Jeff Farber: Our other initiatives, including more frequent home inspections and underwriting restrictions in specific pockets of our book of business, are also helping to improve our XCAT home results. We continue to see the benefit of earned pricing substantially building in the homeowners' portfolio. We expect that trend, together with loss pressures normalizing, should help drive substantial margin improvement through the back half of this year, positioning us to return to target profitability and personal lines on an earned basis in 2025. On the top line, personal lines net written premiums improves sequentially to 3.3% in the second quarter, and we expect growth to modestly increase throughout the remainder of the year.

Jeffrey Farber: We expect that trend, together with loss pressures normalizing, should help drive substantial margin improvement through the back half of this year, positioning us to return to target profitability and personal lines on an earned basis in 2025. On the top line, Personal Lines' net written premiums improved sequentially to 3.3% in the second quarter, and we expect growth to modestly increase throughout the remainder of the year. As expected, renewal price increases for personal lines in the quarter moderated sequentially to 18.5% from 22.8% in the first quarter of this year.

Speaker Change: We expect that trend, together with loss pressures normalizing, should help drive substantial margin improvement through the back half of this year, positioning us to return to target profitability and personal lines on an earned basis in 2025.

Speaker Change: On the top line, Personal Line's net written premiums improved sequentially to 3.3% in the second quarter, and we expect growth to modestly increase throughout the remainder of the year.

Jeff Farber: As expected, renewal price increases for personal lines in the quarter moderated sequentially to 18.5% from 22.8% in the first quarter of this year. As I noted on our Q1 call, we expected home exposure increases to begin ticking down in the second quarter as insurance-to-value inflation adjustments normalized and as we began to apply all peril and wind and hail deductibles to the majority of our renewals. Nevertheless, we are achieving strong rate increases in both lines of business. We believe rates will remain robust and ahead of lost trends. Personal lines retention improved by over 2.82%. PIFCOUT, a lagging indicator, was down as expected, with a year-over-year reduction of about 10% in the Midwest and 3% in other areas.

Jeffrey Farber: As I noted on our Q1 call, we expected home exposure increases to begin ticking down in the second quarter as insurance-to-value inflation adjustments normalized and as we began to apply all peril and wind-inhaled deductibles to the majority of our renewals. Nevertheless, we are achieving strong rate increases in both lines of business. We believe rates will remain robust and ahead of loss. Personal lines retention improved by over 2 points to 82%. The PIF count, a lagging indicator, was down as expected, with a year-over-year reduction of about 10% in the Midwest and 3% in other areas.

Speaker Change: As I noted on our Q1 call, we expected home exposure increases to begin ticking down in the second quarter as insurance-to-value inflation adjustments normalized.

Speaker Change: and as we began to apply all peril and wind inhaled deductibles to the majority of our renewals.

Speaker Change: Nevertheless, we are achieving strong rate increases in both lines of business.

Speaker Change: We believe rates will remain robust and ahead of loss trends.

Jeff Farber: Turning to core commercial lines, we delivered a combined ratio excluding catastrophes of 88.7%, 0.6 points better than the prior year period. The underlying loss ratio improved a 55.7%, supported by the successful execution of our margin improvement plan, including strong pricing and effective property underwriting, particularly in middle market. We continue to capture the benefit of earned rate above lost trend in core commercial. Workers' compensation liability trends remain stable, albeit with a slight increase in indemnity. Consistent with the NCCI reported trends, we are observing a slowdown in claims emergence, which merits caution as we think about current year-loss selections.

Jeffrey Farber: Turning to the core commercial lines, we delivered a combined ratio excluding catastrophes of 88.7%, 0.6 points better than the prior year period. The underlying loss ratio improved to 55.7%, supported by the successful execution of our margin improvement plan, including strong pricing and effective property underwriting, particularly in the middle market. We continue to capture the benefit of the earned rate above the loss trend in core commercials. Workers' compensation liability trends remain stable, albeit with a slight increase in indemnity.

Speaker Change: Turning the core commercial lines, we delivered a combined ratio excluding catastrophes of 88.7 percent, 0.6 points better than the prior year period.

Speaker Change: The underlying loss ratio improved to 55.7%, supported by the successful execution of our Margin Improvement Plan, including strong pricing and effective property underwriting, particularly in middle market.

Speaker Change: We continue to capture the benefit of earned rate above loss trend in core commercial.

Speaker Change: Workers' compensation liability trends remain stable, albeit with a slight increase in indemnity.

Jeffrey Farber: Consistent with the NCCI reported trends, we are observing a slowdown in claims emerging, which merits caution as we think about current year-loss selection. We were satisfied with the solid performance of commercial multi-peril in the quarter as continued strength in property was partially offset by our move to proactively increase current accident year loss selections and liabilities. On the top line, CORE Commercial delivered net written premium growth of 5.5% in the quarter, paced by Small Commercial. The specialty segments combined ratio excluding catastrophes increased 80 basis points to 86.4% compared to the prior year period, driven by higher expenses, as noted before.

Speaker Change: Consistent with the NCCI reported trends, we are observing a slowdown in claims emergence, which merits caution as we think about current year loss selections.

Jeff Farber: We were satisfied with the solid performance of commercial multi-parall in the quarter, as continued strength and property was partially offset by our move to proactively increase current accident-year-loss selections in liability. On the top line, core commercial delivered net-written premium growth of 5.5% in the quarter, paced by small commercial. Renewal price change remained in the double digits, consistent with Q1.

Speaker Change: We were satisfied with the solid performance of commercial multi-peril in the quarter as continued strength in property was partially offset by our move to proactively increase current accident year loss selections in liability.

Jeff Farber: The specialty segments combined ratio excluding catastrophes increased 80 basis points to 86.4% compared to the prior year period, driven by higher expenses as noted before. The segments' underlying loss ratio of 53.1% aligned with our expectations and our target of a low 50s loss ratio. Property large loss activity remained within anticipated levels. We are monitoring select lines for inflationary indicators and maintaining a prudent approach in our current accident-loss selections. Specialty net-written premiums grew 8.2% driven by robust performance across several business lines. Retention remains strong at 83%, while renewal pricing metrics ticked up again, with average renewal increased standing at 11.7% in the second quarter.

Speaker Change: The specialty segments combined ratio excluding catastrophes increased 80 basis points to 86.4% compared to the prior year period, driven by higher expenses as noted before.

Jeffrey Farber: The segment's underlying loss ratio of 53.1% aligned with our expectations and our target of a low 50s loss ratio. Property large loss activity remained within the anticipated level. We are monitoring select lines for inflationary indicators and maintaining a prudent approach in our current accident loss selection. Specialty Net Written Premiums grew 8.2%, driven by robust performance across several business lines. Retention remained strong at 83%, while renewal pricing metrics ticked up again, with average renewal increased standing at 11.7% in the second quarter. Turning to reinsurance, we completed a successful renewal of our property treaties on July 1.

Speaker Change: Property large loss activity remained within anticipated levels.

Speaker Change: We are monitoring select lines for inflationary indicators and maintaining a prudent approach in our current accident loss selections.

Speaker Change: Specialty net written premiums grew 8.2% driven by robust performance across several business lines.

Speaker Change: Retention remained strong at 83% while renewal pricing metrics ticked up again with average renewal increase standing at 11.7% in the second quarter.

Jeff Farber: Turning to reinsurance, we completed a successful renewal of our property treaties on July 1st. We experienced very favorable market responses, which speak to the strength of our pricing, underwriting, and data quality. The market was especially complementary of the underwriting work we have done with regard to commercial properties, as well as our continued work on cat exposures. The key elements and highlights of our current property reinsurance program are as follows. We renewed both treaties, property per risk and cat occurrence, maintaining a very consistent structure from expiring treaties. Companies. Pricing was significantly better than our expectations, helped by our property work, in particular, in middle market and specialty.

Speaker Change: Turning to reinsurance, we completed a successful renewal of our property treaties on July 1st.

Jeffrey Farber: We experienced very favorable market responses, which speak to the strength of our pricing, underwriting, and data quality. The market was especially complimentary of the underwriting work we have done with regard to commercial properties as well as our continued work on cat exposure. The key elements and highlights of our current property reinsurance program are as follows. We renewed both treaties, property per risk and cat occurrence, maintaining a very consistent structure from expiring treaties. Pricing was significantly better than our expectations, helped by our property work, in particular in the middle market and special.

Speaker Change: We experience very favorable market responses which speak to the strength of our pricing, underwriting, and data quality.

Speaker Change: The market was especially complimentary of the underwriting work we have done with regard to commercial properties, as well as our continued work on cat exposures.

Jeffrey Farber: We've secured full capacity across our catastrophe occurrence program, maintaining our $200 million retention, and we purchased an additional $150 million in the traditional reinsurance market at the top of the existing Cat Occurrence Tower. Taken together, these changes have resulted in increased reinsurance limits in our CAT Occurrence Program that exhaust at $1.9 billion compared to the previous $1.75 billion for our highest concentration states. Overall, the success of these renewals provides third-party validation of our underwriting and catastrophe mitigation efforts.

Speaker Change: We renewed both treaties, Property Per Risk and Cat Occurrence, maintaining a very consistent structure from expiring treaties.

Speaker Change: Pricing was significantly better than our expectations, helped by our property work, in particular in middle market and specialty.

Jeff Farber: We secured full capacity across our catastrophe occurrence program, maintaining our $200 million retention. And we purchased an additional $150 million in the traditional reinsurance market at the top of the existing Cat Occurrence Tower. Taken together, these changes have resulted in increased reinsurance limits in our Cat Occurrence Program that exhausts at $1.9 billion compared to the previous $1.75 billion for our highest concentration states. Overall, the success of these renewals provides third-party validation of our underwriting and catastrophe mitigation actions.

