Q2 2024 Kinsale Capital Group Inc Earnings Call

Good morning and welcome everyone to the second quarter 2024 Kinsale Capital Group Inc. earnings conference call. Today's conference is being recorded.

Operator: Bank Earnings Conference Call. To these conferences being recorded.

Operator: Inc. earnings conference call. Today's conference call is being recorded.

Operator: Before we get started, let me remind everyone that, through the course of the teleconference, Kinsale's management may make comments that reflect their intentions, policies, and expectations for the future. As always, these forward-looking statements are subject to certain risk factors, which could cause actual results to differ materially. These risk factors are listed in the company's various SEC filings, including the 2023 Annual Report on Form 10-K, which should be reviewed carefully.

Operator: Before we get started, let me remind everyone that during the course of this teleconference, Kinsale's management may make comments that reflect their intentions, beliefs, and expectations for the future. However, as always, these forward-looking statements are subject to certain risk factors which could cause actual results to differ materially. These risk factors are listed in the company's various SEC filings, including the 2023 Annual Report on Form 10-K, which should be reviewed carefully. The company has filed a Form 8K with the Securities and Exchange Commission that contains a press release announcing its second quarter results.

Speaker Change: Before we get started, let me remind everyone that through the course of the teleconference, Kinsale's management may make comments that reflect their intentions, beliefs, and expectations for the future.

Speaker Change: As always, these forward-looking statements are subject to certain risk factors, which could cause actual results to differ materially.

Speaker Change: These risk factors are listed in the company's various SEC filings, including the 2023 Annual Report on Form 10-K , which should be reviewed carefully. The company has furnished a Form 8-K with the Securities and Exchange Commission that contains the press release announcing its second quarter results.

Operator: The company has furnished a Form 8-K with the Securities and Exchange Commission that contains the press release announcing its second quarter results. Kinsale's management may also reference certain non-GAAP financial measures in the call today.

Speaker Change: Kinsale's management may also reference certain non-GAAP financial measures in the call today. A reconciliation of GAAP to these measures can be found in the press release, which is available at the company's website at www.kinsalecapitalgroup.com.

Operator: A reconciliation of GAAP to these measures can be found in the press release, which is available at the company's website at www.kinsalecapitalgroup.com.

Operator: I will now turn the conference over to Kinsale's chairman and CEO, Mr. Michael Kehoe. Please go ahead, sir.

Operator: Kinsale's management may also reference certain non-GAAP financial measures in the call today. A reconciliation of GAAP to these measures can be found in the press release, which is available on the company's website at www.kinsalecapitalgroup.com. I will now turn the conference over to Kinsale's Chairman and CEO, Mr. Michael Kehoe. Please go ahead, sir.

Speaker Change: I will now turn the conference over to Kinsale's Chairman and CEO , Mr. Michael Kehoe. Please go ahead, sir.

Michael Kehoe: Thank you.

Michael Patrick Kehoe: Good morning everyone. Bryan Petrucelli, our CFO, and Brian Haney, our President and COO, are both joining me on the call this morning. In the second quarter, and sales operating earnings per share increased by 30.2%, and gross written premium grew by 20.9%. The company posted a combined ratio of 77.7% and a six month operating return on equity of 28.8%. Kinsale's strategy of focusing on smaller accounts within the E&S market, maintaining absolute control over our underwriting, and using technology to manage costs to the lowest level in the industry is driving these results and allows us to both generate best-in-class returns and take market share from competitors at the same time.

Michael Kehoe: Good morning, everyone. Bryan Petrucelli, our CFO, and Bryan Haney, our President and COO, are both joining me on the call this morning. In the second quarter, Kinsale's operating earnings per share increased by 30.2%, and gross-written premium grew by 20.9% over the second quarter of 2023. The company posted a combined ratio of 77.7%, and a six-month operating return on equity of 28.8%. Kinsale's strategy of focusing on smaller accounts within the ENS market, maintaining absolute control over our underwriting, and using technology to manage costs to the lowest level in the industry, is driving these results and allows us to both generate best-in-class returns and take market share from competitors at the same time.

Ken Sayles: Thank you. Good morning everyone. Bryan Petrucelli, our CFO , and Brian Haney, our President and COO, are both joining me on the call this morning.

Speaker Change: The company posted a combined ratio of 77.7% and a six month operating return on equity of 28.8%.

Speaker Change: Kinsale's strategy of focusing on smaller accounts within the E&S market.

Speaker Change: maintaining absolute control over our underwriting.

Speaker Change: and using technology to manage costs to the lowest level in the industry, is driving these results and allows us to both generate best-in-class returns

Michael Kehoe: It is this business strategy that gives us confidence in our prospects for both profitability and growth in the years ahead in all types of market environments. The overall ENS market in the second quarter was steady and consistent with conditions in the last few quarters. Generally, we continue to see strong growth in new business submission activity, positive overall rate changes across the book of business, and a rational level of competition.

Michael Patrick Kehoe: It is this business strategy that gives us confidence in our prospects for both profitability and growth in the years ahead in all types of market environments. The overall E&S market in the second quarter was steady and consistent with conditions in the last few quarters. Generally, we continue to see strong growth in new business submission activity, positive overall rate changes across the book of business, and a rational level of competition. Brian Haney will offer some more in-depth commentary on the market here in a moment.

Speaker Change: and take market share from competitors at the same time. It is this business strategy that gives us confidence in our prospects.

Speaker Change: for both profitability and growth in the years ahead in all types of market environments.

Speaker Change: The overall E&S market in the second quarter was steady and consistent with conditions in the last few quarters.

Brian Donald Haney: Generally, we continue to see strong growth in new business submission activity, positive overall rate changes across the book of business, and a rational level of competition. Bryan Haney will offer some more in-depth commentary on the market here in a moment.

Michael Kehoe: Brian Haney will offer some more in-depth commentary on the market here in a moment. The Kinsale Investments Strategy remains conservative, with most of the portfolio allocated to fixed income, with a AA-average rating and a three-year duration. Notwithstanding the conservative approach, we have been gradually increasing our allocation to common stocks over the last couple of quarters. At the end of the second quarter, that allocation was 8% of cash and invested assets, and over the next several quarters, that allocation should grow toward 10%.

Michael Patrick Kehoe: The Kinsale investment strategy remains conservative, with most of the portfolio allocated to fixed income with a double A minus average rating and a three-year duration. Notwithstanding this conservative approach, we have been gradually increasing our allocation to common stocks over the last couple of quarters. At the end of the second quarter, that allocation was 8% of cash and invested assets, and over the next several quarters, that allocation should grow toward 10%.

Brian Donald Haney: The Kinsale Investment Strategy remains conservative, with most of the portfolio allocated to fixed income, with a AA-minus average rating and a three-year duration.

Brian Donald Haney: Notwithstanding the conservative approach, we have been gradually increasing our allocation to common stocks over the last couple of quarters.

Brian Donald Haney: At the end of the second quarter, that allocation was 8% of cash and invested assets. And over the next several quarters, that allocation should grow toward 10%.

Michael Kehoe: We renewed our re-insurance program on June 1st. Some of the modest changes to the program included $2.5 million retention on our excess casualty treaty. Group, up from a $2 million retention on the expiring treaty. On our commercial property quota share contract, the seating commission we received from re-insurers increased slightly, reflecting favorable historical results, and on the casualty excess of loss treaty, we increased our retention from $47.5 million to $60 million and purchased some additional limits at the top of the treaty.

Michael Patrick Kehoe: We renewed our reinsurance program on June 1. Some of the modest changes to the program include a $2.5 million retention on our excess casualty treaty, up from a $2 million retention on the expiring treaty. On our commercial property quota share contract, the seating commission we received from reinsurers increased slightly, reflecting favorable historical results.

Speaker Change: We renewed our reinsurance program on June 1st. Some of the modest changes to the program included $2.5 million retention on our excess casualty treaty.

Speaker Change: Up from a $2 million retention on the expiring treaty.

Speaker Change: On our commercial property quota share contract, the seating commission we received from re-insurers increased slightly, reflecting favorable historical results.

Michael Patrick Kehoe: And on the Casualty Excess of Loss Treaty, we increased our retention from $47.5 million to $60 million and purchased some additional limits at the top of the treaty, as we have seen in recent financial reports. However, some competitors within the PNC industry continue to work through challenges around inadequate loss reserves. Exaggerated loss cost trends due to the expanding torque system and frequency and severity issues involving natural catastrophe losses. The Kinsale strategy of disciplined underwriting and technology-driven low cost continues to perform well in this environment, and our purposeful conservatism in setting reserves for future losses gives us confidence in the strength of our balance sheet.

Speaker Change: And on the Casualty Excess of Loss Treaty, we increased our retention from $47.5 million to $60 million and purchased some additional limits at the top of the treaty.

Michael Kehoe: As we have seen in recent financial reports, some competitors within the PNC industry continue to work through challenges around inadequate loss reserves, exaggerated loss cost trends due to the expanding torque system, and frequency and severity issues involving natural catastrophe losses. The Kinsale strategy of disciplined underwriting and technology driven low cost continue to perform well in this environment, and our purposeful conservatism in setting reserves for future losses gives us confidence and the strength of our balance sheet. Our second quarter results were driven in part by another quarter of actual losses being below our expectations. Notwithstanding the favorable quarterly loss experience, we continue to take a cautious approach to reserving, to prospectively stay ahead of lost trend and an expanding and sometimes unpredictable toward system.

Speaker Change: As we have seen in recent financial reports, some competitors within the PNC industry continue to work through challenges around inadequate loss reserves.

Speaker Change: Exaggerated loss cost trends due to the expanding torque system and frequency and severity issues involving natural catastrophe losses.

Speaker Change: The Kinsale strategy of disciplined underwriting and technology-driven low-cost continue to perform well in this environment, and our purposeful conservatism in setting reserves for future losses gives us confidence in the strength of our balance sheet.

Michael Patrick Kehoe: Our second quarter results were driven in part by another quarter of actual losses being below our expectations. Notwithstanding the favorable quarterly loss experience, we continue to take a cautious approach to reserve to prospectively stay ahead of a loss trend and an expanding and sometimes unpredictable tort system. Favorable results and conservatism in reserving for future claims should give Kinsale investors confidence in our performance and balance sheet and optimism that our losses will continue to develop favorably over time. And with that, I'll turn the call over to Bryan Petrucelli.

Speaker Change: Our second quarter results were driven in part by another quarter of actual losses being below our expectations.

Speaker Change: Notwithstanding the favorable quarterly loss experience, we continue to take a cautious approach to reserving to prospectively stay ahead of loss trend and an expanding and sometimes unpredictable tort system.

Michael Kehoe: Favorable results and conservatism in reserving for future claims should give Kinsale investors confidence in our performance and balance sheet and optimism that our losses will continue to develop favorably over time.

Speaker Change: Favorable results and conservatism in reserving for future claims should give Kinsale investors confidence in our performance and balance sheet and optimism that our losses will continue to develop favorably over time.

Bryan Petrucelli: And with that, I'll turn the call over to Brian Petricelli. Thanks, Mike. Another strong quarter with net income and net operating earnings increasing by 27.2% and 30.2%, respectively. The 77.7% combined ratio for the quarter included 2.8 points from net favorable prior year loss reserve development compared to 3.9 points last year, with one point in cat losses this year compared to a half point in Q2 last year. As Mike mentioned, we continue to take a more cautious approach to releasing reserves. We produced a 21.1% expense ratio in the second quarter and right on top of the 21% last year.

Bryan Paul Petrucelli: Thanks, Mike. Another strong quarter with net income and net operating earnings increasing by 27.2% and 30.2%, respectively. The 77.7% combined ratio for the quarter included 2.8 points from net favorable prior year loss reserve development compared to 3.9 points last year, with one point in CAT losses this year compared to a half point in Q2 last year. As Mike mentioned, we continue to take a more cautious approach to releasing reserves.

Speaker Change: And with that, I'll turn the call over to Bryan Petrucelli.

Bryan Paul Petrucelli: Thanks, Mike.

Bryan Paul Petrucelli: Another strong quarter with net income and net operating earnings increasing by 27.2% and 30.2% respectively.

Bryan Paul Petrucelli: The 77.7% combined ratio for the quarter included 2.8 points from net favorable prior year loss reserve development compared to 3.9 points last year, with one point in CAT losses this year compared to a half point in Q2 last year.

