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

Thank you, Oksana. Good morning, everyone, and thank you for joining us. We're very pleased with the first quarter performance. Our strong start to the year reflects a positive trajectory that's building real momentum and we are excited about the opportunities ahead. Our diversified product offering, broad based profitability, pricing agility, and thoughtful approach to investment management continue to position us well. And our superior results for the first three months of the year reflect the strength of that foundation. We delivered a strong operating return on equity of 17.2% in the quarter, despite significant catastrophe losses that affected the industry, including the California wildfires and multiple convective storms that impacted our geographic footprint. All in, however, our catastrophe experience was quite manageable, which is a testament to the effectiveness of our ongoing catastrophe mitigation actions. Excluding CATs, we achieved a 1-point improvement in our overall current accident year loss ratio, driven by Personal Lines. Our Specialty business performed in-line with expectations. And while we experienced property volatility in core commercial, we believe it is not reflective of any new trend and expect losses to return to our planned levels. Turning to the top line, we expect overall growth of 3.9% in the quarter to be the low point for 2025. Our measured and selective approach to growth enables us to maintain alignment with our margin expansion targets and optimal geographic market focus and spread. Looking at our performance by segment, Personal Lines achieved net written premium growth of 3.0%, reflecting the continuation of our targeted state-specific strategies. We continue to prioritize profitable growth in high-potential markets while managing our exposure in the Midwest to align with our strategic diversification priorities. Our team is operating with discipline, staying true to the strategy we've outlined on past calls, particularly through targeted catastrophe mitigation efforts and our deconcentration approach in regions most vulnerable to severe convective storm activity. At the same time, we're proactively adjusting pricing in states where profitability has improved rapidly, enabling us to lean into favorable trends. Excluding the Midwest, Personal Lines net written premiums increased by 7.1%, supported by solid stable retention levels and strong pricing exceeding loss trends. Our Personal Lines book is exceeding our margin improvement expectations, driven by both earned rate and favorable frequency experience. As it relates to tariffs, we have the tools, agility, and organizational focus to achieve our profitability targets in the vast majority of market scenarios in Personal Lines. The portfolio is well-positioned to adjust to loss cost increases given the strong profitability of the business and multiple levers at our disposal, including exposure changes and new business pricing, all of which we can trigger when and if necessary. Overall, our Personal Lines portfolio is very well-positioned. Our team has adapted well to the dynamic environment, and we are excited about the opportunities to build on our performance and accelerate growth in the quarters ahead. Turning to Core Commercial. Net written premium growth of 3.8% was driven by solid momentum in middle market on the strength of robust new business generation and improved retention. Our previous underwriting actions in middle market have contributed to a meaningfully improved underlying business profile over the last few quarters. This in turn has given us the opportunity to begin prioritizing growth. We are continuing to support our agent partners by leveraging our specialized offering and effective underwriting, augmented by our experienced team, advanced pricing sophistication, and third-party data utilization. Our small commercial segment had a slower start to the year, largely due to a conservative stance on new business and renewal pricing. While the overall small commercial market remains rational, some property-oriented sectors have become slightly more competitive. Accordingly, we are adjusting pricing to achieve desired growth levels. We continue to refine our rate retention balance in some classes of business and in some geographies to optimize growth while maintaining profitability. In addition, reallocation of reinsurance costs from middle market to small commercial impacted the net written premium growth in both segments. We're extremely proud of the high quality book we built and the strength of the new business pipeline. Submission activity continues to increase even following strong growth last year. This speaks to the strength of our market position, the relevance of our insurance solutions, and the growing impact of our tech-enabled capabilities in small commercial. Looking ahead, we are excited about our prospects. We fully expect to benefit from increased investments in field sales and underwriting, our expanded virtual sales teams, and robust third-party data sources to accelerate new agency appointments. We're also placing greater emphasis on high opportunity sectors, including technology, life sciences, professional and human services, and broadly workers' compensation, where we see an attractive runway and strong alignment with our capabilities. With these levers in motion, we are already seeing a growth acceleration in April, and we expect to return to our planned trajectory in small commercial growth. Now moving on to Specialty. This segment's premium growth at 5.4% reflects the team's disciplined execution, particularly given the profitability improvement initiatives and Hanover programs. Excluding programs, specialty growth reached 7.3% year-over-year with upper single-digit to double-digit growth in our most profitable lines, including surety, excess and surplus lines, marine, and healthcare. We continue to drive strong momentum in new business growth, supported by sustained pricing strength across our portfolio. Our sub-90s combined ratio underscores our disciplined approach to risk management and operational excellence and positions us to drive sustained superior performance while maintaining resilience and adaptability in dynamic market conditions. At the same time, we're investing in people, tools, and products that position us to capitalize on opportunities in the marketplace and extend our competitive advantage. We see several distinct levers driving future growth, each tailored to build on our relevance and brand in the market. These growth levers include capitalizing on our small specialty business, which is uniquely positioned to serve the needs of our agents and customers and to differentiate our company in the marketplace, fully implementing our same-day Express Quote solution in management liability and marine with future implementations in E&S and professional liability, capturing momentum with our integration into the small commercial tap sales platform available in our management liability, professional liability and marine lines, and thoughtfully expanding our underwriting appetite to increase our relevance in targeted specialty lines, such as increasing our risk capacity in marine, building out our E&S offerings in professional liability and expanding our offering in the small E&S market. As we advance in 2025, we are confident in our ability to leverage disciplined execution and targeted investments, accelerating year-over-year growth. Looking forward, as we navigate an uncertain economic environment, we approach it with vigilance, acknowledging that the depth and duration of potential tariffs and the likelihood of a recession are unpredictable. However, what is clear, is that our company is prepared to face these uncertainties from a position of strength. Our high caliber book of business stands out for its robust pricing levels, profitability, lower reinsurance attachment points and reserve strength. These attributes provide a solid foundation for navigating macro volatility. Our premium and earnings streams are among the most diversified in our peer group, ensuring stability across the different market scenarios. Our high quality investment portfolio is designed to withstand economic uncertainty. With risk assets currently at the lower end of our appetite, we are also poised to capitalize on market opportunities as they arise. We are taking a proactive approach to our business using scenario work with relevant underwriting units to successfully manage through the uncertainty. We have faced dynamic economic conditions before and emerged stronger, focusing sharply, acting decisively and executing effectively. This playbook remains central to our approach. With agility, alignment and performance at the core of our strategy, we remain confident in our prospects to deliver on our goals for 2025 and beyond. With that, I will now turn the call over to Jeff.

