The Hanover Insurance Group, Inc. (THG) Q2 2026 Earnings Report, Transcript and Summary

Good day, and welcome to the Hanover Insurance Group's Second Quarter Earnings Conference Call. My name is Chris, and I will be your operator for today's call. Please note that today's event is being recorded. 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, our Chief Operating Officer and CEO elect; 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 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 guidance, profitability, growth, strategy, capital management, the implementation and use of new technologies the impact of recently revised policy terms and conditions and targeted property actions. Additionally, they can relate to factors that could impact the company's performance and/or cause actual results to differ materially from those anticipated, including changes in the demand for our products economic and geopolitical conditions and related effects, including economic and social inflation, tariffs as well as other risks and uncertainties such as severe weather and catastrophes. 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. With their comments, I will turn the call over to Jack. John "Jack" C. Roche: Thank you, Oksana, and good morning, everyone. We delivered an outstanding second quarter with results that underscore the resilience of our business and the strength of our execution in a dynamic market environment. Our performance demonstrates that disciplined underwriting and targeted growth can coexist, and this combination is delivering significant returns. We continue to be thoughtful in how and where we grow. Investing in opportunities where market conditions and expected returns are attractive, while maintaining a prudent risk profile across the portfolio. Our strong results reflect the strategic actions we have taken over several years to strengthen and reshape our company. We have refined our portfolio around our underwriting and distribution strengths while investing in capabilities that enhance risk selection, improve efficiencies and enable our teams to operate with greater speed and precision. Together, our actions are driving a stronger, more scalable business and positioning us to deliver consistent profitable growth. The diversification of our portfolio helps us navigate changing market conditions, and we expect to sustain strong earnings in our portfolio over time. In the quarter, we delivered record second quarter performance with operating return on equity of approximately 20% and operating earnings of $5.31 per diluted share. At the same time, net written premium growth accelerated to 4.6%, led by core commercial and specialty while personal lines continue to generate strong margins and leading indicators of business momentum. As we discussed last quarter, we expected top line growth to strengthen and our second quarter results reflect that trend. We entered the second half of the year with confidence in our ability to sustain this positive trajectory. I'll now discuss our segment performance in more detail. Our Personal Lines business is reaping the benefits of prudent underwriting and strong execution in the post-pandemic market environment. The underwriting margin gains we continue to realize reflect sustained pricing discipline, thoughtful terms and conditions management and proactive exposure management actions across the portfolio. Although the industry is experiencing competitive market conditions, particularly in monoline Personal Auto, our relationship-driven approach and full account strategy continue to differentiate the Hanover and position us well in the marketplace with preferred customers. Importantly, our renewal pricing in Personal Lines remains above long-term loss cost trends, supporting healthy margins and reflecting the strong value proposition we deliver to agents and customers. While the quarterly increase in net written premiums was consistent with the first quarter, production activity has picked up in terms of new business submissions, quoting and conversion. Retention improved from the first quarter and the overall quality of the book continued to strengthen as we gradually increase our mix towards higher-value customers. We continue to see a growing contribution from our higher-value Prestige offering, reflecting the deliberate shift we have been driving over the past several years. Prestige customers exhibit higher retention than the broader book and as this business becomes a larger share of the portfolio, it is enhancing portfolio quality and making pricing more resilient. Year-to-date, we have added approximately 100 new distribution points with 75% of those appointments in our targeted diversification states, prioritizing distribution partners that mirror our top-performing agencies. Overall, Personal Lines remains a differentiated account-based franchise that is generating attractive returns and positions us well to further grow our market share. Now turning to Core Commercial. This business is executing very well, delivering both healthy growth and solid profitability. Underlying margins improved from full year 2025 levels, while pricing remains robust. These results reflect the strength of our underwriting strategy and deliberate portfolio management actions. Net written premiums increased by 7.2% in the second quarter, up from 4.3% in the first quarter reflecting continued momentum in core commercial. Market pricing remains favorable, generally in the high single-digits, although we are seeing conditions become a bit more competitive. This environment reinforces our focus on retention, disciplined underwriting and targeted pricing strategies tailored to specific products, industries and geographies. In Small Commercial, premium growth of 6% represents another quarter of healthy expansion. Renewal activity and new business pricing remained favorable and retention is stable at approximately 86% with relatively low remarketing activity in this space. This is a result of the advanced underwriting tools and technology we have been building to improve responsiveness, make it easier for agents to