Zurich Insurance Group Stock

Ladies and gentlemen, welcome to the Zurich Half Year Results 2026 Conference Call. I'm Vicki, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast.

At this time, it's my pleasure to hand over to Adrienne Lim, Head of Investor Relations and Rating Agency Management. Please go ahead.

Good afternoon, everyone, and welcome to Zurich's First Half Results Call. I have with me our Group CEO, Mario Greco; and our Group CFO, Claudia Cordioli. As a reminder, we will not be taking any questions on the proposed acquisition of Beazley or comment on its results, given we are still 2 separate independent companies. Before I hand over to Mario for some opening remarks, please can I remind you to keep your questions for the Q&A session to a maximum of 2. Over to you, Mario.

Thank you, Adrienne. Good afternoon, everyone, and thank you for joining us today. Before we take your questions, I'd like to make a few remarks on our half year results. I'd like to start with 3 messages that I'd like to highlight today. First, we delivered another record result. Business operating profit increased 13% to $4.8 billion and core EPS grew 11.5% with every business segment contributing to this growth. These results reflect the strength of our diversified model, our focus on execution and our ability to generate attractive returns through the cycles.

Second, we are seeing strong momentum in our strategic growth areas. In Property & Casualty, our diversified portfolio allows us to expand selectively in areas where we see attractive returns, such as specialty and middle market. In Life, protection growth reached double digits, well ahead of our targets. In Farmers, policy count growth continues to build with exchanges gaining market share for the first time in a decade. And lastly, today's results reinforces our confidence in meeting or exceeding our 2027 financial targets. We continue to see attractive growth opportunities across our business, supported by structural trends such as investment in AI infrastructure and rising demand for protection solutions.

Now let me briefly touch on the performance across our key business segments. And as usual, I start with Property & Casualty. Gross written premiums grew 7% to nearly USD 30 billion, with an all-time high operating profit of USD 2.8 billion, up 16% year-on-year. Combined ratio was an excellent 92.7%, reflecting the strength of our underwriting and active portfolio management. Within Commercial and Property & Casualty, Specialty remains a key growth area with premiums up 8% and an underlying combined ratio of 91.2%. Construction was a particular strength, growing 18%, supported by demand from AI-related infrastructure, not just in the U.S. but around the globe.

This is an area where our risk engineering, underwriting expertise, global capabilities such as our fully integrated global industry vertical and ZRS expertise give us a meaningful competitive advantage and this supports our leadership position. We currently lead on around 70% of our underwritten data center projects. Within our customer segments, middle market also continued to perform strongly with premiums up 7%, driven by growth in Germany, Italy and France and targeted expansion in the U.S. Across our commercial portfolio, margins remain healthy following several years of cumulative rate increases. We continue to see pressure in lines such as U.S. large property and E&S, while financial lines and cyber are showing signs of stabilization as the market responds to increasing claim complexity and emerging AI-driven threats.

Casualty rates continue to increase, reflecting persistent loss cost trends. Importantly, the breadth of our portfolio across geographies, products and customer segments give us the flexibility to dynamically manage our portfolio through different market cycles. Nat cat losses remain low at 1.9% of combined ratio, reflecting actions we have taken over recent years to reduce cat exposure in our portfolio. In terms of the recent wildfire events in Central Europe, we currently do not see a material impact on our results. You will have seen in our materials from this morning that the prior year development contributed 2.4 points to the combined ratio, somewhat above our usual level.

We expect PYDs to remain modestly elevated in the near term, supported by positive experience from short-tail lines, particularly from EMEA property, where we took a conservative approach following the inflation spike in 2022. In addition, the 2025 accident year has developed very favorably for global travel and for our U.S. crop business. Our approach to long-tail lines remains unchanged, and we continue to carefully monitor trends in casualty given continuing social inflation.

On retail, Property & Casualty, the operating profit grew 14% year-on-year, and the underlying combined ratio improved by a further 60 basis points to 94.6%. Rates remain positive, and we continue to see improvement in motor and property, supported by investment in pricing and claims. In EMEA Motor, for example, the combined ratio has improved by more than 5 points over the last 2 years to a healthy 96.2%, close to our longer-term ambition of operating below 96%.

Turning to Life now. Business delivered a record operating profit of USD 1.3 billion. It is up 16% on a like-for-like basis. We're particularly encouraged by the pace of growth we're seeing in Protection, where premiums grew 10% ahead of our targets. Growth was supported by strong performance in the U.K., Australia and Latin America, where we saw continued expansion in our bancassurance partnerships and our joint venture with Santander returning to volume growth. Beyond protection, both our savings and unit-linked businesses contributed to earnings growth, benefiting from strong customer inflows and favorable financial market impact. As a result of this, we are raising our Life profit guidance for the year. Looking ahead, we see significant opportunity to grow protection further as we continue to help customers address their increasing needs for protection and health solutions.

And now Farmers. Farmers delivered its strongest half year ever with operating profit of USD 1.2 billion. The exchanges grew premiums by 4% and are organically gaining market share for the first time in more than a decade. This represents a key milestone and is a testament to the successful transformation that the team has executed on since 2023. The exchanges are now operating from a position of strength with an industry-leading combined ratio of 82.4% and a surplus ratio of 58.7%. Looking ahead, we expect the exchanges to benefit further from key initiatives to enhance agent productivity alongside a newly launched brand campaign.

So to summarize, we are just at the midpoint of our 3-year financial plan. We announced it at our Investor Day back in 2024. And today, we're pleased with the progress we're making. The strong momentum we are seeing in our first half result reinforces our confidence in meeting or exceeding all our 2027 targets.

Thank you very much for your attention. And now Claudia and I are happy to take your questions.

[Operator Instructions]

The first question from Michael Huttner, Berenberg.

Well done on the results, but I'm really sorry, I want to focus on Beazley, and I only have 2 questions. On Beazley, my 2 questions are the following. One, could you -- is there any update on the timing for the completion of the deal, whether it was September, October or earlier or later? Or are there any milestones we have to think about? And then the second is also on Beazley, and this you might choose to say well, we can't answer, but the results yesterday, the day before were possibly a little bit less strong than we had hoped. Obviously, it's not a very actively followed stock anymore with a cyber combined ratio, which worsened by 12%. And I just wondered if that's changed any of your kind of thoughts about ROE enhancement, ROI return, whatever.

Michael, it's interesting that you start with the first question after Adrienne said that we're not taking questions from Beazley -- that 2 questions. So look, on the timing, I don't know. I mean we are in the process. We got approval by a number of jurisdictions, but not all of them. I would say that this is a Q4 event. Now where in the Q4, it's hard to say. There are no issues, no delays. It's just that it takes time. On the results, we have nothing to say because we have really nothing -- we don't know anything. And so we can comment on something that we have no information about.

The next question is from Fahad Changazi, Kepler Cheuvreux.

On North American rates, minus 1% and Q1 '26 was flat. And I believe the outlook has changed from stabilizing to moderating. I suppose could you just put a bit more -- you already talked about some business lines, but can you just talk about in terms of the outlook then versus now and what's changed? And I was wondering if you could also talk a little bit more about specialty, your specialty business and where rates are developing. You highlight some segments where you've cut back and one other segment that you have increased premiums. But if you could just talk about the different aspects of specialty as well, please?

Yes. So look, on the rates, in particular, the U.S. rates, the rates in the second quarter have been very positive, double-digit positive on specialty. They've been high single-digit positive on liability and motor, as in all the past years have been close to flat on workers' comp, and they've been negative on property. Property remains negative in the rounding of 10%. That's the composition. With respect to Q1, Specialty has improved. Motor and Liability have stayed on the same levels. Property has slightly worsened and workers' comp is practically unchanged. So that's the situation on the North American rates. The rates are slightly better or are better in EMEA. And this is probably structural characteristic. The market is less competitive. So it's not just a lag in transmission. It is just rates in EMEA are structurally higher than the ones in the U.S.

Then you asked about specialty, but what particular angle of specialty do you want me to answer you on? On rate or on the volumes?

I suppose you can do both. And if you could just also segment between the large specialty business and the middle market specialty business as well.

Yes. So on specialty, of course, the predominant component in our results is what the construction and infrastructure vertical does. This has been the highest source of growth, and it's also probably the most rewarding one for us in terms of margins. E&S has performed slightly better than it did in the past years, but it remains for us an area of careful underwriting. Financial lines is showing, as Claudia said, I think, a number of times already showing some improvements in the rates and the margins. Energy remains a growth area for us and quite stable. We got some -- as it happens every number of years, we got some losses in surety for some of the exposures that we had now related with the construction and infrastructures. And on cyber, we see a market which we expect now to turn into better. The rest of specialty for us is insignificant.

If I may add implicit in Mario's comments, there's also the geography aspect, right? It's great to see that the growth is broad-based. So it's not a U.S. topic only. As you were rightly pointing out, there is some overlaps as well between middle market and specialty. So roughly 1/3 of specialty is done with middle market customers. And this is a big driver of growth in the European markets as well. So the U.K. has been traditionally leading. But what we are seeing now becoming more and more prominent is Continental Europe. There's a number of beyond data centers, infrastructure projects, very large projects in the energy field, which need a lot of insurance support. So we're very happy to be growing there. It's double digits in Germany, in Italy, France, Benelux on a smaller basis. So those are great markets for us, and we are very well positioned to be growing there.

The next question is from Iain Pearce, BNP Paribas.

The first one was just if you could talk a little bit particularly about the commercial accident year combined ratio ex cat trend. So that was 120 basis points higher year-on-year. Could you talk a little bit about how you're expecting that number to trend? And if you think that the retail improvements can offset that? And then on the expense ratio, obviously, that was quite a bit higher year-on-year as well. You flagged business mix and commission impact. But when I look, it looks as if the expense ratio has basically gone up in all regions ex APAC and in both the retail and commercial divisions. So I was just trying to see if there's anything else to flag in the expense ratio trend across the different segments.

Yes. So I'll start with the expense ratio, and then Claudia will continue on the combined ratio, commercial and retail. Look, on the expense ratio, there are 2 things that are happening. The pure expenses, we are very confident that you'll see them by year-end coming down. And so we're still confident that we're going to show by year-end and then in the next year, a reduction of the pure expenses component into this. On the commission side, however, that reflects the business mix and reflects partially the different composition of the premiums that we are reporting in our portfolio. Now we will carefully manage it over time and making sure that this doesn't worsen further. But in a sense, this is also a more stable business mix for us. It's a more encouraging business mix on the margins than the one with a lower commission ratio. There are products like travel, but also F&I, which do have higher commission ratios, but then they offer us important benefits on customer loyalty and the profitability of the relationship.

Is that enough on the expenses and commissions or...

Yes. It's all clear.

Thank you, Mario. On the loss ratio, I mean, just to give you some context, out of the year-on-year move on the combined ratio, 2/3 is loss ratio and 1/3 is the commission, essentially the commission point that Mario already mentioned. So the year-on-year worsening on the loss ratio, while it's there, it's 80 basis points. So in the context of a book that's growing 7%, being able to maintain this business mix and this level of margin is really -- and sorry, let me reiterate that because I think it kind of comes across as if it were obvious is not, right? There's a lot of proactive portfolio management that's done to keep a portfolio of this size growing at 7% at 91% combined. So important that we reiterate that. So in terms of the loss ratio changes, there's a bit of a mix impact there as well. So obviously, the rate movement in property is such that we are growing less in property. And here and there, we are also proactively pruning some business where rates are no longer adequate. So that's also visible, obviously, in the loss ratio.

There are a few losses, as Mario was mentioning, it's very pointed on the surety book, older underwriting years, but it's coming through the accident year. So some relatively small in the context of the overall book, but there are a number of factors coming together. So the volumes, property, some very specific losses coming through. We want to continue to grow the book in our target and strategic areas. The combined ratio might move slightly from here. Obviously, we have a very strong focus on expenses, as you know, and we'll continue to have it going forward. But we are happy about the context of the book as a whole and where it's going as long as we are growing at this rate with this type of margins and profitability.

And can I add a comment because not many of you have been around in 2018, 2019, but I was there. And at the time, there was a similar discussion where some of your colleagues were asking us what about further reduction of the combined ratio, we're saying we're targeting EPS growth and BOP growth. We're not targeting low combined ratios. We're running targets for targets which are on BOP and EPS, and this is what we want to achieve. We're not in a race to have the lowest possible combined ratio no matter what the BOP and the EPS are. So please be mindful of this because otherwise, you don't understand what we're trying to do.

And the growth, maybe that might be a related question on this, right? The growth that we are pursuing, just to be very clear on that point as well, is mostly growth that's coming through very profitable, mostly short-tail lines, right? So we are not -- just again, to reiterate, we're not making compromises on the underwriting discipline. We're not taking long-term bets on casualty. We're not growing casualty, in fact, on a net basis, right? So we are not taking bets on future social inflation trends. We want to grow the book in the lines that are mostly profitable, and they happen mostly to be short tail, specifically in the specialty middle market area.

The next question from William Hawkins, KBW.

Could you first talk about any major issues you want us to be aware of in terms of seasonality or sequential change when we think about 2H versus 1H? There may be a lot to say on the non-life side. Obviously, nat cat seasonality, and it would be good to have an update about whether you think PYD or other loss picks could limit the impact of that in the second half. But I'd prefer if you could start by talking about the Life result, please, because you have just had a great print. And I'm not sure about the seasonality of life. From first principles, I'd have thought your Life results should be stronger in the first half than the second half because of things like dividends. But the history seems to say that actually the second half gets better relative to the first half. So I'm just trying to manage my expectations for that. And also thank you very much for Slide 19, where you've dug a bit more into margins on the Life side. For me, at least, that's really helpful.

Then secondly, much shorter question. In the SST walk, there's a very small change in target capital, which seems a positive surprise to me given how much you're growing the business. So could you help me understand why there's almost no change in required capital and what the outlook is, please?

Okay. I'll start, William. And by the way, thank you very much for the title you used this morning to your report on us on the [indiscernible] life, no more that. You remember that I said many, many times, and I'm happy to see that it's finally coming back to be a normal sun. And then I'll ask Claudia to take the capital question. Look, seasonalities. Of course, in the second half of the year, you start watching the weather reports every morning or twice a day, especially on the U.S. That's a constant thing. Now one thing, however, I want to stress is that if you look over the past years, we constantly outperformed the market in terms of share we have on natural catastrophes. We have become very good at selecting the cat exposures, meaning that we're less exposed than anybody else, I would say, in the industry to cat events. So -- but that is the fundamental seasonality in the second half of the year.

I think on the cost side, vice versa, H1 is kind of heavier because we make investments, we make a cost decision at the beginning of the year. And then in the remainder of the year, we manage the results. And so we typically reduce it, and that's why we're confident that the costs will be lighter by year-end. Life, I think the only change that exists between H1 and H2 really is that some of our distribution channels will feel the constraint of meeting their budgets and they will be forced to do better on the sales. And so we expect actually that on the sales side, we should report even stronger numbers by year-end for that. But other than that, there is much seasonality there. On capital?

On capital, so relatively easy explanation, William. So there is a very tiny incremental -- net incremental increase in the capital that we need, but most of it has been diversified away because the growth is so broad-based in terms of where it's coming between life, non-life and geographies as well. This is a place we're talking about seasonality. We might see potentially a bit more of an impact in the second half, but it still stays in the low single-digit areas.

The next question is from Vinit Malhotra, Mediobanca.

So my 2 questions. One is -- I'm sorry, back on Life, but more thinking about -- I mean, this unit has persistently surprised positively over many years. And I'm just thinking that if we are getting a plus -- above 10% earnings growth this year, then how -- I mean, what could theoretically business-wise, say, drive further growth next year? So just looking next year or next year of what could be in the business that could make another push on growth on Life? Second question is, again, slightly hypothetical. The data centers in the U.S., obviously, is one of your keep dwells at the moment, I think, from all the conversations. I mean, recently, there was some article in The Economist, which was titled Compute, which basically shows that the populations and the other people in the U.S. are beginning to object to such data centers. And I understand that, that's where you come in, right? You're there for the warranty, the project being built. Are you seeing anything -- are you hearing anything about such kind of risks to this business line from a claims perspective? Or are you seeing anything there that is worth flagging?

Yes. But that -- sorry, let me address this reactively. That's not a risk for us because we only ensure projects which are authorized, which are decided, authorized and can officially start. So if there is a position, the project will not even start. And anyway, that's not a risk for us that the project then will not be -- how can I say, will not be authorized to continue. The risk for us is that the project doesn't deliver what it is supposed to deliver because construction doesn't work, because construction is not appropriately realized. So we fundamentally ensure 2 things. One is the builders' risk and one is the constructional risk. Plus we ensure the workers, we ensure the transportation, we ensure the energy definition of the solution for the location for the place. the opposition of the people is before the project starts, if there is.

On Life, look, I mean, first of all, I'm glad that life starts to be reconsidered revalued. I think our Life business is fully discounted in our results. I mean, I believe that in 2027, we'll grow even further. We are expanding very nicely across Asia, for example, where our results have been not very significant in the past. We have been investing in Hong Kong and in the development of the life market in Hong Kong. We're even investing in branding around there. That's an area where we expect further returns. Japan has been a fantastic surprise for us, the success we reported there. We own today 8% of the unit-linked market in Japan with incredible success of our products and services and all done on a kind of ground-up basis. Brazil, Latin America, especially with Santander, we discussed it many times. I think they still have something to recuperate. And Santander has very aggressive plans for further growth.

So even there, I expect better results. But to start with, now we want to deliver further improvements in the second half of the year, and we want to deliver a BOP result of life exceeding $2.5 billion, which will be for Zurich and a very important achievement and then we will concentrate on '27. But you remember all the investments we made in Life, we changed the organization. We brought it to a global platform. We in-sourced underwriting. Today, we have a global database of risks in life, which allows us to price and underwrite centrally, giving very good services to customers and achieving full control of how we manage the business. We never had that before and probably not many companies have it. So it's a journey that now is starting to deliver the results and the profits.

Sure. Can I just follow up quickly, please because you mentioned Hong Kong, I mean there's been loads of news around Chinese tax authorities decisions. And I just presume that, that kind of offshore business is not what it does -- it should be more protection, shouldn't it?

Yes, yes. I mean -- and we're not doing offshore business. We're doing business with Hong Kong residents. We're not doing offshore business. But there is very significant wealth there. And so the demand there is super high and super hot, and this is a great opportunity for us.

The next question is from Will Hardcastle, UBS.

So a question on the data center growth, maybe a couple of sub-questions actually. I'm trying to get a grip on Zurich's competitive edge you have here. You've discussed that edge of what the risk engineers give you in the past, but maybe the addition -- is scale also a key advantage. I'm trying to understand perhaps what line size you can offer versus competitors and whether the lead role because of your capability is really differentiating in price versus the follow market. And just as an extension, I read there's some consortiums happening and they're scaling up together to offer higher limits. Are you seeing that as a threat to the price or not at the moment?

No. Well, construction and infrastructure has always been the main competence of Zurich on property and casualty since really decades ago. You remember that we advertised years ago as the insurance company who made the Panama Canal, and that was really decades ago. What we have, which is special, I mean, besides having hundreds, really hundreds of specialized underwriters in this, then we have the risk engineering. But also, we run this as a vertical, as I mentioned before. Vertical means that we don't just offer construction, builders' risk and construction of risk. We offer the customers integrated in the construction of risk and builders' risk, the offer for everything else that they need. And this is motor transportation, marine, this is workers' comp. This is fleets, every kind of -- and of course, this is also surety. Nobody, I think, in the market comes to them with an integrated offer.

And we have people who have done this for years, and they know very well how to make these projects from the insurance standpoint and how to support the customers doing that. Look, this is a market which is clearly in excess demand, not in a demand of insurance. So I'm not afraid of anything. Actually, there are projects who are waiting to start because there is no insurance available. We're happy if some capacity comes because we'll be able ourselves to do more, we can do all by us. We have limits. So we control our exposures. We control our concentration of risks. And as long as there is a clear excess of demand from the customers, we're happy with everybody entering. And I don't see how this can be reverted in a situation of excess supply. I really don't see that happening any time.

Right. At this point in time, if I may add, this is rather a constraint on the insurance and the capital side as well that goes into insuring data centers. We've been -- I think we put it in the deck as well. We were successful in a new strategic placement. We placed a variable quota share now 1st of July, which gave us $1 billion of additional capacity that we now can deploy in the market to support new projects. But as Mario said before, I mean, if we had more capacity to give to our engineering teams, the request is there. They would be actually super happy to deploy more in other projects. So right now, I think we are at a point where the traditional insurance and reinsurance market is coming to a limit in terms of the capacity and solutions that are more innovative that foresee some type of consortia or bundled capacity, I think they are actually a necessity, right, to be able to continue to support projects of this scale. So we are welcoming and we are exploring ourselves as well some innovative forms.

Also, Will, just be mindful that, okay, data center is something that it's easy to visualize, but this is about infrastructure. It's about energy projects. It's about transportation means because a lot of these projects are just about -- in Europe, for example, are about highway and railway systems. A good part of what Germany is now planning to do or started doing is about that. There are lots of energy building infrastructure in -- across Europe. In the Middle East, there are lots of projects, significant ones focused on energy. So it's easy to talk about data center because it's intuitively important for everyone. But a lot of what we do there is infrastructure. And again, this is a nice job for us. I mean we know it. This is core business for us.

The next question is from Andrew Crean, Autonomous.

I wanted to focus on Slide 11 first. You've given us this new breakdown between U.S. Commercial, International and Global Specialties. You've given us the accident year combined ex cats, which I think went up from 90.4% to 91.6%. And I think the Global Specialty deteriorated from 85.3% to 91.2%. Could you just give us the combined for the other 2 sections, both first half '25 and '26, the U.S. commercial and the international because they must have been improving if specialty was going down. That was the first question. And the second question is actually coming back on to data centers. You focused very much on the construction, ensuring the construction of data centers. Are you also big in the insurance of data centers once they're up and running? Because I've seen some reports where the [indiscernible]. you walk away once.

No, because that's casualty, and that's not a target risk for us. So we're not targeting that market. It's a completely different story, and that's not our bread and butter. We are focusing on construction. That's an easy answer. Sorry to interrupt you, but that's easy.

No, sure. That's easy one.

Yes. On the other one, I need support because I don't have in my -- out of my mind.

Go ahead, Andrew.

Do you want me to take this up afterwards? It's a bit of a detailed question.

Yes. No, let's do that. The one point that I think is important to note, and I think the U.S. is actually in the supplement. So it's visible there, the North America piece, which is essentially the U.S. But more importantly...

U.S. commercial will have the specialty -- some of the specialty in it, right?

Yes, yes. Okay. So you were asking for U.S. specialty stand-alone?

For U.S. I mean you have specialty.

U.S., yes, okay.

You split things out on Slide 11. I was just wondering the accident year combined ex cat for those -- I think we've got specialty, it's just the other 2.

Let's do it separately. The one point that I wanted to emphasize is that they're actually improving year-on-year. So both the U.S. ex Specialty underlying combined ratio and the international one, specifically in international, almost 1 point. So there's a lot of good underwriting going on and the quality of the underlying portfolio is improving year-on-year. We'll give you the exact numbers offline, Andrew.

The next question from William Hawkins, KBW.

