Good day, and thank you for standing by. Welcome to the Howard Hughes Second Quarter 2026 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during that session, you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Mr. Joe Villain. General Counsel and Secretary, please go ahead.

Thank you. Good morning and welcome to the Howard Hughes Holdings Second Quarter 2026 Earnings Call. With me today are Bill Ackman, Executive Chairman, Ryan Israel, Chief Investment Officer, David O'Reilly, Chief Executive Officer, Carlos Olea, Chief Financial Officer, and Mark Granderson, Vantage Executive Chair and Howard Hughes Holdings Director. Before we begin, I would like to direct you to our website, www.howardhughes.com, where you can download both our second quarter earnings press release and our supplemental package. The earnings release and supplemental package include reconciliations of non-GAAP financial measures that will be discussed today in relation to their most directly comparable GAAP financial measures. Certain statements made today that are not in the present tense or that discuss the company's expectations are forward-looking statements within the meaning of the federal securities laws. Although the company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, we can give no assurance that these expectations will be achieved. Please see the forward-looking statement disclaimer in our second quarter earnings press release and the risk factors in our SEC filings for factors that could cause material differences between forward-looking statements and actual results. We are not under any duty to update forward-looking statements unless required by law. I will now turn the call over to our Executive Chairman, Bill Ackman.

Thank you, Joe. Before we talk about the quarter, I thought in light of the significance of events over the last few months for the company, I just want to give a little background on how we got here. In May of last year, Pershing Square acquired $900 million of stock and Howard Hughes at $100 a share, increasing our ownership to 47% of the company i became executive chair ryan became chief investment officer with the company and we said look our goal is to turn howard hughes a kind of pure play real estate company into a diversified holding company and our business plan was to acquire an insurance operation to find a platform that we believed that we could build into a highly profitable uh and very successful company and one where persian square's investment capability could add material value within about six months or so we identified and over most recently closed the transaction to acquire Vantage Holdings we purchased the company at a fair price it was not a bargain purchase it was a platform that had been built over the previous five years led by two you know very successful private equity firms we had an opportunity to acquire it and it fits very well with our kind of long-term ambitions our initial thoughts on going into the insurance business we're really driven by what Warren Buffett and what Berkshire Hathaway has achieved over a very long period of time. And as part of that thinking, we reached out to a guy named Mark Randison, who we had met maybe two and a half or almost three years ago, and someone we had greatly admired in the insurance business. And we thought, you know, when we're trying to make a decision whether to acquire a company or to build one from scratch, we looked to Mark for advice. Mark was sort of on the beach. He wasn't sure whether he was prepared to go back into the business he gave us excellent advice but we went up sort of our own way in acquiring you know Vantage since the acquisition mark is furthered in his retirement and and we got him to join the board of Howard Hughes and was very clear from the first day he joined the board meeting his passion for the industry so it's been a it's been a cultivation is how I would or a seduction, if a better word, to try to get Mark, you know, a little bit more involved. And then we had a stroke of luck, which is that David Gansberg, who was kind of a co-president of Arch, you know, someone who was in line for the potential CEO role of the company, was actually let go by Arch. He did not win the battle for CEO, but he was a favored choice of of Mark, and that created really an opportunity for us. Mark was not prepared to come in and be CEO of an insurance company with effectively his right-hand guy. Stepping in as CEO, he was prepared to take a more significant role in the company. And with that, we announced Mark became the executive chair of the company. David has a non-compete until June, or I guess early June of about 10 months from today. and we now had really our dream team in the insurance industry and that's not to diminish in any way Greg Hendrick or anyone an advantage operation but if you look at you know the 25 year history of arch where you know from 20 you know from 2001 you know mark an important young younger member of the team and to all the value and learnings over that period of time to his becoming CEO and building one of the best records in the insurance industry you know this was you know if you look at Pershing Square over time our most successful investments have been finding a great business and then finding the best person in the world to run that company and when we've combined those two things whether it was at Chipotle or at Canadian Pacific or other businesses you know that's really when the magic happens and we couldn't resist the opportunity to recruit David and to get Mark in place at the company. So it's a very, very material announcement. The other thing that I, you know, have experienced over time, you know, when you get someone who's run a large enterprise or, for example, someone who's managed a large investment portfolio, and then you give them a much smaller, you know, the magic they can achieve from that kind of base level is really remarkable. And I think the same thing really applies here. We have a senior leadership team with enormous horsepower stepping into a very small, very young operation, and we're very, very excited about what can be achieved. So the market does not yet understand the significance of this announcement. Now, the other important fact is now that we have, if you will, the dream team in place, we need to do everything we can to raise, you know, to inject more and more capital into Vantage so we can exploit the opportunity created by the team that we've built. And Vantage benefits by beginning with a highly diversified kind of portfolio, lines of business. You'll see that expand. Mark will find other areas of opportunity expansion for the company that will allow us to deploy capital in a market, which is patchy in terms of opportunity, but that's really Mark's expertise. So I have to say that we're incredibly excited about Mark and David. We're excited about the synergies created combining with the Vantage team and what's been built over the last five years, but still at a very early stage. And that's what kind of gives me an opportunity to segue to real estate. As kind of proven by this quarter, this is a time where, you know, rates have risen, you know, very significantly. You read all kinds of stuff about the housing market here and there. And quarter after quarter, you know, continues to be enormous demand for real estate in our communities. And the reason for this is in part political. I'm unfortunately living in a city where the city is not run in a particularly pro-business fashion. It's very, you know, taxes are high and going higher, whereas in Texas, in Las Vegas, you know, kind of our core MPC markets, you know, these are state cities and communities where, you know, safe people like to live and very conducive to business and kind of quality of life. And I think that is a great competitive advantage for us. And so we believe that, you know, our real estate assets are phenomenal assets. Now, in light of the fact we're no longer a pure-paid real estate company, we can take a much harder look at the portfolio and say, which are assets that are kind of strategic and critical for the long-term? You know, think land holdings, kind of sort of core MPC assets. And which are assets where there's a better owner who can pay, you know, who are prepared to buy the asset at a very full price. And, you know, the team has begun to prune the portfolio and generate cash, freeing up liquidity that can be reinvested in real estate. Now, the nature of our real estate business is that it's effectively in large part self-liquidating. You've seen significant condominium closings during the quarter, significant lot sales. over time, we will sell all of our residential lots. We will sell all of our condominium assets. We will sell all of our non-core real estate assets. And then beyond that, we're going to look at, historically, we sort of owned and financed 100% of everything ourselves. We're going to look at joint venture structures. We're going to look at ways to bring in capital. Howard Hughes, the Howard Hughes platform, number one, we have a phenomenal team. He's done an incredible job building out these communities, you know, a lot of skills honed over time in real estate development. And we have, you know, unlike a typical developer who's got to find a piece of land, we have, you know, decades of value. That being said, we have very high cost capital, certainly as the market assigns it to us. We're not a REIT. We're kind of an unusual company. So bringing in third-party capital where we're a really attractive platform and much lower cost capital will enable us to earn much higher returns on real estate assets and also free up additional significant capital so what you should expect to see over the next several years is you know the inherent self liquidating nature of condos and lot sales but also an acceleration in the monetization of what you think of as more stabilized type assets and maybe more partnership type opportunities for the company and maybe even will raise a pool of capital that management can deploy, you know, in these assets on behalf of pension funds or other investors who love to own the kind of assets that Howard Hughes owns. So let's call that the backdrop of what we're trying to achieve. And the result of that will be as the insurance operation, you know, compounds its capital at ideally a high rate over time, as we invest more capital in that business as the real estate business in effect self-liquidates and or we bring in third-party capital to reduce our capital commitment to that business, we're going to become disproportionately an insurance holding company as opposed to a real estate company with an insurance operation. And that's what you're going to see. And we're going to work to achieve that as rapidly as possible. For that, I'm going to introduce Mark Grandison. Mark, why don't you take it away?