Bryan Paul Petrucelli: As Mike mentioned, we continue to take a more cautious approach to releasing reserves.

Bryan Paul Petrucelli: We produced a 21.1% expense ratio in the second quarter and right on top of the 21% last year. The expense ratio continues to benefit from seating commissions generated from the company's casualty and commercial property quarter share reinsurance agreements and from the company's intense focus on managing expenses on a daily basis. On the investment side, net investment income increased by 48.3% in the second quarter over last year as a result of continued growth in the investment portfolio generated from strong operating cash flows and higher interest rates.

Bryan Paul Petrucelli: We produced a 21.1% expense ratio in the second quarter and right on top of the 21% last year. The expense ratio continues to benefit from seating commissions generated from the company's casualty and commercial property quarter share reinsurance agreements.

Bryan Petrucelli: The expense ratio continues to benefit from seeding commissions generated from the company's casualty and commercial property quarter share reinsurance agreements and from the company's intense focus on managing expenses on a daily basis. On the investment side, net investment income increased by 48.3%, and the second quarter over last year has a result of continued growth in the investment portfolio generated from strong operating cash flows and higher interest rates. The annualized growth return was 4.3% for the first half of the year compared to 3.8% last year. Other than the modest increase in the allocation to common stocks that Mike touched on, we haven't made any significant changes to our investment strategy and continue to monitor inflation, interest rates, and related Fed policy commentary, and we'll adjust the circumstances.

Bryan Paul Petrucelli: and from the company's intense focus on managing expenses on a daily basis.

Bryan Paul Petrucelli: On the investment side, net investment income increased by 48.3% in the second quarter over last year as a result of continued growth in the investment portfolio generated from strong operating cash flows and higher interest rates.

Bryan Paul Petrucelli: The annualized gross return was 4.3% for the first half of the year compared to 3.8% last year. Other than the modest increase in the allocation to common stocks that Mike touched on, we haven't made any significant changes to our investment strategy and continue to monitor inflation, interest rates, and related Fed policy commentary, and we'll adjust as circumstances change. New money yields are averaging in the low to mid 5% range, and we have an average duration of three years.

Bryan Paul Petrucelli: The annualized gross return was 4.3% for the first half of the year compared to 3.8% last year.

Mike: Other than the modest increase in the allocation to common stocks that Mike touched on, we haven't made any significant changes to our investment strategy and continue to monitor inflation, interest rates, and related Fed policy commentary and will adjust as circumstances change.

Bryan Petrucelli: Change. New money yields are averaging in the low to mid 5% range, and we have an average duration of three years.

Mike: New money yields are averaging in the low to mid 5% range and we have an average duration of three years.

Bryan Paul Petrucelli: And lastly, diluted operating earnings per share continue to improve and were $3.75 per share for the quarter, compared to $2.88 per share for the second quarter of 2023. And with that, I'll pass it over to Brian Haney.

Bryan Petrucelli: And lastly, diluted operating earnings per share continues to improve and was $3.75 per share for the quarter, compared to $2.88 per share for the second quarter of 2023.

Mike: And lastly, diluted operating earnings per share continues to improve and was $3.75 per share for the quarter, compared to $2.88 per share for the second quarter of 2023. And with that, I'll pass it over to Bryan Haney. Thanks, Bryan.

Brian Haney: And with that, I'll pass it over to Brian Haney. Thanks, Brian. As mentioned earlier, premium grew 21% in the second quarter. We continue to see growth in most of our divisions. We're seeing particularly strong growth in our small property, entertainment, and general casually divisions, as well as in some of our newer divisions, like high value homeowners and commercial auto. Our excess casually businesses also growing nicely. Our professional line segment is seeing the most competition, given that this is a highly profitable segment for us with plenty of margin. We are getting selectively more aggressive in this space.

Brian Donald Haney: As mentioned earlier, premium grew 21% in the second quarter. We continue to see growth in most of our divisions. We're seeing particularly strong growth in our small property, entertainment, and general casualty divisions, as well as in some of our newer divisions like high-value homeowners and commercial auto. Our excess casualty business is also growing nicely.

Brian Donald Haney: As mentioned earlier, premium grew 21% in the second quarter. We continue to see growth in most of our divisions.

Brian Donald Haney: We are seeing particularly strong growth in our small property, entertainment, and general casualty divisions, as well as in some of our newer divisions like high-value homeowners and commercial auto. Our excess casualty business is also growing nicely.

Brian Donald Haney: Our professional line segment is seeing the most competition. Given that this is a highly profitable segment for us with plenty of margin, we are getting selectively more aggressive in this. Submission growth continues to be strong in the low 20s for the quarter, basically unchanged from the first quarter. This number is subject to some variability, but in general, we view submissions as a leading indicator of growth, and so we see the submission growth rate as a positive signal.

Brian Donald Haney: Our professional line segment is seeing the most competition. Given that this is a highly profitable segment for us with plenty of margin, we are getting selectively more aggressive in this space.

Brian Haney: Submission growth continues to be strong in the low 20s for the quarter, basically unchanged from the first quarter. This number is subject to some variability, but in general, we've used submissions as a leading indicator of growth. And so we see the submission growth rate as a positive signal. Turning to rates, we see rates being up around 6% on a nominal basis, down modestly from around 7% last quarter. It is important to keep in mind that the market isn't a monolith. In some areas, our rates are growing up higher than 6%, and in some areas that are growing up less.

Brian Donald Haney: Submission grip continues to be strong in the low 20s for the quarter, basically unchanged from the first quarter. This number is subject to some variability, but in general we view submissions as a leading indicator of grip, and so we see the submission grip rate as a positive signal.

Brian Donald Haney: Turning to rates, we see rates up around 6% on a nominal basis, down modestly from around 7% last quarter. But it is important to keep in mind that the market isn't a monolith. In some areas, our rates are going up higher than 6%, and in some areas, they're going up less.

Brian Donald Haney: Turning to rates, we see rates being up around 6% on a nominal basis, down modestly from around 7% last quarter.

Brian Donald Haney: It is important to keep in mind the market isn't a monolith. In some areas our rates are going up higher than 6% and in some areas they're going up less.

Brian Haney: In some targeted areas, we make cut rates, areas like professional lines because the margins are so high that we feel the trade-off between rate and growth is worthwhile. But overall, that 6% still puts us ahead of trend. And we feel that the business we are putting on the books is the best price business in our history.

Brian Donald Haney: In some targeted areas, we may cut rates, areas like professional lines, because the margins are so high that we feel the trade-off between rate and growth is worthwhile. But overall, that 6% still puts us ahead of trend, and we feel that the business we are putting on the books is the best-priced business in our history. It is worth reiterating that when considering our rates and our growth, what we're attempting to do is to achieve an optimal tradeoff between premium growth and ROE with the ultimate aim of maximizing wealth creation for investors, which we feel we do by growing earnings per share and book value.

Brian Donald Haney: In some targeted areas, we may cut rates, areas like professional lines, because the margins are so high that we feel the tradeoff between rate and growth is worthwhile. But overall, that 6% still puts us ahead of trend, and we feel that the business we are putting on the books is the best-priced business in our history.

Brian Haney: It is worth reiterating that when considering our rates and our growth, what we are attempting to do is to achieve an optimal trade-off between premium growth and RWE, with the ultimate aim of maximizing wealth building for investors, which we feel we do by growing earnings per share and book value. In some instances, we will accept a lower RWE for higher growth, and in other instances, we will trade lower growth for higher margin. This process is going on all the time at the division level, with one caveat. There is a minimum RWE we would be willing to accept.

Brian Donald Haney: It is worth reiterating that when considering our rates and our growth, what we are attempting to do is to achieve an optimal tradeoff between premium growth and ROE with the ultimate aim of maximizing wealth building for our investors.

Brian Donald Haney: In some instances, we will accept a lower ROE for higher growth, and in other instances, we will trade lower growth for higher margin. This process is going on all the time at the division level, with one caveat.

Brian Donald Haney: which we feel we do by growing earnings per share and book value.

Brian Donald Haney: In some instances we will accept a lower ROE for higher growth, and in other instances we will trade lower growth for higher margin.

Brian Donald Haney: This process is going on all the time at the division level, with one caveat. There is a minimum ROE we'd be willing to accept. To be a compounder of wealth, we need to be well above the mid-teens ROE threshold we've discussed over the years.

Brian Donald Haney: There is a minimum ROE we'd be willing to accept. To be a compounder of wealth, we need to be well above the mid-teens ROE threshold we've discussed over the years. Turning to inflation, we continue to be cautious around lost-cost trends. Headline CPI is remaining stubbornly above the Fed's target.

Brian Haney: To be a compounded wealth, we need to be well above the mid-teens RWE threshold we discussed over the years.

Brian Haney: Turning to inflation, we continue to be cautious around lost cost trends. Headline CPI is remaining stubbornly above the Fed's target. This affects our longer tail lines more, and so we tend to be cautious and conservative when it comes to setting prices and booking reserves. We have seen other companies experiencing this adverse settlement, particularly in some of those longer tail lines, and we do not want to experience the same thing. We think it is important that our shareholders have confidence in our reserves, and so we set our reserves such that we feel they are more likely to develop favorably than adversely over time.

Brian Donald Haney: Turning to inflation, we continue to be cautious around lost cost trends.

Brian Donald Haney: This affects our longer-tailed lines more, and so we tend to be cautious and conservative when it comes to setting prices and booking reserves. We've seen other companies experiencing some adverse developments, particularly in some of those longer-tailed lines, and we don't want to experience the same thing. We think it's important that our shareholders have confidence in our reserves, and so we set our reserves such that we feel they are more likely to develop favorably than adversely over time.

Brian Donald Haney: Headline CPI is remaining stubbornly above the Fed's target. This affects our longer-tailed lines more, and so we tend to be cautious and conservative when it comes to setting prices and booking reserves. We've seen other companies experiencing some adverse development, particularly in some of those longer-tailed lines, and we don't want to experience the same thing.

Brian Donald Haney: We think it's important that our shareholders have confidence in our reserves and so we set our reserves such that we feel they are more likely to develop favorably than adversely over time.

Brian Haney: Overall, we remain optimistic. Our results are good. Our prospects are good. At the low cost provider in our space, we have a durable competitive advantage that allows us to continue to gradually take market share from our higher expense competitors while continuing to deliver strong returns and build wealth for our investors.

Brian Donald Haney: Overall, we remain optimistic. Our results are good, our prospects are good, and as a low-cost provider in our space, we have a durable competitive advantage that should allow us to continue to gradually take market share from our higher-cost competitors while continuing to deliver strong returns and build wealth for our investors. And with that, I'll turn it back over to Mike.

Brian Donald Haney: Overall, we remain optimistic. Our results are good. Our prospects are good. And as a low-cost provider in our space, we have a durable competitive advantage that should allow us to continue to gradually take market share from our higher-expense competitors while continuing to deliver strong returns and build wealth for our investors.

Michael Kehoe: With that, I will turn it back over to Mike. Thanks, Brian.

Michael Patrick Kehoe: Operator, we're now ready for any calls in the queue.

Operator: Operator, we are now ready for any calls in the queue. Thank you.

Operator: Operator, we are now ready for any calls in the queue.

Operator: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. We'll go first to Bill Carcache at Wolf Research.

Operator: We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again.

Speaker Change: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again.

Speaker Change: We'll go first to Bill Carcache at Wolf Research.

Bill Carcache: Thanks. Good morning, everyone.

Michael Patrick Kehoe: I wanted to start off on growth. So, despite comparing against over 60% revenue growth in the second quarter of last year, I think your top line growth this quarter was stronger than most expected. But the big question investors are asking is what we should expect from here. Your prior year growth comparisons are going to get easier over the next several quarters. Maybe just if you could please frame for us how you're thinking about the steady state growth rate that Kinsale can generate as we move forward. And if you could put that growth outlook in the context of both premium and revenue growth, that would be helpful.

Unknown Executive: Thanks. Good morning, everyone.

Bill Carcache: I wanted to start off on growth, so despite comping against

Bill Carcache: I think your top line growth this quarter was stronger as I was expected, but the big question investors are asking is what we should expect from here. Your prior year growth comparisons are going to get easier over the next several quarters.

Bill Carcache: Over 60% revenue growth in the second quarter of last year. I think your top line growth this quarter was stronger most expected, but the big question

Speaker Change: Investors are asking is what we should expect from here. Your prior year growth comparisons are going to get easier over the next several quarters.