do business with us and drive better execution. We have expanded no-touch submission flow through our TAP sales offering, resulting in higher submission volumes and deeper agency connectivity. At the same time, our TAP sales workers' compensation product expansion remains on track for a full country rollout this year. We expect this initiative will broaden our market share and further support profitable growth. As these capabilities continue to scale, small commercial remains one of our most important long-term growth drivers, supporting strong profitability over time. Middle Market delivered 9.4% top line growth in the quarter. Excluding the benefit of several nonrecurring or timing items, growth was approximately 7%, a strong result and a significant improvement from 1.5% growth in the first quarter. We continue to win attractive business through our strongest agent relationships that are committed to deepening our penetration and expanding our partnerships. At the same time, we remain disciplined in our underwriting. In the smaller account space, where we are primarily focused, including the lower end of middle market, we are less exposed to the broader property market softening. Over the past several years, we have taken meaningful actions around property terms and conditions, and we continue to maintain that approach, which helps protect profitability and differentiates our portfolio. Combined with our deep expertise and agent-focused approach, we believe core commercial is well positioned to compete, grow and generate attractive risk-adjusted returns as market conditions evolve. Turning to Specialty. This segment remains a key driver of profitable growth. Specialty is a business where our underwriting matters most and where our team converts risk selection expertise into attractive growth and disciplined returns while increasing scale over time. The breadth of our specialized capabilities enables us to pursue opportunities where technical expertise, underwriting discipline and deep relationships create a meaningful competitive advantage. Production activity and growth were not uniform across the portfolio, and that is by design. We saw a healthy growth across professional and executive lines, where market conditions continue to improve. In management liability, strong new business production and continued gains in response speed and underwriting execution drove excellent top line results. Additionally, Surety delivered strong growth, fueled by robust new business, healthy demand and momentum in targeted bond offerings with our strongest distribution partners. As expected and consistent with last quarter, Hanover Specialty Industrial business production was more subdued. Reflecting its greater exposure to the softening property market. This reflects our willingness to moderate production where pricing comes under pressure and reallocate capital to more attractive opportunities further highlighting the advantage of our highly diversified specialty portfolio. In Marine, we are benefiting from strong market relationships and deep local expertise. While competition remains elevated, our teams continue to proactively manage renewals and capitalize on attractive market opportunities as they emerge, including some expanded offerings in motor truck cargo and Builder's Risk quota share. Within E&S, our ability to generate sustained profitability and solid growth remains a key differentiator. The earnings contribution we generate here allows us to be thoughtful about the risks we add and opportunistic in expanding our presence in attractive niches. We continue to see meaningful new business activity through June, and we are deploying capacity carefully with a clear focus on risk-return balance. At the same time, we're making strong progress against our ambitious enterprise-wide transformation agenda. Across our businesses and functions, we are deploying capabilities that improve productivity, enhance decision-making and help our teams focus on the highest value opportunities. As an example, in E&S, our proprietary AI-driven tool, Triage Pro helps underwriters prioritize the most attractive submissions and be more responsive to the best opportunities. And in surety, new workbench tools are streamlining workflows and delivering more actionable insights, enabling underwriters to spend more time on complex risks and customer solutions. As markets evolve, we believe the combination of specialized expertise, data and advanced technology will become an even greater differentiator for our company. I want to recognize our team for another excellent quarter. The strength of our results and improving growth momentum reflects the depth of our talent, the consistency of our execution and the underwriting discipline that continues to distinguish our company from our competitors. As we enter the second half of the year, we do so with momentum, confidence and a clear path toward achieving our strategic and financial objectives. Our strategy is working. Our execution remains strong, and we believe we are well positioned to continue delivering attractive returns and creating long-term value for shareholders. Before I conclude, I'd like to briefly acknowledge the retirement announcement we shared recently. After 40 years in the industry, including more than 20 years at the Hanover and with over 9 years as the CEO, I am extremely fulfilled and grateful for the opportunities that this extraordinary industry has presented to me. And I am incredibly proud of what we have accomplished together at this special company, transforming an undifferentiated regional carrier into a specialized national carrier with a unique value proposition for the top independent agents in the country. I have tremendous confidence in the future of our company and in Dick Lavey's leadership as he prepares to assume the role of CEO in January. We have significant momentum and exceptional team and a bright future ahead. I remain fully engaged through the end of the year and look forward to continuing our work together while helping to ensure a seamless transition. With that, I will turn the call over to Jeff.

