Hanover Insurance Group Inc

Good day and welcome to the Hanover Insurance Group's third quarter earnings conference call. My name is Alan, and I'll be your operator for today's call. At this time, all participants are in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touch-tone phone. To withdraw your question, please press star, then two. Please note this event is being recorded, and I would now like to turn the conference over to Oksana Lukashova. Please go ahead.

Thank you, Operator. Good morning, and thank you for joining us for our quarterly conference call. We will begin today's call with prepared remarks from Jack Roach, our President and Chief Executive Officer, and Jeff Farber, our Chief Financial Officer. Available to answer your questions after our prepared remarks are Dick Levy, Chief Operating Officer and President of Agency Markets, and Brian Salvador, 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 Investor section of our website at www.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 and guidance for 2025, economic conditions and related effects, including economic and social inflation, potential recessionary impacts, tariffs, as well as other risks and uncertainties, such as severe weather and catastrophes that could affect the company's performance and or cause actual results to differ maturely 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-share 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, as I mentioned earlier. With those comments, I will turn the call over to Jack.

Thank you, Oksana. Good morning, everyone, and thank you for joining us today. The exceptional results we delivered in the third quarter once again reflect the strong performance across our business, the effectiveness and the potential of our strategy, as well as the momentum we've established across the organization. In a market defined by continuous change and ever increasing complexity, we're not simply managing our business in the current quarter. We're carefully studying longer term market dynamics, anticipating material trends and developments, and investing in capabilities as we adjust and refine our strategy. And we're positioning our company to continue to deliver meaningful value to all of our key stakeholders over the long term, leveraging the benefits of innovation, discipline execution, and the inherent strengths of our independent agency network. In the quarter, we delivered operating return on equity over 21%, due in large measure to robust net investment income, a very strong XCAP performance, and a quiet catastrophe quarter. As much as ever, we're proud of our continued solid execution as we navigate very complex and diverging market environments across various P&C segments, and we're even more excited about the competitive advantages we're building for the future. What's particularly encouraging is that even as the environment evolves, the markets where we've chosen to compete are relatively rational and healthy. This stability, along with our diversified portfolio, broad-based profitability, and experienced and talented team creates a very solid foundation on which we are building our business, investing in capabilities that are relevant to our agents and customers, and accelerating the continued evolution of our business. Each of our business segments made important contributions in the quarter. Our personal lines team continued to execute exceptionally well, delivering improved profitability and maintaining its focus on geographic diversification. The team achieved steady growth in the low single digits, supported by strong pricing and new business, which is showing positive momentum. Our new business boasts a high-quality profile centered on full account relationships with bundled customers now representing approximately 93%. Our account-focused strategy continues to be a real differentiator in today's market, driving improved retention and higher customer lifetime value. This approach further strengthens our resiliency in the competitive monoline auto market. as we provide our customers with a whole account solution for their complex insurance needs. As most of our property remediation actions are behind us, the rate of PIF decline has slowed significantly. In fact, we're experiencing sequential PIF growth in our diversification states. And we're satisfied with our pricing relative to loss trend, particularly given the successful execution of our goals for the year in terms of repositioning and profitability. The progress we've made has put us in one of the best positions we've ever been in personal lines. Moving on to core commercial. With two strong businesses, small commercial and middle market, our core commercial portfolio offers the flexibility to adapt as market dynamics shift and as we respond to a changing environment while sustaining attractive returns. In the quarter, our core commercial business delivered near double-digit pricing while we carefully balance growth with portfolio quality. For its part, our small commercial business is gaining upward momentum with an encouraging growth trajectory. Strong new business in the third quarter, high retention, and underwriting discipline remain key strengths. Our workers' compensation advantage tap sales rollout is proving to be highly successful. We're now live in multiple states with more expansion underway, which we expect will help drive additional growth. This platform eliminates manual rating and issuance for eligible risks, consolidates policies, and allows agents to generate quotes in just eight keystrokes and in under two minutes for many customers. By increasing straight line issuance with reduced underwriting referrals, it's significantly easier to do business with us while enhancing our efficiency, accuracy, and agent satisfaction. Our small commercial rates remain strong in the quarter. This segment