Q2 2025 Hamilton Insurance Group Ltd Earnings Call

<unk> that links on the Hamilton Investor Relations website, I'd now like to turn the call over to Daria <unk>, Vice President Investor Relations and Finance. Please go ahead.

Speaker #3: Hello and welcome to the Hamilton Insurance Group earnings conference call. As a reminder, this call is being broadcast and will also be available for replay.

Thanks, Operator, hi, everyone and welcome to the Hamilton Insurance Group second quarter 2025 earnings Conference call. The Hamilton Executive leading today's call are peanut Aldo Group, Chief Executive Officer, and Craig Howie Group Chief Financial Officer, We are also join.

By other members of the Hamilton management team before we begin note that Hamilton financial disclosures, including our earnings release contain important information regarding forward looking statements management comments regarding potential future developments are subject to the risks and uncertainties as detailed management may also.

We refer to certain non-GAAP financial measures.

These items are reconciled in our earnings release and financial supplement with that I'll hand, it over to Pina.

Thank you Darren and Hello, everyone I'm excited to report another profitable quarter for Hamilton, including excellent underwriting results with a combined ratio of 86, 8% and underwriting income of $67 million.

Speaker #4: regarding potential future

Speaker #4: subject to the risks and uncertainties as detailed. Management may also refer to certain non-GAAP financial measures. These items are reconciled in our earnings release and financial supplement.

Investment income was also significant in this quarter at $149 million, reflecting strong returns from both the two Sigma Hamilton Fund.

Our fixed income portfolio.

Bottom line net income was $187 million for the quarter, representing an impressive annualized return on average equity of 32%.

Before providing some more commentary on the quarter I want to take a minute to speak about our recently announced management appointments.

Megan Graves CEO of Hamilton re decided to retire after five years of transformational leadership meager.

<unk> will be missed and we are incredibly grateful for her many contributions to hamilton's growth and success during her tenure.

As we announced and as part of a seamless execution of our succession planning.

Adrian Daus CEO of Hamilton Global specialty will succeed Meagan as CEO of Hamilton re from September 1st.

At the same time, Alex Baker, our group Chief risk Officer will take over from Adrian as CEO of Hamilton Global specialty.

Adrian and Alex are both seasoned industry professionals with strong track records and the clear alignment to our strategy given this and the strength of our broader Hamilton team. We are confident about continuing our positive performance trajectory.

Additionally, Tim Duffen currently our chief underwriting officer for Bermuda will step into a newly created role of group Chief underwriting officer as of January one 2026.

Tim's proven leadership business acumen and strong industry relationships, we will provide further positive direction and momentum for our company.

These appointments reflect the depth and breadth of talent in our organization.

They also reinforce our commitment to our strategic imperative of being a magnet for talent by providing growth opportunities to employees within our organization.

We are very pleased and indeed privileged to have such strong leaders in our group.

Well still on the topic of being a magnet for talent. It is important to note that in addition to being able to promote from within we have also had great success in attracting exceptionally qualified external leaders for open positions.

Most recently for the position of group, Chief Information Officer, and group Chief Risk Officer.

We recently announced the appointment of Raymond Karen Bauer as group Chief Information Officer.

Ray has years of relevant industry experience and will join us in September.

We have also hired Russell Buckley as group Chief Risk Officer, Russ is an experienced industry professionals, who is known to many on our executive management team, including me as we've worked together in the past Russ will be joining us shortly.

Turning now to some of the highlights of our impressive second quarter results.

Hamilton delivered strong topline growth with gross premiums written increasing by 18% in the quarter.

This growth is reflective of the fact that we are still overall in an attractive underwriting environment.

And as always focused on proactive cycle management.

This means that we leaned into areas or specific deals where the returns were attractive and pared back our writings or exited deals where this was not the case.

Bermuda led the way on growth up 26% driven predominantly by targeted casualty reinsurance business and new specialty reinsurance classes.

Both of which benefited from our a M best rating upgrade to <unk>.

More specifically I can share that premiums directly tie to the rating upgrade where approximately $50 million in the second quarter and include growth in select casualty classes that are seeing healthy rate increases.

