Q2 2026 Intact Financial Corp Earnings Call

Speaker #1: Conductor question-and-answer session. And if at any time during this call you require me to assistance, please press star 0 for the operator. Also note that this call is being recorded on July 29, 2026.

Speaker #1: And I would like to turn the conference over to Jeff Kwon, Chief Investor Relations Officer. Please go ahead, sir.

Speaker #2: Thank you, Sylvie. Hello everyone, and thank you for joining the call to discuss our second quarter financial results. I'll link to our live webcast and.

Speaker #2: Materials for this call have been posted on our website at intactfc.com under the Investors tab. Before we start, please refer to slide 2 for a disclaimer regarding the use of forward-looking statements, which form part of this morning's remarks.

Speaker #2: And slide 3 for a note on the use of non-GAAP financial measures, and other terms used in this presentation. To discuss our results today, I have with me our CEO, Charles Brindemore.

Speaker #2: Our CFO, Ken Anderson. Patrick Barbot, our Chief. Ashraf Luitri, our Senior Vice President, Personal Alliance. We will begin with prepared remarks, followed by Q&A, and with that, I will turn the call over to Charles.

Speaker #1: Good morning, ladies and gentlemen, and welcome to the Intact Financial Corporation Q2 2026 results conference call. At this time, our lines are in listen-only mode.

Speaker #3: Thanks, Jeff. Welcome, Ashraf, to your first earnings call. And good morning, everyone, and thanks for joining us. Last night we released our second quarter results, which generated net operating income per share of $3.17.

Speaker #1: Following the presentation, we will conduct a question-and-answer session. And if at any time during this call you require my assistance, please press star zero for the operator.

Speaker #1: Also note that this call is being recorded on July 29, 2026. And I would like to turn the conference over to Jeff Kwan, Chief Investor Relations Officer.

Speaker #3: Driven by a combined ratio of 94/9, which included approximately 4 points of excess catastrophes and large losses. Our top line grew 4% in the quarter, driven by continued strength in Personal Alliance.

Speaker #1: Please go ahead, sir.

Speaker #2: Thank you, Sylvie. Hello, everyone, and thank you for joining the call to discuss our second quarter financial results. A link to our live webcast and.

Speaker #3: Our ROE was in the upper teens at 17%. Our book value per share grew 13% year over year, to $111.73. And our balance sheet is very strong, with $3.7 billion of excess capital and that positioned us well in an attractive M&A environment.

Speaker #1: Intact FC dot com under. Slide 2 for a disclaimer regarding the use of forward-looking statements. And flight 3 for a note on the use of non-gap financial.

Speaker #1: Discuss her results today. I have with me our CEO, Charles Brindamour. Our CFO, Kenneth Anderson. That's definitely we treat our senior vice president personalized.

Speaker #3: Now, this quarter was marked by a higher level of large losses than we've experienced historically, and then we expected. Given that, we conducted a detailed and thorough review.

Speaker #1: We will begin with prepared remarks, followed by Q&A. And with that, I will turn the call over to Charles.

Speaker #1: Net operating income per share of $3.17. Driven by a combined ratio of 94/9, which included approximately 4 points of excess catastrophes and large losses.

Speaker #2: Thanks, Jeff. Welcome, Ashraf, to your first earnings call. And good morning, everyone. And thanks for joining us. Last night we released.

Speaker #3: We did not find any common driver or systemic pattern. We view what happened in Q2 as an anomaly, and we're confident that the underlying performance and the fundamentals of our business are very strong.

Speaker #1: Our top line grew 4% in the quarter, driven by continued strength in personal lines. Our ROE was in the upper teens at 17%. Our book value per share grew 13% year over year, to $111.73, and our balance sheet is very strong, with $3.7 billion of excess capital and that positioned us well in an attractive M&A environment.

Speaker #3: Let me now provide some color on each of our segments, beginning with Canada. In Personal Auto, premiums grew 9% in the quarter, including 1% of unit growth.

Speaker #3: This reflects sustained hard market conditions supported by our investments and marketing, and in the digital channel. With the industry remaining unprofitable still at the end of Q1 2026, we expect industry premium growth to remain in the high single digits over the next 12 months.

Speaker #1: With the industry remaining on profitable still at the end of Q1 2026, we expect industry premium growth to remain in the high single digits over the next 12 months.

Speaker #1: Now, this quarter was marked by a higher level of large losses than we've experienced historically, and then we expected. Given that, we conducted a detailed and thorough review.

Speaker #1: Our combined ratio in personal auto improved 1.5 points year over year, to 88.8%—a strong result in a seasonally favorable quarter. This performance was driven by an improvement in the current accident year of more than 2 points.

Speaker #1: We did not find any common driver or systemic pattern. We view what happened in Q2 as an anomaly, and we're confident that the underlying performance and the fundamentals of our business are very strong.

Speaker #3: Our combined ratio in Personal Auto improved 1.5 points year over year, to 88.8%, a strong result in a seasonally favorable quarter. This performance was driven by an improvement in the current accident tier of more than 2 points.

Speaker #1: On the reform front, we're encouraged by the developments in both Ontario and Alberta. In Ontario, while early, customers are choosing the optional protection. Which should help support growth.

Speaker #3: On the reform front, we're encouraged by the developments in both Ontario and Alberta. In Ontario, while early, customers are choosing the optional protection. Which should help support growth.

Speaker #1: In Alberta, we like the direction being set for 2027. We'll provide an update later this fall as the reform package is finalized. But in both cases, we think these reforms are excellent for consumers and support a healthy and competitive automobile industry.

Speaker #3: In Alberta, we like the direction being set for 2027. We'll provide an update later this fall as the reform package is finalized. But in both cases, we think these reforms are excellent for consumers and support a healthy and competitive automobile industry.

Speaker #1: Let me now provide some color on each of our segments, beginning with Canada. 9% in the quarter, including 1% of unit growth. This reflects sustained hard market conditions supported by our investments in marketing and in the digital channel.

Speaker #1: They should also contribute to bring the industry closer to a more sustainable performance level. In personal property, premiums grew 7%, including a 1% increase in units.

Speaker #3: They should also contribute to bringing the industry closer to a more sustainable performance level. In personal property, premiums grew 7%, including a 1% increase in units.

Speaker #1: We see continued strength in this segment. We expect industry premium growth to be in the upper single- to low double-digit range over the next 12 months.

Speaker #3: We see continued strength in this segment. We expect industry premium growth to be in the upper single to low double-digit range over the next 12 months.

Speaker #1: The combined ratio of 103% included 22 points of CAT losses in the quarter. This is a reminder of the impact on industry profitability from severe weather events.

Speaker #3: The combined ratio of 103, included 22 points of cap losses in the quarter. This is a reminder of the impact on industry profitability from severe weather events.

Speaker #1: We believe this will contribute to sustaining hard market conditions. Despite the elevated level of catastrophes in Q2, our year-to-date combined ratio of 93.9% shows our personal property business is positioned to deliver sub-95 performance, even with severe weather.

Speaker #3: We believe this will contribute to sustaining hard market conditions. Despite the elevated level of catastrophes in Q2, our year-to-date combined ratio of 93.9% shows our personal property business is positioned to deliver a sub-95 performance, even with severe weather.

Speaker #1: We view this segment as very attractive and a solid source of growth. Our track record of close to a 90% combined ratio over five and ten years is quite strong and gives us confidence in our growth strategy in that segment.

Speaker #3: We view this segment as very attractive and a solid source of growth. Our track record of close to 90% combined ratio over 5 and 10 years is quite strong, and gives us confidence in our growth strategy in that segment.

Speaker #1: In commercial lines, premium growth was 1% in the quarter. We continue to see traction from our growth initiatives, which drove roughly three points of growth.

Speaker #3: In Commercial Alliance, premium growth was 1% in the quarter. We see continued traction for our growth initiatives, which drove roughly 3 points of growth.

Speaker #1: This was partially offset by two points of mixed shift toward smaller account sizes, as we remain selective in the competitive large account space. I'm encouraged not only by the strength of the SME portfolio but also by sequential improvements in production stats in the mid-market space.

Speaker #3: This was partially upset by 2 points of mixed shift toward smaller account sizes, as we remain selective in the competitive large account space. I'm encouraged not only by the strength of the SME portfolio, but also by sequential improvements in production stats in the mid-market space.

Speaker #1: We expect industry growth in the low to mid single digits over the next 12 months. The combined ratio was strong at 85.7% in commercial lines.

Speaker #3: We expect industry growth in the low to mid-single digits over the next 12 months. The combined ratio was strong at 85.7% in Commercial Alliance.

Speaker #1: This result reflects our continued discipline in applying pricing sophistication and advanced risk selection techniques to retain higher quality accounts. We continue to expect a combined ratio in the low 90s or better.

Speaker #3: This result reflects our continued discipline in applying pricing sophistication and advanced risk selection techniques to retain higher quality accounts. We continue to expect a combined ratio in the low 90s or better.