is less susceptible to market cycles, and we have confidence in our portfolio with a focused growth mindset and strong retention of our business. We continue to supplement organic growth with strategic book consolidations and distribution expansion. In middle market, our growth was impacted by a handful of large account non-renewals and lost accounts, which underscores the heightened competition in the larger account property space. As a reminder, even within our middle market portfolio, we primarily focus on the small and midsize account sectors where we can differentiate ourselves with specialized coverages and risk management tools combined with our cost-effective operating model. That said, underlying retention remain healthy, and we continue to focus on accounts that meet our return thresholds, supporting acceptable margin performance and mixed quality. Our differentiated risk solutions capabilities continue to set us apart. Water sensors are now deployed in the vast majority of our targeted buildings. And our expanding telematics capabilities and commercial lines auto are designed to provide actionable insights that help customers better understand and manage their risks. Now turning to specialty. Top line momentum accelerated significantly in the third quarter, as expected. with net written premiums growing at high single-digit pace, a meaningful step up from the first and second quarter. This included strong broad-based growth in a number of key lines, with marine and healthcare delivering solid expansion with sequential acceleration. Additionally, we posted another quarter of double-digit growth in stable margins in E&S. We're well positioned in E&S with a mix that plays to our strengths in a competitive environment. We focus on smaller, lower limit accounts with a tilt towards casualty. The book delivers stable, attractive margins supported by strong underwriting and a thoughtfully crafted appetite. Our dual wholesale and retail distribution model allows for broader market access and provides greater agility in navigating a bifurcated landscape. Our specialty team continued to achieve above target profitability in the quarter. while implementing healthy renewal pricing increases. Our robust profitability provides us with the flexibility to manage pricing strategically where needed. Despite somewhat tighter competition in some lines, in particular property, the overall environment in our target specialty markets remains fairly rational. Lower middle market and small business specialty segments, where we choose to operate, are typically associated with lower cycle volatility and more resilient pricing. As a result, our markets continue to present attractive opportunities for profitable growth, and we're gaining meaningful top-line traction. Before I wrap up my prepared remarks, I want to highlight some significant initiatives that are transforming our specialty operations. In professional and executive lines, we've implemented a new operating model to streamline quoting and to further strengthen agent relationships. Speed has become increasingly important to agents and clients, so we've redesigned workflows to improve turnaround times across quoting, processing, and binding. Smaller, more transactional accounts are handled efficiently, primarily through technology with input from transactional underwriters. while larger, more complex opportunities are directed to our most experienced underwriters who take a more consultative approach. This shift is already driving efficiencies while allowing us to build deeper agent partnerships, particularly as many of the larger distributors are refining their operating models to create more efficiencies and improve their margins. At the same time, in E&S, we're fine-tuning and training a new AI-powered underwriting tool that streamlines the intake and triage of submissions from agents and brokers. This tool leverages our existing systems and artificial intelligence to structure submission data and then triages the submission against our risk appetite and other proprietary underwriting criteria. The benefits of the tool are substantial. Enhanced operating efficiency and accelerated processing times result in significantly faster submission turnaround and market improvement in service levels. Moreover, it creates an enhanced agent experience with faster approvals or declinations and quicker buying times where appropriate. An important aspect of this AI-powered engine is that it is built upon modular architecture, which enables future scalability and therefore can be extended into middle market, marine, and other specialty lines, and even claims over time with modification and customization. This scalable approach we're taking ensures that innovation developed in one segment can be adapted and deployed across our enterprise. maximizing our return on investment while accelerating the transformation of our entire business. With a clear strategy and continued investments in capabilities, talent, and technology, we're building a specialty business that's agile, scalable, and well positioned to meet evolving market needs, all while setting a high bar for performance and partnership. Our third quarter results further demonstrate that our strategy is delivering. We are achieving target or above target returns across most segments and geographies, positioning us well for growth acceleration into 2026. These results reflect the effectiveness of our portfolio mix, discipline risk management, and strong execution capabilities. We're excited about the momentum we're building across the enterprise, delivering with consistency and clarity while investing in our business. These investments, combined with our disciplined approach to underwriting and our strong agent relationships, create a powerful foundation for sustained success. With that, I'll turn the call over to Jeff.