And I think it would be very interesting to the people on the call, you know, give us some of your first impressions arriving advantage meeting the team and then you know maybe give us a little color on the quarter etc thank you thank you bill it's great to be here today my role is executive chairman advantage risk while it's still an early day since the deal closed spend a fair amount of talent bill with the advantage risk team and I want to thank them all for helping me get up to speed on the business um very confident advantage uh has the solid foundation to to build and you know build out the vision that you know we highlighted already uh i especially want to thank uh greg hendrick you know who continues to lead the team i want to remind that and uh through this transition period and until david uh gansberg our ceo designate joins the company as you may know Vintage was founded in late 2020 with about one billion dollars of capital. Over the next five years, the team has built a diversified specialty platform and a culture that is conducive for profitable growth and expansion. This acquisition that we just made, the incremental 300 million dollar capital contribution, and the fee-free investment management by Ferdinand Square open the next chapter for vantage. Permanent capital allows us to underwrite for multi-year risk-adjusted returns that should generate top-tier growth and book value. Given our current size, we have ample room to grow selectively. The Howard Hughes consolidated financial results for the second quarter include only the stub period from June 4th, the day of the closing of the acquisition, through June 30th. However, everything I discussed today and the Vantage supplemental information that has been disclosed covers full second quarter and first half of the year results for Vantage on a historical gap basis, excluding acquisition accounting, which provides a clearer picture of the business. Turning to our second quarter results, the group's combined ratio was was 101.6% versus 94% a year ago. Gross and net-earned premium in the second quarter each rose 29% to $473 million and $325 million, respectively. Net-earned premium of $295 million was up 22% year-over-year, and we had 18 million of cap losses tied to the conflict in Iran and 19 million of adverse prior development, largely in the discontinued transaction liabilities line, totaling a 10.2% impact on the combined ratio. The combined ratio for the first half of the year was 96.1, and on a trading 12-month basis, the combined ratio was 94.7, both considerable improvements from the previous periods. Year-to-date net income increased to $86 million, up 94%. Year-to-date underwriting income grew to $23 million, roughly doubled from the prior year. In the second quarter, significant net worth of fee income added to these improvements, and in total, more than offset the short-term volatility in the new equity portfolio. The first half and trading 12-month results showed a trend toward the longer-term result that was laid out in the How We Use Valuation Supplement that was discussed on last quarter's earnings call. While we expect reduced volatility in results over the long term as we build scale, quarter on quarter movements will always have some degree of variability commensurate with our book of business. Importantly, the best metric to assess the underlying health of our underwriting is the current accident year combined ratio excluding catastrophes, which improved to 91.4 in the second quarter of last year. On a year-to-date basis, the same ratio improved to 90.9 from 94.6, again showing a positive trend. Let me know how to sum what shareholders should expect from Vantage as we look ahead. Vantage's core operating principles are right out of best-in-class performers in the property casualty insurance space. One, we're going to prioritize underwriting profit over value with proper alignment of incentives between shareholders and management. Two, we maintain a conservative reserving approach. Three, we take a long-term data-driven perspective on loss expectancy and profit margin. And four, we are disciplined in our decision making. Strategically, we will execute our revision by retaining and attracting top talent, expanding and diversifying our platform so that our ability to capture hardening pockets is nimble and fast we'll be investing in data to improve the quality of our decisions and better serve our customers we'll be seeking a margin of safety and pricing we'll be managing aggregation risk conservatively and we will be leveraging our underwriting expertise whenever possible We know that an excellent execution of this strategy by the best people will generate return on equity at or above mid-teams over the cycle. Turning to current PNC market conditions, in the past, I have described the insurance cycle as having broadly four stages. As a reminder, stage one is where the hard market starts, rates rise sharply, capacity withdrawals. Stage two is a restoration phase where further rate increases and reserves are replenished. Then stage three where rates moderate or decline while hard market profits continue to flow, allowing disciplined underwriters to still grow profitably. And finally, stage four, the industry abandons discipline and chases volume as rates fall further. Today, we are primarily in stage 3, with casualties seemingly stalled in stage 2, and a few property and short-term lines already entering stage 4. Broadly, rates are down from peak, and competition has increased, but pockets of attractive returns remain, as many lines still show rate-level adequacy despite the initial market softening. Our capital position is strong and remains well in excess of grading and regulatory requirements. As an example of the relative strength of our capital, book value ended the second quarter as $1.8 billion versus roughly $1.2 billion of trading 12-month net written premium, a conservative low premium to surplus ratio of 0.7. Accordingly, AMBEST affirmed our A- rating with an upgrade to positive outlook. On the other hand, S&P's rating action reflected its group methodology, which included how it was used, as opposed to the standalone quality advantage, for which the anchor rating remained A-. We plan to work with S&P and other rating agencies as we progress with our strategy and its benefits, as you can see more clearly as they develop. In summary, over the next 12 months, we will deepen our underwriting expertise and data focus, expand the diversification of our product offerings, and establish Vantage as a preferred home for best-in-class underwriting talent. We are in the early innings of a multi-year story. The permanent capital structure is in place, underwriting discipline is at the center of everything we do, and the platform is being built out to solidify our principles. We're focused on taking the company to the next level. I look forward to bidding you on the progress in the future. With that, I will turn it over to Ryan.

