Q1 2025 Definity Financial Corp Earnings Call

May 9, 2025

Good morning, ladies and gentlemen, and welcome to the definitive Financial Corporation first quarter of 'twenty 25 financial results conference call and webcast.

At this time all lines are in listen only mode.

In their presentation, we will conduct a question and answer session.

If at any time during this call you require immediate assistance. Please press star zero for the operator.

Speaker Change: This call is being recorded on Friday May 920, 25, I would now like to turn the conference over to Danny Westfall, Vice President of Investor Relations. Please go ahead.

Dennis Westfall: Thank you. Good morning, everyone. Thank you for joining us on the call today. A link to our live webcast and background information for the call is posted on our website at definity.com under the Investors tab. As a reminder, the slide presentation contains a disclaimer on forward-looking statements, which also applies to our discussion on the conference call. Joining me on the call today are Rowan Saunders, President and CEO, Philip Mather, EVP and CFO, Paul MacDonald, EVP of Personal Insurance and Digital Channels, and Fabian Richenberger, EVP of Commercial Insurance and Insurance Operations. We'll start with formal remarks from Rowan and Phil, followed by a Q&A session, during which Paul and Fabi will also be available to answer your questions. With that, I'll ask Rowan to please begin his remarks.

Speaker Change: Thank you for joining us on the call today. A link to our live webcast and background information for the call is posted on our website at detainee.com under the Investors tab. As a reminder, the slide presentation contains a disclaimer on four-looking statements which also applies to our discussion on the conference call.

Dennis Westfall: Joining me on the call today are Rowan Saunders, President and CEO, Philip Mather, EVP and CFO, Paul MacDonald, EVP of Personal Insurance and Digital Channels, and Fabian Richenberger, EVP of Commercial Insurance and Insurance Operations. We'll start with formal remarks from Rowan and Phil, followed by a Q&A session, during which Paul and Fabi will also be available to answer your questions. With that, I'll ask Rowan to please begin his remarks.

Speaker Change: Joining me on the call today are Ron Saunders, President and CEO , Philip Mother, EVP and CFO , Paul McDonald, EVP of personal insurance and digital channels, and Fabian Rickenberger, EVP of commercial insurance and insurance operations.

Speaker Change: We'll start with formal remarks from Rowan and Phil, followed by a Q&A session. During which Paul and Faville will also be available to answer your questions.

Speaker Change: With that, I will ask for all of the please begin as remarks.

Rowan Saunders: Thanks, Dennis. Good morning, everyone. We reported our Q1 results last night that got the year off to an encouraging start and continued to deliver on our financial targets. In the quarter, solid underwriting income, net investment income, and ongoing contributions from our insurance broker platform resulted in operating net income of $75.9 million or $0.65 per share. The firm market conditions in personal insurance and continued favorable conditions overall in commercial insurance and our strong broker proposition combined to generate significant growth as premiums increased 9.6% in Q1, adjusted for our exited line. We delivered a 94.5% combined ratio in the quarter as proactive rate actions and continued expense efficiencies largely offset the impacts of an active winter season.

Thanks, Dennis, and good morning, everyone.

Speaker Change: We reported our first court results last night. They got the year of turning encouraging start and continued to deliver on our financial targets.

Speaker Change: In the quarter, solid undronning income, net investment income, and ongoing contributions from our insurance broker platform resulted in operating net income of $75.9 million or 65 cents per share.

Rowan Saunders: The firm market conditions in personal insurance and continued favorable conditions overall in commercial insurance and our strong broker proposition combined to generate significant growth as premiums increased 9.6% in Q1, adjusted for our exited line. We delivered a 94.5% combined ratio in the quarter as proactive rate actions and continued expense efficiencies largely offset the impacts of an active winter season.

Defirm market conditions in personal insurance.

Speaker Change: and continued favourable conditions overall with commercial insurance and our strong broker proposition combined to generate significant growth as premiums increased 9.6% in the first quarter adjusted for our extended life.

Speaker Change: We delivered a 94.5% combined ratio of the quarter as proactive redactions and continued expense efficiencies largely offset the impacts of an active winter season.

Rowan Saunders: Compared to the benign experience in 2024, winter weather led to higher catastrophe losses and a couple of points of higher core accident year experience. We ended Q1 with a book value per share of CAD 29.52, up 16.2% from a year ago, as we continue to deliver value to shareholders. Our efforts to diversify the profitability of the business in recent years were reflected in our solid net investment income and ongoing contributions from our broker distribution platform, both of which met our expectation for Q1. These results combined with solid underwriting income to generate an operating return on equity of 10.3% over the past 4 months, despite the significant increase in our equity base and the active catastrophe experience in 2024.

Speaker Change: Compared to the non-experience in 2024, winter weather led to higher catastrophe losses and a couple of points of higher core accident-year experience.

Speaker Change: We ended the first quarter with a book value per share of $29.52, up 16.2% from a year ago, as we continue to deliver value to shareholders.

Rowan Saunders: Our efforts to diversify the profitability of the business in recent years were reflected in our solid net investment income and ongoing contributions from our broker distribution platform, both of which met our expectation for Q1. These results combined with solid underwriting income to generate an operating return on equity of 10.3% over the past 4 months, despite the significant increase in our equity base and the active catastrophe experience in 2024.

Speaker Change: Our efforts to diversify the profitability of the business in recent years were reflected in our solid net investment income and ongoing contributions from our broker distribution platform, both of which met our expectation for the first quarter.

Speaker Change: These results combined with solid undrawling income to generate and operating return an equity of 10.3% over the past four months despite the significant increase in our equity base and the active catastrophe experience in 2024.

Rowan Saunders: We proactively positioned our investment portfolio during the quarter in advance of the April tariff announcements, moving nearly CAD 250 million out of common equities into government bonds. This defensive posture has helped protect our portfolio in the current environment and further strengthened our financial capacity, which ended the Q1 at CAD 1.8 billion. Turning to the industry outlook on slide six. We believe the operating environment is one that remains conducive to sustaining favorable market conditions overall. We expect conditions in auto lines to remain firm as insurers aim to keep pace with the combined impact of ongoing cost pressures, regulatory constraints in Alberta, and uncertainty related to the extent and impact of US tariffs and retaliatory actions.

Speaker Change: We proactively positioned our investment portfolio during the quarter in advance of the April tariff announcements, moving nearly 250 million dollars out of common equities into government bonds.

Speaker Change: This defensive posture has helped protect our portfolio in the current environment and further strengthened our financial capacity.

Which ended the first quarter at $1.8 billion.

Rowan Saunders: Turning to the industry outlook on slide six. We believe the operating environment is one that remains conducive to sustaining favorable market conditions overall. We expect conditions in auto lines to remain firm as insurers aim to keep pace with the combined impact of ongoing cost pressures, regulatory constraints in Alberta, and uncertainty related to the extent and impact of US tariffs and retaliatory actions.

Turning to the industry outlook on slide 6.

Speaker Change: We believe the operating environment is the one that remains conducive to sustaining favorable market conditions overall.

Speaker Change: We expect conditions in auto lines to remain firm, as ensures aim to keep pace with the combined impact of ongoing cost pressures, regulatory constraints in Alberta, and uncertainty related to the extent and impact of US tariffs and retaliatory actions.

Rowan Saunders: We also expect market conditions in personal property to remain firm over the next 12 months, reflecting the active winter season on the back of last year's record of approximately CAD 9 billion in industry catastrophe losses. While we expect overall commercial lines conditions to remain attractive, we are seeing that some commercial segments have become more competitive. Slide 7 illustrates our key financial metrics. As you can see, we met or beat each metric in the Q1. We are confident that we have the growth platforms to outpace the market over time, and we'll continue to protect and improve company profitability along the way. We have several organic levers being pulled aimed at improving operating results in the near term. As such, we are targeting to deliver a sub 95 annual consolidated combined ratio this year.