Michael Kehoe: Maybe just if you could please frame for us how you're thinking about the steady state growth rate that Kinsale can generate as you look ahead, and if you could put that growth outlook in the context of both premium and revenue growth, that would be helpful.

Speaker Change: If you could please frame for us how you're thinking about the steady state growth rate that Kinsale can generate as you look ahead. And if you could put that growth outlook in the context of both premium and revenue growth, that would be helpful.

Michael Patrick Kehoe: Bill, this is Mike. You know, we don't forecast growth because, you know, we don't have perfect clarity on it. Obviously, we have enormous confidence in our business model. You know, the segment we focus on, the expense advantage, and the service advantage that we offer our brokers around the country. So we're confident we're going to continue to grow and take share. The pace is a little bit ambiguous, but I think the best reference point would be our growth rate in Q1 and Q2.

Michael Kehoe: Bill is Mike; we don't forecast growth because we don't have perfect clarity on it. Obviously, we have enormous confidence in our business model, the segment we focus on, the expense advantage, the service advantage that we offer our brokers around the country. So we're confident we're going to continue to grow and take share.

Speaker Change: Bill, this is Mike. You know, we don't forecast growth because

Bill: You know, we don't have perfect clarity on it. Obviously, we have enormous confidence in our business model.

Bill: You know, the segment we focus on, the expense advantage, the service advantage that we offer our brokers around the country. So we're confident we're going to continue to grow and take share. The pace is a little bit ambiguous, but I think the best reference point would be our growth rate in Q1 and Q2.

Michael Kehoe: The pace is a little bit ambiguous, but I think the best reference point would be our growth rate in Q1 and Q2. I would use those two as a starting point as to where we think we're going to grow. So growth's written premium obviously that earns out over the life of the policy. So ultimately that will be revenue gap revenue, but there was a little bit of a lag there.

Michael Patrick Kehoe: I would use those two as a starting point as to where we think we're going to grow gross written premium. Obviously, you know, that that earns out over the life of the policy. So, ultimately, that will be revenue gap revenue. But, you know, there is a little bit of lag there.

Bill: I would use those two as a starting point as to where we think we're going to grow. Gross written premium, obviously, that earns out over the life of the policy, so ultimately that will be revenue, gap revenue, but there is a little bit of a lag there.

Bill Carcache: Right, and sort of following up on that commentary, Brian, Amy, you mentioned that growth is not a monolith. We have been getting some questions on the disclosures in the queue that highlight, you know, decelerating pricing growth year over year. Maybe can you discuss the extent to which you've been using pricing as a lever to manage growth? And as we think about the interplay between, you know, that volume growth, you know, the strong submission growth that you're continuing to see and pricing.

Brian Donald Haney: Right. And sort of following up on that commentary, Brian Haney, you mentioned that growth is not a monolith. We have been getting some questions on the disclosures in the queue that highlight decelerating pricing growth year over year. Maybe you could discuss the extent to which you've been using pricing as a lever to manage growth? And as we think about the interplay between that volume growth, the strong submission growth that you're continuing to see in pricing, is that all in the context of your willingness to give up a bit on pricing as long as you're above that 15 percent ROE target, is that sort of a tradeoff you're willing to make? Yeah.

Bill: Right, and sort of following up on that commentary, Bryan Haney, you mentioned that, you know, growth is not a monolith. We have been getting some questions on the disclosures in the queue that highlight

Brian Donald Haney: Decelerating pricing growth year over year, maybe can you discuss the extent to which you've been using pricing as a lever to manage growth and as we think about the interplay between that volume growth, the strong submission growth that you're continuing to see in pricing.

Bill Carcache: Is that all in the context of your willingness to give up a bit on pricing as long as you're above that 15% ROE target? Is sort of a trade off you're willing to make.

Speaker Change: Is that all in the context of your willingness to give up a bit on pricing as long as you're above that 15% ROE target is sort of a trade-off you're willing to make?

Brian Donald Haney: Yeah, so going back to my comments earlier, you know, each division is on its own at www.kinsale.com. Right there, you know, in a situation like that, you know, we can push rates. Sometimes we're in a very high ROE, and we might be shrinking or flat. In that case, you know, there's no point, you know, if our overall ROE is, you know, around 30, there are some divisions that have significantly higher ROEs than that.

Brian Haney: Yeah, so, you know, go back to my comments earlier. You know, each division is in its own position in the market, like the market and preach division is its own state. Some divisions were growing very fast and have a very high are we? Right there, you know, in a situation like that, you know, we can push right. Sometimes we're in a very high are we, and we might be shrinking or flat; in that case, you know, there's no point. You know, if our overall are we is, you know, around 30, there are some divisions that are significantly higher than that.

Speaker Change: Yeah, so, you know, going back to my comments earlier, you know, each division is in its own...

Speaker Change: position in the market, like the market for each division is its own state. Some divisions were growing very fast and have a very high ROE.

Speaker Change: Right there, you know, in a situation like that, you know, we can push right. Sometimes we're in a have a very high ROA and we might be shrinking or flat.

Speaker Change: In that case, you know, there's no point, you know, if our overall ROE is, you know, around 30, there are some divisions that are significantly higher than that. So there's really no point.

Brian Haney: So there's going to point holding the line on right when you got well over 30% are we in a particular division and you're flat.

Brian Donald Haney: So there's really no point in holding the line on right when you've got well over 30% are we in a particular division and you're flat. And so we're trying to do is just, you go back to my comment earlier, we're trying to maximize growth and book value. And each, you know, each division is making that decision with regard to the particular circumstances that they are dealing with in the market.

Speaker Change: holding the line on rate when you've got well over 30% ROE in a particular division and you're flat. And so what we're trying to do is just...

Brian Haney: And so we're trying to do is just you're going back to my comment earlier, we're trying to maximize the growth and book value, and each division is making that decision, you know. with regard to the particular circumstances that they are dealing with in the market.

Speaker Change: Go back to my comment earlier, we're trying to maximize the growth and book value. And each division is making that decision.

Speaker Change: with regard to the particular circumstances that they are dealing with in the market.

Brian Haney: So I guess I would just finish by saying this: there are a lot of different markets we're operating in. And when I say it's not a model, I mean, there's a wide variety of growth rates we're experiencing, our ways we're experiencing, conditions we're seeing. So it really is; it's really tough to blow it down to one number, which I know is not exactly the 20 year.

Brian Donald Haney: So, I guess I would just finish by saying this: there are a lot of different markets we're operating in. And when I say it's not a monolith, I mean, it's like there's a wide variety of growth rates we're experiencing, ROEs we're experiencing, and conditions we're seeing. So it really is, it's really tough to boil it down to one number, which I know is not exactly what you want to hear.

Speaker Change: I guess I would just finish by saying this.

Bill Carcache: That is helpful. Thank you. If I may squeeze in one last one,

Chris: and Chris.

Chris: There are a lot of different markets we're operating in, and when I say it's not a monolith, I mean, it's like there's a wide variety of growth rates we're experiencing, ROEs we're experiencing, conditions we're seeing, so it really is, it's really tough to boil it down to one number, which I know is not exactly which one here.

Bill Carcache: That is helpful. Thank you.

Michael Patrick Kehoe: Separately, investors have expressed concern over your susceptibility to higher catastrophe losses, given the increase in your property exposure that we've seen. But you continue to generate exceptionally strong underwriting performance, even during periods of elevated cat losses. Are you doing anything differently to manage your cat catastrophe exposure, given sort of that increased mix of property business that you've written in recent years?

Bill Carcache: If I may squeeze in one last one, separately, investors have expressed concern over your susceptibility to higher cat losses given the increase in your property exposure that we've seen. But you continue to generate exceptionally strong underwriting performance even during period development cat losses. Are you doing anything differently to manage your cat catastrophe exposure, given sort of that increased mix of property business that you've written in resellers?

Speaker Change: That is helpful. Thank you. If I may squeeze in one last one separately. Investors have expressed concern over your susceptibility to higher cat losses given the increase in your property exposure that we've seen.

Speaker Change: You know, but you continue to generate exceptionally strong underwriting performance even during periods of elevated cat losses. Are you doing anything differently to manage your cat catastrophe exposure given sort of that increased mix of property business that you've written in recent years?

Michael Patrick Kehoe: Yeah, Bill, it's Mike again. You know, our book is generally about a third of property, two-thirds casualty, that more or less mirrors the E&S market overall. A lot of our property business has significant cat exposure to it, but a lot does not. You know, we write a lot of fire-driven business as well. But in general, I think our strategy has been consistent over the years where we have... a combination of expert underwriting and strict limits on concentration of business.

Michael Kehoe: Yeah, Bill is Mike again. You know, our book is generally about a third property, two thirds casually, that more or less mirrors the EMS market overall. A lot of our property business has a significant cat exposure to it, but a lot does not. You know, we write a lot of fire-driven business as well. But in general, I think our strategy has been consistent over the years, where we have a combination of expert underwriting, strict limits on concentration of business. We model the portfolio monthly. We have a very robust re-insurance program. And the net of that is we're trying to capture the significant margin that's there in the cat business, but not have too much volatility.

Speaker Change: Yeah, Bill, it's Mike again. You know, our book is generally about a third property, two-thirds casualty.

Speaker Change: That more or less mirrors the E&S market overall. A lot of our property business has a significant cat exposure to it, but a lot does not. You know, we write a lot of fire-driven business as well. But in general, I think our strategy has been consistent over the years where we have...

Speaker Change: a combination of

Speaker Change: strict limits on concentration of business

Michael Patrick Kehoe: We model the portfolio monthly, we buy, and we have a very robust reinsurance program. And the net of that is we're trying to capture the significant margin that's there in the cat business but not have too much volatility. And I think if you look back to the last really significant catastrophe in the industry, it was Hurricane Ian in the third quarter of 2022. And I think that kind of captures what investors should generally expect from Kinsale.

Speaker Change: We model the portfolio monthly, we have a very robust reinsurance program, and the net of that is we're trying to capture the significant margin that's there in the CAD business, but not have too much volatility. And I think if you look back to the last...

Michael Kehoe: And I think if you look back to the last, you know, really significant catastrophe in the industry was Hurricane Ian in the third quarter of 2022. And I think that kind of captures what investors should generally expect from Cancel. That was a big significant hurricane in a very populated area on the West Coast of Florida. And we, like many people, had significant losses, but instead of maybe a high 70s combined, I think we were in the mid 80s for that quarter and still produced a very attractive, I think it was north to 20 percent, you know, return on equity.

Speaker Change: You know, really significant catastrophe in the industry was Hurricane Ian in the third quarter of 2022.

Speaker Change: And I think that kind of captures what investors should generally expect from Kinsale. That was a big, significant hurricane in a very populated area on the west coast of Florida. And we, like many people, had significant losses, but...

Michael Patrick Kehoe: That was a big, significant hurricane in a very populated area on the west coast of Florida, and we, like many people, had significant losses, but instead of maybe the high 70s combined, I think we were in the mid 80s for that quarter and still produced a very attractive return on equity. I think it was north of 20%. So, you know, we felt the loss, but we still produced, you know, a great result.

Speaker Change: instead of maybe a high 70s combined I think we were in the mid 80s for that quarter and still produced a very attractive I think it was north of 20% you know return on equity so you know we felt the loss but we still produced you know great results

Michael Kehoe: So, you know, we felt the loss, but we still produced, you know, great results.

Bill Carcache: That's very helpful.

Bill Carcache: That's very helpful. Thanks for taking my questions. I'll get back in the queue to let others jump in.

Bill Carcache: Thanks for taking my questions. I'll get back in the queue to let others jump in. Thank you.

Speaker Change: That's very helpful. Thanks for taking my questions. I'll get back in the queue to let others jump in. Thank you.

Operator: Thanks, Bill.

Michael Phillips: We'll move next to Michael Phillips at Oppenheimer.

Michael Wayne Phillips: We'll move next to Michael Phillips at Oppenheimer.

Bill: Thanks, Bill.

Speaker Change: We'll move next to Michael Phillips at Oppenheimer.

Michael Phillips: Thanks, Doug.

Michael Wayne Phillips: Thanks, Ed. Good morning. Well, I think it's pretty well appreciated your cautious, conservative approach to pricing and reserving. But can you maybe just get a little more specific with what you are seeing in your casualty books for current loss trends and maybe how that compares to prior orders?

