Hanover (THG) Q1 2026 Earnings Transcript
Hanover (THG) Q1 2026 Earnings Transcript
Motley Fool Transcribing, The Motley FoolThu, April 30, 2026 at 4:07 PM UTC
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Date
April 30, 2026, at 10 a.m. ET
Call participants -
President and Chief Executive Officer — Jack Roche
Executive Vice President and Chief Financial Officer — Jeffrey Mark Farber
Chief Operating Officer and President of Agency Markets — Richard William Lavey
President of Specialty Lines — Bryan James Salvatore
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Takeaways -
Operating return on equity -- 20.3%, a record for the first quarter, supported by improvement in underlying margins and disciplined execution.
Operating earnings per share -- $5.25, representing the highest level for any first quarter.
All-in combined ratio -- 91.7%, an improvement of almost 2.5 points, reflecting enhanced underwriting actions.
Ex-catastrophe combined ratio -- 85.4%, improving by a similar margin, indicating strong underlying performance.
Net written premium growth -- 3.2%, with management stating the first quarter as the projected low point for annual growth.
Personal lines net written premium growth -- 2.7%; growth attributed to state-specific strategies and margin-focused geographic mix.
Improvement in personal lines underlying loss ratio -- Over one point year over year, demonstrating tighter loss management.
Core commercial net written premium growth -- 4.3%, driven by double-digit new business in Small Commercial and positive Middle Market momentum.
Small commercial growth -- 6.4% net written premium growth; retention rates improved sequentially.
Specialty segment net written premium growth -- 2.3%; growth slowed by competitive pressures in property-exposed lines and strategic pullback in Programs.
Excess & surplus (E&S) lines growth -- 8.1%, attributed to liability offerings while property growth remained limited due to competition.
Marine business growth -- Slightly above expectations; management expects upper single-digit growth for the remainder of the year.
Catastrophe losses -- 6.3 points of combined ratio; half attributed to major March hail/wind in Illinois and Michigan and Winter Storm Fern.
Favorable prior-year catastrophe development -- 3.1 points from reduced severity, largely attributed to changes in terms, deductibles, and property actions.
Expense ratio -- 30.7% for the quarter; full-year guidance affirmed at 30.3% due to anticipated growth leverage.
Favorable ex-cat prior-year reserve development -- $25 million total; Specialty $14.2 million (3.9 points), Personal Lines $9.2 million (1.4 points), Core Commercial $1.6 million (0.3 points).
Personal lines current accident year ex-cat combined ratio -- 83.8%, improved by 0.7 points; Homeowners current accident year loss ratio 46.7%, improving 2 points.
Auto and home pricing increases -- Auto up 6.7%, Home up 10.8%, and Umbrella up approximately 19%.
Core commercial current accident year ex-cat combined ratio -- 91.5%, a 3.6-point year-over-year improvement.
Specialty current accident year ex-cat combined ratio -- 85.4%, driven by property favorability; loss ratio 49%, below the low-50s target.
Net investment income -- Up 19.6%, reflecting higher reinvestment yields and portfolio income diversification.
Investment portfolio quality -- 88% in cash and investment-grade fixed income; weighted-average rating AA-; 95% investment grade holdings; earned yield 4.42%.
Book value per share -- Increased 1% sequentially to $101.86; excluding unrealized losses, up 2.8% sequentially.
Share repurchases -- 503,000 shares totaling $87 million in the first quarter, and $14 million additional through April 28.
Technology and AI initiatives -- Deployment of reusable AI capabilities in risk scoring, triage, and underwriting, streamlining processes across business and claims operations.
Second-quarter catastrophe load guidance -- 7.9 points, per CFO Jeffrey Mark Farber.
Summary
The Hanover Insurance Group (NYSE:THG) emphasized its diversified business structure as a key factor in managing insurance cycles across segments. Management stated that Personal Lines and Commercial Lines are protected from industry-wide pricing compression due to a strong account focus and the ability to shift strategy by region and customer. Executives described the Programs portfolio as having stabilized profitability and being positioned for future growth after a selective pullback. Expense and reserve management discipline remains evident, with investments targeted toward digital efficiency and further technology transformation. Premium retention and new business metrics indicated ongoing customer demand and success in upmarket strategies for both Personal and Commercial portfolios.