Speaker Change: We also expect market conditions and personal property to remain firm over the next 12 months reflecting the active winter season on the back of last year's record of approximately $9 billion in industry catastrophe losses.

Speaker Change: While we expect overall commercial lines, conditions to remain attractive, we are seeing that some commercial segments have become more competitive.

Rowan Saunders: Slide 7 illustrates our key financial metrics. As you can see, we met or beat each metric in the Q1. We are confident that we have the growth platforms to outpace the market over time, and we'll continue to protect and improve company profitability along the way. We have several organic levers being pulled aimed at improving operating results in the near term. As such, we are targeting to deliver a sub 95 annual consolidated combined ratio this year.

Speaker Change: Slide 7 illustrates our key financial metrics. As you can see, we met or beat each metric in the first quarter. We are confident that we have the growth platforms so I paste the market over time and we'll continue to protect and improve company profitability along the way.

Speaker Change: We have several organic levers being pulled aimed at improving operating results in the near term as such we are targeting to deliver a sub 95 annual consolidated combined ratio this year.

Rowan Saunders: We believe this will enable us to continue driving our operating ROE higher within the guidance range. Recognizing that the challenging weather events from Q3 2024 will weigh on this metric until the second half of this year. Slide 8 shows the composition of our national broker platform. We've made great progress in the past few years to develop it into a vehicle to diversify and strengthen the earnings profile of the business. Continued M&A success and the organic growth momentum of the business is expected to result in at least CAD 1.5 billion of managed premiums by the end of 2026, earlier than we originally anticipated. Operating income in the quarter included CAD 11 million of distribution income, reflecting the typical seasonality of a Q1 and benefited from a strong level of commission offset.

Speaker Change: We believe this will enable us to continue driving our operating OROE higher within the guidance range.

Speaker Change: The recognizing that the challenging weather events from the third quarter of 2024 will wear this metric until the second half.

of this year.

Speaker Change: Flight 8 shows the composition of our national broker platform. We've made great progress in the past few years to develop it into a vehicle to diversify and strengthen the earnings profile of the business.

Rowan Saunders: We've made great progress in the past few years to develop it into a vehicle to diversify and strengthen the earnings profile of the business. Continued M&A success and the organic growth momentum of the business is expected to result in at least CAD 1.5 billion of managed premiums by the end of 2026, earlier than we originally anticipated. Operating income in the quarter included CAD 11 million of distribution income, reflecting the typical seasonality of a Q1 and benefited from a strong level of commission offset.

Speaker Change: Continue to emanate success and the organic growth momentum of the business is expected to result in at least $1.5 billion of managed premiums by the end of 2026 earlier than we originally anticipated.

Speaker Change: Operating income in the quarter includes $11 million of distribution income, reflecting the typical seasonality of a first quarter, and benefited from a strong level of commission

Rowan Saunders: We maintain our expectation to increase operating income from the business by approximately 15% in 2025, with a full year 70/30 split between distribution income and commission offset. With that, I'll turn the call over to our CFO, Phil Mather.

Speaker Change: We maintain our expectation to increase operating income from the business by approximately 15% in 2025.

Speaker Change: With a full year, 70, 30 split between distribution income and commission offset. And with that, I'll turn the call over to our CFO for another.

Philip Mather: Thanks, Rowan. I'll begin on slide 10 with Gross written premiums. Gross written premiums were up 10.2% in Q1 2025, driven by a double-digit increase in written rates and continued unit count growth in the broker business, reflective of our improved competitive position in a firm market environment and excluding the premiums of our exited lines from both periods. We expect the business to benefit from continued strong retention and the inherent scalability of our digital platforms. We continue to pursue additional rate and segmentation actions to maintain our target profitability, and recently received approval for an additional 5 points of rate for both Sonnet and Vyne in Ontario. Our disciplined approach includes focusing on areas of the business where we see opportunity for profitable growth.

Thanks Rowan, I'll begin on slide 10 with personal auto.

Speaker Change: Grocery and premiums were up to 10.2% in the first quarter of 2025, driven by a double digit increase in written rates and continued unit count growth in the broker business.

Speaker Change: Reflective of our improved competitive position in the firm market environment and excluding the premiums of our access to blinds from both periods.

Philip Mather: We expect the business to benefit from continued strong retention and the inherent scalability of our digital platforms. We continue to pursue additional rate and segmentation actions to maintain our target profitability, and recently received approval for an additional 5 points of rate for both Sonnet and Vyne in Ontario. Our disciplined approach includes focusing on areas of the business where we see opportunity for profitable growth.

Speaker Change: We expect the business to benefit from continued strong retention and the inherent scalability of our digital platforms.

Speaker Change: We continue to pursue additional rates and segmentation actions to maintain our target profitability and recently received approval for an additional five quits of rate for both summit and mine in Ontario.

Speaker Change: Our Disciplined Approach includes focusing on areas of the business, where we see opportunity for profitable growth.

Philip Mather: Looking at the remainder of 2025, we expect the full year pace of growth to remain solid in the upper single digits, but we expect some variability from quarter to quarter, particularly given the large portfolio transfers that bolster growth in the middle quarters of 2024. Personal auto reported a combined ratio of 97.5% in the quarter, up slightly from a year ago, driven by more challenging winter driving conditions versus the benign weather from a year ago, largely offset by earned race increases and improved Sonnet profitability. Theft continues to be a focus for both us and the industry as a whole. While still elevated from pre-pandemic levels, we've now seen 4 consecutive quarters of year-over-year improving trends. We have a number of claims initiatives targeted towards auto theft and recovery, which are positively impacting our loss costs and helping our customers.

Speaker Change: Looking at the remainder of 2025, we expect the full year piece of growth to remain solid in the upper single digits, but we expect some variability from quarter to quarter, particularly given the large portfolio transfers that bolster growth in the middle courses of 2024.

Speaker Change: Personal Auto reported a combined ratio of 97.5% in the quarter, but slightly from a year ago, driven by more challenging winter driving conditions, versus the benign weather from a year ago, largely offset by earned race increases and improved sonic profitability.

Philip Mather: Theft continues to be a focus for both us and the industry as a whole. While still elevated from pre-pandemic levels, we've now seen 4 consecutive quarters of year-over-year improving trends. We have a number of claims initiatives targeted towards auto theft and recovery, which are positively impacting our loss costs and helping our customers.

Speaker Change: That continues to be a focus for both us and the industry as a whole, while still elevated from pre-pandemic levels, with now seeing four consecutive quarters of year-over-year improving trends.

Speaker Change: We have a number of claims initiatives targeted towards auto theft and recovery which are positively impacting our loss costs and helping our customers.

Philip Mather: Overall, earned rate levels remain above current loss cost trends, reinforcing our expectations for personal auto to generate a mid-90s combined ratio in 2025. We're continuously monitoring the rapidly evolving tariff situation and are ready to take additional actions as necessary to protect our profitability. We continue to believe the potential impact will be manageable. Turning to personal property on slide 11. Growth of 7.8% in Q1 benefited from continued firm market conditions, driving increases in average written premiums. This was partially offset by ongoing active management of our portfolio to address risk concentration in regions with a higher propensity for climate-related peril events. We expect this line to grow at a mid to upper single-digit pace for the full year, given the conditions prevalent in the industry.

Speaker Change: Overall, earned rate levels remain at both current loss cost trends, reinforcing our expectations with personal auto to generate a mid-90s combined ratio in 2025.

