Old Republic International Q4 2025 Old Republic International Corp Earnings Call | AllMind AI Earnings | AllMind AI
Q4 2025 Old Republic International Corp Earnings Call
Speaker #1: Hello, and thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Old Republic International Fourth Quarter 2025 earnings conference call.
Speaker #1: All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad.
Speaker #1: To withdraw your question, press star one again. I would now like to turn the conference over to Joe Calabrese with MWW.
Speaker #1: Please go ahead. Thank
Joe Calabrese: Thank you, Regina. Good afternoon, everyone, and thank you for joining us for the Old Republic conference call to discuss Q4 2025 results. This morning, we distributed a copy of the press release and posted a separate financial supplement.
Speaker #2: Thank you, Regina. Good afternoon, everyone, and thank you for joining us for the Old Republic conference call to discuss fourth quarter 2025 results. This morning, we distributed a copy of the press release and posted a separate financial supplement.
Speaker #2: Both of the documents are available on Old Republic's website at www.oldrepublic.com. Please be advised that this call may involve forward-looking statements, as discussed in the press release dated January 22, 2026.
[Analyst]: Both of the documents are available on Old Republic's website at www.oldrepublic.com. Please be advised that this call may involve forward-looking statements as discussed in the press release dated 22 January 2026. Assumptions, uncertainties, and risks exist that may cause results to differ materially from those set forth in these forward-looking statements. For more information on the assumptions, uncertainties, and risks, please refer to the forward-looking statements discussion in the press release and the company's other recent SEC filings, and the risk factors discussed in the company's most recent Form 10-K and other recent SEC filings. We may also reference to net income excluding net investment gains or net operating income, a non-GAAP financial measure, in our remarks or in our responses to questions. GAAP reconciliations are included in the press release.
Both of the documents are available on Old Republic's website at www.oldrepublic.com. Please be advised that this call may involve forward-looking statements as discussed in the press release dated 22 January 2026. Assumptions, uncertainties, and risks exist that may cause results to differ materially from those set forth in these forward-looking statements.
Q4 2025 Old Republic International Corp Earnings Call
Speaker #2: Assumptions, uncertainties, and risks exist that may cause results to differ materially from those set forth in these forward-looking statements. For more information on the assumptions, uncertainties, and risks, please refer to the forward-looking statements discussion in the press release and the company's other recent SEC filings.
For more information on the assumptions, uncertainties, and risks, please refer to the forward-looking statements discussion in the press release and the company's other recent SEC filings, and the risk factors discussed in the company's most recent Form 10-K and other recent SEC filings. We may also reference to net income excluding net investment gains or net operating income, a non-GAAP financial measure, in our remarks or in our responses to questions. GAAP reconciliations are included in the press release.
Speaker #2: And the risk factors discussed in the Company's most recent Form 10-K and other recent SEC filings. We may also reference net income excluding net investment gains, or net operating income, a non-GAAP financial measure, in our remarks or in our responses to questions.
Speaker #2: GAAP reconciliations are included in the press release. Presenting on today's conference call will be Craig Smiddy, President and CEO; Frank Sodaro, Chief Financial Officer; and Carolyn Monroe, President and CEO of Old Republic International Title Insurance Group.
[Analyst]: Presenting on today's conference call will be Craig Smiddy, President and CEO; Frank Sodaro, Chief Financial Officer; and Carolyn Monroe, President and CEO of Old Republic National Title Insurance Group. Management will make some opening remarks, and then we'll open the line for your questions. At this time, I'd like to turn the call over to Craig. Please go ahead, sir. All right, Joe, thank you very much. Well, good afternoon, everyone, and welcome again to Old Republic's Q4 and full year 2025 earnings call. In the Q4, we produced $236 million of consolidated pre-tax operating income compared to $285 million, and our consolidated combined ratio was 96% compared to 92.7%. For the full year, we produced $1 billion of consolidated pre-tax operating income, and our consolidated combined ratio was 94.7%.
Presenting on today's conference call will be Craig Smiddy, President and CEO; Frank Sodaro, Chief Financial Officer; and Carolyn Monroe, President and CEO of Old Republic National Title Insurance Group. Management will make some opening remarks, and then we'll open the line for your questions. At this time, I'd like to turn the call over to Craig. Please go ahead, sir.
Speaker #2: Management will make some opening remarks, and then we'll open the line for your questions. At this time, I'd like to turn the call over to Craig. Please go ahead.
Speaker #2: sir. All
Craig Smiddy: All right, Joe, thank you very much. Well, good afternoon, everyone, and welcome again to Old Republic's Q4 and full year 2025 earnings call. In the Q4, we produced $236 million of consolidated pre-tax operating income compared to $285 million, and our consolidated combined ratio was 96% compared to 92.7%. For the full year, we produced $1 billion of consolidated pre-tax operating income, and our consolidated combined ratio was 94.7%.
Speaker #3: Right, Joe, thank you very much. Well, good afternoon, everyone, and welcome again to Old Republic's fourth quarter and full year 2025 earnings call. In the fourth quarter, we produced $236 million of consolidated pre-tax operating income, compared to $285 million.
Speaker #3: And our consolidated combined ratio was 96%, compared to 92.7%. For the full year, we produced $1 billion of consolidated pre-tax operating income, and our consolidated combined ratio was 94.7%.
Speaker #3: Some other information on 2025: Our operating return on beginning equity was 14.1%, and growth in book value per share, including dividends, was 22%. We think this reflects our strong operating earnings, higher investment valuations, and our sound capital management strategy.
[Analyst]: Some other information on 2025: our operating return on beginning equity was 14.1%, and growth in book value per share, including dividends, was 22%. We think this reflects our strong operating earnings, our higher investment valuations, and our sound capital management strategy. In the Q4, specialty insurance grew net premiums earned by 8.3% over the Q4 of 2024, and for the full year, grew net premiums earned by 10.9%, and we eclipsed the $5 billion mark for the first time. In the Q4, specialty produced $178 million of pre-tax operating income compared to $228 million, and specialty's combined ratio was 97.3% compared to 91.8%. For the full year, specialty produced $900 million of pre-tax operating income, another all-time high for us, and specialty's combined ratio was 93.2%.
Some other information on 2025: our operating return on beginning equity was 14.1%, and growth in book value per share, including dividends, was 22%. We think this reflects our strong operating earnings, our higher investment valuations, and our sound capital management strategy. In the Q4, specialty insurance grew net premiums earned by 8.3% over the Q4 of 2024, and for the full year, grew net premiums earned by 10.9%, and we eclipsed the $5 billion mark for the first time. In the Q4, specialty produced $178 million of pre-tax operating income compared to $228 million, and specialty's combined ratio was 97.3% compared to 91.8%. For the full year, specialty produced $900 million of pre-tax operating income, another all-time high for us, and specialty's combined ratio was 93.2%.
Speaker #3: In the fourth quarter, Specialty Insurance grew net premiums earned by 8.3% over the fourth quarter of '24. And for the full year, grew net premiums earned by 10.9%.
Speaker #3: And we eclipsed the $5 billion mark for the first time. In the fourth quarter, Specialty produced $178 million of pre-tax operating income, compared to $228 million.
Speaker #3: And Specialty's combined ratio was 97.3%, compared to 91.8%. For the full year, Specialty produced $900 million of pre-tax operating income, another all-time high for us.
Speaker #3: And Specialty's combined ratio was 93.2%. In the fourth quarter, Title Group premium and fees grew by 12.4% over the fourth quarter of '24. And for the full year, Title Group premium and fees grew by 9.1%.
[Analyst]: In the Q4, title grew premium and fees by 12.4% over the Q4 of 2024, and for the full year, title grew premium and fees by 9.1%. In the Q4, title also produced $65 million of pre-tax operating income compared to $55.4 million, and title's combined ratio was 94% compared to 94.4%. For the full year, title produced $140 million of pre-tax operating income, and title's combined ratio was 97.6%. Our conservative reserving practices were slow to release prior year reserves, but we react very quickly to increase reserves. We continue to produce favorable prior year reserve development in both specialty insurance and title insurance, and Frank will give you a little more color around that topic. So with that, Frank, I'll go ahead and turn the discussion over to you, and then please turn things back to me.
In the Q4, title grew premium and fees by 12.4% over the Q4 of 2024, and for the full year, title grew premium and fees by 9.1%. In the Q4, title also produced $65 million of pre-tax operating income compared to $55.4 million, and title's combined ratio was 94% compared to 94.4%. For the full year, title produced $140 million of pre-tax operating income, and title's combined ratio was 97.6%. Our conservative reserving practices were slow to release prior year reserves, but we react very quickly to increase reserves. We continue to produce favorable prior year reserve development in both specialty insurance and title insurance, and Frank will give you a little more color around that topic. So with that, Frank, I'll go ahead and turn the discussion over to you, and then please turn things back to me.
Speaker #3: In the fourth quarter, Title also produced $65 million of pre-tax operating income, compared to $55.4 million. And Title's combined ratio was 94%, compared to 94.4%.
Speaker #3: For the full year, Title produced $140 million of pre-tax operating income, and Title's combined ratio was 97.6%. Our conservative reserving practices were slow to release prior-year reserves, but we react very quickly to increased reserves.
Speaker #3: We continue to produce favorable prior year loss reserve development in both specialty insurance and title insurance, and Frank will give you a little more color around that topic.
