Q2 2025 The Hanover Insurance Group Inc Earnings Call
Yes.
To ask a question you May press Star then one on your Touchtone phone and to withdraw your question. Please press Star then two please.
Please also note that this event is being recorded today.
I would now like to turn the conference over to Oksana and with the sugar.
Please go ahead.
Thank you operator, good morning, and thank you for joining us for our quarterly conference call. We will begin today's call with prepared remarks from Jack Roche, Our President and Chief Executive Officer, and Jeff Farber, Our Chief Financial Officer available to answer your questions. After our prepared remarks, Arctic Levy Chief operating officer and press.
Didn't have agency markets and Bryan Salvatore President of specialty lines before I turn the call over to Jack Let me note that our earnings press release financial supplement and a complete slide presentation for today's call are available in the investors section of our website at Www Dot Hanover, a dot com.
After the presentation of we will answer questions in the Q&A session, our prepared remarks and responses to your questions today other than statements of historical fact include forward looking statements as defined under the private Securities Litigation Reform Act of 1995. These statements can relate to among other things our outlook in <unk>.
Items for 2025, economic conditions and related effects, including economic and social inflation potential recessionary impacts tariffs as well as other risks and uncertainties such as severe weather and catastrophes that could affect the company's performance and or cause actual results to differ.
For materially from those anticipated we caution you with respect to reliance on forward looking statements and in this respect to refer you to the forward looking statements section in our press release, the presentation deck and our filings with the FCC. Today's discussion will also reference certain non-GAAP financial measures such as operating income.
On an accident year loss and combined ratios, excluding catastrophes among others. A reconciliation of these non-GAAP financial measures to the closest GAAP measure on a historical basis can be found in the press release, the slide presentation or the financial supplement which are posted on our website as I mentioned earlier was though.
His comments I will turn the call over to Jack Thank.
Thank you Oksana good morning, everyone and thank you for joining us.
Our excellent second quarter results reflect the extraordinary progress we've made as a company we're proud of our solid execution and consistent discipline.
Our team is energized and focused as we step into the next phase of our growth journey.
At a time, that's both exciting and dynamic for our business.
At the core of our performance is a deeply experienced and talented team a team that is fully aligned on our strategy delivering a specialized and diversified portfolio of products to a select distribution model that targets the best independent agents in the business.
We're truly sets us apart is not just our product offering it's the relationships, we built and the way we engage with the top agents in our business now more than ever as agents and brokers across the spectrum are consolidating and actively redefining their business models, our differentiated approach is standing out and demonstrating gray.
Value.
Today with strong and broad based earnings are balanced and resilient portfolio is enabling us to remain agile and to perform very well through changing market conditions.
We are intently focused on the dynamic market environment, which is characterized by significant variability across insurance product lines industry classes and even geography.
We are seeing a divergence between various lines and segments with property competition rising while liability pressures are building and pricing in these lines is starting to firm.
Our business outlook remains very positive.
With widespread profitability and target level returns across most segments, we are well positioned to capitalize on emerging opportunities and to continue delivering high quality results going forward.
Joe: Good day and welcome to the HANOVER INSURANCE GROUP's second quarter earnings conference call. My name is Joe, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. And should you need any assistance today, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touch-tone phone. And to withdraw a question, please press star, then two. Please also note that this event is being recorded today. I would now like to turn the conference over to Oksana Lukasheva. Please go ahead.
Good day.
And welcome to the Handover Insurance Groups. Second quarter earnings conference call.
Turning to our second quarter highlights operating ROE was 18, 7% a record for the second quarter. Additionally, we delivered operating earnings of $4 35 per diluted share and earnings growth of approximately 25% on an ex cat basis.
My name is Joe and I'll be your operator for today's call.
I'm all participants are in a listen-only mode. And should you need any assistance today? Please signal a conference specialist by pressing the star key followed by zero.
After today's presentation, there will be an opportunity to ask questions.
Topline growth starting to accelerate in the second quarter, and we expect that to strengthen as we progressed through the second half of the year and into 2026.
to ask a question, you may press star then 1 on your touchtone phone and to withdraw a question please press star Zen 2
Please also note that this event is being recorded today.
Our overall combined ratio and ex cat combined ratio, both outperformed our expectations improving by approximately seven points and three points respectively.
I would now like to turn the conference over to Oksana.
Oksana Lukasheva: Thank you, operator. Good morning, and thank you for joining us for our quarterly conference call. We will begin today's call with prepared remarks from Jack Roche, our president and chief executive officer, and Jeff Farber, our chief financial officer. Available to answer your questions after our prepared remarks are Dick Levy, chief operating officer and president of agency markets, and Brian Salvador, president of specialty lines. Before I turn the call over to Jack, let me note that our earnings press release, financial supplement, and a complete slide presentation for today's call are available in the investors' section of our website at www.hanover.com. After the presentation, we will answer questions in the Q&A session. Our prepared remarks and responses to your questions today, other than statements of historical fact, include forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995.
Please go ahead.
Compared to the second quarter of last year.
Our personal lines business performed very well in the quarter as we achieved more balanced growth and strong profitability with high quality execution across the board. Our net written premium growth trajectory continues to build driven by renewal price increases improving retention and rising new business activity, notably.
We delivered approximately 8% growth in our targeted diversification states highlighting the effectiveness of our strategic focus.
Thank you, operator. Good morning and thank you for joining us for our quarterly conference call. We will begin today's call with prepared remarks from Jack roach. Our president and chief executive officer and Jeff Farber, our Chief Financial Officer available to answer your questions. After our prepared, remarks are de clevie Chief Operating Officer and president of agency, markets and brand Salvador, president of specialty lines. Before I turn the call over to Jack, let me know that our earnings
We're achieving quarter over quarter Pip growth in key geographies, where we're targeting profitable expansion that aligns with our margin objectives and enhances diversification across our business.
We remain encouraged by the quality of personal lines, new business with nearly all of it concentrated in account business.
Our full account strategy continues to serve us well, enabling us to deliver holistic long term solutions to customers and meet their needs with products that are more resilient to the competitiveness of the Monoline auto market.
Oksana Lukasheva: These statements can relate to, among other things, our outlook and guidance for 2025, economic conditions and related effects, including economic and social inflation, potential recessionary impacts, tariffs, as well as other risks and uncertainties, such as severe weather and catastrophes that could affect the company's performance and/or cause actual results to differ materially from those anticipated. We caution you with respect to reliance on forward-looking statements, and in this respect, refer you to the forward-looking statements section in our press release, the presentation deck, and our filings with the SEC. Today's discussion will also reference certain non-GAAP financial measures, such as operating income and accident year loss and combined ratios, excluding catastrophes, among others.
With approximately 89% of our personal lines business written on an account basis, we experienced higher customer retention and loyalty.
Additionally, with ongoing challenges and complexities around coverage in many states homeowners is gradually becoming a lead line further emphasizing the effectiveness of our account approach.
Press release financial supplement and a complete slide presentation for today's call are available in the investor section of our website at www.hanover.com. After the presentation, we will answer questions in the Q&A session, our prepared remarks and responses to your questions today. Other than statements, of historical, fact include forward-looking statements as defined under the private Securities. Litigation Reform, Act of 1995, this statements can relate to among other things. Our Outlook, and guidance, for 2025, economic conditions, and related effects, including economic, and social inflation, potential recessionary, impacts tariffs, as well as other risks and uncertainties such as severe weather, and catastrophes, that could affect the company's performance, and or cause actual results to differ. Materially from those anticipated, we caution you with respect to Reliance on forward-looking statements, and in this respect, refer
Profitability continues to improve and personal lines supported by rate and terms, earning in and lower frequency of auto collision and homeowners claims.
The cumulative impact of pricing as well as improved terms and conditions have significantly strengthened the underlying economics of our home book of business that said, we still intend to maintain significant price increases given the higher severity and unpredictable nature of cat losses.
Oksana Lukasheva: A reconciliation of these non-GAAP financial measures to the closest GAAP measure on a historical basis can be found in the press release, the slide presentation, or the financial supplement, which are posted on our website, as I mentioned earlier. With those comments, I will turn the call over to Jack.
In terms of tariffs, while we have not yet seen a material impact we do anticipate some minor loss cost increases emerging in the back half of the year for this reason, we're not in a hurry to decelerate auto pricing significantly.
Jack Roche: Thank you, Oksana. Good morning, everyone, and thank you for joining us. Our excellent second quarter results reflect the extraordinary progress we've made as a company. We're proud of our solid execution and consistent discipline. Our team is energized and focused as we step into the next phase of our growth journey at a time that's both exciting and dynamic for our business. At the core of our performance is a deeply experienced and talented team, a team that is fully aligned on our strategy, delivering a specialized and diversified portfolio of products through a select distribution model that targets the best independent agents in the business. What truly sets us apart is not just our product offering; it's the relationships we built and the way we engage with the top agents in our business.
Statement section in our press release the presentation deck, and our filings with the SEC. Today's discussion will also reference certain non-gaap Financial measures such as operating income and accident year, loss, and combined. Ratios, excluding catastrophes among others. A Reconciliation of these non-gaap Financial measures to the closest Gap measure on a historical basis, can be found in the press release, the slide presentation or the financial supplement, which are posted on our website. As I mentioned earlier, with those comments, I will turn the call over to Jack
Thank you Axana. Good morning, everyone. And thank you for joining us.
Our excellent second-quarter results reflect the extraordinary progress we've made as a company.
We are actively monitoring market conditions for any tariff impacts and we are ready to adjust pricing swiftly and precisely if and when tariff related pressures materialize.
We're proud of our solid execution and consistent discipline.
Our team is energized and focused as we step into the next phase of our growth Journey.
Overall, our personal lines book is exceptionally strong and the progress we've made puts us in an opportune position to capitalize on a complex and dynamic marketplace.
At a time, that's both exciting and dynamic for our business.
At the core of our performance, is a deeply experienced and talented team.
We believe we are well equipped to sustained profit margins, while executing on our targeted growth strategy.
A team that is fully aligned on our strategy, delivering, a specialized and diversified portfolio of products.
Do a select distribution model that targets the best independent agents in the business.
Turning to core commercial.
We're pleased with our overall performance, having diligently maintained healthy margins in the second quarter. Despite an evolving market environment core commercial profitability remained solid and our sub 90% ex cat combined ratio underscores the effectiveness of our strategic portfolio actions in prior quarters.
Jack Roche: Now more than ever, as agents and brokers across the spectrum are consolidating and actively redefining their business models, our differentiated approach is standing out and demonstrating great value. Today, with strong and broad-based earnings, our balanced and resilient portfolio is enabling us to remain agile and to perform very well through changing market conditions. We are intently focused on the dynamic market environment, which is characterized by significant variability across insurance product lines, industry classes, and even geography. We are seeing a divergence between various lines and segments, with property competition rising while liability pressures are building, and pricing in these lines is starting to firm. Our business outlook remains very positive. With widespread profitability and target-level returns across most segments, we're well-positioned to capitalize on emerging opportunities and to continue delivering high-quality results going forward.
What truly sets us apart is not just our product offering, it's the relationships, we built. And the way we engage with the top agents in our business. Now more than ever as agents and Brokers are consolidating and actively redefining their business models. Our differentiated approach is standing out and demonstrating great value.
Net written premium growth improved sequentially in Q2 fueled by accelerated top line momentum in small commercial where our more targeted pricing strategy is beginning to produce the desired results.
Today with strong and broad-based earnings are balanced and resilient. Portfolio is enabling us to remain agile and to perform very well through changing market conditions.
We're encouraged by the growth acceleration, we achieved in the quarter and we have visibility for improved growth through the year as we grow new business and as we strike the proper balance between pricing and retention in our renewal book.
We are intently focused on the dynamic Market environment which is characterized by significant variability across Insurance product lines, industry classes, and even geography.