Speaker Change: We continuously monitoring the rapidly evolving tariff situation and are ready to take additional actions as necessary to protect our profitability. We continue to believe the potential impact will be manageable.

Philip Mather: Turning to personal property on slide 11. Growth of 7.8% in Q1 benefited from continued firm market conditions, driving increases in average written premiums. This was partially offset by ongoing active management of our portfolio to address risk concentration in regions with a higher propensity for climate-related peril events. We expect this line to grow at a mid to upper single-digit pace for the full year, given the conditions prevalent in the industry.

Speaker Change: Turning to personal property on slide 11, growth of 7.8% in Q1, benefited from continued firm market conditions driving increases in average written premiums.

Speaker Change: This was partially offset by ongoing active management of our portfolio to address risk concentration in regions with a higher propensity for climate related parallel events.

Speaker Change: We expect this line to grow at the midst of a single digit pace for the full year given the conditions prevalent in the industry.

Philip Mather: Focusing on the bottom line, we reported a combined ratio of 94.1% in Q1, driven by elevated catastrophe losses, partially offset by higher favorable claims development, and a decrease in the expense ratio. We continue to target a sub 95% combined ratio for the personal property line of business in 2025. Slide 12 outlines the highlights in the quarter for our commercial business. A double-digit growth in commercial lines continued with gross written premiums up 10% versus the prior year. Our results in commercial insurance reflect favorable market conditions, normalizing inflation, further expansion of our strong small business and specialty capabilities, and a comprehensive value proposition that is well supported by our broker partners across Canada.

Speaker Change: Focusing on the bottom line, we reported a combined ratio of 94.1% in Q1, driven by elevated catastrophe losses, partially offset by higher favourable claims development and a decrease in the expense ratio.

Speaker Change: We continue to target a sub 95 percent combined ratio for the personal property alignment business in 2025.

Speaker Change: Slide 12 outlines the highlights in the courts of our commercial business, and double-digit growth in commercial lines continued, with growths and premiums up 10% versus the

Philip Mather: A double-digit growth in commercial lines continued with gross written premiums up 10% versus the prior year. Our results in commercial insurance reflect favorable market conditions, normalizing inflation, further expansion of our strong small business and specialty capabilities, and a comprehensive value proposition that is well supported by our broker partners across Canada.

Speaker Change: Our results in commercial insurance reflect favorable market conditions, normalizing inflation, further expansion of our strong, small business and specialty capabilities, and a comprehensive value proposition that is well supported by our broker partners, Cross Canada.

Philip Mather: While certain segments have become more competitive, we continue to cover the loss cost trends in our commercial portfolio overall, with appropriate pricing and underwriting strategies, which supports our objective for a low 90s combined ratio. We expect that we can maintain our pace of growth at twice the industry growth rate, which should translate into approximately 10% growth into 2025. Commercial lines continue to benefit from our focus on underwriting execution and rate adequacy with a combined ratio of 90.5% in Q1 2025. The improvements in the combined ratio was driven by lower catastrophe losses, higher favorable claims developments, and a decrease in the expense ratio, partially offset by a weather-driven increase in the core accident year claims ratio.

Speaker Change: While certain segments have become more competitive, we continue to cover the lost cost trends in our commercial portfolio overall, with appropriate pricing and underracing strategies, which supports our objective for a low 90s combined ratio.

Speaker Change: We expect that we can maintain our pace of growth at twice the industry growth rate, which should translate into approximately 10% growth into 2025.

Philip Mather: Commercial lines continue to benefit from our focus on underwriting execution and rate adequacy with a combined ratio of 90.5% in Q1 2025. The improvements in the combined ratio was driven by lower catastrophe losses, higher favorable claims developments, and a decrease in the expense ratio, partially offset by a weather-driven increase in the core accident year claims ratio.

Speaker Change: Financial Lions continue to benefit from our focus on underwriting execution and rate adequacy with a combined ratio of 90.5% in the first quarter of 2025.

Speaker Change: The improvement in the combined ratio is driven by low catastrophe losses, higher favourable claims development, and a decrease in the expense ratio partially offset by a weather-driven increase in the core accident-eared claims ratio.

Philip Mather: The decrease in catastrophe losses and the corresponding increase in the core accident year claims ratio was impacted by approximately one and a half points from the change in definition for a single claim loss in Q1 2025. With a strong performance to start the year, we continue to expect our commercial insurance business to sustainably deliver an annual combined ratio in the low 90s. Putting this all together on slide 13, consolidated premiums increased 9.6%, adjusted for exited lines. The disciplined nature of our growth through our underwriting expertise, pricing strategies, and product expansion, along with the continued focus on expense management, resulted in a Q1 combined ratio of 94.5%, up 0.6 points from last year, reflecting the more active winter weather.

Speaker Change: The decrease in catastrophe losses and the corresponding increase in the core accident year claims ratio was impacted by approximately one and a half points from the change in definition for a single claim loss in the first quarter of 2025.

Speaker Change: But the strong performance to start the year, we continue to expect our commercial insurance business to sustainably deliver an annual combined ratio in the low 90s.

Philip Mather: Putting this all together on slide 13, consolidated premiums increased 9.6%, adjusted for exited lines. The disciplined nature of our growth through our underwriting expertise, pricing strategies, and product expansion, along with the continued focus on expense management, resulted in a Q1 combined ratio of 94.5%, up 0.6 points from last year, reflecting the more active winter weather.

Speaker Change: Putting this all together on slide 13 can solidate the premiums increased 9.6% adjusted for

Speaker Change: The discipline nature of our growth through our underwriting expertise, pricing strategies and project expansion along with the continued focus on expense management resulted in a first course combined ratio of 94.5%.

Speaker Change: Sub 0.6 points from last year reflecting the more active winter weather.

Philip Mather: Our expense ratio of 30.3% was 1 point improved from the prior year, benefiting from the investments we've made to improve productivity, along with our disciplined expense management. The net operating expense ratio continues to benefit from operating leverage, having improved from north of 13% to 11.8% in the quarter, and well on its way to our target of 11.5% in 2025 and 11% in 2026. Turning to slide 14. Net investment income increased in Q1 due to an increase in interest income driven by higher holdings of bonds, partially offset by lower dividend income as we reduced our common equity holdings in advance of the recent capital market volatility.

Speaker Change: Our expense ratio of 30.3% was a point improved from prior year, benefiting from the investments we've made to improve productivity, along with our disciplined expense management.

Philip Mather: The net operating expense ratio continues to benefit from operating leverage, having improved from north of 13% to 11.8% in the quarter, and well on its way to our target of 11.5% in 2025 and 11% in 2026. Turning to slide 14. Net investment income increased in Q1 due to an increase in interest income driven by higher holdings of bonds, partially offset by lower dividend income as we reduced our common equity holdings in advance of the recent capital market volatility.

Speaker Change: The Net Operating Expense Ratio continues to benefit from operating leverage.

Having improved from north to 13%.

Speaker Change: To be 11.8% in the quarter and well on its way to our target of 11.5% in 2025 and 11% in 2026.

Speaker Change: Turning to slide 14, net investment income increased in the first quarter due to an increase in interest income driven by higher holdings of bonds, partially offset by lower dividend income as we reduce our common equity holdings in advance of the recent capital markets volatility.

Philip Mather: The level of net investment income in 2025 is currently expected to be largely unchanged from 2024 as market yields have fallen below book yields. In the near term, growth is more likely to be driven by new cash deployment into the portfolio rather than incremental yield capture. This outlook reflects our preference to deploy capital into high-yielding investments and distribution and organic growth initiatives and the impact of lower reinvestment yields. Distribution income in the Q4 increased by CAD 1 million year-over-year, driven primarily by the contributions from acquisitions, combined with solid underlying organic growth. As Rowan Saunders indicated, the commission offset was strong in the Q1, enabling the combined impact to come in slightly ahead of our expectations. We continue to expect the combination of distribution income and commission offset to grow approximately 15% in 2025.

