Q2 2026 Renaissancere Holdings Ltd Earnings Call
Speaker #2: Please stand by. Your program is about to begin. Good. Conference operator today. At this time, I would like to welcome everyone to the Renaissance Re: second quarter 2026 earnings conference call and webcast.
Speaker #2: After the remarks, we will open the call for your questions. Instructions will follow.
Speaker #1: Shifting to capital management. This quarter we repurchased 350 million dollars of our shares, at valuations rapidly accretive to tangible book value per share. We buy our own straw, we buy our own stock the way we underwrite.
Speaker #1: And manage line size aggressively. We then deploy the rest of our toolkit. Including retrocessional buying and capital partners vehicles to shape what we have retained.
Speaker #1: When the risk-adjusted return warrants it. In this market, managing the denominator and the ROE calculation through a proactive capital management is as important as managing the numerator by protecting margin.
Speaker #1: It is the combination of the two that allows us to continue compounding tangible book value per share, independent of changes to our top line.
Speaker #1: Let me now shift to a few comments on reserves. Once again, we reported significant favorable development. We recognize this benefit as the business season's end and the data supports it.
Speaker #1: This was the case for most lines this quarter. We're uncertain to remain an in casualty it does, we remain cautious. Social inflation continues to impact casualty, and we have been proactive in recognizing trend over the last several years.
Speaker #1: You can see this is our reserve in the you can see this in our reserving actions where we've been strengthening and you can see it in our pricing decisions, which reflected the higher initial loss fix for casualty.
Speaker #1: Focusing now on casualty and specialty results. We reported a combined ratio that was above 100 percent this quarter. Our results were impacted by the settlement of the Baltimore Bridge collapse, which resulted in a shift of losses from property to specialty.
Speaker #1: The net effect on our bottom line was relatively small. The reason you see this as a shift between the two, whereas we view it as largely unchanged, is because we divide our reinsurance business into two reporting segments.
Speaker #1: This can sometimes lead to confusion as we manage our accounts holistically across both property and casualty and specialty. But report them separately. Underlying casualty and specialty performance was in line with our guidance, and Dave will walk you through the mechanics.
Speaker #1: On the balance of the year, our view is positive. At this point, our underwriting portfolio is largely in place. The portfolio is well constructed and well protected as we approach the peak of the hurricane season.
Speaker #1: There has been much discussion regarding to what extent potentially historic El Niño may influence the hurricane season. This is not how we think about underwriting risk, however.
Speaker #1: We have built a portfolio to perform across a range of outcomes rather than one that depends on a benign season. Another topic of much discussion recently has been AI.
Speaker #1: As an organization, we are highly focused on continuing to integrate AI into our operations. Our vision for AI is to elevate the impact of our people and enable better decisions.
Speaker #1: I think about this as a combination of augmentation and automation. Regarding augmentation, we have made a variety of generative AI tools broadly available to our employees.
Speaker #1: They are actively and creatively producing innovative use cases that should provide greater insight into the risk we assume. It has been satisfying to see the number of ways AI is being incorporated into our business, and it is probably fair to say that it is being used in one way or another across everything that we do.
Speaker #1: We are now moving towards automation. That said, one thing we have learned is that AI is not a silver bullet. It does not automatically make everything better.
Speaker #1: Rather, especially in the case of automation, it needs to be employed carefully and thoughtfully. To maximize the benefit of AI, it is not sufficient to simply overlay it on top of existing processes.
Speaker #1: Rather, many processes need to be reimagined from the ground up. This is progressing from humans in the loop to humans on the loop. We are devoting significant resources to this endeavor, and I expect it to impact increasing portions of our business over time.
Speaker #1: As I’ve discussed in the past, we are rebuilding our REMS underwriting system, and one of the upgrades is to include the integration of AI into underwriting.
Speaker #1: This is more augmentation, as the goal is to enhance judgment and expand what is possible—new risks, new clients, and new models. Before I conclude my remarks, a word on our leadership transition.
Speaker #1: We have previously announced Bob will retire at year-end and Ross Curtis our chief portfolio officer. They will both remain actively involved in our operations until that time and our focused on ensuring a smooth transition.
Speaker #1: In 2027, Matt Neuber will become our chief financial officer. Bringing a proven record of financial leadership and deep expertise in corporate finance and capital management.
Speaker #1: He played a central role in building our Capital Partners business and scaled our Treasury function in step with the growth of our company. Matt has been with us for over a decade and has been deeply involved in every acquisition, capital decision, and significant change over this time.
Speaker #1: This gives him a deep appreciation for our history, culture, and business, and I look forward to him meeting more of you in the coming months.
Speaker #1: To conclude my opening remarks, the goal that guides every decision we make has been consistent: to maximize long-term growth and tangible book value per share.
Speaker #1: We pursue it through underwriting choices that optimize each of our three drivers of profit, combined with capital management that optimizes our efficiency. Bob will now discuss our financial performance for the quarter, followed by David, who will provide an update on the underwriting performance.
Speaker #2: Thanks, Kevin. And good morning, everyone. This is another strong quarter where we generated operating earnings per share. A $12.92 in annualized operating return on equity of 20.1 percent.
Speaker #2: Annualized return on common equity was 24 percent with 154 million dollars of retained mark-to-market gains primarily from equity. We continued to steadily grow tangible book value per share by 6 percent in the quarter and 27 percent over the last 12 months.
Speaker #2: These strong results reflect the consistency and strength of our earnings, with diversified income across three drivers of profit. There are a few numbers in the second quarter that help demonstrate this.
Speaker #2: First, 15 points, which is the continued contribution from fee and investment income to our ROE, which forms a quarter. Second, $600 million, which was our underwriting income.
Speaker #2: Underwriting builds upon the stable base of income from fees and investments. And finally, $350 million, which was the amount of capital we returned to shareholders through share repurchases—a consistent level with the first quarter.
Speaker #2: So far in the third quarter, through July 20th, we repurchased an additional $83 million of our shares. I'd like to spend some more time on capital management, because it has been an important lever that we have been employing to grow shareholder value over the last two years.
Speaker #2: Kevin spoke about our focus on managing both the numerator and the denominator in the ROE equation. On the denominator side, since the beginning of Q2 2024 through Q2 2026, we have bought back $3 billion of our shares at an average price of $258 per share.
Speaker #2: On the numerator side, over that same period of time, we generated $4.6 billion of operating earnings. Since the beginning of Q2 2024, our diligent capital management, coupled with consistently strong income from our three drivers of profit, has enabled us to grow tangible book value per share by 66 percent and benefit operating earnings per share by more than 20 percent as a result of the lower share count.
Speaker #2: Going forward, we remain focused on growing tangible book value for shareholders by optimizing our income and managing our capital. Our underwriting book remains attractive.