We have multiple small commercial initiatives underway to drive even stronger new business activity, including expansion of our tap sales platform into workers' compensation, bringing our business owners advantage offering to life sciences organizations and multiple other sales initiatives.
We are seeing a Divergence between various lines and segments with property competition Rising. While a liability pressures are building and pricing in these lines is starting to firm.
Our business Outlook remains very positive.
We also appointed new agents further expanding distribution to improve our relevancy and access to additional market opportunities.
With widespread, profitability and Target level returns across most segments. We're well, positioned to capitalize on emerging opportunities and to continue delivering high-quality results going forward.
Jack Roche: Turning to our second quarter highlights, operating ROE was 18.7%, a record for the second quarter. Additionally, we delivered operating earnings of $4.35 per diluted share and earnings growth of approximately 25% on an ex-cap basis. Top-line growth started to accelerate in the second quarter, and we expect that to strengthen as we progress through the second half of the year and into 2026. Our overall combined ratio and ex-cap combined ratio both outperformed our expectations, improving by approximately 7 points and 3 points respectively compared to the second quarter of last year. Our personal lines business performed very well in the quarter as we achieved more balanced growth and strong profitability with high-quality execution across the board. Our net written premium growth trajectory continues to build, driven by renewal price increases, improving retention, and rising new business activity.
We are pleased with our improved performance and continued stability of our middle market business, particularly in the property oriented segments. This.
This progress reflects the significant underwriting actions, we've taken over the past several quarters. Most recently, we have witnessed some elevated competition in some areas of the middle market sector, and we are selectively passed on certain new business opportunities, where pricing was below our thresholds or where terms and conditions did not.
Turning to our second, quarter highlights. Operating Roe was 18.7% a record for the second quarter. Additionally, we delivered operating earnings of $1.35 per diluted, share and earnings growth of approximately 25%, on an xcap basis.
Topline growth started to accelerate in second quarter and we expect that to strengthen as we progress through the second half of the year and into 2026.
Meet our underwriting guidelines.
Our overall combined ratio and xcat combined, ratio both outperformed our expectations.
At the same time, we're sharpening our focus on high opportunity middle market sectors like technology life Sciences, and professional services and positioning for future opportunities as the liability market shows signs of firming.
Improving by approximately 7 points and 3 points respectively, compared to the second quarter of last year.
And these targeted industry segments, we are benefiting from strong brand recognition with our agents and a steady flow of submissions.
Our personalized business performed very well in the quarter, as we achieved more balanced growth and strong profitability with high-quality execution across the board.
Moving onto specialty net written premium growth was four 6% and we achieved an impressive mid <unk> combined ratio importantly.
Jack Roche: Notably, we delivered approximately 8% growth in our targeted diversification states, highlighting the effectiveness of our strategic focus. We're achieving quarter-over-quarter PIF growth in key geographies, where we're targeting profitable expansion that aligns with our margin objectives and enhances diversification across our business. We remain encouraged by the quality of personal lines' new business, with nearly all of it concentrated in account business. Our full account strategy continues to serve us well, enabling us to deliver holistic long-term solutions to customers and meet their needs with products that are more resilient to the competitiveness of the monoline auto market. With approximately 89% of our personal lines' business written on an account basis, we experience higher customer retention and loyalty. Additionally, with ongoing challenges and complexities around coverage in many states, homeowners is gradually becoming a lead line, further emphasizing the effectiveness of our account approach.
Importantly, our continued exceptional profitability allows us the flexibility to adjust pricing strategically to support our growth objectives.
Our net written premium, growth trajectory continues to build driven, by renewal price increases improving retention and Rising new business activity. Notably we delivered approximately 8% growth in our Target. Diversification States highlighting the effectiveness of our strategic Focus
We continue to remain conservative on programs business, and we're not chasing underpriced accounts and certain property focused lines.
We're achieving quarter over quarter. Pip growth in key geographies where we're targeting profitable expansion that aligns with our margin objectives and enhances diversification across our business.
At the same time, we delivered upper single digit to double digit growth across E&S, which grew 22% surety up 13% and healthcare, which increased 8%.
We remain encouraged by the quality of personalized, new business with nearly all of it, concentrated in account business.
And E&S the environment is favorable and the lower mid market and smaller size account space, which is our sweet spot and we continue to gain momentum in this area.
Our full account strategy, continues to serve us. Well enabling us to deliver, holistic long-term solutions to customers and meet their needs with products that are more resilient to the competitiveness of the monoline auto market.
With approximately 89% of our personalized business written on an account basis, we experience higher customer retention and loyalty.
We have also delivered a solid 7% growth in our industry, leading marine business.
We're especially pleased with the growth we are achieving in these lines as they are among our most profitable.
Additionally with ongoing challenges and complexities around coverage. In many states. Homeowners is gradually becoming a lead line further emphasizing the effectiveness of our account approach.
Jack Roche: Profitability continues to improve in personal lines, supported by rate and terms earning in and lower frequency of auto collision and homeowners' claims. The cumulative impact of pricing, as well as improved terms and conditions, has significantly strengthened the underlying economics of our home book of business. That said, we still intend to maintain significant price increases given the higher severity and unpredictable nature of CAT losses. In terms of tariffs, while we have not yet seen a material impact, we do anticipate some minor loss cost increases emerging in the back half of the year. For this reason, we're not in a hurry to decelerate auto pricing significantly. We are actively monitoring market conditions for any tariff impacts, and we are ready to adjust pricing swiftly and precisely if and when tariff-related pressures materialize.
Looking forward, we continue to see many opportunities across specialty, particularly in the smaller sized retail agency market, where pricing remains solid and growth is achievable at target or above target returns.
Profitability continues to improve and personal lines supported by rate and terms earning in and lower frequency of auto collision and homeowners claims.
Backed by deep expertise our team is well positioned to seize these opportunities further establishing specialty as a strong and accelerating growth engine.
Before I close I want to highlight a critical pillar of our overall strategy, our investments in data and analytics and technology for the future.
That said we still intend to maintain significant price increases given the higher severity and unpredictable nature of cat losses.
We're making deliberate strategic investments that are fueling smarter more scalable growth.
In terms of tariffs, while we have not yet seen a material impact, we do anticipate some minor loss cost increases emerging in the back half of the year.
These investments are positioning us to win in a rapidly evolving industry landscape.
For this reason, we're not in a hurry to decelerate Auto pricing significantly.
For example, while we continue to focus on point of sale platforms to support business generation.
We are also leveraging general of AI and AI capabilities to automate account submission ingestion build triage functionality and streamline workflow automation. These technologies are unlocking broader value creation across the enterprise for instance, and E&S, we are developing workflow.
We are actively monitoring market conditions, for any tariff impacts and we are ready to adjust pricing swiftly and precisely if. And when tariff related pressures materialize,
Jack Roche: Overall, our personal lines' book is exceptionally strong, and the progress we've made puts us in an opportune position to capitalize on a complex and dynamic marketplace. We believe we are well-equipped to sustain profit margins while executing on our targeted growth strategy. Turning to core commercial, we're pleased with our overall performance, having diligently maintained healthy margins in the second quarter despite an evolving market environment. Core commercial profitability remains solid, and our sub-90s ex-CAT combined ratio underscores the effectiveness of our strategic portfolio actions in prior quarters. Net written premium growth improved sequentially in Q2, fueled by accelerated top-line momentum in small commercial, where our more targeted pricing strategy is beginning to produce the desired results.
Overall, our personal lines book is exceptionally strong and the progress we've made puts us in an opportune position to capitalize on a complex and dynamic Marketplace.
Automation and AI powered triage functions intended to double throughput on high quality submissions and speed up the quote turnaround with our best agents.
We believe we are well equipped to sustain profit margins. While executing on our targeted growth strategy.
Turning to core commercial.
Workflow transformation in underwriting claims and service functions is a top priority and we are excited about the value creation that comes from operational efficiency enhanced decision, making and a more seamless customer experience across these functions.
We're pleased with our overall performance having diligently maintained healthy margins. In the second quarter despite an evolving Market environment. Core commercial, profitability remains solid and our sub 900s. Xcat combined ratio, underscores the effectiveness of our strategic portfolio actions in Prior quarters.
Our underwriting claims and service professionals are very excited about the ways in which these technologies can enhance their effectiveness and their job satisfaction.
We remain highly disciplined in our investment approach directing resources towards the areas with the greatest potential impact.
Jack Roche: We're encouraged by the growth acceleration we achieved in the quarter, and we have visibility for improved growth through the year as we grow new business and as we strike the proper balance between pricing and retention in our renewal book. We have multiple small commercial initiatives underway to drive even stronger new business activity, including expansion of our TAP sales platform into workers' compensation, bringing our business owners' advantage offering to life sciences organizations, and multiple other sales initiatives. We also appointed new agents, further expanding distribution to improve our relevancy and access to additional market opportunities. We are pleased with our improved performance and continued stability of our middle market business, particularly in the property-oriented segments. This progress reflects the significant underwriting actions we've taken over the past several quarters.
Net written premium growth, improved sequentially in Q2 fueled by accelerated Topline momentum and small commercial where our more targeted pricing strategy, is beginning to produce the desired results.
Notably more than 40% of our employees interact with customers and agents daily processing millions of calls E mails and transactions.
We're the growth acceleration, we achieved in the quarter and we have visibility for improved growth through the year as we grow new business. And as we strike, the proper balance between pricing and retention in our renewable book.
This underscores the significant opportunity we have to streamline and elevate these critical touch points.
Ultimately our focuses on empowering our people and partners with tools that make us faster sharper and more connected charting a course for long term success, we delivered outstanding second quarter results, surpassing our target returns and accelerating growth.
We have multiple small commercial initiatives underway to drive, even stronger, new business activity, including expansion of our tap sales, platform into workers compensation. Bringing our business owners Advantage, offering to Life Sciences organizations and multiple other sales initiatives.
We also appointed new agents further expanding distribution to improve our relevancy and access to additional Market opportunities.
Which demonstrate the strong positive momentum we are carrying into the second half of the year.
We couldnt be more excited about our prospects moving forward.
We are pleased with our improved performance and continued stability of our Middle Market business, particularly in the property oriented segments,
With that I will now turn the call over to Jeff.
Jack Roche: Most recently, we have witnessed some elevated competition in some areas of the middle market sector, and we have selectively passed on certain new business opportunities where pricing was below our thresholds or where terms and conditions did not meet our underwriting guidelines. At the same time, we're sharpening our focus on high-opportunity middle market sectors like technology, life sciences, and professional services, and positioning for future opportunities as the liability market shows signs of firming. In these targeted industry segments, we are benefiting from strong brand recognition with our agents and a steady flow of submissions. Moving on to specialty, net written premium growth was 4.6%, and we achieved an impressive mid-80s combined ratio. Importantly, our continued exceptional profitability allows us the flexibility to adjust pricing strategically to support our growth objectives.
Thank you Jack and good morning, everyone. We are very pleased with our outstanding results in the second quarter, which reflect continued momentum in our earnings trajectory and an improving top line.
Each segment of our business performed very well further validating the strength and resilience of our diversified portfolio.
This progress, reflects the significant underwriting actions. We've taken over the past several quarters. Most recently we have witnessed some elevated competition in some areas of the Middle Market sector and we have selectively passed on certain new business opportunities where pricing was below our thresholds or where terms and conditions did not meet our underwriting guidelines.
In personal lines, we achieved significant margin improvement supported by our targeted actions and strong pricing our specialty segment outperformed our expectations and in core commercial as we anticipated a few anomalous large property losses, we experienced in Q1 <unk>.
At the same time, we're sharpening. Our focus on high opportunity, Middle Market sectors, like, technology, life sciences, and Professional Services, and positioning for future opportunities, as the liability Market shows signs of farming.
in these targeted industry, segments, we are benefiting from strong brand recognition, with our agents, and a steady flow of submissions,
Sided and performance in this book remains very strong.
