Hanover Insurance Group, Inc. Q3 FY2025 Earnings Call

Good day, and welcome to the Hanover Insurance Group's Third Quarter Earnings Conference Call. My name is Alan, and I'll be your operator for today's call. Please note this event is being recorded. And I would now like to turn the conference over to Oksana Lukasheva. Please go ahead.

Thank you, operator. Good morning, and thank you for joining us for our quarterly conference call. We will begin today's call with prepared remarks from Jack Roche, our President and Chief Executive Officer; and Jeff Farber, our Chief Financial Officer. Available to answer your questions after our prepared remarks are Dick Lavey, Chief Operating Officer and President of Agency Markets; and Bryan Salvatore, President of Specialty Lines. Before I turn the call over to Jack, let me note that our earnings press release, financial supplement and a complete slide presentation for today's call are available in the Investors section of our website at www.hanover.com. After the presentation, we will answer questions in the Q&A session. Our prepared remarks and responses to your questions today other than statements of historical fact, include forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. These statements can relate to, among other things, our outlook and guidance for 2025, economic conditions and related effects, including economic and social inflation, potential recessionary impacts, tariffs, as well as other risks and uncertainties such as severe weather and catastrophes that could affect the company's performance and/or cause actual results to differ materially from those anticipated. We caution you with respect to reliance on forward-looking statements and in this respect, refer you to the forward-looking statements section in our press release, the presentation deck and our filings with the SEC. Today's discussion will also reference certain non-GAAP financial measures such as operating income and accident year loss and combined ratios, excluding catastrophes, among others. A reconciliation of these non-GAAP financial measures to the closest GAAP measure on a historical basis can be found in the press release, the slide presentation or the financial supplement, which are posted on our website, as I mentioned earlier. With those comments, I will turn the call over to Jack.

