Definity Financial (TSX:DFY) Q3 2026 Earnings Call

0:00 Good morning ladies and gentlemen and welcome to the DFINITY Financial Corporation third quarter of 2026 financial results conference call and webcast. At this time all lines are in a listen only mode. Following the presentation we will conduct a question and answer session. If at any time during this call you require immediate assistance please press star zero for the operator. This call is being recorded on Friday. November 6, 2026. I would now like to turn the conference over to Dennis Westfall, Vice President, Investor Relations. Please go ahead.

0:40 Thanks, and good morning, everyone. Thank you for joining us on the call today. The link to our live webcast and background information for the call is posted on our website at definityfinancial.com under the Investors tab. As a reminder, the slide presentation contains a disclaimer on forward-looking statements which also applies to the discussion on the conference call. Joining me on the call today are Rowan Saunders, President and CEO, Philip Mather, Chief Financial Officer, Fabian Richenberger, Chief Operating Officer, Paul MacDonald, EVP of Personal Insurance and Digital Channels, and Obaid Rahman, EVP of Commercial Insurance. We'll start with formal remarks from Rowan and Phil followed by a Q&A session during which Fabi, Paul, and Obaid will also be available to answer your questions.

1:25 With that, I will ask Rowan to please begin his remarks.

1:29 Thanks, Dennis, and good morning, everyone. Our third quarter results demonstrate the resilient core earnings power and solid underlying momentum of our business under our significantly expanded scale. As we continue to make meaningful progress on the integration of the acquired Travers business, we are pleased with our achievements to date and the enhanced capabilities of our combined platforms. If you turn to slide five, we provided a comprehensive update on our Travelers Integration Roadmap and the key operational milestones delivered to date. We recently reached an important integration milestone with the conversion process for all product lines now underway, highlighted by the successful deployment of our new specialty lines capabilities and our expansion into Newfoundland.

2:21 To date, Over one third of the acquired portfolio has already been converted to DFINITY's platforms with customer retention tracking strongly and in line with our expectations. I'm also pleased to say that all new claims from converted policies are now being managed in our system. The successful rollout has been supported by strong broker engagement and our disciplined execution. Looking ahead, we remain on track to complete our business conversions and exit of our remaining transition service agreements by late 2027, successfully transitioning our acquired books into steady state business as usual operations.

3:07 Financially and strategically, we continue to execute with exceptional discipline, and this momentum is clearly reflected in our synergy plans on slide six. Nine months post-close, we have already achieved run rate synergy savings of $56 million, representing almost 45% of our increased $125 million target. Year to date, our underlying results include earned synergies of $31 million. Given this accelerated pace of capture, we remain confident in our ability to realize at least one-third of our synergy target by the end of 2026, in line with the increased synergy expectations we announced last quarter.

3:54 In terms of integration costs, we're on track, with our total estimate of $150 million to $170 million, with the majority expected to be incurred during this first year of integration. leaving approximately one third of those costs for 2027. Turning to our performance in the third quarter on slide seven, we delivered impressive top line growth across the board. Gross written premiums grew 36.2% to $1.7 billion, bringing our year-to-date premiums to $4.9 billion and keeping us on track to achieve our full year guidance of $6.5 billion. On the bottom line, our diversified earnings power was on display this quarter, generating a resilient operating EPS of $0.36 while supporting a 3.3% year-over-year increase in our book value per share.

4:54 Our consolidated combined ratio of 100.6% was up 11.2 points from last year, driven almost entirely by catastrophe losses, which were higher by 10.9 percentage points. These severe weather events contributed 12.8 percentage points to our combined ratio as our teams responded to convective storms and flooding in Ontario and Alberta, wind and hail events in Ontario, and Wildfires in British Columbia. While we expected the addition of the acquired business to increase our combined ratio by a couple of points prior to fully realizing synergies, our underlying results remained strong and nearly flat year over year.

5:43 This impressive performance demonstrates the powerful benefits of our increased scale, geographic diversification and underlying discipline. Our trailing 12-month operating ROE was 10.3%, reflecting the impact of elevated Q3 weather losses and the averaging in of our expanded equity base. Turning to our 12-month industry outlook on slide 8, our key message is that overall market conditions remained favorable and conducive to achieving our financial targets. In personal auto, we expect conditions to remain firm overall as insurers maintain pricing discipline to keep pace with loss costs. Evolving regulatory transitions in Ontario and Alberta, along with improved industry rate adequacy and moderating loss cost trends, are actively supporting a more stable and constructive pricing environment.

6:42 In personal property, we expect market conditions to remain firm. We continue to take proactive underwriting and pricing actions required to fund weather losses, while focusing heavily on long-term peril and accumulation management. In commercial insurance, while we expect overall market conditions to remain attractive, continued competitive conditions in the large account segment are expected to temper industry growth. As a result, we expect overall industry growth in commercial lines to be in the low single digits over the next 12 months, varying by segment and company. This reinforces our decision to remain disciplined and focus our growth on SME and specialty niches where pricing conditions continue to be positive.

