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

Thank you, Jack, and good morning, everyone. We are very pleased with our exceptional performance and strong execution in both the fourth quarter and for the full year, headlined by several records as our momentum continues to build across every major area of the business. We wrapped up the year on a high note with an excellent fourth quarter combined ratio of 89% as well as operating return on equity of 23.1%, one of our best results ever. Our full year combined ratio was a strong 91.6%, improving over 3 points year-over-year. Excluding catastrophes, our combined ratio in 2025 was 87.1%, decisively outperforming our original guidance for the year and 1.3 points better when compared to 2024. Catastrophe losses for the year of 4.5 points came in well below our original guidance, helped by generally benign weather and our property management actions, which continue to contribute positively to our CAT and ex-CAT results. Our expense ratio of 31.1% for the year improved 20 basis points from 2024, but was above our original expectations, driven primarily by higher variable agency and employee compensation, reflecting better-than-expected underwriting results and a much lower level of CATs. Additionally, we continue to make investments across the business to support future profitable growth. We remain committed to managing expenses carefully. Quarterly prior year reserve development ex-CAT, was favorable across each segment in both the fourth quarter and the full year. In Specialty, favorable prior year reserve development was 5.3 points for the quarter, with widespread favorability across multiple coverages. In Personal Lines, prior year reserve development was slightly favorable in the quarter. Homeowners' coverage continues to be favorable, while we made a minor increase to auto bodily injury in response to higher severity. We also updated our current year assumptions accordingly. And in Core Commercial, fourth quarter prior year reserve development was 0.3 points favorable, with very minor adjustments by line. As it relates to commercial and personal auto liability, we expect pricing to continue to increase in 2026. In line with our traditional reserving approach, we are being thoughtful and prudent in setting our loss picks in both prior and current accident years to ensure that our balance sheet remains strong. Turning to our underlying underwriting performance. We posted outstanding results and outpaced our expectations in both the quarter and the year. Our consolidated underlying loss ratio improved 1.1 points to 57.1% in the year with impressive improvement in Personal Lines, Specialty results that continue to exceed our expectations and strong underwriting margins in Core Commercial. Now I'll discuss results by segment. Starting with Personal Lines. This business posted an outstanding current accident year ex-CAT combined ratio of 85.3% for the year and 85.4% for the quarter, improving 3.8 points and 0.6 points from the prior year periods, respectively. The improvement in the year was driven by the benefit of earned pricing in both personal auto and homeowners as well as reduced frequency. Our personal auto ex-CAT current accident year loss ratio was 69.5% for the year, an improvement of 2.2 points compared to the prior year. The result for the fourth quarter of 75.7% was higher year-over-year but approximated our expectations. Turning to homeowners. We delivered exceptional ex-CAT current accident year loss ratio improvement, down 6.4 points to 45.8% for the year and down 4.6 points to 36.6% in the fourth quarter. Earned pricing continues to be a benefit as well as favorable weather. We also continue to partially attribute lower claim frequency to deductible changes leading to fewer small claims, not only in CAT, but also in ex-CAT results. Personal Lines growth accelerated to 4.4% in the fourth quarter with the full year at 3.7%. PIF was relatively stable in the quarter, shrinking 0.6 points sequentially, which is an improvement from the third quarter of 2025. We expect PIF growth in 2026. We achieved Personal Lines renewal price of 9.2% in the quarter with auto pricing up 6.9% and home pricing up 12.3%. While price increases were lower sequentially, they remain above our long-term loss trend. Umbrella pricing remains strong, holding around 20%. We are pleased with our current Personal Lines rate levels in light of the strong overall profitability we've achieved. Now turning to our Core Commercial segment. We posted a current accident year ex-CAT combined ratio of 91.6% for the fourth quarter, improving 2.4 points from the prior year quarter and achieved 92.6% for the 2025 year. The fourth quarter ex-CAT current accident year loss ratio improved 1.5 points from the prior year quarter to 57.4% as core property continued to perform well and large loss activity remained within expectations. The full year result of 59.1% was slightly higher compared to 2024, primarily driven by prudently increased loss selections in commercial auto liability and in workers' compensation, partially offset by lower losses in commercial multiple peril. Core Commercial net written premiums grew 3.6% in the year and 2.5% in the quarter, led by Small Commercial on the back of double-digit new business growth and healthy retention. Core Commercial segment growth was impacted by middle market reinstatement premiums, which were receipts in the fourth quarter of 2024 and payments in 2025. Excluding the reinstatement premium impact, the Core Commercial segment delivered fourth quarter growth of 4.1%, inclusive of 2.6% growth in middle market. We're