Speaker Change: We've secured full capacity across our Catastrophe Occurrence Program, maintaining our $200 million retention.

Speaker Change: and we purchased an additional $150 million in the traditional reinsurance market at the top of the existing CAT occurrence tower.

Speaker Change: Taken together, these changes have resulted in increased reinsurance limits in our CAT occurrence program that exhausts at $1.9 billion compared to the previous $1.75 billion for our highest concentration states.

Jeff Farber: Moving to investment performance, net investment income increased $2.8 million, or approximately 3%, to $90.4 million in the second quarter compared to the prior year quarter, as higher interest rates drove strong fixed maturity and short-term income. This was partially offset by a decrease in partnership income. Income from limited partnerships was subdued in the quarter, driven by underperformance in a handful of funds. Variability in quarterly results is inherent in private fund valuations and fully expected in this long-duration asset class. Adjusting for the non-recurring $6.8 million benefit in the second quarter of 2023, partnership results for the first six months of 2024 are only $1 million lower than the first six months of 2023.

Jeffrey Farber: Moving to Investment Performance, Net investment income increased $2.8 million, or approximately 3%, to $90.4 million in the second quarter compared to the prior year quarter as higher interest rates drove strong fixed maturity and short-term income. This was partially offset by a decrease in partnership income. Income from limited partnerships was subdued in the quarter, driven by underperformance in a handful of funds.

Speaker Change: Net investment income increased $2.8 million, or approximately 3% to $90.4 million in the second quarter, compared to the prior year quarter, as higher interest rates drove strong fixed maturity and short-term income. This was partially offset by a decrease in partnership income.

Speaker Change: Income from limited partnerships was subdued in the quarter, driven by underperformance in a handful of funds.

Speaker Change: Variability in quarterly results is inherent in private fund valuations and fully expected in this long-duration asset class.

Jeffrey Farber: Variability in quarterly results is inherent in private fund valuation and fully expected in this long-duration asset class. Adjusting for the non-recurring $6.8 million benefit in the second quarter of 2023, partnership results for the first six months of 2024 are only $1 million lower than the first six months of 2023. We remain comfortable with our partnership investments. Excluding partnerships, net investment income was up approximately 20 percent in the second quarter of 2024 as compared to the year-ago quarter.

Speaker Change: Adjusting for the non-recurring $6.8 million benefit in the second quarter of 2023, partnership results for the first six months of 2024 are only $1 million lower than the first six months of 2023.

Jeff Farber: We remain comfortable with our partnership investments. Excluding partnerships, net investment income was up approximately 20% in the second quarter of 2024 as compared to the year-ago quarter.

Speaker Change: We remain comfortable with our partnership investments.

Speaker Change: Excluding partnerships, net investment income was up approximately 20% in the second quarter of 2024 as compared to the year-ago quarter.

Jeff Farber: During the quarter, we completed the previously announced transfer of our investment-grade fixed maturity portfolio to an external manager. We expect this move will broaden our asset class exposure and further optimize investment's contribution to overall results. In conjunction with this transfer and considering investment tax gains expiring this year, we reposition sector exposures with an investment-grade fixed income and realize approximately 30 million in pre-tax losses. From an asset allocation perspective, we reduced exposure to CNBS with reinvestment of proceeds into other high-quality sub-sectors of secured product, including R&BS and CLOs. We also repositioned within corporate bonds to extend duration slightly and move out of less partnership income. Expectation is approximately 7 to 8 million per quarter, though we remain cognizant of the tendency for private fund returns to follow a lumpy pattern.

Jeffrey Farber: During the quarter, we completed the previously announced transfer of our investment-grade fixed maturity portfolio to an external manager. We expect this move will broaden our asset class exposure and further optimize investment's contribution to overall results, in conjunction with this transfer and considering investment tax gains expiring this year. We repositioned sector exposures within investment-grade fixed income and realized approximately $30 million in pre-tax losses. From an asset allocation perspective, we reduced exposure to CMBS with reinvestment of proceeds into other high-quality subsectors of securitized products, including RMBS and CLOs.

Speaker Change: During the quarter we completed the previously announced transfer of our investment grade fixed maturity portfolio to an external manager. We expect this move will broaden our asset class exposure and further optimize investments contribution to overall results.

Speaker Change: In conjunction with this transfer and considering investment tax gains expiring this year,

Speaker Change: We repositioned sector exposures within investment-grade fixed income and realized approximately $30 million in pre-tax losses.

Speaker Change: From an asset allocation perspective, we reduced exposure to CMBS with reinvestment of proceeds into other high-quality subsectors of securitized product, including RMBS and CLOs.

Jeffrey Farber: We also repositioned within corporate bonds to extend duration slightly and move out of less favored credits at attractive spread levels. Looking ahead, we believe a more normalized partnership income expectation is approximately $7 to $8 million per quarter, though we remain cognizant of the tendency for private fund returns to follow a lumpy pattern.

Speaker Change: We also repositioned within corporate bonds to extend duration slightly and move out of less favored credits at attractive spread levels.

Speaker Change: Looking ahead, we believe a more normalized partnership income expectation is approximately $7 to $8 million per quarter, though we remain cognizant of the tendency for private fund returns to follow a lumpy pattern.

Jeffrey Farber: The current rate environment should continue to provide an accumulating benefit to NII in 2024 and subsequent years. We expect overall growth in NII of at least 10% in 2024 compared to 2023. Moving on to book value and capital position, Gap's book value per share increased 1.1 percent sequentially to 70.96 per share, reflecting net income partially offset by shareholder dividends.

Jeff Farber: The current rate environment should continue to provide an accumulating benefit to NII in 2024 and subsequent years. We expect overall growth in NII of at least 10% in 2024 compared to 23.

Speaker Change: The current rate environment should continue to provide an accumulating benefit to NII in 2024 and subsequent years. We expect overall growth in NII of at least 10% in 2024 compared to 2023.

Jeff Farber: Moving on to book value and capital position, gap book value per share increased 1.1% sequentially to 70.96 per share, reflecting net income partially offset by shareholder dividends. Our capital management strategy continues to balance reinvestment in the business, maintaining strong financial ratings, and providing returns to shareholders through consistent quarterly dividends and share buybacks when warranted. Our outlook for the second half of 2024 remains consistent with our regional expectations, and our third quarter plan cataloged is 7.4%. In summary, our margin recapture initiatives are yielding excellent results, while our discipline growth strategies are effectively targeting our most profitable lines of business.

Speaker Change: Moving on to book value and capital position.

Speaker Change: Gap book value per share increased 1.1% sequentially to $70.96 per share, reflecting net income partially offset by shareholder dividends.

Jeffrey Farber: Our capital management strategy continues to balance reinvestment in the business, maintaining strong financial ratings, and providing returns to shareholders through consistent quarterly dividends and share buybacks when warranted. Our outlook for the second half of 2024 remains consistent with our original expectation, and our third quarter planned cat load is 7.4%. In summary, our margin recapture initiatives are yielding excellent results, while our disciplined growth strategies are effectively targeting our most profitable lines of business.

Speaker Change: Our capital management strategy continues to balance reinvestment in the business, maintaining strong financial ratings, and providing returns to shareholders through consistent quarterly dividends and share buybacks when warranted.

Speaker Change: Our outlook for the second half of 2024 remains consistent with our original expectations.

Speaker Change: And our third quarter plan cat load is 7.4%.

Speaker Change: In summary, our margin recapture initiatives are yielding excellent results, while our disciplined growth strategies are effectively targeting our most profitable lines of business.

Jeff Farber: Looking ahead to the next 12 to 18 months, we are confident our positive trajectory will continue. Underwriting margins should continue to improve as past and current rate increases earn in, and we execute against our catastrophe exposure initiatives. Furthermore, we expect the current interest rate environment should continue to provide an accumulating benefit of higher investment yields. We couldn't be more excited about our prospects and remain committed to delivering value to our stakeholders through sustainable, profitable growth and top-tier performance.

Jeffrey Farber: Looking ahead to the next 12 to 18 months, we are confident our positive trajectory will continue. Underwriting margins should continue to improve as past and current rate increases earn in, and we execute against our Catastrophe Exposure Initiative. Furthermore, we expect the current interest rate environment should continue to provide an accumulating benefit of higher investment yields.

Speaker Change: Looking ahead to the next 12 to 18 months, we are confident our positive trajectory will continue.

Speaker Change: Underwriting margins should continue to improve as past and current rate increases earn in and we execute against our catastrophe exposure initiatives.

Speaker Change: Furthermore, we expect the current interest rate environment should continue to provide an accumulating benefit of higher investment yields.

Jeffrey Farber: We couldn't be more excited about our prospects and remain committed to delivering value to our stakeholders through sustainable, profitable growth and top-tier performance. With that, we'll be happy to take your questions. Operator? We will now begin the question and answer session. To ask a question, you may press star and one on your touchtone phone.

Speaker Change: We couldn't be more excited about our prospects and remain committed to delivering value to our stakeholders through sustainable, profitable growth and top-tier performance.

Jeff Farber: With that, we'll be happy to take your questions.

Operator: Operator? We will now begin the question and answer session. To ask a question, you may press star and one on your touchtone phone. If you are using a speaker phone, please pick up your hands before pressing the keys. To withdraw your question, please press star and two.

Speaker Change: With that, we'll be happy to take your questions. Operator?

Speaker Change: We will now begin the question and answer session. To ask a question, you may press star and 1 on your touchtone phone.