Michael Phillips: Good morning. Well, I think it's pretty well appreciated. Your cautious, conservative approach to pricing and reserving. But can you maybe just get a little more specific with what you are seeing in your casualty books for current loss trends and maybe how that compares to prior orders?

Michael Phillips: Thanks, good morning. Well, I think it's pretty well appreciated your cautious conservative approach to pricing and reserving, but can you maybe just get a little more specific with what you are seeing in your casualty books for current loss trends and maybe how that compares to prior orders?

Brian Donald Haney: Yeah, I think the loss trend is slightly below our nominal rate increase, somewhere between the high 5% range. You know, generally what we're doing in the reserving is we're, you know, we've slowed down the last several years, but the release of casualty reserves, particularly in our longer tail lines, allowed us to continue to produce, you know, pretty compelling returns, even with the increasing conservative.

Michael Phillips: Yeah, I think loss trend is slightly below our nominal rate increase, somewhere between like the high 5 percent range.

Speaker Change: Yeah, I think loss trend is slightly below our nominal rate increase.

Michael Phillips: You know, generally, what we're doing in the reserving is we've slowed down the last several years, the release of casualty reserved. is particularly in our longer tail lines. You know, but a lot of that's offset by the increase in our property business, properties of short tail line, and, you know, that's, you know, allowed us to continue to produce, you know, pretty compelling returns, even with the increasing conservatism.

Speaker Change: somewhere between like the high 5% range. You know, generally what we're doing in the reserving is, you know, we've slowed down the last several years the release of casualty reserves.

Speaker Change: particularly in our longer tail lines.

Speaker Change: You know, but a lot of that's offset by the increase in our property business property is a short tail line and

Speaker Change: You know, that's, you know, allowed us to continue to produce, you know, pretty compelling returns even with the increase in conservatism.

Michael Phillips: Okay, thanks.

Brian Donald Haney: Thanks. And you mentioned in the opening comments, you know, we're all seeing this issue and some of the admitted players with recent action years on on casualty, you know, just talk about your book and how you think you're shielded from those issues.

Michael Phillips: And you mentioned in the opening comments, you know, we're all seeing this issue in some of the admitted players with recent action of ears on causally.

Speaker Change: Okay, thanks. And you mentioned in the opening comments, you know, we're all seeing this issue in some of the emitted players with recent action years on casualty. You know, just talk about your book and how you think you're shielded from those issues.

Michael Phillips: You know, just talk about your book and how you think you're shielded from those issues. Well, I guess, you know, it's a function of the quality of the underwriting combined with, you know, the accuracy or the conservatism in the loss-reserving. And I think we are high performers on both sides. You know, we are an ENS company. We focus on small, smaller, small to medium-sized ENS accounts, which historically have offered up a little bit better margins than writing larger accounts. You know, I think we do write higher hazard business, so that's, you know, typically involved some degree of coverage limitations or restrictions, which, you know, helps drive our underwriting success.

Brian Donald Haney: [inaudible] I guess, you know, it's a function of the quality of the underwriting combined with, you know, the accuracy or the conservatism in the loss reserving. And I think we are high performers on both sides.

Speaker Change: Well,

Speaker Change: I guess, you know, it's a function of the quality of the underwriting.

Speaker Change: Combined with

Speaker Change: You know, the accuracy or the conservatism in the loss reserving, and I think we are high performers on both sides.

Brian Donald Haney: You know, we are an ENS company; we focus on small, smaller, small to medium-sized ENS accounts, which historically have offered up a little bit better margins than writing larger accounts. You know, I think we do write higher-hazard business. So that typically involves some degree of coverage limitations or restrictions, which, you know, helps drive our underwriting success. But then on the reserving side, I think we've always strived to take a conservative approach in setting aside estimates today to pay future claims in a way that we think there's a good probability that our reserves will develop favorably over time.

Speaker Change: You know, we are an E&S company. We focus on small, smaller, small-to-medium-sized E&S accounts, which historically have offered up a little bit better margins than writing larger accounts.

Speaker Change: You know, I think we do write higher hazard business, so that's, you know, typically involves some degree of coverage limitations or restrictions.

Speaker Change: which, you know, helps drive our underwriting success. You know, but then on the reserving side, I think we've always strived to take a conservative approach.

Michael Phillips: You know, but then on the reserving side, I think we've always tried to take a conservative approach in setting aside estimates today to pay future claims in a way that we think there's a good probability that our reserves develop favorably over time. So, you know, we're operating in the same legal system that everybody is. We write similar coverage to a lot of different companies, but anyway, that's our model and it's worked quite well over the last 15 years.

Speaker Change: in setting aside estimates today to pay future claims in a way that we think there's a good probability that our reserves develop favorably over time.

Brian Donald Haney: So, you know, we're operating in the same legal system that everybody is. We write similar coverage to a lot of different companies, but, Anyway, that's our model. And it's worked quite well over the last 15 years. We don't bat 100% on reserving. I don't know that that's possible. But in general, I think we've established a pretty good track record.

Speaker Change: So...

Speaker Change: We're operating in the same legal system that everybody is. We write similar coverage to a lot of different companies.

Speaker Change: Anyway, that's our model and it's worked quite well over the last...

Michael Phillips: We don't bat 1,000 percent on reserving, and I don't know that that's possible. But in general, I think we've established a pretty good track record.

Speaker Change: 15 years we don't bat a thousand percent on on reserving I don't know that that's possible but in general I think we've established a pretty good track record

Michael Wayne Phillips: Okay. Yeah. Thank you very much.

Michael Phillips: Okay. Yeah, thank you very much.

Mark Douglas Hughes: Our next question comes from Mark Hughes at Truist.

Speaker Change: Okay, yeah, thank you very much.

Mark Hughes: Our next question comes to Mark Hughes at Truist. Yeah, thanks. Good morning.

Speaker Change: Our next question comes from Mark Hughes at Truist.

Mark Hughes: Good morning, Mark. I wonder if you could talk about what's going on in the property market. When you look at your growth and property versus casualty, this was the first quarter since the third quarter, 21, where casualty outgrew property. You think property continues to fade from here. Is there some potential that it could shift back? Or, you know, some exposures could go back into the admitted market? Or do you think we're on more of a kind of an even keel? You'll see more balanced growth? I think we're on an even keel, Mark. You know, pricing is at a probably 20-year high.

Mark Douglas Hughes: Yeah, thanks. Good morning.

Brian Donald Haney: I wonder if you could talk about what's going on in the property market when you look at your growth and property versus casualty. This was the first quarter since Third quarter 21 where casualty outgrew property. Do you think property continues to fade from here? Is there some potential that it could shift back or, you know, some exposures could go back into the admitted market? Or do you think we're on more of kind of an even keel and you'll see more balanced growth? I think we're on an airplane.

Speaker Change: Good morning, Mark.

Mark Douglas Hughes: I wonder if you could talk about what's going on in the property market when you look at your growth in property versus casualty. This was the first quarter since

Speaker Change: third quarter 21 where cash will be out group property

Speaker Change: Do you think property continues to fade from here? Is there some potential that it could shift back or you know some exposures could go back into the admitted market or do you think we're on more of kind of an even keel you'll see more balanced growth?

Brian Donald Haney: I think we're on an even keel, Mark. You know, pricing's at a probably 20-year high. We're still getting a high double-digit growth rate. Not high double-digit, you know, double-digit growth rate in property. You know, I think the market has just normalized here in the last couple quarters.

Speaker Change: I think we're on an even keel, Mark.

Mark Hughes: We're still getting a high double-digit growth rate, not high double-digit. You know, double-digit growth rate and property. You know, I think the market is just normalized here in the last couple of quarters. of the, I think you said the overall pricing went from seven to six.

Speaker Change: We're still getting a high double-digit growth rate.

Mark Douglas Hughes: Of the, I think you said the overall price went from 7 to 6. How would you characterize the property?

Mark Douglas Hughes: Of the, I think you said the overall pricing went from 7 to 6, how would you characterize the property?

Mark Hughes: How would you characterize the property dynamic, you know, kind of last quarter or last few quarters, so what you're going to do? Property continues to grow; other rates continue to exceed the average, so I think they're probably probably low teams. I have a number in front of me, but it's more than the average.

Speaker Change: dynamic, you know, kind of last quarter, last few quarters, so what you saw in QQ. Property, it continues to grow, the rates continue to exceed the average, so I think they're probably quite low teens.

Brian Donald Haney: Property, it continues to grow. The rates continue to exceed the average, so I think they're probably, probably low teens. I don't have a number in front of me, but it's more than the average.

Speaker Change: I have a number in front of me, but it's more than the average.

Mark Douglas Hughes: Yeah, you described, I think, excess auto is one of the areas you're growing. A little faster.

Mark Hughes: Yeah, you described, I think, excess auto as one of the areas you're growing a little faster.

Speaker Change: Yeah, you described, I think, excess auto was one of the areas you're growing.

Brian Donald Haney: Could you talk about what niches within excess auto we're talking about? Is this commercial auto, excess? How are you approaching that market? The big ones would be

Mark Hughes: Could you talk about what niches within excess auto we're talking about? Is this commercial auto access? Yeah, the purchasing and marketing. The big ones would be garage liability and excess auto commercial, excess commercial auto. So we don't write primary auto, partially because of the regulatory status you would need to do that and partially because it's a tough market. But it's the same general product: small accounts, high restrictive coverage, high rate. The experience has been good, very good.

Speaker Change: a little faster. Could you talk about what niches within XS Auto we're talking about? Is this commercial auto, XS? How are you approaching that market? The big ones would be garage liability and XS.

Brian Donald Haney: The big ones would be garage liability and excess, auto, commercial, and excess commercial auto. So we don't write primary auto partially because of the regulatory status, you would need to do that, and partially because, Unknown Executive, Bill Carcache, Kinsale Capital Group, the experience has been good. Very good.

Speaker Change: Auto. Commercial. Excess commercial auto. So we don't write primary auto partially because of the regulatory status you would need to do that and partially because it's

Speaker Change: It's a tough market, but it's the same general approach, small accounts, highly restrictive coverage.

Speaker Change: High rate.

Mark Douglas Hughes: And then this question about the premium per policy, I think in the queue, it was down a little bit. Was that a mixed issue? Maybe property versus casualty? Or is that something else?

Mark Hughes: And then the, this question about premium per policy, I think in the queue it was down a little bit.

Speaker Change: The experience has been good. Very good.

Speaker Change: And then this question about premium per policy, I think in the queue it was down a little bit. Was that a mixed issue, maybe the property versus casualty, or is that something else?

Mark Hughes: Was that a mixed issue, maybe the property versus casualty, or is that something else? Yeah, that's all mixed with business mark. I wouldn't read too much into that.

Mark Douglas Hughes: Yeah, that's all part of the mix of business, Mark, I wouldn't read too much into that we sometimes talk about average premiums, just to give people a good understanding of our general focus on smaller accounts. But whether it goes, you know, whether it bounces around quarter by quarter, that's purely a mix of business.

Speaker Change: Yeah, that's all a mix of business, Mark. I wouldn't read too much into that. We sometimes talk about average premium just to give people a good understanding of our general focus on smaller accounts.

Mark Hughes: We sometimes talk about average premium just to give people a good understanding of our general focus on smaller accounts, but whether it bounces around quarter by quarter, that's purely a mix of business.

Speaker Change: But whether it, you know, whether it bounces around quarter by quarter, that's purely a mix of business.

Mark Hughes: And then the final question, Brian Petrocelli, the seeded premium little lower this quarter, was that a property casualty mixing, and is this a good ratio to think on a go-forward basis? Yeah, the market is a mix of business and it's probably good at gauges, is any. Yeah, okay, thank you very much.

Bryan Paul Petrucelli: And then a final question, Bryan Petrucelli, the seeded premium was a little lower this quarter. Was that a property casualty mix thing? And is this a good ratio to think about on a go-forward basis? Yeah, Mark, it is a mix of business, and it's probably a good investment.

Bryan Paul Petrucelli: And then a final question, Bryan Petrucelli, the seeded premium a little lower this quarter, was that a property casualty mix thing and is this a good ratio to think on a go-forward basis?

Bryan Paul Petrucelli: Yeah, Mark, it is a mix of business, and it's probably as good a gauge as any.

Speaker Change: Yeah, Mark, it is a mix of business, and it's probably as good a gauge as any.

Operator: Thanks, Mark.