Speaker #3: So with that, Frank, I'll go ahead and turn the discussion over to you, and then please turn things back to me. I'll discuss specialty insurance, and then I'll turn things over to Carolyn, who'll discuss title, and then we'll wrap up and open it up for Q&A.
[Analyst]: I'll discuss specialty insurance, and then I'll turn things over to Carolyn, who will discuss title, and then we'll wrap up and open it up for Q&A. So, Frank? Thank you, Craig, and good afternoon, everyone. This morning, we reported net operating income of $185 million for the quarter compared to $227 million last year. On a per-share basis, comparable quarter-over-quarter results were $0.74 compared to $0.90. Starting with investments, net investment income increased 7.9% in the quarter, primarily as a result of higher yields on the bond portfolio and, to a lesser degree, a larger investment base. Our average reinvestment rate on corporate bonds acquired during the quarter was 4.6% compared to the average yield rolling off of about 4.2%. The total bond portfolio book yield stands at 4.75% compared to 4.5% at the end of last year.
I'll discuss specialty insurance, and then I'll turn things over to Carolyn, who will discuss title, and then we'll wrap up and open it up for Q&A. So, Frank?
Speaker #3: So
Speaker #3: Frank? Thank you, Craig, and good afternoon,
Frank Sodaro: Thank you, Craig, and good afternoon, everyone. This morning, we reported net operating income of $185 million for the quarter compared to $227 million last year. On a per-share basis, comparable quarter-over-quarter results were $0.74 compared to $0.90. Starting with investments, net investment income increased 7.9% in the quarter, primarily as a result of higher yields on the bond portfolio and, to a lesser degree, a larger investment base. Our average reinvestment rate on corporate bonds acquired during the quarter was 4.6% compared to the average yield rolling off of about 4.2%. The total bond portfolio book yield stands at 4.75% compared to 4.5% at the end of last year.
Speaker #4: Everyone, this morning we reported net operating income of $185 million for the quarter, compared to $227 million last year. On a per-share basis, comparable quarter-over-quarter results were $0.74, compared to $0.90.
Speaker #4: Starting with investments, net investment income increased 7.9% in the quarter, primarily as a result of higher yields on the bond portfolio and, to a lesser degree, a larger investment base.
Speaker #4: Our average reinvestment rate on corporate bonds acquired during the quarter was 4.6%, compared to the average yield rolling off of about 4.2%. The total bond portfolio book yield stands at 4.75%, compared to 4.5% at the end of last year.
Speaker #4: Now, given the portfolio actions taken over the last few years that allowed us to accelerate improvement in the bond portfolio yield, our return of capital initiatives, and the current interest rate environment, we expect net investment income growth to slow in 2026.
[Analyst]: Now, given the portfolio actions taken over the last few years that allowed us to accelerate improvement in the bond portfolio yield, our return of capital initiatives, and the current interest rate environment, we expect net investment income growth to slow in 2026. Turning now to loss reserves, both specialty insurance and title insurance recognized favorable development in the quarter, leading to a 2.4 percentage point benefit in the consolidated loss ratio compared to 2.9 points last year. Within specialty insurance, workers' comp prior year reserve development was slightly unfavorable in the quarter, as a strong favorable development throughout the book was offset by a prior year reserve increase related to a credit loss on a single large deductible program. Commercial auto, general liability, and property all had solid favorable development in the quarter.
Now, given the portfolio actions taken over the last few years that allowed us to accelerate improvement in the bond portfolio yield, our return of capital initiatives, and the current interest rate environment, we expect net investment income growth to slow in 2026. Turning now to loss reserves, both specialty insurance and title insurance recognized favorable development in the quarter, leading to a 2.4 percentage point benefit in the consolidated loss ratio compared to 2.9 points last year. Within specialty insurance, workers' comp prior year reserve development was slightly unfavorable in the quarter, as a strong favorable development throughout the book was offset by a prior year reserve increase related to a credit loss on a single large deductible program. Commercial auto, general liability, and property all had solid favorable development in the quarter.
Speaker #4: Turning now to loss reserves. Both specialty insurance and title insurance recognized favorable development in the quarter, leading to a 2.4 percentage point benefit in the consolidated loss ratio, compared to 2.9 points last year.
Speaker #4: Within Specialty Workers' Comp, prior-year reserve development was slightly unfavorable in the quarter, as strong favorable development throughout the book was offset by a prior-year reserve increase related to a credit loss on a single large deductible program.
Speaker #4: Commercial Auto, General Liability, and Property all had solid favorable development in the quarter. Now, for the full year, the Specialty Insurance loss ratio had a benefit of 2.9 points from favorable development, and there were no large pockets of unfavorable development to report.
[Analyst]: Now, for the full year, the specialty insurance loss ratio had a benefit of 2.9 points from favorable development, and there were no large pockets of unfavorable development to report. We end the quarter with book value per share of $24.21, which, inclusive of the regular and special dividends, equated to an increase of 22% for the full year, resulting primarily from our strong operating earnings and higher investment valuations. In the quarter, we declared nearly $700 million in dividends and repurchased $56 million worth of our shares. This brings total capital return this year to just over $1 billion, and it leaves us with about $850 million remaining in our current repurchase program. I'll now turn the call back over to Craig for a discussion of specialty insurance. Okay, Frank, thanks for that summary.
Now, for the full year, the specialty insurance loss ratio had a benefit of 2.9 points from favorable development, and there were no large pockets of unfavorable development to report. We end the quarter with book value per share of $24.21, which, inclusive of the regular and special dividends, equated to an increase of 22% for the full year, resulting primarily from our strong operating earnings and higher investment valuations. In the quarter, we declared nearly $700 million in dividends and repurchased $56 million worth of our shares. This brings total capital return this year to just over $1 billion, and it leaves us with about $850 million remaining in our current repurchase program. I'll now turn the call back over to Craig for a discussion of specialty insurance.
Speaker #4: We end the quarter with book value per share of $24.21, which, inclusive of the regular and special dividends, equated to an increase of 22% for the full year, resulting primarily from our strong operating earnings and higher investment valuations.
Speaker #4: In the quarter, we declared nearly $700 million in dividends, and repurchased $56 million worth of our shares. This brings total capital return this year to just over $1 billion, and it leaves us with about $850 million remaining in our current repurchase program.
Speaker #4: I'll now turn the call back over to Craig for a discussion of specialty insurance.
Craig Smiddy: Okay, Frank, thanks for that summary.
Speaker #1: Okay, Frank. Thanks for that summary. Specialty insurance net premiums written were up 6.1% in the quarter, with strong rate increases on Commercial Auto and General Liability.
[Analyst]: Specialty insurance net premiums written were up 6.1% in the quarter, with strong rate increases on commercial auto and general liability. We also had solid renewal retention ratios, new business writings, and increasing premium in our new specialty operating companies. As a matter of fact, these new companies contributed over $300 million in net premium written in 2025 and collectively delivered positive operating income. As I mentioned in my opening remarks, in the quarter, specialty insurance pre-tax operating income was $178 million, and the full year was $900 million, while the Q4 combined ratio was 97.3%, and the full year was 93.2%. The loss ratio for the quarter was 67.6%, and that included 2.2 percentage points of favorable prior year loss reserve development. That compares to 64.1% in the Q4 last year, which included 2.4 points of favorable development.
Specialty insurance net premiums written were up 6.1% in the quarter, with strong rate increases on commercial auto and general liability. We also had solid renewal retention ratios, new business writings, and increasing premium in our new specialty operating companies. As a matter of fact, these new companies contributed over $300 million in net premium written in 2025 and collectively delivered positive operating income.
Speaker #1: We also had solid renewal retention ratios, new business writings, and increasing premium in our new specialty operating companies. As a matter of fact, these new companies contributed over $300 million in net premium written in 2025, and collectively delivered positive operating income.
As I mentioned in my opening remarks, in the quarter, specialty insurance pre-tax operating income was $178 million, and the full year was $900 million, while the Q4 combined ratio was 97.3%, and the full year was 93.2%. The loss ratio for the quarter was 67.6%, and that included 2.2 percentage points of favorable prior year loss reserve development. That compares to 64.1% in the Q4 last year, which included 2.4 points of favorable development.
Speaker #1: As I mentioned in my opening remarks, in the quarter, Specialty Insurance pre-tax operating income was $178 million, and the full year was $900 million, while the fourth quarter combined ratio was 97.3%, and the full year was 93.2%.
Speaker #1: The loss ratio for the quarter was 67.6%, and that included 2.2 percentage points of favorable prior year loss reserve development. And that compares to 64.1% in the fourth quarter last year, which included 2.4 points of favorable development.
Speaker #1: The full-year loss ratio was 63.9%, including 2.9 points of favorable development. Moving to the expense ratio, for the quarter it was 29.7%, compared to 27.7% in the fourth quarter last year.
[Analyst]: The full year loss ratio was 63.9%, including 2.9 points of favorable development. Moving to the expense ratio for the quarter was 29.7% compared to 27.7% in the Q4 last year. The full year expense ratio was 29.3%, in line with expectations. Our continued investment into specialty operating companies that we have recently launched, as well as into technology modernization, data and analytics, and AI, does place some short-term strain on the expense ratio, but we're confident these investments will provide significant long-term upside potential. Turning to commercial auto, net premiums written grew 6.4% in the quarter, while the loss ratio came in at 80% compared to 77.9% in the Q4 last year. As we noted in the release, we increased the current accident year loss ratio by 3 percentage points, which for the year added 12 percentage points for the quarter, I should say.
