Q3 2025 Definity Financial Corp Earnings Call

At this time all lines are in a listen only mode.

Following the 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. This call is being recorded on Friday November seven 2025, I would now like to turn the call over to Vice President of Investor Relations Dennis Westfall.

Please go ahead.

Speaker #3: Good morning , ladies and gentlemen , and welcome to the Definity Financial Corporation . Third quarter of 2020 Financial Results conference call and webcast .

Thank you and good morning, everyone. Thank you for joining us on the call today.

Link to a live webcast and background information for the call is posted on our website at <unk> Dot com under the investors tab as.

Speaker #3: Conference call . At this time , all lines are in a listen only mode . Following the presentation , we will conduct a question and answer session .

As a reminder, a slide presentation contains a disclaimer on forward looking statements, which also applies to our discussion on the conference call.

Speaker #3: If at any time during this call , you require immediate assistance , please press star zero . For the operator . This call is being recorded on Friday , November 7th , 2025 .

Joining me on the call today are Ron Saunders, President and CEO Phillip mother, EVP and CFO, Paul Mcdonald EVP of personal insurance and digital channels, and Fabienne, Rick and Burger EVP of commercial insurance and insurance operations.

Speaker #3: I would now like to turn the call over to Vice President of Investor Relations , Dennis Westphal . Please go ahead .

I'll start with formal remarks from rone itself, followed by a Q&A session during which Paul and savvy will also be available to answer your questions.

Speaker #4: 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 .

That I will ask <unk> to begin his remarks.

Speaker #4: Com under the investors tab , as a reminder , the slide presentation contains the disclaimer on forward looking statements , which also applies to our discussion on the conference call .

Thanks, Dennis and good morning.

Last night, we reported record third quarter results continued the momentum for the affinity and what has truly been an exciting year for the company.

Speaker #4: Joining me on the call today are Rohan Saunders , president and CEO . Philip mather , EVP and CFO . Paul McDonald , EVP of Personal Insurance and Digital channels .

During the quarter, we made further progress towards the closing of the announced travelers' transaction, including finalizing the required financing via our inaugural 1 billion bond.

Speaker #4: And Fabian Reichenberger , EVP of Commercial insurance and insurance operations . We'll start with formal remarks from Rohan and Phil , followed by a Q&A session .

Bond offering.

While maintaining our focus on delivering the targeted performance of our existing business as you can see on slide five.

Speaker #4: During which, Paul and Fabi will also be available to answer your questions. With that, I will ask Rohan to begin his remarks.

A strong underlying performance higher net investment income and continued momentum in our insurance broker platform combined to produce third quarter operating net income of $125 2 million or $1 <unk> a share.

Speaker #4: Thanks , Dennis and good morning . Last night we reported .

Speaker #5: Record third quarter results that continue the momentum for Definity in what has truly been an exciting year for the company . During the quarter , we made further progress towards the closing of the announced travellers transaction , including finalising the required financing via our inaugural $1 billion bond offering while maintaining our focus on delivering the targeted performance of our existing business .

<unk> delivered a sub 90 combined ratio in the quarter well ahead of our expectations as our reported core of 89, 4% reflected ongoing actions to improve our operational efficiency and included only one nine points of cat losses.

Speaker #5: As you can see on slide five , our strong underlying performance , higher net investment income and continued momentum in our insurance broker platform combined to produce third quarter operating net income of $125.2 million , or one dollars $0.03 a share .

From a topline perspective, we continued to deliver growth in line with our expectations as gross written premiums increased seven 5% in the quarter to exceed $4 7 billion.

Over the last 12 months, we ended the third quarter with book value per share of $33 43.

Speaker #5: We delivered a sub 90 combined ratio in the quarter , well ahead of our expectations as our reported core of 89.4% reflected ongoing actions to improve our operational efficiency and included only 1.9 points of Cat losses from a top line perspective , we continued to deliver growth in line with our expectations .

24% higher than a year ago inclusive of strong financial results as well as a private placement of common shares to fund part of the Travelers' transaction.

We generated an operating return on equity of 12, 5% over the past 12 months reflective of the continued delivery against our organic levers.

Speaker #5: As gross written premiums increased by 7.5% in the quarter, we exceeded $4.7 billion over the last 12 months. We ended the third quarter with a book value per share of $33.43, which is 24% higher than a year ago. This growth reflects strong financial results, as well as our private placements of common shares to fund part of the Travelers transaction. We generated an operating return on equity of 12.5% over the past 12 months, which is reflective of the continued delivery against our organic levers.

Solid continues to generate a profit for the year, while we remain on track to deliver the targeted improvements from expenses by the end of 2026.

Early experience from our claims transformation is encouraging and we are well positioned to achieve the targeted claims improvements by the end of 2027.

I would note that the improvement in our operating ROE has come along with a 17% increase in our average adjusted equity over the past year.

Moving to slide six our industry outlook is largely unchanged, we expect conditions and auto lines to remain firm as insurers aimed to keep pace with the combined impact of loss cost trends ongoing regulatory constraints, and Alberta and uncertainty related to the extent and impact of a potential U S tariff.

Speaker #5: Sonnet continues to generate a profit for the year while we remain on track to deliver the targeted improvements from expenses . By the end of 2026 .

Speaker #5: Early experience from our claims transformation is encouraging and we are well positioned to achieve the targeted claims improvements by the end of 2027 .

And retaliatory actions.

We expect market conditions in personal property to also remain firm over the next 12 months, particularly following last year's record level of industry catastrophe losses, and the structural move to higher reinsurance attachment points.

Speaker #5: I note that the improvement in our operating ROE has come along with a 17% increase in our average adjusted equity over the past year .

Speaker #5: Moving to slide six . Our industry outlook is largely unchanged . We expect conditions in auto lines to remain firm as insurers aim to keep pace with the combined impact of loss , cost trends , ongoing regulatory constraints in Alberta and uncertainty related to the extent and impact of potential US tariffs and retaliatory actions .

In commercial insurance, while we expect overall market conditions to remain attractive.

I'll continue to see that some commercial segments have become more competitive we expect overall pricing in commercial insurance to keep pace with loss cost trends, which have normalized to low to mid single digits.

Slide seven shows our key financial targets for 2025 as you can see both topline growth and underlying profitability are at or better than target through nine months, while our operating ROE of 12, 5% puts us at the upper end of our target range, we remain confident.

Speaker #5: We expect market conditions and personal property to also remain firm over the next 12 months , particularly following last year's record level of industry catastrophe losses and the structural move to higher reinsurance attachment points in commercial insurance .

Speaker #5: While we expect overall market conditions to remain attractive , we are continuing to see that some commercial segments have become more competitive . We expect overall pricing and commercial insurance to keep pace with lost cost trends , which have normalized to low to mid single digits .

Confidence in our ability to reach a sustainable mid teens operating Roe.

Post integration of the travelers transaction.

Slide eight illustrates the composition of our national broker platform, we've made great progress with M&A activity and solid organic growth, which has US ahead of where we thought we'd be as we close in on our target for at least one 5 billion.

Speaker #5: Slide seven shows our key financial targets for 2025 . As you can see , both top line growth and underlying profitability are at or better than target through nine months .

Managed premiums by the end of next year, we continue to view, our national broker platform as a vehicle to diversify and strengthen the earnings profile of the business yet.

Speaker #5: While our operating ROE of 12.5% puts us at the upper end of our target range, we remain confident in our ability to reach a sustainable mid-teens.

Year to date. This platform has delivered more than $73 million in aggregate contribution to operating results well ahead of our objective to increase it by 20% for 2025.

Speaker #5: Operating ROE post of the travelers transaction . Slide eight illustrates the composition of our national broker platform . We've made great progress with M&A activity and solid organic growth , which has us ahead of where we thought we'd be as we close in on our target for at least $1.5 billion of managed premiums by the end of next year , we continue to view our national broker platform as a vehicle to diversify and strengthen the earnings profile of the business year to date , this platform has delivered more than $73 million in aggregate contribution to operating results .

And with that I'll turn the call over to our CFO faux leather.

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

Gross written premiums were up six 2% in the third quarter in line with our mid single digit growth guidance for the second half of 2025 that we provided on our Q2 call.

This result reflects a proactive approach to rates and unit growth, partially offset by the outsized impacts the portfolio transfers in the prior year.