And in our new credit bond and political risks offerings, which are classified as specialty and had a great take up this quarter.

We also moderately grew our position in property cat during the six one and seven one renewals.

A combination of increased participations on our existing portfolio and new business.

On the flip side and consistent with what I said earlier about cycle management, we decreased our writings in property DNF insurance and certain specialty reinsurance classes, which did not meet our return thresholds.

Moving onto our international segment, which houses Hamilton global specialty and Hamilton select.

Gross premiums written grew 11% in the quarter.

Starting with Hamilton Global specialty gross premiums written were up 7%, which reflects targeted underwriting actions at the market evolved into one requiring a higher level of discipline.

For example, we reduced our writings in cyber insurance, where pricing did not meet our hurdle rates at the same time with over 20 lines of business in Hamilton Global specialty we targeted growth in areas, which are more attractive for example, personal accident business, which as well.

Price and where we are respected market leader.

Hamilton select continued its strong trajectory with growth of 52% over the same quarter last year.

We are seeing a healthy flow of business into our U S. E&S operation. This reflects the relevance of our offerings the talent in our operations and the relationships we enjoy with our producers.

As you've heard from others professional lines classes continue to experience some pricing pressure. So we wrote less of that business in select again this quarter.

On the other hand pricing in excess casualty general casualty and small business remains attractive. So we directed more of our growth towards those lines, where we can also retain tighter terms Nick.

Next I'll speak to the recent reinsurance renewals. However, I will be brief as I'm sure. Most of you will have heard a similar story from our peers.

As we reflect on the midyear renewals there was a healthy balance of supply and demand.

Property catastrophe deals saw some rate pressure big year, particularly in the middle and upper layers of core non loss affected programs.

Despite this since we are coming off of historical highs and the effects of the market reset of 2023 pricing for cat business still remains attractive with terms and conditions holding firm and attachment points, even increasing in some instances.

The casualty market remains attractive as you've heard from others with continued strong underlying rate increases.

And while not a big part of our portfolio. We are also starting to see rates flatten out in the D&O space.

Our strong underwriting topline continues to drive growth in our balance sheet with our investment portfolio growing along with our loss reserves.

With respect to the latter and as we have consistently said we remain vigilant on our loss reserve position. So that we can continue to preserve our ability to have favorable reserve development something we've experienced every year since the inception of this company.

As we have mentioned before the second quarter is when we conduct our regularly scheduled review of cost.

Following this quarter's casualty review, we decided to strengthen some of our casualty reserves by $18 million in Bermuda.

Which was mainly related to discontinued business.

We also released some event specific property reserves this quarter as the claims experience has trended more favorably compared to our initial more prudent estimates.

Overall, our reserve development was favorable for the quarter and year to date.

In closing my remarks, I, just want to say how proud I am of the results we delivered this quarter.

And that I look favorably to the foreseeable future for several reasons.

Our well diversified and well scaled platforms.

Our strong balance sheet and ratings.

The strong client and broker relationships, we have established and last but by no means least the world class team of Hamilton professionals, who know how to navigate all market cycles.

While the market may be coming off historic highs in some areas. There is no one market and the key is to focus on rate adequacy is.

It is still an attractive place to do business, particularly for astute and disciplined underwriting organizations like ours.

With that I will turn the call over to Craig.

Speaker #5: market may be coming

Thank you Panna and Hello, everyone.

Speaker #5: off historic highs in some areas, there is no With that, I'll hand it one market, and the key is to focus on rate adequacy.

Wilson had another strong quarter with net income of $187 million in quarter $1 79 per diluted share producing an annualized return on average equity of 32%.

Speaker #5: It is still an attractive place to do business, particularly for astute and disciplined underwriting organizations like ours. With that, I will turn the call over to Craig.

We had operating income of $162 million equal to $1 55 per diluted share.

Speaker #6: Thank you, Pina. And hello, everyone. Hamilton had another strong quarter with net income of $187 million equal to 1.79 per diluted share. Producing an annualized return on average equity of 30.2%.

