Beazley Stock

Good afternoon, everyone. Welcome to a packed Beazley 2025 Capital Markets Day. I hope you're enjoying your new seats.

There'll be a test later. Hence, the school room feel this afternoon. I'm hoping it will be an informative and useful session for us. So we split it into 2 sections. The first goes into some detail about our business model, how this enables us to produce a consistent financial performance and maximize opportunities across cycle.

And the second, which is the one I think you're waiting for is where we introduce some of the plans we have for the next 5 years to generate idiosyncratic growth alongside that consistent financial performance. It will demonstrate our ambition to seek better access to risk and increasingly risk that is not directly in the mainstream marketplace and new products of emerging demand, which we believe we have value to add in.

So I'll take you through the intro to the first section, Barbara will talk through the financial performance and then Paul, the opportunity maximization. We will then have a well-earned break, and then I'll discuss some of our future plans.

As we'd like to highlight, our focus always is on delivering strong financial results and our track record of almost unbroken profitability, we had 1 blip in our 40 years during COVID in 2020, which demonstrates this. Insurance will always be a cyclical business. It's an industry that doesn't know the cost of the goods it's selling at the point of sale. We learn as the claims develop, and we estimate the impacts of changes to the claims environment. We are always playing catch-up as insurers. So being adept at managing that innate cyclicality, learning and adapting faster than the market is the cornerstone, I think, of a high-performing insurer.

We're able to do this because we're constantly reviewing and refining the key components to that business model, which is a product set that reflects where we can add value and good access to risk in a marketplace, where distribution is inefficient. To that end, we have more than 50 individual products at different levels of maturity, demand growth, claims attributes and pricing cycles.

And then alongside that, we have a platform strategy that focuses on access to risk and being closely aligned with our brokers. Over the last 4 decades, we've grown from a single private Lloyd's syndicate to the largest business in Lloyd's, a U.S. operation writing over $2 billion of premium and a relevant and important player in the E&S market, and an operation in Europe, which we began 9 years ago now, which is building a strong brand as a relevant specialty insurer with a unique set of products in that market.

We also have a reputation of being able to innovate and to invest in products throughout the cycle. We're very choosy here at Beazley about what we do and what we don't do, but our commitment to being a consistent partner is very important to brokers and clients, who have too much experience of insurers coming in and out of classes which makes their lives a lot more complex.

So if we go into the business model, there we go. So how do we choose what products to underwrite? Firstly, we are clear on where we can add value. We deploy a Beazley empowered decision makers at the point of sale in underwriting and in claims. These decision-makers are subject matter experts and making add value in 1 of 2 ways. Either the product has complexity, which means that expertise can allow us to select and price risk and to adjust claims better than the market and/or the customers, brokers and insurers want access to those decision makers who can understand their business, know what they're talking about, make decisions and customize solutions.

For most of the insurance world, what we have doesn't drive competitive advantage. You have no interest in talking to the underwriter insurers your car or your home. But for a shipowner whose fleet is the most important asset he has or for a law firm, who needs their E&O coverage to trade or for a hospital for whom cyber risk can be existential, access to those decision makers is very important. So that's where you find us where risk is volatile, complex, new or changing. We're a specialty insurer.

So there are 3 other attributes we look for when we're selecting product. The first is, is there natural demand growth. We like to be in pools of risk that are growing rather than static. It's a lot easier to grow throughout a cycle, when there is that natural increase in the size of the pool, where the only way to grow isn't to take business off somewhere else.

The second hurdle is can the product generate a 15% return on equity throughout the cycle, which is and always has been a core KPI for us. And the third thing is, is the distribution of that product complementary with our footprint. We are not a large composite insurer with offices in every country. So we prefer that our distribution is more hub in larger cities in Paris, Munich, New York, Chicago, Toronto, et cetera, and in the big wholesale markets, London and Singapore.

That product set that we have is continually evolving to take on new risk, but also to be able to stop doing things that are becoming mainstream or where we can no longer add that value. Our business model is clear. It's focused on delivering for all our stakeholders throughout the cycle and for the long term.

And whilst, as I said, we value consistency, we're also agile in allocating capital to the right opportunities at the right time and pulling back, when conditions change. We are pioneers oftentimes and scalers able to adapt and develop new revenue streams into significant opportunities, cyber, the most obvious one, but also fast follow with 5623 and safeguard our sexual abuse product. And we never lose profitability as the key performance indicator.

So as I said, we started back in 1986. We're celebrating our 40th anniversary or 80 years as we like to say, because if you add up all our platforms, it adds up to 80. So we add up our experience like investment managers do. We started as a Lloyd's company, doing just 2 things: property reinsurance and U.S. liability, all backed by third-party capital, but roll on 40 years and we built a product set of over 50 classes in 3 platforms, Lloyd's still the largest North America where we've been onshore, since 2004 and in Europe.

But as we've expanded across the world, we've been very careful to keep our DNA with identical risk appetite, product sets, remuneration, expertise and approach to underwriting. We do like to stick with what we know and what we know we're good at. And we built slowly and methodically to establish a trusted brand as specialists with the North American and European brokers, which is something that takes decades to do.

You never really become a local market until you've been there for 20 years. So today, we now have our original Lloyd's platform around half our premium. Our North American platform at about 40% and Europe at about 10%. This provides us with options to deploy capital, where we see the best risk reward and growth opportunities, so we can grow as well as maintain consistent profitability.

And with that, I'll hand over to Barbara, who will talk through our financial performance.

Thank you very much, Adrian. So welcome, everyone. As you've heard from Adrian, Beazley has been around for 40 years and a core feature is that we have delivered consistent, strong financial performance through the cycles. As markets are turning, I'll now talk you through some of the specifics of how we have been performing during the last up cycle because we think that's very relevant, including the impact of the investments we've made during this time, which have created value and enabled the benefits that we are now realizing. This graph shows you the premium growth we have delivered since 2010 against the risk-adjusted rate change each year.

During the last upcycle, we acted fast. We derisked at the start with modest premium reductions during 2010 and 2011. We were disciplined and ensured that we only invested in business which met our hurdle rates. We had identified new opportunities in which specialty insurance and deliberately prioritize how to invest in new capabilities to evolve our product suite to build cyber at that time. Hence, when rates persisted to be negative, we had laid the foundation in innovative and structural growth areas such as cyber and furthermore, in expanding our platform reach. This enabled us to grow whilst rates remain subdued and could be seen as a -- at an average of mid-single digits.

When the market started to pick up in terms of hardening rates, all the investments that we have made into long-term value creation meant that we then rapidly were able to expand our growth, leaning into the hard market and moving our compound annual growth rate into high single digits. All throughout, we didn't compromise rate adequacy and managing the cycle. We're being mindful of the evolving business that we had and that we wanted to continue to develop. With our innovative and entrepreneurial spirit, we furthermore identified new areas of structural growth, which enabled us to grow in the right markets at the right time, a testimony to our philosophy of disciplined underwriting.

Furthermore, we have a cross-cycle target to deliver the return on equity of 15% that Adrian just mentioned. And here, you can see that we have achieved an average return on equity in excess of this 15%, actually closer to 16% across the whole period. For the last 5 years, this has been even higher at almost 18%. The core delivery of our business is in the strong underwriting. That's what we're all about. But furthermore, I just want to highlight an important second source to our profit generation, namely our investment portfolio. This has doubled in size, since 2019 with an asset portfolio now in excess of $11.7 billion.

With an average yield currently at 4%, this supports robust capital generation on top of the underwriting profit we deliver. The portfolio is set up, first and foremost, to match insurance liabilities and ensure liquidity under all market conditions with the excess of the portfolio positioned to deliver consistent and attractive returns.

A big topic, I think, for today is around our capital. And this page, I just want to use to demonstrate how we actually manage our approach to capital discipline. This is very much in line with our capital strategy, and you can see how consistent we have been over time. In the years of 2012 to 2016, we returned additional capital to shareholders by way of special dividends, while still delivering premium growth.

In the last 15 years, we've also made a number of bolt-on acquisitions as part of our investment for the long-term value creation. An example of that is the First State acquisition that we did back in 2010, and that was to increase Beazley's access to midsized U.S. commercial property business, which wouldn't typically come to the Lloyd's market or Leviathan in 2016 to bolster the marine offerings.

As rates started to harden from 2017 or '18, we focused our capital on further organic growth areas, which already existed in the business and where the capital was used to create further value for our shareholders. This was realized through the premium growth I showed you on the previous chart.

Throughout the period, we have been paying ordinary progressive dividends, except for 2020, a year which was exceptional because the whole world was impacted by COVID-19 and therefore, we paused the ordinary dividends, but pick that up in the following year in 2021. At year-end 2024, we rebased our ordinary dividend by 76%, reflecting the growth we have achieved following our investments in both organic growth and expansion of our platforms, resulting in an ordinary dividend of $200 million. The strong performance we have delivered in the last couple of years also allowed us to return $825 million to shareholders by the way of buybacks in '24 and '25 of, respectively, to $325 million and $500 million.

So basically, the combination of the financial performance in both the underwriting and the investments just want -- leads me to remind you of our capital strategy. You've seen this slide a number of times before, which defines sort of the boundaries of what we do with the capital that we generate. We have an ambition to remain above an SCR ratio of 170% and then deciding how much capital we should hold above that level, we consider a number of factors.

First and foremost, we are a growth company. We seek to use the capsule for sustainable, profitable growth, which can generate the return on equity of 15% across cycle, taking into consideration growth opportunities in a horizon of 2 to 3 years. In a softening rate environment, where opportunities for organic growth are more limited, we also look at ways to deploy capital to support longer-term opportunities, for example, acquiring capability or the access to risk or distribution. Where surplus capital remains after taking these factors into account, we return the remaining surplus capital to shareholders.

And just to make it extra clear because we very often get questions in terms of how do we decide about where to deploy capital. I just want to elaborate a bit more on those decisions. As you can see, the starting point will always be investing in our organic growth, optimizing our return on equity on a stringent business plan, something that Paul will take you through in more detail in a moment. We have a strong commitment to our ordinary dividend distribution.

And in the case of whatever excess capital we then have, we assess potential opportunities that would fill potential gaps in the core of the business. That could be, as mentioned, enhancing existing capabilities or deliver missing capabilities, which would be aligned with our strategic vision and areas, where we see that could develop. Hence, when looking at inorganic investment opportunities that could accelerate the delivery of our stated priorities, continue to evolve our value proposition across products and platforms and ultimately enhance long-term shareholder value.

Any residual capital, we remain committed to distribute to our shareholders as we have done in the past. You've just seen it on the slide a while ago. And as mentioned, just in the last 2 years, we have on top of our ordinary dividends, bought back shares to the tune of $825 million, equal to buying approximately 12% of the ordinary share capital over the last 2 years.

As we've just illustrated, we've been very consistent and committed to decide and deliver on those 4 pillars of the capital strategy to ensure value creation in the long run. So for the agenda today, as we think about capital deployment, I want to specify a few things. At half year, we had a solvency capital requirement ratio of 287%. And as we know, the coverage ratio is generally higher at the half year than at the full year, as it doesn't contemplate the impact of next year's business plans.