Sorry for the follow-up. I know it's greedy. Mario, you made that passing remark in your prepared remarks about expected PYD to remain modestly elevated. Is that just in the second half? Or is that a more prolonged statement? Because when I hear that, I think of cycle management, so you're doing PYD to offset deteriorating attritional claims ratios. So how do you want me to interpret that kind of emphasis you made on the prolonged PYD, please?

Because we see, as I mentioned, that we have an excess that we have been over the past years in shorter lines that we cannot further hold, and we have no reason to do that. And so we will continue likely in H2 to unload that, but that's not cycle management. We have buffered up our reserves as we should have done over the past years. And we don't like to do cycle management, and we don't plan to do that. But if we exaggerate on shorter lines, then I don't know where -- what to do with that. I mean, we need to get rid of it. So this is not cycle management. It's just if you want, correcting excess or mistakes of the past couple of years.

And please in mind, William, that we have also in the past, for sure, 2 years, probably 3 years, we have been extra cautious, and we continue to be extra cautious in the way we've been reserving, particularly for property lines that were subject to a lot of inflation pressure. So this is now coming through in the PYD. And as I said, we continue with that approach going forward as well. But there were areas where we thought that we would be seeing a lot of inflation pressure. And in some places, it has materialized, some other it hasn't, and this is what we're seeing coming through. And travel is one of the other lines as well that are seeing the same -- exactly the same impact from inflation prudence in the past.

Trust me that we have been doing the opposite of what you think we did. So we actually continue to buffer up. But since we don't plan to use it, you have to put a limit to that because otherwise, we create a new kind of excess capital, which is then very difficult to liquidate at a point in time.

Next question from Ben Cohen, RBC.

I just wanted to ask on Farmers, if I could. I think that the gross written premium growth of 4% in the first half is below the outlook that you've given for the full year. Just could you talk through sort of, I guess, the mechanisms by which you think you are going to achieve that growth? And maybe if you could give us some color by line and by geography in terms of how your competitiveness is working out and maybe a bit more color in terms of what seems like a very competitive end market.

Yes. So as I said in my remarks, Farmers is gaining market share, which means that many of the peers have grown much less than 4% this year. The 4% is composed of 2 pieces. One is the average rates on the portfolio for the renewal of the portfolio and pharmacy is improving on portfolio retention, but the rates are not very high on renewals because the market is kind of soft for auto and homeowners in the U.S. at the moment. And then there is the growth where they grew the customer or the policies in forces by 215,000 in H1, which is the biggest number for them in many, many years. And that doesn't compensate the slow growth of the portfolio. And this is how you get to 4%. Considering the market condition, considering what the competitors are doing, I think this is an excellent result. The growth of the portfolio is accelerating. And as soon as the rates will become more conducive, we will see much more satisfactory numbers of growth from farmers. And they clearly have the capital to do it. Does that answer you?

Well, I guess, I mean, are you seeing the signs that actually pricing is turning in that market? I mean is that why there is that confidence I take it in terms of the PIF growth in terms of -- it sounds like you need price to move as well. And is there a risk there if price doesn't move?

Yes. I mean the other thing that you have to consider in our numbers is that Farmers still had in these first 6 months, a tail of cancellation from the cleaning actions of the past years, which depressed the portfolio numbers and they are over now. So from now on, the growth is the growth and they don't have further impact from cancellation, which is a better condition in H2 and then next year than they had before because remember that they started the transformation in '23 and then they started acting on portfolio cancellation in '24, '25, and they're still seeing in H1 this year, the tail of these cancellations. But overall, I would say that it's a little bit unfair to consider these results. I mean they are better. I mean we look at all the reported numbers from Farmers' competitors. These results stand out. I mean -- and I can mention them one by one, but you can do -- I'm sure that you have seen them yourself.

We take the last question from Mr. Michael Huttner, Berenberg.

Do you have a question on Beazley, Michael?

What did you say?

Do you have a question on Beazley?

No, no, no, no. I think...

I am joking.

No, no, you're absolutely fair. No, no, of course. No. The first one is you highlighted that your growth is BOP and EPS. But maybe it's not combined ratio, but to understand this better, back of the envelope, my guess is you're now writing non-life overall. So everything in at somewhere around 30% after tax in terms of ROE. And then the way I do it is, I mean, really simple, I take the combined ratio, so margin 9%. And I'm assuming that after diversification, there's about 30% capital allocated and 9% divided by 30% is -- and I know there's tax, but there's also investment income that probably offsets it. Is that roughly the way you think about it? And because that, of course, makes a huge amount of sense. Why not grow when you're making such high ROEs.

And then the last one is, I know you give a big interview to Bloomberg last week, the week before, I can't remember on whatever happened in Switzerland. But I was really puzzled. I thought that -- I mean, obviously, there was a mistake made, you've dealt with it, it's passed. But it sounds to me or the way I understood it that, in fact, Zurich Switzerland, so not your decision, but whoever was there at the time, actually, we're getting better pricing to the pension funds than allowed or authorized by the regulator [indiscernible] strange anyway, that was just a question.

I'm not sure I understand what your question, Michael, on Switzerland. So they were giving lower prices to the customers. Yes. So they benefited the customers against the company. Yes. That was what they did.

But why -- okay. So -- but why did the regulator object to that? This is why I didn't understand.

Because prices are controlled in Switzerland and the regulator cares for solvency more than customers satisfaction and set the prices where they think that the solvency of the company must be. Now why the Swiss colleagues did that is still a mystery because this was not incentivized. It was not a KPI. They had no budgets for. So I have no idea why they did that. I presume they started as a mistake and then they thought that it was easier to continue with the mistake against fixing the mistake, but that's my guess. But yes, it's precisely that. They sold, they underpriced customers and -- or a number of customers, and this is no compliance with the rules on that product. Yes.

Then on your calculation, look, I'm not very familiar on how you got it. My point is simpler. I mean, first of all, we're growing short-tail lines. So capital is pretty light on the short-term lines. And we run -- I mean, the targets that the companies have is on BOP and it's on EPS growth and it's on remittances on dividends that they send to the business. Then yes, we do control carefully the combined ratio. But we don't target the combined ratio against the BOP. And I mean, put in a different way, if I look at '94 -- sorry, at 2024 versus 2026, we still have an improvement of our combined ratio. We still have an improvement of roughly 20 basis points, but we have an improvement of also -- of almost $1 billion in BOP. That remains a good trade. That's a good way to run the business because I'm creating space to remunerate shareholders. I'm growing the business, which means that I have more customers that I can then loyalize and I improved over 2 years, the combined ratio still by something like 20 basis points. That reminds me of the discussion in '18 and '19.

This was the last question. I would like to turn the conference back over to Mr. Greco for closing remarks.

All right. Then thank you very much for your question and for the interest in our results. Let me just repeat quickly the key messages for today. We are delivering an outstanding performance in the first half of the year with a record operating profit and double-digit EPS growth. All business segments contributed to this. And we're seeing strong progress against our key strategic priorities. coupled with a strong balance sheet and a high cash conversion rate, this position us well to execute in the best long-term interest of our shareholders. We'll talk later in the year. I wish you a very good summer. Bye, guys.

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.

Ladies and gentlemen, welcome to the Zurich Update for the First Quarter 2026 Conference Call. I am Valentina, the Chorus Call operator. [Operator Instructions] The conference is being recorded. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Jon Hocking. Please go ahead.

Thank you very much, Valentina, and welcome, everybody, to Zurich Insurance Group's First Quarter 2026 Q&A Call. On the call today, we have our Group CEO, Mario Greco; and our Group CFO, Claudia Cordioli. Claudia will make some introductory remarks, but could I please remind everybody to please keep their questions to. Thank you very much. Claudia?

Thank you, Jon. Good afternoon, everyone. Thank you for joining us today. I'm Claudia Cordioli, Group CFO; and joined by our Group CEO, Mario Greco. I will share first a brief overview of our results for the first quarter of 2026, after which we will open for questions. We have started the year strongly with high-quality growth accelerating across targeted business lines and customer segments, including Specialty, Middle Market and Life Protection.

While the external geopolitical environment is uncertain, we are structurally well positioned with a diversified product and geographic mix and remain confident that we will meet or exceed our 2027 targets.

Now turning to each of the key businesses. I'll start with P&C. P&C has started the year strongly with GWP up 8% on a like-for-like basis. Growth was broad-based with strong performances in North America and in EMEA. In Commercial P&C, we continue to deliver disciplined growth with sustained delivery in our strategic segments of Global Specialty and Middle Market, supported by strong growth across the rest of the portfolio.

Gross written premiums grew by 9% like-for-like. Rate environment was broadly stable versus the second half of the year, providing attractive margins despite continued pressure in large account properties and E&S. Auto liability rates remain positive, and we are seeing early signs of stabilization in some specialty lines, including U.S. financial lines. Importantly, our book remains well indexed to inflation. In international property, Q1 renewals drove a mid-single-digit increase in insured values.

Overall, our focus remains firmly on underwriting discipline and enhancing portfolio quality to support sustainable profitability. Global Specialty. Global Specialty grew GWP by 7% like-for-like with our leading U.S. construction business growing by 21%. Our growth in this space is structural, not cyclical, and we continue to see secular growth opportunities given long-term infrastructure trends, not least in the data centers as hyperscalers invest to meet demand for AI computing capacity.

As one of the leading engineering and construction insurance franchises, Zurich has a dedicated construction team of approximately 300 colleagues in the U.S. and about 100 experts in the rest of the world. Our construction book reached premiums of around $800 million in Q1 and profitability remains high as infrastructure spend gained space in the U.S. and beyond, with U.K. and Continental Europe also playing an important role in our portfolio.

Middle Market continues to benefit from investments that we made in recent years in product, technology and targeted recruitment of specialist underwriters. Here as well, premiums grew by 7% with EMEA delivering outstanding growth of 15%. Overall for the group, Middle Market has grown steadily, generating around $2.2 billion of premiums globally in the first 3 months, reflecting the scale we have built and the attractiveness of this segment.

In the U.S., this has been driven by a multiyear infrastructure rollout, now with more than 30 offices nationwide so that we can be close to our customers and distribution partners. These offices are staffed by a growing dedicated underwriting workforce focused on servicing our selected industry verticals. We are now applying the same playbook in Europe, where last year alone, we hired over 100 Middle Market professionals and have recently launched dedicated industry verticals such as Life Science. As in the U.S., these efforts are supported by technology investments that are already improving speed and conversion rates.

Now retail P&C. Gross written premiums rose by 7% on a like-for-like basis in U.S. dollar with momentum across all regions, supported by rate increases of 5%. Importantly, this growth reflects our continued focus on pricing excellence, sophisticated risk selection and disciplined portfolio construction. As a result, retail profitability continues to trend positively, building on the trends in recent years. Retail remains an attractive and scalable growth area where we see meaningful opportunities over the coming years while maintaining a clear focus on return.

Now shifting to Life. The Life business had a very strong quarter, both in terms of growth and profitability with our global protection business producing a particularly strong performance. Overall Life GWP grew by 5% or minus 5% on a like-for-like basis, with the protection business growing premiums by 9%, slightly above our 3-year targets. Growth was broad across EMEA, LatAm and APAC, showing first benefits of our strengthened global focus on Life Protection business.

New business CSM was up 18% year-on-year at a margin of 7.4%, reflecting a higher quality mix of the business. Growth in short-term insurance contracts, mainly related to our highly attractive Latin America protection business, was 9% higher like-for-like, while our investment business enjoyed a 10% higher fee revenue despite volatile markets. Overall profitability in Life showed a further strong improvement in Q1.

Switching gears now to Farmers. Farmers Management Services underlying fee income rose 4% year-on-year, supported by a 4% increase in gross written premiums at the Farmers exchanges. Growth was driven by higher policy count, while rates in most lines remained flat or up low single digits. Policy momentum remained strong with policies in force increasing by 84,000 in the first quarter and further 49,000 in April. This was supported by robust new business, which saw double-digit growth in Q1 and solid retention.

The independent agency channel was the main contributor to Farmers growth, benefiting from actions to improve pricing competitiveness, broaden the product offering across states and increased agent engagement. Importantly, the exclusive agency channel returned to policy growth in both March and April, marking a clear inflection point. In addition, the exchange surplus ratio improved further, reaching 56.4% at the end of March, providing significant financial flexibility to pursue growth in a disciplined fashion.

And finally, we closed out the quarter with a very strong SST ratio of 275% (sic) [ 265% ] which does not include the impact of the new equity issued in March to partially fund the proposed acquisition of Beazley. So in summary, our businesses started the year very positively, delivering disciplined revenue growth, underpinned by a strong capital position. With our geographically diversified business, strong track record and robust balance sheet, I am confident that we are on track to meet or exceed our 2027 targets. With that, Mario and I will be happy to take your questions.

[Operator Instructions] The first question comes from Michael Huttner from Berenberg.

I'll ask my questions in a slightly aggressive way, I hope you don't mind, but it will be easy -- make it easier for me. So 8% like-for-like growth in P&C -- sorry, in Commercial Lines, P&C, including mid-market 7%, Specialty 7%. So there's obviously a missing part, which is growing faster. Now I know you mentioned construction, but my guess is large risk also grew faster.

So if I were a generalist, I'd say, well, your pricing in large risk, I've heard is down. It's a market clearly, which has a lost competition. What's happened there? Why are you so confident that the growth will be profitable? That would be question number one. And question number two is on data centers. These are huge things, huge prospects projects. What's the risk that if something goes wrong, how much money could -- well, not me, but could our investors lose?

So thank you, Michael. So on the first point, yes, it's true there's other areas that are growing and they're growing in an accelerated pace as well. If you take North America, we've got the whole Commercial business, the whole Commercial book that has been growing 10% like-for-like, so slightly above Specialty and Middle Market.

In large casualty, we've been benefiting from significant and continued rate increase, and we've been closing a sizable number of new contracts, including some transactions that are up fronting nature. We've been growing in the captive space as well, and we've been growing in EMEA in a number of other areas in commercial property where margins have been very attractive. So it's a broad-based growth, is not limited to Specialty, not limited to Middle Market, but it's happening at very attractive rates and the margins are definitely attractive across the board.

And Michael, remember that there are areas in Casualties, which are growing like Commercial Auto, close to 20% of rates, and Casualty -- and Liability in general is growing at low double-digit numbers. And so we're not growing with number of contracts and with customers there, actually, the motor portfolio in size is shrinking, but the impact of this rate growth over the past 3 years has been such that the premiums are actually bigger than they were 3 years ago.

Wow! it's nice problem to have.

So on data centers, Michael, so those are projects that are complex, and they are built obviously across different phases, right? So typically, our engineering and construction teams will work with the customers in many situations, in many projects, we are actually a leader in the project. And the prices as well as the risks around accumulation, for instance, on the property side are commensurate to the specific phase and what is that risk in that phase, right?

So for a significant part actually of the construction, which is typically where Zurich is at risk, right, not so much on the operations of the data centers. The building hasn't been fitted yet, right? And you've got essentially a concrete -- a large concrete building with limited exposure in financial terms. And then obviously, the fitting will be made and chips and everything has been implemented. So there's different phases with different exposures and the premiums do reflect that.

We are very attentive on obviously, accumulation risks, be it on the property cat side or any other risk that we are taking. Those are typically products that -- or contracts that cover multiple lines, which is why there aren't so many players that can underwrite this type of exposure. They range from property, workers comp, motor, general liability, excess liability. So there's multiple risks. They're all priced for our judgment in a very attractive way. And typically, we take a part of the exposure. Those are obviously syndicated risks. And we feel very comfortable with our own exposure.

The next question comes from Fahad Changazi from Kepler Cheuvreux.

On the Middle Market premiums of USD 2.2 billion, notwithstanding FX, which still seems a bit positive. Is that a base run rate you can build from? And just following on to that in U.S. Middle Market, are all those new underwriters coming online? And what's your outlook there? And just on Life, if you don't mind, again, very strong new business CSM growth. Anything to highlight on seasonality and any comments on full year '26 outlook?

Yes. I'll take the first one first on Middle Market. We are very pleased about the growth that we've seen in Middle Market and specifically actually on the progress in Continental Europe and U.K. Germany, Italy, France, they all show double-digit growth and the fact that we've been able to invest in the infrastructure, so to speak, in the relationships with the brokers, hiring, as I mentioned before, 100 new middle market underwriters in Continental Europe that has been very conducive to see this growth.

There's potential definitely to expand more. In some countries like Germany, we see increased spend on infrastructure as we've been highlighting a few times, which is definitely a space where we would like to continue to grow. And then there are some areas specifically like life science as mentioned, but also financial transactions, technology where we would like to grow more in -- specifically with Middle Market customers.

So I do see actually opportunities for us to grow -- to continue to grow as strongly at least in Continental Europe and U.S. to accelerate in the latter part of the year. We've been mentioning last year the investment in additional underwriters and the teams that we have recruited in the U.S., they started to produce, and we see that in Q1. I think more can be done from there. So I would expect them to accelerate further in the rest of the year.

Yes. Look, I mean, on Life, simple question. There are no specific seasonality except from the fact that we have not replicated the tactical products Banco Sabadell. You might remember that they were in a takeover battle. They wanted to push commission sales. The products were at margin, not the most exciting ones. So we -- and in a sense, they created an overhang with their customers. So it is okay that I mean, we expected that and we need to be accepted. And this explains what we said before that the margins in Life look better, higher this year compared to last year. That's the only thing which has been, I would say, seasonality.

Brazil has normalized or it is normalizing for Santander. So compared with last year when Brazil was underperforming, now it's getting back to normal size and results. And the Protection numbers honestly are pleasing us and reassuring us that the '27 targets are in sight.

Yes. I would add as well that -- I mean, as you know, we've been setting up Life as a global business in order for us to be more strategic in the way we are growing it across all regions and countries for us to expand bank assurance further. And we start seeing the fruits of that setup, right?

It is more intentional. The way we are going about the growth, it is more broad-based in terms of geographies and the products that we are developing. We've got medical underwriting that we in-source. So there's a number of things that have been contributing to this. I think it did structurally set our book up for better margins, as Mario said, and also for stronger growth going forward.

The next question comes from Vinit Malhotra from Mediobanca.

So for me, the first question would be on the Commercial pricing where I noted with some surprise that the outlook for North America is improving, let's say, from moderating to stable between December and now. Is that a function of the fact that you're growing more in your targeted lines? Or is there something else that you would like to point out? So that's my first question.

Second question is just picking up a little bit on that commercial growth because so if I hear you when you answered that it's more broad-based, but there are lots of other things -- there was growth, there was dealerships, there was direct business, there was lots of other things. So Middle Market 7%, commercial 9%. If you don't mind, could you just say a little bit more about that pickup in the other areas? And if it's a repetition, then please ignore. I'll follow with IR later.

So, no, Vinit, on rates, yes, it's definitely the businesses we are pushing to grow, have better rate, development and stability than the whole market. But equally, I mean, we have seen Property, I would say, improving against the last quarter of last year. The price development is less negative than it was last -- in -- at the last quarter of last year. Commercial auto has been accelerating again. Casualty remains double-digit high and Specialties have been improving. I mean Financial lines have been recuperating against last year.

Construction is very hot for the reason Claudia explained before. And when there is such a high demand, prices also stay quite high. So I would say it's not just the business we target. The market seems to be in a better shape in this -- or has been in these 3 months in a better shape. Honestly, I see an improving pattern on the rates in commercial for -- also for the remaining part of the year. I don't expect this trend that we're seeing in these 3 months to revert for negative or lower in the following months.

Thank you, Mario.

I think that partially answers also the second question, Vinit. So there's a mix of rates. There's a mix of growth in Europe that was -- especially in Continental Europe, more pronounced on the property side. We've been also retaining more business. So there's a number of factors that do play a role in the premium number. There's an indexation of our property book that's also 5%, largely on the commercial side that plays a role in the volumes.

There's several items. You mentioned the direct business in the U.S. So direct markets, yes, that's also one of the markets that are growing. And that, by the way, will earn through also in the number of future years. So it's not all visible in revenues this year. So there's a number of factors that contribute. I would say the biggest one is probably rates and some European growth outside of Specialty and Middle Market.

That said, I mean, again, just to reiterate, right, given the numbers we're talking about in terms of absolute amount, having 7% growth in the strategic targeted areas and such a disciplined execution like we've seen in Q1, it's really a strong performance. I don't want that to go unnoticed just because Commercial overall is increasing 1% more.

The next question comes from Andrew Crean from Autonomous.

A couple of questions actually. Firstly, sort of numerical questions. Firstly, if retail is growing 5% and commercial is growing 8%, could you supply the number for what the rest of the retail book is growing? And similarly, I'm going to come back to this commercial thing and hope we get -- if you're happy to give us the growth rate in Specialty and Middle Market at 7% and 7% versus 9% of the total, could you actually fill us in with the numbers on the other side, which is large corporate and I think your captive business.

Be careful, Andrew, that Specialty and Mid-market are not mutually exclusive. There is overlap because Mid-market also sells Specialty. And you also have to be mindful of the proportions because the book is shifting towards Specialty. And so the weight of the Specialty is growing inside the books. And so it's a complicated mathematical game of proportions in rebalancing the books.

Having said that, I think the IR team can come back with details of all of that, is not here at the point of making a spreadsheet with all the numbers. But there is no anomalous trend in what we're saying. And once again, we're not growing large accounts. I mean it's just that the portfolio is moving -- I mean, already today, before Beazley, Specialty is our biggest line of business in Commercial, and this has never been the case for us ever before. And that completely moves the profile of our results.

Yes. On retail, Andrew, so yes, there's a growth that's driven by rates. So Motor, again, has been the driving force in there. There are some other books in the retail space that are growing less. One of them would be Travel. I mean you can imagine the current circumstances are not necessarily conducive to growth in Travel. Now Q1 was okay, but it's not the book that's seen high single-digit growth year-on-year. So there are a few lines that are growing less than the 6% to 7% that we've mentioned.

So what are they growing, and what rates are they growing at?

Let us come back with a bit of detail on the Retail lines. It's also a fairly diversified picture because Retail is global. The rest of the retail book is mostly -- especially the pieces that move the needle are focused on Europe. So we'll come back, Andrew, on that.

The next question comes from Iain Pearce from BNP Paribas.

The first one is just another one on pricing. So we've had some pretty interesting comments from some of your peers, particularly regarding E&S pricing and property E&S. Could you just comment on what you're seeing in that particular segment of the market? And the second one is on the Travel line of business actually. So thanks for the comments there. But if you could just sort of paint a picture of what sort of risks there are in the outlook for the growth in Travel and also if you expect anything potentially from higher claims in the Travel business to impact in the remainder of the year?

Yes. So E&S, we confirm, also peers have said that E&S continues to be negative. For us, it is shrinking because it's -- E&S, it's a very volatile tactical business. You do it when it's convenient, and you don't do it when it's not. It's a 1-year business, which is fundamentally based on convenience on both sides of the table of the deal. So E&S remains soft and weak, and is shrinking for us.

On Travel, look, it's not a cost issue. The way we structure our travel business is not that we expect significant claims. It's -- there is a risk on the revenues. I mean the revenues has been very reassuring and very solid in Q1. And but -- and so far, we haven't seen a significant reduction, not even through April. But if this situation continues as we keep reading, we can expect a reduction in revenues from Travel over the next months. We haven't seen it yet.