CEO Roche said, "we have the most diversified business and earnings stream in the history of the company," signifying structural insulation against market-specific downcycles.
COO Lavey cited a "full account focus—over 90%" and a "state, driving agency relationships at the desk level," as key to outperforming competitors in Personal Lines.
President of Specialty Lines Salvatore noted that Specialty profitability was "broad-based," specifically calling out property performance and pricing discipline as profitability drivers across multiple subsegments.
Jeffrey Mark Farber confirmed that the slower first quarter for premium growth was "planned" and guided to "ramp up growth from here in Specialty."
Digital transformation efforts—including enterprise-wide AI risk scoring and workflow modernization—are scaling and targeting complexity reduction throughout operations.
Industry glossary -
E&S: Excess & Surplus lines—insurance products covering risks not admitted or eligible for coverage in the standard insurance market, often providing flexible terms and coverage not regulated by state rate and form filings.
Combined ratio: The sum of loss and expense ratios, representing underwriting performance. A ratio below 100% indicates underwriting profitability before investment income.
Programs business: Insurance products or portfolios administered by Managing General Agents (MGAs) or affinity groups, often featuring tailored underwriting criteria and distribution alignments.
Marine insurance: Coverage for property in transit over water (Ocean) or over land (Inland), including contractors' equipment, builders' risk, and marinas, with differing risk profiles between Inland and Ocean segments.
Full Conference Call Transcript
Jack Roche, our President and Chief Executive Officer, and Jeffrey Mark Farber, our Chief Financial Officer. Available to answer your questions after our prepared remarks are Richard William Lavey, Chief Operating Officer and President of Agency Markets, and Bryan James Salvatore, President of Specialty Lines. Before I turn the call over to Jack, let me note that our earnings press release, financial supplement, and a complete slide presentation for today's call are available in the Investors section of our website at hanover.com. After the presentation, we will answer questions in the Q&A session.
Our prepared remarks and responses to your questions today, other than statements of historical fact, include forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. These statements can relate to, among other things, our outlook, profitability, growth and strategic initiatives, the impact of recently revised policy terms and conditions and targeted property actions, economic and geopolitical conditions and related effects, including economic and social inflation and tariffs, as well as other risks and uncertainties such as severe weather and catastrophes that could impact the company's performance and/or cause actual results to differ materially from those anticipated.
We caution you with respect to reliance on forward-looking statements and, in this respect, refer you to the forward-looking statements section in our press release, the presentation deck, and our filings with the SEC. Today's discussion will also reference certain non-GAAP financial measures such as operating income and accident year loss and combined ratios excluding catastrophes, among others. A reconciliation of these non-GAAP financial measures to the closest GAAP measure on a historical basis can be found in the press release, the slide presentation, or the financial supplement, which are posted on our website. With those comments, I will turn the call over to Jack.
Jack Roche: Thank you, Oksana, and good morning, everyone. We are off to a very strong start in 2026, posting excellent first quarter results and setting the stage for continued success. Our performance in the quarter highlights consistently tight execution across the enterprise, as well as the durability of a portfolio that has been deliberately shaped for resilience, flexibility, and strong performance across varying market cycles. Underlying margins across the book continued to trend favorably due in large measure to recent pricing and targeted underwriting actions. At the same time, we continued to benefit from our strong balance sheet and our high-quality portfolio, which once again generated attractive returns through disciplined asset allocation and investment management.
We achieved record first quarter performance including operating return on equity of 20.3% and operating earnings per share of $5.25. Our all-in combined ratio improved nearly 2.5 points to 91.7%, while our ex-cat combined ratio improved by a similar margin to 85.4%, both first-quarter records. While weather activity was elevated in our footprint, our results demonstrate that our underlying earnings engine is performing exceptionally well. Additionally, we are encouraged by the better-than-expected impact of enhanced terms and conditions and targeted property actions, which we believe the meaningful favorable development on prior-year catastrophe losses demonstrates. We generated balanced net written premium growth of 3.2% in the first quarter. We are executing thoughtfully in areas where property conditions are softening.