Good morning, everyone. Before I begin, I want to add that it has been an absolute privilege to work alongside Jack. Jack, your leadership has helped shape a stronger, more resilient company. And while we look forward to continuing our work together through the end of the year, we are all incredibly grateful for your contribution and lasting impact on the Hanover. And I know you have much to do in your last 6 months with us. Dick and I have been great partners for the last 9 years, and I look forward to next chapter with tremendous excitement. With that, let me turn to our second quarter results. We are pleased to have delivered a record performance for the second quarter, continuing our recent momentum, which reflects the strength of our diversified book of business. Each business segment contributed to these results delivering strong underwriting margins, bolstered by another quarter of strong returns in our investment portfolio. We posted a combined ratio of 91.2%, a record second quarter performance improving by 1.3 points year-over-year. Excluding catastrophes, our combined ratio was 85.5% also an outstanding result. Our current accident year loss ratio, excluding catastrophes, was 55.8%, improving from the prior year quarter driven by Personal Lines. Catastrophe losses were 5.7 points of the combined ratio, inclusive of 0.8 points of favorable prior year CAT development. This was below our modeled expectations for the second quarter and gives us further confidence that our past actions are leading to more consistent returns, even with some frequent catastrophe activity in our geographies during the quarter. The expense ratio for the quarter of 31% was modestly elevated compared to our expectations, primarily from higher variable compensation for agents and personal lines, reflecting our meaningfully better-than-expected results to date as well as some employee incentive costs given the much better-than-expected combined ratios. We remain diligent in our expense management, aligning spending with strategic priorities while continuing to make targeted investments that support sustainable profitable growth. Second quarter favorable ex-CAT prior year reserve development of $21.5 million included favorability across each segment. In Specialty, favorable prior year reserve development was $10.8 million or 3 points with widespread favorability across multiple coverages. In Personal Lines, favorable prior year reserve development was $10.1 million or 1.5 points with favorability in homeowners and to a lesser extent, in Auto, both driven by property coverages. And in Core Commercial, favorable prior year reserve development was $0.6 million. Our reserve position remains very strong and aligned to the current uncertain environment. Particularly in liability lines, where we continue to remain prudent. Now I'll further discuss each segment's current accident year results, starting with Personal Lines. This business generated an excellent current accident year ex-CAT combined ratio of 81.9% for the second quarter, a 2.9 point improvement from the prior year period driven by the benefit of earned pricing and benign frequency. In Homeowners, we delivered an outstanding ex-CAT current accident year loss ratio of 43.7%, improving 7.4 points from the prior year quarter and favorable to our expectations. In addition to the benefit of earned pricing, we observed very favorable attritional loss frequency as well as lower large and weather-related losses compared to last year. We continue to attribute some of the benefit we've seen in recent quarters to deductible changes leading to fewer small claims in both CAT and ex-CAT results. In Personal Auto, our ex-CAT current accident year loss ratio was 64.7%, an improvement of 1.5 points compared to the prior year quarter. Frequency remains favorable across multiple coverages, particularly in collision. Personal Lines grew 2.6% in the second quarter consistent with the first quarter. Growth has been impacted by our prior actions to manage exposure in certain concentrations, which has led to lower PIF year-over-year. However, our trajectory has improved over time as PIF was again roughly flat sequentially, and we continue to expect sequential PIF growth by the end of 2026. Both auto and home achieved strong renewal pricing increases in the second quarter that approximated first quarter pricing increases with auto up 7.1% and home up 10.9%. Umbrella pricing increases also continued to be strong at approximately 19%. Now turning to our Core Commercial segment. We delivered a current accident year ex-CAT combined ratio of 91.2% (sic) [ 91.1% ]. The current accident year loss ratio, excluding catastrophes, of 58.7% was 2.2 points higher than the prior year quarter, driven by reduced large property losses in the 2025 quarter and prudently increased liability picks in 2026. Compared to the full year of 2025, the second quarter of 2026 loss ratio improved 0.4 points. Our liability loss selections reflect a disciplined and measured view of the operating environment helping to ensure that the portfolio and our balance sheet remain well positioned over time. We are also pricing business consistent with that view with rate levels