Moving on to Specialty Net. Written premium growth was 4.6%.
In the second quarter, we delivered a combined ratio of 92, 5% an improvement of six seven points year over year, excluding catastrophes, our combined ratio of 85, 5% improved three points compared to last year's second quarter.
And we achieved an impressive, mid 80s, combined ratio.
Importantly, our continued exceptional profitability allows us the flexibility to adjust pricing strategically to support our growth objectives.
Jack Roche: We continue to remain conservative on programs business, and we're not chasing underpriced accounts in certain property-focused lines. At the same time, we delivered upper single-digit to double-digit growth across E&S, which grew 22%, surety up 13%, and healthcare, which increased 8%. In E&S, the environment is favorable in the lower mid-market and smaller size account space, which is our sweet spot, and we continue to gain momentum in this area. We have also delivered a solid 7% growth in our industry-leading marine business. We're especially pleased with the growth we are achieving in these lines as they are among our most profitable. Looking forward, we continue to see many opportunities across specialty, particularly in the smaller size retail agency market, where pricing remains solid and growth is achievable at target or above target returns.
Our current accident year loss ratio, excluding cats was 56, 1% improving two eight points from prior year quarter led by strong improvement in personal lines and in specialty.
We continue to remain conservative on programs business. And we're not chasing underpriced accounts in certain property focused lines.
at the same time we delivered upper single digit to double digit growth across ens which grew 22%
Despite a relatively active quarter for severe convective storms catastrophe losses of seven points came in below our second quarter assumption highlighting the effectiveness of our catastrophe management actions. This was inclusive of four points of prior year favorable cat development.
shy up, 13% and health care, which increased 8%
In ens the environment is favorable in the lower, mid-market and smaller size account space, which is our sweet spot and we continue to gain momentum in this area.
Our expense ratio of 36% was consistent with our expectations for the quarter and was 20 basis points better than a year ago. We continue to maintain a thoughtful approach to expense management keeping costs aligned with our financial goals.
We have also delivered a solid 7% growth in our industry-leading marine business.
We're especially pleased with the growth. We are achieving in these lines as they are among our most profitable.
Net investment income increased 16, 7% to $105 5 million and remains a significant contributor to our overall financial performance second.
Jack Roche: Backed by deep expertise, our team is well-positioned to seize these opportunities, further establishing specialty as a strong and accelerating growth engine. Before I close, I want to highlight a critical pillar of our overall strategy: our investments in data and analytics and technology for the future. We're making deliberate strategic investments that are fueling smarter, more scalable growth. These investments are positioning us to win in a rapidly evolving industry landscape. For example, while we continue to focus on point-of-sale platforms to support business generation, we are also leveraging generative AI and AI capabilities to automate account submission ingestion, build triage functionality, and streamline workflow automation. These technologies are unlocking broader value creation across the enterprise. For instance, in E&S, we are developing workflow automation and AI-powered triage functions intended to double throughput on high-quality submissions and speed up the quote turnaround with our best agents.
Looking forward, we continue to see many opportunities across specialty, particularly in the smaller size retail agency market, where pricing remains solid and growth is achievable at Target or above Target returns.
Second quarter favorable ex cat prior year reserve development of $18 2 million included favorably across each segment.
Backed by Deep expertise, our team is well positioned to seize these opportunities further establishing specialty as a strong and accelerating growth engine.
We are experiencing favorability in property and at the same time, our exercising vigilance in liability lines.
Before I close, I want to highlight a critical pillar of our overall strategy, our investments in data and analytics and technology for the future.
We continue to take a prudent and data driven approach to reserving to stay ahead of the trends.
We're making deliberate strategic Investments that are fueling smarter more scalable growth.
In specialty favorable development was $12 5 million or three five points with favorability in professional and executive lines claims made business and marine.
Are positioning us to win in a rapidly evolving industry, landscape.
for example, while we continue to focus on point of sale platforms to support business generation,
In personal lines favorable prior year reserve development was $2 6 million or four points with favorability in both auto and home.
And in core commercial favorable prior year reserve development was $3 million or <unk> <unk> five points <unk>.
<unk> and CMP and to a lesser extent workers' comp was partially offset by increased reserving in commercial auto in response to rising severity and litigation activity.
Jack Roche: Workflow transformation in underwriting, claims, and service functions is a top priority, and we are excited about the value creation that comes from operational efficiency, enhanced decision-making, and a more seamless customer experience across these functions. Our underwriting claims and service professionals are very excited about the ways in which these technologies can enhance their effectiveness and their job satisfaction. We remain highly disciplined in our investment approach, directing resources toward the areas with the greatest potential impact. Notably, more than 40% of our employees interact with customers and agents daily, processing millions of calls, emails, and transactions. This underscores the significant opportunity we have to streamline and elevate these critical touchpoints. Ultimately, our focus is on empowering our people and partners with tools that make us faster, sharper, and more connected, charting a course for long-term success.
we are also leveraging generative Ai and AI capabilities to automate account. Submission, ingestion, build triage functionality and streamline workflow automation. These Technologies are unlocking broader value creation across the Enterprise for instance in ens we are developing workflow Automation and AI powered triage functions intended to double throughput on high-quality submissions and speed up the quote turnaround with our best agents.
Our commercial liability portfolio as thoughtfully constructed to mitigate volatility with lower policy limits virtually no model line or long haul trucking and auto no exposure to public company, D&O and no standalone or unsupported umbrella business we.
Workflow transformation in underwriting claims and service functions is a top priority and we are excited about the value creation. That comes from operational efficiency. Enhanced decision-making and a more seamless customer experience across these functions.
We maintain a strong reserve position, reflecting the disciplined and prudent approach we've taken over time to ensure reserve adequacy and resilience.
Our underwriting claims and service professionals are very excited about the ways in which these Technologies can enhance their effectiveness, and their job satisfaction.
Now I will further discuss each segment's current accident year results, starting with personal lines.
We remain highly disciplined in our investment approach directing resources toward the areas with the greatest potential impact.
This business generated a very strong current accident year ex cat combined ratio of 84, 8% for the second quarter, reflecting five four points of improvement from the prior year period.
Notably more than 40% of our employees interact with customers and agents daily.
Processing, millions of calls emails and transactions.
This was driven by the benefit of earned pricing above loss trends and favorable property frequency.
This underscores the significant opportunity we have to streamline and Elevate these critical touch points.
Our personal auto ex cat current accident year loss ratio was 66, 2% an improvement of three nine points compared to the prior year quarter, driven by earned pricing and a continued loss frequency benefit.
Jack Roche: We delivered outstanding second quarter results, surpassing our target returns and accelerating growth, which demonstrate the strong positive momentum we are carrying into the second half of the year. We couldn't be more excited about our prospects moving forward. With that, I will now turn the call over to Jeff. Thank you, Jack, and good morning, everyone. We are very pleased with our outstanding results in the second quarter, which reflect continued momentum in our earnings trajectory and an improving top line. Each segment of our business performed very well, further validating the strength and resilience of our diversified portfolio. In personal lines, we achieved significant margin improvement, supported by our targeted actions and strong pricing. Our specialty segment outperformed our expectations. And in core commercial, as we anticipated, a few anomalous large property losses we experienced in Q1 subsided, and performance in this book remains very strong.
Ultimately, our focus is on empowering, our people, and partners with tools that make us faster sharper and more connected charting a course for long-term success.
We delivered outstanding second quarter results, surpassing our Target returns and accelerating growth.
We're seeing favorable frequency trends across all coverages, particularly in collision while remaining prudent on elevated bodily injury severity driven by larger catastrophic type claims.
Which demonstrate the strong positive momentum. We are carrying into the second half of the year.
We couldn't be more excited about our prospects moving forward.
With that, I will now turn the call over to Jeff.
Thank you Jack and good morning everyone.
We are also closely monitoring auto property severity for signs of tariff impact but to date, we have not observed much of an effect turning to homeowners, we posted substantial ex cat current accident year loss ratio enhancement, improving six four points.
We are very pleased with our outstanding results. In the second quarter, which reflect continued, momentum, in our earnings trajectory and an improving Topline.
Segment of our business performed very well. Further validating the strength, and resilience of our Diversified portfolio.
This was favorable relative to our expectations driven by strong earned pricing some impact of benign weather and lower attritional loss frequency, which we partially attribute to deductible changes leading to fewer small claims.
In personal lines, we achieved significant margin improvement supported by our targeted actions and strong pricing.
Our specialty segment outperformed our expectations.
Similar to Q1 personal lines umbrella was quieter in the quarter. We continue to Vigilantly monitor umbrella to stay ahead of evolving industry trends, while achieving healthy price increases of approximately 23% in Q2.
Jack Roche: In the second quarter, we delivered a combined ratio of 92.5%, an improvement of 6.7 points year over year. Excluding catastrophes, our combined ratio of 85.5% improved 3 points compared to last year's second quarter. Our current accident year loss ratio, excluding CATs, was 56.1%, improving 2.8 points from prior year quarter, led by strong improvement in personal lines and in specialty. Despite a relatively active quarter for severe convective storms, catastrophe losses of 7 points came in below our second quarter assumption, highlighting the effectiveness of our catastrophe management actions. This was inclusive of 0.4 points of prior year favorable CAT development. Our expense ratio of 30.6% was consistent with our expectations for the quarter and was 20 basis points better than a year ago. We continue to maintain a thoughtful approach to expense management, keeping costs aligned with our financial goals.
And in court commercial as we anticipated a few anomalous, large property losses, we experienced in q1 subsided and performance in this book. Remains very strong.
Auto and home posted strong pricing gains in the second quarter auto pricing at nine 8% was slightly lower than in the first quarter, but still above long term loss trend home pricing ticked up sequentially to 15, 7%. Our homeowners book is fully transitioned to new terms and.
In the second quarter, we delivered a combined ratio of 92.5% and Improvement of 6.7 points. Year-over-year excluding, catastrophes are combined ratio of 85.5% improved, 3 points compared to last year's second quarter.
<unk> and targeted states.
Our current acts in your loss, ratio, excluding cats was 56.1%, improving 2.8 points. From prior year quarter, led by strong Improvement in personal lines, and in specialty,
With overall home exposures back to positive levels and consistent with longer term historical averages.
We expect overall pricing to remain strong through the remainder of the gear.
Our pricing remains ahead of loss trends positioning us to continue to achieve target profitability for 2025 and personal lines.
Despite a relatively active quarter for severe convective. Storms, catastrophe, losses of 7 points came in below our second quarter, assumption highlighting the effectiveness of our catastrophe management actions. This was inclusive of 04 points of Prior year, favorable cat development.
Personal lines growth was three 7% an increase from the first quarter, new business momentum is especially evident in our target diversification states with double digit growth both sequentially and year over year.
Our expense ratio of 30.6% was consistent with our expectations for the quarter and was 20 basis points better than a year ago.
Jack Roche: Net investment income increased 16.7% to 105.5 million and remains a significant contributor to our overall financial performance. Second quarter favorable ex-CAT prior year reserve development of 18.2 million included favorability across each segment. We are experiencing favorability in property, and at the same time, our exercising vigilance in liability lines. We continue to take a prudent and data-driven approach to reserving to stay ahead of the trends. In specialty, favorable development was 12.5 million or 3.5 points, with favorability in professional and executive lines, claims made business, and marine. In personal lines, favorable prior year reserve development was 2.6 million or 0.4 points, with favorability in both auto and home. And in core commercial, favorable prior year reserve development was 3 million or 0.5 points.
We continue to maintain a thoughtful approach to expense management, keeping costs aligned with our financial goals.
We are nearing the completion of planned exposure reductions and while the geographic rebalancing of our personal lines portfolio will continue we expect to return to positive <unk> expansion in the fourth quarter of this year.