7:31 Leveraging our strong market position and exceptional broker support, We remain confident in our ability to navigate these industry dynamics, manage our portfolio, and price our products appropriately to deliver sustained profitable growth. On that note, I'll turn the call over to our CFO, Phil Mather, to discuss the financial results in more detail.

7:54 Thanks, Rowan. Our third quarter performance underscores the resilience of our expanded business and our team's rigorous operational disciplines. Slide 10 provides a detailed view of our consolidated underwriting and operating metrics. Gross written premiums for the quarter reached $1.7 billion, representing a 36.2% increase compared to Q3 2025. This was driven by a strong 25.7% growth contribution from the acquired renewal book as customer retention rates continue to successfully converge with the underlying DFINITY business. Our underlying growth contribution representing the renewal of our legacy DFINITY business and all new business written across the expanded platform was 10.5%.

8:47 Our consolidated combined ratio for the quarter was 100.6% inclusive of the acquired business. compared to 89.4% in Q3 2025. This was driven by an elevated claims ratio of 71.9% reflecting $190 million or 12.8 percentage points of weather driven catastrophe losses compared to the unusually benign 1.9 points in Q3 2025. Our core accident year claims ratio rose slightly by one point to 60.8%. which was within our expectations as we continue to absorb the impact of the acquired business prior to fully realizing synergies.

9:34 This was partially offset by a 50 basis point improvement in our expense ratio to 28.7% driven by the early capture of integration synergies, lower incentive compensation accruals, and ongoing expense management. I'll now provide some more details on our lines of business. Starting with personal auto on slide 11, gross written premiums grew by 38.1% in the third quarter to $714 million, inclusive of 23.3% growth from the continued strong retention of the acquired renewal book. Our underlying growth contribution was robust at 14.8%, though this benefited by a few points from an elevated quarterly impact from industry pools.

10:23 The combined ratio of 96% increased from 94% a year ago. As expected in our transition plans, this increase reflects the anticipated and temporary impact of consolidating the acquired traveler's portfolio ahead of realizing the full impact of our planned synergy benefits, along with higher catastrophe losses, which were partially mitigated by a reduced expense ratio. Looking forward, evolving regulatory reforms will be an important factor of our operating landscape over the next 12 months. In Ontario, the July 1st auto reforms, which introduced choice-based accident benefits for consumers, have combined with moderating loss cost trends and improving rate adequacy to support a more stable pricing environment.

11:15 Meanwhile, in Alberta, the industry is preparing to transition to no-fault reforms on January 1st, 2027. Average premiums are expected to decline in the mid-teens range in Innes framework, reflecting lower casualty claims costs resulting from reduced tort-related expenses. While this reform will reduce written premiums in 2027, it should contribute to more favorable and sustainable industry profitability over the long term. Note that we have approximately $300 million of personal auto premium in the province. In personal property on slide 12, we delivered top-line growth of 35.3% in the quarter, including 24.7% from the strong retention of the acquired renewal book.

12:06 Continued unit growth and rates achievement across our broker channel led to an underlying growth contribution of 10.6%, bringing total gross written premiums to $486 million. Our combined ratio for the quarter was 112.1% compared to 83.6% in the third quarter of 2025. This increase was driven by severe weather-related catastrophe losses. Primarily related to the convective storms and flooding in Ontario and Alberta, we climbed by 29 percentage points in the prior year to 32.6%. However, our core accident year claims ratio remained relatively stable. rising only 80 basis points to 51.1% despite the integration of the acquired business.

12:58 Turning to slide 13 and commercial insurance, we delivered top line premium growth of 34.2% to $472 million, inclusive of 30.1% growth from the strong retention of the acquired renewal book. Through disciplined execution, We achieved ongoing pricing and volume increases in small business and specialty lines, which helped mitigate the impact of competitiveness in the large account segment. Our commercial combined ratio for the quarter was 96.1% compared to 88.1% in the third quarter of 2025. This increase was driven primarily by an elevated claims ratio, reflecting severe weather catastrophe losses which increased by 6.3 percentage points to 8.9% in Q3 2026.

13:52 Our core accident year claims ratio rose by 1.9 percentage points to 56.4%, reflecting the expected temporary impact of incorporating the acquired traveler's portfolio prior to the realization of our planned underwriting and claim synergies. These headwinds were partially offset by 60 basis point reduction in our commercial expense ratio to 32.4%, demonstrating our strong operational cost discipline and the initial capture of integration synergies, as well as lower incentive accruals. Turning to slide 14, our operating earnings were supported by meaningful growth in net investment income. At $79.3 million, It increased 46.6% compared to Q3 2025, driven by interest income generated from our larger post-acquisition investment portfolio and proactive trading into higher prevailing yields.