Speaker #3: Moving now to our UK&I segment. Our top line decreased by 1% in the quarter. While growth was solid in specialty lines, our domestic UK Commercial Alliance business saw pressure driven by the consolidation of products following the NIG acquisition into one intact value proposition.

Speaker #3: We continue to expect top line to improve in 2026, as we complete this exercise. And we expect the industry premium growth in the low to mid-single digit range over the next 12 months.

Speaker #3: The combined ratio of 112% included 15 points of excess cap and large losses. And we're committed and confident in bringing the combined ratio towards 90%.

Speaker #3: We're making good progress and expect further improvements as we continue to roll out our pricing sophistication tools but also improve the expense ratio over time.

Speaker #3: In the US, premiums increased by 4%, driven by solid new business and strong growth in some of our most profitable verticals. Our top line growth is benefiting from the wider product lineup and continued gains in expanding and deepening broker relationships.

Speaker #1: Applying the increase by 1% in the quarter. While growth was solid in specialty lines, our domestic UK commercial lines business saw pressure driven by the consolidation of products following the NIG acquisition into one Intact value proposition.

Speaker #3: At the industry level, we expect premium growth to be in the mid-single digit over the next 12 months. The combined ratio of 85% in the US this quarter improved nearly 3 points year over year, reflecting the benefits of our strategy of focusing on profitable growth.

Speaker #1: We significantly expanded our ROE outperformance in 2025 to 740 basis points, as we continue to execute on our strategic roadmap. That includes investments in data and AI, as well as leveraging our scale to build an extensive supply chain network that allows us to internalize over 90%—95% of our claims globally.

Speaker #1: We continue to expect top line to improve in 2026 as we complete this exercise. And we expect the industry premium growth in the low to mid-single digit range over the next 12 months.

Speaker #3: This marks our 12th consecutive quarter with a combined ratio below 90%. As we look ahead, across all of our lines of business, we're operating in an environment that plays to our strengths.

Speaker #1: On the AI front, for instance, this includes realizing recurring benefit from investments faster than expected. Indeed, while our initiative generate north of 220 million recurring benefits today, we now expect to achieve 500 million dollars in benefits in 2028, roughly 2 years earlier than we previously announced.

Speaker #1: The combined ratio of 112% included 15 points of excess CAT and large losses. And we're committed and confident in bringing the combined ratio toward 90%.

Speaker #3: We're pricing sophistication and risk selection are paramount. We significantly expanded our ROE outperformance in 2025 to 740 basis points, as we continue to execute on our strategic roadmap.

Speaker #1: We're making good progress and expect further improvements as we continue to roll out our pricing sophistication tools, but also improve the expense ratio over time.

Speaker #3: That includes investments in data and AI, as well as leveraging our scale to build an extensive supply chain network that allows us to internalize over 90%, 95% of our claims globally.

Speaker #1: On the claims side, the recent catastrophes in Canada illustrated our competitive advantage. In June, there were 5 catastrophes: our advanced claims analytics capabilities and in-house restoration business on-site were instrumental in helping us close 47% of the almost 9,000 claims from the June cut.

Speaker #1: In the U.S., premiums increased by 4%, driven by solid new business and strong growth in some of our most profitable verticals. Our top line growth is benefiting from the wider product lineup and continued gains in expanding and deepening broker relationships.

Speaker #3: On the AI front, for instance, this includes realizing recurring benefit from investments faster than expected. Indeed, while our initiative generate north of 220 million recurring benefits today, we now expect to achieve 500 million dollars in benefits in 2028, roughly 2 years earlier than we previously announced.

Speaker #1: At the industry level, we expect premium growth to be in the mid-single digits over the next 12 months, with a combined ratio of 85% in the U.S.

Speaker #1: An impressive result. It demonstrates how we're able to get our customers back on track faster while building a loss ratio advantage. We also remain focused on helping build more resilient communities.

Speaker #1: This quarter improved nearly 3 points year over year, reflecting the benefits of our strategy of focusing on profitable growth. This marks our 12th consecutive quarter with a combined ratio below 90%.

Speaker #3: On the claims side, the recent catastrophes in Canada illustrated our competitive advantage. In June, there were 5 catastrophes. Our advanced claims analytics capabilities and in-house restoration business on site were instrumental in helping us close 47% of the almost 9,000 claims from the June cap.

Speaker #1: Initiatives like the Keep It Intact Prevention Ecosystems are driving proactive risk mitigation. Since the launch of the initiative last year, our customers have recorded over 140,000 prevention actions in our apps.

Speaker #1: As we look ahead, across all of our lines of business, we're operating in an environment that plays to our strengths. These actions are paramount.

Speaker #1: Which helped them better protect their homes. These actions also enhanced the resilience of our personal property portfolio. And on top of that, Jiffy—Canada's number one home maintenance hub and owned only by Intact—is well positioned to benefit from increased prevention activity by homeowners.

Speaker #3: An impressive result. It demonstrates how we're able to get our customers back on track faster while building a loss ratio advantage. We also remain focused on helping build more resilient communities.

Speaker #1: Jiffy's revenues increased 24% year over year. So in closing, although Q2 was a difficult quarter for many of our customers, our teams continue to do outstanding work getting impacted customers back on track as fast as possible.

Speaker #3: Initiatives like the Keep It Intact Prevention Ecosystems are driving proactive risk mitigation. Since the launch of the initiative last year, our customers have recorded over 140,000 prevention actions in our apps.

Speaker #3: Which helped them better protect their homes. These actions also enhanced the resilience of our personal property portfolio. And on top of that, Jiffy Canada's number 1 home maintenance hub, and only owned by Intact, is well positioned to benefit from increased prevention activity by homeowners.

Speaker #1: I want to thank all our employees for their dedication to living our values and delivering for our customers. Our track record demonstrates that external factors—such as natural disasters and industry pricing cycles—didn't impact our ability to consistently deliver on our two financial objectives.

Speaker #3: Jiffy's revenues increased 24% year over year. So in closing, although Q2 was a difficult quarter for many of our customers, our teams continue to do outstanding work getting impacted customers back on track as fast as possible.

Speaker #1: With our net operating income per share growing at a compounded growth rate of 16% over the last 3 years, and 12% over the last 10 years, we've exceeded our goal of at least 10% growth annually over time in both near and long term.

Speaker #1: Our average ROE outperformance has been 600 basis points over the last 3 years, and almost 700 basis points over the last 10 years. Well above our objective of at least 500 basis points outperformance.

Speaker #3: I want to thank all our employees for their dedication to living our values and delivering for our customers. Our track record demonstrates that external factors, such as natural disasters and industry pricing cycles, didn't impact our ability to consistently deliver on our two financial objectives.

Speaker #1: Given the environment in which we operate, our focus on outperformance and our commitment to profitable growth, there's no doubt in my mind that we'll exceed our financial objectives in the next decade as we have in the last decade.

Speaker #3: With our net operating income per share growing at a compounded growth rate of 16% over the last 3 years, and 12% over the last 10 years, we've exceeded our goal of at least 10% growth annually over time, both near and long term.

Speaker #1: Thank you, and now I'll turn the call over to. And good morning, everyone.

Speaker #3: Our average ROE outperformance has been 600 basis points over the last 3 years, and almost 700 basis points over the last 10 years. Well above our objective of at least 500 basis points outperformance.

Speaker #3: Given the environment in which we operate, our focus on outperformance and our commitment to profitable growth, there's no doubt in my mind that we'll exceed our financial objectives in the next decade as we have in the last decade.

Speaker #3: Thank you, and now I'll turn the call over to our CFO, Ken Anderson.

Speaker #2: Thanks, Charles. And good morning, everyone. While the second quarter was active from a catastrophe and large loss perspective, our results demonstrate the resilience of our platform.

Speaker #2: Net operating income per share for the second quarter was $3.17, while operating ROE was strong at 17%, driving a 13% year over year increase in our book value per share to $111.73.

Speaker #2: Let me add some color on second quarter results. The underlying current accident year loss ratio of 59.1% included 3 points of excess large losses.

Speaker #2: The large losses primarily occurred in our UK&I segment, with several large property fires occurring across different segments of commercial and specialty lines. Canadian commercial and personal property also experienced increased frequency of large losses, primarily driven by property fires.

Speaker #2: Importantly, we viewed these these losses as discrete in nature, our underlying performance remained strong. Catastrophe losses in the quarter were 416 million dollars, driven mostly by storms related to water damage in Alberta, Ontario, and Quebec, as well as property-related fires in the UK&I.

Speaker #2: On a year-to-date basis, cap losses remain consistent with our expectations, and our annual cap guidance remains unchanged at 1.2 billion dollars. Quarterly cap activity can create variability, but we manage the business with this in mind, and our overall view of long-term climate trends remains unchanged.

Speaker #2: On the second quarter was active from a catastrophe and large loss perspective, our result.

Speaker #1: That operating income per share for the second quarter was $3.17, while operating ROE was strong at 17%, driving a 13% year-over-year increase in our book value per share to $111.73.

Speaker #2: Our prudent current year reserving practices over time means prior year development remains strong, and we posted favorable PYD of 6.1 points in the second quarter.