Speaker #2: We continue to expect a similar level of management fee income and maintain a positive outlook for investments. We will continue to take a disciplined approach to capital management and anticipate continued share repurchases in the third quarter.
Speaker #2: Now, I'd like to turn to a more detailed view of our three drivers of profit in the quarter starting with underwriting. Where our portfolio continues to perform well, with an adjusted combined ratio of 72 percent.
Speaker #2: We reported strong accident year results, with a low level of catastrophe activity and nine percentage points of favorable development. In property catastrophe, the current accident year loss ratio was 12 percent, and the adjusted combined ratio was 9 percent.
Speaker #2: This included 25 percentage points of favorable development from a variety of accident years. Other Property had another excellent quarter, with a current accident year loss ratio of 53 percent and an adjusted combined ratio of 52 percent.
Speaker #2: We had 35 percentage points of favorable development, primarily related to the attritional book. In casualty and specialty, the current accident year loss ratio was 67 percent—excuse me, 68 percent—and the adjusted combined ratio was 102 percent.
Speaker #2: We reported 4.4 percentage points of prior-year adverse development in the segment, which included 4.1 points related to the Baltimore bridge collapse. This was a result of a shift in reserves from other property to Specialty.
Speaker #2: And David will talk more about this in his prepared comments, but the overall impact to the company was an increase in net negative impact related to the bridge of only $12 million in the quarter.
Speaker #2: Additionally, there were 0.4 percentage points from purchase accounting adjustments impacting the prior year. Overall, gross premiums written were $3 billion, down 12 percent.
Speaker #2: The largest movements were in property catastrophe, where the top line was down 14 percent, excluding the impact of reinstatement premiums, and casualty and specialty, where it was down 15 percent.
Speaker #2: For property catastrophe specifically, lower rates at midyear drove most of the decline. As David will detail, we continue to find this business to be rate adequate and successfully held our lines while finding select opportunities to grow, helping to offset some of the rate decline.
Speaker #2: We chose not to deploy our collateralized vehicle Upsilon at the midyear renewal. Instead, renewing the business on whole yield balance sheets. This should serve to limit the impact on the top line decrease on the bottom line profitability.
Speaker #2: Other property gross premiums written were up 9.5 percent this quarter. Last year, there were a few one-off downward adjustments, and without these, top line was roughly 5 percent.
Speaker #2: In casualty and specialty, we continue to shape the book. A portion of the decline in top-line growth was driven by proactive reductions, and a portion was driven by the timing of deals or premium adjustments, specifically.
Speaker #2: General casualty was down 17 percent as we continued to reduce our general liability portfolio. Specialty was down 16 percent due to a combination of exposure reduction in classes like cyber, rate reductions, and premium adjustments and credit was down 19 percent driven by timing of a few large deals that were not up for renewal this period.
Speaker #2: This quarter, we purchased additional seeded protection across our portfolio. In our property catastrophe book, our purchases were at more attractive rates than last year.
Speaker #2: This resulted in seated spend being about flat. The decline in our seated in our financials relates to the non-deployment of Upsilon which I previously referenced.
Speaker #2: In casualty and specialty, we have increased our session rates across the portfolio, particularly in casualty lines. Which you can see reflected in the growth in seated spend and a decline in net premiums written.
Speaker #2: This quarter, between our seated program and capital partners, we shared about 35% of casualty and specialty gross premium written, compared to 25% a year ago.
Speaker #2: Looking ahead, for the third quarter, we expect other property net premiums earned of around 330 million dollars and an attritional loss ratio in the mid-50s.
Speaker #2: Casualty and specialty net premiums earned of approximately 1.3 billion dollars and an adjusted combined ratio in the high 90s. Turning next to fee income, where we generated 83 million dollars in fees including management fees of 48 million dollars and performance fees of 35 million.
Speaker #2: Management fees remain strong, although they are down compared to last year. As a reminder, in the second quarter of 2025, management fees were elevated because we recaptured Da Vinci fees that had been deferred due to the California wildfires.
Speaker #2: Performance fees were particularly strong reflecting the favorable development we discussed earlier. In the third quarter, we expect management fees of around 50 million dollars.
Speaker #2: Performance fees are highly dependent on underwriting results, but should average around $30 million per quarter; however, this can change as we have large loss events or prior year development.
Speaker #2: Turning now to investments. Retained net investment income was $314 million, up 3 percent from the first quarter or 10 percent from a year ago.
Speaker #2: This is an all-time high. Net investment income was a significant contributor to our results, with fixed maturity, short-term investments, and credit contributing strongly. We report $154 million of retained mark-to-market gains.
Speaker #2: This was driven by gains in equities, partially offset by losses in fixed maturity tied to higher Treasury rates and lower commodity prices. We continue to extend duration to lock in the benefit of higher rates.
Speaker #2: In the quarter, the retained portfolio duration modestly increased from 3.4 years to 3.5 years, and this is up from 3 years at the end of 2025.
Speaker #2: For the third quarter, we expect retained net investment income to continue to trend modestly higher. Finally, a few comments on expenses and taxes. Our operating expense ratio was 4.3%, which is down from last year due to Bermuda tax credits and higher overrides from our casualty ceded program.
Speaker #2: We continue to invest in the business and expect the expense ratio to build towards 5 percent as the year progresses. On tax, our overall effective tax rate on gap net income was 12 percent but as a reminder, we are not taxed on the earnings attributable to our capital partners, investors, which sits in non-controlling interest.
Speaker #2: The tax rate on the income applicable to RenaissanceRe shareholders was just over 70 percent, which reflects the 15 percent Bermuda corporate income tax as well as some tax in other jurisdictions.
Speaker #2: To wrap up, this was a strong quarter. Demonstrating the power of our diversified earnings model. And the benefit of the actions we have taken to manage capital to continue to drive strong shareholder returns.
Speaker #2: And with that, I’ll turn it over to David.
Speaker #1: Thanks, Bob. Good morning, everyone. In the second quarter, our underwriting team led the market at the midyear renewal and constructed an optimal portfolio of risk.
Speaker #1: We applied rigorous risk and portfolio analysis to identify attractive opportunities and drew on the strength of our client relationships to turn those opportunities into signed lines.
Speaker #1: I couldn't be more pleased with the team's execution and with the attractive, diversified portfolio we have built. Underwriting judgment at its essence is balancing margin, risk, and the value of a client relationship.
Speaker #1: This is institutionalized within our underwriting culture and our integrated operating model and we do this better than anyone. It is driven our strong underwriting results over the last several years and is core to Renaissance III's long-term success.
Speaker #1: As I've discussed on prior calls, at each renewal, our underwriting team has two objectives. First, to deliver our market-leading value proposition to clients and brokers.
