Definity Financial Corporation

Good morning, ladies and gentlemen, and welcome to the Defendity Financial Corporation's first quarter of 2026 financial results conference call and webcast. At this time, our lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you need assistance, please press start for the operator. This call is being recorded on Friday, May 8, 2026. I would now like to turn the conference over to Dennis Westphal, VP of Investor Relations. Please go ahead.

Thank you, and 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 thefinity.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 Roland Saunders, President and CEO, Philip Mather, Chief Financial Officer, Fabian Rickenberger, Chief Operating Officer, Paul McDonald, EVP of Personal Insurance and Digital Channels, and Obed Rahman, EVP of Commercial Insurance. We'll start with formal remarks from Rowan and Phil, followed by a Q&A session, during which Fabian, Paul, and Obed will also be available to answer your questions. With that, I will ask Rowan to begin his remarks.

Thanks, Dennis, and good morning, everyone. This quarter marks a pivotal moment for our company. as these are the first results to reflect our new position as a top five P&C insurer in Canada, following the closing of the Transformative Travelers transaction on January the 2nd. The transaction accelerates our ambition to build a Canadian champion in several ways. Beyond advancing our leadership position, the combination adds significant scale to our operations, diversifies our product mix into attractive new segments, and substantially deepens our broker relationships across the country. Just as importantly, it enhances our talents and capabilities by bringing the deep expertise of the new team members into our organization. And we've been very pleased to see strong retention of key talent since the transaction was announced. In short, this acquisition has created a more powerful and resilient business, and our strong first quarter results are the first evidence of that enhanced potential. The integration is moving at a remarkable pace, as you can see on slide five. To provide a tangible example, we have already harmonized the new business intake channels from our combined broker network. meaning that as of February, all new business is being written as a single, unified, definitive offering. Holding on that success, the process of converting existing policies began in April. This rapid progress is a testament to our disciplined playbook and the incredible work of our dedicated integration teams. This early success reinforces the powerful strategic rationale of the deal and is most evident in our synergy plan. We have already achieved an annual run rate of $36 million in expense synergies by quarter end, putting us in an excellent position to deliver on our three-year $100 million target. Given this momentum, we now expect approximately one-third of this target to earn into underwriting income in the first 12 months alone, a significant acceleration of our plan. These are tangible cost savings already being realized. The synergy plan is a key component of a larger story about value creation. The acquisition solidifies our pathway to a sustainable mid-teen operating ROE, a target we intend to achieve through two distinct but complementary set of drivers, which you can see illustrated on slide six. First is the continued execution of our organic improvement plan. You can see the progress we've made on our three organic levers. We have already achieved a break-even level of performance from solid, are on track to deliver our targeted operating expense enhancement by year-end, and are well positioned to achieve at least another point of benefit from our claims transformation by the end of 2027. This organic engine remains a fundamental part of our strategy. Second, The traveler's transaction acts as a powerful accelerator, adding at least another 200 basis points of ROE improvements on top of our organic plan. This comes from three primary inorganic levers. The direct impact of $100 million in expense synergies I've just discussed. Two, the step change in net investment income from a much larger asset base. And three, the benefit of creating a more efficient balance sheet by deploying excess capital and introducing leverage. So when you put it all together, the path forward is clear. The combination of our demonstrated organic improvement plan with the powerful financial levers unlocked by the Traveller's Transaction. gives us a high degree of confidence in our ability to deliver a sustainable mid-team operating ROE post-integration. Turning to our performance in the first quarter on slide 7, we delivered strong results across the board. From a top-line perspective, gross written premiums grew by over 35%, a solid start towards our full-year guidance of $6.5 billion. Our overall profitability was a standout this quarter. We delivered a strong consolidated combined ratio of 92.9%, and for the first time in our history, generated over $100 million in underwriting income in our first quarter. Achieving this level of profitability while integrating a business of this scale is a testament to the strong underlying performance across our portfolios and the discipline of our teams. Our diversified earnings power was also on full display this quarter. Our national broker platform, a key strategic pillar for us, showed excellent momentum with operating income growing by nearly 25% year-over-year. This powerful distribution engine, combined with our strong underrunning results and more than 60% increase in net investment income, produced operating EPS of $0.97. and an operating ROE of 13%. This clearly demonstrates the value and resilience of our diversified business model. Turning to the industry outlook on slide 8, we expect overall conditions in personal auto 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 macroeconomic factors. We also expect market conditions to remain firm in personal property over the next 12 months as the industry continues to remain diligent, taking underwriting and pricing actions required to fund weather loss events amid heightened climate risk. In commercial insurance, while we expect overall commercialized market conditions to remain attractive, we have seen competition intensify in the large account space. We continue to expect overall industry growth to be in the low to mid-single digits over the next 12 months, varying by segment. Against this backdrop, our sophisticated pricing models, modern technology platforms, and disciplined underwriting give us a distinct advantage. We are confident in our ability to navigate these industry trends effectively, select the right risks, and price our products appropriately to deliver sustained, profitable growth. In summary, this was an important quarter for DFINITY. We successfully closed a transformational acquisition by demonstrating strong early progress on integration and synergy capture and have delivered robust operating results in a dynamic market. We are confident that we are building a formidable leader in the Canadian market, one that delivers sustained value for our customers, our brokers, and our shareholders. With that, I'll turn the call over to our CFO, Paul Mather, to discuss the results in more detail.