Operator: If you are using a speakerphone, please pick up your handset before pressing the button. To withdraw your questions, please press star then. At this time, we will pause momentarily to assemble our rocket. The first question today comes from Michael Phillips with Oppenheimer. Please go ahead. Thank you. Good morning, everybody. I'll start with a personal line, specifically homeowners. An ExCAT kind of question.

Speaker Change: If you are using a speakerphone, please pick up your handset before pressing the keys.

Operator: At this time, we will pause momentarily to assemble our roster.

Speaker Change: To withdraw your question, please press star and 2.

Speaker Change: At this time, we will pause momentarily to assemble our roster.

Michael Phillips: The first question today comes from Michael Phillips with Oppenheimer. Please go ahead. Thank you. Good morning, everybody.

Speaker Change: The first question today comes from Michael Phillips with Oppenheimer. Please go ahead.

Michael Phillips: I start questions in personal lines, specifically homeowners. Ask that kind of question. Given your core margins are really don't well, I'm expanding there. Do you expect your rate below 20% in rate? Is that accelerated from here? Is that there? Are we at a peak for that?

Michael Phillips: Thank you. Good morning, everybody. I'll start first with questions in personal lines, specifically homeowners. XCAT kind of question. You know, given your core margins are really doing well and expanding there, I guess, do you expect kind of you're right below 20% in rates? Does that accelerate from here? Is that there? Are we at a peak for that?

Michael Phillips: You know, given your core margins are really doing well and expanding there, I guess, do you expect to kind of be right below 20% in rate? Does that accelerate from here? Is that there?

Jack Roach: Thanks for your question. I want to make sure I clarify. You're speaking specifically to homeowners pricing. Yes, you're just under looks like 20% for the quarter, right? Right. As we said in our prepared remarks, we're obviously coming off of the peak of combination of significant insurance to value enhancement, as well as increased rate. So we're very pleased, frankly, with our personal lines team's ability to meet the market in some ways, leave the market. We're now at a point where insurance to value is very adequate, and we'll continue to look at that in terms of staying on top of that adequacy and maintaining strong rate consistent with what we think the market is enabling us to do.

Michael Phillips: Are we at a peak for that? Mike, thanks for your question. I'm going to make sure I clarify that you're speaking specifically about P to homeowners pricing. Yes, sir.

Speaker Change: Mike, thanks for your question. I'm going to make sure I clarify, you're speaking specifically to homeowners pricing?

Michael Phillips: Yes. Yeah. You know, you're just under it looks like 20% for the quarter rate.

Mike: Yes, sir. Yes. Yeah, you know, you're just under, it looks like 20% for the quarter. Great.

John Roche: Right. Yeah, I think as we said, as we said in our, you know, our prepared remarks, Mike, that, you know, we're obviously coming off of the peak of the combination of significant insurance to value enhancement, as well as an increased rate. And so we're very pleased, frankly, with our personalized team's ability to meet the market and, in some ways, lead the market. And we're now at a point where insurance to value is very adequate.

Speaker Change: Right.

Speaker Change: Yeah, I think as we said in our prepared remarks, Mike, that, you know, we're obviously coming off of the peak of combination of significant insurance-to-value enhancement.

Speaker Change: as well as increased rate. And so we're very pleased, frankly, with our personal lines team's ability to meet the market and in some ways lead the market.

John Roche: And we'll continue to look at that in terms of staying on top of that adequacy and maintaining strong rates consistent with what we think the market is enabling us to do. So it's going to be, I think, pretty stable from here on out. But we'll continue to watch the weather and the overall patterns and stay disciplined in the market. Mike, I think it's also important to remember that while written rates will be relatively consistent for a short period of time, earned rates will actually increase because of the higher written rate that we've had in the last few quarters.

Speaker Change: And we're now at the point where insurance to value is very adequate and we'll continue to look at that in terms of staying on top of that adequacy and maintaining strong rate consistent with what we think the market is.

Jack Roach: It's going to be, I think, pretty stable from here on out, but we'll continue to watch the weather and the overall patterns and stay disciplined in the market.

Speaker Change: is enabling us to do. So it's gonna be, I think, pretty stable from here on out, but we'll continue to watch the weather and the overall patterns and stay disciplined in the market.

Jeff Farber: Mike, I think it's also important to remember that while the written rate will be relatively consistent for a short period of time, the earned rate will actually increase because of the higher written rate that we've gotten the last few quarters. So you'll start to see that impact in the financials. Yep, okay, good, thank you. Thanks for that.

Speaker Change: Mike, I think it's also important to remember while written rate will be relatively consistent for a short period of time, earned rate will actually increase because of the higher written rate that we've got in the last few quarters. So you'll start to see that impact in the financials.

John Roche: So you'll start to see that impact in the financials. Yep. Okay, good. Thank you. Thanks for that. Um, second question, Jeff, Jeff, you said something at first that I didn't really catch. And then, so maybe I want to make sure I got it right and expand upon it a little bit. You were talking about comp, and I think you said something about a slowdown in claims of urgence. Did I get that

Michael Phillips: Second question, Jeff.

Michael Phillips: Jeff, you said something I first I didn't really catch, and then so maybe I want to make sure I got it right at an expanded point a little bit. You were talking comp, and I think you said something about a slowdown in claims of versions. Did I get that right? And if so, what's driving that? And I'm kind of maybe go back a little bit on that one. I think it relates to the indemnity portion, and what we're seeing is some people that originally were out for a period of time that's getting extended a little bit.

Mike: Okay, good. Thank you. Thanks for that.

Jeffrey Farber: And if so, what's driving that and kind of maybe go back a little bit on that. I think it relates to the indemnity portion. And what we're seeing is some people that originally were out for a period of time, that's getting extended a little bit. But it's important to remember that the offset to that is the increased payroll that we've gotten over the last few years. So I think we've been extraordinarily prudent with our workers comp releases and workers comp loss picks. So I'm feeling comfortable with that, Mike.

Jeff Farber: But it's important to remember that the offset to that is the increased payroll that we've gotten over the last few years. So I think we've been extraordinarily prudent with our workers' comp releases and workers' comp loss picks. So I'm feeling comfortable with that, Mike.

John Roche: Was that part of the payroll issue, I mean, your comp growth was a little bit higher than expected. Was that part of what you said about the payroll or anything else behind that 8% or so growth in the quarter? Yeah, this is Jack. Mike, I think again that we have been very disciplined in the workers comp market and watching both medical cost inflation and indemnity trends. I think the net net of that is that the increase in payroll overall is extremely helpful in making sure that we have pricing adequacy.

Michael Phillips: Was part of the payroll issue? I mean, your comp growth was a little bit higher than expected. Was that part of that issue in the payroll or anything else behind that 8% or so growth in the quarter?

Jack Roach: Yeah, this is Jack, Mike. I think, again, we have been very disciplined in the workers' comp market and watching both medical cost inflation and indemnity trends. I think the net net of that is that the increase in payroll overall has been extremely helpful in making sure that we have pricing adequacy. But I think what we're sharing in our prepared remarks is that we're watching to make sure that, particularly the indemnity side of it, that isn't constrained by fee schedules, like medical costs, that there isn't something going on there that would cause some margin compression. We're not seeing any dramatic changes there, but we're just signaling to folks that we're maintaining a level of discipline in our analysis and looking ahead.

Jack Roche: Yeah, this is Jack, Mike. I think, again, we have been very disciplined in the workers' comp market and watching both medical cost inflation and indemnity trends. I think the net net of that is that the increase in payroll overall has been extremely helpful in making sure that we have pricing adequacy.

John Roche: But I think what we're sharing in our prepared remarks is that we're watching to make sure that, particularly on the indemnity side of it, that isn't constrained by fee schedules like medical costs, that there isn't something going on there that would cause some margin compression. We're not seeing any dramatic changes there, but we're just signaling to folks that we're maintaining a level of discipline in our analysis and looking ahead And I'll just add, Mike, that our WorkComp book as a percentage of our portfolio is less than 18% of our book. So, you know, it's a core commercial. Thank you. We are targeting growth in WorkComp in the small commercial business, which performs very well.

Mike: But I think what we're sharing in our in our prepared remarks is that

Mike: We're watching to make sure that, particularly the indemnity side of it, that isn't constrained by fee schedules, like medical costs, that there isn't something going on there that would cause some margin compression.

Mike: We're not seeing any dramatic changes there, but we're just signaling to folks that we're maintaining a level of discipline in our analysis and looking ahead.

Unknown Executive: Yeah.

Jack Roach: And I've just added, Mike, that our work comp book as a percentage of our portfolio is less than 18% of our book. So, of course, thank you. We are targeting growth in work comp in the small commercial business, which performs very well. So our small commercial initiatives include rounding out accounts and writing more of that business.

Mike: Yeah, and I'll just add, Mike, that our work comp book as a percentage of our portfolio is, you know, less than 18% of our book. So, you know, if poor,

Mike: of CORE, CORE Commercial, thank you. We are targeting growth in Work Comp in the small commercial business, which performs very well. So our small commercial initiatives include rounding out accounts and writing more of that business.

John Roche: So our small commercial initiatives include rounding out accounts and writing more of that. Okay, great. Thank you guys. Appreciate it. I'll hop off for a second.

Michael Phillips: Okay, great. Thank you, guys. Appreciate it.

Michael Phillips: I'll hop off for a second. Thank you.

Mike: Okay, great. Thank you guys. Appreciate it. I'll hop off for a second. Thank you.

Mike Zorunki: The next question comes from Mike Zorunki with BMO. Please go ahead. Hey, thanks. Good morning. Trying to re-read that part of the transcript in your pair of marks are always great. I think it was said that in core commercial, there was kind of healthy, maybe favorability, better than expected, and property, and you took that to be more defensive in casualty lines. I don't know if they're you saying you added my understanding that correctly, that you're saying you're kind of one of the staff data comes out.

