Q2 2025 American Financial Group Inc Earnings Call
Good day, and thank you for standing by. Welcome to the American Financial Group. 2025 second quarter results conference call.
At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session to ask a question during the session. You will need to press star 1, 1 on your telephone. You will then hear an automated message. Advising your hand is raised to withdraw your question. Please press star 1 1 again, please be advised. That today's conference is being recorded.
I would now like to hand the conference over to your first Speaker today. Diane Whitner vice president of investor relations. Please go ahead.
Good morning and welcome to American Financial groups. Second quarter 2025 earnings results conference call.
We released our results yesterday afternoon. Our press release investor supplement and webcast presentation are posted on afg's website under the investor relations section.
These materials will be referenced during portions of today's call.
I'm joined this morning by Carl Lindner III and Craig Lindner, Co-CEOs of American Financial Group, and Brian Herzman, AFG CFO.
Before I turn the discussion over to Carl, I would like to draw your attention to the notes on. Slide 2 of our webcast.
Some of the matters to be discussed. Today are forward-looking these forward-looking statements involve certain risks and uncertainties that could cause our actual results and or financial conditions to differ materially from these statements,
a detailed description of these risks and uncertainties can be found in afg's filings with the Securities and Exchange Commission, which are also available on our website.
We may include references to cornet operating earnings, a non-gaap financial measure, and our remarks. Or in responses to questions a Reconciliation of net earnings to coret operating earnings is included in our earnings release.
And finally, if you're reading a transcript of this call, please note that it may not be authorized or reviewed for accuracy. As a result, it may contain factual or transcription errors that could materially alter the intent or meaning of our statements.
Now, I'm pleased to turn the call over to Carl Lindner III to discuss our results.
Good morning. Uh, I will begin by sharing a few highlights of AFG's 2025 second quarter results, after which Craig and I will walk through more details. Uh, then we will open it up for Q&A, where Craig, Brian, and I will be happy to respond to your questions. We are pleased to report an annualized core operating return on equity of 15.5 percent, despite quarterly returns from alternative investments that tempered overall results.
Underwriting margins and our specialty Property, and Casualty Insurance. Businesses were strong and higher interest rates increased. Net investment income. Excluding Alternatives by 10% year-over-year.
In addition, we returned over a hundred million dollars to our shareholders. During the second quarter of 2025 through a combination of regular dividends and share repurchases.
Our compelling mix of specialty Insurance businesses, entrepreneurial culture, disciplined, operating philosophy and an astute team of In-House investment for professionals continue to serve us. Well in environments, such as these and position us for long-term success. Craig and I thank God or talented management team and our great employees for helping us to achieve these results. And I'll turn the discussion over to Craig to walk us through some of these details.
Thanks Carl. Please turn to slides 3 and 4 for second quarter highlights.
Afg reported core net. Operating earnings of 2.14 cents per share compared to $2.56 per share and the prior year period.
Our 2025 results, reflect a year-over-year decrease in underwriting profit and lower Returns on alternative Investments.
I begin with an overview of afg's, investment performance, and share a few comments about afg's financial position capital and liquidity.
The detail surrounding our $16 billion portfolio is presented on slides 5 and 6.
Excluding the impact of alternative investments, net investment income at our Property and Casualty Insurance operations for the 3 months ended June 30, 2025, increased 10% year-over-year as a result of higher interest rates and higher balances of invested assets.
6. Approximately 2/3 of our portfolio is invested in fixed maturities.
In the current interest rate environment, we're able to invest in fixed maturity securities that yield approximately 5.75%, which compares favorably to the 5.2% yield earned on fixed maturities in our PNC portfolio during the second quarter of 2025.
The duration of our PNC. Fixed maturity portfolio, including cash and cash. Equivalents was 2.8 years in June, 3020 2025.
The annualized return on alternative investments and our PNC portfolio was approximately 1.2% for the Q2 2025 compared to 5.1% for the prior year quarter.
As a result overall PNC, net investment income was approximately 5% lower than the comparable 2024 period.
The impact on rental rates and occupancy. From a surge in new apartments Supply. In certain otherwise, strong markets reduced. The fair value of some some multi-family Investments.
