Hiscox Ltd

Good morning, everyone. It’s nice to see you all, and thank you for joining us here.

2024 has been another strong year of delivery from Hiscox. We are achieving broad-based growth and positive earnings momentum across the group.

We have increased our revenues by around $170 million in the year, of which about $150 million has come from our retail business and the quality of this growth is reflected in the undiscounted combined ratio at 93.6% and retail profits of around $300 million. Our effective cycle management in big ticket means we’ve been able to achieve an excellent undiscounted combined ratio of 81.6% in an active loss year.

With each of our segments delivering strong results, our group for the second year in a row is reporting record profits at $685 million and an excellent return on equity of 19.8%. With the strength of our business performance and in particular, the accelerating momentum and improved confidence in the retail business, this creates the flexibility to pursue multiple growth opportunities and to step up our progressive dividend.

We’re increasing our final dividend by 20%, which means a full year 15% increase to our EPS. And we’re also announcing a further substantial special return of capital of $175 million through a share buyback, reflecting the strength of the capital generated in the year, the robustness of our balance sheet and the confidence we have in the quality of our underwriting.

So taking all of this together, our business performance is such that we can pursue an ambitious growth plan and return 10% of Hiscox’s equity to our shareholders. Now as usual, I’ll go through each of our business segments, beginning with retail.

We’re achieving growth and earnings momentum across our retail business, as the management actions we have deployed over recent years are now beginning to show up in the P&L. For example, our U.K.

business is now growing at its fastest rate since 2018 as management actions on brand, technology and distribution are building momentum. Our European business has once again delivered strong growth with a further pickup expected in 2025 as new distribution partnerships come online, including a new bancassurance relationship in Spain.

In U.S. DPD, we’ve once again delivered strong double-digit growth in our direct-to-consumer business as our customer acquisition and cross-sell initiatives take effect.

In digital partnerships, we’ve delivered robust growth albeit at a more moderate pace as due to one or two of our more established partners lowering their production. The vast majority of our partners are growing strongly with us, and we continue to broaden and diversify our partnership network.

In U.S. broker, the business has contracted in 2024, all based on an improving trend, and I expect the business will return to growth in 2025.

I’m going to focus just for a moment on some of the key management actions that are behind the improving momentum. In the U.K., our brand campaign, which many of you will have experienced and seen, has now won 18 awards.

But more importantly, it’s delivering tangible results. We’ve seen a material increase in our brand awareness, an increase in our organic branded search and increased click-through rates to our U.K.

direct portal. In U.K.

and Europe, we’re rolling out AI solutions to our broker channels to improve underwriter effectiveness and efficiency. And you’ll hear in a moment from Jo, on how we’re exploring the potential of AI and other technologies to improve underwriting productivity and access new markets.

In U.S. DPD, we’ve deployed a range of marketing initiatives that have helped sustain that double-digit growth rate in direct-to-consumer and we’ve added 17 new partners to the digital platform.

In U.S. broker, Mary and the team have deployed a range of initiatives to return the business to growth, including measures to streamline the underwriting process adding new product, adding new distribution capability.

And these are leading to an improvement in new business conversion and customer retention. And across all of our businesses, we’re expanding our distribution reach through multi-country specialty MGA opportunities, adding new broker deals and adding partners to our platforms.

All of these initiatives will continue to build momentum over time, so lots of great work done in ‘24 with more to come. Now turning to our London market business, our teams here have once again delivered a strong set of results.

This is the fifth consecutive year our London market business, has achieved an undiscounted combined ratio in the 80% range. This strong performance is underpinned by a disciplined cycle management, which means we grow where we see attractive opportunities and we manage the cycle in other areas.

For example, property has been an attractive segment and we’ve achieved growth in a number of portfolios. Our market-leading Crisis management teams have generated substantial growth against the backdrop of geopolitical uncertainty.

In contrast, in our Casualty division, where market conditions have been less attractive, we have taken proactive and – proactive action to manage the cycle there. And those actions have meant this division has remained profitable throughout the period.

And in Marine, Energy and specialty, our growth has been impacted by a decision to exit the space class of business where rates and terms have not evolved in line with underlying risk and the complexity. Once again demonstrating we will grow and shrink based on our view of risk and our assessment of the medium-term prospects of the market.

Turning to Re & ILS, our teams here have delivered a fantastic result. We’ve increased net premiums by over 11% and delivered a combined ratio – undiscounted combined ratio of 69%.

In Re & ILS, we’ve more than doubled our net premium since 2020 as we’ve grown into the hard market. And since the end of the year, we’ve had a good January renewal season, where, again, we’ve deployed incremental capital and achieved solid net premium growth.

Now as you know, as part of our Re & ILS business, third-party capital management and our strategy to manage that has been integral – an integral part of the business model for many years. And during the course of the year, we attracted $460 million of new inflows into our ILS strategies, which have gone a long way to offset the planned capital return, and we continue to broaden and deepen our quota of share partnerships.

Not only is this strategy Integral, it’s a material contributor of earnings to our Re & ILS business. And in the year, we recorded a record fee income of $128 million.

I want to spend a moment just to reflect on how our business has grown and evolved over the years. And as you can see here, we’ve grown our retail business to $2.5 billion of premiums during the course of the year.

And we’ve grown faster than the market. And indeed, the growth momentum is now picking up again after a period of consolidation, a period during which we’ve added new leadership.

We have reinvigorated the brand. We have replatformed much of our technology and we’ve added capability to our distribution.

And we’re also benefiting from favorable external secular market trends, including strong new business formation, the emergence of new professions and increased digital adoption. All trends are set to continue over the long term.