Bryan Paul Petrucelli: Yeah. Okay. Thank you very much.

Andrew Anderson: Next we'll move to Andrew Anderson at Jefferies.

Andrew E. Andersen: Next, we'll move to Andrew Andersen at Jeffries.

Mark Douglas Hughes: Thanks, Mark.

Speaker Change: Next we'll move to Andrew Andersen at Jeffries.

Andrew Anderson: Hey, good morning. Last quarter I'd left with the impression of perhaps an additional point of conservatism on the underlying loss ratio for full year 24, but this quarter it came in better than last year.

Andrew E. Andersen: Hey, good morning. Last quarter I left with the impression of perhaps an additional point of conservatism on the underlying loss ratio for full year 24, but this quarter it came in better than last year. Could you talk about some of the drivers of that improvement?

Andrew E. Andersen: Hey, good morning. Last quarter I'd left with the impression of perhaps an additional point of conservatism on the underlying loss ratio for full year 24, but this quarter it came in better than last year. Could you talk about some of the drivers of that improvement?

Andrew Anderson: Could you talk about some of the drivers of that improvement? Well, Andrew, yes, we have been releasing casualty reserves really the last couple of years, more slowly, and I think some of that was probably reflected in the loss ratio that you're referencing. But keep in mind that the loss ratio published in our GAT financials is a composite of 15 accident years, 10 or 12 statutory lines of business, and within each of those, it's paid claims, it's case reserves, and it's IBM R. So, you know, I wouldn't read too much into, you know, an incremental shift from one quarter to the next.

Michael Patrick Kehoe: Well, Andrew. Yes, we have been releasing casualty reserves more slowly the last couple years. And I think some of that was probably reflected in The Loss Ratio that you're referencing, but keep in mind that The Loss Ratio published in our Gap Financials is a composite of, you know, 15 accident years and 10 or 12 statutory lines of business. And within each of those, it's Paid Claims, Case Reserves, and IB&R. So, you know, I wouldn't read too much into, you know, an incremental shift from one quarter to the next.

Speaker Change: Well, Andrew, yes, we have been releasing casualty reserves really the last couple of years more slowly.

Speaker Change: and I think some of that was probably reflected in

Speaker Change: The loss ratio that you're referencing, but keep in mind that the loss ratio published in our GAAP financial s is a composite of

Speaker Change: You know, 15 accident years, 10 or 12 statutory lines of business, and within each of those, it's paid claims, it's case reserves, and it's IB&R.

Speaker Change: So, you know, I wouldn't read too much into, you know, an incremental shift from one quarter to the next.

Andrew Anderson: Other than that, there is a purposeful conservatism, especially in the longer tail casually lines of releasing IV&R more slowly. I think we are seeing a benefit with the high performance of our property book, and that area of our business has grown nicely over the last several years, so we are seeing the benefit of that, that short tail business. And then, as I said in my comments earlier, our actual losses in the quarter, you know, came in below our expectations. So, all those things combined with Bryan's comments on our, you know, getting nominal rate increases across our book of business in the 6% range, you know, slightly had a trend.

Michael Patrick Kehoe: Other than that, there is purposeful conservatism, especially in the longer tail casualty lines of releasing IV&R more slowly. I think we are seeing a benefit from the high performance of our property book, and that area of our business has grown nicely over the last several years. So we're seeing the benefit of that, that short-tail business. And then, as I said in my comments earlier, our actual losses in the quarter came in below our expectations. So, all those things combined with Brian's comments on our, you know, getting nominal rate increases across our book of business in the 6% range, slightly ahead of trend. It should be a positive story.

Speaker Change: Other than that.

Speaker Change: There is a purposeful conservatism, especially in the longer tail casualty lines of releasing IV&R more slowly.

Speaker Change: I think we are seeing a benefit with the high performance of our property book and that area of our business has grown nicely over the last several years, so we're seeing the benefit of that. That's short-tail business.

Speaker Change: [inaudible]

Speaker Change: All those things combined with Brian's comments on our, you know, getting nominal rate increases across our book of business in the 6% range, you know, slightly ahead of trend. It should be a positive story.

Andrew Anderson: It should be a positive story.

Andrew Anderson: Michael, I'm sorry. I was thinking about the underlying, the 58.4 versus the 59.1 in the prior year, so would the improvement there just be attributable to property, perhaps, if casualty is kind of staying the same? Yeah, yeah. I think casualty is probably, again, we're releasing IV&R a little bit more slowly than we have, but I think that's more than offset by the favorable experience in the short tail business. Got it.

Michael Patrick Kehoe: Mike, I'm sorry; I was thinking about the underlying 58.4 versus the 59.1 in the prior year. So would the improvement there just be attributable to property, perhaps if casualty is kind of staying the same?

Mike: Mike, I'm sorry, I was thinking about the underlying, the 58.4 versus the 59.1 in the prior year. So would the improvement there just be attributable to property, perhaps, if casualty is kind of staying the same?

Michael Patrick Kehoe: Yeah, yeah, I think casually is probably, again, we're releasing IBNR a little bit more slowly than we have before. But I think that's more than offset by the favorable experience in the short-tail business.

Mike: Yeah, yeah, I think casually it's probably, again, we're releasing IBNR a little bit more slowly than we have, but I think that's more than offset by the favorable experience in the short-tail business.

Brian Donald Haney: Got it. And maybe just back on pricing, down about a point, and I thought I heard property at mid-teens, but could you touch on the casualty market? Are you seeing pricing improving there? And do you expect that to improve as the year progresses?

Andrew Anderson: And maybe just back on pricing down about a point, and I thought I heard property admittines, but could you touch on the casualty market? Are you seeing pricing improving there? And do you expect that to improve as the year progresses? There are some segments within casualty where the rates are going up; some are flat, down slightly. So the longer tailed lines, we're pushing rate, and then some like the professional lines, the claims made business were flat to sometimes down in certain instances. I would expect the casualty, the casualty red environment either stay the same or improve just based on what we're seeing and hearing in the market.

Speaker Change: Got it. And maybe just back on pricing, down about a point and I thought I heard property at mid-teens, but could you touch on the casualty market? Are you seeing pricing improving there and do you expect that to improve as the year progresses?

Brian Donald Haney: There are some segments within casualty where the rates are going up, some that are flat to down slightly, so the longer tailed lines where we are pushing rates, and then some like the professional lines, the claims made business was flat to sometimes down in certain instances. I would expect the casualty rate environment to either stay the same or improve just based on what we're seeing and hearing in the market.

Speaker Change: There are some segments within casualty where the rates are going up. Some of them are flat to down slightly. So the longer tailed lines where we're pushing rate and then some like the professional lines, the claims made business where

Speaker Change: flat, sometimes down in certain instances.

Speaker Change: I would expect the casualty rate environment to either stay the same or improve just based on what we're seeing and hearing in the market.

Scott Heleniak: Thank you. We'll take our next question from Scott Hilleniac at RBC Capital Markets.

Scott Gregory Heleniak: We'll take our next question from Scott Heleniak at RBC Capital Markets.

Speaker Change: Thank you.

Speaker Change: We'll take our next question from Scott Heleniak at RBC Capital Markets.

Scott Heleniak: Yeah, good morning. First question, how was just on, you mentioned in the first quarter, some potential benefit from companies mentioned, again, to having reserving the issues. Are you starting to see that benefit already?

Bryan Haney: Yeah, good morning. The first question I have is just on, you mentioned in the first quarter some potential benefit from companies, and you mentioned again, too, having reserving issues. Are you starting to see that benefit already? Is that something you expect to see later in the year? And if so, any particular lines that you can point to where you're seeing that benefit?

Scott Gregory Heleniak: Yeah, good morning. First question I had was just on, you mentioned...

Scott Gregory Heleniak: You mentioned in the first quarter some potential benefit from companies, and you mentioned again too, having reserving issues. Are you starting to see that benefit already? That's something you expect to see later in the year, and if so, any particular lines that you can point to where you're seeing that benefit?

Scott Heleniak: That's something you expect to see later in the year, and if so, what any particular lines that you can point to, you're seeing that benefit?

Bryan Haney: This is Bryan Haney. We haven't seen much of an immediate effect from the people that just announced, but I'm sure we will eventually. That's also focused on mostly public companies, but I would say that, you know, for private companies, or particularly some MGAs, you're seeing that same dynamic play out worse. So we are seeing some change in behavior in certain lines of business. Generally speaking, they would be like lines of business that are, you know, commercial general liability, access, anything written on an occurrence basis, or the law.

Brian Haney: This is Brian Haney. We haven't seen an immediate effect from the people that just announced, but I'm sure we will eventually. That's also focused on mostly public companies. I would say that for private companies or particularly some MGAs, you're seeing that same dynamic play out worse. We are seeing some change in behavior in certain lines of business. Generally speaking, they would be like lines of business that are commercial general liability. Access, anything written on the current spaces for the long tail. Auto is pretty rough, but yeah.

Scott Gregory Heleniak: This is Bryan Haney. We haven't seen like an immediate effect from the people that just announced, but I'm sure we will eventually.

Speaker Change: That's also focused on mostly like public companies. I would say that you know for private companies or particularly some MGA's you're seeing that same dynamic play out worse.

Speaker Change: So, we are seeing some change in behavior in certain...

Speaker Change: [inaudible]

Scott Gregory Heleniak: Okay, the auto is pretty rough. Oh, yeah.

Brian Donald Haney: Okay, that's helpful. And then just on the property market, you guys talked about a little more competition in the first quarter. We definitely heard that on second quarter calls so far. It sounds like it's maybe accelerated a little bit. You guys hadn't mentioned anything about that. Is there any change in what you're seeing, Q2 versus Q1, or is it pretty similar? It's more of the same.

Speaker Change: Auto is pretty rough, but yeah.

Scott Heleniak: Okay, that's helpful. And then just on the property market, you know, we've talked about, you guys talked about a little more competition in the first quarter. We definitely heard that on second quarter calls so far, and it sounds like it's maybe accelerated a little bit.

Speaker Change: Thank you.

Speaker Change: Okay, that's helpful. And then, just on the property market, you know, we've talked about, you guys talked about a little more competition in the first quarter. We definitely heard that on

Speaker Change: Second quarter calls so far and it sounds like it's maybe accelerated a little bit. You guys hadn't mentioned anything about that. Is there any change in what you're seeing Q2 versus Q1 or is it pretty similar?

Scott Heleniak: But you guys hadn't mentioned anything about that. Is that, is there any change in what you're seeing Q2 versus Q1, or is it pretty similar? It's more the same. I would say you're seeing competition in the larger placements, particularly ones that involve multiple carriers. But you know, as I mentioned in the comments or small property divisions growing, probably one, but that's one of the fastest growing divisions we have. So on the smaller staff, we're not saying it as much on the larger gets the more we're seeing it. Yeah, okay.

Brian Donald Haney: It's more of the same. I would say you're seeing competition on the larger placements, particularly ones that involve multiple carriers. But, you know, as I mentioned in the comments, our small property divisions probably won't. That's one of the fastest growing divisions we have. So, on the smaller stuff, we're not seeing it as much. On the larger it gets, the more we...

Speaker Change: It's more of the same. I would say you're seeing competition on the larger placements, particularly ones that involve multiple carriers. But, you know, as I mentioned in the comments, our small property division is growing probably, that's one of the fastest growing divisions we have.

Speaker Change: So on the smaller stuff we're not seeing it as much on the larger it gets the more we're seeing it

Scott Heleniak: And then just one last question to you on the cat losses: you're very low for the quarter. I know you guys don't have much Midwestern exposure. That's surprising; it wasn't a little more given everything that's happened in Texas.

Scott Gregory Heleniak: And then just one last question, too, on the cat losses. You're very low for the quarter.

Speaker Change: Yeah, okay.

Speaker Change: And then just just one last question to you on the cat losses. You're very low for the quarter I know you guys don't have much Midwestern exposure

Brian Donald Haney: I know you guys don't have much Midwestern exposure, but I was surprised there wasn't a little more given everything that's happened in Texas. Anything you can comment on just that, you know, what we saw in Texas and whether Hurricane Beryl will have any particular losses expected from that? Just anything you can comment on some of the cat loss activity we've seen industry-wide versus your book?

Speaker Change: Surprise, there wasn't a lot more given everything that's happened in Texas. Anything you can comment on, on just that, that, you know.