Speaker #1: Operating net investment income increased to $405 million in the quarter, driven by growth in our investment portfolio from strong capital generation. Our expectation for $1.7 billion of investment income in 2026 is unchanged.

Speaker #1: Let me add some color on second-quarter results. The underlying current accident year loss ratio of 59.1% included 3 points of excess large losses. The large losses primarily occurred in our UK&I segment, with several large property fires occurring across different segments of commercial and specialty lines.

Speaker #2: As always, any assessment of underwriting performance should combine the current accident year and prior year development. But our PYB track record is consistently strong, averaging 4.8%, 3.5%, and 4.1% over the last 5, 10, and 15 years.

Speaker #1: Distribution income million. Supported by robust organic and inorganic growth, somewhat tempered by our investments to support service levels ahead of the Ontario Auto Reform.

Speaker #1: Canadian commercial and personal property also experienced increased frequency of large losses, primarily driven by property fires. Importantly, we viewed these losses as discrete in nature; our underlying performance remained strong.

Speaker #2: Of note, the introduction of IFRS 17 in 2022 increased PYD by roughly 1 to 2 points, with an offset corresponding increase in the current accident year loss ratio.

Speaker #1: This represents a targeted near-term expense, with no change to our expectation for distribution income growth of at least 10% annually over time. The operating effective tax rate of 22.9% was in line with our guidance of 22-23%.

Speaker #1: Catastrophe losses in the quarter were $416 million. Driven mostly by storms related to water damage in Alberta, Ontario, and Quebec, as well as property-related fires in the UK&I.

Speaker #2: Given our strong long-term track record, the impact of IFRS 17 and the stability of our PYD, we believe recent PYD experience provides the most relevant reference point in assessing near-term PYD levels.

Speaker #1: On a year-to-date basis, cap losses remain consistent with our expectations, and our annual cap guidance remains unchanged at $1.2 billion. Quarterly cap activity can create variability, but we manage the business with this in mind, and our overall view of long-term climate trends remains unchanged.

Speaker #1: Non-operating gains, increased by $274 million, year over year, supported by favorable capital market movements as well as lower acquisition and integration costs as these expenses continue to decline.

Speaker #2: Moving to expenses, the consolidated expense ratio was 34.9% for the quarter. An increase of roughly half a point, mainly coming from a non-recurring premium tax item.

Speaker #2: We expect our 2026 consolidated expense ratio to be in line with our annual guidance of 33 to 34%. Operating net investment income increased to 405 million dollars in the quarter, driven by growth in our investment portfolio from strong capital generation.

Speaker #1: Our prudent current-year reserving practices, over time, mean prior-year development remains strong, and we posted favorable PYD of 6.1 points in the second quarter. As always, any assessment of underwriting performance should combine the current accident year and prior-year development.

Speaker #2: Our expectation for 1.7 billion dollars of investment income in 2026 is unchanged. Distribution income increased 4% to 172 million dollars, supported by robust organic and inorganic growth, somewhat tempered by our investments to support service levels ahead of the Ontario auto reform.

Speaker #1: But our PYB track record is consistently strong, averaging 4.8%, 3.5%, and 4.1% over the last 5, 10, and 15 years. Of note, the introduction of IFRS 17 in 2022 increased PYD by roughly 1 to 2 points, with an offsetting corresponding increase in the current accident year loss ratio.

Speaker #2: This represents a targeted near-term expense, with no change to our expectation for distribution income growth of at least 10% annually over time. The operating effective tax rate of 22.9% was in line with our guidance of 22 to 23%.

Speaker #1: Given our strong long-term track record, the impact of IFRS 17 and the stability of our PYD, we believe recent PYD experience provides the most relevant reference point in assessing near-term PYD levels.

Speaker #2: Non-operating gains increased by 274 million dollars year over year, supported by favorable capital market movements as well as lower acquisition and integration costs as these expenses continue to decline.

Speaker #1: Moving to expenses, the consolidated expense ratio. An increase of roughly half a point, mainly coming from a non-recurring premium tax item. We expect our 2026 consolidated expense ratio to be in line with our annual guidance of 33-34%.

Speaker #1: Our adjusted debt-to-capital ratio improved again to 16.2%. Overall, our balance sheet strength, low leverage, and strong capital generation provide significant financial flexibility to capitalize on attractive M&A opportunities and that landscape continues to improve.

Speaker #2: Moving to our balance sheet, we continue to operate with significant financial flexibility, with 3.8 billion dollars of total capital margin well in excess of what is required to manage volatility.

Speaker #2: Our adjusted debt-to-capital ratio improved again to 16.2%. Overall, our balance sheet strength, low leverage, and strong capital generation provide significant financial flexibility to capitalize on attractive M&A opportunities and that landscape continues to improve.

Speaker #1: Share buybacks also remain an important tool when our shares are undervalued, and we completed over $180 million in share buybacks in the second quarter, bringing the year-to-date total to approximately $350 million.

Speaker #2: Share buybacks also remain an important tool when our shares are undervalued, and we completed over 180 million dollars in share buybacks in the second quarter, bringing the year-to-date total to approximately 350 million dollars.

Speaker #1: We continue to view our shares as undervalued. We calibrate the pace of buybacks based on excess capital levels, the outlook for inorganic growth opportunities, and our view of the size of the discount-to-fair value.

Speaker #1: With our strong track record of delivering significant value, M&A remains our preferred choice for capital deployment. We are well positioned to continue to deliver on our financial objectives.

Speaker #2: We continue to view our shares as undervalued. We calibrate the pace of buybacks based on excess capital levels, the outlook for inorganic growth opportunities, and our view of the size of the discount to fair value.

Speaker #1: Over the last decade, we've exceeded our 500 basis point ROE outperformance target by delivering an average of 670 basis points of annual outperformance. We've also surpassed our 10% NOIC growth objective by delivering compounded annual growth of 12% over the same period.

Speaker #2: With our strong track record of delivering significant value, M&A remains our preferred choice for capital deployment. We are well positioned to continue to deliver on our financial objectives.

Speaker #2: Over the last decade, we've exceeded our 500 basis point ROE outperformance target by delivering an average of 670 basis points of annual outperformance. We've also surpassed our 10% noise growth objective by delivering compounded annual growth of 12% over the same period.

Speaker #1: Moving to our balance sheet, we continue to operate with significant financial flexibility, well in excess of what is required to manage volatility.

Speaker #1: Our discipline and focus has shifted operating ROE into an upper-team zone while we maintain one of the lowest levels of ROE volatility amongst our global peers.

Speaker #1: These results reflect the durability of our competitive advantages and the strength of our platform. We're positioned to continue creating significant value over time. With that, I'll turn it back to Jeff.

Speaker #2: Our discipline and focus has shifted operating ROE into an opportune zone, while we maintain one of the lowest levels of ROE volatility amongst our global peers.

Speaker #2: These results reflect the durability of our competitive advantages and the strength of our platform. We're positioned to continue creating significant value over time. With that, I'll turn it back to Jeff.

Speaker #2: Thank you, Ken. In order to give everyone a chance to participate in the Q&A, we would ask that you limit yourself to 2 questions per.

Speaker #1: Thank you, Ken. In order to give everyone a chance to participate in the Q&A, we would ask that you limit yourself to two questions per person.

Speaker #1: You can certainly re-queue for follow-ups, and we'll do our best to accommodate if there's time at the end. So, Sylvie, we're ready to take some questions now.

Speaker #3: Thank you, sir. Ladies and gentlemen, if you would like to ask a question, please press star followed by 1 on your touchdown phone. You will then hear a prompt acknowledging your request.

Speaker #3: And if you would like to withdraw from the question queue, simply press star followed by 2. And if you're using a speakerphone, you will need to lift the handset first before pressing any keys.

Speaker #3: Please go ahead and press star 1 now. If you have any questions. First, we will hear from John Aiken at Jefferies. Please go ahead, John.

Speaker #4: Good morning. Charles, you describe it as an attractive M&A environment, and Ken's saying your preferred choice of capital deployment is M&A. I guess two-part question for you.

Speaker #4: What is making this so attractive an environment? And secondarily, what's holding you back from pulling the trigger on M&A outside of distribution?

Speaker #5: Thanks, John. Yes, I think it's a favorable M&A environment. There are in my mind three vectors that you ought to pay attention to when you qualify the M&A environment.

Speaker #5: From our perspective, the first vector is strategic fit. So in our case, very keen on North America and global specialty lines. Second vector is the economics.

Speaker #1: And we'll do our best to accommodate. If there's time at the end. So, Sylvie, we're ready to take some questions now.

Speaker #5: Does the target on its own generate an internal rate of return in excess of 15%? First and foremost. And second, does it increase your earnings power per share once integrated?

Speaker #2: Thank you, sir. Ladies and gentlemen, if you would like to ask a question, please press star, followed by 1 on your touchdown phone. You will then hear a prompt acknowledging your request.

