Good day, ladies and gentlemen, and welcome to the 3Q 2025 Arch Capital Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. Before the company gets started with its update, management wants to first remind everyone that certain statements in yesterday's press release and discussed on this call may constitute forward-looking statements under the federal securities laws. These statements are based upon management's current assessments and assumptions and are subject to a number of risks and uncertainties. Consequently, actual results may differ materially from those expressed or implied. For more information on the risks and other factors that may affect future performance, investors should review periodic reports that are filed with the -- by the company with the SEC from time to time, including our annual report on Form 10-K for the 2024 fiscal year. Additionally, certain statements contained in the call that are not based on historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The company intends the forward-looking statements in the call to be subject to the safe harbor created thereby. Management also will make reference to certain non-GAAP measures of financial performance. The reconciliation to GAAP for non-GAAP financial measures can be found in the company's current report on Form 8-K furnished to the SEC yesterday, which contains the company's earnings press release and is available on the company's website at www.archgroup.com and on the SEC website at www.sec.gov. And now, I would like to introduce your host for today's conference, Mr. Nicolas Papadopoulo; and Mr. Francois Morin. Sirs, you may begin.

Good morning. And welcome to Arch's Third Quarter Earnings Call. We delivered record results in the quarter with over $1 billion of after-tax operating income and over $1.3 billion of net income both up 37% year-over-year. After-tax operating earnings per share of $2.77, another record represented an 18.5% annualized operating return on average common equity. These results reinforce the strength of our diversified platform, which enables our underwriter to pursue opportunities and deploy capital across the enterprise. Meaningful contribution from all three segments combined with solid investment returns, pushed year-to-date book value per share growth to 17.3%. Our quarterly consolidated combined ratio of 79.8% reflect excellent underwriting and low cat activity in the quarter. Big picture, our 9 months combined ratio of 83.6%, which include the impact of California wildfires and severe convective storms highlights the strong underwriting performance across our businesses. Now some comments about market conditions. As you have heard on other calls, competition is generally increasing. As cycle managers who lean into the strikes of our brand, including underwriting discipline and using risk-based pricing tools to generate profitable business. We deployed capital into businesses we believe will generate superior risk-adjusted returns. However, given relatively weaker market pricing and an attractive entry point for our stock, we repurchased $732 million of shares in the quarter. Critically, our strong balance sheet and strong capital-generating capabilities permits us to both invest in our business and return capital to investors. Our objective is clear throughout the cycle to maximize return for our shareholders over the long term. Importantly, I want to emphasize that we are actively looking to deploy as much capital as possible towards attractive underwriting opportunities. Our playbook remains consistent, allocate capital to attractive opportunities that meet our risk-adjusted target returns, pursue profitable growth while prioritizing renewals that meet…

[Operator Instructions] And your first question will be from Elyse Greenspan at Wells Fargo.

My first question is just on capital. The level of buyback went up in the quarter. So, I guess my question is maybe two-pronged. Just how do we think about the level of buybacks going forward just given the strong earnings this year? And then, I know last year, you guys had gone the route of a pretty substantial special dividend. So, is this year the route more of buyback versus a special in terms of capital return? François Morin: Yes. The last one, I think it's -- for us, we think of those as two options, but most likely not going to do both at the same time. So, in this current environment where, yes, we certainly see our earnings profile being very strong, and we think there's -- as we've seen, right, limited opportunities for grow -- for us to grow aggressively in the business. So, capital return to shareholders will be -- will remain a focus. And given the stock price, I think share buybacks will be our preferred method going forward. At least for the short term, we'll see how things play out moving forward, but that's obviously something we talk with our Board on a regular basis. So, I'd say that's kind of where we're at. And again, balance sheet remains very strong. So, is there room for us to do more buybacks as we move forward? And I think the answer is, is definitely yes, and something we'll keep evaluating as we move forward.

And then, my second question is just on the insurance premium growth. So, we've annualized the mid-corp deal, but there is going to be some impact from non-renewals there. And obviously, just the overall market, which is softening in spot. So, how do we think -- as you guys think about pricing, the combination of the non-renewals on MidCorp, how do you guys see the premium growth outlook for your insurance book from here?