The full year loss ratio was 63.9%, including 2.9 points of favorable development. Moving to the expense ratio for the quarter was 29.7% compared to 27.7% in the Q4 last year. The full year expense ratio was 29.3%, in line with expectations. Our continued investment into specialty operating companies that we have recently launched, as well as into technology modernization, data and analytics, and AI, does place some short-term strain on the expense ratio, but we're confident these investments will provide significant long-term upside potential.
Speaker #1: The full-year expense ratio was 29.3%, in line with expectations. Our continued investment into specialty operating companies that we have recently launched, as well as into technology modernization, data and analytics, and AI, does place some short-term strain on the expense ratio, but we're confident these investments will provide significant long-term upside potential.
Turning to commercial auto, net premiums written grew 6.4% in the quarter, while the loss ratio came in at 80% compared to 77.9% in the Q4 last year. As we noted in the release, we increased the current accident year loss ratio by 3 percentage points, which for the year added 12 percentage points for the quarter, I should say.
Speaker #1: Turning to commercial auto, net premiums written grew 6.4% in the quarter, while the loss ratio came in at 80.0%, compared to 77.9% in the fourth quarter last year.
Speaker #1: As we noted in the release, we increased the current accident year loss ratio by 3 percentage points, which for the year added 12 percentage points for the quarter, I should say.
Speaker #1: This action is consistent with what we've regularly communicated, and that is that we reserve conservatively and work quickly to react to increases in loss trends that we are observing; and those loss trends for commercial auto are now coming in a bit higher than we were observing earlier in 2025.
[Analyst]: This action is consistent with what we've regularly communicated, and that is that we reserve conservatively and were quick to react to increases in loss trends that we are observing. Those loss trends for commercial auto are now coming in a bit higher than we were observing earlier in 2025. As such, as noted in the release, rate increases accelerated in the Q4 to 16% for commercial auto. Again, this would be in line with our philosophy of loss trends that are commensurate with rate increases. Workers' comp net premiums written was 6% lower in the quarter, while the loss ratio came in at 65.2% compared to 35.5% in the Q4 last year. The big difference here is that the vast majority in the Q4 of 2025 vis-à-vis the Q4 of 2024 is the significant difference in level of prior year favorable development.
This action is consistent with what we've regularly communicated, and that is that we reserve conservatively and were quick to react to increases in loss trends that we are observing. Those loss trends for commercial auto are now coming in a bit higher than we were observing earlier in 2025. As such, as noted in the release, rate increases accelerated in the Q4 to 16% for commercial auto. Again, this would be in line with our philosophy of loss trends that are commensurate with rate increases. Workers' comp net premiums written was 6% lower in the quarter, while the loss ratio came in at 65.2% compared to 35.5% in the Q4 last year. The big difference here is that the vast majority in the Q4 of 2025 vis-à-vis the Q4 of 2024 is the significant difference in level of prior year favorable development.
Speaker #1: And as such, as noted in the release, rate increases accelerated in the fourth quarter to 16% for commercial auto, and again, this would be in line with our philosophy of loss trends that are commensurate with rate increases.
Speaker #1: Workers' comp net premiums written were 6% lower in the quarter, while the loss ratio came in at 65.2%, compared to 35.5% in the fourth quarter last year.
Speaker #1: The big difference here is that the vast majority in the fourth quarter of '25, vis-à-vis the fourth quarter of 2024, is the significant difference in the level of prior year favorable development.
Speaker #1: Rate decreases in work comp were about 3%. Here too, in line with loss trends we're observing, severities remained very consistent, and loss frequency continues its decline.
[Analyst]: Rate decreases in work comp were about 3%. Here, too, in line with loss trends we're observing, where severities remained very consistent and loss frequency continues its decline. So given positive wage trend that we apply our rates to, a relatively stable severity trend, and a declining loss frequency trend, we think our rates remain adequate even with a small level of rate decreases. I'll also touch on property here. We had net premiums written which increased 21% in the quarter, bringing the full year property writings to $750 million. The property loss ratio was 55% in the quarter, and that included some favorable prior year loss reserve development. It's of note that our property writings are diverse and often written on an E&S basis, particularly at our new specialty operating companies.
Rate decreases in work comp were about 3%. Here, too, in line with loss trends we're observing, where severities remained very consistent and loss frequency continues its decline. So given positive wage trend that we apply our rates to, a relatively stable severity trend, and a declining loss frequency trend, we think our rates remain adequate even with a small level of rate decreases. I'll also touch on property here. We had net premiums written which increased 21% in the quarter, bringing the full year property writings to $750 million. The property loss ratio was 55% in the quarter, and that included some favorable prior year loss reserve development. It's of note that our property writings are diverse and often written on an E&S basis, particularly at our new specialty operating companies.
Speaker #1: So, given the positive wage trend that we apply our rates to, a relatively stable severity trend, and a declining loss frequency trend, we think our rates remain adequate, even with a small level of rate decreases.
Speaker #1: I'll also touch on property here. We had net premiums written, which increased 21% in the quarter, bringing the full-year property writings to $750 million.
Speaker #1: The property loss ratio was 55% in the quarter, and that included some favorable prior year loss reserve development. It's of note that our property writings are diverse and often written on an E&S basis, particularly at our new specialty operating companies.
Speaker #1: So, we expect solid growth and profitability in specialty insurance to continue through 2026, reflecting the growing contributions from our new specialty operating companies and also reflecting our commitment to underwriting excellence within all of our specialty companies, including a keen focus on pricing discipline and cycle management.
[Analyst]: So we expect solid growth in profitability in specialty insurance to continue through 2026, reflecting the growing contributions from our new specialty operating companies and also reflecting our commitment to underwriting excellence within all of our specialty companies, including a keen focus on pricing discipline and cycle management. It's also noteworthy that our specialty portfolio is now more diversified than it's ever been, which also helps set us up to successfully manage market cycles. So I will now turn it over to you, Carolyn, to report on title insurance. Thank you, Craig. Title reported premium and fee revenue for the quarter of $789 million. This represents an increase of 12% from Q4 of last year.
So we expect solid growth in profitability in specialty insurance to continue through 2026, reflecting the growing contributions from our new specialty operating companies and also reflecting our commitment to underwriting excellence within all of our specialty companies, including a keen focus on pricing discipline and cycle management. It's also noteworthy that our specialty portfolio is now more diversified than it's ever been, which also helps set us up to successfully manage market cycles. So I will now turn it over to you, Carolyn, to report on title insurance.
Speaker #1: It's also noteworthy that our specialty portfolio is now more diversified than it's ever been, which also helps set us up to successfully manage market cycles.
Speaker #1: So I will now turn it over to you, Carolyn, to report on title insurance.
Speaker #2: Thank you, Craig. Title reported premium and fee revenue for the quarter of $789 million. This represents an increase of 12% from the fourth quarter of last year.
Carolyn Monroe: Thank you, Craig. Title reported premium and fee revenue for the quarter of $789 million. This represents an increase of 12% from Q4 of last year.
Speaker #2: The fourth quarter was our strongest of the year, and is a continuation of the market story that we have been reporting all year. We are seeing strong activity in the commercial sector, and softness in the residential market driven by persistent price and some affordability challenges still.
[Analyst]: The Q4 was our strongest of the year and is a continuation of the market story that we have been reporting all year, seeing strong activity in the commercial sector and softness in the residential market driven by persistent price and some affordability challenges still. Premiums produced in our direct title operations were up 18% from this time last year. Our agency-produced premiums were up 13% and made up 77% of our revenue during the quarter, which is consistent with Q4 of last year. Commercial premiums increased this quarter and were 29% of our earned premiums compared to 23% in the Q4 of last year. For the year, our commercial premiums made up 26% of our earned premiums compared to 22% in 2024. Investment income was also up this quarter by nearly 12% compared to the Q4 of 2024, primarily from higher investment yields.
The Q4 was our strongest of the year and is a continuation of the market story that we have been reporting all year, seeing strong activity in the commercial sector and softness in the residential market driven by persistent price and some affordability challenges still. Premiums produced in our direct title operations were up 18% from this time last year. Our agency-produced premiums were up 13% and made up 77% of our revenue during the quarter, which is consistent with Q4 of last year. Commercial premiums increased this quarter and were 29% of our earned premiums compared to 23% in the Q4 of last year. For the year, our commercial premiums made up 26% of our earned premiums compared to 22% in 2024. Investment income was also up this quarter by nearly 12% compared to the Q4 of 2024, primarily from higher investment yields.
Speaker #2: Premiums reduced in our direct title operations were up 18% from this time last year. Our agency-produced premiums were up 13% and made up 77% of our revenue during the quarter, which is consistent with the fourth quarter of last year.
Speaker #2: Commercial premiums increased this quarter, and were 29% of our earned premiums, compared to 23% in the fourth quarter of last year. For the year, our commercial premiums made up 26% of our earned premiums, compared to 22% in 2024.
Speaker #2: Investment income was also up this quarter by nearly 12%, compared to the fourth quarter of 2024, primarily from higher investment yields. Our combined ratio improved to 94% this quarter, compared to 94.4% in the fourth quarter of last year.