Speaker #1: That supports a durable pipeline of renewable business, first-call status, and favorable signings that are resilient to competition. Second, to construct the optimal underwriting portfolio across lines to support each of our three drivers of profit, and generate capital-efficient, attractive returns both in the current year and over the cycle.
Speaker #1: In a competitive market, you can see the benefit of the first objective: delivering our value proposition consistently, year after year. Increasingly, we are seeing a two-tiered market emerge in lines like property catastrophe and specialty.
Speaker #1: Clients are coming to us first to anchor their programs because we support them through the cycle, deploy significant capacity, bring an expert view of risk, and engage with them across lines.
Speaker #1: This dynamic means that we can retain full lines where we choose to participate, and grow where there are profitable opportunities. Excess capacity in the remainder of the program means that following markets are signed down and don't get the lines they want.
Speaker #1: This brings me to our second objective which is what the majority of my comments are about this morning. We maintain a diversified book across property, casualty, and specialty.
Speaker #1: Because that diversification is what fuels all three of our drivers of profit. Our job is to know when to grow certain lines and when to shrink others.
Speaker #1: We then use retrocessional protection to optimize margin and capital efficiency across the portfolio. I'll step through our actions in the quarter starting with property.
Speaker #1: At the midyear renewal, our leadership position in client relationships enabled us to grow property catastrophe limit with high-quality clients in the US. Rate decreases in our portfolio were in the high-teen percentages.
Speaker #1: This is down somewhat from the low-teen percentages we saw at January 1st, but we view the rate adequacy in our portfolio to be equally strong for both sets of renewals.
Speaker #1: Rates at the midyear renewal last year held up better than January 2025 because many programs were repricing after the California wildfires. To put this in perspective, over the last two years, rates in our January 1 and June 1 US property cap book are both down by about 20 percent.
Speaker #1: Rates increased by around 50 percent in 2023. Set against that increase and improved terms and conditions, we continue to believe U.S. property catastrophe business has a strong level of rate. We grew U.S. property cat limit by $600 million.
Speaker #1: We did this by growing on nationwide accounts of key clients and California programs where rate adequacy is particularly strong. In addition, we held our share on Florida domestics after three years of successful growth and maintained our private pricing on 65% of this Florida premium.
Speaker #1: We also reduced on some programs where the clearance did not reach our hurdle. Year to date, even though rates are down in the mid-teens, our property cap gross premiums written are only down 9 percent excluding the impact of reinstatements.
Speaker #1: This is excellent execution and demonstrates our ability to deploy capital into high-margin opportunities. Our Florida book is a good example of how we use all the tools at our disposal to shape a position over time.
Speaker #1: We reduced this business significantly in 2020, as we found it unattractive due to inadequate rates, poor claims practices, and excessive litigation. However, we maintained excellent client relationships, and over the last three years we rebuilt our position to historical levels as rates improved.
Speaker #1: Tort reform stabilized the market, and the private market expanded. We have a very attractive book of Florida domestic accounts. In the second quarter, we successfully retained the business and maintained our favorable pricing above market terms.
Speaker #1: In Other Property, the business continues to produce strong results with low current year losses and favorable prior year development. We have selectively reduced risk in some areas such as South Florida, where rates are under pressure and we see better returns in the Property Cat book.
Speaker #1: This business benefits from our expertise in individual location underwriting and portfolio shaping with Seeded. If rates continue to deteriorate, we will reduce our exposure in a targeted way to maintain attractive expected returns.
Speaker #1: Turning now to casualty and specialty. We continue to successfully shape our portfolio by maintaining our positions in preferred classes, actively managing our net exposure through ceded reinsurance on Fontana, and supporting customers who are demonstrating the strongest underwriting and claims performance.
Speaker #1: As Kevin discussed, there are some shifts in how we reserve the Baltimore bridge loss that impacted casualty and specialty results this quarter. Specifically, we moved part of that loss from other property to specialty.
Speaker #1: This resulted in an underwriting loss and adverse prior year development for the casualty and specialty segment. Excluding the Baltimore bridge and purchase accounting adjustments, our year development for the segment overall would have been modestly favorable, with an adjusted combined ratio in the high 90s, consistent with our guidance.
Speaker #1: This shift between segments relates to changes in the Baltimore bridge settlement structure, which allows property insurers to recover against marine liability policies. The market's total industry loss estimate also increased.
Speaker #1: But as we reserve this event to a $3 billion industry loss from the start, the overall net negative impact to our bottom line was small.
Speaker #1: Most specialty business renews on January 1, and with the increase in the Baltimore bridge loss, the war in the Middle East, and recent energy and aviation losses, we believe rates need to stay firm.
Speaker #1: Moving to general liability, we are continuing to monitor improvements in claims handling, as well as rate change, to ensure it is keeping up with trend.
Speaker #1: The market has made good progress, but the trend continues at an elevated level and we remain cautious in our underwriting. We are continuing to support clients who are the most effective at managing both rate and claims, and are selectively reducing on others.
Speaker #1: Credit continues to perform well and remains attractive. Profitability is resulting in increased competition, but we've been successful in holding our lines. Finally, a brief comment on the war in the Middle East.
Speaker #1: The war has returned to an active phase with attacks on shipping and infrastructure in the region. We are aware of assets that have been impacted and believe any impact would be covered in our current reserves.
Speaker #1: But we'll continue to monitor the situation closely, as facts on the ground could change rapidly. Moving on to a few comments on our seeded strategy.
Speaker #1: As Kevin mentioned, our seeded purchases, alongside our capital partners' balance sheets, play an important role in shaping the portfolio and preserving margin. In property catastrophe, we increased seeded limit, maintained retentions, and improved coverage on a larger subject portfolio.
Speaker #1: While keeping spend flat. As a result, even though we wrote more property catastrophe limit, our risk going into wind season is essentially unchanged. In casualty and specialty, we also use ceded reinsurance to shape the net book.
Speaker #1: As Bob said, between our seeded program and capital partners, we share about 35% of casualty and specialty gross premium written, compared to 25% a year ago.
Speaker #1: This is consistent with historical levels for the segment. These seeded purchases help preserve margins, generate fee income through overrides, and manage underwriting volatility. For the casualty book, most of the session is proportional.
Speaker #1: Regular session heirs pay an override, which covers our expenses plus a margin to assume a share of our book and benefit from our access to business and underwriting acumen.
Speaker #1: For specialty lines, we purchase proportional coverage, and we also manage cat-like volatility through seeded excess of loss structures. In 2026, we expanded these covers in cyber, marine, energy, and aviation.
Speaker #1: Looking ahead, we've already begun preparing for the January 1, 2027, renewal, and we're in active discussions with our clients about how we can support their portfolios across multiple lines.