On the insurance side, I think, we're still very much bullish about the business. I think, we like the market we trade in, and we would like to grow and we talk about profitable growth. That's what we're really focusing on. And you have to divide the market in three broad categories. First one being areas where we still see some rate increase, like casualty will be the main one and the middle market business where we think, we have the rate increase, and I think we have the propensity to grow. Then, you have the second segment, which is the one that have witnessed headwinds in the past, which is mostly professional lines, whether it's GNO or cyber. The good news there, I think the rate decrease has really moderated on the GNO, pretty flat. And on cyber, there are signs that they are moderating. So, that should be less of a headwind going forward. And third, it's really the property, whether it's the large account property and the E&S property. The good news for us is that, we don't write much of the shared and layer property business. And we have a relatively small footprint on the E&S side, which is really under a lot of pressure today. So, I think overall, if I look at the outlook for us and our positioning in the London market as well, if I look at the outlook, I would expect us to have the ability of the insurance to grow better than the market we play into.

That's helpful. And then just one last one. There's a hurricane out there right now with the potential to impact the Caribbean. I don't think there is a lot of insurance or even reinsurance exposure there. But do you guys just have high level -- some high-level thoughts there just on potential exposure?

I think, it's just too early to tell. I think for sure, it will be -- it's going to be a, it looks like a big event potentially for Jamaica. And we're -- it's big enough to have repercussion, that goes effect the Caribbean overall, too early to tell. François Morin: Just quickly, I mean, obviously, depending where it hits like some of the resorts might be the insured values that might be more that we might participate on, just not knowing at this point where, again, where things may land, but I think that's -- in terms of where the exposures are and what could be impacted, that would be the focus area, I would say.

Next question will be from Andrew Kligerman at TD Cowen.

So, maybe starting with, you just touched on growth in insurance with a lease, maybe shifting over to reinsurance. You kind of kicked off -- I remember in the first quarter, you thought that -- I think you did adjusted net written premium growth of 6% or 7%. You kind of repeated that in reinsurance in the second quarter. And then in this quarter, you talked about the two deals and the reinstatement premium is kind of creating a bit of noise. So Part A of it is, what would the normalized growth have been in the absence of those items? And the Part B is, how are you thinking about growth going forward in that segment? François Morin: Well, I'll take the first part, and then maybe Nicolas can share in the second. I mean, the normalized growth absent all of these kind of one-offs or again, and they happen, right? We talked about it in the past, it's reinsurance can be lumpy. There's deals that happen, they don't happen. The timing of it is not always predictable. But yes, the fact that with a little bit of the headwinds that we're seeing, again, coming from a very high bar on the property, property cat 7/1 renewals, I'd say our growth in the quarter might have been around, like, call it, a decrease of 3% to 4% not the 10% that we -- that is -- was reported in the quarter.

Yes. Thank you, Francois. And on the outlook for growth on the reinsurance side. So, I think, think of reinsurance, it's pretty much the same outlook as insurance. I think, you have rate pressure on the short-tail lines, but I think you're seeing a rate increase in this location on the casualty lines that could provide opportunity. So, I think, I would say a similar picture, but for, I think, a big headwind is like a lot of ceding company like the business like we do. We like the insurance business. So, after a few years, there's less fear in the marketplace. People feel better about their balance sheet. So, what we're seeing is company retaining more, which is -- creates a significant headwind for the reinsurance group. I mean by doing so, they either retain the business or move -- very often you move more to an excess of loss position that presents additional opportunities for us. And I would say that the margin on the excess of loss is usually better than the margin on the quota share. So, I think we may see a different makeup of the margin going forward.

I see. And then, maybe shifting back to insurance. As a specialty writer and especially with pressure in E&S property these days, just more from the industry perspective, and you touched on your view of how Arch is going to do, but maybe again a little bit. But how do you see E&S premium for the industry playing out over the next few years? I mean, not only have we've seen such tremendous growth over the last few years, but is it possible that E&S premium as an industry starts to decline over the next few years? So, outlook and then just Arch in E&S over the near intermediate term as well.

So, I think, the outlook of the industry, I think, is -- I think it's a tale of two stories. I think, on the casualty side, I think, because of what's happening in the market and because of the issues people are having with the prior years, and I think my view is that the trend of more of the business moving to the excess and surplus side where you have freedom of rate and forms and where you can add exclusion that take a much longer time to be able to do on the admitted side. That will continue. On the shorter line, we could see some of the shared and layer business and cat exposed business going back to the admitted market as we've done historically. So I think, it's hard to predict, but I think the fundamental shift, which is been driven by casualty that I expect to continue.