Thanks, Rowan. As already mentioned, the diversified earnings power of our combined business was evident, with strong performance from all our profit drivers. Slide 10 illustrates that our consolidated gross written premiums grew by an impressive 35.4% to $1.4 billion, given primarily by the successful onboarding and strong retention of the acquired business, complemented by continued solid organic growth. This growth translated into a 41% increase in net underwriting revenue. Our consolidated underwriting income was a record for a first quarter at $100.1 million, resulting in a combined ratio of 92.9%. This represents a 1.6-point improvement from a year ago, a particularly strong result given the inclusion of the acquired business, and demonstrates the strength of our underlying portfolio as we absorb the initial impact of the acquisition ahead of realizing planned synergies. I will now provide some more detail on our lines of business, starting with personal auto on slide 11. Grocering premiums grew by over 35% in the first quarter of 2026, due primarily to the acquired premiums and continued rate achievement. I'll point out that the contribution from the acquired business varies significantly by quarter, demonstrating the highest growth in Q1. For the full year, we anticipate growth to be in the low 30s for personal auto. The combined ratio of 97.5% was consistent with a year ago, as we absorb the temporary and expected impact of the acquired business prior to realizing synergy benefits. In personal property on slide 12, we delivered top line growth of 37.3%, again driven by the acquired premiums and continued rate achievement. Unlike personal auto, we expect a more consistent quarterly rate of growth in property throughout 2026. We delivered a robust first quarter combined ratio of 85%, a significant improvement of 9.1 points from the prior year. The improvement in the combined ratio was driven by a decrease in catastrophe losses, which were largely in line with expectations in the first quarter of 2026, compared to elevated levels in the first quarter of 2025, and the decrease in the core accident year claims ratio. Turning to slide 13 and commercial insurance, top line growth was 34% from a year ago, altered by the acquired premiums as well as pricing increases and ongoing market share gains in small business and specialty lines. As the integration progresses, we anticipate an increasing pace of growth in commercial lines gross written premiums in subsequent quarters, and maintain our expectation for it to represent approximately one-third of overall company premiums in 2026. The combined ratio of 93.9%, which increased as expected, reflects the solid profitability of this business. This resulted from the inclusion of the acquired business and its associated expenses, which we expect will temporarily increase the core claims and expense ratios prior to the benefits of future plan synergies. Looking forward, this acquisition meaningfully expands our growth potential in this business, as you can see on slide 14. The addition of specialized talent and deep expertise unlocks segments where we previously had limited or no presence. For example, adding capabilities in areas like professional liability, ocean marine, and cyber expands our total addressable market in commercial lines from $27 billion to approximately $34 billion. This nearly $7 billion increase in market opportunity gives us a significant new runway to profitably grow our commercial business in the years ahead. Turning to slide 15, net investment income grew over 60% to $79.9 million. This was driven primarily by the larger asset base from the acquisition, in addition to our proactive repositioning as fixed income yields increased. Given this strong performance and our view of the current yield environment, we now expect our net investment income for the full year 2026 will be approximately $320 million. Our broker distribution platform operating income grew by nearly 25%, driven by strong policy growth and favorable contingent profit commissions earned on a high-quality portfolio. As indicated last quarter, Commission income grew as a proportion of overall broker operating income, now reflecting our ownership of the acquired business. For the full year, we maintain our guidance for growth of approximately 20% in broker operating income. The combined performance of our underwriting, investment, and distribution operations generated operating net income of $118.1 million, or 97 cents per share, representing a 55% increase from a year ago. Our trailing 12-month operating ROE also increased to 13%. Now, turning to some early wins on the travelers transaction, which illustrate the disciplined financial execution we brought to the acquisition. I'll point you to slide 16 for the details. Across the board, the execution and financing have exceeded our initial modeling. First, the transaction itself was more efficient than planned. Reinsurance renewal outcomes were materially better than expected, and overall acquisition costs are tracking approximately 10% below our expectations. Second, our financing outcomes were highly favorable. Interest rates on our new debt were 40 basis points lower than modeled. Furthermore, by repaying a term loan five months earlier than expected, We saved approximately $15 million in future interest expense. The discipline continues with our synergy plan on slide 17. While Rowan mentioned our strong start, this slide provides a transparent look at both our progress and the associated costs. On the left, you can see we're at a $36 million run rate for synergies, with $6 million realized in our Q1 underwriting results. While these initial savings are largely from the elimination of U.S. parent company service charges and proactive attrition management, the next phase of synergies will be driven by technology platform consolidation and operational efficiencies as the integration progresses. Just as importantly, the right side shows the cost to achieve these savings. To date, we have incurred approximately $93 million in acquisition costs, and recorded $44 million of integration-specific expenses, keeping us firmly on track with our total estimates. The benefits of this disciplined execution are also clearly visible on our balance sheet, as shown on slide 18. Our debt to capital ratio is already down to 26.8%, approaching our long-term target of 25%, well ahead of our 24-month guidance. Even after funding this major acquisition, our total financial capacity remains robust at more than $1.1 billion, putting us in an enviable position to fund future organic growth and deliver on our capital priorities. This disciplined execution underpins our financial strength and the strong results we've reported today. With that, I will turn the call back over to Rowan.