Thank you. Jack, and good morning, everyone. We are very pleased with the strong start to the year and proud of the results we delivered. We're seeing clear evidence that our strategy and portfolio actions are driving measurable improvements across our business. In the first quarter, we achieved excellent operating earnings per share of $3.87, a first quarter record and a combined ratio of 94.1%, slightly outperforming our expectations. We grew net written premiums by 3.9%. Catastrophe losses were 6.3%, inclusive of 0.8 points of favorable CAT development, despite an active quarter of severe convective storm activity in the Midwest and California wildfires. California wildfire losses accounted for $35 million all-in with the balance of first quarter CATs attributable to severe convective storms in the Midwest and Southern states. Excluding catastrophes, our combined ratio was 87.8%, reflecting a 1.7 point improvement over the prior year quarter, primarily driven by a significant loss ratio reduction in Personal Lines. The expense ratio for the quarter was 30.8%, relatively in line with our expectations. We continue to take a diligent approach to expenses, aligning costs with strategic priorities. For the full-year, we continue to expect an expense ratio of 30.5% as the benefit of growth leverage and some efficiencies skew towards the latter part of the year. First quarter favorable ex-CAT prior year reserve development of $20 million included favorability across each segment. In Specialty, favorable development was $15.9 million or 4.7 points with widespread favorability across the business, most notably in marine and professional and executive lines claims made business. In Personal Lines, favorable prior year reserve development was $2.8 million or 0.4 points with favorability in both auto and home. And in core commercial, favorable prior year reserve development was $1.3 million or 0.2 points. Modest favorability in workers' comp was largely offset by commercial auto additions to the 2022 to 2024 years to prudently adjust to ultimate severity assumptions in response to the litigation environment. We believe our reserves remain strong and we continue to have full confidence in our prudent reserving practices. Our current liability portfolio is thoughtfully constructed to mitigate severity impacts with lower policy limits, carefully crafted coverages and low reinsurance attachment points. Now, I'll further discuss each segment's current accident year results starting with Personal Lines. This business generated an excellent ex-CAT combined ratio of 84.1% for the first quarter, a 7 point improvement from the prior year period. The benefit of earned pricing and favorable loss trends helped drive a 6.4 point improvement in the underlying loss ratio. Our personal auto ex-CAT current accident year loss ratio was 66.9%, an improvement of 6.7 points compared to the prior year quarter, driven by the benefit of earned pricing and lower than expected claims frequency physical damage. Additionally, bodily injury was within our expectations. At the same time, we remain cautious as severity is elevated. Turning to homeowners, we delivered outstanding ex-CAT current accident year loss ratio improvements for the quarter, down 5.8 points. This was slightly favorable to our expectations and primarily driven by strong earned pricing, coupled with lower frequency. Personal Lines umbrella was quieter in the quarter. However, we continue to monitor activity closely to stay on top of evolving trends. We are achieving healthy price increases in umbrella, up 22.8% in the first quarter, and we expect a similar level in Q2. Both Auto and Home also achieved strong pricing increases in the first quarter with auto up 11.8% and home up 14.9%. We continue to price ahead of loss trend and should achieve target profitability on an earned basis for Personal Lines this year. We do not currently expect potential tariffs to disrupt that trajectory in 2025. While the broader impact of the proposed tariffs remains to be seen, we are well positioned to navigate this uncertainty successfully. Assuming the tariffs go into effect as announced and there are no material shifts in supply-chain dynamics, we anticipate a mid-single-digit one-time increase in auto severity. We've considered our customers car fleet characteristics, including cars and parts manufactured by country, as well as average age and life of the fleet among other things. Importantly, we believe the impact of tariffs to be very manageable. Our pricing infrastructure enables us to initiate pricing changes swiftly and with precision. Additionally, the frequency benefit we've observed in physical damage coverage provides us with lead time to execute pricing adjustments if needed. Our team is fully engaged with robust tracking mechanisms in place, including granular analysis of tariff sensitive cost drivers such