SiriusPoint Q2 2026 Earnings Call Transcript

Quartr
Provided by Quartr
July 30, 2026

Key Takeaways

  • Positive Sentiment: Strong first-half profitability: SiriusPoint reported a 90.1% core combined ratio, 14.7% operating ROE, and 31% year-over-year growth in underwriting income to $126 million, with operating EPS rising 17% to $1.37.
  • Positive Sentiment: The company is growing selectively in attractive specialty areas, including Accident & Health, surety, credit, and niche property programs, while reducing exposure to less favorable markets such as property catastrophe, aviation, and commercial auto.
  • Positive Sentiment: Capital strength remains a key support, with a 239% estimated BSCR ratio, $1.1 billion of liquidity, debt-to-capital of 22.9%, and $95 million of share repurchases year-to-date; management said an additional $79 million remains authorized.
  • Neutral Sentiment: Portfolio changes toward longer-duration business reduced second-quarter earned premium by approximately $31 million, though management characterized this as a timing effect that should support incremental earned-premium growth through the remainder of 2026 and into 2027.
  • Negative Sentiment: Pricing pressure remains elevated in property catastrophe reinsurance, financial and professional lines, and parts of casualty and aviation; management expects continued selectivity and indicated that further rate action may be needed in major airline business.
AI Generated. May Contain Errors.
Earnings Conference Call
SiriusPoint Q2 2026
00:00 / 00:00

There are 9 speakers on the call.

Operator

Good morning, ladies and gentlemen, welcome to the SiriusPoint second quarter 2026 earnings conference call. During today's presentation, all parties will be in listen-only mode. Following the conclusion of the prepared remarks, management will host a question and answer session and instructions will be given at that time. As a reminder, this conference call is being recorded, and a replay is available through 11:59 P.M. Eastern Time on August 13th, 2025. With that, I'd like to turn the call over to Liam Blackledge, Investor Relations and Strategy Manager. Thank you. Please go ahead.

Speaker 1

Good morning, thank you for joining us for SiriusPoint's second quarter and half year 2026 earnings call. Last night, we released our earnings press release, Form 10-Q, and financial supplement, all available on our website at investors.siriuspt.com, along with the slides that will accompany today's discussion. Joining me on the call are Scott Egan, our Chief Executive Officer, and Jim McKinney, our Chief Financial Officer. Before we begin, I'd like to remind you that today's remarks contain forward-looking statements based on current expectations and actual results may differ materially. We will also reference certain non-GAAP financial measures, which we believe are useful in evaluating the performance of the business. Reconciliations can be found in the presentation and our SEC filings. Please refer to our earnings release and accompanying material for a more complete discussion of the forward-looking statements and non-GAAP measures.

Speaker 1

With that, I'll turn this call over to Scott.

Speaker 2

Thanks, Liam, welcome everyone to our second quarter and half year results call. SiriusPoint delivered another quarter of consistent and strong underwriting profitability. We continue to demonstrate the durability of our performance, which is especially important as more markets become tougher. We firmly believe delivering a strong return on equity year in, year out is key to creating long-term shareholder value. This is why, over the last three years, we've deliberately taken actions to diversify the book and reduce our volatility. We are well positioned for cycle resilience and to deliver on our across the cycle 12%-15% return on equity target, our half year results for 2026 are another proof point that our strategy is delivering against that aim. Our headlines at the half year are clear. The business continues to perform strongly.

Speaker 2

We are growing where we create the most value and where we see attractive returns for the risk we take. Our approach and growing reputation means our growth pipeline remains strong. Finally, our balance sheet and agile capital management serve as the bedrock to maximizing business opportunities. Jim will take you through the details of the second quarter shortly. We delivered a core combined ratio of 91.4% and an operating return on equity of 13.8%. This means that at half year our net income is up 44% over the prior year, and our operating ROE of 14.7% is at the upper end of our 12%-15% target range. Our core result, which excludes our run-off business, continues to outperform and delivered a 16.2% return on equity, which is above our target range. Our book value continues to grow.

