Conference Transcript - AII 2026-09-10

Speaker 2

Okay. We're going to keep things moving here.

Speaker 1

Our next fireside chat here today is with American Integrity, and we're happy to be joined by Bob Ritchie, John Ritchie, and Brian Foley. Bob, can I turn it over to you to make any introductory remarks?

Speaker 4

Happy to. Thank you for the opportunity, and thanks for listening to our story. Our story is not unique, and Florida is not unique. Florida is rebellious sometimes, and so for almost 20 years, we've been building this company. I can tell you it's not proof of concept. It's real, so much so that other states are looking at our successes and how maybe they can replicate it. Who would have thought that? So we've never had a problem with Mother Nature. Some people will tell you we have. We haven't. reinsurance ebbs and blows both capacity and pricing what has kept us up at night and what created so many failures was the litigation crisis matter of fact we were not in the insurance business we were in the lawsuit management business that's all different and we're growing successfully we're 16 months in as a publicly traded company not here to tell you that we've learned everything I am to tell you we're serious students for investors as we grow this company responsibly and um we're just looking forward to telling our story excuse me go ahead yeah so i think the kind of a good area to start is probably the most common question and frankly concern that

Speaker 1

that we get around florida is around the competitive environment you know it's i think everyone that the consensus view is the reforms are working yep uh the carriers in florida are printing very strong returns reinsurance pricing is trending favorably why does this not invite more competition perhaps fears of prices getting cut national carriers coming back into Florida just speak about the competitive environment a lot to unpack there but thank you for that first and foremost third most populous state we need more not less and even today Tommy as I look at the cadre of competition first and foremost where Florida is not unique but especially different compared

Speaker 4

to say California. And I mentioned this last year in this very room. Our commissioner is appointed, not elected. That's a game changer. Mike Jaworski, who's been on the job now, what, John, about three years. In my view, we had a great woman, Kevin McCarty. Guy before Jaworski, not so much. Jaworski's been responsible. He's done his job as an advocate, of course, for the consumer, but also for a healthy market. And Tommy, I am not seeing any evidence of any rate filings, both new companies and existing, where buying business can be an option for Florida. And as we look at the competitive landscape, we've got a lot of great competition, but the models are different. We're fortunate because almost 20 years into this, we've got deep relationships. But back to a few more of your question points, I think the inference is, will margins go out the window because competition becomes reckless? I don't see that. I do not see that in the short or medium term. Later, we can talk about the confidence I've got in Tallahassee and why these reforms are real, but competition is not something that keeps American integrity up at night. We also, we have two rules. They're very simple. In insurance, God, they're hard. If you write a piece of business, make a profit, underwriting profit, not investment, and offer to renew it, so pick the right ones. This marketplace is in an exceptional place. Matter of fact, I don't believe there's never been a better time, even with rates coming down, with reinsurers or primary insurers or investors, to look at Florida. And I don't say that because it's a calm season. No, the weather's not the problem. But competition is also not the problem.

Speaker 1

Can you talk a little bit about the phenomenon for why Florida is dominated by specialists rather than national carriers?

Speaker 4

You don't want to hear just from me. John, will you take that?

Speaker 3

Look, national carriers are rightfully so beholden to national A&B standards, and Florida doesn't get a carve out. And that's why specialty carriers like American Integrity, amongst others, are able to exist in the marketplace. However, they want the auto, of course, within the state of Florida, they just don't want the homeowner's risk, and that's a channel for us from a distribution perspective. We write with virtually every national carrier that actively writes auto insurance in Florida, and there's no indications that they're changing their flavor or their take on Florida property, particularly homeowner's risk, in terms of the commentary we're hearing from them privately and then, of course, what we're hearing publicly. So we do believe from a national carrier perspective, carving out State Farm, who does write within in the state of Florida with their pup company, we feel like the moat's pretty wide and deep in terms of the protection of the specialist's role within Florida.