Speaker #5: Well ahead of our objective to increase it by 20% for 2025. With that, I'll turn the call over to our CFO for Mather.

Early indications for growth in the fourth quarter suggest the slowdown may prove to be more short lived unexpected.

The combined ratio for personal auto improved to 94% in the third quarter from 98, 3% last year, driven by earned rate increases improved profitability and lower catastrophe losses.

Speaker #6: Thanks , Rohan . I'll begin on slide ten with personal auto gross . Written premiums were up 6.2% in the third quarter . In line with our mid-single digit growth guidance for the second half of 2025 .

We continue to expect personal also will generate the mid ninety's combined ratio for the full year.

Speaker #6: That we provided on our Q2 call . This result reflects our proactive approach to rates and unit growth , partially offset by the outsized impacts of portfolio transfers in the prior year .

While tariff related policy changes have not materially impacted performance to date.

We remain diligent and are ready to take additional actions were necessary to protect our profitability.

Speaker #6: Early indications for growth in the fourth quarter suggest the slowdown may prove to be more short lived than expected . The combined ratio for personal auto improved to 94% in the third quarter , from 98.3% last year , driven by earned rate increases .

Turning to slide 11 personal property continues to show momentum with Q3 premium growth of nine 3%.

<unk> from increases in average written premiums and improved unit growth.

Speaker #6: Improved sonnet profitability and lower catastrophe losses . We continue to expect personal auto will generate a mid 90s combined ratio for the full year , while tariff related policy changes have not materially impacted performance to date , we remain diligent and are ready to take additional actions where necessary to protect our profitability .

Past efforts to proactively address regions with Cathay exposure, a proven successful from an underwriting perspective.

And now that they are largely complete we have begun to see a return to unit growth.

We believe we are well positioned to maintain our growth momentum in the fourth quarter, given the conditions prevalent in our industry.

The combined ratio for personal property was robust at 83, 6% in Q3 2025 compares.

Speaker #6: Turning to slide 11 . Personal property continues to show momentum with Q3 premium growth of 9.3% , benefiting from increases in average written premiums and improved unit growth .

Compared to 124, 9% in Q3, 2024, driven by lower catastrophe losses.

Though the most recent quarter experienced the benign level of catastrophe losses. The nine two points of cats year to date is only a couple of points less unexpected for this line of business.

Speaker #6: Past efforts to proactively address regions with Cat exposure have proven successful , from an underwriting perspective . And now that they are largely complete , we have begun to see a return to unit growth .

Such we are very pleased with our year to date combined ratio of 95% and believe we are well positioned to outperform our sub 95% combined ratio targets for the personal property line of business in 2025.

Speaker #6: We believe we are well positioned to maintain our growth momentum in the fourth quarter . Given the conditions prevalent in our industry . The combined ratio for personal property was robust at 83.6% in Q3 2025 , compared to 124.9% in Q3 2020 .

Slide 12 outlines the highlights in the quarter for our commercial business with premium growth of seven 5% in Q3, and nine 2% year to date, driven by strong retention and rate achievements and continued expansion in small business and specialty.

Speaker #6: Four , driven by lower catastrophe losses , though the most recent quarter experienced a benign level of catastrophe losses . The 9.2 points of cats year to date is only a couple of points less than expected for this line of business .

Industry growth is trending to the low to mid single digits driven by normalized loss trends we continue.

Speaker #6: As such , we are very pleased with our year to date combined ratio of 90.5% and believe we are well positioned to outperform our sub 95% combined ratio target for the personal property line of business in 2025 .

To expect that we can deliver growth at roughly twice the pace of the industry, all better which should translate into high single digit growth for the remainder of 2025 due to our strong broker support digital capabilities on specialty expansion.

Speaker #6: Slide 12 outlines the highlights in the quarter for our commercial business with premium growth of 7.5% in Q3 and 9.2% year to date , driven by strong retention and rate achievement , and continued expansion in small business and specialty industry .

Commercial lines continued to benefit from our focus on underwriting execution and discipline with a strong combined ratio of 88, 1% in Q3 2025.

Compared to 89, 9% in Q3 2024.

Speaker #6: Growth is trending to the low to mid single digits , driven by normalized loss trends . We continue to expect that we can deliver growth at roughly twice the pace of the industry .

The improvements in the combined ratio was driven by lower catastrophe losses.

Currently offset by an increase in the core accident year claims ratio.

Speaker #6: Or better , which should translate into high single digit growth for the remainder of 2025 . Due to our strong broker support , digital capabilities and specialty expansion , commercial lines continued to benefit from our focus on underwriting , execution , and discipline .

The decrease in catastrophe losses, and the corresponding increase in the core accident year claims ratio was impacted by the change in definition for single claim catastrophe loss in 2025.

We continue to run our commercial insurance business with the intensive operates at an annual combined ratio in the low nineties through the cycle.

Speaker #6: With a strong combined ratio of 88.1% in Q3 2025 , compared to 89.9% in Q3 2024 . The improvement in the combined ratio was driven by lower catastrophe losses , partially offset by an increase in the core accident year claims ratio .

Putting it all together on slide 13 consolidated premiums grew seven 5% in Q3, and eight 7% year to date adjusted for exited lines.

At the same time underwriting results were well ahead of expectations with an overall combined ratio of 89, 4% in Q3.

Speaker #6: The decrease in catastrophe losses and the corresponding increase in the core accident year claims ratio was impacted by the change in definition for a single claim.

Substantial improvement from Q3 of last year, reflecting the strength of underlying improvements in our business supported by a much lower level of cat losses.

Speaker #6: Catastrophe loss in 2025 , we continue to run our commercial insurance business with the intent to operate at an annual combined ratio in the low 90s through the cycle , putting it all together on slide 13 , consolidated premiums grew 7.5% in Q3 and 8.7% year to date , adjusted for exited lines .

As you can see on slide 14 operating results in the quarter was strong with net investment income of $54 1 billion supported by higher interest income from continued growth in our portfolio size.

Given the contribution from proceeds of a private placement of common shares and senior unsecured notes.

Speaker #6: At the same time , underwriting results were well ahead of expectations , with an overall combined ratio of 89.4% in Q3 , a substantial improvement from Q3 of last year , reflecting the strength of underlying improvements in our business , supported by a much lower level of cat losses .

Now expect net investment income to exceed $210 million in 2025.

Distribution income of $18 $2 million reflected another impressive quarter from our broker distribution platform, which continues.

News to deliver both organic growth and strategic expansion.

Speaker #6: As you can see on slide 14 , operating results in the quarter were strong , with net investment income of $54.1 million , supported by higher interest income from continued growth in our portfolio size .

The aggregate contribution from a national broker platform, including distribution income and the beneficial impact of the commission offsets.

<unk> increased by approximately 26% so far in 2025 and.

Speaker #6: Given the contribution from proceeds of our private placements of common shares and senior unsecured notes , we now expect net investment income to exceed $210 million in 2025 .

And positions us well to achieve our financial targets of delivering an increase of approximately 20% in 2025.

These results combined with healthy underwriting income contributes to an operating return on equity of 12, 5% over the past 12 months.

Speaker #6: Distribution income of $18.2 million reflected another impressive quarter from our broker distribution platform , which continues to deliver both organic growth and strategic expansion .

Step forward on our path to sustainable mid teen operating Roe.

The integration of travelers.

Speaker #6: The aggregate contribution from our national broker platform , including distribution , income and the beneficial impact of the Commission offset , has increased by approximately 26% so far in 2025 and positions us well to achieve our financial target of delivering an increase of approximately 20% in 2025 .

As you can see on slide 15, we ended the third quarter with shareholders' equity above $4 billion for the first time.

A significant milestone with the affinity and a testament to our continued strong performance on the capital generative nature of our business.

On a per share basis. This represents 24% increase year over year, reflecting both robust operating results and the impact of a private placement of common shares.

Speaker #6: These results , combined with healthy underwriting income , contributed to an operating return on equity of 12.5% over the past 12 months . Clear step forward on our path to sustainable Mid-teen operating ROE Post-integration of travellers .

We successfully completed a $1 billion private placement of senior unsecured notes in September.

Marketing, our inaugural bond offering and the final piece of our financing strategy for the Travelers' transaction.

Speaker #6: As you can see on slide 15 , we ended the third quarter with shareholders equity above $4 billion for the first time , a significant milestone for Definity and a testament to our continued strong performance and the capital generative nature of our business .