Michael Phillips: Thank you. The next question comes from Mike Zaremski with BMO. Please go ahead. Hey, thanks. Good morning.

Speaker Change: The next question comes from Mike Zaremski with BMO. Please go ahead.

Michael Zaremski: I'm trying to reread that part of the transcript, and your pair of marks are always great. I think it was said that in core commercial, there was kind of a healthy, maybe, favorability, better than expected, and property, and you took that to be more defensive and casualty lines. I don't know if you're saying you added that or if I understand that correctly that you're saying you're kind of when the stat data comes out. Until next year, we'd see more IBNR or what to do if you want to unpack that. Yes, so the property favorability and core was very useful.

Mike Zaremsky: Hey, thanks. Good morning.

Speaker Change: I'm trying to reread part of the transcript and your remarks are always great. I think it was said that in core commercial, there was kind of healthy...

Speaker Change: May be favorability better than expected and property and you took that to Be more defensive in casualty lines I don't know if are you saying you you added that and I understand that correctly that you're saying you're kind of

Jeff Farber: I guess not until next year, we'd see more IB&R or what did you, if you want to unpack that comment? Yes, so with the property favorability and core was very useful; some of that was recorded, and some of it allowed us to be more prudent or defensive in the casualty lines across the book. And at this point, it's generally IB&R, as those claims haven't shown themselves; you're seeing those in prior years. Got it, okay.

Speaker Change: When the stat data comes out, I guess not until next year, we'd see more IV&R or what did you want to unpack that comment?

Jeffrey Farber: Some of that was recorded, and some of it allowed us to be more prudent or defensive in the casualty lines across the book. And at this point, it's generally IB&R as those claims haven't shown up. You're seeing those in prior years. Got it.

Speaker Change: Yes, so with the property favorability in core was very useful, some of that was recorded and some of it allowed us to be more prudent or defensive in the casualty lines across the book. And at this point, it's generally IB&R as those claims haven't shown themselves. You're seeing those in prior years.

Mike Zorunki: And are you just staying with the theme on casualty lines since it's been a big topic of conversation for especially recently? You know, I feel like you all have done a good job of explaining to us that over the last five plus years, you have taken making proactive decisions to exit certain metros where there's higher social inflation, et cetera. Have you, is there a way to unpack, you know, or if you looked at data to try to help us triangulate whether, you know, your loss trend assumptions might be different than others, or, you know, just anything that you feel that you want to better unpack to give folks more confidence that, you know, the reserve friends we've been seeing for you all, which have been excellent.

Michael Zaremski: Okay, and are you just staying with the theme on cash and lines? It's been a big topic of conversation, especially recently. I feel like you all have done a good job of explaining to us that, you know, over the last five plus years, you have taken, made proactive decisions to exit certain metros where there's higher social inflation, et cetera. Have you, is there a way to unpack it, you know, or have you looked at the data to try to?

Speaker Change: And are you, you know, just staying with the...

Speaker Change: What's the theme on cash to line since it's it's you know been a big topic of conversation for especially recently

Speaker Change: You know you I feel like you all have done a good job of explaining to us

Speaker Change: that, you know, over it, you know, over the last five plus years, you, you have taken making proactive decisions to exit certain metros, where there's higher social inflation, etc. Have you, is there a way to unpack

Speaker Change: or have you looked at data to try to...

Speaker Change: , . . . . . . .

Unknown Executive: And are, are run writable.

Speaker Change: folks more confident that, you know, the reserve trends we've been seeing for you all, which have been excellent, are run rateable.

Jack Roach: Mike, during 2016, you may remember we strengthened our balance sheet with a large reserve charge. At that time, we became increasingly concerned with the liability and legal trends in major metropolitan cities. And with certain industries being more prone to losses, we also removed any remaining monoliner unsupported umbrella. We were talking externally and demonstrating these underwriting actions in 2018 and 19 as a result of those geographic and industry portfolio choices. We're experiencing, as you reference, a very substantial commercial liability frequency decline since pre-COVID to 2019 levels. For example, having a relatively small contractor book is serving as well.

John Roche: to help us triangulate whether, you know, your loss trend assumptions might be different than others or, you know, are you, you know, just anything that you feel that you want to better unpack to give folks more confidence that, you know, the reserve trends we've been seeing for you all, which have been excellent, are run rateable. Mike, during 2016, you may remember, we strengthened our balance sheet with a large reserve charge. At that time, we became increasingly concerned with the liability and legal trends in major metropolitan cities, and with certain industries being more prone to losses. We also removed any remaining monoline or unsupported umbrella.

Speaker Change: Mike, during 2016 you may remember we strengthened our balance sheet with a large reserve charge. At that time we became increasingly concerned with the liability and legal trends in major metropolitan cities.

Speaker Change: and with certain industries being more prone to losses. We also removed any remaining monoline or unsupported umbrella.

John Roche: We were talking externally and demonstrating these underwriting actions in 2018 and 2019. As a result of those geographic and industry portfolio choices, we're experiencing, as you referenced, a very substantial commercial liability frequency decline since pre-COVID-19 levels. For example, having a relatively small contractor book is serving us well.

Speaker Change: We were talking externally and demonstrating these underwriting actions in 2018 and 2019 as a result of those geographic and industry portfolio choices

Speaker Change: We're experiencing, as you referenced, a very substantial commercial liability frequency decline since pre-COVID 2019 levels. For example, having a relatively small contractor book is serving us well.

Mike Zorunki: This overall frequency decline has generally offset our actions to consistently and meaningfully increase our casualty severity assumptions since 2019. This decline, along with more recent property line favorability, has allowed more prudent reserving and increases in loss picks. Loss trend severity is intense broadly in the industry, but we're relatively well positioned to navigate the challenges. It's hard to say whose loss picks might be higher, but our loss picks since 19 have gone up consistently, very dramatically. Okay, that's helpful.

John Roche: This overall frequency decline has generally offset our actions to consistently and meaningfully increase our casualty severity assumptions since 2019. This decline, along with more recent property line favorability, has allowed more prudent reserving and increases in loss spectra. Lost Trend Severity is intense broadly in the industry, but we're relatively well positioned to navigate the challenges. It's hard to say whose loss picks might be higher, but our loss picks since 19 have gone up consistently and very dramatically.

Speaker Change: This overall frequency decline has generally offset our actions to consistently and meaningfully increase our casualty severity assumptions since 2019.

Speaker Change: This decline, along with more recent property line favorability, has allowed more prudent reserving and increases in loss picks.

Speaker Change: Loss trend severity is intense broadly in the industry, but we're relatively well positioned to navigate the challenges.

Speaker Change: It's hard to say whose loss picks might be higher, but our loss picks since 19 have gone up consistently very dramatically.

Jeffrey Farber: Okay, that's helpful, and if this is a stat you don't want to share, you don't have it, that's fine. But anyway, you can dimension what percentage of your reserves are umbrella, and being I'll just say many of your competitors don't want to disclose that, so not saying you need to but, Curious if you could help us to mention that. Yeah, I don't have that right in front of

Unknown Executive: If this is a stat, you don't want to show you don't have, it's fine, but anyway, you can dimension what percentage of your reserves are umbrella. And I'll just say many of your competitors don't want to disclose that, so it's not saying you need to. Curious if you could help us to mention that. Yeah, I don't have that right in front of me, but that's something that we can get back to people if they're interested. Okay, great.

Speaker Change: Okay, that's helpful and if this is a stat you don't want to share you don't have that's fine but any way you can dimension what percentage of your reserves are umbrella?

Speaker Change: And being, and I'll just say many of your competitors don't want to disclose that, so it's not saying you need to, but...

Speaker Change: Curious if you could help us to mention that. Yeah, I don't have that right in front of me, but that's something that we can get back to people if they're interested.

Jeffrey Farber: But that's something that we can get back to people if they're interested. Okay, great. And just lastly, back to personal lines, in terms of kind of the plan to, you know, redimension the, especially the home portfolios, you know, well in action. Can you remind us, I believe you glide past us to a CAT ratio, you know. [inaudible] Mike, this is Jack.

Mike Zorunki: And just lastly, back to personal lines. In terms of kind of the, you know, clearly the, the plan to, to, you know, redimension the, especially the home portfolios, well, you know, well in action. To remind us, I believe you know, you glide past us to a cat ratio that would eventually, you know, you know, fall over time. It's kind of the actions took place. Is that kind of, you know, based on the trajectory of the portfolio repositioning over the last six months, is anything changed at a high level in terms of kind of glide path down over time and in the cat ratio cat catastrophe load ratio, sorry, over time.

Speaker Change: Okay, great. And just lastly, back to...

Speaker Change: personal lines. In terms of kind of the, you know, clearly the, the plan to

Speaker Change: to redimension the home portfolios well in action. Can you remind us, I believe you glide past us to a cat ratio that would eventually, you know,

Speaker Change: You know

Speaker Change: fall over time as kind of the actions took place.

Speaker Change: Is that kind of, you know, based on the trajectory of the portfolio repositioning over the last six months, has anything changed at a high level in terms of kind of that glide path down over time in the CAT ratio, CAT, catastrophe load ratio, sorry, over time?

Jack Roach: Mike, this is Jack. I'll talk broadly from an enterprise perspective. Middle market has dramatically changed the profile of their cat exposure over the last couple of years. And as we looked at some profit improvement opportunities. We also looked at what, what types of classes and within which geographies could we reset our catastrophe exposure and frankly enable the enterprise to have some maneuvering relative to our property aggregations across the country. So I think that's having a profound effect. I also think that, you know, we can't state enough that when you combine dramatic pricing crease in our personal lines book, combine with the deductible implementation that we're well underway with.