This tempered, the performance of our alternative Investment Portfolio. In the second quarter of 2025 by nearly $30 million.
Although substantial Supply, persists new construction starts have plummeted.
We expect current inventory to be absorbed over the next 12 months.
Notably multi-family starts are down approximately 20% year-over-year and down nearly 50% from their 2022. Peaks
The combination of tightening Supply and a significantly reduced development. Pipeline is forecast to drive higher, rental, and occupancy rates over the next several years and should result in stronger Returns on our multifamily investments.
Longer term we continue to remain optimistic regarding the prospects of attractive returns from our overall alternative Investment Portfolio with an expectation of annual returns averaging, 10% or better.
Please turn to slide 7, where you'll find a summary of AFG's financial position at June 30, 2022.
during the quarter, we returned over 100 million dollars to our shareholders including 30 M 39 million in share repurchases uh and our 80 cent per share regular quarterly dividend
We expect our operations to continue to generate significant excess capital throughout the remainder of 2025, which provides ample opportunity for acquisitions, special dividends, or share repurchases.
We evaluate the best alternatives for capital deployment on a regular basis.
We continue to view total value creation as measured by growth and Book. Value Plus dividends is an important measure of performance over the long term.
For the 6 months, ended June 30 2025, afg's growth in book, failure per share, excluding aoci plus, dividends was 6%.
Our strong operating results. Uh, coupled with effective Capital Management and our entrepreneurial opportunistic, culture, and disciplined operating philosophy, and able us to continue to create value for our shareholders,
And I'll turn the call over to Carl to discuss the results of our PNC operations. Thank you, Craig. Please turn to slides 8 and 9 of the webcast, which include an overview of our second quarter results.
Overall underwriting profitability was strong in our specialty PNC businesses in the second quarter of 2025. We remain confident about the strength of our reserves, a continued favorable pricing environment, increased exposures, and new business opportunities, which have enabled us to grow our specialty property and casualty businesses. We continue to expect premium growth for the full year.
In 2025 looking at a few details, you'll see on slide 8 that our specialty Property and Casualty Insurance businesses generated a 93.1 combined ratio in the second quarter of 2025 2.6 points, higher than the 90.5 reported in the second quarter of last year. Results for the 2025 second quarter include 2.3 points related to catastrophe losses. Consistent with results in the 2024 second quarter.
Second quarter 2025 results benefited from 0.7 points of favorable prior year reserve development compared to 2.3 points in the second quarter of 2024.
Williams were up 10% and 7% respectively when compared to the second quarter of 2024 uh earlier reporting of crop acreage by insureds impacted the timing of the recording of crop premiums and contributed to the year-over-year increase, particularly when compared to later reporting of acreage the previous year. So if you exclude the crop business, our gross and net written premiums grew 6 and 5% respectively.
Average renewal price of their property. Casualty group, excluding our workers comp businesses was up approximately 7% in the second quarter. Consistent with pricing increases in the first quarter, including workers. Compensation, renewal rates were up approximately 6% overall about a point higher than in the previous quarter. We reported overall renewal rate increases for 36 consecutive quarters and we believe we're achieving overall renewal rate increases in excess of prospective loss ratio Trends to meet or exceed, our Target of returns.
Now, I'd like to turn to slide 9 to review a few highlights from each of our specialty Property and Casualty business groups. Details are included in our earnings release self-focus on summary results. Here
The business is in the property. The transportation group achieved a 95.2% calendar year combined ratio overall in the second quarter of 2025.
2 and a half points higher than the 92.7, uh, reported in the comparable 2024 period. The second quarter 2025 combined ratio benefited from 2.2 points of favorable prior year Reserve development compared to 6.3 points in the in the 2024 second quarter, particularly reflecting a special, a strong results for a crop business in the prior year period.
Second quarter, 2025 gross and net written premiums in this group were up, 15% and 10% higher respectively than the comparable prior year as mentioned before earlier reporting a crop acreage compared to 2024, which impacts the timing of crop premiums contributed to higher second quarter premiums. In this group. Again, when you exclude the crop business, gross and net written premiums. In this group, grew by 6 and 5% respectively. Increased exposures new business opportunities in a favorable rate, environment, contributed to our growth in our transportation businesses,
Overall, renewal rates in this group increased.