The issuance was well received by the market.

Other than our modeled interest rates and further enhances our financial flexibility as we prepare for closing in the first half of Q1 2026.

Speaker #6: On a per share basis , this represents 24% increase year over year , reflecting both robust operating results and the impact of our private placements of common shares .

We currently expect to leverage ratio of approximately 30% upon close of the travelers' transaction.

Or the plans to get that back to our target level of 25% within 24 months.

Speaker #6: We successfully completed a $1 billion private placement of senior unsecured notes in September , marking our inaugural bond offering and the final piece of our financing strategy for the travelers transaction .

Turning to slide 16, our financial position remains strong with ample capacity to support both organic and inorganic growth initiatives.

We continue to deploy capital in a disciplined manner prioritizing ongoing broker acquisitions and investments that enhance longtime shareholder value.

Speaker #6: The issuance was well received by the market at better than our modelled interest rates and further enhances our financial flexibility as we prepare for closing in the first half of Q1 2026 .

With that I'll turn the call back over to ROE.

Thanks, Phil.

Speaker #6: We currently expect to leverage ratio of approximately 30% upon close of the travelers transaction , with a plan to get that back to our target level of 25% within 24 months .

Let me end with an update on the travelers' transaction on slide 17.

As I mentioned last quarter I believe this is a concrete demonstration of our commitment to build a Canadian champion in the P&C insurance industry.

Speaker #6: Turning to slide 16 . Our financial position remains strong , with ample capacity to support both organic and inorganic growth initiatives . We continue to deploy capital in a disciplined manner , prioritizing ongoing broker acquisitions and investments that enhance long term shareholder value .

Integration planning is nearing completion as I joined transition planning team has made tremendous progress employee and broker sentiment has been and remains overwhelmingly positive.

Ploys are excited at the prospect of a scaled capabilities and the expanded opportunities that they will bring.

Speaker #6: With that, I'll turn the call back over to Rohan.

Our brokers on Louisiana stake and are showing a clear interest and our enhanced product offering post close.

Speaker #5: Thanks , Bill . Let me end with an update on the travelers transaction on slide 17 . As I mentioned last quarter , I believe this is a concrete demonstration of our commitment to build a Canadian champion in the PNC insurance industry .

We now expect the transaction to close in the first half of Q1 2026, following receipt of customary regulatory approvals ahead of our initial expectations.

Speaker #5: Integration planning is nearing completion as our joint transition planning team has made tremendous progress . Employee and broker sentiment has been and remains overwhelmingly positive .

An important deliverable to ease integration process was to finalize our claims transformation.

Just last month, we successfully implemented the guidewire property and casualty molecule, marking the completion of our God why claim center rollout.

Speaker #5: Employees are excited at the prospect of our scaled capabilities and the expanded opportunities that they will bring our brokers are enthusiastic and are showing a clear interest in our enhanced product offering , Post-close .

We are now on Guidewire cloud for the majority of claims administered by the affinity the implementation of claim center as part of a broader effort to reduce friction by modernizing and digitizing key steps in the claims journey. This enhances our ability to deliver on our commitment of providing up to two points of operating Roe.

Speaker #5: We now expect the transaction to close in the first half of Q1 2026 , following a receipt of customary regulatory approvals ahead of our initial expectations and important deliverable to ease integration process was to finalize our claims transformation .

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<unk> innovation and a seamless end to end customer experience as.

Speaker #5: Just last month , we successfully implemented the guidewire property and Casualty module , marking the completion of a guidewire claim center rollout . We are now on Guidewire Cloud for the majority of claims administered by Definity , the implementation of Claim Center is part of a broader efforts to reduce friction by modernizing and digitizing key steps in the claims journey .

As a proof point since implementation of claim center for auto claims in April of 2024 hour cycle time has improved by 19% driving better operational efficiency enhanced indemnity outcomes and higher net promoter scores, we look forward to seeing similar benefits on the property and cash.

Speaker #5: This enhances our ability to deliver on our commitment of providing up to two points of operating ROE contribution by having a robust platform for scalable growth .

Syed.

As we approach the end of 2025. The company is performing strongly and is in a great position to begin the process of integrating our upcoming acquisition and with that I'll turn the call back over to Dennis to begin the Q&A session. Thanks, Ron with that we are now ready to take questions.

Speaker #5: Ongoing innovation and a seamless end to end customer experience . As a proof point , since implementation of Claim Center for Auto Claims in April of 2024 , hour cycle time has improved by 19% .

Thank you ladies and gentlemen, we will now begin the question and answer session.

You have a question. Please press the star button, followed by the number one on you touched on phone you'll hear a prompt that youre Hana has been raised should you wish to decline from the polling process. Please press the star button followed by the number two if you are using a speaker phone. Please lift the handset before pressing any key.

Speaker #5: Driving better operational efficiency , enhanced indemnity outcomes and higher net promoter scores . We look forward to seeing similar benefits on the property and casualty side as we approach the end of 2025 , the company is performing strongly and is in a great position to begin the process of integrating our upcoming acquisition .

One moment. Please for your first question.

First question comes from Stephen Boland of Raymond James Go ahead.

Speaker #5: And with that , I'll turn the call back over to Denis to begin the Q&A session .

Speaker #4: Thanks , Ron . With that , we are now ready to take questions .

Wow.

I guess, Geoff Kwan is not here anymore. So I guess it goes to the next person.

Speaker #3: Thank you . Ladies and gentlemen . We will now begin the question and answer session . Do you have a question ? Please press the star button followed by the number one on your touchtone phone .

So could you just breakdown.

Usually pretty good at breaking out in personal auto the inflation.

The different buckets that are causing that.

Speaker #3: You will hear a prompt that your hand has been raised should you wish to decline from the polling process , please press the start button followed by the number two .

Maybe just your outlook.

For for inflation over.

Over the next 12 months.

Speaker #3: If you are using a speaker phone , please lift the handset before pressing any keys . One moment please , for your first question .

Well, Steve Thanks, very much for the question happy to take that and Paul gave you. The flavor I think the big picture for Us would be we like where the market is at this stage.

Speaker #3: First question comes from Stephen Boland of Raymond James . Go ahead .

We've got to a position, where it's pretty stable and when we see stable loss cost trends, we're able to underwrite we're able to get our pricing points at the right level.

Speaker #7: Wow . I guess Jeff Kwan's not here anymore . So I guess it goes to the next person . So could you just break down ?

Speaker #7: You're usually pretty good at breaking down personal auto inflation between the different buckets that are causing that . And maybe just your outlook for for inflation , you know , over the next 12 months .

And then that gives us a pretty favorable outlook and I think when we go back to the market is still pushing significant prices through as they strive to get to profitability. We're in a good position because we are rate adequate and we are profitable we have the buying scalable platform and so as we think forward.

Speaker #5: Stephen , thanks very much for the question . Happy to take that . And have Paul give you the flavor . I think the big picture for us would be we like where the market is at .

We're quite bullish on this line of business, but Paul could you give more color on too.

Speaker #5: This stage . And , you know , we've got to a position where it's pretty stable . And when we see stable loss , cost trends , we're able to underwrite , we're able to get our pricing points at the at the right level and then that gives us a pretty favorable outlook .

The cost trends and the breakout of the breakouts, absolutely, yes, so Stephen as I previously.

Sean there are components of it between the property damage and the casualty the casualty we've been fairly consistent throughout the last few quarters in that mid single digit and we're not really seeing any changes in that maybe is a bit more stable <unk>, a little bit more volatile, but overall, it's still that mid single digit range.

Speaker #5: And I think when we go back to the market is still pushing significant prices through as they strive to get to profitability . We're in a good position because we're very adequate and we are profitable .

Speaker #5: We have the vine scalable platform . And so as we think forward , you know , we're quite bullish on this line of business .

The one that we've spoken about consistently is on the property damage side, which includes obviously comprehensive and collision. We also include theft and that element and there we've seen a more stabilization of the trends around that mid single digit range. This is fairly consistent with pre pandemic levels and it really represents the natural.

Speaker #5: But Paul , could you give more color on to the cost trends and the the breakouts . Absolutely . Yep .

Speaker #8: So Stephen , as I've previously shown , there are components of it between the property damage and the casualty , the casualty we've been fairly consistent throughout the last few quarters in that mid-single digit .

Cost inflation of vehicles have more higher higher content in the vehicles more expensive vehicles cost of repairing them. The good news is as I said that stabilize to that mid single digit range I mentioned SaaS.