remaining healthy. Particularly in commercial auto and umbrella. Moving on to Specialty. This business continued to perform extremely well with a current accident year ex-CAT combined ratio of 88.6% (sic) [ 85.6% ] in the second quarter. The current accident year loss ratio, excluding catastrophes, was 51.6% in line with our expectation for this segment. This result was modestly elevated from the prior year quarter which saw lower-than-expected property large losses, while property losses in the current quarter approximated our expectations. We remain very pleased with the continued strong performance of our Specialty book, and the positioning of the business to capture attractive growth opportunities in our markets. Net written premiums grew 4.4% in the quarter, an acceleration from the first quarter. This growth level reflects our focus on protecting the strong profitability of the business while leaning into attractive opportunities. We remain focused and have line of sight to further premium growth acceleration in Specialty. Turning to reinsurance. We completed a very successful renewal of our property treaties on July 1. The market response was quite favorable with both incumbent reinsurers and new participants joining our panel, reflecting the effectiveness of our property and catastrophe management initiatives. The highlights of our current property reinsurance program are as follows: we renewed both treaties, our property per risk and CAT occurrence, maintaining or enhancing structures relative to prior year. We issued a new CAT bond with expanded coverage relative to the expiring CAT bond. Positive investor interest allowed us to upsize this bond to $150 million, reduced the pricing guidance range and issue at the low end of that reduced range. Our CAT occurrence program exhausts at $2.05 billion for all covered perils, while maintaining our $200 million retention. We achieved better-than-expected financial outcomes with substantial reductions of reinsurance costs on a risk-adjusted basis on our loss-free CAT program. We expanded our property per risk limit by $25 million, which replaces facultative purchases while maintaining the attachment point and reducing co-participation. Pricing was significantly better than original expectations. Turning to our recent investment performance. Net investment income increased 13.4% in the quarter driven by growth in our asset base from strong earnings and the benefit of higher reinvestment yields for fixed income. Partnership income was lower than our expectations for the quarter but has performed in line with our expectations through the first half of the year. Net investment income from the fixed income portfolio increased 16.3% over the prior year quarter. Our investment portfolio continues to provide steady growing returns, helped by our disciplined mix and broad diversification. Roughly 88% of our total invested assets are in cash and investment-grade fixed income, highlighting the high-quality composition of our portfolio and the relatively modest size of our other exposures. Our fixed maturity portfolio weighted average rating is A+ with 95% of Holdings investment grade. Earned yields on the fixed maturity portfolio were 4.45% in the second quarter, up from 4.24% a year ago, and we continue to reinvest at higher yields than what is maturing. Portfolio duration, excluding cash, increased slightly to approximately 4.5 years, consistent with our long-term asset liability alignment approach. Moving on to our equity and capital position. Our book value per share increased 3.5% sequentially to $105.40 driven by strong earnings in the quarter, partially offset by share repurchases, the quarterly dividend and a slight increase in the unrealized loss position. Excluding unrealized book value per share increased 3.8% sequentially. We continue to actively participate in share buybacks, repurchasing approximately 291,000 shares totaling $55 million in the second quarter. And year-to-date through July 24, we have repurchased approximately 827,000 shares at an average price of $180. In the second quarter, we announced our new share repurchase authorization of $700 million. As capital builds fast in the current highly profitable moderate growth environment, it is allowing us increased flexibility. We will continue to evaluate the most effective uses of capital and as excess capital accumulates, returning capital to shareholders through dividends and share repurchases remains an increasingly important component of our approach. Through the first half of 2026, our results continue to run a couple of points better than the trajectory we contemplated in our original combined ratio guidance. We don't expect to give that back. However, we prefer not to update guidance intra-year. Our third quarter CAT load is expected to be 6.9%. To wrap up, we've achieved an exceptional first half of 2026 and are well positioned headed into the second half of the year, thanks to our diversified earnings stream outstanding team. The combination of our very well-performing investment portfolio and the ongoing underwriting profitability should serve us quite well. With that, we are ready to open the line for questions. Operator?