I see. And then Arch, how do you see yourselves? Do you see gaining share on the short-tail and the casualty, respectively?

I mean, the short-tail will be a challenge based on what we see in terms of the pricing. I think, we are more optimistic on the casualty side where we've been underweight in the difficult years. And I think, we're -- I think, our loss picks have been holding pretty well. So, that gives us confidence in how we price the business forward. So, I think that as rates continues to improve, I think that gives us an opportunity certainly to do more at a time maybe where our competitors are still kind of caught up into looking at the right things they did in the earlier years.

Next question will be from Josh Shanker of Bank of America.

Yes. I don't want to pigeonhole you too much, but obviously, you did a lot of buybacks in 3Q. Some companies don't do buybacks in 3Q, because they're worried about the outcome of the hurricane season. But I'm trying to gauge your appetite for 4Q and maybe 1Q. When did you start buying back? And how much -- were you buying the whole quarter? Or really you were able to do $732 million within about a month ending up the quarter? François Morin: Yes. I mean it's pretty consistent throughout the quarter. I think, there was a little bit more in September and that kind of -- as I mentioned, I think we've been active in October as well. I think, again, it's -- I think, I touched on it on the last call. I think no question that some years ago, we would have said we would not buy during the hurricane season. But I think Arch is different today than it was back then. I think, Arch is much more diversified, much stronger, less exposed on a percentage of equity from a massive or a cap PML even at the 1 in 250 or below. So, for all these reasons, we felt -- we do feel and felt a lot more comfortable buying back during the wind season. And I think, as I said earlier, I think we're going to keep pursuing that opportunity as we move forward.

And you're not worried, in the past, you've said part of the reason to do a special dividend was because you just don't think you can return as much capital as you desire to through the buyback of the limitations as you look out into the end of this quarter and beyond? Do you think you can satisfy every bit of capital return you need through repurchases? François Morin: It's a daily thing. We look at daily. I certainly think we can do more capital return, where, as can we -- I mean, we don't set a target for ourselves, right? So, I think it's an ongoing process, but there's a lot of liquidity in the stock right now, and we're able to buy back stock. We think what we perceive to be a very attractive price. And we'll do as much as we can, how much we think is right, and then we'll see where we're at.

Next question will be from Tracy Benguigui at Wolfe Research.

This is a bit belated, but it's been a while since I've been on your call. Congrats on your S&P upgrade back in June. Since capital is so topical, my question is, while it's great that you have a AA- rating, it's a new category. You now have to hold AAA capital, back when you were rated A+, you only had to hold AA capital. And I realize a lot of that was just model methodology driven. But my question is, how important is it to you to stay in this new rating category when you're thinking about your ability to deploy capital? François Morin: I mean, is it critical? I mean, it's not, but it's certainly an advantage, and we've seen the benefits of that already in some places, particularly in Europe. So, no question that the new higher rating, I think, has been well received, and we're able to benefit from that. But you're right, I mean, it comes at a certain cost. I'd say, though, that the S&P capital model is only one of the things we look at. We have our own internal view of capital. We have our -- I mean, there's other rating agencies that we look at as well. So, all in, I think our capital position is -- remains very strong. It was always strong. And again, we try to optimize within all those constraints from all the rating agencies and regulators that look at us. But the AAA level of capital that you mentioned is really not something that is not really new to us, because we were, I'd say, we're already at that level. So, that's kind of -- it wasn't an additional kind of burden or initial step we had to meet.

And I think, we don't only manage one point. I mean, usually, we look at AA, AAA -- and for a while, I think we were a little bit on the penalty box, because of the MI. So, I think now I think it's more. I don't think it changed completely our capital structure. And also, I think it's been helpful on the -- some of the MI, CRT and SRT where the buyer are extremely sensitive to the rating of those layers and they actually pay a differentiated price for better ratings. And as Francois said, I think in Europe, as we lean to, especially on the reinsurance side, but also on the insurance side to -- our strength is really casualty professional lines. And as we lean into those markets, I think having a AA- rating is an advantage.

