adjusted EBITDA guidance to $45 million from $40 million. These increases reflect the diversity and continued momentum of our distribution platform. At Everspan, we are revising our adjusted EBITDA guidance to $6 million from $7.5 million. This change is primarily driven by higher than expected acquisition costs associated with the mix of newer programs we are onboarding. While these costs impact near-term profitability, we believe these programs will produce more attractive long-term economics through lower and more stable loss ratios, supporting a stronger and more durable earnings profile over time, particularly as we build scale. Six million of adjusted EBITDA would represent a 58% increase over 2025's adjusted EBITDA of 3.8 million. We are also updating our adjusted net income per share guidance to a range of 15 cents to 20 cents per share, compared with our prior expectation of 50 cents per share. This revision reflects updated estimates for interest expense, depreciation, taxes, and a more refined allocation of non-controlling interests across the business. Importantly, our outlook continues to represent a significant milestone for the company. We expect 2026 to be the first year we generate positive adjusted net income per share, excluding the legacy financial guarantee business since launching our P&C strategy in 2021. At the midpoint of our revised guidance, this represents approximately a $0.76 per share improvement from a 2025 adjusted loss of $0.58 per share, driven by the continued growth and increasing earnings power of our insurance distribution platform. All other guidance remains unchanged. I will now turn to call back the client.

As we move into the second half of 2026, I am confident in the strength, scalability, and resilience of our business model. While the market environment remains dynamic, we are executing with discipline, maintaining our focus on underwriting quality, portfolio management, and responsible growth. These results reinforce our confidence in Octave Group's long-term opportunity. We believe the foundation we are building positions us well to deliver sustained, profitable growth and advance our vision of becoming a leading specialty insurance distribution company. Operator, I would now like to open the call to questions.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question please press star 1 on your telephone keypad a confirmation tone will indicate your line is in the question queue you may press star 2 if you would like to remove your question from the queue for participants using speaker equipment it may be necessary to pick up your handset before pressing the star keys and our first question will come from maxwell fricher with truest securities Yeah, thank you.

Good morning. I'm calling in for Mark Hughes. How would you characterize the pipeline for startup MGAs? And then how is the pipeline for the class of 2027 shaping up if you have a line of sight there?

Good morning, Max. Yeah, so where we stand for 26, I think we indicated that we thought there would be a lower number of MGAs launched this year. We haven't launched any to date, although we still expect to, but we indicated one or two for 26. This came off the large number that we launched in the class of 24 and 25. We launched nine, representing roughly 40% of our total MGA portfolio. So it was our expectation to keep that number lower this year as we focus on the large number of MGA's launched in that period. Roughly close to 75% of our organic growth this quarter was delivered by the class of 24 and 25. So those MGA's are just beginning at the early stages of scaling their platforms and really taking hold of the growth and also beginning to deliver EBITDA. Roughly half the MGA's of that class are delivering EBITDA at this point in time. and we expect more to start contributing and contributing much more meaningfully as we get through to the end of the year and into 27. So right now, as we kind of look at the trajectory in terms of our target, EBITDA, looking at 28 that we put out of 80 million, a significant percentage of that will come out of the class of 24, 25. But coming back to your specific question on 26 and 27, you know, we're still targeting a relatively modest number of EMGAs in 27. I think we're probably in a range of two to four in terms of launch. We do have a pipeline of startups that we continuously evaluate for launching. We're very selective, of course, in choosing the EMGA portfolios that we're looking at. But we've also been refining our integrated operational platform that we believe will enhance our ability to launch EMGAs even quicker than we had in the past and get them to scale sooner, which has also been a major initiative that we've been focused on in 26 and have made tremendous progress in the last number of months. So again, the pipeline is deep, but we are, you know, the class of 24-25 and to focus on those, and I mentioned in my prepared remarks, the fact that we're adding teams to those MGAs as well, not just those, but others that we acquired, has been an alternative way to grow and scale What I'll say, the small to midsize MGA launches, we're able to get them up and running much quicker by adding teams to existing MGA platforms, and that has been a key source of growth also for this year as well.

Great. That's helpful. Thank you. And then in terms of capacity, what are your observations around your current partners and then the market in general's appetite around providing more capacity?

Maybe I'll let Naveen Anand, who's with us this morning, to answer that.

Good morning, Max. So, overall, I think from a capacity standpoint, it really goes up to underlying results and our underlying results and performance of generally good. And as a result, we see that. And so, we expect that we'll continue to see a strong capacity mix for major choices supporting our venture businesses.

And I just said that we are continuing to broaden and diversify our capacity. Again, our model is a purity capacity model, and we continue to add capacity partners. Most quarters, we're adding at least one or more, so that's part of our strategy and something that we will continue to progress as we scale the platform.

Thank you. And then I guess turning to rates, I'll start with non-cat property. What sort of pricing are you getting there? And then when you look at where we are in the cycle, do you think we're anywhere near a floor? is, yeah, what are your observations on that market?

I'm asking from Naveen again. You know, generally we're seeing rate declines in the sort of 10 to 20% range, as Claude mentioned, in that sort of property lines, both primarily on the large-count property lines and more on the cat-exposed property lines. I expect we're still in both of the early innings, assuming, you know, obviously things can change quickly if there are other large cat events, but at this point we expect that those We'll continue to soften as we move forward into the range of 26 to 27, particularly with the cat events.

Yeah, and as we mentioned, our portfolio is much more year to the non-cat and non-large account, more of the SME side of the business mix. So I think for us, when we kind of look at the average, it's probably closer to 5 or 10 or the lower end of that range, just given the business mix that our portfolios are focused on. And we still are having strong growth in some of our property MGAs, again, the ones that are focused on the ENS SME space. And again, so it is a mix for us, and I'd say that more muted in terms of the price impacts, although there are a few that, as Naveen mentioned, have been in the flow of the larger account DNF markets that have had some impact that are more aligned with market, but that is a small percentage of our portfolio.

And at Everspan, I know excess liability is a decent part of the mix there. What are your observations pricing there? Is there any incremental competition you're seeing? If so, where do you see that coming from? And do you still think pricing is running ahead of lost trends?

Yeah, Max, this is Naveen again. Generally, we're still seeing rate, positive rate environment. It is moderating a bit in terms of as the quarter goes on, but it's still generally in line with and better than loss costs from that standpoint. And, you know, obviously it's dependent on portfolio on that basis, but for the portfolio that we have and the targets that we have in Everspan, we're generally seeing a positive rate.

And I'd say another trend with Everspan is we are seeing a broadening of programs that we're seeing. I think also some of the times with the market conditions that we're seeing, again, certainly some casually, but more specialty programs that are differentiated in the marketplace. So I think the selection and breadth of programs that we're seeing has improved. And also, you know, the pipeline has improved overall. So I think the Everspan platform, we do see some strong growth for the year. Again, we're not chasing growth and we're being very selective there as well, but we are seeing a very much higher quality and deeper and broader breadth of opportunities in the program space for Everspan.

And then last one for me, and I'll hop back in the queue, but is there any associated investment or costs related to the rollout of the new AI tool to your remaining MGAs?

Yeah, so we are, as I mentioned on prior calls, the implementation, customization, and also the development of the AI tools that we have in our platform, we're in the low to mid single digit millions for the year targeted for that. When you add the additional costs that we're encountering in connection with technology upgrades and also the implementation of technologies across the platforms to support that, that is an additional amount that is also in the low to mid single digit millions. So those are going to be costs that are more one time in nature. Again, I always say that there could be obviously additional initiatives that we'll be looking at next year, certainly. But for this year, I think this will be one of the larger additions in terms of AI and technology that we have in our sort of forecast period. And we will see some of those costs begin to peel off early next year. And by mid-next year, I think a meaningful percentage in the millions will be discontinued. And we also expect to benefit from those investments, obviously, and there'll be significant cost benefits as well as revenue benefits that will be coming out of that that will far offset any of the implementation costs that we put in today. Great.

Thank you for taking my questions. Thanks, Max.

And again, that is Star 1 to ask a question. We'll go next to Tommy McJoynt with KBW.

Hey, good morning. Thanks for taking our questions. The first one here, with our Modicare and some of your other MGAs, the accident in health is a major line of business for you guys. Market commentary tends to generalize pricing and conditions, talking about the property and casualty buckets. But A&H does have some of its own drivers. So can you spend a minute and just talk about the market conditions that you're seeing in A&H and as that relates to inputs to your future organic growth opportunity in that Sure.

This is Naveen. A couple of points. A&H is a pretty broad market segment, right, and our focus is – AmadaCare is focused on the excess benefits and the benefits area, and then our exchange benefits platform is primarily focused on the first stop loss. And then we've got some other focus and other answering lines within A&H. For our key areas, we're seeing strong sector growth. There are strong sort of underlying trends that are driving both the ESL market and the benefits markets, and those growth trends will continue to support organic growth as we move forward. In addition to that, we're seeing positive rate environment in those sectors as well, generally in the double-digit range, low double-digit range, low teams to high single digits. And again, we expect that to continue as we move forward into 26 to 27 based on the sort of underlying trends within those segments. It's an important part of our portfolio. It's about a third of our portfolio today and an important contributor to our results and balance to some of those challenges in the broader PNC cycles.