Speaker #8: And we're not really seeing any changes in that maybe is a bit more stable , buys a little bit more volatile , but overall still , that mid-single digit range , the one that we've spoken about consistently is on the property damage side , which includes , you know , obviously comprehensive and collision .

Theft has come down quarter over quarter pre pandemic. It was about two points of loss ratio at its peak. It went up to almost seven points of loss ratio and it's down to about 262, 7% so still a little elevated.

Speaker #8: We also include theft in that element, and there we've seen a more stabilization of the trends around that mid-single-digit range. This is fairly consistent with pre-pandemic levels.

But certainly much improved over the last year and really when you take all of those things together, we're really talking about a mid single digit trend. The good news is we believe that we are well placed to cover that trend with our natural rate.

Speaker #8: And that really represents the natural cost inflation of of vehicles that have more higher , higher content in the vehicles , more expensive vehicles , cost of repairing them .

Speaker #8: The good news is , as I said , that that stabilized to that mid-single digit range . I mentioned theft . Theft has come down quarter over quarter .

Filings and we've essentially caught that trend over the last while so we're in a good position to be at a stable place. We do believe the industry as a whole isn't there yet and so the industry as a whole will have to continue to take rate to cover that trend, but we are well positioned in that.

Speaker #8: Pre-pandemic , it was about two points of loss ratio . At its peak , it went up to almost seven points of loss ratio .

Speaker #8: And it's down to about 2.62.7 . So still a little elevated , but certainly much improved over the last year . And really , when you take all those things together , we're really talking about a mid-single digit trend .

Okay. That's really helpful and the second question still on personal auto you mentioned in the MD&A just about the Ontario.

Our reforms coming in is that going to put pressure on premium growth.

Speaker #8: The good news is we believe that we are well placed to cover that trend with our natural rate filings . And we've essentially caught that trend over the last while .

Lots of articles going around about that I'm, just wondering what your thoughts are.

We are certainly very involved and getting ourselves ready for the auto reforms.

Speaker #8: So we're in a good position to be at a stable place . We do believe the industry , as a whole isn't there yet .

There is extensive activity in this space. These are things that the industry has gone through so this isn't new to the industry and certainly not new to us and we have reforms going in Alberta as well.

Speaker #8: And so the industry as a whole will have to continue to take rate to cover that trend . But we're well positioned in that .

Speaker #7: Okay. That's really helpful. And the second question, still on personal auto, you mentioned in the mDNA just about the Ontario reforms coming in.

But we believe that this is a good place for the industry to go and really what we're talking about most of these reforms focus on the casualty side of the equation.

Speaker #7: Is that going to put pressure on premium growth ? I mean , there's lots of articles going around about that . I'm just wondering what your thoughts are .

Don't really have a lot of focus on the property damage side of the equation, which as I. Just mentioned has over the last few quarters being the one that has put pressure on the results, but the reforms are a good way for the industry to reset every few years, you will see a slight increase in trends performs come in the industry responds and then and then there's a period of.

Speaker #8: Where we are certainly very involved in getting ourselves ready for the auto reforms . There's extensive activity in this space . These are things that the industry has gone through .

Yeah.

Speaker #8: So this isn't new to the industry and certainly not new to us . And we have reforms going in Alberta as well . But we believe that this is a good place for the industry to go .

Of.

Onboarding the benefits from those reforms for the couple of years thereafter in terms of your question around overall pressure on premiums. We don't believe it's going to be a significant pressure on premiums.

Speaker #8: And really , what we're talking about , most of these reforms focus on the casualty side of the equation . They don't really have a lot of focus on the property damage side of the equation , which as I just mentioned , has over the last few quarters been the one that's put pressure on the results .

What these things, we'll do is offset increases so instead of seeing a pressure or a decrease in premiums what youre going to see us is less need for additional rate beyond that to cover the trends that I disclosed it does give some clients a bit more ability to control their overall premiums, but we believe it's.

Speaker #8: But the reforms are a good way for the industry to reset every few years you will see a slight increase in trends , reforms come in the industry , responds and then and then there's a period of of of onboarding the benefits from those reforms for the couple of years thereafter .

And ups still maintaining a well balanced portfolio. So it doesn't cause us any concern from a topline perspective.

Okay I appreciate that thanks, so much.

Speaker #8: In terms of your question around overall pressure on premiums , we don't believe it's going to be a significant pressure on premiums . What these things will do is offset increases .

<unk>.

Next question comes from Alex Scott of Barclays. Please go ahead.

Hi, Thanks for taking the question.

Speaker #8: So instead of seeing a pressure or a decrease in premiums , what you're going to see is , is less need for additional rate .

First one I had is on the traveling acquisition just now that you've had some more time with it and so forth and that closing reasonably soon can you talk about just.

Speaker #8: Beyond that to cover the trends that I disclosed . It does give some clients a bit more ability to control their overall premiums , but we believe it's going to end up still maintaining a well , portfolio .

The influence that would have on your combined ratio is initially appreciating that there'll be some repricing of remediation over time, but I just wanted to make sure I understand sort of the starting point.

Speaker #8: So it doesn't cause us any concern from a top line perspective .

Speaker #7: Okay , I appreciate that . Thanks so much .

We should expect next year.

Speaker #3: Next question comes from Alex Scott of Barclays . Please go ahead .

Thanks for that so firstly, a quick update on the progress I mean, I think as we said in the materials versus proceeding very well, we do think that it will close a little earlier than originally anticipated. So that's exciting for US. We've also made great progress on <unk>.

Speaker #9: Hi. Thanks for taking the question. First one I had is on the Travelers acquisition. And just now that you've had some more time with it.

Speaker #9: And so forth , and it closing reasonably soon . Can you talk about just , you know , the influence you would have on your combined ratios initially ?

Things like getting the financing complete with I'd overall bond offering, which again went very very well and I will say that the teams are working very well together.

Speaker #9: You know , appreciating that there'll be some repricing of remediation over time . But I just want to make sure I understand sort of the starting point , you know , that we should expect next year .

And with the very advanced stages of the integration planning so we're pretty excited about that.

I think when it comes to the impact that it will have on US next year. What we've kind of said is look we have a good sense of the size of business. That's coming we know that it's very complementary to our portfolio of course it moves us from the sixth largest are the fourth largest pro forma so clearly it will have a significant impact.

Speaker #5: Thanks for that . So firstly , a quick update on the the progress . I mean , I think as we said in the materials , this is proceeding very well .

Speaker #5: We do think that it'll close a little earlier than originally anticipated . So that's exciting for us . We've also made great progress on things like getting the financing complete with our inaugural bond .

On a road if a new going into next year. We also said that this is essentially a breakeven business.

Speaker #5: You know , offering , which again , went very , very well . And I will say that the teams are working very well together and we're at the very advanced stages of the integration planning .

We have a plan to integrate this and to get cost synergies of $100 million that takes a couple of years to.

Speaker #5: So we're pretty excited about that . You know , I think when it comes to the impact that it will have on us , you know , next year , what we've kind of said is , look , we have a good sense of the size of business that's coming .

Work its way into the portfolio, so as we roll through the year and as we close the transaction when we update our guidance for 2026, we'll be able to kind of give more color than that but clearly I think from our perspective. This business is.

Speaker #5: We know that it's very complementary to our portfolio . Of course , it moves us from the six largest to the fourth largest performer .

Speaker #5: So clearly it will have a significant impact on our overall revenue going into next year . We also said that this is essentially a break even business .

Something we're pretty excited to get we know more about it now that we.

We're getting closer to the transaction date.

Speaker #5: And , you know , we have a plan that to integrate this and to get cost synergies of $100 million that takes , you know , a couple of years to to work its way into the portfolio .

And we're as excited about it as we were before we are getting exactly what we think we expected.

And I think more to come in the new year.

Speaker #5: So as we roll through the the year end , as we close the transaction , when we update our guidance for 2026 , we'll be able to kind of give more color in that .

Yes.

Yes.

That's really helpful.

Next I wanted to see if you could.

Dig a little deeper into the distribution income trajectory I mean, it sounds like you expected continued strong growth rate there, but just interested in where youre seeing the opportunities.

Speaker #5: But but clearly , I think from our perspective , this business is , you know , something . We're pretty excited to get .