So this is an incredibly exciting time for us at Hiscox, where we have more certainty and greater confidence to capture that structural growth opportunity in the U.S., in the U.K. and in Europe.

And in our big ticket segment, we’ve captured the opportunity of the hard market in a disciplined way. In Re & ILS, we’ve increased our net premiums by 159% since 2020 as we’ve grown into the hard market.

In our London market business, where business is much more diverse, we’ve been managing – proactively managing the micro cycles to optimize returns. Again, for example, property has been an attractive segment over this period, and our major property premiums have increased by 45% since 2020.

In contrast, D&O and Cyber is where we’ve seen multiple years of rate declines, we reduced our premiums by around 30% over the same period. It’s this discipline, which underpins the profitability of the London market over many years.

The Hiscox business model is unique, with that balance between our cyclical big-ticket businesses, where our entrepreneurial culture, our underwriting pedigree, combined with effective cycle management leads to periodic surges in growth and profitability. And our retail business, where, again, our entrepreneurial business-building culture combined with our specialty underwriting capability, our brand and our broker and digital platforms position us very well to capture the long-term structural growth opportunity and the benefit of compounding through the insurance cycle.

And over the years, our business model has – our business has grown and evolved such that today, retail profits make up 44% of the group’s total, compared to 34%, 10 years ago. And this gives us the confidence to pursue multiple growth opportunities and to step up our final dividend by 20%.

So in summary, it’s another strong year of delivery from Hiscox, a year in which we’ve delivered high-quality growth, record profits, accelerating momentum in retail, substantial capital generation, a significant step-up in our progressive dividend and a further substantial return of capital to our shareholders and exciting times ahead for Hiscox. On that note, thank you.

I’m going to hand over to Paul to provide an update on our financial performance followed by Jo to provide an underwriting perspective, and then I shall be back to wrap up.

Thanks, Aki, and good morning. It’s great to be here with you today presenting another great set of results.

The group is delivering on its promise. We’re achieving high-quality growth with insurance contract written premium increasing by $169 million as growth momentum builds across our retail business.

Pleasingly, this was achieved with an excellent undiscounted combined ratio of 89.2% in an active loss year and an insurance service result of $554 million with strong results in each segment. We continue to make good progress in improving our expense ratio.

This has fallen by around 1 percentage point for the second consecutive year as we continue to manage our costs carefully. Other operating expenses are up 19%, reflecting continued brand investment, which increased 25%, investments in efficiency savings and a one-off cost relating to the sale of DirectAsia, Thailand.

The group’s profitability is supplemented by the investment return of $384 million as cash and coupon income continues to grow. The growing underwriting profits and the strong investment result has delivered a profit before tax of $685 million, up 9.5% on last year’s record profits.

This has resulted in substantial capital generation, an excellent return on equity of 19.8% and an estimated BSCR of 225%. Our high-quality growth and building of momentum in retail support a step-up of our progressive dividend with an increase in the final dividend of 19.6%.

In addition, the substantial capital generation allows us to make a special capital return of $175 million in the form of a buyback. Our strong financial position enables us to make this special capital return despite the tragic events in California in Q1.

The group estimates a net loss from the California wildfires of around $170 million at an industry loss of $40 billion. This will be booked in the first quarter of 2025 with $150 million expected to be recognized in Re & ILS and $10 million in each of London market and retail.

The buyback, together with the total 2024 dividend means that we plan to return around $320 million or 10% of 2024s opening equity, demonstrating our disciplined approach to capital management. And you can see the benefits of this in NAV per share, which has grown by 14% year-on-year, driven by a combination of strong earnings and the capital returns completed during 2024.

The Bermuda corporate income tax came into force on the first of January 2025. And this will increase the group’s effective tax rate to between 15% and 20%.

In relation to this, we have recognized a $155 million deferred tax asset. However, under new OECD guidance published in January, the future benefit of up to 80% of this asset is uncertain.

Following new BMA guidance, we have recognized 20% of the DTA in capital for 2024. And delving into these results a little further, starting with our retail segment.

Hiscox’s Retail ICWP grew by 5.1% in constant currency to $2.5 billion, driven by continued good growth in Europe and the U.S. DPD and improving momentum in the U.K.

U.S. broker continued to act as a drag on the retail growth, shrinking 4% in the year, and we expect U.S.

broker to rotate back to growth in 2025. The retail insurance service result increased by 39% to $247 million as a result of an improvement in the undiscounted combined ratio of 2.8 percentage points to 93.6.

To achieve this level of profitability while continuing to invest in growth is a pleasing result and reflects the quality of growth being achieved. In 2024, we concluded the sale of Direct Asia, Thailand.

The remaining direct Asia business is held for sale and won’t be reported within the retail results going forward. Moving on to London market, ICWP declined by 2%, reflecting our proactive cycle management within casualty and our exit from space as the group remains focused on risk-adjusted returns.

And this is evidenced by an undiscounted combined ratio of 88.6%, marking the fifth consecutive year in the 80s range despite an active loss environment with several U.S. hurricanes making landfall and a number of man-made losses.

Turning to Re & ILS, net ICWP is up 11.1% as the business has continued to deploy additional capital into attractive market conditions. The strength of the portfolio we have built is demonstrated by an insurance service result of $166 million and an undiscounted combined ratio below 70% for the second consecutive year, an excellent performance in an active loss year.

This is recognized by our third-party capital providers with new ILS inflows of $460 million and growth in Outwards quota share capacity. These alongside higher profit commissions following the fantastic underwriting results in both 2024 and 2023 have resulted in record fee income of $128 million.