Thanks, Mark. As Bill talked about earlier in the call, and really the thesis we've laid out since we announced our transaction with Howard to Use a little over a year ago, is that we think the insurance business is a very great and unique business that can offer the opportunity to generate incredibly high and sustained returns on equity over the long term if you do two things. First, you optimize the liability side of your balance sheet by bringing in world-class talent to have profitable underwriting growth which is the addition of Mark and then the incoming CEO and future David we think we've accomplished. The second is by optimizing the asset side of the balance sheet by bringing in a much higher rate of return strategy than what would typically be a fixed income only portfolio at relatively low rates of return that's subject to a lot of interest rate risk. And that's really what we've been seeking to do on the Pershing Square side in managing this investment portfolio for Vantage. If you look at what's happened since we closed Vantage in early June, we have about a $3.4 billion portfolio that was entirely allocated to fixed income securities at a relatively low rate with a duration profile of three to four years, which meant there was a fair amount of longer term interest rate risk there. We moved very quickly to rebalance that portfolio to a barbell approach, where we have, as of the end of the quarter, which is really just a few weeks after we closed, more than 60% of the overall portfolio allocated to short-term U.S. treasuries where we take no duration risk, no credit risk. And the goal of that portfolio is really to balance all of the reserves that we have so there is no risk in funding those reserves into the future. And then we also have about a $1.1 billion equity portfolio that we established, which is about a third of the overall portfolio in just a few weeks. We think moving quickly to establish that was a very good strategy because interest rates, longer-term interest rates, had risen very rapidly over the ensuing months since we closed Vantage, and we've avoided what could have otherwise been some losses on that portfolio. Subsequent to the quarter, though, we've continued over the last month to increase the allocation of equities, and it's now about 40% of the overall investment portfolio, and over time, we'll continue to increase that percentage as we think we have the opportunity to invest and some of the world's best businesses led by great management teams that productively use their free cash flow to create shareholder value. And that barbell approach of taking no risk on the insurance liabilities, having a short-term treasury portfolio combined with buying businesses where we can achieve high rates of return can allow for a very attractive and low-risk result. Now, to give you a little bit of a flavor, I'll describe sort of the businesses that we buy, which are effectively, we like to say, royalty-like businesses with strong secular growth opportunities. So they're what we call simple, predictable, free cash flow-generated businesses run by great management teams, minimal financial leverage, no capital markets dependency. It's been the approach that we've taken at Pershing Square for over two decades and has led to really good results, and we believe it will also lead to similarly positive results with Vantage in the future by continuing to do that approach. We're going to have our Pershing Square, our publicly traded asset manager earnings call, next Thursday, which we'd encourage you to listen to. At that point, we will be describing some of the new investments that we've made, which are applicable to the Vantage Portfolio, as well as providing an update on the existing investments that we've had in the portfolio. But on a high level, the way to think about it, before we get into those details next week, is we will have a dozen to 15 different investments that we believe are ones that we could hold for long periods of time that will generate high rates of return based on their structural competitive positions, management teams, and strong levels of earnings growth. Before I close the portfolio, just acknowledge one thing, which is as we were establishing the portfolio through June to the end of the quarter, that's a week period of time, due to some broader market weakness. The portfolio on the stocks is down about 3%. It's already in the last month recovered and is up between 4% and 5%. And while we're not focused on the short-term results of equity portfolio, I do think it's just interesting to portfolio in just a couple of months is earned for the entire year. So I think we're off to a very good start. And with that, I'll turn it over to David to talk about the real estate.