It's the same story, I would say, with inflation. I mean we're monitoring very carefully any sign that inflation is creeping or is coming back. We haven't seen it yet, but we do expect something like that to happen later. But it's not a claims issue. It's a revenue issue. On claims, we don't expect surprises from Travel. But revenues, we're watching carefully.

Since it is generally a global book, and as you might remember, the book that has been with us for a longer period of time, cover more -- has a very large exposure or presence in Australia, and that's the piece that possibly will see some more hit in terms of revenues earlier, as Mario was saying. We are seeing actually the EMEA book performing solidly in line with expectations, same for North America so far. The exposure that we've got in LatAm and APAC also fairly stable. It's the Australian part of it, which may be the first one that we see potentially hit by less travel activity. That's really the core point.

The next question comes from William Hawkins from KBW.

I've been doing some work on admin expense leverage across the European insurers and the data is still surprisingly hard to come by in a reliable way. But at least on my analysis, Zurich is still streaming quite high relative to other big European peers for its non-life and life admin expense ratios. I'm not sure that's a statement that you recognize. But it leads to 2 questions, please, on that.

When you're doing your own expense analysis across your business units, where do you think you're best-in-class? And where do you see meaningful improvement potential? And then secondly, when you're thinking about your EPS growth guidance, do you ever envisage absolute admin expenses falling as a driver of profit growth? Or is this always going to be a relative game of saving and reinvestment for volume growth so that it's more the ratio that you're seeking to improve?

So William, first of all, I agree with you. I mean, the industry is still fat, has a lot of fat over the body and can reduce expenses. We have an internal target, but we learned between '16 and '18 that announcing external targets for admin expenses reduction is not very, how can I say, conducive of the morale of the organization.

But we're actively working on expense reduction. We have a number of programs to do that. It's very difficult to compare with others. So we're very much working on just internal nominal amounts of expenses that we want to reduce in this year and in the next years.

Then on reinvestment, so will the total expenses reduce? This is what we're trying to do. Of course, there is also a need to continue investing, especially in technology, which we will not -- how can I say, disappoint on. But that's one of the priorities that Claudia and I have to continue working on reducing expenses. But I'm not going to say any number. Sorry for that. But yes, we burn our fingers when we say and we delivered the numbers. Actually, we did it, but then we had to repay other things internally for that.

The last question for today is a follow-up from Michael Huttner from Berenberg.

One on Farmers, one on Solvency. Solvency 265%. What can you say about the kind of capital generation side of the equation? Is it better? Basically, I'm asking profit question, but maybe -- anyway. And then on Farmers, the policy in force numbers are fantastic. But -- the growth is not so good, 4%, what's the disconnect, please? Or when -- or maybe I ask it more politely, sorry, when will we see the PIF numbers lead to better or higher kind of premium and revenue figures?

Okay. Let me start on Farmers and then Claudia will address the capital question. Look, on Farmers, Michael, I understand the dynamics. Farmers has a huge portfolio and is defending this portfolio. So it's improving on retention, which means that in today's rate environment, they have to sacrifice rates to keep the customers in the portfolio. And that is growing the business, which the positive net policies in force.

So think about what the rate of growth would have been if they didn't grow or compare Farmers numbers with U.S. peers. We have done that and Farmers is growing significantly above the U.S. peers this year and equally last year. So it's all about rates. As soon as the rates will stabilize and then start growing, Farmers will have a very strong multiplier to their growth numbers. With the current conditions, I think this is a pretty good result and the acceleration in policy counts growth and customers' growth, it's very reassuring for us. Does that makes sense?

Perfect. Actually, yes.

Michael, on SST, indeed quite a strong capital generation in the quarter. There were a few factors, a few elements to it. One is the genuine business earnings generation, obviously, also some capital that went into supporting that new business. There's some market tailwind. Obviously, as you know, interest rates are -- when they grow, they're positive for net positive for SST and so is U.S. dollar depreciation. So that was a positive as well.

There's some tailwind as well from management actions that we've taken. We've been reducing tactically some exposure to a few equity positions that has also helped in this quarter. So all in all, I would say it's a fairly balanced capital generation business, some market-driven management actions that we've taken to reduce the risks and then some tailwind from interest rates and currency.

Ladies and gentlemen, that was our last question. I'd like to turn the call back to Ms. Claudia Cordioli for any closing remarks.

Thank you, Valentina. So just to reiterate again, Zurich has made a really strong start to 2026. The current quarter performance is underpinned, as we said, by very strong quality growth, the uniquely diversified footprint that we've got, our focus on delivering sustainable quality growth, and that's coupled with strong capitalization you see in our SST numbers we just discussed. This all positions us well to meet or exceed again our 2027 targets, and we are confident about that. Thank you very much.

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.

Ladies and gentlemen, welcome to Zurich Annual Results 2025 Conference Call. I am Valentina, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Jon Hocking. Please go ahead, sir.

Thank you very much, and welcome to the call this afternoon. I have with me our group CEO, Mario Greco; and our group CFO, Claudia Cordioli. Before I hand over to Mario for the introductory remarks, can I please remind you to keep your questions for the Q&A session to a maximum of 2, please. And also as a reminder, we'll not be taking any questions on the potential offer for Beazley Plc. For any information on that, please refer to our website.

And with that, I'll hand over to Mario.

Thank you, Jon. Good afternoon, everybody, and thank you for joining us. Let me provide a few remarks on our results before Claudia and I will take your questions.

We've made a very strong start to our new financial cycle with the record results which indicated we're well on track to achieve or even exceed our 2027 targets. BOP is up 14% to a record level of USD 8.9 billion with core EPS up 13%. Net income attributable to shareholders is also at a record level of USD 6.8 billion. Core ROE reached a new high of 26.9%. And as we continue to produce exceptional returns on capital while carefully pursuing disciplined growth. Profitability reached a record level across each of P&C, Life and Farmers.

P&C gross written premiums exceeded $50 billion for the first time. While their BOP exceeded $5 billion also for the first time. Life produced an underlying increase of 10% in BOP. While Farmers produce another outstanding results with growth in policy count accelerating through the year, supported by the Exchanges reporting a combined ratio of 84.6%. Crucially, we also continue to demonstrate a structurally high level of conversion of earnings into cash with remittances of $7.4 billion. This, together with Zurich's signature financial strength underpins the proposed dividend of CHF 30, which is up more than 7% on prior year supported by a payout ratio of 76%. And this means that the dividend will have increased by 50% since 2020 by 76% since 2016, and this is the eighth increase in 10 years.

Looking at our business segments in turn. The P&C business today reports an excellent combined ratio of 92.6% with BOP up by 22%. The Commercial Insurance saw the combined ratio improved by 1.2 percentage points year-over-year to 91%. It was especially pleasing to see the benefits of the ongoing portfolio optimization actions that we have spoken about showing in the results. Crop produced much improved results with the combined ratio in the low 90s. While Commercial auto in the United States saw a year-on-year improvement to more than 18 points in the combined ratio. We continue proactively steering the portfolio, taking corrective actions on areas where there is scope for improvement while pursuing careful growth in strategic priority segments, such as Middle Market and Specialty.

Within Specialty, we see construction as a particular opportunity. We have a unique set of skills and capabilities with Zurich playing a leading role in supporting the rapid AI driven growth in demand for data centers. In the U.S. alone last year, we were involved in ensuring more than 200 projects with a total insured value of USD 150 billion. We see similar secular growth trends across the broader technology space and also in infrastructure more generally. We continue to reserve carefully with the strong results of the year achieved while also continuing to build our balance sheet strength.

For retail, while there is still plenty of opportunity to improve returns from here, 2025 saw a very encouraging level of improvement. Retail P&C BOP increased by 50% year-over-year. The results having improved fourfold from the level reported in 2023. Growth in retail gross written premium was very strong with a 16% increase in U.S. dollars and 7% on a like-for-like basis. This was supported by positive rate increases of 5%. However, it is also good to see the underlying structural improvement being driven by increasingly sophisticated pricing and risk selection.

The January renewals in key markets such as Switzerland and Germany, give us confidence in our ability to drive further upside from here. The Life business continues to perform extremely strongly, reporting an all-time high BOP of $2.3 billion, with both the insurance service results and the fee result improving year-on-year. We also ended the year with a record high CSM. Our strategic focus on protection continues to pay off with a 5% increase in protection gross written premium year-on-year on a like-for-like basis. The discrete second half growth accelerated to 7%, driven by recovery of the bancassurance sales in South America.

New business premiums in the CSM perimeter grew by 14% on a like-for-like basis to $19.5 billion, while short-term insurance sales grew by 9% in local currency, with promising signs of renewed momentum in bancassurance in Brazil. Farmers, 2025 was another year of delivery for Farmers with the exchanges producing 4% growth in gross written premium, supported by a combined ratio of less than 85%. A major milestone was reached with the policy count growing organically for the first time in over 10 years. Since turning positive in Q2, growth has accelerated through the year. The Farmers team have a clear road map to continue improving the product offer, driving distribution efficiency and accelerating the growth rate to the mid- to high single digits range.

Now looking into the future, and please at the start we have made to our new cycle. That's really a very good start into the 3-year plan, and we see significant opportunities for the business to grow and generate attractive returns for our shareholders. Before we turn to the Q&A session, I would like to make clear that we will only be taking questions related to this results announcement. And we will not be making any further comment on Beazley as Jon said before. With that, Claudia and I will be delighted to take your questions.

[Operator Instructions] The first question comes from Michael Huttner from Berenberg.

Well, congratulations on the outstanding results. So many questions. The one very general one, AI risk to farmers. And another one, which I suppose is more also quite general. Your pricing improved by 2% at the full year and 3% in 9 months, which doesn't seem much strong as the term you're using to describe your results. I just wonder if you could square the circle a little bit. When I spoke to your outstanding IR team, they highlighted that property commercial was down. And I know margins are high, but we always like that, that's it.

Michael, I'm not 100% sure what is the question. I -- look on margins, first of all, let me stress a point, which is quite important for me. We have done a lot of work, and you see that in the page of our presentation on reducing the impact of nat cats on us. And we have been beating the rest of the market on that. So I think we have now a superior portfolio of nat cat exposed risks and generate less losses than the others have and this means that having better customers that produce less losses, you don't have to charge them as much as the others do. And it also means that we have higher loyalty and higher retention rates, particularly than the others have.

On commercial, look, the way I see the market today is casualty, especially excess casualty still has to recover. And double-digit price increases are probably not yet fully sufficient to rebalance the market to where the profitability has to be. Commercial auto fully deserves double-digit price increases. Property is in a good space until catastrophes will happen. And then when they will happen, let's see what's the impact on the industry and what's the impact on every player and I expect that we will be much less impacted than the average of the market. Also, remember what we said and what is true, we have remained very prudent and very careful in managing our reserves and our margins consequently. We're not in a sprint, and we're there to deliver '27 and after '27, we will be there to deliver the next 3 years. I don't know if I answered your question.

Yes, did. And on Farmers, the AI risk, it was a big topic last week where we all thought that Farmers would lose all its business to machines.

Right. Look, what is the risk there? I mean I thought that your discussion over last week was about distribution and customer preferences. Beside that, that discussion has been around for many years. What is precisely the risk, I mean, the agents are not a property of farmers. If the customers want to go directly, they can deal with farmers directly, if they like that. Farmers is already living in a multichannel distribution system. I don't see that as any relevant specific risk for farmers or for us. This discussion about this intermediating insurance has been there for many years. One day it will happen, but we are completely neutral to distribution channels. And we have been growing our business with alternative distribution channels everywhere, including farmers.

I will probably add -- Michael it's Claudia here. The AI and the deployment of AI has made the agency force in farmer is actually much more efficient. So talking to Raul and the team, they were highlighting that in general. So overall, the agency force has reduced the operating costs last year by approximately 20% and the more technology savings, saving agents have actually managed to reduce cost by 40%. So the fact that they can deploy those AI tools and Raul has been quite explicit in the technology they developed and the platform they are now deploying to the agency force. They managed to actually write more business, be more effective in the way they reach out to the customers. They're able to use the data they've got available in a more sophisticated way. So the team at Farmers is actually positive, and they embrace the technology in a way that they believe will help them grow at lower costs rather than a threat.

Apologies for disappointing you on the dividend.

Yes. Actually I want that. Thank you for that. Next year, hopefully.

Yes. Next year, we'll try better and harder. Sorry for that.

The next question comes from Vinit Malhotra from Mediobanca.

Yes. So for me, I'll stick to one key question for me is that the -- when I see the presentation today on the specialty lines and just if I can -- I mean just referring to, for example, Slide 10. I mean, I see that the AY CoR is getting a little worse despite obviously the construction getting much better. So it means that some other lines are suffering a bit. I mean also when I see the reinsurance in the last few days of reporting, it's all about specialty lines facing a little more pressure. And I know we keep asking you about this. But I mean, how -- what's happening on the specialty lines, please? Is it like -- because that's your core strategy? And if there is more pressure there, what should we be thinking from the outside about looking at this chart going up a little bit on Slide 10.

Vinit, I don't see the pressure. If you look at this Page 10, it says that we have grown the share of construction inside specialty and Construction is a business that cannot be run at 85% combined ratio. So what you see on the left side is just a mathematical result pretty much of a progressively heavier construction specialty portfolio. So I don't see much of this pressure. It's not under pressure. It remains an incredibly stable and rich line of business with the change more recently that construction and infrastructure is in very high demand. And if we look at the book of business that we see coming for '26, this will pretty much remain the story for us also in 2026, and we will try hard to serve all the customers that are requesting support in the U.S. and in Europe on construction and infrastructure. But it's pretty much a mathematical consequence of the -- and composition of the book, which is tilting towards construction and infrastructure.

Sure. And if I can squeeze in the second one now that I have the opportunity. In EMEA motor, the retail EMEA motor book, in the original plan the idea was to get -- our ambition was to get to about 96% combined ratio and one is already working much better. But is that ambition still at the same level? Is it being achieved, but I don't see the EMEA motor print anywhere. So I'm just curious on that.

Yes. We think there is still -- I think I said that, but we really think there is still progress to be made this year. We're not where we expect to be in retail. Germany, Switzerland filed rate increases and market reaction was fair. We haven't lost significant loyalty retention with these rate increases. So the market is conducive for that. We expect retail to continue improving, especially in motor through this year. The emerging markets are a different story because it takes longer for them to show the improvement, but they're tiny. They don't have an impact and it's definitely not a short-term play for us in all of these emerging markets.

The next question comes from Andrew Crean from Autonomous.

A couple of questions, if I can. Firstly, could you talk a bit about retail nonmotor. Just the size of it, whether it's deteriorating or improving and just talk a little around that? And secondly, in Commercial Lines, you talked about mid-market and specialty, which is about half your commercial lines book. I'd like you to talk a little bit about the other half, which I think half of that is crop and captives and direct market, but half of this is your large corporate where there's greater rate compression. Could you talk a bit about the results there and how that's looking?

Yes. Andrew, starting from that, large property is I would say, the most profitable line of business at this moment through risk selection and through the progressive development of the portfolio, actually large property is very, very profitable at the moment. Crop, I think what Dalynn Hoch did there was a masterpiece. She has transformed our portfolio. If you will run a deep dive on crop yield and you compare the portfolio we had in 2024 with the portfolio we have at the end of '25, it's impressive. If you look at '23, '22, you wouldn't believe it. Geographically, she moved out of some states and she grew other states. Costs, she has taken out a significant portion of fixed costs in the product balance between the private products and the public ones, thorough transformation of it. It's a totally different business, honestly. And it shows, once again, if we needed the demonstration, what's the value, what's the power of good management on running this portfolio.

I mean, similar to what we saw, farmers, you put a good, strong manager leading the business. The results come very quickly. Captive is a $3 billion business, I think in revenues altogether. It's very significant. It's growing. We're quite happy with that. It's profitable. Programs has been the subject of actions, especially on the commercial auto side. And this is what you saw also in the negative volumes of mid-market, because program belongs to mid-market in our classification. And they were just canceled portfolios of commercial auto, which we did not trust anymore that could be brought back to profitability.

The weak point in our results remain on casualty, especially excess casualty. There, the rate increases are necessary. And there, our underwriting continues to carefully look at customers' guarantees, exposures. And finally, workers' comp is super stable. We continue not to deliver sufficiencies to profits. We continue to reinvest them. But the portfolio remains stable, profitable as it was in the past years. Does that answer your question on commercial, Andrew. And motor retail...

Yes.

Look, retail motor broadly speaking, very positive results out of Europe. Some huge events in Europe. For example, in Switzerland, the famous mud sliding disaster. But every year, you have a number of these results. Pretty pleased with the European profitability. The expansion of the business in Australia on SME is also kind of noteworthy for us. So we've been struggling many years in Australia on growing the business and also in growing profitably over the past 3, 4 years. The colleagues there have done a remarkable job of stabilizing growth and results there. So I'm quite pleased. Having said that, we still think that we need to recuperate between 1 and 2 points of combined ratio in retail altogether between this year, the majority of it and maybe the final part of it next year.

The next question comes from Hadley Cohen from Morgan Stanley.

And first question, I think going back to the plan one of the targets was for more than $10 billion of GWP in mid-market space. And Just given the current sort of dynamics and trends and what have you, are you still comfortable with that target? Or is that something that you're rethinking? And then second question, please. The $7.4 billion remittances is obviously a very, very strong number and a lot more than the run rate implied by the $19 billion cumulative target and also higher than the net income for the year. Is it possible to tell us where the sort of excess is -- has been coming from? And how much scope there is for more of that to come going forward?

Look, I'll answer mid-market and Claudia is getting ready to answer on liquidity creation and cash generation. Look, mid-market, remember that we had there the program cancellation there, which is a kind of one-off. Stripping that off when we saw the mid-market there, it was growing at near double-digit numbers, which is what we need to achieve the target. So we remain confident that we're going to reach that target. We don't plan to do other restructuring actions at the moment. So if nothing new emerges over the next 12 months, we think we'll drive this to the target as all the other targets that we indicated.

To give you an indication of how we see January, even though it's relatively contained in Europe, but the U.S. are already seeing positive development in terms of the demand in middle market. So please remember that all the actions that we've been talking about, the portfolio management, actions that we've taken in 2025 went against the growth, right, the headline growth in middle market. Now the investments that we made in the last few quarters are starting to come through. We've been hiring last year alone in the U.S., roughly 100 underwriters and over 50 in Europe. So obviously, the production didn't come through yet in 2025. It's starting to come through now, and we are seeing actually growth in the U.S. in the low teens in January. Again, it's a limited data point. I appreciate that, but the direction is definitely the right one.

And rates here are still positive.

And rates are positive. Exactly. That's another positive indication. So we're actually happy and comfortable with what we're seeing from the market. On the cash remittances point, you're right. So if we take as a run rate, the 85% normalized cash conversion rate that we have taken on U.S., the $7.4 billion is slightly higher than that. We had 2, let's call them, management actions that I would flag. One, the largest one is the fact that we've been optimizing our reinsurance structure from the U.S. on the U.S. cat business, and that's coming through in the ability to release liquidity. So that was sizable in 2025.

The second point was related to the U.K. pension business. There has been as well a limited amount of cash remittance that we could repatriate related to that. You should expect us to be able to continue to optimize liquidity over the planned period. So not going to commit a number other than, obviously, our 3-year target of cash remittances above $19 billion. But as we said previously, it's a large balance sheet. There are many opportunities for us to continue to optimize. So I would see us well on track to achieve or exceed that target.

The next question comes from William Hawkins from KBW.

First of all, the outlook for the Life business, your CSM is growing 18% and your Life business is less anchored to the CSM runoff than some of your peers. So you also seem to be growing really well in the short-term business. You flagged 9% in your remarks, Mario. So bringing all those points together, I'm not sure why you're being so cautious in just talking about mid-single-digit growth profit outlook for the business. Is it just that you're conservative? Or is there sort of some headwinds that I'm not appreciating?

We're always conservative, and we always like to exceed. And especially in Life, we have always done that, which I'm not necessarily very proud of. But as a matter of fact, it's very consistent with -- if you look back, we have always done that in Life. So there is nothing else to be known about that. It's just our usual consistent style in Life to mislead them and deliver more.

Got it. My second question, I'm just -- I'm still really wondering the outlook for your non-life combined ratio. And I know you don't guide to it as a specific number, but it's giving me a headache. You said very clearly at the 3Q stage that Zurich is not the kind of company that smoothens like cats unlike its peers. So I just want to check, first of all, when we get to the end of the year, was that actually the case? And if it is the case, I can't see how you're not from here. The second half seems to show a deteriorating attritional claims ratio.

And the outlook for 2026 implies a very big headwind from the normalization of cats of something like 1.5 to 2 percentage points, which even given the positive stuff that you said about retail, that's only part of the business. I find it very hard to see that you don't have an overwhelming headwind to the outlook for your combined ratio for this year. So I'm assuming there are positives that I'm not mentioning. So can you just help me understand what may be the positive drivers? Or am I right that you just had an amazing year and by definition, you can't have an amazing year every year?

I would agree. I don't think we had an amazing year. So first of all, if I compare our nat cat results with the peers, I think we are establishing ourselves at least, I would say, a couple of points below our American peers. And this is risk selection is the way we build our portfolio. It is consistent. This method is not luck. And it has been stable over the past years, and we'll continue like that. Second, it is true what you said. We want to be prudent, and we don't want to release and then adjust. And so we clearly took advantage this year to build on our reserve strength.

Third, I think the more we progress, the more the weight of the specialty and the mid-market portfolios will weigh in and will benefit our total combined ratio. Fourth, I think there is work that can be done and that we're doing now on our expenses. And this work will create further buffers this year, next year on our results, if that makes sense.

The next question comes from Kailesh Mistry from Deutsche Bank.

Just wanted to come back on the cash question. Could you just let us know what the cash balance is at the holding company at the end of the year following the strong remittances. Secondly, could you just let us know roughly what you see as your debt capacity? And then lastly, if I could just squeeze one in, just back on the Life business. Obviously, very decent results there. But when you look through the CSM roll forward of the different segments, there's a lot of 0.5 billion one-off movements in variances and other lines. Is that just business reclassification? Or is it something else?

Look, on cash, I would say that it's more than adequate what we have today in our wallet. On the size of debt that we can take and we see some movements, I bet Claudia to answer your question because I will not be able to do that myself.

So on that capacity, we're not constrained by our leverage ratio. In fact, we've been improving our leverage ratio, both on an IFRS basis, but also the Moody's based calculation from the end of 2024 to 2025. That said, we are in a good and very comfortable position where we are today. So I would expect, if anything, our balance sheet size and equity to grow over time, and we've seen that happening in 2025. So leverage should actually go down in terms of leverage ratio over the planning period. On CSM, sorry, can you repeat the question? I'm not sure I fully heard that.

Yes. So on the CSM at the aggregate level, all looks okay. But when you dig into the different segments of protection, unit-linked savings and annuities, there's a lot of $0.5 billion movement in other lines and operating variances. So just wondering if there's something that you need to flag there.

Yes. So thank you for the question. We had a few reclassification of some businesses where the protection element became prevalent. So we've done those reclassifications there. Nothing really to flag of -- regarding the underlying business or the CSM production strength is a pure classification.