John Roche: I'll talk broadly. From an enterprise perspective, the middle market has dramatically changed the profile of their cat exposure over the last couple of years. And as we looked at some profit improvement opportunities, we also looked at what types of classes and within which geographies we could reset our catastrophe exposure and, frankly, enable the enterprise to have some maneuvering relative to our property aggregations across the country. So I think that's having a profound effect.

Speaker Change: Mike, this is Jack. I'll talk broadly. From an enterprise perspective, the middle market has dramatically changed the profile of their CAT exposure over the last couple of years and as we looked at some profit improvement opportunities

Speaker Change: We also looked at what types of classes and within which geographies could we reset our...

Speaker Change: catastrophe exposure and frankly enable the enterprise to have some maneuvering relative to our property aggregations across the country.

John Roche: I also think that, you know, we can't state enough that when you combine the dramatic price increase in our personal lines book, combined with the deductible implementation that we're well underway with, and some, you know, PIF growth patterns that further enable better diversification, all of that aids us in having confidence looking forward that our CAT loads will certainly start to move in a better direction. And we'll continue to monitor the weather patterns and make additional adjustments if that's required.

Speaker Change: So I think that's having a profound effect. I also think that, you know, we can't state enough that when you combine dramatic price increase in our purse lines book combined with the deductible implementation that we're well underway with

Jack Roach: And some, you know, piff growth patterns that further enable a better diversification. All of that aids us in having confidence, looking forward that our cat loads will will will will certainly start to move. In a better direction and will continue to frankly monitor the weather patterns and make additional adjustments that that's required. But based on what we know today. And based on the actions, we have the highest level of confidence we've ever had that we are addressing our cat loads and further diversifying our portfolio.

Speaker Change: and some, you know, PIF growth patterns that further enable a better diversification, all of that

Speaker Change: aids us in having confidence looking forward that our

Speaker Change: Our CAT loads will certainly start to move.

Speaker Change: in a better direction. And we'll continue to frankly monitor the weather patterns and make additional adjustments if that's required. But based on what we know today,

John Roche: But based on what we know today, and based on the actions, we have the highest level of confidence we've ever had that we are addressing our cat loads and further diversifying our portfolio. Thank you very much.

Speaker Change: And based on the actions, we have the highest level of confidence we've ever had that we are addressing our cat loads and further diversifying our portfolio.

Mike Zorunki: Thank you very much. Thank you, Mike.

John Roche: Thank you, Mike. The next question comes from Paul Newsome with Piper Sandler. Please go ahead. I guess a little bit of a follow-up to Mike's question about caps. I mean, specifically looking at the terms and conditions being on the personalized side.

Speaker Change: Thank you very much.

Paul Newsom: The next question comes from Paul Newsom with Piper Sandler. Please go ahead. I guess a little bit of follow-up on Mike's question about cats. I mean, specifically looking at the terms of conditions behind the personal line size. Is there any way to think about the quantification of those changes? Does it have an impact? I think we can measure on PML for anything that you know, you could tell us or even maybe you can even describe what you know internally as a description for that impact. And we just kind of have to know it directionally to get idea.

Mike Zaremsky: Thank you, Mike.

Speaker Change: The next question comes from Paul Newsome with Piper Sandler. Please go ahead.

Paul Newsome: I guess a little bit of a follow-up on Mike's question about caps. I mean specifically looking at the terms and conditions being on the personalized side.

Paul Newsome: Is there any way to think about the quantification of those changes? Does it have an impact? You can measure on PMLs or anything that, you know, you could tell us or even, maybe you can describe what you know internally as a description for that impact, and we just kind of have to know what direction to go. Listen, first of all, we understand the desire to be able to get, you know, more specific KPIs or more transparency to metrics.

Paul Newsome: Is there any way to think about the quantification of those changes? Does it have an effect you can measure on PMLs or anything that...

Speaker Change: You know, you could tell us or even...

Speaker Change: Maybe you can describe what you've known internally as a description.

Speaker Change: for that impact, or we just kind of have to know a direction, it's a good idea.

Speaker Change: Listen, first of all, we understand the desire to be able to get, you know, more...

Speaker Change: specific KPIs or more transparency to metrics. The reality is, is the way you kind of answered the question for us is exactly how we're trying to pursue it, is that we have to.

Paul Newsome: The reality is, the way you kind of answered the question for us is exactly how we're trying to pursue it. We have to take our measured steps that we've taken, both in personal lines and more broadly, and continuously model the business and look at where our AALs micro concentrations are and how that affects, ultimately, the PML first for earnings volatility metrics driven by severe convective storms, but also relative to our tail. And I think we are more effective than we've ever been.

Jack Roach: And how we're trying to pursue it is that we have to take our measured steps that we've taken both in personal lines and more broadly and continuously model the business and look at where our AALs micro concentrations are and how that affects ultimately the PML first for earnings volatility metrics driven by severe convective storms. But also relative to our tail. And I think we are more effective than we've ever been, where we've added some additional resources to make sure that we're as proficient as we possibly can be in measuring the impact that we're making on the actions we're taking today and thinking about what else we could do if that's necessary.

Speaker Change: Take our measured

Speaker Change: steps that we've taken, both in personal lines and more broadly, and continuously

Speaker Change: model the business and look at.

Speaker Change: where our AALs microconcentrations are and how that affects ultimately the PML first for earnings volatility metrics, you know driven by severe convective storms, but also relative to our tail and I think we

John Roche: We've added some additional resources to make sure that we're as proficient as we possibly can be in measuring the impact that we're making on the actions that we're taking today and thinking about what else we could do if that's necessary. But as I said earlier, we're really confident that we are moving our cat loads in the right direction and also providing ourselves additional incentives to grow in other less concentrated areas because of the diversification credit that is more visible to us now as we use the enhanced models. Paul, the impact of the second quarter of additional deductibles was extremely limited because it only started going in on April 1 for renewal business.

Speaker Change: We are more effective than we've ever been. We've added some additional resources to make sure that we're...

Speaker Change: as proficient as we possibly can be in measuring the impact that we're making on the actions we're taking today.

Jack Roach: But as I said earlier, we're really confident that we are moving our cat loads in the right direction and also providing ourselves additional incentives to grow in other left concentrated areas because of the diversification credit that we is more visible to us now as we use the enhanced models. All the impact on the second quarter of additional deductibles was extremely limited because it only started going in April 1 for renewal business.

Speaker Change: and thinking about what else we could do if that's necessary. But as I said earlier...

Speaker Change: We're really confident that we are moving our cat loads in the right direction.

Speaker Change: Also, providing ourselves additional incentives to, you know, grow in other less concentrated areas because of the diversification credit that is more visible to us now as we use the enhanced models.

Speaker Change: Paul, the impact on the second quarter of additional deductibles was extremely limited because it only started going in April 1 for renewal business.

John Roche: So, but as you think about coming around to what we consider the severe convective storm primary season, the second quarter of next year, it's going to be a completely different story. We're very optimistic. Second question, I want to ask maybe a broader question about the expense ratio and the target over time. At one point, you had, I think it was a 20 basis point per year goal that changed with the profit struggles that you had several years ago.

Jack Roach: But as you think about coming around to what we consider the severe convective storm primary season, second quarter of next year, going to be a completely different story, we're very optimistic.

Paul Newsome: But, as you think about coming around to what we consider the severe convective storm primary season second quarter of next year, it's going to be a completely different story. We're very optimistic.

Paul Newsom: Second question I want to ask a maybe broader question about the expense ratio and the target over time. At one point, you had, I think, this 20 basis point per year goal that changed with the profit struggles that we had several years ago.

Speaker Change: Second question, I want to ask maybe a broader question.

Speaker Change: about the expense ratio and the target over time.

Speaker Change: At one point, you had, I think it was 20 basis points per year goal.

Speaker Change: that change with the profit struggles that we had several years ago. Are we kind of back to that theme or has the nature of the company changed such that that's not something that necessarily makes a lot of sense as we look forward over the long term?

Jeffrey Farber: Are we kind of back to that theme, or has the nature of the company changed such that that's not something that necessarily makes a lot of sense if we look forward over the long term? So I think the 30.7% Paul that we guided to and are still guiding to for this year's expense ratio is a consistent 20 basis points improvement. Now, from time to time, it's been 30 or 10, but it's over time it's been pacing that way. Generally speaking, we're still committed to that, and we should be able to achieve that. Having said that, our mix could change, and that could change the trajectory a little bit overall.

Jeff Farber: Are we kind of back to that theme, or has the nature of the company changed such that that's not something that necessarily makes a lot of sense if we look forward a little on term. So I think the 30.7% Paul that we guided to and are still guiding to for this year's expense ratio is a consistent 20 basis points improvement. Now, from time to time, it's been 30 or 10, but it's over time it's been pacing that way. Generally speaking, we're still committed to that, and we should be able to drive that. Having said that, our mix could change, and that could change the trajectory a little bit. Overall, most importantly, we're looking for hundreds of basis points improvement in the combined ratio, and in any given year, a little less focused on whether it's 10 basis points more, 10 basis points less of the expense ratio. I think there's more action right now in the loss ratio for us.

Speaker Change: So I think the 30.7% Paul that we

Speaker Change: [inaudible]

Speaker Change: Generally speaking, we're still committed to that and we should be able to drive that. Having said that, our mix could change and that could change the trajectory a little bit overall.

Jeffrey Farber: Most importantly, we're looking for hundreds of basis points of improvement in the combined ratio and, in any given year, a little less focused on whether it's 10 basis points more, or 10 basis points less of the expense ratio. I think there's more action right now in the loss ratio for us. Appreciate the help, as always.