Speaker 1

An important element of your story that I think about often is the organic growth opportunity. It's not a, the citizens takeouts have largely played out when you look at the number of policies still there. So let's talk about a couple of the verticals that you guys are interested in growing in. And we'll start off with the Tri-County area. That region was sort of off-limits for you for a number of years. What led to the decision to turn that back on, give you conviction that it was safe to write there? And then along the same lines, how do you convince independent agents in that region to start writing your product when you hadn't been in that area for a number of years?

Speaker 4

You'll help me in a second, John. So South Florida, when the company was formed in 07, we did a little down there. And this was way before the lawsuit crisis. There was a kitchen fire crisis down there at that time. But we were a very small company. And so we didn't need to be risking $10, $12 million of surplus. There were other bets that were safer, number one. Number two, Miami-Dade, for any industry, is right with fraud. And so if you're going to do business in Miami-Dade, pick your right partners. And the reason we've got the confidence today, and we didn't do it overnight, these reforms of 22-23, we began writing just last year in South Florida. And so we're not doing it just because we're public. This was already in the works. The confidence level exists because of the substantial reduction in first-party lawsuits that were created by bad laws. As a matter of fact, Morgan & Morgan shut down their first party property division. And so carefully looking at South Florida, Miami in particular, we had openings where we could immediately write. And can you help with that?

Speaker 3

Yeah, so for us, the builder channel, new construction channel, we were able to enter that space immediately. They were looking for additional capacity. And new construction is healthy in that part of the state as it is throughout the entirety of Florida. In addition to that, I already spoke to it, but the national carriers were looking for additional capacity there. But to your point, Tommy, yeah, we had to actively and we still are actively appointing independent agents, particularly in Dayton Broward. We remained open in a limited fashion in Palm Beach County throughout the entirety of the last 20 years. So we had some distribution that existed already. But we have found that certainly us going into Dayton Broward has been welcomed by the independent agents in that part of the state. They were looking for a marquee name in terms of longevity in the marketplace like American Integrity to add to their distribution channel or lineup, if you will. So we've seen very favorable success. I mean, to the point now where, you know, one out of every five new business policies that we're writing on a daily basis is coming from the Tri-County region.

Speaker 4

So to expand on that, this is all public, looking at some stats. Through Q2, American Integrity wrote 43,000 new business policies. That was up 54%. Of that 43,000, to John's point, 7,600 came from Tri-County. 9,000 came from Middle-Age Homes, which might be your next reference point. So it's a part of our growth story. It's not all of it It's being underwritten in ways that produce profit retention and renewal Yeah, I mean if you if you want to also a little talk about the the middle-aged you know home opportunity and and honestly Might be helpful for you to characterize what that is, you know for people what defines a middle-aged home love to so you have a chance to meet our new CFO So can you take this question, Brian, and talk about middle-aged roofs, homes, call it what you like, and why it's a driver and important to us?

Speaker 2

Yeah, happy to. So we define middle-aged homes as kind of a roof that is older than five years in age. And specifically in the HO3 product, that is where we saw the heaviest amount of litigation during the crisis. So in those middle-aged HO3 homes, we pulled back significantly. So we were predominantly writing new business policies only for new construction. And the DP3 product that we write is a little bit more insulated from some of this frivolous activity because of the actual cash value on the roofs. So we were still able to kind of write that. But as Bob said and as John said, we feel very comfortable that the regulatory reforms are working as intended and are allowing us to move back into that market, which is a huge subset of the Florida market. And it's really core to who we are. So when this business was founded, we did many middle-aged roofs. And we love that business and we price it accordingly and we have the data to do so. So we just didn't really feel comfortable with all the litigation that was in place. But now we're kind of moving back into that market with force.

Speaker 4

Thanks. Thanks, Brian. During the crisis, I was accused of being a roof guy. I guess I probably still am in Tallahassee. We have town criers one year holding up placards. There's no such thing as a free roof. I even had a flyover once. Got accused of being blow from Progressive on the house floor. But because now laws exist and the impetus is taken away, free roofs are no longer available, mainly because we obliterated something called the one-way attorney fee statute, 130-year-old statute in this reform. So if you want a free roof, hire your own lawyer. Oh, and by the way, we've got policy language unique for us that obliterates the SIBO destruction. So we'll take you on. We'll do it case by case. You won't get the free rope and you'll hate us and we'll keep our surplus.