However, last year, we saw an uplift in the SCR percentage at year-end because the impact of new business was more than offset by 3 factors. One was that we had a favorable movement in interest rates. They increased. So that was a relief on the capital for the investments. We saw additional cyber catastrophe reinsurance in the form of cat bonds. And then finally, we had some reserve releases in the long-tailed specialty classes.

This year, on the other hand, interest rates have fallen, our level of cyber cat reinsurance is broadly stable and the reserve releases are in the shorter classes. So all other things being equal, the SCR ratio will be lower at year-end 2025 than it was at half year. We then consider the investment in Bermuda. And for the purposes of solvency ratios, it will have an impact of roughly 10% to 15% in 2026.

As per usual process, we will be making a decision on any capital distribution at year-end and communicating this as part of our year-end results, contemplating all the factors that I've just been going through.

With that, I will now hand over to Paul to talk more about how we underwrite and how we position ourselves to deliver in any stages of the market side.

Thanks, Barbara. Good afternoon, everyone. So I'm going to talk a little bit about, keep the slide moving on, maximizing opportunities through the cycle and managing the cycle, which is something we've been talking a lot more about recently, particularly since the half year results. It's been something that has been quite a focus not just here, but in the market more broadly.

And I think, firstly, we're a growth-focused company, whatever part of the insurance cycle we're in. However, I think as we all know, today, the market is currently in the softer part of the market cycle. And as much as people see that as a challenge and a setback for us, that's really where we come to the front. If you look at the DNA here and the alpha underwriting DNA that we have amongst our trading teams and amongst our business, this is really when we work hard and really where that pays its dividends.

During the hard market, you saw us lean in the various hard markets, property, cyber, D&O, we lend in. And as you'll see in some slides in a little while, we lent in, I think, extremely well. But during the soft cycle, we have to derisk. We have to do the right thing. We have to focus on our price adequacy. We have to think more around innovation, access to risk, access to profitable business, looking through each line and understanding the risk landscape and how that's fitting with the wider insurance market is very important.

So today, I'm going to try and give a bit of a flavor of how we achieve this, how we do it, what's in some of that secret sauce that everyone asks us about all the time, and how we will deliver both through our platforms and our products to make sure we can outperform in the market.

So what this slide shows is really coming back to the alpha that we've all touched on the alpha underwriting that we've spoken about previously. We believe we are experts in seeking risk and building portfolios that will outperform over time. And as Adrian says, our business model now has even more flexibility to do so than it has even in the past.

Products and geographies can have different rate dynamics, different things happening around the world in different markets. Just because something is happening on cyber in North America doesn't mean it's happening in Europe, so and so forth. So you have to have those levers and that optionality in your business. And so having good access to risk across our 3 core platforms and a wide diversified product portfolio is very key.

This is what underpins our annual business planning process, which is rigorous. And we are constantly challenged, what should we do more of, what should we do less of, what do we need to stop doing, not just based on what we're seeing today, but what do we think the next 12 to 24 months is bringing to certain lines of businesses and how will we respond and how will we react to that and what profitability challenges is that going to give us.

We do this from the bottom up and every team gets challenged. We could have somewhere in the region of 75-plus business plans in totality across the company that myself and the business planning team are overseeing, challenging and thinking through every year. It's a 6-month process is very robust.

We're looking at the ROCs, the rate, the profitability, the future profitability, the past profitability, what are the trends in the book at the moment on the historic years, what are we seeing that we may or may not need to react to, what are other markets setting, what intelligence are we seeing from our reinsurance brokers, reinsurance partners and how you put all that together in the business planning process to come up with a true reflection of the plan for the following year and to make sure that all of our teams are achieving the ROE across the market cycle is really what we're doing.

As we've said and you can see here, we break it into 3 categories. We think about growth, BAU and derisking. 17%, we are derisking. And this is more than we would have seen in the past few years. Why? Because of the point we run in the market cycle. Derisking doesn't mean we're exiting 17% of our business, and I just want to be clear on that. Derisking may mean we're pushing for rate. We're taking other underwriting action, but becoming more risk selective. We are thinking around how we can drive that book back to the ROE that we know it needs to achieve to meet our cross-cycle targets.

And in some areas, yes, we do take a difficult decision to exit a line of business. If we can't get the profitability that we need, if we see no improvement and we see that we're struggling to get what we need from the market, then sometimes we do have to make those difficult decisions. And we will continue to take action on business that doesn't meet our criteria to make sure that we outperform as a specialty insurer over the market cycle. And this is really in action now as we go into the 2026 business plan.

But what I'd also point out is 80% of our business is in BAU or growth. We're still growing our BAU business. BAU doesn't mean flat. It means there's growth opportunities, but growth is where we see perhaps more growth, a little bit extra growth that's available for certain lines. And so I think the important thing to take away here is we have lots of growing parts and profitable parts of the business, and we are taking action boldly on 17% of the business to make sure that we outperform as we go through the next stage of the market cycle.

When I first spoke to you many years ago, particularly during the COVID times, everyone said, you know, you may -- you made many people think we're just a cyber player. But what this shows is we are not and nor do we want to be. But what I think this slide shows really well is just how diversified our business is. And when there's hard market, we're able to lean in, do the right thing, take advantage of the opportunities and then see that diversification come back over time.

And so as you can see, the proportion of our premium across our business lines can ebb and flow over any time. But broadly, we are agnostic on where the growth comes from. If there's a profitable growth opportunity in one of our key platforms and products, we will make sure we have the agility to execute on that. And that over time, you can see here from the cyber bars here in the blue, yes, we grew. We grew in the hard market, and you can see that flattening off in the softer market conditions.

Property obviously had a phenomenal hard market that we lent into recently. And again, you're starting to see some of that. So this is to ensure no single product goes above a certain size on a net group basis. And we work incredibly hard as part of the business plan to think through what are the markets going to do next year, what challenges could each of these product lines give us in terms of its total size, how do we manage that, are we comfortable that we can manage that as we often do, do we need to hedge a little bit more through some of our reinsurance relationships. We have lots of optionality and tools that enable us to do that.

Moving on into how we can lean into hard markets and do the right things in soft markets, whilst looking at growth. We picked a few examples to walk through. Some of these are in across our various divisions. So we're going to start with our MAP business, which gives us a really good example. MAP here is shown on a total managed basis, so not to be skewed by some of the structural changes that we've spoken to around in recent results and recent years. But what you can see that MAP continues to show good growth. It's a line that we've always said is exposed and benefits from geopolitical risk and uncertainty in the world, and it's at the front line of many of those opportunities.

You can see here that even when something that impacts MAP happens such as COVID-19, having a direct impact on -- contingency other lines will be growing at that time to take over the demand. So you see COVID-19, you see our contingency business have a slowdown there.

But you can see the diversification within MAP, Decile 10, when Lloyd's was looking at a lot of the marine market, which sits within the MAP business around having challenges on profitability and needed to take action to correct it, we were able to lean in because of the profitability that our Marine team is showing and really take advantage of that opportunity, and I'll show you more around the marine profitability in a few slides. So things may not be growing all at the same time, but we have a diverse product set even within each of our divisions, which enables us to grow the business and make sure that we pivot accordingly.

Next example is property. We've spoken about property a lot in the recent years. And it's a market where you can see we really had that huge opportunity that we spoked about leaning in on. And the property market continues to be increasing, increasingly complex. You've got climate change, you've got rising property values and underwriting property became more specialized than it ever has been. And that is what we always said, that leans into our specialist insurer and the DNA and the alpha underwriting that we have.

Five years ago, we looked at this and we looked at how we could grow that business. And you'll see here as the opportunity arose, we kept our growth quite small in the early years, when we didn't see an opportunity to grow that property business in the way that we thought we could and how we could do it profitability and underwriting and bringing all the alpha to it. But as the market has presented that opportunity, you can see the growth and the rate that the team has achieved.

This enables us, again, playing into our strength as a specialty insurer. And even as the environment changes, we remain rate adequate. Should this change, should the property market change in 2026, and we don't have the ultimate crystal ball here. But should it change, we will do the right thing, manage the cycle and make sure that we focus on rate adequacy and maintaining profitability.

Next example is specialty risk. And clearly, D&O is the best example that we thought we could give here because it's the one that we get the most questions on. And specialty risk and the D&O is a great example of diversification in action. We had the hard market. It doesn't feel like that long ago, but it was actually 2019 to 2021, the D&O hard market now. And you can see the growth during those years.

And as the market softened, hopefully, what you can see through these charts very clearly is bringing our exposure down, bringing our premiums down on the P&L side, whilst the rest of specialty is growing, our environmental business, our M&A business, some of the other many products that we have there, as you can see here, over 25 plans that make up specialty, whilst D&O was coming off of the tremendous growth, we're able to lean in and grow other areas of the business to really show that diversification.

So when people said, how are you managing the D&O book now that the market has been so competitive in the last few years, we have clearly been doing that, and we will continue to do that should we need to. And as the D&O market presents another opportunity if it does, we will be prepared to lean in again.

Another example within specialty. Adrian mentioned it earlier, actually, we have a niche class a business called Safeguard, which offers prevention, a liability cover for sexual abuse and molestation. One of the reasons we're able to grow whilst retracting from D&O is because of the great growth that we saw in Safeguard amongst many other products within specialty. Here, it's a little bit of a unique product in that we have a pioneer approach to cyber risk with services that we've lent into on the Safeguard product. So it also is a policy that has insurance and services associated with it.

In 2014, we brought this into a new and sadly growing area of risk particularly in the U.S., and there was more instance of sexual molestation liability. Since then, we focus on demand. We've seen our underwriting growth to more than $100 million. We've expanded it geographically. We are not afraid to take products that we have success with into other territories as and when that demand comes online and really fires.

Today, most of this cover is being excluded from general liability policies. That, again, gives us an additional opportunity to lean into a product, where we are achieving rate adequacy, profitable growth. And yes, we're not in the casualty general liability market, and we've said that many times, but some of the changes there and the exclusions, we're seeing further increase for demand for products like this that we have in our suite.

The second thing we have is platform optionality and this is all around our 3 platforms, both our wholesale platform, including Lloyd's business, our European platform and our North American platform. And we have access and ability to access markets no matter what the dynamics are. That is something very different that we've invested a lot in, in recent times to make sure that we have that optionality. So to bring that alive, we thought we'd start with North America, which clearly is the one that we've been investing a lot for a number of years.

We started Beazley 40 years ago, as Adrian said, just writing predominantly North American business in Lloyd's. And 20 years ago, which again, feels longer than it actually -- looks longer than it actually feels. 20 years ago, we started writing onshore in the United States. We underwrite on admitted and non-admitted paper and we have Beazley in the E&S market as we've been talking about more recently. And since going onshore, we've invested heavily gaining the trust and the support of local brokers. This takes time.

We can't just turn up and say, we're here, we're Beazley, [ tada ], right? We have to really work with our brokers, get their support, build the relationships locally, have underwriters that are out there, front of mind, pounding the street, pounding the offices, getting us in to see all these submissions and access to risk.