Speaker #5: We know more about it now that we , you know , are getting closer to the transaction date . And we're and we're as excited about it as we were before .

What the M&A environment is like there for the bolt ons.

Yes.

I think this is something that we're very pleased about and I think that it's worked extremely well for us over the last couple of years, and it's becoming quite a meaningful number.

Speaker #5: We are getting exactly what we think we expected . And , you know , I think more to come in the new year .

The way we look at this is that the broker platform.

Speaker #9: That's really helpful . Next , I wanted to see if you could dig a little deeper into the distribution income trajectory . I mean , it sounds like you expect a continued strong growth rate there , but just interested in where you're seeing the opportunities .

These are high quality brokers, they are doing really well in the marketplace as they've got kind of scale, they've got more capability and that's allowed them to increase their growth rate. So this is a strong organic growth.

Platform and then on top of that you add a pretty active.

Speaker #9: You know , what the M&A environment is like there for the bolt ons .

Speaker #5: Yeah . Look , I think this is something that we're we're very pleased about . And I think that it's worked extremely well for us over the last couple of years .

M&A market, where there is a significant amount of consolidation that has occurred we still believe will occur going forward. So when we when we looked at this year. Originally we said that we had a 15% guidance in the <unk>.

Speaker #5: And it's becoming quite a meaningful number. The way we look at this is that the broker platform. These are high-quality brokers.

National broker platform operating earnings.

They were doing well and they accelerated some acquisitions and so we upped our guidance on XD, they're even.

Speaker #5: They're doing really well in the marketplace as they've got kind of scale . They've got more capability and that's allowed them to increase their growth rates .

Outperforming that at this stage so.

Speaker #5: So this is a strong organic growth platform . And then on top of that you add , you know , a pretty active M&A market where there is a significant amount of consolidation that has occurred .

Latest guidance that we had left in places 20% year on year, that's a combination of strong organic growth and a healthy pipeline and as far as we could see out we don't see a change in that.

Speaker #5: And we still believe will occur going forward . So when we when we looked at this year originally , we said that we had a 15% guidance in the National broker platform , operating earnings .

Environment for the next for the next number of quarters, there is still a pretty healthy pipeline.

Available.

Great. Thank you.

Speaker #5: They were doing well and they accelerated some acquisitions . And so we upped our guidance . And actually there even exceeding they're outperforming that at this stage .

Next question comes from Paul Holden of CIBC. Please go ahead.

Thanks, Good morning wanted to follow up on a comment that Phil made regarding personal auto fulfill you said the slowdown of personal auto maybe more short lived than expected. So maybe you can drill down about simply asking Ohio.

Speaker #5: So so you know the latest guidance that we had left in place is a 20% year on year . That's a combination of strong organic growth and a healthy pipeline .

Speaker #5: And as far as we could see out , we don't see a change . You know , in that environment for the next for the next number of quarters , there is still a pretty healthy pipeline available .

What are the indicators that make you believe it.

Actually more shortly.

Yes go ahead Paul thank.

Thank you Paul it's Paul here.

Now I'll take you back to comments I made in previous quarters. This is very much deliberate we had indicated at the beginning of the year that we'd be pushing hard on gaining unit growth and.

Speaker #9: Great . Thank you .

Speaker #3: Next question comes from Paul Holden of CIBC . Please go ahead .

Speaker #10: Thanks . Good morning . Want to follow up on on a comment that Phil made regarding personal auto ? So Phil , you said that a slowdown of personal auto may be more short lived than expected .

And rate growth at the beginning of the year on auto, but we did expect to see that slow down a bit in the back half of the year and the reason is quite simple is that we knew we were taking significant rate in the back half of the year and you may recall in previous curious when we took rate in the back half of the year.

Speaker #10: So maybe maybe you can drill down on that . Simply asking why ? Why ? Like what are the indicators that make you believe its potentially more short lived ?

That was followed by a little bit of a period of lack of competitiveness or reduced competitiveness and then that came back to us. So the exact same thing happen. This year very deliberate we took 5% rate additional rate in our Ontario portfolio, which is our largest that was on top of an existing seven and a half that was already flowing through that.

Speaker #5: Yeah .

Speaker #7: Go ahead Paul .

Speaker #8: Thank you Paul , it's Paul here . You know I'll take you back to comments I made in previous quarters . This is very much deliberate .

Speaker #8: We had indicated at the beginning of the year that we'd be pushing hard on gaining unit growth and and rate growth at the beginning of the year on auto .

Portfolio and in effect, what that meant was at 12, 5% increase on.

Speaker #8: But we did expect to see that slow down a bit in the back half of the year . And the reason is quite simple is that we knew we were taking significant rate in the back half of the year and , you know , you may recall in previous years when we took rate in the back half of the year , that was followed by a little bit of period of lack of competitiveness or reduced competitiveness .

On.

<unk> customers in that jurisdiction, we knew that that would reduce competitiveness very deliberately and it has in fact done so but what we're pleased to see is unlike the previous two years, where it took a couple of quarters for some of the growth to come back it's actually come back so faster so even within the quarter what we saw.

Speaker #8: And then that came back to us . So the exact same thing happened this year . Very deliberate . We took 5% rate , additional rate in our Ontario portfolio , which is our largest .

July and August.

The topline was was reduced a little and then in September it's come back quite healthily. So we expect that trajectory of healthy growth to maintain into Q4, and so we really manage this portfolio to the full year. The full year growth is at $8 six which is exactly in line with our guidance and we expect to close the year close to that.

Speaker #8: That was on top of an existing seven and a half that was already flowing through that portfolio . And in effect , what that meant was a 12.5% increase on , on , on , on customers in that jurisdiction .

Speaker #8: We knew that that would reduce competitiveness very deliberately . And it has , in fact done so . But what we're pleased to see is , unlike the previous two years , where it took a couple of quarters for some of the growth to come back , it's actually come back .

The upper single year guidance is what we expect and I will say at the same time remember that the inverse is true for property. We indicated at the beginning of the year that we were taking extensive actions to improve the <unk>.

Speaker #8: So faster . So even within that quarter , what we saw is July and August , the the top line was , was reduced a little .

Concentration in accumulation in our property portfolio and we were redesigning our property Wordings and what we did not want to do is accumulate a lot of units in advance of a cat season until that work had been completed that work has in fact completed and so as I indicated in previous quarters, we expected healthy growth on that.

Speaker #8: And then in September, it's come back quite healthily. So we expect that trajectory of healthy growth to maintain into Q4. And so we really manage this portfolio to the full year.

Speaker #8: The full year growth is at 8.6 , which is exactly in line with our guidance . And we expect to close the year close to that .

Our property portfolio in the back half of the year to offset that slight reduction on the auto and that's exactly what we're seeing we're seeing very healthy growth in Q3 and even the deep.

Speaker #8: That upper single year guidance is what we expect . And I will say at the same time , remember that the inverse is true for property .

Speaker #8: We indicated the beginning of the year that we were taking extensive actions to improve the concentration and accumulation in our property portfolio , and we were redesigning our property wordings and what we did not want to do is accumulate a lot of units in advance of a cat season .

Within the quarter steady improvement month over month in our property earnings. So really what we're looking for is a full year high single digit result, both auto both property combined we're very pleased with the performance of these portfolios.

Got it.

Speaker #8: Until that work had been completed , that work has , in fact completed . And so , as I indicated in previous quarters , we expected healthy growth in the property portfolio in the back half of the year to offset that , that slight reduction on the auto .

Makes sense and I know you haven't given 2026 guidance.

Officially but I kind of want to follow up particularly on an auto how to think about 2006. So I hear you on the <unk> taken more recently rate of 5% and in Ontario, which is in line with the mid single digits claims inflation you highlighted earlier so that's.

Speaker #8: And that's exactly what we're seeing . We're seeing very healthy growth in Q3 . And even the the months within the quarter , steady improvement month over month in our property earnings .

That makes sense.

Stable margins.

Speaker #8: So really what we're looking for is a full year high single digit result , both auto both property combined . We're very pleased with the performance of these portfolios .

If we extend that 5% out to 2026, and then combine that with the.

<unk> you said industry is still catching up does that mean premium growth could be in excess of 5% next year, because you get the 5% on rates plus picking up a little bit of market share or is that.

Speaker #10: Got it. That all makes sense. And I know you haven't given 2026 guidance or outlook yet officially, but I kind of want to follow up quickly on auto and how to think about 2026.