Thanks, Lowell. To conclude, this quarter represents a launch point for the new DFINITY. We have successfully closed a transformational acquisition by demonstrating strong early progress on integration and synergy capture and have delivered robust operating results. This performance validates our strategy and highlights the durable value of our diversified business model. With strong contributions from underwriting, distribution, and investments, we are confident that our modern platform and clear growth strategy have us well positioned to continue building a Canadian champion. As we pursue our updated goal of becoming a top three P&C insurer, we remain focused on discipline execution, technology and analytics, broker partnerships, and broad-based growth. Finally, I want to touch briefly on our commitment to innovation. As we announced in March, we are expanding our strategic relationship with Google Cloud by deploying Gemini Enterprise for all DFINITY employees, making us one of the first Canadian companies to adopt it company-wide. This is a key step in our journey to grow our digital and AI advantage. Our approach is about more than just technology. It's about empowering our employees to unlock innovation, foster creativity, and boost productivity. By embedding these intelligent tools directly into our daily workflows, we are reshaping how we work to drive efficiency and deliver exceptional experiences for our brokers and customers. This initiative builds on more than a decade of experience leveraging AI, and we are confident it will further strengthen our operational resilience and cement our position as one of Canada's leading and most innovative P&T insurers. With that, I'll turn the call back over to Dennis to begin the Q&A session.

Thanks, Roland. With that, we are now ready to take questions.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star, followed by the one on your touch-tone phone. You will hear a prompt that your hand has been raised. If you wish to decline from the polling process, please press star, followed by the two. And if you are using a speakerphone, please lift the handset before pressing any keys. First question comes from John Aiken with Jefferies. Please go ahead.

Good morning, Phil. In terms of the change in the balance sheet, I completely understand how you're driving down the leverage ratio, but can you talk about the mechanics of the MCT ratio that drove the increase in the quarter? Granted, I found it a little bit surprising, but I'm sure there's something that I missed in the calculations.