Looking at investments, returns from coupon on cash have continued to grow as high yields have earned through delivering an investment return of $384 million or 4.8%. The reinvestment yield has fallen slightly to 4.6%, while the quality of the fixed income portfolio remains high with an average credit rating of A.

Through the course of the year, we have extended the duration of our assets to 1.8 years to more broadly match that of our claims liabilities. And these strong investment returns should continue to provide a tailwind for the group.

Moving on to discounting, the net discounting impact from IFRS 17 was a positive $16 million in 2024. The unwind of $154 million is in the middle of the guidance range of $135 million to $165 million.

For 2025, we expect the unwind to be between $125 million and $155 million. We’ve updated the interest rate change sensitivity to reflect market conditions and the balance sheet as at the 31st of December.

Looking at reserves, our conservative reserving philosophy remains unchanged with a risk adjustment of $267 million and a confidence level of 83% within our 75% to 85% range. In addition, our LPTs cover over 37% of gross casualty reserves for 2019 and prior and provide protection from inflation and other pressures.

Turning to reserve releases. The group has continued its long history of favorable reserve development with a release of $146 million or 3.7% of opening reserves for 2024.

The group’s prudent reserving has delivered sustained releases with all recent accident years below the initial estimate and continuing to run off favorably. Finally, an update on capital.

The group has generated significant capital in the year, reflecting excellent profits, the recognition of 20% of the Bermuda DTA as well as the benefit of some technical optimization. The group remains strongly capital even after the impact of a significant loss scenario.

And as you can see, the strong BSCR position means we are again able to announce a special capital return of $175 million via share buyback after taking into account our ambitious growth plans and capital required to maintain a strong balance sheet. Even after the impact of the new buyback, the step-up in the ordinary dividend and the expected loss from the California wildfire, the group’s pro forma BSCR remains strong at 198%.

The step-up of our dividend reflects our high-quality growth and building momentum in retail. And going forward, we expect to return to a more steady period-on-period increase in DPS growth.

I will now hand over to Jo, who will provide you with an update on underwriting.

Thank you, Paul, and good morning all. So you’ve heard how we’ve grown and delivered an excellent underwriting profit as we continue to benefit from a portfolio of quality, balance and choice.

Our effective cycle management and our underwriting strategy of cyclical growth in our big ticket business and structural growth in our retail business gives us the opportunity to expand profitably through the cycle. Looking at our business in more detail.

Retail growth momentum is building. Commercial is up 5% in constant currency with improving U.S.

DPD growth. In U.K., we’ve got pleased in double-digit growth in general liability and commercial property and in Europe, in emerging PI and general liability.

Our accelerated growth in Art and Private Client continues, and we’ve grown that 8% with U.K. high-value household, a standout at 18% growth as we benefit from our expertise and an underwriter – an AI solution rolled out to help our underwriters.

And in reinsurance, the market remains favorable. We have incrementally deployed our capital.

We’ve grown 4% gross and 10% net leaning into things like international and proportional where we’ve been underweight. And London Market, attractive but more nuanced byline as we manage the cycle in some portfolios and react to market trends in others.

As an example, in specialty, we’ve exited the space market. We didn’t believe that there was a route to profit because we believe the risk had fundamentally changed.

In product recall, it’s challenged and we’ve exercised discipline. Outside of these, specialty has grown 6% and London market tariff 16% as we see attractive market opportunities.

In Marine and Energy, hull and renewable operations have grown well. Liability and renewable construction have been affected by market trends, the latter because there were just less construction projects in the market in 2024.

And in casualty, D&O continues to shrink, continues to soften, and we have shrunk 13%. General liability was still taking rate and it’s growing.

But overall, I’m really pleased with how our London market team continued to manage the various micro cycles in their portfolio, delivering another undiscounted combined operating ratio within the 80s. So moving on to rate and market.

The graph on the left-hand side will be familiar to you. This is our rate index back to 2018 for our various segments.

And the attractive rate environment sustained in 2024, London market rates up 2%, the reinsurance rates holding. Retail up 2%, almost generally less cyclical with regard to rates, taking rate has been necessary in our retail portfolio over the last few years as we’ve dealt with a higher inflationary environment, where we continue to see a positive delta between claim inflation and the assumptions that we took.

As you know, 1/1 is a key renewal date for us and we typically write about 45% of our reinsurance business and about 20% of our London market business in January. And for the first year in about 7, we saw some rate decline at 1/1 renewals.

So rates were up about 3% in London Market and about 8% in our reinsurance property cat. Now what we’ve shown on the right-hand side is a view for you of our view of rate adequacy within the portfolio.

And you can see the vast majority of our portfolio is priced to deliver attractive returns in a mean loss environment. Whilst we’re a net beneficiary of reinsurance rates, we’re also a significant buyer of reinsurance and our Outwards team did a great job at 1/1 of placing our own program at substantial savings.

So, moving on to claims and the very busy first half continued with a very active second half. Managing and paying claims is exactly what we’re here for and how we earn our reputation.

Like others, we look at our claims through the lens of attritional, large and cats. From an attritional point of view, frequency was slightly up, returning to more normal levels.

From an underwriting point of view, it’s all about anticipating current and emerging trends. It’s all about understanding inflation and then ensuring both of those are taken into account and reflected in our rates and our terms.

We were also notified of many large risk losses in 2024 well over 200 losses notified to us have claims in excess of $1 million. And that’s about an 8% increase year-on-year.

From an underwriting point of view, it’s all about spread, it’s all about balance and diversification and then managing our exposure through both line size and risk sharing with our partner reinsurers. And then catastrophe, 2024 was a very active nat cat year with over $145 billion of industry – insured industry losses.

Again, from an underwriting point of view, it’s all about us being focused on understanding that changing nature of peril, utilizing our own view of risk and marrying that to the external science and models on a forward-looking basis. And also, we’re a utilizer of third-party capital and reinsurance for both relevance and also to protect our peak volatility.

So in summary, 2024 was a very active year from a claims point of view, but we served our customers well and our portfolio has demonstrated resilience. So whilst not in our numbers, California had a devastating start to 2025 with the Los Angeles wildfires.

And of course, our thoughts are with all of those who were affected by this event. Our #1 priority is to support our customers and cedents, and we have already paid over 70% of losses presented to us.

We understand our loss and our exposure through both a top-down market share analysis and also a bottom-up analysis working with our customers and cedents. And as you’ve heard, we’ve estimated our loss for this event to be $170 million, and that’s based on a $40 billion industry loss, the vast majority, $150 million in our Reinsurance segment.

We then look at a post-event evaluation, and we check the loss against our models and then we look at our capital and reinsurance. Our loss is within modeled range.

We were an early adopter of the version 12 model change, which was at the back end of 2024, which saw a significant uptick for California wildfires. You heard from Paul, our capital remains very, very strong.

And in terms of reinsurance, our London market program intact, and we reinstated our retro program, and we bought some additional protection on both a second loss basis and also, we placed a $200 million catastrophe bonds out of our retro 1/1 savings. And then lastly, the future of this event on the market, clearly, our own customers will need reinstatements, potentially backup and we’ll see as we progress through the midyear is the effect in terms of the market and rates.

So in summary, whilst an extremely tailored brand, this is modeled and within contemplation and our ability to execute our own plans for 2025 and our appetite is unchanged. So this is a slide we showed at the half year about how we’re investing in technology across all of our business to do 1 of 4 things: Firstly, ease and speed of doing business, understanding our customers, helping us to risk select and price and then lastly, operational scale and leverage.

And whilst we’ve got many, many pilots running across our group, I thought I’d showcase the ones that are in underwriting. So we’ve been a user of technology in retail underwriting for many, many years.

And in our digital space, over 95% of our business is automatically underwritten. But we’ve now turned our attention to our trading business.

So what you have on the slide is green, where we’ve had pilots, Amber, where we’re scaling them next and then gray when they’re on a broad implementation road map. So just to pick out a few examples.

So top left, so this is our submission, automation to all that we’ve built in our London market. As you heard, we piloted in terrorism.

It’s now rolled out and it’s in production and it’s helping our underwriters and contributing to that 16% growth that I talked about earlier. We’ve now scaled this to a major property, and it’s on the broader road map to roll out to our London market lines.

And then bottom left, a couple of retail examples. The first, the one that I mentioned earlier in our U.K.

high-value homeowners, we built an AI tool to assist underwriters to basically automate the submission and to triage. And again, that is contributing to the growth in that line of 18% alongside our E-Trade capability and our expertise.

Same number of underwriters are quoting about 50% more business. We have another similar example in our U.S.

business where we’re rolling out a pilot technology to assist our Cyber underwriting from what would be hours in terms of producing a quote to minutes. And then clearly, we’d look to roll out both of those technologies across the broader retail franchise.

And then lastly, top right, contract comparisons. We rolled this out in our reinsurance business.

So this doesn’t just save our underwriters’ time but it immediately highlights any change in terms and conditions and coverage. And clearly, that has very broad applicability across the whole of our business, so we will look to roll that out more broadly.

So here is just some examples, but I’m really excited what we’re going to achieve in this space. And back to Aki.

Thank you, Jo. So to wrap up on what you’ve heard today.

2024 was an excellent year of delivery. Growth and earnings momentum is building in retail.

And in big ticket, we’ve captured opportunity in a disciplined way. We’ve delivered an excellent result with a combined ratio of 89% and a return on equity of 19.8%.

Our confidence in the balance sheet strength and earnings momentum of the group enables a significant step-up in our progressive dividend, with a final dividend up 20% and the declaration of a further substantial return on capital of $175 million through a share buyback. So as I said, an excellent year with significant financial flexibility to pursue an ambitious growth plan.

So, now as customary, some thoughts on the outlook for 2025, beginning with retail. In retail, I expect positive momentum to continue building with retail growth to be above 6% in constant currency in 2025.

London market is expected to return to growth as we continue to see positive market conditions in the property segment in particular. In Re & ILS, we continue to deploy incremental capital into attractive market conditions.

Hiscox is a leading specialty insurer with a unique and diverse business and best-in-class underwriting, underpinned by our entrepreneurial business builder culture. Our big ticket colleagues excel at cycle management to optimize risk-adjusted returns.

Our retail business is now delivering accelerating growth momentum and strong profitability and this positions the group extremely well to deliver growth and attractive returns through the cycle. We are at an exciting time at Hiscox.

We’re now better placed with more confidence and certainty to seize the long-term structural growth opportunity in the U.S., in the U.K. and in Europe.

We’ve got a great story to tell, and we’re excited to be hosting our first ever Capital Markets Day on the May 22 in London. I’ll be joined by Mary, John and Robert, our three retail CEOs.

They will provide insights into each of our retail businesses and how we will capture the market opportunities ahead of us. Shali, our new Chief Operations and Technology Officer, will be there to set out how we will deliver operating leverage in this next phase of our journey and how this will fuel our growth.

And of course, Paul will join to provide this perspective. Now the May event will be followed by a spotlighting of our big ticket businesses in the second half of the year.