Speaker 2

Book value per diluted common share, excluding AOCI, increased 3% in the quarter and 8% year-to-date. We've repurchased $95 million of common shares year-to-date, bringing total capital return to shareholders in 2026 of $295 million, including the preference share redemption in February. Our value creation continues to be driven by our earnings growth, reflecting the quality, discipline, and durability of our operating model. We are driving the company to be a focused specialty underwriter, underpinned by a diversified and lower volatility portfolio, which is meaningfully more balanced than it was several years ago. A key example of this is the growth of our Accident and Health business to around $1 billion, given its strategic importance as a consistently profitable and low volatility business with a low correlation to wider P&C pricing cycles.

Speaker 2

The combination of our insurance and services and reinsurance businesses, coupled with our 10 different specialty lines and our multiple distribution channels, act as good diversification, supporting more stable earnings and a resilient capital profile. Turning to slide eight. The quarter once again demonstrated both our underwriting discipline with a low nineties combined ratio and our ability to grow. Our insurance and services gross written premium grew 15%, while our reinsurance premium declined 9%. We will be disciplined in areas where pricing or risk-adjusted returns do not meet our thresholds. We have the ability to redirect our capital quickly to other, more attractive lines, segments, and geographies. Slide 11 shows the scale and breadth of our growing specialty platform and our active management of the various pricing cycles. We have meaningful positions across many lines. To reiterate, underwriting discipline is key to how we manage the business.

Speaker 2

We will not pursue growth at any cost. This quarter, we have added some additional detail to the slide on trailing growth trends. As you can see, we are growing strongly in areas where we have previously said pricing is more attractive, such as Accident and Health and surety, and pulling back in areas where pricing is more competitive, like aviation, property cat, and certain segments of casualty. Jim will cover each of our specialties in more detail, but this slide shows how we are building in specialty lines where we have underwriting expertise, relevant distribution, and the ability to generate attractive returns. As the portfolio evolves, driven by our underwriting focus, the shift in our business mix has affected the timing of our earned premium recognition, meaning premiums are earning through more slowly.

Speaker 2

You can see that in some of the numbers this quarter, Jim will unpack this later in the call. Turning to underwriting performance briefly on slide 12, this shows exactly the type of business portfolio we are building. This is now consistently delivering strong combined ratios and lower volatility, our volatility profile continues to be favorable against our U.S. specialty peers and, of course, is very different to that of the largely reinsurance-focused Bermuda-domiciled peers. This is obviously very different to our past. Slide 13 shows a disciplined approach to partnering with specialist MGAs. We've reinforced this many times during these calls before, but given their importance to us and our strong performance, it is worth reiterating. The headlines are we are highly selective in choosing partners, declining more than 90% of opportunities. We take our time getting to know potential partners before onboarding.

Speaker 2

Once we enter a relationship, we deliberately start conservatively in our net positions, growth, and reserving. Importantly, incentives are aligned with underwriting profitability and not premium growth. You can see this in our acquisition ratio as profitability improves. This is a dynamic we are very happy with. The result is a portfolio built around long-term relationships with strong renewal rates and with a significant portion of premiums coming from partners we have worked with for many years. We believe our differentiated approach to this distribution channel is the key to our success and earnings power. Turning to our people. As you know, at SiriusPoint, we put a lot of emphasis on our culture. Once a year, we run an employee engagement survey, which gives us a real benchmark on how we are doing with the most important asset in our business, our staff.

Speaker 2

Our approach to everything we do is that it starts with having the right people, the right culture, and the right mindset. I believe this has been the most important ingredient of our success over the past three years. The highlights of this year's survey are seen on slide 14. Our overall employee engagement score is now at 83, increasing for the third consecutive year. Our scores across leadership, organizational alignment, collaboration, development, recognition, and pride are top quartile scores. Finally, our NPS score at +40 is well above industry benchmarks and once again increased double-digit year-on-year. I see a direct link between these scores and the business performance we are driving. It is the cornerstone of long-term sustainable performance. I'm incredibly proud of and grateful to all of my colleagues and what they do every single day. They are our secret sauce.