Speaker Change: Most importantly, we're looking for hundreds of basis points improvement in the combined ratio and in any given year, a little less focused on whether it's 10 basis points more or 10 basis points less of the expense ratio. I think there's more action right now in the loss ratio for us.

Speaker Change: Appreciate the help, as always.

Grace Carter: Next question comes from Grace Carter with Bank of America.

Paul Newsome: The next question comes from Grace Carter with Bank of America. Please go ahead. Good morning, everybody.

Grace Carter: Please go ahead.

Speaker Change: The next question comes from Grace Carter with Bank of America. Please go ahead.

Jack Roach: Hi, good morning everybody. We've listened to peer results this quarter. It sounds like everyone's concerned with social inflation, obviously. But the commentary has varied a bit from one peer to another, with some industry participants more concerned on general liability, some more commercial auto, some commentary is focused more on primary layers and others on excess. I guess I'm wondering, in your opinion, is there a particular area of commercial liability that deserves more attention than others these days, or is the potential pressure from social inflation? Pretty widespread in your view.

Grace Carter: While we've listened to peer results this quarter, it sounds like everyone's concerned with social inflation, obviously, but the commentary has varied a bit from one peer to another, with some industry participants more concerned with general liability, some more with commercial auto, some commentaries focused more on primary layers, and others on excess. I guess I'm wondering, in your opinion, is there a particular area of commercial liability that deserves more attention than others these days? Or is the potential pressure from social inflation pretty widespread in your country? Grace, this is Jack.

Grace Carter: Hi. Good morning, everybody.

Speaker Change: While we've listened to peer results this quarter, it sounds like everyone's concerned with social inflation, obviously, but the commentary has varied a bit from one peer to another with some industry participants.

Speaker Change: More concerned on general liabilities, some more with commercial auto, some commentaries focused more on primary layers and others on excess. I guess I'm wondering, in your opinion, is there a particular area of

Oksana Lukasheva: Oksana Lukasheva

Jack Roach: Grace, this is Jack. Thanks for the question. You know, I think ultimately social inflation and legal system of use are just affecting the severity of the severity of liability trends and, and more broadly, you you see obviously in auto accidents or in kind of business to consumer type of exposures. You have individuals being harmed that lend themselves to higher jury awards, higher litigation rates, and the court system clearly has changed in that more cases are going further into the, you know, into duration, and that's somewhat helped by litigation finance. So I think those are are are pretty broad base.

John Roche: Thanks for the question. I think, ultimately, social inflation and legal system abuse are just affecting the severity of the severity of liability trends. And more broadly, you see, obviously, in auto accidents or in kind of business-to-consumer type exposures, you have individuals being harmed that lend themselves to higher jury awards, higher litigation rates, and the court system clearly has changed in that more cases are going further into the, you know, duration, and that's somewhat helped by litigation finance.

Oksana Lukasheva: Grace, this is Jack. Thanks for the question.

Jack: You know, I think...

Speaker Change: Ultimately, social inflation and legal system abuse are just affecting the severity of the severity of liability trends.

Oksana Lukasheva: And more broadly, you see, obviously, in auto accidents or in kind of business-to-consumer type of exposures, you have individuals being harmed.

Speaker Change: that lend themselves to higher jury awards, higher litigation rates.

Oksana Lukasheva: and the court system clearly has changed in that more cases are going further into the, you know, into duration and that's somewhat helped by litigation finance. So I think those are our pretty broad base.

John Roche: So I think those are pretty broad based. Some of the differences I think you're observing are what kind of portfolio one has and how much of that is susceptible to those social inflationary trends, whether that be limits profile or kind of classes the business into some degree of geography that you play in.

Jack Roach: Some of the differences I think you're observing are what kind of portfolio one has and how much of that is susceptible to those social inflationary trends, whether that be limits profile or kind of classes of business into some degree geography that you play in. But also I think, as Jeff has been, you know, articulating both in his prepared remarks and in his response to the previous question, it's what changes have you been making along the way that could be running against some of those liability severity trends. And in our case, we know that we have made some real portfolio actions, particularly in middle market, that are showing, are giving us some advantages, and that frequency of severity improvement is offsetting the natural severity of the severity trends that's going up.

Speaker Change: Some of the differences I think you're observing are

Speaker Change: What kind of portfolio one has and how much of that is susceptible to those social inflationary trends, whether that be limits profile or

Oksana Lukasheva: kind of classes the business into some degree geography that you play in. But also, I think as Jeff has been, you know, articulating both in his prepared remarks and in his response to the previous question, it's

John Roche: But also, as Jeff has been, you know, articulating both in his prepared remarks and in his response to the previous question, it's, What changes have you been making along the way that could be running against some of those liability severity trends? And in our case, we know that we have made some real portfolio actions, particularly in the middle market, that are showing that they are giving us some advantages, and that frequency of severity, improvement is offsetting the natural severity of the severity trends that are going up.

Jeff: What changes have you been making along the way that could be running against some of those liability severity trends?

Jeff: And in our case, we know that we have made some real portfolio actions, particularly in middle market, that are showing, are giving us some advantages, and that frequency of severity

Jeff: improvement is offsetting the natural severity of the severity trend that's going up.

Jack Roach: And then last but not least, you know, the decision we made, you know, eight years ago, starting eight years ago to, you know, really get out of the excess umbrella business, particularly over, you know, over other companies, is proving to be very beneficial because we obviously know our book of business well and we know how to provide umbrella coverage above our own business. I think where some companies might be getting caught short is they don't do the primary underwriting, and so they have an excess book of business that tends to be.

John Roche: And last but not least, the decision we made, you know, eight years ago, starting eight years ago to, you know, really get out of the excess umbrella business, particularly over, you know, other companies, is proving to be very beneficial, because we obviously know our book of business well, and we know how to provide umbrella coverage above our own business. I think where some companies might be getting caught short is that they don't do the primary underwriting.

Jeff: And then last but not least, the decision we made eight years ago,

Jeff: You know really get out of the excess

Speaker Change: umbrella business particularly over you know over other companies is proving to be very beneficial because we obviously know our book of business.

Speaker Change: Well, and we know how to provide umbrella coverage above our own business I think where some companies might be getting caught short is is they don't do the primary underwriting And so they have an excess book of business that tends to be

Jeffrey Farber: And so they have an excess book of business that tends to be much more vulnerable and harder to understand where those trends are coming from. Thank you. And we've also seen some of the pressure on casualty reserves kind of spilling out of the soft market years into more recent accident years over the past couple of quarters. I mean, I guess, could you talk about your observations from that standpoint?

Grace Carter: Much more vulnerable and harder to understand where those trends are coming from. Thank you, and we've also seen some of the press run casualty reserves kind of spilling out of the soft market years into more recent accident years over the past couple of quarters. I mean, I guess, could you talk about your observations from that standpoint, and you mentioned some of the repositioning that you've done in your casualty portfolio. Starting maybe 2018, 2019, and if those actions have inflated you so far from some of the some of the pressure that we started to hear about and the experience from the past couple of years, thanks.

Jeff: Much more vulnerable and harder to understand where those trends are coming from.

Speaker Change: Thank you. And we've also seen some of the pressure on casualty reserves.

Speaker Change: kind of spilling out of the soft market years into more recent accident years over the past couple of quarters. I mean, I guess could you talk about your observations from that standpoint? And you mentioned, you know, some of the repositioning that you've done in your casualty portfolio starting maybe 2018, 2019, and if those actions have insulated you so far from some of the pressure that we've started to hear about.

Jeffrey Farber: And you mentioned, you know, some of the repositioning that you've done in your casualty portfolio starting maybe 2018, 2019. And if those actions have insulated you so far from some of the experience from the past couple of years.

Jack Roach: Grace, I think the frequency benefits that were evident in 2020 year during the COVID year unrelated to what we were talking about a few minutes ago. Have provided an opportunity to question those phenomena that you were just referring to, so we weren't really sure whether liability matters were delayed or whether they just didn't happen in 2020. And so prudence with those picks in that year have proven to be quite useful as we roll forward and deal with, as you referred to, the you know the softer market periods. So it really is the combination of all those things coming together and you know how thoughtful and conservative were you along the way with your picks and you're observing. And that's where I think we want to, you know, share our confidence that particularly on a relative basis we think we have done extremely well.

Grace Carter: Grace, I think the frequency benefits that were evident in the 2020 year, during the COVID year, unrelated to what we were talking about a few minutes ago, have provided an opportunity to cushion those phenomena that you were just referring to. So we weren't really sure whether liability matters were delayed or whether they just didn't happen in 2020. And so prudence with those picks in that year has proven to be quite useful as we roll forward and deal with, as you referred to, the softer market periods. So it really is the combination of all those things coming together and, you know, how thoughtful and conservative were you along the way with your picks and your reserves?

Speaker Change: the experience from the past couple of years. Thanks.

Speaker Change: Grace, I think the frequency benefits that were evident in 2020 year, during the COVID year, unrelated to what we were talking about a few minutes ago,

Grace Carter: have provided an opportunity to cushion those phenomena that you were just referring to. So, we weren't really sure.

Jeff: whether

Speaker Change: liability matters were delayed or whether they just didn't happen in 2020.

Speaker Change: And so prudence with those picks in that year have proven to be quite useful as we roll forward and deal with, as you referred to, the softer market periods.

Speaker Change: So it really is the combination of all those things coming together

Jeffrey Farber: And that's where I think we want to, you know, share our confidence that, particularly on a relative basis, we think we have done extremely well. The next question comes from Meyer Shields with KBW. Please go ahead. Great, thanks. Good morning, and thanks for taking my call.