Speaker Change: The level of net investment income in 2025 is currently expected to be largely unchanged from 2024, as market yields have fallen below bulk yields.

Speaker Change: In the near term, growth is more likely to be driven by new cash deployments into the portfolio rather than incremental yield capture.

Speaker Change: This outlook reflects our preference to deploy capital into high yielding investments in distribution and organic growth initiatives and the impacts of lower reinvestment yields.

Philip Mather: Distribution income in the Q4 increased by CAD 1 million year-over-year, driven primarily by the contributions from acquisitions, combined with solid underlying organic growth. As Rowan Saunders indicated, the commission offset was strong in the Q1, enabling the combined impact to come in slightly ahead of our expectations. We continue to expect the combination of distribution income and commission offset to grow approximately 15% in 2025.

Speaker Change: Distribution income in the fourth quarter increased by $1 million a year over year driven primarily by the contributions from acquisitions combined with solid underlying organic growth.

Speaker Change: As Rowan indicated, the commission offset was strong in the first quarter, enabling the combined impact to come in slightly ahead of our expectations.

Speaker Change: We continue to expect the combination of distribution income and commission offset to grow approximately 15% in 2025.

Philip Mather: As you can see on slide 15, our financial position remains robust with close to CAD 1.8 billion of financial capacity. The increase during the quarter was due primarily to capital generated from operating net income and recognized gains on investments, partially offset by deployed and broker acquisitions and disciplined deployment of capital to support our organic growth and dividend priorities. Moving a portion of our investment portfolio from common equities to government bonds had the impact of freeing up capital, which added to the benefit from our operating income. Our 16.2% increase in book value per share to CAD 29.52 was due primarily to strong operating performance and the return of restricted cash. Slide 16 shows our recent capital management actions and longer-term priorities.

Speaker Change: As you can see on slide 15, our financial position remains robust, with close to $1.8 billion of financial capacity.

Speaker Change: The increase during the quarter was due primarily to capital generated from operating net income and recognized gains on investments, partially offset by deployed and broker acquisitions and disciplined deployments of capital to support our organic growth and dividend priorities.

Philip Mather: Moving a portion of our investment portfolio from common equities to government bonds had the impact of freeing up capital, which added to the benefit from our operating income. Our 16.2% increase in book value per share to CAD 29.52 was due primarily to strong operating performance and the return of restricted cash. Slide 16 shows our recent capital management actions and longer-term priorities.

Speaker Change: Moving a portion of our investment portfolio from common equities to government bonds at the impact of freeing up capital, which added to the benefit from our operating income.

Speaker Change: Our 16.2% increase in book value for sure to $29.52, but you primarily to strong operating performance and the return of restricted cash.

[inaudible]

Speaker Change: Slide 16 shows our recent capital management actions and longer term priority.

Philip Mather: When it comes to deploying our capital, the primary focus remains in support of our robust organic growth strategy. We also intend to continue growing our dividend over time. With an objective to build a company into a top five player in the industry, we are actively pursuing inorganic growth, including both insurance carriers and distributors. Following our initial build of the platform via our partnership with McDougall, recent broker acquisitions have been more programmatic in nature, which we expect to continue. As of early May, we have committed to four broker transactions totaling approximately CAD 130 million, of which three have already closed, and the fourth is expected to do so by the summer. With that, I will turn the call back over to Rowan for some final remarks.

Speaker Change: When it comes to deploying our capital, the primary focus remains in support of our robust organic growth strategy.

Speaker Change: We also intend to continue growing our dividend over time with an objective to build a company into a top five player in the industry. We are actively pursuing inorganic growth including both insurance carriers and distributors.

Philip Mather: Following our initial build of the platform via our partnership with McDougall, recent broker acquisitions have been more programmatic in nature, which we expect to continue. As of early May, we have committed to four broker transactions totaling approximately CAD 130 million, of which three have already closed, and the fourth is expected to do so by the summer. With that, I will turn the call back over to Rowan for some final remarks.

Speaker Change: Following our initial build of the platform we are our partnership with McDougall, recent broker acquisitions have been more programmatic in nature, which we expect to continue.

Speaker Change: As of early May, we have committed to four broker transactions, totaling approximately $130 million, of which three have already closed, and the fourth is expected to do so by the summer. With that, I will turn the call back over to Rowan for some final remarks.

Rowan Saunders: As we've outlined before, we have three organic levers to improve our operating ROE towards the upper end of our target range. These include improving Sonnet profitability, expense optimization, and the transformation of our claims operations. Beyond this, we require inorganic growth, which would allow us to deploy our excess capital and introduce leverage into the balance sheet, thereby enabling us to target a mid-teen level of returns. Since we did a deep dive into these levers at our September investor day, we continue to make progress on all of these organic levers and continue to see an operating environment that is favorable to executing our ambitions and strategies. We are well on track to deliver the targeted improvements from Sonnet and expenses by the end of 2026. The third lever, our claims transformation to Guidewire ClaimCenter, is also advancing very well.

Rowan Saunders: As we've outlined before, we have three organic levers to improve our operating ROE towards the upper end of our target range.

Rowan Saunders: These include improving Sonnet profitability, expense optimization, and the transformation of our claims operations.

Rowan Saunders: Beyond this, we require inorganic growth, which would allow us to deploy our access capital and introduce leverage into the balance sheet, thereby enabling us to target and maintain level of returns.

Rowan Saunders: Since we did a deep dive into these levers at our September investor day, we continue to make progress on all of these organic levers and continue to see an operating environment that is favorable to executing our ambitions and strategies. We are well on track to deliver the targeted improvements from Sonnet and expenses by the end of 2026. The third lever, our claims transformation to Guidewire ClaimCenter, is also advancing very well.

Rowan Saunders: Since we did a deep dive into these levers at our September yesterday, we continue to make progress on all of these organic levers and continue to see an operating environment that is favorable to executing our visions and strategies.

Rowan Saunders: We are well on track to deliver the targeted improvements from Sonnet and Expenses by the end of 2026.

Rowan Saunders: The third lever, our claims transformation to Godwide Claim Center, is also advancing very well.

Rowan Saunders: In April 2024, we began managing our new auto claims on this platform, and the expected benefits in claims resolution, indemnity costs, and expense management are being realized. We are also progressing nicely on transitioning our property and casualty claims to this new system later this year, the final phase of our claims transformation. With all of this in place, we are well positioned to deliver the targeted claims improvements by the end of 2027 while delivering better broker and customer experiences. With that, I'll turn the call back over to Dennis to begin the Q&A session.

Rowan Saunders: In April 2024, we began managing our new auto claims on this platform, and the expected benefits in claim resolution in deputy costs and expense management are being realized.

Rowan Saunders: We are also progressing nicely on transitioning our property and casualty claims to this new system later this year, the final phase of our claims transformation.

Rowan Saunders: With all of this in place, we are well positioned to deliver the targeted claims improvements by the end of 2027 while delivering better broker and customer experiences.

Rowan Saunders: And with that, I'll turn the call back over to Dennis to begin the Q&A session.

Philip Mather: Thanks, Rowan. With that, we are now ready to take questions.

Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press star followed by the number one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the number two. If you are using a speakerphone, please leave the handset before pressing any keys. Your first question comes from Tom MacKinnon of BMO Capital. Please go ahead.

Dennis: Thank you. Ladies and gentlemen, we will now begin the question and answer session.

Dennis: Should you have a question, please press star followed by the number one on your touch tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the number two.