Speaker 2

Before I pass across to Jim, I'll end with some key takeaways as we head into the second half of 2026. Our business has delivered another strong half year of performance, operating at the upper end of our return on equity guidance. Our track record shows the consistency and predictability of what we are saying and doing. This matters. The continued growth of our insurance business is creating real shareholder value, our pipeline is strong. Our capital and balance sheet are very strong, as demonstrated by the ratings upgrades to A by S&P, Fitch and AM Best earlier this year. Our aim is to continue to improve. To end with the World Cup theme of the past few months, for all you soccer lovers, it's halftime in the SiriusPoint 2026 match.

Speaker 2

A strong performance in the first half by the team, all to play for in the second half, the team is ready, able and hungry for success. I look forward to providing you with our next update at the third quarter hydration break. With that, I'll turn over to Jim to walk you through the match stats for the first half. Jim.

Speaker 3

Scott, I expected you to call it football, glad to see you are coming around to calling it soccer. Good morning or good afternoon, everyone. I'll provide a bit of additional detail to our second quarter and half year results, cover underwriting, investments, capital and the balance sheet. Turning to our financial results, the strength and consistency of the portfolio Scott just described translated into another quarter of solid operating performance. Core gross written premium increased 6% to $982 million, reflecting continued growth in our insurance and services business, while net written premium grew 1% as we maintained our disciplined underwriting approach. Underwriting performance remains strong with a combined ratio of 91.4% and underwriting income of $55 million. While this compares to an exceptionally strong prior year quarter, it remains fully consistent with our across the cycle profitability objectives.

Speaker 3

As Scott noted earlier, changes in our portfolio mix during the first half of the year extended the earning pattern of our unearned premium, reducing earned premium recognized in the quarter by approximately 10% or $31 million. This shift reflects growth in longer duration lines such as surety, combined with reduced exposure to shorter tail property catastrophe business. Importantly, this is a timing impact rather than an economic one, creating a favorable earned premium tailwind that will benefit future periods. The earnings profile continues to benefit from diversification across underwriting, fee income, and investment. Net service fee income increased 15% year-over-year to $10 million, or 41% adjusting for go forward MGAs. Total investment income remained strong at $73 million, including $66 million of net investment income.

Speaker 3

These results produced operating net income of $79 million or $0.67 per diluted share, unchanged from the prior year despite a more competitive market environment. Importantly, we continue to grow intrinsic value during the quarter with diluted book value per share excluding AOCI increasing $0.50 to $19.48. Overall, the quarter reflects the quality of our underwriting portfolio, the growing contribution from fee-based earnings, and the resilience of our balance sheet and investment portfolio. The key takeaway is that we continue to deliver consistent operating earnings and book value growth while maintaining underwriting discipline and a strong capital position. The strength of our portfolio is translating into consistent financial performance. For the first half of the year, core gross written premium grew 3% to nearly $2 billion, while actions to improve portfolio quality and reduce volatility contributed to a 2.3 point improvement in the combined ratio to 90.1%.

Speaker 3

That drove a 31% increase in underwriting income to $126 million, while strong investment performance and growth in fee income further diversified earnings. As a result, operating earnings per share increased 17% year-over-year to $1.37, and diluted book value per share excluding AOCI increased $1.38 to $19.48. Overall, the first half demonstrates that our strategy is delivering the outcomes we set out to achieve. Strong underwriting profitability, growing earnings diversification, and continued growth in intrinsic value per share. The combination of strong earnings generation, book value growth, and a resilient balance sheet continues to provide significant flexibility in how we deploy capital for shareholders. Turning to segment performance. The results reinforce the themes Scott and I have discussed today. Disciplined growth in Insurance and Services and continued portfolio optimization and Reinsurance.

Speaker 3

In Insurance and Services, gross written premium grew 15% in the quarter and 11% year-to-date, driven by areas where we see attractive risk-adjusted returns. Despite that growth, the combined ratio remains strong at 90.7% for the quarter and 91.4% year-to-date, reflecting disciplined underwriting and favorable prior year development. In Reinsurance, we continue to prioritize profitability over volume. Gross written premium declined as a result of intentional portfolio actions. While the combined ratio improved 5.2 points year-to-date to 88.3%, driven largely by lower catastrophe losses and an improved portfolio quality. Expense ratios remain disciplined across both segments. The modest increase in acquisition ratio reflects higher profit commissions on the prior year business, consistent with favorable reserve development. The OUE ratio was impacted by the timing shift in earned premium recognition discussed earlier.