Okay. I mean, do you view it just opportunistically? Or could you see a scenario where you could reduce capital and live with the back to the A+ rating? François Morin: It's obviously something, I mean, it's a trade-off we constantly look at, right? I mean, how much capital do we need to hold on the margin to get the incremental rating. Right now, we already have the capital. We're not -- we're in a very strong capital position. But if down the road, if conditions change, the question you ask is something that we've asked ourselves many times in the past, like how much capital do we -- is it really worth it to us to hold that incremental level of capital. But right now, given our capital position, and again, given the strength of our earnings, the earnings profile that where we generate internally the capital on a regular basis, I think we're in a very, very good position.

Okay. My next question is, you said you liked insurance and you're bullish on the business, and you mentioned casualty rate increases. Casualty can mean a lot of things. So, once I strip out some of the casualty lines like you mentioned professional lines, what is really left -- what you're left with in terms of like attractive pricing as GL, commercial auto, and excess liability, which includes auto. So, I'm wondering where you're seeing the opportunities? Is it more auto-orientated? Or if you could just let me know the different casualty lines that are attractive?

So, I think the -- one of the opportunities on the E&S casualty side, which would be excess, excess liabilities. So that will include some auto, but usually, we don't focus on the auto on the E&S side. And then, we have other franchise, like sensitive business, like national accounts or constructions, which are casualty-led lines with heavy components of workers' comp, general liability and a lesser amount of auto. So, those are the places where we think we have the ability to grow.

Next question will be from Ryan Tunis at Cantor.

Just wanted to go back, I thought it was an interesting comment that on the reinsurance side, you're seeing cedents proactively retain more. And I guess I'm curious, when I look at like the facultative property decline of 17% this quarter, how much of that is, I don't know, you guys proactively walking away or a decline in exposure as opposed to rate, because I was thinking it was kind of more rate driven, but that comment maybe think it might be more volume-based.

No, I don't think we are cutting back. I think, at this stage, I think we -- on the other property, which, I think you should clarify other property line of business, I think the main factors there is a couple of our clients on the E&S side of the business and on the retaining more of the business at this stage. So, that's really -- we would like to do more. And also, I think -- let's not forget, the rates are also going down. So, some of our cedents are also revising some of their ceded premium to the downside. And so those are the two components. Their ability to wanting to retain more of the business and also they're reforecasting their growth downwards, which impacts our insurance volume. François Morin: Ryan, I think, just to confirm, I mean, it's no question that the rate environment is down in property. There's also a drop in exposure, but the -- just to be clear, I think, that drop in exposure is typically not our decision, right? It's the cedent decision. There are some situations where, again, they decide to keep it net or they use a different structure, but we still like the product. We still like the line. I think, most of what we do, we like a lot. And any reduction in exposure that you see that we experience is generally at this time, more because the cedents choose to do something different, not because we decide to walk away.

Got it. And then just a follow-up. You guys talking about the transitioning market. I think a lot of times, we just kind of, focus on pricing. But I'm curious if what type of lines or -- it might be in primary, because there's business going back to admitted and just some of the more bad stuff stays E&S or facultative, I guess, it could be a cedent just choosing to, I guess, just continue to seed the stuff where they feel like there's an arbitrage. But like are there pockets you point out that are kind of particularly challenging to underwrite in this type of market where you really got to kind of cross your Ts and dot your Is?

I think, it's a competitive market, Ryan. So, I would say a lot of the market today, you get a lot of anti-selections. So, we develop a lot of data analytics tools to really segment our portfolios and provide underwriters some really granular information that, which price for which risk, which limit for which risk. So, I think underwriting the market, we are bullish because we have those tools. I think, if you don't have the tools, I would be a lot less bullish about our ability to write profitable business going forward.

The next question will be from Mike Zaremski at BMO.