14:54 We maintain our full-year outlook of at least $320 million of net investment income for 2026, which reflects our expectation of a sequential increase in the fourth quarter. Slide 15 illustrates the performance of our national broker platform, which continues to deliver as a key strategic pillar, ranking among the top 10 brokers in Canada. Our distribution income reached $18.7 million in the quarter. Combined with $10.6 million of intercompany commission income, our total broker operating income reached $29.3 million. This represents a 10.2% increase over the prior year, and 17.6% on a year-to-date basis, keeping our national broker platform on track to achieve our full year guidance of approximately 20% growth.

15:50 Of note, this quarter's growth rate was moderated by a particularly strong Q3 2025 comparative period, which had benefited from the specific timing of broker acquisitions. While quarterly broker income can reflect transaction timing fluctuations, We remain confident in our forward-looking trajectory, having closed several acquisitions late in Q3 and into Q4, which should increase the contributions in the coming quarters. The structural strength and resilience of our balance sheet is clearly visible on slide 16. Despite absorbing nearly $400 million in combined pre-tax catastrophe losses and unrealized bond devaluations in the quarter, We have successfully grown our book value per share to $34.53, representing the resilient 3.3% increase from a year ago.

16:44 With total financial capacity remaining robust at nearly $1.2 billion, we are in an enviable capital position to continue funding our organic and inorganic growth plans, support our broker network, and deliver on our capital deployment priorities. With that, I will turn the call back over to Rowan.

17:05 The operational and financial results Folgers walked through demonstrate the structural resilience of our expanded business. We entered this year with a clear mandate to execute on the transformational integration, rapidly secure cost synergies, and protect our underlying underwriting margins. And our progress this quarter demonstrates that we're delivering on those commitments. Our integration success to date validates the business case we established for the travelers transaction, which is expected to deliver a more than 200 basis point improvement in our operating ROE on top of our organic plants. With this powerful accelerator, we are confident in our progress toward our mid-term objective of sustainable mid-teens operating ROE.

17:58 Our disciplined execution of this integration strengthens our operational playbook and increases our conviction as we pursue our goal of building a top three property and casualty insurer in Canada. Underpinning this ambition is our strong structural profitability and capital base, which ensure we are positioned to continue building long-term sustainable value for our shareholders. Holding on our leading digital platforms, we continue to scale our core AI capabilities as a key contributor to loss ratio outperformance and operational efficiency. We are proud to share that our claims and technology teams collaborated to recently deliver DFINITY's first fully agentic AI solution or broker-first nurse of loss. Early results indicate this has delivered a 50% reduction in claims administration effort for broker submitted claims, serving as a powerful proof point of our ability to translate new technology into concrete business value.

19:04 Building on that same commitment, we continue to invest heavily in our claims operations to provide industry-leading support to our brokers and customers in their key moments of truth. Let me add my appreciation to our claims professionals and customer service teams across Canada. The third quarter of 2026 was an active period for severe weather and our teams responded to multiple catastrophe events that impacted many of our communities. Our frontline employees demonstrated exceptional dedication to support our customers and brokers when they need us most. It is their extraordinary effort during these challenging events that defines DFINITY's customer-centric values and operational excellence.

19:49 With that, I'll turn the call back to Dennis.

19:53 Thanks, Rowan. We are now ready to take questions. Thank you. Ladies and gentlemen, if you'd like to ask a question, please press star 1. To retry a question, press star 2. One moment, please, for your first question. Your first question comes from Bart Jarski from RBC Capital Markets. Please go ahead.

20:16 Good morning. Thanks for taking the question. I wanted to start with the lowered industry outlook for commercial. Could you provide more detail on what you're currently seeing and does that lowered outlook contemplate pricing pressure moving to the mid-market to the extent you're seeing any? Thanks.

20:35 Well thanks very much for that Bart. Maybe let me start and then I'll ask Obaid to add a bit of color. I think that we've called out that we think the industry is going to be in the low single digits and that's really no change to the current environment we see because currently the industry is running in the low single digits and we think this is pretty stable. We haven't seen any change over the last couple of quarters to what we expect in the next and so we remind everyone that the market is still a bifurcated market so the large business which you know close to a third of the industry remains competitive and we've explained that before as after multiple years of hard markets there's significant margin in but we're still seeing a lot of competition in the large business as far as the rest you know the small business is stable and continues to be that we've seen no contagion down market We do think that the industry outlook is going to vary by segment and by insurance company.

21:37 Overall, from our perspective, we still believe it's very conducive to the way we shaped our portfolio, what our ambitions are. We have for some time now been deploying our cycle management playbook, which continues to work very effectively for us. We do have a culture of underlying discipline. We have been very active in portfolio shaping and essentially that means avoiding those hypersensitive segments or poor performing segments. We've been very focused on pricing adequacy, using our granular models, risk selection with the specialized underwriters. We spend a lot of time on broker management, mostly ensuring great service to them. appropriate incentives and making sure they're aligned to our underlying appetite so we're still getting good flow of opportunities from them and you might have noticed as well we've been very active for some time now on expense management and that's both claims expense management and OPEC so that we're confident in our plans and our things are going but we are just more reflecting I think what we've kind of current conditions are but let me ask Obaid to add some color to that and how it's affecting our portfolio

22:50 Thank you, Rowan. So just to follow up on what Rowan said, and we've said this before, less than 20% of our portfolio is exposed to the large account segment where competition is most intense. Here we are defending the accounts where profitability is strong and our retentions are fairly strong. Competition is most intense on business coming to the market, so this is where the new business is. We are disciplined in that part of and others. As a result of it, we're winning less new accounts in the large account space and that's impacting the growth in that part of the book. When you move past that 20%, the SME side, we continue to see mid to high single digit pricing and retention levels are very much in line with what we've seen historically. They're very strong.