Speaker 3

Despite this, we remain on track to deliver a full year OUE ratio of approximately 7% at the upper end of our guidance range. Overall, these results demonstrate the benefits of our strategy, growing where returns are attractive, reducing exposures where they are not, and consistently improving the quality of earnings across the portfolio. Circling back and double clicking into our core specialty lines shown on page eleven. Accident and Health, our largest line at 27% of premium, remains highly attractive business, combining strong profitability with low capital intensity. Employer stop loss continues to show signs of firming, and we remain well positioned to capitalize on improving market conditions. General liability pricing remains broadly aligned with loss trends, although rate momentum has moderated. We continue to focus on segments where underwriting discipline supports attractive returns. Other property conditions remain mixed.

Speaker 3

We have reduced participation where reinsurance pricing has softened, while continuing to grow selectively in property insurance niches offering attractive economics. Financial and professional lines remain competitive, particularly in D&O and professional liability. While market conditions are stabilizing, we remain cautious and highly selective, prioritizing margin over growth. Within other casualty, we continue to reduce auto exposure given unfavorable loss cost trends, while benefiting from strong growth and performance in environmental. Surety remains an attractive diversifying line. While we are monitoring emerging loss trends across the market, our portfolio remains differentiated with a focus on commercial surety and limited exposure to larger project related risks. Aviation remains disciplined with expectations for continued rate improvement in major airline business later this year. Credit remains well priced and delivered strong growth in the quarter, supported by favorable market conditions.

Speaker 3

Marine and energy presents a mixed environment, with attractive opportunities in selected energy and specialty niches offset by continued competitive pressure in cargo, haul, and upstream energy. Finally, property catastrophe reinsurance, now approximately 4% of the portfolio, experienced further rate pressure at mid-year renewals. Consistent with our strategy, we reduced participation and allowed premium volumes to decline, prioritizing profitability and capital efficiency over top-line growth. Overall, market conditions continue to vary by class, but our approach remains unchanged. Deploy capital where risk-adjusted returns are strongest, maintain underwriting discipline, and continue improving the quality and resilience of earnings. Turning to slide 20. Another important indicator of portfolio quality is our reserve performance and consistency of prior year development. We recorded our 21st consecutive quarter of favorable prior year development, supported by disciplined reserving process, prudent reserve setting on new business, and meaningful protection from our LPT structures.

Speaker 3

This consistent track record is another example of the underwriting and risk management discipline that underpins our earnings and book value growth. Turning to slide 21. Our investment portfolio continues to provide a stable and predictable earnings stream that complements our underwriting results. In the first half, net investment income was $132 million, and total investment income was $151 million. The portfolio remains conservatively positioned with a double A minus average credit quality, approximately 99% investment-grade exposure, limited private credit exposure, and no fixed income defaults during the period. Combined with strong liquidity and a short duration profile, the investment portfolio remains well-positioned to support earnings consistency and balance sheet strength. Turning to financial strength and capital position on slides 22 and 23. Our capital position, leverage profile, and liquidity continue to provide significant flexibility to execute our strategy and create shareholder value.

Speaker 3

Our estimated BSCR ratio remains strong at 239%, reflecting a well-capitalized balance sheet while maintaining resilience in severe stress scenarios. At current trading levels, we continue to view share repurchases as an attractive capital allocation opportunity, offering compelling returns and payback economics. We've repurchased $95 million of common shares year to date and have $79 million remaining under our authorization. We continue to manage the business within a capital framework aligned with S&P's triple A capital model assumptions, underscoring our commitment to balance sheet strength. Our debt to capital of 22.9% is near the lowest level in several years, providing additional financial flexibility. Liquidity remains robust at $1.1 billion, giving us ample capacity to support the business, pursue strategic opportunities, and navigate market volatility.

Speaker 3

Importantly, we continue to believe our current valuation does not fully reflect the value of our MGA platform, particularly IMG, nor the quality and earnings power of the broader franchise. In conclusion, we are proud of our results for the second quarter and half year. Our strategy, predicated on underwriting excellence, volatility reduction, and balanced capital management, continues to yield strong results. The quarter saw us deliver strong underwriting profits, continued attritional loss ratio improvement, net investment income well supported by portfolio yields, returns comfortably within our across the cycle targets, and continued capital strength and balance sheet flexibility. We have made exceptional progress in becoming a best-in-class specialty underwriter, though there is still room to improve, and that is what the second half of the year is for. With that, I'll turn the call back to the operator and we'll open the line for questions.