Thank you, Oksana. Good morning, everyone, and thank you for joining us today. The exceptional results we delivered in the third quarter once again reflect the strong performance across our business, the effectiveness and the potential of our strategy as well as the momentum we've established across the organization. In a market defined by continuous change and ever-increasing complexity, we're not simply managing our business in the current quarter. We're carefully studying longer-term market dynamics, anticipating material trends and developments and investing in capabilities as we adjust and refine our strategy. And we're positioning our company to continue to deliver meaningful value to all of our key stakeholders over the long term, leveraging the benefits of innovation, disciplined execution and the inherent strengths of our independent agency network. In the quarter, we delivered operating return on equity over 21% due in large measure to robust net investment income, a very strong ex-CAT performance and a quiet catastrophe quarter. As much as ever, we're proud of our continued solid execution as we navigate very complex and diverging market environments across various P&C segments, and we're even more excited about the competitive advantages we're building for the future. What's particularly encouraging is that even as the environment evolves, the markets where we've chosen to compete are relatively rational and healthy. This stability, along with our diversified portfolio, broad-based profitability and experienced and talented team creates a very solid foundation on which we are building our business, investing in capabilities that are relevant to our agents and customers and accelerating the continued evolution of our business. Each of our business segments made important contributions in the quarter. Our Personal Lines team continued to execute exceptionally well, delivering improved profitability and maintaining its focus on geographic diversification. The team achieved steady growth in the low single digits, supported by strong pricing and new business, which is showing positive momentum. Our new business boasts a high-quality profile centered on full account relationships with bundled customers now representing approximately 93%. Our account-focused strategy continues to be a real differentiator in today's market, driving improved retention and higher customer lifetime value. This approach further strengthens our resiliency in the competitive monoline auto market as we provide our customers with a whole account solution for their complex insurance needs. As most of our property remediation actions are behind us, the rate of PIF decline has slowed significantly. In fact, we're experiencing sequential PIF growth in our diversification states, and we're satisfied with our pricing relative to loss trend, particularly given the successful execution of our goals for the year in terms of repositioning and profitability. The progress we've made has put us in one of the best positions we've ever been in Personal Lines. Moving on to Core Commercial. With two strong businesses, small commercial and middle market, our Core Commercial portfolio offers the flexibility to adapt as market dynamics shift and as we respond to a changing environment while sustaining attractive returns. In the quarter, our Core Commercial business delivered near double-digit pricing while we carefully balance growth with portfolio quality. For its part, our small commercial business is gaining upward momentum with an encouraging growth trajectory. Strong new business in the third quarter, high retention and underwriting discipline remain key strengths. Our workers' compensation advantage TAP Sales rollout is proving to be highly successful. We're now live in multiple states with more expansion underway, which we expect will help drive additional growth. This platform eliminates manual rating and issuance for eligible risks, consolidates policies and allows agents to generate quotes in just eight keystrokes and in under two minutes for many customers. By increasing straight-line issuance with reduced underwriting referrals, it's significantly easier to do business with us while enhancing our efficiency, accuracy and agent satisfaction. Our small commercial rates remained strong in the quarter. This segment is less susceptible to market cycles, and we have confidence in our portfolio with a focused growth mindset and strong retention of our business. We continue to supplement organic growth with strategic book consolidations and distribution expansion. In middle market, our growth was impacted by a handful of large account nonrenewals and lost accounts, which underscores the heightened competition in the larger account property space. As a reminder, even within our middle market portfolio, we primarily focus on the small and midsized account sectors where we can differentiate ourselves with specialized coverages and risk management tools, combined with our cost-effective operating model. That said, underlying retention remained healthy, and we continue to focus on accounts that meet our return thresholds, supporting acceptable margin performance and mix quality. Our differentiated risk solutions capabilities continue to set us apart. Water sensors are now deployed in the vast majority of our targeted buildings and our expanding telematics capabilities in commercial lines auto are designed to provide actionable insights that help customers better understand and manage their risks. Now turning to Specialty. Top line momentum accelerated significantly in the third quarter as expected, with net written premiums growing at a high single-digit pace, a meaningful step-up from the first and second quarter. This included strong broad-based growth in a number of key lines with marine and health care delivering solid expansion with sequential acceleration. Additionally, we posted another quarter of double-digit growth and stable margins in E&S. We're well positioned in E&S with a mix that plays to our strengths in a competitive environment. We focus on smaller, lower limit accounts with a tilt towards casualty. The book delivers stable, attractive margins, supported by strong underwriting and a thoughtfully crafted appetite. Our dual wholesale and retail distribution model allows for broader market access and provides greater agility in navigating a bifurcated landscape. Our Specialty team continued to achieve above-target profitability in the quarter while implementing healthy renewal pricing increases. Our robust profitability provides us with the flexibility to manage pricing strategically where needed. Despite somewhat tighter competition in some lines, in particular, property, the overall environment in our target specialty markets remains fairly rational. Lower middle market and small business Specialty segments where we choose to operate are typically associated with lower cycle volatility and more resilient pricing. As a result, our markets continue to present attractive opportunities for profitable growth, and we're gaining meaningful top line traction. Before I wrap up my prepared remarks, I want to highlight some significant initiatives that are transforming our specialty operations. In professional and executive lines, we've implemented a new operating model to streamline quoting and to further strengthen agent relationships. Speed has become increasingly important to agents and clients. So we've redesigned workflows to improve turnaround times across quoting, processing and binding. Smaller, more transactional accounts are handled efficiently, primarily through technology with input from transactional underwriters, while larger, more complex opportunities are directed to our most experienced underwriters who take a more consultative approach. This shift is already driving efficiencies while allowing us to build deeper agent partnerships, particularly as many of the larger distributors are refining their operating models to create more efficiencies and improve their margins. At the same time, in E&S, we're fine-tuning and training a new AI-powered underwriting tool that streamlines the intake and triage of submissions from agents and brokers. This tool leverages our existing systems and artificial intelligence to structure submission data and then triages the submission against our risk appetite and other proprietary underwriting criteria. The benefits of the tool are substantial. Enhanced operating efficiency and accelerated processing times result in significantly faster submission turnaround and improved service levels. Moreover, it creates an enhanced agent experience with faster approvals or declinations and quicker buying times where appropriate. An important aspect of this AI-powered engine is that it is built upon modular architecture, which enables future scalability and therefore can be extended into middle market, marine and other specialty lines and even claims over time with modification and customization. This scalable approach we're taking ensures that innovation developed in one segment can be adapted and deployed across our enterprise, maximizing our return on investment while accelerating the transformation of our entire business. With a clear strategy and continued investments in capabilities, talent and technology, we're building a specialty business that's agile, scalable and well positioned to meet evolving market needs, all while setting a high bar for performance and partnership. Our third quarter results further demonstrate that our strategy is delivering. We are achieving target or above target returns across most segments and geographies, positioning us well for growth acceleration into 2026. These results reflect the effectiveness of our portfolio mix, disciplined risk management and strong execution capabilities. We're excited about the momentum we're building across the enterprise, delivering with consistency and clarity while investing in our business. These investments, combined with our disciplined approach to underwriting and our strong agent relationships, create a powerful foundation for sustained success. With that, I'll turn the call over to Jeff.