Speaker Change: How thoughtful and conservative were you along the way with your picks and your reserving? And that's where I think we want to can you know share our our confidence that Particularly on a relative basis we think we have done extremely well

Jack Roach: Thank you.

Meyer Schultz: The next question comes from Mayor Schultz with KBW. Please go ahead. Great, thanks. Good morning. Thanks for taking my questions.

Jeff: The next question comes from Mayor Schultz with KBW. Please go ahead.

Meyer Shields: If we can go back to Workers' Comp, two things. So you mentioned an uptick in, I guess, indemnity related to verity. And I'm wondering, didn't that get covered by? Is that a reserve concern or an adequate one? I don't believe it's a reserve concern. I think what we're making is more of an observation that, Unknown Speaker, we see some evidence that lost time cases, on average, have moved out a little bit further, and that the increased payrolls that obviously are captured in our premium base are also showing up in the indemnity dollars. So we're not sending out any alarms.

Jeff Farber: If we go back to work as compensation, two things first: so I mentioned an uptick in, I guess, and then they related severity, and I'm wondering. Didn't that be covered by the closer you can close in the line? Is that a reserve concern or an adequacy concern? I don't, I don't believe it's a reserve concern.

Mayor Schultz: Thanks. Good morning and thanks for taking my questions.

Speaker Change: If we go back to workers' compensation, two things.

Mayor Schultz: You mentioned an uptick in, I guess, indemnity related to Verity, and I'm wondering,

Mayor Schultz: Shouldn't that be covered by...

Speaker Change: The exposure unit goes in the line. Is that a reserve concern or an adequacy concern?

Jeff Farber: I think what we're making is more of an observation that we see some evidence that lost time cases, on average, have moved out a little bit further and that the payrolls, increased payrolls that obviously are captured in our premium base, are also showing up in the indemnity dollars. So we're not sending out any alarms. We're trying to address the fact that in the industry everyone's trying to determine where are we in the workers comp medical cost inflation and the broader workers comp trends, and we're trying to reinforce investors that we are on top of these trends. We're not being overly optimistic; if anything, being conservative with our picks, and I wouldn't read any more into it than that.

Speaker Change: that we see

Speaker Change: some evidence that lost time cases on average have moved out a little bit further and that the payroll increased payrolls that obviously are captured in our premium base are also showing up in in the indemnity

John Roche: We're trying to address the fact that in the industry, everyone is trying to determine where we are in terms of workers comp, medical costs, inflation, and the broader workers comp trends. And we're trying to reinforce investors that we are on top of these trends. We're not being overly optimistic. We're, if anything, being conservative with our picks.

Speaker Change: So we're not sending out any alarms. We're trying to address the fact that in the industry, everyone's trying to determine where are we.

Jeff: in the workers' comp.

Speaker Change: medical cost inflation and the broader workers comp trends and we're trying to

Speaker Change: reinforce investors that we are on top of these trends, we're not being overly optimistic, we're if anything being conservative with our

Jeff Farber: We're trying to address the fact that in the industry everyone's trying to determine where are we in the industry everyone's trying to determine where are we in the industry everyone's trying to determine where are we in the industry everyone's trying to determine where are we in the industry everyone's trying to determine where are we in the industry everyone's trying to determine where are we in the industry everyone's trying to determine where are we in the industry everyone's trying to determine where are we in the industry everyone's trying to determine where are we in the industry everyone's trying to determine where are we in the industry everyone's trying to determine where are we in the industry everyone's trying to determine where are we in the industry everyone's trying to determine where are we in the industry everyone's trying to determine where are we in the industry everyone's trying to determine where are we in the industry everyone's trying to determine where are we in the industry everyone's trying to determine where are we in the industry everyone's trying to determine where are we in the industry everyone's trying to determine where are we in the industry everyone I think we still see relatively modest increases in medical costs, particularly related to workers comp, because of the fee schedule phenomenon.

John Roche: And I wouldn't read any more into it than that. Okay, perfect. Thanks for clarifying. Also, on workers' comp... Is anything happening on the medical side of things? I guess it goes beyond comp, but since you call that a day in the day, I'm wondering about medical.

Speaker Change: are picks, and I wouldn't read any more into it than that.

Speaker Change: Okay, perfect. Thanks for clarifying. Also on workers' compensation, is anything happening on the medical side of things? I guess it goes beyond comp, but since you called out Indiana today, I'm wondering about medical trends.

John Roche: I think we still see relatively modest increases in medical costs, particularly related to workers' comp, because of the fee schedule phenomenon. And again, almost two-thirds of the loss costs in comp are medical costs related. We get a real tailwind from the surge in payrolls that have come along for the ride and made their way into our premium base. So I think that's why you're seeing more stability than people predicted is because you're getting both the premium side and the medical costs, on a relative basis, are still relatively benign. All right, perfect.

Speaker Change: I think we still see, you know,

Speaker Change: relatively modest increases in medical costs, particularly related to workers' comp because of the fee schedule phenomenon. And again, it's almost two-thirds of the loss costs in comp are medical costs related.

Jeff Farber: And again, in almost two-thirds of the loss costs in comp are medical costs related, we get a real tailwind from the surge in payrolls that have come along for the ride that make their way into our premium base. So I think that's why you're seeing more stability than people predicted is because you're getting both the premium side; the premium side is getting aided by payrolls, and medical costs on a relative basis are still relatively benign.

Speaker Change: we get a real tailwind from the surge in payrolls that have come along for the ride that make their way into our premium base. So I think that's why you're seeing more stability than people predicted.

Speaker Change: is because you're getting both the premium side.

Speaker Change: The premium side is getting aided by payrolls and medical costs on a relative basis are still relatively benign.

Unknown Executive: All right, perfect. Thank you so much.

Speaker Change: All right, perfect. Thank you so much.

Bob Farnam: The next question comes from Bob Farnam with Jenny. Please go ahead. Yeah, hi there, good morning.

Meyer Shields: Thank you. The next question comes from Bob Farnam with Channy. Please go ahead. Yeah, hi there. Good morning.

Speaker Change: The next question comes from Bob Arnand with Channy. Please go ahead.

Bob Farnam: Unfortunately, one more question on casualty reserves. I don't know if you've actually given it explicitly, but what, what, Underlying severity trend assumption are you using for your current loss pick, and how has that changed over the years?

Jeff Farber: Unfortunately, one more question on casualty reserves. I don't know if you've actually given it explicitly, but what underlying severity trend assumption are you using for your current loss picks, and how has that changed over the years? And I guess how does that compare to pricing these days? Well, we haven't given an individual severity assumption over time, and the reason is we just find it difficult to give one casualty severity assumption. The lines are so different; we look at it individually. However, it has gone up dramatically, and it has gone up in our assumption similarly to price along the way, if not even higher.

Bob Arnand: Yeah, hi there, good morning. Unfortunately, one more question on casualty reserves. I don't know if you've actually given it explicitly, but what,

Jeffrey Farber: And I guess how does that compare to price? Well, we haven't given an individual severity assumption over time. And the reason is we just find it difficult to give one casualty severity assumption; the lines are so different, we look at them individually. However, it has gone up dramatically, and it has gone up in our assumption similarly to price along the way, if not even higher. So, as I said before, our frequency benefit has allowed us to increase that severity assumption without having to increase the loss pick or the loss ratio as dramatically as it otherwise would have been.

Bob Arnand: underlying severity trend assumption are you using for your current loss picks and how has that changed over the years and I guess how does that compare to pricing these days?

Speaker Change: Well, we haven't given an individual severity assumption over time and the reason is we just find it difficult to give one casualty severity assumption. The lines are so different we look at it individually.

Speaker Change: However, it has gone up dramatically and it has...

Speaker Change: gone up in our assumption, similarly to price along the way, if not even higher. So, as I said before, our frequency benefit has allowed us to

Jeff Farber: So, as I said before, our frequency benefit has allowed us to increase that severity assumption without having to increase the loss pick or the loss ratio as dramatically as it otherwise would have been. Right, I think more importantly, I just wanted to make sure that the pricing these days was keeping up with the; it sounds like you increased your expectations this quarter, so I just want to make sure the pricing is still keeping, keeping pace. It is. So it is our belief that the core commercial rate of 9.3% and overall price change of 11.7, and when you deconstruct the casualty component under that, it is our belief that we are getting more price than loss trend at the moment.

Speaker Change: increase that severity assumption without having to increase the loss pick or the loss ratio as dramatically as it otherwise would have been.

Jeffrey Farber: Right, I think I think more importantly, I just wanted to make sure that the pricing these days is keeping up with the inflation rate. It sounds like you have increased your expectations, quarter. So I just want to make sure the pricing is still keeping pace. It is.

Speaker Change: Right. I think more importantly, I just wanted to make sure that the pricing these days was keeping up with the... It sounds like you increased your expectations this quarter, so I just want to make sure the pricing is still keeping pace.

Jeffrey Farber: So it is our belief that the core commercial rate of 9.3% and the overall price change of 11.7%, and when you deconstruct the casualty component under that, it is our belief that we are getting more price than lost trend at the moment. Yeah, Bob, maybe you can link it up to a previous question regarding Umbrella. Dick, maybe you can speak to this. We have ratcheted up our pricing in the Umbrella line, commercial lines, and Umbrella line significantly over the last few years with the assumption that the severity trends were going to deteriorate even before we saw it in our results. So maybe you could comment on that. I'll just put a number to it.

Speaker Change: It is. So it is our belief that the

Speaker Change: core commercial rate of 9.3% and overall price change of 11.7% and when you deconstruct the casualty component under that, it is our belief that we are getting more price than lost trend at the moment.