Speaker #1: That forward engagement is central to how we manage these relationships and it is how we position ourselves well ahead of year-end. So to close, this quarter demonstrated both of our underwriting objectives working together.
Speaker #1: Our value proposition made us the first call in an increasingly competitive market, and we built a diversified, well-protected portfolio. We are growing property catastrophe where the returns are strong, pulling back where they aren't, and using our seeded protection to manage expected profitability.
Speaker #1: And with that, I'll turn it back to Kevin.
Speaker #2: Thanks, David. In closing, this was another strong quarter. We were making the underwriting and capital decisions that compound tangible book value per share over the long term.
Speaker #2: Property cat business remains attractive and we continue to find opportunities to grow the book. The interest rate environment continues to improve supporting persistent net investment income.
Speaker #2: Fees remain robust and should continue to be a capital-light, diversifying source of income. In short, each of our three drivers of profit performed well, and we continue to return capital to shareholders at attractive multiples. We remain confident in the balance of 2026.
Speaker #2: And with that, we'll open it up for questions. Thanks.
Speaker #3: At this time, if you would like to ask a question, please press star one on your telephone keypad. If you wish to remove yourself from the queue, you may do so by pressing star two.
Speaker #3: We remind you to please unmute your line when introduced, and if possible, pick up your handset for optimal sound quality. In the interest of time, we ask that you please limit yourself to one question and one follow-up.
Speaker #3: We'll now take our first question from Elise Greenspan with Wells Fargo. Building upon that, right, if we see a lack of, you know, significant losses, this hurricane season, when do you you guys think the property cat market might bottom or do you expect that we can continue to see rate level until there are losses or when, you know, you know, Kevin, and David, do you think that we get to some kind of flattening in '27, '28?
Speaker #3: Like, I guess, how do you think about the market developing in the absence of any significant losses?
Speaker #2: Elise, I think we missed the first thing that you said. There was a problem with the communication. Can you just repeat the first part?
Speaker #3: Okay. I mean, I was just trying to ask, I guess, you guys are talking about the property cat market remaining attractive. So building upon that, right, if we see a lack of any significant losses this hurricane season, how do you guys think about the market evolving from here?
Speaker #3: Would you expect that we continue to see rate declines coming off of this attractive level until there are losses, or at some point do you see us getting to a bottom in '27 or '28?
Speaker #3: How are you seeing the evolution of property cat pricing in the absence of significant losses for reinsurers?
Speaker #2: Okay, thanks for the question. The, you know, the market moves in cycles. I would expect that, you know, from a macro perspective, there's a lot of supply in the market.
Speaker #2: We're still seeing an increase in demand but at a reducing level compared to what we've seen over the last couple of years. That dynamic, I think, will set up for continued pricing pressure moving forward.
Speaker #2: That's kind of what's going on in the overall environment. From our perspective, we have a long track record of executing in changing markets. This is not a soft market.
Speaker #2: It is a changing market, which I think you've highlighted well. we like where the rates are. We are building a portfolio that uses more of the tools that are available to us, which we've done historically over time.
Speaker #2: So, I would expect that there'll be more rate pressure, but as the market continues to become more competitive, we will increase our output to the market, which is historically what happens in a declining rate environment.
Speaker #2: So when I look forward into ’27, I would expect, you know, competition to remain robust, but I don’t anticipate that it will create major obstacles for us to continue to build a great portfolio and to continue to compound tangible book value per share.
Speaker #3: Thanks. So then, you know, my second question is on the casualty specialty segment. You guys saw, you know, a big reduction in premium there.
Speaker #3: You guys are still booking, right? The accident year to around, like, 100 or slightly below that, right? Adjusting for the Baltimore Bridge this quarter.
Speaker #3: And you've pointed to conservatism, right, in your picks. So I guess my question is first, like, you know, just a little bit more color on just why you're seeing such a, you know, such a big decline in premium there.
Speaker #3: And then secondly, we hear about loss costs, right? You guys pointed to just some high loss costs in the business and your repair comments.
Speaker #3: So could you just help us think about the comfort, you know, in the back book and the picks you have there? Because, you know, away from the bridge, right, I think you guys highlighted there really was not any significant movement in reserves.
Speaker #4: Hey, Elise, this is David. I, I can take that. I think one of the things I'll comment on is, you mentioned the movement in the book.
Speaker #4: So we're always optimizing the book with the opportunities we see. What we saw this quarter—second quarter—and a bit year to date was that we have made some portfolio shaping decisions, mainly in the general liability space.
Speaker #4: I mean, we're a couple of years into the market, fully recognizing that trend was something that needed action. And, you know, the market's been doing a pretty good job taking action there, but some clients have done better than others.
Speaker #4: So the trend is, is continuing, we're watching that very closely. And what we did in the second quarter was we took action and, and reduced the some of the portfolio there.
Speaker #4: The other thing that's impacting our net written premium is the seeded structures. And, you know, seeded is something we have used for years in the casualty specialty segment, also in the property segment.
Speaker #4: we see more opportunities to seed risk and attractive terms. It has the positive effect on the portfolio of reducing volatility turning, risk income into fee income through the overrides.
Speaker #4: It also lets us maintain an option on the upfront book. So with all the uncertainty that is in the market, this is the way that we're confident is the right way to manage through an environment where trend is persistent and is still a risk to the book.
Speaker #4: and we're, you know, doing the right things to manage that.
Speaker #3: Thank you. Our next question will come from Josh Schenker with Bank of America. Please go ahead, your line is open.
Speaker #5: Yeah. I hope this works, everyone. I'm on a train, and I apologize. I want to dig a little bit into the credit decline. Bob said it was due to the non-renewal of some large transactions.
Speaker #5: In the quarter, they weren't up for renewal. Are they up for renewal in another quarter, or has the cedent decided to take all that business in-house?
Speaker #4: Hey, Josh. This is David. I can comment on that. What we've seen in the credit book is a lot of the transactions are multi-year and, when they initiate, they're more lumpy.
Speaker #4: So it's not a smooth quarter-by-quarter renewable book. our earned premium has stayed relatively consistent there. It's just that we had some multi-year transactions that we initiated last year that weren't repeated with this year's gross written premium.
Speaker #4: overall, we're looking for opportunities in the credit space. We found some in 2025. We'll, we'll write more credit book, but, I see our credit book is essentially flat.
Speaker #5: All right. And then, with the higher sessions in the general caps, people, you know, because you see pricing's not as attractive with the general, the casualty special book, and versus combined ratio.
Speaker #5: When you cede a bunch of business that was formerly retained, and there's almost no underwriting profit in the book on a calendar or accident year basis, what is really the impact of the cessions, and how should we think about that?
Speaker #4: Hey, Josh. You're breaking up a bit, but I think you were asking about the impact of the sessions on general liability and the casualty specialty business.