The next question comes from Emanuele Musio from Intesa Sanpaolo.

Actually, I have 2 questions. So one is on the Lloyd's syndicate that you recently -- I mean, you initiated the process of starting the syndicated Lloyd's. And I was just wondering whether this is something you may use to leverage the chain of security and therefore, improve in a way the capital efficiency of some of your current book? And then the second question is more on capital and in particular, the farmer exchanges where the surplus ratio is now at 52.9%, which is well above your target, 44% to 38%. And I was wondering, given this excess capital and the reduced farmers participation, if there is any plan to accelerate capital returns to Zurich?

No, no, no, hold on there. There is no way to connect the capital of the exchanges to Zurich. This is capital of the exchanges, not of Zurich. And these are 2 completely separate world. As much as we cannot contribute capital to the exchanges, the exchanges cannot return capital to us. Now the fact that they have such a surplus is very good because it means that they will be not constrained at all in growing the business. And since we're pushing for growth of the business, not just growth of policy counts, but also of revenues and accelerating growth, that means that there is no constraints on the exchanges to do that. But it's a totally separate company entity. It's a different world and there is no connection with us, in no way that exists. Look, on Lloyd's, we have paused for the moment the request to open a syndicate, waiting to see what happens with the transaction that we cannot talk about. And we will see later if we need to reactivate it or we just let it stay in sleep as it is today. One way or another through this year, we're going to have a presence in the Lloyd's syndicates.

And the last question comes from Michael Huttner from Berenberg.

Very 2 simple questions. Expense ratio, I just wonder if you could kind of detail the -- it's gone up. You say for good reasons, but have you given any reasons. I just wonder if you could kind of detail and maybe if there's an underlying improvement, so this is from 28.6% to 29.9%. And the second question...

The acquisition, Michael.

Okay. Sorry. Sorry. Okay.

This is the first year that we completely accounted for the acquisition. And so part of the growth of retail is M&A driven. There is a page in the presentation that volume -- shows the volume. So yes, let me see is -- Page 8 precisely. If you see on Page 8, the $1.3 billion movement is M&A indicated. And it's mainly TravelGuard.

There's growth happening in there as well.

Yes. Excellent. Okay. And then the other question is the $900 million corporate expenses and the guidance was $800 million to $850 million. I just wondered if there is anything here to note?

There was some integration expenses included in there as well, Michael, and some FX impact from the fact that headquarter expenses or a relevant chunk of headquarter expenses tend to be in Swiss franc. So translating into U.S. dollar unfortunately, makes it look worse.

Ladies and gentlemen, due to time constraints, this was our last question. I'd like to turn the call back to Mr. Mario Greco for any closing remarks.

So thank you very much for all your questions. In conclusion, I'd like to repeat, we're very pleased with this first set of results in the '25-'27 cycle. That means that we are well on track to achieve or even exceed our '27 targets. In Property & Casualty, we continue to focus on agile portfolio steering looking to actively improve our book while pursuing growth opportunities in a very disciplined way. For Life, we have exciting growth initiatives across the globe to pursue as we work to further scale our protection business and accelerate our participation in selected segments of the Savings business. Farmers have significant opportunities, leveraging its financial flexibility and improved go-to-market capabilities to move to a structurally higher growth rates. I look forward with confidence to this year to 2026 as we look to continue to deliver durable growth with exceptional returns on capital. Thank you very much for participating and for your interest in Zurich.

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.

Good morning, everybody. I'm Mitchell Todd, Head of Investor Relations and Rating Agency at Zurich. A very warm welcome to Zurich Insurance's Investor Day for 2025.

I'll just take a quick moment to run through the running order for today. I'll shortly invite Mario Greco, Group CEO; and Claudia Cordioli, Group CFO, to provide a strategy update.

We'll have a very brief break after that to get the stage set for a fireside conversation with our new Global Head -- Head of Global Specialty and Mario and myself. That will be followed by 3 breakout sessions. The first will be Middle Market before lunch, followed by Retail and Farmers. You will have opportunities to ask questions both in the fireside and the breakouts, and then we'll convene at the end of the day for a broader Q&A session where we'll invite Mario and Claudia back on to the stage as well.

Some logistics around the breakout groups. We'll divide you into 2 groups. So those of you with a yellow badge will be staying in this room in an auditorium. This will be webcast live for the entirety of today. Those with a green badge will be guided to a room just adjacent to this one. Plenty of people on hand to help you get across here, but it's not too far of a commute.

For Q&A sessions, we ask you please keep to 2 questions just to make sure everyone else can get a chance to engage with the leadership team that's here today. Thank you very much for your participation. I know a number of you have traveled in early morning flights to get here. We really appreciate it. With that, I'd like to hand you over to Mario Greco and Claudia Cordioli. Thank you very much.

Good morning. Thank you so much for coming over. It's a real pleasure for us to have you here. Remember, this is really a presentation to provide you information details, so ask any question. Now Claudia and I will try to do this with 4 hands, which we never tried before. So let's see how this works. But the purpose of our session is to give you an update on where we stand 1 year after we launched the new 3-year plan. So we feel good about it.

First of all, we kept ourselves highly concentrated. We kept working on the strategy, no matter the noise around the world and the dangers that emerged. We kept working on what we needed to deliver. And the way we see it mid-November, so still 40 days to go to the end of the year is that we feel very good against our targets, and we feel ahead of where we wanted to be by this time of the year.

The growth is coming, and the growth is coming where we wanted to go for that, which is mid-market, specialty, life protection. All 3 lines of business are, I cannot say surprising us, but they are delivering what we expected. The profitability is coming. So the margins are improving as we expected. Retail is back as honestly, we expected it to be this year in '25, is back with an excellent profitability, but it's also back with very strong growth. And we still see that the liquidity, the cash creation is very supportive of great shareholder value at the end of the year. So that is a very good first year.

But let's now understand what happened and how we got at the end of this first year so strongly. What are the targets? I mean, we indicated the 4 business targets last year. Commercial, which, of course, was in focus when we presented the plan last year. We committed to deliver in excess of $ 4.2 billion of BOP by '27 and we are committed to surpass the $10 billion mark for Middle Market gross written premium. Both are still seen very much as achievable targets at this point in time, 1 year into the plan. Retail return to long-term profitability. It is what we see today. Retail will continue improving next year. But again, we see that this is very much achievable. And then accelerate on customer loyalization. We have some interesting data on customer loyalty retention even if we kept improving -- increasing the rates and improving the profitability.

Life Protection. Life is growing nicely. You know that there is some noise, as always in Life, especially for the Brazilian performance of our partner, Santander, but that's a temporary issue. The growth that we see coming is very, very strong and supportive of this target.

And then Farmers. Farmers, just as an introduction to the job of Raul later. Farmers is not a turnaround story. Farmers is a transformation story. What's the difference? The difference is that what you see today is the beginning of an improving speed to benefits, changing results of farmers over the time because this transformation will produce more and more benefits over time. So again, it's an impressive start of the year, and it's an impressive delivery of a full transformation of an organization by Raul and his team.

So what does it mean in financial terms? When we launched the plan a year ago, I was keen to stress that all the targets that we've defined for 2027 were not a series of financial KPIs that we defined in top down. This was the product and it's still the product of bottom-up plans that have been prepared by the business leaders with very concrete and tangible actions in the background to execute.

And this is the exciting thing about today. You'll hear directly from those business leaders in the breakout sessions about what their plans are, how they're executing and the progress that they've made to date. So we'll hear about Middle Market, and Mario has just talked about that and how it's driving superior margins in our commercial franchise. We'll hear about specialty, which is already 1/3 of our book, and we want to grow further. We hear about the transformation at Farmers and how from here, the team around Raul and Ken are going to deliver mid- to high-single-digit growth. All of this is fueling the targets that we talked about. And we are absolutely confident in 2027 that we will achieve them.

EPS compound growth above 9%, cash remittances accumulated of above $19 billion, and I'll come to that afterwards. An ROE in average of above 23%, and we'll keep doing that, staying above -- comfortably above the 160% SST threshold floor that we define. So very comfortable about that and the progress is what we are going to take you through in the course of today.

Now what is the market that we see out there today. And again, strip off the noise, strip off the worries and the news. That's the market which is out there. There is strong growth out there for infrastructure and construction, even in Europe. Yes, even Europe has a long opportunity, long weighted opportunity for growth. And now this is growth that we know very well what it is. Claude and I will touch on this because construction and infrastructure is our core competence and core business.

Energy demand and energy transition. Again, renewables are something that we've been investing heavily. These are competencies that we have in the team. This is good news for us. AI data centers, U.S., Europe, Asia, business that we have been opening, developing, following. We'll give you data on how much of this business we have already insured and developed together with the clients over the past years. And this is a great opportunities for us in the future.

Supply chain repositioning to regions, same story. It's about creating infrastructure, construction in the different regions of the world. And then the increased risk complexity means that our services to prevent, mitigate and anticipate are in high demand and our customer service is highly appreciated.

And finally, we're living in a world which remains also interesting for protection demand because welfare is coming down everywhere in the world, but worries and concerns of people are not, and this is boosting the protection.

Now what has been the answer that we gave it to it? And let me, first of all, clear one thing that could be in mind because I'm going to spend a few minutes on why we did the organizational changes? What was the reason? What's the purpose? And why is that related -- why was that related to what I just mentioned? The organization changes have nothing to do with the '27 targets. The '27 targets are kind of already in the books. You will see at the end of year how strongly we perform. The results of '27 by this time next year will be in our books. What is not in the books will be just the natural catastrophes of '27 that we cannot predict and some action on the costs. And these trends here, they will last much longer than '27.

And so we start today acting or with the new organization of 1/1, we start acting for the future of the organization past '27 to give us further drive and further advantage after we finish the '27 target.

Now, Specialty is the core of all these things here. This is where the growth is. It's going to be in Specialty. And it's going to be in Specialty crossing mid-market too. So we thought about what do we need to really build today a competitive advantage, to really be the beneficiary of this growth in the next years. We need a different organization where we can invest more in skills, where we can deploy more resources where needed and where we can create a real competitive advantage in a skill-based business like specialties against the peers. And so thinking about how we do that, we said, okay, let's revolutionize our current organization. Let's organize Specialty as a global business, which I said, we're sitting there and then you'll see it in the fireside chat. We'll take the lead of it starting 1/1. And then we also strip off and simplify the commercial insurance organization in 3 divisions. Specialty, International division and the U.S. business, of course.

Sierra takes direct responsibility also for the U.S. business. And of course, she maintains the commercial insurance responsibility side in Specialty. International divisions will be led by Luciano Chirina, who has many years of experience and competence in the commercial space.

Again, the purpose is to capture a significant portion of this growth and to create an unbeatable competitive advantage for us in the market. We also changed the organization in Life. Going back in a sense into history, even though not precisely like that, by creating one responsibility for Life under Alison Martin because it's, again, it's a skill issue. We need to buy, bring, develop Life skills more than we have done so far. If we want to continue creating again the success story that we want to create for the next many years, we need to have the skills that we need in Life. And in order to do that, we need to centralize it and to start investing from the center.

And on Retail, we progressed on the pioneering development that Carsten and the German team has done on retail and underwriting, and we want to bring it globally. And after we tested -- I mean, initially, I started asking Carsten and his team, can you do it for us? It doesn't work. A country cannot do it. The country has to run itself and doesn't have the time to run the rest of the organization. And so now still with the help of the German team, who is more advanced than anybody else, but we want to standardize retail and underwriting on a global level under Kristof Terryn leadership of the retail organization. These are the most important changes in the organization.

Again, it's a long-term view of where the market is going, and it's adapting the organization up to the market opportunities. If you have any other questions now or later, please ask questions on that.

Let's move on now to the businesses. If I can make the clicker work. Okay. Let's start with Commercial Insurance. Commercial Insurance is naturally our biggest business, and it's also where we have the biggest market share, the biggest leadership position worldwide. It's a highly diversified as you see it in the center, it's diversified. This is practically how the organization will look like a 1/1 out of, let's say, $30 billion of premiums at the end of last year, 1/3 roughly is in Specialty, $9 billion.

International, it's a roughly $6 billion of premium. And then the rest is the U.S. business. So roughly 50% of it is in the U.S. business or you can read it by customer size mid-market, it's roughly 1/3 of it. The other part is a combination of direct and captives, which fall under Alex in the U.S. So you'll see them also in the mid-market U.S. numbers and crop. And then corporate is 49%.

In terms of profitability, coming back to something that Mario has said, it's extremely important. We want to build an unbeatable competitive advantage. And this is done not by being static and just following what the market is doing on rates and loss trends. This is done by dynamically managing the portfolio through peaks and lows in a way that it brings competitive advantage and it brings superior margins. And I'm looking at Sierra, who's here in the audience today. The team around Sierra has done an impressive job over the years, as you see on the screen, right, to improve the combined ratio step by step, year-by-year, just shaping the portfolio in a way that was able to capture the best part of the market. Was able to build a franchise, right, like Mario has explained around Specialty, around Middle Market and we want to grow further, in places where the margins are higher and more stable and predictable.

So this is not by chance. This is not just going with the market. This has been a conscious strategy of building a competitive advantage. And this is why Specialty, Middle Market are so important for us right now in Commercial because this is what we want to do, we want to dynamically and proactively manage the cycle. And I would expect the combined ratio to continue to improve and stay on a very high level -- on a very good level because, as I said, the team is managing this proactively and choosing the parts of the market that are more stable, bringing better margins and have high barriers of entry, so it require unique and very deep knowledge like Specialty does.

Specialty has been the focus of our growth efforts and development since 2016. For those of you aware at our investors presentation, the first plan back in 2016, you remember that we mentioned growing Specialty and property and growing mid-market. This is where we are today. We are presumably #3 globally on Specialty size, $9 billion of business, progressively growing year after year. This is in a highly fragmented market. You see that the top 10 companies barely control 25% of $0.5 trillion of the business. So there is a huge space for growth for us, for consolidation, for a brand and for the experience and the skills of a company like ourselves.

Now what is Specialty? Because Specialty is a big bucket where the definition matters because every company has a different definition. And I will be even more detailed in a second about it. So this is the composition of Specialty today. For us, the most important line in Specialty, as you see, is Construction. Construction in engineering is $3 billion out of $9 billion. This is also the -- where we have a clear lead in skills and expertise.

Energy is the significant, financial lines, as you can imagine. And then I'm going to list what is comprised in these definitions, credit and surety. A part of it goes together with construction because we sell it together when there is an infrastructure project, a development project, you also have a credit line together.

Cyber is 4% of it, but of course, there is a high demand for Marine, significant E&S. It's a very U.S.-based business, which is -- which allows us to do non-admitted business. And so it allows us to rule our conditions and contracts to the customers instead of being -- applying and being approved by the states and then accident and health is 6%.

The reflection of it is obviously a superior financial performance. So going back to what Mario was saying before, we want to grow in Specialty because it's a line that requires specific competencies. It's much more difficult to attack a player in those areas that require very highly skilled underwriting workforce, and we'll go into that later on, and you'll hear more in the fireside chat, right? You need highly skilled and writing capabilities. You need the right locations. You need to have the right relationships with the customers and with the brokers. This translates into superior financial performance.

So as you see in the graph on the right, Specialty has been performing on a superior level compared to the rest of the commercial book, and we expect the profitability to remain in this mid-80s combined space. Why we are growing it? So remember that this is a $9.5 billion book, and we want to grow it from there.

Now what is the definition of these lines? And so let's spend a second just to align ourselves. Let's start with financial lines. Financial lines says some coverages that you would expect there, like managing liability, but has some very innovative ones like transactional liability. Now you might have seen that at the beginning of the year, we acquired an MGA specialized on transactional liability, which is a way for us to internalize the underwriting competencies that's an MGA, which has been in the market for years. And Sierra and her team have been chasing the quality of the business that they were writing very carefully.

Then we've got comfort that, yes, these people know what they do, then why don't we acquire them and we transform them in our underwriting department for transaction and liability. Very specialized business. You need lawyers. You need accountants. You need experts to write this kind of book. You can't just get the capital to go and write it. That's a suicide. You need to know what you're doing.

Professional indemnity, of course, you know what that is. Crime, M&A, which is part of transactional liability. It's a huge new line of business, very interesting for the customers and very profitable. Energy. This is the classical energy, up and downstream, but it's also renewables. On renewables, so we've been investing a lot to creating hubs. There is a huge demand. And again, you need specialization. You need to know the techniques. You need to know how they work. Otherwise, you are insuring blindly and you shouldn't do, of course, do that.

Construction, the core of our competencies, is construction of risks, erection of risks, building risks. We'll come back on how sizable is our experience on that. Accident and health. I'm going to skip that because I think you will understand it. Wholesale is E&S that I mentioned before, the non-admitted. Marine, I think, again, Marine is pretty straight forward it is.

Credit lines. The credit lines are often related to construction and energy. And surety also is about the financial guarantees for the obligation of the parties. Cyber, you know what it is. We're very careful in cyber, but we like cyber for SMEs for mid-market. We're roughly 100 underwriters specialized on cyber today. We want to grow the size. If you want to provide cyber coverages, you need specialized people to do that. And you need to keep building their competencies and their knowledge and keep them motivated.

Beginning of next year, we will also have a different compensation scheme for all these underwriters. The Specialty people have -- need to have long-term incentives. Their portfolios develop over time and they must be participating to the success of these portfolios. They must have clear incentives, but equally, they must have clawbacks and/or financial penalties if the portfolios don't perform. So that's another reason why we kind of created an independent unit for them because they will be treated from 1/1 in a different way than the other underwriters even financially. It's a competence skill-based business where you can't just enter and leave. You have to be there. You have to know what the risks are, and you build it year after year over time, which makes it very sustainable for us. This is not a transactional activity. This is a business that stays there for long.

Now as I said, there are global trends, which are very important on Specialty. Infrastructure investments in Europe, in the U.S., in Japan, in Korea, all the Western world is rebuilding itself. And the amount of cumulative investments is impressive, and it's an opportunity for us to lead and do business with that.

Technology developments. AI is clearly changing, not just the way we live, but it's also changing the investments made by the companies. We can participate to this investment as we have done already by contributing with our knowledge to the infrastructure and constructions needed. And then energy demand in transition, as we said before, and these are the lines which are impacted.

Construction. I kept repeating the market leader there. This is the size of our U.S. construction. This has been growing at a 9% CAGR over the past years. This is in excess of $2 billion of business construction in U.S. only. We have to add more than 250 underwriting experts in the U.S. We have 90 risk engineers. These are all people who have been working for years, senior people known in the market with a unique wealth of experience. We are a leader in construction ensuring in the U.S. For what is relevant, we've been awarded Insurance Construction Team of the Year in 2025. We are the first one to offer a parametric solution to construction projects. This has a lot of innovation, competence, experience, history and this is what we can bring wherever these needs appear to be, in Europe, in Asia, wherever they are, we have the people who can provide an answer to that.

Hopefully, we will not stay for the day long on the stage. Yes. Okay. And finally, you had a significant risk here that you will spend the next 4 hours on construction.

Middle Market. I guess, we have been talking Middle Market for a long time. I think Alex has presented in a couple of Investor Days, our journey through Middle Market, how we grew our business from close to 0, it wasn't 0, but it was a tiny business to be today one of the leader, not just in the U.S. but globally, and we applied the same recipe in all the different markets.

So first of all, this is a $300 billion business worldwide. This has been growing 5% as business altogether, we have been growing close to 10%, 9%. And pretty much the '27 target is the same rate of growth, right? So it's not -- I mean, when we presented, I got comments, is this overambitious? This is just banking on the fact that we will continue what we have been successfully doing over the past years. The business that Alex directly leads is 60% of this portfolio. But then you see that we do it in the U.K. significantly where we started years ago delondonizing our business and opening branch offices and deploying underwriters in the countryside, not necessarily in London City. And now it's 10% of our roughly $9 billion of business that we have today. And this is highly profitable.

Yes. It's interesting, and please ask Alex and Drazen all the questions that you've got on the progress they're making on the growth. But don't forget that there's another very strong franchise in Continental Europe, only the market that's growing nicely. Countries like Italy, France, Spain, they're growing double digit and with all the infrastructure spend and the support that is coming as well on large initiatives, for instance, in Germany, but also in Italy and other places. This is a segment that for us is poised to grow globally.

So as Mario said, 60% is U.S., 40% is the rest of the world. And while the U.S. is growing very nicely, I would expect also the rest of the world to at least grow at the same pace, if not in a quicker fashion.

Profitability, I mean, you see the combined ratio there, highly profitable. It has all the characteristics that we like. For obvious reasons, it's a market that's more fragmented. So it's also less exposed to large losses. So frequency is a different topic. Severity is much lower compared to large accounts. We continue to like large accounts and underwrite large accounts. But compared to 10 years ago when our balance sheet and our exposure was dominated by very, very large customers on the corporate side, we've been changing and reshaping the portfolio. And now as you saw before, 26% of our portfolio is made of Middle Market, and I would expect that percentage to change and increase as we go into the execution of our plan from here.

While obviously, we see that margins are holding better than the large corporate space, right? There's less pressure on prices, market rates are more stable. And we believe that we have, again, back to the point we made before, that competitive edge that allows us to be able to continue to perform at a superior combined ratio.

There is a lot of underwriting work behind these numbers. I don't think that the market runs Middle Market at 87%. You can ask Alex, you can ask Drazen, how much underwriting pruning actions that they continuously do. When we started back in '17, for us, Middle Market was above 100%. It took us years to understand where to target, who are the underwriters, how to run the business. And so we're very pleased today, but there is a ton of underwriting work behind this market. This is not what the market does per se. This is what we extract from the market with the actions of competence and underwriters.

Good. This time, we moved quickly. So quickly on Retail. Retail is delivering what we have been expecting and waiting patiently for 3 years to see coming from Retail, which is growth, and it is profits. Now we have changed, however, a number of things in Retail. We've introduced a lot of pricing sophistication. This, as I said before, has been piloted by our German colleagues and then has been progressively extended and still has to become a global tool.

We have worked a lot on claims on steering the claims and make sure that we take initiative and we direct the claims where they need to go. And still, there is work to be done there and benefits to be extracted. And you will see later that we have started using artificial intelligence to deliver better results on the retail performance. And all through this, we have improved retention which is a very significant benefit that we are extracting these days or we are delivering these days because we manage through the improved retention to have the customer accepting in much higher rate prices and still they're willing to remain with us because the service was outstanding for them.

That's the key point -- well, there's 2 key points, I think, to take away from a financial perspective. One is the fact that we've been able to improve rates where it was needed, right, in Germany but also in other countries, from Japan to Spain, Italy and a number of -- Switzerland, obviously, and we've done that while increasing retention. So this is -- this goes to credit of the teams that have done a very strong work on segmentation of the customers, putting rates where it was needed and making sure that the book goes back to profitability again.

The other thing which is remarkable. I'm pleased with Carsten and Peter here for the breakout session, ask them how they did it. They managed to grow the business so that we've got not only better retention on the existing customer book, but they've also been adding a lot of new business through their direct and through other initiatives, right, beyond motor. So a very interesting journey that the German team has been on, and now we are sharing this -- these learnings and the strategy more broadly across Europe.