And today's first question comes from Michael Phillips with Oppenheimer.

Congrats on the quarter and the year and maybe the decade. I guess first question is on Personal Lines. A couple of quick questions and then maybe a little broader question on Personal Lines. Can you just remind how you specifically define Prestige and what percent of your personal book is Prestige right now? And then just a broader question around that. I was surprised to see the rate kind of accelerate from last quarter. I assume that's just maybe that book of business is more insulated from the price competition that we see in the direct channel and the non-packaged business. But should we expect that to continue, I guess, Jack, with your comments on margins are healthy and are above loss trends, kind of trajectory of rate from here on that book? John "Jack" C. Roche: Yes. I'll send that right over to the expert.

All right. Thanks, Mike. So Prestige, we just defined as $750,000 to, say, $3 million of coverage A. As a reminder, that's a replacement cost. And of course, varies by geography as to what fits into those bookends. But we are pushing towards $350 million of that business and growing it very nicely. So it's -- if you look at our PIF growth, we're seeing that outpace the rest of the book. The second question was around rate increases, yes. Mike, that was frankly driven by a sizable rate increase that we implemented in a particular state, and we had a full quarter of impact from that refiling come through, and that drove the rates up. In addition, of course, our other states, renewal pricing held steady. So really, I think that speaks to our strategy working. Where we focus full accounts being close to 90% common effective dates where a single shopping event is close to 80% and moving upstream towards the prestige and higher coverage A all that, frankly, there's less price elasticity up there. So we're bullish that, that will continue. And of course, we watch this marketplace very closely, including what happens in the direct-to-consumer market, have awesome visibility into our agents data, as you know. And so we're watching for that unbundling and agents losing business, and we're not seeing evidence of that in -- certainly in our segments. But we'll keep a close eye on it.

Okay. Great. I guess second question, maybe on your comments on the casualty loss pick and raising a little bit there, I know it's not needle moving for you guys at all, pretty small numbers. But maybe it's a chance to kind of help us to think about kind of a reminder of what's going on at the industry level and maybe also a good reminder for how you set your reserves. So sort of a 2-part thing. Can you go into maybe where -- what you were seeing in casualty? I think in the past, it's been Commercial Auto. Is it less frequency benefits? Is it more higher severity? Anything there that you can comment on, maybe help us frame how we think about what's going on in the industry? And then for you guys specifically, I guess, it's not the first quarter you've done that. I think you've done it 3 or 4 quarters out of the past 5 or so. So when we see that -- again, I know it's not needle moving for you guys, but when we see that, what does it mean for how we think about your prior book of business, your prior year reserves if you're raising the current picks a couple of quarters or 3 in a row? And that's just a chance to maybe remind us on how you set your reserves. John "Jack" C. Roche: Mike, this is Jack. I'll just make a few comments on the macro picture that you're asking about, and then I'll let Jeff speak specifically to our discipline around PICCs. I'll remind you that our casualty book, really, as you stated, is broad-based. And so there are a portion of the liability book that is exposed to legal system abuse and some of the trends that continue to deteriorate. But frankly, the diversification of our portfolio, even within casualty is quite broad. Much of the Specialty business is less exposed to some of those phenomenons and obviously, where we play in the liability arena is a little bit more less exposed to some of the severity trends. But with that, why don't I let Jeff speak specific to the base of your question.

