Q2 2025 American International Group Inc Earnings Call

Finally, today's remarks related to net premiums written of presented on a comparable basis, which reflects year-over-year comparison on a constant dollar basis and adjusted for the sale of the global personal travel and assistance business as applicable.

We believe this presentation provides the most useful view of our results and the go forward business. In light of the substantial changes to the portfolio since 2023.

Please refer to page 25 of the earnings presentation for reconciliations of such metrics, reported on a comparable basis.

With that. I'd now like to turn the call over to our chairman and CEO Peter zafino.

Thank you, Quinton and good morning everyone. Thank you for joining us today to review our second quarter 2025 Financial results.

Following my remarks Keith will provide more detail on the quarter.

And then we will take questions. John Hancock and Don Bailey will join us for the Q&A portion of our call.

Egg had an outstanding second quarter. We continue to make meaningful progress on our strategic operational and financial objectives that we outlined at investor day.

Our momentum continues to build with strong performance across the board.

We delivered adjusted after tax income for diluted, share of a dollar 81, an increase of 56% year-over-year.

Adjusted after-tax income for the quarter was $1 billion, an increase of 35% from the prior year quarter, driven by our general insurance business.

Which had underwriting income of 626 million, an increase of 46% year-over-year.

on an adjusted pre-tax basis was 955 million, an increase of 9% year-over-year,

As a Justice was 88.4%.

Calendar year. Combined ratio was 89.3% and Improvement of 320 basis points from the prior year quarter.

We achieved a core operating Roe of 11.7%.

We returned 2 billion dollars of capital to shareholders bringing the year-to-date total to 4.5 billion dollars.

We sold 430 million or 13.4 million shares of corebridge financial reducing our state to approximately 21% and finally both S&P Global and Moody's upgraded. Their financial strength, ratings of eggs, Insurance subsidiaries during the quarter which was a major milestone.

This is our first upgrade from S&P Global since 2013 and our first upgrade from Moody's since 1990.

For our call this morning, I will share a detailed review of our second quarter results.

A few observations on the global property market and specifically our portfolio.

Highlights from our successful completion of egg next.

Which delivered 500 million dollars in savings and significant operational improvements.

An overview of Russia, Aviation related claims.

And an update on our Genai initiatives.

Before I review the quarter in more detail, I'd like to take a moment to welcome. John Neil to egg.

He'll be joining us as president on December 1st.

As many of, you know, John is 1 of the most accomplished Executives in our industry.

He's very well known to our stakeholders, has significant global operating experience, and an impressive track record leading underwriting organizations, most recently as the CEO of Lloyd's of London.

John will oversee, our general, insurance organization, and will partner with me, and the Business Leaders in driving the Strategic direction of the business.

John's background experience in global expertise at depth to our excellent management team and we look forward to working closely with them in his new role.

Now, let me provide a more detailed view of our second quarter Financial results.

Net premiums written were 6.9 billion dollars an increase of 1% year-over-year.

Growth in global commercial.

North America, Commercial Insurance, net premiums written, increased 4% year-over-year.

Which I will discuss in more detail. North America, Commercial Insurance, net premiums, written increased 11%.

We had growth in businesses that we believe have strong risk, adjusted margins. And we tempered growth in those businesses that had rate pressure

Retail casualty and Lexington Lexington, casualty each increase. 19%

Western World, increased 15%.

Is which consists of glass filter and programs. Also increase 19%.

These results were offset by retail property and Lexington property, where net premium is written decline by 8%.

International Commercial Insurance, net premiums written increased 1% year-over-year.

By Modest growth in casualty and Global specialty which was offset by decline in property and financial lines.

In the second quarter, global commercial continued to produce strong, new business of nearly 1.4 billion, dollars a 7% increase from the prior year quarter.

In 2024 North America commercial experienced, tremendous, new business growth.

In 2025, we continue to see incremental growth led by Lexington Middle Market Western World and our alternative businesses.

It's worth noting that the submission count and our Lexington business continues to be very strong increasing 28% year-over-year.

Is very strong, new business and Specialty with a 35% increase from the prior year quarter led by marine and energy.

In addition, global commercial had very strong, renewal retention across North, America, commercial and international commercial of 88%.

Global personal net premiums written decreased by 3%, as I discussed on the previous earnings call.

We entered into a high-net-worth quota share reinsurance treaty with strategic partners that is driving profitability improvement of the portfolio. However, it had a 6-point negative impact on global personal net premiums written growth in the quarter.

Turning to expenses, Keith will go into more detail on his remarks but I wanted to make a few points.

Our general insurance expense ratio was 31% a 50 basis, point Improvement year-over-year.

For the first half of 2025, The General Insurance expense ratio was 30.8% compared to 31.6% for the prior year period.

The General Insurance business has continued to absorb expenses that used to reside in other operations.

In addition, we've made meaningful investments in cyber security and gen Ai, and the cost for both are being absorbed in the businesses.

For all other operations.

General operating expenses, were 90 million in the quarter, and 175 million for the first half of 20125.

This is in line with a $350 million annual run rate for parent expenses for 2025, which is simply an outstanding result.