Net investment income. Increased 16.7% to 105.5 million and remains a significant contributor to our overall financial performance.
Now turning to our core commercial segment.
We delivered a combined ratio of 93% and a combined ratio excluding catastrophes of 88, 9%.
Second quarter, favorable, xcap prior year, Reserve development of 18.2 million included favorability across each segment.
We posted a strong underlying loss ratio of 56, 5%.
This was 80 basis points above Q2 last year, which was a low watermark for the 2024 year as expected our second quarter 2025 loss ratio is an improvement over the full year 2024.
We are experiencing favorability in property and at the same time, our exercising vigilance in liability lines. We continue to take a prudent and data-driven approach to reserving to stay ahead of the trends.
In specialty, favorable development was 12.5 million or 3.5 points with favorability. In professional and executive lines, claims made business and Marine
We're seeing favorability in CMP as pricing above loss trend has earned in and large loss activity normalize from elevated levels last quarter in commercial auto we remained cautious in our current accident year picks we expect pricing to elevate seeking double digit increase.
Points with favorability in both auto and home.
Jack Roche: Favorability in CMP and, to a lesser extent, workers' comp was partially offset by increased reserving in commercial auto in response to rising severity and litigation activity. Our commercial liability portfolio is thoughtfully constructed to mitigate volatility with lower policy limits, virtually no model line or long-haul trucking in auto, no exposure to public company D&O, and no standalone or unsupported umbrella business. We maintain a strong reserve position, reflecting the disciplined and prudent approach we've taken over time to ensure reserve adequacy and resilience. Now, I'll further discuss each segment's current accident year results, starting with personal lines. This business generated a very strong current accident year ex-CAT combined ratio of 84.8% for the second quarter, reflecting 5.4 points of improvement from the prior year period. This was driven by the benefit of earned pricing above loss trends and favorable property frequency.
And in core commercial favorable prior year Reserve development was 3 million or 0.5 points.
In this line.
Net written premiums grew four 4% led by five 6% growth in small commercial driven by double digit new business growth and strong stable retention.
Favorability in CMP and to a lesser extent workers comp was partially offset by increased reserving in commercial Auto in response to Rising severity and litigation activity.
Middle market grew two 4%, reflecting disciplined execution in a more competitive environment.
Moving on to specialty.
Our current accident year loss ratio ex cat was 49.0% favorable to both expectations and the prior year quarter, primarily driven by excellent property results in marine in Hanover specialty industrial while liability coverages are tracking within expectations. We continue.
Our commercial liability portfolio is thoughtfully constructed to mitigate volatility with lower policy limits virtually no model line or long-haul Trucking in Auto, no exposure to public company dno and no Standalone or unsupported umbrella business.
We maintain a strong Reserve position reflecting the disciplined and prudent approach. We've taken over time to ensure reserve, adequacy and resilience
Now, I'll further discuss each segment's current accidents in the year. Results, starting with personal lines.
To expect go forward results to be in line with our low <unk> long term target.
Specialty renewal pricing was seven 8% while at the same time retention improved sequentially to 81, 8% underscoring the continued appetite for our offerings.
This business generated, a very strong, current accent ear, xcat combined ratio of 84.8% for the second quarter reflecting 5.4 points of improvement from the prior year period.
Pricing remains strong and in line with loss trends.
Jack Roche: Our personal auto ex-CAT current accident year loss ratio was 66.2%, an improvement of 3.9 points compared to the prior year quarter, driven by earned pricing and a continued loss frequency benefit. We're seeing favorable frequency trends across all coverages, particularly in collision, while remaining prudent on elevated bodily injury severity driven by larger catastrophic type claims. We are also closely monitoring auto property severity for signs of tariff impact, but to date, we have not observed much of an effect. Turning to homeowners, we posted substantial ex-CAT current accident year loss ratio enhancement, improving 6.4 points. This was favorable relative to our expectations, driven by strong earned pricing, some impact of benign weather, and lower attritional loss frequency, which we partially attribute to deductible changes leading to fewer small claims. Similar to Q1, personal lines umbrella was quieter in the quarter.
This was driven by the benefit of earned pricing above loss trends and favorable property frequency.
We are very pleased with the performance in our specialty book and remain confident in our positioning to further capture attractive growth opportunities in our markets.
Our personal Auto xcat current accident year, loss ratio was 66.2% and Improvement of 3.9 points. Compared to the prior year quarter.
Turning to reinsurance we completed a successful renewal of our property treaties on July one.
Driven by earned pricing and a continued loss. Frequency benefit.
The market response was very favorable reflecting the effectiveness of our property and catastrophe management initiatives.
The highlights of our current property reinsurance program are as follows we renewed both treaties our property per risk and cat occurrence, maintaining or enhancing structures relative to prior year.
We're seeing favorable frequency Trends across all coverages particularly in Collision while remaining prudent on elevated. Bodily injury severity driven by larger catastrophic type claims.
We issued our third and largest cat bond with expanded coverage positive investor interest allowed us to upsize this bond of $200 million at the low end of price guidance.
We are also closely monitoring Auto property severity, for signs of tariff impact. But to date, we have not observed much of an effect turning the homeowners, we posted substantial, xcat current accent, ear loss, ratio enhancement improving, 6.4 points.
We also added a new $100 million traditional reinsurance layer on top of our existing reinsurance tower.
Taken together these changes have resulted in a $150 million increase in reinsurance limits in our cat occurrence program that now exhausts at $2 <unk> 5 billion, while maintaining our $200 million retention, we achieved better than expected financial outcomes highlighted by a double digit reduction.
this was favorable relative to our expectations driven by strong earned pricing some impact of benign weather and lower attritional loss frequency which we partially attribute to deductible changes leading to fewer small claims
Jack Roche: We continue to vigilantly monitor umbrella to stay ahead of evolving industry trends while achieving healthy price increases of approximately 23% in Q2. Both auto and home posted strong pricing gains in the second quarter. Auto pricing at 9.8% was slightly lower than in the first quarter, but still above long-term loss trend. Home pricing kicked up sequentially to 15.7%. Our homeowners' book is fully transitioned to new terms and conditions in targeted states, with overall home exposures back to positive levels and consistent with longer-term historical averages. We expect overall pricing to remain strong through the remainder of the year. Our pricing remains ahead of loss trends, positioning us to continue to achieve target profitability for 2025 in personal lines. Personal lines growth was 3.7%, an increase from the first quarter.
similar to q1 personal lines. Umbrella was quieter in the quarter.
We continue to vigilantly monitor umbrella to stay ahead of evolving industry, Trends while achieving healthy price increases of approximately 23% in Q2.
And risk adjusted reinsurance costs on our loss free Cat program.
The property per risk maintain the attachment point and was priced at better than original expectations.
Moving on to investment performance.
Both auto and home posted, strong pricing gains in the second quarter, Auto pricing at 9.8% with slightly lower than in the first quarter. But still above long-term loss Trend. Home pricing kicked up. Sequentially to 15.7%
Net investment income increased 16, 7% in the quarter driven by higher earned yields in our fixed income portfolio, reflecting both the favorable rate environment and continued growth in operating cash flows.
Our homeowners book is fully transitioned to new terms and conditions and targeted states.
With overall home, exposures back to positive levels and consistent with longer term, historical averages.
And at the same time, our underwriting profitability is generating solid cash flows and reinforces the financial foundation of our business.
We expect overall pricing to remain strong through the remainder of the year.
Together with attractive yields these elements not only support the continued growth and resilience of our asset base, but also position us to achieve meaningfully higher net investment income over time further contributing to the overall earnings power of the company, we're very pleased with the positioning and performance of our investment.
Our pricing remains ahead of loss, Trends, positioning us to continue to achieve Target profitability for 2025 in personal lines.
Jack Roche: New business momentum is especially evident in our target diversification states, with double-digit growth both sequentially and year over year. We are nearing the completion of planned exposure reductions, and while the geographic rebalancing of our personal lines portfolio will continue, we expect to return to positive PIF expansion in the fourth quarter of this year. Now, turning to our core commercial segment, we delivered a combined ratio of 93% and a combined ratio excluding catastrophes of 88.9%. We posted a strong underlying loss ratio of 56.5%. This was 80 basis points above Q2 last year, which was a low watermark for the 2024 year. As expected, our second quarter 2025 loss ratio is an improvement over the full year 2024. We're seeing favorability in CMP as pricing above loss trend has earned in and large loss activity normalized from elevated levels last quarter.
Personal lines. Growth was, 3.7% and increase from the first quarter, new business. Momentum is especially evident in our Target, diversification states. With double-digit growth, both sequentially and year-over-year.
Portfolio.
Moving on to our equity and capital position, our book value increased 6% sequentially and 13, 2% year to date.
We continue to participate in share buybacks in Q2, demonstrating our commitment to returning capital to shareholders is a key component of our capital management strategy.
We are nearing the completion of planned exposure reductions. And while the geographic rebalancing of our personalized portfolio will continue, we expect to return to positive pif expansion in the fourth quarter of this year.
Now, turning to our core commercial segment.
From the beginning of April through July 28, the company repurchased approximately 295000 shares of common stock totaling $48 2 million of which approximately 170000 were purchased during the second quarter of 2025 for $27 6 million with the.
we delivered a combined ratio of 93%, and a combined ratio excluding catastrophes of 88.9%
We posted a strong underlying loss ratio of 56.5%.
This was 80 basis points above Q2 last year, which was a low watermark for the 2024 year.
<unk> balanced purchased through a <unk> one plan during July.
We have approximately $244 million of remaining capacity under our existing share repurchase program.
As expected our second quarter, 2025 loss ratio is an improvement over the full year 2024.
Our third quarter cat load is expected to be six 8%.
Now that our aggregation initiatives in personal lines and the underwriting initiatives in middle market are mostly complete we are well positioned to profitably grow these portfolios along with small commercial and specialty accordingly, we expect growth of net written premiums to be in the 6% to <unk>.
Jack Roche: In commercial auto, we remained cautious in our current accident year picks. We expect pricing to elevate, seeking double-digit increases in this line. Net written premiums grew 4.4%, led by 5.6% growth in small commercial, driven by double-digit new business growth and strong stable retention. Middle market grew 2.4%, reflecting disciplined execution in a more competitive environment. Moving on to specialty, our current accident year loss ratio ex-CAT was 49.0%, favorable to both expectations and the prior year quarter, primarily driven by excellent property results in marine and Hanover Specialty Industrial, while liability coverages are tracking within expectations. We continue to expect go-forward results to be in line with our low 50s long-term target. Specialty renewal pricing was 7.8%, while at the same time, retention improved sequentially to 81.8%, underscoring the continued appetite for our offerings. Pricing remains strong and in line with loss trends.
We're seeing favorability in CMP as pricing above loss, trend has earned in and large loss. Activity normalized from elevated levels. Last quarter,
In commercial Auto, we remained cautious in our current accident ear picks. We expect pricing to elevate seeking double-digit increases in this line.
7% range for the second half of 2025 through the first six months of the year. We've delivered strong results that highlight the momentum we've built across the business demonstrated by year to date operating return on equity of 18%.
.6% growth in small commercial driven by double-digit new business growth and strong stable, retention,
Middle Market grew 2.4% reflecting discipline execution in a more competitive environment.
Moving on to Specialty.
With both our underwriting and investment performance contributing.
The momentum we've built gives us great confidence in our ability to continue to delivering outstanding results in the second half of the year.
We are very optimistic about our future with the fundamentals of our business strong and we remain intently focused on executing our strategy.
Our current accent your loss. Ratio xcat was 49.0%, favorable to both expectations and the prior year quarter primarily driven by excellent property results in Marine and Hannover specialty industrial. While liability coverages are tracking within expectations.
We continue to expect go-forward results to be in line with our low 50s long-term target.
In this dynamic environment, we are well positioned to deliver success this year and beyond.
With that we're ready to open the line for questions operator.