Thank you, Jack, and good morning, everyone. We are very pleased with our strong results in the quarter, marked by several third quarter records, including operating earnings per share of $5.09 and a combined ratio of 91.1%. This excellent performance reflects our continued momentum and underscores the strength of our positioning as we head toward finishing the year and look forward to continued success in 2026. Our combined ratio, excluding CATs, improved 0.2 points from the prior year quarter, primarily driven by improvement in Personal Lines. Catastrophe losses of 3 points came in 3.8 points below our third quarter assumption and lower than historical averages. Benign weather played an important role, and our property management actions have also contributed positively to our CAT and ex-CAT results. Our expense ratio of 31.3% was slightly above expectations, driven primarily by higher variable agency compensation, reflecting better-than-expected year-to-date results, including much lower catastrophe losses. We remain focused on managing expenses carefully while investing strategically in initiatives that drive our long-term success. Third quarter favorable ex-CAT prior year reserve development of $12.1 million included modest favorability across each segment. In Specialty, favorable development was $10 million or 2.8 points with widespread favorability, most notably in professional and executive lines claims made business. In Personal Lines, favorable prior year reserve development was $0.9 million driven by home. And in Core Commercial, favorable prior year reserve development was $1.2 million. Favorability across a few coverages was partially offset by increased reserves in commercial auto as we respond to increased severity. Now I'll further discuss each segment's current accident year results, starting with Personal Lines. This business posted an outstanding third quarter current accident year ex-CAT combined ratio of 85.8%, improving 3.4 points from the prior year period, primarily driven by strong improvement in our homeowners line. Our personal auto ex-CAT current accident year loss ratio was 69.1%, an improvement of 0.7 points compared to the prior year quarter, driven by the benefit of earned pricing and continued favorable loss frequency across multiple coverages, most notably in collision. Turning to homeowners. Our ex-CAT current accident year loss ratio of 47.2% was an 8.5 point improvement from the prior year period and favorable relative to our expectations, driven by strong earned pricing and lower attritional loss frequency, which, as previously mentioned, we partially attribute to more benign weather. Personal Lines grew 3.6%, with new business momentum continuing to accelerate. Growth is especially strong in our target diversifying states. We achieved renewal price of 10.5% in the quarter with auto pricing up 8% and home pricing up 13.9%. While price increases were lower sequentially, they remain above our long-term loss trend. Umbrella pricing remains strong, holding above 20% and consistent with the second quarter. We are satisfied with our current Personal Lines rate levels in light of the strong overall profitability we've achieved. Now turning to our Core Commercial segment. We posted a current accident year ex-CAT combined ratio of 94.3%, 2.5 points above the prior year period driven by the loss ratio. We continue to prudently increase picks in commercial auto in response to increased severity, and we also experienced a couple of larger claims in workers' comp in the quarter. Core Commercial net written premium grew 3.5%, fueled by strong momentum in small commercial, where top line expansion accelerated on the back of double-digit new business growth and healthy retention. Overall retention in Core continues to be robust at 84.4%, underscoring the quality and stability of the book. Core pricing moderated slightly, reflecting lower exposures from the slowing economy, while underlying rate increases remained stable and continued to outpace loss trends. Moving on to Specialty. The business performed exceptionally well, posting a current accident year combined ratio ex-CAT of 86% and a current accident year loss ratio ex-CAT of 48.8%, slightly above the prior year quarter, but better than our long-term expectation of low 50s for this business. Property performance continued to be favorable and liability coverages remained within expectations. Specialty renewal pricing was 8.3%, up slightly from Q2, while at the same time, retention improved sequentially to 83.2%, underscoring the continued appetite for our offerings. Pricing remains strong and above loss trend. We are very pleased with the consistent execution in our specialty book, including an accelerating top line and remain confident in our positioning to further capture attractive growth opportunities in our markets. Moving on to a discussion of our investment portfolio, which continues to provide higher returns and remains a key source of our earnings power. Net investment income was exceptionally strong, increasing 27.5% from the prior year quarter to $117 million, reflecting growth in our asset base from underwriting and investment activity, improved partnership results, the benefit of higher reinvestment yields and the success of our portfolio repositioning efforts. During the quarter, the realization of certain tax carrybacks enabled us to further reposition the portfolio. Third quarter NII also included a benefit of approximately $2 million from the investment of funds from our recent $500 million debt issuance. We expect a benefit in the fourth quarter of approximately $4 million. However, this benefit is offset by higher interest expense on our debt. The debt level is temporarily elevated following our issuance as we have $375 million of senior notes maturing in April 2026, callable in January at par. Our fixed maturity portfolio continues to carry a weighted average rating of A+ with 95% of holdings investment grade. Portfolio duration, excluding cash, remained stable at approximately 4.4 years, consistent with our long-term asset-liability alignment approach. We also maintained limited exposure to variable rate instruments, providing stability in our investment income and reducing reinvestment risk as short-term rates decline. Moving on to our equity and capital position. Our book value increased approximately 7% sequentially and 21% year-to-date. We were active in share repurchases in Q3, demonstrating our ongoing commitment to returning capital to shareholders as a key component of our capital management strategy. From the beginning of July through October 27, the company repurchased approximately 323,000 shares of common stock, totaling $55 million, of which approximately 213,000 shares were purchased during the third quarter of 2025 for approximately $36 million, with the remaining balance purchased through a 10b5-1 plan during October. We have approximately $210 million of remaining capacity under our existing share repurchase program. We're entering the final quarter of the year from a position of real strength, delivering a 19.1% operating return on equity, a 92.6% combined ratio and operating income per diluted share of $13.31 year-to-date. These results underscore the power of our diversified earnings engine and disciplined execution across the enterprise. Each quarter of this year, we've been slowly ramping up our top line growth. Looking ahead, we expect premium growth to continue to accelerate given our smaller-sized account focus in Commercial Lines and the momentum we are building in Personal Lines diversification states. Our fourth quarter CAT load is expected to be 5.2%. With a strong foundation, resilient portfolio and exceptional team, we are well positioned to sustain this performance and to continue creating meaningful value for shareholders. With that, we are ready to open the line for questions.