Uh, a pro approximately 8% in the second quarter of 2025, a point higher than the pricing achieved in this group for the first quarter of 2025. We continue to remain focused on rate adequacy, particularly in our Commercial Auto liability line of business, where rates were up approximately 15% in the second quarter.
In terms of our crop business.
Commodity futures pricing remains within acceptable ranges relative to spring discovery prices. Based on the most recent crop progress reports, overall corn and soybean conditions are slightly better than last year at this time.
We believe that there's been adequate moisture to date and those areas so that the excessive excessive heat in recent weeks shouldn't be problematic. However, moisture levels through August and early September remain important.
Now, the businesses in our specialty casualty group achieved a solid 93.9 combined ratio overall in the second quarter, 4.8 points higher than the very strong 89.1 reported in the comparable period in 2024.
Second quarter, 2025 gross and net, written premiums increased 4 and 2% respectively. When compared to the same prior year, period, higher year-over-year, premiums in our mergers and Acquisitions business, and growth across a variety of other businesses in the group.
Our resulting from new business opportunities, higher rates and strong policy retention were partially offset by lower premiums due to a challenging Market in our directors and officers liability business.
In addition, we continue to non-renew certain housing and daycare counts and our social services businesses.
Excluding our workers' compensation businesses, renewal rates for this group were up 8% in the second quarter.
Pricing in this group, including workers comp was up about 6%.
I'm pleased that we achieved renewal rate increases in the mid teens. In our most social inflation exposed businesses, including our social services and excess liability businesses.
Financial Group continued to achieve excellent underwriting, margins and reported a combined ratio of 86.1, uh, for the second quarter of 2025 3.6 points better than the 89.7 reported in the comparable period in 2024. These results reflect higher year-over-year underwriting profitability and our financial institutions and shy businesses.
Second quarter, 2025, gross, and net rate premiums. In this group were up, 15%, 12%, respectively. When compared to the prior year period, due primarily growth in our financial institutions business, renewal pricing, this group was flat in the second quarter.
Craig and I are proud of our history of long-term value creation. We have years of experience navigating economic and insurance cycles.
Our insurance professionals continue to exercise their specialty property cash and any knowledge and expertise to successfully compete in a dynamic marketplace. Baron House, our investment team, has been both strategic and opportunistic in the management of our $16 billion investment portfolio.
One of our greatest strengths is finding opportunities in times of uncertainty. We feel we're well positioned to continue to build long-term value for our shareholders for the remainder of 2025 and beyond.
Uh, when I open the lines for the Q&A portion of today's call, Craig, Brian, and I would be happy to respond to your questions.
What's your session as a reminder, to ask a question, you will need to press star 1, 1 on your telephone and wait for your name to be announced to withdraw your question. Please, press star 1 1, again please, stand by while we compile the Q&A roster.
Our first question comes from Michael Zirinsky at BMO Capital Markets.
Hey thanks. Good morning. My first question is um on the uh lender Place business uh within um,
Specialty Financial. Um, I I think that might be driving some of the, uh, the continued Healthy. Growth this quarter again, um, maybe just zooming out, um, is there a way you could help us frame how to think about? Um, how that market grows? Uh, in terms of, you know, does it follow mortgage delinquencies, or
A hard market for soft market dynamics. Um, and then also just, you know, more color on kind of how it appears you all have also gained maybe market share too, if you agree, within that. Um, business. Thanks.
Uh, thank you. Um,
the lender Place property business, uh,
Is, uh, a business that has a smaller number of competitors. Uh, I believe, uh, it's a business that today, you know, last year, uh, was about 700 million in Gross written premium.
Uh, so a significant business for us.
Um,
I think the, uh, this business creates greater opportunities when when you have a weak economy actually. And, uh, you know, when people fall behind, you know, on their on their payments and that, and, and dont and dont pay their insurance. That's the primary, uh, you know, at the, you know, from a cycle standpoint. Um,
You know that, uh, that's primarily the case. Uh, it's a business that is made up of, uh, large account, uh, large client relationships with financial institutions, uh, that are significant. So if there's disruption in the market like there has been the last year or two, uh, where, um, some competitors, uh, faltered and gave us opportunities. Uh,
That also uh added to the the momentum that we've had um, and and growing this business over the past couple years.