Specialty renewal pricing with 7.8% while at the same time, retention improves sequentially to 81.8% underscoring, the continued appetite for our offerings.
We will now begin the question and answer session.
Jack Roche: We are very pleased with the performance in our specialty book and remain confident in our positioning to further capture attractive growth opportunities in our markets. Turning to reinsurance, we completed a successful renewal of our property treaties on July 1st. The market response was very favorable, reflecting the effectiveness of our property and catastrophe management initiatives. The highlights of our current property reinsurance program are as follows. We renewed both treaties, our property per risk and CAT occurrence, maintaining or enhancing structures relative to prior year. We issued our third and largest CAT bond with expanded coverage. Positive investor interest allowed us to upsize this bond to 200 million at the low end of price guidance. We also added a new 100 million traditional reinsurance layer on top of our existing reinsurance tower.
Pricing remains strong and in line with loss trends.
To ask a question you May Press Star then one on your Touchtone phone.
If youre using a speakerphone please pick up your handset before pressing the keys and.
We are very pleased with the performance in our specialty book and remain confident in our positioning to further capture attractive growth opportunities in our markets.
To withdraw your question you May Press Star then two.
At this time, we will pause momentarily to assemble our roster.
Turning the reinsurance, we completed a successful renewal of our property treaties on July 1st.
The market response was very favorable reflecting the effectiveness of our property and catastrophe management initiatives.
And our first question here will come from Michael <unk> with Oppenheimer. Please go ahead.
The highlights of our current property, reinsurance program are as follows.
Thank you good morning, I wanted to start with the specialty segment.
I kind of want to ask about the kind of a decelerating rate environment, there and at what point does your current book kind of bump up against loss trends there, even though you are still getting phenomenal results, but maybe Jack your opening comments are part of the answer to that and so I kind of wanted to see if thats. The case, because you're really focused on the E&S and a small retail.
We renewed both treaties, our property per risk and Cat occurrence maintaining or enhancing structures relative to Prior year.
We issued our third and largest cat bond with expanded coverage.
Positive. Investor interests, allowed us to upsize this bond to 200 million at the low end of price guidance.
Jack Roche: Taken together, these changes have resulted in a $150 million increase in reinsurance limits in our CAT occurrence program that now exhausts at 2.05 billion while maintaining our $200 million retention. We achieved better than expected financial outcomes highlighted by a double-digit reduction in risk-adjusted reinsurance costs on our loss-free CAT program. The property per risk maintained the attachment point and was priced at better than original expectations. Moving on to investment performance, net investment income increased 16.7% in the quarter, driven by higher earned yields in our fixed income portfolio, reflecting both the favorable rate environment and continued growth in operating cash flows. And at the same time, our underwriting profitability is generating solid cash flows and reinforces the financial foundation of our business.
We also added a new 100 million traditional reinsurance layer on top of our existing reinsurance Tower.
Accounts, there and maybe the answer is over time that specialty segment start to see a bit of a mix change than what your current book as.
Anyway.
That's the question.
Great well thanks for the question Mike.
I'll, let Brian chime in here, but.
Taken together, these changes have resulted in a 150 million increase in reinsurance limits in our cat occurrence program. That now exhausts at 2. 0 5,
Really proud of the fact that over a course of the last decade, plus we've developed a really diversified now high performing specialty business.
we achieved better than expected Financial outcomes. Highlighted by a double-digit reduction in Risk adjusted reinsurance costs on our loss, free cat program.
That really allows us to.
Emerge to the market opportunities, but at the same point understand where the competition lies in how we adjust to that so but Brian you can speak more specifically about how you are managing through the competitive landscape yes.
The property per risk, maintained the attachment point and was priced at better than original expectations.
Moving on to investment performance.
Like a lot of your comments are really consistent with the way we're thinking about this right. So I would start by saying the pricing is still resilient silica consistent with loss trend.
And as you mentioned the ongoing profitability of our portfolio looks very good but then.
Jack Roche: Together with attractive yields, these elements not only support the continued growth and resilience of our asset base, but also position us to achieve meaningfully higher net investment income over time, further contributing to the overall earnings power of the company. We're very pleased with the positioning and performance of our investment portfolio. Moving on to our equity and capital position, our book value increased 6% sequentially and 13.2% year to date. We continued to participate in share buybacks in Q2, demonstrating our commitment to returning capital to shareholders as a key component of our capital management strategy. From the beginning of April through July 28th, the company repurchased approximately 295,000 shares of common stock, totaling 48.2 million, of which approximately 170,000 were purchased during the second quarter of 2025 for 27.6 million, with the remaining balance purchased through a 10(b)(5)(1) plan during July.
Net investment income increased 16.7% in the quarter driven by higher earned yields in our fixed income. Portfolio reflecting both the favorable rate environment and continued growth in operating cash flows. And at the same time, our underwriting profitability is generating solid cash flows and reinforces the financial Foundation of our business.
Or are you kind of touched on that gas has gone to right now.
We have increasingly differentiator ourselves the ability to write that lower middle market and small business, where there is less volatility in the pricing can remain more resilient and so as you know as we continue to invest there and drive growth.
Together with attractive yields, these elements, not only support the continued growth and resilience of our asset base but also position us to achieve meaningfully higher, net investment income over time, further contributing to the overall earnings power of the company.
We're very pleased with the positioning and performance of our investment portfolio.
Into the small part of our portfolio.
Really making.
Meaningful differentiation for our agents, because theyre investing and streamlining the placements of that kind of business, we're just really well positioned.
Moving on to our equity and capital position. Our book value increase 6% sequentially and 13.2% year to date.
Okay. Thank you and I hate to ask it looks like lithium took a small small number but.
We continue to participate and share BuyBacks and Q2 demonstrating our commitment to returning, Capital to shareholders as a key component of our Capital Management strategy.
The commercial auto charge, it's a big piece of your business, but we've seen sort of a trend with number of companies, where one quarter, maybe two quarters, maybe three quarters. So maybe just confidence that that's not going to be the case for you guys.
Could be the start of a trend in commercial auto.
Thank you, Mike where favorable development in all segments. There is 3 million favorable in core and as we said CMT and workers comp had some favorability in seal auto we added to reserves.
From the beginning of April, through July 28th. The company repurchases, approximately 295,000, shares of common stock totaling. 48.2 million of which approximately 170,000 were purchased. During the second quarter of 2025 for 27.6 million with the remaining balance purchased through.
Jack Roche: We have approximately 244 million of remaining capacity under our existing share repurchase program. Our third quarter CAT load is expected to be 6.8%. Now that our aggregation initiatives in personal lines and the underwriting initiatives in middle market are mostly complete, we are well-positioned to profitably grow these portfolios along with small commercial and specialty. Accordingly, we expect growth of net written premiums to be in the 6% to 7% range for the second half of 2025. Through the first six months of the year, we've delivered strong results that highlight the momentum we've built across the business, demonstrated by year-to-date operating return on equity of 18%, with both our underwriting and investment performance contributing. The momentum we've built gives us great confidence in our ability to continue delivering outstanding results in the second half of the year.
At 10 B, 51 plan during July.
We have approximately 244 million of remaining capacity under our existing share repurchase program.
All of those items in core commercial were single digit non material amounts.
Our third quarter cat load is expected to be 6.8%.
US the commercial auto is a relatively small line, it's about $400 million of premium we've actually had half shrinking over the last several years and we've got a fairly small risk profile and the increase in reserves is IV at our in effect, our case reserve levels are down and IV.
Now, that our aggregation initiatives and personal lines, and the underwriting initiatives in Middle Market are mostly complete.
<unk> is up significantly.
Okay. Thanks, Jeff.
Just one quick small one Jeff you mentioned in your comments on personal auto.
The bodily injury severity are you seeing more of those kind of higher type claims happened in this quarter that might suggest some warning signs there or was there anything kind of anomalies this quarter.
We are well positioned to profitably grow these portfolios along with small commercial and Specialty accordingly, we expect growth of net written premiums to be in the 6 to 7% range for the second half of 2025 through the first 6 months of the year. We've delivered strong results. That highlight the momentum we've built across the business demonstrated by year-to-date operating return on Equity of 18%.
Both our underwriting and investment performance contributing.
Largely just prudence there with the frequency benefit that we're seeing it's just appropriate what we're hearing in the market and worrying about liability and lawyer involvement.
Jack Roche: We are very optimistic about our future, with the fundamentals of our business strong, and we remain intently focused on executing our strategy. In this dynamic environment, we are well-positioned to deliver success this year and beyond. With that, we are ready to open the line for questions. Operator.
The momentum we've built gives us great confidence in our ability, to continue to delivering outstanding results in the second half of the year.
Yes, okay. Good. Thank you I appreciate it.
We are very optimistic about our future with the fundamentals of our business strong and we remain intently focused on executing our strategy.
Yeah.
Yeah.
And our next question will come from Mike Zaremski with BMO. Please go ahead.
In this Dynamic environment. We are well, positioned to deliver success this year and Beyond
Hey, good morning, Thanks on the.
With that, we are ready to open the line for questions. Operator.
Catastrophe load guidance for Q I believe I heard a number in the high sixes.
Joe: We will now begin the question and answer session. To ask a question, you may press star, then one on your touch-tone phone. If you're using a speaker phone, please pick up your headset before pressing the keys. And to withdraw your question, you may press star, then two. At this time, we will pause this momentarily to assemble our roster. And our first question here will come from Michael Phillips with Oppenheimer. Please go ahead.
We will now begin the question and answer session.
Can you provide.
Color.
to ask a question, you may press star then 1 on your touchtone phone,
Mostly.
That's better than I think consensus is that does that improve your coming from much Marcel personal lines are a little commercial lines two and.
If you're using a speaker-phone, please pick up your handset before pressing the keys.
And it will draw your question. You may press star then 2
at this time, we will pause this momentarily to assemble our roster.
Is there still a potential trajectory for the cat load.
Improve in outer years, depending on how kind of the homeowners.
Reach reshaping takes place or that's baking in much of the portfolio reshaping.
And our first question here will come from Michael Phelps without the timer. Please go ahead.
Bryan Salvatore: Thank you. Good morning. I wanted to start with the specialty segment. I kind of want to ask about the kind of decelerating rate environment there, and at what point does your current book kind of bump up against loss trends there, even though you're still getting phenomenal results? But maybe, Jack, your opening comments are part of the answer to that, and so I kind of want to see if that's the case because you're really focused on the E&S and the small retail accounts there. And maybe the answer is over time that specialty segment starts to see a bit of a mix change than what your current book has. Anyway, that's the question.
Yes, six eight is the number that we gave for the third quarter and again Thats, an average annual load for the quarter versus a tale type of measurement over the last several years, we've done a lot of work in personal lines as you know with deductibles and that's helped home a lot and so personal lines, we'll see some improvement.
But also commercial lines in terms of.
Building the the larger PMO items.
Cat risk as far as future years, we continue to work on it we're getting a fair bit of rate and we're optimistic but I think Mike It's a little too early for us to be giving you a view of 2026.
Jack Roche: Great. Well, thanks for the question, Mike. You know, I'll let Brian chime in here, but I'm really proud of the fact that over a course of the last decade plus, we've developed a really diversified, now high-performing specialty business that really allows us to emerge to the market opportunities, but at the same point, understand where the competition lies and how we adjust to that. So, but Brian, you can speak more specifically about how you're managing through the competitive landscape.
Thank you. Uh, good morning. Um, I wanted to start with a specialty segment. Um, I kind of want to ask about the kind of decelerating rate environment there and at what point does, your current book kind of bump up against loss Trends there even though you're still getting phenomenal results. But, but maybe Jack you're opening comments are part of the answer to that. And so I kind of want to see if that's the case because you, you really focused on the ens and the small retail accounts there. And maybe the answer is over time that specialist segment. Starts to see a bit of a mix change. Then what your current book has um anyway that's that's the, that's the question.