This approach is enabling us to preserve margin integrity while positioning us for enhanced growth opportunities. Our 2026 plan assumed first-quarter growth would represent the low point for the year. Turning now to our segment results, beginning with Personal Lines. Our performance in the quarter reflects a business that is tracking well, even as external conditions remain fluid. We increased Personal Lines net written premiums by 2.7%, reflecting the effectiveness of our state-specific growth strategies. We continue to prioritize profitable growth in our underpenetrated states while carefully managing our exposure in the Midwest to align with our strategic diversification priorities.
As the quarter progressed, we saw positive new business momentum, reinforcing our confidence in the trajectory of our Personal Lines business. Importantly, pricing levels for the total Personal Lines book continued to exceed loss cost trends, and we remain confident in our ability to preserve margin integrity. Quoting activity, close rates, and conversion metrics also remain healthy, reflecting strong alignment between price, risk selection, and customer value. And we maintained excellent profitability in the quarter, as evidenced by a year-over-year improvement of more than one point in our underlying loss ratio.
Overall, our Personal Lines business is well positioned with our preferred full account strategy, disciplined pricing, and stable customer behavior despite the increased competitiveness in Personal Auto in many states. Moving to Core Commercial. We delivered solid growth of 4.3% in the quarter, led by strong premium growth in Small Commercial and building momentum in Middle Market. Our results reflect improved execution and are well aligned with our profitability objectives. Small Commercial net written premiums accelerated sequentially from the prior quarter, driven by double-digit growth in new business. Transactional flow, digital engagement, and consolidation activity all made positive contributions and are tracking to expectations.
And we believe we are extremely well positioned with our small account customer base and strong agency position, as evidenced by improved retention. Looking ahead, we expect our growth initiatives will enable us to continue to drive our top line while maintaining underwriting discipline. Middle Market growth was positive in the first quarter, reflecting improved momentum, which we expect to build on going forward. Against the backdrop of softening property conditions, we are maintaining underwriting discipline where pricing pressure is evident, with a continued focus on margin preservation.
At the same time, we are implementing pricing and underwriting actions across Commercial Auto and Umbrella to address continued industry loss ratio pressure, while segmentation efforts are enabling us to refine our portfolio toward more attractive risk profiles. Overall, we are pleased with the solid growth we delivered in Core Commercial, supported by strategic positioning of our portfolio and strong momentum in Small Commercial. Turning to Specialty. Our performance continues to validate the inherent strengths of our Specialty business, our clear focus on pricing for risk and returns, and our ability to generate strong profitability ahead of expectations. Growth of 2.3% reflects our measured posture in areas characterized by heightened competition, particularly in property-exposed lines like Hanover Specialty Property.
Top line pressure also reflects our strategy to keep our powder dry, protecting higher-tiered accounts and selectively pulling back from underpriced lower-quality business where returns are less attractive. As an example, net written premiums declined in our Programs business during the first quarter, and while profitability in our book of business is quite good today, we are taking a cautious approach relative to the MGA environment, remaining very selective in our distribution relationships. At the same time, we have seen double-digit momentum in Management Liability, Surety, and Specialty GL, upper single-digit growth in E&S, and positive growth in Professional Lines and Marine. Pricing discipline remains a cornerstone of Specialty execution.
Loss costs and margin focus continue to guide our pricing decisions, particularly as competition intensifies in a softening property environment. Looking at Specialty subsegment highlights for the first quarter, Professional and Executive Lines are taking advantage of a new operating model to enhance execution across underwriting, capacity planning, and workflow modernization. Cross-selling and pipeline discipline are further improving mix quality, supported by closer coordination with our Core Commercial Lines team. E&S grew 8.1%, supported by liability-focused offerings, with property growth tempered in response to competitive market conditions. Our team remains focused on expanding our presence in the small E&S market, where we continue to see attractive opportunities.
In Marine, quarterly growth was expected to be a low point for the year, and results actually came in slightly above expectations. We continue to benefit from our leadership in the Marine market today, and we expect growth to return to upper single digits for the rest of the year. Our Marine team remains focused on selectively allocating capacity and pursuing opportunities that help maintain margin quality and agency relevancy. As we think about the year, we expect overall Specialty growth to ramp up from here. We remain confident in our ability to drive top line growth across our highly diversified Specialty book while we continue to deliver very strong profitability through disciplined execution and targeted investments.