That definitely is helpful. Um, you know, when you're getting more proper values for, uh, for the business.
uh, and that, um,
Is, uh, anything else? Uh, you know, I tried to, uh, you know, frame the business and Carl would, um, lender place also be, you know, excellent margins in the segment.
Um, is that also what's driving the pricing power, um, kind of to decel?
Yeah, I think, you know, this business is very profitable for us. Again, you know, it’s made up of large accounts, I think.
Pricing is uh in this business uh through 6 months is prices are up about a percent.
Um, the loss ratio Trends are very low single digits in this business. And I think, again, the last thing I mentioned, uh, as far as a new from, um, unpaid mortgage balance as a basis. Uh, for premiums to move to, um, replacement costs, uh values. I think that helps offset, um, you know the difference between, um, the price increase and the, uh, loss ratio Trend, uh, if that makes sense.
Yep, that's helpful. Um, my follow-up is, um, pivoting to, um, what I believe are some of the more social inflationary lines of business. Um,
Um, you continue to kind of reference, um, some non-renewals in, um, in certain lines. I'm assuming, you know, there's always obviously non-renewals going on, but you're calling it out because I, I think it's if I'm understanding correctly, it's still at a kind of higher than quote, unquote, normal level of what you'd what the AFT would would expect. Um, you know, I guess just, you know, I know the goalpost is always moving a bit on.
Lost cost inflation but just kind of maybe broad brush or if you want to talk about Commercial Auto versus some of these other housing and daycare accounts, kind of where do you feel afg is in terms of the uh, remediation actions and kind of? Um, I think you did say, pricing versus loss Trend, you feel comfortable or good about and that's my final question. Thanks sure, sure. Yeah, that's a complex question. You know, when you're in 36 businesses, uh, and that, but I'll take a crack at it, uh, in our nonprofit, specialy human, uh, Services businesses, which we, which we brought those. So it's kind of reference to different, kind of things, both housing and daycare, uh, accounts. Uh, and that, I think we're pretty much have completed the non-renewal of the housing account after,
um,
which if you think back to the million dollars comment, um, quarters ago, and all that, I that's that was roughly probably 20 of the fionn dollars, uh, or so.
Uh, and that, but I think we're pretty much through that. We, we no longer provide property or liability insurance for any low-income or affordable housing accounts, you know, at this point, um, on the daycare side, uh, I think we probably have, you know, maybe 9 or 10 million dollars left of business that we think will be finished non-renewing by, by year end. Uh, you know, on the, on the daycare, we, we started that effort early this year and, uh, we feel that that'll be completed, uh, by year end. Um, you know, we, we still are a big writer of YMCA's which provide daycare. So, you know, there are certain number of agents that have great books of business in that area. And, you know, we kind of have specialized and focused on YMCA. And so we continue to write daycare in in, uh, with specific risk. But, uh, our, you know, a significant portion of our our daycare business that wasn't profitable has been, you know, will be
Uh, we we write over pools, uh, you know, we're pretty much we've been through, um, the, uh, process of increasing our retention and we're continuing to take, uh, take rate there. But, uh, I think, you know, we're, we're going to see some more opportunities in that area now, that, uh, we're through that, uh, that cycle, um, and the excess liability business, um, we're still, uh, in a couple of our business units. We're still taking, um, you know, mid mid, um, double digit, uh, increases in price there. Uh, 1 thing. I've mentioned in the past is uh, adjusting limits, downward moving limits up non-renewal of some accounts that have had higher Commercial Auto liability exposure, uh and the underlying uh insured on that. I think in our Fortune 1000 business. Uh,
You know, my understanding is that we're pretty much through, um, you know, that readjusting, um, the book and our Great American Custom book, which is more focused on Fortune 1000, uh, and that. So, I would expect us to, uh, see some opportunities, uh, you know, now that that's, uh, the adjustments and the limits profile that we want is done, uh, to see, you know, some growth opportunities, um, uh, their, uh, Commercial Auto.
Um, not really in our specialty casualty business. You mentioned it, though.