as auto parts, equipment and used vehicle prices, ensuring we remain nimble, adapt accordingly and are well positioned to achieve our profitability targets. Now turning to our core commercial segment. We delivered an ex-CAT combined ratio of 94.9%. The current accident year loss ratio, excluding catastrophes of 61.7% was much higher than expectations and the prior year quarter. This increase was driven by a handful of large property losses within CMP, which while infrequent, do occur periodically. This quarterly spike does not diminish our confidence in the quality of the business. Liability results remain well within expectations. We continue to achieve higher middle-market umbrella rates, up approximately 13% in the quarter, along with the tightening of terms and conditions. We expect liability pricing in the market to continue to firm and we are well positioned in core commercial to take advantage of an accelerating rate environment in 2025. Moving on to Specialty, we are very pleased with the strong results of this business. Specialty current accident year loss ratio, excluding catastrophes was 51.1% in the quarter, coming in slightly better than our expectations and within the range of our low 50s target for this segment. This represents quite a few quarters in a row where we have posted results at or better than our long-term target, highlighting the exceptional profitability of our Specialty book. Specialty current accident year loss ratio was up relative to the first quarter 2024 ratio, driven primarily by lower than usual large loss activity in the prior year quarter in our Specialty Industrial property unit. Specialty renewal pricing was 8.4% with high single-digit or double-digit gains in marine programs, general liability and healthcare, highlighting our sustained pricing power across key Specialty Lines. Moving on to Investment Performance. Net investment income increased 18.3% in the quarter, driven by higher earned yields within our fixed-income portfolio and continued growth in operating cash flows. Earned yields on our fixed maturity portfolio rose 4.08%, up from 3.52% in the first quarter of 2024. Against the backdrop of volatile economic conditions, our portfolio was very effectively positioned. It is well diversified by asset class, maturity, and industry segment. 95% of the portfolio is investment grade, and we've maintained our weighted-average rating of our fixed maturity portfolio at 8 plus. We've taken deliberate steps over the last 18 months to reduce our overall portfolio risk, lowering the percentage of equities, CMBS, and some other risk assets in our portfolio. As a result, our asset exposure currently stands toward the lower end of our historic asset risk appetite, reflecting a clear priority of capital preservation while increasing yield. We are strategically positioned to take advantage of a changing market environment. With increased cash generation, we can be nimble to capitalize on dislocations and attractive buying opportunities. As credit spreads widen, we are taking advantage of more favorable entry points into high-quality credit, enhancing long-term yield potential while adding limited incremental risk. Moving on to our Equity and Capital position. Our book value increased sequentially by 6.8% all in, 2.5% excluding unrealized. After reentering the market in Q4, we continued to participate in share buybacks. Year-to-date through the end of April, we have repurchased approximately 178,000 shares of common stock or about $29 million. Approximately 65,000 were purchased in the open market during the first quarter of 2025 for $11 million with the remaining balance purchased through a 10b5-1 plan during April. We have $274 million of remaining capacity under our existing share repurchase program. Our philosophy on repurchases is unchanged, and we continue to view them as a useful tool for capital return and enhancing shareholder value. Our second quarter CAT load is expected to be 7.9%. More broadly, as we continue into the second quarter, we expect premium growth to increase from the recent quarter. We anticipate strong underwriting profitability driven by pricing exceeding loss trends. Higher net investment income should continue to benefit the bottom line, driven by higher reinvestment yields and increased cash flow. At the same time, we remain disciplined in managing our expenses and are comfortable with our expense ratio plans. We're very confident in the direction we're heading. The fundamentals of our business are strong and we remain focused on executing our strategy. We have demonstrated success in executing our margin recapture strategy and CAT mitigation plans, which are now contributing to superior returns and book value growth. In this uncertain environment, we remain well-positioned for success this year and beyond. With that, we are ready to open the line for questions. Operator?