Stepping back from the segment results, the impact of our technology investments is increasingly visible across the organization. We are advancing everyday innovation alongside operating model transformation. By accelerating our quoting processes, improving speed to answer, and strengthening claims execution, we are delivering better outcomes for customers, agents, and employees. We are intentionally building reusable AI capabilities for the most common enterprise tasks to reduce complexity, strengthen execution, and enable scale. For example, risk scoring and AI-enabled triage are helping underwriters prioritize submissions and streamline intake and decision-making. Built on an enterprise ingestion foundation, now used across many underwriting, customer service, and claims operations, these capabilities continue to scale.
All in, this represents a disciplined transformation across the organization, grounded in robust data, modern technology, and responsible AI, and positions the company to operate more efficiently and scale with confidence. We will continue to refine our strategy and business model in ways that enhance the alignment between risk, price, and capital; provide our agents and customers with the most innovative and responsive products and services possible; and drive top-tier results. While volatility, particularly from catastrophe activity, will always be a factor in our industry, our underlying performance continues to demonstrate the effectiveness of our past exposure management actions and stability across a range of conditions.
We plan to continue emphasizing disciplined underwriting as we pursue selective growth where returns are compelling, deploy capital efficiently, and further invest in the capabilities needed to navigate an evolving P&C market. Most importantly, we remain confident in our ability to deliver sustainable, profitable growth and attractive long-term value through a consistent, execution-driven approach. Our unique selective distribution partnership model with the best independent agents in the country continues to boost this confidence. In fact, this month, we held our annual President's Club Conference, which includes the top 5% of our agents.
During the conference, we had many excellent conversations with our agent partners about our business strategies, operational tactics, and ways we could best work together in this complex marketplace. Feedback from our agents has been very positive, particularly with respect to our underwriting and claims transformation efforts. We have successfully navigated dynamic industry environments before, remaining sharply focused, acting decisively, and executing with discipline, and we are committed to doing so going forward. With agility, alignment, and performance at the core of our strategy, we are confident in our ability to deliver on our goals for 2026 and in years ahead, delivering value for our shareholders and many other stakeholders. With that, I will turn the call over to Jeff.
Jeffrey Mark Farber: Thank you, Jack, and good morning, everyone. We are very pleased with the strong results we delivered in the first quarter, which are a testament to the outstanding execution of our team and the diversification of our businesses. Each part of the business contributed to our impressive results, with Personal Lines remaining at outstanding margins, Specialty profitability outperforming our expectations, and Core Commercial posting solid, healthy margins, all bolstered by our investment portfolio, which continues to provide very strong returns. Catastrophe losses were 6.3 points of the combined ratio. We recognized 3.1 points of favorable prior-year catastrophe development, largely from lower severity on 2025 events.
We believe this reflects stronger-than-originally-estimated benefits from terms and conditions changes and other property management and risk prevention actions. As an example, on hail events, we have observed lower severity as a result of increased policy deductibles in both Personal and Commercial Lines. We are very encouraged by what we are seeing, reinforcing our optimism that these actions will drive better stability in our underwriting results going forward. Current accident year catastrophe losses were primarily driven by an unusually severe hail and wind event in March, with the heaviest impact in Illinois and Michigan, and to a lower extent, Winter Storm Fern in January, which impacted many states across the country.
Together, these two events made up over half of current-year cat losses. As claims develop and mature, we will be in a good position to assess the favorable impact that our underwriting actions achieve. Excluding catastrophes, our combined ratio was extremely strong at 85.4%, reflecting a 2.4-point improvement over the prior-year quarter, with loss ratio improvements in each segment. The expense ratio for the quarter was 30.7%, in line with our expectations. We continue to take a diligent approach to expenses, aligning costs with strategic priorities while making targeted investments to support future profitable growth.
For the full year, we continue to expect an expense ratio of 30.3%, as the benefit of growth leverage skews towards the latter part of the year. First-quarter favorable ex-cat prior-year reserve development of $25 million included favorability across each segment. In Specialty, favorable prior-year reserve development was $14.2 million, or 3.9 points, with widespread favorability across multiple coverages. In Personal Lines, favorable prior-year development was $9.2 million, or 1.4 points, with favorability in Home and, to a lesser extent, in Auto driven by property coverages. And in Core Commercial, favorable prior-year reserve development was $1.6 million, or 0.3 points, with minor adjustments by line. Our reserve position remains strong and aligned to the current uncertain environment.