[Analyst]: Our combined ratio improved to 94% this quarter compared to 94.4% in the Q4 of last year. During the quarter, our continued expense management efforts and increased revenues resulted in a decrease in our operating expenses of 1.2% relative to premium and fees. Our loss ratio increased to 0.8%. Although prior policy years continued to develop favorably, the amount of favorable development in the Q4 this year was less than in the Q4 of 2024. Our pre-tax operating income this quarter was $66 million compared to $55 million in the Q4 of last year. This 18% increase during the quarter brings our full year pre-tax income to $140 million for 2025. As we start 2026, the cornerstone of our business continues to be our title agents. We remain focused on the importance of providing our agents with the innovative technological solutions required to maintain a competitive edge.
Our combined ratio improved to 94% this quarter compared to 94.4% in the Q4 of last year. During the quarter, our continued expense management efforts and increased revenues resulted in a decrease in our operating expenses of 1.2% relative to premium and fees. Our loss ratio increased to 0.8%. Although prior policy years continued to develop favorably, the amount of favorable development in the Q4 this year was less than in the Q4 of 2024.
Speaker #2: During the quarter, our continued expense management efforts and increased revenues resulted in a decrease in our operating expenses of 1.2% relative to premium and fees.
Speaker #2: Our loss ratio increased to 0.8%. Although prior policy years continued to develop favorably, the amount of favorable was less than in the fourth quarter of development in the fourth quarter this year, 2024.
Our pre-tax operating income this quarter was $66 million compared to $55 million in the Q4 of last year. This 18% increase during the quarter brings our full year pre-tax income to $140 million for 2025. As we start 2026, the cornerstone of our business continues to be our title agents. We remain focused on the importance of providing our agents with the innovative technological solutions required to maintain a competitive edge.
Speaker #2: Our pre-tax operating income this quarter was $66 million, compared to $55 million in the fourth quarter of last year. This 18% increase during the quarter brings our full-year pre-tax income to $140 million for 2025.
Speaker #2: As we start 2026, the cornerstone of our business continues to be our title agents. We remain focused on the importance of providing our agents with the innovative technological solutions required to maintain a competitive edge.
Speaker #2: Operationally, we will continue our margin expansion efforts to ensure that our structure efficiently serves our agents. We remain focused on maximizing efficiencies and implementing the Qualia operating platform across the title operations during 2026, as well as continuing our initiatives to service the large commercial transactions we are seeing in the market.
[Analyst]: Operationally, we will continue our margin expansion efforts to ensure that our structure efficiently serves our agents. We remain focused on maximizing efficiencies and implementing the Qualia operating platform across the title operations during 2026, as well as continuing our initiatives to service the large commercial transactions we are seeing in the market. And thank you. And with that, I'll turn it back to Craig. Okay, Carolyn, thank you. So that concludes our prepared remarks, and we will now open up to the discussion, the Q&A, and I'll either answer your question or I'll ask Frank or Carolyn to chime in and help me out. We will now begin the question and answer session. In order to ask a question, simply press star followed by the number one on your telephone keypad. Again, that is star one for any questions.
Operationally, we will continue our margin expansion efforts to ensure that our structure efficiently serves our agents. We remain focused on maximizing efficiencies and implementing the Qualia operating platform across the title operations during 2026, as well as continuing our initiatives to service the large commercial transactions we are seeing in the market. And thank you. And with that, I'll turn it back to Craig.
Speaker #2: Thank you, and with that, I'll turn it back to Craig.
Craig Smiddy: Okay, Carolyn, thank you. So that concludes our prepared remarks, and we will now open up to the discussion, the Q&A, and I'll either answer your question or I'll ask Frank or Carolyn to chime in and help me out.
Speaker #1: Okay, Carolyn, thank you. That concludes our prepared remarks, and we will now open the discussion to Q&A. I'll either answer your question, or I'll ask Frank or Carolyn to chime in and help me out.
Operator: We will now begin the question and answer session. In order to ask a question, simply press star followed by the number one on your telephone keypad. Again, that is star one for any questions.
Speaker #3: We will now begin the question and answer session. In order to ask a question, simply press star followed by the number one on your telephone keypad.
Speaker #3: Again, that is star one for any questions. Our first question will come from the line of Gregory Peters with Raymond James. Please go ahead.
[Analyst]: Our first question will come from the line of Gregory Peters with Raymond James. Please go ahead. Hey, good afternoon, and happy New Year to everyone. Happy New Year, Craig. I guess starting at just the high level, I know in the past you've talked about sort of what you think the specialty insurance target combined ratios should look like over a course of a year. And I guess in the context of understanding those moving pieces, can you provide us some perspective of how you think the budgeting is coming along and where you think the combined ratio targets might be for 2026? Sure, Greg. Yeah. So ending the year at a combined ratio in specialty of 93.2 feels pretty good to us. We would hopefully, over time, be a bit better than that. But I think where we're at in the P&C cycle, that feels pretty good.
Our first question will come from the line of Gregory Peters with Raymond James. Please go ahead.
Speaker #3: ahead. Hey, good
Gregory Peters: Hey, good afternoon, and happy New Year to everyone.
Speaker #4: Afternoon, and happy New Year to
Speaker #4: everyone. Happy New Year,
Craig Smiddy: Happy New Year, Craig.
Speaker #1: Craig.
Gregory Peters: I guess starting at just the high level, I know in the past you've talked about sort of what you think the specialty insurance target combined ratios should look like over a course of a year. And I guess in the context of understanding those moving pieces, can you provide us some perspective of how you think the budgeting is coming along and where you think the combined ratio targets might be for 2026?
Speaker #4: I guess, starting at just the high level, I know in the past you've talked about sort of what you think the specialty insurance target combined ratios should look like.
Speaker #4: Over the course of a year, and I guess in the context of understanding there are moving pieces, can you provide us some perspective on how you think the budgeting is coming along and where you think the combined ratio targets might be for—
Speaker #4: 2026? Sure,
Craig Smiddy: Sure, Greg. Yeah. So ending the year at a combined ratio in specialty of 93.2 feels pretty good to us. We would hopefully, over time, be a bit better than that. But I think where we're at in the P&C cycle, that feels pretty good.
Speaker #1: Craig: Yeah, so ending the year at a combined ratio in specialty of 93.2 feels pretty good to us. We would hopefully, over time, be a bit better than that, but I think where we’re at in the P&C cycle, that feels pretty good.
Speaker #1: And relative to next year, our plan is to produce something around the same level. It depends, but we have 20 different operating companies. Depending on the operating company, that varies.
[Analyst]: Relative to next year, our plan is to produce something around the same level. It depends. We have 20 different operating companies. Depending on the operating company, that varies. If it's longer tail lines of business, it might be a little bit higher. If it's shorter tail lines of business, it's probably lower. So all the businesses have a unique plan, and they have targets that they set relative to those plans. So I would say 2026, we're looking for a very consistent year. Obviously, there's talk of pricing pressure in the marketplace, but we're going to maintain our discipline. As I mentioned in my opening comments, we're keenly focused on pricing discipline, underwriting discipline. Every company is focused on combined ratio over top line.
Relative to next year, our plan is to produce something around the same level. It depends. We have 20 different operating companies. Depending on the operating company, that varies. If it's longer tail lines of business, it might be a little bit higher. If it's shorter tail lines of business, it's probably lower. So all the businesses have a unique plan, and they have targets that they set relative to those plans. So I would say 2026, we're looking for a very consistent year. Obviously, there's talk of pricing pressure in the marketplace, but we're going to maintain our discipline. As I mentioned in my opening comments, we're keenly focused on pricing discipline, underwriting discipline. Every company is focused on combined ratio over top line.
Speaker #1: If it's longer-tail lines of business, it might be a little bit higher. If it's shorter-tail lines of business, it's probably lower. So all the businesses have a unique plan, and they have targets that they set relative to those plans.
Speaker #1: So, I would say 2026—we're looking for a very consistent year, obviously. There's talk of pricing pressure in the marketplace, but we're going to maintain our discipline, as I mentioned in my opening comments.
Speaker #1: We're keenly focused on pricing discipline, underwriting discipline, every company is focused on combined ratio over top line. And even in our incentive compensation plans, when we have soft pockets of business, we're pricing is too aggressive in the marketplace.
[Analyst]: And even in our incentive compensation plans, when we have soft pockets of business where pricing is too aggressive in the marketplace, we will remove any kind of growth or retention goal and make compensation based strictly on combined ratios. So it's all about bottom line for us, and that's really driven by the combined ratio. Great. I guess the other two questions I had on the specialty insurance side, one is just going back to just some more background and what led to the higher loss pick because you said it wasn't reflected yet in the paid claim data. So I'm just curious what you're seeing. And I do recognize your approach to case reserves and loss picks.
And even in our incentive compensation plans, when we have soft pockets of business where pricing is too aggressive in the marketplace, we will remove any kind of growth or retention goal and make compensation based strictly on combined ratios. So it's all about bottom line for us, and that's really driven by the combined ratio.
Speaker #1: We will remove any kind of growth or retention goal and make compensation based strictly on combined ratios. So it's all about bottom line for us, and that's really driven by the combined ratio.
Gregory Peters: Great. I guess the other two questions I had on the specialty insurance side, one is just going back to just some more background and what led to the higher loss pick because you said it wasn't reflected yet in the paid claim data. So I'm just curious what you're seeing. And I do recognize your approach to case reserves and loss picks.