Thank you, Jack, and good morning, everyone. We're very pleased with our strong results in the quarter. marked by several third quarter records, including operating earnings per share of $5.09 and a combined ratio of 91.1%. This excellent performance reflects our continued momentum and underscores the strength of our positioning as we head toward finishing the year and look forward to continued success in 2026. Our combined ratio excluding cats improved 0.2 points from the prior year quarter, primarily driven by improvement in personal lines. Catastrophe losses of three points came in 3.8 points below our third quarter assumption and lower than historical averages. Benign weather played an important role, and our property management actions have also contributed positively to our cat and ex-cat results. Our expense ratio of 31.3% was slightly above expectations, driven primarily by higher variable agency compensation, reflecting better than expected year-to-date results, including much lower catastrophe losses. We remain focused on managing expenses carefully, while investing strategically in initiatives that drive our long-term success. Third quarter favorable ex-cat prior year reserve development of 12.1 million included modest favorability across each segment. In specialty, favorable development was 10 million or 2.8 points with widespread favorability, most notably in professional and executive lines claims made business. In personal lines, favorable prior year reserve development was 0.9 million driven by home And in core commercial, favorable prior year reserve development was 1.2 million. Favorability across a few coverages was partially offset by increased reserves in commercial auto as we respond to increased severity. Now I'll further discuss each segment's current accident year results, starting with personal lines. This business posted an outstanding third quarter current accident year XCAT combined ratio of 85.8%, improving 3.4 points from the prior year period, primarily driven by strong improvement in our homeowner's line. Our personal auto XCAT current accident year loss ratio was 69.1%, an improvement of 0.7 points compared to the prior year quarter. driven by the benefit of earned pricing and continued favorable loss frequency across multiple coverages, most notably in collision. Turning to homeowners, Our ex-CAT current accident year loss ratio of 47.2% was an 8.5 point improvement from the prior year period and favorable relative to our expectations driven by strong earned pricing and lower attritional loss frequency, which as previously mentioned, we partially attribute to more benign weather. Personal lines grew 3.6% with new business momentum continuing to accelerate Growth is especially strong in our target diversifying states. We achieved renewal price of 10.5% in the quarter, with auto pricing up 8% and home pricing up 13.9%. While price increases were lower sequentially, they remain above our long-term loss trend. Umbrella pricing remains strong, holding above 20% and consistent with the second quarter. We are satisfied with our current personal lines rate levels in light of the strong overall profitability we've achieved. Now turning to our core commercial segment. We posted a current accident year ex-cat combined ratio of 94.3%, two and a half points above the prior year period driven by the loss ratio. We continued to prudently increase picks in commercial auto in response to increased severity, and we also experienced a couple of larger claims in workers' comp in the quarter. Core commercial net written premium grew 3.5% fueled by strong momentum in small commercial, where top-line expansion accelerated on the back of double-digit new business growth and healthy retention. Overall retention in core continues to be robust at 84.4%, underscoring the quality and stability of the book. Core pricing moderated slightly, reflecting lower exposures from the slowing economy, while underlying rate increases remained stable and continued to outpace loss trends. Moving on to specialty. The business performed exceptionally well, posting a current accident year combined ratio ex-cat of 86% and a current accident year loss ratio ex-cat of 48.8%, slightly above the prior year quarter but better than our long-term expectation of low 50s for this business. Property performance continued to be favorable and liability coverages remained within expectations. Specialty renewal pricing was 8.3%, up slightly from 2Q, while at the same time, retention improved sequentially to 83.2%, underscoring the continued appetite for our offerings. Pricing remains strong and above loss trend. We are very pleased with the consistent execution in our specialty book, including an accelerating top line, and remain confident in our positioning to further capture attractive growth opportunities in our markets. Moving on to a discussion of our investment portfolio, which continues to provide higher returns and remains a key source of our earnings power, Net investment income was exceptionally strong, increasing 27.5% from the prior year quarter to $117 million, reflecting growth in our asset base from underwriting and investment activity, improved partnership results, the benefit of higher reinvestment yields, and the success of our portfolio repositioning efforts. During the quarter, the realization of certain tax carrybacks enabled us to further reposition the portfolio. Third quarter NII also included a benefit of approximately $2 million from the investment of funds from our recent $500 million debt issuance. We expect a benefit in the fourth quarter of approximately $4 million. However, this benefit is offset by higher interest expense on our debt. The debt level is temporarily elevated following our issuance, as we have $375 million of senior notes maturing in April 2026, callable in January at par. Our fixed maturity portfolio continues to carry a weighted average rating of A+, with 95% of holdings investment grade. Portfolio duration excluding cash remained stable at approximately 4.4 years, consistent with our long-term asset liability alignment approach. We also maintained limited exposure to variable rate instruments, providing stability in our investment income and reducing reinvestment risk as short-term rates decline. Moving on to our equity and capital position. Our book value increased approximately 7% sequentially and 21% year-to-date. We were active in share repurchases in Q3, demonstrating our ongoing commitment to returning capital to shareholders as a key component of our capital management strategy. From the beginning of July through October 27, the company repurchased approximately 323,000 shares of common stock, totaling $55 million, of which approximately 213,000 shares were purchased during the third quarter of 2025 for approximately $36 million, with the remaining balance purchased through a 10b-5-1 plan during October. We have approximately $210 million of remaining capacity under our existing share repurchase program. We're entering the final quarter of the year from a position of real strength, delivering a 19.1% operating return on equity, a 92.6% combined ratio, and operating income per diluted share of $13.31 year-to-date. These results underscore the power of our diversified earnings engine and disciplined execution across the enterprise. Each quarter of this year, we've been slowly ramping up our top-line growth. Looking ahead, we expect premium growth to continue to accelerate, given our smaller-sized account focus in commercial lines and the momentum we are building in personal lines diversification states. Our fourth quarter cat load is expected to be 5.2%. With a strong foundation, resilient portfolio, and exceptional team, we are well positioned to sustain this performance and to continue creating meaningful value for shareholders. With that, we are ready to open the line for questions. Operator?