Now I will further discuss each segment's current accident year results, starting with Personal Lines. This business generated an excellent current accident year ex-cat combined ratio of 83.8% for the first quarter, a 0.7-point improvement from the prior-year period. The benefit of earned pricing in both Auto and Home and favorable frequency helped drive a 1.1-point improvement in the underlying loss ratio, driven by Homeowners. In this line, we delivered an outstanding current accident year loss ratio of 46.7%, improving 2 points from the prior-year quarter and favorable to our expectations, helped by the benefit of strong earned pricing.
We also continued to observe lower attritional loss frequency and partially attribute the benefit to deductible changes, leading to fewer smaller claims in both cat and ex-cat results. Our Personal Auto ex-cat current accident year loss ratio was 66.7%, an improvement of 0.2 points compared to the prior-year quarter. We are seeing continued stability in collision frequency, aside from the impact of severe winter weather. Personal Lines grew 2.7% in the first quarter, with PIF flat sequentially, which is an improvement from 2025. We continue to expect PIF growth in 2026. Both Auto and Home achieved strong pricing increases in the first quarter, with Auto up 6.7% and Home up 10.8%.
Umbrella pricing increases also continued to be strong at approximately 19%. Now turning to our Core Commercial segment. We delivered a current accident year ex-cat combined ratio of 91.5%, a 3.6-point improvement from the prior-year quarter. The current accident year loss ratio, excluding catastrophes, of 58.8% was 2.9 points better than the prior-year quarter. 2025 included some elevated property large losses, while large loss performance was within expectations in 2026. Core Commercial net written premiums grew 4.3% in the quarter, propelled by increased momentum in both Small Commercial and Middle Market. Small Commercial grew 6.4%, improving over 1.5 points compared to 2025. Middle Market net written premiums increased 1.5%.
Price levels remain healthy and elevated, particularly in Commercial Auto and Umbrella. Moving on to Specialty. This business continued to perform very well, with a current accident year ex-cat combined ratio of 85.4%. The current accident year loss ratio, excluding catastrophes, was 49% in the quarter, coming in better than our expectations and our low-50s target for this segment, driven by property favorability while liability remained within expectations. The continued exceptional performance and profitability of this segment highlight the quality and positioning of our Specialty business. While growth was pressured in the quarter, it reflects our prudent approach and focus on protecting the strong profitability of the business. We are working tirelessly to ramp up premium growth.
Turning to our recent investment performance, net investment income increased an impressive 19.6% in the quarter, driven by growth in our asset base from strong earnings, the benefit of higher reinvestment yields, and improved partnership income. Our investment portfolio continues to provide steady returns, helped by disciplined positioning and broad diversification. Roughly 88% of our total invested assets are in cash and investment-grade fixed income, highlighting the high-quality composition of our portfolio and the relatively modest size of our other exposures. Our fixed maturity portfolio weighted-average rating is AA-, with 95% of holdings investment grade.
Earned yields on the fixed maturity portfolio were 4.42% in the first quarter, up from 4.08% a year ago, and we continue to reinvest at higher yields than what is maturing. Portfolio duration, excluding cash, remained relatively stable at approximately 4.4 years, consistent with our long-term asset-liability alignment approach. Moving on to our equity and capital position, our book value per share increased 1% sequentially to $101.86, driven by strong earnings in the quarter, partially offset by an increase in the unrealized loss position, share repurchases, and the quarterly dividend. Excluding unrealized, book value per share increased 2.8% sequentially. We continue to actively participate in share buybacks, repurchasing approximately 503 thousand shares totaling $87 million in the first quarter.
Additionally, we repurchased approximately $14 million worth of shares through April 28. We remain dedicated to responsible capital management and prioritizing shareholder value. Our second-quarter cat load is expected to be 7.9 points. To wrap up, we had an exceptionally strong start to 2026 and are confident in our strong market position headed into the rest of the year. The company continues to perform well across the board, helped by our diversified business and earnings stream, as well as our extremely talented team. With that, we are ready to open the line for questions. Operator?