23:43 We're not seeing any impact of the same level of competition coming in there. When we look at the middle market segment, we're seeing pricing which is low to mid single digits. Again, retentions remain fairly in line with what we've seen historically. And as a result of these two things, we are getting a mix shift where we are growing in exposure and customer base on the smaller accounts, not so much on the larger accounts. And that mix shift is costing us about one or two points in premium growth. Moving further, we've talked about our specialty business. About a third of our portfolio is in the specialty business. We've got maybe 10 verticals in there. Competition varies by vertical. It varies by size of account within the verticals.

24:29 But we try and look at this business as a whole. And as a whole, we're getting about mid to high single digit growth in that segment. and that's really a function of the lower market share we have in that segment as well as many sort of new capabilities we've built organically and now we've gained some net new capabilities out of Travellers and the acquisition. So we don't see this changing either. We think this momentum on the specialty side will continue for us. So now really if I take a step back and I put it all together, Our portfolio construction, what we've built in our digital assets from the small business side, the capabilities we have on the specialty side, we think this will continue to give us momentum to have 2x our performance to the industry in terms of growth. We really don't see that changing.

25:22 Industry is at the low single digits. That doesn't really change our outlook on it.

25:29 Thanks for that. It's a very helpful caller. And then on the Travelers integration, so it looks like we're seeing momentum continuing. You're talking about the strong retention and conversion. Can we just get a maybe mark-to-market update on where you're spending the most time today? You touched on specialty lines capabilities being built out. So just have to get an update there. Thanks.

25:51 Yeah, and look, I think the main message here is that this is a huge undertaking for the organization and it continues to be going very well. We look at the key drivers of, is the retention as we wanted? Absolutely it is. And in fact, they're converging on affinity levels. We look at the conversion which is now in flight as we move them on to our scalable platforms and then we think about you know the synergies that we've shared to the market obviously we updated that last time to 125 million we've now triggered about 45 percent of those and we continue to have a very very strong you know broker support so you know we're well into the integration and it might be useful to kind of hear from Fabi but you know how's it actually going?

26:36 Yeah certainly so from a big picture point of view and I appreciate your question I'd say that we are really pleased with how the conversion of the travel businesses has been progressing this year. Very much in line with Rowan's comments we are getting great support from our broker partners across Canada and that is helping us to achieve our plans retention thresholds both in product lines and in commercial lines as well. As importantly I would say that the loss ratio of the acquired business is coming in very much in line with our expectations as well and that's a function of the detailed pricing segmentation work that we've done across all of our segments. As you can imagine this integration has been a major operational undertaking for us and I could say that we are really pleased We have a close to 1000 of our employees actively involved in this integration.

27:44 We have been executing against the 2500 major integration milestones to keep this program on track and as we disclosed earlier on we've been able to write new business on a combined basis leveraging the new capabilities that we've acquired within a few weeks of closing that gave us a good new business traction gave us an opportunity to expand our value position with our broker partners and then in Q2 we started converting the acquired business out of Ontario. In Q3 we added Ontario and today we are at the point where we have all segments, all product lines being converted over to our underwriting and claims platforms. For all kind of product lines we have detailed process maps in place.

28:33 and typically when you run integration of this size you get to a point where we have a little friction with your broker partners but we don't get any negative feedback from our broker partners. They would say that this has been the best run integration that they've experienced in Canada and they are really pleased and again as I mentioned this allows us to achieve our retention threshold. While we are onboarding the 400,000 individual clients across commercial lines and personal lines that we acquired, we are relying on a comprehensive transition service agreement with Travellers who continue to be excellent integration partners and we have migrated and rationalized over 1,000 external supplier agreements as well. From a business perspective, we have been welcoming over 100 new brokers. We are glad to say that we retained all of them.

29:26 And in line with my earlier comments, we are at the point now where we are converting between 30,000 and 40,000 policies over to our underwriting and claims systems. To do that, we also secured the required regulatory approvals across all provinces in a timely manner so that we could keep our overall conversion on schedule. So far, we have converted about a third of the acquired portfolio and we have a great deal of confidence that we can complete the conversion by the end of 2027. At that point, we will exit the TSA and then decommissioning all of the legacy travel systems as well. As I mentioned, we are really pleased with the integration progress that we've been achieving and I think it's a great proof point on the talented and engaged employees that we have across in our company.