Yes.
That's helpful.
Pivoting to the.
Commercial lines competitive environment.
Great. Well, thanks for the question. Mike. Uh, you know, I'll let Brian chime in here but I, you know, I'm really proud of the fact that over a course of the last decade, plus we developed a really Diversified now, high-performing specialty business. Uh, that really allows us to, you know,
All commercial not just core commercial.
When we saw pricing this quarter.
I think pricing held up a lot better than peers.
That is mostly because you're a bit underweight property.
Bryan Salvatore: Yeah, sure. And Mike, a lot of your comments are really consistent with the way we're thinking about it, right? So I would start by saying the pricing is still resilient. It's still consistent with loss trends. And as you mentioned, the ongoing profitability of our portfolio looks very good. But then, you know, where you kind of touched on that Jeff touched on too, right, that we have increasingly differentiated ourselves in the ability to write that lower middle market and the small business where there is less volatility and the pricing can remain more resilient. And so as you know, as we continue to invest there and drive growth into the small part of our portfolio, really making meaningful differentiation for our agents because they're investing in streamlining the placements of that kind of business. We're just really well-positioned. Okay. Yeah, thank you.
Versus peers I don't know if you have any thoughts on that but I guess, where.
We're seeing.
Signs of increased competition.
Emerge to the market opportunities, but at the same time, uh, understand where the competition lies and, and how we adjust to that. So, um, but Brian, you can speak, uh, more specifically about how you're managing through, uh, the the competitive landscape. Yeah, sure. And and Mike a lot of your comments are Bob really consistent with the way we're thinking about this, right? So I would start, by saying, the pricing is still resilient. It's still consistent with lost friends.
Could you.
Expect the pricing environment is subside a bit on a on a go forward basis.
At a macro level or.
And I guess, you know a lot of.
Astra's also asked us about weather.
Small commercial can enter a soft market.
Yes, Mike This is Jack I'll say, a few words here and then let <expletive> Lavey chime in.
I think this is a point at which the real diversification of our portfolio plays to our advantage right not only personal lines the commercial lines, but also within commercial lines across core commercial and specialty.
Um, and as you mentioned, the ongoing profitability of our portfolio looks very good. But then you know where where you kind of touched on that jazz touched on too, right? That that we have increasingly differentiated ourselves and the ability to write that lower Middle Market and the small business where there is less volatility and the pricing can remain, you know, more resilient and so as you know, as we continue to invest there and drive growth uh into the small part of our portfolio. Um really making
We still have a healthy percentage of our business in property, but we tend to play on the lower side of the spectrum, we're not getting caught up in the layered property or some of the dynamics that are particularly challenging in the middle market space or the higher end of specialty.
Meaningful differentiation for our agents because they're investing in streamlining, the placements of that kind of business. We're just really well positioned.
Bryan Salvatore: And I hate to ask on this one because it seems like a small number, but the commercial auto charge, it's not a big piece of your business, but you know, we've seen sort of a trend with a number of companies where one quarter meets two quarters, makes three quarters. So maybe just confidence that that's not going to be the case for you guys, that this could be the start of a trend in commercial auto.
But I think what what we what we see is we're probably in a transition hurry period, where while there is some competitive pressure coming on property because the margins are improving so so quickly.
Okay. Yeah, thank you. Um, and I hate to ask on this 1 because it seems like a small small number. But, um, the commercial Auto charge. It's not a big piece of your business, um, but you know, we've seen sort of a trend with a number of companies where 1 quarter meets 2, quarters makes 3 quarters. So maybe just confidence that that's not going to be the case for you guys that uh this could be the start of a trend in commercial Auto.
Jack Roche: Thank you, Mike. We're favorable development in all segments. There's 3 million favorable in core, and as we said, you know, CMT and workers' comp had some favorability in sale auto. We added to reserves. All of those items in core commercial were single-digit, non-material amounts. You know, for us, the commercial auto is a relatively small line. It's about $400 million of premium. We've actually had PIF shrinking over the last several years, and we've got a fairly small risk profile, and the increase in reserves is IB&R. In fact, our case reserve levels are down, and IB&R is up significantly.
That the liability pricing is still building and my guess is that if you are a balanced portfolio like we are where you have a healthy amount of property and casualty that will create a different level of pricing stability. Then if your for example in E&S property shop or somebody Thats.
Thank you, Mike. Um, we're favorable development at all segments. There's 3 million favorable in core. And as, as we said, you know, CMP workers comp had some favorability and seal Auto. Uh, we added to reserves all of those items in core commercial were were single digits non-material amounts, you know, for us.
Really overweighted in that part of the cycle you want to add.
Add on I think you said it well our resiliency comes from where we play so the.
Not only our account focus, but our small account focus where there where the pricing pressures probably they don't show up as much as they do on the higher higher end property spaces. So and you know you've got puts and takes by various lines. So obviously the property is coming down a bit but liability, we certainly view as continuing to harden commercial auto definitely needs.
The commercial auto is a relatively small line; it's about $1 million of premium. We've actually had PIF shrinking over the last several years, and we've got a fairly small risk profile. The increase in reserves is IBNR. In fact, our case reserve levels are down, and IBNR is up significantly.
Bryan Salvatore: Okay. No, thanks, Jeff. Last one, a quick small one, Jeff. You mentioned in your comments on personal auto, the bodily injury severity. Are you seeing more of those kind of higher type claims happen in this quarter that might suggest some warning signs there, or is there anything kind of anomalous in this quarter?
To continue to harden and drive more rate where comp may be flattening coming up at some point. So we believe because of where we play in those dynamics.
Jack Roche: Largely just prudence there. With the frequency benefit that we're seeing, it's just appropriate what we're hearing in the market and worrying about liability and lawyer involvement.
Okay, no thanks Jeff. Last 1, a quick small 1. Jeff, you mentioned in your comments on personal Auto. Um, the bodily injury severity. Um, are you seeing more of those kind of higher type claims happen in this quarter that might suggest some morning signs there? Or is there anything kind of anomalous this quarter?
That will continue to show some resiliency and then your last point about small commercial softening.
Largely just Prudence there uh, with the frequency benefit that we're seeing, it's uh, you know, just appropriate what we're hearing in the market and uh, worrying about liability and lawyer involvement.
Bryan Salvatore: Yep. Okay. Good. Thank you. Appreciate it.
We just we just feel so strongly about our value proposition and what we offer in the market.
Appreciate it.
Joe: And our next question will come from Mike Zurinski with BMO. Please go ahead.
Broad appetite ease of doing business local presence strong distribution strategy, our customer service center that helps drive retention up all that comes together and we just feel really optimistic about our small commercial sustaining the performance.
And our next question will come from Mike Jeremy with BMO please. Go ahead.
Jeff Farber: Good morning. Thanks. On the catastrophe load guidance for 3Q, I believe I heard a number in the high sixes. Can you provide a color that's better than, I think, consensus? Is that improved view coming from much more so personal lines or a little commercial lines too? And is there still a potential trajectory for the CAT load to improve in outer years, depending on how kind of the homeowners' reshaping takes place, or that's baking in much of the portfolio reshaping?
Hey morning. Thanks on the um,
Alright helpful.
Lastly, sneak one last one in on investment income.
But the trend has been a friend to you all as investors.
catastrophe load guidance for 3Q. I believe I heard a number in the high sixes. Um, can you provide a color? Uh, that's mostly, um, which that's better than I think. Uh, consensus is that is that improved you coming from much more, so personal lines or a little commercial lines, too. And, um,
From.
Is there still a potential trajectory for the cat load to?
And we just simply use the forward curve you have a lot more data than us, but it feels like there is some conservatism.
Within the <unk>.
The current guidance.
Improve an outer years depending on how kind of the homeowners, um, re reshaping takes place or that that's baking in. Um, much of the the portfolio reshaping
Jack Roche: Yeah, 6.8 is the number that we gave for the third quarter. And again, that's an average annual load, you know, for the quarter versus a tail type of measurement. Over the last several years, we've done a lot of work in personal lines, as you know, with deductibles, and that's helped home a lot. And so personal lines will see some improvement, but also commercial lines in terms of thinning the larger PML items of CAT risk. As far as future years, you know, we continue to work on it. We're getting a fair bit of rate, and we're optimistic, but I think, Mike, it's a little too early for us to be giving you a view of 2026.
Which we used to.
The forward as well.
Is there any is there any nuances to your your.
Investment income guide that would have some level of conservatism in it somehow or.
Maybe we just need to go offline and we can kind of understand why were materially higher thanks.
Yes, Thank you Mike.
We issue our guide at the beginning of the gear and where.
We're comfortable with with that nobody really knows at the beginning of the year, what's going to happen with interest rates and I think we've been very fortunate that interest rates have remained high so each and every week, we have got things maturing at low coupons and they get replaced with things.
Yes, 6.8 is the number that we gave for the third quarter. And again, that's an average annual load, you know, for the quarter versus a tail, you know, type of of measurement, over the last several years, we've done a lot of work in personal lines as you know, with deductibles and that's helped home a lot. And so personal lines will see some improvement but also commercial lines in terms of uh thinning the the the larger PML items uh of of cat risk as far as future years you know we continue to work on it. We're getting a fair bit of rate and we're optimistic but I think Mike get
It's a little too early for us to be giving you a view of 2026.
Jeff Farber: Okay. That's helpful. Pivoting to the commercial lines competitive environment, you know, all commercial, not just core commercial. You know, when we saw pricing this quarter, I think pricing held up a lot better than peers. I'm guessing that is mostly because you're a bit underweight property versus peers. I don't know if you have any thoughts on that, but I guess, you know, we're seeing signs of increased competition. Would you expect the pricing environment to subside a bit on a go-forward basis at a macro level? Or I guess, you know, a lot of investors also ask us about whether small commercial can enter a soft market. Thanks.
Okay. Um,
it's helpful, not pivoting to the
Our higher coupon. So we have been performing well that performance is not anomalous, it's driven by strong cash flows and strong renewal.
I should say reinvestment rates.
um, commercial lines, competitive environment and um, you know, all all commercial not just core commercial. Um, you know, when we saw pricing this quarter, um,
And I expect that to continue.
Jeff could you show your reinvestment rate and thanks.
It varies day to day, depending on on spreads and rates, but generally it in around the 5% or low 5% level.
Uh, I think pricing held up a lot better than peers. I'm guessing that is mostly because you're a bit underweight property versus peers. I don't know if you have any thoughts on that, but, um, I guess, you know, we're.
And that's certainly accretive it depends on each particular week, what's rolling off which tends to be lower than what the current portfolio yield is so there's still quite a bit of a pickup between the reinvestment level and what's rolling off on a daily weekly monthly basis.
Jack Roche: Yeah, Mike, this is Jack. I'll say a few words here and then let Dick Levy chime in. You know, I think this is a point at which the real diversification of our portfolio plays to our advantage, right? Not only personal lines to commercial lines, but also within commercial lines across core commercial and specialty. We still have a healthy percentage of our business in property, but we tend to play on the lower side of the spectrum. We're not getting caught up in the layered property or some of the dynamics that are particularly challenging in the middle market space or the higher end of specialty. But I think what we see is we're probably in a transitionary period where, while there's some competitive pressure coming on property because the margins are improving so quickly, that the liability pricing is still building.
Um, we're seeing, um, signs of increased competition. Um, would you expect the pricing environment to subside a bit on a go-forward basis? At a macro level, or, um, I guess, you know, a lot of investors also asked us about, you know, whether, um, small commercial, um, can enter, um, a soft market? Thanks.
Thank you.
And our next question will come from Paul Newsome with Piper Sandler. Please go ahead.
Good morning.
On the call.
Maybe you could touch on a couple of broader issues. One is can you talk a little bit more about what's going on with the distribution side.