The other difference that we have, yes, is in distribution. We have a very different distribution mix that any of the peers that you can think of. And I would say that our distribution is really future oriented, and it's not built into the past. We do have agents, but not as the predominant force of distribution. We use very well bank partnerships. We're very, very effective and successful on the bank partnerships. We use, of course, brokers, especially for SME business, but we also have grown very successfully a direct business. And today, you will hear especially from Peter Stockhorst, what's the experience because in a number of years, we have changed the profile of distribution in Germany and being very much now led by the direct growth and profitability.

The opportunities for us continue to remain important because even the best bank partnerships like the one with Santander has so far hit a very strict minority of their customer potential. And so there is much more than we can achieve with the banks. Equally, the direct growth is so reassuring that now from Germany, Peter and his team are expanding into the rest of Europe.

On Life. Life is important in matters. Life is close to the same profitability of Farmers. I understand that it takes a little bit more capital than Farmers does, but not that much more. It's completely undervalued. When people talk about Zurich, talk about Commercial Insurance, Farmers and everybody forgets Life. Life matters. It's a bigger addressable market. It's growing very nicely for us.

Now look at what is the contribution that we have. Of course, we have the bank partnerships, Santander, but also the Sabadell partnership in Spain. But then we have Australia, which is a very strong market for us where we have a leadership position. U.K. historically, U.K. has always been a very strong Life market for us and highly profitable. Switzerland itself. We do incredibly well in Japan. Now we're growing with unit-linked business.

Life can grow more than it did in the past years and can produce more BOP and that's the purpose of the changes in the organization regarding Life.

Here as well, highly comfortable business that we like. And unlike some other Life books that you might see from the rest of the industry, highly cash generative. A large portion of the book is short term, and you'll hear from [ Claudia ] afterwards directly on Santander, the performance and how he plans to continue to grow that. 17% BOP margin is extremely high, and we want to continue to grow the business, keeping that margin at that level. So a very important franchise for us. It is 1/4 our BOP, as you know, and we expect it to continue to grow in the years to come.

Right. Farmers has said it's a thorough transformation of a big organization, which needed a thorough transformation, not a fix. So what were the issues that Raul needed to tackle management, balance sheet, distribution, cost basis and quality of the product. Am I forgetting something, Raul? Claims, maybe, even claims management. He tackle all of these things at the same time. So what you see today is the initial impact of the changes that he has brought into the business by tackling each one of these single issues at the same time. This will continue to drive the growth improvement of Farmers for a long time. They changed completely the balance sheet positioning. They changed completely the profitability of the business.

So renegotiating aggressively with the states but also changing the product mix and the product conditions. They changed the distribution model by growing very effectively the independent agents, but also working on the captive agents and the exclusive agents. We're finally starting in the last months to come back to positive in-force developments.

The growth of the top line, it is significant and will accelerate because now it's based on the policies in force growth. I think the -- where we see today, Farmers is delivering 40,000 new policies per month on a net basis. This is a significant increase, not just against the past, but it's a significant increase against the basis of the policies in force. This means that there is roughly 4% of growth that comes from the increased number of customers on a net basis that they are generating. Progressively, this will become kind of the basis of the growth for the next year, on top of which you will have the rates.

So this is why when we were at H1, we kind of uplifted the expectation for Farmers that Farmers will be growing the business, not at single digit, but at high single-digit numbers for the rest of the 3-year targets and then for the following years.

We're moving. Okay. Now you stay with Farmers.

[indiscernible].

And staying with specialities or mid-market. Look, so what is -- at this point in time, one year into a 3-year plan, what is our assessment of these targets. We feel very good about it. On the core ROE, we're clearly running ahead of these targets. This year, if nothing catastrophic happens in the next 40 days, we will clearly deliver well ahead of the 23% mark. Then if we look at cash remittances, Claudia will comment later on that. We gave the message already in H1 that we were running ahead of our plans for the year. And so great confidence that the $19 billion will be achieved or exceeded. Core EPS growth, again, the development of this year is very, very positive for us. And Claudia will comment about it again.

And on SSD, okay, I don't see anything on SSD because you know the story, and I don't want to have questions on SSD.

So going back to what I consider to be the most selling KPI on our performance between now and 2027, core EPS. I mean, as you know, this is a reflection of what BOP does, right? As Mario mentioned, we have made a great progress 9 months into the year on all targets, all indicators and EPS is one of them. In terms of what happens between now and 2027, what gives us confidence that we will be hitting our target. 80% of our achievements is expected to come from underwriting, which is what we do best, right, as you know.

And there are 2 areas here. One is the work that the teams have done and will continue to do on underperforming portfolios to make sure that they perform better. So all the work that we've been talking about on reshaping the portfolio, re-underwriting parts of it, pruning other parts of it. This goes into here, and that's 40% of the delivery. This is like it's indicated in -- on the right, this is the part that I think we are advanced in a way that's probably beyond what we had expected in 2025. And that's a reflection of the retail work that has been done by the teams in Continental Europe, but also the advancement in the commercial space.

If I think of commercial auto, the crop business in U.S., there are some areas that are really, really progressing well. Then Insurance growth. We spoke at length about Middle Market and Specialty not only that, but obviously, the resale piece that you'll hear more about later on, that overdrove the top line to grow 8% in P&C at Q3 and more to come in 2026.

Life, 11% top line growth to date. And again, as we said before, Santander is coming back to stronger growth. We have all the reasons to believe that this will pick up even more strongly. Farmers, Mario mentioned already the transformation, and you will hear more directly from Raul and Ken afterwards. The positive turning point on top of all other aspects on the PIF has been remarkable. This has come earlier than we had expected and the Farmers team had expected. Already in the second quarter, so between Q2 and Q3, effectively 6 months, the team has been able to add 103,000 new policies. And we have indications that October has accelerated further compared to September. So all of this underpins Raul's target to grow mid- to high single digit from next year on.

We expect also contribution from investment results. As you know, we are in a very conservative, very prudent asset liability allocation. This will continue to be the case. We expect a solid contribution to our BOP from the investment activities with obviously the expected as well increasing the unwind that will come through.

Perfect. So giving -- diving a bit deeper into the portfolio quality point, right? So the 2 biggest contributors to the EPS growth that I mentioned before. We've been talking about profitable growth at length on Middle Market, Specialty and Retail. I will now go back into that. I want to spend just a moment on the portfolio quality actions because, as I said before, I believe that here, we are on track, if not ahead of our targets in a number of areas. You'll hear more about the German -- from the German team about the work that has been done to reshape the motor portfolio.

EMEA at Q3 has been improving 5 points year-on-year, and Germany was significantly ahead of that. So that's definitely a place that while it's improving for the whole market, I believe Zurich has been at the forefront of that. In the U.S., the commercial auto portfolio has seen a lot of actions as well. As we've been open with you last year, we wanted to fix a number of areas. We were overexposed to some commercial auto relationships in U.S. program and the captives area. The work to prone this exposure is 95% complete as we speak. So this has been a drag to the commercial premiums in the U.S. for 2025, we do not expect to see the same extent of drag in 2026. This has also been a very important contributor to the commercial combined ratio improvement that you saw before.

We've been growing lesser than expected in some areas in E&S, specifically large customers in property where we saw that the rates were not up to our expectations. In crop, also a lot of actions have gone into reshaping the portfolio, making sure that the outside exposure that we had to certain state, certain underlying exposure like hail, livestock has been decreased. Right now, the exposure to the private part of the portfolio versus the MPCI has decreased. And as you see, 20% of the premium have come down there. We expect it to be compensated on the more profitable side of the book.

So I will resist the temptation to make any comments on the crop profitability at this stage. It's too early for us to do that. But in terms of underwriting actions of the portfolio work expense control, everything that the team has done has been really, really good and allow us to progress well on the substance of the portfolio.

Last but not least, and I made the comment on that also at H1. Natural catastrophe exposure was obviously one of the drivers of the good performance year-on-year. But this is not just good luck. So while everyone in the market had less events or financially impactful events in 2025, there has been a lot of work from a portfolio management perspective to reduce the exposure to natural catastrophes.

And as an indicator, we've been reducing our average annual exposure to U.S. hurricanes by 1/4 in 4 years.

By the way, in the deck, we've also put one slide on farmers, who has been on a very similar journey and actually has been reducing significantly the market share. You can see it on the example of the wildfires in California which is low, significantly lower than the rest of the market, in proportion to the market share that farmers has. This is the result of underwriting work.

One comment on our balance sheet and the cash generative nature of the business. We mentioned before that we are running a book in life and in P&C that is generating cash quickly and in a reliable way. As you can see on the left-hand side, this applies to all the businesses we like -- we run. And this is really the result of a lot of work that has been done to shape the portfolio and the business model in such a way. So for every $100 of news that we generate, roughly $85 generate cash in a very quick traction, and that's an average number.

The point that I think is important for today, well, it's twofold. On one side, Mario said that already, we have a very good line of sight to where we stand on cash at this stage of the year, as you would expect. And we are executing very well against our $19 billion target for the three years. We are ahead of the target as we speak in terms of the portion that we had allocated for this year.

The other important point for us to consider is that the core contribution to the $19 billion target over the next three years is coming from the core earnings generation so there is less reliance on extraordinary projects and management actions on things that are on top of the ordinary cash generation. There will be some for a balance sheet of our size, you always expect, obviously, that there are opportunities for us to repatriate excess and surplus capital. There will be regulatory changes, there will be transformation in the entities structure. But the core of it is generated by earnings, and we have obviously a very robust plan between now and 2027 on how we exceed that $19 billion target.

Okay. So I think we're adding up, this is to introduce the next session which we have already done, I would argue, Mario. So you'll hear from the business leaders that represent and are responsible for 50% to 60% of our [indiscernible] and the initiatives that most relevant in terms of achieving our three year target. So you'll hear from Mario and Saad on Specialty in the fireside chat in a moment. You'll hear from Alex [indiscernible] on the middle market growth. You'll hear from Claudio, [indiscernible] and Peter on the retail space, P&C and life and then last but not least, Raul and Ken on farmers. Take the opportunity to understand the business, understand the progress and what the plans are for this plan period, but also beyond.

Thank you all. And let's move to the fireside chat.

Thank you.

So thanks for that. I have now failed my Swiss proficiency test by losing track of time. So I think citizenship is now dead to me. But a good session and thanks for the good discussion. I suggest we take a 10-minute break to get the stage set up so that we can proceed with a fireside chat. If you want to grab a very quick coffee rest break, please do so, but make sure you're back in here 10 minutes sharp, please. Thanks very much.

[Break]

Okay. Let's get started. Welcome back, everybody. Really pleased to welcome Mario and Saad Mered back to the stage. Saad, our new CEO of Global Specialty. And as you heard in the earlier session, a really interesting and exciting opportunity for Zurich Insurance in the months and years ahead.

We thought it would be interesting just to start with a very brief fireside conversation, introduce Saad to the group and then also just tee up the discussion that comes after. We will open the floor to Q&A. That will be open to those of you who are joining on the web as well. So please submit questions and we'll put those to my colleagues to the left.

Maybe just to kick off, Mario, on a question for you. Zurich created this new Global Specialty unit. Can you talk to the reasons why and just share what you think is so special about Specialty.

So first of all, Specialty means for the next years, an impressive amount of growth in the market. And in order to capture this growth, you need to have the skills, the size, the investments, the resources now in order to capture the growth in 5 to 10 years forward. Second, Specialty, we like Specialty because it's a very sustainable business where you cannot simply enter. You need to plan, you need to invest, you need to create the conditions. So the composition of the market, it's a very, very interesting and stable. And this is why we prefer Specialty to other lines of business.

And Saad, turning to you. First, congratulations on leading this exciting new unit. You've passed the interview, but you still got your boss with you here, so no pressure. Can you tell us about your priorities in this new role and just the vision for the Specialty business you can from here?

Thanks Mitch. Thank you. First of all to note, this feels like coming home to me, Specialties is where I started my career, and it's been an important part of who I am today as an insurance executive. So I'm super excited to lead this journey for Zurich and leading this great business forward. Our priority is actually fairly simple.

The first and foremost is really to focus on strengthening the Zurich franchise globally on Specialty. We are, as Mario mentioned earlier, we're a top three player, but we still feel that -- and we believe that we have room to grow and improve this business. The second priority is around our people. We have an amazing team, world-class talent, but we need to keep investing in that talent. We need to expand that talent, invest in them, invest in the technology to support them so that they can thrive out there in the marketplace and grow Zurich for us out there. Third, I believe that we need to really foster a greater culture of innovation and collaboration. And I think the global business model that Mario described a few minutes ago, will help us bring a sense of cohesion to that team globally and to allow us to really be more compelling for our customers and, therefore, strengthen our franchise globally.

And one of the points that we touched on in the prior presentation was just the attractive margin that we see in this business. Claudia talked about a mid-80s level. I guess one of the questions we've received more recently, just how do we think about the medium to long-term margin profile of Specialty? Maybe you could talk us through that.

Yes. Specialty is a bucket of many different things. So what makes the margins there is not the market trend, but it's a composition. So every year, you accelerate some business and you decelerate or even shrink other businesses. That's the case, for example, this year [indiscernible] which is clearly an important part of the Specialty buckets. But this year, we decided to slow it down because we didn't see the same margins that existed in the past years. And vice versa, should the condition change, we will be ready to accelerate again.

So you have to understand that the Specialty that per se is not a uniform line of business. You don't have a Specialty price, you have a combination of many different trends, which are pretty much independent of each other. And what you have to decide is how much you want to push on one or the other in order to keep the margin steady.

Over the past five years, we kept pretty much the margin steady by playing on the acceleration, deceleration of the good products and the less good products on a yearly basis. And this is not about the long-term trends, it's just about the claims experience of the past year that then increased the condition to accelerate the year after and vice versa.

So Mitch, I would just add to that, that Mario earlier and just now just mentioned a number of what makes Specialty special and what's unique about it, but I think all those contribute to barriers to entry as well that gives us sort of a bit of a defense. And I think those barriers to entry based on the secular trends that Mario discussed earlier, are actually getting higher.

First and foremost, it's really around talent. And we have 1,200 great underwriters around the world, expert underwriters, super experienced. They're backed up by 400 risk engineers supported by over 4,000 claims examiners and claims experts. That team is supported by a decades-long investment in data and a huge amount of progress has been done on our data lake in the last few years and the use of that data lake. That's become a true sort of super power for us and a clear differentiated IP for us. And of course, leading on to our multinational account servicing, our ability to serve customers globally. It's really uncontested in terms of our leadership in that space. So all those really contribute to a moat around that business that really gives us confidence for the future.

Just before we move to the floor and online for questions, I mean this is a business that's existed for a long time for Zurich, but we did talk about some of the sort of newer more secular structural trends. Maybe you could just help frame the growth opportunity for this business and the different drivers, again, over a medium to long-term perspective. How should investors and analysts think about it?

Yes. I think intuitively, your value, what's going to happen on infrastructure and construction all around the world. and it's also needed to understand the power of the data center opportunity that exist in the market. Kelly Kinser, who is our Head of Construction and Surety globally in SaaS organization from [ 11 ] I think she told me that last year, we did 250 data centers in the U.S., construction of 250 data centers. I don't think that there is another company who has such a track record. And I don't think that there is another company who has such an experience and credibility to bring to the customers.

So I see this as huge opportunities, which, by the way, it's a theme that I want to repeat. I mean everybody is scared of what's happening in the world. Everybody asked me about geopolitics, I see immense opportunities instead. I mean geopolitics is something I can do nothing about. But I was born during cold war. And what I remember when I was a kid is nothing compared to the anxiety that I hear these days. These are cycles and the world is not a safe place. It's not a stable place, but it's not a safe place either. I don't consider this world a very dangerous one, I've seen worse conditions, but I consider this situation as full of incredible opportunities. And this is what we want to go after. These are [indiscernible] things that we want to go after.

One final thing. We had a session with the Board on energy and can an energy transition exist or is that just impossible? I don't know what the answer is, and I don't know if Michel has an opinion on that. But for sure, there is an immense amount of investments in energy. And again, we know what to do there. We know how to tackle it. So we have the risk engineers, we have the people. This is what Saad and the team have to take as an opportunity for them.

Okay. Good jumping off point. Let's go to the floor and see if there's any questions for -- okay. Lots of hands. William, should we just start on the bottom right-hand side here, Patricia? William Hawkins?

It's William Hawkins from KBW. I'm still -- you've done a fantastic job defining how you see Specialty business. But I still -- when you're looking inside the business, how straightforward is the distinction between what is Specialty and what is non-specialty? Presumably there's quite a gray area, and that could lead to a lot of management tension in terms of the -- there's still the great stuff we want to grow and there's other stuff we're not so keen on that. And I can imagine a lot of people are going to be saying, "well, this is this Specialty", Oh, no, it's not. So how do you manage any internal channel conflict at the front end between standard and nonstandard lines?

And then secondly, please, on Slide 8, the pie chart that you showed, the mix that you walked through. If you look forward in five years' time, how might that pie chart be different? I mean you've implied that E&S near term could be a bit smaller but I'm wondering if there's a big shift in that pie chart or if it's going to look roughly the same.

Look, on the telecon, William, it's a very good question. So first of all, Saad is not going to run an independent P&L independent from the countries. The purpose for us of doing this is to have the capability to simply invest in direct investments and where we think this investment should be that the business will be run on the country's papers. The underwriters will sit in the countries. So Germany has the biggest surety business, credit and surety business today in Europe, and the team stays there and continues to run it on German paper. But if we will believe that it's an opportunity to hire five experts in renewables for Germany.

Now Saad will have the capability to do that and today, we will have to go and negotiate space in the German expense budget and in the German priorities while -- sorry, if I'm using Germany, but just because you are in the first row. That's why people sit in the back. So that's the advantage for us. So I don't imagine that we are creating conflict on who's going to do this because it is the team who have done it so far, they continue doing it. It's more about the new investments. It's more about saying, if we want to have 20 more cyber experts, underwriters, where we want to deploy them, that's Saad's decision. And Saad will send the people with the budget covered already to the countries, and these people will write the business that Saad wants them to write. So I don't really imagine that. And so far, this hasn't been raising conflict issues or worries in the countries.

On where this will be in five years, to be honest, I don't know. I mean I presume that we will get some surprises. I think cyber is going to grow much more than it is today. I think businesses like energy will grow even more than they are, but I still think that construction and infrastructures will lead our pie. But this is just a guess. It's fascinating to see this happening for me, for us. And so let's just play along with it.

It's Kamran Hossain from JPMorgan. Two questions. Just really interested in what you think about whether a Lloyd's business would provide value like a franchise there. I know you used to have like a physical box at Lloyd's, not a syndicate, but you used to have a a box of [indiscernible], kind of your thoughts there, whether the corporation seems to be encouraging people and whether that would make sense?

And the second question is just, I guess, in terms of the Specialty business, how much of it is syndicated and if there's any of it at all, how much of it do you lead?

Yes. Okay. On the Lloyd's, look, [indiscernible] and I have been in touch with Lloyd's for a long time. Look, we don't need distribution. We have every access, one of the typical reason why people go to Lloyd's is that because they don't have distribution. We have distribution. We don't need that. But we also appreciate that there are businesses that don't go outside the Lloyd's platform, right? And so by not being present on the Lloyd's, we might be missing a portion of the business. That has to balance against the costs of the Lloyd's platform and the time needed to set up and start the syndicates. We're hoping to consider, but we're not -- we have not concluded any decision. If we will eventually find out that the benefits in terms of a business that we don't have an access to today are bigger than the cost and the time needed to start it. We will start to syndicate. If not, we will continue as we're doing today. But it's a very, I would say, practical consideration that we're giving it to.

On leading conditions...

I'll take that. So look, it's hard to be a top three player in this world with $9.5 billion in premium with that being -- having a propensity or even a majority of our programs where we are delayed. And so that percentage will change from specialty lines to specialty line, obviously, and from market to market, geography to geography. But by and large, we are a lead underwriter, and we take pride in doing that. And that's how we deploy our resources, our skill in the town and that's what we have invested so much in those resources.

Yes. Vinit from Mediobanca. So two questions, please, again. But -- so one is on competition and one is on just a bit of strategy. So I mean, you emphasize very clearly that the entry barriers are quite high in specialty lines. But somehow -- and forgive me from the outside, a lot of insurers say that they want to focus on these areas, Specialty lines, middle market as well. But is there a sense that competition is also seeing some of this -- or is that -- is your position that, yes, for example, construction, we are the leaders by far, so we can relax [indiscernible]. So how do you see the competition from the outside [indiscernible]?

And second question was just for Mario as well. Like last year, we spoke a lot about middle market. And now this year, we're talking a lot about Specialty lines. I just want to check, is it just because you think there a shift in how you think between these two buckets? Or is it just the same, but you want to just emphasize another aspect of your strategy today?

Yes. Let me start from this because this is maybe more fundamental. So first of all, specialty in mid-markets, they are overlapping each other. A big portion of what the mid-markets colleagues do it is in specialty. The reason we are talking more specialty this year is it is because we felt we needed to make an organization a change about specialty and run it in a different way. That's the only reason. But since 2016, we have been pushing to grow mid-market in specialty, and we continue looking at this as a [indiscernible] not as one or the other. And so there is no shift in emphasis at all.

On competition, look, I think everybody can claim whatever they like. But I think we show you the numbers. I mean today, we are #3 globally on specialties. So everybody can claim the #1, #2, #3. I mean, they're just two bigger than us. It cannot be 10. And everybody wants to come feel free to do it. It's a market where the top 10 make less than 25% of the total so I'm not afraid of whether it wants to grow. I want to quickly start growing ourselves even faster in order to concentrate more of the markets because this is a market about skills. And so the bigger you are, the better. It's not a market where you can invent much. You need the size, you need the numbers. I don't know how many of our competitors have more underwriters than we have? How many have more than 250 underwriters for constructions? How many have more than 100 underwriters in cyber? This is a -- just it's a size game. You can play if you have five, you do nothing.

When we started renewables years ago, [indiscernible] and I said, "Okay, let's go into renewables". So we started hiring the underwriters in dozens, not in units. I mean you do nothing with one or two. So no, I'm not afraid of competition.

In mid-market, again, Alex has explained many times how you need to go for mid-market. So you need to establish local presence. You need to not just have an office and not just deploy the people there, but you need to be intimate, you need to be local there. It takes time, you don't establish yourself in Denver and you get the business the day after, right? Because you need to get to know the brokers, the customers, establish the claims service, the risk engineers. It takes time.

I mean, we have gotten where we are today 9 years after. The numbers you see are 9 years after. As I said many times, everybody can be better than us, but they won't make it in a year. If they're better than us, they can make it in 8 years, in 7.5. But that's the time frame, which you see our numbers is 9 years after. Just have that in mind almost.

Just to add a couple of comments. One, just quickly, you used the word relaxed. I think that's something we don't -- that's the word we don't use at Zurich, especially under Mario's leadership. Just want to make sure that's clear. But the mid-market Specialty is we're interplay, we look at it as mutual support. And then Alex and [indiscernible] we'll have some great examples. One of the sort of the strength of our mid-market offering, which you'll see is the [indiscernible] verticals, for example. And it's hard to be compelling in industry verticals with the Specialties being at the table and sometimes forefront of the table. So you'll hear more on that at the breakouts.

Just William who's patiently waiting beside you [indiscernible].