Operator: We will now open the call for questions. To ask a question, you may press star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. At this time, we will pause momentarily to assemble our roster. The first question today comes from Michael Wayne Phillips with Oppenheimer. Please go ahead.
Michael Wayne Phillips: Thank you. Good morning, everybody. I want to start, Jack, with what is admittedly a generic topic but an important one that I think could separate The Hanover Insurance Group, Inc. from peers over the next couple of years. That is where the market, specifically the commercial market, is headed. I will start with an answer here, hopefully not the answer, but I am going to sound too familiar: do not follow the market down, we are laser focused on margins, says everybody.
Obviously, it is a matter of degree, but Jack, can you talk about any structural things within The Hanover Insurance Group, Inc. that, if we fast forward to next year, give us confidence that commercial renewal rate deceleration for Hanover will not be as dramatic as your peers?
Jack Roche: Yes, Mike, thanks for the question. I would start off with the fact that we have the most diversified business and earnings stream in the history of the company, and that is essential as we face off on a market that is going to be showcasing many cycles as opposed to one total cycle that affects all businesses and all geographies the same way. So to be in a position where all of our major business units and most of our geographies are contributing to our profitable growth, that is powerful in and of itself. Within Commercial Lines, having a pretty diversified portfolio across Small Commercial, Middle Market, and nine Specialty businesses again is an extension of that enterprise view.
And we work, as you know, in the small to lower end of the Middle Market. We have a good balance between property and casualty. We have a strong alignment with our agency plan. I think we are particularly well served by leveraging those profit margins into appropriate pricing that does not generate a lot of remarketing activity in this dynamic marketplace. So I think the secret sauce for us is we have figured out how to make money in a lot of different places, and we can navigate and pull different levers across the way without being stuck in one business segment that is in a down cycle.
Michael Wayne Phillips: Thanks, Jack. I think it is a good story. I appreciate the thoughts. Sticking specifically with Small Commercial, one could argue there might be more pressure longer term from advances in tech, at least from a distribution angle. Is that something you feel you have to think about?
Jack Roche: We constantly think about not only how we navigate the contemporary challenges and opportunities, but also where the longer-term view is going to be. I think, like some of our better competitors have articulated, Small Commercial is much more complex than people fully appreciate in terms of how fragmented it is across the distribution system, and how you have to both have a point-of-sale or portfolio approach to some parts of Small Commercial and a separate operating model that gets the appropriate level of underwriting for the upper end of Small Commercial. And then, furthermore, you look at small specialty—how much business really extends into that more specialized line.
I would not say there is a moat necessarily around it, but you have to have made a lot of investment. You have to have a lot of history and data around where the profitability is by line of business, by geography, and by business segment. If you do that well, I think you can manage through at least the short-term pressures. The longer-term view we are very optimistic about because, as you know, Richard can share with you we are heavily invested and excited about some of the transformational opportunities that will take what we do today and make us more efficient and more competitive into the future.
Michael Wayne Phillips: Okay. Wonderful. Thank you for the comments, Jack.
Operator: The next question comes from Jon Paul Newsome with Piper Sandler. Please go ahead.
Jon Paul Newsome: Good afternoon, or morning wherever it is. Thanks for the call. I was hoping you could touch a little bit more on your comments you made around the Programs business. It is kind of hard as an outsider to know exactly what is in there. Are there specific areas within Programs—market-wise, geography—where you might see unusual pricing concerns as well as terms and condition changes?
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Jack Roche: Paul, I will make a couple of comments broadly and then let Bryan speak to Hanover Programs. I will remind you and others that we write program and programmatic business across many business units in our enterprise. As a matter of fact, I do not think there is a single business that does not have at least some programmatic business with individual distributors across the various lines and businesses. Frankly, our Hanover Programs business in total is smaller than the program business that we write across the enterprise in other specialized businesses.
What we articulated in our prepared remarks is that in the Hanover Programs area that we have been working on to improve its profitability, we have achieved the profitability we were seeking and have greatly improved it. But on the margin, we are trying to keep our powder dry for what we think is the next round of opportunities. So I would say we shrunk a little bit, following through on that discipline, and not taking in any material new programs, but we are quite optimistic about how we can translate that into eventually stronger growth in the future. Bryan, do you want to build on that?