Operator

Thank you. Ladies and gentlemen, the floor is now open for questions. If you would like to ask a question, please press star one on your telephone keypad at this time. A confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. Again, that's star one to register a question at this time. Our first question today is coming from Michael Phillips of Oppenheimer. Please go ahead.

Speaker 4

Thank you. Good morning, everybody. Thanks for your time. I guess, first off, it's all about timing, right? It's a tough day to report given the broader market and what's happened in insurance today. We'll get past that. I guess I want to start with your comments on the insurance growth in one piece. The other property segment, it's one of your top three lines. Jim, you said it's mixed, right? Can you just maybe help define specifically or give some examples of your book in other property and pieces of that that you think are more attractive than others so we can kind of frame what that could look like over the next year?

Speaker 2

Hi, Mike. It's Scott. As always, thank you for your questions. Thanks for dialing in. Look, for us, obviously, we always talk about the property cat market in general terms when we talk about the unattractiveness, but actually, we have some quite strong property programs in our program MGA space. These tend to be more niche in a sense. We have programs both in U.K., Europe in North America, examples might be landlords, examples might be SME businesses in the U.K. They tend to be more niche products. Actually, we're happy, Mike, with the environment that we're seeing in them, both in terms of performance of the actual schemes, and also the rate that we're carrying. Of course, we never fall asleep and we're always alert.

Speaker 2

The dynamics that we're seeing in those type of markets is actually quite different to what I would call the kind of broader general property markets and property cat markets, if that helps answer your question.

Speaker 4

Yeah, it does. Thanks for addressing that because typically people think of property right now, and it's under a lot of pressure, but clearly there's some spaces and you're a

Speaker 2

Yeah

Speaker 4

where it's not.

Speaker 2

Mike, yeah. Mike, maybe I can make a general point here. Sorry, I know I interrupted you there. I should have said it when I answered your question, which is, look, I think one of the things that our MGA program distribution focus allows us is often to partner with sort of specialists in niche spaces. It's one of the things that we really like. Therefore, we get access to niche markets. We also partner with really specialist underwriters who understand that space. So it's a really sort of two-pronged answer in a sense, which is it also talks to a focus in strategic focus and MGA and programs as well and why we find that attractive.

Speaker 3

Yeah. I would just add one element to clarification or enhancement. I think when the market is referencing property in total, many times, Mike, I think they're referencing the property cat market as they go versus the attritional property market. Those at times can have very different trends as you know and as others know.

Speaker 4

Thanks, Jim and Scott. Appreciate that. Let me turn to IMG for a second. You've done some deals recently there, and I guess just more broadly longer term, does that IMG book currently have as diversified of a book as you want it to have? Or should we think there could be more to come from what you've done recently with, say, Assist America and World Nomads?

Speaker 2

Look, I think the IMG business is an interesting one, Mike. I would say we've definitely improved the diversification over the last three years. We've introduced some new products, and actually we're introducing sub-products as we speak underneath those tiered products, et cetera. We've also diversified our distribution to market. Our direct-to-consumer in IMG now makes up roughly about one third of our distribution, whereas, a few years ago when I arrived, it was heavy and predominantly via aggregators and brokers, et cetera. We are diversifying the business. We are diversifying the product set. We are diversifying routes to market. There's nothing imminent on the horizon, and I'll never rule it out. If there's something that fitted well with our skillset, with our underwriting skillset and our platform, then we'd look at it.

Speaker 2

I think something like Assist America and World Nomads, we're really building on products that we had and customers that we had, albeit in slightly different geographies. Look, ultimately, World Nomads is a great example where it's a sort of subspecialism within the product. I sometimes think, Mike, that's a really smart way of sticking to what you know, but getting access to different segments within the marketplaces. Look, we're quite excited with where IMG is going. We're quite excited by the products that it has, and we're quite excited by the bolt-on acquisitions that we've done, if that answers your question.