Thank you. Just by separating out the specialty, will this change your approach at all to the reinsurance buying? Any extra leverage this could maybe drive or manage volatility? Or are you going to keep managing volatility of the total P&C level? And I guess, just within that, what is sort of a normalized cat for specialty? Or is it zero?

So on reinsurance, honestly, we don't know yet. This is something, especially [indiscernible] and I considered in the past months. We discussed it also together with [indiscernible]. Yes, you can also go into different reinsurance protection schemes for Specialty. But it's too early and Saad still has to start and sitting here, but it still has 45 days to go as ahead of Canada. So let's talk in a year time about that.

Great answer.

And Normalized cat?

It's not zero for sure, but it's the same approach that we use for the rest of the business. I mean the construction infrastructure part of the business, of course, it's got exposed, [indiscernible] Energy is, [indiscernible] marine is, and we apply the same principles that we apply in the rest of the business. So it's definitely not categories immune, not at all.

Yes. As Claudia mentioned earlier, I mean, the robustness of the framework in terms of how we manage cat right now is working for us, and that's something we want to lean into in a major way.

Dominic O'Mahony, BNP Paribas. Can I just follow up on the data center point? I mean, I didn't even know that 250 centers are being built. Could you help us just size the opportunity here, can you give us any sense of the percentage of the construction book that is data centers? I'm trying to work out, given that's going to be a massive growth area for the economy, how big a tailwind is this for your business?

Yes. It is massive. I have in mind something that this was -- yes, it's here on the page. It's $350 billion worth of investments. Now the question is how much of this is business that we will capture ourselves, right? I mean we're not the only insurer ready there to make an offer to the construction to the builders. And so I can't really speculate on that. But it's a gigantic opportunity for us. And it's an opportunity that we don't want to miss.

So that 10% policy count is actually 14% of our builder's risk in the last period on average. The -- what's Interesting about what we've done in the U.S., for example, which is the biggest source of the investment right now and that's projected globally, by the way, at $7 trillion by 2030 which is around the corner, literally. So all these products have been announced, sometimes already permitted. And a big chunk of the $7 trillion is in U.S. for obvious reasons. What's super interesting for us is that we've been -- because of our proposition, because of our reputation, because of the skill sets that we have, we've been on every hyperscale project as well. So -- and we can't mention names here, but I think you know who they are. And that's really a testament to the team and the testament to the brand.

And part of this, by the way, is the benefit -- it's the ultimate beneficiary of the Geopolitics tensions because since nobody wants to be at risk of losing their data and have the data stranded or hijacked somewhere, every country wants to build their own data centers to storage, to have local clouds. And again, that's a fantastic opportunity for us, that's business, and it's a good business.

So we've got a question online and we might be able to squeeze one more quick one after that. So it's from Andrew Crean, who obviously were missed today. I hope your ankle gets better. How does the Specialty market concentrate? We talked about the Specialty market being fragmented. So how does the Specialty market concentrate? And what role do we play in that hiring underwriters, et cetera? And then the second part of the question is are there any Specialty lines that we're not exposed to that we would like to have exposure to?

Yes. I mean, on the second one, not really at the moment. I mean we can assess it frankly, also, we're opportunistic in growing or shrinking. Years ago, we had no presence in E&S, and now we are a decent player in E&S but at the moment, we don't plan to enter into other specialty lines.

How is the market going to concentrate? A lot of this is underwriters acquisition is hiring, retaining, growing, maintaining your underwriters. This is the competitive advantage. This is where the value is. It is in the people. This is a people business. And you hire underwriters, not only because you can pay them but also because you can give them credibility. You give them a brand, you give them systems, you give them reinsurance, you give them capital capacity, you give them an ecosystem where they can work well. And I think we're pretty competitive on that side.

So we've got three minutes left, which probably means half a question. James Chuck, if you can do half a question for the last three minutes I saw your hand up earlier.

Whatever that is, James.

It's James Shuck from Citi. So a have half a question in three parts from me. Actually it is just one question, and when it comes to Global Specialty, there's a number of different business models out there that have been successful. And in particular, I'm thinking about the use of third-party capital. So my question really is, does it make sense for Zurich to always retain the underwriting risk? Or could you do more by offering them more holistic offering in the specialty space and introduce third-party capital into that? And I suppose the second part of that question would be, Mario, how are you thinking about the potential use of reinsurance captive rather than reinsurers?

Maybe is the half answer to the half question. Yes. I mean -- these are all things that we've been considering. And again, behind the decision to create a Global Specialty unit, we saw that opportunity now to use these tools ourselves. And then we thought if we have a Global Specialty unit that we can really make these kind of decisions without it. It will be practically impossible. So these are things that we will consider next year and then let's see how far we go with that. Yes, spot on.

Great point to finish on. We have a short break for 10 minutes coming up after this session. Just a reminder, the green badges will move to the next room for the breakouts, yellow badges stay in this room, please. So on your way, collect coffee, et cetera. And just maybe a short appreciation to Saad and Mario for the session. Thank you.

[Break]

Okay. Welcome back, everybody, and thank you for keeping on time as well. I really appreciate that. It helps us keep the day moving. So a real pleasure to introduce the first breakout session, we'll have about 45 minutes, so we'll finish on 1:00. And the first session up today is middle market. Alex Wells, who heads up our U.S. business and Drazen Jaksic who heads up our U.K. business. we'll talk for 10, 15 minutes or so -- 15, 20 minutes, sorry, and then we'll break for questions after that. So over to you guys.

Great. Thank you, Mitch. All right. Let's talk about middle market. And as Mitch said, I'm Alex Wells, and I run middle market in the U.S. I'm joined by my good friend in Cali, Drazen, the CEO of our U.K. businesses. Together, our businesses represent over $5.4 billion in middle-market GWP or about 70% of Zurich's middle market business globally.

I joined you last year in London to discuss the success we had in the U.S., middle market and the platform and capabilities we had built. Drazen and I are here this year to give you an update against our progress on the 2027 strategic plan and give you a view into our two largest middle market books of business. Spoiler alert, we are executing globally against our strategies, and we have some double-digit growth in a majority of our middle market businesses this year, including in our core U.S. and U.K. business, and we feel good about achieving the $10 billion target that was laid out in the 2027 plan.

As Mario mentioned, the global middle market is a large segment with higher growth, better margin and less less volatility than other market segments. In many places, it is also experiencing broker consolidation that offers targeted opportunities for accelerated growth. Zurich has built a strong technical and operational foundation and expanded geographic footprint and distinctive capabilities that create a competitive advantage in many of our markets. We also have a demonstrated record of success, and we are executing against a strategic plan to gain market share, both in a consistent and disciplined manner.

Zurich has an established global middle market franchise with nearly $8 billion in gross written premium and a combined ratio in the 80s, since Mario laid out the original middle-market strategy almost a decade ago, we have consistently grown this book at an above market pace and with strong profit margins. And we're confident in our ability to continue that trajectory through this strategic cycle with a 9% CAGR. We are continuing to invest in smart middle market growth around the world and our technical expertise, strategic portfolio expertise and disciplined expense management will continue to provide a differentiated combined ratio that's accretive to our overall commercial book of business.

So let's talk a little bit about the middle market and the U.S. The U.S. has the largest middle market with a conservatively estimated $120 billion in GWP and a strong projected market growth of nearly 6% annually. The top six carriers only control about 25% of the market, we have no one carrier in a dominant position. Zurich sits among those top six carriers, and we've been gaining market share consistently over the last five years with an outsized 14% CAGR. Zurich is an acknowledged leader in the U.S. middle market with differentiated growth. However, we still see significant market opportunity with only a 3% to 4% market share currently. The fragmentation of the market that Mario spoke about, combined with broker consolidation and the regulatory and operational complexity to entering this market give established top carriers such as Zurich, a natural growth and margin advantage in the next cycle.

As you can see, we have nearly doubled our book of business in the last five years while improving the margin in our book to a consistent sub-90s combined ratio, and we're now committing to growing this book by an additional $1.4 billion during this market cycle, while maintaining a strong profit margin. 2025 has been another proof point year of execution in the U.S. with projected double-digit growth in our core business and a combined ratio once again in the 80s. Zurich is one of a few carriers with a consistent demonstrated execution culture and a full suite of capabilities necessary to have success in the competition for individual accounts and book consolidation. We have outperformed the market for the last five years. We're outperforming the market this year, and we expect to outperform the market in the next strategic cycle.

Geographic expansion and specialty underwriting are core pillars to our strategy in the U.S. middle market, creating local relationships by putting more underwriters closer to the broker and customer have been crucial to our success. The value of local underwriting is a uniquely middle market proposition with accelerated growth and improved profitability consistently the result. Our expansion offices have grown 3 to 5x as fast as our mature offices with a better portfolio mix that leads to better profit margins. Since 2020, we have expanded the number of offices in the United States from a core of 13 to now nearly 35 and now generate almost half of our new business from those expansion offices. 2025 alone saw us add five new offices in the United States, and we have plans for five additional offices in 2026.

The key to our geo expansion is hiring talent. We talked about that a little bit last year as one of my friends just reminded me. We've hired over 70 new underwriters in 2025, 30% of those came in our new expansion offices and 40% came on our focused industry specialization. Focused industry specialization is our second strategic advantage that we've leaned into. As we discussed last year, we've built 12 industry verticals that cover nearly 90% of the U.S. economy. All 12 of these industry verticals bring unique insights and value to both our customers and our brokers. But the 6 focus verticals that you see on this page are those in which we've made outsized investments including a dedicated underwriters and unique claims and risk engineering capabilities. These are the verticals that are both growth engines to the U.S. economy and have shown that they value differentiated expertise and service in their financial partners.

Our growth in these focused industry verticals over the last five years have been nearly twice as fast as the rest of our book of business with a loss ratio of 5 to 10 points better in each one of those verticals. We lean into these industry verticals and they give us differentiated growth, but they also help drive our combined ratio lower year-over-year.

This slide gives you two examples of how we combined our geo expansion strategy with our industry vertical strategy. On the left is one of our first expansion offices, Charlotte, North Carolina, we've established that in 2021. Charlotte started as a $5 million office and we'll finish 2025 above $20 million. That's a 32% CAGR through 2024 with continued growth this year. Charlotte is a financial and banking hub in the United States, and one of our recent successes is a good example of the types of accounts that we're writing out of this territory. This is a financial consulting firm with about 100 employees. We have a dedicated financial institutions underwriter based in Charlotte, and they knew this account solicited from one of our new relationship brokers and we were successful in securing the order, taking the account from a 20-year incumbent because of our local relationship and our dedicated specific underwriting expertise.

On the right, in San Diego, a newly opened expansion office this year in 2025. We've always managed our San Diego territory out of our Los Angeles office. But because of our new product capabilities in our life sciences industry vertical and our knowledge of the concentration of that type of business in the San Diego territory, this year, we decided to base several underwriters physically in the San Diego office. Our new business this year is 6x the production we had experienced last year when we were trying to handle San Diego out of our Los Angeles branch. And this account is an exact example of the type of business we expect them to write by making this investment in the San Diego territory.

Lastly, I want to give you a little bit of a sense of what we're doing with AI in our middle market operation in the U.S. We touch over 10,000 middle market accounts which is about 50,000 lines of business annually in the U.S. Our success is often predicated upon our ability to bring smart solutions to our clients and our brokers faster than our competition and with less questions. We know that our underwriters spend a lot of time collecting, summarizing information, waiting for data. And lastly, trying to reconcile that against our underwriting appetite and our underwriting guidelines. The three AI-driven solutions you see on this slide were specifically developed to address nonproductive friction points in that process. The work was done collaboratively with both internal and external AI specialists and with our underwriting community. It was developed, piloted and rolled out inside of the last 12 months. These are all live tools that we're using now to make our underwriters and UAs more efficient. We expect that this is going to add 20% to our efficiency for both underwriters and UAs without having to change our customer-centric and consultative underwriting model. This is the future of what we will be doing in the United States by using AI.

In summary, we've built a multibillion-dollar franchise in the United States in the middle market. What we've built is special and different. We have a proven track record that our model and our culture is successful. And we have room to continue to grow without giving up margin.

And with that, I'm going to turn the mic back over to Drazen who'll talk to you a little bit about the U.K., and then we'll be back for questions afterwards. Thank you.

Thank you, Alex. So you heard from Alex in the U.S. and now I'm going to tell you how in the U.K. through our service delivery capabilities and then a particular focus on international and regional brokers who are looking to outperform the market. U.K. mid-market is a large and growing and conservatively, it was valued at $15 billion 2024. And Zurich have about a 5% share, and we are in the top 5 providers. The market is fragmented as you would imagine. And the top 10 carriers have about half of the market. And the rest is spread amongst numerous providers. It is not uncommon to see a broker panels as many as 30 providers of capacity.

Alex obviously talked about why middle market presents significant growth potential, but it's obviously due to rate resilience. That's a critical one, profitability, but also due to this fragmented nature of the market, which, of course, gives us an opportunity to increase our share of growth or market share.

However, to succeed in this market, it is just not enough to compete on price and product. You have to have a really great technical and operational capabilities and service, which is particularly critical. And of course, that is difficult to build and creates a barrier to entry, but it also provides a competitive advantage for us. Brokers now expect to transact very quickly and often digitally and sometimes even self-service. We're using the self-service platform, which is more aligned with the SME segment. But at the same time, they also want the ability to speak directly with technical experts and have more tailored solutions from the corporate segment as well. So in reality, they're really looking for the best of both worlds in this case.

So we've been building these capabilities over the past several years. I think just like in the U.S., we also expanded geographical presence, we increased central offices from 7 to 11 offices. But then again, support with increasing our technical -- local technical expertise and we are proud to say that 99% of all of our underwriting decisions are made locally, which means that it really enables us to respond very quickly to broker queries.

We've also invested in building digital solutions and now have the ability to quote and buying policy within 24 hours. We'll introduce also a rapid renewal process where at a request from broker or a customer, we can renew and bind and issue of policy within the same day. And to give you a sense of scale, in 2024, about 1/3 of our mid-market portfolio was renewed through this rapid process. So all of these improvements have led to a strong growth both in our London and regional portfolios over the past few years. But particularly a regional portfolio has grown at double the rate of our London book with combined ratio consistently below 90%. And if we look at 2025, it's another strong year with double-digit growth across the board despite the competitive market.

So how do we know the brokers like what we do? So if you look at our [indiscernible] scores, particularly for us, original business, it has improved from plus 33 in 2021. to plus 75 in September this year, which is considered world class. All of this was driven by this buildup of capabilities and service. And to top it up, this year also, we achieved a 5-star rating in Insurance Times commercial lines survey, which is conducted by 850 U.K. brokers. And we are one of the only three insurance in the U.K. who have that rating.

So now that we established the strong foundation, we are ready to capitalize on this drive to grow further. Overall, market is projected to grow 4% to 5% CAGR over the period. And we aim to outperform the market with the most significant opportunity again in our regional and mid-market portfolio and still maintaining our sub 90 combined ratio. The main focus will be on increasing share of wallet with international and regional brokers, particularly in the regional areas. But we're also making further investments into online broker submission tools to enable them to submit their requests through their normal usual trading tools as well. And just like in the U.S., we're piloting some of the AI capabilities such as a [ sixfold all guideline IQ ] as well.

But I also talked a little bit about how brokers want the best of both worlds. And we want to leverage our SME servicing capabilities, just to differentiate our service further. And I'll give you an example of a live chat, which we use as the SME, we handle about 10,000 live chats with brokers every month.

And we respond -- 60% of those live chats are answered within 30 seconds. So brokers love as they can get an immediate answer to some of their queries. So just to close this slide off, if we could grow the share of the market with international share of the wallet between international and regional brokers to the same level that we have with our major global brokers that would present significant material opportunity for us for growth for the next few years.

And just to close off, so you've had it.

So you had the U.S. story and then, of course, now the U.K. The middle market for us is a large and growing, it's profitable and it has lower volatility. And in most markets around the world, it is fragmented, which, of course, gives opportunity for growth. Zurich has an established profitable franchise of almost $8 billion and have built -- we've built platform and capabilities to create competitive advantage and barriers to entry. And we have already proven that we can grow middle market book profitably.

And in 2025, we're going to have another strong year with double-digit growth in all of our major countries, including, of course, the U.S. and U.K. with sub-90 combined ratio. And with that, we have every confidence in our ability to leverage our competitive advantage and meet our 2027 target.

Okay. Thanks, guys. We will go straight to Q&A now. [Operator Instructions]

Its' Andrew Baker Goldman Sachs. So I guess, both on the U.S. sort of growth in underwriters, 100 added by 2026. So I guess if you add that -- if you count the full 100 in, do you have a sense of whether the market share by underwriters will be higher or lower than the 3% to 4% market share that you show in the slides, which I'm assuming it's GBP? And then second, I guess, is the 100 million, is that a net number, so it includes added and underwrite left, you able to give us a sense of sort of how that breaks out? And then how we should think about premium added on a go-forward basis?

I appreciate or take up takes some time to ramp up sort of premium per underwriter, any metrics there would be really helpful.

Yes. So it is in that number. That number that we gave of 100 new underwriters was not across the 3-year cycle. So not in the U.S. we still have, as Mark said, 40 days ago, so fingers crossed, but we're sitting a little bit above 50 net new underwriters in our core middle market business, that as we talked about earlier, there are some other parts of our business that are also defined as middle market and they sit in specialty.

So we've added 20 net new underwriters in our construction space as well in middle market construction. So the 70% is really a net from those 2 combined areas. And it does, it does take a little bit of time to ramp up our underwriters. We actually dedicated 2 staff positions during 2025 because we knew we were going to add this type of new underwriters. We had [indiscernible] unit positions specifically to help onboard our new underwriters and get them productive faster.

And we've cut in half the amount of time that it takes for a new underwriter, an experienced new underwriter that's coming to work for us to get their letter of authority. So it was about 6 months, and now it's been about 3 months over the last 2 quarters. And we've really shortened the amount of time that it takes for our underwriters to become productive in the market.

And so I think that we've changed that cycle from about 2 years to get fully ramped up for an underwriter to something under a year. But yes, a lot of these underwriters that we invested in, in 2025, they're built for '26, '27, and as Mario said, really beyond even cycle. We're investing in strategic talent in order to grow differently.

I didn't mention we also have an underwriting trainee class that we add every year. This year, we had the largest trainee class we've ever had. In the middle market. And that's something that many of our competitors have done away with over the years. It's -- it takes a lot of time and effort to bring new people that do nothing about insurance into the world.

But we believe in it. We believe we get better underwriters over time by having those folks. We really started that almost 6 years ago. And the people that have graduated through that program and are now some of our top-performing underwriters in the U.S.

Dom O'Mahony, BNP Paribas. So first, just 2 questions. So I wonder if you're reflecting the growth of the mid-market business has delivered very significant GWP growth, also growth in offices and people. Is the driver really people? Is this really about growing the number of people because actually the amount is being done by each individual underwriter or each individual office is essentially the driver?

Or have you also been getting the operational leverage of more business per one. Could you just help us break down number of people, volume and price of things. And then the second question is, I think one of the messages that you folks have given us over the last few years is mid-market, a lot of it is about location, just by being in San Diego not just in L.A.

Can you just help us understand why that is? Because I mean, a lot of the people here are based in London, we serve international plans. And when you were just to fine away from our clients, why is it you need to be that local? And indeed, what -- so firstly, what's the value of that from a commercial perspective?

But what is losing the fact that if you are in San Diego, you're not sitting with the health care colleagues in State Pennsylvania.

So we make strategic growth decisions on people knowing that we have to earn into those over time. We earn into them fairly quickly. But as we're on a growth trajectory, we have to have more individual underwriters in the marketplace against the new business that they're writing.

And then as they mature in a market, they gain enough market share relative to their book size for that to make sense. So we -- I'm a finance guy, so I measure both of those things, right? I know I have to have more bodies in the marketplace to drive that type of new business growth but we also measure the efficiency of our underwriters and our ability to handle bigger books of business over time.

We have a number of tools that we've put behind that. So we know we have established underwriters and if we take our established underwriters and look at the average premium that they're handling on an ongoing basis in a mature market, we've actually recognized about a 30% efficiency gain over those 5 years against those underwriters.

Now when we invest into a new underwriter in a new geography, we see them with some part of a book of business, but most of their time and effort is spent on new business and being relevant in that marketplace. And so that brings back the average. But if I look at the established underwriters, I understand where we will be once we mature into all of those businesses.

Now with regard to your question about the importance of [indiscernible]

Just jump in. Slightly different story in the U.K., for example, where we don't recruit anyone near as large numbers as they do in the U.S. But our focus is completely on service and some digital aspects of it. So where we get to when we get -- even when we get new underwriters in, we're able to expand the portfolio that they're writing over a period of time.

So it's not for us, it's not so much of putting tens of new underwriters in. But training, of course, we'd always add new ones, training them and then just plugging into some of the digital services. So I think that's a lot of slight news. It's a different market.

Absolutely. The second part of your question about the regionalization or the geographic expansion. There are 50 city jurisdictions within the United States that have over 1 million people in them, right? So when we start looking at the geographies across the United States, there are a lot of opportunity in places that we don't have any of our large competitor sitting in them, right?

And so when we look at the opportunity to add a physical presence in more of these locations, we see greenfields. We see competition. I mean, we compete and take business from our major competitors, and we have to, and we're good enough to do that. I think we've got a differentiated model. But when we go into some of these smaller markets, we're competing with far lesser levels of competition relative to sophistication, ability to handle business across even Stateline it's much less multinational or international.

And even in the middle market in the U.S., as you think about the size of individual accounts. Often, most of the time, they're doing -- they have multistate exposures and often, they're going international, right? And so we bring a differentiated level of expertise into those marketplaces. And the brokers that are based there are provincial. They want to do business locally whenever they can.

They will do business at a centralized level going into another city if they have to, but their preference is to stay local. And their preference is always to give local relationships their best business, right? They protect their best business locally because they believe that if they know the person that's providing that underwriting that, that underwriting is going to be more consistent and more stable over time, which helps them manage their relationships with their customers individually.

Hadley, I think is ready for a question now. So, Hadley?

Hadley Cohen, Morgan Stanley. Just on the theme of around hiring talent have you -- can you -- can you just give us a bit more color around where you're hiring these people from how they're incentivized to come over to Zurich and I guess, how they're remunerated, what are the KPIs that they're focused on?

And does that vary by line industry presumably. And then the second question is around AI. It's always very interesting to hear companies talk about their AI initiatives have you but from an outside perspective, it's very difficult to see what's different to what other companies are saying.

Do you have a sense of how you are differentiated from an AI perspective and to what extent -- or is it just that you need to be doing this to keep a pace with your larger peers in the space?

So I'll talk about the talent management first, right? I mean we've built a reputation, and that's the first thing that we go into any hiring situation around, right? So we build our reputation as being a place that good underwriters can be successful. And unfortunately, in the middle market broadly, that's not true with all of our competitors, right? There's a lot of expectations in other places that on rate just follow rules.

Just go and follow these portfolio rules and write this business, just colored by numbers, right? And we talk a lot about the fact that we expect underwriters to be professional decision-makers and that's appealing to the best underwriters in the market, particularly the specialists in the various industry specializations that we've built.

We've taken folks from our major competitors. We take folks from regional competitors when we go into a new market, sometimes we're hiring somebody that's worked for a regional insurance company in the U.S. and is looking to expand their footprint and work for a bigger company. So it really kind of depends in the major markets. It's often the top 10 carriers have folks that we go after.

But we look for talent, drive and an ability to think about their business differently, and that's how we hire. And we've been very successful. I don't think that there's another middle market carrier that's hired as well as we have or as consistently as we have over time. In terms -- we have an underwriter scorecard that we use, and it's differentiated by specialization.

We've got 15 to 20 factors that we talk to people about. Certainly, growth is one of them, but there's a lot of book mix and technical components to it. And I think we pay very fairly for a Marriott based type of underwriting approach. So I'm sorry, what was the second part of the question? Yes.

Yes. So I mean, there is a certain level of AI, you have to start to embed into your business that I think everybody is doing. Again, I think we think about it a little bit differently in our middle market space than some of our competitors do in I'm looking to enable smart decisions by my underwriters.

I think some of my competitors are trying to make decisions for their underwriters using AI and I think that the secret sauce in the middle market is this combination and Jason touched on this, there's individual account underwriting, there's portfolio underwriting, and you need to give underwriters insights into both of those things.

I need to give people a better understanding of the individual account that they're working on and how that fits in the portfolio. And then the trick is whether those underwriters can combine that information through their own expertise to make good decisions, avoid bad accounts and good portfolio classes and write good accounts in maybe some struggling portfolio classes, right?

And that's how you differentiate yourself from a sub-80s combined ratio versus 100 combined ratio, which is where the general market runs. I mean, Claudia touched on this, right? This isn't just happen sands. This isn't just the market runs where we run. We run much better than the general market does.

So Alex, thanks for the underwriter battle for talent feel that you're giving us. I'm just curious that the your outperformance on combined ratio versus the market? I mean how much of that is a little bit being put at risk by aggressive hiring practices or not aggressive, but enthusiastic hiring Sorry, capital.

So that's 1 quick one. Second one is just -- sorry about the Chart '26, but I seem to remember that middle market was 7.5 7.3 -- 7.5 billion in '23 with 7.7% in '24 I mean that doesn't look like a growing fast-growth business unless the definitions have been revised differently from last year. So maybe more.

Yes. I think maybe we have to reconcile those numbers for you. I mean, we've seen a 9% CAGR globally against our middle-market books in 2016, and that's a continuation into the next strategic cycle. And I think we're comfortable with that.

Why don't we pick that one up today. When we do the group and stick to the U.S. and U.K. for Okay.

So U.S. has 1 question for you. And then second question on the U.K. was you left a said that these are about how it could get much better. I'm just trying to take your word for it where you said if you could grow the share of wallet for international and regional as much as the global I mean is that something like an upside? Or is that part of your assumptions for planning think.

I mean it's absolutely part of our strategy. We have a number of quite strategic relationships with those brokers, and you would have seen consolidation of the expansion in the market. And by virtue of their consolidation, we automatically kind of get opportunity to write more business with them. And it goes beyond just new business.

We do a number of other things with joint professional developments, et cetera, et cetera. So there's a much deeper relationship with those brokers. But it's a -- our share of wallets with international and regional brokers is about half of that, that we've got with our major global brokers. It's a really significant opportunity for us as we go forward.

Yes, you did this the talent. So whenever you new people into the organization, you have to train them and make sure that they're doing things the way you want them to do it. I mean we're hiring experienced talented people, often referrals from people that already work for us. And so -- our job is to bring them in and train them and make sure that they're able to do what they do well according to the sort of Zurich model.

And again, we're just trying to do that faster. Right? And so we don't give somebody a letter of authority as soon as they show up and let them go do whatever they want to do. They have to go through a process, and they -- and we check and make sure that they know what they're doing. But we're hiring talented people and we need them in the marketplace. And so -- we're trying to do that faster

Will Hardcastle with UBS. I guess you touched on just quickly on the U.K. broker consolidation. I think the broker consolidation was more broad as a first point. So just thinking about that in the U.S., perhaps you do highlight that it's working in your favor are you specifically saying there versus detail of the competitors?

Or are you also saying versus your bigger competitors, and I guess why? The second one is there seems to be a lot of businesses talking and trying to grow U.S. middle market. It's clearly got a very strong franchise here. I guess, how can we be take sure that the increased supply capital won't drive more competitive pricing in the environment and therefore, deteriorate margin? Or is that somewhat assumed with the efficiency benefits being eaten into.

So

I think the broker consolidation -- there's certainly the tail to all of the carriers out there. I mean, when I talk to our broker friends, they'll tell me that they do business with hundreds carriers in the United States, and they're trying to shorten that tail to a couple of dozen, right, that they really want to do business with.

So certainly, I think there is an automatic opportunity that happens because of that. I think that we also can compete -- we can be very competitive with our top carrier competitors, and we expect to win more than we lose when we start talking about that -- also that top of the consolidation chain.

I think it's easy to just let the trend happen, but we expect to outperform the trend as we think about it. With regard to the competitive nature of the marketplace and the capital, I think there are different trends that are going on in the U.S., and I think there's capital coming in on the property side, and I think there's a lot of pressure in the liability lines to raise rates, and we're seeing uplift on that and profitability increases against the casualty lines of business. And I think on balance, the middle market is more stable than most other market segments. We still see rate above overall trend across all of our lines of business for 2025.

There's pressure, but this is what we do. And the reality is good carriers beat the market on up cycles and down cycles. And my expectation is that we've hired the right people, and we're -- and we're managing them in a way that we're going to beat that cycle as we move forward as well.

Stay on this side and then we'll move after. So Will, just over here, Patricia.

William Hawkins from KBW. Could you talk a bit more about how you're managing growth versus profitability with regards to the investment spend that you're implying in all of this growth? So I guess the first question just -- is all of this investment spend immediately booked in the combined ratio? Or are you capitalizing it in some way.

And I have no idea about the scale. Is this a big deal of investment were just lost in the rounding. And then related to that, when you're thinking about the balance between the 2, it's likely to have a combined ratio in the 80s, but you could be sitting there saying, why don't we have a combined ratio in the 9s and then we could open 10 offices a year rather than -- so I don't know how you're thinking about the optimal growth rate.

And depending on how you answer that question, does there come a point when you sort of say, okay, investment has now reached its maturity so we can step down the combined ratio? Or is it always going to be a continuum in how SP-11 Business evolves?

Yes, sure. So the immediate investment that we're making these underwriters probably impacts our book 0.5 point to 1 point, something like that in terms of the expense ratio. We'll grow into that. I'm not really concerned about the initial investment against that. Your question about growth versus profitability, I mean those -- that's what we do as underwriters, right?

We're constantly balancing and looking at our book of business and saying, should we be growing faster? -- how do we grow faster in the most profitable parts of our business because our business is in a monolith, right? We have a lot of different sub segmentation strategies. We talked a little bit about the focused industry practices.

The faster I grow those and the better I am at delivering that expertise to that clientele, the better my combined ratio is going to be, right, because those inherently have a better combined ratio in my underlying book of business. So we lean into those. And as you saw, a lot of our investment in people is in places that we think have a better combined ratio in other parts of our business.

And we think about that strategically -- every time we hire a person, we said is this accretive to the book of business

George, just in front of you there. James?

James Shuck from Citi. Interest mid-market is defined on the slide earlier for the market as a whole was turnover of up to $300 million. Just curious if that's the same threshold that you have for mid-market and kind of moving on from that, how important is it to have a cyber product for the mid-market offering?

Because I know [indiscernible] reticent to underwrite side. But I would think that having a holistic product that is anchored around cyber would be an important unique proposition that's kind of increasingly needed. And then sort of just a final point is just what's the opportunity?

I'm not sure if this is a question more for larger corporate. But is there an opportunity in AI in insurance? So obviously, it's a massive market and growing, and it's a liability line, but actually some quite attractive numbers in terms of the size of that market and time.

Yes. So I mean, I think your question about cyber, we want to write cyber in the middle market, right? Like that's the target area of our cyber initiative, and we certainly partner between our P&C lines of business and our cyber line. So I don't think that that's -- I don't think that's at odds I think we've got the right appetite in our cyber space for the middle market and especially in the U.S., and I know the U.K.

So I don't think that there's any problem with that. I think I don't know that there are a lot of accounts where cyber is the lead line on a relationship or a discussion. In the U.S., it usually centers around the traditional property and casualty in the middle market and then the cyber is an ancillary and supporting line of business. You asked about the size of account in the middle market.

Yes, there are different definitions around the world. In the United States, it's generally under $1 billion in turnover revenue would fit within the middle market space. Some of our competitors will define it a little bit less than that. We certainly have some very straightforward more vanilla risks where that turnover is a little bit higher than $1 billion. I think in the U.K. is related...

It's 100 and then you will find it in Asia Pac in many countries, it will be up to 150, for example, just because of the nature of the local markets. And I would just say we're looking forward to working with Sam cyber for mid-market in.

And I think the AI space, we're -- I think everybody is still trying to figure out what the ongoing AI exposure and opportunity to provide insurances, right? Like right now, it's all about how do we build it? And then we'll see if that becomes a more mature operational exposure, how we participate in that. But I think you're right.

It certainly starts at a large global corporate level that we're going to have those conversations. But a lot of our business in the U.S. is tech business, and we see an increasing number of fact middle-market accounts that are AI oriented, right? Like they're all shifting into this, and we're understanding it as we go along

James, just a reminder that they put this slide in the half year with the breakdown of the specialty business mix and circa 4% of that $9.4 billion was Iber dedicated. So in and of itself, it's a pretty large number. and also within a market context as well obviously goes right across the business.

Is that ever take us [indiscernible]

[indiscernible] So I was just mentioning that -- this is 1 of the reasons why we've made investment in Cabell, which gives us the foundation not only to be good on underwriting to support middle market, but also cyber services.

Okay. That is taking us up pretty much to the close. You will get an opportunity to speak to the team, obviously at lunch and at the end of the day as well. Thank you very much for the questions. We have good questions from the floor. Thanks for the guys for a good presentation as well. we're going to truncate the lunch. So we will come back at 1:40. We're conscious that some of you have got flights to catch, so we don't want to be responsible for not getting on to see families and friends and so on.

So can I ask you to be back in the room at 140 sharp, please. And for everyone online 1:40 European time will be back online live. But thanks very much for the guys for a good presentation. Thanks for the questions.

Okay. Welcome back, everybody, to the second half. Hopefully, you have been well fared and water, good conversations. We move on to the second breakout session. And to give you true value, we're giving you not 1, but 2 for the price of one. We have Carsten Schildknecht and Peter Stockers to talk about our German retail business, and Claudia to talk about Zurich Santander.

Hugely interesting part of the world, demographically, obviously interesting in terms of medium and long-term growth profile and not something that we get full questions on all the times, it would be great just to get interest in both of these sessions and good questions after. So with that, I'll hand over to the team. Thanks very much, guys.

Great pleasure to be here today. Peter and I would like to share with you how we succeed in the German retail market through leading digital and technical capabilities and how this ultimately leads and translates into doubling the BOP in the next 3 years in the German retail business. My name is Carsten Schildknecht and I'm the CEO [indiscernible] Germany.

And I'm Peter Stothart, Head of Digital Business and partnerships in Germany.

Two years ago, at the 2023 Investor Day. I was talking to you about our very successful turnaround between '18 and '22 and how we wanted to continue this successful journey going forward. We delivered on our promise in the last 2 years, we could keep and enforce the momentum of the turnaround. But let's talk about the market first.

The German Winter insurance market is 1 of the largest insurance markets in Europe in P&C #1 in life #3, have a sizable, stable and attractive market which do Germany generates 83% of the total premium volume across Life and P&C retail. In both segments, Zurich is the top 10 player.

But this is now very important in specific, very fast-growing segments, we are top 3 in P&C. We're the third largest direct player and own the #1 insurtech in the German market. We're also leading in partnerships, in life, we are a top 3 player in unit linked and also in the banking channel.

In the last 7 years in both segments, we were able to outgrow the German market, our P&C premium grew 7% compared to 5% market growth. And our Life new business grew 12% per year in the last 7 years compared to a market of 1%. Simultaneously, we brought customer and partner satisfaction measured in NPS and employee satisfaction to record levels which are already reported back in '23.

So the momentum of the turnaround continues, growing above market share has become a competitive edge in the German retail market. And based on the track record, we can lift the BOP in the German retail business by $220 million, nearly doubling the 2024 results. This is driven by continued top line growth of 7%, well ahead of market, which is expected to be 3% to 4%.

In addition, we will significantly increase the P&C margin by reducing both loss ratio and expense ratio driven by underwriting claims and efficiency measures. So the Life business continues its very steady BOP growth, the P&C retail business will fully recover from the difficult year 2024, which was negatively effective industry-wide by inflation, claims frequency and cut weather.

There are important proof points for this significant bob uplift, which is mainly driven by the P&C retail business. First, the ongoing profitable growth above market, and you can see that in the middle chart, is driven by our top competitive position in the fastest-growing segments of the market, direct and insurtech as well as partnerships. Whilst we are holding a top 10 position in the slowest growth, more conventional P&C business through agents and brokers, we have gained top positions in the fast-growing segments in the recent years.

This already was and will be a source of above-market growth and ongoing BOP generation because these businesses are very, very profitable. That's also unique. In the market to own a profitable insurtech. Secondly, this dynamic is, as we speak, already in force. Year-to-date, we see continued strong top line growth of 12%, well ahead of market, which we estimate to grow at 7% this year.

And this is not only driven by rate change, but also by new business. In addition, as a proof point for the expected strong margin improvement year-to-date, we could reduce the combined ratio in P&C retail by 11 percentage points, a very strong recovery from last year. Let's review these 4 segments and highlight how leading digital and technical capabilities are the ultimate source of this successful development.

Year-to-date, our more conventional P&C business through agents and brokers shows a strong recovery from last year. The premium volume is up 7%, of course, lower than the 12% because of the composition of our mix in retail. Motor is up even 12%. As a result of rate change in portfolio steering we could approve the accident year combined ratio by 7%. We excluded POD and cut to highlight the recurring improvement which are coming from management action and concrete measures and underwriting claims and expenses.

Despite higher rate changes in both years, '24 and '25 than in the previous years, retention did not drop. Churn did not increase. Industry from '23 to '24. The insurance industry showed an uplift in churn in the German market in the motor business of 40%. Our assurance stayed flat despite high rate changes. This is clearly the very tangible results of our leading data analytics and pricing capabilities.

Based on our scalable cloud-based tech infrastructure, we were able in recent years to develop fully automated real-time platforms for risk modeling and price delivery using machine learning, also our portfolio steering significantly improved taking line of business profitability and customer lifetime value into consideration.

And going further and forward, will further accelerate the build-out of these capabilities. And at the back of this can improve our accident combined ratio further by 4 percentage points until 2027. And for the first moving segments in the retail market, I hand over to Peter.

Thank you, Carsten. Let's talk about direct, our strong and profitable growth in direct with even more great opportunities in the future based on our digital excellence. [indiscernible] we have reached top 3 in the German direct market with double-digit growth last year. And now we are even accelerating seizing additional opportunities in the hardening motor market.

With our digital capabilities, along the whole customer journey, whether pricing, sales or services. So just let me highlight our dynamic pricing, which is definitely cutting edge in the German market today. Optimizing margins and conversions in real time at the various points of sales. And if you look at the numbers, you can see our actual growth in motor this year with a combined ratio of 96%.

And based on our leading pricing skills, we see even more potential in other European markets. Therefore, we are now entering additional markets by partnering with a minimum and InsurTech focusing on dynamic pricing. Here, we already started in the last weeks in 3 countries Poland, the Netherlands and Sweden. And that's the message for direct motor strong and profitable growth in Germany expansion in Europe.

But direct is more and more true. So let's talk about non-motor and our digital health business, our #1 insurtech in the German market from -- starting from scratch, we have built a profitable business of more than EUR 100 million. With our own Insurtech, Petoro, acquired in 2019 and ways to #1 in Germany. We started with dental insurance. Then in 2021, we launched our pet insurance.

And you can see our continuous growth from the beginning, continues and profitable growth with a sustainable common we issue you below 90%. Because this business is based on a completely new own IT platform for the entire value chain, fully digital and highly customized. With the new way of marketing, using social media and hundreds of sales funnels to attract new target groups and to optimize the conversion rates.

With 100% app offering for our customers, usually confirming a claims payment within 30 seconds. And here, let me highlight, it's not a one shot. It's a growth engine, generating growth week by week and day by day. And based on our track record, we see a lot of potential for our pet insurance and other European markets with low penetration.

As a first step, we launched our pet insurance in France this here, scaling from Berlin with the French team. And the next step isn't planning and will follow next year. And that's the message for direct non-motor, unique growth in Germany, scaling in Europe. And now to B2B2C. With exclusive partnerships, another engine of profitable growth.

Here, we are creating value with tailored solutions, especially for leading consumer platforms. First of all, [ Media Mark Saturn ] Germany's leading retailer, #1 in consumer electronics launched in 2019, focusing on extended warranties offered at the point of sale whether online or off-line at the branches. And this is maybe the largest corporation of its kind in Europe.

And we were able to extend this partnership for 10 years until 2035. With Booking.com, we started in 2021, offer internal products also deeply integrated into the booking process. And now this year, we have won new partner with Kaufland.

Part of the Schwartz Group, which is the owner of [ Lidl ] and retailer #1 in Germany. Here, we are now launching our first product. And based on our leading capabilities with our existing partnerships, we have already built a profitable business of about EUR 400 million. There's tremendous potential for the future in this market with data solutions for existing and new partnerships.

And that's my story today, strong and profitable growth in direct and partnerships with leading capabilities in fast-growing markets.

Yes, to sum up, we have developed in recent years, leading game-changing digital and technical capabilities in Germany, which do both expand the margin of the more conventional business to a record level as well as being able to grow in the fastest-growing segments in the German retail markets with stop market positions.

With that, I hand over to Claudio Chiesa.

Thanks, Carsten. Good afternoon, everyone. A very pleasure to be here once again to present the leading position and progress at Zurich Santander. So first of all, I'd like to draw your attention on today's 4 key messages. Zurich Santander operates in fast-growing markets.

Bancassurance is where you have to be in those markets as it is the main channel by far, for life distribution but also an important one for P&C. Zurich Santander is the Bancassurance leader in the region, having consistently outgrown the market since its creation in 2011, and we still have a huge growth potential expecting double-digit growth in both over the next years.

So now elaborating a bit more on those statements. Zurich Santander, our joint venture operating in life savings, pension and P&C is active in 5 fast-growing countries in Latin America, whose growth has been double digit over the last 5 years. So how could we outgrow the market for such a long time?

Well, we have done that, thanks to a very clear strategy implementation agility as we are a large company in terms of results, but relatively small in number of people and organizational layers. So we decide fast, and we implement fast. And finally, thanks to innovation. So we have pioneered the market in many areas. We were first in launching fully automated quotations.

First, in using AI retention. First, in launching stand-alone products in credit journeys. We are convinced that we will continue leading the market by focusing on innovating in 2 very specific areas. In increasing our share of wallet in the Santander customer base currently at approximately 25% only with product personalizations and with synergies between distribution channels, and in increasing our portfolio persistency with a holistic end-to-end approach to retention massively using AI.

And this will allow us to keep growing double digits in BOP over the next years. So let me now remind you what the essence of curing Santander is. Well, our JV, which has a full range of P&C and life products with the exception of motor for retail and SME customers distributes through any Santander channel in the region.

Made of more than 4,000 branches and all other alternative channels, such as digital, telephone, that ATMs. As said, we have significantly outgrown the market. since 2012 with a 18% growth in CAG in BOP versus 10% approximately of the market with a very healthy combined ratio of 74% and reaching EUR 2.5 billion in protection premiums and over EUR 4 billion in saving inflows and servicing more than 20 million customers.

And also in the second half of 2025, confirming, again, a very strong growth trajectory. We are the largest bancassurance group in Latin America with leading positions in each of the geographies in which we operate. And we still significant growth potential over the next 12 years of our partnerships. Thanks to our focus on growing our customer share of wallet and persistency using data AI as we are going to see over the next slides.

So one of the most important data models we have developed is around personalized customer proposals. More in detail, we structured the following 3 steps. So firstly, we prioritize customers with higher expected persistency according to our internal models, which are based on insurance and bank data.

Then for those customers, according to product propensity models, we propose the best product to each customer. And thirdly, we make 3-quarter personalized proposals according to its customer specific characteristics in terms of type of cover, some insure pricing with no need of questions for them. And additionally, payment means are already precharged and the whole sales process require maximum 3 steps.

And all these have allowed us to reduce the churn by 15% an improved premium collection, which is a critical topic in the region by 20%. This way generating more than EUR 150 million of additional premiums in Brazil only. I'd like now to turn in the next slide to the how we are dealing with the substitution of contact with customers in branches, as number of branches and visits of the customer to the branches keep decreasing every year with touch points in remote channels.

We have learned that in alternative channels, we need more than one interaction with our customers to finalize the sale. And this is why it's so important that we are able to generate synergies between channels and generating a lead or a sale opportunity in 1 channel and be able to close the sale in a second channel.

We have already implemented a number of best practices on that, but today, I'm going to focus on 2 examples. In Chile, we leverage the enormous amount of inbound calls to the bank, approximately 1 million per month. At the end of which the customer service agents make a proposal to the customer.

For example, after having blocked a lot credit card, would comment to the customer that we noticed that is or can house is not insured, and we have a very interesting proposal. And that's suggesting to be referred to an insurance specialist -- then those customers who are set to be referred and 1 in 2 on average accepted are then immediately transferred to an expert to close the sale.

And with that, conversion rate has jumped from below 5% of a traditional outbound to 20%, 25% in addition to a significant increase of the average premium. In Argentina, we are embedding insurance proposals real time in a number of customer journeys, such as credit card payments, bank new bank account opening, new credit card issuing and thanks to the preloaded offers and per simplified process, we are achieving up to 5% conversion ratio, which might look lower than in the previous case, but this applies to a massive business made of hundreds of thousand transactions every month.

Let me now shift on how we are focusing on retention. As we are very proud of our innovative and unique way to manage persistency, which consists in an end-to-end approach to the customer value chain. Or in other words, is a coordinated and consistent management of all touch points. I'd like to focus today on the evolution of our retention centers. Those are also specialized agents who manage cancellation requests of our customers.

Over time, we have exponentially increased the number of cancellations redirected from the branches to the retention centers. From 24% at the beginning of last year to 82% now. And then we have introduced AI to detect the best retention arguments and select the best retention solutions.

And thanks to AI, we have seen a nearly 30% improvement in retention effectiveness from 30%, 32% to 42%.

And this just described holistic approach to retention has led to an accumulated approximately 15% improvement in the churn since the start of the journey and generating EUR 20 million of additional BOP. Now talking about the customer experience, let me now explain you how we are innovating our core activity, claims management. We are increasingly using AI to speed up our claims sending process as this generates cost efficiencies as well as an improvement of DT NPS.