This has been 1 of the most widely discussed topics in the industry. And I thought it was worth spending a few minutes outlining a technical view of eggs underwriting approach to our us property portfolio in this environment.

My comments will focus on us property because our International property portfolio is experiencing very different market dynamics.

It has terrific results and a rate environment that is currently positive.

Our us property business has been 1 of the best stories for egg during the repositioning of our underwriting portfolio.

What used to be a highly unprofitable portfolio, with massive limits and combined ratios of 120 or greater, accompanied by significant volatility and outside catastrophe losses, has now become one of the most profitable lines of business for AIG.

Even in the Corona virus, our portfolio has been performing exceptionally, well across retail property and Lexington wholesale large account where on average pricing decreases have been 11% and Lexington, Middle Market property, was largely flat.

Since 2018 retail property and Lexington wholesale, large account cumulative, rate increases have been 135% and 120% respectively in Lexington Middle Market has had cumulative rate increases of 90%.

Additionally over the last several years taxing, your combined ratios as adjusted have been below 60% on average for both retail and wholesale property.

Further.

And an important distinction, approximately 90% of our large account property, retail, and wholesale is placed on a shared and layer basis, which means non-concurrent pricing and non-concurrent terms on that placement.

Differentiate a pricing and policy wording, coverages, and exclusions for the limits. We deploy for each risk.

And when we report out our rate increases or decreases, it is against the pricing, that we established for our layer, not the index of the average pricing of the market for that placement.

Also with Sheridan layer placements, most of the businesses, net a commission.

This means it has a very low acquisition expenses.

And eggs case, retail property has an acquisition ratio of approximately 1%.

Inherently it, therefore has a higher loss ratio as the total premium includes very little expenses to grow up.

In contrast, a middle-market portfolio, which for AIG is 35% of our total property book, has different characteristics.

Middle market accounts have a higher acquisition expense ratio and total expense ratio, which translates to lower loss ratios because the total premium is grossed up through a higher total expense load.

When reviewing the quality and profitability of a property portfolio at a high level. In addition to excellent individual risk underwriting, you should also have a technical view of the following components.

Let's start with catastrophe.

You need a proper analysis of potential cat layers, using extensive modeling along with an accurate, view of exposure and appropriate funding for cat risks, including comprehensive reinsurance at all appropriate, return periods, and tail risk.

Then you should review, average, annual losses, or a, which are cat losses that are within your net retention below. Your property cat reinsurance program. The typically for lower return periods

Net retain catastrophe, requires, an appropriate risk load.

Also important our vertical single losses that are typically protected with property per risk. Reinsurance. And finally,

You should consider attritional loss selections with an appropriate risk margin.

When you analyze each of these components, I believe our approach has been conservative with respect to each variable.

Why do I feel this way?

The reason is, we have a clear and detailed understanding of our fully loaded reinsurance cat cost.

We've been able to purchase reinsurance at low attachment points.

And have high exhaust limits. And importantly, these costs are fully embedded into our insurance pricing.

This year, a risk adjusted pricing decreases for reinsurance are at or greater than the pricing decreases on our primary business. Limiting the impact of the rate environment on our net loss ratios,

This would not be the case to be chose to take these layers, net.

even with a significant increase in frequency of cats,

our A's have been roughly equal to or greater than our actual experience over the past 3 years.

A single large losses. We have significant protection on property per risk with reinsurance attaching at 25 million and exhausting in excess of 600 million.

This is another strategic choice to reduce volatility.

We have fully embedded this cost into our pricing.

We've also benefited from risk adjusting pricing decreases on our property per risk treaties.

The outcome of all these variables is that our traditional loss ratios, over the past 3 years, have performed better than our expected acts in your loss ratio picks. As I noted, another critical component of the loss projection is how much risk margin you have. As part of the ultimate action, your loss ratio, in our case, that margin has continued to expand as a result of our exceptional underwriting and cumulative ratings.

When developing our lost picks we include a risk margin that ranges from 10 to 20% depending on the segment of business.

We've structured our portfolio to manage through various Cycles. Going forward. We're looking to maintain our us property portfolio, which is evidenced through our strong retention growing where it makes sense for us, based on a risk, adjusted returns. And when market conditions, warrant, we have the ability to Pivot quickly.

When you take into consideration, all of these components of a property portfolio, we expect in the current environment to deliver strong profitability in both retail and wholesale properties.

Now, I'd like to provide an update on our operational accomplishments.

At the end of 2023, we launched egg next to create a leaner more simplified and more effective organization supported by the right infrastructure and capabilities while achieving at least 500 million dollars and run rate savings.

Doing a number of key initiatives.

First, we created a lean parent company with costs aligned to being a public company. Representing 1% to 1 and a half percent of net premiums earned.

In 2023, other operations expenses were approximately $1 billion.

In order to achieve our future State parent expenses, we transferred million dollars as part of the core Bridge, Financial diversity.

We either eliminated or reapportioned the remaining 350 million into our general insurance businesses.

Second.

We drove Global consistency and local relevancy across our end-to-end processes including centralizing, our Treasury, and capital activities to create Global Enterprise standards.

Third.

We reduced organizational complexity to the creation of 3 distinct business segments.