Um, I think, uh, you know, the second quarter, uh, we had healthy growth and
I think we're you know as uh we're continuing to outperform the industry by probably 8 points uh in that we're still trying to get our Commercial Auto liability portion of that business to an underwriting profit. Uh but that said with the with the uh, 15% you know, price increase, we're getting uh, Commercial Auto liability. Um, you know, we feel that uh, we're beginning to see more opportunities and I think everybody's mentioned mgas have probably on the, on the calls. Uh, we're aware of 1 MGA that, uh, may be dropping out of a particular, uh, part, uh, or segments, you know, of the, uh, commercial auto business, which we would see as an opportunity, um, you know, over the next 6 months or so. So, um,
Hope that covered a few different subjects for you.
That was that was comprehensive. Thank you very much.
Our next question comes from Gregory Peters at Raymond James.
Oh, well. Hello. Uh, everyone, um, I think for the first question...
Um, I'd like to focus on the Inland Marine, Ocean Marine business, and maybe the Trade Credit business too. Um,
First of all, in the marine and ocean marine, it feels like.
I’m hearing from some of the other specialty players that they see opportunities for growth in that business.
And I, I, I guess what I'm my question for you is, you know, how you're positioned for growth there, but...
you know, there's Marine cargo involved with the Trade Credit business, there's export and domestic trade involved and I'm
You know, as I'm thinking about your businesses, I'm just curious. You know what the volatility and the tariffs might mean for that business, you know, in the interim until things settle down.
Yeah, Greg. Um, you know, we have a, uh, we have a very nice ocean marine book of business, uh, both, um,
you know, here in the US and through our Singapore, um, office, uh, you know we write you know, we have a very strong focus on on ocean marine uh and that also uh and our property in the Marine book is um,
You know, a nice business, not so much. We're trying to focus more on inland marine builders, written, you know, in the marine coverages versus, um, as some do, you know, this large property placements, uh, in that.
Um, but they've both been good businesses for us. Uh,
Ocean Marine has provided some...
Uh, in that. So, you know, I think we're, you know, we're, we're pleased with that. Uh, as we've
I think on the property inland marine side, uh, the
Builder's risk. There's hasn't been as many opportunities you know, on the Builder's risk side. I think because of just where we are in the economy, um, whether its tariff activity or not, I'm not sure. Um, but that's probably acted as a little bit of a regulator on our our property. And and the Marine, um, business is that Builder's risk and traditional in the Marine
Products or kind of our focus in that, um, those businesses, uh, have been, uh,
You know, over a long period of time, uh, we've been, uh, very profitable businesses for us also, uh, in that.
Um, clearly, uh, you know, it's it's kind of hard to, uh, see exactly what the Tariff impacts going to be but, uh, clearly, you know, an ocean and in the Marine. Um, as I've mentioned, I think, at the S&P conference, you know, could could be impacted due to to lower shipping and cargo transport volumes. I'm not so sure. We're really seeing anything right now. Um, I think the bigger question is, is these as these tariff percents, um, are are completed country by country event, you know, then, then what happens, um,
so,
That's my take at this point.
Would you say the same thing about the, uh, the Trade Credit business too, as it relates to tariffs?
Actually, our Trade Credit business is growing. I think there's been a little bit of hardening, uh, in that markets are very, very small specialty business for us. But yeah, I do think, you know, depending on, um, you know, who gets what tariff, and what country, uh, it could have some impact, probably probably more on, uh, on the premium side, at some point. But right now, uh, you know, anything, we're we're seeing some growth there.
Perfect. Um, I guess. Um, I want to go back to some of the comments you made in your opening remarks. Um,
And specifically, you talked about M&A.
Um, and I, it just, it.
I don’t know if there’s been a shift in market conditions, if you’re seeing a bigger pipeline today than you were a year or two ago. But
Um, I feel like you're always in the market. So, when you mentioned it on the call, maybe there's something percolating or obviously. I'm just curious for your perspectives on the M&A side of the equation because you called the dot and the comments.
sure, um, m&a is, uh,
You know, it's a business—a hundred million dollar type of business for us. It gets a little bit volatile based off of, um, you know, what the...