We will now begin the question and answer session. To ask a question, please press star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question today comes from Michael Phillips of Oppenheimer. Please go ahead.

Thank you. Good morning, everybody. I wanted to start with the large account property in the middle market business, just because we've had some kind of mixed stories from others. And I guess I'm going to hear your opinion of whether you think we've reached a floor for pricing there, first off, and then any impact specifically on your margins in the near term because of that.

Mike, thanks for the question. This is Jack. I'll say a couple words here and then let Dick obviously respond with a little bit more specificity. I think overall you know that we have remained fairly conservative in the upper middle market, whether it be property or casualty driven. That tends to be where the market softens the quickest or decelerates in pricing. And frankly, we differentiate ourselves in a more dramatic way in the low to midsize account, particularly with our specialization and niches. So I do think that we are getting to the point where the competition is that has increased, has to recognize that the property pricing can't continue to go in the wrong direction, and the liability trends are gradually going to need to be addressed. So we think there is likely, hopefully, some bottoming out of that, but that's not where we focus most of our energy. Yeah, I don't have too much to add to that, Jack.

I mean, I'd say it's, you know, we take each account one by one. And we look at what we believe to be the technical pricing on those accounts. And we look at the full account, obviously. So we think about pricing property in the context of the other lines as well. So it's hard to say if the floor is here, but we're certainly going to remain disciplined. And we've been really disciplined about our ITVs and making sure those are in good order. So we'll continue to fight the fight account by account.