Speaker #4: Great. I guess the other two questions I had on the specialty insurance side—one is just going back to get some more background on what led to the higher loss pick, because you said it wasn't reflected yet in the paid claim data.
Speaker #4: So I'm just curious what you're seeing, and I do recognize your approach to case and loss case reserves and loss picks. And then the other question I had, just so we get them all out on the table for you, is I think Frank mentioned a credit loss on one of the large deductible programs—just some background on that as well.
[Analyst]: And then the other question I had, just so we just get a model on the table there for you, is I think Frank mentioned a credit loss on one of the large deductible programs. Just some background on that as well. Sure, Greg. I'll take both of those. Yeah. So we start the beginning of the year with what we believe to be a conservative loss pick. And from there, as we go through each week, we study what's happening with case reserves and also what's happening with paid losses. And we take those into consideration and look at what trend we think that that implies. We take a close look at severity. We take a close look at frequency, and come up with an overall trend. So what we saw in commercial auto this year for the better part of the year was trends.
And then the other question I had, just so we just get a model on the table there for you, is I think Frank mentioned a credit loss on one of the large deductible programs. Just some background on that as well.
Speaker #4: well. Sure,
Craig Smiddy: Sure, Greg. I'll take both of those. Yeah. So we start the beginning of the year with what we believe to be a conservative loss pick. And from there, as we go through each week, we study what's happening with case reserves and also what's happening with paid losses. And we take those into consideration and look at what trend we think that that implies. We take a close look at severity. We take a close look at frequency, and come up with an overall trend. So what we saw in commercial auto this year for the better part of the year was trends.
Speaker #1: Craig, I'll take both of those. Yeah, so we start the beginning of the year with what we believe to be a conservative loss pick.
Speaker #1: And from there, as we go through each week, we study what's happening with case reserves, and also what's happening with paid losses. We take those into consideration and look at what trend we think that implies. We take a close look at severity, we take a close look at frequency, and come up with an overall trend.
Speaker #1: So, what we saw in commercial auto this year, for the better part of the year, was trends—we said, I think on prior calls, we were seeing trends in the low teens.
[Analyst]: We said, I think on prior calls, we were saying trends in the low teens and that we were obtaining rate increases that were at least commensurate with those trends. That was the case. As we got toward the end of the year, while we did not notice any paid claim difference, we did notice that case reserves were higher. As we communicate, we're conservative. If we see case reserves at a higher level, we'll react. We did that, I think, a couple of years ago, same exact thing where trends all of a sudden moved a bit higher than what we were seeing earlier in the year. As such, trends now look to be, rather than in the low teens, the mid-teens. As such, the 3 percentage point increase to the accident year loss ratio.
We said, I think on prior calls, we were saying trends in the low teens and that we were obtaining rate increases that were at least commensurate with those trends. That was the case. As we got toward the end of the year, while we did not notice any paid claim difference, we did notice that case reserves were higher. As we communicate, we're conservative. If we see case reserves at a higher level, we'll react. We did that, I think, a couple of years ago, same exact thing where trends all of a sudden moved a bit higher than what we were seeing earlier in the year. As such, trends now look to be, rather than in the low teens, the mid-teens. As such, the 3 percentage point increase to the accident year loss ratio.
Speaker #1: And that we were obtaining rate increases that were at least commensurate with those trends. And that was the case. As we got toward the end of the year, while we did not notice any paid claim difference, we did notice that case reserves were higher.
Speaker #1: And, as we communicate, we're conservative, and if we see case reserves at a higher level, we'll react. We did that, I think, a couple of years ago—same exact thing.
Speaker #1: Where trends all of a sudden moved a bit higher than what we were seeing earlier in the year. And as such, trends now look to be, rather than in the low teens, in the mid-teens.
Speaker #1: And as such, the three-percentage-point increase to the accident year loss ratio would rather be conservative and go with what we're seeing in case reserves, as opposed to being relaxed and relying on paid losses.
[Analyst]: We'd rather be conservative and go with what we're seeing in case reserves as opposed to being relaxed and relying on paid losses. So I just point out, it's not something we missed. And to give everyone a little more color around that, loss trends move. They're volatile. We follow them regularly, daily, weekly, monthly, quarterly. And it's always a moving target. It's impossible to instantaneously know what today or tomorrow's loss trend is. No one has a crystal ball. And the best anyone can do is make a projection based on current observations. And that's exactly what we do. We make a projection based on what we're seeing. It's usually a conservative projection, in this case, a conservative projection around what we saw in the movement between case reserves in the beginning of the year as opposed to case reserves more toward the end of the year.
We'd rather be conservative and go with what we're seeing in case reserves as opposed to being relaxed and relying on paid losses. So I just point out, it's not something we missed. And to give everyone a little more color around that, loss trends move. They're volatile. We follow them regularly, daily, weekly, monthly, quarterly. And it's always a moving target. It's impossible to instantaneously know what today or tomorrow's loss trend is. No one has a crystal ball. And the best anyone can do is make a projection based on current observations. And that's exactly what we do. We make a projection based on what we're seeing. It's usually a conservative projection, in this case, a conservative projection around what we saw in the movement between case reserves in the beginning of the year as opposed to case reserves more toward the end of the year.
Speaker #1: So I'd just point out it's not something we missed. And to give everyone a little more color around that, loss trends move. They're volatile.
Speaker #1: We follow them regularly—daily, weekly, monthly, quarterly. And it's always a moving target. It's impossible to instantaneously know what today’s or tomorrow’s loss trend is.
Speaker #1: No one has a crystal ball, and the best anyone can do is make a projection based on current observations. And that's exactly what we do.
Speaker #1: We make a projection based on what we're seeing, and it's usually a conservative projection. In this case, a conservative projection around what we saw in the movement between case reserves in the beginning of the year, as opposed to case reserves more toward the end of the year.
Speaker #1: And just to underscore this a little bit more, when I make the statement that it's impossible to precisely and instantaneously know what your trend's going to be, it takes time from the first notice of loss to the time that an adjuster is able to set ultimate case reserves.
[Analyst]: And just to underscore this a little bit more, when I make the statement that it's impossible to precisely and instantaneously know what your trend's going to be. It takes time from the first notice of loss to the time that an adjuster is able to set ultimate case reserves. At the time of first notice of loss, the ultimate number of bodily injuries, the severity of the injuries, whether or not there's attorney representation, those are all things that are not usually immediately known, and it takes time for that to play out. And that's why it's impossible to instantaneously know what your severity is until you get that kind of information and the year progresses and it comes through in your case reserves. So hopefully, that provides a little more color around what we saw, how we reacted.
And just to underscore this a little bit more, when I make the statement that it's impossible to precisely and instantaneously know what your trend's going to be. It takes time from the first notice of loss to the time that an adjuster is able to set ultimate case reserves. At the time of first notice of loss, the ultimate number of bodily injuries, the severity of the injuries, whether or not there's attorney representation, those are all things that are not usually immediately known, and it takes time for that to play out. And that's why it's impossible to instantaneously know what your severity is until you get that kind of information and the year progresses and it comes through in your case reserves. So hopefully, that provides a little more color around what we saw, how we reacted.
Speaker #1: At the time of first notice of loss, the ultimate number of bodily injuries, the severity of the injuries, and whether or not there's attorney representation—those are all things that are not usually immediately known.
Speaker #1: And it takes time for that to play out. And that's why it's impossible to instantaneously know what your severity is until you get that kind of information, and the year progresses and it comes through in your case reserves.
Speaker #1: So hopefully, that provides a little more color around what we saw, how we reacted, and it's really 100% consistent with what we've communicated to all of our investors and analysts when we observe higher loss trends.
[Analyst]: It's really 100% consistent with what we've communicated to all of our investors and analysts. When we observe higher loss trends, we immediately react by adjusting the loss ratio. As you saw in the Q4, as I mentioned in my comments, we immediately react with rate. Rate increases in commercial auto accelerated in the Q4 and now are upwards of 16% compared to, I think, we were at 14% last quarter. We'll keep doing exactly that. So I'll move on to your second question regarding the $17.5 million offset we had on workers' comp favorable development. That came from, as we said in the release, a large deductible program where the losses from prior years had developed. In this case, there was a credit risk exposure. So we ended up with insufficient collateral.
It's really 100% consistent with what we've communicated to all of our investors and analysts. When we observe higher loss trends, we immediately react by adjusting the loss ratio. As you saw in the Q4, as I mentioned in my comments, we immediately react with rate. Rate increases in commercial auto accelerated in the Q4 and now are upwards of 16% compared to, I think, we were at 14% last quarter. We'll keep doing exactly that. So I'll move on to your second question regarding the $17.5 million offset we had on workers' comp favorable development. That came from, as we said in the release, a large deductible program where the losses from prior years had developed. In this case, there was a credit risk exposure. So we ended up with insufficient collateral.
Speaker #1: We immediately react. By adjusting the loss ratio, and as you saw in the fourth quarter—as I mentioned in my comments—we immediately react with rate, and rate increases in commercial auto accelerated in the fourth quarter and now are upwards of 16%, compared to, I think, we were at 14% last quarter.
Speaker #1: So, and we'll keep doing exactly that. So I'll move on to your second question. Regarding the $17.5 million offset we had on workers' comp favorable development.
Speaker #1: And that came from, as we said in the release, a large deductible program where the losses from prior years had developed, and in this case, there was a credit risk exposure.