Speaker #5: Yeah, 100% combined ratio. It doesn't seem like it's just impacted one way or the other.
Speaker #4: Well, and so, what, what we when the way it comes to the books and, you know, one thing I'll comment on is we've we, we were buying more, cover in 2026.
Speaker #4: That cover essentially incepts in the beginning of 2026, but covers everything that we'll write during the year. So the amount will continue to ramp up and affect the books more and more over the year and into next year.
Speaker #4: It has a positive effect on the books in a couple of ways. We get an override, so the override expenses, and then some.
Speaker #4: So that will work to improve the net margin in the book, all other things being equal. We also get reduced volatility because, as volatility may arise in the future, we've now seeded a portion of the book, and there's less exposure at risk.
Speaker #4: So all those combined are the two effects on the overall book. The other piece is that we're able to maintain options on the inwards book, despite the uncertainty, and we're able to act on that, you know, even when the market improves in the future.
Speaker #5: Thank you, and I apologize for the background noise.
Speaker #4: No problem.
Speaker #3: We'll take our next question from Yaron Kinnar with Mizuho. Please go ahead, your line is open.
Speaker #6: Thank you. good morning. I wanted to go back to the other property book and understand what the drivers for the 5% growth in the gross premiums written on unadjusted basis were.
Speaker #6: Because it seems like it's going against the trend we've seen in recent quarters of some declines.
Speaker #5: Hi, Yaron. This is Bob. I'll take that. As I said in my prepared comments, I did acknowledge that it's roughly flat because last year we had some premium adjustments that would have put downward pressure on it.
Speaker #5: So what you're seeing in terms of real risk change year over year—it's about flat. It doesn't look like it grew by five or six percent.
Speaker #5: Does that make sense as an EPI adjustment? Is that what we talked about in the past before?
Speaker #6: So, I thought it was 9% growth and then 5% with the adjustment. So maybe I misunderstood.
Speaker #5: I didn't call out the adjustment. Actually, largely, it's flat. You know, it's not 9%. The risk, when you think about the underlying risk in terms of limits, is flat.
Speaker #6: Okay. That, that makes sense and I, I guess I just misunderstood earlier. And then, on the buyback front, I don't want to quibble too much here, but it seems like the quarter to date, buyback is a little bit lower than what it was quarter ago.
Speaker #6: Are you still thinking that 350 is roughly the right run rate for the future?
Speaker #5: great question. We're talking about a week earlier, okay? We're talking a week earlier than we did, the quarter a year ago. in fact, we're, you know, I think right now, honestly, we're around 95 million as of today.
Speaker #5: So, we've pretty much exhausted the plan, and we're looking into wind season. You know, we have the capacity and the capability, as I said in my prepared comments.
Speaker #5: We didn't give you a number, but we're still focused on buying through the wind season. Absent any large events that occur, nothing really changed in our capital plan.
Speaker #6: Thanks so much.
Speaker #3: Thank you. We'll take our next question from Meyer Shields. Please go ahead. Or with KVW, please go ahead. Your line is open.
Speaker #7: Great, thanks so much for taking my questions. Kevin, in the past, we've talked about different views between the pricing and reserving actuaries for casualty lines.
Speaker #7: When you're increasing the sessions, which of those actuarial opinions is driving that?
Speaker #4: it well,
Speaker #5: Each of the sessions is going to somebody who's doing their own analysis as to what they are assessing for the performance of the portfolio.
Speaker #5: We share with them what we believe the portfolio looks like. Right now, there's not that much of a difference between our pricing and reserving.
Speaker #5: In other times, there's been a bigger gap between the two, so it's probably less of an issue. But they're doing an independent assessment, and we're sharing the information with them.
Speaker #5: I would say most of them are probably looking more at the pricing. But it really depends on who the season is, and some of these are more structured as well, so it's a little bit more complicated.
Speaker #7: Okay, understood. And then I guess as far as for Bob, if we look at the acquisition expenses in Other Property, would we look at it on a year-over-year basis or quarter-over-quarter?
Speaker #7: Is that about $20 million of resolving it? Is there anything unusual in that?
Speaker #5: You're referring to the operating expenses or the acq, and kind of missed the focus on the question that you were looking at, sorry.
Speaker #7: The acquisition expenses in other property.
Speaker #5: Right. It sounds slightly higher because this is as a result of a prior year deal that boosted it up probably by about a point. That was done so.
Speaker #7: No, so I'm talking about—right. Go ahead, I'm sorry.
Speaker #5: So the current action year loss rate's about right, okay? The current acquisition rate in this quarter is, is, is more in line with, what we expect.
Speaker #7: Okay. Perfect. Thanks so much.
Speaker #5: No, I'm going to change that. I was referring to something different—sorry. The acquisition ratio is up. I apologize, it is up. There was a one-time event that came through, which did run through this quarter as opposed to last year.
Speaker #5: 29 to 30 is roughly the right acquisition expense ratio for other property.
Speaker #7: Okay. That's very helpful. Thank you so much.
Speaker #3: Thank you. We'll take our next question from Mike Zarinski with BMO. Please go ahead. Your line is open.
Speaker #8: Hey, good morning. Thanks. thinking about, some of the, I guess, opportunistic, shrinking of the portfolio, especially in, in casualty and specialty on a on exposure basis, should we be thinking about, a material capital free-up as well, or, or not so much because when you grew that, that there was a big diversification benefit?
Speaker #8: Any color would be helpful.
Speaker #5: Yeah. w-we w-we're there without the changes in the portfolio. We're in a very, very strong capital position. I think you point out, something that's important we actually deployed more limit into the property cat space because we don't find that to be quite attractive.
Speaker #5: As David mentioned, our exposure this year compared to last year going into wind season is relatively flat. This isn't a perfect transition, but with that, you can assume the capital consumption within the portfolio reflects the flat exposure that we have going into wind season.
Speaker #5: The casualty has a lower capital charge per dollar of premium compared to the property changes that we've made. So I wouldn't think about the changes in our top line as being directly correlated to the capital deployment.
Speaker #5: That said, we're in a very strong capital position to continue to, you know, grow the book where we find opportunities and return capital to shareholders.
Speaker #5: through share repurchases.
Speaker #7: Kevin, that's helpful. And, moving to, operating expenses investments, may-maybe for Bob, you know, when we you called out the Bermuda tax credit benefit this quarter, but then I think in your prepared remarks you're still kind of guiding to, to the five, opex ratio for the back half.
Speaker #7: So it implies a big bump. Maybe you can remind us, just, you know, as your views changed on this, since the Bermuda tax credits are cumulative through 2070, you got another big bump.
Speaker #7: Are, are you all still expecting to spend the vast majority of that? And, and if you are, are you know, would those maybe be one-time expenses in 26, 27 so there's an eventual kind of fall-off in some of those technology costs if we're thinking really, you know, 28 and beyond?