Speaker Change: If you are using a speaker phone, please leave the handset before pressing any keys. Your first question comes from Tom McKinnon of VMO Capital. Please go ahead.

Tom MacKinnon: Yeah, thanks very much. Just a question with respect to auto, can you give us some color as to how rate approvals might be progressing in Ontario with respect to Sonnet and the and your Economical or affinity product? As well, I think you did mention that in Q4 that Sonnet was breaking even. Was that the case again in Q1 of this year? Thanks.

Tom McKinnon: Yeah, thanks very much. Just a question with respect to auto. Can you give us some color as to how rate approvals might be progressing in Ontario with respect.

Tom McKinnon: and the, um, and your economical or definitive product. Um, and as well, um, I think you did mention that in the fourth quarter of that sonnet was breaking even. Um, was that the case again in the first quarter of this year?

Thanks.

Paul MacDonald: Thanks, Tom. It's Paul here. A couple of things. As Phil mentioned earlier, we did get approved for 5% rate increase in Ontario in both our Economical and Sonnet portfolios, which is positive. That's scheduled to hit in May this month, so we look forward to that. That's in addition to the rate that we have already flowing through the portfolio. I would respond to your other item by first of all, talking a little bit about the year-over-year performance of the automobile. I just want to highlight that the attritional performance is actually something that we're quite pleased with. If you look, last year was quite benign to the tune of about 1.5 points better than the long run average.

Tom McKinnon: Thanks, Tom. It's Paul here. So, a couple of things. As Phil mentioned earlier, we did get approved for 5% rate increase in Ontario and both our economical and sauna portfolios, which is positive. That's scheduled to hit in May this month, so we look forward to that.

Tom McKinnon: That's in addition to the rate that we have already flowing through the portfolio and I would respond to your other item.

Tom McKinnon: By, first of all, talking a little bit about the Eurovere performance of the automobile. I just want to highlight that the additional performance is actually something that we're quite pleased with. If you look, last year was quite benign.

Tom McKinnon: To the tune of about one and a half points better than the long run average.

Paul MacDonald: This year was worse to the tune of about 1.5 points relative to average. That's about a 3-point swing in attritional weather. That's in addition to the cats that we had. The rate that we mentioned and our segmentation activities have allowed us to maintain our core accident claims ratio very close to what it was last year despite that wide swing. That's an indication of the strength of our underlying performance, and that's for both the Economical and the Sonnet portfolios. Now to answer your second question around the profitability, we're very pleased actually that the Sonnet Auto portfolio was indeed profitable despite what I just mentioned about the attritional and cat weather performance year-over-year.

Tom McKinnon: This year was worse to the tune of about one and a half points relative to average. And that's about a three point swing in attritional in attritional weather. That's in addition to the cast that we had. So.

The right that we mentioned and our segmentation activities.

Tom McKinnon: Have allowed us to to maintain our core accident claims ratio very close to what it was last year despite that white swing so that's an indication of the strength of our underlying performance.

and that's for both both the

Tom McKinnon: Economic and the son of portfolios and now to answer your second question around the profitability We're very pleased actually that the son at auto portfolio was indeed profitable despite what I just mentioned about the nutritional and cat weather performance you're over here

Paul MacDonald: That's represents about 75% of the Sonnet portfolio, currently. That bodes well for our guidance for the rest of the year of sustaining our profitable position on the Sonnet portfolio.

And so that's represents about 75% of the Sauna portfolio.

Tom McKinnon: Currently and so that votes well for our guidance for the rest of the year of sustaining our profitable position on this on a portfolio.

Rowan Saunders: Tom, just to add to that, I think that, you know, what we're pleased about is that the loss cost trends have really normalized now, we're seeing some good signs and even items like theft seem to be kind of coming back down again. When you, when you think about the period we've been through, where it's quite encouraging that we've now got consistent mid-single digit loss cost trends. It's kind of back to normal. Then, you know, Paul talked about the rates we're getting and even the industry is getting about 10 points of rate. It's a pretty firm marketplace in automobile, and that's helping us not only achieve our rate plans, but, you know, positive retention, longer tenure customers, you know, et cetera.

Tom McKinnon: And Tom, just to add to that, I think that, you know, what we're pleased about.

Tom McKinnon: is that the lost cost trends have really normalized now and we're seeing some good signs in there even items like theft seem to be to them.

Coming back down again.

Tom McKinnon: And so when you think about the period we've been through, it's quite encouraging that we've now got consistent mid-single digit loss cost trends. It's kind of back to normal. And then Paul talked about the rates we're getting. And even the industry is getting about 10 points of rate. So it's a pretty firm marketplace in automobile and that's helping us.

Tom McKinnon: Not only achieve our rate plans but positive retention, longer tenure customers.

You know, et cetera. So, let's-

Rowan Saunders: You know, to reinforce Paul's point, you know, we're certainly getting more optimistic about the auto environment and pleased that Sonnet is now, you know, contributing versus the investment of the prior years.

Tom McKinnon: To reinforce Paul's point, we're certainly getting more optimistic about the auto-environment and please, that Sonnet is now contributing versus the investment of the prize.

Tom MacKinnon: Okay, thanks for that.

[inaudible]

Okay. Thanks for that.

Operator: Your next question comes from Jaeme Gloyn of National Bank Financial. Please go ahead.

Speaker Change: Your next question comes from Jane Gloyne of National Bank Financial. Please go ahead.

Jaeme Gloyn: Yeah, thanks. First question, just on the Sonnet, if you can just dig in a little bit more on the profitability of that business and some of the growth that you're seeing. How much more can you push? Just elaborate a little bit on what kind of profitability and early contribution you guys have seen so far.

Jane Gloyne: First question just on the on the side, if you can just dig in a little bit more on the profitability of that business and some of the growth that you're seeing, how much more can you push just elaborately a little bit, elaborate a little bit on what kind of profitability and are we contributing to guys who sound so far?

Paul MacDonald: Yeah. Jaeme, thank you. It's Paul again. Just to give you a couple of additional points. As I mentioned earlier, we were pleased that we were profitable on that auto portfolio in Q1 despite the seasonality impact of that, which again, gives us confidence that we can sustain that profitability target for the remainder of the year. We're doing that on purpose to make sure that we're not going above that element. In that, there's quite a bit of new business that comes in to replace the business that we're actively removing from the portfolio to help reduce volatility. That's quite a bit of new business flowing through that, both unit and, as Phil and I said earlier, the rates impacting positively as well.

Yeah, thank you. It's Paul again.

Speaker Change: So just to give you a couple of additional points, as I mentioned earlier, we were pleased that we were profitable on that auto portfolio in Q1 despite the seasonality impact of that, which again gives us confidence that we can sustain that profitability.

Target for the remainder of the year.

Speaker Change: We're doing that on purpose to make sure that we're not going above that element and...

Speaker Change: In that there's quite a bit of new business that comes in to replace the business that

Speaker Change: Actively removing from the portfolio to help reduce volatility. So that's quite a bit of a new business flowing through that, both the unit and as Phil and I said earlier, the rates impacting positively as well. We've got some good momentum in that portfolio around affinity for example. The affinity is now almost 40% of our GWP in there and we continue to move that upward targeting greater than that.

Paul MacDonald: We've got some good momentum in that portfolio around Affinity, for example. The Affinity is now almost 40% of our GWP in there, and we continue to move that upward, targeting greater than that. That's very good business, long-term business, profitable business for us. Our UBI portfolio is now almost 10% of our auto portfolio in there. That's showing some good progress. That being said, what we want to do is be quite prudent about how we accelerate growth. We've taken great pains over many years to get that to a break-even position. We know that there's quite a bit of volatility in the marketplace. Obviously, cats, we've talked about a little bit, and there's a bit of uncertainty in the economic environment.