Bryan James Salvatore: Yes. First of all, I think you said a lot of that quite well. The Programs business I think you are referring to is the smaller part of our total program portfolio, which actually performs very well. As Jack pointed out, we have worked very diligently on that Hanover Programs book. It is performing well, and the pricing in part of the portfolio is actually quite strong. We feel very good about that. I would add that keeping our powder dry is important. We are finishing up some of that cleanup work, and what we see our agents doing is increasingly leaning towards this area to be able to work their portfolios.
With all the work that we have done, we feel really well positioned to support them across multiple lines, in programs and outside of programs. This is an important space to our agents.
Jon Paul Newsome: That is great. Then maybe some thoughts on the comments you made about Commercial Auto and some of the other severe hotspots. Some of your peers this quarter and in the past have really gotten behind the ball in terms of what is going on. From your perspective, are we seeing an acceleration of some of those severity issues? Or is it just continuing at the high levels we have seen in the recent past?
Jack Roche: I would echo what I said on the last quarter call: there is a maturation of the trends, but at a very high level. We know that the severity of liability cases—whether they are Commercial Auto or slip, trip, and fall or other types of liability claims—are dramatically higher than they were historically. As we have gotten further away from the COVID court closures, we have started to see how those litigation trends come through in some of the jury and judge awards. It is clearly starting to mature. But different carriers are in different places with their book mix, reserve position, and how they have actuarially addressed the loss trend analysis.
We feel really good about the way we have managed through this, but we pay close attention to these liability trends because they are elevated.
Jeffrey Mark Farber: Paul, this particular quarter, our Commercial Auto results were fairly benign in both the current year and prior year. There is not all that much informational content in that statement. I think that, industry-wide, Commercial Auto has reached a plateau of fairly high severity. We are all managing through that and making sure we get substantial rate.
Jon Paul Newsome: Great. Congrats on the quarter. Appreciate the help as always.
Jack Roche: Thanks, Paul.
Operator: The next question comes from Michael David Zaremski with BMO. Please go ahead.
Michael David Zaremski: Good morning. Switching gears to Personal Lines and the continued excellent results for you all especially, but also on an industry basis, should we expect pricing power to moderate more materially toward peers? Or, since you have a more differentiated portfolio, especially regional as well, do you expect to keep pricing well above the industry average? Maybe include how to think about retention as well. Thanks.
Jack Roche: Mike, I will let Richard speak to specifics about the Personal Lines business, but your articulation of where we play and how we are different is an important part of the answer. We are the best account writer in the 20 states we choose to do business in, in the IA channel, and that gives us real staying power. That said, we live in a competitive business. Our account strategy itself is now paying huge dividends, because there is no doubt that in the direct channel, and even in the captive channel, there is real pricing pressure coming, particularly on Auto.
But having Home as part of our proposition is a meaningful part of how we differentiate ourselves and keep ourselves out of that pure Auto pricing market.
Richard William Lavey: A lot of great points there, Jack. I would reemphasize sticking to our strategy—both geography and customer segment—which we believe will help us continue to outperform and stands up better in a competitive market. The full account focus—over 90%—and the fact that we have approximately 76% of a common effective date brings efficiencies to having multiple policies renew on the same date. We have an excellent state management capability, working as a co-CEO with a field leader in each state, driving agency relationships at the desk level.
The analytic tools and practices we have built over the years allow us to stay on top of trends and be laser-like in how we outperform in the marketplace—looking at new business through comparators and adjusting quickly, studying intensely customer behavior on renewals, specifically price elasticity, and making sure we are doing the right kind of renewal pricing to maintain and keep our best accounts. We know who we are, we stick to our strategy. We are not immune, but we believe we can outperform, particularly as we continue to push ourselves upmarket with higher coverage. Our Prestige product is having tremendous success, and that gives us confidence about the future.
Michael David Zaremski: Okay. Great. Maybe shifting to the excellent results in Specialty. If we focus on the core loss ratio, it continues to track below the low 50s, which is great. Are there any items you want to call out that have been better than expected and that we should keep in mind?
