Definity Financial Corporation

Good morning, ladies and gentlemen, and welcome to the DFINITY Financial Corporation second quarter of 2025 Financial Results Conference Call and Webcast. At this time, all participant lines are in the listen-only mode. Following the presentation, we will conduct a question and answer session. And if at any time during this call you require immediate assistance, please press star zero for the operator. Also note that this call is being recorded on Friday, August 1st, 2025. And I would like to turn the conference over to Dennis Westphal, Vice President of Investor Relations. Please go ahead, sir.

Thank you. Good morning, everyone. Thank you for joining us on the call today. A link to our live webcast and background information for the call is posted on our website at definity.com under the Investors tab. As a reminder, the slide presentation contains a disclaimer on forward-looking statements, which also applies to our discussion on the conference call. Joining me on the call today are Rowan Saunders, President and CEO, Philip Mather, EVP and CFO, Paul McDonald, EVP of Personal Insurance and Digital Channels, and Fabian Rickenberger, EVP of Commercial Insurance and Insurance Operations. We'll start with formal remarks from Rowan and Phil, followed by a Q&A session, during which Paul and Fabian will also be available to answer your questions. With that, I will ask Rowan to please begin his remarks.

Thanks, Dennis, and good morning. The second quarter of 2025 was an exciting one for DFINITY as we announced an agreement to acquire Travelers Canada, a true milestone for our company, and our next step in building a Canadian champion. The addition of Travelers Canada will allow us to surpass our strategic goal of becoming a top five P&C insurer in Canada, and we believe it will generate significant shareholder value through scale benefits and enterprise synergies. leading to an enhanced return profile for the combined business. I will provide an update on this acquisition later in the call. In the meantime, we remain focused on delivering the targeted performance of our existing business and clear progress was made during Q2 on all three of our organic operating ROE levers, as you can see on slide five. We have achieved a break-even level of performance from Sonnet and are well on track to deliver the targeted improvements from expenses by the end of 2026. In addition, we are well positioned to achieve the targeted claims improvements by the end of 2027 and expect to implement Guidewire for property and casualty claims on time and on budget in the fourth quarter. Beyond this, we've said we'd require inorganic growth, which would allow us to deploy our excess capital and introduce leverage into the balance sheet. That is exactly what the traveler's transaction will enable us to do. We can now optimize our previously unlevered balance sheet through the strategic deployment of excess capital and utilization of financial leverage capacity. which we expect will enhance our run rate operating ROE by over 200 basis points. So if I put that all together, I'm confident DFINITY is well on the pathway to a target of sustainable mid-teen operating ROE post-integration. Now turning to the results from the second quarter on slide six, we again delivered on our objectives. with gross written premiums up 9.1% from a year ago, adjusted for our exited line, and a better than target combined ratio of 92.9%. A healthy level of underrunning income More than $50 million in net investment income and a seasonally strong contribution from our insurance broker platform resulted in operating net income of $98.9 million, or 84 cents per share. We ended the second quarter with book value per share of $31.39, up 19.9% from a year ago. inclusive of our private placements of common shares to fund part of the traveler's transaction, as well as continued solid financial results. We generated an operating return on equity of 9.6% over the past 12 months, despite the active catastrophe experienced from Q3 2024, which continues to weigh on operating ROE. Turning to the industry outlook on slide seven, we expect conditions in auto lines to remain firm as insurers aim to keep pace with the combined impact of lost cost trends, ongoing regulatory constraints in Alberta, and uncertainty related to the extent and impact of potential U.S. tariffs and retaliatory actions. We expect market conditions and personal property to also remain firm over the next 12 months. particularly following last year's record level of industry catastrophe losses and the move to higher reinsurance attachment points. In commercial insurance, while we expect overall market conditions to remain attractive, we are continuing to see that some commercial segments have become more competitive. We expect overall pricing in commercial insurance to keep pace with lost cost trends, which have normalized since their post-pandemic peak to low to mid single digits. Slide 8 shows our key financial targets for 2025. As you can see, both top line growth and underlying profitability are at or better than target midway through the year. While I have already expressed the confidence we have in the pathway to an improved operating ROE in the coming years, Despite the drag from higher equity levels, we continue to expect to deliver an operating ROE of 10% plus in 2025. Slide 9 illustrates the composition of our national broker platform. Deal activity continued in the quarter, including a strategic acquisition in Nova Scotia, marking our first location in Atlantic Canada. Our progress with M&A activity and solid organic growth has enabled us to close in on our target for at least $1.5 billion of managed premiums by the end of next year. We continue to view our national broker platform as a vehicle to diversify and strengthen the earnings profile of the business. And with that, I'll turn the call over to our CFO, Phil Mather.