Thank you so much, Ryan. After listening to Bill and Mark and Ryan, I think it's clear one of the reasons Vantage is such a great fit for Howard Hughes is that both businesses reward patience, discipline, and thoughtful capital allocation. Completely different industries, but we share many of the same economic characteristics, and that mindset has guided our real estate business for over a decade. It continues to be reflected in the results we delivered this quarter. As I walk through the results this morning, now that the supplemental has been out for over a quarter, I'm going to spend less time going through the numbers of the supplemental, and more time discussing what they tell us about the business and why they matter to shareholders. The headline from the quarter is simple. Our real estate platform is doing exactly what we designed it to do. Our master plan communities continue to monetize scarce land and attractive values. Our operating assets continue to grow recurring cash flow. Our condominium platform converted years of development work into substantial cash proceeds and together those businesses generated the capital and financial flexibility that helped fund the most important strategic transaction in our company's history those aren't isolated accomplishments are all connected parts of a capital allocation system starting with our master plan communities npc earnings before taxes increased 32 percent year-over-year to $134.7 million, driven primarily by strong residential and commercial land sales. More importantly, demand remained healthy across the portfolio. New home sales increased 12%, including 34% at the Woodland Hills, 17% at Bridgeland, and continued growth in Summerlin. The number I think investors should focus on isn't simply quarterly earnings. It's a combination of pricing power and demand. We continue to convert entitled, developer-ready land into cash and increasingly attractive values while maintaining strong demand from home builders. We've often said that we're not selling land, we are harvesting scarcity. And this quarter is another example of that principle. Every acre we develop leaves fewer remaining. Every new neighborhood enhances the value of the next one. Over time, price becomes a much more important driver of value than volume. That's why we encourage investors not to judge this business by any single quarter. Land sales are going to be lumpy. Instead, look at the long term trajectory of pricing, demand, and earnings. Those indicators continue to move in the right direction. Our remaining wholly owned land bank represents approximately $5.6 billion of projected margin-affected residual value, excluding the substantial future opportunity embedded in Terra Vallis and Floreo. That land represents decades of future capital generation. Turning to operating assets. NOI continued to grow during the quarter as leasing momentum remained healthy across the portfolio. While adjusted maintenance-free cash flow declined modestly during the quarter because we invested in leasing activity and incurred higher interest expense. I actually view those investments as encouraging. We're deploying capital today to increase occupancy and strengthen future recurring cash flow. I think the more important point is what this business has become inside of Howard Hughes. Operating assets are no longer simply stabilized real estate. They're generating recurring cash flow while creating additional opportunities to unlock and redeploy capital. They provide predictable cash generation gives us flexibility during market cycles, supports new investment opportunities, and reduces our dependence on capital markets. We also demonstrated our commitment to disciplined capital recycling. We sold Creekside Park and Creekside Park to Grove, generating approximately 30 million dollars of net proceeds after debt repayment, while achieving approximately a 30 percent project level IRR over the life of those investments. Those transactions also illustrate how we think about our real estate portfolio going forward and you know as bill mentioned while we maintain and want to remain committed to the long-term oversight of our master plan communities we've significantly expanded our toolkit for creating shareholder value as assets mature we'll continually evaluate whether our shareholders are best served by continuing to own them outright or pursuing alternative structures including selective asset sales, joint ventures, recapitalizations, or other strategic transactions, all of which that could unlock embedded value while preserving the long-term advantages of our platform. The objective isn't monetization for its own sake, it's disciplined capital allocation. If we can realize the value we've created in a lower-turn asset and redeploy that capital into opportunities with higher expected returns, whether that's expanding vantage or advancing transformational developments like the Toro District, we believe that's a better outcome for our shareholders. Our holding company structure gives us greater flexibility to make those decisions than ever before, while remaining committed to the principles that have made Howard Hughes successful for decades. When we believe capital can earn a higher return elsewhere, we'll recycle it. And that discipline is just as important as developing great assets. Turning to condos, they delivered exactly what we expected. The completion of the park ward village generated meaningful cash flow of about 227 million dollars of net proceeds after repayment of the construction loan those proceeds are the result of work that began years ago because our projects are substantially pre-sold before construction is complete the accounting you know appears lumpy while the economics are remarkably predictable i often describe our condominium platform as self-financing we contribute irreplaceable land fire deposits and non-recourse construction financing fund the majority of the development. We largely lock in our margins years before delivery. And today, we have more than $4 billion of future expected condominium revenue with roughly 78% already under contract. That pipeline provides excellent visibility into future cash generation while maintaining a conservative risk profile. Finally, on our balance sheet, following the close of the Vantage acquisition, we continue to maintain significant liquidity, modest corporate leverage, and substantial capacity to fund future growth. That financial flexibility matters because it allows us to continue investing through market cycles while maintaining discipline around capital allocation. But taking a step back to wrap it up, I think the broader takeaways from the quarter are The communities are demonstrating pricing power. The operating assets are growing recurring cash flow. Our condominium platform continues to recycle capital, and together, those businesses generated the strength that enabled Howard Hughes to successfully begin its next chapter as a diversified holding company. Our real estate platform continues to create intrinsic value, generate capital, and provide the foundation for which we're going to build Howard Hughes for decades to come. With that, I'll turn it back over to Bill for any remarks before Q&A.