Speaker Change: Very good business, long-term business, profitable business for us, and our UBI portfolio is now almost 10% of our auto portfolio in there, so that's showing some good progress.

Speaker Change: But that being said, what we want to do is be a quite prudent about how we accelerate growth.

Speaker Change: We've taken great pains over many years to get that to a to a break even position. We know that there's quite a bit of volatility in the marketplace. Obviously cats, we've talked about a little bit and there's a bit of uncertainty in the economic environment. So given that what we want to do is just be very prudent about adding additional volume.

Paul MacDonald: Given that, what we wanna do is just be very prudent about adding additional volume. We're doing it on a very segmented basis. In the segments where we wanna play and we want to produce, we're seeing the growth that we like. For example, in the Ontario Auto portfolio and the affinity portfolio that I mentioned earlier. Other ones we're a bit risk-off. One example I'd give you is, you know, that previously we withdrew Sonnet Auto from Alberta due to the rate environment there. We did maintain our Sonnet property portfolio there. What we have seen over time is quite naturally a lot of those auto customers who have moved their auto policies elsewhere have taken their property portfolio with them.

Speaker Change: And we're doing it on a very segmented basis. So in the segments where we want to play and we want to produce, we're seeing the growth that we like. For example, in the Ontario Auto Portfolio and the Affinity Portfolio that I mentioned earlier. And in other ones, we're a bit risk off. So one example I'd give you is, you know, that previously we withdrew a son of auto from Alberta due to the rate and vibrant there. So here we go.

Speaker Change: We did maintain our sonner property portfolio there but what we have seen over time is quite naturally a lot of those auto customers who have moved their auto policies elsewhere have taken their property portfolio with them so we've seen a bit of a reduction in the sonnet Alberta property portfolio.

Paul MacDonald: We've seen a bit of a reduction in the Sonnet Alberta property portfolio. We're actually quite pleased with that given the Alberta environment around cats. We think that's a good risk off position for us. We'll be very cautious to maintain that and look for opportunities for growth in the future.

Speaker Change: We're actually quite pleased with that, given the Alberta environment around cats. We think that's a good risk off position for us, so we'll be very cautious to maintain that and look for opportunities for growth in the future.

[inaudible]

Fabian Richenberger: Okay. Next question just on the broker platform and acquisitions that have been made to date. Good to see that there's still activity here. But as it relates to the guidance for 15% growth in, I guess, distribution income, you know, at what level of acquisition activity would it take to drive an increase in that guidance, I guess? Like what's baked in on an annual basis in terms of acquired written premiums, assuming like, you know, all else equal, of course?

Speaker Change: And that's question just on the the broker platform and acquisitions that have been made to date. Good to see that there's still activity here. But as it relates to the guidance for 50% growth in I guess distribution income. You know what at what level of acquisition activity.

Speaker Change: would it take to drive an increase in that guidance? I guess like, what's baked in on an annual basis in terms of acquired Britain premiums? Assuming like, you know, all else equal of course.

Rowan Saunders: Thanks for the question, James. I mean, I think that when we think about the broker distribution in a platform, the first point I would say is we're really pleased with not just the strategic benefits we're getting, the adoption and the trading relationship with affinity and how well our proposition, you know, has been received as well. The pipeline is pretty significant, I will tell you. That the model that the McDougall's platform is putting into the marketplace is attracting a lot of attention. We're being disciplined in terms of attracting the right, you know, brokers. As you know, it's quite a programmatic approach now. We are trying to get more geographic breadth in there. Most of the deals we've done in the quarter, you know, have been Central Canada, Ontario, you know, based.

Thank you.

Speaker Change: Thanks for the question, Jim. I think that when we think about the broker distribution in a platform, the first point I would say is we're really pleased with not just the strategic benefits we're getting.

Speaker Change: The adoption and the trading relationship with the affinity and how well our proposition has been received as well.

Speaker Change: The pipeline is pretty significant, I will tell you, that the model that the McDougal's platform is putting into the marketplace is attracting a lot of attention. So we're being disciplined in terms of attracting the right brokers. As you know, it's quite a programmatic approach now. We are trying to get more geographic breadth in there. The most of the deals we've done in the quarter have been Central Canada, Ontario based.

Rowan Saunders: I think the way we look at this is that this business really is a strong organic grower, which is kind of up a single-digit that looks to continue, and then they apply their bolt-on programmatic acquisitions. We kind of, you know, keep telling you or updating what those numbers would be. What would really drive outperformance is converting more transactions through the rest of the year in the pipeline. I think what we've guided is, look, we started this as a half a billion-dollar business. We thought we'd get to CAD 1 billion. We got there much faster than anticipated. We guided to CAD 1.5 billion. We're not updating guidance today, that does look, you know, very conservative to us now, given the success that we've had.

[inaudible]

Speaker Change: I think the way we look at this is that this business really is a strong organic grower which is kind of up a single digit that looks to continue and then they apply their bolt on programmatic acquisitions we kind of you know keep telling you or updating what those numbers would be what would really drive out performance is converting more transactions through the rest of the year in the pipeline. So that's what we're going to do right now.

Rowan Saunders: What would really drive outperformance is converting more transactions through the rest of the year in the pipeline. I think what we've guided is, look, we started this as a half a billion-dollar business. We thought we'd get to CAD 1 billion. We got there much faster than anticipated. We guided to CAD 1.5 billion. We're not updating guidance today, that does look, you know, very conservative to us now, given the success that we've had.

Speaker Change: And I think what we've guided is look we started this as a half a billion dollar business. We thought we get to a billion. We got there much faster than anticipated. We then got it to $1.5 billion. We're not updating guidance today, but that does look very conservative to us now, given the success that we've had.

Rowan Saunders: And in terms of the annual guidance, we've said, you know, 15%, you know. When you take both components that impact our bottom line, which is the commission offset in addition to the distribution income, you know, we're growing more like 20-ish percent in Q1, not the 15. I mean, maybe that, you know, at least gives you some insight into the direction of travel and the kind of confidence that, you know, at least we will achieve the guidance for the year.

Thank you.

Speaker Change: And in terms of the annual guidance we've said you know 15% when you take both.

Speaker Change: Components that impact our bottom line which is the Commission offset in addition to the distribution income you know we're growing more like 20 ish percent in the first quarter not the 15 so maybe that you know at least gives you some inside in the direction of travel and the kind of confidence that you know at least we will achieve the guidance for the year.

Fabian Richenberger: Yep. Very helpful. Thank you.

Yes. Very helpful. Thank you.

Operator: As a reminder, if you wish to ask a question, please press star followed by the number one. Your next question comes from Brian Meredith of UBS. Please go ahead.

Speaker Change: As a reminder, if you wish to ask a question, please press star followed by the number one. Your next question comes from Brian Meredith of UBS, please go ahead.

Brian Meredith: Yeah. Thank you. Rohan, I was hoping could you maybe give us a little more detail into what's going on with the commercial lines pricing environment? I know you mentioned there's certain areas that are getting a little more competitive. I know large ticket property is. Are you seeing that spread down at all? Kind of what's the environment looking like?

Brian Meredith: Yeah, thank you. Rowan, I was hoping to give us a little more detail into what's going on with the commercial lines pricing environment. I know you mentioned there's certain areas that are getting a little more competitive. I know a large ticket property is. Are you seeing that spread down at all? What's the environment looking like?

Rowan Saunders: Yeah. I'm gonna ask Fabi to kind of, you know, pick that up and give you more insight. I would just start off by saying that, you know, where we play, it's actually looking pretty reasonable for us. A couple of things I like that the team are doing. We're keeping high retention, so that is, you know, good based on our proposition. The areas of growth we're very, you know, comfortable with. When you step back, you know, you see us again, 10% growth, where we have a target of twice the industry. I would say the industry in aggregate is recognizing based on strong margins, there is less inflation than there was previous year. The need for rates to maintain the margin at an industry level is a little lower.