Reasonable way to think about it.

Speaker #10: So, you know, I hear you on the, you know, you take in the more recently rate of 5% in Ontario, which is in line with mid-single digits claims inflation.

Yes, it's Paul again, I think that's a reasonable way just remember that when we have written rate and all of that flows directly to the results because there is natural drift that occurs in the portfolios.

Speaker #10: You highlighted earlier . So that's that that makes sense . And that's projects stable margins . If we extend that 5% out to 2026 and then combine that with the , you know , indication , you said industry still catching up , does that mean premium growth could be an excess of 5% next year because you get the 5% on rates , plus picking up a little bit of market share , is that a reasonable way to think about it ?

But really what we're talking about is mid single digit rate probably taken.

Extra point or two above that to maintain parity with the trend so.

So it's reasonable to assume that the industry as a whole will be growing at that from a rate perspective, and then of course on top of that you add unit growth depending on on on the market. So in our case, we still feel confident about the rate achievement and also the unit growth and targeting that high single digit range.

Speaker #11: Yeah , it's it's Paul .

Speaker #8: Again , I think that's a reasonable way . Just remember that when we have written rate , not all of that flows directly to the results because there's natural drift that occurs in the portfolios .

Okay. That's helpful and then I'll ask one more.

If thats okay.

So I wanted to go down a little bit more on the.

Speaker #8: But but really what we're talking about is mid-single digit rate . Probably take an extra point or two above that to maintain parity with the trend .

On commercial answer same line of questioning so thoughts slow down to seven 5% growth this quarter, which is consistent with the guidance you gave last quarter. So maybe no surprise there.

Speaker #8: So it's reasonable to assume that the industry as a whole will be growing at that from a rate perspective . And then , of course , on top of that , you add unit growth depending on on on the market .

Like how should we think about that just in terms of great versus market share gain that's what I'm trying to get a better better sensor.

Speaker #8: So in our case , we still feel confident about the rate achievement . And also the unit growth and targeting that high single digit range .

Thank you Paul this is probably a reasonable answer your question.

Speaker #10: Okay . That's helpful . And then I'll ask one more if if that's okay . So I want to drill down a little bit more on the on commercial and sort of same line of questioning .

So maybe I'll give you elements of big figs assessments of how we view the marketplace overall, so while we've seen more competition this year and especially in the large account segment I will tell you that the morphine someone's overall remains very attractive.

Speaker #10: Right . So saw a slowdown to 7.5% growth this quarter , which is consistent with the guidance you gave last quarter . So maybe no surprise there .

Overall and most of you are very pleased with the results achieved in Q3 and year to date to sell maybe wanted to Santa <unk>.

Speaker #10: How should how should we think about that just in terms of rate versus market share gain . That's what I'm trying to get a better , better sense of .

Two or three data points with you that illustrate the might be also confident about the commercial business. The first one and I think thats. The most important one is that in our core business and it's as you know with small business and lower in commercial business and it makes all banks with them once a month.

Speaker #12: Thank you . Paul , this is Robbie Reichenberg . Answering your question . So maybe I'll give you a little bit of a big picture assessment of how we view the marketplace overall .

So on a same portfolio, we don't view market condition.

Speaker #12: So while we've seen more competition this year , especially in the larger segment , I would say that the commercial insurance overall remains a very attractive segment for us overall .

That segment being filled.

I will call our core business beyond achieving mid single digit rate increases.

Speaker #12: And we are very pleased with the results that we have achieved in Q3 and year to date as well. Maybe what I do is share two or three data points with you that illustrate why we are so confident about our commercial business.

Against our retention numbers, both in terms of policy count and premium or in the high eighties.

We like the new business as eloquent Martin's.

Gaining market share, which is very much in line with our strategic transformation.

Speaker #12: The first one , and I think that's the most important one , is that in our core business , which , as you know , is small business and low rent commercial business , and which makes up actually the most , the vast majority of our portfolio , we don't view market conditions in that segment being soft across our core business .

Our core business.

Also benefiting from strong portfolio management capabilities and our digital enablement.

Business allows us to renew that business in an automated manner and that is protecting our margin as well.

I know that.

Speaker #12: We are achieving a mid-single digit rate increases , which we are happy with our retention numbers , both in terms of policy count and premium , are in the high 80s , and we are actually writing new business as merchants and gaining market share , which is very much in line with our strategic aspirations , our core business is also benefiting from strong portfolio management capabilities and our digital enablement of that business allows us to renew that business in an automated manner , and that is protecting our margin as well .

That is a concern about what's happening in the Lords account segment, then sure lots of content has been more competitive.

Guiding on <unk>.

It has to make the decision and if the margin equation doesn't make sense, we are quite happy to let those lots of commscope and the gun because that Lawrence account is the smallest portion of our commercial business. Overall, we don't really see those positions to have a material impact that went out of business.

The only thing that you can.

Important throughout.

The site content join today is happening in the different structural context than a new cycle before and what I mean by that.

Speaker #12: I know that there's a concern about what's happening in the large account segment , and for sure , that large account segment has been more competitive .

What we've seen over the last 10 years, you've seen a lot of consolidation happening in the core business.

Speaker #12: But we are guiding our underwriters to make the adequate decisions . And if the margin equation doesn't make sense , we are quite happy to let those larger accounts go .

Again, small business small and middle market business that makes up the majority of our portfolio that business now is concentrated on four or five large domestic domestic caveat in all of them are very disciplined so if overall, we like the underlying profitability.

<unk>.

Our Q3 reporting.

Yes.

5% that continues to cover the loss trend that you have in our portfolio.

Our profitability remains stable if you will kind of combined ratio on a year to date basis. We lost 89, 4% that same number last year was 89, 5%, which means that the phone plan on July developing a really good job.

Multiple season overall, and so I would tell you that.

Answer to your question, we are confident that we will be able to sustain our combined ratios in the low nineties and sustain thank Joel that's been posted in Q3.

I'm sorry ask that.

Just one follow up question on that because the point on the consolidation of the market was really interesting.

Vic to SME does the largest of the large account market look different I E far more competitors than four to five.

Very different.

Southern <unk>.

Laurence.

Right.

We have seen in past cycles as well.

A lot of new capacity foreign capacity of installed capacity is coming into the allowance account segment I don't see it having been in that business for over 25 years now.

And then what's happening at every site consumer piece on block five six years, we have been very deliberate in terms of how we've been constructing our portfolio and as I mentioned before the vast amount of our portfolio is in the lower end of the commercial marketplace in terms of account size and premium level and that gives us a much better opportunity to sustained profitability.

In our commercial segment and what we do.

<unk>.

That launched some segment and market conditions. All farm, we are going to be quite opportunistic and we're going to generate growth rate in the 25% to 30% range, but then when the market turns which is the case this year.

To conclude from driving profit goes more into motion preservation mode and what this means as I mentioned, it's a guiding our underwriters select accounts go if the market increases that makes sense and then the growth rate is more flat and.

Again close that lots of contact lens.

A portion of our portfolio overall, we don't see those efficient as having a material impact on our portfolio.

The cycle of a 10 year period, if you are quite happy that and drive profitable growth and adequate bought something that large account segment itself.

Got it okay. That's helpful. I'll leave it there thank you very much.

Next question comes from Jamie <unk> line of National Bank Capital markets. Please go ahead.

Yes.

Yeah.

Thank you.

Just wanted to dig in on the property.

Accelerated this quarter it sounds like some of those.

Initiatives too.

Some of the concentration risk are done.

Is the is the view that we should continue to see this acceleration through Q4 and into 2026.

Or do you anticipate that maybe some some more competition or pricing adjustments as you're as you're picking up that unit growth.

In the coming quarters.

Tim I think that for us as you see holds initial kind of comment we're pretty confident that this kind of growth is going to continue.

If you think about the last couple of years.

It was still high single digit, but it was all right.

And what we would do is effectively churning the portfolio by shifting the new business to less cat exposed areas and reducing concentration in those areas at a higher payroll.

Apparel scores.

That will continue but the vast majority of that is one that's just ongoing good portfolio management. So I think that we feel with that heavy lifting behind us. We now benefit from a hard market continued rate increases, but also unit count and we've seen a pickup in the unit count as we're gaining share.

This line of business should continue to perform very strongly for us both rates, which will continue and that protects and adds to the margin, but but also now taking share.

Okay great.

And then just just to go back to auto.