Speaker #5: Thanks for the question. Yeah, you got the tax right. We're modestly higher than 15%. The Bermuda tax credits came in through operating expenses; reminding you that only about two-thirds can come through the operating, the other third comes through the corporate side of it.
Speaker #5: But we've continued to invest in the business. That's something we've talked about. We continue to invest in the business in areas as we continue to optimize and scale.
Speaker #5: So we're projecting growth, like I said, up to 5% by the end of the year. We had a couple of expense benefits that came through, so we feel that 5%, plus or minus, is where we're at.
Speaker #5: You know, I said 5% to 5.5% before. We feel we're coming in at the low end on it now.
Speaker #7: Got it. And no comment about just some of these investments, or some of these maybe one-time that would fall off in outer years, or these would be just—.
Speaker #5: Yeah, that's fair. That, that's fair. We're, we're investing in our front office systems. That's going to be a surge in that expense. It'll taper off over time.
Speaker #7: But.
Speaker #5: We have other investments we're building inside the company to help out with the scale that we've created over the last couple of years. So those are investments that we make, that will taper off over time and create efficiencies.
Speaker #5: And as we talked about reinventing processes, we're using AI to help with that. That does cost some money upfront, but we do have a significantly low operating expense ratio.
Speaker #5: And we feel very comfortable that that gives us the opportunity to make these investments, knowing that we've got the payback coming.
Speaker #7: Thank you.
Speaker #3: Thank you. We'll take our next question from Andrew Anderson with Jefferies. Please go ahead. Your line is now open.
Speaker #8: Hey, good morning. Specialty and credits have become a larger percentage of that portfolio over the last several years within CNS. How much additional opportunity is there to increase the mix in that book, and at what point are you kind of running up against further competition or just internal constraints?
Speaker #5: hey, Andrew. This is David. I'll, I'll comment on that. so w-we're very focused on where we can deploy into high-margin businesses. as we think about, you know, growth opportunities, you know, credit is one that's a high-margin business.
Speaker #5: We're, you know—if we said we can deploy more, we will. But those deals are lumpy. It's hard to, you know, know what will happen quarter by quarter, year on year.
Speaker #5: We have a great market position in specialty. There is loss activity in specialty. The Baltimore Bridge is now, I think, the largest marine loss ever on the marine liability side.
Speaker #5: So, we think that will present some opportunity. Q1, most of that business is 1-1 renewal, so it's a bit early to tell. There's a lot that could happen between now and then.
Speaker #5: But we have a really strong team post-Validus. We have a market-leading specialty team, as we put two market leaders together and retain the book.
Speaker #5: so we're really well positioned for that. I think the, but the, the, the, the counterbalance is that there's a lot of, competition in the market, both in property cat and in specialty.
Speaker #5: So, we'll be well positioned when the growth opportunities come, but, you know, it may not result in top-line growth quarter-on-quarter or year-on-year.
Speaker #8: Thanks. And I think you mentioned you chose not to deploy Upsilon at the mid-year, but maybe you could just talk about how you're thinking about growing the fee-bearing capital versus balance sheet capital over the next year or so.
Speaker #5: Yeah. Upsilon is relatively small anyway, so that was a strategic decision we made for this year. We continue to see interest in our vehicles.
Speaker #5: We actually have more capital interest for the vehicles than we have opportunity to include them into structures. The cap-on mandate continues to perform well, and we're continuing to see interest there.
Speaker #5: So, when we look at it, our Capital Partners business remains in a very strong position. We have very strong capital opportunities to deploy should the market provide those risk opportunities to match them with.
Speaker #5: So we feel good about where we are. But I would say right now, where their size is now is likely to be where their size will be next year.
Speaker #5: This year was relatively close to where they were sized last year.
Speaker #8: Thank you.
Speaker #3: Thank you. We'll take our next question from Chris Hartwell with Autonomous Research. Please go ahead, your line is open.
Speaker #9: Yeah, good—good morning. A quick first question really is just on a background to the renewals, and specifically terms and conditions. I've been hearing a lot of chat amongst brokers around the balance of risk sharing between primary insurance and reinsurance.
Speaker #9: I was wondering if that had an bearing, through the mid-year renewals. And, I guess more overall, I'd be very interested in your thoughts on how, brokers or cli or students may push on, terms and conditions through next year, and whether the reinsurers can, can really defend, current levels on sort of thinking about sort of attachment points, aggregates, that sort of thing.
Speaker #9: Thank you.
Speaker #5: Hey, Chris. This is David. I can comment on that. So, overall, terms and conditions remain really strong in the property cat space. Since the step change in 2023, that was a big reset in terms and conditions—which included coverage, structure, and level.
Speaker #5: And, while we've seen pressure on rate, we've seen pretty stable terms and conditions. There's been talk about whether companies should buy down into the earnings level.
Speaker #5: In general, that's gone the opposite way. There's been more demand at the top end and some reduction in demand at the bottom end, which might have been creeping into the earnings level.
Speaker #5: So, still very healthy there. The aggregate programs where there’s been a bit of demand and growth recently, that’s all definitely at the capital level that we are participating there.
Speaker #5: You know, they're well priced. from a, a traditional loss model perspective, from a premium perspective, and, and attaching at the, capital structure. So, we look at terms and conditions and, and think that it leads a lot of stability to our ability to continue to take risk on the cat side.
Speaker #8: Wonderful. Thank you. Thank you very much. Actually, you know, a follow-up question. I was wondering if you could give a little bit more color on the cyber environment.
Speaker #8: I noted that you've got some sort of volume adjustments that came through. I don't know whether that's environmental, or relating to seeding company activity.
Speaker #8: I presume the latter. But if you could, share some thoughts there.
Speaker #5: Yeah. So, we grew cyber rapidly in 2021 and 2022, and rates were increasing significantly. The claims were also decreasing at that time. We've seen, as the rate has come off those peaks, that claims have been returning back to previous norms.
Speaker #5: So we've been taking some cyber risk off the table. There's been some reinsurance portfolio adjustments that we've made proactively there. Also, with the reducing rate, our clients end up writing smaller books.
Speaker #5: So those are some of the premium adjustments that come through about a year after the fact. But that's the way we're managing cyber. We've also made some seeded purchase decisions on the cyber side.
Speaker #5: And so we have a smaller and better protected cyber book than we did at the peak of the market.
Speaker #3: Thank you. We'll take our next question from Ryan Tunis with Cantor Fitzgerald. Please go ahead. Your line is now open.
Speaker #10: Hey, thank you. Good afternoon. First question, just on capital planning. So, year to date, the equity base has grown. I recognize it's only two quarters in.