Okay, no, thanks, both. I guess turning to the core commercial and the action-year loss ratio, you said pretty clearly the 2.4 points was the large workers' comp and then the addition to commercial auto. But I guess given comments recently from you guys on pricing and loss trends there, I guess X that two things, your core loss ratio, it sounds like it was probably flat. Should we have expected some improvement there? And I guess what's your confidence that we might get some margin expansion in core commercial in 2026? Thanks.

Mike, it's Jeff. We'll give our guidance on our loss ratio and the combined ratio when we get to January. But I think overall, we're very confident and optimistic about the price increases that we've been getting relative to loss trend. And it's hard to talk about individual lines, but I am optimistic about the firm overall, given the 9.9 points of price we're getting in core commercial. And I think that bodes well when some of the things that showed themselves in this quarter start to normalize.

Okay. Thank you, Jeff. Appreciate it. Thanks, guys. Congrats.

Thank you. Bye. Our next question comes from Matt Carletti of Citizens. Please go ahead. Hey, thanks. Good morning.

Morning.

You guys have done, I think, a really good job in recent years of kind of staying ahead of the eight ball in a really challenging environment. Jack, you made some comments about, you know, remaining forward-looking and not just kind of in the past and gave a few concrete examples. I was hoping maybe you could zoom out kind of 30,000 feet. And as we look forward for Hanover over the next, you pick your period, one, three, five years ahead, kind of just kind of strategically where you want to take the business. I mean, if I'm hearing from some of your examples, I think I'm hearing speed and efficiency and ease of doing business, you know, with your agents is kind of a key focus, but what else might be on that list?

Thanks, Matt, for that, for that question. And, and I can't, I can tell you that I've never been more optimistic about our future. Sincerely. It's, it's, It's really hard in our business to build a diversified portfolio that has broad-based profitability. And frankly, we're right where we want to be in that regard. You're never going to get to the point where everything is perfect, but to have four major businesses contributing to our profitability, most of our geographies in relatively good position to grow, that's really the horsepower you need in order to lean into the current marketplace. We had, obviously, an opportunity to build on the momentum in small commercial and specialty, and I really am optimistic that middle market will be able to contribute, particularly next year, in our profitable growth. And personal lines is already where we need it to be. The only restraint that we have is one that we've self-imposed around diversification and making sure that our property aggregations are appropriate relative to earnings volatility. So I really believe we're at a point now where our capabilities are, we're not done in terms of building new things and expanding our appetite where it's appropriate. But I would say that what we're most excited about is that the distribution is starting to come to us. Increasingly, the best agents in the land are looking to improve their margins on the small base value, whether that be personal lines, small commercial, or even in the small specialty world. So I think we have an opportunity to take our operating model work that we've highlighted and lean into the changes in the distribution system that are making, frankly, creating a higher demand for what we already do. And refining that and improving upon that is gonna be a big part of the way in which we improve our own economics, but we help agents improve their economics. So you should expect us to talk, you know, early in 26 about how we're going to elevate our underwriting appetite at the right time, and I think we're positioned to do that, particularly in specialty and middle market, and look at additional sectors for both growth and relevancy. We have a track record of doing that, and we're ready to kind of use our elevated profitability to help us kind of lean into those opportunities. Thanks, Jack. That's super helpful. Thank you. I appreciate it.

Our next question comes from Mike Zarensky of BMO. Please go ahead.

Thanks. Good morning. I'm switching to personal lines. On the home insurance side, and I appreciate the comments about the percent that's bundled now, definitely higher than historical. Just so we can maybe better appreciate the durability of the current profit margins, would you be willing to share how much lower the frequency levels are that you expect kind of under the new terms and conditions, deductibles, et cetera, versus kind of the old portfolio?