I think we should just go to Q&A. So, Operator, why don't you go ahead and give us some questions?

Sure. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile our Q&A roster. And our first question will come from the line of Anthony Pallone of J.P. Morgan. Anthony, your line is open.

Hi, it's Tony Aldia. I'm Mr. Salas on Anthony Pallone's line here. Maybe for Bill, Pershing Square stepped up with $1 billion of preferred equity on Vantage. So how should we think about the financial capacity of Howard Hughes right now beyond what the balance sheet allows? And is there more support from Pershing Square that can be garnered to make other acquisitions? Thank you.

Well, Pershing Square is obviously very much committed to Howard Hughes. We think the billion of incremental capital is, I would say, what is needed for the company to execute on its plan we think within the existing kind of resources asset base of the real estate operation as I mentioned in my commentary and as David alluded to as well we have a lot of one great things about real estate is they're all different kinds of investors with different risk and return kind of thresholds you know Howard Hughes is a you know very experienced platform young team an incredible platform and we've not historically looked to monetize joint venture partner raise funds things like this I expect any incremental capital that comes to Howard Hughes will come from just the existing assets but in most likely in bringing in outside partners raising third-party capital that kind of thing and I would just add that is on top of the two and a half to $3 billion that we've talked about that the company should naturally be generating as excess-free cash flow over the next five years.

So to Bill's point, we have over time more than sufficient capital to be able to meet all of our objectives, both for the real estate business and for its very quickly growing Vantage portfolio. But we also have opportunities in the shorter term to be able to supplement that in a very quick way based upon opportunistically monetizing real estate as well.

Yeah, don't be misled by our $4 billion market cap in thinking about the actual underlying resources of the company. The market cap only reflects an underappreciation of the intrinsic value of the company. It doesn't reflect the capital resources of the business.

That's helpful. Thank you. And then I have my second question. I know it's a smaller piece, but it looked like Park Ward Village performed the original guidance you guys gave back in 4Q. What drove that? It was pretty much pre-sold. And is there anything we should be expecting from the condo business in the second half?

Happy to take that question. This is David. I think it performed exactly as we expected. I think with the amount of pre-sales that we had, the amount of net proceeds that came was very consistent with our expectations. There's typically a handful of things that come in at closing that could round the number up a little bit, like the sale of storage or upgrade to units, but those are typically minor. I would say that this is pretty consistent with our expectations. And, you know, if anything, we're thrilled to see it all closed within one quarter in one fell swoop.

Thank you. That's helpful. Thank you.

Our next question will be coming from Alexander Goldfarb of Piper Sandler. Alexander, your line is open.

Hey, good morning down there. And congrats to everyone on getting the Vantage and everything closed. A few questions here. First, I'm going to go to David. You know, the beauty of Howard Hughes, and I know we've had this discussion before, but the beauty of Howard Hughes versus, you know, when it was owned by prior companies is the, you know, holistic approach, the value that's created by not allowing, you know, competitors to come on to your MPCs and, you know, be bidding against you, whether it's on a shopping center office, et cetera. So as you guys refine the monetization approach, are you thinking about having competitors come on? Or how do you figure out, I know you sold some peripheral apartments, but how do you figure out which parts of Howard Hughes now you want to monetize versus previous?