Speaker 4

It does. I guess maybe a follow-up there, Scott, would be, we've seen in the last couple of quarters the margin on that business kind of tick up a bit, and you called out this quarter Assist America. I wonder, is there more to come, or are we hitting that mid-teens margin as kind of the ceiling for a margin of the business, given the recent deals that you've done?

Speaker 2

To be clear, World Nomads is not yet in our numbers, Mike, so that's still got to come through. I think, the strategic focus in IMG is to continue to grow our direct-to-consumer business. That's not always easy. Obviously, inorganic and organic are tools that we can deploy. I think what is true is that if we grow our direct-to-consumer business, the margin on that product or on that distribution channel, should I say, is higher than via other routes. Obviously, there is an offsetting expense where ultimately we have to market the brand. So one of the questions we're asking ourselves perhaps for the plans next year and beyond is should we be doing more to perhaps invest in the brands that we have with a view of growing that distribution channel? Ultimately, the economics of that are attractive.

Speaker 4

Okay. Yeah, makes sense. Thank you, Scott, and congrats on the quarter. I'll hop off for now. Thanks.

Speaker 2

Thanks, Mike. Appreciate the questions.

Operator

Thank you. The next question is coming from Timothy D'Agostino of B. Riley Securities. Please go ahead.

Speaker 5

Thanks for all the commentary this morning and taking the questions. Just one from my end. Within the past month or so, you launched the Fine Art out of the Crisis Solutions offerings. I guess, can you just provide some color on why now is the time to do that, what you're seeing there, and how it fits the SiriusPoint model? Thank you.

Speaker 2

Yeah. No, great question, Tim, and thanks again for joining. Maybe if I go back a step, Tim. I think we've always been very clear that the London market fits very well with our strategy of specialisms. For the first few years that I was here, certainly we were investing in some of our processes, underlying infrastructure capabilities, et cetera. Earlier on this year, we broke it out as one of our standalone P&Ls, and David Goldfinch within our business took over the leadership of that. For us, what we're looking to do is develop teams and develop products within that business. These are two areas, PVT, which we've actually labeled Crisis Solutions. That's the brand we've given that. I think it's actually, quite frankly, it's a better badge than PVT. It sounds like medicine.

Speaker 2

Fine Art and Specie is areas that we think are attractive in the market and where we can make money. We've actually gone out and attracted some of the best talent in the London market. Honestly, Tim, being very humble about it, three years ago, we would not have been able to do that. We're really excited that the platform we've created, the leadership that we put there, and our growing reputation means that we're able to attract people with really good, strong underwriting skills in niche markets in London that we find attractive.

Speaker 5

Okay, great. Thank you so much for the commentary and congrats on the quarter.

Speaker 2

Thanks, Tim.

Operator

Thank you. The next question is coming from Andrew Andersen of Jefferies. Please go ahead.

Speaker 6

Hi, guys. This is Charlie on for Andrew. The first question I have is just on the casualty side. When you guys are looking at reserve adequacy, where are you more focused today? Is it on social inflation, claims emergence, severity trends, litigation funding? I guess, where are you seeing the most cause for concern and scrutiny?

Speaker 3

Yeah. No, good question. I would say, maybe I think about it a little differently than any of the individual elements that you said, because I guess we focus on all of them when we come back to it. As I think prudent reservers, I think we always take a skeptical eye as well to each of the underlying environmental components. We probably lean forward as a whole from a risk perspective, if you will, being a little bit more skeptical than where the market would probably be on each of those elements. That's a hard thing to exactly measure, because there's a bunch of different ways to look at that.

Speaker 3

What I would point you to is essentially the 21 consecutive quarters of favorable prior year development and our overarching reserving philosophy, which is to be prudently and thoughtfully reserved at a class level, at an individual level, and most importantly, at the portfolio overall. There's been no change in any of our thought processes against that. We continue to see the environment lining up relative to our expectations. If something changes there, we're going to appropriately and consistently have that skepticism that we've had, and you'll see us react to that. We're starting with that, so I think we feel pretty good. I think we've demonstrated a really good track record of being thoughtful in navigating environments in a good way.