30:20 All of that gives us confidence that we need to achieve our growth guidance of 6.5 million and achieve our enhanced synergy targets of 125 million.

30:30 So, Bob, I think that was a nice comprehensive insight into, you know, this big program. But to me, I think the main message here is we're removing the execution risk and any uncertainty related with the transaction. So, we're feeling really good.

30:43 Great.

30:44 Thank you both. Those are very comprehensive answers. Appreciate it. Your next question comes from Alex Scott from Barclays. Please go ahead.

30:59 I wanted to probe a little bit more on some of the comments on the use of artificial intelligence. I think you mentioned it was benefiting the loss ratio in particular. So just interested in some of the things you're doing, how far they're rolled out, what kind of benefit it's having on claims administration within the loss ratio.

31:18 Sure, happy to do that. I mean, it's a big and obviously focus area of ours and there's a lot of activity that we've been putting in place. Generally, we feel that most of the activity and value seems to be impacting the loss ratio and then obviously the remainder on the expense ratio. you know we think with we've got a really good advantage here on the marketplace there's a couple things driving that for us we've got 30 plus years of digitized and proprietary data we have a great cloud platform the Google platform we've been doing this for well over 10 years we've got over 250 AI and data practitioners. We're currently running an excess of 140 active models and solutions. And the other part that I think is really relevant, it's one thing to have these capabilities, but you've got to get them to the front of the business. And when you think about the Vine platform, the modern technology platforms claims now, as well as what we've got on the personal lines and commercial lines, we're getting this stuff to the front lines.

32:25 you know you ask about a couple examples for you know there's so many in commercial lines you know we've been using it in a number of things including underwriter submission intakes which really helps the productivity the code velocity of our underwriters which will help us you know grow a business in claims you know in my comments I mentioned you know we just launched an agentic agent for first notice of loss we're seeing less about 50 percent effort reduction there as that rolls out We're using it in fraud. On the one hand, it helps our pre-bind quality of business in sonnets. On the other hand, we are getting less claims leakage. We've got tools like document tampering that reduce and identify fraud.

33:11 Certainly appraisals get more accurate. In our contact centers and claims, we've got over 15% of productivity. We have an AI agents assistant. We've got call summarization. And then, of course, on the tech side, it really helps with coding and even replatforming some of our existing kind of systems. So it's pretty deep in the organization, I would say, and being very well adopted. and what we're really focused on is now you put this to work, can you start seeing the measurable impacts? And that's a real focus of ours of making sure actually it does drive more revenue or better attention or less fraud or sharper pricing segmentation, which we believe it is. But there's still a lot of opportunity ahead and I think this is going to be one of our value drivers in the years ahead.

34:09 Got it. Helpful. and my follow-up, I'll stick on the AI topic. I mean, if you look into your crystal ball, how do you see it evolving the distribution of personalized products and do you have anything in the works that'll connect more directly into some of these large language models that might be part of that? Yeah, a couple of things there.

34:36 I think when you think about the potential for disruption, It's very unlikely to impact the commercial business with the complexity there. And so in personal lines where there are some more commoditized or standardized products, we do think that there might be some modest disintermediation. But on the other hand, there's a number of offsets there. I think what we're seeing is the growth of these digitally savvy and AI enabled brokers that actually are growing and taking share. And I think that even within the broker distribution channel, there's just a mixed shift going on from some of the traditional smaller, less sophisticated bricks and mortar brokers. We have definitely seen people using AI for a while now in the price and product discovery phase. It's interesting that still about 40% end up after that research going to brokers.

35:31 And where you do see some of the early movers, we still think it's a limited population and a gradual use of, for example, these personal assistants that you see coming out. So it's not that we don't see any impact. We just think it's manageable. And I think when you think about the implications for DFINITY, the fact we're multi-channeled, you know, certainly gives us a very good position to trade through this. and we also do have a broker platform we've built over the years, a top 10 broker. They tend to have a slightly mix of business and locations that are in some of the smaller communities. Human connections are still very important.

36:18 Advice makes a difference. They themselves are using AI. It's helping their business in the admin heavy world improve their margins. and I think it probably drives more pipeline for the brokers as well. So I think the only comment I may ask Paul to just touch on there is as we think about some of our platforms, how are we linking?

36:43 Yeah, thank you, Rowan. Actually, so really two things. One is we believe we're future-proofed. Our investments that we've made over the last several years to automate our systems to move all of it into the cloud and to connect through APIs allows us therefore to take advantage of these emerging AI capabilities much faster than a company that would have to make those investments. So we did that very consciously and deliberately. and now we're able to take advantage of it. The second comment I would make is despite those capabilities, we do have to be a little cautious around the use of it. And there's been some publication recently around will companies allow agents to access their sites. And so there has to be a balance between Thank you.

37:57 Your next question comes from Brian Meredith from UBS. Please go ahead.

38:03 Yeah, thanks. My first question, I'm just curious with the Alberta reforms, is there any lag between the benefits you're going to see with respect to the, you know, lost cost, you know, benefits and the premium reduction? So maybe an impact on lost races in 2027, or is it rateable?