Scott Heleniak: Anything you can comment on just that, that you know, what we saw in Texas and where the hurricane barrel, you'll have any particular losses expected from that. Just anything you can comment on some of the cat loss activity with the industry wide versus your book. Yeah, the, you know, I mean, I think we had like 8 or 10 cats in the quarter, so there was a lot of activity. All of our losses were to minimums. Burles is probably the biggest, but that's, I don't know what the numbers can be, but if I had to guess, you know, $2,000, it's going to be pretty to minimums. Okay.

Speaker Change: What we saw in Texas and with a hurricane barrel you'll have any particular losses expected from that Just anything you can comment on some of the cat loss activity we've seen industry-wide versus your book

Brian Donald Haney: Yeah, the, you know, I think we had like, eight or 10 cats in the quarter. So there was a lot of activity. All of our losses were de minimis borough was probably the biggest, but that's, I don't know what the number is going to be. But if I had to guess, it's, you know, a million or $2, it's gonna be pretty de minimis.

Speaker Change: Yeah, I mean, I think we had like eight or ten cats in the quarter, so there was a lot of activity.

Speaker Change: All of our losses were de minimis. Borough was probably the biggest, but that's... I don't know what the number's going to be, but if I had to guess, it's, you know, like a million or two dollars. It's going to be pretty de minimis.

Scott Gregory Heleniak: Okay. All right. Appreciate the answers. Thanks. Thanks, Scott.

Scott Heleniak: All right.

Scott Heleniak: Appreciate the answers. Thanks.

Operator: Thanks, Scott.

Speaker Change: Okay. All right. Appreciate the answers. Thanks. Thanks, Scott.

Pablo Augusto Serrano Singzon: We'll go next to Pablo Singzon at J.P. Morgan.

Pablo Singzon: We'll go next to public things on at JP Morgan.

Pablo Augusto Serrano Singzon: Hi, good morning. So the first question is on the operating expense ratio. So if you look at G&A X acquisition costs, they've been going, you know, plus 30%, right? Whether you look at 23 or the first half this year, and it seems like premiums earned should slow down from their historical pace. So, you know, how are you thinking about the expense ratio from here going forward? Would it be reasonable to assume that there might be some pressure there?

Pablo Singzon: Hi, good morning. So the first question is just on the operating expense ratio. So if you look at GNA exact position costs, they've been going, you know, plus 3%, right? Whether you look at 23 or first half this year, and it seems like premiums earn should slow down from their historical pace.

Speaker Change: Hi, good morning. So the first question is just on the operating expense ratio. So if you look at G&A X acquisition costs, they've been going, you know, plus 30%, right? Whether you look at 23 or first half this year, and it seems like premiums earned should slow down from their historical pace.

Pablo Augusto Serrano Singzon: Or are you making changes on the G&A side as well that will sort of match the likely slowdown in earnings? And I guess if you could sort of like include what's happening on the tech side here, because I know you guys are in the midst of an investment program.

Pablo Singzon: So, you know, how are you thinking about the expense ratio from here going forward? Would be able to assume that there might be some pressure there, or are you making changes on the GNA side as well that will sort of match the likely slow it on and earn. And I guess if you could sort of like include what's happening on the tech side here, because I know you guys are in the midst of an investment program. Yeah, Pablo, I think, you know, we've commented on the past that, you know, that expense ratio can sort of bounce around a little bit quarter to quarter.

Speaker Change: So, you know, how are you thinking about the expense ratio from here going forward? Would it be reasonable to assume that there might be some pressure there? Or are you making changes on the G&A side as well that will sort of match the likely slowdown in earn?

Speaker Change: And I guess if you could sort of like include what's happening on the tech side here, because I know you guys are in the midst of an investment program.

Bryan Paul Petrucelli: Yeah, Pablo, we've commented in the past that the expense ratio can sort of bounce around a little bit quarter to quarter. I think if you kind of look at it over, you know, a 12-month period, that's, that's a pretty good gauge. So I would expect it to be flat going forward.

Speaker Change: Yeah, Pablo, I think, you know, we've commented on in the past that, you know, that expense ratio can sort of bounce around a little bit quarter to quarter. I think if you kind of look at it over, you know, a 12 month period, that's, that's a pretty good gauge. So I would expect it to be flat.

Bryan Petrucelli: I think if you kind of look at it over, you know, a 12-month period, that's that's a pretty good gauge. So I would expect it to be flat going forward. I would just add, Pablo, this is my longer term. We think there's a good opportunity to drive that number downward as we're able to, you know, drive automation further into our business process. There are some modest economies of scale in the PNC business. So if the company grows, we'd probably get an incremental benefit there.

Michael Patrick Kehoe: I would just add, Pablo, this is Mike. Longer term, we think there's a good opportunity to drive that number downward as we're able to, you know, drive automation further into our business process. There are some modest economies of scale in the P&C business.

Speaker Change: going forward.

Mike: I would just add, Pablo, this is Mike, longer term, we think there's a good opportunity to drive that number downward as we're able to, you know, drive automation.

Mike: further into our business process.

Speaker Change: There are some modest economies of scale in the PNC business, so as the company grows.

Michael Patrick Kehoe: So as the company grows, we probably get an incremental benefit there. But, you know, in the near term, we're making a very significant commitment in the technology area. We've got about one hundred and twenty five of our, you know, slightly over six hundred employees now in the tech space. And partly that's because we see such a tremendous return on the investments we're making there. So, I agree with Bryan. It should be steady in the near term, but longer term, we would hope to see continued progress there.

Bryan Petrucelli: But, you know, in the near term, there is, you know, we're making a very significant commitment in the technology area. We've got about 125 of our, you know, slightly over 600 employees now in the tech space. And partly, that's because we see such a tremendous return on the investments we're making there. I agree with Brian. It should be steady for the near term, but longer term, we would hope to say continued progress there.

Speaker Change: We'd probably get an incremental benefit there, but, you know, the near term, there is, you know, we're making a very significant commitment in the technology area. We've got about 125 of our, you know, slightly over 600 employees now in the tech space.

Speaker Change: And partly that's because we see such a tremendous return on the investments we're making there.

Bryan: I agree with Bryan. It should be steady for the near term, but longer term, we would hope to see continued progress there.

Pablo Singzon: Okay, thank you. Next question I had, and I'm going to ask you guys, you forgot to get a bit here, but just as we think about the casual market, right, so it seems like everyone is expecting, you know, prices to stay where they are, even increased from here. It is your sense that this sort of next leg will be the same as if we saw early in the cycle, right?

Pablo Augusto Serrano Singzon: Okay, thank you. The next question I had, and I'm going to ask you guys to procrastinate a bit here.

Speaker Change: Okay, thank you. Next question I had, and I'm going to ask you guys to procrastinate a bit here, but just as we think about the casualty market, right, so it seems like...

Brian Donald Haney: But just as we think about the cash flow market, right, so it seems like everyone is expecting prices to stay where they are, or even increase from here. Is your sense that this next leg will be the same as what we saw early in the cycle, right? Where there's potentially a bunch of other things that really went up, or does it feel to you that there might be some benefit, but maybe not as strong as we saw four or five years ago?

Speaker Change: Everyone is expecting prices to stay where they are, even increase from here. Is your sense that this next leg will be?

Michael Kehoe: You know, there's actually a bunch of other things that really went up, or does it feel to you that there might be some benefit, but, you know, maybe not as strong as we saw like, you know, four or five years ago at this point. It would be tough for us to know; like we can't really predict the future. I would say that, you know, we never really experienced as far to market as we probably might have expected.

Speaker Change: the same as if we saw early in the cycle, right? You know, where there's actually a bunch of other things that really went up, or does it feel to you that there might be some benefit that, you know, maybe not as strong as we saw like, you know, four or five years ago at this point?

Brian Donald Haney: It's tough, it would be tough for us to know, like we can't really predict the future. I would say that, you know, we never really experienced as difficult a market as we probably might have expected, so far. So my guess, if I were just guessing, would be to say it's probably going to go a lot longer than people think because it hasn't reacted as quickly or as aggressively as it should to correct some of these underpricing and under-reserving issues.

Speaker Change: It's tough. It would be tough for us to know. Like, we can't really predict the future. I would say that, you know, we never really experienced

Michael Kehoe: So far, so I think my guess, if I was just guessing, would be to say it's probably going to go a lot longer than people think because it has not been. The market has reacted as quickly or as aggressively as it should to correct some of these under pricing and under reserving issues.

Speaker Change: as hard a market as we probably might have expected.

Speaker Change: So far, so I think.

Speaker Change: My guess, if I was just guessing, would be to say it's probably going to go a lot longer than people think because it has not been, the market hasn't reacted as quickly or as aggressively as it should to correct some of these underpricing and under-reserving issues.

Michael Kehoe: And I would just add to Brian's comment that, you know, the tort system continues to evolve and expand in general. And so the industry is going to need to stay up with those trends. Some companies do it better than others. So that would be a good argument for a continued favorable trading environment.

Michael Patrick Kehoe: And I would just add to Brian's comment that, you know, the tort system continues to evolve and expand in general. And so the industry is going to need to keep up with those trends. Some companies do it better than others.

Speaker Change: And I would just add to Brian's comment that, you know, the tort system continues to evolve and expand in general.

Speaker Change: And so the industry is going to need to stay up with those trends. Some companies do it better than others.

Michael Patrick Kehoe: So that would be a good argument for a continued favorable trading environment. And then the second point is just to reiterate the comment Brian made a minute ago, which is that there is not a monolithic casualty market. There are a ton of small sub-markets, and they kind of ebb and flow independently all the time.

Speaker Change: So that would be a good argument for a continued favorable trading environment. And then the second point is, just to reiterate the comment Bryan made a minute ago, which is, there is not a monolithic casualty market, there's a ton of small sub-markets.

Michael Kehoe: And then the second point is just to reiterate the comment Brian made a minute ago, which is there is not a monolithic casual market. There's a ton of small submarkets, and they kind of have been flowing independently all the time. Okay.

Brian: and they kind of ebb and flow independently all the time.

Pablo Augusto Serrano Singzon: Okay, and then last for me. You spoke about the sort of trade-off between margins and growth, right? And I think, you know, people are beginning to recognize that. But how are you thinking about the trade-off between capital and growth, right? So presumably, in some environment where you might be growing slower, you might not need sort of the capital supporting the book now. Any thoughts on how you're thinking about that aspect of, you know, a transition to a more normal environment? Yes,

Pablo Singzon: And then last for me, you spoke about the trade-off that being largest and growth, right? And I think, you know, people have been to recognize that, but how are you thinking about the trade-off between capital and growth, right? So presumably, in some environment where you might be growing slower, you might not need sort of the capital supporting the book now. And your thoughts on how you're thinking about that aspect of, you know, a transition to a more normal environment.

Brian: Okay, and then last for me...

Speaker Change: you spoke about sort of the trade off between margins and growth, right, and

Speaker Change: I think people are beginning to recognize that.

Speaker Change: How are you thinking about the trade-off between capital and growth, right, so presumably in some environment where you might be growing slower, you might not need sort of the capital supporting the book now. Any thoughts on how you're thinking about that aspect of, you know, a transition to a more normal environment? Thank you.

Michael Kehoe: Thank you. Yes. And obviously we're thinking about that, you know, with our growth rate in the 20s now versus, you know, the last several years in the 40s. But I would say, in general, we strive to be capital efficient. We don't want to have a super abundance of capital beyond what we need to operate the business. And most likely we would, you know, allocate that through dividends or share buybacks, with the bias toward the buyback.

Michael Patrick Kehoe: Yes, and obviously we're thinking about that, you know, with our growth rate in the 20s now versus, you know, the last several years in the 40s. But I would say, in general, we strive to be capital efficient. We don't want to have a superabundance of capital beyond what we need to operate the business, and most likely, we would allocate that through dividends or share buybacks with a bias toward the buyback.

Speaker Change: Yes, and obviously we're thinking about that, you know, you know, with our growth rate in the 20s now versus, you know, the last several years in the 40s.

Speaker Change: But I would say in general, we strive to be capital efficient. We don't want to have a super abundance of capital beyond what we need to operate the business.

Speaker Change: and most likely we would, you know, allocate that through dividends or share buybacks with a bias toward the buyback.

Pablo Singzon: Okay. Thanks for your answers.

Pablo Augusto Serrano Singzon: Okay, thanks for your answer. You bet.

Operator: You bet.