Speaker 1

So those are a couple good opportunities in Florida. A common playbook for some public Florida carriers has been to expand a bit outside of Florida. You know, some have gone as far as the Northeast and to California.

Speaker 4

You guys have relationships with home builders that, you know, has introduced you to some other states uh in the southeast would you ever consider writing in the southeast not through the builder relationships and we are so the by the way we didn't just we didn't go out of florida just because we were public this was always on the drawing board number one number two our first state was south carolina it's taken us three years to get to 30 000 customers very profitable They're profitable. So the starting point where these builder agents, largely Westwood, part of Baldwin group, said we need capacity. We don't want to give it all to others, and Progressive doesn't want our business anymore. And so we began expanding out of Florida, being very cognizant, and I won't name names, it's not fair, but other Florida companies have done it unsuccessfully, only a few have done it successfully. One of them is ASI, and they're gone now. So we were thoughtful, and it took us 15 years. We had a crisis, so we didn't want to do it then. It took us 15 years to go outside Florida. So the predominant look of business will always be in Florida in this foreseeable future. But South Carolina is attendant to what we do. It allows us for new construction. It gives us power of relationships for a Westwood to write even more in Florida. We're more important to them now. And same thing for Georgia, same thing for North Carolina. But as we build that nucleus and hire staff, we've begun to appoint other independent agents that are writing non-new business. Can you talk about that, John?

Speaker 3

We've seen success sort of in descending order of what Bob just described, just given longevity in the marketplace of getting independent agents appointed in those three states. The new construction piece certainly is still the largest component of the new business in those expansion states, but we're seeing some really good momentum with independence and beginning conversations with national carrier partners in certain states where it may make sense for them to offer capacity or us to offer capacity to them to right homeowner's risk, particularly in South Carolina.

Speaker 4

So the entry was distribution, certainly product-focused. but not as a whim to create top-line growth.

Speaker 1

Maybe just to be direct, can you envision a scenario where you're not at least 90% Florida in the next few years?

Speaker 4

Now, I can't give forward-looking advice in a room like this. The majority, I can tell you, is Florida for the next good couple, three years. Today, though, as you look at our policy count, we had 462,000 customers at the end of Q2. And at that time, there was about 30,000 outside of Florida. So call it 420, 430, was Florida 30 outside. So that mix is 92.8. What would it be in a couple, three years more than that?

Speaker 1

It'll be a double-digit part of that pie for outside of Florida, yet Florida will be dominant. everyone in insurance knows that you know the earnings are much more sensitive to combined ratios than they are to to top line but you know as we think about that top line projection and sort of taking all these inputs together what is your base case maybe expectation for top line premium growth over the next couple years is double digit growth feasible yes no we have not told you and given you those those forward numbers and we're close to being doing doing that brian will.

Speaker 4

But we clearly see this engine as we look into next year of producing customer growth in the low double digit scenario. Anything else you want to have?

Speaker 2

Yeah, look, I mean, we had a record second quarter, and that was 43,000 new business policies, the best the company's ever done. So we're very proud of that. Additionally, based on the Quasar data that we also published, we are the number one voluntary writer of new business in florida from the public company pier set year to date 6 30 and we feel that that momentum is going to continue so we kind of look at this business from a customer account from a piff count like bob said i think we've exceeded our expectations thus far this year into the double digits i think you know it's reasonable to expect that growth in customer count to be kind of high single digits, low double digits over the long run, then kind of translating that into premium. As some of you are aware, you know, we are in a modestly softening rate environment across the PNC industry. Things are not falling off of a cliff. And we publish some data in our decks that kind of show rate stability, you know, but still down kind of one, two, three, four percent, certainly not double digit rate declines. So you can probably expect a written premium to trail the customer growth modestly. And we'll kind of continue to see how the market evolves going forward and putting those pieces together based on cat loss experience, reinsurance costs, inflation, et cetera.