38:25 Thanks for your question, Brian. It's Paul here. So really just stepping back for a second, the simplest way to explain this is essentially any activity or claim up until that point continues under the old regime. So all the reserving that we've done, all the... We've done the premium we've collected on those accounts, continues to support that business. Essentially what happens on January 1 is a full reset. This is quite unique in one time and what that means is all new accounts and all new claims after January 1 are under the new regime. and the new regime essentially removes a lot of that tort liability out of the system and of course the accompanying premium related to it. So we estimate there's likely a mid-teen impact to top line premiums for the industry and then there's a commensurate reduction in the liabilities.

39:15 From our perspective it is immediate and there's no real lag and we also think that that's going to be a slightly positive impact to the bottom line for us.

39:25 Terrific, very helpful. And then second question, can I talk a little bit about excess capital? I mean, your stock is down a couple of percent year to date, despite some pretty impressive results. How are you thinking about that? I know your leverage ratio is still a little bit high, but you've got more than $700 million of excess capital.

39:49 Yeah, I think, you know, Brian, on that one is, you know, if you go back to, you know, our philosophy around our capital priorities and the first one remains supporting organic growth, which has been big and we see that as great. We keep moving the dividend forward. And then it's M&A. And, you know, as you know, M&A can be a little lumpy. You know, you can't perfectly line these things up. Since we've gone public, we have deployed about a billion dollars of capital into our broker distribution channel. We've spent $3.3 billion on travelers. I think you can see we're active and we're effective. at deploying these, which in both of those examples is a really strong performance out of that. We have a goal of being top three, and part of that goal is to continue outperforming the industry. You heard Obaid talk earlier about commercial lines growing at twice the rate of the industry.

40:44 Thank you very much. Scale increasingly makes a difference. And that commercial market is a bit more complicated now than it was a few years ago. So we definitely think that's the case. When we consider M&A, and really this would be the big mover of capital deployment, We think about our operational readiness, and of course, Travelers is going really well.

41:30 We know there's a regulatory time lag between announcing a deal and getting it done. So we're not on the sidelines. We are active in this. We have a screening process and a prioritization process where we look at the size of the business and the portfolio mix, the quality of their operations, the potential of the synergies, ease of integration, availability, of course. and then our financial capacity. And I think that's where you're getting to is that we have a significant amount of financial capacity you know over a billion dollars and that's before you know any any equity race so you know our view is that we're growing this business organically but we will participate in a consolidating market and you know the timing of that is just you know a little bit difficult to proceed so at this stage that that's kind of still the way we think about our capital deployment and we don't have any other immediate plans for that that excess capital

42:31 Excellent. Appreciate it. Thank you. Your next question comes from Jamie Glorn from National Bank. Please go ahead.

42:42 Yeah, I just wanted to dig in a little bit on investment income. Came in a little bit maybe later than I was expecting. So just curious if there was anything from a portfolio construction standpoint during the quarter. And then looking ahead, with a recently higher interest rate environment, were you able to transact and capture any benefits from that?

43:10 Yeah, thanks, James. Quarter on quarter, we were pretty flat. What I would say, though, is Q1 and Q3 usually are a little lower than the average loan rate because we have some timing of dividend income that really transacts in Q2 and Q4. So not out of line with expectations overall, but you'll see those little dips between the first and third quarters. For the full year, we fully believe we're going to exceed $320 million. and as I mentioned earlier on in the comments, we see a pickup in Q4 from a couple of factors. One is that dividend timing. The second one is trading activity into the high prevailing yields that you just mentioned. So sequentially, we'd see Q4 tick up. We think it'll be the highest individual quarter of the year and we fully expect we're going to be higher than the $320 million for the current year. In terms of the portfolio construction, that is pretty stable.

44:09 but we have been pretty active from a trading perspective and in at the end of Q3 we had about just under 3.6 percent book yields on the overall portfolio at the end of Q3 we were about 20 points higher than that from a market yield perspective so you know the team has been proactive from a trading standpoint our efforts and intent is to try and capture some of that yield so I think right now we feel pretty comfortably positioned that we'll see an increase in that net investment income contribution next year.

44:43 And then on the distribution income side, all in 18% growth, just a little short of the 20% target. The question I'm wondering is, can you get to that 20% target organically today with what you have and what you can see for the fourth quarter? Or does that require some M&A or maybe even recent M&A to sort of hit the tape to get you to that target?

45:15 Yeah, I think we're very confident that we'll be there or thereabouts on that 20% year to date. So two things happening in the quarter, which leads to that comment. Year on year, you know, we looked a little low, but that really is reflection of the timing of M&A in a very strong comparison period. So when we look at the broker platform, obviously there's the organic growth on the pre-existing portfolios. but they're very programmatic in their M&A activity. So we fully anticipate each year that part of that growth target we set is programmatic acquisition activity as opposed to the carriers where it's much more lumpy. We see that continuation of behavior. If you look what's happened this year versus last year, we've deployed about $80 million year to date at the end of September on acquisition activity within the broker platform.