And as you can see from some of the bars here, that takes time to grow. And then it starts to snowball in a good way. You start to see that momentum building. We've also had bolt-on acquisitions along the journey to fill gaps or get us better access to risk. There's a couple on here. But obviously, First State was aware of the origins of a lot of our property business came from. I mean, now that was a wholesale predominantly broker-facing business that we acquired. And now we're leaning in heavily with our retail brokers in North America on the property opportunity, but also Creechurch gave us important access. It was an NGO that we acquired. It gave us a flag and Beazley Canada that we have today, which again, if you're going to do in North America, that was something that you absolutely need to have to be a key carrier.

Our growth has been consistent and successful. Today, we're about 43%, 45% of premiums across 12 office locations and over 1,000 colleagues, which is a testament to the investment that we will make and the results that you're seeing.

And interestingly, when you look at this business over the last few years, the growth of 17% from 2012 to 2019 compared to 3% across the group. So we were able to grow this business faster than we are growing the group and that is because of the investments we're making in all of the hard yards that we were putting in.

That moves us nicely on to our European platform, where we're on the same journey, but it feels just the same and then perhaps a little bit faster. And I can see Fred at the back of the room, who's smiling at me, who's a General Manager for Europe. Since 2017, 8% of Beazley's total premiums doubling in the last few years, we grew 10% in 2024. And those bars are again, what are they testament to? We've got underwriters on the ground. We've got all of our teams represented across our European business.

We're out there building those key broker relationships, making sure we're pounding the street, we're able to lean in through the hard markets with our expertise on D&O and cyber. We're bringing property now, our property teams expanded into the European market. So we're able to use our specialist products, along with access to the European platform to really partner with our brokers, provide the same products and value that we do in the U.S. and start to build an incredible business.

We have an infrastructure that is solid around 7 offices with more than 200 people and colleagues that are spread across Europe, and they're constantly working now as a close-knit unit to make sure we go and execute on our plans. We have ambitious targets, which will see us continue to expand the product set, continue the growth as long as we can do it profitably. We'll be focusing. There are areas in Europe where we do need to manage the cycle. But even with that, we can achieve the growth that you're seeing here. The 3 platform approach has optionality that allows us to really deliver the results.

And then a cyber example. It's the first cyber example, so a cyber example. There's a few more coming in a little while. But this one, as you can see, is what we've been talking around, around having that diversification in the cyber business and what that can mean. We've been talking around that the North American cyber business is challenged. We invested in non-U.S. cyber a long time ago. Alessandro was here, who runs the cyber business, came back to Beazley. He was here previously a little over 10 years ago now. He's doing sabbatical already, which feels crazy, right, that he was sitting here and he's already doing sabbatical.

But we started investing in a non-U.S. business that long ago because we knew that the demand and the rising demand would come to Europe and further afield. This shows how our European business and our wholesale international business has been going compared to our North American business. And you can see the diversification that's helping us manage some of those cyber market cycles, but we can lean in, in Europe and the rest of world for growth as we have a flattening and potentially shrinking business that we've seen in certain years in North America. That is a huge asset.

And as you can see now, previously, when we spoke about our non-U.S. cyber business, people thought it was $50 million in premium or $100 million in premium. It's a significant part of the book, which really means we can lean in and really benefit from having that.

I'm now going to share a video, technology moment. It's a video that I did with Fred, Fred Kleiterp, who's our European General Manager, talking a little bit around Europe and what we're up to there. So hopefully.

[Presentation]

Thanks very much for taking the time to have a chat. As everyone knows, we're a product-led company, but it's also essential that they work very closely alongside our platforms to make sure we achieve the profitable growth that we're looking for. Can you talk a little bit about the platform model and especially why that's important for Europe?

Yes. Sure, Paul. So the platforms really provide us with access to attractive pools of specialty risk across the globe, right? So they allow us to deploy our product and underwriting expertise as close as possible to the brokers and clients in our chosen target markets. And that's also why we're building a European platform. Europe currently contributes roughly 8% to group premium income, and we're looking to grow that contribution materially over the years to come.

Now historically, we've built up a reputation, a very strong reputation even in Europe around cyber and financial lines in particular. And we're complementing that offering with additional specialty products that are relevant to the European marketplace. We currently employ roughly 200 people in Europe, and they focus on 4 clusters of countries through 7 offices.

I remember when we established cyber in Europe, and I was part of that, and it's very excited to see just how many more people, how many more products and just how we're bringing all of Beazley to Europe now, which is fantastic to see.

Moving on, it would be good to hear from you around what our vision is and your vision is for Europe and whether we're using our experience of building out North America as a template for that.

Yes, you're right. I think we built a very strong track record of growing successful business in North America over the last 2 decades. America and North America and Europe are very different markets, but many of the principles of growing successfully are actually very similar. So as mentioned before, we're looking to achieve faster growth in Europe than the rest of the group, so outgrow, if you will, the rest of the group, which we will do or which we are doing by expanding and building on our product sets in Europe. So for instance, in the past 12 months, we've added property, renewable energy, contingency and a number of other specialist products.

Now the routes to markets in Europe are very diverse. So you have the global international brokers, of course, but you also have local and more specialist national broking groups as well as alternative distribution channels. And that's why being on the ground and having local expertise in our target markets is so incredibly important.

It's been incredibly exciting. I know I've been working with yourself and the team leaders of the 4 divisions to make sure that given we have such a profitable growth opportunity that we're diverting resource and energy and people to that. As other areas of the business don't have that opportunity, we've been shifting resources around to really help support this and make sure that we achieve that together.

Yes, absolutely.

So perhaps then lastly, let's talk a little bit around the opportunity and some of the success that we've experienced so far.

So our premium volumes in Europe have doubled in the meantime, since 2017. It's roughly $400 million. Now we are expecting that number to grow further in the years to come. I'm very excited about what we're doing here, and I'm very excited to put the future of Beazley in Europe.

I totally agree. And it's great to see that Europe is going to have a big role to play in some of our group-wide initiatives. We're building a transition business. You mentioned the renewables team. We're going to have a lot of transition opportunity in Europe. We're building a captive business. Europe is going to have a fantastic opportunity there. So it's great to see that we're working on things on a group basis that Europe is going to really help drive and be a massive contributor to as well.

[indiscernible] great. Thank you, Paul.

Thanks Fred. Brilliant. Nothing like see your self massive on the screen. And thanks, Fred, for doing that as well. Moving on to expertise. So how do we leverage expertise through the cycle? We talked to you about our deep technical knowledge, and that we balance that with risk appetite and our ability to flex to the market conditions. We talk around innovation leadership and our constant strive to keep improving and strive for better. And we have full alignment with the pay and the performance of our talent, which is something we'll come on to. What that gives us is a hugely motivated team even more so at this point of the market cycle.

Let me talk you through some examples of the expertise, and so you can see it playing out in action and live, so to speak. The first one, we thought we'd start with is property risks. So property risk, as we said already, we lend into the property business when the market conditions present themselves. And we lend into the hard market, and we're able to price and underwrite extremely well. And I think the team executed fantastically.

And then we were tested because we hadn't been tested for a while. And we saw Helene, Milton and the wildfires, the more recent wildfires just to be clear. And what this shows is that during those, the losses we experienced and the gross loss ratios as a percentage of our property income have outperformed the wider market benchmarks across a range of Lloyd's syndicates in this instance. This is a true testament to the team, how we lent in underwrite on that per location per [ peril ] basis, looked at the modeling, look to climate change, all those things to be able to execute on that property opportunity.

Second one is cyber. And there's -- we've spoken a lot about this, both at the half year this morning at the update and already Adrian referenced on the cyber market. We put this together, working with a third party from the reinsurance world that we work with closely. And as you can see here, the most recent years combined ratios highlight a couple of things that I thought was worth talking about.

First, the need for change in North America cybermarket and the need for rate adequacy, rate adequacy needs there, needs to be there and action needs to be taken. This slide shows that some write well over 100% combined ratios. And in fact, 2025, the market average is over 100%. Rates are still declining in the U.S., and albeit we are seeing flattening rate, we're losing premium both a little bit of renewal premium, where there's a competitive market and the new business opportunity because we're not seeing that pricing adequacy to write as much new business at levels we need. At some point soon, the cyber market is going to have the need to correct.

The second point I'd like to make on this slide is our outperformance over the wider market, where our combined ratio is consistently below the market average. With the size of business that we have and the leading position we have in this market, that is incredibly difficult to do. We are never going to be the lowest. That's hard to do with the size of the book we have, but to be where we are positioned here is a testament to the underwriting and the focus on profitability that we strive for.

Carrying on with cyber, this side comes from a major third-party insurer, reinsurer cyber market. And this shows the development of ransomware losses in the recent years. And as we all know, ransomware losses became extremely reduced during the Russia and Ukraine war, particularly when it started and lasted for a couple of years.

And what we've been talking around is that it's back. And what you can see here driven by the blue line, and we've highlighted it here because it's sometimes hard to pick the lines out. 2023, both frequency and severities on the rise, and that's something that we see, we are managing that. We are maintaining and focus on our price adequacy, but this is not just Beazley, this is the market.

This is the market losses. So that frequency and severity is rising again, and that is what's driving that 2023 up towards the levels that we saw in '19 and '20 and so on and so forth. So that illustrates some of the challenges that we are seeing. Hopefully, this helps underscore why we do think that the market at some point will need to react.

Next example, we're going to move on to marine. This shows our marine business, for many of you who don't know, is predominantly a wholesale Lloyd's business, most of it is written on the wholesale Lloyd's platform. And this is a comparison of our results compared to the Lloyd's market. This shows incurred loss ratios, which is an important note that the recent years are less developed. So as the recent years developed further, you'd expect the gap to widen and us to continue to outperform like we have in the past.

However, the prior years are more effective because they're more developed on an incurred basis. But what this does demonstrate is that every year, the team is consistently outperforming, and I fully expect this to continue in '22, '23, '24, '25. And even when we put together the business plan for '26, that have a solid business plan moving into next year.

And then a specialty risk example. We just saw marine. We use our marketing leading expertise. We do the same here. So here, you can see our environmental product recall and M&A business versus the Lloyd's market. And again, you'll see that same development on the incurred loss ratios. You see the same outperformance.

And yes, the recent years have a little bit more of an incurred gap already here, which is, again, a sign of our performance. We expect that to continue, but this shows, as we've diversified into that specialty business through some of these products, we are seeing the profitability and we are seeing the outperformance of the market cycle.

Profit-related pay. This is something that all underwriters are on it Beazley here. And as we've said many times, interests are fully aligned between all of our key stakeholders, whether it would be shareholders, staff, business, employees, everyone is aligned. Our underwriters are incentivized to write profitable business. And that's something that's quite unique out there. It's very rare that I've seen a -- someone leave for a profit-related pay somewhere else, another organization, as I've said many times.

We set very robust targets. We measure carefully and reclaim if we need to. We continue to do that over the long term, and these are long-term agreements that we have with our underwriters. Our underwriters are incentivized to be here for the long term and right profitable books of business. That's incredibly important because as a specialist insurer, the people that we have across the business are what drives our outperformance and that expertise drives our results.

So just walking through, you can see that we do target settings as part of the business planning process. And you can see here that underwriters can get up to a maximum of 200% of their salary should they make those profitability targets. We don't award that year 1. We wait 3 years to see how that -- you have that book and how that year develops.