Speaker #2: And if you would like to withdraw from the question queue, simply press star, followed by 2. And if you're using a speakerphone, you will need to lift the handset first before pressing any keys.

Speaker #5: And third, actionability. And I would say sitting here today, John, I think there are more options that tick all those boxes today than a year ago.

Speaker #2: Please go ahead and press star 1 now. If you have any questions. First, we will hear from John Aiken at Jefferies. Please go ahead, John.

Speaker #3: Good morning. Charles, you describe it as an attractive M&A environment, and Ken, you said your preferred choice at a couple of points is M&A. I guess a two-part question for you.

Speaker #5: And that's why I think it is a favorable M&A environment. And one point I would add is you need operational readiness when you tackle these things, because it's in the integration that the value gets created.

Speaker #3: What is making this such an attractive environment? And secondarily, what's holding you back from pulling the trigger on M&A outside of distribution?

Speaker #5: And I would say from a GSL in North American point of view, the operational readiness is definitely there. Lastly, I think the balance sheet is very supportive of strong economics, but acquisitions need to stand on their own.

Speaker #1: Thanks, John. Yes, I think it's a favorable M&A environment. There are, in my mind, three vectors that you ought to pay attention to when you qualify the M&A environment.

Speaker #5: So what's holding us back? First, you want to see options that hit those three vectors. And then it's discipline, prudence, and making sure you pace yourself.

Speaker #1: From our perspective, the first vector is strategic fit. So, in our case, we're very keen on North America and global specialty lines. The second vector is the economics.

Speaker #1: Does the target on its own generate an internal rate of return in excess of 15%—first and foremost? And second, does it increase your earnings power per share?

Speaker #5: But we like the environment in which we operate.

Speaker #4: You're through. Thanks, Charles. I'll re-queue.

Speaker #3: Question will be from Alex Scott at Barclays. Please go ahead, Alex.

Speaker #1: Once integrated. And third, actionability. And I would say sitting here today, John, I think there are more options that tick all those boxes today than a year ago.

Speaker #6: Hey, thanks for taking the question. I was wondering if you could provide a little more insight into some of the remediation efforts in the UK commercial and that progress towards the 90 combined ratio.

Speaker #6: Can you help us think about, I don't know, how many underwriting cycles it might take to get there? What you'd expect from top-line growth as you're doing that?

Speaker #1: And that's why I think it is a favorable M&A environment. And one point I would add is you need operational readiness when you tackle these things, because it's in the integration that the value gets created.

Speaker #6: Any kind of bigger pruning that you got to do? If you can help us out on how to model some of that kind of stuff and how to think about it, it'd be great.

Speaker #5: Yeah. Thanks for your question. Alex, we're not banking on underwriting cycles to improve the performance. In the UK, we're aiming to get towards 90% in the midterms.

Speaker #1: And I would say, from a GSL and North American point of view, the operational readiness is definitely there. Lastly, I think the balance sheet is very supportive of strong economics, but acquisitions need to stand on their own.

Speaker #5: There are a number of levers that we are pulling. Pricing and risk selection. Would be at the top of the list. Deploying science and deploying tools and governance.

Speaker #1: So, what's holding us back? First, you want to see options that hit those three vectors. And then it's discipline, prudence, and making sure you pace yourself.

Speaker #5: We're making really good progress there. Second, we're re-platforming from a technology point of view that environment. That is a multi-year process. It impacts the speed of the transition, but we want to build a great P&C business, and that requires a modernization effort, which is reflected in the performance.

Speaker #1: But we like the environment in which we operate.

Speaker #3: You're through. Thanks, Charles. I'll re-queue.

Speaker #2: Question will be from Alex Scott at Barclays. Please go ahead, Alex.

Speaker #4: Hey, thanks for taking the question. I was wondering if you could provide a little more insight into some of the remediation efforts in the UK commercial, and the progress towards the 90 combined ratio.

Speaker #5: Third, we're focused on making sure that the service for brokers in the UK commercial line space is second to none. Making excellent progress there.

Speaker #4: Can you help us think about, I don't know, how many underwriting cycles it might take to get there? What you'd expect from top-line growth as you're doing that? Any kind of bigger pruning that you’ve got to do?

Speaker #4: If you can help us out on how to model some of that kind of stuff and how to think about it, it'd be great.

Speaker #5: We're seeing broker advocacy being up meaningfully fourth. We're bringing the various products that were on the shelves in the UK into what we think is a top market product now branded Impact Insurance.

Speaker #1: Yeah, thanks for your question, Alex. We're not banking on underwriting cycles to improve the performance. In the UK, we're aiming to get towards 90% in the mid-terms.

Speaker #5: And I would say lastly, it's about improving the expense base as well. My perspective is this is a midterm effort. I think two, 24 to 36 months.

Speaker #1: There are a number of levers that we are pulling. Pricing and risk selection. Would be at the top of the list. Deploying science and deploying tools and governance.

Speaker #5: But I'm pleased with the progress we're making. It's heavy lifting, Alex. I mean, I'll be very clear, it's heavy lifting. And when you do such transformation, there are bumps in the roads from time to time, but I'm very confident with the on.

Speaker #1: We're making really good progress there. Second, we're re-platforming from a technology point of view in that environment. That is a multi-year process, and it impacts the speed of the transition.

Speaker #6: Got it. That's helpful. And as a follow-up, if I could ask about the US market, I think there's probably a bit more competition there.

Speaker #1: But we want to build a great PMC business, and that requires a modernization effort, which is reflected in the performance. Third, we're focused on making sure that the service for brokers in the UK commercial line space is second to none.

Speaker #6: Particularly in some of the products you're in in the US. So how are you approaching that market? What are the ways you're trying to achieve profitable growth there?

Speaker #5: Thanks, Alex. I'll first say I love the US market. Our platform is really strong. And if you look at industry results today, we're outperforming from a combined ratio our specialty lines peers by close to 8 points.

Speaker #1: Making excellent progress there. We're seeing broker advocacy being up meaningfully fourth. We're bringing the various products that were on the shelves in the UK into what we think is a top market product now branded Intact Insurance.

Speaker #5: And we're outperforming from a top-line point of view by about a bit less than a point at this stage. And so our approach in first, our US business is specialty lines only.

Speaker #1: And I would say lastly, it's about improving the expense base as well. My perspective is this is a midterm effort. I think two, 24 to 36 months.

Speaker #5: It's 12 vertical. So the first order of business is you double down on the lines of business that are very profitable. And so if I'm to frame this for you Alex, about two-thirds of our portfolio operates in the '70s to low '80s combined ratio.

Speaker #1: But I'm pleased with the progress we're making. It's heavy lifting, Alex. I mean, I'll be very clear—it's heavy lifting. And when you do such transformation, there are bumps in the road from time to time, but I'm very confident with the trajectory we're on.

Speaker #4: Got it, that's helpful. And as a follow-up, if I could ask about the US market—I think there's probably a bit more competition there.

Speaker #5: And that's the book that we're growing north of 5%. A reminder of the portfolio operates in the mid-'90s, and that was largely flat this quarter.

Speaker #4: Particularly in some of the products you're in within the U.S. So, how are you approaching that market? What are the ways you're trying to achieve profitable growth there?

Speaker #1: Thanks, Alex. I'll first say, I love the U.S. market. Our platform is really strong. And if you look at industry results today, we're outperforming our specialty lines peers by close to 8 points on a combined ratio basis.

Speaker #5: So you don't need to be a rocket scientist here to see that. Because you have optionality across 12 verticals, the growth is coming from the low combined ratio verticals.

Speaker #5: Then it is about distribution management. It is about going deeper in the relationships that we have. It's about distributing our 12 verticals to the brokers where we have relationships.

Speaker #1: And we're outperforming from a top-line point of view by a bit less than a point at this stage. And so our approach in, first, our U.S. business is specialty lines only.

Speaker #5: And it is about expanding the number of brokers we operate with in the US. One thing we do on the distribution side is we're also buying MGAs.

Speaker #1: It's 12 vertical. So the first order of business is you double down on the lines of business that are very profitable. And so if I'm to frame this for you, Alex, about two-thirds of our portfolio operates in the 70s to low 80s combined ratio.

Speaker #5: We in extensions of segments in which we operate. And lastly, we're bringing global capabilities to our offer in the US market now following the RSA acquisition.

Speaker #1: And that's the book that we're growing north of 5%. A reminder of the portfolio operates in the mid-90s, and that was largely flat this quarter.

Speaker #5: As you know, we have not only strong cross-border capabilities with Canada, a major trading partner of the US, but also global capabilities with our global networks.

Speaker #5: And I would say these are the levers we are pulling. Now, when a vertical goes off the rail for some reason or another, we put the brakes and put remediation in place with 12 verticals.

Speaker #1: So you don't need to be a rocket scientist here to see that. Because you have optionality across 12 verticals, the growth is coming from the low combined ratio verticals.

Speaker #5: You can expect you always have one or two that needs more work. And in aggregate, that's our approach in the US. We really like what we see.