Got it. Thanks for that, Keller. And then switching over, the Eversand book continues to charge ahead toward its mid-teams for ROE at scale. Can you just remind me what your definition of scale is in that business, and is there any chance that fronting economics could change for either better or worse over the coming years as you gain scale? And then just lastly, does that ROE that you're targeting equate to a specific combined ratio relative to the 97% adjusted combined that you did in the first half of the year?

In terms of scale, I think the way we had modeled out the growth of the platform, given the way that we've staffed and implemented systems and technologies to support a business that was always intended to be a hybrid platform, not a pure funding platform, we do have a higher overhead cost associated with the business. Our target to scale was somewhere north of $500 million premium, which we'll be approaching that this year but but not quite there so i think and and from there forward i think we'll start seeing you know a lot less impact of that you know fixed cost drag on on the uh combined ratio in earnings and even going forward but i think once we get past that you know i think we still probably this year we'll have a few points of drag uh associated with scale but again that will begin to uh ameliorate next year uh i think this year we're targeting being in the mid-force uh in premium?

410 is our grant.

So 410 is where we're targeting. So again, I think we'll be in that range, possibly a little higher. But next year, I would expect us to be closer to that 500 million scale number. In terms of the second question, we'd be able to let David hit on the combined.

Yeah, on the combined ratio, what we've said in the past is that we're looking at sub 95 combined ratio, you know, as a casualty focus of business, you know, you expect our, you know, loss ratios to be a little higher than businesses that have heavy property books and but more cat exposed. We've added some property exposure to the portfolio at this point, which is, you know, we're certainly starting to see the benefit of in the loss ratio and expect to see that further in the remainder of the year. But, you know, let's say between 90 and 95 is, you know, what our target is, which, you know, both a function of, you know, getting those loss ratios down and more stable and what Claude had mentioned in terms of just continuing to scale the business from a expense ratio standpoint.

And then just last question to switch topics one more time. A lot of brokers and MGAs are benefiting from strong profit commissions or contingents. You guys had a nice uptick in the first half of the year. Was any of the change in guidance contemplating a higher level of profit commissions? And then do you guys have line of sight to what you think that contingents could be in the second half of the year, either on an absolute dollar basis or on a percentage of distribution revenue?

Yeah, the way we account for our profit commissions, we scale into our numbers that we're seeing. So we try to avoid a lot of volatility. So I think based on our calculations, we had expected in our original guidance included profit commissions close to the levels that we're seeing here today. We baked in a little bit additional profit commissions for one of our businesses, but I wouldn't say it was material. And so, you know, we think we'll have a good year on PCs, particularly for the lines of businesses that are driving it, which tend to have more stable loss ratios.

And moving next to Mark Hughes with Truist Securities.

Yeah, thanks. My flight hasn't left yet, so I thought I'd speak one in. On the Everspan, you described hiring some new executive talent. Sounds like your growth outlook for 2027 is pretty robust. I think you added a number of programs just this quarter. Did you talk about the quality control on that underwriting?

That's obviously a point of risk for anyone with programs and new programs. how do we uh what are you doing to give yourself confidence that the underwriting there is going to be uh high quality yeah so again i think it the talent we're bringing in uh would be bevin who has deep experience and been a chief underwriting officer uh and her breadth of experience was actually one of the things that attracted us to her and she's you know that experience will be coming you know she's replacing um you know darwin who was in that role as chief underwriting officer and Chief Reinsurance Officer. Darwin also has, you know, extensive experience, years of experience. And, you know, the broadening of the team, you know, and the depth of the team, along with our claims team, which is also very important in terms of, you know, managing our loss ratios and then the underwriting, I think has really expanded dramatically over the last year. So I think we feel very confident of the, you know, the experience of the team. and to the extent there are programs that come in uh that we require uh additional uh diligence we also don't shy away from uh from reaching out and and bringing in additional resources and expertise to help us uh on the review and underwriting of the programs i think our our approach to the underwriting again we really are a gross line underwriter so we really focus on the uh on the full program uh again we're not a fronting uh pure front platform so i think from our perspective uh you know we we were robust i think we're we're now that much more robust and um the claims oversight that is done and managed uh you know throughout uh you know program monitoring and the audits that we do on programs right after 90 days from commencement uh and thereafter yearly if not more depending on the program i think gives us confidence that our selections will be good as well as our ongoing oversight and monitoring of uh of exposures Okay, I appreciate that. Thanks, Mark.

And that concludes our question and answer session. Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines and have a wonderful day.