Producing an annualized operating return on average equity of 26, 1%.

We also increased book value per share by eight 3% this quarter to a record $25.55.

These results compared to net income of $131 million or $1 20 per diluted share.

Annualized return on average equity of 23, 6%.

And operating income of $136 million or $1 24 per diluted share.

Annualized operating return on average equity of 24, 4% in the second quarter of 2024.

Turning to our underwriting results Hamilton continues to grow topline on an impressive double digit rate.

In the first half of 2025 gross premiums written increased to one 6 billion compared.

Compared to $1 $3 billion. This time last year, an increase of 17%.

Our first half combined ratio was 99, 1%.

All three of our operating platforms Hamilton Global specialty Hamilton Solar and Hamilton re we're able to strategically grow in lines of business that were most attractive while shrinking those lines that did not meet our underwriting partners.

Now for some more detail on our quarterly underwriting figures.

Milton had underwriting income of $67 million in the second quarter.

Compared to underwriting income of $65 million in the second quarter last year.

The group combined ratio was 86, 8% compared to 84, 4% in the second quarter of 2024.

In the second quarter the loss ratio increased one six points to 52, 8% compared to 51, 2% in the prior period.

The increase was primarily driven by the current year Attritional loss ratio, which was 53 zero percent compared to 51, 6% in the prior period.

This increase was driven by a change in business mix towards the casualty class and a specific large loss in our Bermuda segment, which I'll cover shortly.

We had favorable prior year and personal development of 0.5 points in the quarter, driven by specialty and property classes offset by certain casualty classes, which I'll discuss when I cover the segments.

This compares to 0.4 points of favorable development in the second quarter last year.

The expense ratio increased 0.8 points to 34.0% compared to 33, 2% in the second quarter last year.

Kris was mainly driven by the acquisition expense ratio due to the shift in mix of business.

As always I'd encourage you to use the full year of 2020 for Attritional loss and expense ratios as an indication of where we expect the current book to perform.

Next I will go through the second quarter results by reporting segment.

Let's start with the international segment, which includes our specialty insurance businesses and will bring global specialty and Hamilton score.

For the first half of 2025 international gross premiums written grew to $715 million from $632 million an increase of 13%.

This was primarily driven by growth in all classes, meaning our property casualty and specialty classes.

In the second quarter International have underwriting income of $27 million and a combined ratio of 89, 3% compared to underwriting income of $19 million and a combined ratio of 91.0% in the second quarter last year. The decrease in the combined ratio was primarily related to the loss ratio.

So decreasing by three points, mainly due to favorable prior year development, partially offset by higher expense ratio.

The prior year Attritional loss ratio decreased by two eight points compared to the second quarter last year.

This was driven by favorable development in all classes, meaning where property specialty and casualty classes.

The expense ratio increased one three points to 40.0% compared to 38, 7% in the second quarter last year.

The increase was primarily driven by the acquisition expense ratio due to increased profit commissions and a change in business mix.

I will now turn to the Bermuda segment, which houses Hamilton room, Hamilton re U S entities that predominantly right our reinsurance business.

So the first half of 2025, Bermuda gross premiums written grew to $841 million from $693 million an increase of 21%.

The increase was primarily driven by both new and existing business and casualty and property reinsurance classes, including nonrecurring reinstatement premiums related to the California wildfires.

In the second quarter of 2025, Bermuda had underwriting income of $40 million and a combined ratio of 84, 3%.

Compared to underwriting income of $46 million and a combined ratio of 77, 4% in the second quarter of last year.

The increase in the combined ratio was primarily related to the loss ratio with.

With increases on the current year and prior year Attritional loss ratios.

The acquisition expense ratio was also higher than the second quarter last year.

The Bermuda current year Attritional loss ratio increased three seven points to 54, 2% in the second quarter compared to 55% in the second quarter last year.

Due to a change in business mix, including more casualty reinsurance business and the air India airline loss this quarter.

The Bermuda prior year Attritional loss ratio increased two five points to 2.0 points in 2025 compared to a favorable 0.5 points in the second quarter last year.