Thank you. To get into the specifics of PICCs and reserving, in the second quarter, we were 2.2 points higher than the second quarter of '25. But I'll remind you, we were below the first quarter of '26 and below the full year of 2025 on a loss ratio basis. The second quarter of '25 had very low large losses. So that's a big chunk of it in terms of the compare. And you're right, we have been raising our PICCs for casualty really over the last several quarters. And we want to be above the actuarial central estimate for the current accident year, which puts us in line with where we are in prior years, where we've been consistently above the actuarial central estimate and setting uncertainty reserves for all the things that Jack was really referencing in the beginning of the answer to the question. And I will remind you that when we're setting current accident year, it's all IBNR. So we just want to be well prepared, Mike.

And the next question comes from Dan Cohen with BMO Capital Markets.

Maybe just first one, just focusing on pricing and retention in Core Commercial, just with retention improving sequentially and maybe the pricing figure there, not deselling as much as we've seen peers so far. Can you maybe just talk about what do you think is driving that retention and kind of the stability in the pricing? And then maybe squaring that with Jack's comments just on conditions becoming little more competitive. Was that solely property comment? Or is that starting to bleed over to some liability lines?

This is Dick. I'll take this question. Yes. The durability of our pricing and retention, super proud of it. We -- I would say it's directly related to where we play. Both in the customer segment being smaller account size customers, the low end of the market and of course, industry there's less price elasticity. So we see that coming into the factoring in here. But also technology, operating model, distribution strength factor in here, of course, playing at the lower end where there's -- we believe we can achieve higher rates and still have that retention. But the technology we've put in place in small commercial allows for better segmentation on renewals, so we can get more precise on pricing, less touch, so greater straight-through processing on renewals. So that enables you to achieve a higher rate and higher retention. The operating model that we've put in place in middle market, where our underwriters are very focused and spent a lot of time out in the marketplace, working very closely with our distribution. So I'd add distribution strength of that, our relationships with our agents. We're out in advance of our renewals. We do not -- we try very hard to keep accounts from going out to renewal. So that connectivity to the agent and the producer helps in that regard. So you kind of put all those together, and we feel like there's a flywheel of performance that helps us outperform.

And then maybe for Jeff on capital management, just how should we be thinking about buybacks here in the near term, given the strength in shares recently, just given the move? Just thinking about is that maybe the payback period is out a little bit longer. Should we think about returning capital as kind of a ratio just of net income? Or are we thinking that maybe we can move to possibly a special dividend here at some point?

Dan, you probably noticed we bought a little less stock back in the second quarter than we did in the first quarter, and that was not intentional. There are a variety of factors, as you referenced, some of them that go into buybacks, including dilution in the payback period on that dilution. Because of the CEO succession process, and out of an abundance of caution. We were out of the market for more days in this particular period. So we bought a little less. But as you referenced, dividends and stock buyback will be an active tool in our deployment of existing and future excess capital. So I think we'll be active in the market.

Our next question is from Paul Newsome with Piper Sandler.

Congratulations on the quarter. And obviously, congratulations to Jack and Dick. That's great. I don't think it was asked. Obviously, you've got a transition here from -- any thoughts on strategy as things change. Dick, you're on the spot.