Yeah, thanks, John. So you do see that the NCC ratio is higher than we'd normally operate it in Q1, and that was really born out of some kind of prudence on the way into the acquisition. So a couple of things happened there. First thing is the overall balance. generally speaking for the company, was in a strong position. So, you know, what we acquired had additional asset base attached to it, and that additional asset base rolls into the kind of consolidated MCT position. So that was, if you look at the consolidated goodwill, there's about $100 million, though, of additional kind of value that we have acquired through that transition fees. And goodwill and intangibles, you don't get any capital credit for that. So that plays through the I think the other things I would say which were more on the kind of prudent positioning side um the reinsurance structure we acquired we changed that on the renewal so we actually took that acquired business to our risk appetite in doing stuff that created some additional comfort and protection against insurance risk so that contributed close to 100 million dollars to of effective management essentially we're buying at a you know a risk appetite level that's commensurate with our overall organization And that provides some support. And the last key elements I'd reference would be the overall mix within the investment portfolio. You know, what we acquired was a very fixed income, high quality dominated portfolio. And we pretty much left that the same. So when you put those two together, effectively that dials back your insurance risk and creates some additional excess capital out of the transaction. I'd say in summary, what we've done, is we recognize that we've increased the overall level of the insurance activity. We've increased some operational risk as we go through this transition. So we've dialed that back with some additional reinsurance protection to our appetite, and we've taken the insurance risk component back a little bit as well. The final thing I'd say is, you know, we were going through the first quarter, so we wanted to prudently position the company as we go through that transition. So, you know, we've admittedly left a little bit more capital down in the insurance operations, just as we navigate through that official, you know, initial first couple of quarters of integration.

Fantastic. Well, thank you very much. I'll read you.

Thank you. We have a reminder, if you have any questions, please press star 1 now. Next question comes from Brian Meredith with UDX. Please go ahead.

Hi. Yeah, a couple of questions here for you. First one, I'm just curious, on the $100 million of expense synergies, since they're coming through faster than expected, do you think there's upside to that number?

Well, Brian, I think the point we would make there is we're very, very pleased with the first start. I mean, remember, we're just 90 days into this integration. But the reality is we did guide that we would be earning it faster than originally thought. And if you think about, you know, we've said that 36 million have triggered synergies, and we think that will be earned, you know, one-third of the total into the first year. So that's a bit of an acceleration. But I think as we look at the initial stages here, we feel very confident about the ability to deliver, you know, at least that $100 million. and delighted with the accelerated timeline that the team has been able to kind of achieve. So, you know, we're not re-forecasting that at this stage, but I would say that our confidence level is extremely high.

Great. That's helpful. And I'm just wondering, is it possible to get a sense of what called the run rate kind of combined ratio, I don't know how combined ratio was in commercial and personal, if you If you strip out travels, I'm just trying to get a perspective that as things get implemented here, kind of what the true kind of margin is for the business.

I think the way to look at that is that, you know, firstly, we're very happy with the performance of the quarter, right? That 92.9% is a very strong result, a quarter that typically has, you know, the more challenge to it. You know, overall, we – you take the two businesses that we have kind of guided that travelers would really move the combined ratio up by about two points on aggregate. That's going to move a little differently by line of business. And so we think that in commercial life, there's more of a three-point impact there. In personal auto, it's more like two, and it's about one point in personal property. So I'll give you a bit more of a sense of the early implications of that. And of course, are very confident we could execute over the next couple of years.

That's really helpful, and thank you. And then last quick question here, is it possible to get a sense of what the organic growth rate was in the quarter, and is it possible for you all to kind of give us those numbers here for the next couple of quarters so we understand what the underlying business is doing?

Yeah, we'll do that. I'll ask Paul to kind of give you a bit of color on that because it does vary a little bit by line of business. I mean, I think the macro point would be What was really important for us here in our first, you know, quarter of this integration was to, you know, secure the business and then keep the core business, you know, running along at the performance level that it was. And I must say we're delighted we can do that. So we'll give you the detail, but I think the main message is the retention of the traveler's business has been very strong. And that is actually each of the three lines of business. That's really important, as you know. That's what we've acquired. We wanted to make sure we can keep it. We wanted evidence because the customers like the proposition. So that's the good story. And then I think the other item is that, you know, there still is, you know, good organic growth overall through our business. So maybe, Phil, it's worthwhile you unpacking that a bit.