Yeah, Mike, this is Jack. I'll, I'll I'll say a few words here and then let uh, dick Levy. Uh, chime in, you know, I think this is a point in which the real diversification of our portfolio plays through our advantage, right? Not only personal lines, the commercial lines but also within commercial lines, uh, across core commercial and Specialty.
<unk> lines business I know you've been shifting around from a retail perspective, but are you.
In an active position to add a lot of states prospectively.
What are you thinking about that.
That overtime.
Yes, Paul this is Jack I'll start us off and CFO <expletive> has something to add I think overall, we're comfortable with our geographic footprint as it is today.
We still have a healthy percentage of our business in property, but we tend to play on the lower side of the spectrum. We're not getting caught up in the layered property or some of the Dynamics that are particularly challenging in the Middle Market space or the higher end of specialty. Um, but I think what what we what we see is we're probably in a transitionary period where while there's some competitive pressure coming on property because the margins are improving. So so quickly.
Um,
While we have the ability to move into additional states at the right time, we're really not moving swiftly in that direction.
Jack Roche: And my guess is that if you're a balanced portfolio like we are, where you have a healthy amount of property and casualty, that will create a different level of pricing stability than if you're, for example, an E&S property shop or somebody that's really overweighted in that part of the cycle. Dick, you want to?
We are doing though is further diversifying our business across the footprint that we have.
And part of that accelerated growth in some of the states, where we're less penetrated.
Dick Lavey: Yeah, no, I'd add on. I think you said it well. Our resiliency comes from where we play. So, you know, not only our account focus, but our small account focus where the pricing pressures, probably they don't show up as much as they do in the higher-end property spaces. So, and you know, you've got puts and takes by various lines. So, obviously, the property is coming down a bit, but liability, we certainly view as continuing to harden. Commercial auto definitely needs to continue to harden and drive more rate. Work comp may be, you know, flattening coming up at some point. So, we believe because of where we play and those dynamics that we'll continue to show some resiliency.
Is coming from adding additional agents on top of just penetrating the ones that we have so.
that the liability pricing is still building. And my guess is that, if you're a balanced portfolio, like we are where you have a healthy amount of property and and casually that will create a different level of pricing stability than if you're, for example, an ens property shop, or somebody that's really overweighted. In that part of the cycle. Dick. You want to? Yeah. No, I add on. I think you. You said it. Well, the our resiliency comes from where we play. So, you know, the
As you might imagine.
Being the best account writer in the independent agency space attracts a lot of attention. We have an awful lot of agents that are coming to us versus us going to them, saying, we'd love to have that.
Hanover platinum and prestige capability at a time when when people are struggling particularly on the home side of the business. So so we're leaning into that opportunity and we're doing that without compromising our select distribution approach.
Not only our account Focus but our our small account focused with their with the pricing pressures probably. Uh, they don't show up as, as much as they do in the higher higher-end property spaces so and you know, you've got puts and takes by various lines. So obviously the properties coming down a bit but liability, we certainly view as continuing to harden. Commercial Auto, definitely needs to continue to Target and drive more rate work comp, maybe, you know, flattening, uh, coming up at some point. So we
But there's no doubt that adding more agents and the right territories to help us grow and diversify is a deliberate part of our strategy.
Dick Lavey: And then your last point about small commercial softening, we just feel so strongly about our value proposition and what we offer in the market: broad appetite, ease of doing business, local presence, strong distribution strategy, a customer service center that helps drive retention up. All that comes together, and we just feel really optimistic about our small commercial sustaining the performance.
Mmm.
Very different question.
A lot of time in the opening remarks talking about your efforts on technology segmentation.
We believe because of where we play and those dynamics that, um, that will continue to show some resiliency and then, your last point about small commercial softening, we just, we just feel so strongly about our value proposition. And, and what we offer in the market, um,
Which.
Also great, but as an outsider we have double the time trying to figure out.
Which companies do better job than others.
Our, our small commercial, uh, sustaining the performance.
Just thoughts on sort of where we should look specifically that we can say listen you.
Jeff Farber: All right. Helpful. And maybe lastly, sneak one last one in on investment income. The trend has been a friend to you all and investors. You know, from, and we just simply use the forward curve. You have a lot more data than us, but it feels like there's some conservatism within, you know, the current guide, and you know, which we use to project the forward as well. Is there any, is there any nuances to your investment income guide that would have some level of conservatism in it somehow, or, or, you know, maybe we just need to go offline and we can kind of understand why we're materially higher? Thanks.
Hanover is definitely got some payments.
Got it helpful and hey last I think 1 last 1 in on investment income. Um,
You need.
Others I think in the past you had sort of an interesting.
the trend has been a friend to you, all an investors um, you know, from
Were you helped brokers evaluate businesses.
Just curious if theres something that we can point to as outsiders. We can stay within this is this.
And we, we just simply use the, the, the forward curve. You, you have a lot more data than us but it, it feels like there's
This is really where we can see the difference.
Yeah, Paul first of all it's a very good and important question and so im going to say a couple of things and I'm going to allow it to chime in here because you probably saw that.
In enhancing.
<unk> role earlier this year to be our chief operating officer. The main focus beyond running the businesses that he runs today is to help lead.
Some conservatism and uh, within you know, the the the the current guy and you know, you know, which we use to to project the forward as well. Um, is there any is there any nuances to your your investment income guide? That would have some level of conservatism in it somehow or or you know maybe we just need to to to go offline and we can kind of understand why we're materially higher, thanks?
Jack Roche: Yeah, thank you, Mike. It's, you know, we issue our guide at the beginning of the year, and we're, you know, we're comfortable with that. Nobody really knows at the beginning of the year what's going to happen with interest rates. And I think we've been very fortunate that interest rates have remained high. So, each and every week, we've got things maturing at low coupons, and they get replaced with things that are higher coupons. So, we've been performing well. That performance is not anomalous. It's driven by strong cash flows and strong renewal, I should say, reinvestment rates. And I expect that to continue.
And work with our chief investment or excuse me Chief information officer to pursue targeted tech driven investments.
That are geared towards.
Further enhancing our operating models and our operating efficiency and frankly, we're quite excited about some of the pursuits that we have.
And <expletive> along with will Lee, our Chief Information Officer, and the other business leaders are having an even more coordinated effort about where is that an enterprise effort versus a bespoke effort to one part of the organization whether that be business unit or operating engine. So <expletive> do you want to maybe I'll share something.
Yeah, thank you, Mike. It's, um, you know, we issue our guide at the beginning of the year and we're, um, you know, we're comfortable with with that. Nobody really knows at the beginning of the year. What's going to happen with interest rates? And I think we've been very fortunate that interest rates have remained high. So each and every week we've got things, maturing at low coupons and they get replaced with things that are are higher coupon. So, we've been performing well, that performance is not anomalous. It's driven by strong cash flows and strong renewal
Uh, I should say, uh, reinvestment rates.
Few points and try to get to the heart of your question Paul It's a very good one.
And I expect that to continue.
Jeff Farber: Jeff, could you share your reinvestment rate? And thanks.
It is hard for an outsider to see the impact or benefits of it but I would just challenge you to keep asking questions of carriers.
Yep. Can you share your reinvestment rate and and thanks?
Jack Roche: It varies day to day depending on spreads and rates, but, you know, generally in around the 5% or low 5% level. And that's certainly accretive. It depends on each particular week what's rolling off, which tends to be lower than what the current portfolio yield is. So, there's still quite a bit of pickup between the reinvestment level and what's rolling off on a daily, weekly, monthly basis.
Where they're placing dollars and what benefits they are seeing from that so I could geek out on this topic on yet and we could spend more time on it but we absolutely are targeting our efforts.
On our transformation, we're thinking about it as a growth enabler really to help us scale. The company. So it's about scalability and so that means getting into your operating models in your end to end kind of process improvements across your domains underwriting operations claims, but then also in a horizontal domains like you heard some of Jack.
Uh, it it varies day to day, depending on on spreads, and, and rates. But, you know, generally in around the, the 5% or low 5%, uh, level, and that's certainly a creative. Uh, it depends on each particular week. What's rolling off, which tends to be lower than what? The current portfolio yield is. So, there's still quite a bit of pickup between the reinvestment level and what's rolling off on a daily weekly monthly basis.
Jeff Farber: Thank you.
Thank you.
Joe: And our next question will come from Paul Newsom with Piper Sandler. Please go ahead.
Commentary about submission triage call synthesis, so when those things come online.
And our next question will come from Paul gnome with 5% Sandler. Please go ahead.
Paul Newsom: Good morning. Thanks for the call. I was hoping you could touch on a couple of broader issues. One is, can you talk a little bit more about what's going on with the distribution side of your personal lines business? I know you've been shifting around from a regional perspective, but are you, you know, in an active position to add a lot of states perspectively? And, you know, what are you thinking about with that over time?
You will see impact and benefit.
Uh, good morning. Um, thanks for the call.
So it's going to take some time, but we are we're thrilled and I would say a differentiator about us is that our size is our friend in this space because unable to get all the business leaders and the and the.
Functional leaders aligned on those priorities.
I was hoping you could touch on a couple of broader issues 1 is. Could you talk a little bit more about what's going on with the distribution side of your personalized business? I know you've been shifting around from a retail perspective, but are you
Larger companies are a heck of a time kind of gaming that alignment so that's going to be an advantage.
To where you started the question, yes, I would tell you our ease of doing business, our tap sales platforms, they're as good as the best in the industry hard to differentiate perhaps at the top of the stack, but our agency insight.
You know, in an active position to add a lot of States perspective. And um, you know, what are you thinking about with that over time?
Jack Roche: Yeah, Paul, this is Jack. I'll start us off and see if Dick has something to add. I think overall, we're comfortable with our geographic footprint as it is today. While we have the ability to move into additional states at the right time, we're really not moving swiftly in that direction. What we are doing, though, is further diversifying our business across the PL footprint that we have. And part of that accelerated growth in some of the states where we're less penetrated is coming from adding additional agents on top of just penetrating the ones that we have. So, as you might imagine, being the best account writer in the independent agency space attracts a lot of attention.
<unk> capabilities are bar, none the best in the industry and that leads to our consolidation capabilities, which as you know is becoming more and more important now in the flow businesses as agents by more agents and attempt to consolidate the markets that they use so that that I would put at the top of the list. So we will try to bring.
Yeah, Paul. This is Jack. I'll start us off and see if uh dick has something to add. Um, I think overall, we're comfortable with our Geographic footprint, as it is today. Um um, while we have the ability to move into additional States at the right time, we're, we're, we're we're really not moving swiftly in that direction. Uh, what we are doing though, is further diversifying our business across the G, the pl footprint that we have.
More to that as we get further along in our development, but I think one of the reasons why I highlighted at this particular quarter is because we're really starting to see.
Movement, and some progress that I think will demonstrate that value and in future calls, we will try to be even more specific about what that looks like.
Jack Roche: We have an awful lot of agents that are coming to us versus us going to them saying we'd love to have the Hanover Platinum and Prestige capability at a time when people are struggling, particularly on the home side of the business. So, we're leaning into that opportunity, and we're doing that without compromising our select distribution approach. But there's no doubt that adding more agents in the right territories to help us grow and diversify is a deliberate part of our strategy.
And part of that accelerated growth in some of the states where we're less penetrated is coming from adding additional agents, on top of just penetrating the ones that we have. So, as you might imagine, being the best account writer in the independent agency space attracts a lot of attention. We have an awful lot of agents that are coming to us, versus us going to them, saying, we'd love to have.
Thank you I appreciate the help thanks.
Thanks, Paul.
And our next question will come from Meyer Shields with <unk>. Please go ahead.
Thanks, I just had a couple of quick modeling questions.
For.
The reserve adjustments commercial auto translate into any changes to the accident year 'twenty five loss pick for that line.