Speaker #1: So, we ended up with insufficient collateral, and on large deductible programs, when that happens, that's something that then falls to us. And accordingly, we have to put up the reserves ourselves.
[Analyst]: And on large deductible programs, when that happens, that's something that then falls to us. And accordingly, we have to put up the reserves ourselves. So that's what happened in this quarter. And you've been following us long enough to know that those kind of losses are somewhat unique. And certainly, in our 40- to 45-year history, that's a pretty big number for us relative to past experience. And 99 out of 100 times, we have enough collateral to take care of things, even if losses do develop unfavorably in prior years. But in this one instance, there was insufficient collateral. Well, that's excellent detail. So it's appreciated. Mindful that others might be asking questions. So I just close out. Carolyn, if you could just provide your crystal ball view on what 2026 might look like for the title business.
And on large deductible programs, when that happens, that's something that then falls to us. And accordingly, we have to put up the reserves ourselves. So that's what happened in this quarter. And you've been following us long enough to know that those kind of losses are somewhat unique. And certainly, in our 40- to 45-year history, that's a pretty big number for us relative to past experience. And 99 out of 100 times, we have enough collateral to take care of things, even if losses do develop unfavorably in prior years. But in this one instance, there was insufficient collateral.
Speaker #1: So that's what happened. In this quarter—and you've been following us long enough to know—that those kind of losses are somewhat unique, and certainly, in our 40, 45-year history, that's a pretty big number for us relative to past experience.
Speaker #1: And 99 out of 100 times, we have enough collateral to take care of things, even if losses do develop unfavorably in prior years. But in this one instance, there was insufficient collateral.
Speaker #1: And 99 out of 100 times, we have enough collateral to take care of things, even if losses do develop unfavorably in prior years. But in this one instance, there was insufficient collateral.
Gregory Peters: Well, that's excellent detail. So it's appreciated. Mindful that others might be asking questions. So I just close out. Carolyn, if you could just provide your crystal ball view on what 2026 might look like for the title business.
Speaker #2: Well, that's excellent detail, so it's appreciated. Mindful that others might be asking questions, so I'll just close out. Carolyn, if you could just provide your crystal ball view on what 2026 might look like for the title business.
Speaker #2: I feel like your pick might be as good as anybody's out there. So just curious about your perspective on that.
[Analyst]: I feel like your pick might be as good as anybody's out there. So just curious about your perspective on that. Sure. In all of kind of the research that we do from people that report on that, it's still showing that commercial should have about a 15% to 20% improvement over this year, which was a wonderful year for commercial. But they see a single-digit increase in residential for next year, less than 10%. So it goes between 3% and 7% depending on who you look at. So I think it's going to be another year like this year with some improvement, especially if commercial does improve like it did. So we're looking forward to 2026. When you say next year, both you and Craig, I presume you mean '26. Yes, I do. Right. Right. Yeah. Perfect. Yeah.
I feel like your pick might be as good as anybody's out there. So just curious about your perspective on that.
Carolyn Monroe: Sure. In all of kind of the research that we do from people that report on that, it's still showing that commercial should have about a 15% to 20% improvement over this year, which was a wonderful year for commercial. But they see a single-digit increase in residential for next year, less than 10%. So it goes between 3% and 7% depending on who you look at. So I think it's going to be another year like this year with some improvement, especially if commercial does improve like it did. So we're looking forward to 2026.
Speaker #3: Sure. In all of the research that we do from people that report on that, it's still showing that commercial should have about a 15 to 20 percent improvement over this year, which was a wonderful year for commercial.
Speaker #3: But they see a single-digit increase in residential for next year, less than 10%. So somewhere it goes between 3 and 7 percent, depending on who you look at.
Speaker #3: So, I think it's going to be another year like this year, with some improvement, especially if Commercial does improve like it did. So we're looking forward to—
Speaker #3: 2026. When
Gregory Peters: When you say next year, both you and Craig, I presume you mean '26.
Speaker #2: You say next year, both you and Craig—I presume you mean '26.
Carolyn Monroe: Yes, I do.
Speaker #4: Right. Right. Yes, I do. Yeah.
Craig Smiddy: Right. Right.
Gregory Peters: Yeah. Perfect.
Speaker #2: Yeah. Perfect.
Craig Smiddy: Yeah.
Speaker #4: Yeah, we're stuck here. Fourth quarter, full year '25 mode right now.
[Analyst]: We're stuck in Q4, full year 2025 mode right now. Right. I assume so, but thanks for the answers. Thank you. Once again, for any questions, simply press star one on your telephone keypad. Our next question will come from the line of Paul Newsome with Piper Sandler. Please go ahead. Good afternoon. Thanks for the call. Maybe just to follow up on the case reserves, and I apologize if I missed this because I had a little technical issues myself getting on the call. The case reserve increases, were there any sort of geographic or patterns within the case reserve that stood out or would suggest, other than just pure sort of overall loss trend, that might give us a hint as to what might be happening under the hood? Yeah. Paul, that's a great question. And we've looked at it in great detail.
We're stuck in Q4, full year 2025 mode right now.
Gregory Peters: Right. I assume so, but thanks for the answers.
Speaker #2: Right. I assume so, but thanks for the answers.
Craig Smiddy: Thank you.
Speaker #4: you. Thank
Operator: Once again, for any questions, simply press star one on your telephone keypad. Our next question will come from the line of Paul Newsome with Piper Sandler. Please go ahead.
Speaker #1: Once again, for any questions, simply press star one on your telephone.
Speaker #1: Keypad. Our next question will come from the line of Paul Newsom with Piper Sandler. Please go ahead.
Speaker #1: ahead. Good afternoon.
Paul Newsome: Good afternoon. Thanks for the call. Maybe just to follow up on the case reserves, and I apologize if I missed this because I had a little technical issues myself getting on the call. The case reserve increases, were there any sort of geographic or patterns within the case reserve that stood out or would suggest, other than just pure sort of overall loss trend, that might give us a hint as to what might be happening under the hood?
Speaker #5: Thanks for the call. Maybe just to follow up on the case reserves, and I apologize if I missed this because I had a little technical issue myself.
Speaker #5: Getting on the call. The case reserve increases—were there any sort of geographic or other patterns within the case reserves that stood out, or would suggest something other than just overall loss trend?
Speaker #5: That might give us a hint as to what might be happening under the hood.
Craig Smiddy: Yeah. Paul, that's a great question. And we've looked at it in great detail.
Speaker #4: Yeah, Paul, that's a great question. And we've looked at it in great detail. I can't say geographically there's anything we've detected, but there are a few things we do know.
[Analyst]: I can't say geographically there's anything we've detected, but there are a few things we do know. And that is that the number of people making bodily injury claims relative to the number of accidents that we have is higher. And the percentage of bodily injury claims with attorney representation is higher. And the percentage of claims that end up in litigation is higher as well. So a bit of an opinion section here. And that is our view is that litigation system abuse is accounting for these increases. And that includes the ongoing proliferation of attorney advertising where plaintiff attorneys are attempting to vilify insurance companies. And you only need to turn on the television or drive down the interstate and see the billboards. And it's amazing. The number of advertisements on television, on billboards, is just continuing to proliferate.
I can't say geographically there's anything we've detected, but there are a few things we do know. And that is that the number of people making bodily injury claims relative to the number of accidents that we have is higher. And the percentage of bodily injury claims with attorney representation is higher. And the percentage of claims that end up in litigation is higher as well. So a bit of an opinion section here. And that is our view is that litigation system abuse is accounting for these increases. And that includes the ongoing proliferation of attorney advertising where plaintiff attorneys are attempting to vilify insurance companies. And you only need to turn on the television or drive down the interstate and see the billboards. And it's amazing. The number of advertisements on television, on billboards, is just continuing to proliferate.
Speaker #4: And that is that the number of people making bodily injury claims relative to the number of accidents that we have is higher, and the percentage of bodily injury claims with attorney representation is higher.
Speaker #4: And the percentage of claims that end up in litigation in ours is higher as well. So, a bit of an opinion section here.
Speaker #4: And that is, our view is that litigation system abuse is accounting for these increases. And that includes the ongoing proliferation of attorney advertising, where plaintiff attorneys are attempting to vilify insurance companies. You only need to turn on the television or drive down the interstate and see the billboards, and it's amazing.
Speaker #4: The number of advertisements on television, on billboards, is just continuing to proliferate. And to us, it's clear that plaintiff attorneys have come to the conclusion that there's a return on these investments.
[Analyst]: To us, it's clear that plaintiff attorneys have come to the conclusion that there's a return on these investments. So I think there's industry studies out there from some good industry associations that we're part of. They are coming to the same conclusions. So those are the only observations. Again, if you have an accident and you have a property damage claim, we track both bodily injury and property damage, third-party property damage separately. Third-party property damage frequency isn't going up, but bodily injury frequency is going up. Well, how can that be other than just more people willing to make bodily injury claims? So again, it comes back to the only conclusion that we can come to is that this litigation system abuse and proliferation of attorney advertising continues to rear its head. We'll have to see where it goes.
To us, it's clear that plaintiff attorneys have come to the conclusion that there's a return on these investments. So I think there's industry studies out there from some good industry associations that we're part of. They are coming to the same conclusions. So those are the only observations. Again, if you have an accident and you have a property damage claim, we track both bodily injury and property damage, third-party property damage separately. Third-party property damage frequency isn't going up, but bodily injury frequency is going up. Well, how can that be other than just more people willing to make bodily injury claims? So again, it comes back to the only conclusion that we can come to is that this litigation system abuse and proliferation of attorney advertising continues to rear its head. We'll have to see where it goes.