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And your first question today will come from Michael Phillips with Oppenheimer. Please go ahead.

Thank you. Good morning. It sounds like the comments on small commercial was more on a more competitive pricing environment. I guess I want to confirm that. And then, Jeff, your comments on the liability pricing you gave -- a number for umbrella, 13% and then talked about continued expectation of accelerating pricing and liability this year. I didn't know if that was just for umbrella overall liability. So hoping you can kind of confirm the pricing piece in small commercial. And then maybe parse out can rate pricing environment and liability for small -- for overall commercial lines versus casualty?

Mike, this is Jack. Thanks for your questions. Let me start with small commercial and just let you know that we have been really pricing at the high-end of the peer group for some time in small commercial as most people have observed and have benefited frankly from generating better margins because of the pricing versus our loss trends. But admittedly, as we came into the new year, we -- the competition maybe got a little bit stronger as we suggested in our remarks in certain sectors. But I think we were probably slow to change some dials, particularly on new business. So Dick, you want to build on that?

No, absolutely. Thanks, Mike. Frankly, I'm disappointed in the growth that we saw in Q1 and it definitely was a new business drawback, specifically our pricing approach there. So I'm just really confident because of that, that we can snap this back and elevate our growth to the trajectory that we are on. We've already made those adjustments. Frankly, you heard that was in our prepared remarks, tweaking the dolls on our new business pricing in certain classes and markets. So this is definitely not a statement about our value proposition or not resonating in the market that the interest is high, submissions are up. So this will be something that we'll come back to where we were previously a great year last year. So I'm very confident we can get back there.

Mike, with respect to your second question, the comment on pricing increasing refers to all casualty lines, not just umbrella. And we've been raising our view of loss trend -- long-term loss trend for casualty consistently for about five years, year-on-year-on-year. We continue to do that. Our expectation of casualty pricing is that we can stay at or above loss trend over the long term.

Okay, great. No, thanks for confirming all that stuff. I appreciate it. And then I know the numbers are small, but Jeff, you did mention the commercial auto recent action here is 2020 to 2022 to 2024. Did you see something this quarter in the data that led you to do that than prior quarters or kind of what led to that? Or was it more? We haven't seen much, but there could be something coming to be more cautionary. I guess comments on commercial auto.

Yes. Just generally speaking, if you take a step back with development, we had $20 million favorability, favorable in every segment. The favorability for workers' comp and the adverse for auto were really immaterial for our disclosing of it. And obviously, you said that. But really, we've been favorable in every major line in commercial for the last several quarters, so we felt we should mention it. It was relatively minor. We saw a few individual matters in the 2022 to '24 year and decided to be prudent and raise those picks. I don't think it's indicative of a broader issue in the book.

Okay. No, perfect. Thank you very much.

Thank you, Mike.

Thank you.

Your next question today will come from Paul Newsome with Piper Sandler. Please go ahead.

So maybe you can give us a little bit more thoughts on the competitive environment in Personal Lines, particularly as you expand geographically? And just broadly thinking, maybe some thoughts as well just on sort of the process of build as you think about this sort of move out of the Midwest as time has gone on?