Speaker Change: Okay, thanks for your answers.

Michael David Zaremski: And our next question comes from Mike Zaremski at BMO Capital Markets.

Michael Zaremski: And our next question comes from Mike Zaramsky at BMO Capital Markets.

Speaker Change: You bet.

Speaker Change: And our next question comes from Mike Zaremski at BMO Capital Markets.

Michael Zaremski: Hey, happy Friday. The first question just, maybe just roughly if you don't know the standard of willing to share it. Of your property business, like what percentage is syndicated versus non-syndicated if that's a good way to kind of parse out large versus smaller.

Michael David Zaremski: Okay, happy Friday. First question, just maybe just roughly, if you don't know the standard willing to share it for your property business, like what percentage is syndicated versus non-syndicated, if that's a good way to kind of parse out large versus small.

Michael David Zaremski: Hey, happy Friday.

Michael David Zaremski: first question just maybe just roughly if you don't know the standard willing to share it of your property business like what percentage is

Michael David Zaremski: syndicated versus non-syndicated if that's a good way to kind of parse out large versus smaller

Michael Patrick Kehoe: Yeah, we don't have the answer at the top of our head. But I would say a lot of it is syndicated.

Michael Zaremski: Yeah, we don't think we don't have the answer on top of that. I would say a lot of it is syndicated. Okay, got it. Okay, that makes sense. Give an optimistic growth that you guys have had in that.

Speaker Change #101: Yeah, we don't have the answer on the top of our head. I would say a lot of it is syndicated.

Michael David Zaremski: Okay, I got it. Okay, that makes sense.

Speaker Change #102: Okay, got it. Okay, that makes sense.

Michael Zaremski: I guess it's moving back to the loss trend. I think you said in the high fives. I don't know if it's all apples to apples, but I'm looking back at what you said in the past. I think last quarter might have been four to five, but I also think a couple of years ago, you might have said 8%. And so just kind of curious, maybe that's not apples to apples, but you can kind of reflect. I know you've been very clear that you're baking and higher loss trend now, but you know, it has your view of loss trends kind of have been floating in recent years downwards and now back upwards.

Michael David Zaremski: Given the optimistic growth that you guys have had in that. I guess just moving back to lost trend, I think you said in the high fives, and if I'm, I don't know if it's all apples to apples, but I'm looking back at what you've said in the past, and I think last quarter might have been four to five, but I also think a couple of years ago, you might have said 8%.

Speaker Change #103: have had in that. I guess just moving back to the lost trend.

Speaker Change #104: I think you said in the high fives, and if I'm, I don't know if it's all apples to apples, but I'm looking back at our, what you said in the past, I think last quarter might have been four to five, but I also think a couple of years ago, you might have said,

Michael David Zaremski: And so just kind of curious, maybe that's not apples to apples, but you can kind of reflect. I know you've been very clear that you're baking at higher losses right now, but, You know, has your view of the loss trend kind of ebbed and flowed in recent years, downwards and now back upwards? Yes.

Speaker Change #105: 8% and so just kind of curious maybe that's not apples to apples but you can kind of reflect I know you've been very clear that you're baking in higher loss trend now but um

Speaker Change #106: You know, has your view of loss trends kind of ebbed and flowed in recent years, downwards and now back upwards?

Michael Patrick Kehoe: Yeah, Mike, I think the four to five may have been a miscommunication. I think it was clearly when we were in a higher inflation environment a year or two or three ago. It was quite a bit higher than where we are today. We're a little bit below 6%.

Michael Zaremski: Yeah, Mike, I think the four to five may have been a miscommunication. I think it was clearly when we were in a higher inflation environment a year or two or three ago, it was quite a bit higher than where we are today. We're a little bit below six percent. That's that's a function of mix of business, right, because we said, you know, the loss trend by line of business. It's not, it's not one trend for the whole, for the whole company. But in general, I would say it's come down as inflation's come down, but it's still quite high, and I think that's a function of concern around where inflation may be going.

Speaker Change #107: Yeah, Mike, I think the four to five may have been a miscommunication. I think it was clearly when we were in a higher inflation environment a year or two or three ago.

Speaker Change #108: It was quite a bit higher than where we are today. We're a little bit below 6%. That's a function of mix of business, right? Because we set, you know, the loss trend by line of business.

Michael Patrick Kehoe: That's a function of the mix of business, right? Because we set, you know, the loss trend by line of business. It's not one trend for the whole company. But in general, I would say it's come down as inflation's come down, but it's still quite high. And I think that's a function of concern around where inflation may be going but also where the, you know, the tort system is trending.

Speaker Change #108: It's not one trend for the whole company.

Speaker Change #108: But in general, I would say it's come down as inflation's come down, but it's still quite high. And I think that's a function of concern around where inflation may be going, but also where the, you know, where the tort system is trending.

Michael Zaremski: But also where the, you know, where the towards system is trending.

Michael Patrick Kehoe: Okay, got it. And when you say, I mean, if you have lost trend, just to clarify a sec, you know, Everyone has slightly different definitions, but would you say it's just some kind of more recent business put on the books or the overall portfolio, what your reserves today are embedding overall or any nuances there we should be thinking about?

Michael Zaremski: OK, got it.

Michael Zaremski: When you say your view of loss trend, just to clarify a fact, you know, everyone has slightly different definitions, but would you say it's just some kind of more recent business put on the books or the overall portfolio, but you know, what your reserves today are embedding overall or any nuances there what we should be thinking about. I would say when we talk about lost time, we're talking about the whole book of business, so basically the weighted average across all of our lines of business. And all that I'm all I say here too.

Speaker Change #109: Okay, got it. And when you say your view of laws, trying just to clarify, is that, you know,

Speaker Change #110: Everyone has slightly different definitions, but would you say it's just on kind of more recent business put on the books or the overall portfolio, what, you know, what your reserves today are embedding overall or any nuances there we should be thinking about?

Michael Patrick Kehoe: I would say when we talk about lost time, we're talking about the whole book of business. So basically, the weighted average across all of our lines of business, and all that. I'm all eyes on you.

Speaker Change #111: I would say when we talk about lost time we're talking about the whole book of business so basically the weighted average across all of our

Michael Zaremski: OK, got it and think one last one in. So, you know, any in terms of the pulse of the property market right? All the lot of attention to what I guess for businesses has been nice to see a deceleration and property pricing increases given the, I guess, lack of extremely severe weather, you could say, in certain parts of the country, but is there any. For Julie to the marketplace to the extent there this was a year that had some major one or two major of answers, the you know, would it take something like, you know, but really large events to really turn the market any color there, thanks.

Michael David Zaremski: Okay, got it. And sneak one last one in. So, you know, any, in terms of the pulse of the property market, right, a lot of attention to, you know, what I guess for businesses has been nice to see a deceleration in property pricing increases, given the, I guess, lack of transcripts provided by Transcription Outsourcing, LLC. I would say...

Speaker Change #112: And all that's MLI centers, yeah.

Speaker Change #113: Okay, got it.

Speaker Change #114: Let's sneak one last one in. So, you know, any, in terms of the pulse of the property market, right, all the, a lot of attention to, you know, what, I guess, for businesses has been nice to see a deceleration in property pricing increases, given the, I guess, lack of

Speaker Change #114: extremely severe weather you could say in certain parts of the country but is there any fragility to the marketplace to the extent there this was a year that had some major one or two major events or is the you know would it take something like you know

Speaker Change #115: But a really large event to really turn the market any color there. Thanks

Michael Patrick Kehoe: I would say, you know, the market, especially the property insurance market, tends to have like short-term amnesia. So we had a pretty innocuous 2023, and that's what's led to some of the deceleration. The rates are still going up; it's just not going up as much. We're still predicting a very active hurricane season, and we haven't had a major earthquake in the United States for a long time. I think if you start to see some big cats happen, you might see some of the property market revert to higher rate changes. But, like, we're definitely not out of the woods when it comes to exposure to large cats.

Michael Zaremski: I would say, you know, the market, especially property in terms of market, tends to have like short term. In music, so we had a we had like a pretty innocuous 2023 and that's what led to some of the deceleration. The rates are still going up. It's just not as not going up as much. We're still; they're still predicting a very active hurricane season, and we haven't had a major earthquake in the United States for a long time. I think if you start to see some big cats happen, you might see some of the property market revert to pirate changes, but like we're definitely not out of the woods when it comes to exposure to large cats as an industry.

Speaker Change #116: I would say, you know, the market, especially property insurance market tends to have like short term

Misa: and Misa.

Speaker Change #118: So we had a pretty innocuous 2023, and that's what's led to some of the deceleration. The rates are still going up, it's just not going up as much.

Speaker Change #118: They're still predicting a very active hurricane season and we haven't had a major earthquake in the United States for a long time. I think if you start to see some big cats happen, you might see some of the property market revert to higher rate changes.

Speaker Change #118: But we're definitely not out of the woods when it comes to exposure to large cats.

Michael David Zaremski: Got it. And I guess just one more since, you know, you're all willing to talk about the lost trend. When you say loss run in the five or six range, I guess it feels a bit lower than what other companies would say, given you don't really write any comp, and that's where comp is the one where loss run is the negative. But I guess, on the other hand, I do think that people have an increasing appreciation of just how much more profitable the E&S marketplace is versus the traditional marketplace, because most of the folks giving off trend are big players But anything that you think what I'm saying is incorrect or anything you'd want to point out.

Speaker Change #118: as an industry.

Michael Zaremski: I guess just one more since, you know, you all are willing to talk about lost trend. You know, when you say lost trend in the five or six range, I guess, you know, that it feels a bit lower than what other companies would say given you don't really write any comp and that's where, you know, comp is the one or lost trend is the negative. But I guess on the other hand, you know, I do think that people have an increasing appreciation of just how much more profitable the enough marketplace is versus the traditional marketplace. Most of the folks giving lost trend are our big players in the traditional and the small or no units units, but anything that you think what I'm saying is correct or anything you want to point out.

Speaker Change #119: Got it. I guess just one more since you know you're you all are willing to talk about lost trend. You know

Speaker Change #120: When you say loss run in the five or six range, I guess, you know, that it feels a bit lower than what other companies would say, given you don't really write write any comp, and that's where, you know, comp is the one where loss runs the negative.

Speaker Change #120: But I guess on the other hand, you know, I do think that people have an increasing appreciation of just how...

Speaker Change #121: much more profitable than the U.S. marketplace is versus the traditional marketplace because most of the folks giving off-trend are big players in the traditional and have small or no U.S. units. But anything that you think what I'm saying is correct or anything you'd want to point out?

Michael Zaremski: I would just say that there's, you know, we look at a lot of points of reference to set those lost trends by line of business. You know, there are some commodities in the economy that are dropping in price. Lumber is a good example. It's probably a third of the price it was two years ago. Come, come way down, use car prices are dropping. So look, inflation in general is a concern. And I think we've, you know, we have a lot of confidence in the numbers for confusing, and I think we've got a good track record of reserving. But, you know, it does vary a bit by line of business, and, you know, we're looking at an average across our portfolio.

Michael Patrick Kehoe: I would just say that there are, you know, we look at a lot of points of reference to set those loss trends by line of business. You know, there are some commodities in the economy that are dropping in price. Lumber is a good example.

Speaker Change #122: I would just say that we look at a lot of points of reference to set those lost trends by line of business.

Speaker Change #122: You know there are some commodities in the economy that are dropping in price.

Speaker Change #123: Lumber is a good example. It's probably a third of the price it was two years ago.

Michael Patrick Kehoe: It's probably a third of the price it was two years ago, and coming way down. Used car prices are dropping. So look, inflation in general is a concern. And I think we've got, you know, we have a lot of confidence in the numbers we're using, and I think we've got a good track record of reserve. But, you know, it does vary a bit by line of business, and, you know, we're looking at an average across our portfolio. And so, maybe it makes sense that our number is different from other carriers because they probably have a very different mix of business. Definitely.

Speaker Change #123: Come way down. Used car prices are dropping. So, look, inflation in general is a concern. And I think we've, you know, we have a lot of confidence in the numbers we're using, and I think we've got a good track record of reserving. But, you know, it does vary a bit.

Speaker Change #123: By line of business, and, you know, we're looking at an average across our portfolio, and so maybe it makes sense that our number is different from other carriers. They probably have a very different mix of business.

Michael Zaremski: And so maybe it makes sense that our numbers differ from other carriers. They probably have a very different mix of business. Definitely.