Thanks, Rowan. So firstly, if you just look at the total growth in the first quarter of 35.4, to $1.4 billion overall. First common deadmate is obviously that's off to a very solid start opposite our $6.5 billion target that we're aiming for for 2026. We'd say about 80% of that growth is coming through the acquired business in the first quarter. Now, attribution to that gets less simple as time goes on, because with the pace of integration, we've already unified the new business offerings. We're trying to split that between the acquired operations versus the underlying run rate activity. The company gets more complex as you go forward. That said, if you take the 35.4% and you just simply isolate out the impact of the retained premiums that we acquired through the deal, the split for that is just over 27% is coming from the retention of the acquired premiums in the quarter. And just over 8% is coming from the underlying organic growth of the business, combined with the traveler's kind of new business contribution in that quarter. And for context, that 27% retention of the acquired business That's running at about an 82% retention rate for that block of business. That's already within just a couple of points of our company-wide retention rate. So as Rowan has said, that's already positioned us in a very good place for the continuation of that acquired block of business. If you go into a line of business basis, I'll just do the same split. On personal auto, about 26% is coming from the retention of that newly acquired block. and about 9% is coming from the underlying growth of the business and in travelers' new business contribution. That retention is about 79% on the acquired book, which is very, very close to about 80% that we see in the DFINITY legacy business. So you're almost already at the same levels of retention, despite the fact that we're only one quarter in. Similar story on personal property. You have about 25% coming through the acquired business, about 12% is coming from, you know, the organic growth and the traveler's contribution. That's about an 88% retention rate against the 90% for the company. So, again, very high and very close to our normal run rate. And in commercial lines, you see about 31% is coming from the acquired block, and just over 3% is coming from that underlying organic growth and the traveler's contribution, with, again, very good retention rates in the low 80s on commercial lines within four points of what we see at the total company level, which is a very good contribution in a quarter, but there's a lot of disruptive activity going on. So if you step back, and try to infer what's happening on an underlying basis. Personal auto, we'd say we're growing in the upper single-digit range. Personal property, we're actually contributing in the low double-digit range. And in commercial lines in the first quarter, we grew about in the low mid-single-digit range. If you look forward, just to put some color on that, you are going to see variability this year between the lines of businesses and the quarters. So for personal auto, we're guiding to the low 30s for the balance of the year. That's really a function of the relative size of the Trinity book to the traveler's book, which is a wider gap as you look out to the rest of the year. Personal property, we'd say that's much more consistent in the middle of the 30s range, similar to what you saw in Q1. And in commercial lines, we actually see the growth rate increasing into the upper 30s range over the balance of the year, driven by a couple of factors on these higher organic growth levels in the underlying business, moving back into that mid-single-digit range, and then also continued capture of the retention of that acquired book as we go through conversion. So overall, very, very happy with where we've started. What is it? for the $6.5 billion. And, you know, we're very pleased to see that continued organic.

Great call, Phil. Thank you so much. It was great. Okay. Thanks so much.

Thank you. The next question comes from Bart Jarski with RBC Capital Markets. Please go ahead.

Great. Thanks, and good morning, everyone. Apologies if this has been asked already, but wanted to ask around the financial capacity of $1.15 billion post-deal close. I think that's higher than we would have expected, so a good result there. Maybe just give us a bit more detail on what drove that level, and then as we look out, you know, you have excess capital. How are you thinking about deploying that, or do you want that to build a little bit before you deploy it further? Thanks. Thanks.

Yeah, thanks, Art. So in terms of what drove the financial capacity, yeah, we're super pleased. You know, we've... ...the transaction and we leave with a billion dollars, more than a billion dollars in the first quarter after that. So that's obviously a great spot for us to be. In terms of, you know, where it's landed, I think there's a couple of things there. One for sure is that when we actually closed the transaction and we looked at the opening balance sheet position that we acquired, That was in excess of what we would have originally planned. So, you know, that original, that passage of time between the deal announcement and the actual balance sheet closure, we ended that in a very good spot. And so that obviously was a good contribution to the overall position of the company. We also took some actions just around managing the overall risk profile. So we brought the insurance into alignment. We brought the equity position in the investment portfolio down on a plentiful basis. So in essence, what we've done is we've de-risked a little bit on investment risk and we've used an effective tool as provided some cushion against the increased operating leverage. Those two items So a good, effective excess capital over and above the required regulatory levels. And then the last thing I'd say is just, you know, very strong performance. If you look at that first quarter, you know, there's over close to $120 million of operating earnings that comes through there. So that's really helped contribute as well and generate good capacity for us.