Sure, Paul, this is Jack. I'll make a few comments here and then I'm sure Dick will provide some color. But I like the way you articulated the question because we are trying to further diversify our book of business while taking advantage of a market that allows us to improve our profitability really across the footprint in a fairly significant way. And so as we do that, what you're seeing is we have been very deliberate that when we believe first on a written basis and now on an earned basis, when we are generating at or above our hurdle rates on a particular state, we are moving towards more offense. We have changed our new business pricing, albeit in a very favorable environment. And the only constriction or constraints that we put on ourselves are on Michigan and particular counties in Michigan and a few counties that surround that in the Midwest, where our property aggregations need to continue to be addressed. We're really excited about the momentum we have with not only pricing, but terms and conditions. So we don't have to shrink our way to greatness there. We just need to really take the property aggregation issues down a level and then continue to grow the business more broadly. So Dick, I don't know if you want to build on that.

Yes, I won't deliver the points too much, but we are really pleased with just the profile or how we've architected the growth strategy here. We're already seeing positive TIF movement in the number of states that we've been targeting. So that feels really good. It's just asked by the actions that Jack just referenced, of course, in the Midwest state. So really like the trajectory of how the business is moving. To your specific question about the competitiveness and the environment. Yes it's -- no question it's -- auto is becoming more competitive, shopping is up. You do need to look at it by channel, you need to look at what happens in the direct channel versus the captive and the IA channel. And certainly, the direct channel is more aggressive on pricing right now. I would say that the IA and the other channels are converging. Terms and conditions are consistent on the new business side. So as the shopping is increasing, as customers try to go find a new home for their insurance, they're finding that those terms and conditions are more consistent across more markets. So we really like our position when that happens. Our account strategy is a critical element of that, as you know. So it's not just the auto, it's the home and often the umbrella. So customers, our view is customers really want to secure great insurance with a great insurance company. So while they go-to-market to see what they can find, they're obviously concerned about the capacity. So we're -- we couldn't feel better about the improvements in Personal Lines and how our strategy that we put in-place is playing out.

On the commercial line side kind of -- I'd like to ask a similar question, competitive environment type question. We've been hearing a lot this quarter about increased competition as the account size goes up. Obviously, you folks are much more middle market but -- and we're also hearing about more competition sort of in Specialty, which is definition you can drive truck through. But maybe you could talk about those pieces larger and especially from a pure competitive perspective and whether or not you're sort of exposed to some of these businesses that we're hearing today aren't becoming maybe a little undisciplined?

Yes. Paul, let me just say a couple of things that I'm sure Bryan has some thoughts to add and that is, you know, our business is always competitive for the better business, particularly when it's performing well. But the reality is that, if you position yourself in the marketplace to be a distinctive offering and you generate a portfolio that's broad based, you're not as commoditized as folks that are either working exclusively in the wholesale channel or kind of on our one trick pony. And so, I really think that what you see is, where we play both across the nine businesses in Specialty and in the small to lower middle market space makes us less susceptible to some of those pricing pressures, but also we have good margins in many of those businesses. And so a little bit of competition is just fine by us. We intend to grow and prosper despite a little bit of competition.

Yes sure. Thanks, Paul. And I'll lean a little bit into some of the things that Jack spoke about, right. So we are very fortunate to have a diversified portfolio of a lot of middle market and smaller account business, right. So I think that positions us well at a time like this. And so when I look at a number of our lines, right, we're still seeing really strong upper single-digits, double-digit growth in a number of our areas, right, marine, E&S, surety, healthcare all of these areas, we're still seeing in spite of the competition the ability to grow nicely. And I think something Jack said was important, right. There are areas for example D&O, right. Keep in mind, right, we write small privately held D&O, middle market D&O. So competition is there. But because of the pricing we've been able to get over the last few years, we're able to balance that price versus retention and getting new business. And so, we've been able to continue our growth. So there's definitely competition, but I think we're well positioned.

I always appreciate the help. Thank you guys very much.

Thank you, Paul.

And your next question today will come from Mike

Hey, thanks. Good morning. On home insurance, I think favorable frequency might have been called out again this quarter. If that's correct is that coming from the policies that have had the meaningful terms and conditions changes, which could kind of imply that the plan is working maybe better than expected or is it emanating from just other parts of the home portfolio?