North America Commercial International commercial and Global personal.

Which is led to better and differentiated experiences for our clients and partners.

Forth. We restructured and simplified our underwriting and claims organizations to accelerate and scale our data digital and Genai strategy.

And finally, we Advanced our technology transformation.

And modernize our infrastructure, which included among other initiatives. The elimination of 1,200 Legacy applications.

As we did with egg 200 and our underwriting turnaround. I'm very pleased to share that. We've achieved our objectives ahead of schedule.

We actioned over 530 million dollars of annual run rate, expense savings with over 500 million dollars. Realized through the second quarter

I often say that 1 of the most impressive, differentiators of egg is our colleagues ability to execute multiple complex, strategic initiatives at the highest quality.

The Accelerated results that we've achieved through egg next or a testament to our culture of teamwork and willingness to execute a pace across the company,

We thought it would be helpful to provide perspective on the Russia Aviation related claims a complex industry Topic in the headlines.

These Aviation Insurance exposures are related to aircraft leased to Russian Airlines.

That were kept in Russia. After the invasion of Ukraine.

As you may recall.

Airline Les sores are seeking compensation under contingent and possessed as well as operator policies. Covering both all risks and War perils

on June 11th.

A judgment was issued in a legal proceeding in the UK in which a number of Les, led by air cap brought claims against insurers, that issued contingent and possessed policies to them.

And that judgment the UK High Court ruled that the lessor suffered a covered War loss. As a result of actions that the Russian government took in March of 2022.

This decision aligns broadly with several prior rulings in the U.S.

as we said at the outset,

this was an unusual event for the industry with complicated issues, including

whether a covered loss occurred. And when

Which Peril triggered coverage.

Did the lezzers take appropriate steps to mitigate losses?

Should sanctions. Apply and which policy should respond continued in possessed or operator?

the situation was further Complicated by the fact that many policyholders were quick to file coverage litigation

Which significantly delayed the loss of adjustment process.

Despite these complexities egg, along with other insurers, made a concerted effort early to engage with policyholders, in a unified manner to resolve the claims consensually.

Reflecting the intent of the policies which were written on a subscription basis in the London Market.

Unfortunately, the market participants were not able to agree on a solution which is often the case in our industry and litigation for seeded in multiple jurisdictions, most notably in the UK

In the UK preceding, egg was the lead, all risked representative defendant and as such Advanced, the position that any losses by air cap should fall to the war cover which was eventually adopted by the court.

It's worth noting that egg sought to and successfully settled all other claims under contingent and possessed policies in the UK proceeding.

Businesses. The pain releases of our exposure under any applicable. Operator policies.

With regard to the operator policies. There is a separate UK, preceding concerning claims, that less sores have brought against egg in several other insurers.

We believe these operator claims face significant hurdles given among other factors that the relevant aircraft continued to be used by the Russian operators.

Like many in the market egg wrote, both all risk and more policies.

early on, WE conducted a thorough evaluation of the potential net Financial impact of these claims on egg

Factoring in the complex coverage issues and all applicable reinsurance and various scenarios.

As a result of this analysis.

As I have stated previously, we prudently reserved for our expected net loss exposure, and the outcome in the air cap case, along with the settlements in other cases, have been in line with our expected net loss estimates.

now, let me take a few minutes to provide an update on our Genai work, which continues to accelerate while generating significant interest among our stakeholders

At our investor day, we provided an overview of our Genai approach and how we're deploying Genai, end to end Across The Core Business, to power our underwriting business.

Specifically.

We talked about how we're leveraging large language models, our agentic ecosystem of capabilities, and our Partnerships with AWS palantir and anthropic among others.

We laid out our framework, which is built around data ingestion, augmentation, and prioritization. Powered by our agentic AI ecosystem.

We first deployed Egg Underwriter assistance to our private, non-profit business and financial lines at the end of the first quarter, and the early results are very promising.

Submission ingestion has increased by 4 times and the submit to bind ratio has increased by 20% from the Baseline.

Looking forward.

We remain on track to introduce egg underwriter assistance for our Lexington Middle Market property and casually businesses in the third quarter of this year and across all of North, America commercial UK and Amia commercial lines in 2026.

And we continue to explore opportunities.

To accelerate our roll out.

As we scale Jedi across underwriting. We've also been building AIG claims assistance

We have successfully configured the core Genai capabilities of ingestion augmentation and prioritization that we built for egg underwriter assistance to support claims.

With this framework, we can ingest unstructured data to expedite first notice of laws.

Prioritize claims assignments and augment claims adjusters' investigations with relevant external multimodal data from approved sources.

For claims.

We've been training, large language models to extract and organize key insights automatically to enable claims adjusters to make more informed decisions faster than ever in order to fulfill our promise of helping our clients. When they need us, most

We've conducted preliminary testing on the first notice of loss process.

Which is the first report made to an insurer about a potential claim. In our sample, the processing time has decreased from days to hours.

We've also seen cycle time for coverage endorsement reviews. A key part of a coverage assessment decreased from hours to minutes.

Our objective with these Advanced tools is to enable more technical reviews.

Provide our underwriting and claims experts with more insight and capabilities.