Speaker #1: Then it is about distribution management. It is about going deeper in the relationships that we have. It's about distributing our 12 verticals to the brokers where we have relationships.

Speaker #5: We like the outperformance. We like the optionality. And if I could deploy capital there, in the near term, we would have no hesitation to do so.

Speaker #1: And it is about expanding the number of brokers we operate with in the U.S. One thing we do on the distribution side is we're also buying MGAs.

Speaker #6: Very helpful. Thank you.

Speaker #4: Next question will be from Tom McKinnon at BMO Capital Markets. Please go ahead, Tom.

Speaker #1: We are expanding in the segments in which we operate. And lastly, we're bringing global capabilities to our offering in the US market now, following the RSA acquisition.

Speaker #7: Yeah. Thanks very much. Good morning. Speaking a little bit deeper in the UK and I, if you take the 112 and subtract 15 points from the hire and expected cats and large losses, you're at a 97.

Speaker #7: Last year, you were running this thing in the 93, 94, 95-ish range. And prior to the year prior to that, it was even a little bit better.

Speaker #1: As you know, we have not only strong cross-border capabilities with Canada, a major trading partner of the U.S., but also global capabilities with our global networks.

Speaker #7: Now, maybe you can talk about what's happening in this commercial lines marketplace in 2026. Is it a tougher rate cycle you're trying to navigate here?

Speaker #1: And I would say these are the levers we are pulling. Now, when a vertical goes off the rails for some reason or another, we put on the brakes and put remediation in place, with 12 verticals.

Speaker #7: I get some of the decommissioning efforts you speak to, but that's kind of a little bit more expense ratio stuff, perhaps you can delve a little bit more into what's happened with this line just over the last six months and what's and are those losses are those is that higher combined we're seeing there?

Speaker #1: You can expect that you always have one or two that need more work. And, in aggregate, that's our approach in the U.S. We really like what we see.

Speaker #1: We like the outperformance. We like the optionality. And if I could deploy capital there in the near term, we would have no hesitation to do so.

Speaker #7: Is that just the normal course? And maybe when would you be able to hit that 90% target?

Speaker #5: Yeah. Thanks, Tom. Good observation. That segment run rate 93, 94-ish as we've seen in the past couple of years. I'll let Ken share a bit of perspective on trajectory.

Speaker #4: Very helpful. Thank you.

Speaker #2: Next question will be from Tom McKinnon at BMO Capital Markets. Please go ahead, Tom.

Speaker #3: Yeah. Thanks very much. Good morning. Speaking a little bit deeper in the UK and I, if you take the 112 and subtract 15 points from the hire and expected cats and large losses, you're at a 97.

Speaker #5: Then Patrick and I will pick up the market observation question. So Ken.

Speaker #7: Yeah. Thanks. Tom, I guess maybe the first thing I wouldn't use one quarter to sort of anchor on the overall run rate performance. Beyond the cats and large losses, you'll have a bit of volatility in other things.

Speaker #3: Last year, you were running this thing in the 93, 94, 95-ish range. And prior to the year prior to that, it was even a little bit better.

Speaker #7: I think, for example, in the second quarter, in the first half of the year, indeed, the expense ratio is a little higher. But I would go back to the 24 and 25 combined ratio, which overall, for those two years, was about a 94.

Speaker #3: Now, maybe you can talk about what's happening in this commercial lines marketplace in 2026. Is it a tougher rate cycle that you're trying to navigate here?

Speaker #3: I get some of the decommissioning efforts you speak to, but that's kind of a little bit more expense ratio stuff. Perhaps you can delve a little bit more into what's happened with this line just over the last six months, and are those losses—is that higher combined we're seeing there?

Speaker #7: That's our view of the most relevant reference point to start from. And clearly, as Charles has laid out, the focus is to drive performance towards the 90% pricing sophistication, firstly, the expense improvements from modernizing technology, and then over time, top-line benefits from the improved broker service proposition and the specialty product expansion, which will also improve the expense base and the expense ratio.

Speaker #3: Is that just the normal course? And maybe, when would you be able to hit that 90% target? Thanks.

Speaker #1: Yeah. Thanks, Tom. Good observation. That segment run rate 93, 94-ish as we've seen in the past couple of years. I'll let Ken share a bit of perspective on trajectory.

Speaker #7: And those are really the elements that over time will drive towards 90%. The team in the UK are very focused on what they can control and are executing on it.

Speaker #1: Then Patrick and I will pick up the market observation question. So Ken, yeah.

Speaker #5: Thanks. Tom, I guess maybe the first thing I wouldn't use one quarter to sort of anchor on the overall runway performance. Beyond the cats and large losses, you'll have a bit of volatility in other things.

Speaker #7: Market conditions can slow down or speed up that timeline, but I wouldn't anchor on a specific quarterly roadmap here but we certainly should see progress and visible progress year over year.

Speaker #5: I think, for example, in the second quarter, in the first half of the year, indeed, the expense ratio is a little higher. But I would go back to the 2024 and 2025 combined ratio, which, overall, for those two years, was about 94.

Speaker #5: Patrick, do you want to provide a bit of color on the marketplace to Tom's question?

Speaker #2: Yeah. I don't think

Speaker #7: we're we're seeing from a rates perspective a ton of difference compared to the observations we communicated in the past couple of quarters. We've seen more competition in the larger size of accounts.

Speaker #5: That's our view of the most relevant reference point to start from. And clearly, as Charles has laid out, the focus is to drive performance towards the 90% pricing sophistication, firstly, the expense improvements from modernizing technology, and then over time, top-line benefits from the improved broker service proposition and the specialty product expansion, which will also improve the expense base and the expense ratio.

Speaker #7: From a top-line perspective, we're having good momentum from a specialty lines perspective. And it's really an offset in the regular commercial. That's really driven by the significant transformation we're doing in the field with the systems and some of the other points that Charles mentioned earlier.

Speaker #5: And those are really the elements that over time will drive towards 90%. The team in the UK are very focused on what they can control and are executing on it.

Speaker #7: Overall, by the way, on top line, this the remaining remediation we're applying on the books plus the drag from the consolidation of the NIG and RSA offer is a drag of about three points on the overall UK and IQ2 top line.

Speaker #5: Market conditions can slow down or speed up that timeline, but I wouldn't anchor on a specific quarterly roadmap here. However, we certainly should see progress—and visible progress—year over year.

Speaker #7: And we expect that we'll see sequential improvements going forward. There's mix in that as well, given pricing sophistication and the fact that we are prudent in the large accounts.

Speaker #1: Patrick, do you want to provide a bit of color on the marketplace to Tom’s question?

Speaker #7: I wouldn't see the 97 once you remove 15 points of excess cats and large losses as a new starting point or deterioration. From prior years, but it can be bumpy from one quarter.

Speaker #4: Yeah. I don't think

Speaker #3: we're seeing from a rates perspective a ton of difference compared to the observations we communicated in the past couple of quarters. We've seen more competition in the larger size of accounts.

Speaker #5: Yeah. I think the specialty lines growing really well is the UK CL franchise that is shrinking a bit and the connection between the market and the transformation, I view it as follows, Tom.

Speaker #3: From a top-line perspective, we're having good momentum from a specialty lines perspective. And it's really an offset in the regular commercial. That's really driven by the significant transformation we're doing in the field.

Speaker #5: When you integrate products, that creates dislocation. Okay? From a price point of view, second, we're deploying science on top of that change. So the amount of dislocation that is taking place on the portfolio is meaningful.

Speaker #3: With the systems and some of the other points that Charles mentioned earlier, overall, by the way, on top line, this the remaining remediation we're applying on the books plus the drag from the consolidation of the NIG and RSA offer is a drag of about three points on the overall UK and I Q2 top line.

Speaker #5: And in a competitive environment, the more competitive environment, the bigger the hit when you've got that dislocation. And I think that's the three points that Patrick is talking about.

Speaker #3: And we expect that we'll see sequential improvements going forward. There's mix in that as well, given pricing sophistication and the fact that we are prudent in the large accounts.

Speaker #5: But we're focused on the mid to long term. And we think bringing science and integrating products is more important than status quo just to avoid dislocation.

Speaker #3: I wouldn't see the 97, once you remove 15 points of excess CATs and large losses, as a new starting point or deterioration from prior years. But it can be bumpy from one quarter.

Speaker #5: And I think bumping the road here and there trajectory, I'm comfortable with.

Speaker #7: Okay. And then one quick one on the you're down year over year, in terms of top line in the UK, constant currency. You had some momentum maybe in the first quarter, but now you're talking about the rebranding initiative is contributing to that slowdown.

Speaker #1: Yeah, I think the specialty lines are growing really well. It's the UK CL franchise that is shrinking a bit. And the connection between the market and the transformation—I view it as follows, Tom.

Speaker #7: I thought the rebranding initiative is actually going to be helpful in terms of a better service proposition to the brokers. I mean, was this expected?

Speaker #1: When you integrate products, that creates dislocation, okay? From a price point of view. Second, we're deploying science on top of that change, so the amount of dislocation that is taking place on the portfolio is meaningful.

