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Operator: Hello, and thank you for standing by. Welcome to QBE Fiscal Year 2025 Results Conference Call. [Operator Instructions] I would now like to hand the conference over to Andrew Horton, Group Chief Financial Officer (sic) [ Chief Executive Officer]. Sir, you may begin.
Andrew Horton: Good morning, everyone, and let's begin. I'm here with Chris Killourhy, our new group CFO. Hopefully, you've had a chance to take a look at our release this morning. We've had a great year with an ROE just shy of 20%. And we're very proud of these results. Before we begin, I'll start by acknowledging the traditional owners of the many lands on which we meet today. For me, this is the Gadigal lands of the Eora Nation and recognize their continuing connection to land, waters and culture. I pay my respects to the elders past and present, and I extend this respect to any First Nations people joining us today. Moving to Slide 4 with a snapshot of our results. This is a great summary of our performance. We exceeded all our key guidance and targets this year. Headline GWP growth picked up to 7% and tracked ahead of our guidance for mid-single-digit growth. We beat our combined ratio guidance again this year with an excellent result of 91.9%. Our catastrophe experience and an improvement in our crop business drove the majority of the upside relative to the 92.5% we reiterated in November. Profitability is attractive across the majority of portfolios, and we're confident of sustaining strong underwriting performance. We had an exceptional investment result this year. Our high-quality investment portfolio returned 4.9%, driving another record year of income. Collectively, both post-tax profit of USD 2.1 billion and earnings per share were up around 25% for the year. And our return on equity at around 20% is excellent. Capital improved to 1.87x and remains comfortably above our targets. This leaves us with valuable flexibility to support growth alongside active capital management. In November, we announced our first buyback in several years and we wasted no time in getting started through late December. The final dividend of $0.78 takes a full year dividend to $1.09, which is a 50% payout. It's clear the business is in fantastic health with strength across the board from growth to underwriting investments to capital. Moving on to Slide 5. This is a simple summary of our progress in recent years. It's been roughly 4 years since we refreshed our strategy in late 2021. Since then, we've executed well, driving steady improvement in both financial performance and also the key metrics we track around people, culture and customer. This year, we've extended a strong and consistent track record of growth. Underlying organic volume growth continued at 7%, and we have a business that can confidently sustain this trend. We have strong messages on catastrophe costs and reserving. This year, catastrophe costs were $400 million below budget, marking the third consecutive year below allowance. These have not been light cat years by any means, with '23 and '24 amongst the costliest years on record for the industry. And the $130 billion of insured losses in 2025 was only modestly below last year. I'd also remind you that these aggregate figures mask the fact that the insurance industry is picking up a greater share of industry losses as reinsurers have moved further away from the action. We had a favorable reserve development this year, and we've spoken about our confidence in more stable and predictable reserving outcomes. Piecing these elements together, the end outcome is a simple picture. Our combined operating ratio steadily improved, volatility is down and ROE is up. This is driving strong returns for shareholders. Our TSR is roughly double the local market since we launched our strategy, and we see great opportunity ahead. Before passing to Chris to unpack the results in more detail, for the next few moments, I want to take a step back and share how we're thinking about performance over the medium term. So turning to Slide 6. This is a summary of how we think about the industry outlook and the 5 medium-term aspirations since we have for QBE. The audience -- this audience will appreciate the increasing complexity in the world, which is resulting in a risk landscape for our customers, which is highly complex. Risk awareness is elevated and the role commercial P&C has to play has never been more important. With this complexity, the industry is needed to become more mature and sophisticated, but ultimately, those in the industry, you truly understand risk, plus of scale, diversified operations are going to be in the driver's seat over coming years. We have great breadth and diversification in the business with capacity to deploy across all our key markets, spanning insurance and reinsurance. I do think this point is underappreciated, but is going to become more obvious and valued asset for QBE as we continue to execute around these aspirations. Delivering durable growth while sustaining strong margins and returns. So turning to Slide 7 on growth. The great breadth in our portfolio means there will always be classes we can grow. Looking out over the medium term, there are 3 overarching pillars to how we think about growth. Firstly, we remain in supportive market conditions. While rates are softening in parts of the portfolio, this is coming from a starting point of very strong rate adequacy. As we look to 2026, over 90% of our portfolio is expected to be at or above rate adequacy, defined by the pricing we need to achieve target returns. This foundation of strong and broadly distributed profitability is an excellent starting point as we look to grow the business. This picture may not be present every year, though with a diversified business, we'll always have flexibility to navigate various product cycles. Touching on some of the structural opportunities over the coming decade. Many of the global investment megatrends on this graphic will give rise to new risks and in some cases, rapid growth in insurance value pools. We have broad expertise across most specialty and commercial lines with leading underwriters and strong relationships. It's hard for many in the market to match our capacity to deploy collaboratively across 3 divisions, multiple classes of business covering both insurance and reinsurance. We'll continue to work with our major trading partners to provide innovative solutions and position into these fastest-growing economic megatrends. I'll leave you with a handful of data points. We have a leading energy and renewables presence who truly shine when brokers are looking for innovation. Investment in clean energy will be substantial, resulting in insurance premiums in the tens of billions of dollars. We're finding our strong position in these segments dovetail nicely into the growing energy requirements supporting artificial intelligence. Alongside this, the construction of data centers will drive significant growth in premium across multiple classes over the next few years. And as the world continues to digitize, cybersecurity moves higher as a risk for companies of all sizes, while AI liability will be of increasing focus. Cyber premiums around $15 billion today are expected to increase towards $30 billion at the end of this decade. Growing mobility demands will result in more boats, planes and trucks, while infrastructure investments support growing and urbanizing populations will be substantial. So plenty of areas where premium growth will substantially outpace the general economy, and we're well placed to capture a sensible share in the context of a well-balanced portfolio. The final pillar speaks to some topical trends in the industry. Firstly, surrounding the structural increase in market facilitization. We have a leading portfolio solutions franchise, which has been around for roughly 2 decades. We've seen and participated in the complete journey of this burgeoning market and learned a lot along the way. Today, our Portfolio Solutions team manage about 20 different facilities, and we lead two of the world's largest. Facilitization is only going to increase as it represents a more efficient option for the customer and broker and if structured correctly, strong performance for the carrier. In and around each of the investment megatrends just touched on, there are facilities already being developed. And as a market leader, we'll get the first look. As more business gets facilitized, it will come at the expense of those without a strong market proposition or genuine underwriting expertise. This will ultimately consolidate capacity toward market leaders. Finally, on AI, we continue to build, deploy and partner to enhance many aspects of our business. AI will allow us to boost underwriter productivity, unlock sharper risk insights and become a more efficient and effective business. We have a significant amount of proprietary data and market insights, which have been built through market-leading franchises in operation for many decades. AI can help us to better unlock and leverage these data assets and further enhance our market position. So let's turn to Slide 8. This slide brings many of these points together, detailing our new medium-term outlook. Our financial outlook has been primarily based around a single year ahead with both premium growth and the combined ratio. With where we stand today, having restored performance and pivoted the business as an organization, our strategic focus is much longer dated. The quality of our earnings is substantially improved with better breadth, stability and visibility. Our planning is more medium term, and we organize ourselves around a much clearer view of value creation for the enterprise. So we want to start sharing some of that with you and begin translating our medium-term plans into our guidance. To get ahead of the obvious question, medium term for us here means the next 3 years. So starting with growth, we see a continuation of mid-single-digit GWP growth over the medium term. Where we can do better and deploy capital at strong returns, we'll always hold a preference to grow the business. Over the medium term, we see our Group ROE trending in the 15% plus range. This assumes an effective tax rate of around 25% and an investment return sustain in the 3% plus range, which is essentially what futures predict today. Underpinning the outlook is a view that combined ratios are fairly sustainable around current levels. We spoke in August about the breadth in our business with 50-plus sales, which aggregate up to around 14 underwriting pools. Each have different P&L characteristics, different claims drivers, different capital requirements and different dimensions across combined ratio and investment income. How effective we are as capital allocators will be a key driver of our performance as we look to deploy our capital to optimize risk-adjusted returns and drive value. With 2025 marking QBE's fourth consecutive double-digit ROE, on the right-hand side, you can see the extent to which we've driven compelling value for our shareholders. As we continue to execute over the medium term, we should be able to extend this picture where a 15% plus ROE profile will continue to deliver great value for shareholders. Before moving on, I want to emphasize that this is not signaling any relaxation of our focus on combined ratio. It will always be a key metric for QBE. Now ultimately, we manage the business to a view of return on equity, and the combined ratio is really an output of our portfolio mix. So moving to Slide 9. Having discussed growth and returns, this slide gives some color on how capital fits into the picture. We shared our capital allocation framework last year. It's relatively straightforward. We have an aspiration to grow the business, provided we can achieve adequate returns. All our pricing models and view of rate adequacy is calibrated to an ROE hurdle, which works out to roughly 1.5x our Weighted Average Cost of Capital. This is a hurdle, not a ceiling, which many parts of the portfolio are comfortably clearing. We just delivered an ROE of almost 20% and see returns holding over the hurdle over the medium term. We have a 40% to 60% dividend payout ratio, which should be highly dependable through market and economic cycles. And finally, we have additional levers to distribute surplus capital beyond the dividend as needed, as we recently highlighted with the buyback announcement. Had a small window in December to start buying before the close period and completed around $90 million of the total. I want to build a track record of following through on these announcements and moving through them with some pace. So looking ahead, the simple outlook of mid-single-digit growth alongside returns of 15% plus ROE suggests a very healthy picture for capital. We have ample flexibility to support growth and likely see ongoing surplus capital generation on top. To ensure we optimize returns, we'll look to return any surplus. This will be an annual assessment as we exit the year where we have full visibility of our current period profits and growth plans for the year ahead. The final message on this slide relates to alternative capital. We've historically had limited alternative capital in our business. As these markets and investors have evolved, we do see opportunities from both a cost of capital and capital efficiency perspective. This can be an important lever for us as we strive for sustainable mid-teen returns, particularly where we can build long-term strategic partnerships. I'm going to stop here and pass to Chris to take you through the financials and should take a moment to welcome him this morning. As you know, we placed a great deal of emphasis on consistency and stability of management in recent years. We've been focused on building greater talent depth and genuine succession pathways. I'm proud that we've been able to announce Chris into his new role in such a quick time. He's a highly experienced and talented executive and having operated through a number of key roles for QBE in the past decade, will no doubt settle him well and become a great asset for us. So over to you, Chris.
Christopher Killourhy: Thank you, Andrew, and good morning, everyone. It really is a privilege for me to be speaking for the first time today as Group CFO. As Andrew mentioned, I've been lucky enough to be with QBE for around 12 years now across actuarial leadership, divisional CFO roles and most recently leading QBE Re. Across those roles, 2 things have consistently stood out, the depth of our talent and the strength of our culture. And it's that foundation that I believe that underpins the performance we're sharing with you today. Turning first to Slide 11. 2025 was an excellent year. We exceeded plans and delivered QBE's strongest Return on Equity in many years. Gross written premium grew 7% to $24 billion, around 8% if we exclude crop and exit. The combined ratio improved to 91.9%. That's more than a better -- that's more than 1 point better than last year and comfortably ahead of our outlook of 92.5%. This result is underpinned by both prudent reserving and a continued focus on portfolio optimization. Investment income was around $1.6 billion, delivering a return of 4.9%. The net impact from ALM activities was again broadly neutral, and our tax rate for the year was 24%, modestly better than an actual tax rate of around 25%, and that's driven by the mix of our earnings tilting towards our North American tax group. Profit for the year was a record $2.1 billion. Earnings per share grew around 25% and our ROE has increased to 19.8%. Our capital position also remains very strong with a PCA multiple of 1.87. Our final dividend of AUD 0.78 takes the full-year dividend to AUD 1.09, up 25%. The payout ratio remains at 50%, a level we see as sustainable. Above this level, it's likely that we will continue to use buybacks to distribute surplus capital. We've also increased the franking rate of the final dividend to 30%, which we expect to maintain going forward. Turning now to Slide 12. Headline GWP growth of 7% exceeds our mid-single-digit outlook with underlying growth close to 8% if we exclude exits. This is a full 4 points higher than headline growth in 2024 and highlights the impressive momentum we continue to see across the business. Growth continues to be skewed to the Northern Hemisphere led by reinsurance, Accident and Health, portfolio solutions and targeted adjacencies in North America. Australia Pacific was broadly stable, but the story here is momentum, which improved through the second half with a return to ex-rate growth that we expect to continue into 2026. We entered 2025 with a clear set of initiatives to restore growth in ASPAC, including new partnerships, distribution improvements and a more dynamic approach to pricing. It's been great to see the outcome of execution as these actions gain traction. A brief comment on our crop business and its impact on Net Insurance Revenue. Crop GWP increased 11% to $4.3 billion. However, given our focus on portfolio optimization, Net Insurance Revenue actually declined by 6% over the period. This is because we've increased sessions to the federal reinsurance pool, materially reducing exposure to those states we regard as underperforming, including California and Texas. This does, however, weigh on Group Net Insurance Revenue growth in 2025. But in 2026, I'm pleased to say that Group GWP growth and Net Insurance Revenue growth should be much more closely aligned. Before moving on, it's worth remembering that our ex-rate growth here includes both volume and exposure adjustments. And these exposure adjustments play an important role in managing inflation. Our underwriters generally adjust on sums insured for property lines on wage rolls or turnover for workers' compensation and liability lines. And in the case of energy and marine lines, premiums often adjust off commodity prices. Turning to Slide 13 for a little more on the group's underwriting performance. Underwriting performance was excellent with a combined ratio of 91.9%. Catastrophe costs were around $750 million, which is well below allowance, but this is a pleasing outcome in a year where industry losses have been pegged at $130 billion, including a challenging year here in Australia and the devastating California wildfires. We shared catastrophe costs at our November update and losses have increased only modestly from this level. I do think that highlights the quality of the portfolio given the challenges observed here through the Australian summer. I'd also remind you that if we cast the mind back to the first half, we were comfortable with our catastrophe budget then in what was actually the most expensive first half on record for the insurance industry. Turning now [Audio Gap] to reserving. I do believe we're now starting to see the impact of our more prudent reserving strategy that Andrew and Inder have outlined over recent years. During 2025, we recognized a modest central estimate release of $40 million, and that's our first full year [Audio Gap] in several years driven by short-tail lines plus LMI and CTP [Audio Gap] while retaining prudence against more uncertain longer-tail lines. Our reserve strength and resilience has steadily improved over recent years, and I'm confident we're exiting 2025 with group reserves in the strongest position we've held for many years [Audio Gap] needed. Importantly, these charts also highlight the extent to which we're managing to multiple pricing cycles. This diversification provides a meaningful lever through which QBE can manage the overall underwriting cycle. This picture results in an overall rate increase of around 1% for the year. If we exclude Property business and Lloyd's, the rate increase is actually closer to 4%, which have been fairly steady throughout the year. Premium rate adequacy remains comfortably in excess of targets across the group, and as Andrew touched on, is broadly distributed across the business as we look to 2026. The expense ratio was 12.4%, while absorbing an elevated investment envelope of around $300 million. These investments are supporting modernization, including the migration of Australia Pacific portfolios onto our new cloud-based Guidewire platform. Importantly, expense growth has moderated meaningfully now at 5% from closer to 10% over the past few periods as we're starting to drive greater efficiencies. Highlighted another way, in 2025, headline GWP growth was 7%, which contrasts favorably with a headcount reduction of 1% over the same period. Efficiency, along with capital allocation is going to be a major focus for me, and we've got a meaningful opportunity as we drive greater benefits from recent investments embed the deployment of AI and work ruthlessly to eradicate process inefficiency. Looking ahead, we expect an expense ratio of around 12% in 2026 and for that to guide lower over the medium term. Turning now to Slide 14 with some more information on the performance of each of our divisions. Pleasingly, all 3 divisions have delivered margin expansion. Under Julie's leadership, North America improved by over 1 point despite pressure in Accident & Health and Aviation. Starting with our crop business, this business delivered a result of 88%. That's our strongest performance in 7 years. The positive performance reflects in part the early benefits of the strategic overhaul we've highlighted throughout the year. We reset our leadership team, recalibrated our utilization of the federal fund and repositioned our private products portfolio. Further benefit from these actions is anticipated in 2026. Alongside the benefits from internal actions, the portfolio was supported by better-than-average yields in a number of our key Midwest states, including the Dakotas, Iowa, Illinois, and Nebraska. Our Commercial Lines business in North America has also performed well. However, as flagged earlier, our specialty business has been impacted by claims activity in A&H and Aviation, resulting in a combined operating ratio of over 100% for our U.S. specialty business. I'd like to say some more on Accident & Health. This is an excellent business in a growing sector of the economy with strong market position, good track record and a highly attractive through-cycle return on capital. We write close to $1 billion in premium. And this year, we did see a lift in claims severity on account of rising treatment costs, medical advancements and the demand for new drugs. The team has responded quickly through rate, policy terms, and attachment points. Around 70% of the book renews at 1 January, and we achieved a rate increase north of 20% in addition to tightening terms. We'll continue to monitor loss trend, and we'll take whatever action necessary to return this book to profitability. Moving now to International. It's been another year of impressive performance for Jason's business with growth across all segments and a combined ratio of 88.5%. We did benefit from cat running below allowance, which offset some reserve strengthening in certain liability and marine portfolios as called out at the half. Given 2 of our more cycle-exposed segments, namely Lloyd's and Reinsurance, reside in International, it's sensible to say a little more on rate here. Rate for International was fairly flat for the year, where our U.K., Europe and reinsurance businesses saw rates in the low to mid-single digits, this was partly offset by some softening in our Lloyd's portfolio. Putting this in some context, however, since 2018, our Lloyd's business has benefited from cumulative rate change to 2025 of around 60%. This contrasts with the rate reduction of around 3% at the 1/1 renewals last month. Similarly, for QBE Re, rates were down 1% at 1/1, where we renew over half the book, but that contrasts with cumulative rate increases of around 65% since 2017. We do see it as a positive that competition is largely restricted to rate, while discipline remains around terms and conditions. For both QBE Re and Lloyd's, terms and conditions, attachment points, how we selectively deploy capital year-on-year and how we leverage facultative reinsurance are frequently more important than rate when it comes to delivering performance. Finally, on Australia Pacific, SES business had an excellent year with the combined ratio improving significantly, supported by favorable reserve development across 15 of our 20 sales, along with easing inflation. The impressive performance is despite catastrophe costs running modestly over budget in what we know was an active catastrophe year. Overall, rate increases tracked in the low single digits, fairly stable on what we reported at the half year. And looking ahead, we'll benefit from substantial CTP rate increases put through in recent months, including around 15% in New South Wales. Turning now to our investment results on Slide 15. Our investment portfolio delivered another record result with income of around $1.63 billion, representing a return of around 4.9%. Risk assets returned almost 10%, while fixed income yields exited the year at approximately 3.7%. And for reference, futures markets currently imply the fixed income yield will exit 2026 at around 3.8%. Investment FUM increased by 17% this year, with roughly 1/3 of that attributable to the weakening U.S. dollar. Our assets and liabilities are, however, well insulated from FX. And while funds under management have increased, so too have our claims reserves. Similarly, the increased prescribed capital amount associated with higher FUM and reserves is absorbed by an increase in available capital, resulting in negligible impact on the PCA multiple. There remains a modest FX gain of $24 million in the group P&L, and that's reported within the expenses and other line shown here in this table. Investment mix shifted slightly with risk assets of 15% of the portfolio. The OCI fixed income book now stands at around $3.5 billion or 12% of our overall core fixed income portfolio. Moving now to Slide 16 and an update on reinsurance. We achieved another strong and importantly, sustainable reinsurance outcome. Our diversification by region and class of business means we have a highly sought-after proposition in the market. Given the support of our strong reinsurer relationships, we were again able to reduce the attachment point of our CAP program now to $250 million. That's a reduction of almost 40% in just 2 years. And this is at a time where in the market more generally, attachment points and terms and conditions are rarely moving. Ultimately, we see this as strong external validation of our approach to portfolio management and the initiatives we've executed to reduce problematic exposures. The lower cat retentions have allowed us to modestly reduce the cat budget to $1.13 billion, whilst maintaining sufficiency around the 80th percentile. Whilst the allowance has been trending lower, group property premiums have been fairly stable. And the chart here summarizes catastrophe experience for our North American division and helps illustrate the improvements in our catastrophe portfolio. You may recall that historically, this division had driven much of our cat volatility. It's a simple picture, highlighting the impact of portfolio remediation led by Peter and Julie, including the exit of multiple programs, the middle market business and our consumer portfolios. Despite these exits, our share of regional property premium is down only modestly in contrast to a much more significant fall in our share of property losses. Finally, on reinsurance, I did want to expand on Andrew's earlier comments about alternative capital. Following the launch of QB Re's first Cat Bonds in 2025, the 2026 bond has broadened coverage to the whole group, attaching now at $800 million. The bond provides greater certainty around the availability of capacity whilst also reducing our overall cost of capital. We also launched the casualty sidecar on the QB Re casualty portfolio. As you know, you can think of the mechanics of the sidecar is similar to that of a quota share. And we've effectively quota shared around 1/3 of the casualty reinsurance portfolio for the 2025 underwriting year. In effect, this allows QBE to swap underwriting risk for fee income, enabling us to recycle capital, manage reserve risk and ultimately support more capital-efficient growth. These are early transactions as we build our profile in these markets, but I do see this space as important as an important lever for QBE as we calibrate the business to deliver sustainable mid-teen returns. Turning now to my final slide, Slide 17. I'm fortunate to be inheriting a balance sheet in excellent health. We received credit rating upgrades from both S&P and Fitch moving to AA- for the first time. The year-end PCA multiple has increased to 1.87. And following payment of the final dividend and adjusting for the buyback, the pro forma PCA reduces to 1.73. Alongside our 50% payout ratio, the buyback brings our total shareholder distributions to around 65% of this year's profits. And turning finally to funding. We retired our Tier 1 notes effectively replacing this funding with Tier 2 issuance. This reduces our cost of capital and leaves us with significant flexibility to engage these markets opportunistically if we need to in the future. This does mean that our debt to capital increased by around 4 points to 24%, but we expect gearing will glide back toward the middle of our target range over the medium term. It's been a pleasure to have the opportunity to present what I believe are a very positive set of results today. But before passing back to Andrew, I wanted to briefly touch on a small transaction we announced earlier in the day. We've agreed terms to sell and exit our global trade credit and surety business, chiefly composed of our Australian and U.K. trade credit operations. While this business has performed well over an extended period underpinned by an excellent team, we recognize its leverage to macroeconomic settings. The exit will allow us to recycle capital into our core focus areas where we see a greater opportunity for long-term growth. Total premiums under consideration around $200 million, and we're planning to close later in the year. The modest upfront proceeds and capital release will add to today's messages around capital strength. I'll pause here and hand back to Andrew.
Andrew Horton: Thanks, Chris. We gave our 2026 outlook back in November, and there's no change today. We see growth continuing in the mid-single digits and a combined ratio of around 92.5%. We expect the pace of growth will sustain over the medium term and see a solid 15% plus outlook for ROE. We've included a quick bridge here of our 2025 underwriting result to this year's guidance of 92.5%. I appreciate many will adjust our reported result of 91.9% for the favorable catastrophe experience and this leaves you in the early 94% range. Consistent with what we flagged in November, there were 3 categories driving the bridge to our outlook. Firstly, reinsurance spend and our cat budget. We achieved quite significant savings on the new program and our cat budget will be a touch lower year-over-year. Secondly, on expenses, we had an expense ratio of around 12.4% this year and should be able to land at 12% or better in 2026. And finally, on ex-cat claims. We see support from pricing initiatives. Chris spoke to the substantive 20-plus increase at 1/1 in A&H. While small, our U.S. Aviation portfolio recently saw rate increases of over 40% for the large airline segment. And closer to home, we've now put through mid-teen increases in New South Wales CTP. Where there's claims activity the industry is showing discipline and pushing for rate. Our performance management agenda has plenty of remaining upside, particularly as we work through remaining underperforming cells. And finally, we've spoken about the elevated level of large claim costs where we expect some normalization. Through the recent reinsurance renewal, we're also able to lower the retention for our risk excess of loss cover. The coverage were generally attached for non-cat large claims of $50 million previously and in many instances, that is now just $25 million. This will help manage large claim volatility. So I hope that gives you a bit more clarity on how we're seeing things into 2026. We'll hold our usual first quarter update alongside our AGM on May 8. Before wrapping up, I do want to thank our 13,000 people for their contribution to these outstanding results, which we can all be proud of. With that, I want to thank you for joining us. And before passing to the operator, I want to remind you, we'll be taking just 2 questions per analyst. Thank you once again.
Operator: [Operator Instructions] Our first question comes from the line of Andrew Buncombe with Macquarie.
Andrew Buncombe: Congratulations on a great result. Just the first one for me. In previous years, there's been some surprise around how you pay out the first half dividend, just to set us off on the right track for next year. Can you just remind everybody how you think about the payout in the first half results for dividends?
Andrew Horton: Yes, exactly. I think we're paying it, Andrew, on a 1/3, 2/3 basis. I was just getting confirmation before I made that comment. So we're just seeing 1/3, 2/3 rather than 50% of the first half profit. And that sort of takes out the volatility. So we look at 1/3 of where we're forecasting to be at the end of the year rather than 50% of where we are at the half year.
Andrew Buncombe: Excellent. And then the other one from me was just can you remind us whether there's any benefit to the FY '26 combined ratio from the tail of any of the roll-off of the North American portfolio, the noncore portfolios?
Andrew Horton: No. So we're expecting not to talk about the roll-off of the North American book anymore. It's just an all-inclusive number. So no expected benefit, no expected negativity from it. It's relatively small at this point in time, so we can absorb it within the North American numbers.
Andrew Buncombe: My congratulations again.
Andrew Horton: Thanks, Andrew.
Operator: Our next question comes from the line of Andrei Stadnik with Morgan Stanley.
Andrei Stadnik: Can I ask my first question around the casualty sidecar? I think you mentioned reinsuring about 1/3 of the risk. But can you remind us the dollar figures involved? Because I thought this sounded relatively meaningful.
Andrew Horton: Yes. Chris, can I hand to you as you were running that business when we did it.
Christopher Killourhy: Sure. I mean the size of the sidecar is in the region of $450 million. I think a way of thinking about the cycle, the benefits we get. It's roughly -- the ratio is roughly sort of 1:3 in terms of premium to capital. But where we really see the capital benefit potentially coming in is in outer years as reserves build up and we bring more years in?
Andrei Stadnik: For my second question, you've spoken a lot about all facilities and how you've been growing that. Can you talk a little bit more maybe about some of the efficiency benefits? Are you seeing anything on the cost there, particularly in the context where there's some really heavy criticism about the cost of operating in the Lloyd's market and how long they're taking to replatform. So the way you run a facility, is that a way to maybe help with that?
Andrew Horton: Yes. So I mean, the great beauty about them is the facilities are both Lloyd's and some that are non-Lloyd's. From our point of view, we write about $1.5 billion of premium with a group of around 20 people. So our own costs of doing it are low. For brokers, it's very efficient for them because they have a preplaced amount, so they don't need to open broke that amount within the facility. So the brokers costs go down, and they pass some of that on to the clients or some cost to the clients. So the clients benefit from a lower price. The brokers have lower costs, and we have relatively low cost to actually write it. So generally, it works out well for the buyer of insurance, the intermediary and ourselves. And that's why I believe these are things that are going to stay. The market did have a facilitization 25, 30 years ago. And I don't think there was that balance of dividing up the economic benefit, particularly well. And therefore, they generally collapsed in the late 90s. These are much larger, much more structural and the client and buyer benefits quite a lot.
Operator: Our next question comes from the line of Kieren Chidgey with UBS.
Kieren Chidgey: Andrew and Chris, just first question on the North American combined ratio detail. you've provided today on Slide 14, just sort of 97.7% at a divisional level, obviously, including crop. And I think you're flagging a profit in noncore this period. So it does imply the core business, excluding crop and that noncore is well into the 100% level. And I appreciate Accident & Health, you've already flagged as an issue in aviation, but just keen if you can give us an idea around how the rest of the U.S. business was tracking last year ex those 2 areas, particularly given it was a benign [ cat year ] and it looks like you had a bit of PYD support there as well.
Andrew Horton: Yes. So I have a go at starting on that. So as it breaks down into crop, commercial and specialty, the crop business obviously had a very good year as we've talked about. The commercial also had a good year. That's broken down between the property programs, which not surprisingly performed well. You made the comment about having a few [ cat ] percentage of losses also dropped. So the activity we've taken to rebound that portfolio has worked well. A commercial casualty within that business was also good, a bit of stress in workers' comp in that division. But overall, the commercial performed well. So the challenge, I think, as Chris just mentioned, was almost all in the specialty and had a combination of factors. It has the A&H book, does have aviation, which had 1 or 2 large losses. We did pick up some prior year negative in transaction liability, which the market has recognized in the U.S., and we've seen rate increase quite considerably in transaction liability, particularly in the U.S. on the back of it. And 1 or 2 of the financial lines programs did not perform well. So you're right. I think the overall combined ratio, excluding crop, is close to 100% year-on-year, but we see the potential improvement in the A&H. We think we're on top of the transaction liability in the market moving. Financial lines programs have either dropped or changed. So we see that as a positive, although it's negative in 2025, positive for the potential performance of the business in 2026.
Kieren Chidgey: Andrew, the ex rate growth in the U.S. in the year ahead, sort of outside obviously, the repricing in A&H and aviation, are you actually growing in those specialty areas have been quite weak in the past year?
Andrew Horton: So I think that's a great question. I don't think there'll be any ex rate growth, particularly in A&H. We'll probably be looking at the rate and ensuring we've got the right clients and the right portfolio. I think there will be some extra growth in aviation. We've been working on that team for a number of years now. It's a great team. So we do want to build on that. And then within the U.S., most other lines will be looking for ex rate growth in 2026.
Kieren Chidgey: My second question is just on reinsurance you flagging significant reinsurance savings in the year ahead, I guess, not out of line with sort of double-digit renewal reductions we've heard sort of globally at 1 January, but there's quite a bit that goes on in your reinsurance line with the crop quota share and the like. Can you give us a better feel for how much cat reinsurance spend is and roughly how meaningful this rate reduction on the cat cover is into 2026. I know it's complicated as well with some of the reinsurance transactions, Chris has probably talked about earlier.
Andrew Horton: Yes, it's not going to be an easy one to answer on this call. We may have to come back to it. And as you say, we saw the reductions in the property cat reinsurance, which is in line with what people have been talking about. And it seems to vary between 10% and 20% depending on who you talk to and whether you've changed your retention or not. So we're definitely in the mid-teens in terms of price savings on the cat reinsurance. I think we'll have to come back to you on the mix because you're right, there's some in our reinsurance spend. There's always going to be some complexity of how much we reinsure in the crop world, and we're looking at how do we balance what we retain and what we reinsure. And we do this reinsurance to the federal funds in the U.S., but we also buy some external reinsurance. And if we're comfortable about the crop performance, we may lower our external reinsurance. It's not a simple one to work out exactly what percentage of our gross premiums we're going to reinsure out. Chris, I don't know if you have a better answer than that, but we may need to come back to you and give you a bit more depth on that outside this call.
Christopher Killourhy: Yes. I think on the breakdown, we can come back with more detail. I think to Andrew's point that we hugely value the relationships we have with our reinsurers. So we don't want to go into too much of exactly where we got to on the final negotiation. But to Andrew's point, we see the -- you'd have seen ranges between 15% to 20%, and we'd like to think we came out towards the better side of that. But I think most meaningfully for us is the fact that we're able to secure the reduction in attachment point and also the cat bond we placed this year has just helped us a little bit with bringing down the overall cost of the program.
Kieren Chidgey: Okay. You can't sort of give us a rough feel for that combined cat budget reinsurance building block on your core waterfall, how you're viewing that from a materiality point of view next year? You've been quite clear on the expense ratio improvement.
Andrew Horton: Yes. Well, on the waterfall, it's obviously not coming from crop. It's coming from the cat mainly because that is the one where we're seeing rate reductions. I don't know, we obviously give it in size on the waterfall. So let's come back to you and we can come up something on that.
Christopher Killourhy: It's approaching a point improvement, maybe in the region of 80 basis points for both the cat, the combined benefit of the reduction in the cat allowance and also the reduction in the cost of the program. So in the aggregate, it's around about 80 basis points.
Operator: Our next question comes from the line of Julian Braganza with Goldman Sachs.
Julian Braganza: Just the first one, just looking at your initial estimate of ultimate claims for 2025. You sort of alluded to that. It's looking very strong and improved materially just over the last few years, particularly from 2024. Just want to understand, one, how much of that improvement is due to mix versus resilience? What are your expectations here for leases over the medium term? And also just what's baked in your ROE guidance for reserve releases as well over the medium term? That's the first question.
Andrew Horton: So I mean part of it is what we've been talking about in a number of years of ensuring we are reserving well for claims, especially medium and long-term claims, and we do think that's building up, which is a positive sign for us. I don't know whether you've got anything else to add to.
Christopher Killourhy: Yes. I mean I think in terms of as we look forward, we're not sort of factoring anything in specifically for reserve releases in the -- in our guidance. But if you -- exactly to Andrew's point, if we just think of the math that we're holding on to long tail -- on our long tail portfolio, we're holding on to the loss ratios for a period of 3 years. So by definition, you would expect that to all things being equal to translate into some releases, but we haven't factored that explicitly into the guidance we've given today.
Julian Braganza: Okay. And just to clarify as well, your ROE guidance assumes 80% POA on the cat budget similar to what you've structured this year and last year? Just the clarification.
Andrew Horton: No, definitely Yes.
Julian Braganza: Awesome. Okay. And then just a second question. In terms of just your cat loading, 5% to 6% of NEP, is there an opportunity to bring that down further as you think about derisking your business from a cat perspective, look at some of your global peers, they're around the low single-digit mark. We've seen your MERs come off. We've seen noncore losses run off as well. So just wondering how you're thinking about that over the medium term?
Andrew Horton: Yes, I don't think we necessarily think about lowering it. What we've spent a reasonable amount of time over the past few years was taking out the cat losses, which were too large. In other words, it wasn't in good balance. So I think writing property business in catastrophe zones is fine as long as you're in control of the balance of it, you don't have too much of it, you're comfortable with the reinsurance program you have, and you keep back testing that against various catastrophic losses that you haven't got an outsized share. So we haven't really thought in bringing it down to a lower level. And while it delivers a good ROE and we can cope with that volatility within the rest of the book. We have not set ourselves a target of getting the 5% to 6% down to 4% to 5% to 3% to 4%. So we actually quite like it at the pricing it is, complements everything else we do. It makes us important to brokers and clients when we can do both. So no, we're not thinking of lowering it.
Operator: Our next question comes from the line of Nigel Pittaway with Citi.
Nigel Pittaway: First of all, a question on growth. I mean, Andrew, you mentioned that, obviously, at the moment, you're still seeing supportive market conditions with competition confined to rates and where necessary, people are disciplined in pushing for rate. I mean do you see any risk to that? And then in that context, do you expect your sort of GWP growth in '26 to be in similar areas to '25, obviously, taking into account the fact you've said there'll be no unit growth in A&H and a bit of pickup in growth in Australia.
Andrew Horton: So I think it's a great point. So I feel comfortable in the medium term of looking at the growth. So 2026, definitely, with the breadth of the book and the support we're getting in pricing and the areas we're focusing on, feel pretty comfortable about that. We do believe QBE Re and the portfolio solutions and cyber will continue to grow into 2026, and those were 3 good growth areas for us in 2025. We're trying to think of other areas. There are new areas, and we touched on earlier on about as renewables going to grow or the energy world going to grow and data centers, a lot of talk about insurance and data centers, and I'm sure we'll get a share of that. So I feel pretty comfortable about the 2026 growth. We're also trying to balance it of not putting too much stress into the system, and I've talked about this before, it growing mid-single digit is not trying to overstress us. We're not forced into growth in any way, shape or form because fundamentally, margin is by far the most important thing. And we're trying to get this margin under as much control as possible and manage the volatility around that margin. So yes, I feel pretty good about 2026 where the rating environment is. Just as a touch point, rates on Jan 1, where we write a reasonable amount of the international business virtually in line -- almost exactly in line with where we thought they were going to be. So we haven't seen anything in the first 1.5 months that takes us away from this potential growth for 2026.
Nigel Pittaway: And then I mean in terms of the rate rises and terms and condition changes you've put through in A&H, I mean at 3Q, you sounded pretty confident competitors were going to follow suit. I mean the latest intelligence is that that's what you've done is pretty much in line with the market? Or have you been sort of stricter than the rest of the market in your reaction to the losses that occurred this year?
Andrew Horton: I think, Nigel, we're in line with the market. As you say, there's been a lot of talk about this. So that's a good thing because it means the market needs to resolve it and it's obviously nothing unique to us, and it's much easier to resolve when the market is accepting the issue rather than we're the only ones who think we need a rate of x and the market is happy with half x or 75% of x. So it's definitely a market-wide issue and numbers are similar. I'm sure we're going to find some people who are further ahead of it, and some people aren't as up speed in it, and the portfolio is going to vary a bit. But fundamentally, I feel good that it's a market-wide issue and rate is holding.
Operator: [Operator Instructions] Our next question comes from the line of Siddharth with JPMorgan.
Siddharth Parameswaran: Couple of questions. Just firstly, on the ex-cat claims ratio bridge that you've flagged the improvement that you're flagging from '25 into '26. I was just hoping you could help us understand what's happening on the inflation versus rate side. In terms of what I saw in the fourth quarter, it seemed like rates were slightly negative, and I know you're flagging some rate increases since 1 Jan, but just wanted to get a perspective, one would think that six months ago, you flagged that rate was behind inflation and rate has got lower. So just keen to make sure that we understand where that improvement is coming from?
Andrew Horton: Yes. I mean if we just do it at a completely macro level, I think the rate increase across the whole portfolio in '26 is going to be a low number. And what we're planning for is inflation being 2 or 3 points higher than that. So we definitely have that. And that means if we did nothing and just renewed everything and nothing actually changed, margin would potentially shrink. But that's not what we'll be doing. And some of the rate increases built into the exposure you charge anyway. So the rate is always a bit of a -- this is a headline premium adjustment as opposed to that inflation being built into the exposure on which you charge the same rate. So it's a very simple number. We're changing the portfolio on the back of it. You try and focus not surprising on core clients that have a better, better rating and you drop the ones that are worse in an environment where you potentially are being squeezed. That could be property or A&H and therefore, you can end up with a similar outturn despite apparently having this difference between inflation and rate. The other thing I'd say is inflation is always an estimate, and generally, you don't really know what it's going to be like until a few years down the track while rate is what it is, and it's just purely based on a premium number.
Christopher Killourhy: I think another point I'd add. I mean, Andrew mentioned earlier about we see circa 90% of our portfolio as being above adequate. And actually, it's interesting when we look at rate movements that the 10% of the portfolio that, therefore, is inadequate is where we're still seeing rate strengthening come through. So I think it again goes to evidence that the market is still behaving pretty rationally.
Siddharth Parameswaran: I guess the question was just around the 2 components. What is your view on rate and what is your view on inflation?
Andrew Horton: Yes. So I'd say in total, the view on the rate is, it's going to net to a small single digit, but the spread is obviously large because we talked about A&H getting 20% plus, and they are going to be 1 or 2 that go negative. And then the inflation assumptions are going to average to 3%, but some of them are going to have inflation of 10% to 20%, and some are going to have none. And overall, net-net-net, those are the 2 numbers. But there's so much more to the group than those 2 numbers. So I'm not sure what to do with them because I don't see 1:3 meaning margins should go down by 2 because that just assumes we don't do anything, and we will be. And that's what Chris was trying to pick up on. When you got it well rated, you're relatively comfortable to continue with it. And when you -- it's not well rated, you're not.
Operator: Our next question comes from the line of Simon Fitzgerald with Jefferies.
Simon Fitzgerald: Just quickly, Andrew, you talked about rate adequacy. I just wanted to explore that a little bit more in the context of property. I recall that you said, I think, at the half that property could fall by 25% in terms of rate adequacy before you would lose interest in that segment. In some pockets of property, property core, for example, we are getting a little bit close to that. And I noticed in terms of the graph on Page 21, property forms 33% of GWP. I was just hoping you could maybe break that down a little bit more in terms of the ones that are exposed to that sort of 10% to 15% as you described or more and ones that aren't. Maybe you could just sort of describe that property portfolio in a little bit more detail.
Andrew Horton: Yes. I haven't necessarily got the quantum of it all, but I'll have a go at it. So we write catastrophically exposed property and non-cat exposed property. So what we're finding is the specifically U.S. cat exposed property is taking the largest decrease. So that's starting with the largest decrease or planned was in 2025, probably will be in 2026. And that's often what's driven the reinsurance, the cat reinsurance. It's been the reduction in the U.S. property cat reinsurance going down. Elsewhere in the world, it is less than that. Going to -- if your non-cat European property, of which we write a reasonable amount, we're probably seeing no rate decrease, rates holding and it's fine. So you've got that big spread. So within the 30-odd percent, there is a big spread between the U.S. cat and, let's say, European non-cat. And everything else is plotted in between on that. So of course, when we're looking at rate adequacy, we're trying to break it down by portfolio, by country, by type and determining what is rate adequate and what isn't. So I'd expect this year, potentially the most stress could be the U.S. cat. That said, of course, it was the one that went up the most in the 4 years prior to it. So its rate adequacy went up over shot. I mean this is what the insurance industry can do with a volatile classes. We find myself inadequate, we overshoot and then we start coming back to where we could have been the whole time if we've known exactly what everything was going to happen. So that's why we tried to show these cumulative rate change charts, just to remind people where we've actually come from in each of the lines business. I'm not sure I've answered it as precisely as you would like. What I'm trying to flag is we've got a lot of different types of property geographically cat, non-cat within the portfolio and trying to manage those to deliver the best risk-adjusted return. Again...
Simon Fitzgerald: Maybe a question -- just in regards to the change in the reinsurance structures and so forth, can you just give us a little bit of guidance in terms of '26 about how we should be thinking about that reinsurance expenses line and will it be broadly similar to '25 or what sort of decrease should we expect given the new change?
Andrew Horton: Yes. I mean the property cat reinsurance is definitely coming down. And we just -- I think we were saying earlier on, we probably need to do some analysis of that and share that with you because it's quite hard to determine what the net position of that reinsurance line is going to be based on it having property and casualty and some quota share and crop in it. And so we need to do that rather than me try and estimate it now. So let's come back to you on that.
Operator: Our next question comes from the line of Freya Kong with Bank of America.
Freya Kong: Providing the bridge to 92.5% for this year. Just as a follow-up to Sid's question about 1% rate versus 3% inflation. Are there any business mix shifts that are being assumed in getting us to 92.5%, i.e., shift towards lower combined ratio lines next year?
Andrew Horton: Yes. I mean, obviously, when we were talking earlier on about trying to grow the QBE Re and QBS and cyber, potentially those at this point in time have good margin, and therefore, we're trying to push those. So that's it -- I mean, that's a really important point that we're forever rebalancing the portfolio, and therefore, it's not stable. So the math just doesn't work that we just take these 2 numbers and assume everything is going to come down on that basis because we're not at all sitting in a consistent position year-on-year. So we're doing exactly what you're suggesting of -- and it's pretty obvious, isn't it, remediate the ones which are under pressure and really grow the ones where the margins are good. And that's what I think we're getting better at and why the results are improving as we've done more and more of that. And what we've done is let go some of the businesses that historically gave us combined ratios greater than 100% and also drove quite a lot of the volatility around it. So that's why we feel comfortable. So in that ex cat element, there is a reasonable amount of rebalancing and is also looking at some of the portfolios that truly need to change and how do we change those and that can be re-underwriting, going back to our core shrinking, there could be a number of things in it. That's why we feel comfortable about it. Sorry, Chris.
Christopher Killourhy: I think it's a great question because I think one of the things we do want to be really respected for is how we move capital between portfolios across cycles. And we just see that as good underwriting, good sort of running an insurance company. So absolutely, there will be sort of change in the portfolio in terms of rebalancing the business we see as being more adequate or performing better. What I would say, however, is there is sort of a fundamental mix shift in terms of, for example, increasing our weighting to property cat because it runs at a lower combined ratio, that would then bring in some additional volatility. So we are -- the mix will change as we just look to keep rebalancing towards the business we see is more adequate, but we're certainly not relying on a shift to sort of more volatile business to bring the combined ratio down.
Freya Kong: Okay. Great. That's really helpful. And can I just ask on Accident & Health, what's the impact been on retention in the book, given you push through 20-plus percent price increases? And is this still an area for growth in the medium term, assuming remediation this year go as well?
Andrew Horton: So the latter part, definitely. I mean we've been involved in this group or the team since 2001, and I think we acquired the company in the late -- around 2010. So it's been with us a long time. They've got a lot of tenure. They manage all sorts of different types of events that have taken place. So definitely want to grow it. I think in the short term, we've don't really want to grow too much this year. We've been able to retain almost everything we wanted to retain. I think that just shows stress in the market, the fact that people are shopping around and struggling to get a move and have come back to us on the back of trying to do that. It's generally a relatively low retention business. So these companies do move on a regular basis. So I think the average retention normally is around 70%, which is considerably lower than our average, which is in the 80s on average. So generally, it is a shopping around business, and I think more has taken place this year. And therefore, we've been able to retain everything we wanted to retain.
Christopher Killourhy: Yes. And I think we do see, as Andrew says, this is a portfolio that, I guess, does have lower in general retention rates than we'd see elsewhere. And one of the things we do all see generally over time is that the renewed business tends to perform better than the new business because it does sort of take that one cycle just to sort of harvest the business. And so there is an element of while it was growing, you will just get a little bit of strain in there. So that's part of what we're just managing going forward as well.
Operator: Ladies and gentlemen, due to the interest of time, I would now like to turn the call back over to Andrew for closing remarks.
Andrew Horton: I'd just like to thank everyone for joining us today, and I'm sure we're going to be seeing a number of you over the next week or two. Thank you very much.