It's a great question, Alex. I appreciate you asking. Look, I don't think the strategy has changed. And for the assets that we believe we have a competitive advantage by having a disproportionate amount of ownership or market share within our communities, we're going to continue to own those. And when I say own, I don't necessarily mean we have to own 100%. I think there are ways, as Bill talked about and I talked about through joint ventures and different monetization strategies, where we can still own, manage, and control the destiny that creates that competitive advantage without having 100% ownership of every asset. And then there are those assets that are on the periphery, on the edge, that are assets that don't give us a competitive advantage. And for those, we're always looking to monetize at the right time when prices are appropriate.

Okay. And then Ryan, appreciate the update on the book and congrats to you guys for moving quickly before rates move too much. But can you just recap? You mentioned a lot of moving pieces. It sounds now like the investment portfolio is 40% treasuries. It sounded like 60% equities, but then you also mentioned businesses, which I didn't know if that meant stock positions that are royalty companies or if you're investing privately in royalty companies.

Sure. Yeah. And let me clarify. It's a good question. So what I was saying is at the end of the quarter, we had about a third of the overall portfolio in marketable securities or common stocks. We have increased that subsequently over effectively the last five weeks to about 40%. We are not investing and have not invested in private companies. This is just common stocks. What I was trying to describe were some of the characteristics of the businesses that we're looking for, which are some of the world's best businesses, where they have great management teams, royalty-like in their nature, strong secular growth opportunities. Effectively, businesses where we believe over the coming many years or decades can compound their earnings at very high rates of return. And over time, by doing so, we believe the investment returns will be very similar to these high-growth earnings-per-share businesses that we own. The best part about it is we don't need to negotiate private transactions because the public markets, particularly at this moment, it's our view, are giving us an opportunity to buy some wonderful businesses at discounted prices.

And Ryan, why don't you just speak to at, quote-unquote, almost like stabilization, what should the portfolio look like in terms of percentage? By the way, we have no plans to invest in private assets in Vantage. So again, and these are the most liquid, large-cap companies in the world. Again, next week we'll go into some detail. You can look at the existing Pershing Square portfolio, the names that have, I would say, most of the names that you've read about publicly, we own the portfolio. We've got an additional group of names that we'll talk about next week. What should be the ultimate plus or minus mix, Treasuries versus...

Yes, and so the way to think about it at a very high level is we want to make sure that our float or sort of the insurance reserves, the net insurance reserves, are backed by short-dated U.S. Treasuries so there's no duration, no credit risk on that, plus a cushion. The balance of that is going to be common stocks over time. Our view is that we can ultimately get to somewhere north of 50%. We're still evaluating the exact result of the overall investment invested portfolio in common stocks. And it could be a little bit higher than that based exactly on how much float is generated. So the way to think about it is it looks like we're already getting pretty close to those targets after having moved, we'll continue to evaluate to see what the right amount is over time.

But the way to think about it is at least 50% of- And so to be clear, I think, Bill, you said previously like Vantage was like thousands of positions. So you've effectively gone through the entire Vantage portfolio and converted all those thousands of QSIPs to treasury indexing?

Yeah, sure. It was externally managed portfolio by, I think, BlackRock and Goldman Sachs. we liquidated the portfolio very quickly I think there was a small residual maybe 7% of the assets that we had not sold by the end of the quarter with an expectation you should expect that those will likely be gone over time so it's a very very simple portfolio 100% treasuries short term treasuries for the float plus a cushion and the balance in large cap and then appreciate just one final question And Ryan, I think one of the things, and obviously coming from a real estate guy talking about insurance, a little dangerous, but I think what you've said, what you guys have said before is

in general, insurance companies do not need to liquidate their investment books to pay out on claims. But the point is that you guys want to maintain sort of that 50% treasury cushion to allow for any excessive claims. Is that correct?

Or do you envision that you would actually have to dip into the treasury portfolio as cash that you know that we have available to pay claims as they come due you know we do expect is they kind of ladder out their fixed income maturities to kind of duration match with how they expect claims to come in uh and that's so they go they take more risk if you will on the on the fixed income uh term structure uh to get more yield, and they're able to do that because of the nature of insurance company float business. We're really not taking advantage of duration of float at all. We're taking the most conservative approach, which is to put your portfolio to meet any claims as they come in, plus a cushion. And then on top of that, we own large cap common stocks. We would not expect to be forced to liquidate a common stock portfolio to meet a claim because we have a margin of safety in the U.S. Treasury portfolio we hold.

Thank you.

And our next question will come from the line of Meyer Shields of Keith, Briette, and Woods. Your line is open, Meyer.

Great. Thanks so much. I guess a couple of questions for Mark, if I can. First, very basically, is the expected return from the equity component of the investment portfolio, does that factor into the underwriting margin targets in your long-term ROE goal?

No, it doesn't.

No. Okay. Second, I guess on the cycle, you've talked about how we're in phase three, I completely get that, but it does seem like it's much more abrupt than it has been in the past, maybe because of MGAs or access to third-party capital or whatever, does that impact near-term planning? Near-term what? May I please repeat? Not near-term what? Near-term planning in terms of just building the business.