Great. Pivoting to the mortgage side of the business, I feel like when we were to quiz most people and ask them what the historical, I don't know, 5-, 6-, 7-year loss ratio was, most people wouldn't guess it was 0. And obviously, there was unique circumstances in the past 5-ish years. But just curious, and we know it's a future family business, but curious if your views on a normalized loss ratio is different than what it was in the past if we think about kind of the current cycle and the next cycle coming. François Morin: Well, not knowing what the next cycle will look like, I think we'd be speculating. I think, we have talked about a normalized loss ratio in the 20% range across the cycle. I think, we have said and we believe strongly that home prices are the key driver of what the performance will look like for the mortgage book. And so far, I mean, home prices have remained very strong. I mean, there's been -- in some pockets, there's been some home prices decline. Some home price declines in a few areas, but across the nation, across the U.S., you can see that home prices remain very strong. So that, I think, explains in large part, I'd say, the outperformance of the mortgage business relative to what we would have thought over an extended period. Does that remain the same going forward? Again, there's a lot of macro factors that will come into play on that. But as long as -- and we do have strong beliefs that based on lack of inventory and kind of there's a lack of housing in the U.S., I think, will support home prices for the foreseeable future. And on that basis, we'd like to think that the performance will remain strong. Now does it -- again, does it inch up a little bit over time? Maybe a little because it feels like it's been really, really good for a long, long time. But the time being, again, we've said it, and we still are very, very, very bullish about the mortgage business because it's been truly a terrific business for us.

And the underwriting remains excellent. I think, if you look at the FICO distribution, I think they are getting better. So that will drive a better outcome.

Got it. Moving to capital management. Clearly, you signaled buybacks are high on the list. Maybe you can just give us an update. Has anything changed quarter-over-quarter on maybe inorganic opportunities? Is U.S. small commercial still something that's on the retail small commercial still high up on the wish list? François Morin: Yes. The wish list is long. I mean, we -- but by the same token, we have a lot that we are working on and can work on. Middle market is obviously a big focus for us. We've talked about other areas that we'd like to grow in. But as you know, these M&A opportunities, they don't happen that often. They take a while to materialize. And so we're not going to hold a ton of excess capital just in the -- on the potential that we might do an M&A transaction. I mean, our -- our leverage ratio is maybe the lowest it's ever been. So we've got a lot of flexibility. The balance sheet is strong. We got some excess capital. So, we've got a lot of flexibility and our ability to execute on that, I think, is really good. So, if there's other things that we can get our hands on that would make us better, we'll be happy to do that. But in the meantime, there's a lot that we already have that are -- that is -- we can generate good earnings on as well.

Got it. And maybe just sneaking one last one in since you guys provide excellent market commentary. And Nicolas, you provided a good view of kind of how to think about the E&S marketplace going forward. Do you have a view on what has also been the kind of exponential growth of the MGA marketplace and kind of how it's been impacting Arch or maybe the industry? And do you view the MGA's marketplace growth to continue to grow much faster than the rest of the market?

Interesting subject. I'm personally bullish on the MGA. I think historically, strong growth in the MGA, except for a few exceptions, didn't turn out to be good. I think, the lack of incentive alignment, the delay in the information to the insurance carrier or the reinsurers, I'm not bullish on that model. So, I think, it's been the flavor of the months and the last few years. And I'm still a little bit questioning what the outcome is going to be. So, but...

Next question will be from David Motemaden of Evercore ISI.

Just had a question. Obviously, still very good reserve releases. Just focusing in on insurance and reinsurance specifically. Could you talk about the movement between long-tail and short-tail lines between those two? Any sort of things to point out on that front? François Morin: I'd say nothing unusual, very similar to prior quarters. There is a little bit of adverse on casualty. I mean, nothing that stands out. It's a couple -- it could be one accident year within one business unit, the one line of business. So, small adverse on casualty, which I don't think is surprising, at least to us. But when we look at the overall picture around kind of where -- how the reserves are performing, our quarterly actual versus expected, which is still showing favorable, meaning lower than expected, I think, gives us a lot of comfort there. So, we're reacting to the data. And in some places, there is no question, there's trends that are showing up that we're addressing. But big picture, the short-tail stuff did extremely well as it has for quite some time, and we'll keep evaluating it every quarter.

Got it. And then just taking a step back, the mix shift to casualty lines in both insurance and reinsurance. At least if I look at it on an earned basis, that definitely is up a bit year-over-year hasn't really increased much, I guess, over the past few quarters. Is that having any bit of an impact at all on the underlying loss ratios in either segment? And how should we think about that going forward?

So, I mean, at some point, it will, but because I think the loss peak on the casualty line is a bit higher than the loss peak on the short-tail lines. But I think the shift -- the mix hasn't really changed fundamentally at this stage, I think. So, I think down the road, I think it might.

Next question will be from Rob Cox at Goldman Sachs.