Speaker #4: So, I think there are industry studies out there from some good industry associations that we're part of, and they are coming to the same conclusions.
Speaker #4: So those are the only observations. Again, if you have an accident and you have a property damage claim, we track both bodily injury and property damage—third-party property damage—separately.
Speaker #4: Third-party property damage frequency isn't going up, but bodily injury frequency is going up. Well, how can that be, other than just more people willing to make bodily injury claims?
Speaker #4: And so again, it comes back to—the only conclusion that we can come to is that this litigation system abuse and proliferation of attorney advertising continues to rear its head.
Speaker #4: And we'll have to see where it goes. But that is what we would attribute a good portion of this.
[Analyst]: But that is what we would attribute a good portion of this to. Were the trends any different? I know you cited long-haul trucking. Were the trends any different in other portions of what you do in commercial auto? Obviously, trucking is your big piece, but I think you do some other stuff as well. Was it just consistent across anything that had to do with commercial auto? Another great question. Because on our other commercial auto, other than long-haul trucking, the trends are there, but they're not as pronounced as they are on long-haul trucking. I think coming back to litigation abuse, a lot of these plaintiff attorneys try to target trucking companies and vilify the trucking companies and insurance companies. And usually, long-haul trucking in particular has larger limit policies, and plaintiff attorneys know that. So there's more of a target on their back, so to speak.
But that is what we would attribute a good portion of this to.
Speaker #4: to. Were the
Paul Newsome: Were the trends any different? I know you cited long-haul trucking. Were the trends any different in other portions of what you do in commercial auto? Obviously, trucking is your big piece, but I think you do some other stuff as well. Was it just consistent across anything that had to do with commercial auto?
Speaker #5: Were trends any different? I know you cited long-haul trucking. Were the trends any different in other portions of what you do in commercial auto? Obviously, trucking is your big piece, but I think you do some other stuff as well.
Speaker #5: Was it just consistent across anything that had to do with commercial?
Speaker #5: auto? Another great
Craig Smiddy: Another great question. Because on our other commercial auto, other than long-haul trucking, the trends are there, but they're not as pronounced as they are on long-haul trucking. I think coming back to litigation abuse, a lot of these plaintiff attorneys try to target trucking companies and vilify the trucking companies and insurance companies. And usually, long-haul trucking in particular has larger limit policies, and plaintiff attorneys know that. So there's more of a target on their back, so to speak.
Speaker #4: Because on our other commercial auto, other than long-haul trucking, the trends are there, but they're not as pronounced as they are on long-haul trucking.
Speaker #4: I think, coming back to litigation abuse, a lot of these plaintiff attorneys try to target insurance or trucking companies and vilify trucking companies and insurance companies.
Speaker #4: And so, usually, trucking—long-haul trucking in particular—has larger limit policies, and plaintiff attorneys know that. So there's more of a target on their backs, so to speak.
Speaker #4: So, there is a little bit more rearing its head on long-haul trucking as opposed to other commercial.
Speaker #4: So there is a little bit more rearing its head on long-haul trucking as opposed to other commercial auto. So I know in the past—
[Analyst]: So there is a little bit more rearing its head on long-haul trucking as opposed to other commercial auto. So I know in the past, you've been—this is the last question I'll ever ask—but I know in the past, you guys have been very disciplined about hitting a loss trend rate. And I'm going to assume that that's the plan prospectively as well. Are there other things that you're considering in terms of reacting to the loss trend change in terms of condition or areas that you write or anything else, sort of non-rate actions? Or is this going to be just a matter of hit it with rate at whatever you think is happening from the loss trend perspective? Yeah. So out of all of our 20 companies, our most sophisticated data and analytics area is within our long-haul trucking company.
So there is a little bit more rearing its head on long-haul trucking as opposed to other commercial auto.
Paul Newsome: So I know in the past, you've been—this is the last question I'll ever ask—but I know in the past, you guys have been very disciplined about hitting a loss trend rate. And I'm going to assume that that's the plan prospectively as well. Are there other things that you're considering in terms of reacting to the loss trend change in terms of condition or areas that you write or anything else, sort of non-rate actions? Or is this going to be just a matter of hit it with rate at whatever you think is happening from the loss trend perspective?
Speaker #5: You've been noticing—last question—a lot of people ask, but I know in the past you guys have been very disciplined about hitting loss trend with rate.
Speaker #5: And I'm going to assume that that's the plan, perspectively, as well. Are there other things that you're considering in terms of reacting to the loss trend change—in terms of condition, or areas of your ride, or anything else, sort of non-rate actions?
Speaker #5: Or is this going to be just a matter of hitting it with rate at whatever you think is happening from the loss trend perspective?
Craig Smiddy: Yeah. So out of all of our 20 companies, our most sophisticated data and analytics area is within our long-haul trucking company.
Speaker #4: Yeah, so out of all of our 20 companies, our most sophisticated data and analytics area is within our long-haul trucking company. And we slice and dice the data and analytics in a very robust and sophisticated fashion.
[Analyst]: And we slice and dice data and analytics in a very robust and sophisticated fashion, which helps us with targeting rate to those customers that elevate higher propensity for loss. And so part of that is risk selection as well. It helps us with risk selection and being able to not broad brush rate, but target rate to the insureds that require more rate. And then also continually refine our risk selection so that we're selecting what we think are the best risks and making it very punitive or not providing quotes at all to those risks that we deem too high. With respect to terms and conditions, there's not, while in other of our businesses, terms and conditions are really key to the business, the specialty business they're in. Long-haul trucking, there's not a lot you can do with terms and conditions on commercial auto.
And we slice and dice data and analytics in a very robust and sophisticated fashion, which helps us with targeting rate to those customers that elevate higher propensity for loss. And so part of that is risk selection as well. It helps us with risk selection and being able to not broad brush rate, but target rate to the insureds that require more rate. And then also continually refine our risk selection so that we're selecting what we think are the best risks and making it very punitive or not providing quotes at all to those risks that we deem too high. With respect to terms and conditions, there's not, while in other of our businesses, terms and conditions are really key to the business, the specialty business they're in. Long-haul trucking, there's not a lot you can do with terms and conditions on commercial auto.
Speaker #4: This helps us with targeting rate to those customers that elevate higher propensity for loss. And so part of that is risk selection as well.
Speaker #4: It helps us with risk selection and being able to not broad-brush rate, but target rate to the insureds that require more rate. And then also continually refine our risk selection so that we're selecting what we think are the best risks and making it very punitive, or not providing quotes at all, to those risks that we deem too high.
Speaker #4: With respect to terms and conditions, there's not—while in other of our businesses, terms and conditions are key. Really key to the business, the specialty business they're in.
Speaker #4: Long-haul trucking, there's not a lot you can do with terms and conditions on commercial auto. So I wouldn't say that there's a lot we're doing with terms and conditions.
[Analyst]: So I wouldn't say that there's a lot we're doing with terms and conditions. But we react with rate. We make sure our overall portfolio rate increase is reflective of the trends that we're observing. And when I answered Greg's question, I explained that understanding what the trend is is not instantaneous, but we use a conservative approach. We assume trend is going to, if it's going up, we assume it's going to continue to either be where it's at or continue to go up. And until we have clear evidence it's going down, we're not adjusting rates downward. We adjust the rates upward. And just in one quarter, two or three hundred basis points. And we'll have to keep our foot on the pedal on that, assuming that our goal is to stay ahead of trend, which we will continue to do.
So I wouldn't say that there's a lot we're doing with terms and conditions. But we react with rate. We make sure our overall portfolio rate increase is reflective of the trends that we're observing. And when I answered Greg's question, I explained that understanding what the trend is is not instantaneous, but we use a conservative approach. We assume trend is going to, if it's going up, we assume it's going to continue to either be where it's at or continue to go up. And until we have clear evidence it's going down, we're not adjusting rates downward. We adjust the rates upward. And just in one quarter, two or three hundred basis points. And we'll have to keep our foot on the pedal on that, assuming that our goal is to stay ahead of trend, which we will continue to do.
Speaker #4: But we react with rate. We make sure our overall portfolio rate increase is reflective of the trends that we're observing. And when I answered Greg's question, I explained that understanding what the trend is is not instantaneous, but we use a conservative approach.
Speaker #4: We assume the trend is going to, if it's going up, we assume it's going to continue to either be where it's at or continue to go up.
Speaker #4: And until we have clear evidence it's going down, we're not adjusting rates downward. We adjust the rates upward. And just in one quarter, 200 or 300 basis points, and we'll have to keep our foot on the pedal on that, assuming that our goal is to stay ahead of trend, which we will continue to do.
Speaker #4: I would also just point out that as far as what this means for 2026, because we do that, our expectations for 2026 are not different from where we're at now with respect to loss ratio.
[Analyst]: I would also just point out that as far as what this means for 2026, because we do that, our expectations for 2026 are not different from where we're at now with respect to Loss Ratio. We assume we're going to keep up with trend. You may recall from a couple of years ago, we had similar kinds of observations back at the end of 2023. And for the fourth quarter of 2023, we bumped up that Accident Year Loss Pick. And if you look at how that year's played out, you can look at the financial supplement. Things after 2023 remained pretty steady into 2024 and 2025 with 72% Loss Ratios following a 71.5% Loss Ratio in 2023. So we would expect the same to happen here again. We're not changing our view on how 2026 looks. Great. Always appreciate the help and insights. Thank you very much.