very satisfied with what we're seeing in this segment of the market and have confidence in our ability to continue capturing profitable growth opportunities. Overall retention in Core continues to be solid at 85.3%, up nearly 1 point from Q3, while price increases, including exposure changes, moderated only slightly to 9.4%. Price levels remained elevated compared to historical averages and overall rate continues to be above loss trend. Moving on to Specialty. The business continues to perform extremely well, posting a current accident year combined ratio ex-CAT of 87.4% for the year and 89.5% for the quarter. The current accident year loss ratio ex-CAT of 50.1% for the year and 51.4% for the quarter were both within our long-term expectation of low 50s for this business. Fourth quarter loss experience was largely in line with expectations, while the year saw favorability driven by large property losses, which can fluctuate period to period. Liability continued to remain within expectations. We are very pleased with the consistent execution and profitability in our Specialty book and remain confident in our positioning to further capture attractive growth opportunities in our markets. Turning to reinsurance. We successfully completed our multiline casualty reinsurance renewal on January 1. The program was placed in a similar manner to last year, including the same $2.5 million per risk retention at rate levels slightly below our expectations. As a reminder, our property per risk and catastrophe reinsurance treaties will renew on July 1. Moving on to a discussion of our investment portfolio. Net investment income increased an impressive 24.9% in the fourth quarter and 22% for the year to $454.4 million. This performance reflects growth in our asset base from strong earnings, the benefit of higher reinvestment yields, improving partnership income and the success of our portfolio repositioning efforts. As we mentioned last quarter, fourth quarter NII also included a benefit of approximately $4 million from the investment of funds from our $500 million debt issuance in August 2025. This benefit is offset by higher interest expense on our debt. The debt level was temporarily elevated following our issuance but will normalize in the first quarter. We repaid approximately $62 million of senior notes that matured in October of 2025 and also called $375 million of senior notes at par, which were retired in January, originally set to mature in April. Our investment portfolio continues to be a key pillar of our diversified earnings stream. It is conservatively positioned, broadly diversified across sectors and is not overexposed to any single asset class or industry sector. Our limited exposure to variable rate instruments also continues to provide stability in our investment income and reduces reinvestment risk as short-term rates decline. Our fixed maturity portfolio continues to carry a weighted average rating of A+ with 95% of holdings investment grade. Portfolio duration, excluding cash, remained relatively stable at approximately 4.3 years, consistent with our long-term asset liability alignment approach. Moving on to our equity and capital position. Our book value increased approximately 27% in 2025, ending the year at $100.90, driven by strong earnings in the year and an improved unrealized loss position on invested assets. Excluding unrealized, book value increased approximately 15% for the year to $104.21. In December, we raised our quarterly dividend by 5.6% to $0.95 per share, marking the 21st consecutive year we have increased our dividend, underscoring the durability of our enterprise, our commitment to delivering shareholder value and the confidence we have in the company's future. We also continue to be active in share buybacks, repurchasing approximately 307,000 shares totaling $55 million in the fourth quarter and approximately 754,000 shares totaling $130 million during 2025. Additionally, we repurchased approximately $44 million worth of shares through January 30. We remain dedicated to responsible capital management and prioritizing shareholder value. Turning to our annual guidance for 2026. We expect overall consolidated net written premium growth to accelerate in 2026 to mid-single-digit growth. We expect net investment income growth in the mid- to upper single digits compared to 2025. Our expense ratio for 2026 is expected to be 30.3%. However, we want to let you know we will not be giving specific expense ratio guidance in future years. We will continue to be disciplined financial managers, but we believe the combined ratio overall should really be the focus that we guide to. The combined ratio, excluding catastrophes, should be in the range of 88% to 89%, an improvement from our 2025 guidance. Our CAT load for the year is 6.5%, consistent with our guidance for 2025. Although CAT losses for 2025 came in below our expectations, and we continue to observe benefits from our deductible and terms and conditions changes, we believe holding our CAT load consistent for now is prudent given the volatility of this income statement line and evolving weather patterns. Our CAT load for the first quarter is 6.1%. To wrap up, we are beginning 2026 in a position of strength and are extremely well positioned to deliver on our goals. Our broad and resilient portfolio, diversified earnings stream and talented team are the foundation that will allow us to sustain this performance in 2026 and beyond. The combination of underwriting performance and the strong investment portfolio puts the Hanover in a terrific place. With that, we are ready to open the line for questions. Operator?

[Operator Instructions] And the first question today will come from Michael Phillips with Oppenheimer.

Congrats on a nice year and quarter. Jeff, in your opening comments, you talked about adjusting the current year for auto BI severity. I assume you're referring to personal auto there given what we see in the quarter. So I guess -- and you also, of course, mentioned the Core Commercial accident loss ratio up a bit given the activity you took earlier in the year. We didn't see that activity for Core Commercial this quarter. I don't think we did. And I guess, does that mean that the pressure you felt from those casualty lines and Core Commercial, you felt less of a need to do so and maybe things are kind of easing there?

So your first question, yes, it was PL auto liability that we were raising picks in the fourth quarter. With respect to Core Commercial auto, yes, we didn't see a whole heck of a lot this particular quarter. It's been a relatively quiet quarter there. But we've been mentioning it all year long, and we've been increasing our IBNR reserves for auto largely for -- solely really for 2023 and '24 and '25. Years before that are quite mature. And I think we leave 2025 with the strongest balance sheet that we've ever had.

I like the way you came at this question, Mike, is are we doing anything differently? Or do we have to lean in more differently? And I'd say, yes, we adjust kind of our activity and specifically our talk track with our agents, more time spent on helping them understand their economics and their behaviors in this kind of marketplace, watching the trends, kind of the leading indicators, really focused on the benefits of keeping accounts stitched together, right, in a bundled way because when you separate those out and you have perhaps 2 shopping opportunities, that creates issues for them in the future with potential risk to retention. So we spent a lot of time talking about that, how to -- the benefits of not only [ bundled ] accounts, but then in our case, we have a common effective date, which is really powerful because both of those policies renew on the same date. So we try to put data in front of them for their own book and for the industry. And our team, you've heard me say this before, it's a super power of ours that we bring data and we help agents understand their own situation. So that's probably what I'd add to Jack's response.

The next question will come from Mike

Maybe on Personal Lines specifically, if you can kind of just tease out directionally what the non-CAT property benefit was in home? I think there was a benefit for the year, just so we kind of can better understand the run rate. You guys have obviously done an excellent job improving margins there. And just maybe higher level overall Personal Lines, kind of like I see the comment in your deck about expecting policy count to grow a bit. But I guess what's kind of the North Star in the current competitive environment? Would it be kind of very low single-digit PIF growth? Or any comment there would be helpful.

Thanks, Mike. It's Jeff. I'll start on the loss ratio. A lot of moving pieces with respect to home. First off, we're getting price above loss trend, which is really earning in and being very powerful for us. But you also have issues like the benefit of the deductibles and even some consumer behavior. Clearly, favorable weather in 2025 and even particularly in the fourth quarter is having a healthy benefit. So it's -- I'm reluctant to spike that out, even though we've tried to estimate it because it's just -- it's too raw. I don't have enough confidence in it. But I think it would be wise to assume that the 47.5% that we did for the year will need to come up a little bit because of that particular benefit.

All right. And I'll take the question on the North Star Personal Lines. So thanks for that. We've really been maniacally focused on our North Star in Personal Lines, which is to be the best market in the IA channel for preferred accounts. So I do think of our future as like strengthening that strength, growing thoughtfully while achieving our diversification objectives, not only across states, but even within states where we have a lot of market share, pushing ourselves continuously upstream into that prestige account space, the $750 million to $3 million space. And then as you've seen, importantly, continue to invest in that account solution. So classic cars, schedule items and things like that. So we are -- we continue to be focused on that. I like a mid-single-digit growth objective kind of into the future. I think that's a good place to be. And as prices come down to more rational levels, that's always been our objective.

Okay. Sounds good. My follow-up, Jeff, a lot of commentary helpful on the reinstatement premiums. Can you just remind us what drove the reinstatement premiums? Is that CAT or casualty?

Sure. So again, with reinstatement premium, we had some incoming reinstatement premium on reserve takedown in 2024 quarter and some outgoing on an increased reserve for reinsurance. It was not CAT. It was generally property -- large property loss exposure in the property per risk program.

The next question will come from Paul Newsome with Piper Sandler.

Yes, Paul, severe convective storm is the area that has given us some issue over the last several years with that volatility. And we've done a tremendous amount of work on thinning out the aggregations, putting in place the deductibles for the terms and conditions and making it -- so those matters are less severe, getting lots of rate and then also, particularly in the commercial space, putting in place new technology that is having a tremendously beneficial impact on limiting those CATs where people have devices that will let them know if there's either excessive cold temperatures or some water issues with pipes, and that's a real benefit for us.