Doesn't matter what product, doesn't matter what line of business, doesn't matter what division. We wait 3 years to make sure those book developed in the way that we plan for profitability. And then profit has started to be realized as we get to years 4 to 10. And as you can see, then the PRP start to pay out. And if you think about this over many years, once you've had your first 3 years, you then have another year coming online and another year coming online.

So you have multiple years that go forward to make up an underwriters' bonus. And yes, sometimes we have bumps in the road, and we have profitability challenges. That can create a slight reduction on the bonus the following year. So our underwriters are fully incentivized to ensure that we are targeting that profitable growth. At this point in the market cycle, it really is an incredible important asset that we have.

And this shows it even clearer. What you can see here is that PRP is linked to the lines of business that are key drivers of our profitability. So you can see the PRP payouts going upside there. You can see the plan and the profit, the target profit along the bottom. And you can see the lines of business that are generating some of the biggest PRPs. And that directly correlates to the profitable growth that we have as an organization, encourages long-term profitability, not just short term, not just a year or 2. It acts as a retention tool. It helps us retain our top talent and really supports an underlying culture of alpha underwriting that has accountability and performance associated with it.

So to summarize that section, just to close a little bit, managing the cycle is really what we do well, and we are more focused on it right now than we ever have been in recent times. Soft cycle is not the moment to stand back. It's about leaning in, taking action, derisking, focusing on the profitable growth opportunities that we do have and executing well just like we have in the previous market cycles. But fundamentally a growth company, and we have moments then there will be future moments to accelerate, and there will be future markets that present us opportunities to accelerate.

And we will keep that agility in our business to make sure that we can execute quickly as they do arise. We're really about thinking through how we manage that cycle, partner with our brokers to do so, use our platform, use our products and bring the best of all those together to get the best of Beazley to outperform.

And so before I hand back to Adrian in a little while, I think we are now scheduled to take a break, and that is going to be about 15 minutes. So 15 minutes of break. Thank you.

[Break]

Okay. Well, welcome back for Part 2. I hope you enjoyed your tea and a biscuits or scone. So welcome back. I -- Barbara, Paul and I got given our notes paper form just before we started, and I noticed that my sheet was bigger than theirs, which only just realized. So something happened with the allocation of speaking. So you've got me for a little bit now.

So we're going to talk about some of the new things we're doing, entitled innovation enables growth, which I hope we've shown some of the ways that we've done that in the past, and we'll go through a couple of the ideas that we are going to execute over the next few years.

So the strong foundations that Paul outlined in successfully managing that cycle is one of the reasons we were able to outperform because we're continuously evolving our access to risk and our product set and our capabilities.

So if we talk about Bermuda. So you've all seen them anyway. There's no revealers there because you've already got the slide. Right. Fine. I'll move on then. Opening an office in Bermuda is something we've been thinking about for a while. If you go back, I don't know, 10, 20 years, there has always been this rivalry between London and Bermuda, and you kind of planted your flag in 1 place or the other and were loyal to that place.

I think the markets have -- are sufficiently different now that actually it does make sense for us to have a foot in both camps because they give us access to slightly different pools of risk. But what we want to do in Bermuda is slightly distinctive, and I think it's a natural extension of the franchise that we have.

As I mentioned, there are 4 strands to it. I think it is a little different from the traditional Bermudan reinsurance. It's not just another line in the water, if you will. But these are the 4 strands. The first is an alternative risk transfer business, concentrating on large corporates, captives and the ILS market.

The second is specialty reinsurance. So we have a specialty reinsurance business currently in specialty risks. We can add to that and add mortgage indemnity to that. Then there's specialty insurance being a selection of other specialty risk classes and property reinsurance. And there is business in Bermuda that doesn't come to the London market and that extends that franchise for us.

We are in the final stages of establishing a Bermudan entity. We will be putting in -- we've got a draft application and with the authority now. We should be putting in the final application either the end of this week or next and hopefully, we'll be up and running in the first quarter of 2026.

As we mentioned, it's a $500 million entity. The business plan has about $400 million of premium in it by 2030, and we'll be rolling out our products on a staggered basis. So let's go through some of them now. We'll start with ILS.

So we are -- although as Paul was keen to point out, we're not just a cyber shop, much as Ali would like us to be but we are probably best known for our cyber capabilities. And there's a quick snapshot of our history here, which began in 2008 when we underwrite our first stand-alone seller policy and launching the flagship BBR Beazley Breach Response in 2009, which is a combination of risk transfer, risk management and crisis response services.

And it remains to this day, I think the marquee product in the cyber world some 16 years later. It has some features in it. Most notably, the services that we provide and the fact that some of the indemnities are not limited that we thought would be copied successfully within 2 years and 16 years have passed since then and no one has been able to beat it.

It became obvious to us though fairly early on that risk engineering and insurance are as intertwined in the world of cyber as they are in property. What the factory mutual system pioneered in fire insurance in the 19th century in America is highly relevant in the cyber world. Engineering makes for better cyber risk and the best cyber insurers combine underwriting and risk management. And the fact that in cyber, the risks change over time, I think, accentuates that fact.

And that was the driver behind us founding Lodestone, which is our cyber risk consultancy firm that is now called Beazley Security, enable us to launch full-spectrum cyber in 2024. Alongside that, of course, we created -- we helped to create the cyber market in 2023 with the first ever cyber catastrophe bond, followed by a number more and payer insurers have followed suit.

As we've said many times, it's vital that we build a vibrant reinsurance market to allow the insurance market to hedge the systemic risk in cyber just as there is in property. And if the cyber market is going to reach the size, it's estimated that it can be some $40 billion, that reinsurance market, both traditional and alternative capital needs to grow. And that is what lies behind the first strand of our strategy. And to introduce that, I'm going to play a video.

[Presentation]

Very exciting. Ali. Thank you very much.

But I take on board how huge you felt, Paul. Anyway, good. So thank you, Ali. So the property cat industry built a highly successful alternative to traditional reinsurance, which created significant value creation. A number of reinsurers, particularly post Hurricane Katrina or KRW in 2005, built large valuable ILS businesses alongside their reinsurance practices.

And our thesis is that there is a real need for the cyber markets to build similar capabilities. And in that, we have value to add. There is substantial growing demand for cyber catastrophe. Most insurers now are reducing their quota shares. Historically, some 50% to 60% of cyber insurance was quota shared to reduce the risk. That is reducing now, and more and more insurers are looking for catastrophe coverage and look to manage their attritionals themselves, which is growing the demand for cyber catastrophe, for which there is a limited amount within the traditional reinsurance market.

And our thesis, as I said, is that the opportunity for the ILS market in cyber is substantial. And we, of course, have spent a long time understanding and modeling cyber catastrophe and systemic risk. And so we think we have some expertise to leverage going beyond just being a sponsor of bonds to playing a significant role in the creation securitization and transformation of cyber risk and to establish ourselves as a leader in the investment space for cyber ILS.

So to that end, we are working with a partner with an ILS platform to launch a cyber fund in 2026. It will likely be doing cyber and cyber and property combined. More on that to follow, but I think it's a very exciting opportunity for us. And not only will it generate some underwriting returns for us, but it will also generate some fee income as well.

So captives then. Captives, which is the second strand to our 4 legged stool. It doesn't quite make sense, does it? Second leg to our 4-legged stool. Captives have been around for decades. The first captive insurer, of course, was established in 1962 in Bermuda, the Youngstown Sheet and Tube company, captive insurance company, if you're interested. But particularly since 2019, they have been growing significantly both in size and scale.

The extended hard market has made the case for self-insurance for mid-market and large corporates, particularly compelling. So the captive market is growing in number. They are growing in scale and they're growing in the scope of what underwriting risk they are taking on. Traditionally, the exposures have been concentrated in auto liability, general liability and workers' compensation, not areas that we do. But increasingly, there is rising interest in our product set, D&O, E&O, cyber, property and so on and so forth.

We ensure -- or we reinsure a number of captives currently but have always done so on an ad hoc basis. We have noted though, that once you've established a relationship with a captive, your relationship with the parent tends to be much more enduring and much more stable. So we've enjoyed the captive relationships that we've had, but they've happened -- by happenstance -- by serendipity, if you will, rather because we've been particularly looking for them.

So given the number of captives across the world, they're rising size and number and scale. There's an opportunity for us to industrialize this by building out a team that is purely focused on providing reinsurance and risk management services to the captive industry. We'll be rolling this out across all our platforms, but the team will be based in Bermuda, which is an established captive market and well known to U.S. businesses, which are the world's largest users of captives.

But as Fred will tell you, if you're next to us at dinner tonight, Europe also has a large number of captives. Many countries across Europe are rolling out a captive framework. The U.K. is looking to do the same thing next year, slower than some of our peers. But the captive world is an exciting and growing one, and one that most insurers aren't a part of.

It's a particularly discrete distribution. It's kind of a specialist subject. It's a little geeky, very admin heavy. And for the first time, really, over the last couple of years, it's coming into our world. And so we think we have some value to add in terms of IP, risk management and underwriting.

And I think this is a good example of us expanding into areas that are contiguous to what we currently do. As I said, it's a specialist form of distribution with its own ecosystem of captive managers and service providers, but the risk transfer that they buy is business that we already underwrite. So it's a rich, new and discrete source of access to risk. And as I mentioned at the beginning, slightly off the mainstream, slightly off the beaten part.

And the third that I want to mention was alternative risk transfer. And it's a description of a form of insurance and reinsurance that is structured differently from normal insurance products. For the purposes of this, I think there are 2 main elements to it. The first is parametric insurance. And parametric insurance is a form of insurance, which responds to pre-agreed triggers with pre-agreed payouts. For example, wind speed or an earthquake of a specific strength at a specific location or the amount of rainfall in a given period. And once that trigger is met, the payment is automatic. And what that means is there's no delay for claims adjustment and there's no uncertainty to the claims adjustment.

So for the insured or for the reinsured, it provides a very quick form of liquidity in a crisis. And for the insurer, it's highly modelable. There's no basis risk. So it's a win-win. And there's lots of growing demand for this, both from large corporates as part of their insurance program, because although large corporates do have a good balance sheet, that need for fast liquidity is not unique to the small guys.

Everyone needs fast cash after a large event and this provides that. So increasingly corporate or buying parametric insurance as part of their risk management and insurance complex. There's also demand from buyers who can't afford traditional insurance. So increasingly, Parametric insurance is bought in Australia, for example, where people can't afford to buy the flood or the cyclone insurance down there.

And the second type of alternative risk transfer is multi-class multiyear reinsurance or insurance, which is a structured product covering a number of classes, often with reinsurance features like limited reinstatements or paid reinstatements over 2 to 3 to 5 years. Many captives buy this product as well as large products. So again, it's a large corporates rather. So again, it's a pool of risk that is naturally growing.

Again, we write this business already, and we have done for some time. It suits us. Going back to the kind of attributes we covered when we look for product, these tick all the boxes. And given the size of these markets now, however, just like for captives, I think it's time for us to establish a dedicated team to focus on this client base.

So we've spoken through the opportunity that we see within ILS and captives and ART. Overall, we expect the ART business to grow to around $200 million by 2030. And the additional premium will be from the other sets of products.

Okay. So we've talked about the next subject a little bit, but we thought we'd grow into some more detail today, and that's transition underwriting. Oh, it was a video. That's why.