And, Bart, I would say that we're very happy with that capital generation and our story remains very consistent to think about how we deploy our capital. We do see good organic growth. We do obviously keep moving our dividend upwards. And, you know, despite the fact that we're in the middle of this transformational integration of travelers, it's looking very well. And our experience is that this would not put us on the sideline for other opportunities that come by. Certainly, when you think about the time between initiation and closing. And so we're happy to keep building up some of that capital because our conviction is that it will continue to be M&A opportunities in the Canadian marketplace over the next couple of years.

Got it. Thanks for that. Very helpful. And then A question around the operating ROE of 13% last 12 months. There's lots of moving pieces, and I know there's, like, puts and takes to it, but could you help us walk through maybe what do you view as the core ROE, if you will, if you strip out those puts and takes, just because there's a lot going on this quarter and last 12 months. Thanks.

Sure is. I think what we'd say is that if you look back on the trail in 12-month basis, it doesn't feel like this very often, but we actually had a relatively benign cap period overall. So if we look at our expectations just on a normalized kind of plan, something happened. There's probably about a point and a half of operating ROE support that came through that period of time. Now, that wasn't the story a couple of years ago, obviously. But if you look at that trailing 12, that's what's with them. Looking ahead, there's a little bit of a headwind. We still have the averaging in of the equity raise to come, although most of that is behind us. And we're still pretty productive in terms of, you know, the equity generation that we expect to come in the rest of the year. So if you ask me where we stand today, we're around the midpoint of that 10% to below the kind of operating range that we'd expect to be in. And, you know, we've got good conviction that the pathway we're on, the organic leaf and the contribution of the traveler's deal, once we get to that fully synergized place, that's the really clear kind of pathway that we're looking at to get us up into the mid-teen level. But right now, I'd say we're around the midpoint of that target range, you know, in terms of where we stand.

Great. Thanks for taking my questions.

Thank you. The next question comes from Tom McKinnon with BMO Capital Markets. Please go ahead.

Yeah, thanks. Good morning. Just a question with respect to your Fable Reserve Development Guide. I think it was always one to three, so just correct me if I'm wrong there. And has the acquisition of the Travelers Canada book changed that at all? They may have. Sometimes what can happen is there can be – they can beef up the reserves just prior to the acquisition. And maybe that's... Yeah, thanks, Tom.

So in terms of... You just chopped out a little bit there. I think you're asking about PYD. So the historic range we've delivered is about the one to two point range. And I think, you know, that we see as a pretty consistent expectation going forward. You see this quarter is a good indication of that. We were kind of bang smack in the midpoints of that range. With the traveler's book of business coming on, I think we still think that's a pretty good guidance point. We've taken a really robust look at the opening balance sheet. We've done some good work around that. What I'd say on that is we've kind of brought that reserving position kind of up to DFINITY's standards. So we've taken a good thorough scope. We feel confident. about that opening balance sheet position. So at this point, we'd say on a go forward, you know, it's a good reason to continue to have conviction in that one to two point range. And we'll obviously watch it very closely as we move forward. But really, I think the key story for us was no surprises in that review. We were very happy with, you know, the quality of the liability position that we inherited. And we brought it in line with our kind of expectations going forward. So you know that's kind of how we feel that closely as the next few quarters unwind thanks thank you next question comes from paul holden what's the idc please go ahead thank you uh good morning attention um conversation just want to see if there's any

Now that the book has landed, I want to see if there's any changes in terms of plans to or need to reprice any certain lines of business or products. You're still happy where you think the travel is?