Speaker #7: And how long would this slowdown in top line as a result of the rebranding initiative play out?

Speaker #5: Yeah. I don't think it's the rebranding initiative. It's the migration towards one product. That creates a bit of dislocation. To which you add the pricing sophistication initiatives that we're deploying.

Speaker #1: And in a competitive environment—the more competitive the environment, the bigger the hit when you've got that dislocation. And I think that's the three points that Patrick is talking about.

Speaker #5: In the field. In the marketplace, that is competitive. I think in the upper mid space in particular. And so timeline, I think the heavy lifting in my mind has probably a 12 sort of month horizon in terms of the amount of dislocation.

Speaker #1: But we're focused on the mid- to long-term, and we think bringing science and integrating products is more important than maintaining the status quo just to avoid dislocation.

Speaker #1: And I think a bump in the road here and there in the trajectory, I'm comfortable with.

Speaker #5: We will likely see and so near term, in my mind. And the trajectory thing 24, 36 months. So it's funny.

Speaker #3: Okay, and then one quick one. You're down year-over-year in terms of top line in the UK, on a constant currency basis. You had some momentum, maybe in the first quarter, but now you're talking about the rebranding initiative contributing to that slowdown.

Speaker #7: I'd maybe add, Tom, if you look at the growth in 2020 five, you were in the minus three, minus four, minus five zone. We're not we certainly made a move in the early part of 26 into more of a flat growth position.

Speaker #3: I thought the rebranding initiative is actually going to be helpful in terms of a better service proposition to the brokers. I mean, was this expected?

Speaker #3: And how long would this slowdown in top line as a result of the rebranding initiative play out?

Speaker #7: So progress there and looking ahead, you should see improvement over time.

Speaker #1: Yeah, I don't think it's the rebranding initiative. It's the migration towards one product—that creates a bit of dislocation. To that, you add the pricing sophistication initiatives that we're deploying.

Speaker #4: Okay. Thanks.

Speaker #1: Next question will be from James Loin and National Bank Capital Markets. Please go ahead, James.

Speaker #1: In the field, in a marketplace that is competitive. I think in the upper mid space in particular. And so timeline, I think the heavy lifting in my mind has probably a 12 sort of month horizon in terms of the amount of dislocation.

Speaker #5: Yeah. Thanks just first quick

Speaker #7: follow-up on the M&A and the balance sheet today. I think you've previously talked about being able to deploy about 6 billion or complete a 6 billion dollar acquisition without other sources of equity capital.

Speaker #7: Is that can you just refresh us on where that sits today?

Speaker #5: Yeah. Thanks, Jim. I'll ask Ken to share his perspective on the balance sheet.

Speaker #1: We will likely see. And so, near term, in my mind—and the trajectory thing—24, 36 months, towards 20.

Speaker #7: Yeah. So as I said earlier, financial position very strong and continues to improve and provides a lot of flexibility. The capital margin, 3.8 billion.

Speaker #5: I'd maybe add, Tom, if you look at the growth in 2025, you were in the minus 3, minus 4, minus 5 zone. We certainly made a move in the early part of '26 into more of a flat growth position.

Speaker #7: Debt to capital improved at 16.2. And capital generation outlook moving forward is very strong. So ample capacity on the M&A front. And to your point, today we could deploy 6 billion without issuing new shares.

Speaker #5: So, progress there, and looking ahead, you should see improvement over time.

Speaker #7: On M&A. So the outlook very good and continues to improve. Obviously, with the track record, IRR north of 20% on the 10 billion plus that we've deployed over the last decade.

Speaker #3: Okay. Thanks.

Speaker #6: Next question will be from James Loyd at National Bank Capital Markets. Please go ahead, James.

Speaker #1: Yeah. Thanks just

Speaker #7: That's the priority.

Speaker #4: A first quick follow-up on the M&A and the balance sheet today: I think you've previously talked about being able to deploy about $6 billion or complete a $6 billion acquisition without other sources of equity capital.

Speaker #5: Great. And then second one,

Speaker #3: just on the personal property market. Growth is 7%. Nice to see it rebound from the sort of one-time flip last quarter. But underperforming, let's say, the industry growth expectation of around 10%.

Speaker #4: Could you just refresh us on where that sits today?

Speaker #1: Yeah. Thanks, Jim. I'll ask Ken to share his perspective on the balance sheet.

Speaker #3: So is there still some lingering impacts from the previous quarter? Or can you dig into that run rate for us a little bit more?

Speaker #3: Yeah. So, as I said earlier, our financial position is very strong and continues to improve, providing a lot of flexibility. The capital margin is $3.8 billion, and debt to capital improved to 16.2%.

Speaker #5: Ashraf, why don't you take this one?

Speaker #2: Sure. Thanks, Charles. So James, maybe back just to the Q1 that you referred to. You're right. Looking back at Q1 personal property growth was negatively impacted by a one-time impact from our travel business.

Speaker #3: And capital generation outlook moving forward is very strong, so ample capacity on the M&A front. And to your point, today we could deploy $6 billion without issuing new shares.

Speaker #2: And when we adjust for that one-time impact from travel, we were in the upper single-digit range in Q1. And that was the range that we were expecting to be at for the remainder of 2026.

Speaker #2: Now when you look at Q2, growth was strong at plus 7% with one point of unit. Retention remained high and stable. So with our new business competitiveness.

Speaker #3: On M&A—so the outlook is very good and continues to improve. Obviously, with the track record—IRR north of 20% on the $10 billion-plus that we've deployed over the last decade—that's the priority.

Speaker #2: And from a pricing perspective, we are maintaining our strong rate. And when you zoom out from an industry perspective, industry needs to price for inflation severity in addition to the long-term climate trend.

Speaker #4: Okay, great. And then, second one—just on the personal property market—growth is 7%. Nice to see it rebound from the sort of one-time dip last quarter.

Speaker #2: And June, we just saw multiple CAT events that hit both the West and East of the country. And these are a reminder of the volatility of the product and we expect will continue to support the current hard market conditions.

Speaker #4: But underperforming, let's say, the industry growth expectation of around 10%. So, is there still some lingering impact from the previous quarter, or can you dig into that run rate for us a little bit more?

Speaker #2: So all things considered, we remain comfortable with our growth profile in the upper single-digit range. And maintain a positive outlook from the industry perspective.

Speaker #5: Yeah. I don't think we'll be far from the industry if you look at it quarter by quarter. Obviously, Q1 at this one-time travel thing.

Speaker #1: Ashraf, why don't you take this one?

Speaker #2: Sure. Thanks, Charles. So, James, maybe back just to the Q1 that you referred to. You're right—looking back at Q1, personal property growth was negatively impacted by a one-time impact from our travel business.

Speaker #5: But we're in the zone and big bottom line outperformance as well. Want to grow this segment performing really well.

Speaker #2: And when we adjust for that one-time impact from travel, we were in the upper single-digit range in Q1, and that was the range that we were expecting to be at for the remainder of 2026.

Speaker #1: Thank you. Next question will be from Mario Mendonza at TD Securities. Please go ahead, Mario.

Speaker #4: Good morning. Charles, if we could go to the UK business one more time. I can see from a financial perspective that this year at least, and presumably you'd expect a lot more from this in the future.

Speaker #2: Now, when you look at Q2, growth was strong at plus 7% with one point of unit. Retention remained high and stable, so with our new business competitiveness.

Speaker #4: It's not making a big financial contribution to the company. Sub $100 million in earnings this year likely relative to maybe $4 billion consolidated earnings.

Speaker #2: And from a pricing perspective, we are maintaining our strong rate action. And when you zoom out from an industry perspective, industry needs to price for inflation severity in addition to the long-term climate trend.

Speaker #4: So help me understand how the UK fits in to the total company. Is having this UK business important as you pursue global specialty? Is it important to have a UK business or is this just a business that stands on its own?

Speaker #2: And in June, we just saw multiple cat events that hit both the West and East of the country. These are a reminder of the volatility of the product, and we expect they will continue to support the current hard market conditions.

Speaker #4: A standalone, it has the merits of belonging to inside intact? Help me understand this business.

Speaker #2: So, all things considered, we remain comfortable with our growth profile in the upper single-digit range and maintain a positive outlook from the industry perspective.

Speaker #5: Mario, you're talking about the UK domestic commercial lines business, correct?

Speaker #1: Yeah. I don't think we'll be far from the industry. If you look at it quarter by quarter, obviously, Q1 had this one-time travel thing.

Speaker #4: Yeah. Does it play a bigger role for this company or is it just a standalone? It lives on its own merits.

Speaker #1: But we're in the zone and big bottom line outperformance as well. Want to grow this segment performing really well.

Speaker #5: So I think first of all, the UK commercial lines market is a big market. It's bigger than Canada. It's an attractive market. And the competitive set and the type of business, the domestic UK business is doing is very consistent with what we do in Canada.

Speaker #4: Energy.

Speaker #6: Next question will be from Mario Mendonza at TD Securities. Please go ahead, Mario.