The m&a environment is, you know, in in this country in particular, um, this year is, uh, you know, there seems to be quite a bit of activity. Um, last year was probably a lower amount of activity and so the business was, um, you know, a smaller business this year though. There's, uh, you know, we've seen quite a bit of activity and we have, uh, a very capable, uh, group of, uh, you know, Underwriters in this area. And uh, we've done. It's been a very profitable business for us. Uh, I think, uh, others have kind of strayed into some of the, The Fringe higher risk.
You know, parts of this business, uh, which you know, we we haven't as much and, uh, you know, we're really kind of stuck. Pretty much on the representations and warranties and the tax indemnity and credit insurance aspects. And that and.
We have a, a good reputation, we're known for, you know, knowing the business well and being, uh, you know, strong specialists in the area.
Thanks for the additional detail.
Our next question comes from Andrew Anderson at Jefferies.
You know, I think it's still too early, you know, for us to, uh, to put our usual, you know, average, blower average, above average, kind of, you know.
Caption on it. Uh and that but I think uh you know as you see what's uh on the commodity Futures pricing, you know they remain an acceptable ranges uh relative to the spring Discovery prices. I
I didn't see the final yesterday, but I I believe corns down about 14% soybeans down, um, a little under 6% on prices. Um, you know, the average deductible the farmers, uh, in our book of business that's, uh, chosen up. Um, excluding the rainfall products be about 20 and a half percent, we would project this year. Um, so you know, you need losses or combination of um, um, commodity price, decrease and loss, you know, to exceed that, that first line of um, defense, which is the, the deductible that the, the farmers, uh, choose up in that
Um, and then when you look at, uh, you know, the most recent crop progress, reports the overall corn and soybean uh, conditions are slightly better than, um, you know, at at, at, than last year at this time. Um,
You know, there was some concern people have had about the excessive heat but there's been so much moisture and, you know, adequate moisture to date that we don't think it's problematic, uh, to date. Um, but, you know, I think it's important that they're that good moisture levels remain in in August and uh, you know, through early September, uh, in that
so, um,
I might mention, uh, as part of the big, beautiful bill.
There was, uh, actually an increased loss adjustment expense payment, uh,
within states that have over 120% loss ratio. So, uh, actually there was a nice adjustment and improved Improvement in the program. Through the, the big beautiful Bill where, uh, in the lot, the L payment now is 6% versus, um, an existing 1 and a half percent. So, it's always nice. There's always some tweaks, uh, in the program, you know, down or that are slightly negative. But over time, it seems like generally, there are more positive things that happen. And, um, that's 1 of the most re recent things the, the farm bill, I think, has been a has been extended till September of
um,
I think through September of this year, uh, in that
Okay, thanks for that. And then, just pivoting, I think your workers' comp book is slightly skewed to specialty workers' comp. So, just curious how the pricing environment is in the end of the market and if you expect any positive momentum on the workers' comp front. I also think California is the largest state for workers' comp for you, so just curious if you're seeing any different loss experience there.
A personal California is only about 15% of our workers' comp business. I would think Florida probably is, would be, uh, the largest state.
Um, workers' compensation is about 13.5% of our overall gross written premium. Um,
Overall results, uh, continue to be, uh, you know, for the second quarter and six months, continue to be excellent. Um, so the
6 months, calendar year combined rate slightly higher than last year. Um, our national interstate, the transportation related. Uh,
Uh, workers' comp at our Summit, which is Southeastern mainly; um, Strategic Comp, which is large deductible.
Uh, those parts of our business have had good calendar year action, that year underwriting results. Again, this year, uh, Republic or California workers' comp is the one entrance in the second quarter, uh, an app.
Is, uh, put into place, uh, January of this year. That was the lowest decrease in 7 years, uh, in the state of Florida and in California, um, actually, um, you know we're achieving, um,
Uh, we achieved about a 5%...
Pricing increase in the second quarter and that brings, uh, our pricing, you know, to 1% year to date, more importantly, uh, California approved. Um,
An 8.7% increase effective 9125. That's the first hike in a decade.
Uh, now it's needed, you know, in an industry. California comp the whole industry. I think the combined ratio is in the 120s.