For <unk> it does it does sound.

A little bit like you are expecting.

Right to sort of just aligned with.

Loss cost trends as we get into 2026, there is obviously a lot of rate written in.

In 25 that will end up earned in 2000 <unk> levels.

<unk> premiums.

At the top line, but it does seem like rates are now kind of going to move more towards a flat with loss cost trends and so margin expansion, maybe a little more challenging to get in in 'twenty. Six 'twenty seven is that is that fair.

Do I understand that correctly.

And then I guess, there's probably some other things that are going to help on the margin expansion side specific to definitively even that line.

Yes, so Jamie it's Paul just wanted to highlight the nuances of that so a couple of things first I said that.

The trends are stabilizing around that mid single digit range. Overall I also indicated that the market as a whole hasnt quite caught that trend. So many insurers will have to take rate.

Ahead of that too.

To to help them get back to a rate adequate position, we are in a favorable position relative to that so for definitive specifically, we believe we are at rate adequacy on the hall and what that means for US moving forward is that we will be taking sufficient rate to cover trend.

As you mentioned and then maybe some to maintain.

To focus on avoiding volatility. However, your second question around margin expansion is that we believe there's still significant opportunities in the marketplace for for margin improvement. We mentioned reforms earlier there are other elements around segmentation and we believe we have a strength in.

Our ability to segment.

And chase the right customers. So they're still we're still going to maintain our focus on that there is also the volatility aspect of tariffs.

Right now we are.

We have a fairly muted response to tariffs, we're not seeing a significant impact rolling through the portfolio. Yet we believe our current rate trajectory is sufficient to cover the current tariff impact, but we remain diligent.

This changes significantly.

To your question around 26% 27 is there may be a commensurate increase if tariffs jump up insurers like US will then file for tariffs specific rate increases and that can change the trajectory of the rate environment quite significantly.

Okay understood Thats clear.

And then last just just wanted to get more details on on sonat.

I think it's in the MD&A talking about driving profitability for.

For the auto portfolio can you can you give us some little bit more detail as to how well it's growing.

And in that profit contribution and what you see in 2006 or for that platform.

Sanjay if you recall, what we were trying to do there is make sure that sonic could breakeven. So remember that we have the target of cannot be sub 100% combined ratio and kind of do that sustainably and so thats really been our focus for this year.

Solid once again.

Produced an underwriting profit in the quarter and that makes four consecutive quarters in a row. So the task. We set ourselves is can we scale this business in Canada.

One is a contributor of underwriting results and the answer is yes, and so that's very good news for us because we were able to now have confidence that we can retain the right customers. We can attract the right customers and then the next step for US is to return to growth. So there isn't any growth in the portfolio. This year that really was our intention.

This would be more of a flat year as we made sure we were comfortable with the quality and the operating model itself. Now we know we have we will look to.

Return on that portfolio to growth, but that really will only occur as we get into 2020.

26.

Yeah.

Okay. That's good thank you.

Okay.

Next question comes from Mario Mendonca out of TD Securities. Please go ahead.

Good morning, I have two broad questions one fulfill one for Ron first though I'm not going to hold you to something you said a year ago, but you did offer and the Q3 24 call that you thought ROE could reach 12% in 2026. So much has changed since then not the least of which is a 17% increase in capital I don't think anyone could have anticipated.

And travelers as you said is breakeven in the early going but a lot of other things have gone well like Guidewire sonat, turning somewhat profitable expense saves. So that's a lot of moving parts could you revisit your 12% ROE in 2026 outlook in the context of all of those changes.

Yes, Thanks, Mario I think the first comment I'd make is you're right. There are a lot of moving parts.

We look at those that are driving continued expansion of the operating earnings were really pleased with the progress that we've made so obviously.

The coal business is doing very well with <unk>.

Hello.

Sub 95 objectives for the current year.

And if we look at the three operating levers that we've talked about.

The past and we're making really good progress against all of them as Robin has said it is now there I would say.

If you look at the past quarter year to date in the past 12 months.

<unk> made a positive contribution across all of those periods. So that is.

Meanwhile, in reflected in the numbers.

On Opex, we've still got some benefit ahead of us so.

If you look at the overall goal, we want to get to 11, 5%. This year. However, up 11, 4% year to date, so gliding very nicely, we still think on a court affinity business.

There's still about a half point of opportunity ahead of us in 2026. There is no change in view on that and then if we look at the claims Guidewire implementation as you mentioned.

We're probably about halfway into that we just had a successful launch of the property casualty side of that platform. A couple of weeks ago ahead of ahead of plan. So thats. Good news that is coming in earlier, but we have not tapped any benefits on that side of the business, yet and there's probably a couple of years.

Until you get to full run rate. So I would say on all of those contribute to believers really pleased with the progress that we've made.

You rightly point out that we've had very significant book value expansion at the same time so I.

Lovely problem to have we'd be really able to grow the scale of the business.

That denominator some of that.

That is still ahead of us next year.

And you're right also on the travel this transaction we've raised the capital this year.

We will only take ownership and the our expectation as the first half of 2026, and then there'll be a period of time until you actually get the synergies.

<unk> taken and so a lot of moving parts, what I would say, though is what.

Without talk into next year, specifically, we're really pleased with the progress that's being made on that journey into the <unk>.

Mid teens on a sustainable basis, we do need that.

Travelers' transaction to optimize that position embraces into the teen criteria and as I say on that one what youll see next year is youll see the levers being pulled to one of the top of the synergies.

More of a lag on an earnings pattern, so more of that contribution to driving the operating ROE openings of the teams is more likely to come in 2007.

It is in 'twenty six.

So the reference to 12% last year you'd have us think of that as more of a maybe exit 2026 are into 2027 is that more appropriate like is it no longer appropriate for us to rely on the 12% for 2026 that you offered last year.

I think I'd say look our current range is in that 10% to below team prior to the deployment into travel is on getting the accretive benefit of those synergies coming through there is no change in our view on that the underlying business continues to track forward.

Comfortably.

But we don't see breakthrough into the teen period.

You get the earnings pattern the synergies what Youll see next year it.

It will be able to pull levers on the <unk>.

Synergies from a run rate basis, but they won't turn in until you get the insurance market behind them. So I would tell you.

Happy with the progress, we're making on the coal business.

Wouldn't change our outlook on operating ROE for the coal business, but.

But we just have to recognize that the great news is we've generated a lot of capital we've deployed that capital we expect to do so in the first half of Q1 and it will just be a bit of a lag impact until you can get the synergies did and then get us to cross and start seeing areas.

Mark.

In terms of where the business is going.

Yes, certainly wasn't a question of the fundamentals I think things have changed and I think your comments reflect that change and how much. The book has grown around can we go to another broad topic here.

About the middle of this year onward, all the P&C names in the U S and Canada really lost a lot of momentum in terms of the share price and the concern of course with that.

Cycle is changing it was softening and things were going to be much worse.

What im hopeful you can do is address the notion.

That in Canada.

The sort of the large high quality P&C companies that put your your company in that care in that category.

Ken.

Hope with a moderating.

Software cycle like what makes the large high quality P&C companies in Canada are different and capable of coping with the softer cycle is there a reasonable argument to made there.

Yeah, Thanks sure of that barrier.

A couple of points, so we'd kind of offer on that topic number one would be.

This isn't a surprise the P&C industry goes through a couple of cycles from time to time, and so I think that.

Good operators anticipate that and structure their business to be resilient.

Through and able to operate well through the cycle and so we thought about that in terms of our mix of business, which segments. We play in what propositions, we bring to the marketplace. The other part that I would make is that.

There isn't just one cycle and so if you think about periods of more competitiveness. We have now some parts of commercial that will definitely more competitive but not all verticals not all parts of commercial and as <unk> said on the call earlier the market is structurally different in commercial than it was many years ago.

And that's why our portfolio, particularly that is heavily skewed to the smaller accounts.

There isn't a soft market, where we're actually getting rate on the portfolio and Thats ahead of trade. So we're actually increasing some margin on that on that part of the portfolio. There are some other areas even in the specialty areas that we continue to grow in where rate adequate this good opportunities and what you see us doing in commercial lines is.

Where there are segments that are more competitive, we just slow down a bit or putting new business capital.

And so what you therefore see is us maybe not growing at 10%, but growing at high single tips and plus like we did the more high single digit.