Just curious, as you start to renew the MCE book, anything interesting you're seeing either on the delegated or the non-delegated side? And how far are we through the non-renewals on the programs book?

So, I think what we've seen so far, and I think we've renewed the entire book has been transferred to Arch. I think, we -- I'm personally very pleased with the -- what we've seen so far. And I think, the stickiness of the business, the ability to provide additional lines of business to our distribution partners to be more relevant to them, the property expertise that in the admitted property business that we really didn't have that we acquired, all those assumptions that we had made at the time of the purchase turned out to be true. So, I'm actually very pleased with the strategic decision we made to go for the acquisition. On the dedicated side, the MGA, I think we knew, we didn't do the deal, because of the MGA portfolio that was coming with the acquisition. So, I think we started the remediation. And there, I think we is pretty much what we expected. So, and I think we -- it takes more time than you think, because all these MGAs have notice period. So, I think we'll see the impact really in 2026 of the non-renewal of the notice period that we signed a number of those MGAs this year.

Got it. And then just wanted to follow up on credit. I mean, just given the mortgage book and the investment in Coface and I think a relatively larger private credit book that you guys have. Any thoughts on the credit environment and anywhere you're leaning into or out of just given some of the noise in private credit? François Morin: Yes. I think you got to be careful, I'd say, what we're looking at. No question that certainly maybe the headlines around subprime auto loans not performing well. I think that's a totally different type of customer than what our borrowers would be on the USMI front. So, I think that -- and we're not seeing any of the same kind of results and I guess, the proof is what we reported this quarter. So, again, very specific around kind of the type of borrowers in the U.S. The trade credit world, no question that there's been a couple of insolvencies that have made the headlines that we -- Coface, we don't know, but may be exposed and that's for them to work on. But there's no question that, when these types of events happen, people will start to think a bit harder about dependencies in the credit and lines of credit they extend, et cetera. But that's not unusual. So at this point, we're very, very comfortable with the exposure we have. We understand it well. And obviously, we look and monitor all the external data and the trends that are happening. But so far, there's nothing really that stands out that we think where we have to adjust our thinking or strategy.

And more specifically on Coface, I think, is a short-term credit. So, the game here of the underwriting is really as you are aware of a weaker credit is really to over time, cut your line to that particular credit name so that when the inevitable happen, your exposure is much less. So, I think they played that game really, really well. And I don't know about the latest insolvencies, but historically, they've been very good at that.

Next question will be from Alex Scott at Barclays.

First one I had was just circling back on Rob's question on the remediation. Could you frame for us at all like how much impact that could have on the insurance segment? Just thinking through trying to dial in premium growth estimates and knowing how much some of us missed our reinsurance growth this quarter from not knowing about the transactions. I just want to make sure I'm layering in enough for this lagged remediation impact. François Morin: Yes. So, specifically on the programs that we acquired, the premium that we've identified and has been -- will be non-renewed is roughly $200 million. And again, as Nicolas said, the notices went out and then there's a notice period and then MGA has 3 to 6 months to find another carrier and some are more -- I mean, some are more successful in getting a replacement sooner. So, some of that may actually start happening in the fourth quarter. I don't have the precise like projections of when it's going to hit the top line in each of the next few quarters. But just at least give you an idea, like, call it, $200 million part of $1.5 billion to $1.6 billion book is -- which was the overall MCE premium volume is kind of the impact that we expect to see. The flip of that, though, is that the middle market business that we really was attractive to us was really what we were trying to get has done very, very well. So, the rate environment both on casualty and property in that business has been very good. And we just came back from a couple of industry conferences where our business partners are very supportive, and they are very happy to do business with Arch. So, we like to think that some of that kind of headwind in terms of giving up or non-renewing some of those programs, we can make up some of that, at least in the middle market side.

Got it. That's helpful. Second question I had is on the reinsurance business and casualty specifically. The repricing efforts, I guess, are -- a lot of it's on the quota share, the actual underlying primary taking rate. Can you characterize what you're seeing there? I mean, are the underlying primaries taking enough rate where it's in excess of loss cost and it's actually building improving margin in there? Is that why you're speaking more optimistically about it? Or is it still pretty obviously high loss cost environment. So I'm just trying to get a feel of whether that's actually improving or not.