Hi, Paul. It's Rowan. I think we got to just your question. Unfortunately, we just had a little bit of toughness in hearing you there. And I think what we got was, are we happy with the traveler's portfolio and is there any particular portfolios that we need to reprice? If that is the case, I think we said through our new diligence that we thought this was a break-even business. And I think having a quarter in, we When we send back, you know, there clearly was more of an opportunity to come in line with us on the expense side than the loss ratio side. That, again, varies a little bit by line of business. Probably had the most loss on appeal. And so there will be two things happening there. There will be their own rate filings that started last year earning through. And then as it converts onto our platform, the buying rules, segmentation, and pricing. So, you know, that's just automatically going to happen over the conversion cycle. And then the other two lines of business. material segments or portfolios that don't fit our appetite or need significant actions.

I do seem to be having some connection issues. Hopefully you can hear me okay. So let me ask one more question. You pointed out intensifying competition in commercial large accounts. how should we think about the way DFINITY is responding to that? Is it simply, are you actually shrinking exposure to that segment of the market?

So, They kind of give you some color on that one there, Paul. I think the main point for us and what we're assuming there is that the market is still very conducive to delivering our plans overall. The competition has intensified in a certain segment of that business, and that is really what we define as the large commercial elements of that. That's a significant portion of the industry. The way we structured our portfolio, we're less exposed to that. So we have less than 20% of our commercial business exposed to that large, large segments. But of course, you know, we do have a playbook on how we manage this environment and those trends. So maybe, Abed, could you just add some color into the impact, what's happening, policy counts by segment?

Absolutely. Thank you, Rowan, and thank you for the question, Paul. I'll maybe start with, you know, as we've mentioned in a couple of quarters, that the market is bifurcated where competition is most intense in the large pound segment. And as Rowan just said, over 80% of our business is not in that segment. When we look at the renewal book that we have, we have strong retention in And we're still getting strong rate on the majority of that book. So we don't really have any concern with how the renewal portfolio is performing. You know, the margin is holding. No concerns there. When you get to the new business side of it, this is where the discipline in our underwriting strategy is leading to a shift in mix, where we're writing more smaller accounts versus larger accounts. And what that's doing is it's having – and impact on the overall growth, premium growth percentage by about a couple of points. And we're continuing to grow the customer base and the PIF count. Overall, you know, when we sit back, as we've mentioned, there are maybe, you know, three levers that we look at, you know, from our perspective, how things will go and where the growth will come from. One, we've talked about how well the traveler's integration is going. We expect that retention of that book to continue to strengthen as we move forward. We're already very close to where the affinity retention is. In addition to that, we've gone through Q1, which has been our transition quarter. We've been onboarding new underwriters, some of the new capabilities. We launched three new products towards the end of Q1. The first wave of underwriters, production underwriters from the traveler side, got deployed towards the end of Q1. The second wave is coming in Q2. And what we see is that extra capacity that will come onboard as well as the new products and capabilities that will keep on rolling through the year, that will give us a boost in growth, as well as the structural advantage that we have, that we've got the digital platforms on the small business side, our specialty market share gain is still underway. So putting it all together, our view would be that we're managing the cycle with a lot of discipline in terms of preserving margin and Our small business specialty, as well as the traveler's capabilities come on board, will continue to give us market outperformance and be sort of in that mid-single-digit range as we go through the year.

And, Paul, one of the points that I think gives us a lot of comfort is that, you know, where we are winning a lot of unit count, it really is the small business and specialty area. And that's the digital advantage that we're winning and competing on. And then the other part of the point I would point you to is you look at the accident-year claims ratio. you can see that it's up only 2% with the traveler's acquisition coming in. And that portfolio is really the synergies. That's mostly expenses that flow through pre-synergized books. So if we looked at that and said, you know, what would that look like on a normalized basis post the synergies, you see that there's no deterioration in the accident year result. So that's a very encouraging trend for us.

Okay. Okay. Thanks for taking my questions. Thanks for the answers. I'll leave it there. Thanks.

Thank you. We have no further questions. I'll turn the call back over to Janice Westphal for closing remarks.

Thanks, Elena. We understand there's been some sound quality. We will do our best to fix or update any missing parts in the transcripts and have that posted on the website. Thank you, everyone, for participating today. The webcast will be archived on our website for one year. A telephone replay will be available at 2 p.m. today until May 15th, and a transcript will be made available on our website. Please note that our second quarter results will be released on July 30th. That concludes our conference call for today. Thank you, and have a great weekend.

Thank you, ladies and gentlemen. This concludes our conference call for today. We thank you for participating. We ask that you please disconnect your lines.