[Presentation]

All right. There we go. And then I'm going to go back again. So the investment into decarbonization and transition is in the trillions annually. And over the last 3 or 4 years, we've seen that number accelerate from hundreds of billions to trillions. And despite the political climate changing across various parts of the world, the train has left the station when it comes to investing in decarbonization and transition.

And industry has decided that now it is actually the time we need to invest in figuring out how we can do things in a more carbon neutral way from energy to use of plastics and so on and so forth. And what we've seen over the last few years is the demand for insurance of this stuff begin to grow. We've been talking about it for a while, but it's taken some time for us to figure out exactly what that opportunity looks like.

And as Tim was mentioning, there is an opportunity across quite a lot of our product set. So we do this business already. So we're already ensuring transition risks across property, within construction, within our renewables energy team, obviously, within cyber, with an M&A and tax insurance, a lot of the projects are being subsidized with tax credits, which you can and should ensure product guarantee and warranty. So again, we already write warranties for wind farms or solar farms or so on and so forth so that the -- they can ensure the revenue stream through performance guarantee, environmental liability, of course, and D&O.

But again, just like with captives and just like with ART, we're doing this on an ad hoc basis sporadically across the business. And because the size of that investment has really begun to grow, and we're seeing these projects come across the business, and they're not coming as a property opportunity or as an environmental opportunity.

They're coming as a -- there's this product and we need lots of insurance for it. And so we realized that we need a team that can face off the market that can talk to these project owners as a holistic solution to their insurance needs rather than a property specialist or a cyber specialist. Because what the conversations that the owners want with us and these project sponsors want with us is how can insurance make a project more financeable, how can we help to derisk the project so they can get the debt and equity financing that it needs, whether it's a carbon capture or storage plant, whether it's a nuclear fusion plant, which we are working on for in Washington State for next year, whether it's modular nuclear reactors, undersea distribution, whatever it is.

They've got different projects, which -- a battery farm or it's a EV charging network. They're all got these very, very large product -- projects which require financing, and they need to make them the risk controlled enough so that they are financeable.

And what we do is work with them to explain how insurance can derisk that, be it political risk or terrorism, be it ensuring the tax credits, be it ensuring the cyber risks or the environmental liability or whatever it is. And the solution is different for each one. And so the intention here is to bring all the products that we have that can ensure transition risks together in 1 team that will allow us to talk to our clients as an insurer rather than as a cyber underwriter.

And as I say, the needs will be different for the different attributes of that product, data centers, wind farms, hydrogen production and so on and so forth. The live one at the moment is around data centers. There's a lot of chat about what insurance they need and what insurance can do to make them insurable or financeable rather, they are enormous in value. The one that we've just quoted in Texas is over $7 billion worth of value.

And the financiers want the whole lot insures. They're not just ensuring the first billion, they want the whole $7 billion insurer. They don't just want property. They want environmental. They want cyber. They want a whole range of products. And so we need to be able to face off for these. And we're not just talking about 1 data center, we're talking about dozens across the world.

And that's very exciting. I think there's an opportunity for us as a company to be able to have a practice that focuses on the needs of those sorts of clients. And it's trillions of dollars a year. And the thing that we like about it is that it's across a number of our products, and this is an investment opportunity. That's not just 1 or 2 years, it is for the next 20 years. If we are going to decarbonize, this is a 20- to 30-year mission. And so there's a rich theme for us to mine here of a new set of products which we can grow over a period of decades.

Every major shift in energy shift in history has driven economic growth and innovation and insurance growth. And I don't think this is any different for that. So for us, it's a chance to be useful and to drive business growth. And I think, again, it helps amplify the value that we bring to our clients in terms of providing thought and IP bespoke solutions rather than just coming as a product underwriter and it's a structural area of growth for the next couple of decades.

So we're continuing to build out our optionality through the opening of a new Bermudian platform, not a platform, an office. Strategic rationale there is to extend our access to risk and expand our product set into new, but contiguous areas. All these initiatives do both and equally importantly, as I said a couple of times, they're all slightly out of the mainstream open market business with specialist distribution and underwriting needs. And then in light of the marketplace that remains competitive, I think that is a powerful tool.

So what should all this mean? Well, I think what we've been talking about so far is the behavior that we've exhibited in the past and which I think we're demonstrating we want to continue into the future has driven real long-term value for the company and for its shareholders, a total payout of over $450 million in 2024 or over $700 million in 2025. So $2.5 billion returned to shareholders over the last 10 years with an average ROE of over 15%.

From a total shareholder return basis, that's what we do. It is -- remains in excess of both our U.K. and global peers. We've shown this chart now for a couple of years, 345% since 2014, and it's a track record that we want to continue in the future.

So just to summarize then, what we were talking about today, consistent financial performance over the last 40 years through both cycle management, dedication by platform and by product and expertise. The secret sauce, we think, is innovation-led growth, and our track record demonstrates that we think deeply about new opportunities and how to invest in them and execute them and to be able to scale them, but always going back to consistent financial performance.

There has not been growth in our business this year. That's happened a couple of times in the past, as Paul demonstrates particularly at the start of a soft market where we rethink what we have to do to grow because we can't carry on doing what we've always done. But I think we have demonstrated that we have the tools and strategies to develop new things to mine that will allow us to be able to maintain single-digit growth over the medium term, just as we did during the last softening cycle between 2011 and 2017.

So Bermuda was a big investment for us, capitalizing a new $500 million entity is not something we take lightly. As Barbara said, we expect that has a 10% to 15% impact on our SCR coverage for next year, which we think is reasonable and with the ability to develop $400 million worth of premium that all exceeds our return on equity hurdle, we think that's a good investment for us and for our shareholders.

So with that, we'll go into Q&A. And I've been told I have to sit down before we do that. Well, put your hand down.

Go on, go on.

William Hardcastle, UBS. Just quickly on the 10 to 15 points. I think just thinking about numerator denominator, I think that means the SCR uplift is about 100 to 150. Is that about right? Would it need more in '27 or it's all -- that's all in, therefore, and can fund a couple of years growth?

I think, obviously, you need to capitalize the entity up front as the business grow. Obviously, once we are past a certain hurdle rate that will require more. But at that time, we would also have generated own funds. So it is important that it's capitalized up front.

Okay. And the second one is thinking a bit more about one of those growth opportunities for cyber peers. I guess as you launch an ILS fund, is there a challenge here and correct me, if I'm wrong that maybe you're getting line of sight to competitors' business strategy, plans and therefore, it would be competition or not?

That's why we're doing it. We're working with a partner who has an ILS platform, and we'll be using that platform to do it. We'll be committing resource to it that can bring the cyber underwriting to the JV, and then they're providing the ILS expertise. So it will be a complete separate venture walled off from us.

But I do think we have probably as much knowledge as anyone does about cyber cat exposure. And we looked back at, I don't know, [indiscernible] Partners, Hiscox, Everest, RenRe and what they did with their ILS business post 2005. And in our heads, if that -- if the cyber ILS world grew like the property ILS world did, and we didn't form a part of that, having pioneered it, that will be a real lost opportunity and a missed opportunity for us, but we're doing it in a way that is walled off from us, yes.

Okay. And I'm just going to steal just because it's linked with that still. And your risk, are you putting -- would you be putting it through this from your book as well? Or is that totally separate? This is about...

We'd probably invest in the fund. Yes, but it wouldn't be on our own balance sheet and that it will be on the fund.

Darius Satkauskas, KBW. 2 questions, please. The first one is just on how do we think about the near to medium-term capital returns. When you were thinking about this investment opportunity, were you thinking about it in respect to you deploying excess capital, and therefore, it's very accretive because it's currently sitting there earning nothing, and you've got an opportunity to convert into the earnings stream and you can still do buybacks and dividends? Are we thinking it as a near-term capital allocation priority and therefore this should be seen as an expense of what you'd potentially distribute? That's the first question.

The second question, you showed an interesting slide on your mix of business, 30% being in growth modes, 70% being sort of remediation action requiring business. I suppose that's in terms of premiums. Are you able to tell us what it would look like in terms of capital intensity?

Should I take the first one on capital?

Do you want to?

Yes. I think as I tried to illustrate in my presentation we have, you can say, the capital strategy that we are applying. And obviously, we see there is a huge opportunity in investing the capital in Bermuda, not only now, but also for the future. And obviously, we expect that to generate, you can say, capital in the future.

It will help us to evolve the platform and the products that we have and therefore, value-adding in the future. So obviously, in the strategic deployment of capital, we will still have a look at what are the excess capital that we have, the ability to repay to the market, exactly like I tried to explain with the 4 pillars. So investing in organic growth, but still looking at what is the excess capital and distribute whatever sets to the market.

On the growth and the de-risking capital intensity. I don't have an exact answer to that -- sitting in front of me. But what I can tell you is both of those books are diversified in themselves. So the amount of businesses and product business plans we have in growth and in derisk, it's not 1 or 2 products, right? So it's a diversified set. And we can come back on some of the intensity. So we can take a look at that, but I don't have it at hand, but no, it will be broadly diversified.

Can I just clarify? The reason I'm asking is because I assume that in the 17%, a lot of cat intensive business sits, and therefore, it'd be disproportionate impact on the capital requirement rather than premium.

Yes. So the 17%, there's a little bit of cat business in there, but it's not heavy cat, if that helps.

This is Vash Gosalia from Goldman Sachs. Just 1 question. So you obviously earmarked $500 million for Bermuda, but you expect premium of $400 million over the next 4 or 5 years. So essentially, the slide suggested you would have premiums of around $70 million in year 1. Just trying to understand what happens in the interim with the balance money? I mean, you've set it aside, but how do you really utilize that? What comes through in those first, second and third year until the entire $500 million is utilized?

Yes. I think, obviously, establishing an entity like we do in Bermuda requires capital upfront in order to be able to write the business. But as we also alluded to in terms of the impact on the solvency capital ratio in itself, it's more capital efficient than a face value. So that's how you should think of it. So not a full impact day 1 as we establish the entity.

I think I've been given the green light to go ahead. Abid Hussain from Panmure Liberum. I think I've got 3 questions. The first one is on ILS fee-based revenues versus commoditization. I'm just struggling to think how should we think about the tension between expanding into the ILS market, it's just a big market at the moment and the growth opportunity is fantastic versus potentially commoditizing the underlying insurance market that's associated with that. So that's the first question.

And then the second one is on capital for potential future investments. So the Bermudan investment looks good, looks great. You've laid out the opportunity around the transition market. I'm just wondering, if you've left any spare change for any investment around any further investment around that space. And if you could sort of touch on how much spare change perhaps.

And then the third one is on KPIs. I think you're committing to mid-single-digit growth through the cycle and 15% ROE again through the cycle. What's your guidance for the next couple of years?

Okay. So we're not giving guidance on '26, yet. Okay. I think what we're trying to say is that the initiatives that we've laid out, if we assume the business is relatively flat aside from that should give us the ability to generate mid-single-digit growth. Obviously, it will take some time for that to ramp up. So we'll give you some guidance on 2026 when it comes to the year-end. Likewise, we'll tell you what our thoughts are around any capital distribution at year-end.