Speaker 4

And as the as the top line might adjust, I want to assure you the combined ratios are all being priced for profit. The other thing too that has really helped us, and I don't say this in a way to feel like we're the biggest and best because we're not, is the diversity and multiplicity of our distribution system. About six years ago, we hired Dick Dowd, who is our EVP of sales and marketing. Dick worked with me at American Modern two decades ago. A brilliant, successful guy at The heart of Dick's magic is relationships. Great example is Allstate. Before Dick came on board, Allstate said, well, you can do business with us like everybody else, but it's take-all-comers. He said, no, it's not us. Take-all-comers for agents, parts of the state, no. And Dick was successful in working with Bill Borst and breaking that code. I'm happy to tell you that Allstate, We don't put all of our marbles for reasons that Allstate will change their underwriting appetite a lot. Yet, we can be there as Allstate and Advantage need us. So this multiplicity and diversity that Dick has built for builder agents, national accounts, affiliates like mortgage companies, realtors, and of course our bread and butter are the independent agents in Florida. That's our backbone. So it's not like the backbone has shrunk, or gotten less strong, or that slice of that pie is not growing, it is, just the entire pie is building, and these new segments are creating really good pie slices. Anything else you want to add there? And that's our magic. And so it's in our publicly presented investor presentation. It's here from my words. No secrets here. Anybody else can do it. It just takes time. It takes time. And we're in a position post-reform, I can tell you, that the history of this company, when I founded this company, I had a lot of people in the industry thought it was crazy. You're going to Florida to do what? Come on. You won't be sustainable. And as passionate as I was, as David Clark and I founded this company shortly after John as he joined the company, and now, of course, Brian, I am more excited today about the opportunity not to buy business, not to change our underwriting approaches, but we're doing it differently. we're not quite valued yet the stock and the market cap will do what it's supposed to over time but here's what I'm not changing is what I'm doing what we're doing and running this company and growing it and the time now for this company has never been brighter before we jump into the reinsurance side which I certainly want to talk to you about I'm happy to take any questions from the

Speaker 1

audience if uh there are any um okay so let's jump into the the reinsurance side so florida carriers spend a huge chunk of their budget paying for for reinsurance and and rightfully so can you talk a little bit about the evolution of your reinsurance tower and how having that vertical and sideways protection you know allows you to sleep well at night even in the middle of hurricane season John's going to tell you if I got four words, how sweet it is.

Speaker 4

Even post Monte Carlo. Go ahead.

Speaker 3

Yeah. You know, our buying philosophy has always been certainly from a first event perspective to cover, you know, now to a 130 year plus return period, but it's the horizontal cover too. And the 2004 storm season has always been the barometer for us. You know, can American integrity withstand a similar season both in frequency and severity with the current exposure and that's something that's been incredibly important for us to buy to beyond that retention both first and subsequent event retentions we've always wanted to keep those as low as as as possible given the market and the economics just to protect the balance sheet in terms of the evolution of the tower certainly that has changed throughout the course of market cycles in terms of participation from certain regions or lack thereof the type of cover that we're purchasing we've been active in the ILS community for going on a decade now and that's become a very important part of both our vertical cover but the the 6-1 renewal was positive obviously a storm free season last year was beneficial for both ranchers but also us as buyers of cover for this year's renewal. And as Bob was alluding to, the reform, you can't ignore it any longer. And the last couple renewal cycles, the commentary from reinsurers, and I understand their position, was let's wait and see how this is actually going to play out. Is it going to be as intended? Will it be unwound? And Hurricane Milton two years ago, and Helene to a certain extent, but certainly Milton really was the event that they can point to, and we certainly are pointing to to show litigation frequency was a fraction of what it was for hurricane Ian or hurricane Irma previously severity was significantly lower than what those events were because of the lack of litigation so the the sentiment in Bermuda and London and mainland Europe and domestically is reform worked lost costs are going down and therefore pricing is reducing and you know absent an event this season we certainly would expect you know a similar type of environment next year when we renew the program can you actually summarize for everyone what was the results of your recent june renewal in terms of like maybe pricing or some general metrics yeah so the the commentary um generally speaking was you know mid-teen risk adjusted rate decreases For us, we were in excess of that, so we certainly did see marginal improvement upon what the consensus was in terms of rate reductions. But it's more than just rate online reductions. It's terms and conditions. It's types of cover that was able to be returned back to the market. For instance, cascading cover for traditional reinsurance fell completely out of vogue in the last 10 years because of market conditions. and we were able to reintroduce that to add some sideways cover that we didn't have previously. So, you know, rate, terms and conditions, and type of cover offered, it was all beneficial for American Integrity and the market in general.