I would also just point out that as far as what this means for 2026, because we do that, our expectations for 2026 are not different from where we're at now with respect to Loss Ratio. We assume we're going to keep up with trend. You may recall from a couple of years ago, we had similar kinds of observations back at the end of 2023. And for the fourth quarter of 2023, we bumped up that Accident Year Loss Pick. And if you look at how that year's played out, you can look at the financial supplement. Things after 2023 remained pretty steady into 2024 and 2025 with 72% Loss Ratios following a 71.5% Loss Ratio in 2023. So we would expect the same to happen here again. We're not changing our view on how 2026 looks.
Speaker #4: We assume we're going to keep up with the trend. You may recall from a couple of years ago, we had similar kinds of observations back at the end of 2023.
Speaker #4: And we, for the fourth quarter of 2023, we bumped up that accident year loss pick. And if you look at how that year's played out, you can look at the financial supplement.
Speaker #4: Things after 2020-23 remained pretty steady, and into '24 and '25, with 72% loss ratios, following a 71.5% loss ratio in '23. So, we would expect the same to happen here again.
Speaker #4: We're not changing our view on how 2026 looks.
Speaker #4: looks. Right.
Paul Newsome: Great. Always appreciate the help and insights. Thank you very much.
Speaker #5: Always appreciate the help and insights. Thank you very much.
Speaker #4: Thank you,
[Analyst]: Thank you, Paul. Our next question is a follow-up from the line of Gregory Peters with Raymond James. Please go ahead. Hey, one of the things I just wanted to touch upon just to close out the capital position of the company. I mean, you've been, your record of special dividends alongside your regular dividends is pretty interesting. I'm just curious how you view, in light of the $2.50 dividend that I guess was paid out already in January here, how you view the capital of the company at this point in time, and what are the metrics we should be watching for to determine whether there's still excess capital, etc.? Sure, Greg. I'll be happy to do that.
Operator: Thank you, Paul. Our next question is a follow-up from the line of Gregory Peters with Raymond James. Please go ahead.
Speaker #4: Paul. Our next question is
Speaker #1: A follow-up from the line of Gregory Peters with Raymond James. Please go ahead.
Speaker #1: Go ahead. Hey, one of the things I just
Gregory Peters: Hey, one of the things I just wanted to touch upon just to close out the capital position of the company. I mean, you've been, your record of special dividends alongside your regular dividends is pretty interesting. I'm just curious how you view, in light of the $2.50 dividend that I guess was paid out already in January here, how you view the capital of the company at this point in time, and what are the metrics we should be watching for to determine whether there's still excess capital, etc.?
Speaker #5: wanted to touch upon just as to close out the capital position of the company. I mean, you've been your record of special dividends alongside your regular dividends is pretty interesting.
Speaker #5: And I'm just curious, how you view, in light of the $2.50 dividend that I guess was paid out already in January here, how you view the capital of the company at this point in time, and what are the metrics we should be watching for to determine whether there's still excess capital, etc.?
Speaker #5: And I'm just curious, how you view, in light of the $2.50 dividend that I guess was paid out already in January here, how you view the capital of the company at this point in time, and what are the metrics we should be watching for to determine whether there's still excess capital, etc.?
Craig Smiddy: Sure, Greg. I'll be happy to do that.
Speaker #4: Sure, Greg. I'll be happy to do that. So, part of our regular planning cycle is to head into our February board meetings and present our plan for 2026, which includes a complete analysis of our capital position and our projected capital position.
[Analyst]: So part of our regular planning cycle is to head into our February board meetings and present our plan for 2026, which includes a complete analysis of our capital position and our projected capital position. We still think we have plenty of capital. So we think that'll put us in a position to, again, recommend to the board a regular dividend increase somewhere in line with what we've been doing over the last couple of years. And in the meantime, we also have $850 million still remaining on our share repurchase program. And we'll put that to work, especially when there's opportunity. We said all along that we like having both tools in our tool chest, the share repurchase tool as well as the special dividend and regular dividend tool. And to the extent that we think there's a buying opportunity, we've said we'll be opportunistic.
So part of our regular planning cycle is to head into our February board meetings and present our plan for 2026, which includes a complete analysis of our capital position and our projected capital position. We still think we have plenty of capital. So we think that'll put us in a position to, again, recommend to the board a regular dividend increase somewhere in line with what we've been doing over the last couple of years. And in the meantime, we also have $850 million still remaining on our share repurchase program. And we'll put that to work, especially when there's opportunity. We said all along that we like having both tools in our tool chest, the share repurchase tool as well as the special dividend and regular dividend tool. And to the extent that we think there's a buying opportunity, we've said we'll be opportunistic.
Speaker #4: We still think we have plenty of capital, so we think that'll put us in a position to, again, recommend to the Board a regular dividend increase, somewhere in line with what we've been doing over the last couple of years.
Speaker #4: And in the meantime, we also have $850 million still remaining on our share repurchase program, and we'll put that to work, especially when there's opportunity.
Speaker #4: We said all along that we like having both tools in our tool chest—the share repurchase tool, as well as the special dividend and regular dividend tool.
Speaker #4: And to the extent that we think there's a buying opportunity, we've said we'll be opportunistic, and to the extent that markets react or overreact, it gives us a buying opportunity to repurchase more shares.
[Analyst]: To the extent that markets react or overreact, it gives us a buying opportunity to repurchase more shares. So we have that $850 million. We believe that if the opportunity presented itself, we could put most of that to good use throughout the year. We would do that. Then as we get further along in the year, again, take a look at where we're at with that capital position, what we've been able to do with share repurchases. As we did at the end of last year in December, if we think we are ending the year with more capital again, we'll reset it with a special dividend. All right. Got it. Thanks for letting me ask the follow-up question. Thank you. This concludes our question and answer session. I'll hand the call back to management for any closing comments. Okay. Well, thank you.
To the extent that markets react or overreact, it gives us a buying opportunity to repurchase more shares. So we have that $850 million. We believe that if the opportunity presented itself, we could put most of that to good use throughout the year. We would do that. Then as we get further along in the year, again, take a look at where we're at with that capital position, what we've been able to do with share repurchases. As we did at the end of last year in December, if we think we are ending the year with more capital again, we'll reset it with a special dividend.
Speaker #4: So, we have that $850 million. We believe that if the opportunity presented itself, we could put most of that to good use throughout the year.
Speaker #4: And we would do that. And then, as we get further along in the year, again, take a look at where we're at with that capital position, what we've been able to do with share repurchases, and if we—as we did at the end of last year in December—if we think we are ending the year with more capital again, we'll reset it with a special dividend.
Speaker #4: And we would do that. And then, as we get further along in the year, again take a look at where we're at with that capital position, what we've been able to do with share repurchases, and if we, as we did at the end of last year in December, if we think we are ending the year with more capital again, we'll reset it with a special.
Paul Newsome: All right. Got it. Thanks for letting me ask the follow-up question.
Speaker #5: All right. Got it. Thanks for letting me ask the follow-up.
Speaker #5: question. Thank
Craig Smiddy: Thank you.
Speaker #4: you. And this concludes our
Operator: This concludes our question and answer session. I'll hand the call back to management for any closing comments.
Speaker #1: question and answer session. I'll hand the call back to management for any closing comments.
Craig Smiddy: Okay. Well, thank you.
Speaker #4: Okay. Well, thank you. We appreciate the Q&A. We appreciate the opportunity to share our prepared remarks in addition to the earnings release, and wrap up 2025 for the year.
[Analyst]: We appreciate the Q&A. We appreciate the opportunity to share our prepared remarks in addition to the earnings release, and wrap up 2025 for the year. It was another very good solid year. We think we're set up for a very good 2026. We realize market conditions are in question, but we'll focus on bottom line and profitability, and continue with our underwriting excellence initiatives and our pricing discipline, and continue to produce growth, particularly as our new specialty operating companies are producing more and more premium. We feel very good about where we're heading in 2026. Thank you all for your interest and participation. We will talk to you all again next quarter. Thank you. This concludes today's call. Thank you all for joining. You may now disconnect.
We appreciate the Q&A. We appreciate the opportunity to share our prepared remarks in addition to the earnings release, and wrap up 2025 for the year. It was another very good solid year. We think we're set up for a very good 2026. We realize market conditions are in question, but we'll focus on bottom line and profitability, and continue with our underwriting excellence initiatives and our pricing discipline, and continue to produce growth, particularly as our new specialty operating companies are producing more and more premium. We feel very good about where we're heading in 2026. Thank you all for your interest and participation. We will talk to you all again next quarter. Thank you.
Speaker #4: It was another very good, solid year, and we think we're set up for a very good '26. We realize market conditions are in question, but we'll focus on the bottom line.
Speaker #4: And profitability, and continue with our underwriting excellence initiatives and our pricing discipline, and continue to produce growth—particularly as our new specialty operating companies are producing more and more premium. We feel very good about where we're heading in '26.
Speaker #4: So, thank you all for your interest and participation. And we will talk to you all again next quarter. Thank you.
Speaker #4: you. And this concludes
Operator: This concludes today's call. Thank you all for joining. You may now disconnect.