I think what Barbara laid out earlier was a way to think about the SCR coverage between now and the end of the year and the different things that impacted that last year and this year and the impact of the investment in Bermuda. And like always, if once we've done those sums, there's surplus capital, then we'll redistribute it. We don't know the answer to that yet because we haven't got to the year-end.

So -- but we're not going to follow any particular different process. I don't think we're out of money. We are still generating a lot of capital as we speak, and we started the year strongly capitalized. So we have optionality, which is good for us, and it's good for our shareholders.

The ILS thing is an interesting one. We've been asked before whether bringing more capital into the reinsurance market will commoditize cyber. And I think the answer to that is no. There are 2 distinct things to underwrite properly if you're a cyber insurer. The first is the attritional losses, which are most of what we pay. And I think the exposures there are complex and changing in and of themselves and not to be undertaken lightly. You need a significant ecosystem, I think, to be able to do that responsibly.

And then there's the cat risk. So I would turn it on it's head and I would say if insurers -- if as insurers, we're going to continue to do our job responsibly, we need more cat. So far from commoditizing cyber insurance, I think it's just enabling it to grow. But underwriting it, even with the cat reinsurance is a complex matter.

It's James Shuck from Citi. Just a few questions for me. On the $500 million investment, can I ask you to be a little bit more specific about what that's being spent on? I think you mentioned 10 to 15 points. That was 100 to 150. Is the implication that the SCR just goes up, but there's no reduction in own funds, i.e., for the actual investment itself? And I think the $500 million is obviously a lot bigger number than the 10 to 15. So over what time frame would you actually incur the additional 15-odd points. I think it is to be dragged through on the solvency.

And secondly, I guess, when you looked at what the options were to try and generate growth, and you've decided on these buckets and delivering from Bermuda, what were the other things that the other avenues you could have gone down? I asked because your premium growth that you're leading through the soft cycle is flat, excluding this. When I speak to other companies, there's lots of companies out there that are very excited about the opportunities.

And I think in one of the slides, you talk about how you're focused on high-growth areas, specialists, this is what you do. I would have thought in this risk world that we're in, that it's not a flat market, frankly. I understand that it's a softening market and particularly in cyber rates at the moment, but we've got inflation around. We've got risk awareness increasing. We've got new business lines. So why didn't you take a slightly different route and deepen the verticals and go through more growth, innovation and industries if you like.

And then I just had 1 other question, which kind of echoed from a question this morning. I think it's an important one. And that is when you look at the planned SCR increase for the year ahead, obviously, you've got flat premium expectation roughly into 2026. I understand interest rates will play around a little bit with the required capital, but let's just focus on the insurance risk.

Is there any reason to think why that number will go up next year? The SCR allocated to insurance risk, if the top line is going to be flat?

So let's do the second question because I think it was the longest. Why have we chosen to invest in Bermuda rather than deepen the verticals? And I think it's because 2 things. 1, we're always looking to innovate. And I think the opportunity in Bermuda is exciting irrespective of timing, right? So have we had the resources to invest in it, we have done it, whether it was a hard market or a soft market because I think it's a really good idea.

I agree with you that it's a -- it's a risky world, and that should provoke increased demand for what we do, and it should mean that the risk is attractive to underwrite. It's also fiercely competitive and not entirely rational. And had there been more opportunities to grow in property, cyber specialty and MAP, we would have taken this year.

I think we have the footprint to do so. And I think we have the underwriting teams to do so. And if other insurers disagree with us and think that now is a good time to grow in some of these areas, then that's what makes the market, isn't it?

But now how long a soft market will last in a world that is obviously risky is another question entirely. And if those market conditions change, then we will change and we've shown -- we'll change faster than both ways. But I think the Bermuda investment stands up irrespective of timing because the size of the prices that we've outlined are really, really interesting and they suit us.

Yes. And I think other parts of the market where you see growth at the moment is casualty. And as you know, we deliberately don't want to be in casualty. So I think there are also certain parts where we have delivered and said that's not for us. We want to apply our specialty competencies in parts of the market where we can.

And that's also where, for instance, what Paul was talking about is the cycle management actually sort of masks that underneath it, you have certain lines and certain areas in the world where we do see significant growth and certain parts are just been, you can say, trimmed to some degree. So you can say that's all going on. So I think they're definitely being deliberate in terms of where we want to play and how we want to play is extremely important.

Yes. So the mix is changing consistently, isn't it? As I mentioned this morning, I thought it was quite informative that stamping premiums in 4 large territories in Q3 for the E&S market were flat. That's the first time that's happened for 8 years. I'm not saying exposures were flat, but premiums were flat. So it's definitely a changing market.

Do you want to talk about questions 1 and 3?

Yes, can do. So I would totally agree when you look at a softening market when you don't grow as much, you don't need the same capital to invest in the growth. So totally agree to that. But that's also why you can say it's an opportunity for us to invest in establishing ourselves because it will, as we're talking to allow us to continue to have further access to risk but also develop the product suite that we have today.

We actually generally believe that this is a good evolution of the product suite we have today and it's areas that we would really like to be part of in the future because as we talked about, just cyber ILS is something that we have quite high aspirations for. So that is why we decide to invest in establishing both the platform and the capabilities in those product areas. So that is where you should see the allocation of capital.

By that, sorry, the 10 to 15 points impact on solvency, all of that is SCR-related, right?

Yes.

So no impact on own funds?

That's correct, yes.

And then there was just 1 other point, I suppose, could you keep flagging that in Q4, there will be a drag from expected growth in the year-end, but I don't see that growth.

When you look at second half of the year, we look at the own funds generated during the year, but also looking at what are the requirements from the business to invest in future years. So as we've spoken about, it is something where we do look 1, 2, 3 years ahead in terms of what would that require in terms of capital. So that goes into our considerations at year-end.

But when we look at the SCR requirement the capital requirements for next year, that will be driven by how much we're expecting to grow next year and we haven't finalized that yet.

You broadly said flat, right, so excluding...

[indiscernible] so yes, it will grow generally speaking by as much as we're expecting to grow, which is relatively.

So there shouldn't be any Q4 drag from growth?

It will be less than it's been in the past, yes.

It's Derald Goh from Jefferies. So I'm just trying to understand the change in the risk mix from these new ventures. So it sounds as though you might be, I don't know, increasing line size, maybe writing more businesses with the same clients. How does that impact your diversification or your, I guess, the old volatility of it? Because I guess the other way to think about it is if I compare the underwriting leverage by $200 million of premiums and $500 million of capital that tells me that this is pretty high capital intensity, which typically means high margins have volatility. So is that how you're managing the aggregation or diversification in that aspect?

And then secondly, very quickly, does this bring any sort of capital synergies that with the Bermudian platform? Because I guess there's a reason why a lot of reinsurance companies are set up in Bermuda instead of being Solvency II based. So does that kind of -- does that explain why is 10 to 15 points and not higher?

And then thirdly, I know you spoke about mid-80s combined ratio. But what about the other operating expense ratio has its outside of service results. So that had a step-up last year and this year from the build-out cost. Does that mean that this is kind of rebased on your level and might even go up?

Okay. I don't think it will have a huge impact on the business mix. So when we go through all those opportunities, they're all multidivisional opportunities. As we mentioned, the $500 million is driven by the capital requirements of Bermuda, it's driven by the fact that that's the amount of capital the entity will require to get on the security list of the companies with whom we want to deal. So it's kind of an entry, it's a sticker price.

So it's not required because of the inherent volatility of the businesses because that's the size of entity that is required to do the business that we want to do. And as Barbara said, we've done it in a way that means the impact on our SCR is relatively moderated.

And the second question was...

The second was around capital synergies. And you can say, obviously, we measure our capital in Solvency II so the new entity will also be part of the Solvency II capital requirement calculations.

That's what it cost?

And the cost was the last one, yes. Obviously, if we look at the last couple of years, you have had an impact of 2 things that I just want to draw forward. One thing is we have had a really, really strong performance, as you heard in the past years. And that's also where the payout of the remuneration that Paul spoke about is then kicking in. So for instance, if you look at this year and last year, you've had an impact of prior year's very strong performance.

So that has been, you can say, having an impact on the expense ratio. And for this year, the timing was also slightly earlier because ordinarily, we take in the accruals for the profit-related pay in the second half of the year, whereas we already had visibility on that in the first half. So that's why you saw you can say the expense ratio go up in the first half year.

And then at the same time, we're also -- we have been investing in technology, so making sure that we have the ability to scale, and we have very strong data being a global business. So that is also something that has been impacting the expense ratio, but where we will see the efficiencies of that having a positive impact as we continue to grow.

So I think the impact of building out Bermuda will have a negligible impact on our expense ratio. And so we're focused over the next few years of bringing that number down rather than increasing it.

Kamran Hossain from JPMorgan. 2 questions. The first one is I think it's the first insurance presentation I've heard in a while where there's no mention at all to AI. I don't think it's in your slides. And really interesting I've known you for a long time, you've talked about being aligned to growing areas. No mention of AI.

AI wrote it.

AI wrote it. No mention of AI. And also, I guess, somethings that's becoming slightly more topical in the U.K. AV as well.

What?

Autonomous vehicles. With Waymo starting up and probably a change in product suite. Just really interested in kind of why that's not on the slide? Or is that 1 to 3 years growth we should think about that at some point?

And the second question is on Bermuda itself. I think like many people this morning, I was struck by -- what felt like field $500 million. And I was really interested in whether how internally led this is versus this is client saying that, this is a product we really need. I look at what you've done in cyber over the past. I followed it for many, many, many years, and I know that a lot of that was driven by clients saying, actually, we need some of this. You talk to the same people in the company that's going by it. So pretty interested in how much of the Bermuda setup is like kind of client driven versus something where you think you should be positioned to capture growth going forward?

I think the -- that's a pretty good question. So I mentioned that we've been doing ART and parametric and captives on an ad hoc basis for a while. And we're seeing more of it and we're seeing increasingly clients use those tools. And we have a niche we think, we've got something we call close to the clients where we've been establishing more holistic relationships with our top clients over the last 5 years and they've been talking more and more about this.

And we've always said, well, we can do it and then that we play at it. And so it's becoming increasingly obvious that there's a business to be built here and that our clients would like it if we did. So that definitely informed our thinking, for sure, yes.

We haven't mentioned AI because we're just getting on and doing it. And if Troy were here, he could give you a long talk about how that's made its way into our modernization and a lot of our systems and processes and in some of our underwriting as well, I think that's a different topic. So maybe we'll do that for next year.

Paul and I actually went on a AV trip -- mission AV trip 7, 8 ago now to -- it's Philadelphia. Wasn't it?

Pittsburgh, that's right, thinking about how we -- how you could ensure some of the key components of AVs. And we keep an eye on that market actually and there could be an opportunity for us. It will be interesting to see which -- what goes to the auto liability world and what comes into the kind of products liability world and whether there's an opportunity there.

And what some of the regulation does and as well is going to be key.

Just on the -- I guess, on the first question. In terms of the, I guess, where you are writing business for captives, if you look at it versus the group level of mid-80s combined ratio, do you say it's kind of better or worse? Because I know it's a small sample versus how are you going to grow, but is it tends to be more profitable.