Speaker 4

We also have some uniqueness, and it isn't terribly expensive. Not everyone buys for the sideways horizontal cover. Here's been the mantra I've had. We were able to do it every year but one or two during the extreme crisis. Is it if, if, if O4 would repeat itself again, where four majors hit Florida in a single year? We want to manage those four retentions, those four deductibles. And we also want to manage the opportunity to fully, in advance, re-insure granted smaller towers as the multiplicity of an extraordinary year might happen. And that's sleep insurance for you as an investor, for us as an operator. And I'm happy to say that we've strengthened that, what John was alluding to is strengthening that horizontal coverage.

Speaker 1

There's been some market chatter coming out of Monte Carlo. That January, you might see prices down another 10% or so is sort of the whisper number. that we're hearing and understanding you know january is not the the florida renewal season but do you guys have a sort of a base case expectation for you know knock on wood if this is a benign hurricane season that what you would expect pricing to do or is the next leg going to be more addressing the terms and conditions side you might see the cascading features both in fact even before monte carlo brian and david clark is in the audience our executive chairman and john had begun to model a what if now June 1st is a long way away but the bellwether is the 1-1 and if it is minus 10 1-1 and we have a clean year we don't know yet look we're right at the

Speaker 4

peak time it only takes one here's what I tell everybody says oh we're done no we're not 1992 was supposed to be a less than average year hurricane Andrew A was in August or only September or whatever day it is today night. So we're not clean yet. But let's just say we are. Say we're clean. Say we're minus 10 for the industry. Monte Carlo Chattano was right.

Speaker 3

Yes.

Speaker 4

We're setting up for another substantial reduction in rates online for June. And we'll go out early, as we do, and seam this up in Q1.

Speaker 2

Yeah. I mean, what I will say is, you kind of asked the question, we certainly don't plan for rate declines like we saw at 6-1 this year and then potentially what will happen next year. Obviously, if we get minus 10, that would be terrific. We'd be welcoming that, but it's not how we run the business. We're not planning for a perpetual soft market in reinsurance. Our brokers that kind of give us data and the industry reinsurance brokers obviously track pricing and ROEs pretty closely for the reinsurers. And I think the reinsurer ROEs are still quite healthy. And if you kind of look at a 20-year period, I think you could make the argument that reinsurers have been willing to go lower in price than we saw at 6.1 of this year, but time will tell.

Speaker 4

And look, we're all capitalists. We're going to ride the waves. Rates online go down. We're going to endure overreaction. They're not regulated, and I'm not criticizing. They're capitalists. Yet, in my view, Floridians in particular, from a regulatory, from a consumer perspective, we're all better served if we have normalized, but reinsurance, given the dynamics of not being regulated, is always cyclical. And so we'll ride it. But I'm proud of this. We've had nearly no defections over these 15, 20 years for participants, Unless they got bond or the reinsurance, they went out of property, okay, get all that. But they've stayed with us. London has shrunk a little bit here. We're going to get the best deal. I never want to do a win-lose negotiation. I think that's unhealthy. And in times of scarcity, of reinsurance capacity, that's remembered. So we're going to do right by investors, by our P&L. not looking for the absolute lowest dollar, but will be within range. This year we did beat because the marketplace saw a couple of things. They saw publicly being publicly traded and the due diligence. I think that was an intangible that helped. Here's what they do see. And we're mixing it with middle-aged homes is the new construction stock, the dynamics of our rating classification factors are superior. And the market, everybody says that they differentiate pricing, it's hard especially as the market softens in reinsurance. Yet I believe the work we did, we benefited from those elements.