Bryan James Salvatore: I am quite pleased with the performance of almost all of our portfolio—really, across the board. The core loss ratios across our lines of business are very strong. The profitability we delivered was broad-based. I would probably highlight that property continues to be very strong from a profit perspective. We have really good profitability across this portfolio, some of that from hard work in parts of the portfolio—discipline in our pricing and portfolio management—but beyond that, I would not single out one area. It is broad-based profit.
Jack Roche: I would add that one of the strengths of playing primarily in the retail agency side of Specialty across multiple businesses is the ability to flex based on market cycles. We used the example of Management Liability last quarter, where we faced several quarters of some pricing pressure. We held on to our book of business but lowered some of our growth trajectory. As we finished up 2025 and headed into 2026, we were able to re-elevate our growth because we maintained that profitability, and pricing discipline started to come back into the business.
That is the secret to being in more specialized businesses: maintain core profitability and have multiple areas where you can bob and weave so you are not trapped in one business that is too cyclical.
Bryan James Salvatore: And to add quickly, our focus on the small to middle market space definitely benefits us, especially right now.
Michael David Zaremski: Just a quick follow-up for education. You continue to highlight Marine. When many of us think about Marine, we think of the more syndicated large account marketplace—Lloyd’s of London-type business. Maybe give us a quick flavor of what the typical Marine account looks like.
Bryan James Salvatore: There is quite a bit to Marine—many product lines. Even there, we focus on the middle market to smaller space. The vast portion of our business in terms of PIF is smaller accounts. A lot of that is builders risk and contractors' equipment—what you would call Inland Marine. Relative to what people often refer to as Ocean Marine, our book does not look like many others you may be thinking of. We do not write a lot of hull coverage. We write marinas and brown water risks—things that are traditionally better performing.
We are fortunate, because of our agent relationships, to have built one of the larger Marine practices in the Inland Marine space and what I think of as lower-severity Marine.
Michael David Zaremski: Got it. Inland was the clarification I missed. Appreciate that. Thanks.
Operator: The next question comes from Analyst with KBW. Please go ahead.
Analyst: Good morning. This is Jing on Meyer. Thanks for taking my question. My first question is Specialty—just a follow-up on that. We see that there is a pricing slowdown this quarter. What is driving that? And you mentioned you will see Specialty growth ramp up from here. What areas are you focusing on, given the slowdown in overall Specialty pricing? Thanks.
Bryan James Salvatore: Thank you. First, we are very deliberate about our pricing. It ties into the second part of your question. This is a very diversified portfolio—nine businesses, 19 separate product areas—focused on the small to middle market space, and they are not all traveling on the same path. We did feel pricing pressure in property—one of our most profitable areas—and we are managing that in a very disciplined way. As Jack pointed out regarding Management Liability, we have a track record of appreciating the profit margin, understanding that we have to compete, but doing that in a measured and deliberate way—sometimes sacrificing near-term growth so that we are well positioned to grow going forward.
That is how we are thinking about pricing in this environment. We do see the ability to continue to drive growth in the areas where we had success: Management Liability, Surety, E&S/Specialty General Liability. We also see increasing growth in Marine and Professional Liability.
Jeffrey Mark Farber: Jing, we had planned for 2026 to be the lowest growth quarter of the year, and that, combined with Bryan’s optimism for the various areas, gives us confidence that we can ramp up growth from here in Specialty.
Analyst: Got it. Very helpful. Thank you. My second question, just a quick one: Is there any underlying reserve movement on the casualty lines?
Jeffrey Mark Farber: I am not exactly sure how to answer that, Jing. Every quarter, we look at our entire book, so we are always making adjustments in terms of our overall reserves. If your question is about prior-year development specifically in Core Casualty, there were essentially no, almost no, movements in individual lines of business.
Analyst: Gotcha.
Jeffrey Mark Farber: Thank you, Jing.
Operator: The next question comes from Rowland Mayor with RBC Capital Markets. Please go ahead.
Rowland Mayor: Hi. Good morning. I wanted to quickly ask on the cat prior-year development. Was that a result of a specific review of how you had booked the business, or are you considering holding some conservatism around the underwriting changes in Personal Lines?
Jeffrey Mark Farber: We look at our cat reserves every single month, and, as we did at the end of March and in April, we looked at 2024 and 2025 reserves. We certainly do not want to get short, so we look at those in a prudent way. But we were really surprised that the level of severity and, to a lesser extent, [inaudible].
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