Speaker 6

Okay. Yeah, fair. Thank you. The second question I had is on the property side. We've had a pretty quiet wind season so far, obviously far from the end of wind season. Assuming that there are no major industry loss events through year-end, how would you guys think January 1 property reinsurance renewals should develop? Assuming that we see another year of significant pricing declines, how would that shift your perspective on capital deployment between property versus casualty or certain lines of business within those on the back end?

Speaker 2

Charlie, I'm afraid I don't have my weather crystal ball, right? I do hope for a quiet wind season, but I must admit, if you've been in Bermuda for the last few days, you wouldn't be feeling hopeful. It's been awful. Look, for us, the market is important, but relative to our overall business, small. I think Jim talked about it earlier on. It's 4%. For us, it's not really the bellwether of the group, if you like. On a personal level, I think if there's no activity, I think it will just put further pressure on pricing. I think there is momentum in the market that is driving rate down. We saw that at mid-year. We saw it at 1/1, we saw it at mid-year again. That's one of the reasons why our reinsurance is down at the half year.

Speaker 2

Equally, I think we should balance that up. We still do have really strong property cat book. We've got clients that have been with us a long time, we've renewed many of those clients, but there are some individual risks in individual areas that we're just not seeing the rate adequacy on. We're not frightened to walk away. In truth, if it's a quiet wind season, I think I'm afraid it probably puts more pressure on the rates. I can't see that reversing. Luckily for us, we've got a very well-diversified book, lots of different specialisms, and property cat is such a small part of it now that we believe we can still drive strong earnings performance regardless.

Speaker 3

Yeah. Charlie, I would add on to what Scott has said, and I don't think the trade is purely between property cat and casualty and how we balance the book. You've seen us growing strongly through A&H, through surety credit. We're looking at where the best return on capital is across the market and where we can essentially create significant value both immediately and through time. We have a bunch of options on that, and it's really going to be about the risk-adjusted return on capital for us as a business that would direct those activities. There's a bunch of different avenues that we have to deploy capital and to do that really thoughtfully that's inside our core specialty capabilities.

Speaker 6

Okay, great. Thanks, guys.

Speaker 2

Thanks, Charlie.

Operator

Thank you. The next question is coming from Mitch Rubin of Raymond James. Please go ahead.

Speaker 7

Hey, good morning, guys. This is Mitch on for Greg Peters. We're hearing rhetoric about MGA price competition intensifying, and I appreciate the commentary around your selective onboarding process and specialty niches. Is elevated competition showing up at all in the loss assumptions you're building into new business?

Speaker 2

Mitch, it's an interesting one. Look, the MGAs operate in markets. They don't operate in vacuums. Of course, they're not protected from what I would term wider pricing pressures. I do think, though, when you think of MGAs, and certainly many that we work with, customers approach them because of their deep expertise and specialisms that they buy in terms of understanding their risk. Whilst I don't think that removes the sort of pricing elasticity, I do think that customers or end customers are prepared to pay for that expertise. For us, when we look at our relationship to that, we can see that. We can see some of the general market rating pressure. What I would say, if you look at our insurance business, it's growing very strongly. A large engine of that growth is our MGA and program business.

Speaker 2

I would say in general, we are happy with our partners and the rate adequacy across many and most of our schemes. The one I would highlight, which is a more difficult marketplace in general, including through our MGA who we partner with, is aviation. Where we highlighted at the end of last year where we had to take significant pricing action, and that was on the back of loss trends. I would say in the first half of the year, those loss trends have continued, and therefore, I think when it comes to Q3, Q4, which is a sort of major airline renewal season, I think that needs significant rate action to make sure that the risk is matched with price. I would highlight that one as one that stands out. The rest, I would say in general terms, we are happy.

Speaker 2

If we're not happy, then we will either take action, which was Jim's point earlier on, or occasionally we will close down a partnership. I would like to say that that, though, is the minority, and we don't often see that. I think examples of that, just to be balanced, our commercial auto, where we've just lost our appetite for the market. We've announced that before and said it in our previous calls. Look, I'm trying to give you a balanced perspective, Mitch, in terms of the question that you asked.