Speaker 1

Is it worth fighting for lower attachment points, you think, when it comes to these negotiations?

Speaker 4

And also just remind us, do you have a general rule that you try to subscribe to about where you want attachments to be relative to either pre-tax earnings or some ratio we don't want to expose more than 10 or 15. um i um we were just talking about this last night um i believe because we've been we've been conservative privately held company very small starting out for years we had a six million dollar retention my brain still attached that we we don't want it, we'd overpay, we won't get it again. But I think we feel that, again, I'm not trying to get forward-looking advice, that this retention could go upward just a little bit, don't you think, Brian?

Speaker 2

Yeah, I mean, our book has grown, so I think it logically makes sense that as that grows and our capital and surplus grow as well, that you'd expect retentions to move up. There's, you know, games to be played at the bottom of the tower. That's where the most expensive reinsurance is. So you got to kind of do a cost-benefit analysis as to what's worth it. But I think a reasonable expectation is that retentions probably move up a little bit.

Speaker 4

Here's what we don't want. And war wounds of the past, Poe, 2004, didn't buy below the Florida hurricane cap bump, which means they had a retention. It was crazy for them. Then they thought, well, we'll go back and we'll play craps again and get it back. Well, in 05, there were two more large deductibles. Here's where I'm going. Horizontal cover, that retention needs to slide down quickly from event two, event three, event four. Because we don't want to, in most years, even with one or two, it's an earnings. It's not a capital surplus event. Yet, if we kept that $35 million times four, obviously, we'd be raising money again. We don't want to do that. Can't say it would never happen. But the responsible companies will both buy horizontal and then keep that retention down for the subsequent events.

Speaker 1

I'll pause again here just to see if there's any questions that anybody has. All right. Switching over, I think a common theme across property and casualty lines is expectations for loss ratios to deteriorate as the soft market starts to permeate more. Can you talk about your expectations for where you think your attritional loss ratio, so ignoring the cat side, where you think the attritional loss ratio can go from really currently strong levels?

Speaker 4

Happy to. And we can talk about loss ratios at the end of the day. it's about pure premium. Frequency and severity, that's the driver, not the number. And so let's look at frequency. And post-reform, frequency for the industry was approaching 6%, down to 3, 3.5. Ours is less because of the quality and nature of our book. So you don't go out of business with a severity problem. You go out of business with a frequency problem. And frequency for the industry, and especially for us, is really performing well. Severity is in range. Inflation is not zero. We have an inflation guard factor, which helps to absorb that. But net net, you look at those two together in the pure premium, those trends are remarkable. And then, so the reduction in average premium isn't because people are gambling on the loss cost. It's that the lawyer tax has been squeezed out, and now that can be appropriately displayed in the rate. But there's two other points. There's inflation, which is not zero, and of course, reinsurance. So your next question or thought might be, well, you got litigation tax out, you got reinsurance down. Yeah, of course. Yet the downward pressure is single digit, partially offset by the inflation guard factor.

Speaker 3

Yeah. And, you know, one point to note here is, as Bob said, certainly it's, you know, a mid-single-digit primary rate reduction environment. However, for American Integrity, as we're adding tri-county and middle-aged homes to the portfolio with a higher average premium, that's being offset or that rate reduction is being offset by the mixed change for the book of business but with that being said certainly as those two segments grow we fully anticipate in our modeling that you know yeah that's probably got a point point and a half maybe two point increase um to the non-cat loss ratio just given the um the risk profile of that business but the premium we're collecting certainly compensates for it it's just it's a fraction it's math yeah Yeah.