Brian Meredith: Yeah, I'm gonna ask Baby to kind of, you know, pick that up and give you more insight, but I will just start off by saying...

Brian Meredith: That, you know, where we play, it's actually looking pretty reasonable for us. A couple of things I like that the team are doing. We're keeping high retention. So that is, you know, good based on our proposition. The areas of growth we're very, you know, comfortable with.

Brian Meredith: And when you step back, you see us again 10% growth where we have a target of twice the industry.

Brian Meredith: I would say the industry in aggregate is recognizing based on strong margins, there is less inflation and then there was privacy so the need for rates to maintain the margin at an industry level is a little lower. I think that is a good thing but as you call out, we are seeing some evolution in the marketplace.

Rowan Saunders: I think that's, that is a good thing. As you call out, you know, we are seeing some evolution in the marketplace, but still very attractive and happy to keep, you know, growing at the pace in the areas we are. You know, Fabi, why don't you provide some more color into Brian's question about the competition, but also I think touch on where we're getting our growth from.

Brian Meredith: But still very attractive and happy to keep growing at the pace in the areas we are. But Fabi, why don't you provide some more color into Brian's question about the competition. But also, I think touch on where we're getting our growth from. Yeah, yeah. No, glad you're there, everyone. Thank you, Brian , for your question. I think there are two or three.

Fabian Richenberger: Yeah. Yeah. No, glad to do that, Rohan. Thank you, Brian, for your question. I think there are two or three additional underlying data points in addition to what Rohan mentioned that give us a lot of confidence when we look at our commercial results overall. I think the first one is that we are really pleased with our rate and retention numbers, and our frontline teams are doing a really good job executing our business plans and mitigating the impact of what is now a less firm market environment. If you look at our exposures, the growth rate that we achieved in Q1 is 10%.

Fabio: Additional on the line data point in addition to our role mentioned that gave us a lot of confidence when we look at our commercial results overall. I think the first one is that we are really pleased with our rate and retention numbers.

Fabian Richenberger: I think the first one is that we are really pleased with our rate and retention numbers, and our frontline teams are doing a really good job executing our business plans and mitigating the impact of what is now a less firm market environment. If you look at our exposures, the growth rate that we achieved in Q1 is 10%.

Fabio: And our frontline teams are doing a really good job executing our business plans and mitigating the impact of what is now a less firm market environment.

Fabio: If you look at our resources, the growth rate that we achieved in Q1 is 10%.

Fabian Richenberger: What I always point out is that more than half of that growth rate is being generated with rate and inflation adjustments, and that is very much showing the loss trend that we have in our portfolio, and that gives us a great deal of confidence that we'll be able to sustain our margin position and our low 90s combined ratio guidance. As I mentioned, we are also pleased with our retention numbers in what is now a more competitive environment. It really shows the strength of the value proposition that we have in the marketplace. Our retention numbers are holding quite nicely in that mid-80s level.

Fabio: And what I always point out is that more than half of that growth rate is being generated with rate and inflation adjustments and that is very much showing the lost trend that we have in our portfolio and that gives us a great deal of confidence that we will sustain our multiple position and our low 90s combined ratio guidance.

Fabian Richenberger: As I mentioned, we are also pleased with our retention numbers in what is now a more competitive environment. It really shows the strength of the value proposition that we have in the marketplace. Our retention numbers are holding quite nicely in that mid-80s level.

Fabio: As I mentioned, we are also pleased with our retention numbers and what is now a more competitive environment that really shows the strength.

of the value proposition that we have been marketplace.

Fabio: Our retention numbers are holding quite nicely in that mid 80s level.

Fabian Richenberger: As Ron mentioned, we have more retention success in the small business segment and the retention that we have in the large account segment that is more subject to more intense pricing pressure is lower. That very much illustrates our willingness to walk away from large accounts if the margin equation doesn't make sense. I guess the main point that we're communicating with you is that we are really benefiting from our commercial portfolio being skewed to the lower end of the commercial marketplace in terms of account size and exposure base. That just gives us an extra opportunity to optimize rate and retention. Maybe the other point I wanna add is that obviously we are reviewing what type of new business we are writing on a weekly and monthly basis as well.

As I mentioned, we have more returns to the class.

in the small business segment.

Fabio: and the retention that we have in the large account segment that is more subject to more intense pricing pressure is lower and that the very multilistrates are willingness.

Fabio: To walk away from larger counts if the more tunic creation doesn't make sense and I guess the main point that you're communicating with you is that you are really benefiting from our commercial portfolio being skewed to the low end of the commercial marketplace in terms of account size and exposure base and that just gives us an extra opportunity to optimize rate and retention.

Fabian Richenberger: I guess the main point that we're communicating with you is that we are really benefiting from our commercial portfolio being skewed to the lower end of the commercial marketplace in terms of account size and exposure base. That just gives us an extra opportunity to optimize rate and retention. Maybe the other point I wanna add is that obviously we are reviewing what type of new business we are writing on a weekly and monthly basis as well.

Fabio: Maybe the other point I want to add is that we are reviewing what type of new business we are.

Fabio: Writing only weekly and monthly basis as well and here as well if you look at our Q1 numbers we are just very confident in terms of how our frontline teams are executing our game plan. The vast majority of the growth that we've had in Q1 about 5% of the growth the vast majority of the growth is in that small business segment as well. As you know from our invested day from prior calls we have very strong digital capabilities in the segment and here as well it just mitigates the impact of price.

Fabian Richenberger: Here as well, if you look at our Q1 numbers, we are just very confident in terms of how our front line teams are executing our game plan. The vast majority of the growth that we've had in Q1, about 5% PIF growth, the vast majority of that growth is in that small business segment as well. As you know, from our investor day, from prior calls, we have very strong digital capabilities in the segment. Here as well, it just mitigates the impact of price quite effectively. Overall, it's a more competitive environment. We have the resilience, we have the underwriting capabilities, we have the team doing an example show, as mentioned, executing game plan.

Fabian Richenberger: As you know, from our investor day, from prior calls, we have very strong digital capabilities in the segment. Here as well, it just mitigates the impact of price quite effectively. Overall, it's a more competitive environment. We have the resilience, we have the underwriting capabilities, we have the team doing an example show, as mentioned, executing game plan.

Fabio: It's a more competitive environment, but we have the resilience, we have the on-the-right capabilities, we have the team doing an example of Chauvin's mental executive aim plan, so we have confidence that we can continue to grow the commercial business at ties that industry growth rate.

Fabian Richenberger: We have confidence that we can continue to grow the commercial business at 2x that industry growth rate and to sustain our margin position overall. The last point for me to share, complementing what Ron mentioned as well, on the commercial side as well, loss trends are normalizing as well. As you know, we've seen increased inflation post-COVID that resulted in higher loss trends, result in higher rate need. That number is now normalizing as well. Loss trends are coming down, which means that we need less rate to sustain our profitability as well. We would expect that the industry growth rate overall will be in that mid-single range level, around 5%.

Fabio: and to sustain our marching position overall and to maybe the last point for me to share complimenting what the role mentioned as well on the commercial side as well. Lost trends are normalizing as well as you know we've seen increased inflation post-COVID.

Fabian Richenberger: As you know, we've seen increased inflation post-COVID that resulted in higher loss trends, result in higher rate need. That number is now normalizing as well. Loss trends are coming down, which means that we need less rate to sustain our profitability as well. We would expect that the industry growth rate overall will be in that mid-single range level, around 5%.