Michael David Zaremski: Definitely. Thank you.

Michael Zaremski: Thank you.

Speaker Change #124: Definitely. Thank you.

Bill Carcache: We'll take a follow-up question from Bill Carthage at Wolf Research. Thanks for taking my follow-up. I had one for Brian Petrocelli on the investment portfolio. Do you expect any changes in positioning ahead of rate cuts? Are you at all concerned about pressure from lower rates, and are there any changes to the duration that you're considering? Bill, you know, a comment on it a little bit in my, in my notes, but I wouldn't expect any significant change in strategy going forward. But it is, you know, we do monitor interest rate changes; we're monitoring what's going on from a Fed policy perspective.

Bill Carcache: We'll take a follow-up question from Bill Carcache at Wolf Research.

Speaker Change #124: We'll take a follow-up question from Bill Carcache at Wolf Research.

Bill Carcache: Thanks for taking my follow-up. I had one for Bryan Petrucelli on the investment portfolio.

Bill Carcache: Thanks for taking my follow-up. I had one for Bryan Petrucelli on the investment portfolio. Do you expect any changes in positioning ahead of rate cuts? Are you at all concerned about pressure from lower rates and are there any changes to the duration that you're considering?

Bryan Paul Petrucelli: Do you expect any changes in positioning ahead of rate cuts? Are you at all concerned about pressure from lower rates? And are there any changes to the duration that you're considering?

Bryan Paul Petrucelli: Hey Bill, I commented a little bit in my notes, but I wouldn't expect any significant change in strategy going forward, but it is, you know, we do monitor interest rate changes; we monitor what's going on from a Fed policy perspective, so it's something that we actively manage on a day-to-day basis, but I would just say I wouldn't have any expectations of major changes in the near term.

Bryan Paul Petrucelli: Hey Bill, you know, I commented a little bit in my notes, but I wouldn't expect any significant change in strategy.

Bill: going forward, but it is, you know, we do monitor interest rate changes, we're monitoring what's going on from a Fed policy perspective, so it's something that we actively manage on a day-to-day basis, but I would just say I wouldn't have any expectations of major changes in the near term.

Bill Carcache: So it's something that we, you know, actively manage on a day-to-day basis, but I would just say I wouldn't have any expectations of the interchanges in the near term. That's helpful. Thanks.

Michael Patrick Kehoe: And then finally, for Mike, following up on your opening comment about E&S growth remaining steady, you highlighted the over 30 year trend of E&S taking share from the standard market. Can you speak to the persistence of those trends and whether you see any indication of a reversal amid the debate over if and when ENS volumes will return to the admitted market?

Bill Carcache: And then finally for Mike, following up on your opening comment about ENS growth remaining steady. You highlighted over 30-year trend in NS taking share from the standard market.

Bill: I.

Bill: That's helpful, thanks. And then finally for Mike, following up on your opening comment about E&S growth remaining steady, you highlighted the over 30 year trend in E&S

Michael Kehoe: Can you speak to the persistence of those trends and whether you see any indication of a reversal amid the debate over, you know, if and when ENS volumes will return to the admitted market. Yeah, I mean, obviously this is speculative, but I think it's going to continue on the commercial side. I think on the personal side the last couple of years, it's accelerated. So we're bullish on the EMS market. Very helpful.

Speaker Change #126: Taking share from the standard market, can you speak to the persistence of those trends and whether you see any indication of a reversal amid the debate over, you know, if and when ENS volumes will return to the admitted market?

Michael Patrick Kehoe: Yeah, I mean, obviously, this is speculative, but I think it's going to continue on the commercial side. I think on the personal side, in the last couple of years, it's accelerated. So we're bullish on the E&S market.

Michael David Zaremski: Yeah, I mean obviously this is speculative, but I think it's going to continue on the commercial side. I think on the personal side, the last couple years it's accelerated.

Bill: So we're bullish on the E&S market.

Bill Carcache: Very helpful. Thanks for taking my questions.

Bill Carcache: Thanks for taking my questions. Thanks, Bill.

Bill: Very helpful. Thanks for taking my questions. Thanks, Bill.

Casey Alexander: We'll move next to Casey Alexander at Compass Point. Hi, good morning. And thanks for bringing up the earthquake issue. I hadn't thought of that since I woke up this morning. So I'm feeling a little worse about my day.

Casey Jay Alexander: We'll move next to Casey Alexander at Compass Point.

Speaker Change #125: We'll move next to Casey Alexander at Compass Point.

Casey Jay Alexander: Hi, good morning. And thanks for bringing up the earthquake issue. I hadn't thought of that since I woke up this morning. I'm feeling a little worse about my day.

Casey Jay Alexander: Hi, good morning, and thanks for bringing up the earthquake issue. I hadn't thought of that since I woke up this morning, so I'm feeling a little worse about my day.

Casey Jay Alexander: Transcribed by https://otter.ai

Casey Alexander: My question is a little simplistic. You talked about various areas of lines where you're increasing retention. I'd ask you to walk through those lines again, and maybe this is way too simplistic way of thinking about it, but should, by increasing those retention, isn't that, should that be an accelerant to your earned premiums going forward? Maybe resulting in a little bit higher loss ratio, but net, net, when you put it all together, results in better underwriting income. Is that the right way to think about it? I would agree with that. It's an incremental increase from two to two and a half million dollar retention, so it's not going to be significant across the whole book of business.

Brian Donald Haney: My question is a little simplistic. You talked about various areas of the brain where you're increasing retention. I'd ask you to walk through those lines again, and maybe this is a way too simplistic way of thinking about it, but shouldn't increasing those retentions be an accelerant to your earned premiums going forward, maybe resulting in a little bit higher loss ratio, but net net, when you put it all together, resulting in better underwriting income? Is that the right way to think about it?

Casey Jay Alexander: And maybe this is way too simplistic way of thinking about it, but should...

Casey Jay Alexander: By increasing those retentions, shouldn't that be an accelerant to your earned premiums going forward?

Speaker Change #128: may be resulting in a little bit higher loss ratio, but net-net, when you put it all together, results in better underwriting income. Is that the right way to think about it?

Brian Donald Haney: I would agree with that.

Brian Donald Haney: Can you review Lionfish? Yeah, it's our excess casualty treaty. It's an incremental increase from two to two and a half million dollars in retention. So, it's not going to be significant across the whole book of business. Okay.

Speaker Change #133: I would agree with that.

Speaker Change #128: Can you review the line?

Speaker Change #130: It's our excess casualty treaty. It's an incremental increase from two to two and a half million dollar retention. So it's not going to be significant across the whole book of business.

Casey Alexander: Yeah. Okay.

Casey Jay Alexander: Yeah, okay. All right. Thanks.

Casey Alexander: All right. Thanks.

Casey Alexander: That's it.

Speaker Change #129: Okay. All right. Thanks. That's it.

Michael Wayne Phillips: We'll move next to Michael Phillips at Oppenheimer.

Michael Phillips: We'll move next to Michael Phillips at Oppenheimer. Hey, thanks. Just a quick follow up. Sorry. I think I missed this clarification. Like sure I got to write. You gave the 6% rates and property low change. Was that 6 just casualty? I'm sorry. I didn't catch that. What did you say? Yeah. When you earlier talked about rates up 6%, was that just casualty? No, that was the entire book. That was the average. Perfect.

Michael Wayne Phillips: Hey, thanks. Just a quick follow-up. Sorry, I think I missed this. Just a clarification to make sure I got it right. You gave the 6% rates and property low teens. Was that just a casualty?

Speaker Change #129: We'll move next to Michael Phillips at Oppenheimer.

Michael Phillips: Hey, thanks. Just a quick follow-up. Sorry, I think I missed this. Just a clarification to make sure I got it right. You gave the 6% rates and property load change. Was that 6% just casualty?

Brian Donald Haney: I'm sorry, I didn't catch that. What did you say?

Michael Wayne Phillips: Yeah, when you earlier talked about rates going up 6%, was that just a casualty? No, that was the entire book.

Michael Phillips: I'm sorry, I didn't catch that. What did you say? Yeah, when you earlier talked about rates up six percent, was that just casualty?

Brian Donald Haney: of the average. All right.

Mark Hughes: All right. Thank you.

Speaker Change #131: Yeah, that was the entire book.

Speaker Change #132: All right. Thank you.

Mark Douglas Hughes: And we'll take a follow-up from Mark Hughes at Truist.

Mark Hughes: And we'll take a follow-up from Mark Hughes, that true us. Yeah. On the C income line, if we're modeling that, it's quite more to written or to earn, which is to say, you know, 2, 2, you've got seasonally strong written premium. Should that be income still be increasing sequentially as long as it goes up, or is it more tied to written? It would be tied to written mark. I had to written. Okay. And then the homeowners line, I think you said you were high value homeowners; you've seen some movement there. If you're talking about whether that is material yet or whether you think it could be within the foreseeable future.

Speaker Change #132: And we'll take a follow-up from Mark Hughes at Truist.

Bryan Paul Petrucelli: Yeah, on the fee income line, if we're modeling that it ties more to written or to earned, which is to say, you know, to Q, you've got seasonally strong written premium. Should the fee income still be increasing sequentially as earned goes up? Or is it more tied to written?

Mark Douglas Hughes: Yeah, on the fee income line, if we're modeling that, is that tied more to written or to earned, which is to say, you know, 2Q, you've got

Mark Douglas Hughes: Seasonally Strong Written Premium. Should that fee income still be increasing sequentially as earned goes up or is it more tied to written?

Mark Douglas Hughes: It would be tied to a written mark.

Bryan Paul Petrucelli: I'd be ready, and then the homeowner's line. I think you said you're high-value homeowners, and you're seeing some movement there. You talk about whether that is material yet or whether you think it could be within the foreseeable future. I don't think...

Mark Douglas Hughes: It would be tied to written mark.

Speaker Change #134: I'd have written. Okay. And then the homeowners...

Ryan: Ryan, I think you said you were high value homeowners. You're seeing some movement there. Can you talk about the...

Speaker Change #136: Whether that is material yet or whether you think it could be within the foreseeable future?

Mark Hughes: I don't think. I don't want to call it immaterial, but I mean it's not one of our largest lines. It's a big opportunity because I think Mike said business is moving from on the personal side. Business is moving into the in space. And that's probably one of the best examples of that. So we think it's a big opportunity.

Brian Donald Haney: I don't think I don't want to call it immaterial, but it's not one of our largest lines. It's a big opportunity because, as Mike said, business is moving from the personal side, business is moving into the E&S space, and that's probably one of the best examples of that.

Ryan: I don't think...

Ryan: I don't want to call it immaterial, but I mean it's not one of our largest lines. It's a big opportunity because I think as Mike said, business is moving from, on the personal side, business is moving into the E&S space and that's probably one of the best examples of that.

Speaker Change #137: So, we think it's a big opportunity. I will just say this anecdotally, of all the product launches we've ever had, I think this might be first or second fastest.

Mark Hughes: I will just say this anecdotally: of all the product launches we've ever had, I think this might be first or second pass.

Brian Donald Haney: So we think it's a big opportunity. I will just say this anecdotally, of all the product launches we've ever had, I think this might be the first or second fastest. It has gone fast. There is a lot of demand. Okay.

Michael David Zaremski: It has gone fast.

Speaker Change #138: A lot of demand.

Operator: And that concludes our Q&A session.

Speaker Change #139: Great, thank you.

Michael Patrick Kehoe: And that concludes our Q&A session. I will now turn the conference back over to Mike Kehoe for closing remarks.

Michael Kehoe: I will now turn the conference back over to Mike Kehoe for closing remarks. Okay. Well, thank you everybody for joining us, and we look forward to speaking with you again here in a few months.

Speaker Change #139: And that concludes our Q&A session. I will now turn the conference back over to Mike Kehoe for closing remarks.

Michael Patrick Kehoe: Okay, well, thank you everybody for joining us, and we look forward to speaking with you again in a few months. Have a great day.

Michael Patrick Kehoe: Okay, well thank you everybody for joining us and we look forward to speaking with you again here in a few months. Have a great day.

Operator: Have a great day. And this concludes today's conference call. Thank you for your participation. You may now disconnect. Thank you.

Operator: And this concludes today's conference call. Thank you for your participation. You may now disconnect.

Speaker Change #141: And this concludes today's conference call. Thank you for your participation. You may now disconnect.