I hope you’d be there. For now, thank you very much for listening and we’ll turn to questions.

Thank you very much. Can you hear me?

Yes.

Okay, good. This is Ivan Bokhmat from Barclays.

Thank you very much for the presentations. I have a few questions.

Maybe the first one on the 6% target for retail, I mean you’ve talked about some segments accelerating into double-digits, I was just wondering if you could provide a little bit more color on where the confidence is the strongest around the 6% number? We’re seeing the broker returning to growth as well.

So maybe a little color on that? Secondly, I don’t know maybe it’s a question to Paul, maybe to you.

When you think about the average expectations of cat losses, I’m thinking about maybe the previous 2 years and 2025. What is the number that you have in mind?

I mean, from history, I look back and it’s 5%, 6% of net insurance revenues, like $200 million to $250 million, the wildfire seems to be kind of way ahead of the run-rate. And as I – as we think about the 2025 profit ambition, it would present a challenge to keep growing that earnings.

So maybe you can talk about some offsets that you have to keep delivering that? Thank you.

Okay. Thank you, Ivan.

So in terms of the cat loss expectations and how we think about that, I’ll pass it across to Jo. I’ll cover the growth and the profit expectations.

In terms of confidence in our 6% growth, this has been a gradual journey where we’ve increased growth to 4% in ‘23, 5% in 2024 and a further expectation of the momentum continuing in 2025. Now those statistics and themselves really don’t – they kind of mask the actual improvement that we’re seeing.

If you remember, we were in a peak inflation era where substantial rate has been driven through the book. So 2023 growth, the 4% was helped materially by rates.

2024 was not. And if you look at the underlying numbers, or the underlying assessment, the figures that we see, there has been a material uplift and that’s the management actions that we’ve taken over recent years, which include reinvigorating the brand, adding distribution capability, some of the efficiencies that you heard Jo talk about, all of those are contributing.

And they’re not in any single business unit or a single cost of business, but across the piece. So, all of those factors give us confidence.

I mean if I think about policy numbers, the policy count – the new business policy count doubled in 2024 versus 2023 for the retail business. So that gives you a measure of the actual improvement and what our confidence is based on.

So plus 6% is where we’re picking it for 2025 with momentum continuing to build through the year. In terms of our overall profit expectations, I’ll hand over to Jo for answering the cat loss expectations.

It’s one of the benefits of the diverse portfolio we have across the group. And if you think about the effects of the wildfire, they’re more or less isolated to one particular business.

And a particular business where, as you know, over the last 2 or 3 years, there has been significant price correction. And therefore, on the whole, our view is that we’re paying – paid adequately for the risk that we’re taking.

Our London market business is a much more diverse business, which has been largely unaffected by this and it has, frankly, an excellent record of profitability over the last 5 years. Now I’m not going to give you a profit expectation but all the disciplines that we put into place over the last few years continue.

And with that, we also expect growth. And then, of course, we have our retail business, which is not cyclical, is nowhere near as volatile as the big ticket businesses.

And as you just heard we say, we are now more confident and more certain of our ability to capture the long-term structural growth opportunity and I’m expecting positive momentum both on the top and the bottom line. So when we think about the group overall, the group continues to be well positioned to deliver attractive returns and to grow through the cycle.

Jo?

Thanks, Aki. So yes, so when we think about our cat, I think what I would say on this event, it is an extreme event.

If you look at previous wildfire events sort of 2017, 2018, they’ve been around the sort of $10 billion. So this is an extreme event.

However, it is modeled. It’s a tail event, but it’s in contemplation and it is modeled.

And as Aki said, this is off the backdrop of a very robust and high rate environment in our reinsurance. And I think I would just point to either maybe the last couple of years, we’ve delivered a sort of low – sort of under 70 combined operating ratio against a backdrop of 2 very active cat years, $145 billion of cat losses in 2024, the notable ones of Hilton of – Milton, Helene towards the end of the year.

It was a very, very active year. And I think what it demonstrated is the resilience within that portfolio.

I think the other thing we put in place the exhibit on our rate adequacy just to give you an insight of where we believe those portfolios are priced. So it is modeled.

Yes, it’s in the tail, it’s in contemplation and we’re getting price to take that risk. Building on Aki’s point, clearly, it is one part of what we do, is reinsurance.

We got a very broad portfolio across our London market business, which again is a 1 line, it’s 16 different lines, so a diverse portfolio there and affected by this event and then in retail, clearly, completely unaffected by this event. So yes, it’s an extreme event, but it is in model, it’s in contemplation and we believe we’re getting price to take that risk.

Kamran?

It’s Kamran Hossain from JPMorgan. A couple of questions.

The first one is just on, I guess, the outlook that you set out for 2025. On the London market side, it sounds like you want to grow, you’ve been – you’ve had great results from a very disciplined approach.

If I look at the chart that Joe put up on adequacy plus adequate and then anything that’s kind of below that, it’s probably less exciting than reinsurance. So just wondering what’s the rationale at this stage of the cycle?

Like when you said prices are coming down for the first time a number of years that this is the right time to go off and maybe grow exposure there? The second question is on the capital return, the share buyback.

I think it’s very helpful to know the impact of the wildfires on the BSCR. Did the 11% impact play into your decision on how much to return today?

Thank you.

Okay. Thank you, Kamran.

I’ll give you a view on the capital return. In terms of London market growth, Jo will provide a perspective on that.

In short, Kamran, the – not in any significant way, the wildfires did not have a significant impact on our contemplation of – on the Board’s contemplation of the capital return. As you can see and as Paul has evaluated, the balance sheet remains robust.

And I think over time, we have demonstrated and we will continue to demonstrate that we are good custodians of shareholders’ capital. We have our capital framework, which I think everybody is familiar with.

First and foremost, we deploy for growth. Secondly, to maintain balance sheet strength and any excess is returned.

And that’s the framework that we continue to apply.

Yes. In terms of the charts, I mean when we talk about adequate plus adequate, that’s to deliver attractive returns in a mean loss environment.

So, we believe in – for the vast majority of our London market is in a really attractive position. We have built a quality diversified portfolio and we see really good opportunities to grow.

I think a couple of things to add. I think if you recall, in 2020 – the beginning of 2024, one of the reasons that we have had some slight contraction is because we removed some of our deployed aggregate from a couple of binders and we look to deploy them later on in the year.

Clearly, we have done that, but that earnings doesn’t start coming through a little bit in ‘24, but mostly into ‘25. So, that’s one reason that we are confident in terms of that outlook.

Another – we just talked about there are pockets of really good opportunity for us. We have built out our ESG syndicate.

We have invested in capability and engineering capability. We are expecting more construction projects, renewable construction projects in the market in 2025 as opposed to 2024.

We talked about some other areas that we grow in, London Market, Terra as an example. So, we are seeing some really good opportunities.

You are absolutely right, though, we are disciplined underwriters and you can see that in our casualty where D&O has softened and we have shrunk at 13%. Clearly, if rates continue to come down, we will exercise that discipline.

But I think the pleasing thing there is that segment is profitable. We are still getting paid adequately for the risk that we are taking.

But clearly, we manage these micro cycles. But yes, I think we have got a good outlook for our big ticket business, both in terms of London market insurance and of course the reinsurance segment.

Andreas.

Andreas Van Embden, Peel Hunt. Two questions, please.

First of all, on the fee income, the $128 million, that’s quite a chunky number within the – I don’t know whether all of that is reinsurance, where it’s across the board. I just want to just check how sustainable that is.

I assume there is a huge amount of profit commissions in there. I just wonder whether you could split that out between profit commissions and the management fees on the $1.4 billion assets under management.

I also wanted to check whether this includes quota share ceding commissions, whether it’s like an aggregate number or it only pertains to the ILS third-party capital? And my second question is on casualty, please.

Of the reserve releases of $146 million, could you maybe highlight whether this includes also releases within your casualty book, particularly U.S. casualty?

Could you comment on how the recent vintages 2021 to 2023 have behaved, particularly in the general liability line? And whether there has been any material increase in your loss picks for that U.S.

casualty book? Thank you.

Thank you, Andreas. And I think both of those for Paul.

Yes, great. So, in terms of fee income, the $128 million that we quote is entirely Re.

You can see the group number is $113 million that washes up in other income. The difference is because within Re, you have got about three lines of geography where those fee incomes arrive, it’s either premium or claims or the other income line.

The predominant amount of other income is ILS fees. So, the way that splits, I think it’s important to bear in mind that a significant proportion of that fee income is volume driven.

And I think if you look at some of the things that we have been pleased with in 2024 going into ‘25 is, one, the ability to attract $460 million of additional capital and grow our quota share outwards, so that all helps on the sort of volume side. And it’s absolutely right to point out on the profit commission, we have benefited substantially from the 69% combined ratios of ‘23 and ‘24.

So, high profits, clearly going into 2025, that’s more uncertain with the January wildfires, but let’s see how the year plays out, but current expectation is that the PC element will be lower than it is in ‘24. And then I think in terms of reserve releases, one of the things that’s pleasing for me, and you have seen me talk about it is, from an overall perspective, we have a conservative reserving philosophy.

And you can see in the presentation, you have got the each year account coming down year-on-year-on-year. So, what we have seen is reserve releases come out for each of our business segments.

And I think the other aspect that we have got on that is not only is a risk adjustment, pretty strong, nearly $270 million, but also you have got the other aspects, as you can see the LPTs cover about 37%. So, I think from my perspective, the reserving component of the balance sheet is very, very strong.

Now, in terms of recent vintages and various line items, you are going to get some ups and downs here and there depending on any lines in any year. But I think the overall sort of track record is very, very consistent.

And in terms of going in loss picks, we have not seen anything sort of dramatic change.

Will.

Thanks very much. Will Hardcastle, UBS.

So, I guess the BSCR post distribution, thinking about California wildfire or not is somewhere around 200 to 210 that sort of range. I guess is that the right sort of number if the growth is in this environment to think about future capital distribution, or is there something else?

Is there another binder constraint that should point you away from that and think about something else? And on the second one, just thinking about California wildfire, the loss disclosure by the divisions will be helpful.

There has been a fair bit of press about the art, etcetera, and there was a linkage with Hiscox. Obviously, it’s a big book.

I guess anything you can say on – I mean I would assume that’s not in the Re & ILS loss. And just it’s a bit greedy, but it’s still California wildfire loss related.

I guess in that $170 million, is that inclusive of that new cat bond issues, or is that on top? I am just trying to think about the protection as well going forward.

Thanks.

Okay. In terms of the capital and the strength of the balance sheet, Paul, can you take that?

And then in terms of wildfire and the loss makeup in the art, Jo?

Yes. Sure.

Yes. So, just to orientate people, you are right.

So, you can see that we are around the sort of 210 level before the wildfires. Now, I think when looking at balance sheet strength going into 2025, it’s important to take account of the things that we know about and have already recognized or will recognize in Q1.

So, what it does envisage, for example, is the wildfires that you can see up there. What it doesn’t include is clearly the February cat bond that we issued as well as the capital regeneration prospectively into 2025 that we would expect normally to generate.

As regards to sort of the 198, once you take account of that wildfires, we have traveled in and around the 200% for about the sort of recent history, but we don’t have a target range for BSCR. You have heard from Aki, that we have a very well-defined capital management framework.

We see a lot of opportunity for deploying capital for growth into 2025. We have already done that at 1/1.

We want to continue to capitalize on the structural growth opportunity within retail. And so from that perspective, that is almost like the first priority.

The second aspect then is ensuring that we have got a strong balance sheet. The 198, you can see enables us one, to absorb a very significant loss scenario, $650 million there as an illustration, but also to capitalize on any opportunities that may arise through the year.

So, I think it’s not a constraint, but what it is, is ensuring that we have got the financial flexibility to take advantage of opportunities as they emerge. And then I think the last aspect is the binding constraint.

So, really the binding constraint that we look to is the S&P rating. And that is pretty – we have got a lot of headroom from the 198 that we are currently showing.

Yes. And then picking up the wildfires loss, yes, so the vast majority of our lost $150 million of the $170 million is in our reinsurance segment.

We have not seen any material losses from an art perspective. The rest of that loss is shared pretty equally between our London market business and our U.S.

business, so yes, nothing specific from art. In terms of what that number contains, so this is – includes all reinstatement premiums.

It also doesn’t include any subrogation. So, if you think of the modeled number, I think in the model, it takes into account about 20% subrogation.

We have not included any subrogation for to be cautious. Albeit there is going to be potentially some subrogation on these events.

But yes, it’s including the reinstatement, but not the cat bond. The cat bonds actually, we were already in – already buying the cat bond, this is unrelated to the wildfire.

We are already in the market because we saw substantial retro 1/1 savings across – reinsurance savings across our portfolio and the cat bond market looked attractive. So, we were already out in the market looking to place between $150 million and $200 million bonds.

It just happened to coincide that we completed that and secure that just after, but they were unrelated.

Abid be over there. Just give me a moment.

I need a bit of water. It’s quite dry up here.

It’s Abid Hussain from Panmure Gordon. Thanks for taking my question.

Three questions, I think still. First one is on tax.

Were you surprised by the tax rate change, or was that broadly in line with where you thought you would end up? The second one on growth, I know there has been a few questions on growth.

Just wondering if we can get more color in terms of which lines across the big ticket you are looking to back in 2025? And I am thinking in terms of any examples you could give across quota share, excess of loss and any particular lines that you are looking to back and indeed exit?

You have mentioned Terra is an area of growth, but just anything else would be useful. And then the final question is on retro.

Has your overall retro protection cover increased going into ‘25? And then if possible, could you share what the price of retro per unit risk has done?

Has it sort of stayed flat, come down, or is it up year-on-year? Thank you.

Thank you, Abid. So, I will take the question on growth.

Paul, can you take the question on tax, and Jo, on retro protection. In terms of growth in our big ticket businesses, which I think where the question was directed, in our London market business, I think you heard from Jo, there are definitive pockets of business where – which we believe are attractive.

And by inference, that is where we are going to target. But London market is a diverse portfolio.

And what I don’t want to do is give you a growth target by the line of business. But overall, when we look at the whole portfolio, it is attractively placed.

And we expect the business to grow. Some of the context behind that is, as you know, we came off a couple of binders last year for a number of business reasons.

And we redeployed that aggregate. So, that was already redeployed before the year was out.

That is just going to earn through in 2025, and we have also then signed up a few more opportunities in areas that we regard as attractive. The tariff team and the tariff book, I mean we are a market-leading underwriter of that business.

We have been doing this for, I think they are in 50 years. And at the moment, that is a very attractive area for us.

And then, of course in our reinsurance business, we deployed incremental capital at 1/1, and we have seen attractive growth in our net book. The rest of the year will depend on how the market conditions play out.

As we look forward today, we think the rate reduction that happened at 1/1 may well moderate. In which case, we will look to deploy more capital.

If that doesn’t happen, then we will think again. Paul, can you take the tax question, please?

Yes. And I think on tax, I think there are several levels to the question around surprise.

So, I think the first one is we have been trailing for a period of time that we expect the ETR to go up on the basis of the implementation of the global minimum tax. I think where there has been variability is just the implementation of one, the OECD guidelines.

And then secondly, the Bermuda legislation as they interpret and implement those guidelines into their own tax law. And I think what you have seen is way back when 2023, the back end of 2023, there was the ability to recognize the deferred tax asset of something like $150 million.

And you will recall that what we did is recognize it for GAAP as following the accounting guidelines. But then from a capital perspective, we deliberately didn’t recognize it, and that was partly because the guidance was you couldn’t.

But also I think there was await clarification. Now, what’s happened subsequently is there has been new guidance issued in January of this year by the OECD.

The sort of Bermuda regulators have helped interpret that. And really the direction is to say that essentially out of that $150 million so of deferred tax asset, only 20% will turn into economic benefit in simple terms.

So, in essence, what we have done is said we will recognize 20% into capital. And that’s the sort of the – how we have applied that.

So, not really a surprise, I think there is a trailing it around where we expect the ETR to go and then interpreting it as we go and apply it.

Yes. And then picking up the reinsurance, so we don’t disclose our detailed reinsurance structure, but we are a heavy buyer of reinsurance across all of our business lines and across property, casualty and specialty.

I mentioned that clearly, we planned for our reinsurance spend for our retro and our London market property insurance spend. We have made a plan, and our outwards team did a great job and placed our program with substantial savings.

Hence, the cat bonds that we are already in the market to utilize some of those savings.

Faizan.

Hi there. Faizan Lakhani from HSBC, I wanted to come back to the capital on Slide 19, specifically.

If my math is correct, the capital generation, 43 points translates to roughly about $800 million to $900 million. That’s substantially ahead of the net income, does generate an IFRS 17 basis.

I understand there is a delta between the two based on methodology. If you could just sort of bridge that that would be helpful.

Second, coming back to Ivan’s question from a slightly different angle, if I look at the four elements, Europe, UK, DPD, they are all above 7% growth with momentum and you are guiding for above 6%. So, is there an underlying headwind that we are not thinking about in there?

And implicitly, what have you assumed for rate within retail? Thank you.

Okay. Thank you, Faizan.

I will take the question on growth and Paul, if you can take the question on capital. So, thank you for that question.

So, yes, as you say, both U.S. DPD and Europe are growing above the level that we have guided today.

The UK is slightly below. And the U.S.

traded business has been contracting. Now, as I mentioned earlier, the U.S.

traded business, we do expect to return to growth. You won’t immediately flip, but we are seeing very positive trends.

So, I do expect that to be positive in 2025. The UK business will grow in momentum, as will our European business.

So, the guidance that we are providing is in excess of 6%, not at 6%, and the momentum will build as the year progresses.

Yes. And then just in terms of the capital generation, what is great is that it’s been very strong in 2024.

So, the lion’s share of that is the strong profits that we have generated and the two other things we draw attention to is. One is the 20% of the DTA we have booked, but that’s modest.

It’s a couple of points, 2.5%, something like that. And then the balance is just every year, we look at the internal model is just part of our general housekeeping.

And through that, we had some optimization. It’s sort of a handful of solvency points, but around certain of the risk charges we deemed were too prudent.

That’s it. That’s the component.

Derald.

Hey. It’s Derald Goh from RBC.

So, sticking to capital, as you said, historically, post capital returns used to run around 200% at year-end. Now you are at 210 before the wildfires and then you bought those cat bonds, meaning you might have been some 15 points of excess to which you said it didn’t impact your capital returns.

What will you plan to use all that 10 points, 15-plus points for? And then secondly, I guess with back to the retail growth guide.

On one hand, you can say more than 6% is ambitious have been a bit of realistic based on the recent run rate. But the big picture, you could say it’s prudent, right, relative to the 5% to 15% that you should talk about, so just looking for a bit of context as to whether that 5% to 15%, is it no longer relevant and now we are a bit more realistic?

And could you also speak to the undiscounted retail combined ratio improvement within those growth plans? Does it mean that the improvement might moderate as you push for growth?

Thank you.

Okay. Let me take these questions.

In terms of capital, I will reiterate our capital framework. We retain capital for growth.

We retain capital for balance sheet strength and the rest is considered for disbursement to shareholders. That’s the approach that we have taken.

That’s the approach we will continue to take. I think if you look back at our track record, over a long period of time, or indeed over the last couple of years.

I think we have shown ourselves to be good custodians of capital. We also operate in a market where opportunities can emerge and hence, we retain a degree of balance sheet strength to capture those opportunities as they emerge.

And frankly, we will have the same conversation in 12 months’ time. And if there is any surplus capital, then we shall be returning it, and we can go through this again.

Secondly, in terms of retail, is the 5% to 15% still relevant, yes, it is. We have various businesses that operate at various points in that 5% to 15%.

Some operate at the upper end of that, including our direct-to-consumer business in the U.S., a couple of businesses in Europe. You heard earlier from Jo on our UK PC business, which is growing at the upper end, indeed slightly above the upper end of that range.

So, it continues to remain relevant, but also what I have heard from all of you is it’s a very wide range. It’s been around for a long time.

And therefore, the intent this year has been just to provide a little bit more precision on the guidance that we expect it to be in excess of 6%. In terms of the – what might happen to the combined ratio, look, what you saw in 2024 is an improvement in both bottom and top line.

For 2025, we expect the momentum to continue. Okay.

Well, I think we are done. Ivan wants to have another go.

Okay.

Thanks very much. Yes, sorry.

So, I was just wondering, in the past, you were talking about the combined ratio kind of through the cycle for the large ticket businesses for the London market and Re and ILS. Maybe I could ask for your view given the renewals of whether those numbers are where we are sitting here.

And secondly, the question, I appreciate all the color on reserving that you gave, Paul. But maybe on the LPT, I am just wondering if you could maybe update on how much headroom you still have there and if there is anything to flag?

Thanks.

Okay. So, grand total of five questions from you, Ivan.

So, look, I will give you a response on the call. Paul, if you can take the reserving question.

I don’t think we have ever provided a through the cycle combined ratio guidance target for our big ticket business. It is not something we would do.

We have done for retail, that is maintained. But just to reiterate, we regard both the reinsurance market and the various – and the London market business as a whole.

They continue to be in an attractive part of the cycle as we have entered 2025.

Yes. And simplistically, if you look at the LPT, the aggregate limit that’s available is still very significant.

Well, thank you very much, everybody. Thank you for listening, and thank you for those great questions.

So, in closing, it has been another strong year of delivery from Hiscox. And as a reminder, we have delivered high-quality growth, record profits, accelerating momentum in retail, a substantial capital generation and a significant step-up in our progressive dividend and a further substantial return of capital through share buyback.

And we are optimistic about the future. We are excited about what we are doing at Hiscox.

And hopefully, I will see you again in a few – on the 22nd of May actually. So, hopefully, I will see you then.

Thank you very much.