Mike, that's really hard to say. At present, the frequency benefit is substantial. We haven't really shared that, and I don't think we're prepared to do that. But both in terms of auto, particularly around collision, and in homeowners, we're seeing it. And as most have talked about, it's really hard to tell in auto whether it relates to safer driving because of technology, safer driving because people are concerned about premiums going up or just general concern where they've actually had a claim and they don't want to make a claim for fear their premium would go up or all of the above. Going forward, we're trying to assess right now whether we think that frequency benefit is going to continue in both home and auto as we plan and ultimately as we give our guidance for next year. So stay tuned when we come back to you in late January, early February on the call. We will do our best to give you that readout.

Okay, great. Pivoting to the core commercial segment, the underlying loss ratio, you know, you called out, you know, what might be some one time on work comp, but then, you know, commercial auto, I think we'll assume that just given the state of commercial auto for a long time that maybe that's more run rateable, the impact it's having. I'm assuming in the past, I think you've talked about a 57 to 58 action or loss ratio target in that overall segment. Is it fair to say that we should be thinking a bit higher?

That's hard to say. This year, as you know, it's 60. A year ago, it was in the 58 range, and I think that's a reasonable target. I'm still optimistic about that. even though we've raised our picks in commercial auto, the team is actively working that book and assessing and trying to obtain some price increases there. So still optimistic that that's the appropriate level going forward. Okay, got it.

And lastly, just on the overall competitive environment, I know you've touched on this a bit already, but I think that one of the main questions we've been fielding for a while now from investors is just the the rate of change on pricing power in commercial. You know, the pricing is accelerating a bit, but it's not accelerating a lot. So maybe you can kind of talk about, you know, are you guys doing something different in the market with, like, underlying actions that's keeping pricing propped up, or is just the market not as competitive as some might think it is when they look at especially the large account space?

Yeah, Mike, this is Jack. Thanks for that question. You know, I think at the highest level, it's where we play and who and how we do business with agents. We're focused on the small to lower end of middle market business, not only in core commercial, but in specialty. And that is, I think, something that is not as easy to kind of address for a lot of carriers because it requires a a unique operating model and an ability to underwrite efficiently beyond just point of sale systems. So I think there's not exactly a mode around it, but I think it's much more stable business historically. And I think you're also seeing with some of the volatility in the upper middle market, both in specialty and middle, that agents have less and less time to worry about saving a few dollars on the Schmidl market, if you will. So I think that's part of the influence. But we do work hard in creating some value such that preferred accounts can stay with a preferred market. And I do think that is how agents perceive us. Maybe you could just give Brian a chance on the specialty area in particular to highlight why we think we're kind of having sustained pricing even in a relatively competitive market.

Yeah, sure. And I would say, Jack, to start, our play in that small and middle market segment, we see the competitive pressure, but it's definitely not as pronounced as we're seeing in other areas. And I think the work that we've done on our operating model to what I believe really solves a need for our agents, especially the larger agents, the consolidating agents, and they're streamlining their placement platforms And so our ability to turn the submissions around same day in a lot of instances and really help their economics in this space, it doesn't, to your point, it doesn't create a moat around the business, but it absolutely provides us the benefit of their appreciation for the work that we do with them and, frankly, also just delivering a breadth of of products that are healthy so we can solve a range of their needs in a really efficient way.

The strong growth this quarter, the high retention, and also the high price increase that we're getting I think is good evidence that Brian's strategy is clearly working.

Thank you.

As a reminder, if you have a question, please press star, then 1. Our next question comes from Paul Newsome of Piper Sandler. Please go ahead.

Good morning. Thanks for the call. I was hoping you'd maybe give us some thoughts, updated thoughts on the expense ratio goals. At one point, you were kind of looking for about 20 basis points of improvement per year, but that kind of got derailed by some other issues and some exchanges. If we look at 25, are we at kind of a place where you can think about returning to that goal, or is that something that you just have to revisit entirely?