I mean, not really. I think the, you know, go back to what I said in my remarks. I think that we're undersized for what we can in terms of capability. So we can definitely pick our spots a bit, you know, a bit better than otherwise. and not only concerned by that there's always competition Myers you know we do very much talk about this in the past but I think we're a bit more nimble and more on the edges and find our way around that so no concern at this point in time if we were multiple the size we would have probably different conversations although there are ways to address that as you know but right now where we are and I feel very very good about our opportunities despite some of the lines of business transitioning into stage three and then actually stage four, which is only a few of them. And then the quickness by which things move, you're quite right, is a little bit of short tail in nature, right? Certainly property is one prime example. But, you know, we're not a huge property cat rider, as you'll discover over the next several years. So that's not as much of an impact for us.

Okay. And then one final question. I don't know if it's numeric or otherwise, but how are you thinking about scale specifically on reinsurance at this point?

Right now, there's a couple of lines of business that I won't disclose here, but there are more lines of business that we could be doing and growing the portfolio. And since we're also building, we're still in the next chapter, which is also including building the portfolio, I would expect, I would not be surprised that reinsurance will go a bit quicker because we're going to be adding new products, new lines of business. So we may have a little bit more reinsurance for the short term to take advantage of some of the opportunities that are there as well on the insurance. But as you know, it takes a bit longer to seize on these opportunities on the insurance side. So I'll be front running, if you will, some of the market opportunities on the reinsurance side. But over time, you know, it will be really be reflective of the opportunities, Meijer. So this is the same as before. If the opportunities of the capital is dearer on the reinsurance, we'll be providing more reinsurance capacity in the market and vice versa when the insurance won't change. And I think the insurance is probably slow bill, more slowly steady as it goes, as we've seen in the past. But I'll let the market dictate, if you will, the relative contribution of reinsurance versus insurance.

Okay, perfect. It's great to hear from you again, and thanks so much. Thanks, Maya.

And as a reminder, if you would like to ask a question, please press star 11 on your telephone and wait for your name to be announced. Our next question will come from the line of Eli Dashus of An Individual Investor. Your line is open, Eli.

Hi, thanks for taking my question. You described Howard Hughes as built on disciplined capital allocation. Now that Vantage has closed and you have more competing users for capital than ever, what does that discipline look like in practice? And when opportunities compete for the same dollar, what does an opportunity have to clear to win that capital?

So we believe that we've built, we've acquired a great insurance platform. We've recruited a very talented, very experienced senior leadership team to oversee that platform, and we believe that capital in the insurance business can be put to work intelligently and earn high rates of return, both in terms of from an underwriting perspective and also from an investment perspective. So the priority for every incremental dollar of free cash flow is to put it into Vantage, and that's how we're thinking about it. And then within the asset side of Vantage, as Ryan spoke about, once we've covered our insurance liabilities, the balance we think is a very opportune time to invest in the public markets. Volatility has increased enormously, as I'm sure you noticed. And also, the market's attention is drawn to, I would say, a smaller and smaller subset of, there's a lot of FOMO going on where people pile into the same sort of sectors. And that's caused a meaningful number of businesses that we have followed for years to become available occasionally at very, very attractive prices. You wake up one day and stocks are down 25%, and based on a short-term factor that once, assuming we've done our due diligence correctly, we believe does not have a long-term impact on the business, it's allowed us to construct a very attractive portfolio. So I encourage you to join the Pershing Square call next week. It's the 13th, I guess, a week from today. And we're going to go through that portfolio in detail, maybe be able to be more granular in your question.

Okay, and thank you for that. And Bill, as a quick follow-up, you're a devoted disciple of Berkshire and Warren Buffett. As Howard Hughes grows into a larger holding company, what lessons from Berkshire's experience matter most dear? And where, if anywhere, should Howard Hughes do it differently?

Look, I think business quality is, you know, we've learned over time is the most important metric in our view in selecting securities for investment. You know, look at Berkshire over time. Excuse me, Warren Buffett, one of the greatest investors ever. But, you know, if you go back and read the Berkshire letters, the shareholders, you know, Buffett talked about how great a business the World Book Encyclopedia was or the newspaper business, a whole host of various businesses that were disrupted by technology. And I think the world has gotten even, I would say, more disruptive. AI is an incredibly disruptive, powerful force. So I think the biggest takeaway from following 60 years of Berkshire on the allocation side is error for business durability and quality. I think there are a lot of lessons that we're just following very closely. If you look at how Buffett operated, first of all, the vast majority of value of Berkshire has been built in the insurance operations. the combination of selective underwriting and intelligent investment of the capital, the assets of the insurer, has driven the bulk of the value of that company over time. That's why we acquired Vantage. That's why we recruited Mark and David. And that's why that's really going to be a big focus business going forward. I think the other thing that Berkshire did very well over time is all that value was created on largely a fixed share count. um and so uh you know we could you know issue a ton of equity and raise capital we we don't think that's an intelligent approach certainly at anything close to current share prices and we think there's plenty of capital within this operation it just needs to be redirected and uh from kind of lower returning assets into what we believe will be a high returning asset over time and i think we if we follow those principles um we're going to build a very valuable company over time. Thank you. Why don't we give another thank you for your question. Let's take operator next question.

Our next question will come from the line of Josh Coffin of Retail. Your line's open, Josh.