The next question comes from Rowland Mayor with RBC Capital Markets.

Yes. I don't think that you should interpret our moving away from guidance as in any way, lacking financial expense management discipline. To the contrary, we're still every bit as disciplined as we always have. But a year like we've had this year where the loss ratio is or the overall combined ratio is much lower than we had guided to with or without CAT, it causes us to have an expense ratio elevation and just didn't really want to be slavish toward reporting against it or being held to it. Having said all that, there's an awful lot going on with expenses. We have expense needs and demands to make investments in technology and data and analytics in AI, in a variety of different places, and we're making those investments in a way that we'll spend a little bit of money before we'll get the benefits of that, which will come. But we're funding that. And so we have a very active process of looking at our expenses across the organization and creating the capacity that's needed to be able to make those investments.

That's super helpful. And I wanted to quickly then ask on the repurchase volumes, and they've been steadily walking up the past few quarters and even the January number looked -- I think it was the biggest probably month you've had in a very long time. Can you walk through the approach there and just how we should be thinking about your ability to buy back stock and maybe capital needed for growth needs?

Yes. We bought back, as you said, $100 million of stock in the last 4 months, which is a healthy dose with growth being a little bit lower in the last 12 months and the earnings and profits being super strong, we're building a lot of capital, as you can imagine. It ends up being a high-class problem. And we've always been good stewards of capital. We've got choices. Growth is always at the top of the list, continuing buybacks, of course, dividends. We can consider things about reinsurance, perhaps even small inorganic or renewal rights deal. But we'll be balanced, Rowland, as to how we use capital. And I suspect the stock buyback will continue to play a meaningful role.

The next question will come from Meyer Shields with KBW.

Two quick questions on the line, if I can. First, at least in the third quarter of this year, we're seeing most Personal Lines coverages claim frequency decline. I'm wondering whether that broad picture matches what you're seeing in your preferred market?

Yes, definitely. We're seeing the frequency on the property coverages in the auto and the homeowner side of things. And certainly, some of that's related to customer behavior, we believe. Some of it's related to the terms and conditions that we put in place, certainly on the home side and the weather, ex CAT weather. And then, of course, as you know, on the auto side, the safety technology that is being implemented in the cars as they roll off the conveyor belt and more and more of those on the streets and highways is definitely having an impact on the number of accidents and frequency down.

The next question will come from Mike

Great. Just a quick follow-up. Does the -- is the winter storm recently in 1Q, is that big enough to -- we should talk about it? And is it -- if so, is it in the guide for '26?

So burn represented most of our January CATs this winter storm burn. And based on what we're seeing, there's no reason to modify our first quarter CAT estimate of 6.1%, Mike.

And the next question will come from Daniel Lee with Morgan Stanley.

My first question is on the Specialty segment. I was just kind of curious to hear just some more details on like competitive dynamics. I know you guys mentioned just competitive pressure across the Property Lines. But -- and yes, maybe with management liability and pricing stabilization across for professional and executive lines, how are you guys thinking about the competitive dynamics going forward for that subsegment?

Yes. Thank you, Daniel. I'll take that. It's Bryan Salvatore. And yes, to your point, we do see increased competition across the property lines, and we are reacting to that. We're really fortunate to have a very diversified portfolio. And the things that you mentioned, for example, management liability, really pleased with the progress we saw in the fourth quarter, right? Yes, the market has stabilized. But that along with the investments we've made in operating model efficiency, improving turnaround, we saw double-digit growth in the fourth quarter for management liability, and we see that continuing. And we also saw improvement in professional liability from the investments we've made there. So that diversified portfolio for us gives us a lot of confidence in our ability to appropriately grow in 2026 even in this environment.

Yes. So I guess my follow-up is, I'm also kind of curious on just the overall E&S demand that you guys are seeing out there. Is there still more robust submission flows that are coming in for E&S? Or do you guys kind of see that subsiding as a little bit of the [indiscernible] markets start to open up? Just curious.

So I'll react to that too. Sorry, I'll react to that, too. We have not seen any abatement in the activity in our E&S book. It grew double digits throughout the year. It grew double digits in the fourth quarter. The submission volume is quite high. And we do have a couple of benefits. One is where we're positioned, which is middle to smaller E&S, and so the competition there isn't as severe as you might see in some other places. Also, we have a real nice mix now of retail play E&S business and wholesale space. So we have different avenues, different access to opportunities. And so we continue to see that business growing for us in a nice, healthy way.

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 dialing in today. We're looking forward to talking to you next quarter.