Speaker #7: Good morning. Charles, if we could go to the UK business one more time. I can see from a financial perspective that, this year at least—and presumably you'd expect a lot more from this in the future.

Speaker #5: And our skill set in Canada. So we view this as a business opportunity where we're capable to win because we know that space. So that's the first point.

Speaker #7: It's not making a big financial contribution to the company—sub-$100 million in earnings this year, likely, relative to maybe $4 billion in consolidated earnings.

Speaker #7: So help me understand how the UK fits into the total company. Is having this UK business important as you pursue global specialty? Is it important to have a UK business?

Speaker #5: Is it existential to intact pursue that business opportunity? No. But it's a business opportunity where we think we can win. And therefore, that's what we're working on.

Speaker #7: Or is this just a business that stands on its own—a standalone? It has the merits of belonging inside in tech. Help me understand this business.

Speaker #5: Second, that footprint in the UK, that regional business in the UK opens up hundreds of distribution relationships. That otherwise would not be available to distribute some of our specialty lines product.

Speaker #1: Mario, you're talking about the UK domestic commercial lines business, correct?

Speaker #7: Yeah. Does it play a bigger role for this company, or is it just a standalone? It lives on its own merits.

Speaker #5: Embedded in the UK commercial lines domestic business is a number of local specialties like regional marine, as well as regional what we call profin or call that management liability.

Speaker #1: So, I think first of all, the UK commercial lines market is a big market. It's bigger than Canada. It's an attractive market, and the competitive set and the type of business the domestic UK business is doing is very consistent with what we do in Canada.

Speaker #5: So I think, Mario, this is a business opportunity where we think we've got the skills to outperform. It is an extension of our ability to distribute our specialty lines product it makes sense to be there.

Speaker #1: And our skill set in Canada. So we view this as a business opportunity where we're capable to win because we know that space. So that's the first point.

Speaker #5: Lastly, I think if people had to pick a business profile to operate P&C Insurance in the UK and you ask them to design from a white page what they'd like their business to look like, they would design the business we're building now.

Speaker #1: Is it existential to impact, to pursue that business opportunity? No. But it's a business opportunity where we think we can win, and therefore, that's what we're working on.

Speaker #5: And therefore, we have capital, we have competencies, this is a business opportunity. We're investing and trying to make the most out of it. And I think we will outperform.

Speaker #1: Second, that footprint in the UK—that regional business in the UK—opens up hundreds of distribution relationships that otherwise would not be available to distribute some of our specialty lines products.

Speaker #5: It's not existential. No. That's clear. But it's a very good business opportunity. And it complements nicely our specialty lines operation.

Speaker #4: I think that's clear. Thank you.

Speaker #5: Thank you, Mario.

Speaker #1: Embedded in the UK commercial lines domestic business is a number of local specialties like regional marine, as well as regional what we call profin or call that management liability.

Speaker #1: Next question will be from Paul Holden at CIBC. Please go ahead, Paul.

Speaker #6: Thank you. Good morning. First question is going back to M&A and Charles. You're very clear on where you stand and why the opportunity set.

Speaker #1: So I think, Mario, this is a business opportunity where we think we've got the skills to outperform. It is an extension of our ability to distribute our specialty lines product it makes sense to be there.

Speaker #6: You view as rich. Well, like one question I think about is, and you'll recognize it, more broadly across the industry, you are seeing soft pricing conditions.

Speaker #6: Obviously, more so in certain lines of products versus others. But how does that impact your appetite for M&A and specifically, I guess I'm thinking about timing.

Speaker #1: Lastly, I think if people had to pick a business profile to operate P&C insurance in the UK, and you asked them to design from a white page what they'd like their business to look like, they would design the business we're building now.

Speaker #6: Why is now the right time if there is soft pricing conditions to do an acquisition?

Speaker #5: I think it's a great question, Paul. We're cycle agnostic when we look at acquisitions. And why are we cycle agnostic when we look at acquisitions?

Speaker #1: And therefore, we add capital, we add competencies—this is a business opportunity. We're investing and trying to make the most out of it, and I think we will outperform.

Speaker #5: Because it all depends on the price. First and foremost. And second, if you outperform, which we do in the segments where we want to deploy capital, bear in mind Canada 8 points of combined ratio outperformance US 8 points of combined ratio outperformance you can absorb pressure with that sort of outperformance because it takes a short period of time when you already have a footprint, which we do, to generate that outperformance across the larger platform.

Speaker #1: It's not existential. No. That's clear. But it's a very good business opportunity. And it complements nicely our specialty lines operation.

Speaker #7: I think that's clear. Thank you.

Speaker #1: Thank you, Mario.

Speaker #6: Next question will be from Paul Holden at CIBC. Please go ahead, Paul.

Speaker #7: Thank you. Good morning. First question is going back to M&A and Charles. You're very clear on where you stand and why, and the opportunity set.

Speaker #7: You view it as rich. Well, one question I think about is—and you’ll recognize it—more broadly across the industry, you are seeing soft pricing conditions.

Speaker #5: And so what are the practical realities of being in a competitive marketplace when you look at M&A? You might take a slightly different stance on top line in the near term as you integrate.

Speaker #7: Obviously, more so in certain lines of products versus others. But how does that impact your appetite for M&A and, specifically, I guess I'm thinking about timing.

Speaker #7: Why is now the right time, if there are soft pricing conditions, to do an acquisition?

Speaker #5: Just as we've shown in the case of the UK. Dislocation can be a bit higher. You bake that in your DCF. Upfront. You model a couple of years' worth of disruption that might be greater in a softer market than in a hard market.

Speaker #1: I think it's a great question, Paul. We're cycle-agnostic when we look at acquisitions. And why are we cycle-agnostic when we look at acquisitions?

Speaker #5: And then you sit back and you look at the IRR first. Then you look at the accretion earnings power accretion. You look at what it does to your book value.

Speaker #1: Because it all depends on the price, first and foremost. And second, if you outperform—which we do in the segments where we want to deploy capital—bear in mind, Canada: eight points of combined ratio outperformance; U.S.: eight points of combined ratio outperformance. You can absorb pressure with that sort of outperformance, because it takes a short period of time, when you already have a footprint (which we do), to generate that outperformance across the larger platform.

Speaker #5: You look at what it does to ROE. And if things hang together, you can pull the trigger. And so we've done very good transactions in hard markets.

Speaker #5: We've done very good transactions in softer markets. And in aggregate, you really need the outperformance to make a difference. And that's why we're really keen on the North American sort of landscape to deploy capital.

Speaker #1: And so, what are the practical realities of being in a competitive marketplace when you look at M&A? You might take a slightly different stance on top line in the near term as you integrate.

Speaker #5: But for me, I mean, it's a little bit like you. We look at DCF, we bake in the near to mid-term conditions in which we operate.

Speaker #5: And if the numbers work, we pull the trigger. And I would say in my framework as described earlier of strategic fit economic threshold and availability, in this environment, we think there are more options that tick the three boxes than a year ago.

Speaker #1: Just as we've shown in the case of the UK, dislocation can be a bit higher. You bake that into your DCF up front. You model a couple of years' worth of disruption that might be greater in a softer market than in a hard market.

Speaker #6: Understood. Okay. Okay. That's a good answer. Second question is going back to the UK and I don't want to beat this one to death, but you're talking about reaching your profit objective of low 90s.

Speaker #1: And then you sit back and you look at the IRR first. Then you look at the accretion, earnings power accretion. You look at what it does to your book value.

Speaker #1: You look at what it does to ROE, and if things hang together, you can pull the trigger. And so we've done very good transactions in hard markets.

Speaker #6: 24 to 36 months from now. Now, if I go back in time and I think look at the original timeline it would have been earlier than that.

Speaker #6: So maybe you can just help us understand sort of better why it's taking a little bit longer to get to that low 90s objective or certain things that have come up that have been unexpected?

Speaker #1: We've done very good transactions in softer markets. And in aggregate, you really need the outperformance to make a difference. That's why we're really keen on the North American landscape to deploy capital.

Speaker #6: Are there certain things that are just taking longer to execute on than originally planned? Is there any color you can provide there would be helpful.

Speaker #1: But for me, I mean, it's a little bit like you. We look at DCF, we bake in the near to mid-term conditions in which we operate.

Speaker #6: Thanks.

Speaker #5: Yeah. I think first of all, you have to look at the fact that we have bought NIG to double down on the space we like and then we've exited purse lines.

Speaker #1: And if the numbers work, we pull the trigger. And I would say, in my framework as described earlier—of strategic fit, economic threshold, and availability—in this environment, we think there are more options that tick the three boxes than a year ago.

Speaker #5: And we're conducting a disposal and an integration at the same time. While we're investing in modern system, and in pricing, and risk selection, environment.

Speaker #7: Understood. Okay, okay, that's a good answer. Second question is, going back to the UK—and I don't want to beat this one to death.

Speaker #5: It's heavy lifting. It's taking time. Is it taking a bit longer than what we thought? Maybe. But directionally speaking, I don't view the UK as materially different than I did 12, 24 months ago.