That's still good growth and its store protect the margin and I think that's to me. The main point that we could take out of this could there be.

A period of time, where we're not growing commercial at double digit yes, they could be but we will still be holding our margins and still be outperforming the industry. It will still be growing at twice the rate.

The of the industry and particularly in that small business segment. It's not just a price play. This is a product that <unk> experienced and automate automation play it's digital it's the bond business.

So I think that's an important piece if I just flip quickly to the other part of the business, 70% of our business is first slides you heard Paul talk it's hard.

We're getting higher rates on personal property and actually adding margin to that put business in personal auto with a good position.

Sub 95, we plan on being somebody five even including the solid business and we will start to get some growth in that solid story up there and then the final thing, which is I think a strategic differentiator for us in the business as we've also built a top 10 insurance broker. So now we add stable repeatable.

The distribution income.

And so that's why I think we feel very confident that we could manage the cycle I'd go back to a big picture Big picture is we wanted to be a top five player we will pro forma with travelers now be in that top five top full player of course, we will set a new target top three or something like that.

We are operating ROE expansion, you had a discussion with Phil that we're very confident about all of those levers. Some of them are already reflected like solid the others are still earning in and particularly the claims transformation, which we're really confident about there's another couple of points that BD has just.

Good.

Come in.

To the business.

And then.

The traveler story is a good one because even if the market in this cycle gets a bit more difficult. This is a good time for us to pick up.

A large portfolio and bid.

A significant amount of premium on our platforms and our terms and our conditions. So I do think.

In aggregate.

It would be silly to say.

When you shift from one cycle to another part of the cycle Theres no impact, but what I can say is we absolutely think we can do a very good job of managing it was structured resilient fleet.

And.

We will continue to update our guidance next year, but it's still going to be we think we can grow at twice the rate of the industry. We think we could run this business into the low ninety's and we're very confident that as we integrate the travelers' business.

We ended up in the mid teens operating ROE in the next few years so.

That's I guess.

The level of confidence we are expressing today.

So barring some kind of meltdown and I don't think anyone is calling for a meltdown like a really bad cycle youre, saying things like getting ahead on pricing.

Addressing it through mix managing expenses building distribution and sort of being conservative reserved allocating capital Youre, saying all of those things.

You put them altogether high quality companies can grow and thrive in a somewhat softer cycle.

I do yes.

Thank you.

Okay.

Next question comes from Bart.

Zarefsky out of RBC. Please go ahead.

Great. Thanks, and good morning, I wanted to follow up on Mario's questioning around the ROE. So.

Look at your operating ROE last 12 months 12, 5%, there's probably some benefit there from benign cat.

Q3, 'twenty forecast coming off but I guess my question is why Couldnt that reached the 13% just organically in the sense that you still have one to two points coming of benefit from claims and Opex.

Are there other factors that may slow down that trajectory and I am asking because you're you're unique in the sense that you have an ROE expansion story organically. So I just wanted to understand that a little bit.

Better yes, yes.

So yes, I would say if you thought if you break it into the two components you've got the operating contribution and then you've got the equity story. So on the operating contribution Youre absolutely right. We still have several leaders that are not fully.

<unk>.

The operating results will help us a little bit by cat losses, it looks pretty dramatic on the quarter. If you look at the year to date, we're about three six points of cat losses, just under a point less than we would expect for a full year. So it helps us.

It's not the whole salary by any stretch and really.

Big part of the contribution towards that 12% was seen in this quarter is those operating leaders coming through and so I agree with you that we.

We still have progress to be made on that and that should drive the operating contribution.

I think.

Factors that we're looking at our mill sides of the equation.

Net investment income, we know yields have drifted down a little bit we've done a very good job of sustaining book yields, but as we reinvest some natural diet.

Dynamic there, where we're going to get upside opportunity as the cash flow coming into the portfolio as opposed to yield so we still.

Positive about our ability to manage those funds and the capital unprofitable nature of the organization is helping goes deploy more funds in there, but it's not as much of a tailwind as it had been in the past I think the thing that.

We do after recognizes the equity expansion, which is great let's be clear, we've been really able to expand that book value.

Through this period of outperformance not deliberately.

Challenge to have if you like from a denominator perspective.

But as we operate Jim.

Book value that number's going to climb next year, and so that would be the denominator challenge it's not operating.

Earnings story, it would be the denominator so that would be the fact about that just from a math standpoint.

Yes.

Is the headwind that he's is because we're now deploying our capital Accretively, We believe we Australia, the travel less transaction, but in year one.

We expect it to be about a breakeven business, we will start making progress on the synergy capture but with insurance math showing that up in earnings takes a little bit of time, because you know you're deferring cost amortizing it in.

The getting to a run rate view is a little different.

So thats why when we told you about the transaction and we will do this next year as we start giving you updates on progress.

We will give you a lens of the actions taken on the synergies and what is a run rate view versus what it is and the.

The distinct culture I think that's important.

Because that's the pathway into the next function.

Great. Thanks, that's very helpful. And then I had a question around sort of data insight and market share. If you will so last year, we had call. It three or four outsized kind of then maybe wanted 51 in 100 years.

So have the cat loss kind of probability models pricing models that you guys use have they caught up to that in terms of normalizing for those events and to the extent they have it like is there an ability to kind of leverage some of the insights youre seeing on the ground to take advantage of that and gain some more market share.

Hi, Mark it's Paul.

Yes, I think the answer to both of your questions is yes.

What we've seen obviously over the course of the last few years is an increasingly severe weather in cat.

Severity and so we've increased our modeling to reflect them, we've increased our pricing to reflect that last years.

Clearly an outlier in terms of the worst.

One on record.

But even outside of the act.

We were still profitable last year and that I think that reflects the second part of your question, which is is there an opportunity to gain a benefit from that and I think yes, we need to have increasingly sophisticated modeling and segmentation, we need to consistently update things like flood maps and wildfire maps and we do that.

And I think our performance shown over the last few quarters in terms of we are significantly below our natural market share in terms of our of our cat costs. So.

This is really an area, where we believe we excel in terms of being able to utilize that capability to then take share.

Used an example, previously and I'll highlight that again part there are times, where you would imagine.

Unless sophisticated insurer might be using a large geographic area like FSA, which are the first three digits of a postal code to do their ratings. So if you. If you have a large area like that in one part of it is exposed to water.

You may treat that entire area as a high risk zone, we have improved our fidelity, we've been able to get from an FSA to a postal code and then down to a 100 square meter and the ability is even to get more refined than that and if you think about my example, what that means is if we're in a large postal code.

We can actually write risks that are not close to that water body source that previously would have been considered to be high risk and vice versa. We can get much more sophisticated I'm, making sure that if it's very close to our risk exposure. We can then charge an appropriate premium or not or not right. So it does over time.

Start to show the benefits of those investments in analytics and capability and the AI capabilities that are coming through to then target particular segments in particular risks and then gained share.

Great. Thanks for that very comprehensive.

Last question today comes from Tom Mackinnon with BMO. Please go ahead.

Okay.

Yes.

Question with respect to.

Distribution income growth and what you're seeing really in terms of.

Further acquisition opportunities that mcdougall.

How much of it.

Growth really alright, inorganically augmenting some of the organic growth that you are talking about there.

Thanks, Tom I think that.

The organic growth generally is high single digits and I think that this is a business that.

As a superb sales culture, very entrepreneurial great products and.

So I think that the benefit is as they make acquisitions.

There are some obvious cost synergies that you get from a bigger platform, which improved their EBITDA, but they also help the acquired businesses improve their ability to win and compete in the marketplace and so what you get is acquisition.

Earnings that come in and then those businesses tend to operate better than they even did before and Thats why I think when we think about the trajectory here, we expect high single digit organic growth and then that supplemented with inorganic activity.

That's that really is what's been kind of driving some pretty impressive year on year growth rates to date.

Overall, we think that the.

<unk> transactions this year and the pipeline still looks pretty full.

Alright. Thanks.

Yes.

Yes.

There are no further questions at this time.

I'd now like to turn the call back over to Dennis Westfall, Vice President Vice President of Investor Relations for final closing comments. Please go ahead.

Great. Thank you everyone for participating today, the webcast will be archived on our website for one year a telephone replay will be available at two PM today until November 14th and transcript will be made available on our website. Please note that our fourth quarter and full year results for 2025 will be released on February 12th that concludes our conference.

Call for today, Thank you and have a great one.

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