Our first question today comes from Michael Phillips of Oppenheimer.

I wanted to start with the large account property and the middle market business just because we've had some mixed stories from others. And I guess I'm going to hear your opinion of whether you think we've reached a floor for pricing there, first off? And then any impact specifically on your margins in the near term because of that?

Mike, thanks for the question. This is Jack. I'll say a couple of words here and then let Dick obviously respond with a little bit more specificity. But I think overall, you know that we have remained fairly conservative in the upper middle market, whether it be property or casualty driven, that tends to be where the market softens the quickest or decelerates in pricing. And frankly, we differentiate ourselves in a more dramatic way in the low to midsized account particularly with our specialization and niches. So I do think that we are getting to the point where the competition that has increased has to recognize that the property pricing can't continue to go in the wrong direction and the liability trends are gradually going to need to be addressed. So we think there is likely, hopefully, some bottoming out of that, but that's not where we focus most of our energy.

I don't have much more to add, Jack. We evaluate each account individually, considering the technical pricing for those accounts. We also look at the overall account, taking into account pricing in relation to other lines. It's difficult to determine if we have reached the lowest point, but we are committed to maintaining discipline and have been diligent about our ITVs to ensure they are managed well. We will continue to address this on a case-by-case basis.

Okay. I guess turning to the Core Commercial and the accident year loss ratio. You said pretty clearly the 2.4 points was the large workers' comp and then the addition to commercial auto. But I guess given comments recently from you guys on pricing and loss trends there, I guess, ex that 2 things, your core loss ratio, it sounds like it was probably flat. Should we have expected some improvement there? And I guess what's your confidence that we might get some margin expansion in Core Commercial in 2026?

Mike, it's Jeff. We'll give our guidance on our loss ratio and the combined ratio when we get to January. But I think overall, we're very confident and optimistic about the price increases that we've been getting relative to loss trend. And it's hard to talk about individual lines, but I am optimistic about the firm overall, given the 9.9 points of price we're getting in Core Commercial. And I think that bodes well when some of the things that showed themselves in this quarter start to normalize.

Our next question comes from Matt Carletti of Citizens.

You guys have done a really good job in recent years of staying ahead in a challenging environment. Jack, you mentioned the importance of remaining forward-looking, providing some concrete examples. I was hoping you could take a broader perspective. As we consider Hanover's future over the next one, three, or five years, where are you strategically heading with the business? From your examples, it seems like speed, efficiency, and ease of doing business with your agents are key focuses, but what else might you include in that vision?