Speaker #7: But you're talking about reaching your profit objective of low 90s, 24 to 36 months from now. Now, if I go back in time and look at the regional timeline, it would have been earlier than that.

Speaker #5: Lots has happened in the past 24 months. As I said, broker advocacy is up. Experience is up. Engagement is up. I like the trajectory.

Speaker #7: So maybe you can just help us understand a bit better why it's taking a little longer to get to that low 90s objective.

Speaker #5: It's heavy lifting. I mean, that's for sure. It's a material transformation. Ken, maybe you want to add a bit of color.

Speaker #3: One other point and just going back to where we're starting from and 2024, 25 average combined ratio at 94. With the capital we have deployed in the UK, that 94 combined is a mid-teens operating ROE on the capital that's at work in the UK.

Speaker #7: Are there certain things that have come up that have been unexpected? Are there certain things that are just taking longer to execute on than originally planned?

Speaker #7: Any color you can provide there would be helpful. Thanks.

Speaker #1: Yeah. I think, first of all, you have to look at the fact that we have bought NIG to double down on the space we like.

Speaker #3: So the starting point, obviously, we're aiming to get to 90, make no mistake. But with a run rate performance in the mid-90s, the operating ROE is not a significant drag on our overall performance.

Speaker #1: And then we've exited personal lines, and we're conducting a disposal and an integration at the same time, while we're investing in modern systems and in a pricing and risk selection environment.

Speaker #1: It's heavy lifting. It's taking time. Is it taking a bit longer than what we thought? Maybe. But, directionally speaking, I don't view the UK as materially different than I did 12 or 24 months ago.

Speaker #6: Okay. That's it for me. Thanks for your time.

Speaker #1: Ladies and gentlemen, a reminder to please press star one should you have any questions. Thank you. Next will be Bart Desarsky at RBC Capital Markets.

Speaker #1: Please go ahead, Bart.

Speaker #1: Lots has happened in the past 24 months. As I said, broker advocacy is up. Experience is up. Engagement is up. I like the trajectory.

Speaker #2: Great. Thanks for taking the question. Good morning, everyone. Just wanted to stick out as well with the UK and I and maybe to clarify so Charles, you talked about the trajectory being a two to three year one.

Speaker #1: It's heavy lifting—I mean, that's for sure. It's a material transformation. Ken, maybe you want to add a bit of color?

Speaker #2: So do we have that right to understand 2028 is when we should see that combined ratio hit 90%? And if so, does that impact when the business may be operationally ready for a bolt-on acquisition in that geography?

Speaker #3: One other point. And just going back to where we're starting from: in 2024-25, the average combined ratio is at 94%. With the capital we have deployed in the UK, that 94 combined is a mid-teens operating ROE on the capital that's at work in the UK.

Speaker #5: I think the you should see a migration towards 90% over that period. That's the first point. As Ken said, this business is running then in the ROE in the upper teens, and it has oxygen from an operational point of view.

Speaker #3: So, the starting point—obviously, we're aiming to get to 90, make no mistake. But with a run-rate performance in the mid-90s, the operating ROE is not a significant drag on our overall performance.

Speaker #5: We would deploy capital even if it's not at 90. But my the most important thing for me right now is I don't doubt the trajectory.

Speaker #7: Okay, that's it for me. Thanks for your time.

Speaker #8: Ladies and gentlemen, a reminder to please press star 1 should you have any questions. Thank you. Next will be Bart Desarsky at RBC Capital Markets.

Speaker #5: I doubt the team's ability to absorb another acquisition in the near term. And that's the element that would lead me to say, ideally, you don't add inorganic opportunities in the near term in that space.

Speaker #8: Please go ahead, Bart.

Speaker #9: Great. Thanks for taking the question. Good morning, everyone. Just wanted to stick out as well with the UK and I and maybe to clarify so Charles you talked about the trajectory being a 2 to 3 year one.

Speaker #9: So, do we have that right to understand 2028 is when we should see that combined ratio hit 90%? And if so, does that impact when the business may be operationally ready for a bolt-on acquisition in that geography?

Speaker #5: But we would deploy capital if operationally the team is ready to handle it. And that could be before 24 to 36 months. Why? Because this would be ROE accretive likely.

Speaker #1: I think that you should see a migration towards 90% over that period. That's the first point. As Ken said, if this business is running then the ROE is in the upper teens, and it has oxygen from an operational point of view, we would deploy capital even if it's not at 90.

Speaker #2: Got it. That's helpful. Thanks, Charles. And then maybe one on distribution income. So 4% growth. I think year to date it's tracking below the 10%.

Speaker #2: Ken, you talked about investments in the business. Could you maybe quantify how much that impacted the growth and maybe more importantly, when we should expect a resumption to that 10% long-term growth target?

Speaker #2: Thanks.

Speaker #3: Yeah. So Bart, the Q2 distribution income growth was about 4%. It was tempered by investments that broker link made to improve service levels, somewhat related to the Ontario reforms.

Speaker #1: But the most important thing for me right now is I don't doubt the trajectory. I doubt the team's ability to absorb another acquisition in the near term.

Speaker #3: But we certainly expect the growth to return to at least the 10% level in the coming quarters. Why do we say that? Well, firstly, that impact from the volume on the Ontario reform was not as high as we anticipated.

Speaker #1: And that's the element that would lead me to say, ideally, you don't add inorganic opportunities in the near term in that space. But we would deploy capital if operationally the team is ready to handle it.

Speaker #3: So expenses should normalize in the second half. Of this year, the growth pipeline continues to be strong at broker link. So there's opportunities to grow both organically and inorganically.

Speaker #1: And that could be before 24 to 36 months. Why? Because this would likely be ROE-accretive.

Speaker #3: And also in the context of broader distribution income, MGAs remain an attractive avenue for growth. Recall since 2020, we've put over 600 million to work in MGAs.

Speaker #9: Got it, that's helpful. Thanks, Charles. And then maybe one on distribution income. So, 4% growth—I think year to date it's tracking below the 10%.

Speaker #3: They collectively are writing a billion and a half of premium today. And we're continuing to deploy capital in that space. And maybe lastly, onside, which is countercyclical restoration business, that will benefit in the coming quarters from that elevated level of cap losses.

Speaker #9: Can you talk about investments in the business? Could you maybe quantify how much that impacted the growth? And, maybe more importantly, when should we expect a resumption to that 10% long-term growth target?

Speaker #9: Thanks.

Speaker #1: Yeah, so Bart, the Q2 distribution income growth was about 4%. It was tempered by investments that BrokerLink made to improve service levels, somewhat related to the Ontario reforms.

Speaker #3: That we've seen in the second quarter. So over the past 5 and 10 years, we've compounded distribution income in the mid-teens so we very much expect to get back to at least a 10% rate in the coming quarters.

Speaker #1: But we certainly expect the growth to return to at least the 10% level in the coming quarters. Why do we say that? Well, firstly, that impact from the volume on the Ontario reform was not as high as we anticipated.

Speaker #2: Very helpful. Thanks for taking my questions.

Speaker #1: Out 2. Ladies and gentlemen, this is all the time we have today. I would now like to turn the call back over to Jeff Kwon.

Speaker #1: So, expenses should normalize in the second half. This year, the growth pipeline continues to be strong at BrokerLink, so there are opportunities to grow both organically and inorganically.

Speaker #4: Thank you, everyone, for joining us today. Following the call, a telephone replay will be available for one week. And the webcast will be archived on our website for one year.

Speaker #4: A transcript will also be available on our website in the financial report section. Of note, our 2026 third quarter results are scheduled to be released after market close on Tuesday, November the 3rd, 2026, with the earnings call at 11:00 AM Eastern the following day.

Speaker #1: And also in the context of broader distribution income, MGAs remain an attractive avenue for growth. Recall, since 2020, we've put over $600 million to work in MGAs.

Speaker #4: Thank you again, and this concludes our call.

Speaker #1: They collectively are writing at a $1.5 billion premium today, and we're continuing to deploy capital in that space. And maybe lastly, OnSide, which is a countercyclical restoration business, will benefit in the coming quarters from that elevated level of CAT losses.

Speaker #1: Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines.

Speaker #1: That we’ve seen in the second quarter. So, over the past 5 and 10 years, we’ve compounded distribution income in the mid-teens, so we very much expect to get back to at least a 10% rate in the coming quarters.

Speaker #9: Very helpful. Thanks for taking my questions.

Speaker #8: Ladies and gentlemen, that is all the time we have today. I would now like to turn the call back over to Jeff Kwan.

Speaker #1: Thank you, everyone, for joining

Speaker #9: Thank you for joining us today. Following the call, a telephone replay will be available for one week, and the webcast will be archived on our website for one year.

Speaker #9: A transcript will also be available on our website in the Financial Report section. Of note, our 2026 third quarter results are scheduled to be released after market close on Tuesday, November 3, 2026, with the earnings call at 11:00 a.m. Eastern the following day.

Speaker #9: Thank you again, and this concludes our call.

Speaker #8: Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines.