HSX.LHSX.LLSE
Loading
Hamayou Hussain: Well, good morning, everyone. It's wonderful to see you all, and thank you for joining us. 2025 has been a pivotal year for Hiscox. In May, we set out our strategy going deeper into our retail business and making several important commitments. We're executing on that strategy and delivering on those commitments with pace and energy. Our diversified portfolio is built for this market. Growth is accelerating with premiums up $275 million or 6% year-over-year. This is high-quality profitable growth across each of our businesses, driven by product innovation, expanded distribution and customer growth built on our specialty expertise and technology capabilities. and we're expanding our margins. Our undiscounted combined ratio of 87.8% is the best in a decade, and our record insurance service result is the fifth consecutive year of underwriting earnings growth. And growth is translating into a larger asset base, underpinning a record investment result and contributing to a third consecutive year of record profit before tax. We are delivering excellent returns with a 12% growth in book value per share and an operating RoTE of 21%, materially above our target. This strong performance, continuing momentum and execution of our strategy enables us to reward shareholders through a new $300 million share buyback and a further 20% step-up in the final dividend per share as we announced at the CMD last year. This excellent performance, combined with our diversified portfolio makes our business strongly capital generative. Indeed, over the last 3 years, we have organically generated over 100 points of regulatory capital, enabling us to deploy capital in an unconstrained way to pursue profitable growth in each of our businesses and reward our shareholders with returns of $1.1 billion over the last 3 years. Now turning to our results by segment. Retail added almost $200 million of premium as the pace of growth increased to 6.3%, a continuation of our multiyear acceleration. This growth is broad-based across each of our retail businesses, driven by strong customer growth of 7.5% and crucially not rate dependent. And most importantly, this is profitable growth. The retail undiscounted combined ratio at 92.6% is the strongest since 2016. In London Market, we are successfully navigating a competitive environment, returning to growth through product and distribution innovation, while delivering a combined ratio in the 80s for the sixth consecutive year. And in reinsurance, we selectively deployed additional capital to support 6% growth, mostly in specialty lines. And the quality of our reinsurance business is demonstrated by a combined ratio in the 60s for the third consecutive year. Now let's take a look at how we delivered that growth. And frankly, the pace, energy and innovation of our colleagues has resulted in premiums from growth initiatives increasing fivefold in 2025 compared to the previous year. Supported by the launch of more new products than in the last 5 years and expansion of distribution. As we set out at the CMD, there is a huge structural growth opportunity in Retail. And we're capturing this through entering more segments, launching more products, expanding distribution and more markets. Retail is on a multiyear growth acceleration journey. We grew 4% in 2023, 5% in 2024 and over 6% in 2025 and plan to step up growth to 8% for the full year 2026. We have set the course to achieve double-digit growth in 2028. In London Market, we are leveraging our deep underwriting expertise to expand into new adjacencies while deploying AI augmented technology platforms to access new markets. In reinsurance, we have captured the opportunities of the hard market, increasing our net premium by 180% since 2020. Now the ability to innovate is a crucial part of our Hiscox DNA. It has and will continue to open up new growth opportunities in every part of our business. Now let's take a look at innovation in action at Hiscox. Now what you can see here is a sample of the initiatives we've taken in the last year to expand our business and drive growth. We're executing on these with pace and energy, launching new products at an excellent rate. Some of these you may remember as work in progress at the half year. These have now been launched, and we have refilled the pipeline with new products and opportunities that will begin production in 2026. For instance, in the U.S., one of our largest DPD partners has expanded our access to their agent network. And in the U.K., we followed up on the signing of one of our largest ever distribution deals in 2025 with an even larger opportunity that will begin producing premium in the first half of this year. In France, we successfully launched our new cyber product in the fourth quarter. This will be rolled out across all of retail in due course. These actions and many more are accelerating retail growth and enabling us to capture more of the $317 billion target addressable market. And in big ticket, our innovation is moderating the impact of cycle management in certain lines. During the year, we leveraged our existing technologies to grow into SME cargo and U.S. middle market property. In addition, using our underwriting expertise, we expanded into new adjacencies such as tech E&O and financial institutions. The blend of technology and underwriting expertise gives us the confidence to pursue new opportunities with more initiatives set to appear on this list over the coming periods. Now let's turn to the transformative force that is beginning to reshape our industry. Now with the advent of generative artificial intelligence, we are seeing the beginnings of profound changes in society and our market. The way consumers and small businesses are buying insurance is beginning to evolve. Large language models, LLMs are increasingly a key part of the buying process. Now with our experience, decades experience of providing specialist insurance directly to customers, we have an established competitive advantage from our trusted and distinctive brand to our leading Net Promoter Scores and high-quality service. These objective strengths stand out even more in the world of AI, where agents -- AI agents can evaluate a policy quickly on more than just price. We've been investing in technology for many years, building out our core systems and improving data quality. We have a leading global digital platform for small commercial insurance, now approaching $900 million of premium at almost 900,000 customers. These investments enable us to implement AI tools relatively quickly at a modest cost. We're excited about the efficiency and growth opportunities that AI brings. And we're not standing still. This year, we will begin to roll out new, more powerful customer and broker portals in the U.S. and in Europe. These will enable us to personalize the purchasing journey and help customers identify their insurance needs and simplify and speed up processes for brokers. As of this month, in fact, I think it's today, we are deploying AI agents into our U.S. customer contact centers to create real-time feedback loop for our operations and marketing teams on customer experience and sentiment. And if a customer wants to make a claim, an AI agent will be there to help. We are embracing generative AI for the benefit of our customers, our colleagues and our shareholders, and I believe Hiscox is well positioned to win. Now turning back to today's results. We've delivered on our promises in 2025. Retail has grown 6.3%. This growth will accelerate in 2026, building to 8% for the year before reaching double digits in 2028. Our operating RoTE of 21% is materially above our mid-teens through-the-cycle target. The change program has delivered a P&L benefit in the year of $29 million and is on track to deliver $75 million of benefit in 2026. Paul will provide further details on this. And our shareholders benefit from our growth and earnings with a 20% increase in the final dividend per share and a new $300 million share buyback. With that, I'll now hand over to Paul.
Paul Cooper: Thanks, Aki, and good morning. It's great to be here with you all today presenting another strong set of results. We have achieved high-quality growth across each of our segments with ICWP up $275 million or 5.9% against the backdrop of falling rates, demonstrating the strength of our diversified growth. Importantly, we have delivered excellent profitability alongside this growth. The undiscounted combined ratio of 87.8% drove a record insurance service result of $614 million. The group's profit is supported by the record investment result of $443 million, underpinned by increased AUM following stronger premium growth. Our superb underwriting and investment results have translated into a record profit before tax of $733 million, up 6.9% and delivered an attractive RoTE of 20.9%. This is despite a 2.5% drag from the increase in the effective tax rate. The group's excellent profitability has driven substantial capital generation with a year-end estimated BSCR of 233%. And this is after returning over $400 million of capital over the course of 2025. As a result of our strong capital generation and balance sheet, the Board has ratified the 20% step-up in the final dividend per share announced at the CMD. In addition, we will be returning $300 million to shareholders through a new buyback, resulting in total returns of over $450 million in respect of 2025. Delving into these results a little further, starting with our Retail segment. In line with guidance, Retail ICWP grew by 6.3% in constant currency to over $2.6 billion. This growth has been broad-based across all markets as management actions delivered results. Growth has been accompanied by an improvement in the undiscounted combined ratio to 92.6 partially due to early benefits from the change program. Importantly, retail growth is transforming the shape of the group's earnings profile with retail representing nearly half of the group's PBT, up from just over 40% in 2023. Moving on to London Market. London Market returned to growth with ICWP increasing by 1.6%. In a competitive market, the business benefited from product innovation and opportunities arising from London Market's diverse portfolio. Profitability continues to be strong with an undiscounted combined ratio of 85.9%. This is testament to our underwriting discipline, risk selection and pricing as we navigate the market's micro cycles. Turning to reinsurance. Net ICWP grew by 7.9%, driven by growth in pro rata and specialty lines, including our climate resilience portfolio, mortgage and surety. The quality of our risk selection is demonstrated by an insurance service result of $189 million and an undiscounted combined ratio of 67.4%. Fee income of $109 million is very healthy, above $100 million for the third consecutive year. And we continue to see strong interest in our ILS funds with more than $330 million raised in the last year and a robust pipeline for 2026. ILS AUM on the 1st of January 2026 is $1.5 billion. As we continue to see strong capital inflows from third parties, while managing our own net exposure to property cat perils, the earnings mix between fee income and underwriting will continue to evolve. Moving on to our change program. We're making strong progress. On this slide, you can see examples of achievements against our ambition and some of the actions that will deliver benefits in 2026. We have significantly increased fraud detection rates through new capabilities, representing a real cash saving in 2025. However, given our conservative reserving philosophy, much of the benefit is yet to be recognized in the P&L. We have in-sourced over 100 roles in our Lisbon Tech Hub, enhancing the capabilities that drive our competitive advantage while leveraging the use of a lower-cost location. In 2026, we will build on this, rolling out more centers of excellence and further extending the scope of outsourcing where we benefit from the greater scale that specialist providers, partners provide. In procurement, we have reduced our property footprint and continue to consolidate our suppliers, enabling us to negotiate better terms. Over the coming year, we will double down on this, increasing the number of strategic partnerships and preferred suppliers while better managing demand within the group through improved cost governance. Finally, in technology, we decommissioned 20% of our applications in 2025 while launching new automation tools across the value chain, which will help to drive scale into the business. This will continue in 2026 as we launch new automation tools that will deliver efficiency benefits alongside driving revenue growth. Looking at the benefits. We're on track with our change program and we have achieved a benefit of $29 million at a cost of $24 million. And while we're slightly ahead of our 2025 benefit guidance, there is no change to our targets. We remain on track to deliver a $75 million benefit in 2026 as we optimize processes, sourcing and procurement, fraud detection and recoveries. We expect the cost to achieve to be $75 million, which includes costs associated with in-sourcing and outsourcing, legal expenses and tech implementation costs, including some of the exciting new capabilities that Aki referred to earlier. And these will help to deliver a $200 million P&L benefit in 2028. Let's look at how this is impacting the P&L. Disciplined cost management and savings from our change program means that our underlying expense base has increased by just $6 million. This is despite inflation and changes in variable comp and the investment in growth and technology initiatives highlighted by Aki. This, in turn, is driving improvement in our operating jaws with a 0.8% increase in underlying expenses comparing favorably to a 5% growth in premium in constant currency. Overall, this is very pleasing progress. Now turning to investments. Our record investment result benefited from strong yields and increasing assets under management as growth in the business translated into more assets on the balance sheet. As we go forward, that increase in AUM will help to offset the small reduction in the reinvestment yield to 4%. As such, strong investment returns should continue to provide a tailwind for the group. The quality of the fixed income portfolio remains high with an average credit rating of A, and the business is conservatively positioned on the asset side. Looking at reserves. Our conservative reserving philosophy is unchanged with a risk adjustment of $345 million, representing an increase in the confidence level to 86%, slightly above our target range. And this is despite a healthy level of prior year releases and reflects the point where we are in the cycle, the quality of our underwriting and the conservatism of our reserves. Over time, we expect the confidence level to return to within the 75% to 85% range. The conservative nature of our reserving has enabled us to release $293 million or 7.2% of opening reserves for 2025, continuing our long history of an uninterrupted positive reserve development. All accident years are below the initial estimate and continue to run off favorably. Finally, an update on capital. The group has delivered outstanding organic capital generation of 34 points. This has supported both investment in the business and returns to shareholders of 22 points of capital, resulting in a year-end BSCR of 233%. Following the payment of our final 2025 dividend and our new $300 million share buyback, we have a pro forma BSCR of 211. This compares favorably to our through-the-cycle operating range of 190 to 200, providing us with the flexibility to capture opportunities as they arise in a rapidly changing market. Thanks for listening. And with that, I will now hand over to Jo, who will provide you with an update on underwriting.
Joanne Musselle: Thank you, Paul, and good morning, all. So our underwriting results reflect disciplined cycle management, profitable expansion and a strategic investment in both data and capability to continue to build a balanced and diversified portfolio, which you can see on this next slide. Our retail compound growth is anchored in profitable underwriting, delivering a core of 92.6%. In the U.K., Private Client is up double digits as we continue to benefit from our market-leading expertise. Commercial growth is due to an expanded customer base and a sharper sector focus. In Europe, France and Germany are leading the charge as we continue to go deeper into our chosen segments and deliver new products tailor-made to our customer needs. And in the U.S., Digital Direct is continuing its excellent growth. Momentum in partnership is building and broker once again expanding as we have delivered improved service delivery and a slightly broader appetite. Turning to the London market, where our ability to manage those micro cycles has remained a key differentiator, and we've once again delivered a combined operating ratio in the 80s. So property has seen some growth fueled by a U.S. high net worth portfolio and the tech-enabled expansion into mid-market. And this is offsetting some intentional cycle management in major property and commercial lines. We've seen some modest growth in casualty. We've had some rate tailwinds in general liability and a successful launch of financial institutions and technology E&O. And this is mitigating some declines in cyber and D&O as those markets continue to soften. And then lastly, reinsurance, a slightly softer market in 2025, but still a really favorable market. And despite another year of over $100 billion in industry losses, our risk selection, our robust reserves and a benign second half has enabled us to deliver a core in the 60s. So where are we in the cycle and how favorable is the market? So this next slide, hopefully, a familiar slide to you. So the chart on the left is our rates indexed back to 2018 for our segments. The purple line, which is Retail, is just less sensitive when it comes to the rate cycle. Rates were up in aggregate 2% and pricing across U.K., Europe and the U.S. remains strong. In 2025 for the first year in many saw aggregate rate declines for both London Market and reinsurance, although we remained in an attractive market. So the blue line is our property cat reinsurance rates come down 4%. This moderated as we went through the year as our midyear renewals, particularly those loss affected, attracted some rate increases. Across the whole of the reinsurance segment, rates were down about 5%, but still up 83% since 2018. And we saw a similar story in London Market, a 4% dip in 2025, but still at 67% since 2018. And that softening has continued in 2026. So our January renewals saw London Market come down another 4% and reinsurance down 13%, particularly in the areas of property, cat and retro. So the chart on the right gives you an indication of what we believe that does to the rate adequacy of our portfolios. So as a reminder, adequate means we believe it's adequately priced to deliver a good return in a mean loss environment. Adequate plus means we've got margin in addition and low, still profitable, but just below our target underwriting reserves. And you can see, despite the softening, we believe that much of the portfolio is still really well positioned to deliver a good return. And we benefited from some tailwinds in our own outwards reinsurance purchasing. So mastering changing markets and managing micro cycles is not new to us, and we continue to have many different portfolios in many different parts of the markets. And you can see this on the next slide. So the London Market rate environment is highly nuanced both at a line and a divisional level. And you can see the divisional picture on the right-hand side is quite different to the London Market headline. During this period, casualty rates have declined, whilst property rates have seen significant gains, and we've acted decisively. So during the same period, our average exposure per policy and casualty has reduced by 20%. And more recently, we've added over $100 million of property income. This laser focus on exposure management and profitable expansion has been the key to that consistency in that combined operating ratio. So we've learned from lessons of the past and our enhanced cycle management is really focused on 4 things. Firstly, a forward-looking view of risk, really understanding those inflationary trends, whether they be economic, societal or climate. A market in transition framework. This is a framework that's honed to capture the position of each one of our lines in the market and proactively respond to evolving conditions. Exposure management, we absolutely know -- need to know when to trim when we don't believe we're getting paid to take that risk, but also when to expand when we believe the expected returns justify the exposure. And lastly, new, of course, we want to actively manage the portfolio that we have and seize new opportunities for profitable growth. So this next slide gives you a little bit more information on our market and transition framework. So what you can see here, each bubble represents a line of business in London Market. So this is a proprietary framework. We built it around 10 quantitative type metrics, things like technical index, exposure deductible. And we add to that 5 more subjective metrics on the market. These could be things like broker interaction or terms and conditions. So for London Market, we're monitoring 285 metrics on a quarterly basis, and we have a very similar framework for our reinsurance business. Now each metric has an expectation or a tolerance and flags for investigation if it's outside of that. Now not all investigations will result in underwriting action. Most often when we look, the underwriting action has actually already been taken. But when it is required, responding really quickly is key, and that could be reducing your line size as an example. So in summary, a transitioning market, but a largely attractive market. So unlike our big-ticket businesses that flex with the cycle in Retail, we're looking for compound growth through the cycle, all anchored in consistent profitable loss ratios, and you can see that from the chart on the left-hand side. We've built out a specialist underwriting ecosystem from risk selection through to claims management, all underpinned by investment in brand, technology and capability. Our focus is squarely on customer value. We invest in our segments for the long term. We maximize value through market-leading retention and product penetration. After decades of investments, the majority of our retail customers already benefit from being auto underwritten, but we have ambition to go much further. And lastly, new, we want to deliver new products and services to existing customers, go deeper into our segments to attract new and boldly go into new markets. So as I look forward to 2026, my 3 priorities are clear. Firstly, a relentless focus on managing our portfolio, knowing when to trim, but also knowing when to expand when the outlook is compelling. Turbocharge innovation. We want to find quicker ways to bring new products, new services and expanded appetite to market. And lastly, capability. We want to blend humans with the best humans with advanced technology to really amplify our specialist underwriting expertise. And we want to train our underwriters for skills for the future so they've got data fluency and a practitioner at their core. Thanks very much. I'll now hand back to Aki.
Hamayou Hussain: Thank you very much, Jo. So looking ahead to this year, as a result of the pace, energy and innovation we've generated, this year is positioned to be another really exciting year for Hiscox. Retail growth momentum will continue into 2026, building to 8% for the full year and on track for double digits in 2028. In big ticket, we expect innovation and new opportunities will moderate the impact on growth from our disciplined cycle management activities. And in reinsurance, following strong growth in recent years, in 2026, we expect to maintain our natural catastrophe exposures broadly flat on a net basis, while we are continuing to seek out growth opportunities in specialty classes. And finally, as you've heard from Paul, our change program remains on track to deliver $75 million of P&L benefit this year. So in closing, 2025 has been a pivotal year, a year of record underwriting results record investment results, record profits, and momentum has been building over the last few years and is set to continue. The group's combined ratio is the best in the decade. Retail's margin continues to expand. London Market has delivered a combined ratio in the 60s -- sorry, in the 80s, I wish 60s, 80s for the sixth consecutive year and reinsurance in the 60s for the third consecutive year. And in our change program, we are delivering expense efficiency and a significant build-out of capabilities with more to come. Our operating ROTE of 21% is materially above our through-the-cycle target. And our capital generation has been strong, enabling us to deploy capital in an unconstrained way to pursue high-quality growth in each of our businesses and to reward our shareholders with capital returns of $1.1 billion over the last 3 years. We look forward with confidence and optimism. These are exciting times at Hiscox. Thank you for listening. And now we'll take questions. Okay. Why don't we go right to left. So Shanti?
Shanti Kang: It's Shanti from Bank of America. The first question was just on the retail growth outlook, that step up to 8% in '26. Where is that really being driven from by region? A walk of how to get there from the 6% that you've done this year would be quite helpful. And then I was just looking at the claims ratio in Retail this year, and it looked like that deteriorated a little bit year-on-year based on the restatement. Is there any reason for that deterioration? Is that really on more conservative initial loss picks? That would just be helpful.
Hamayou Hussain: Okay. So kind of taking each of those in turn. In terms of the growth outlook, okay, I think context is important as well. So we've already taken the business from what was 4% growth in 2023 to 5% and then over 6%. And as you say, we're guiding to 8%. This is broad-based growth. There's no one single action that's driving this. It ranges from the effectiveness of our distribution teams and our distribution functions. And as you've heard me say many times before, we are increasingly winning positions on broker panels. We're winning new opportunities, new distribution deals. In fact, the U.K. has been leading the charge across the group on that. In our U.S. business, we're adding more partners. This year or in 2025, we added a further 23 partners. So as those gain traction and build production as well as growth from our existing partners. We're continuing to invest in marketing. In 2025, we increased the investment by 9%. I think we're now at about $109 million. You can expect that to go up by a further 10%. This is a great investment. We get very good returns from the step-up. We have stepped up our product innovation and expansion into adjacencies. And you can see that reflected in the 5x growth from new initiatives. We've turned around the U.S. broker business. That is now growing. So it's a range of different factors that are driving that -- that are achieving that growth. And as I mentioned earlier, and this is not rate dependent. In fact, rates have been going the other way. We have now come off the rate step-up that we were seeing in the Retail business as a result of inflation as inflation has abated. And if you go back to 2023, the rate increase was about 7%. Now the rate increase is 2%. At the same time, the growth has grown from 4% to 6%. You can see what the underlying is doing here. This is a volume-driven growth story here, and it's largely about the effectiveness of the management actions we've deployed over the years. In terms of loss ratio, look, we don't land this on the head of a pin. That is a market-leading loss ratio for the Retail business, we're very pleased with it. Andreas, I know this will and keep going.
Andreas de Groot van Embden: Yes, Andreas van Embden, Peel Hunt. Just on cycle management. It sounds like we're going to continue growing exposures into a softening cycle in the next few years. I just wonder if you take a 3-year view through this planning cycle, what are your assumptions about the increases in capital requirements across the business. Is that going to be a gentle sort of rise over time as you grow exposures or will you, at some point, de-risk that property cat book and will capital requirements come down again? That's the first question. And the second question is on your reserve buffer. You're now at the top end or slightly above the top end of the range. Is this something that will be released in the future? Are you being sort of extra cautious or will inflation eat into those buffers, so it will naturally erode within that 75%, 85% range?
Hamayou Hussain: Okay. Thank you, Andreas. So I think there are kind of a number of parts to that question. In terms of how we expect the big-ticket business to evolve over the next period, I think we've spoken about the fact that our product innovation and expansion into adjacencies will moderate the cycle management activities. I think Jo can provide a little bit more detail on that. In terms of capital requirements, as we expect them to evolve and the reserve buffer, Paul will address that.
Joanne Musselle: Yes. Thanks, Aki. So as I said, we are a disciplined underwriter, you can see that in terms of our track record. So what we didn't say was we're looking to grow exposures, there's lots of lines where actually we have actively and decisively shrunk exposures. So we talked about some of the casualty lines where the rate has been decreasing. We've been actively taking -- reducing our exposure during that time. And as we look forward, we're seeing some softening in our property lines. And clearly, if that continues, we'll trim. So first and foremost, we are a disciplined cycle manager in our big-ticket businesses, albeit we are still in an attractive market today. And obviously, the rate adequacy slide show that in the majority of the portfolios, we still have rate adequacy. So that's -- but I think what we did say is what we've managed to do, particularly in 2025 is we've just mitigated some of that intentional cycle management action by some of the new things that we've been doing. And that's the launches of adjacencies. So we mentioned a couple in casualty. I mentioned the sort of mid-market property expansion as an example. That is offsetting some intentional reduction elsewhere. In casualty, we launched technology E&O. Now we've been a tech E&O writer for a couple of decades across all of our Retail business. It's a real heartland for us. And we launched a new product in our London market business. So this is to capture the slightly larger customers, find their way to London, written on a subscription basis. So that's what we're talking about in terms of that cycle management. Of course, we are a disciplined writer. I always say our job is to make money in the market that's in front of us, not the market that we'd like to have in front of us. So we'll react accordingly, and we're looking for new opportunities to profitably grow. And it's the combination of those 2 things. So it's actually really underpinned that consistency you see particularly in the London market with an 80s combined for the last few years.
Paul Cooper: Yes. Building on that and how that translates into capital. So I think there's kind of 3 drivers. One is market conditions looking ahead of us, the second is the retail business and the third is cat P&L. And I think if you look at sort of consumption over, say, the last 2 years, it started to moderate. Now the reason that started to moderate is we've really held our cat P&Ls constant, but at the same -- and that's off of, obviously, a very high base as rates of strength. And you heard that we've increased our premium income 180% from a capital perspective over the last 5 years. So we sort of hold that constant. But what you've seen is the retail business accelerate in terms of its momentum. And looking forward, we've talked about 8% in 2026 and double digit for 2028. Now clearly, that requires more capital. Retail is the least capital intensive part of the business, but it still requires some capital on the balance sheet to grow. And so what I'd expect is that degree of moderation looking ahead now, clearly, the third dynamic is what happens with market conditions and also what happens about these opportunities that Jo has talked to around innovation, that will dictate whether we sort of need less capital and reduce exposure or actually need more because we're taking advantage of these opportunities. So that's sort of the outlook ahead of us from a capital perspective. I think from a reserving perspective, I think the important aspect around inflation is it's built into our loss picks. So we do have a cautious approach to reserving. We have a cautious approach to our loss picks, and that does obviously generate redundancy coming forward. Now our positioning at 2025 from a year-end perspective has been quite deliberate. We obviously have built on that sort of conservatism that we've talked about by increasing the confidence level. We are at 86% from 83% but we've also increased the level of margin in the reserves. And I think that puts us in a great position in terms of where we are at this point in the cycle. And you're absolutely right, Andreas, that looking prospectively, we've got a range of 75% to 85%. I'd expect us to trend back within that range. And I don't think inflation as we currently see is an issue because it's already built into the loss picks.
Hamayou Hussain: Will?
William Hardcastle: Will Hardcastle, UBS. If I can try and pin you down slightly on one of those answers, Paul. You mentioned the capital consumption. I think it was 13 points in that solvency bridge last year. Just linking it with Andreas' question, is that likely to be a relatively stable number? And I know there's a bit of a range around that? Or is it likely to go more likely down than up next year? Then on the LLM impact into the SME distribution, I guess you touched on it in the conversation, Aki, but I'm really trying to understand whether you -- what are the risks, what are the threats and what are the opportunities for Hiscox to really take advantage and why? And it's really thinking about broker disintermediation by the LLMs.
Hamayou Hussain: Okay. Paul, if you address the capital point, but let me cover the LLM point first. I guess, first and foremost, we are pretty excited about the ability and the prospect of using LLMs and frankly, the emerging world, which is not quite here yet of agentic e-commerce. We have a long track record of investing in technology and being on the front foot, particularly when it comes to that small commercial business segment, which is a heartland for the retail business. And again, if you look at the context, we've been investing in that business in terms of technology, et cetera, for decades. We have a market-leading global platform now that covers 12 countries, U.K., U.S. and Europe, with $900 million of premium flowing through it and serving 900,000 customers roughly, which is highly automated with all the underwriting automated. So in excess of 99% of the risks that flow through that platform are auto underwritten. So we've invested in the technology. We've been ripping out core systems and replacing them with new. We've been cleaning up the data for many, many years. And actually, that puts us into a fantastic position now that with the advent of Gen AI, we can actually build our own or adapt -- adopt rather the AI tooling relatively quickly and for a relatively modest cost. And that's exactly what we've been doing across the business. So we're excited about the efficiencies that this will bring, but we're also really excited about the growth opportunity, the expansion of our reach into our customer -- into our prospective customer base and also the opportunity to develop new products that, frankly, just didn't exist before, and I think that's going to be a real opportunity for us as well. I mentioned earlier that we're deploying AI today, right? So there's things that we've just done. There are things that are in development that we are doing. And what we've done, we're already using AI agents in our marketing analytics. We're using it to triage broker submissions in the U.K., and that's going to be rolled out across the whole of the group. We were first to launch an AI augmented lead underwriting platform in London market. That was the first for Lloyd's. Again, we were able to do that because we've already invested in the tech and the data. The emerging things that we are doing, which are really going to open up the funnel for growth. It will take a bit of time because it does require customer adoption as well. So we have -- I think it's today or yesterday, we've launched AI agents into our U.S. call centers. That will give us, I think, as I mentioned earlier, real-time feedback, immediate feedback to our operations teams on customer sentiment and experience and also feed directly into our ads platform, right, which then dictates how we then market back to those customers. If you think about the strength that we've built up over the last decade, which is having a trusted and distinctive brand, market-leading claims service. We have an NPS score, which is in the 70s and 80s. The market average is materially lower than that. Our world-class customer service, the tailored coverage that we provide, these are all objective strengths, which in the world of AI agents and agentic e-commerce stand out, right? In the old world or -- sorry, in the current world, really, if you go online, the only thing you can really compare on is price. We don't trade on price. In the prospective world, as a new person who's buying insurance for their small business, you can get much more information. And in that world, I think we open up the platform. I think we will stand out much more, and we are readying our platform for the world of agentic e-commerce. As I said, we're in the process of building for deployment later on this year, new, much more powerful portals. These will sit alongside. If you think back about the strategy that we've had, we have an omni-channel distribution approach, right? We are building leading platforms to enable us to access and trade with brokers. We trade with partners and we go direct. This agentic e-commerce channel as it were, certainly for the moment, will just sit alongside depending on customers' preference. So we're pretty excited about it. But a lot of the hard work has been done, and now it's about implementing these new tools and seeing how they're adopted, both internally and externally.
Paul Cooper: Just on consumption, yes, to knock that one off. Yes, so based on the conditions we see ahead of us today, consumption will be lower.
Hamayou Hussain: Ivan?
Ivan Bokhmat: I've got one big AI question and 2 small finance questions, please. So on the big AI question, I'll start with that. I think there's a perception that for reinsurers, the underwriting edge is essentially the moat that can protect you from being disrupted. So I was just wondering if you could maybe provide some of your views on this. And if you think about your data and what's out there in the market for available for underwriting, how much of it is publicly available, like cat models or cyber models or whatever it might be? How much of it is proprietary? And how much of it is unstructured proprietary that you could still tap on, but maybe where you are in that journey versus peers? So that's question one. And then question two, I mean, I've noticed that across your growth initiatives, and this has been a trend for a little while now, you don't really have like AI CapEx, data centers and all that. And I was just wondering what your thoughts on that might be? Is it the next leg for you to expand in? Or is there a reason why you haven't really been pushing there? And the third question is, I mean, on the capital ratio, obviously, you have to 11% now, 13% stress. It gives us 180% post-stress ratio, which I think in the past was like a good guide for how you would manage your capital. Is this still the case? Or any developments there?
Hamayou Hussain: Okay. Thank you for those questions, Ivan. So what's our underwriting edge in reinsurance? I think that's one for Jo. In terms of underwriting appetite then in terms of data centers, et cetera, again, another one for Jo. And Paul, if you want to address the question on capital and how we manage that within the ranges?
Joanne Musselle: Yes. Thanks, Aki. So I think in answer to the question, it is a combination. So what we rely on is, of course, and I talked about it, we, of course, rely on in that reinsurance world, the best external models as an example. We take what's available, but then we blend and we overlay what we call a Hiscox view of risk. And we do that across both our reinsurance and indeed, all of our other insurances. And that is really important, and that is proprietary, where we are utilizing our own proprietary information, our own bespoke data sets, building in things like that forward-looking view of inflation. It's really important for us to get ahead of some of these trends and price forward. So I'd say in terms of the edge, it is a combination. We are utilizing the best external data, but also blending that with our own internal data. And of course, we're using technology, have been for many years in that underwriting process to do 1 of 3 things, either to make us easier to do business with. So take the reinsurance example, how can we consume submissions quicker. Clearly, the advance of technology enables us to consume more submissions in a much shorter time, much better in terms of response time back to, in that instance, brokers or indeed more broadly, customers, we're utilizing it there, absolutely utilizing it to make better decisions. So whether that is ingesting third-party data, make us -- make better underwriting decisions, underwriting of pricing decisions, that's sort of the second area that we're utilizing and clearly making us more efficient. So I'd say it's a combination. It definitely is looking outside and taking the best external information that exists and then blend into our own proprietary data sets. So with regard to data centers, yes, absolutely. I mean, data centers is definitely becoming a significant area. We talk -- there's a lot of talk about it being a structural growth opportunity, and it really is underpinning that digital economy. We're really thoughtful. We're really thoughtful. We have lent into that. We're curious. We've deployed some capacity in both our primary and our London market business and in our reinsurance business. But at the moment, we're thoughtful because one of the significant areas that we need to get a head around is accumulation. And we're also investing at the same time, deploying a little bit of capacity. We're also investing in building our own accumulation model. So we're really clear around where these accumulations lie, and we can actually manage them -- managing them ourselves. So yes, watching it, deploying some capacity, but also thoughtful in terms of accumulation.
Paul Cooper: On capital, at the CMD, we announced our target operating range through the cycle of 190% to 200%. You'd see the 211% on a pro-forma basis is a bit outside that. So sometimes you can expect through the cycle we will be outside it. I think it's a small amount above. I think we've struck the right balance between the increased share buyback that we have announced today of $300 million and retaining the optionality for further opportunities for growth. We are a growth business, if you look at our capital management framework, the first priority is growing the business.
Hamayou Hussain: Okay. Let's keep going along. Abid?
Abid Hussain: It's Abid Hussain from Panmure Liberum. I've got 3 questions. The first one is on the pricing cycle. Just wondering if you could talk to your past experience on previous soft cycles and that move from adequate pricing to inadequate pricing. Is that typically gradual? Or does it happen in a sort of cliff edge moment? And if so, are you looking forward, are you sort of seeing potentially any cliff edges on any key lines of business, so that's the first question. The second one, just coming back on the reserving philosophy. So you're reserving now at 86% above the 75% to 85% confidence interval that you set yourself as a target. And it sounds like you're saying you're just being conservative because pricing is softening. Just wondering if there were indeed any areas where you saw loss picks deteriorating, any sort of concerns at all? Or is it just genuinely just being conservative? And then just sort of how quickly would you expect yourselves to trend back to around 80%. So that's the second one. And then just finally, very quickly, the final question on M&A. Are there any areas where you benefit from participating in M&A? So I'm thinking really sort of adding new capability, new sort of product sets in adjacent areas to help you accelerate growth in adjacent areas.
Hamayou Hussain: Okay. Thank you, Abid. So in terms of the evolution of the pricing cycle, Jo will take that. In terms of reserving, Paul will provide commentary. In terms of M&A, I guess the first thing to say for our business, as you can see from the results today and from previous years and the diversification within our portfolio is we don't need M&A for growth. We have a fantastic retail franchise, where I think last year, we set out the extraordinary growth opportunity. And what you can see is over the years, we are accelerating the pace at which we're capturing that opportunity, and we're very confident and optimistic, frankly, about getting to 8% in 2026 and extending that up to double digits in 2028. And in our big-ticket business, again, we've demonstrated we are leading class in terms of cycle management. At the same time, we are -- we've stepped up the product innovation, and we are expanding into adjacent classes to moderate the impact of cycle management. Now again, if you look at the history, we're approaching $5 billion of premium. That is almost exclusively organic growth. That is the predominant form of growth that we will achieve. But what you also saw from 2025 is where there's a strong strategic rationale and the financial metrics make sense, we will consider small bolt-ons. Of course, we purchased a very small entity called Lokky in Italy, which we closed in the second half of last year. That gave us a toehold into the country. Frankly, no premium, but it gave us a system, and it's given us 23 people who understand the local market. It was a pretty new start-up. And we are now consolidating that and that we will move forward from there. Pleasingly, we are getting premium in 2026. And then we also deepened our presence in the U.S. where we made, again, a very small acquisition. And just building on your point, Abid, that did give us access to a couple of classes of business that were on our to-do list, but it's given us quality underwriters, some engineering capability and access to life sciences and tech start-ups. And it's also given us the beginnings of a tech platform for our broker intermediated channel as well. Over to Jo on the pricing cycle.
Joanne Musselle: Thanks, Aki. And maybe if we can just bring up that pricing chart because I think it's a helpful backdrop. I'm not going to give any predictions on the pricing cycle going forward, but just maybe just some observations on the cycle that we've already been in. I think this has been a very different pricing -- a hard market or hardening market than we've had historically. I think if you look at that slide, I mean, we've had gradual increases over many, many years across different lines. And I think that's because it's been driven by lots of different things. So it's not just been driven by significant cat activity. It's been driven by lots of things, whether it be low interest rates, whether it's high inflation, geopolitical uncertainty, emerging risk, climate change. There have been so many different factors that have driven this current cycle that it's been really, really prolonged. So it's difficult to see one thing disappearing and the market changing overnight. I think the other thing about this cycle, which has been very unusual is it was actually primary insurance led. So normally, cycles are reinsurance rates led, reinsurance rates go up and therefore, you have to put your primary rates up. Actually, you can see that red line, which is our London market lines. I mean, they moved significantly quicker than the blue line, which is property. And actually, during that early period, '18, '19, '20, I mean, we were calling for a harder market in reinsurance because we just didn't believe we were getting paid to take the risk. And so we were actually very vocal in terms of that. The other thing on the red line, and I showed you with the sort of underneath is that's an aggregate view. What actually was happening with those early rate rises was casualty. So casualty was the early rate rises. Casualty has now softened, but rates went up 200%, 300% for some lines, and now they're moderating. Property lines really started to move in sort of 2023. And I think the other really important thing about rating is what you can't see on this slide is terms and conditions. We all talk about the rates going up or down. We talk about rate adequacy, but actually terms and conditions are really significant. So the biggest driver of the '23 blue line, yes, of course, rates went up 30%, 40%. But actually, terms and conditions materially changed, particularly attachment points in reinsurance and terms and conditions tighter around the coverage and those have largely been maintained. So when we look back at this softer part of the cycle as in '26, where rates have come off, actually, it was a price-led softening. Terms and conditions, attachment points have largely maintained, which is why there's a vast majority of that. So I talked about it being a really active year, over $100 billion, $120 billion of industry losses in 2025, but a lot of them didn't make their way to the reinsurance because of that attachment point. So yes, no predictions for the future other than to say it's difficult because it's being driven by so many different things. I can't think of if one thing changed overnight that obviously, the cycle would dramatically change in one go.
Paul Cooper: Its a good segue across to the reserving. I think -- so what I'd say is and what we said consistently is our conservative reserving approach remains the same. So it's unchanged. We have a prudent best estimate, and we've built upon it. I think the important point for 2025 is we're coming at this from a position of strength, the increase in the margin and the increase in the confidence level to 86%. And that really builds on what Jo has just said. We're coming at this from a point where we've got high-quality underwriting. I mean, look at the loss ratios that we've delivered across each of our business segments. So the quality of the underwriting, the diversity of the portfolio enables us to do what we've done in 2025. I think in terms of the pace of the -- getting back within the range, I'm not going to guide to that, but we will be back within it.
Hamayou Hussain: Just to add to Paul's point, if you flip back to the slide which shows the reserve releases, where you can see we're in a, I guess, in a fantastic position where you've seen stronger reserve releases predicated on, frankly, every accident year seeing a positive trend and at the same time, increasing reserve redundancy. And that's something just to kind of factor in as a package. That's what you're seeing here. Daniel?
Daniel Wilson-Omordia: Daniel, Morgan Stanley. Encouraging to see the change program coming through as expected this year. I'm just wondering the actions you put through this year, do you see them as quick wins or easier than the actions to follow from here? Or is there any -- another way to phrase the question, is there anything that's been harder to achieve this year than you expected or anything that's coming up that you think will be harder to achieve than what you put through this year?
Hamayou Hussain: Okay. Paul will cover kind of the detail of that. Let me just give you a kind of overarching comment. The overall program, I think we laid out the categories last year, is tech rationalization, capability buildup, procurement and operational excellence. The program is underpinned by tens of initiatives. There's no one single initiative that's going to kind of drive the savings. And reality is not everything is going to work. But that's kind of factored into the number of listings we have, which if they all work, the sales will be a little bit more than what we set out. So there's some contingency built into that, but I'll let Paul get to the meat of the issue.
Paul Cooper: Yes, absolutely. Thanks. So I think the important thing to bear in mind is what we're trying to achieve. So it is all about really driving scale, improving productivity across the business and the $200 million falls out of the back of that. If you look at what we've done for 2025, the $29 million gives us a really good baseline going into 2026, and we've got a clear line of sight of that $75 million that we'll deliver by the end of this year. There are, of course, some quick wins within this. So setting up a procurement function is one aspect where you can renegotiate some contracts. I mean, I say it's easy, but there's obviously a lot of work in understanding how you get to that point. But I'd say to Aki's point, the number of initiatives that we've got on and the strong sponsorship and the program management around this gives us strong confidence in those areas. So we talked about the benefits and the visibility that we're seeing around, say, fraud and recovery, we have in-sourced as you can see there, more than 100 roles to Lisbon that is at a lower cost. So that is already sort of underway. We're sort of in the middle of outsourcing since certain components. And again, good line of sight on track in terms of that component. So I'd say the program is well established. You can see the areas that we are tackling. It will give us a business that is much, much more scalable than it is today.
Hamayou Hussain: James?
James Shuck: It's James Shuck from Citi. I just wanted to ask about the Google Cloud relationship. It's a multiyear relationship and up to this point, it's really been focused on kind of efficiency gains and underwriting. With the pace of change that we're seeing, it's not clear to me what else they can bring to the table, the larger language models that are emerging, whether it's agentic AI. Since you kind of started that agreement, sort of what are your views on how far that relationship can develop and what else can they bring to the table? We start to use unstructured external data? Where else can it be applied to? That's the first question. And secondly, probably the only accounting question today. But on Slide 51, just interested in the reinsurance receivables, which remain very elevated. I presume some of that is COVID-related. In which case, I'm kind of wondering at this point why we haven't reverted back down to the 10% average that we've seen prior to COVID? If we did see that 15% reinsurance recoverable come back down to the 10%, does that have any implications for the solvency?
Hamayou Hussain: Okay. So I think the accounting one is directed to you, Paul. So in terms of Google Cloud, et cetera, look, we have strong and deep relationships with a number of, I guess, leading software and cloud companies, including Microsoft and Google. Look, they -- those partnerships extend to a range of different factors. So firstly, we have a lot of our applications and software on the cloud. And I think with the advent of gen AI and agentic e-commerce, et cetera, I don't think that's going to change. Those are facilities that frankly, those 2 companies and others invest billions and billions of dollars in, in terms of making sure they're high-tech secure, et cetera. Where else do we use the skills of those companies? Those organizations have tens of thousands, if not hundreds of thousand software engineers. And what they can help us do is accelerate the journey that we're on. Now what do we bring to the party? I said -- the thing that we bring to the party are kind of 3 things. One, we have invested significantly in our technology over the years. This is not something new to us. It's already within the P&L. You can see it. We have spent years gradually cleaning up our data. It's never perfect, but it's in pretty good condition. And the third thing is ambition and culture. So we have a culture that's a business builder culture. So we're looking for new opportunities. We're continuously experimenting. So we use the state-of-the-art AI tooling these days that they are bringing, but we already have a system where we can integrate it and build it and start to develop real use cases within our business. So for instance, in our London market business, they're using, was it Google X, which is, again, one of the divisions within the Google business. And we're using some of the technology there to help us underwrite some of the risks in the U.S. and the property risks in the U.S. with some really, what we think is high-quality, very granular data with a very long history. We're using these organizations to help build some of the base technology for the new powerful portals. Now once we build those, we can do a lot of things ourselves. So that partnership, I think, will continue. The shape of it, of course, evolves over time. But the key thing they bring to us is capability and acceleration of our own ambitions, which we can then amplify with our own capabilities.
Paul Cooper: Yes. And then I think on reinsurance recoveries, I think it's sort of multifaceted. I think the first point is around actual reinsurance collections that are COVID related have gone very, very well. We're very happy with that perspective. I think what's happening and what you can see in terms of the recovery is versus, let's say, 10 years ago is book mix. So one is it's going to be much more shorter tail business 10 years ago than it is today. But also think about the re and -- well, now re-mix, so the third-party capital is obviously greater than it was 10 years ago, and therefore, you've got a natural level of additional recoveries on the balance sheet that you'd have a decade ago. So I think that's that in terms of implications for solvency I mean as that comes down, obviously, the credit risk charge comes down. It's pretty modest in terms of our overall sort of capital. It's not a big driver at all, but clearly, there will be a modest benefit as that comes down.
Hamayou Hussain: Okay. Vash?
Vash Gosalia: This is Vash Gosalia from Goldman Sachs. I have 2 questions. One on the retail business. So you've announced or you've delivered 6.3% constant currency growth in '25. But at the same time, you've had benefit on the rate 2% and then policy count of growth of 7.5%. So could you just help us square those numbers as to -- and I'm guessing the difference comes from mix shift, but then where exactly or which product line is it that you grew in or what geography and maybe how are each different from the other? That's the first one. And the second one, just on reserves again. Trying -- so honestly, we were a bit surprised by the reserve release that we saw in the second half. So could you unpack as to where those reserve release have come from, either accident years or any particular events that you saw improve?
Hamayou Hussain: Okay. So Paul will comment on the reserve releases. In terms of retail, I think you hit the nail on the head. It is entirely mix. So yes, we did receive -- we did see a 2% rate accretion across the retail portfolio and 7.5% increase in policy count within the 2 big kind of segments are the digitally traded business, so largely direct and through partners. There, the average premium is kind of $1,000 or slightly less. That is simply growing faster and therefore, adding more policy count than the broker business. I think as you would expect, healthy growth in both, but the digital platform is growing a little bit faster.
Paul Cooper: Yes, just in terms of reserving H2, it was basically all years, you could see actually on the chart, all years and all segments, so really across the business. I think it comes back and we can't state enough that this is a manifestation of conservative reserving -- conservative loss picks. So if you're strong on the way in, clearly, you're going to be strong on the way out from a redundancy perspective, and you can see that in all of those years trending down. And Aki is right, you sort of bear in mind that point about strong releases are a manifestation of increasing redundancy.
Hamayou Hussain: Okay. Ben and then Kamran.
Benjamin Cohen: Ben Cohen, RBC. I had 2 related questions. Firstly, could you say how much kind of good fortune was in the result in the second half of the year because that's quite hard to unpack? And secondly, when we look at the rate declines that you've announced for January renewals, how should we think about that in terms of -- how that's likely to feed through into the combined ratio over the next couple of years?
Hamayou Hussain: Okay. In terms of good fortune, well, we all need some, I think. And I think Jo will kind of provide a bit of commentary on that. I guess my overarching comment is we've not received any more good fortune than anybody else, so we're very pleased with the outcome, but Jo will comment on that. In terms of rate declines and how that might impact the combined ratios and so on. Let me kind of just kind of deal with that. Again, just for completeness, retail business, we continue to forecast 8% growth and a combined ratio within the 89% to 94% range and with a gradual improvement within that range as operating leverage and the efficiency program continues to deliver. In terms of our big-ticket business, look, it's -- the eventual combined ratio will be a factor of many, many things. I think the key thing I would ask just kind of bear in mind is if you go back to Jo's slide on rates and the quality of the portfolio, the majority of the portfolio, both for reinsurance and London market is in a very, very good place. So -- and therefore, the potential for strong earnings growth or earnings in 2026 remains pretty high.
Joanne Musselle: Yes. Thanks, Aki. So absolutely, I think when we look at the year as a whole, there was still $120 billion of industry losses. We started January with the really tragic events in California. We ourselves reserved $170 million for that event. Majority of that was in our reinsurance. So of course, when we talk about the sort of benign second half, yes, absolutely, that particularly the North American wind season was more benign. And so looking at the totality of the year, it was still a pretty active year. I think the thing that I always look at, though, is the underlying because the wind can blow or not. And clearly, we respond. But actually, it's the underlying health of the portfolio. And so looking at the attritional loss ratio, looking at the risk loss ratio. And across all of our segments, whether that's London market reinsurance and indeed retail, all within expectation. And that for me is the real health of the portfolio is that attritional loss ratio. So yes, pretty pleased with that underlying claims performance being within expectation.
Hamayou Hussain: Thank you, Jo. And Kamran.
Kamran Hossain: It's Kamran Hossain from JPMorgan. First question is on retail. So clearly, kind of 9 months into the new strategy, the new plan, things seem to be going very well. Just trying to work out whether actually your historic kind of retail combined ratio range now probably looks quite conservative. If I think of the tailwinds you've got this year seems to have gone quite well. You're clearly very excited about the potential benefits from AI. You probably should have taken a point off that range anyway for DirectAsia last year. If I assume a lot of the expense savings come into that, it feels like the historic range seems a little bit cautious. You're 9 months in, so I understand that. So just interested in whether you feel kind of more or less confident on delivering maybe outperforming that number at some stage. The second question is on share buyback versus dividend. Clearly, the step-up in the buyback was great. I think it reflects the confidence you have in the business. At some stage, do you expect to change the mix between dividend and buyback? Because at the moment, I think it's not unlike peers, but at the moment, the buyback is quite a lot bigger than the dividend. And one last question. I know we talked about AI and data centers. We didn't talk about data centers in space, but that's probably for another day. But what's the -- there's clearly going to be product demand for AI errors, admissions, hallucinations. What are you seeing in the market for that at the moment?
Hamayou Hussain: Okay. Very good. Thank you, Kamran. So in terms of underwriting data centers in space and AI hallucinations, et cetera, and how we deal with it from an underwriting perspective, Jo will cover that. In terms of share buybacks versus dividend, Paul will cover some of the detail. But suffice to say, I think certainly for the moment, we are very happy. And I think we -- again, we -- this is all about balance. I think we're striking the right balance in the form and quantum of capital return that we're providing to shareholders and balancing that against also the investment that we're putting into the business for both near- and long-term growth. In terms of the retail core, the guidance is 89% to 94%. We expect to improve within that range. We have ideas where we have been at the upper end of that range. We are providing guidance that we expect over the next few years that we will edge towards the lower end of that range as the business continues to grow and deliver operating leverage and the expense efficiency program and the build-out of capabilities that Paul has laid out delivers. But why don't we go to Jo first on data centers in space. And then Paul, any more color you want to add to that.
Joanne Musselle: Yes, absolutely. I think I'll focus on the AI part.
Hamayou Hussain: Well, that was the core of the question.
Joanne Musselle: Look, we talked a lot today about our own use of AI and maybe our customers' use of AI. But just to be clear, we have just as much thought going into how our customers are using AI and that's going to change the nature of the risks that we insure. So this absolutely is an emerging risk. There's going to be some areas of risk that actually gets better because some of it is still driven by fat finger and actually with an AI that is more consistent in terms of decision-making, maybe some of those errors and emissions actually improve. But there's definitely new areas of risk for sure. And we're being really thoughtful about that. Certainly, from our point of view, we're not going down the route of blanket exclusions. We're being really thoughtful around the risks that they present, understanding those risks and then indeed accommodating those risks, either pricing for them or providing sort of affirmative coverage. So a good example would be in our U.K. portfolio and our technology. We were one of the first to confirm affirmative AI coverage within that policy. I think the other area that we think about is not just the risk, but actually the opportunity. So we are an insurer, a specialty insurer for emerging economies, for new economies. There's a lot of people. There's a lot of investment in AI and data centers and that attached to this digital world that all need insurance. And we're really well placed to be able to provide insurance for the consultant who happens to be in that AI world. So we're also thinking about it from an opportunity point of view. How do we understand the risk, how do we develop our own products and services to help our customers with that risk and then also how do we broaden our appetite to capture some of this more new economy in terms of their own insurance needs. But yes, a lot going on, on that space internally.
Paul Cooper: Yes. Thanks, Jo. And so the nature form structure of capital returns fits squarely within the capital management framework. So we will prioritize growth. We'll maintain a strong balance sheet. We'll have a progressive dividend. Now you've seen that we've increased our final dividend per share 20% in each of the last 2 years and then have a progressive dividend thereafter. When we've done all of that, then the surplus that's left after that will be returned to shareholders, and that remains the condition.
Hamayou Hussain: Okay. Chris?
Chris Hartwell: Chris Hartwell from Autonomous. Just 2 very quick questions, hopefully. First of all, just on the recent reorganization within Hiscox Re, I was wondering if you can talk about what advantages you think that brings? And in particular, on Hiscox Capital Partners, where would you like to see the fee element of Re going over the next few years and particularly if it's the right time or a good time in the cycle to be doing that? And then it's probably my lack of understanding or lack of knowledge rather, just on tax and Bermuda. A lot of your Bermuda peers have been sort of talking about the tax credits that they will accrue from the recent tax reforms in Bermuda. And I guess sort of 2 parts to the question. First of all, if you could help me understand what is your, I guess, on island expenses or headcount or something where I could sort of think about that? And if there's anything you can do to to really take advantage of that?
Hamayou Hussain: Okay. In terms of Bermuda tax, Paul will cover that. In terms of Hiscox Re and the sort of reorganization to create Hiscox Capital Partners. Look, as you know, we've had a long-term strategy using third-party capital that wants to access, frankly, the fantastic underwriting capability of our Hiscox reinsurance business. And we've had a number of different sort of verticals. We've had traditional capital in the form of quota share providers, partners rather. We created ILS funds just over sort of 10 years ago, and those have evolved. We have a number of ILS funds with different sort of risk levels. We have an SPV. We have sidecars. We've also then expanded into cat bond fund capabilities. And frankly, the Re and ILS was a nomenclature, which no longer describes what we actually do. It is much more mature and much more sophisticated in terms of the different capital basis that we're managing. And that's a reason for -- first reason for kind of using the new nomenclature. And in terms of -- at this point in the cycle, we are -- frankly, last year and this year, we have seen increased interest in third-party capital coming in to benefit from our underwriting. I think you heard from Paul earlier, the AUM, the one thing we quote, which is ILS AUM has increased from, I think, $1.4 billion at the start of last year to $1.5 billion at the start of this year, albeit that deployable capital has gone up a little bit more because we had some outflows and then some new money coming in. In terms of fees, again, as you heard from Paul, the last 3 years of fees have been in excess of $100 million. So a nice contributor to the reinsurance business and to the overall group. The fees are structured essentially, as you can imagine, two-fold. So you have a fixed component and you have a profit commission component. And over the last few years, because of the underwriting results, the profit commission component has increased quite significantly, getting us to over $100 million. What we have done actually over the last couple of years is also gradually restructured some of those fees. So now the majority are fixed. In terms of where that fee income will go, well, there's 2 major drivers. One is the quantum of third-party capital that we're able to deploy. And I think that is going to grow. So that will kind of push the fee income up, but then it's down to the actual results. Whilst the majority is now fixed versus PC, profit commission. The PC is still pretty significant, and that will be determined by the outcome of in-year results. Paul ?
Paul Cooper: So yes, the Bermuda-based tax credits, I mean, they're small, they're sort of single-digit millions. They're absolutely dwarfed by the introduction of the global minimum tax this year. And you can see that our tax rate has gone from 8.5% to like 17.6%, so that's a big uplift. What can we do more in order to sort of maximize that benefit? Essentially employ more people on Ireland that don't need a work permit. That that's the sort of driver that will trigger more benefits. The reality of it is, it's caped at around 150 people. So there is a limit to sort of how much additional benefit you can get out of that. That's the biggest driver for it.
Hamayou Hussain: Okay. I think we're done. So guys, thank you very much. This is a time of change, right? I think it's time for the nimble and the bold and those who can really turn imaginative ideas into operational reality. And I think that describes the culture and capabilities at Hiscox. These are really exciting times for us. So thank you very much.