Reduce cycle time.

Significantly enhanced decision-making and meaningfully improved service to our clients and partners.

Foundational to this work is ontology.

You will hear a lot more on this topic in the coming quarters, especially as we make more progress with our rollout.

We've been building our egg ontology since we began our work in AI.

A reflection intent to create a digital twin of our business representing all key data processes, business logic and a map of relationships across businesses and functions.

Ontology is critical for deploying large language models. It brings together the relevant data sets that define the components of our insurance business.

and then models how they relate to 1 another

Our ontology will create a clear record of any actions taken.

Which will inform business logic and provide the ability to audit agents activities.

We've seen an acceleration sense investor day as large tech companies have made significant capital expenditure commitments, to further, Advance Genai capabilities. I'm very encouraged with the progress that egg is making.

With that overview. I will now turn the call over to Keith.

Thank you, Peter and good morning.

I'm going to expand on the financial highlights for the quarter.

Overall, total adjusted pre-tax income (API) was $1.4 billion, an increase of 37% from the prior year quarter.

This was driven by excellent results from the business and focused execution of our investment portfolio strategy.

General Insurance, gross premiums written were 10.1 billion in the second quarter and increase of 4% from the prior year.

Net premiums written were 6.9 billion an increase of 1%.

For the second quarter, General Insurance accident year, combined ratio as adjusted was 88.4% an increase of 80 basis points over the prior year quarter.

I'll unpack the loss ratio when I cover the segments.

Looking at expenses in the second quarter, General Insurance expense ratio was 31.0%, a 50 basis point increase year-over-year.

In general insurance absorbed 83 million of additional expenses that were booked in other operations in the second quarter of 2024.

We remain on track to reduce our expense ratio below 30% by 2027.

Moving to catastrophes charges for the quarter total of 170 million or 2.9 loss ratio points.

Prior year development for the quarter, net of reinsurance was 128 million favorable, which included 97 million of favorable loss, Reserve development, and 31 million of ADC amortization.

The favorable development primarily stemmed from workers. Compensation largely driven by favorable Trends on excess of loss, sensitive business.

Us property and special risks also developed favorably.

We strengthened us casualty by 106 million, which was driven by mass tort and older accident years of which the vast majority, is an accident years 2015, and prior which are covered by the ADC.

We also reapportioned some of the uncertainty provision in casualty lines into the more recent accident years as we outlined in the fourth quarter.

This is a prudent measure given broader litigation and inflationary Trans in the industry.

This was not related to any of observable deterioration in our book.

The General Insurance calendar year. Combined ratio was outstanding at 89.3% a 320 basis point Improvement compared to the prior year quarter.

now, moving to the segments,

North America commercial accident. Near combined ratio as adjusted was 86.2%, an increase of 150 basis, points over the prior year quarter.

The accident year loss ratio of 63.1% was up 120 basis points, owing to...

Changes in business, mix as our casualty business grew and we pulled back on property.

Increased Prudence in our 2025 lost picks predominantly and Casualty lines. Given Mass tort and general litigation trends.

And reapportionment of unallocated loss adjustment expenses into the loss ratio. Largely related to lean parent implementation

the expense ratio is up 30 basis points to 23.1% also driven by lean parent implementation,

The quarter included 470 basis points of catastrophe losses, and 500 basis points of favorable prior year development.

North America commercial calendar year. Combined ratio was 85.9% and Improvement of 430 basis points from the prior year,

Turning to International commercial.

The accident year combined ratio as adjusted was 85.0% an increase of 290 basis points.

Additional conservatism and lines facing macro uncertainties and changes in business, mix.

The expense ratio Rose 130 basis points to 30.8% driven, by lean parent.

This quarter included 140 basis points of catastrophe losses and 50 basis points of favorable prior year development.

the international commercial calendar year, combined ratio with 85.9% a 270 basis point Improvement year-over-year,

Is the 9th consecutive quarter of a sub, 90% combined ratio and speaks to the high quality of our portfolio.

Turning to Global personal the accident year, combined ratio as adjusted was 96.1%.

A 120 basis, point Improvement, adjusting for the divested travel business.

The accident year loss, ratio was down 160 basis points to 54.2% driven by lower reinsurance costs, increased earned premiums, as well as stronger underlying profitability.

The expense ratio was up 40 basis points to 41.9%. Also driven by lean parents implementation,

This quarter included 240 basis, points of catastrophe losses and no, prior year development.

The global personal calendar year combined ratio with 98.5% and Improvement of 170 basis points year-over-year.

We continue to make progress in the profitability of our Global personal business as outlined at investor day.

Moving to rates Peter has already provided detailed perspective on the property market, so my comments will focus on other lines.

Market conditions for pricing have remained largely stable and consistent outside of property.

Which is in line with loss cost trends.

In North America casualty, we continue to see price firming.

In the excess casualty space, with pricing up 17%.

Primary casualties saw 12% pricing increases, which were above lost cost trends.

In North America, financial lines pricing reductions moderate to down 2%, which is the lowest level of decrease since rates. Move negative in the second quarter of 2022 and was 3 points better than the first quarter.

Moving to International, overall pricing was down 3%.

Global specialty pricing was down 6%.

Talbot down 3% and financial lines down 4%.

Eggs. Well Diversified Global portfolio allows us to manage across geography and products prioritizing lines of business that offer the most compelling risk, adjusted returns while navigating a complex and dynamic Global Insurance Market.

Moving to other operations second quarter. Adjusted pre-tax loss was 106 million versus the prior year quarter of 163 million.

This reflects a significant reduction in general operating expense and lower interest expense, partially offset by lower. Net investment income.

Adjusted for travel.

Total General operating expenses, across both General insurance, and other operations where 867 million in the second quarter up 1%. From the prior year

This small increase in goe compares to 6% growth in net. Premiums earned.

For the first half of 2025, total goe was 1.7 billion down, 3% year-over-year, while net premiums earned grew by 4.

This is an excellent outcome. Especially considering our continual investments in data digital and gen AI capabilities and reflects positive operating positive operating leverage from our expense discipline.

The second quarter. Net investment income on an API basis was 955 million an increase of 76 million year-over-year.

In general insurance. Net investment income was, 871 million growing 17% year-over-year.

Increase was driven by fixed maturity Securities. Owing to the optimization of our lower yielding portfolios asset growth higher reinvestment yields and an adjustment of interest income primarily from the first quarter.

2025, General Insurance, net investment income was 1.6 billion and grew 7% year-over-year.

Is a better indicator of our expected run rate for the full year subject to market conditions.

During the second quarter, the average new money yield on the fixed maturity and Loan portfolio was roughly 110 basis points. Higher than sales and maturities.

Other operations, net investment, income of 88 million declined, 48 million over the prior year quarter and and reflects income from our parent liquidity, portfolio of 58 million and corebridge financial dividend income of 27 million.

Yesterday, we announced the sale of another 30 million shares of corebridge financial with proceeds of approximately 1 billion dollars.

This brings our ownership to roughly 15%.

Peter already provided some detail on Capital Management in his remarks.

Based on our current liquidity and cash flow profile. We anticipate being at the high end of our 2025 share of purchase guidance. Range of 5 to 6 billion subject to market conditions.

Turning to dividends, we increased our quarterly dividend in the second quarter by 12 and a half percent to 45 cents per share delivering a third straight year of double-digit growth.

Turning to liability management. We've made significant progress over the last several years, improving our financial strength and flexibility in may we issued 1.25 billion of debt upsizing. The offering as a result of significant demand,

the proceeds were partially used to retire, 830 million of debt, effectively managing our maturity ladder.

As a result, we have no material debt maturities in 2025 and 2026.

We ended the quarter where the 9 billion of debt outstanding and a debt to Total Capital ratio of 17.9%.

Amongst the lowest in our peer group.

As Peter already mentioned, but it Bears stating again during the second quarter eggs, major Insurance subsidiaries received Financial strength upgrades from smpp to A A minus from A+ and Moody's to A1 from A2.

These actions speak to the strength and stability of AIG and are a meaningful validation from our key stakeholders, representing the collective hard work of our colleagues over several years.

We continue to have strong Capital ratios across our major Insurance subsidiaries which supports consistent and growing statutory dividends over time.

We are on track to generate approximately $3 billion of subsidiary dividends in 2025.

Book value per share, June 30th was 74.14 of 8% from June 30th 2024 reflecting strong growth in net income as well as the favorable impact of lower interest rates on investment aoci.

Adjusted tangible book value per share was $69.81 up 4% from June 30th 2024.

In summary, we delivered an excellent second quarter with annualized core operating Roe of 11.7%.

While the macro and insurance Market remained Dynamic. We are well, positioned with multiple levers to drive continued, strong performance. We remain on track to achieve our 10% plus core. Operating Roe Target in 2025 and continued to make steady progress on the long term Financial targets. We outlined at our investor day with that. I will turn the call back over to Peter

Thank you Keith uh Michelle. We're ready to take questions.

Thank you. If you'd like to ask a question, please press *1 1.

If your question hasn't answered, and you'd like to remove yourself from the queue. Please press star 1 1 again.

Our first question comes from Alex Scott with Barclays. Your line is open.

hey, uh,

Thanks for taking the question first, when I had is, you know, just on the the property pricing implications and some of the comments you made around the, you know, impact of reinsurance and so forth. I just wanted to make sure I understood that right. I mean, it sounded like that.

Net wasn't really much of a headwind actually uh in in the underwriting. So I just wanted to understand.

You know, if I'm if I'm getting that right? If, if it's more, the makeshift and, you know, can you still hit the combined ratio targets you've talked about in the past

but I was trying to outline uh in my prepared remarks was

We are a big buyer reinsurance on property. Everybody knows that we have low attachment points. We have high exhaust.