Speaker #10: But, just given the changing market environment, I wouldn't think that there'd be a goal to continue to grow the equity base, and just wondering if I'm thinking about that right?
Speaker #10: Thanks.
Speaker #5: Yeah. Thanks for the question. Yeah. Year to date, we've grown through earnings. We've, just over 900 million dollars. We've repurchased probably close to let's just call it 800 million.
Speaker #5: So it's a modest increase year to date. I feel really good about the position that we're in going into the wind season. And as I said in my prepared comments, we fully expect to continue buying shares back, but obviously in Q3, we've started.
Speaker #5: We'll see where it goes. But backing off on buying shares is not where we're going.
Speaker #10: Got it. And then, just a follow-up on the Florida renewal. Can you share any general themes, if there were any, when you did walk away from business? What were some of the general themes involved there?
Speaker #10: Thank you.
Speaker #5: Hey, Ryan. This is David. It was mostly just too much pressure on price based on the exposure in that seeding's portfolio and our view of that.
Speaker #5: You know, as we model each individual portfolio from the ground up, for each individual peril, the market may have a different view. And if the client was pushing too hard—if the clearing price was lower than what our view of the appropriate clearing price was—that's when we walked away.
Speaker #5: You know, there were very minor attempts to broaden coverage, and we would have walked away from those, but those were largely unsuccessful. It was mostly rate.
Speaker #10: Yeah, just on some of the stuff you’re saying on the casualty, with rate and claims management.
Speaker #5: Yep. And that actually—that's a good point. So, on the casualty side, we did make some portfolio adjustments there. And, you know, while we're seeing rate continue to keep up with trends in aggregate, we've seen that some companies have been less successful than others.
Speaker #5: And with their portfolios, you know, showed signs that they weren’t able to keep up with the trend, head in the right track to improving profit margins—those were the targets that we used to reduce our support on the casualty side.
Speaker #3: Thank you. We'll take our next question from Pablo Singson with JP Morgan. Please go ahead, your line is now open.
Speaker #11: Hi, good morning. Thanks for the detail you provided in your use of record session. I was wondering if you could provide perspective on the relative returns of the business you're writing, on the gross versus net basis.
Speaker #11: It sounds like the returns on these placements are still attractive to you on a gross basis. Is that accurate?
Speaker #5: That is accurate. I think we are using retrocessional coverage to position the portfolio for the future. You know, one of the things we do—if you go back to October of last year—we built a pro forma portfolio as to what we wanted our risk to look like.
Speaker #5: And what we thought for, what we had for pricing expectation going into this year, we've achieved our objectives on the portfolio. Included in those objectives was to manage the level of rec net risk both on the casualty and specialty side, and the property side, with the use of retro.
Speaker #5: We think that positions us well going into the 1/1/27 renewal, which, as we mentioned earlier, we expect will still see quite a bit of supply coming into the market and some rate pressure.
Speaker #5: So, a lot of this is about positioning the portfolio for where we want to be over the next several years. We are still seeing a gross portfolio that's well in excess of our cost of capital.
Speaker #5: And we're enhancing that with the use of retrocessional purchases on the net portfolio.
Speaker #11: Makes sense. And then, follow-up: So, many primary companies have flagged MGAs and the capital standing behind them—you know, whether funds or reinsurers—as an area of increasing risk.
Speaker #11: So, do you agree with that assessment? And can you talk about your participation in that part of the market? And I guess maybe comment more broadly about your approach to client selection.
Speaker #11: Thanks.
Speaker #5: Yeah. I think a-a-as the market softens and, you know, if you look back historically, careful monitoring of MGAs becomes increasingly important. I think that is going to be has been true and is going to be true, as, as markets continue to, to change and evolve.
Speaker #5: You know, from our perspective, we are not a very large writer of MGAs, and the MGAs we have are more concentrated, with relationships we've had for a long period of time. Comment more specifically, Dave.
Speaker #5: Yeah, I would say, on the underwriting side, where we deploy capacity through MGAs, the most significant piece is on the other property side, where we've written cat-exposed E&S property through MGAs, who were an efficient distribution source for that.
Speaker #5: In those kinds of situations, we control the underwriting, the pricing, and the cat exposure. So we're very hands-on in our systems that are tied directly into the MGAs.
Speaker #5: So we make sure that we're on top of changes in risk there.
Speaker #10: Yeah. An example—one thing we did earlier this year is we reduced significantly some of the other property risk in Southern Florida because we saw that we could deploy that capital more efficiently within property cat.
Speaker #10: So, this is something we closely monitor. And I think we have a good degree of skill in thinking about how to deploy, both through the other property and then where we might enhance return to property cat.
Speaker #3: Thank you. We'll take our next question from Brian Meredith with UBS. Please go ahead, your line is now open.
Speaker #11: Yeah, thanks. I was just curious, David, if you could comment a little bit about the new alternative capital that we've been seeing coming into the marketplace.
Speaker #11: You know, h-has it been disciplined or, or maybe are we heading towards a p a place with that where, something like before 2020 where things got pretty competitive with alternative capital?
Speaker #10: Yeah. I think,
Speaker #5: An area where we've seen a change over the last several months, or even a year, was the increase from private credit funds looking for long-term assets.
Speaker #5: I think we've talked about this before. If you look, you know, historically, capital has come into the market looking for low-beta risk from property cat, thinking about how that can enhance their portfolios.
Speaker #5: Capital that's coming in now has existing investment strategies. And looking for assets that can fund the investment strategies that they have. those vehicles, there's been a lot of talk of them.
Speaker #5: There have been vehicles that have done it; they haven't moved the market at this point in time. It's something we're very close to. We're in all those discussions.
Speaker #5: And, you know, continue to monitor, how much capital is coming in and what effect it's having. At this point, it's been negligible.
Speaker #11: That's helpful, thanks. And then I'm just curious—any kind of meaningful movements in terms and conditions, or loosening of terms and conditions, in the year renewals?
Speaker #5: you know, terms and conditions have stayed very strong really ever since the, the step change in 2023. we've seen pressure on rate, but the terms and conditions have remained strong.
Speaker #5: You know, we're still attaching at the capital level rather than the earnings level, which is one of the most important. And, you know, a-and, and coverage has not broadened.
Speaker #5: So we're happy with that.
Speaker #3: Thank you. We'll take our next question from Tracy Bandige with Wolfe Research. Please go ahead, your line is now open.
Speaker #12: Thank you. Good morning. you mentioned that you're still seeing positive gross portfolio that's well in excess of your cost of capital enhanced by the use of retro on the net portfolio.
Speaker #12: Can you touch on the current pricing spread between retro and reinsurance property cat pricing, and what is the profile of your retrocession partners?