As Peter mentioned in the second quarter, we did our regularly scheduled casualty reserve reviews, which resulted in an $18 million charge on certain casualty lines with the majority coming from our discontinued lines of business.

This represents only about 1% of our casualty reserves and about a half a percent of our total reserve position.

To be clear, we completed our casualty reserve reviews, and strengthen our reserves based on our own review and not because of any third party review.

Our actions are consistent with our reserving philosophy of being quick to react to adverse development trends and slow to release reserves until we have more certainty.

The Bermuda expense ratio increased by 0.6 points to 28.0%.

Paired with 27, 4% from the second quarter of 2024.

This was driven by an increase in the acquisition expense ratio due to the change in business mix, partially offset by a decrease in the other underwriting expense ratio.

Similar to my comment about the group ratios I'd encourage you to use the full year of 2020 for Attritional loss and expense ratios for the segments as a guide for how we expect the current segments books to perform.

Now turning to investment income.

Total investment income for the second quarter of 2025 was $149 million.

<unk> to investment income of $96 million in the second quarter of 2024.

The fixed income portfolio short term investments and cash produced a gain of $62 million for the quarter compared to a gain of $20 million in the second quarter of 2024.

As a reminder, this includes the realized and unrealized gains and losses and Hamilton reports through net income as part of our trading investment portfolio.

The fixed income portfolio had a return of two 2% in the quarter were $58 million and a new money yield of four 3% on investments purchased this quarter.

The duration of the portfolio was three four years.

Average yield to maturity on this portfolio was four 3% compared to four 7% at year end 2024.

The average credit quality of the portfolio remains strong at double a three.

The two Sigma Hamilton fund produced an $87 million game or four 4% for the second quarter of 2025.

The fund had a net return of 10, 1% for the first half of 2025.

The latest estimate we have for the two Sigma Hamilton Fund year to date performance was eight 2% through July 31, 2025, a decrease of about one 9% in July.

At this stage the farm is still ahead of achieving our planned target of 10% for the year.

The two Sigma Hamilton fund made up about 39% of our total investments, including cash investments at June 30, compared to 40% at March 31, 2025 now.

Now turning to capital management in 2024, we announced a $150 million share repurchase authorization by the Hamilton Board of directors during the second quarter of 2025, we put a <unk> one share repurchase plan in place.

With that we were able to repurchase $35 million of shares this quarter.

After the close of the quarter, we repurchased an additional $15 million of shares as of the end of July all shares were purchased at a discount to book value.

With $62 million remaining under our share repurchase authorization, we're able to continue repurchasing shares and growing the business all while maintaining our strong capital position even during times of uncertainty.

We will revisit additional share repurchase authorizations in the future as appropriate.

Next I'll have some comments on our strong balance sheet.

Total assets were $8 9 billion at June 32025 up 14% from $7 8 billion at year end 2024.

Total investments and cash were $5 3 billion at June 30, an increase of 11% from $4 $8 billion at year end 2024.

Shareholders' equity for the group was $2 6 billion at the end of the second quarter, which was a 10% increase from year end 2024.

Our book value per share was $25 55 at June 32025 up 11% from year end 2024.

Thank you.

And with that we'll open up the call for your questions.

Thank you we will now begin the question and answer session. If you have dialed in and we'd like to ask a question. Please press star one on your telephone keypad Teresa Han and joined the queue and if you would like to draw. Your question simply press Star one again.

For this session. We kindly ask you to limit yourself to one question plus one follow up and then rejoin the queue for any further question.

And our first question comes from the line of.

Chris can get solved with Wells Fargo. Your line is now open.

Hi, Good morning can you provide more color around the reserve increases in the discontinued lines in terms of what accident years or was that and where those covered by your LPT and then sticking with that with the casualty Reserve review done does that lead to any change in your underlying loss picks.

Particularly like on the Bermuda side, because I think it's a little bit hard for us to see since you Didnt quantify the air India lost like how much uptick there was versus the prior year. Thank you.

Alright, Thanks for that question I'm going to just lead off very high level, and then I'm going to pass the baton over to Craig.