So Mike, I'll just say a couple of things here. And I know Dick has some detail for you, but I would tell you that we have driven higher deductibles across the entire country, particularly from an all peril perspective, and there's no doubt that is contributing to our frequency benefit and frankly just the lower attritional losses that we're experiencing. But Dick, maybe you want to give some specifics as well.

Yes. That's exactly right. Our -- we're 90% complete with our wind/hail deductibles in the Midwest, 75% complete throughout the whole country on our higher all peril deductibles. And it's no doubt having an impact on the smaller claims. Customers are reticent to put forward those smaller claims at fear of either higher price increases or the loss of insurance worse yet. So that is definitely inuring to our benefit in the bottom line. The frequency, you mentioned home but really it's even more dramatic on the auto side and whether that's the terms and conditions or the deductible strategy and the auto for the industry is not as -- it's not as prevalent, but there's other factors. I think that same fear factor is at play about not submitting small claims. There's no doubt some technology benefits in cars that are helping with smaller claims not happening, right. And so, those things clearly are likely going to continue. So we're excited that the frequency benefit will be a positive going forward.

Okay, got it. I think 2Q is your biggest attritional seasonally loss ratio. So I guess we'll probably get a lot more data when we speak next in 90 days. Switching gears to commercial lines. I believe you said earlier, you reminded folks that you've been raising your casualty loss trend assumptions for five years now and you think you're keeping up with trend. I'm just curious, we're always hungry for numbers. Some companies have been willing to kind of share high level GL loss trend assumptions. Would you be willing to share any numbers around kind of the assumptions you're embedding?

Mike, we generally haven't shared it, not because we don't want to but because it's so different for so many different lines of business and so many segments that I think it's a fool's errand to throw out a number, but it has definitely moved meaningfully higher over the course of that time period across all of the different casualty lines.

Okay. That's fair. I tried. I guess lastly, just a clarification on the CAT load guide, I know you didn't update your outlook on any items. But you had favorable catastrophe reserve releases, I believe. Should we be -- I think does your guide include the PYD? I'm assuming it doesn't. So I'm just kind of curious if we should be thinking about adjusting our CAT loads due to the PYD to make sure we're still kind of around your guide.

Our guide does not include any PYD, either for ex-CAT or for CAT. We try to get our balance sheet just right and be prudent, but we don't plan on any development.

Okay. Thank you.

Thank you, Mike.

[Operator Instructions] And your next question today will come from Meyer Shields with KBW. Please go ahead.

Great. Thanks so much and good morning. If I understood correctly, you talked about maybe a slightly lower pricing for small commercial to reinvigorate growth. I was hoping you could give us a sense in terms of what that pricing entails -- as how much?

As a percentage. That's hard to say. It varies across class business by segment, geography. No, we're not talking dramatic. We're just really talking about tweaking the dials on new business. We say to ourselves, we don't want to come in second place too often, right? So you're right there with the competition and you just have to be super vigilant on what's happening, what competitors are doing, both national players, regional players. So I can't really give you a specific number.

Yes. this is Jack, Meyer. The only thing I would build on that is that we're really focused on building earnings per share and driving and taking advantage of the margins that we've created, but also the momentum that we have definitely developed with more and more agents and frankly, more and more account managers within the agency. So when we look at it from that perspective and we're still getting what we believe is price over loss trend, we're willing to take some of that excess margin off the top of new business to generate that next level of new business and overall growth. So that's how I would think about it. We're still very bullish on the underlying earnings and the growth opportunity in small commercial.

Okay. No, that's very, very helpful. And then very quickly on Personal Lines, you mentioned favorable frequency. How much of that do you view as sustainable and therefore can be incorporated into pricing?

Yes. I think, Meyer, it's appropriate to assume that it's going to continue. There's the dynamics at play here that I referenced around on the auto side, sort of reticence of customer, put small claims in. I think the technologies that are in cars will continue to bring benefit for smaller claims, the auto braking, and what-not. We were close to that data and it definitely proves that it works. There's probably some driving pattern elements to this too. So we think that this will probably continue.

Meyer, in terms of orders of magnitude for the improvement in Personal Lines across auto and home, clearly, the earned premium over loss trend is the majority of the improvement and the frequency benefit is a part of it and we had planned on some of that frequency benefit of the course of the year and it seems to be a bit bigger than we had planned on. But that should give you some of the scale of the components.

Yes. No, that relative measure is very helpful. Thank you.

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

Thank you, everyone, for your participation. We are looking forward to talking to you next quarter.