Over the long run, we are committed to that goal of 20 basis points per annum improvement, and that was built into our guide of 30.5, and we'll address that end of January, February when we do our fourth quarter call. What I've said from time to time on these calls when asked about it, when we have years or periods where the loss ratio is below what we had guided to in the combined ratio, and also when cats are below our guide, there are scenarios where the expense ratio has to increase a bit, but that would be a small offset to the overall decline in the combined ratio. So even if you think about CATS, when we have lower CATS, there are slightly higher agency profit share that has to be paid. So it's a little harder to deal with the expense ratio in and of itself. But overall, Paul, we are committed to that long-term objective.

That's my only question. Appreciate the help as always.

Thank you, Paul. Thank you. Our next question comes from Meyer Shields of KBW. Please go ahead.

Great. I wanted to really get Jack's thoughts on both core and contingent commission rates. In the past, as pricing has softened, I think the broker's hands have gotten strengthened and they've been able to push for more. And I'm wondering whether you're seeing that and whether consolidation of the smaller account space among the larger brokers is playing a role.

Thanks, Mayor. Listen, I can tell you that as recently as the CIEB conference in October, we have had what I think is some of the most strategic dialogue with the biggest and best agents in the land around how we have a unique opportunity to work together to better serve customers in a more efficient way. And frankly, we've been really upfront that we don't get there by exchanging the last nickel that we both earn and move our margins into brokers' margins. What we've been successful in doing heretofore, and I think we can continue to do that, is use our capabilities to help agents improve their margins, particularly on the lower face value business, and to grow their business in a very strategic way through our partnering approach. And I really believe that the way in which we engage with agents keeps us out of a tug of war for the last nickel. And so we have not seen any major pressure in that regard. In fact, the bigger the agents get, the more they want some stability in their contingencies. So we negotiate a proper balance of guaranteed supplemental type of stuff so that they don't come up dry on a less good year. but we simultaneously negotiate kind of taking some off the top to pay for that over time. So I feel great about the way we're working with those agents in a very strategic way, and we're going to continue to push that as part of our strategy.

Okay, perfect.

That's good to hear.

Related question, when you see technology that's certainly better to a lot of the competitors that are out there, and the business that you win from that perspective, should we think of that as recurring, or is that like a one renewal cycle, and then you've already gotten what you're going to get?

Maybe you could clarify for us a little bit, Mayor, when you say a one-time benefit, tell me what you're thinking.

So I'm wondering whether you go through a year, and Agent X has technology that gets responses much faster and stuff like that. So you've boosted the new account wins on that basis. Does the accelerated growth, is that something that persists going forward or is it just similar growth off of a higher base?

Let me let Dick kind of respond to that more holistically. But I think we're in a phase where you know, agents are looking at who are their most strategic markets that can help them become more efficient and better serve customers at the right level. And all these things are tools. So I think embedded in all that is if you're positioned as a top tier market, whether it be in small commercial or in specialty, particularly on the small end, you're creating a kind of a strategic position that has some sustainability to it in terms of profitable growth. But You can update on the technology side.

Another color I'd add to that, Mayor, is it isn't just about the technology on the way in, the front door. Your technology, your system, your operating model needs to wrap around that customer throughout the year through your renewals that persist. How are you at handling endorsements and certificates and calls on billing? So it's a collection of services that brings forward a a terrific experience so that the customer is happy with the carrier, happy with the agent. And as you know, particularly in a small commercial, the retentions are quite high. We have some of the highest retentions in that market segment in the industry. So we've been at this for years to obviously have a forward-facing ease of quoting so that that comes to us preferentially, but then the stickiness of that business is dependent upon all the other components that you have in your operating model. So I would argue that it sustains the growth model.

Yeah, and if I could, this is Brian, if I could just add one more thing. We've also worked really diligently in the small space on making the renewal process very low touch on those small, simple policies. So I would definitely say it's not just on the new business, but it goes through the process.

Okay, that's very thorough. Thank you so much.

This concludes the question and answer session. I would like to turn the conference back over to Oksana Lukashova for any closing remarks.

Thank you very much, everybody, for your participation today. We're looking forward to talking to you next quarter.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.