Hello.

I know Ryan and Bill said that next week you guys will be touching more on the investment strategy, but I was wondering since the goal of Vantage is to kind of mirror perishing holdings, would it make sense to buy PSUS or one of those other perishing holdings in order to take advantage of the discount to net asset value right now?

Yes. It's not the Pershing Square USA call, but Pershing Square USA is trading at about a 23% discount to the market value of its underlying holdings, and I view that as a very favorable – we like the holdings at net asset value. To be able to buy them at a 23% discount, we think, is extremely attractive. But let's save that for next week's call.

And if I could, I would say, I think, just real quickly, Josh, your question. The Howard Hughes stock and the Pershing Square US stock, they also reflect different things. So for example, PSUS is a pure play on publicly traded securities. What Howard Hughes offers is effectively two businesses right now, an increasingly and rapidly growing insurance business run by what we think is really the best insurance management team on the planet. It will also have access to what we believe will be very attractive long-term returns from Pershing Square's helping optimize the asset side of the insurance balance sheet, which will be very powerful. And we have a very good real estate business led by a great team where we will have the opportunity to grow that business, but also increasingly redirect some of the excess cash flows and potential asset monetizations to help grow Vantage more quickly. So I also look at them as two businesses, you know, much like you can observe the discount to PSUS, you can calculate according to the supplement that we put out last quarter what we think the net asset value is of the business and how that will grow over time, which we highlighted, and you can compare that to the share price. and clearly, Howard Hughes is also trading at a very significant discount to what we conservatively calculate. We really view it as both our firm, but we also think they reflect different investment considerations based on the type of ultimate investment exposure that you're seeking.

Yeah, just to add to what Ryan's saying, we paid $100 a share to buy a 15% stake in Howard Hughes 15 months ago. We've made a huge amount of progress since that time, and the stock price is about the same as it was then which is losing the middle 60s I've inject you know real time you know this is a business that is we think not only increased intrinsic value over the last 15 months by you know generating cash and growing but most more significantly we've acquired you know we've clearly on our way to building you know an interesting company with a great platform, the addition of Mark and David to that platform, the redeployment of the capital of that business into higher returning assets. So we're excited about where we are. But thanks for your question, Josh.

And our next question will be coming from the line of Tucker Anderson of Above All Advisors. Tucker, your line is open.

Thank you very much, and I want to thank Mark as a long-term holder of Arch Capital. And my question about how AI is going to affect the insurance business, particularly the PC business and the underwriting side. And I'm wondering how you view AI might change how you want to operate Vantage in the future and what you're doing to take advantage of it.

Great question. I think first things first is AI is being used across Vantage, you know, in testing it out and working with it, helping it with the coding. It's already helping us being a bit more efficient in many areas, but it's still early stages, right? The way we look at AI right now is going to be a great tool for us to be better at execution of decision-making and gathering data and getting access to data. So that's currently on the way. that's pretty going to be so first and foremost the companies really utilizing to leverage it for themselves to improve uh the only the flow and the processes and the decision making which we're already doing it over time it's very difficult to see right i think that there'll be more and more automation across the supply chain or the you know how we go from the insured the insurer to the to the broker to the insurance company to the reinsurance company there's going be a lot more work uh over time i could perceive for possibly integration across the whole um the whole value of proposition um we'll be positioned to take advantage of it and it's going to be a an industry you know why a phenomenon and we'll be participating in like everyone else is there an opportunity for once for someone such as ourselves to be disruptor remains to be seen there's a lot there's a lot to happen it's really hard to it's the future but clearly it's going to enable making better decisions and we're already using this as a tool to help our decision making thank you and a follow-on question would be do you care to speculate the writing cycle the one thing uh well it could um the only thing i have historically tucker that i can you know look back on is the um when we had all the property cap modeling that came to the marketplace the big argument was supposed to be standardizing the way we look at risk and it would make soft market go away forever and i've used this or a hard market for that matter and that was used like in the you know mid 90s when the ar the rms all the cat modeling came up and guess what it didn't solve the cycles uh you know what's happening in each cycle and i think it's because it's a human you know insurance like everything else in between the human system right it's one thing that the that the model is giving you a number but it's another thing to actually act upon it and execute on that basis many reasons for that one of which might be or has always been the way underwriting teams are compensated so there's always these things already you know mucking around what ultimately the decision will be made so I'm not saying it's going to be the same thing but I won't the only one thing that I remember in my my lifetime and my career that he did not it did not change to know the cynical nature of the businesses because it's human intervention in there so what are you going to ask me when do you think we'll have no any human interventions I don't think I'm only I'm going to see this in my lifetime and and so would give us plenty of

opportunity to do to take advantage of the market thank you I appreciate your and I would now like to turn the call back to Bill for closing remarks.

Thank you. So thank you all for joining. We're excited about the current state of play at Howard Hughes, and we look forward to being in touch next quarter. If you care to join, next week we will be discussing the Vantage underlying portfolio in some detail. We welcome you to the Pershing Square call next week. Thanks very much.

And this concludes today's conference call. Thank you for participating. You may now disconnect.