Fabio: that the result is in higher loss trends, result in higher rated, but that number is now normalizing as well, so loss trends are coming down, which means that we need less rate.

Fabio: to sustain our profitability as well. So we would expect that the industry growth rate overall will be in that mid-signal range level around 5% of the asset overall based on the capabilities that we have built those last few years. We are confident that we can sustain our guidance of low-90s comment ratios and close the commercial business at 5.

Fabian Richenberger: As said, overall, based on the capabilities that we have built over the last few years, we are confident that we can sustain our guidance of low 90s combined ratios and grow the commercial business at twice the industry growth rate that we just mentioned.

The Industry growth rate that we just mentioned.

Brian Meredith: Great. That's helpful. Then second question. I know it's a fluid situation and not as big of an issue up in Canada, but Ron, maybe give us some updated thoughts on what potential impact tariffs would have on loss cost inflation across your lines of business.

Brian Meredith: Great, that's helpful. And then a second question, I know it's a fluid situation and it's not as big of an issue up in Canada but Rowan maybe give us some updated thoughts on what potential impact tariffs would have on lost cost inflation across your line to business.

Paul MacDonald: Yeah. Brian, the main message there is that, you know, we've been spending lots of time modeling, anticipating, tracking this. I think that, you know, the main message remains it's very manageable for the P&C industry, including, you know, Definity. In fact, the tariff kind of exposure to our performance has been diminishing over the last kind of number of weeks with some of the changes. When we step back at the aggregate level, about 6% of our cost base, our loss cost base is actually exposed. So it was higher before. And therefore, you know, whilst it mostly affects the auto, you know, line, we really think it's not too difficult and not that material, you know, to our portfolio.

Yeah.

Brian Meredith: The main message there is that we have been spending a lot of time modeling and anticipating tracking this.

Brian Meredith: And I think that, you know, the main message remains, it's very manageable for the PNC industry, including, you know, Definity.

Brian Meredith: In fact, the tariff kind of exposure to our performance has been diminishing over the last kind of number of weeks with some of the changes.

And when we step back at the aggregate level.

Brian Meredith: about 6% of our cost-based loss cost-based is actually exposed. It was higher before.

Brian Meredith: And therefore, you know, why is it mostly affects the auto, you know, line? We really think it's not too difficult and not that material, you know, to our portfolio.

Brian Meredith: Wonderful. Thank you.

Wonderful. Thank you.

Operator: Your next question comes from Paul Holden of CIBC. Please go ahead.

Speaker Change: Your next question comes from Paul Holden of CIBC. Please go ahead.

Paul Holden: Thanks. I just have 1 question. You talked about sort of mid-single digit inflation, personal auto. You also talked about 5% rate increases coming through in Ontario and on top of existing rate increases. Maybe just an update on what you have in the system in terms of auto rate increases, both in terms of written and earned premiums.

Paul Holden: Thanks. I just have one question. So you talked about sort of mid single-digit configuration, personal auto. You also talked about 5% rate increases coming through on Ontario and on top of existing rate increases. So maybe just an update on what you have in the system in terms of auto-rating increases both in terms of written and under premiums.

Paul MacDonald: Paul, thank you. It's Paul again. Just to clarify, we have a double-digit rate flowing through the system currently. As I mentioned, we have an additional 5 points of rate flowing through our Ontario portfolio starting in May. That's on top of the rate that, as I outlined earlier, was already covering our trend. If you look at our overall portfolio, we're still looking to have written an earned rate in the high single, low double-digit range. That's to cover the trend that you mentioned. Any potential increases in tariff exposure, which as Ron mentioned right now, we don't believe are unmanageable. While theft is improving, as Ron also mentioned, it's still a little bit elevated.

Paul Holden: Well, thank you. It's Paul again. So just to clarify, we have a double digit rate flowing through the system currently as I mentioned. We have an additional five points of rate flowing through our Ontario portfolio starting in May.

Paul Holden: So that's on top of the rate that as I outlined earlier was already covering our trend.

Um...

Paul Holden: If you look at our overall portfolio, we're still looking to have written and earned rate in the high single low double digit range. That's to cover the trend that you mentioned.

Rowan Saunders: Any potential increases in tariff exposure, which, as Rowan mentioned right now, we don't believe are unmanageable.

Rowan Saunders: While theft is improving as Rowan also mentioned, it's still a little bit elevated so just to give you a point.

Paul MacDonald: Just to give you a point, prior to the pandemic, the theft impact was about two points of loss ratio. It's still just under three, so it's still elevated relative to that. When you look at all of these things together, including the attritional weather impacts, we feel quite comfortable that our rate trajectory is more than sufficient to cover these trends, also cover any of the volatility and help us maintain our guidance and our outlook.

Rowan Saunders: Part of the pandemic, the theft impact was about two points of loss ratio. It's...

Rowan Saunders: Still just under three, so it's still elevated relative to that.

Rowan Saunders: But when you look at all of these things together, including the traditional weather impact, we feel quite comfortable that our rate trajectory is more than sufficient to cover these trends also cover any of the volatility and help us maintain our guidance and our outlook.

Paul Holden: I had one question, but, you know, I'm gonna ask a second one. Any kind of observation on change in trend or concern on the BI side? I know there has been higher claims inflation and BI, I think in Alberta specifically. Just checking to see if that's improved, getting worse, same, or if you're starting to see the same in Ontario or Ottawa.

Thank you.

Speaker Change: So I have one question, but I'm going to ask a second one.

Rowan Saunders: Any kind of observation, change in trend or concern on the BI side? I know there has been

Rowan Saunders: Higher claims inflation of B.I. I think in Alberta specifically just checking to see if that's that's approved getting worse same or if you're starting to see the same in Ontario welcome.

Paul MacDonald: Hi, Paul. It's Paul again. No change. We're still maintaining the outlook that we had before. We still had slight elevation in Alberta, but we've taken the necessary action in that space. Nothing material really to call it in Ontario. We continue to watch that space quite carefully to make sure that we cover any anticipated trends, but there's essentially no trend, no change in what's moving.

Speaker Change: High-pollars Paul again. No change. We believe it's we're still maintaining the outlook that we had before. We still had slight elevation in Alberta but we're we've taken the necessary action in that space. Nothing material really to call it and on-terrace. We continue to watch that space quite.

Speaker Change: Carefully to make sure that we cover any anticipated trends but there's essentially no change in what's moving.

Paul Holden: Okay, good. Good. I'll leave it there then. Thank you.

Okay, good. So I'll leave it there. Thank you.

Operator: As a reminder, if you wish to ask a question, please press star followed by the number one. Thank you, ladies and gentlemen. That concludes our question and answer session. I will now turn the conference back over to Dennis Westfall. Please go ahead.

Speaker Change: Thank you ladies and gentlemen. That concludes our question and answer session. I will now turn the conference back over to Dennis Westfall. Please go ahead.

Paul MacDonald: Thank you everyone for participating today. The webcast will be archived on our website for one year. A telephone replay will be available at 2:00 PM today until 16 May, and a transcript will be made available on our website. Please note that our Q2 results for 2025 will be released on 31 July. That concludes our conference call for today. Thank you and have a great one.

Speaker Change: Thank you everyone for participating today. The webcast will be archived on our website for one year. The telephone replay will be available at 2pm today until May 16th and a transcript will be made available on our website. Please note that our second quarter results for 2025 will be released on July 31st. That concludes our conference call for today. Thank you and have a great one.

[inaudible]

Operator: This concludes today's conference. Thank you for attending. You may now disconnect your lines.

Speaker Change: This concludes today's conference. Thank you for attending. You may now disconnect your lines.

Speaker Change: Yeah.

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