So, I think, you got it right. I think, we believe in casualty in general, we're getting more rate than the loss cost. And it's an elevated loss cost. So, I think that's what -- if you back on the reinsurance side, if you back the right specialty underwriters, people that manage their limits well, avoid some of the heavy auto or other difficult class of business, I think you would want to do more business with them. And I think over time, we expect to be able to write more of that business.

Next question will be from Andrew Andersen at Jefferies.

Maybe you could just expand a bit on how you're thinking about 1/1 prop cat renewals. Do you still see returns of kind of 20% here on this line? And how are you thinking about ILS impacting kind of return levels and industry capital?

Yes. On the cat side, we remain bullish. The outlook is bullish. We like the margin. And maybe a couple of data points. The market really peaked in July 2024. So, a little bit over a year ago. And I think in 2025, market -- the price went down between 5% and 10%. So, we are into our second round of rate decrease. And depending on the region, the increase that we witnessed from 2021 to 2024, some of those rate double. So, I think we are really -- we are in a good place. It depends on the region. But generally, we remain optimistic that the business is attractive. There's more demand. We had more demand last year. We expect more demand to come to the market in the U.S. on an international basis. So overall, we think despite pressure -- expected pressure on the rates, we remain -- we think the margins are still very attractive.

Next question will be from Meyer Shields at KBW.

I guess, in the past, you've talked about ramping up some spending associated with mid-corporate. I was hoping if you could get an update of timing and maybe amounts of increased spending? François Morin: Well, increased spending, I think, was more the focus -- no question that we got -- I don't want to call it a barebones organization, but the people that transferred back in August of 2024 was, call it, primarily underwriters and claims people, right? So, that was the bulk of the staff that transferred. And what we talked about at that time was that, yes, we would need to hire to reinforce our capabilities in terms of actuarial data analytics, and a few support functions here and there. So, that we knew would take some time. It's a competitive job market. We've been able to address some of that, too. But I think ultimately, it's still -- I want to say on the expense ratio on the OpEx side, I mean, we can run the incremental mid-core business at a more efficient or lower expense ratio than we had pre the acquisition given the synergies and kind of some of the infrastructure costs that we can spread to a bigger base. So, I think we're -- we still have a few, I'd say, openings that we're trying -- both on the underwriting side and on the kind of support functions that we're trying to fill. But we've done a lot of the work has been done in the last year. And it's shown, right? The business is doing well, and we're able to execute on the strategy and try to grow in some specific areas. So, we're -- again, a little bit of work to do, but we're in a good spot.

Next question will be from Brian Meredith at UBS.

Two quick ones here. Just going back to the whole MCE, MidCorp and the program business runoff, the underlying loss ratio improvement in insurance, is that a direct result of some of the actions being taken there? Is that something else? And therefore, as we start to see this runoff, should we start to see underlying loss ratios continue to improve in insurance? François Morin: It's more the latter. The impact of the non-renewals has not really come into play into our -- on an earned basis. So, the improvement, again, somewhat not huge on this quarter, but I think the -- there -- hopefully, there should be some benefit as this business runs off, and we'll see some improvement or at least some stable loss ratios.

Great. And then, Francois, I wonder if you could talk a little bit about the substance base tax credits that Bermuda came out with, I think it was the end of September, what that impact could potentially be for you all? François Morin: A bit early to tell. No question, yes, the consultation paper is out. Comments have been submitted. We have had meetings with, obviously, as an insurance community with the government expressing our views. The biggest, I'd say, remaining item that we don't have clarity on is, is on the transition credits. I mean, at what pace will these kind of credits be allowed to be reflected starting in 2025. So, that is still to be determined. There's work being done on that right now. We expect to have clarity in the first, call it, first half of December, clarity/almost finality, because it has to be enacted before the end of the year for us to be able to reflect it in our financials. But to your question, Brian, I think it will be substantial, we hope. And when we have like the law, I mean, we'll be very quick to share that with you all and give you a bit more color on what that might mean for us.

At this time, I'm not showing any further questions. I would like to turn the conference back over to Nicolas Papadopoulo, for closing remarks.

Yes. Thank you for spending time with us this morning, and we're looking forward to talking to you next quarter.

Thank you, sir. Ladies and gentlemen, again, thank you for participating in today's conference. This concludes the program. You may all disconnect your lines.