Thanks, Matt, for that question. I've never been more optimistic about our future. It's challenging in our industry to create a diversified portfolio that achieves widespread profitability, but we're in a great position in that respect. While perfection is unattainable, having four major businesses contributing to our profitability and most of our regions in good shape for growth provides us with the momentum we need to capitalize on current market opportunities. We have the chance to build on our success in small commercial and Specialty. I'm particularly optimistic about the middle market's potential contribution to our growth next year. Personal Lines is already performing well. The only limitation we have is the one we set ourselves concerning diversification and ensuring our property aggregations align with earnings volatility. I believe we're at a stage where our capabilities are strong, and we're still working on new developments and expanding our approach when feasible. What excites us most is that top agents are increasingly looking to enhance their margins across Personal Lines, small commercial, and small specialty sectors. We have an opportunity to leverage our operating model improvements and adapt to changes in the distribution system, which are generating greater demand for our offerings. Fine-tuning and enhancing what we do will play a significant role in improving our own financial performance while assisting agents in improving theirs. You can expect us to discuss how we will increase our underwriting appetite at the right time in early 2026. We're positioned to do this, especially in Specialty and middle market, and explore additional sectors for growth and relevance. We have a proven history of this approach, and we're prepared to use our increased profitability to pursue these opportunities.

Our next question comes from Mike Zaremski of BMO.

I'm switching to Personal Lines. On the home insurance side, and I appreciate the comments about the percent that's bundled now, definitely higher than historical. Just so we can maybe better appreciate the durability of the current profit margins. Would you be willing to share how much lower the frequency levels are that you expect kind of under the new kind of terms and conditions and deductibles, et cetera, versus kind of the old portfolio?

It's difficult to provide a concrete answer at this time. Currently, the frequency benefit is significant, but we haven't disclosed specific details, and we are not yet ready to do so. We are observing this trend in both auto insurance, especially in collision, and homeowners insurance. As many have noted, it's challenging to determine whether the improvement in auto frequency stems from advancements in technology promoting safer driving, increased concern about premium hikes, or simply a general apprehension among those who have previously made claims. Moving forward, we are evaluating whether this frequency benefit will persist in both home and auto insurance as we prepare our guidance for next year. We will do our best to provide an update when we return for our call in late January or early February.

Okay, moving to the Core Commercial segment, you've mentioned potential one-time impacts related to workers' compensation, but regarding commercial auto, it seems that given its ongoing situation, the effects might be more consistent. You've previously discussed a target accident year loss ratio of 57% to 58% for that segment. Should we expect that number to be a bit higher?

That's hard to say. This year, as you know, it's 60%. A year ago, it was in the 58% range, and I think that's a reasonable target. I'm still optimistic about that. Even though we've raised our picks in commercial auto, the team is actively working that book and assessing and trying to obtain some price increases there. So still optimistic that that's the appropriate level going forward.

Okay, I understand. Lastly, regarding the overall competitive environment, you've mentioned this somewhat already. One of the main inquiries we've been receiving from investors is about the rate of change in pricing power within the commercial sector. While pricing is slowing down slightly, the decrease isn't substantial. Can you discuss whether you are implementing different strategies in the market that are maintaining pricing, or if the market is not as competitive as some might assume, particularly when considering the large account sector?

Yes, Mike, this is Jack. Thanks for your question. At a high level, it’s about our focus and how we operate with agents. We concentrate on the small to lower end of the middle market, not just in Core Commercial but also in Specialty. This approach is challenging for many carriers because it necessitates a unique operating model and effective underwriting beyond standard point-of-sale systems. While it’s not exactly a protective barrier, it historically leads to a more stable business. With the volatility in the upper middle market, agents are increasingly less concerned with saving a few dollars in the middle market. This influences our strategy. We strive to create value that encourages preferred accounts to remain within the preferred market, and I believe agents recognize this. I can also let Bryan discuss the specialty area, particularly why we believe we’re maintaining pricing even in a competitive market.

Yes, sure. To begin, in the small and middle market segment, we do notice competitive pressure, but it’s not as severe as in other areas. The improvements we've made to our operating model really address a need for our agents, particularly the larger and consolidating ones, by streamlining their placement platforms. Our ability to process submissions on the same day in many cases helps their economics in this area. While it doesn't create a protective barrier around our business, it certainly fosters their appreciation for our efforts. Additionally, we provide a wide range of robust products that allow us to meet various needs efficiently.