Uh, and that, uh, we have a, uh, you know, we have a more moderate underwriting loss. We've always generally performed better than the industry. But, uh, I really like, um, you know, when I'm saying, uh, and that, you know, as far as the, uh, the comp pricing, uh, environment.
So, it's still very competitive, but it sure feels like the affirming market is coming in California, in particular.
uh,
Can I help you? Thanks for your answers. Yep, thank you.
Our next question comes from Meijer Shields at Keith Bruett in Woods.
Great, thanks so much. Good morning. Um, a little bit deeper into what you're seeing in terms of pricing and rate adequacy in professional lines. I'm asking because you sounded somewhat cautious, and we've heard a couple of other carriers talk about maybe green shoots or bottoming. I just want to get your perspective on that, please.
Sure. Um,
Let me just, uh, from, uh,
Overall macro perspective.
we have good results in the second quarter and 6 months for our, our dno business and our, our banking related, uh, you know, dno product business abas
Uh, it's a significant business for us. Uh,
400 million dollars, uh, you know, and DNO and ABIS. And if you include the other professional liability business we write, you know, it's a half billion dollars plus.
um,
Net written premiums are down in the second quarter in six months.
Uh, we continue to see, um, the public company businesses, uh, you know, continues to be competitive. Uh, though, I would say I am enthusiastic about seeing, you know, I think the price on that business was only down 1.6% in the second quarter. Uh, in that, um, you know, when you look at our overall D&O, uh, executive liability businesses overall, our rates are actually flat. And
In the second quarter and year to date, 2025, and that's kind of what we expect for the whole year. But I'm I'm very pleased to see, um, you know, the public company pricing level out. Some now, in our case, uh, public dose is only 15% of our of our dno premium. So, you know, it's, we're more opportunistic, um, players, uh, you know, and, and that that part of the business and that our abbess actually in our financial or, you know, related, um, dno and products, uh, pricing was up about 4%, uh, through 6 months, uh, of this year. So, um, yeah, still competitive on public. Do you know? But certainly signs that, uh, it stabilizing, uh, particularly on, on the primary policy.
Hope that's helpful.
It is very much so, thank you. Um, and I just want to confirm because I'm trying to get my head around the impact of the earlier crop reporting.
Should we think of some portion of the premiums, losses, and related expenses that showed up last year in the third quarter as moving to the second quarter this year? Is that how that plays out?
That that shift in premiums is about 100 million gross and 40 million net from the when you're looking quarter over quarter. So that that's the amount of Premium that would have otherwise been reported in the third quarter. Those instead of the second quarter because of the advanced reporting. So if you want to think about a flip between quarters on the top line, 40 million in that written premiums is about that, that flip. Now on the profitability side, in our crop business, we we tend to uh, book close to zero profits in the second quarter of. The only Prophet that would come through. The second quarter would be kind of development from from prior periods as the vast, majority of our crops are still in the ground. So we tend to report most of the profitability in our crop business, actually, in the fourth quarter, a little bit in the third and then some in the fourth and then it may develop favorably into the next year. So all else being equal, when you look at our numbers, you can think of our combined ratio and crop being kind of closer to 100 in the second quarter. And then if it's profitable, that tends to help our combined ratio look better,
In the fourth quarter, all things being equal, there’s no real impact on profits, but there is on.
The written premiums.
Okay, that's helpful, but just take it one step further. This means that whatever the earned premium component of that $40 million is, that's producing a higher commodity issue than the rest of Property and Transportation. That's moved from the third quarter to the second quarter. So, that's a little bit less of that 100% commodity ratio earned premium in the third quarter.
That's what I'm trying to get at. Like took work to be a little better for that. That's a little tricky and that's a little tricky, just because we did in some of our earlier season products, the ones that were actually more earning in the first half of the year. We did have uh some growth there and some some changes in how much we've seeded. So the earned premium,
Is higher still, and is higher for other reasons. Also, in the second quarter. So I would, I would say, really the driver of of profit recognition is going to be how how the weather goes and the next couple of months. And, um, whether that pushes us to above average or, or average there or, or where that sits right now, as Carl said, the conditions look good, but we don't want to call that before too soon.
Okay, that helps a lot. Thank you so much.
Our next question comes from Bob Farnum at Jamie Montgomery Scott.