46:09 60 million of that came in Q3 and came towards the end of Q3 so what that tells you is the relative level of new acquisition activity is lower this year at this point of time but there's quite a big contribution in Q3 and actually in October we deployed another 60 million dollars of capital through M&A activity so when we look at that overall year-to-date target the 18% so we've delivered much more commensurate with what we'd expect in Q4. And we do think we'll be there or thereabouts that 20% four-year target. So good momentum, but timing of the M&A activity can cause some individual costly variances.

46:52 And Jim, I think the other point just to add to that timing point, if you just step back, I mean, this is a strategic asset for us. And since we've started this a couple of years ago with the acquisition of McDougall, The premium acquired CAGR is about 30%. There's about 25% CAGR on distribution revenue, and there's about 30% CAGR of operating income. So you could see that whilst there are some lumpiness to the timing, there is good organic growth, there's good M&A, and obviously strong overall growth and strong margins. So we're pretty comfortable, as Phil said, with the trajectory going forward this year and next.

47:36 Yeah, thanks. Yeah, it's clearly a nitpick type question, but just wanted to get that color. And Phil, I just wanted to make sure I heard correctly. The timing of acquisitions you talked about in September and October, that's this year, 2026. We're not referring to last year, right?

47:55 That's correct. When I talk about the 80 million share, that's right. But we were very active last year as well. It's that comparative conversation if you look at Q1Q.

48:07 Yeah, perfect. Thank you. Your next question comes from Tom McKinnon from BMO Capital Markets. Please go ahead.

48:18 Yeah, thanks very much. And good morning here. Just a follow-up question with respect to distribution income here. And Rowan, I like your comments about premium acquired CAGR. As that increases, you end up seeing your distribution income increase. yet I assume a good portion of the premium CAGR that these brokers have is related to personal and personal auto and if we're going to get personal auto premiums not certainly increasing at the same level going forward as a result of reforms that could have certainly an impact on that premium CAGR.

49:03 I do know MacDougall did acquire Dryden, and that was largely an Alberta company. And if you're talking about mid-teens reductions here in personal auto premiums, how does that factor into your projected growth for distribution income?

49:22 Thanks, Tom. I think, you know, as you look at McDougall's, it's really expanded now to almost a full, you know, national brokers. And so they're still more Ontario weighted than they would be Alberta weighted, but you call out a fair point, you know, in Alberta. and I think as we think about the addition of some of these acquisitions, as Phil said, there was a number of deals done late in Q3. We've actually closed two already in Q4. When we factor all of that in, we're pretty comfortable with the growth rates overall, the pluses and the minuses going forward. And the point that you raise on the auto, I think it's important for everyone to understand, this really is kind of... you know a one-time event you know you you have here structural costs that are changing with these reforms and so the market does a one-time product pricing adjustment to that you see that a bit in Ontario it'll be significant in Alberta but outside of that the normal environment the normal cost trends you know on property and on the physical uh damage part of the car is all going to continue so so I think this is just a little bit of a unique slowing for the industry from his current growth rate in 27, and then we think that's going to normalize going forward.

50:39 Overall, we still feel comfortable with that, but yes, that is one of the headwinds that we anticipate and have reflected in our outlook for the broker.

50:49 Have you given a guidance for distribution income for 2027 growth at all?

50:56 We do that in February.

50:57 Yeah, no, we haven't at this point, Tom. We will provide a comprehensive update on our overall financial targets and support and guidance, including distribution income in the February position. But I think what it's fair to say is that we feel pretty comfortable that we've got continued government.

51:17 Okay, thank you. Your next question comes from Munish Garg from CIBC World Market. Please go ahead.

51:28 Yeah, thank you and good morning. So my first question is on personal auto. To look at the underlying personal auto growth is very strong at 15%. So could you please break down the 15% growth for us? How much of that was unit count growth? and is the unit count growth coming from SONET or a particular region within Canada?

51:56 Yeah, perhaps I'll start and then I'll hand it over to Paul and give you some more color. I think when you look at the overall growth for auto, which is very strong in the quarter, as you say, at 38%, that reflects both the retention of the acquired renewal book of travelers and then everything else we group within the underlying growth contribution. So if you look at that split what we're seeing is and seeing very good retention of just the purely acquired back book of travelers. So that's coming on a very good level. It's in the low 80s kind of retention levels. It's very consistent with what we've seen in the DFINITY book. So that's a very good success story in terms of how that business is rolling on.

52:44 when you look at the underlying growth contribution the way we calculate that is it's everything else so that's taking the renewal of the DFINITY book it's taking the new business across the entire expanded platform and it's taking that over the prior year DFINITY comparison so that's how it comes about within there there's a couple of points of facility association growth in the quarter so I'd say there's two to three points there that's more elevated because of the kind of timing of FA. So that's quarterly noise. It bounces around a little bit, but it gives you a perspective that that underlying growth contribution, absent that, is more in that kind of 12% range. Paul, I don't know if you want to give a perspective on just what you're seeing in the underlying overall book business.