Jeff Farber: Yeah, Bob, maybe to even link it up to a previous question regarding umbrella, and Dick, maybe you can speak to this. We have, we have ratcheted up our pricing in the umbrella line, commercial line to umbrella line significantly over the last few years with the assumption that the severity trends we are going to deteriorate even before we saw it in our results. So maybe you could talk on that. I put a number to it. I mean, over the last four years, we have seen our umbrella pricing upwards of 40%, almost 40%. So, you know, we have been getting ahead of it.

Speaker Change: Yeah, Bob, maybe to even link it up to a previous question regarding Umbrella, and Dick, maybe you can speak to this, we have ratcheted up our pricing in the Umbrella line, commercial lines, Umbrella line, significantly over the last

Dick: a few years with the assumption that the severity trends were going to deteriorate even before we saw it in our results. So maybe you could comment on that.

John Roche: I mean, over the last four years, we've seen our Umbrella pricing increase by upwards of almost 40%. So we've been getting ahead of it. We've been looking at the methodology of how we're rating and making the appropriate filings to make sure we're adequate. And I think that's a big part of how, as you try to figure out how this is playing out in the industry, what was your starting point in terms of lost trend assumptions? How much have you priced over the lost trend?

Dick: put a number to it. I mean, over the last four years, we've seen our umbrella pricing upwards of 40, almost 40 percent. So, you know, we're

Jeff Farber: We have been looking at the methodology of how we are rating and making the appropriate filings to make sure we are adequate. And I think that is a big part of how, as you try to figure out how this is playing out in the industry, is what was your starting point in terms of loss trend assumptions, how much have you priced over loss trend, and what underwriting actions have you taken that might prove beneficial as those social inflationary effects start to kick in. And I think on all three of those dimensions, we have been very proactive.

Speaker Change: We've been getting ahead of it, I've been...

Speaker Change: looking at the methodology of how we're rating and making the appropriate filings to make sure we're adequate. And I think that's a big part of how, as you try to figure out how this is playing out in the industry is, what was your starting point in terms of lost trend assumptions?

John Roche: And what underwriting actions have you taken that might prove beneficial as those social inflationary effects start to kick in? And I think on all three of those dimensions, we've been very proactive. Great. Thank you. Thanks for the additional color.

Speaker Change: How much have you priced over loss trend and what underwriting actions have you taken that might prove beneficial as those those social inflationary Effects start to kick in and I think on all three of those dimensions We've been very proactive

Unknown Executive: Creative.

Bob Farnam: Great. Thanks for the additional color. Thank you, Bob.

Bob Farnam: Thank you, Bob. Again, if you have a question, please press star and 1 to enter the queue. The next question comes from Michael Phillips with Oppenheimer. Please go ahead. Hey, thanks for the follow up. Just a quick one. If you could spend a second, maybe, on your Specialty Marine book. Can you just spend a second kind of describing the general nature of that book first? Yeah, I think I heard a blip for a second there.

Speaker Change: Great. Thank you. Thanks for the additional color.

Operator: Again, if you have a question, please press star and want to enter the queue.

Michael Phillips: The next question comes from Michael Phillips with Oppenheimer. Please go ahead. Hey, thanks for the follow-up. Just a quick one. If you could spend a second, maybe you could love your specialty marine book. Can you just a second on kind of describing the journal nature of that book first? Yeah, I think I heard you blip for a second there, but I think you said you wanted us to talk about the marine book within specialty. Correct. Yes. Thank you. Okay. Go ahead, Brian. Yeah, sure. So I think it's a great question because we listed pretty simply, right, as marine. But under marine, we have quite a number of product lines.

Speaker Change: Again if you have a question please press star and 1 to enter the queue. The next question comes from Michael Phillips with Oppenheimer. Please go ahead.

Michael Phillips: Hey, thanks for the follow-up. Just a quick one. If you could spend a second, maybe.

Michael Phillips: about your Specialty Marine book. Can you just a second on kind of describing the general nature of that book first?

Michael Phillips: But I think you said you wanted us to talk about the marine book within specialties. Correct. Yes, thank you. Okay, go ahead, Bryan.

Speaker Change: Yeah, I think I heard you blip for a second there, but I think you said you wanted us to talk about the Marine book within specialty.

Bryan Salvatore: Yeah, sure. So, I think it's a great question, because we list them pretty simply, right, as marine, but under marine, we have quite a number of product lines. Much of it is inland marine. It's a mix of builders risk business, contractors, equipment business, and things like that. But additionally, we have a lot of what you would call floaters for computers and musical equipment. So it's really diversified. I would say there's probably 20 different product segments that we're going after in marine. So that's one of the things we like about the book. It's very diversified, both geographically, and it's also got a real diverse mix of products that are in there.

Speaker Change: Correct, yes, thank you. Okay, go ahead, Brian. Yeah, sure, so I think it's a great question because we list it pretty simply, right, as marine, but under marine we have quite a number of product lines, right?

Bryan Salvatore: A much of it is inland marine. It's a mix of builders risk business, contractors, equipment business, and things like that. But additionally, we have a lot of what you would call floaters for computers, musical equipment. So it's really diversified. I would say there's probably 20 different product segments that we're going after in marine. So that's one of the things we like about the book. It's very diversified both geographically, and it's also got a real diverse mix of product that's in there. So, you know that I think for us, and maybe you've seen this, that's really helped it to remain very profitable, even throughout all this time of increased cats, etc.

Brian: Much of it is inland marine. It's a mix.

Brian: of Builders Risk Business, Contractors' Equipment Business, and things like that. But additionally, we have a lot of what you would call floaters for computers, musical equipment. So it's really diversified. I would say there's probably 20 different...

Brian: product segments that we're going after in marine. So that's one of the things we like about the book.

Brian: It's very diversified both geographically and it's also got a real diverse mix of product that's in there. So, you know, I think for us, and maybe you've seen this, that's really helped it to remain very profitable.

Bryan Salvatore: So, you know, I think for us, and maybe you've seen this, that's really helped it to remain very profitable, even throughout all this time of increased cash, etc. We've been able to manage through that and have a diversified book that absorbs that. Yeah, no, that's helpful. It's a silly follow-up. I imagine the answer is no.

Bryan Salvatore: We've been able to manage through that and have a diversified book that absorbs that. Yeah, no, that's helpful. So it's still like follow up. I imagine the answer is no, but I mean, I would imagine given your book is so different. But there's been a lot of buzz. I would say marine more than global counts and stuff be a little what's happening right here in my backyard from from Baltimore. None of that trickles down to you. None of that excitement, I guess, on the price in the trickles down to your book, I imagine, right? So, so like I didn't completely hear. I think you're I think you were alluding to that, that I'll call it a crash into place in Baltimore.

Brian: Even throughout all this time of increased cats, etc., right, we've been able to manage through that and have a diversified book that absorbs that.

Michael Phillips: But I mean, given your book is so different, but there's been a lot of buzz, I would say around Marine Corps more than global accounts and stuff because of what's happening right here in my backyard from Baltimore. None of that trickles down to your pricing, I guess, on the excitement that trickles down to your book. So, like I didn't completely hear what you were alluding to, I think you were alluding to that. I'll call it a crash that took place in Baltimore.

Speaker Change: Yeah, no, that's helpful. It's a silly follow-up, but I imagine the answer is no. But I mean, I would imagine, given your book is so different, but there's been a lot of buzz, I would assume, around Marine, more than global accounts and stuff, because of what's happening right here in my backyard in Baltimore. None of that trickles down to your— None of that excitement, I guess, on the pricing trickles down to your book, I imagine, right?

Speaker Change: So, like I didn't completely hear, I think you were alluding to that.

Michael Phillips: And so we have a little bit of what you might call ocean marine as well, but that's really more like docks and marinas and lobster boats and really kind of simple stuff relative to what you're talking about. We don't do large hulls. We don't do that type of exposure that I think you're referring to, and we certainly don't put up limits that support major infrastructure across the country. So that's not our bailiwick at all.

Bryan Salvatore: Sure. And yeah, and so we have a little bit of what we might call ocean marine as well, but that's really more like docks and marinas and lobster boats and really kind of simple stuff relative to what you're talking about. We don't do the large holes. We don't do that type of exposure that I think you're referring to. And we certainly don't put up limits that support major infrastructure across the country. So that's not our our our pale look at all. It's predominantly an in the marine book of business that is very diversified, like we said in one of our most profitable businesses over a very long period of time.

Speaker Change: I'll call it a crash that took place in Baltimore. Sure. And yeah, and so we have a little bit of what you might call ocean marine as well, but that's really more like docks and marinas.

Speaker Change: and lobster boats and really kind of simple stuff relative to what you're talking about. We don't do the large hulls.

Speaker Change: We don't do that type of exposure that I think you're referring to. And we certainly don't put up limits that support major infrastructure across the country, so that's not our bailiwick at all. It's predominantly an inland marine book of business that is very diversified, like we said, and

Bryan Salvatore: It's predominantly an inland marine book of business that is very diversified, like we said, one of our most profitable businesses over a very long period of time. Okay, good. Thank you. Good stuff. Appreciate it. This concludes our question and answer session and concludes the conference call. Thank you for attending today's presentation. You may now disconnect.

Unknown Executive: Okay. Good. Thank you. Good stuff. Appreciate it.

Michael Phillips: one of our most profitable businesses over a very long period of time.

Speaker Change: Okay, good. Thank you. Good stuff. Appreciate it.

Operator: This concludes our question and answer session and concludes the conference call. Thank you for attending today's presentation.

Speaker Change: This concludes our question and answer session and concludes the conference call. Thank you for attending today's presentation. You may now disconnect.

Operator: You may now disconnect. Thank you.