The strong growth this quarter, the high retention and also the high price increase that we're getting, I think, is good evidence that Bryan's strategy is clearly working.

Our next question comes from Paul Newsome of Piper Sandler.

I was hoping you could share your updated thoughts on the expense ratio goals. At one time, you were aiming for about 20 basis points of improvement per year, but that was impacted by some other issues and changes in the mix. As we look towards 2025, are we in a position to consider returning to that goal, or do we need to reevaluate it entirely?

Over the long run, we are committed to that goal of 20 basis points per annum improvement, and that was built into our guide of 30.5%, and we'll address that end of January, early February when we do our fourth quarter call. What I've said from time to time on these calls when asked about it, when we have years or periods where the loss ratio is below what we had guided to in the combined ratio and also when CATs are below our guide, there are scenarios where the expense ratio has to increase a bit, but that would be a small offset to the overall decline in the combined ratio. So even if you think about CATs, when we have lower CATs, there are slightly higher agency profit share that has to be paid. So it's a little harder to deal with the expense ratio in and of itself. But overall, Paul, we are committed to that long-term objective.

Our next question comes from Meyer Shields of KBW.

Great. I wanted to really get Jack's thoughts on both core and contingent commission rates. In the past, as pricing has softened, I think the brokers' hands have gotten strengthened and they've been able to push for more. And I'm wondering whether you're seeing that and whether consolidation of the smaller account space among the larger brokers is playing a role?

Thanks, Meyer. Listen, I can tell you that as recently as the CIAB conference in October, we have had what I think is some of the most strategic dialogue with the biggest and best agents in the land around how we have a unique opportunity to work together to better serve customers in a more efficient way. And frankly, we've been really upfront that we don't get there by exchanging the last nickel that we both earn and move our margins into brokers' margins. What we've been successful in doing heretofore, and I think we can continue to do that is use our capabilities to help agents improve their margins, particularly on the lower face value business and to grow their business in a very strategic way through our partnering approach. And I really believe that the way in which we engage with agents keeps us out of a tug of war for the last nickel. And so we have not seen any major pressure in that regard. In fact, the bigger the agents get, the more they want some stability in their contingencies. So we negotiate a proper balance of guaranteed supplemental type of stuff so that they don't come up dry on a less good year, but we simultaneously negotiate kind of taking some off the top to pay for that over time. So I feel great about the way we're working with those agents in a very strategic way, and we're going to continue to push that as part of our strategy.

Okay. Perfect. That's good to hear. Related question, when you see technology that's certainly better to a lot of the competitors that are out there and the business that you win from that perspective, should we think of that as recurring? Or is that like a one renewal cycle and then you've already gotten what you're going to get?

Maybe you could clarify for us a little bit, Meyer, when you say a one-time benefit. Tell me what you're thinking.

So wondering whether you go through a year and Agent X has technology that gets responses much faster and stuff like that. So you've boosted the new account wins on that basis. Does the accelerated growth, is that something that persists going forward? Or is it just similar growth off of a higher base?

Let me let Dick kind of respond to that more holistically. But I think we're in a phase where agents are looking at who are their most strategic markets that can help them become more efficient and better serve customers at the right level. And all these things are tools. So I think embedded in all that is if you're positioned as a top-tier market, whether it be in small commercial or in Specialty, particularly on the small end, you're creating a kind of a strategic position that has some sustainability to it in terms of profitable growth. But Dick, you can update on the technology side.

The other color I'd add to that, Meyer, it isn't just about the technology on the way in the front door, your technology, your system, your operating model needs to wrap around that customer throughout the year through your renewals that persist. How are you at handling endorsements and certificates and calls on billing, right? So it's a collection of services that brings forward a terrific experience. So the customer is happy with the carrier, happy with the agent. And as you know, particularly in the small commercial, the retentions are quite high. We have some of the highest retentions in that market segment in the industry. So we've been at this for years to obviously have a forward-facing ease of quoting so that comes to us preferentially. But then the stickiness of that business is dependent upon all the other components that you have in your operating model. So I would argue that it sustains the growth model.

Yes, this is Bryan. I would like to add that we have worked diligently in the small space to make the renewal process very low touch for those simple policies. So I would definitely say it's not only about new business, but it also applies to the entire process.

This concludes the question-and-answer session. I would like to turn the conference back over to Oksana Lukasheva for any closing remarks.

Thank you very much, everybody, for your participation today. We are looking forward to talking to you next quarter.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.