It's certainly no worse. What captive business can be is a couple of things. So why we've seen the demand for it. As Adrian said, more people have been reaching out to us about it. There's definitely more specialty products moving into captives. Traditionally, captives was a lot of casualty and that's not us. What you've seen in recent times and what we've been learning in the last year or so, really is, can you do the property? Can you do the cyber?

Can we put our D&O in a captive, we're thinking of putting all these things in all the boardroom coverages, so to speak, into captives. So there's a shift there. It's stickier business as well. When you look at the market cycles, it does tend to be a little bit more resilient to market cycles. Clients have a captive. They wanted to survive, they want them to work and manage that risk over a period of time. They're not looking to have their captive lose money. And so it makes it stickier business that can be a little bit more resilient to the market cycles and can bring in the combined ratios that actually we're planning for.

Darius Satkauskas. Just a follow-up question. On a few slides, you mentioned bolt-on acquisitions. And I'm just curious, your business as it is with Bermuda platform, is it you think capable of delivering those sort of mid-single-digit growth rates during the soft part of the cycle? Or is that plan sort of perhaps need some bolt-on sort of deals here and there to get to that level?

No, we're not reliant on acquisitions to get our mid-single digits growth. I think if we look at the the 2 real things -- the 2 things you talked about, so the Bermudan thing and the transition thing, there's lots of IP in that transition world. And we have a good chunk of it. There's some stuff we don't have so there are some capabilities that we're going to look to build over the next few years.

And some of them may be individuals or teams, but there may be the occasional bolt-on acquisition to that too. That's not for a growth reason, particularly, it's for an IP reason. That's what we're interested in.

So you shouldn't expect us just to buy to get top line. It's the capabilities that would be in the scope.

And just on that, how -- your $5 billion company, how do you define bolt-on acquisition, just a $200 billion? Or can it even be higher than that?

Yes. I think that's probably at the top end. If you look at some of the acquisitions we've done in the past, they have all been well below $50 million. We were also a smaller company at that time. But yes, it shouldn't -- you shouldn't expect anything transformative of any kind in that space.

It's James from Citi. Can I just ask of the $400 million of premium that you're targeting for this, how much of that is kind of fronted stroke ILS type business versus you as the risk carrier? I know you gave the $200 million for the...

Most of the success are risk carrier. So again, most of the success are risk carrier.

And then -- so the overall margins on this has a sort of by 2030, are we sort of -- because that $400 million, is that a gross number, I presume it wasn't clear on the slide that's gross. So the net 85% of that is net, is it the same at the group level, roughly?

Roughly.

Yes. Okay. So have I just apply a normal combined ratio at the group level to that number to get? Okay. No, that's helpful. And then when you looked at this doing -- allocating this $500 million, how did you sort of -- what is the IRR on the investment, what's the payback period? And how do you square that with doing a buyback, which is essentially a 15% return on day 1?

I think the [ RA ] calculations obviously go into the equation, but I think what we have really tracked to get across is that we don't do this for tomorrow. We do it to increase our footprint and deliver sustainable results over time. So you can say it's very much taking into account that this adds something in the profile that we have. So the value add for that investment over time will be more than doing the share buyback upfront.

But we've done IRR work and it works.

What is the IRR?

I'm not going to tell you. [indiscernible] Otherwise, we would have done.

William Hardcastle, UBS again. Just trying to think a helpful color on the combined ratio type discussion there in premium. I'm just trying to think about the underlying volatility around that portfolio. Is it a little bit more presumably volatile than the rest of the Beazley book or it's very much aligned with the current portfolio?

And then on the parametric stuff, it's a bit early, but you touched on large corporate potential buying the parametric. I may have missed it. I saw quite a big bar of parametric risk as governments at the moment. Do you think that a company like Beazley can be a big player in that side of the parametric risk as it emerges? Or is that more a capital markets...

It's certainly something that we -- that is in scope for sure. We're part of the sustainable markets initiative, and that's been helping various governments by parametric insurance or prefunded catastrophe finance as they'd rather call it.

And yes, that's sort of business is certainly within scope as is as our insurance products to emerging parts of the world that can't buy traditional insurance. That's all part of it. So long as we can model it properly. And I think that's -- I think it's very exciting.

Volatility?

At the margin.

Marginally a tiny higher?

I mean it's -- ALT is complex. Parametric is catastrophe. So -- but I think the impact it will have overall on volatility is going to be marginal. And we show, what are what intends and what our 1 in 250s are. So if there is an impact on that, you'll see it.

Just a quick one. I was just trying to sort of think about what resource you actually need to bring in-house to achieve the $400 million of premium you're going for in Bermuda, and how much of this is a reallocation of resource for personnel to Bermuda? How much is this reliant on bringing teams or new teams and other capabilities into the business?

Yes, it's a little bit of both. A lot of the initial staffing is by people moving to Bermuda. There were a number of people that put their hands up to do that, any applications greatly received. But there are some capabilities we're looking to add as well. So it will be a bit of both. It's not a huge office. I think we see after 3 to 5 years, it's sort of 50 people odd, that sort of thing. So a lot of the services for Bermuda will be providing centrally. So it's predominantly the underwriting operations that we'll be building out there.

And that's not 50 underwriters. That's the totality of the office.

Okay. Thank you very much indeed. Thanks for...

Thank you for coming.

Thank you for coming. Thank you for your questions. If you have any other follow-up questions, please reach out to the woman that wrote the presentation. So thanks everyone.

Good morning, and welcome to Beazley's 2025 Q3 Trading Update. [Operator Instructions] I will now hand over to Chief Executive Officer, Adrian Cox. Please go ahead.

Thank you. Well, good morning, everyone, and welcome to Beazley's Q3 IMS. I will cover the key points of the quarter's performance and then move to questions.

So our year-to-date growth is now at 1%, and the key drivers of this reduction have been in cyber and property. At the interim presentation in August, I said that in some important segments for us, and I was referring particularly to D&O, cyber and property, markets were getting a lot less frothy, and this was anticipated to make it easier to grow in the second half. The evidence for this was that D&O rate reductions were beginning to ease after 3 years of very public softening, that we had successfully pushed for flat rates during the important North American July renewal season in cyber, which we believe is necessary given the increased levels of cybercrime and liability claims the market has experienced since 2023, and that property rate reductions had also eased following a very aggressive second quarter.

However, that prediction did not come true. The D&O and property markets are still very competitive. And despite the fact that we believe the U.S. cyber market is now unprofitable, given that very active claims environment, it continues to soften.

It is notable, I think, that premium growth in the E&S market as a whole has slowed. For example, E&S stamping premiums in California, Texas, Illinois and Florida were flat year-on-year in Q3, having been growing increasingly more slowly over the year. We, therefore, have reacted accordingly, maintaining our underwriting standards, and this has impacted our growth for the third quarter.

As such, we are reducing our guidance for the full year to flat to low single digit. We remain confident that we can maintain our margin and seize the opportunity to grow when conditions improve, but we will not do so until then. Alongside the adjustment to our growth, we are also updating our combined ratio guidance to low 80s.

Our attritional losses continue to develop favorably, though less so than in previous quarters, and the third quarter cat activity was less than we had budgeted. The combination of these 2 factors has allowed us to improve our combined ratio guidance to that low 80s.

Going through the teams then. In cyber, premiums are now down 8% from 6% at the half year, but the rate reductions have eased from 7% to 6%. As I mentioned just now, the team have been keeping rates flat in our renewal business in North America, and this has improved the year-to-date rate change, but our new business is down.

We continue to grow well internationally, and I'll talk about that a little bit more or rather Paul will talk about that a little bit more at the CMD this afternoon. We do find the lack of market discipline in North America somewhat surprising given the claims environment. This does need to adjust if we are to avoid the extreme swings in pricing that we saw in 2021 and 2022.

Moving on to property. Our year-to-date numbers are relatively consistent with the interims, indicating that the market remains competitive. The lack of hurricane activity during this year's windstorm season, whilst positive for this year's profits will likely have an impact on market behavior next year.

Rates, though, are still adequate, and we continue to eke out growth and there remains further opportunity to do so in 2026 as we build out our business with the retail brokers there. Historically, our U.S. property business has been exclusively through the wholesale channels.

Moving on to MAP. That business continues to have a good year. Demand growth persists, particularly across our contingency political risk and political violence businesses, and that's reflected in the numbers.

Moving on to Specialty. As we flagged at the half year, growth in specialty risks has moderated in the second half as we continue to derisk the parts of the book that we believe are overly exposed to social inflation, particularly in medical malpractice. Encouragingly, the stronger financial markets have driven increased demand for our M&A and transaction business, which is growing nicely. As I mentioned earlier, though, the D&O market remains very competitive.

Looking forward, we are also planning to open a new venture in Bermuda in early 2026, subject to regulatory approval with $500 million of funding from the group. This business will be quite distinctive with 4 main elements to it. The first, captives, insurance and reinsurance; the second, alternative risk transfer, including parametric products. The third is an ILS business, focusing on cyber reinsurance and insurance; and fourthly, specialty insurance and reinsurance. The first 2, captives and ART are fast-growing markets in which we participate, but currently do not have teams focused on them, and this will allow us to do just that.

As we've discussed many times, we believe that a deep cyber catastrophe reinsurance market is essential for the health of the cyber insurance market, and we spent the last few years pioneering such. It is now beginning to blossom, and we are well positioned to build a franchise around this, and we'll be launching a fund to do so next year.

And lastly, Bermuda provides additional access to risk, especially in specialty insurance and reinsurance that we currently write. We believe this is an exciting opportunity for us and for business that is slightly off the mainstream, giving us that idiosyncratic growth in a way that allows us to maintain our underwriting margins. We will, of course, be discussing this in much more detail this afternoon, along with our other exciting plans at our CMD, but I thought it would be useful to outline here the main tenets of our Bermudan strategy.

And with that, I'll pass over to Barbara to go through investments and our beloved IFIE.

Thank you very much, Adrian. Bring us back to the numbers immediately. But just to remind you, as we've done in previous quarters this year, we are providing the Q3 insurance finance income and expense balance, the IFIE, to assist you with the modeling. Furthermore, we'll also be placing the yield curves utilized as at the end of Q3 on our Investor Relations website.

The change in financial assumptions in the third quarter has produced an income. Yield curves have decreased in the quarter, creating an expense as well as the discounting unwind expense. The result of these 3 pillars is a total year-to-date expense of $169 million.

When it comes to our investments, our asset portfolio has increased to $11.7 billion from the $11.5 billion we had at half year, returning $458 million year-to-date at Q3 or 3.9%. This is 1.43% or $146 million in the third quarter. An improvement in the macroeconomic conditions during the year and easing of trade-related tensions created a favorable environment for risk assets. Equity indices have risen and corporate bond spread continues to compress.

Expectation of a loosening of monetary policy have driven the short-dated treasury yields lower, which contributed positively to fixed income returns. As of the 30th of December, the average yield for fixed income investments is 4%, with an average duration of 1.7 years, which gives a positive backdrop for future investment income.

With that, we will open for a Q&A on the current trading, but please remember that we have a capital market session this afternoon at 1.

Thank you, Barbara.

[Operator Instructions] We'll now take our first question from Vash Gosalia of Goldman Sachs.