I think it's really important to note that the amount of increase overall was modest here in the context of our annual review of this line quite a bit to give you more detail on on that and as you rightly pointed out the increase stems from lines of business.

We discontinued as part of our strategic transformation you might recall when I joined in 2018. The first thing. We did was take a look at the entire portfolio and we re underwrote that entire portfolio exiting a number of lines.

That is what this stems from Craig do you want to add on top of that.

Sure.

First of all this is $18 million, it's a very manageable number for us it represents about a half a point of our overall reserve position about 1% of our total casualty reserves as Peter mentioned it comes from discontinued lines of business business that we no longer write things like commercial auto.

And clients that we no longer do business with so.

That's what it relates to Christian you asked with respect to the years for years, our 2020 and prior.

And you also asked whether.

<unk> was impacted by the L. P. J, we do not have a loss portfolio transfer with the Bermuda book. This was essentially all related to the Bermuda book.

The casualty reserves in the international segment were favorable throughout this process and review I think your other question was also did this cause us to change any of our loss picks are the answer is no. It did not cause us to change any of our loss picks for this what we essentially did was we reviewed.

All the runoff patterns for these discontinued lines and that's what it impacted you may recall in the third quarter of last year, we actually did make a change in our casualty reserves for the social inflation impacted lines of business. We did that in the third quarter and that continued into the fourth quarter and into 2002.

<unk> five so that those changes were made in the third quarter and 2024.

The other thing you may want to just know.

One large loss that we had this quarter with respect to those reserves, which is impacting nutritional wash line was the air India loss, we took a $6 million charge for that loss, we booked a full limit on our exposure for that loss this quarter and that was out of the Bermuda segment, the Bermuda segment rates aviation reinsurance.

There's not rate aviation insurance.

Got it. Thank you and then for my follow up can you talk about what you saw in the quarter in terms of proper pricing, particularly for your portfolio and maybe if you could quantify how much of your property book skews towards large accounts versus SME and then if you want to go a step further if you could maybe potentially size the property exposure.

And your E&S portfolio. Thank you.

Okay.

I'll lead with that one.

Our property pricing, let's start with insurance first.

Noted in my prepared remarks, we did see some pressure on property and DNF insurance and we saw that both in our international book and in our Bermuda book and as a result of that I mean, it's still very attractive pricing, let's start with that is just coming off of like seven straight years of right at a price increase.

However, we don't want to be responsible for driving the market down. So we were very disciplined there and these are in part but not exclusively the stuff. We would come off of is the larger business, where we're seeing the most pricing pressure the business. We stayed on with what we said loss pressure and that's probably mid size to smaller accounts Ah that's on the issue.

<unk> side on the in terms of our Hamilton select that's where we drive the smallest risk we are not writing property in that.

Entity at this time.

Did you and then I don't know, but in terms of property on the reinsurance side.

You've heard a lot about that from my peers I think it's fair to say that property pricing midyear. It was very deal specific ranging from minus 15% to plus 50% depending on what history in peril exposure.

That business is that where reinsurance is coming off of historic highs.

Benefiting from the market reset the higher attachment points tighter terms and conditions that we saw starting 2023, so that business, we still view as attractive and we as I mentioned on the call moderately grew our property cat portfolio at mid year.

Great. Thank you.

Yeah.

Your next question comes from the line of Michael Xyrem schemes with BMO capital markets. Your line is now open.

Hey, good morning, Dan on for Mike, maybe just sticking with the select business I think.

That business performed a little bit better quarter over quarter, just in terms of the absolute growth rate just wanted to understand maybe are you guys seeing a lot of MGA competition.

Your select business or how should we be thinking about that growth capability for rest of the year.

Yeah happy to take that yes, we're very very happy about the development of our Hamilton select business again.

Take up for that align and.

For the product that we offer are very high and that's a testament to the strength of our team.

We saw we still seeing a healthy flow of business into our operations and we're leaning into the areas as I mentioned, it would be general casualty excess casualty and.

Small business, where the rates are more attractive pared back a little bit on professional lines, which is still under pressure.