Speaker 1

And ROEs last year were 40% and incredibly strong. Do you think mid-teens is the right ROE for this business through the cycle? And then how long does it take before it sort of decreases to that level?

Speaker 4

I do. And Brian's the guy to tell us. Go ahead, Brian.

Speaker 2

Yeah. So look, our ROEs and our Florida peers ROEs have been elevated for the last several years. And there's a couple of things driving that. So there was this huge depopulation of citizens, which gives tremendous windfall to earnings because you're not paying acquisition costs up front. And then you're getting some benefits on the reinsurance side, provided you're taking those businesses out or policies, I should say, out after wind season. So that is a very short-term elevated ROE kind of profile now we are entering a period of more normalization so citizens is at the lowest level it's ever been at and we do not feel like there are tremendous amount of opportunities to continue to take policies out of citizens we'll look maybe 100 200 here and there and really going forward it's a voluntary growth story and you're not going to see that short-term benefit from taking policies from citizens. So yes, our ROEs were terrific last year. Another component of that was there wasn't a landfalling hurricane in Florida. But over the long run, I do think this is kind of a mid kind of teens ROE kind of story. I think we're certainly at a point in the cycle that is above that.

Speaker 4

And we're pleased that I think we'll kind of you know be in that period of time at least for for next year with more normalization probably coming after that but we'll see and and our business plan our model our p l our combined ratio not dependent upon the clean season matter of fact we we model point eight call it one uh hurricane per year one retention per year and so yeah great when you got the clean year good there's more capital. Last year we did a special dividend. We'll also look at share buybacks this year. We're in heavy discussions. What we don't want to do is to do it prematurely. Let's wait until December 1st and let's see how the season clears out. And then we're looking at the responsible way to use or even return some of that excess capital.

Speaker 1

So when we take these different pieces so you know mid-teens roe target you know running above that currently the potential growth opportunity maybe somewhere in the low double digits um there's still probably a gap there where you're generating excess capital um can you talk about um you know one sort of what is the right level of premium leverage to run at so is there a chance to you know optimize around that and then two you know you briefly touched on it there but you know kind of firmly rank the priorities there for for excess capital buybacks dividends things like that happy to and now the writing ratios for florida they're not things that really can be achieved and i'll explain why in a minute gross 10 to 1 net 4 to 1. um something called the risk-based capital rbc ratio that's

Speaker 2

the driver maybe you can give some color on that yeah so understand the question where we really manage the business to is an RBC ratio. And if you kind of look at peers and public companies, you know, that's kind of floating around the 400% range. So it's not as simple as just saying, oh, net written premiums to surplus is X and that's our target. It's a much more complicated kind of way to think about capital. In terms of where we're at now, you know, we have a fair amount of excess capital at the Holt Co. But also keep in mind that we have uses for that. The first priority is organic growth with our voluntary new business policies that we're writing in the state of Florida and ex-Florida. I would say the second priority is taking down the quota share. So our quota share was at 40%. We took that down to 25% this year. And I think will continue to step that down into 2027. That will consume some capital. And then after that, we've always had a track record of returning capital to shareholders. If we have excess, we don't want to hoard piles of cash. I think both dividends and buybacks are certainly on the table. M&A would probably be the lowest kind of priority for us. It's not that we'll never do a deal, but it would have to be a pretty high bar there.

Speaker 4

And we're growing nicely organically, so we're de-risking our growth. That's right.

Speaker 1

And just when it comes to buybacks versus dividends, you know, I assume you guys factor in the liquidity of the stock when you contemplate buybacks?

Speaker 2

Yes and no. Look, there's levels where we're clearly buyers and, you know, liquidity of the stock, you know, may not matter as much, but it's on our mind. I wouldn't say it's the, the sole defining factor. All right.

Speaker 1

Well, gentlemen, thank you very much for your time. Thanks for the opportunity, Tommy.

Speaker 4

Appreciate it.