Speaker 3

Just adding on, Mitch, to some of the comments that Scott had made is I would just add to that our variable commission structures and that we put in place, while we're willing to trade a little bit of upside, provide downside protection from a loss ratio perspective as well. When you think about it, you can't just focus on one line. You got to think about the sum total that comes together that helps us achieve our targeted risk-adjusted return on capital.

Speaker 7

Got it. Thank you. I appreciate all the color on that. As a follow-up, across the industry, peers are leaning heavily into AI in underwriting and expense efficiency, but it hasn't seemed like as much of a point of emphasis for you. Can you provide some perspective on how you're thinking about AI and technology in your operations?

Speaker 2

Very timely question, Mitch. Actually, we had our board meetings in Bermuda this week. We always, on annual basis, have a sort of strategy check-in with the board. AI was one of those topics. We are doing quite a lot across the organization in terms of AI, and Mike was asking questions in IMG, et cetera, earlier on. We've got AI work going on in IMG, but we've also got it going on across the wider business, helping us understand risk understanding, helping us manipulate data, helping us with contracts, et cetera. We've got lots of use cases. Tens and tens and tens of use cases. Some of those will work and some of those won't work. I would say we are now into the swing within the organization of creating both a framework and an infrastructure. We are investing in AI.

Speaker 2

I think for all organizations, you have to be prepared for some of them to work and not work. What I would say is I've not seen anything that fundamentally shifts the operating model of a company in our sector yet. I see lots and lots of examples where AI can help us be both a better underwriter. I think it can help us be more efficient. Therefore it has multiple uses. We shouldn't just concentrate on the efficiency lever, because I actually think one of the most powerful parts of AI is both speed and also quality of underwriting. Look, I hope that gives you a bit more color, Mitch, in that that was certainly the discussion we had with our board this week.

Speaker 7

Yeah, that's really helpful. Thanks, guys.

Speaker 3

Yeah. I think adding to that, it just

Speaker 2

Okay. Super. Thank you, Mitch.

Operator

Thank you. Once again, ladies and gentlemen, that's star one if you would like to register a question at this time. Our next question is coming from Matt Palazola of Bloomberg Intelligence. Please go ahead.

Speaker 8

Hey, guys. This is just more of a modeling one. Sorry if I missed this. You had mentioned the slowdown in earned premium growth and then some potential pickup. Is that expected to be a sharp thing in maybe the third quarter, or would the pickup be more extended throughout and go into 2027?

Speaker 3

Yeah, the pickup will be extended throughout 2026. You'll see incremental increases throughout each of the next quarters from a baseline perspective. There'll also be a little bit of impact relative to that mix that goes through there. In short, we're basically starting the first quarter of 2027 in a stronger position than we otherwise would because the remaining tail of that earnings from the extension comes through in that first quarter. Basically, it's a three-quarter element as it'll work our way into our business.

Speaker 8

Okay, thanks. I just wonder about cyber. I assume it's a small part of the business, and given recent events with kind of AI going rogue, has that changed the way you think about that business or the attractiveness of it at all? Thanks.

Speaker 2

Yeah. Matt, cyber makes up a very small proportion of our portfolio. That said, I don't think it's something that any insurer can ignore. It's a risk that customers want to insure. We're very thoughtful, very cautious about it, and the example you gave is the reason why we're very thoughtful and very cautious about it.

Speaker 8

Thank you.

Operator

Thank you. At this time.

Speaker 2

Super. Thank you.

Operator

Thank you. At this time, I'd like to turn the floor back over to Mr. Eagan for closing comments.

Speaker 2

Super. Listen, thank you very much. We do appreciate you dialing into a call. We know this is a busy time of the month for you guys. Look, end with just a couple of closing remarks. Look, my view is our first half year has been another half of strong performance at the top end of our return on equity guidance, and actually for our core go-forward business above that. I think what's really, really important for us is the consistency and the predictability of our earnings, and I hope you're seeing that come through on a continued basis. The growth that we're seeing in our insurance business is very deliberate. We go into the second half of the year both aiming to improve but also upbeat about our second-half expectations, and we look forward to speaking to you again at Q3. Thank you very much.

Operator

Thank you. Ladies and gentlemen, this concludes today's event. You may disconnect your lines or log off the webcast at this time, and enjoy the rest of your day.

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