We do not support MGE as in the Hamilton select portfolio at all we do all the underwriting in house.

We are seeing some impact from a M G as in perhaps them being more aggressive however in our specific niche of hard to place.

We are still seeing a very healthy flow of business and we're comfortable with how we're underwriting it.

Yeah.

That's helpful. Thank you and then maybe just going to the Bermuda casualty growth alright. Thank you guys.

$80 million a M best target.

That upgrade.

I believe it was around $50 million or so this quarter just wondering.

If you could maybe give us a new outlook on that number for the year.

Yeah, well, let me talk about that a little bit more generically then I'll get specifically to that question here.

Firstly, I think as you've heard from many of our peers.

Casualty and specifically you know general casualty excess casualty is experiencing probably the strongest rate increases in the market.

We're growing that both in the insurance side, but predominantly the predominant casualty growth came this quarter on the casualty reinsurance side and there are a number of reasons for that in a number of reasons that we feel comfortable with that growth.

As you may recall from previous calls we are growing from a much smaller base than many of our peers. We are growing on the back of that a M. Best rating upgrade that gives us access to business that we have been targeting for years at a time, where some markets who perhaps were over.

Exposed on the softer years are paring back so, giving us that opportunity to move in when pricing as I said earlier is probably at the highest we've seen for some time.

Our focus here is really selectively on our top tier key clients that we support across many classes. These are clients that we've identified as having strong underwriting culture that take the rate that limit their line sizes that have strong claim teams.

And importantly, keep eight significant retention of this business, we ensure they have skin in the game.

Also our participations are rather modest we want to make sure we have a diversified portfolio, we're growing in and each deal is actuarial review would probably a little bit more than you wanted to know, but I think it's important to give you context around the growth again, we benefited significantly from this a M. Best upgrade we told you we thought.

We do a $80 million again this year as we did last year, we did 40 million in the first quarter $50 million. This quarter. So we're slightly ahead of where we thought we were going to be but if I look forward into the future I, having had the benefit of this upgrade now for a full year.

You will see much more moderate growth as we've gone through an entire cycle already having said that you will see that premium that strong premium on the back of strong rate increases continue to earn in.

Okay. That's helpful. Thanks, and maybe for Craig on share repurchase levels that.

That pace accelerate a little bit worse versus <unk> and I understand there was some timing nuances just given the filing status in the window that was open for that and then her $15 million in July but just wondering is this the right run rate for the future and just wondering how we should think about that with Wednesday coming up.

<unk>.

Yeah. Thanks, Dan.

So first of all I. Appreciate the question I guess the answer is it depends right. So first we put a <unk> one share repurchase plan in place this quarter, which allowed us to continue buying.

For the entire quarter. So that was the difference between that and Q1 as you mentioned, we buy back the shares for a couple of reasons. One is capital management and the other is to take advantage of the share price because we think that the company is currently undervalued. So.

If those conditions stay we will continue to buy because we think it's accretive.

We think it's accretive to all shareholders, it's accretive to earnings per share. It is accretive to book value per share it's accretive to Roe.

We're going to be able to continue to buy we have plenty of capital to be able to do that but I will tell you that we will be diligent about buybacks during the wind season as it progresses.

Yeah.

Again, if you would like to ask a question. Please press star one on your telephone keypad and your next question comes from the line of Tommy Moll join with K B W.

Your line is now open.

Hey, good morning, guys.

One quick one.

Are you guys still fighting remain great headwinds against those discontinued lines that you called out from the transformation process or where that's been long last year. This truing up the reserves now.

No Tom with respect to premium growth first of all I think we've shared this in the past last year, we were able to grow our premium by 24%. Okay. So far this year through the first half we've grown 17%. So we're still expecting double digit growth in premium, albeit at lower levels than what you have.

<unk> seen in the past okay. So as a reminder, we've been able to grow this book at double digit premium growth every year.

17.

But at the end of the day, we've established a culture of underwriting discipline and that's allowed us.

It will be reflected over time, and it's really allowed us to.