In a market like this, we benefit. Because if if the rates are going down on reinsurance on CAD as an example that does benefit the original pricing, if you're funding it, net, what I was saying, like if I look at our own ails, like if the market gets softer, I don't reduce the ails, they say the same. And so what I was trying to say is that when you look at,

The amount of reinsurance that we would purchase, we're getting risk, adjusted reductions that are at or greater than what we're pricing. Our original policies, that's a benefit. So there's no headwind there, but if you're funding it net, your A's are still the same. So you have to take a look at your attritional a little bit sharper, I believe because, um, you know, the overall pricing is going down. If you don't have the commensurate rates going down on your catastrophe, that's a headwind. We don't have that. And so that's what I was just trying to unpack, uh, in in sort of the different components of property. Now, look at the combined ratio could go up a bit. Um, we have great combined, ratios, I I've given

You know, some clarity at investor day and product quarters that we posted in many of our businesses, um, you know, in the 70s, uh, combined ratio. So if it goes into the low 80s, um, it's still a great business. We are tempering our growth there because I don't know what happens, the rest of the year with cat, um, and it's just something we want to be cautious with, but we still want to retain the business. We still want to price it appropriately and believe that we can have very strong returns in the current environment as I Look to 2025

Yeah, that's helpful uh, second 1 I had is sort of a follow up on on what you mentioned on growth. I mean if if the growth environment turns out to not be quite as good as expected, you know what what will you do with the the capital situation? You have? Because I you know, I see premium to equity I think it's a little below like 70%.

I think that's the lowest in the peer group, I look at um and that's sort of

not even that heavily influenced by the core Bridge. Uh proceeds and we have to hold go. So

You know what, what would you do in the event? That that the growth Outlook doesn't end up being what you'd hoped for, what out, what you outlined at the investor day. You know how quickly would you take action to try to get some of that Capital redeployed elsewhere?

Well I outlined that investor day um that over a period of time undefined. Um, but it would be a medium-term that if we can't deploy the capital for growth, we would return to shareholders but we do believe look at it's a moment in time with the property, you know the second quarter before cat season uh the property lines, run really well. And and I'm going to ask Don and John to comment on this because we're seeing other opportunities for growth. I think that we're getting Mass, a little bit with property, we outlined it. We sort of bifurcated it because it's sort of anomalous to what's happening in the rest of our lines of business. But um, we don't need the capital um, to execute on our sort of Capital Management strategy out of the subsidiaries. And we really believe we can grow into it over a period of time if we can't. Um and you know, the market stays in a in a place where we have excess capital

We'll return it to shareholders, but I don't think that's the place we are. It's a moment in time in this particular quarter, I think we got to look out over the next few years. Um, and and I believe egg now has a business that can grow when we had the market turned. Last time, egg wasn't prepared. Uh, we were still, you know, re-underwriting our portfolio, we still had a bottom 15 20%, we were growing in lines, repositioning the portfolio. The market turns this time, we have massive opportunities to have exponential growth and we will execute on that. But Don, maybe let me start with you about what you're seeing in casualty, and then maybe I can shift to John talk a little bit about specialty.

Absolutely done.

Uh, we're definitely going to see the right opportunities as we go forward there. In the growth opportunities that follow gladfelter is a machine for us. Uh, it's highly Dependable growth engine for us. And with the work, we've done with gladfelter to kind of rebuild our programs business that increasingly is a huge driver of our growth as we go forward as well. So that's going to start to deliver even more as we go forward. We covered some of those businesses and investor day. And I would just say this about Lex too, that outside of the large account property segment,

uh, every other segment within Lexington is growing quite nicely. And we had 28%, increase in our submissions at Lexington in the quarter, which again, is a strong indicator for future growth opportunities. Uh, last thing I would just say our distribution model is highly aligned to drive everything that I just talked about. So we see more and more opportunities ramping up as we go forward. And we continue to be a, a very strong brand at Lex, gladfelter and egg with our distribution partners and our insurers.

Thanks, Don, that's that's helpful. John, maybe just talk about like specialty and how we're positioned in the market would be great.

yeah, and certainly, I mean,

Specialty, you know, we highlighted this and invest today, we talked about it a lot because it is such a um, fantastic business. Uh for us we've uh, delivered 5% growth in the quarter 7% um year to date and for sure there is increasing competition and rate pressure generally

But global specialty as much as anywhere.

It's an area. We have real clear, differentiated proposition, we're a leader, we're not an index for the market. Um, and we're position, I think better than anyone to achieve Superior terms and managed through the cycles and that's what we've been setting ourselves uh, up for um, oh, over the years and I think it's also worth saying on on specialty is, you know, we're still seeing that good growth of the Prophet is phenomenally. Um, good. We're confident that that maintains

Its a big part, you know, in in the quarter and I agree with you Peter. I mean a quarter.

Is not a good judge of of any growth plan. There's a lot of noise in any single um uh quarter. Look at the longer um term and that's what we build. Certainly a specialty book for if I stick to the quarter, you know Specialties for 45% of the international commercial uh business on a growth uh basis.

But it's only 28% of net, um, premiums and that's in part due to those reinsurance protections that that you talked about uh, uh, Peter and that, those reinsurance protections do make the result better. It might mean we give up a little bit of margin in a hardening and Rising price cycle and we do that for to manage the volatility. But it also significantly mitigates the downside.

In the market that we're in, um, now. So, so that's a, that's a strong thing. And that's part of a long-term sustainable, reinsurance strategy, helping us manage across the Cycles. Yeah, bear in mind as well. We've seen nearly 70% cumulative rate increase in in specialty over the last few years and then 20 odd percent in in energy. So we're really well positioned. We've got long-term strategic Partnerships with those reinsurers. That's a big part of our, our proposition. So the future is really strong. Yeah, thank you both very much.

Okay, next question.

Thanks.

Thank you. Our next question, comes from mayor shield with KBW. Your line is open.

Um, great, thank you for watching, good morning. Um, I wanted to just check in on the reapportionment of Reserve, uh, tax in years, 21 and 22. And I guess I know we're only looking at net numbers, but should we have seen something like that? Affect 23 and 24 as well?

Thanks mayor. Um, look at, I'm going to recap a little bit, what I said. Um, and and that Keith alluded to uh, in in the fourth quarter of, of sort of last year,

we had this provisional Reserve that we created in 2022 and then we did add to it in subsequent years to um you know, add to margin. And it was really in response to some of the uncertainty with inflation other variables sort of post-pandemic and then sort of the social inflation environment that we're in uh the provision uh which included ibnr uh had been carried in lines that we thought were be most susceptible to the rising inflation. Um and the uncertainty provision was set above Los picks from our action Barrel reviews. That didn't have.

Completing Reserve reviews, a portion of them into lines of business that we thought were appropriate. And I think that's what you, uh, had started to see in the fourth quarter of 2024 and it'll actually go through the fourth quarter of of 25. So, you know, the the accent year is the most recent ones. It wasn't that much number 1. Number 2 is a zero sum game, those reserves are already set, uh, we just are putting them into, you know, lines of business that we think are the most appropriate. Uh, when we look at the wide range of outcomes of casualty, we just thought it was prudent to reapportion those actions. There's nothing in the underlying portfolio. That would suggest that those additional reserves are needed, but we had the uncertainty provision, and we're allocating them to lines of business throughout 2025

Okay, that's helpful. Um, and then a bigger picture question. When you talk to your, uh, insurers. Uh, I know there's a lot of concern in the insurance industry about social inflation. Is that translating into increasing demand for liability coverage. Is that manifesting itself in the market yet?

I'll have Don comment a little bit about what we're seeing sort of in the casualty Market, what I would say. Um, there is that there is a strong pull.

For underwriting companies that have expertise in casualty lines. So it's not just capacity. If you're going to lead, do you understand the complexities that exist within their business? Their Industry Group, their structures? How do we help them think through the total cost of risk working with our partners? Um, and I think when egg had a slight pullback in casualty, there was a lot of demand from our clients asking for us to be, uh, you know, more involved. And so I think the way in which we react to that is by trying to create solutions for our clients in the environment that we're in. So don maybe just, you know, quickly, just what you're seeing in casualty to Mary's question, you know around, uh, you know, client demand and and how we're helping them um, on an advisory basis? Yes. Yeah. The social inflation and some other factors in the casualty Market, have the market, appropriately disrupted, um, and and generally discipline. And we expect that to continue social inflation.

My it's a long-term issue and why that matters is it casually is a long-term relationship as opposed to a property relationship often times. So these are 2030 year relationships. So when we look at the question you're asking buyers are definitely in a flight to Quality mode where they see that long-term partner because of social inflation, being even more important and being even more critical. So our brand in this place, our multi-line capabilities, our platform, our financial

Cial strengths become incredibly attractive, uh, for Brokers and buyers out there, so it's like the quality is real and we'll see that as we go forward.

Thank you. Okay, great. Thanks, mayor.

Next question.

Thank you. Our next question, comes from Elise. Greenspan with Wells, Fargo, your line is open.

Hi, thanks. Um, good morning. Um, my first question. Um, I wanted to go um to the pricing discussion. Um, you guys said excluding property North America commercial is up 6% and you packed that is in line with lost trend.

I might have assumed just given the casualty makeup of the book that lost Trend would have been above 6%. So maybe um, if you could just help by kind of parsing it out on the Lost trends that you're seeing within kind of, you know, some number that's less than 6 x property in that North America book.

Thanks Elise. Look, we're not going to break it down by by line, and if you look at where we're getting strong rate, it would be where there's, you know, a bigger loss cost Trend. So, if you think about, you know, excess casualty in particular, um, some of the retail primary casualty, uh, you know, we are, you know, booking at what we took out properties, this is, it's a part of the index, but, um, you know, I think the loss cost trend.

uh, is

Where where we had outlined it on sort of on an index basis. And I think we are covering loss costs on on casualty and other lines excluding property.

Okay, thank you. Um and then um my my follow-up um you know is there been any um significant change in price that you guys have seen in in July relative to the Q2? Um just because I think right property is probably perhaps a bigger makeup of the second quarter. Just trying to get a sense of any kind of pricing change um quarter to date in the Q3.

Look at if we had Insight that we could give you, um, we would give it but it's just, it's just too early a lease I mean, because we're still aggregating July.

reported for the first half of the year and I think we really just need to play out the quarter as we, you know, go into um,

You know, the last 2 months of the quarter, so I I just think it's too premature, you know, to outline anything in July or, um, there's nothing that we've seen that is, you know, significantly different than what we report in the second quarter.

Thank you. Thank you.

Thank you. Our next question comes from Mike zimski with BMO. Your line is open.

Okay, thanks. Good morning. Um, question on the, um,

the meaningful expense ratio Improvement to just kind of on the, on the Cadence. Um, should we be thinking that? Um, the Improvement, um, is going to be a bit more kind of a back-end loaded, um,

Given the, um, the Top Line being weighted way down a bit by property rates, or is that kind of not, um, that much of a its operating leverage not that much of a factor at this point.

Keep let me start with this uh, good morning Mike. And I, I will like, just provide like sort of high level than any details. You want to add to it, please. Uh, please do 1 as we started this sort of process of a portioning. Um, you know, parent expenses, uh, you know, into the business. You know, in the third quarter of last year was a fully loaded in the third and fourth quarter know but it was mostly there. So I think when you look at the first half of the year, it's kind of continuing

Of what we did. Um, you know, from other opiates goe into the business. I don't think the second quarter is an accurate run rate, I think it starts to bend the curve a bit in the third and fourth to where there's less going into the business. Um, when you compare it to, uh, sort of the second quarter, there's some 1-time um, you know, sort of headwinds in the second quarter. But like we're really just focused on getting to

Future state, which I think we've done an exceptional job in terms of the parent company. The business has done a tremendous job of absorbing those costs. Um and you know I thought it would actually be a a longer transition. It has not been um, and then you have to recognize too. We haven't fully earned in all the egg next while we have completed, you know, the 500 million, we still have um, you know, more to earn in. Um, in terms of incremental, in-ear benefits in the third and fourth quarter. So look at this isn't guidance that you ought to like take it way down but it is guidance saying that I think you got to look at it for the full year. Like the first half was a little bit more um bumpy than I think the back half will be and we're going to watch, you know, sort of the, you know, the earned premium and making sure that uh, we don't have any issues on the expense side. But Keith, I mean, a couple of variables you may want to add. Yeah, just 3 quick points and and Peter Peter said it. Well, you know, the first thing, um, it's it's not linear right quarter to quarter. I think is, is a good way of looking at

Looking at it over the course of a, of the full year is, is a better way. Just a couple quick points, you know, on in my script, we talked about, uh, I wanted to give you a fully loaded view of expense looking at goe, plus other operations expenses to get a feel for. Are we getting the expenses? And the answer is yes, right? You see, minus 3% in the first half of the year when you load fully full expenses together and plus 1 in the quarter, and that compares to, you know, 6 and 4 and 6% growth on the top line respectively. So we're getting the operating leverage, uh, 0.2. If you look at the um, expense ratio, um, it's up 20 BS, adjusted for travel in the first half and that's with more than 100 basis points of, uh, parent cost, push down. So we're getting again, the ratio is underlying improving. And the third thing to Peter's point he made is that the noise from this. The parent pushed down will dissipate over time, you know, this quarter we had 90 million of the

Expense was 184 in the prior year, the third quarter had 144. So you're starting to see uh, and when once we get to fourth quarter that will completely dissipate as we get into uh 2026.

Okay perfect. That's helpful. My um, my follow-up questions um, on um the ens Marketplace. Um, I believe Peter you cited um submissions intellects being plus high 20s, um, which just seemed like a I don't, I don't think he disclosed it every quarter but it seemed like a, you know, a very high level. Um, can you maybe just kind of talk about

So, um, any comments or couple?

My first comment is be careful who you speak to. Um,

because,

This Dynamic is is very different than any other Market where you know industry um you know Executives that have been in the wholesale and Retail.

Will expect this to be, um, you know, a market that just transitions back into retail, and that may or may not happen. We're not seeing it, like, I mean, so like we keep citing, the submission counters, because

It's not that we're surprised but we're like unbelievably encouraged because in a market that typically would find retail casualty, um, and Retail property being more in demand. Um, that doesn't seem to be the case. And, and so, um, you know, when we look at our own growth, um,

Lexington, casualties growing, very strong, you know, property to be honest, held up better than than the retail. Um, and uh, that's from, you know, the Middle Market play that that we had in the past and I think that wholesale Brokers have become more than ens Market placement. They are now a broad range of whether it's through, you know, mgas and mgus or actually being placement mechanisms for the 40,000 independent agents that exist within the United States. So, I I I think that the market is seeing, uh, some pricing pressure. But so is the retail. Um, and there's no evidence from us that, um, it's slowing down in terms of submission calendar. And we have

I want an investor day is that if we can start to harness that submission count and get it to better bind ratios because it's a business that we like we still see growth opportunities. It's not that we're saturated, uh, with the submission count that we're maximizing, you know, our own growth potential or the industry is. And, um, you know, there may be new entrance, new participants, but they're Irrelevant in terms of the market that we trade in. Uh, so we, we remain encouraged cautious, because we want to watch what's happening within the property. But overall, it's, it's holding up really well.

Thank you. Okay.

Thank you very much. Um appreciate everybody, uh, participating. I want to thank all of our egg colleagues for, yet another outstanding contribution to this quarter and uh, I wish everybody a great day.

This does include the program. You may now disconnect good day.

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