Questions about undocumented workers, and I'm not sure if that really impacts the types of...
Classes that you write. But the question was, you know, do you have, or do you expect the industry to see any change in clean patterns as undocumented workers are swapped out for...
For citizens or documented workers, the thought of being an undocumented worker often leads to concerns about filing workers' compensation claims because they worry about their immigration status.
Hi, this is Brian. So we we, uh, when we ensure our our, our companies, we're enduring for any of their workers, whether they're undocumented or not and would pay any claims that come through. So if if you're asking it as undocumented workers, maybe a reduced and and more and replaced by documented workers, will that will, that will have an impact or not, we're not seeing anything yet. We will continue to pay all the claims that we owe and collect the right premiums, uh, for the for the payrolls that are in place, regardless of whether they're documented or undocumented.
Yeah, no, the question was, you know, the thought is the undocumented workers don't even file claims because they're worried about it. So is that, are you expecting maybe an increase in reported claims as those workers are replaced with...?
With documented workers, that was just the question. Yeah, um,
At the moment, we're not expecting that, but it's obviously something we'll keep an eye on as we price our business and set reserves going forward.
Okay.
Uh, and uh, so I also have some questions on the excess liability business. Um,
You've, you've had, you know, modest adverse development in the last several quarters, is that, uh, related to any particular action ears, or, or particular Alliance of business or classes of business. I'm just kind of curious. If, if you know what you saw this quarter is it similar to what you saw in. You know most of last year in in the first quarter of this year.
Group there is ten million dollars of ads versus development there. And that is driven by adverse severity and parts of our social inflation exposed businesses, particularly the excess and surplus that you mentioned and also in our nonprofit social services businesses in those businesses where we saw an uptick in settlements, we had just our case reserves for known claims and we did increase ibnr for similar potential liabilities out there. So the claims of musical inflation exposed, this is can be lumpy. So when you look at Advanced the adverse development by accident, you're really is spread over a lot of different years. So it's There's No 1, big thing or 1 Big Year, it's just little amounts over several years, you know, you may also see in our current accident year picks that we we currently increase some of those for the same reasons. So we're constantly trying to learn from what we see and adjusting both our lost picks and pricing relative and relatively real time so that we can maintain our
improve our good results.
Right. Okay. Did do you do you write the primary layers on on that next liability book or is that the third parties that that write the primary leaders?
Where we're seeing the adverse development is mostly coming out of the ones where we are right in the excess layers.
Where you're writing the primary layers as well.
No.
Okay.
Uh, that's it for me. Thanks.
Our next question comes from Michael Zrinjski at BMO Capital Markets.
Thanks for, um, taking the follow-up. Um,
My question is on the um you know the the previous uh 1050 cents um 25 guide, you know, obviously the street is lower um do partially to the first quarter investment uh returns. Um, I guess my questions focused on the um maybe the year to date Reserve releases of about a point um down um, you know down 65% approximately year-over-year still obviously a very good guy releases, great to see, um, would you be able to share whether that Reserve release ratio is, you know, better or worse in line with what you had contemplated when putting that that guy together, the 1050 guide.
With with so many different lines of business and products. It's it's really hard to say. I think if, if you remember we talked about uh, when we gave our our business plan, assumptions at the beginning of the year, we did talk about an expectation of low lower levels of favorable development. Now all the reasons behind that ended up not necessarily being exactly what we thought in the beginning, but we did anticipate. And I think hopefully did share that. We thought that some of the favorite development we would have been seeing would would diminish a bit and then we were were optimistic about improvements in the act of the Year. XC cats uh, loss ratio which we did see improvements other than where we were were more prudent on some of those social inflations exposed businesses. So I think overall it's it's pretty much in line with what we were expecting but not necessarily business, you know, by business unit but within a range I'd say yeah.
Okay, thanks for taking the follow-up. Thank you.
This concludes the question-and-answer session. I would now like to turn it back to Diane for closing remarks.
Thank you all for joining us this morning and for the great discussion and good questions. We look forward to talking with you all next quarter when we share results for Q3. I hope you have a great day.
Thank you for your participation. In today's conference, this does conclude the program. You may now disconnect.