Consider when and where we want to grow our book for the best risk adjusted returns.

Okay got it.

And then was the the higher profit Commission that you called out that drove the higher expense ratio.

Was that an anomaly this quarter or is that a reset in those agreements and as this is the level in Q2, a good one to assume going forward.

So the way the profit Commission works is it's based on the underlying book of business. If the underlying book of prisoners performs properly and there is a profit commission on certain lines of business, it's not on all lines, but as those continue to perform that's when you'll see that come through you'll typically see it at the same time.

We try to recruit in the same quarter that the <unk>.

Profit commissions earned so again, it's on certain lines of business it could be in the international segment, where it could be in the Bermuda segment, depending on those lines. So.

So it's not a normal run rate.

Great. Thank you.

Your next question comes from the line of Chris can get solved with Wells Fargo. Your line is now open.

Hi, I just had one follow up was there any change in your reserves related to the UK verdict on the Russia, Ukraine aviation losses.

Christian this quarter there was no change in our reserve for the quarter, we booked as a reminder, a fulsome reserve three years ago in 2022, taking into account all of the potential losses, including aviation.

And at this point there is no new certainty around those potential losses for us to make a change in our loss estimate this quarter.

Got you and then just one more follow up I noticed the interest expense dropped by $1 million quarter over quarter, but your debt was essentially flat what was the driver of that.

So first let me go back to the other question real quickly about the Ukraine expense one of the things I will say is that we did book a loss three years ago at $79 million, we still have about 75% of that helping reserves as IBM or so just to answer that question first as far as the interest expense goes I. Appreciate you asking that question.

It's a multi.

Factor answer one is the sofa right, which is where our term loan is based is a floating rate and that rate is down about 100 basis points year over year. So that's number one second we had two reductions in our margin around our letters of credit one because of our ratings upgrade and two because of our banking partners have really recognized.

Our credit story and when we renew those facilities, we got lower rates. So certainly we are a better credit than we were.

Even three years ago.

Got it thank you.

Yeah.

Your next question comes from the line of Michael Zaremski with BMO capital markets. Your line is now open.

My follow up is just on the total company other underwriting expense ratio.

Just wondering I know theres some headwinds are the acquisition costs, just given mix, but I'm trying to understand the other.

Other expense ratio story, and just maybe how that can grind down over time and your focus on that some improvement year to date not as much as last year, but.

Update on that timeline.

No understood. So then the acquisition expense ratio. So the expense ratio itself is based on two components acquisition expense ratio and other underwriting expenses. The acquisition expense ratio is really based on mix of business. That's why you're seeing a change in that and that's what we're attributing that increase to the acquisition expense ratios.

Be that as well as the profit commissions.

That's what you're seeing there, but as we expect to continue our margin improvement is in the other underwriting expenses, that's something that we have control over and that ratio has declined each and every year. Since 2019. If you look at the whole picture you've heard me say this before about going back and looking at the full year of 2024 right now.

The full year 2024 for a total expense ratio was 33, 1% and where are we year to date in 2025 were at 33, 2%. So we're really right on target for what I would say if you look at it from a full year perspective.

Okay.

Your next question comes from the line of Matthew <unk> with <unk> capital markets. Your line is now open.

Hey, Thanks, good morning.

Just a quick one probably for Craig.

Just how should we be thinking about that.

Tax rate.

Going forward.

Great question, you may recall from an overall standpoint taxes is something that we're very focused on we think we still have a strategic competitive advantage from.

From the standpoint of the global minimum tax from the standpoint that we are deferred for five years, we do not start paying global minimum tax until the year 2030. So our current effective tax rate is still in the low single digits compared to the 15% global minimum tax.

Right.

So again from our standpoint, it's a five year deferral for them.

Great. Thank you.

Okay.

Thank you that will conclude our question and answer session for today now I will turn the call back over to the piano Apple you may begin.

I just wanted to thank everybody for joining us on our call today. We appreciate the opportunity of sharing our story in the positive trajectory that we're on and also the opportunity to answer to your questions.

We look forward to speaking to you again next quarter.

Yeah.

Ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect.