Nearly 82% of executives surveyed by AXIS Capital Holdings Limited said their organizations plan to increase their cybersecurity budgets over the next 12 months, while 75.2% said they are likely to reduce cybersecurity headcount due to greater productivity resulting from investment in AI cybersecurity tools.AXIS surveyed 500 chief executive officers (CEOs) and chief information security officers (CISOs) across the U.S. and UK, revealing striking differences in how executive leaders view the risks and reward ...

Core Insights - AXIS Capital's research highlights the transformative impact of artificial intelligence (AI) on the risk landscape, revealing differing perspectives between CEOs and CISOs regarding AI's risks and rewards [1][2] Group 1: AI's Impact on Cybersecurity - AI is recognized as a transformative force for data analytics and operational efficiency, but it also introduces new risks, including advanced cyber threats such as shadow AI and ransomware attacks [2] - The survey indicates that 93.5% of U.S. CEOs and 87.5% of U.S. CISOs believe AI delivers a return on investment (ROI) for cybersecurity, compared to 69.1% of U.K. CEOs and 74% of U.K. CISOs [4] - AI-driven attacks are perceived as the greatest emerging cyber threat, with 29.6% of U.S. executives and 20.8% of U.K. executives identifying them as a major concern [6] Group 2: Divergent Perspectives Between CEOs and CISOs - CEOs view AI as a driver of productivity and competitive advantage, while CISOs see it as a source of increased exposure, with 29.7% of CISOs less optimistic about AI strengthening cyber defenses compared to CEOs [5] - Confidence levels differ significantly, with 85% of U.S. leaders feeling prepared for AI threats, while only 44% of U.K. leaders share this confidence [6] - CEOs are more likely to believe their companies are prepared to respond to AI threats, with 60.2% expressing this view compared to 50.6% of CISOs [7] Group 3: Budget and Resource Allocation - Nearly 82% of respondents plan to increase their cybersecurity budgets in the next 12 months, while 75.2% are likely to reduce cybersecurity headcount due to productivity gains from AI tools [6] - A significant gap exists in the adoption of cyber insurance, with 94% of U.S. respondents carrying it compared to 68.4% of U.K. respondents [4] Group 4: Methodology and Demographics - The findings are based on a survey of 500 CEOs and CISOs from the U.S. and U.K., conducted from October 22–29, 2025, with respondents representing companies of at least 250 employees [9]

Industry Overview - The insurance industry is experiencing soft pricing, with global commercial insurance rates declining by 4% in Q3 after seven years of increases [1] - Natural catastrophe losses are expected to reach approximately $107 billion by 2025, primarily due to events like LA wildfires and severe storms in the U.S. [2] - The combined ratio for the insurance sector is projected to improve to 98.5% in 2025, supported by increased exposure and prudent underwriting practices [2] Berkshire Hathaway (BRK.B) - Berkshire Hathaway operates as a diversified conglomerate with over 90 subsidiaries across various industries, with insurance being a key segment contributing about 25% of total revenues [4] - The company benefits from a float-driven model that enhances earnings and provides capital for investments, supported by a strong cash reserve exceeding $100 billion [5][7] - Despite a return on equity (ROE) of 7.3%, which is below the industry average of 8%, Berkshire has shown improvement over time [8] - The Zacks Consensus Estimate for BRK.B's 2026 revenues indicates a 6% year-over-year increase, while EPS is expected to decline by 4.2% [17] Chubb Limited (CB) - Chubb is a leading provider of property and casualty insurance, boasting a diversified business model that enhances earnings stability [11] - The company anticipates an 8.6% increase in EPS by 2026, contrasting with BRK.B's expected decline [10] - Chubb maintains one of the lowest combined ratios in the industry due to disciplined underwriting practices and strategic mergers and acquisitions [14] - The Zacks Consensus Estimate for CB's 2026 revenues suggests a 6.5% year-over-year decrease, while EPS is projected to rise by 8.6% [18] Comparative Analysis - Chubb outperforms Berkshire in terms of ROE and dividend growth, making it a more attractive investment option [10][24] - Berkshire's price-to-book multiple is 1.53, above its five-year median of 1.44, while Chubb's is 1.52, below its median of 1.56 [19] - Chubb has a solid dividend track record, increasing dividends for 32 consecutive years, with a current yield of 1.3%, compared to Berkshire's lack of dividends [23]

Core Viewpoint - The Illinois appellate court ruled that payments made by an insured following a cyberattack, which were reasonable but not contractually necessary, do not qualify as insured "extra expense" under the cyber insurance policy [1][5][12] Group 1: Case Background - The case involved Villa Financial Services, which suffered a cyberattack on Kronos Group in 2021, leading to payroll processing issues and resulting in overpayments of $1.2 million to employees [2][3] - Villa sought coverage from its cyber insurance carrier for these overpayments, claiming they were incurred as "extra expense" due to the cyber event [3][4] Group 2: Court Rulings - The trial court ruled in favor of the insurer, stating that Villa failed to demonstrate that the overpayments were "necessarily incurred" as required by the policy [4][5] - The appellate court affirmed this ruling, emphasizing that the policy's language did not support reimbursement for payments that were not contractually required [6][7] Group 3: Policy Interpretation - The cyber policy defined "extra expense" as reasonable sums necessarily incurred to mitigate business interruptions caused by cyber events [4] - The court highlighted that the term "necessarily incurred" implies that expenses must be essential and indispensable for business operations, which Villa could not prove [6][11] Group 4: Comparison with Other Cases - The Villa decision contrasts with the Fifth Circuit's ruling in Southwest Airlines, where the court found that the term "solely" in a different policy context allowed for a broader interpretation of coverage [11] - The Villa case serves as a reminder of the importance of precise language in insurance contracts and the courts' reluctance to create coverage where none exists [12]

Financial Data and Key Metrics Changes - Adjusted net income for Q3 2025 was $18 million, with gross written premium growing by 33% year over year to $311 million, up from $234 million in Q3 2024 [5][13] - Net written premium increased by 30% year over year to $118 million, up from $91 million in Q3 2024 [15] - Consolidated net income for Q3 was $98 million, or $3.77 per diluted share, a $107 million improvement year over year [19] - Total shareholders' equity at the end of the quarter was $422 million, up 14% from $362 million at year-end 2024 [19][20] Business Line Data and Key Metrics Changes - Casualty increased to 25% of gross written premium, up from 14% last year, while commercial and multi-peril increased to 21%, up from 13% [14] - Homeowners decreased from 47% of gross written premium in Q3 2024 to 32% in Q3 2025 [14] - Renters increased to 22% of net written premium, up from 10% last year, with a significant growth of 203% year over year [15][16] Market Data and Key Metrics Changes - The company bound its first new policies with Westwood Insurance Agency, which is expected to triple access to annual new home closings [7] - The underwriting results improved significantly, with a net loss ratio improving by 25 percentage points year over year to 48% [9][17] Company Strategy and Development Direction - The company is focusing on three strategic pillars: strategic diversification, unlocking market growth, and optimized risk management [6] - The introduction of a new reporting structure aligns with a unified way of managing the business, emphasizing gross and net premium by line of business [12] - The company anticipates growth in the homeowners market over the next three years, aiming for over $2 billion in premium by 2028 [31] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the underwriting discipline and the ability to maintain pricing standards amid increased competition [8] - The company raised its full-year 2025 guidance for gross written premium to a range of $1.09-$1.11 billion, reflecting expectations for continued growth in newer lines of business [20] - The consolidated net loss ratio guidance was improved to a range of 63%-64%, driven by positive loss trends [21] Other Important Information - The company appointed Robin Gordon as Chief Data Officer to enhance risk management and customer experience [10] - The consolidated combined ratio improved by 28 percentage points year over year to 100% [18] Q&A Session Summary Question: Growth in casualty business - Management noted that casualty growth is a combination of cyber, commercial general liability, and other lines, with a cautious approach to risk retention until profitability is established [25][26] Question: Competition in homeowners market - Management indicated that the admitted market is rebounding, leading to increased competition, but they feel confident in their pricing adequacy [27] Question: Future business mix by 2028 - Management expects to diversify further while anticipating growth in the homeowners market, aiming for over $2 billion in premium by 2028 [30][31] Question: Share repurchases and capital use - Management stated that capital will be used for portfolio growth and potential acquisitions to accelerate diversification [34]

Core Insights - Global commercial insurance rates fell by 4% in Q3 2025, marking the fifth consecutive quarterly decrease, driven by increased competition among insurers and favorable reinsurance pricing [1][3][5] - All global regions experienced year-over-year composite rate decreases, with the Pacific region seeing the largest decline at 11% [2][5] - Casualty rates increased by 3% globally, primarily due to an 8% increase in the US, while property rates declined by 8% globally [5] Summary by Category Global Insurance Market Trends - The overall composite rate in the US declined by 1% in Q3 2025, following a flat rate in Q2 2025 [2] - The trend of declining rates began in Q1 2021, reversing a seven-year period of increases [3] Regional Performance - The Pacific region experienced the largest composite rate decrease at 11%, followed by Latin America and the Caribbean (6%) and the UK (6%) [2] - Rates in Asia and India, as well as the Middle East and Africa, declined by 5% each, while Europe saw a 4% decrease and Canada a 3% decrease [2] Specific Insurance Lines - Property insurance rates declined by 8% globally, with the Pacific region experiencing a 14% decrease [5] - Financial and professional lines saw a 5% decrease globally, with the Pacific region experiencing the largest drop at 10% [5] - Cyber insurance rates decreased by 6% globally, with Europe seeing a 12% decline [5]

Core Insights - Asset managers are particularly vulnerable to cybercrime due to the sensitive data and large volumes of money they handle [1] - A survey revealed that 93% of investment management executives experienced at least one cyber incident in the past year, with nearly 20% facing multiple threats [2] Cybersecurity Risks - 88% of surveyed executives acknowledged that a successful cyberattack could lead to asset withdrawals or losses, with this figure rising to 94% among CFOs [3] - Concerns include operational disruption (63%), financial theft or fraud (47%), loss of client trust (46%), and increased insurance premiums (30%) [3] Preparedness and Response - Ransomware is the type of attack that 51% of executives feel least prepared to recover from [4] - While most leaders believe employees can recognize AI-driven threats, about one-third lack full confidence, and only 17% prioritize security awareness training in the coming year [5] Cybersecurity Spending - Over 78% of firms increased cybersecurity spending in the past year, with 88% of firms managing $101 million to $500 million in assets doing so [6] - Registered investment advisers were the least likely to increase security budgets, with only 57% doing so, and 11% significantly decreasing IT spending [6] Assessment Frequency - 41% of firms still rely on quarterly or less-frequent cybersecurity assessments, creating vulnerabilities that attackers can exploit [7]

Core Insights - Many U.S. homeowners lack essential insurance protections, creating opportunities for agents to educate clients on necessary coverages [1][4] - Homeowners often overestimate the protection offered by standard policies, highlighting the need for additional coverage for valuable items [2][3] Opportunities for Agents - Independent agents play a critical role in educating homeowners about evolving risks and coverage options [4] - After learning about umbrella coverage, two-thirds of unprotected homeowners expressed interest in obtaining it, with nearly 25% being "very interested" [5] - Customer service is crucial, with 81% of homeowners rating it as "absolutely essential" or "very important," compared to only 58% prioritizing the lowest price [5] Coverage Awareness - A significant gap exists in homeowners' awareness of various coverages; 87% had not been informed about cyber insurance, and 61% about umbrella coverage [6] - Despite high awareness of coverage for valuables (87%), only 26% of homeowners have additional coverage for them [7] - Cyber insurance has the lowest awareness at 46%, with only 7% of homeowners having coverage [9] Customer Preferences - Homeowners prefer having a single insurance company for all policies, which enhances customer service and helps identify coverage gaps [7][8] - Bundling policies can provide discounts and streamline the claims process, making it more convenient for homeowners [8]

Core Insights - A survey by The Hanover Insurance Group reveals that many U.S. homeowners lack essential insurance protections, exposing them to risks like lawsuits, cybercrime, and inflation [1][2]. Coverage Awareness - The survey assessed homeowners' understanding of four types of insurance: umbrella, cyber, valuables, and recreational vehicles, showing a significant gap between awareness and actual coverage [2]. - Only 23% of homeowners have an umbrella policy, while 66% expressed interest in obtaining one after learning about its benefits, indicating a need for better education on insurance options [2]. - Cyber insurance has the lowest awareness at 46%, with only 7% of homeowners having coverage [8]. - Awareness of valuables coverage stands at 87%, but only 26% are actually covered [8]. - Recreational vehicle insurance is known by 94% of homeowners, yet only 31% have discussed it with their insurance agents [8]. Role of Insurance Agents - The findings emphasize the critical role of independent agents in educating homeowners about their insurance needs and helping them make informed decisions [3]. - Customer service is deemed essential, with 81% of homeowners rating it as "absolutely essential" or "very important," compared to 58% prioritizing the lowest price [3]. Coverage Management - Keeping insurance coverage with a single carrier can help identify potential gaps and provide a more consistent customer service experience [4].

Summary of Hippo Conference Call - September 17, 2025 Company Overview - **Company Name**: Hippo (NYSE:HIPO) - **Industry**: Insurance, specifically a tech-enabled program carrier focusing on personal and commercial lines, with a legacy in homeowners insurance [3][4] Key Financial Metrics - **Gross Written Premium**: Approximately $950 million in the last 12 months, projected to reach $1.1 billion by the end of 2025 [4][5] - **Revenue**: $425 million in the last 12 months, expected to be between $460 million and $465 million by the end of 2025 [4][5] - **Net Income**: Achieved net income positive for the first time from net operating activities [4] - **Book Value**: $333 million as of the end of the quarter, projected to increase to about $420 million by the end of 2025 [5] Growth Projections - **Future Growth**: Expected to nearly double gross written premium from $1.1 billion to over $2 billion by 2028 [7] - **Adjusted Net Income**: Projected to quadruple from about $30 million in 2025 to more than $125 million in 2028 [7] - **Return on Equity**: Anticipated to be in the high-teens by 2028 [7] Strategic Initiatives - **Organic Growth**: Plans to grow existing programs by 10% to 15% annually, leveraging a history with managing general agents (MGAs) [9] - **New Programs**: Aiming to add $100 million to $150 million in gross written premium from new programs each year [10] - **Partnership with The Baldwin Group**: This strategic transaction will triple access to new homes closed annually, enhancing growth and underwriting profitability [11][24][25] Underwriting Approach - **Diligent Underwriting**: Reviewed over 140 program opportunities in 2024, approving only 4, which resulted in $130 million of new business [10] - **Legacy Homeowners Business**: Focused on newly constructed homes through builders, with a loss ratio significantly lower than the industry average [18][30] - **Rate Increases**: Implemented over 170 rate filings resulting in a cumulative rate increase of more than 80% [19] Risk Management - **Geographic Diversification**: Reduced concentration in high-risk areas like Harris County, Texas, and focused on states with lower catastrophic exposure [31][32] - **Portfolio Diversification**: Increased mix of commercial property and casualty lines to enhance predictability and reduce volatility [32] Market Resilience - **Interest Rate Sensitivity**: Business has shown resilience to interest rate changes, with partnerships with builders providing better mortgage terms [22][23] - **Performance in Challenging Markets**: Despite challenges in homeowners insurance, diversification into casualty and commercial lines has provided stability [32] Conclusion - **Execution Track Record**: The company has a strong history of meeting or exceeding ambitious goals set in previous investor communications [20] - **Future Outlook**: Focus on responsible growth, improved underwriting performance, and a diversified portfolio to achieve higher profitability with lower volatility [21][14]