The Handover platinum and, and Prestige capability at a time when when people are are struggling particularly on the home side of the business. So so we're leaning into that opportunity and uh we're doing that without compromising our select distribution approach. Um, but there's no doubt that adding more agents in the right territories to help us grow. And diversify is a deliberate part of our strategy.
Paul Newsom: And then a very different question. You spent a lot of time in the opening remarks talking about your efforts on technology and segmentation, which all sound great. But as an outsider, we have a devil of a time trying to figure out, you know, which company is doing a better job than others. Do you have thoughts on sort of where we should look specifically that you can say, "Look, here Hanover's definitely got something that's different and unique than others"? I think in the past, you had sort of an interesting way you could help brokers evaluate their own businesses. But, you know, just curious if there's something that we can point to as outsiders that we can say, "Listen, this is really where we can see the difference.
We did increase our loss pick in commercial auto.
In core commercial in the current year so.
Overall, it was a sequential took meaningful decline by a few points. It was probably 80 basis points or so higher than year over year.
But largely just prudence too.
Reflect what we were doing in the prior years.
Okay. So thats embedded in the in the quarterly loss ratio all.
Correct.
Yeah, Andy the two separate points, but when we look at I guess.
Reinsurance pricing on the one hand.
And then, um, a very different question. You spend a lot of time in the open remarks talking about your efforts on technology and segmentation, um, which all sound great. But as an outsider, we have a devil of a time trying to figure out, you know, which company is doing a better job than others. Um, do you have thoughts on sort of where we should look specifically that we can say? Listen, here, Hanover is definitely got something that's different and unique than others. I think in the past, you had sort of an interesting um,
And.
Do you expect an inflection in the homeowners.
Policy count going forward is there any change in the underlying loss or underlying combined ratio of trajectory from either of those two factors.
Businesses. But you know, just curious if there's something that we can point to as Outsiders that we can say within this,
Jack Roche: Yeah, Paul, first of all, it's a very good and important question. And so I'm going to say a couple of things, and I'm going to allow Dick to chime in here because you probably saw that in enhancing Dick's role earlier this year to be our chief operating officer. The main focus beyond running the businesses that he runs today is to help lead and work with our chief investment, or excuse me, chief information officer, to pursue targeted tech-driven investments that are geared towards further enhancing our operating models and our operating efficiency. And frankly, we're quite excited about some of the pursuits that we have.
This is really where we can see the difference.
Reinsurance itself as we spoke about during our prepared remarks.
Yeah, Paul first of all it's a it's a very good and important question. Uh and so I'm going to say a couple of things and I'm going to allow dick to chime in here because you probably saw that
Cost of reinsurance.
in in, uh, enhancing
It goes up in total on a risk adjusted basis. It comes down so it should be on the margin helpful to the overall economics of the homeowners line.
Okay, and then is there something analogous to the personal auto new business penalty when you start growing homeowners book.
Uh, Dick's role earlier this year to be our chief operating officer the main focus Beyond running, the businesses that he runs today is to help lead, uh, and work with our chief investment or excuse me, Chief Information officer to pursue targeted tech-driven Investments.
That are geared towards.
Okay.
Yes.
Jack Roche: And Dick, along with Will Lee, our chief information officer, and the other business leaders, are having an even more coordinated effort about where is it an enterprise effort versus a bespoke effort to one part of the organization, whether that be business unit or operating engine. So, Dick, you want to maybe I'll share something?
This is Jack.
Further enhancing our operating models and our operating efficiency. And frankly we're quite excited about some of the Pursuits that we have. Um,
I mean listen we generally new business penalty and our industry comes from.
Two basic areas, you don't know that business as well as you're doing your renewal book and you tend to price it more aggressively to get it and then mature the pricing over time, we're at a very unique time in the cycles.
Dick Lavey: I'll add a few points and try to get to the heart of your question, Paul. It's a very good one, and I think it is hard for an outsider to see the impact or benefits of it, but I would just challenge you to keep asking questions of carriers as where they're placing dollars and what benefits they're seeing from it. So I could geek out on this topic on you, and we could spend some more time on it, but we absolutely are targeting our efforts on our transformation work, thinking about it as a growth enabler, really to help us scale the company.
Where the pricing on new business.
And renewals is remarkably similar.
And in particularly in home, where we're being very disciplined and the competition is is not not.
Terribly aggressive so I would say in the short term.
And Dick along with will lie, our Chief Information officer and and the other Business Leaders are having an even more coordinated effort about where is it an Enterprise effort versus a bespoke effort to 1 part of the organization? Whether that be business unit or operating engine. So uh dick, you want to? Maybe I'll share something, add a few points and try to get to the heart of your question, Paul. It's, it's a very good 1 and it, I think it is hard for an outsider to see the impact or benefits of it. But I I would just challenge you to keep asking questions of carriers as, um, where they're placing dollars and and what benefits. They're
We are at a very unique time, where we're very comfortable with home pricing and frankly, the quality of the business that we're bringing through the door and that gives me great confidence.
They're seeing from it. So I, I could geek out on this topic on you and we, we could spend some more time on it but we we absolutely are, you know, targeting our efforts. Um,
Dick Lavey: So it's about scalability, and so that means getting into your operating models and your end-to-end kind of process improvements across your domains, underwriting, operations, claims, but then also, you know, in horizontal domains, like you heard some of Jack's commentary about submission, triage, call synthesis. So when those things come online, you will see impact and benefit. So it's going to take some time, but we are thrilled. And I would say a differentiator about us is that our size is our friend in this space because I'm able to get all the business leaders and the functional leaders aligned on those priorities. You know, larger companies have a heck of a time kind of gaining that alignment. So that's going to be an advantage.
Okay fantastic. Thank you so much.
And this concludes our question and answer session I would like to turn the conference back over to Oksana <unk> for any closing remarks.
Thank you everybody for your participation today, and we're looking forward to talking to you next quarter.
Okay.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.
Yeah.
Dick Lavey: Back to where you started the question, yes, I would tell you, you know, our ease of doing business, our TAP sales platforms, you know, they're as good as the best in the industry, hard to differentiate perhaps at the top of the stack, but our agency insight tools, capabilities are barned on the best in the industry. And that leads to our consolidation capabilities, which, as you know, is becoming more and more important now in the flow businesses as agents buy more agents and attempt to consolidate the markets that they use. So that I would put at the top of the list.
On our transformation work thinking about it as a growth enabler really to help us scale the company. So it's about scalability and so that means getting into your operating models and your end-to-end kind of process improvements across your domains underwriting operations claims. But then also, you know, in a horizontal domains like you heard some of Jack's commentary about submission triage call synthesis. So, when those things come online, um, that you will see, impact and benefit. Um, so it's it's going to take some time, but we are, we are thrilled. And I would say a differentiator about us is that our size is a, a friend in this space because I'm able to get all the Business Leaders and the, and the functional leaders aligned on those priorities, you know, larger companies have a have a heck of a time kind of gaining that alignment. So that that's going to be an advantage back to where you started the question. Yes. I I would tell you, you know, our ease of doing business, our tap sales platforms, you know, they're as good as the best in the industry. It's hard to do.
Differentiate, perhaps at the top of the stack, but our agency insight.
Jack Roche: So we will try to bring more to the as we get further along in our development. But I think one of the reasons why I highlighted it this particular quarter is because we're really starting to see movement and some progress that I think will demonstrate that value. And in future calls, we'll try to be even more specific about what that looks like.
Tools capabilities, our Bar, None the best in the industry, and that leads to our consolidation capabilities, which as you know, is becoming more and more important. Now in the flow, businesses, as agents, buy more, um, agents and attempt to consolidate the markets that they use. So that, that, that I would put at the top of the list.
So we will try to bring more to the the as we get further along in our development. But I think 1 of the reasons why I highlighted it this particular quarter is because we're really starting to see uh movement and some progress that I think will demonstrate that value. And in future calls we'll try to be even more specific about what that looks like.
Paul Newsom: Thank you. Appreciate the help as always. Thanks.
Jack Roche: Thanks, Paul.
Thank you, appreciate the help, as always. Thanks, thanks Paul.
Joe: And our next question will come from Meyer Shield with KBW. Please go ahead.
And our next question will come from Myer. Shields KBW, please go ahead
Jeff Farber: Thanks. I just had a couple of quick modeling questions. First, did the reserve adjustments commercial auto translate into any changes to the accident year '25 loss pick for that line?
Uh, thanks. I just had a couple of quick modeling questions. Uh, first, did the reserve adjustments in Commercial Auto translate into any changes to the accident or 25 Los pick for that line?
Jack Roche: We did increase our loss pick in commercial auto in core commercial in the current year. So while overall it was a sequential meaningful decline by a few points, it was probably 80 basis points or so higher than year over year, but largely just prudence to reflect what we were doing in the prior years.
We did increase our loss, picking Commercial Auto in core commercial in the current year. So,
Jeff Farber: Okay. So that's embedded in the quarterly loss ratio.
Well, overall it was a sequential the meaningful decline by a few points. It was probably 80 basis points or so higher than year-over-year, um, but largely just Prudence to, uh, to, to reflect, um, what we were doing in the prior years.
Jack Roche: Correct.
Okay. So that's embedded in the in the quarterly loss ratio, correct.
Jeff Farber: And these are two separate points, but when we look at, I guess, reinsurance pricing on the one hand and the expected inflection in homeowners' policy count going forward, is there any change in the underlying loss or underlying combined ratio trajectory from either of those two factors?
And these are 2 separate points. But when we look at, I guess, reinsurance pricing on the 1 hand. Uh, and
The expected inflection in the homeowners.
Uh, policy count going forward. Is there any change in the underlying loss or underlying commodity ratio of trajectory from either of those 2 factors?
Jack Roche: Reinsurance itself, as we spoke about during our prepared remarks, the cost of reinsurance, while it goes up in total, on a risk-adjusted basis, it comes down. So it should be, on the margin, helpful to the overall economics of the homeowner's line.
Cost of reinsurance. Well, you know it goes up in total on a risk-adjusted basis; it comes down, so it should be on the margin helpful to the overall economics of the homeowner's line.
Jeff Farber: Okay. And then is there something analogous to the personal auto new business penalty when you start growing homeowners' PIF?
Okay. And then is there something analogous to the personal auto new business penalty when you start growing homeowners?
Jack Roche: Yeah, this is Jack. I mean, listen, we generally, new business penalty in our industry comes from two basic areas. You don't know that business as well as you do your renewal book, and you tend to price it more aggressively to get it and then mature the pricing over time. We're at a very unique time in the cycles where the pricing on new business and renewals is remarkably similar. And particularly in home, where we're being very disciplined and the competition is not terribly aggressive. So I would say in the short term, we're at a very unique time where we're very comfortable with home pricing and frankly, the quality of the business that we're bringing through the door, and that gives me great confidence.
Yeah, this is Jack. Um, I mean, listen, we generally see new business penalty in our industry comes from.
Uh 2 basic areas, you don't know that business as well as you do your renewal book.
And you tend to price it more aggressively to get it and then mature the pricing over time. We're at a very unique time in the cycles.
Where is the pricing on new business?
And renewals is remarkably similar.
And and and particularly in home, where we're being very disciplined. In the competition is is is not not in terribly aggressive. So I would say in the short term
Um we're at a very unique time where we're very comfortable with home pricing and frankly the quality of the business that we're bringing through the door and and that gives me great confidence.
Jeff Farber: Okay. Fantastic. Thank you so much.
Okay, it's fantastic. Thank you so much.
Joe: And this concludes our question and answer session. I'd like to turn the conference back over to Oksana Lukasova for any closing remarks.
And this concludes our question and answer session. I'd like to turn the conference back over to axon and Luca for any closing remarks.
Oksana Lukasheva: Thank you, everybody, for your participation today, and we're looking forward to talking to you next quarter.
Thank you everybody for your participation today and we're looking forward to talking to you next quarter.
Joe: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.