53:31 Yeah, thank you, Phil. Just to clarify or add to the FA comment, as Phil said, it is a bit lumpy quarter to quarter as facility association does its work, but we expect that to be net neutral for the full year. So it is a part of our overall performance. Underlying that, as Phil mentioned, there is strong momentum and it's almost exactly half of our growth is unit count. And that's a reflection of the fact that we feel that this is a very favorable environment. We're pursuing share growth. That's an important part of our overall strategy. And we believe we have the platforms and the capability to continue to have outsized performance in that regard. Now, you had asked is it coming specifically from Sonnet versus the broker book of business? And what I will say is that our broker business remains very consistent in terms of how it's growing throughout based upon the capabilities of the Vine system. And as I previously mentioned, Sonnet, we have more moderated growth. It's still a positive growth, a couple of points less than our broker book of business, but that's because we're being very prudent around how quickly we scale that business into the marketplace. Lastly you asked is there a regional split and the reality is we're actually growing units throughout the country.

54:51 We're very very strong on growing the book profitably and we are really seeing consistent growth in almost every jurisdiction. Newfoundland obviously is the newest one. That one we've just gone live with recently so we'll have more to update on that in the future but for now we're very positive about this line.

55:12 Thank you very much. And just one last for me. So just checking with the personal auto. So we look at the outlook for industry. You do call out some variability between different provinces. So apart from Alberta, can you provide some more color on differences in premiums growth and profitability across different regions in Canada?

55:38 Yeah, absolutely. So I would say outside of Alberta and Ontario, the two reform jurisdictions that Rowan had mentioned earlier, there's generally good growth from a rate perspective as the industry is taking rate to cover the underlying trend. Alberta, as you pointed out, is a little bit different. That's going to come with a reset on January 1, but as Rowan mentioned, There are other underlying trends that continue on, such as the physical damage trend. So we'll evaluate that as we go. Ontario's the one remaining one that's a little bit more unique. And maybe it's worth stepping back for a second to explain the situation in Ontario. So if you look back a few years, Ontario was the one that had the most significant COVID lockdown and people were therefore not driving and it was the only province that moved forward with rate returns or rate rebates.

56:34 Unfortunately what happened is in that period of low rate that was right before the really unique inflationary trends and theft trends that occurred globally and particularly in Canada and so in Ontario the province or the industry as a whole was behind rate and so you'll see that over the next few years the province had to take double digit rate or the industry had to take double digit rate to catch the trend. That continued on for several years and then last year the trends came down pretty significantly and the theft trends came down much faster than we expected and what that means is we can't respond that quickly in the marketplace and so there was a bit of excess and many others. The rate pent up in the industry really through the earned profile and so what you'll see over the next few quarters is less rate needing to be taken or written by the industry because the earned is sufficient to cover the trend. So Ontario is in a period of adequacy.

57:36 For us, as I mentioned earlier, that's very good. That means it's a favorable environment. We like the margin that we're getting. We're protecting the margin and we can still grow with significant unit growth. So that's a little bit more unique. We would expect then in the back half of next year for the industry to begin taking additional rates to cover trend.

57:56 Thank you so much. I'll leave it there. And there are no further questions at this time. I will turn the call back over to Dennis Westfall for closing remarks.

58:09 Great, thanks all for those questions. Before we sign off today, I'll turn it back to Rowan for some final thoughts.

58:14 Well, thanks, Dennis. Look, I just want to take a step back for a moment from the quarterly results and just reinforce why we're so confident in the DFINITY trajectory. And I think if you look at where we're at, firstly, the travel integration continues to progress exceptionally well, and we're consistently removing execution risk and uncertainty related to that. You heard from Fabi how well it's going in the percentage of completion. I think the next thing I look at is how well we're delivering on the strong underlying profitability. So despite the expected near-term margin drag of the traveler's portfolio, our underlying core combined ratio is nearly flat compared to last year once cap losses are kind of normalized. And so that's very good news about holding and improving margins.

59:00 And then thirdly, I think, you know, as we look at these underlying metrics, you can see how resilient the company is. And it's a very clear path towards our long term operating order we expansion. We see the traveler synergies continue to earn into our bottom line over the next two years. and as such you know we're very comfortable with that mid-teens operating ROE so it's becoming clearer and clearer for us as we de-risk travelers and continue growing and performing well on the on the core portfolio so we keep executing and are happy with where we got to.

59:34 Thanks Rowan and thanks everyone for participating today. The webcast will be archived on our website for one year. A telephone replay will be available at 2 p.m today until November 13th. A transcript will be made available on our website. Please note that our fourth quarter and year-end results for 2026 will be released on February 11th. That concludes our conference call for today. Thank you and have a great one. Ladies and gentlemen, this concludes today's conference call. You may now disconnect. Thank you.