Speaker #5: We have—so, the vocabulary we tend to use is how much we keep, because we have so many different types of structures. You know, we're sharing risk with balance sheets that are funded by third-party capital.
Speaker #5: We're trading with ILS funds. We're trading through traditional structures, and some with our partners. It depends on the vehicle. We don't disclose what the spread is between the products we're buying and selling, but we have more tools and better transparency on that than I think anyone else.
Speaker #5: we've done this for a long time. You know, and as I mentioned earlier, my comments, as markets become more competitive, and rates compress because of that competition, we tend to increase our alpha to the market.
Speaker #5: And one of the ways we do that is by managing the amount of retained risk we're keeping.
Speaker #12: Great. Just a quick follow-up on the cyber discussion. Does any of your reduced exposures reflect maybe a lower appetite in the wake of Mythos specifically?
Speaker #12: I don't know if you've seen the same pullback by Seedance?
Speaker #5: So I think, mythos is one example of how the risk landscape could be changing and we're monitoring that very closely. i-i-it, it it ha we haven't seen any uptick in claims due to AI or, or mythos or, and it their effect on the market so far, but it's the kind of thing that we'll continue to, to monitor.
Speaker #5: overall, even without that, the claims have come up to historical levels. And with some increase in seeding commissions and some, rate reductions, we don't see the profit margins as as attractive as they were a couple of years ago, which is the main reason behind our, change in portfolio.
Speaker #12: Thank you.
Speaker #3: Thank you. We'll take our next question from Alex Scott with Barclays. Please go ahead. Your line is now open.
Speaker #10: Hey. Thanks for squeezing me in. I wanted to circle back on, the casualty business and, and particularly the, the pieces of it that you weren't willing to renew.
Speaker #10: Could you just talk about, you know, what, what you did in terms of looking at the reserves and, you know, your comfort with the loss picks on, on, you know, particularly the, the areas of the business that you weren't willing to renew and just, you know, what, what, what would you say to, to help us gain some comfort with, you know, h-how those have been reserved for in light of not wanting to renew that stuff?
Speaker #5: Yeah. Hey, Alex. This is David. I guess the way I would characterize our approach to casualty business is we've been following it for the last couple of years very closely, getting more data from our cedants, monitoring their portfolios at a granular level.
Speaker #5: And, overall, you know, my underwriting view is that the market has been doing a good job getting rate and improving claims handling. Two-year check-in, we're still in the early stages of what is a long process to fight social inflation and the plaintiffs' bar.
Speaker #5: But i-it's been clear in the data that some, clients were more effective at doing that than others. And the, the way that shows up is we look at the actual versus expected, emergence.
Speaker #5: We look at what their how they've evolved their portfolio, the layers they're writing, are they in that kind of working layer right above the first excess, where there's a, a a especially high amount of claims, being, kicked into that because the, the personal injury awards are the claims that are seeing the most, inflation.
Speaker #5: It's not the class actions that, that necessarily hit the, the 500x500 layer. It's the personal injury awards that might hit a 25x25 or a 50x50.
Speaker #5: So it's, it's somewhat data-driven, but also involves underwriting judgment in terms of our opinion as to whether client A versus client B and structure A versus structure B will be the most resilient if inflation continues.
Speaker #5: And we do think inflation will continue. You know, all the signs are w-while there is some tort reform, there have been some favorable court decisions at the Supreme Court level that are could be reversing the tide that will still take time to come through.
Speaker #5: And we're planning for continued inflation.
Speaker #10: Okay, thanks. My follow-up is on tort reform as well, actually. I wanted to see what you think about Florida tort reform and how that could be impacting property.
Speaker #10: loss trend and just your view of potential losses, you know, from when and that kind of thing. You know, I've heard that's a reason for some of the softening.
Speaker #10: Is that something that you're giving credit for in your loss trend?
Speaker #2: Yeah, I think on previous calls we've talked about the tort reform in Florida and that we were conservative in our assessment of the impact it would have in Florida.
Speaker #2: It actually had more impact than what that conservative original assessment anticipated. So, we have seen a real benefit from it. You know, when we were going in with a risk-adjusted view for Florida, part of that risk-adjusted view was the reductions, taking into account the benefit of the tort reform.
Speaker #2: So we're pleased to see that other states are looking at that. And we've seen some, you know, expansion of it beyond Florida, but we do think it's been meaningful.
Speaker #2: And, we were happy to give credit for it in the in this year's renewal.
Speaker #12: Thank you. We'll
Speaker #3: take our last question from David Motamatin from Evercore ISI. Please go ahead. Your line is open.
Speaker #4: Hey, thanks. Good morning, and thanks for squeezing me in. I just wanted to ask about property cap rates, which—it's good to hear that they remain adequate.
Speaker #4: you know, after being down, call it mid to high teens, after they're, you know, big renewal this year. if we see similar rate declines next year, just wondering how you are thinking about just rate adequacy in the market.
Speaker #2: Yeah. I'll start, then I'll turn it over to David. So, there's two assessments that need to be done when thinking about property cap because of the capital consumption in the correlations.
Speaker #2: One is what is the standalone economics and what's the marginal economics? Marginally, I expect that even with the same level of rate reduction and the, the, the associated increase in the loss ratio for the individual deals, we will like the portfolio.
Speaker #2: We will further enhance the capital efficiency of that portfolio, increasing marginal returns through the risk-sharing mechanisms that we have. When I look into '27, I do anticipate that there will be more competition.
Speaker #2: I also anticipate we're gonna build a ca property cap portfolio that we really like.
Speaker #4: Got it, thanks. And then, I heard about the $600 million increase in limit that you guys deployed at mid-year. But Kevin, you also mentioned that demand is increasing, but at a reducing level going forward.
Speaker #4: So, you know, how you how are you thinking about the demand environment as we move into next year compared to this year?
Speaker #5: Hey, David. This is Dave Marra. I'm the demand side. You know, we've had increasing demand, but at a slower rate over the last few years.
Speaker #5: You know, two years ago, we counted $20 billion of demand on the US cap side. Last year, $15 billion. This year, it's just over $10 billion.
Speaker #5: So, we think the long-term dynamics are very strong. You know, the more Florida private market participation, lower public market, IT growth in TIVs, you know, clients are all over this, and they're buying more limit.
Speaker #5: that being said, we would ex we wouldn't expect an accelerating growth in demand going forward. And w-we there's still competition, and competition from the cap bond space.
Speaker #5: so, so a bit of a mix there.
Speaker #3: Thank you. I'll turn the floor back to Kevin O'Donnell for any additional or closing remarks.
Speaker #2: Thank you for joining today's call. We feel like we're in a great position, having built a portfolio that we targeted as we go into wind season.
Speaker #2: And look forward to talking to you, in a couple months about the third quarter. Thanks very much for, joining today's call.