Maybe 1 or 2 quick questions from me. So one is on the Bermudian platform. Obviously, you'll be investing $500 million. But could you give us a sense of how this will impact your capital position? Because I'm guessing it's not as simple as a 1:1. And second, could you then also give us a little bit of flavor of what growth could we expect from this investment just because given you've already cut your guidance, I'm just trying to find what are the levers that you have moving into 2026.

Good questions. Barbara, why don't you take the first one, and then I'll do the second.

Yes. I think, obviously, we see a very exciting opportunity in Bermuda and hence, investing $500 million of capital is the right thing for us to do because that will support, as you point out, future growth for our company.

I think in specifics, we will come back this afternoon around how we see our capital in general. But just remember that we stay true to our commitment to returning capital if we cannot see opportunities to invest in our organic growth and the ordinary dividends as we ordinarily would pay. So coming back to capital this afternoon. But for now, just reaffirm that it is a great opportunity for us to invest in future growth.

Thinking about future growth. What we've consistently said in the past is that we believe across all market conditions, we should be able to do mid-single digits. And as we look ahead over the next 3 to 5 years, we think the Bermuda venture will help us get back to that sort of growth levels. There are a couple of other things that we're going to reveal this afternoon, which will also help. But we believe Bermuda will be a material part of being able to get back to the mid-single digits, which is our target. So hopefully, that's useful.

We'll now take our next question from Will Hardcastle of UBS.

I'll try again slightly differently maybe on the deployment. Just thinking about the ROI that is plausible and the sort of time drag to get to sort of a maturity of ROI is quite important in that, if that's possible. I'm just wondering if that capital requirement is sort of front-end loaded and then there's room to grow into it as such. And then is the -- it was really helpful you gave us the 4 sort of drivers there on what it's going to be deployed in. But I'm sure there'll be lots of moving parts. But if we take a step back, how much of that $500 million is likely to be sort of underwriting risk versus fee income risk, if that's possible? Very general is obviously what I'm looking for.

Yes. Thank you. Yes, I mean, the capital, of course, is front-end loaded. The regulatory requirements are going to be a lot less than that going into the first couple of years. But if we're going to be a credible market in Bermuda and make the security lists of the companies that we're looking to do business with, that entity will need to have at least $500 million. So that's sort of table stakes for Bermuda, which is why we've allocated that much. The vast bulk of what we'll be doing will be through underwriting.

We will be -- the plan is to develop a fee-earning business within the ILS market. And we'll go through a little bit of that this afternoon. We do believe that the ILS market for cyber and potentially cyber and property together is going to be a booming market over the next few years, and we want to be ready for that. To a certain extent, the size of that venture will be driven by how fast the demand for that product grows. So I think it's safe to say that the bulk will be underwriting at least for the first few years as well.

And as you've already seen, well, it's also a question of the exact ROI, but this is again giving us new capability and a new access to risk compared to where we are today. So we see that as a strategic investment as well.

All the lines of business that we've outlined, we believe can make our 15% ROE hurdle.

And we'll now take our next question from Kamran Hossain of JPMorgan.

Let me try 3. The first question is just on the top line guidance for the year. Obviously, the guidance has come down for the year. When you look to the flat to mid-single digits, how dependent is that on cyber renewals? I know there's a big renewal date coming up in about 5 days' time. How dependent is it on that? And kind of do you see things changing to maybe make that a little bit better in the fourth quarter?

Second question is just on the attritional kind of discussion here. At the half year, you said potentially you would upgrade the guidance if attritional experience continued to be good like it had been in the first half. I didn't have a double upgrade to kind of around 80 in my numbers. But just intrigued why maybe that didn't play out. So it feels like nat cat was an upgrade, but attritional wasn't. So just intrigued kind of what's going on underlying there?

And the third question, I know we're going to talk about this afternoon. If you think about Bermuda versus the rest of the group and you look at premium leverage versus capital maybe you're like 2 and a bit times premium leverage to your capital requirement in the business. How do you see Bermuda? Is that -- I think if I look at it, they've tended to be like 1x businesses. Just interested in kind of what that might look like. I don't know, that's probably an afternoon question.

Thanks for those 3 questions, Kam. Yes, Q4 is actually quite a big quarter for us, just under half our business is written in Q4 -- just half a quarter, sorry...

A quarter, yes.

Of our business is written in Q4. It's big in D&O. As you mentioned, there's a big D&O, a big cyber renewal date coming up. It's quite big for parts of our MAP business. So -- and property has actually got more in Q4 than you would think. So there's quite a lot going on between now and the end of the year. It's not particularly dependent upon cyber in and of itself because it's quite big across most of our divisions. So we will see. There is increasing talk about the cyber market and its lack of profitability in North America, particularly amongst the reinsurers, but we're not seeing that impact market behavior yet, which is why we've sort of called that out earlier in the call today.

When we look at the attrition -- when we look at the loss ratios, yes, Q3 was light for cat. Our attritional losses were still favorable, just less so than they have been in previous quarters. I think there are 2 main drivers to that. One is that we're not immune from the increase in cybercrime and liability issues. As we'll demonstrate this afternoon, we are outperforming the market quite nicely, but we're not immune to those -- that increased claims activity, which has impacted the attritional losses there. And we continue to be very cautious in how we reserve for business that we think is exposed to social inflation because that's not getting any better. And those 2 have meant that our attritional losses are less favorable than they have been in previous quarters.

As we look at the leverage ratio on our Bermuda business, because we're front-loading the capital, it is less efficient. I think over the medium to long term, our overall capital efficiency will remain relatively constant. Part of the discussions that we've been having over the last couple of years has been how our capital model would work in Bermuda. And I think we are fairly comfortable that it's not going to impact our overall leverage, there would be much.

[Operator Instructions] And we'll now move on to our next question from Abid Hussain of Panmure Liberum.

I think I've got 3 questions as well. The first one is on Bermuda and the alternative risk transfer space. Thanks for giving us some of your thinking on investing in Bermuda and the alts space. Just -- can you just give us a little bit more color, or perhaps this is later for this afternoon in terms of how commoditized is that space? And what are the margins like? If you can just give us some color on that? And then how quickly can you establish your presence there in Bermuda and in those markets? So that's the first question.

And then the second one is on growth and KPIs. You've sort of touched on growth of mid-single digits. But given that we're in cycle management stage or it feels like we're in the cycle management stage here, what are the KPIs that you're running the business to? Is it growth? Or is it something else?

And then just finally on the cyber insurance lines. You've obviously pushed through some rate in the last few months, and I suspect you're trying to push through some more rate in the coming weeks. But just wondering how sustainable do you think those rate increases are now that it feels like the U.S. market is underpriced. When will that market turn?

Very good last question.

Yes, I will -- yes, I'd love to be able to answer the last question. Okay. So the ART question, I think we're -- so it's business that we currently do. So we do some alternative risk transfer across a number of bits of our portfolio. So we write parametric business. We reinsure captives. We do, do other forms of ART, so multiline, multiyear kind of structured insurance and reinsurance. So it's a business that we're already in, but we're trying to focus it and have a team directly concentrating on that business.

We like it because it's slightly more complex. The distribution is a little bit different, particularly with captives. So it's slightly out of the mainstream. The underwriting is a little bit more technical, but the margins are what we seek. And I think the whole point of what we're trying to do in Bermuda is to find avenues of growth in areas that do suit what we think we're good at and allow us to keep the margins that we currently have. So we think we can ramp up relatively quickly. We've got some folks who are going to move over to Bermuda next year. We will be recruiting as well, and we're building on a base that isn't 0. So it's sort of -- it's business that we're already doing. So -- and we'll provide a little bit more detail about the sort of long-term ambitions for Bermuda this afternoon.

Our KPIs, moving on to cycle management haven't changed. So we still, as we'll demonstrate, target the 15% return on equity. I think the way to think about it is that the business that we have currently, we should be able to maintain sort of flat, which is what we've done historically in a softening market. And then the initiatives that we'll be talking about this afternoon will allow us to grow because we've chosen areas where we think the margin is going to be good enough over the next few years.

But when looking at what to prioritize, as you can see also in the way that we have positioned us this year, we very much focus on the long-term profitability to be able to deliver sustainable results. So at the expense maybe short term on growth, but that's because we believe it's long term, the right thing to do.

And yes, so we've been maintaining rates on our cyber business in the U.S. since July. We've been successful in that. Our retention levels are down a little bit, but not very much. It's the new business that's been really impacted on that. We will continue to do that. It's important to us that we maintain the profitability of our cyber business. And if that means the U.S. cyber business continues to shrink, then we will carry on doing that because we believe it's the right thing to do.

It's not the first time we've had to do something in a cyber book that the market has taken a little while to catch up on. But it is relatively short-tail business. So the lack of profitability will be fairly obvious, I think. So we are hopeful that the cyber market at some point will begin to correct. But the longer it waits, the sharper that correction will be, which is really in no one's interest.

And we'll now take our next question, a follow-up from Will Hardcastle of UBS.

It's a really quick one, I hope. Just touching back on cyber. Just coming back to it, clearly competition is going on a bit longer than maybe you anticipated. Is there major culprits to this? Is it widespread? Just trying to get an idea of the structure of competitive dynamics and how -- give us an idea of how quickly that could change.

Well, as I mentioned, it's fairly short tail. And so the lack of profitability is already -- is already obvious, I think, in the 2023 and underwriting and accident years depending on how you account. It's a subject of much debate amongst the reinsurers. As we'll demonstrate this afternoon, though, I think the combined ratio spread of cyber insurers is relatively wide. And so I think there is a real difference in performance, and I think that's impacting how people are behaving. So I'm not going to call anyone out, Will, no.

It was a try.

And we'll now take our next question from Ivan Bokhmat of Barclays.

I've got one question, which you might not be able to answer straight away, but perhaps I'll try. When I think about the growth for this year, we're talking about pretty flat volumes. And I think we are also reading about you placing extra cat bonds, but then rates are lower. So I'm just wondering, looking towards year-end, how do you think about your solvency capital requirements. If we take the Bermuda bit aside, should we expect actually SCR inflation this year?

Yes. I think very good question. This year is back to normal. If you look at '24, we saw a pickup in the solvency capital ratio at the end of the year, but that was driven by factors where you saw positive movements in interest rates, you saw releases in some of the long-tail classes, which gave us a capital relief and so forth. But this year, you should expect an ordinary pattern where you would see the solvency capital ratio from the half year to go down for the full year. So that should be the expectation, Ivan.

Still healthy.

Yes, yes, absolutely, absolutely.

Sorry, but maybe I could follow up on this. So given the lack of growth in gross written premiums and some extra risk transfer that I think you're trying to place, is this number going up or down? It's very simple. I'm sorry. I'm not sure I understand.

I think when you look at the risk parameter of the cat bonds, that's a renewal. So it's not adding. It's a renewal of some that are expiring.

What we may be doing is replacing some of the industry loss warranty that we have with cat bonds, which are more capital efficient, but it's...

Marginal. Yes.

Relatively marginal. Yes.

Thank you. With no further questions on the line, I would like to pass to the management team for closing remarks. Thank you.

Great stuff. Thanks, very much. Well, thanks for dialing in, everyone. I know we announced this one relatively late. So we appreciate your time, and we look forward to seeing some of you this afternoon. Thank you very much, indeed.