Well, first of all, I'll remind you that we have an Investor Day on September 17, which I'm very excited about. It's a great opportunity to lay out the next 5 years and talk about our strategic initiatives and our financial plan. So we'll look forward to saying more then. Right now, we're really heads down. We're just heads down on executing our strategy, which is well defined and working well, profitably growing our diversified set of businesses. At the same time, I am keenly engaged and focused on enhancing our capabilities, right, to strengthen the relevancy we have in the distribution channel with the best agents in the country. And of course, leveraging technology to scale our business with our enhanced operating model. So those are a big area focus for me. Naturally, you'd expect us to stay the course on a strategy that's working, but layer in some important elements like innovation and capability to help scale the company. So more to follow.

Maybe a little bit of a follow-up on the technology piece. Particularly in Personal Lines, it looks like the winners over time have had materially lower expense ratios. And I'm just curious, big picture, do you think that given the platform that that's -- that Hanover is capable of moving expense ratios down? I'm not talking about next year, but over time to where some of those better peers are.

Yes, absolutely. We're highly focused on this topic and the technology will enable us to scale the business, Personal Lines. That technology has been in place for, gosh, a decade. So we continue to refine it. And think about ways to scale. So we're working through that. The expense ratio question. So we'll say more about it at our Investor Day. So certainly, we -- you can expect some improvement through all of the investments that we're making, but it would be inappropriate to say too much about that right now.

And the next question comes from Riley Sandom with RBC Capital Markets.

Good morning. This is Riley Sandom on for Rowland Mayor. Great. Your stock has moved up a lot, and it's now a fairly valuable currency. Would M&A make sense today, especially as you generate excess capital? John "Jack" C. Roche: Riley, this is Jack. I just want you to restate the question so we get it right.

Sure. Your stock has moved up a lot and is now a fairly valuable currency. Would M&A make sense today, especially as you generate excess capital? John "Jack" C. Roche: Yes. So we talked often, Riley, about capital deployment and how we prioritize that. In addition to growing organically, we have had a fairly consistent pursuit from a corporate development standpoint on M&A opportunities. Early in our journey, as you know, we did a number of acquisitions and renewal rights transactions. The last decade, we've been frustrated, frankly, that we haven't found things that align with our strategy, but also could come to us at an appropriate price or would have a cultural fit. So that pursue is going to continue. I think going into the future, I believe there are going to be more and more opportunities that present themselves in the marketplace and our company is very capable of not only assessing those opportunities, but executing on the ones that we find to be really strategic. So time will tell how much of that actually ends up being part of our next chapter, but I think it's certainly part of our regular pursuit.

Just to add to that a little bit, we've never really done large transformational M&A even in our history that require the use of stock. So I think that's unlikely. As Jack referenced, some of the smaller capital-light inorganic opportunities to expand capability, product, talent are very much in that capability. And that might utilize some of the excess capital without actually using that currency so -- but unlikely to be transformational in terms of its acquisition.

Great. And maybe just one more follow-up here. Could you speak to current trends you're seeing in net investment income and maybe more specifically, how limited partnership is resulting?

Sure. We have a very conservatively constructed portfolio. We take a lot of risk in underwriting like most property casualty insurers do, and we think we want to be fairly conservative. It's largely fixed maturities. The investment partnerships have delivered solid returns for a long, long period of time. It's not a large book, I think, $400 million. It's been in place for decades. And from time to time, in a given quarter, it would have a lower performance rather than stronger performance. It was $3.6 million in this particular quarter. It was a little over $11 million in the first quarter. So that was an outstanding first quarter and a bit of a weaker second quarter if you put it together. But sometimes, there are idiosyncratic reasons in the 30 to 35 underlying partnerships where there could be either write-downs or write-ups or monetizations that happen from time to time, Riley.

And this does conclude today's question-and-answer session. I would now like to turn the conference back over to Oksana Lukasheva for any closing remarks.

Thank you, everybody, for your participation today, and we are looking forward to talk to you at our Investor Day event on September 17. Thank you.

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