Key Takeaways HRTG is resuming selective personal lines underwriting while focusing on E&S growth and rate discipline. HCI is expanding via Citizens policy takeouts and has launched a second reciprocal insurer, Tailrow. HCI plans a tax-free spin-off of Exzeo to unlock tech value. HRTG initiates a $10M share buyback.Despite the rise in catastrophic events, the property and casualty (P&C) insurance industry is poised for continued growth, fueled by a shift toward personalized offerings and enhanced customer ...

Core Insights - Verisk Analytics, Inc. (VRSK) stock has increased by 13.9% over the past year, outperforming the Business - Information Services industry growth of 9.1% and the Zacks S&P 500 composite rise of 8.3% [1] Financial Performance - VRSK's revenues are projected to grow by 6.7% in 2025 and 7% in 2026, while earnings are expected to rise by 6.2% in 2025 and 11% in 2026 [3] - The company has a long-term earnings per share growth rate estimated at 11.4% [3] - In Q1 2025, VRSK reported revenues of $753 million, reflecting a 7% increase overall and a 7.9% increase on an organic constant-currency basis [4][8] - Underwriting revenues grew by 6.8% (7.2% OCC), driven by strong performance in various services [4] - Claims revenues increased by 7.5% (9.6% OCC), highlighting growth in property estimating and anti-fraud solutions [5] Strategic Developments - The introduction of the SRCC model enhances political violence risk modeling, allowing insurers to utilize a forward-looking approach [6] - Verisk's acquisition of Nasdaq's Risk Modelling for Catastrophes (NRMC) in April 2025 strengthens its catastrophe risk modeling capabilities [7][9] - NRMC provides access to over 300 third-party and custom models, enhancing risk analysis across the insurance value chain [9] Shareholder Returns - VRSK has consistently returned value to shareholders, paying over $188 million in dividends annually since 2021 and increasing share repurchases from $475 million in 2021 to $2.8 billion in 2023 [10] - In Q1 2025, the company returned more than $250 million to shareholders through dividends and repurchases, and initiated a $200 million Accelerated Share Repurchase program [10][11]

Upstart (UPST) 2025 Conference Summary Company Overview - Upstart is a consumer credit platform that connects borrowers needing credit with funding sources seeking yield, focusing on risk modeling and underwriting technology [5][6] Core Business Insights - Upstart aims to improve approval rates and reduce annual percentage rates (APRs) by applying modern technology to credit prediction models, addressing the inefficiencies in traditional consumer credit markets [6][17] - The company has achieved a high level of automation, reaching 92% for unsecured loans, which enhances its ability to serve various borrower segments, particularly in the prime and super-prime markets [34][35] Recent Market Conditions - The macro environment has seen fluctuating default rates, with a peak of approximately 1.6 (60% worse than pre-COVID levels) in 2023, stabilizing to around 1.4-1.5 in 2025 [11][12][18] - Origination levels declined significantly during the rise in default rates but have recently begun to recover as the environment stabilizes [14][17] Growth and Delinquency Trends - Upstart's growth model is unique; it focuses on improving underwriting over time, which allows for better risk management and lower default subsidies, leading to reduced APRs and increased acceptance rates [15][16] - The company is guiding for growth in origination volumes for the remainder of the year, assuming the macro environment remains stable [18] Funding Environment - Upstart has worked to secure more resilient funding sources, adapting to market volatility by establishing partnerships with more stable counterparties [27][28] - The company has implemented structures designed to withstand economic cycles, enhancing its funding predictability [26][27] Technology and Model Differentiation - Upstart's models are designed to be reactive rather than predictive, allowing for quick adjustments to macroeconomic changes based on real-time borrower data [29][30] - The company emphasizes the importance of fraud modeling to reduce friction in the loan process while maintaining risk management [36][37] Market Segmentation and Strategy - Upstart has shifted its focus towards the prime borrower segment, with March originations up 125% year-over-year, now constituting 32% of overall originations [55][58] - The company aims for a balanced mix of borrowers, reflecting the broader population demographics [59] Regulatory Environment and Community Banks - The current regulatory landscape has led banks to pull back as direct lenders, which may impact Upstart's operations and partnerships [66][67] - There is a discussion on whether banks should transition to being financiers rather than direct lenders to adapt to the evolving market [67] Future Opportunities - Upstart is exploring opportunities in revolving credit and purchase mortgages to build more engaged customer relationships [69][70] - The company is aware of the potential risks associated with student loan debt among its borrower base, with 35% of borrowers having such debt, but has not seen significant performance issues yet [74][75] Conclusion - Upstart is positioned to leverage its technology and market insights to navigate the current economic landscape, focusing on improving underwriting models and expanding into new credit segments while managing risks associated with macroeconomic changes [88][89]

Industry Overview - The property and casualty insurance industry is projected to grow despite an increase in catastrophic events, driven by personalized products and digital innovation [1] - Higher premium volumes from solid policyholder retention, broader exposure, and favorable pricing are sustaining profitability for insurers [1] Kingstone Companies (KINS) - KINS is the 12th largest homeowner insurer in New York with a 2.1% market share in 2024, positioned to expand as the Northeastern U.S. commercial insurance market is expected to grow by 12.3% through 2025 [3] - The company is focusing on core operations and exiting underperforming segments while adhering to disciplined underwriting practices [4] - KINS has raised prices ahead of inflation, expecting direct written premiums from its core business to grow between 15% and 25% in 2025 [5] - The company aims to lower its net underwriting expense ratio, projecting an improved combined ratio of 81% to 85% in 2025 [6] - KINS has shown continuous improvement in net margin, expanding by 2560 basis points over the last two years, with a return on equity of 31.9%, significantly above the industry average of 7.8% [7] United Fire Group, Inc. (UFCS) - UFCS offers a diverse range of products and has a strong presence in the Midwestern U.S., though it faces geographic concentration risks [8] - The company is finalizing a new policy administration system to enhance efficiency and product management, with full implementation expected across various business units [9] - Core commercial new business production is growing, driven by prudent pricing and risk selection [10] - UFCS is experiencing continuous improvement in net margin, which expanded by 640 basis points in the last two years, with a return on equity of 9%, also above the industry average [12][11] Financial Estimates - The Zacks Consensus Estimate for KINS' 2025 revenues and EPS indicates a year-over-year increase of 31% and 37.9%, respectively [13] - For UFCS, the 2025 revenue estimate implies a 6.7% increase, while EPS indicates a 2.4% decline, although EPS estimates have improved recently [14] Valuation - KINS is trading at a price-to-book multiple of 2.68, above its five-year median of 0.82, while UFCS's price-to-book multiple is at 0.88, slightly above its median of 0.81 [15] - UFCS is considered more affordable than KINS, with both stocks carrying a Value Score of A [16] Conclusion - KINS is strategically positioned to tap into a market opportunity exceeding $200 million, focusing on core business expansion and improving pricing efficiency [17] - UFCS is viewed as a value opportunity with a diversified portfolio and steady premium growth, appealing to investors seeking stable, dividend-paying regional insurers [18]

Financial Data and Key Metrics Changes - For the quarter ended March 31, GAAP and core net investment income was 18¢ per share, with total distributions of 24¢ per share [14][18] - As of March 31, the adjusted NAV was $7.48 per share, down 1.2% from $7.57 per share in the prior quarter [18] - The debt to equity ratio was 1.28 times, indicating a diversified capital structure across multiple funding sources [19] Business Line Data and Key Metrics Changes - During the quarter, the company invested $177 million in three new and 52 existing portfolio companies at a weighted average yield of 10.7% [15] - The joint venture (JV) portfolio grew to $1.4 billion, with the JV investing $170 million at a weighted average yield of 10.1% [15][16] - The portfolio consisted of 46% first lien secured debt, 2% second lien secured debt, 13% subordinated notes, 7% other subordinated debt, 7% equity in PSLF, and 25% in other preferred and common equity [20] Market Data and Key Metrics Changes - Approximately 80% of originations came from existing borrowers, with 20% from new platform investments [6] - The weighted average debt to EBITDA for new portfolio company investments was 3.9 times, with a weighted average interest coverage of 2.3 times [8] - The market yield on first lien term loans stabilized in the range of plus 500 to 550 basis points for high-quality assets [8] Company Strategy and Development Direction - The company aims to generate attractive risk-adjusted returns through income while preserving capital, focusing on growing middle market companies with high free cash flow conversion [17] - The strategy includes rotating out of larger equity positions and redeploying that capital into interest-paying debt investments to increase core net investment income [14] - The company remains selective in pursuing new investments, emphasizing rigorous underwriting and maintaining a conservative orientation [10][11] Management's Comments on Operating Environment and Future Outlook - Management noted that despite market volatility, the company had a solid quarter and expects originations to remain concentrated among existing portfolio companies [6][7] - The management expressed optimism about the upcoming vintage of loans, indicating that market volatility creates opportunities [8] - The company is closely monitoring the potential impact of tariffs across the portfolio, reporting limited exposure [9] Other Important Information - The company has a significant balance of spillover income, amounting to $58 million or 88¢ per share, which will be used to cover any shortfall in core net investment income versus dividends [15] - The credit quality of the portfolio remains strong, with three nonaccruals representing 1.6% of the portfolio at cost and 0.4% at market value as of March 31 [19] Q&A Session Summary Question: How would you characterize the current pipeline for new investments? - Management indicated that M&A deals impacted by tariffs were delayed, but there has been modest activity since April, with a growing pipeline expected for the rest of the year [24][25] Question: How much of the lower level of new deals was due to stricter underwriting? - Management stated that tariff-impacted deals are not being pursued, while the majority of their focus remains on existing borrowers in sectors not significantly affected by tariffs [28][50] Question: Can you discuss the exposure to government reimbursement and health care? - Management highlighted that the defense budget is expected to increase significantly, aligning well with their portfolio, and noted that their health care investments are performing well due to lower leverage compared to peers [39][44]