With respect to simple claims, thanks to AI, we either deny immediately already 20% of all our denials originate from fast track process. or after an analysis, which is based on a number of key variables, we proceed directly to payments. Already more than 20% of all our claims are processed end-to-end within 15 minutes. And we are in a process to roll it out to more complex claims. And customer experiencing fast track claims show an almost 30-point increase in TMPS, which in turn translates as at Zurich Santander, we measure everything in approximately 20% increase in persistency and EUR 40 million of additional premiums.

In conclusion, thanks to our clear strategy, implementation agility and innovative approach, we believe we have set the foundation to keep growing faster than the market, especially focusing on the increase in penetration of our share of wallet in the customer base and in portfolio persistence improvement. And with that, I'll hand over for Q&A session.

[Operator Instructions]

Okay. Thanks, gentlemen. Let's open it straight up, and we'll go Andrew over here. A question here.

Andrew Baker, Goldman Sachs. So 2 on Zurich Santander, if that's okay. First, are you able to just give an overview of some of the disruptions in Brazil life sales in the first half? And I guess, should we assume that this is now behind us in terms of the turnaround?

And is there anything you can say on sort of 4Q and the run rate versus last year there? And then secondly, I guess my understanding is that the Life Protection business is booked on the PA. So I guess the benefits of growth is it comes through the P&L quicker than GMM business. So you've obviously talked about the double-digit BOP growth. You've got the retention targets coming through as well. So does this imply that your GWP growth is above or below the group protection GDP target of 8%?

With respect to life sales in Brazil, yes, what we -- what happened is that at the end of last year, there were a number of changes all at the same time in the commercial structure in Brazil, including change of leadership in some of the territories, change of incentive systems, and this hit us for the first half of 2025. Then over this time, we had continuous conversation, of course, with the bank to restore that. That was pretty unprecedented. And let's say, a lot of changes were implemented starting from 1st of July to revert the situation. And what we have seen was a very fast recovery. I was expecting a bit more time to fully recover because clearly, you need to regenerate this sort of familiarity of the sales force with products. In reality, the pickup was very quick.

And since August, we have seen record results. So we expect to close the year with a very strong growth. And when we look quarter against quarter, my expectation is fourth quarter will be well ahead of last year. With respect to the accounting of life, you're absolutely right. Our business is short-term business, highly cash generative. And we are in the process right now to discuss the next planning cycle with the bank. I think we have some tailwinds there.

We are expecting certainly the visibility and the relevance of insurance is increasing within the bank. So we have expectation for significant growth of the new business. So my expectation is that we might contribute significantly to the growth target of the group, especially for protection.

[indiscernible] Side, James?

James Shuck from Citi. On Santander, I just kind of wanted to get a feel for bancassurance kind of more broadly in the region. It seems to me in other territories that reward systems are something that the direction that the banks are going in. And to have insurance very separate from banking, which is what the JV essentially is, seems to me to be a source of kind of channel conflict.

I know there's still 12 years left, so on it, but I'm just keen to get your insight into the growth of reward schemes in order to drive customer behavior between banking products and insurance products and ultimately, how you manage that? And then secondly, I just wanted to push back a little bit on DA Direct, which I know it's profitable, but it's been in the market for a number of years, and it's still only generating EUR 400 million of premium. It does seem as if direct in Germany is a challenge.

And obviously, there's an annual renewal period that makes it more difficult to grow. But whether it's Zurich Connect or previous incarnations of direct, they never seem to quite work for Zurich in Germany. So perhaps you could just help me understand why after a number of years, it's only EUR 400 million of premium.

I'm going to start with the first question. It's a very, very interesting question because that's a real point. So the challenge in a joint venture is trying to benefit from the advantages of having an insurance partner, which can bring you the best in terms of skills and competence with the full integration in the bank. That's the real. So that's the reason why we see our offices are in the bank.

We are fully integrated into the bank. We are integrated into the bank system and not in the tourist system, by the way. We discuss and prioritize and align every single day with the bank. So the new strategic plan I was referring to before is done exactly hand, taking into account the bank priorities and insurance priorities in order to align them.

So in reality, yes, there is always a competition for shelf space in the branches, like any other product because also credit cards, loans, et cetera, they fight for the shelf space in the branches. I think one of our advantages is that we try to align every single day. We have a specific governance to align every single day into that. So yes, but I think the way our joint venture is structured allow us to take a fair share of priorities in the bank.

On the direct, I make a start and then pass over to Peter because he's running the business. When we took over in 2018, the only thing about the Direct, which was direct was a name. It's the branch network and also a lot of the capabilities were neither digital nor advanced.

So it took us the last couple of years to build all these pricing capabilities, to build all these digital capabilities and in addition, to diversify away from motor to non-motor. So these are the true kind of sources why we believe that this is now starting through is the digital technical pricing capabilities to drive the motor business going forward and then the diversification into the non-motor space. And if you look at DI Direct in 3 or 4 years from now, it's half-half motor and non-motor, and that's the future. And maybe, Peter, you want to add how we did the 2 things.

Yes. It takes time, yes. As Carsten mentioned, I joined the group, Zurich Group end of 2018, and we defined a new strategy for DI Direct with 2 strategic directions. First of all, to fully transform the value chain in motor and then to enter new markets with our digital health business. And to give you a feeling for that, when I joined Dea Direct, we had branches. We closed that within some months. And then we started our digital journey, if you like, launching dynamic pricing in 2019.

And then we built a new sales channel. We built new service channels. We are running AI pilots at the moment and so on. And also important for the motor market, you need the right timing. I think you know all the insurtechs, which failed in the last years with the wrong timing and a soft motor market. So now motor market is hardening, and we can here realize our potential in motor.

And second direction, digital health business, yes, we started from scratch, and we see a lot of potential for the next years with growth rates of 40% at the moment. You have seen that. In total, we have a growth rate of 30% this year. So the next EUR 100 million from EUR 400 million to EUR 500 million, we are already #3 in the market.

And yes, if we maintain our current growth rates, we will reach our first EUR 1 billion within the next years. So -- and yes, that's the outlook for the next year.

And the reason the German direct market is going nowhere because we were one of the few who defined 19 in the strategy and stayed course and executing the strategy. You see a lot of players going in, going out and with the wrong timing with the wrong capabilities. And that's the reason why the direct market in Germany is underdeveloped. But it's not the demand, which is not there. It's just that the player didn't stay course.

Okay. I'll bring over to this side. Hadley, I think your hand was up.

Hadley Cohen, Morgan Stanley. Just on Germany first, please. Can you give us an indication of how much of your portfolio renews in January? I guess I'm asking because you might have some idea of pricing expectations going into January and how they compare with loss cost trends at the moment.

I guess I'm just wondering, you've got a 4 point -- you still want to improve the combined ratio by 4 points by 2027, but presumably, actually you might be able to achieve that next year. what you said.

Yes, I think there we are completely different than industry. 2/3 of our portfolio is not renewing on January 1 because that's when the competition is highest. And that's a big advantage for us. And in the direct, it's similar. It's even higher the ratio, which is not renewing January 1. We have been moving out of January 1. which is a big advantage.

Okay. But in terms of general pricing versus loss cost trends at the moment, I mean, do you think you could potentially achieve the -- additional 4-point improvement in 2026?

We said '27. Yes. I mean, look, what we see in our life in Germany in terms of the very sophisticated technical analytical and pricing capabilities. The first time we applied -- we developed this. The first time we applied this on the '23 renewal and the '24 renewal, we already see a big advantage we have vis-a-vis competition. Of course, the entire industry had to change rates in motor.

And -- but we were the only one or one of the few who could keep the churn ratio completely flat, while the churn in the industry increased from '23 to '24 by 40% with the same rate change, we kept the churn flat, and that's exactly the advantage of the superior pricing capabilities. We just not have technical pricing, but also behavioral pricing, mixing up supported by machine learning. We're finding for the right risk, the right price with optimizing churn and retention. And that will drive also the combined ratios further down.

Okay. And then sorry, my second question on LatAm, and apologies, it's a bit of a broad question. But when -- often when we talk to investors and we talk about LatAm and what have you, people associate that with high risk and what have you.

But what could actually go wrong in the LatAm business? I mean the growth the profitability is incredibly impressive and you're showing a 74% combined ratio. I mean it's very impressive. What are the potential risks there in that space?

Well, my -- for me, number one, it's clearly the evolution of the commercial model, meaning even more quickly than in other geographies, customers are shifting from going to physical locations and interacting with remote channels. Just to give you a rough number, but for example, in Brazil, visits of customers to the branches from pre-COVID have decreased by approximately 60%.

So that means that the service model is changing, and that's what we are trying to lead there. So that requires to do 2 things. On one side, to provide a more specialized service model in branches, and we are accompanying this strategy. And on the other side, we'll be able to replace that with alternative channels.

But clearly, this is what I was trying to explain that it's impossible to have the same type of interaction in which you had your customer in front of you and sell one policy in one interaction. That's the mastering of the different channels and the blend of channels. And we are not talking about -- in general about omnichannel or multichannel. Now we are very concrete as to what are the path of our customer from one channel to the other and prioritize those. It's not that any channel has the same role. The path are very, very well structured.

For example, a typical one is, for example, from digital to telephone. Sometimes it's from the branch to digital. So we are prioritizing those. So my main challenge is going to be to lead and stay ahead of my competition that we start -- that's why we started 3 years ago investing in that, and that's why we already have a number of best practices because I need to stay ahead of the competition in the ability on getting to my customers through any alternative and remote channel.

We've got time half question and half answer if we can.

A very short question on the German part of the business. How do you use aggregators? Do you apply this dynamic pricing because you are selling through aggregators? Or is there another reason?

That's a question I have to leave to Peter because with Zurich, we are not present on aggregators. And because we don't need them for the Zurich brand. But in the direct, there's obviously a very sophisticated usage of aggregators.

Yes, of course. We work with aggregators, but it's a minor channel for us. For example, in motor is it's 1/3 of our business, just 1/3, 2/3 come from our own sales channels. And the digital health is less than 5%. So near 0, yes, because we are focused on making a lot of business with our own insurtech.

And that's also a difference. Coming back to the other question about the direct market in Germany, a lot of these new players who are entering the motor market, they were having 80%, 90% with the aggregators, which is not sustainable from a profitability perspective.

And that's exactly one of the advantages we have. We use for competitive reasons, for price reasons, et cetera, aggregate is important to know where we are in the market. But you want to control the share of your new business coming from aggregators because it's not highly profitable business.

Great. Okay. We'll wrap it up there. Thanks for the quick question and keeping on time, gentlemen. We have a 10-minute break now before the final breakout with farmers. And then following that will be the broad Q&A, and then that will be a wrap after that. Thanks for the questions and interest in both the retail businesses. Really appreciate that, and thanks to the guys for a good presentation. So we're back here at 2:30.

[Break]

Okay. Welcome back, everybody. And again, thank you for keeping on time. I know it's quite a fast pace and it's a quick espresso during the breaks, but I appreciate the effort. Thank you. So we move into the last breakout session for today. It's great to finish on a high.

You heard Mario talk earlier about just all the hard work that's gone on in farmers over a number of years now. And hopefully, you'll now see in live action with the team to talk through just the growth trajectory that's in front of this business post a really extensive turnaround. So Raul, Ken, over to you. Thank you.

Thank you so much. Good afternoon, everyone. I'm Rahul Vargas, I'm CEO of Farmers Insurance, and I'm joined by Ken Walton, our President of Distribution. We are delighted to share with you our progress over the last 12 months.

And let me start saying that at Farmers, we have developed a playbook for success, which means we define key opportunities, we put the plan in place and we execute flawlessly. And then with discipline, we allow the results to flow through. Over the last 24 months, we have deployed more than 200 initiatives worth more than $2.5 billion of economic value. And this is not just a quick fix.

This is a complete transformation of this business in every lever, where we're talking about product pricing, exposure management, distribution performance, operational efficiencies, claims accuracy and more. And proof of that is our story. Three years ago, we shared a plan to return to profitability and strengthen our capital position.

At that time, the initiatives were in place, and we just needed time for the results to flow through. And 1 year later, they did. We delivered 14 points combined ratio improvement, restoring profitability, and we strengthened our capital position for more than 7 points. So with that strong foundation in place, we move to the next chapter, addressing the 800-pound gorilla, growing policies in force.

And today, that moment has arrived. For the first time in a decade, farmers is growing beef, and we are doing it in record time. Premiums are growing 5%, but no longer by rate, driven by competition, competitiveness, customer appeal and flawless execution. Our surplus ratio now stands at 50%, the highest in our history, giving us the strength and flexibility for a new cycle of accelerated growth.

And now we need to turn page to the next part, sustain mid- to high single-digit revenue growth. We have built 3 fast-growing business models: our exclusive agency channel, our independent agency channel and our direct business. All of them are growing today exponentially in terms of new business, which in time would translate into accelerated gross written premium growth. And just as we have done it before, we are applying our proven playbook. The initiatives are in place, the engines are built, and now it's time to let the results to flow through.

So let's look at how all these initiatives have translated into compelling performance. We are a leader in profitability with a combined ratio improvement of 15 points, reflecting our underwriting discipline and our operational control. Since 2022, we have delivered more than $1 billion in run rate savings in terms of business efficiencies.

And still, we remain focused to deliver our $300 million ambition on savings for 2026 in terms of vendor management and AI-driven transformation. Just to give you some context, today, we are already running at $207 million of run rate savings. All these gains almost have doubled our surplus from $6 billion to more than $10 billion. This is a 79% increase and put our surplus ratio at more than 50% above our targets.

In short, we have rebuilt profitability, restored strength and created the capacity to invest in growth. And again, the playbook delivered. Farmers Exchanges gross written premium is growing at 4% CAGR. And for the first time in many years, policies in force are growing. We reversed a 10 years decline in record time. And this turnaround came from 3 core capabilities that will serve us in the future.

First, financial strength to invest ahead of the curve; second, a competitive product offering; and third, a winning execution culture. This is a team that plans, acts and delivers. In just 2 years, we have rebuilt competitiveness, reignited growth and laid a solid foundation for the next chapter. And the next chapter is about sustained mid- to high single-digit revenue growth. The engines are built and the levers are channel expansion, product sophistication and enhanced customer and agent experience boosted by technology.

With these components, we have built 3 powerful fast-growing channels. Our exclusive agents, which are entrepreneurs, but they have the choice to third-party products, our independent agency channel where we are the only company that can provide a full suite of products and our direct business, digital speed, but with human touch. But to tell you more about that, I will pass it over to Ken that will take you through each of these in more detail. Ken?

Thank you, Raul. Good afternoon, everyone. Let me now share with you details around 3 powerful businesses we've created and our plans for each in the exclusive, the independent and the direct channel. The good news is that our performance is strong, and we have tremendous growth opportunities within each channel.

First up, the exclusive channel. We've transformed the model for our farmers agents, and the strategy is generating significant growth. As you'll recall from last year, Rahul shared with you how we're on track to see agency owners double their net income through 4 pillars as shown on the charts on the left. The first pillar is product and pricing. We've expanded our appetite and implemented a more sophisticated pricing approach, which is generating higher conversion rates. The second pillar is distribution.

Here, we've launched our choice model, which is giving Farmers agents the opportunity to sell third-party products and gain access to additional customers. Next is retention uplift. Here, we are leveraging our customer retention team to help retain our best customers, those that bundle or purchase multiple products from us.

And last, under expense efficiency, we're eliminating friction from the agency and customer experience, making it more efficient for agents to sell and service customers. And all of this great work is resulting in significant growth in new business and gross written premium for our most engaged agents, which you'll see in the middle column there.

So what does this mean? It means more of our unengaged agents are willing to invest in their business and become engaged in growing customers. It also means we have a tremendous recruiting opportunity because we now have a proven and validated model. We have the best small business opportunity in America. We've successfully shown that we can take and recruit an entrepreneur who has $100,000 or more in liquid assets.

We can offer additional training and insurance. We can educate them on ways other agents have run a successful business and see them generate a significant return in a very short time period through owning a farmers agency. Based on all of the above, this winning model will produce growth rates in the 4% to 6% range for the 2026 to 2027 period. Let's now move to the independent agency channel. And let me start with a bit of color on the U.S. market.

The Personal Lines U.S. market is split into 2 primary segments: the specialist market, which includes nonstandard customers and the standard market. Farmers has strong market share in the specialist market. This market represents 20% to 25% of the total market and is characterized by nonstandard customers as well as customers who own toys, recreational vehicles, motorcycles and boats, for example.

We've experienced strong growth in this segment, and we expect continued growth due to additional investments in product and pricing. One of those investments that I'd like to highlight for you today is in data. We're leveraging our data science team to improve our segmentation as well as to identify high propensity cross-sell opportunities in this market. The standard market, on the other hand, is much larger, representing 75% to 80% of the total market.

This market has higher lifetime value customers. These are customers that pay their bills on time and generally have fewer losses. Farmers has low market share in this market, and this represents a gigantic opportunity for the company. We've taken learnings from the specialist market and are applying those in the standard market to expand and grow our business.

One of the ways we're doing that, we've built an entirely new model to service the standard market. This model includes new product, new technology, new servicing capabilities and a new approach to distribution. We've launched this new model in 22 states, and we're seeing a significant 274% increase in new business. We expect this level of new business growth to continue as we launch into remaining states into 2026. So in the independent agency channel, we're taking advantage of newly built capabilities to grow 15% to 20% next year.

Let me now move to the final piece of the puzzle, the direct channel. Farmers has a powerful brand, one of the most recognized brands, not just in insurance, but in all industries. We're leveraging our brand to take advantage of the organic traffic that comes to us through farmers.com, through our call centers and through our employer and affinity groups. We've invested in farmers.com to improve the customer experience, making it easier for a consumer to obtain a quote and to purchase a policy. We've enhanced our call center. to become more efficient and close more accounts through the use of artificial intelligence.

And on employer and affinity groups, we are the exclusive or preferred provider of personal lines products to thousands of large U.S. employer groups as well as to hundreds of university alumni groups, which give us access to tens of millions of employed prospects. We'll continue to leverage these capabilities, both in the web and in our call center to expand the number of endorsed relationships we have as well as to target new consumers within those groups.

So within direct, the summary is we're optimizing our capabilities to take advantage of our significant brand power and we'll grow 15% to 20% in the direct channel next year. So in conclusion, these 3 engines give us the comprehensive ability to meet customers where and how they choose to engage with us, whether that be in the exclusive, independent or direct channel. And with that, I'll turn the program back over to Raul to share with you plans going into 2027.

Thanks, Ken. So as this business gained momentum, we see a clear path to sustain mid- to high single-digit revenue growth. Across every channel, we see accelerated growth. Our exclusive agents, we expect it to grow 4% to 6%. Our independent agents, we're expecting 15% to 20% growth and our direct business also within 15% to 20% in the years to come.

Meanwhile, discontinued operations continue to run off. gradually removing drag for the overall growth of our business. So over time, the math plays out naturally. Over the next 2 years, we'll be on track to deliver 8% to 9% underlying gross written premium growth. To bring it all together, we have mastered the discipline of execution with record results. We strengthened our capital position through disciplined underwriting, creating the capacity for accelerated growth. We achieved policies in force growth in record time.

Our next chapter, sustain mid- to high single-digit growth, enhanced by our value proposition and our channel expansion. And last, let's don't forget our capital-light fee-based model, which delivers durable and predictable earnings with a very high cash conversion. That's the farmers playbook in action. We size the opportunities. We define key initiatives. We execute them relentlessly. And then with discipline, we allow the results to flow through. Thank you so much and open for questions.

Okay. Thanks, gentlemen. We'll start on this side, Patricia, Will, sorry.

William Hawkins from KBW. First of all, congratulations to you and the team on the turnaround you're implementing relative to the conversation 2 to 3 years ago.

The balance in the gross written premium growth between PIF growth and premiums per policy, I'm getting a lot of incoming that as the U.S. market softens, premiums per policy could be a headwind to your growth ambitions. So can you talk a bit about how the 8% to 9% breaks down between PIF growth and premium per policy, please?

Yes. Great question. The reality is that we will need to adapt to the reality of the market, right? So right now, we are thinking that more or less, we are running at 4% PIF growth. But Mario mentioned it, it's around 40,000, 45,000 policies. So the remaining part, you could expect that to come from rate. but it will depend.

So -- because it depends on market conditions. The good thing is that our combined ratio is really healthy. It's probably, if not the best in the market. So that allowed us to actually be more competitive as needed in order to get the additional inflow of policies and therefore, matching to that level of growth. But it's difficult to say right now because we don't know what exactly is going to happen in the market.

As we all know, we are expecting impact from tariffs, right? And those will put some pressure in terms of -- on severity. And also, we have benefit from the last 18 months of a very low frequency. We don't believe that it's going to stay forever, right?

So answering to your question, I think we have a very strong basis on our PIF growth now that we will expect to keep improving over time. But finding the right balance is something we will address through the speed of action and flexibility we have in farmers.

Cameron?

It's Cameron Hoszain from JPMorgan. Just echo Will's comments, spectacular turn around. Two questions for me. The first one is on the health of the competition at the moment. Clearly, farmers is in a really very good place right now. How is the competition? And if you're willing to be a little bit more competitive, do you think they will be too?

And the second question is thinking maybe 20 years out. Autonomous vehicles, I'm not sure I'll still be here in 20 years, I might be. Autonomous vehicles, what's the sense on how farmers is prepared for that? Clearly, it's a California heavy company. It's something you see a lot more than you do in Zurich or London for now, but I'm sure it will spread a little bit wider. So just interested in kind of how you're prepared for that.

Okay. So starting first with the market. It's difficult to guess, right, because you saw it, right? All the companies are showing very strong results. And you could expect that, that is going to be -- would expect some investment of that health in rate. The reality is that a few things, right?

We have focused our strategy on creating value with our customers. So we see that our customers are less elastic to those changes, right? We typically try to provide a full value proposition to a customer, which is just not the car, but the home, the toys and if they have a business, the business as well. So that position us in a segment that probably doesn't shop as much as the overall market.

The second topic is we do have space, right? Our surplus ratio, our capital position is very strong. We are coming from a very, very healthy combined ratio, and this will help us to take action as we see the market moving, right? So that also gives us the confidence that we could keep changes in the market.

And the other thing that I think is important is that important part of our business is this specialty business Ken mentioned about. That business, which is about toys, motorcycles, jet skis, camper vans as well as the nonstandard market is less elastic, right? It doesn't suffer so much from price, right?

So when we put all this together, we feel confident that we will take advantage of the opportunities that we see in the market as we go through. The other question related to autonomous vehicles, right? I think if I'm not wrong, the inventory of cars in the U.S., it will take 15 years to change, right?

And we still don't see full autonomous vehicles ready to be on the market yet. So the time frame is -- but yes, if that happens, right, it will be a change between the personal lines part to the commercial part of the business. We are confident that we keep building a very solid foundation with our customers through all our solutions, not just auto, but actually also through home. We are a leader in the home space.

We have been expanding our appetite. We have been proven that we are able to write business in a smart way. And this is what we see that's where we get the most loyalty to the customer. So it's too early for me to predict 20 years from now. But what I do see is that I think we will still have a vibrant market and the fact that we are able to round the customer with a full value proposition is going to give us a competitive advantage wherever we land in the next 20 years.

James?

It's James from Citi. Are you able to tell me what the fully loaded expense ratio is at farmers? Because the reason why I ask is, obviously, there's a 7% management fee that's been unchanged forever. And my concern is that farmers -- I mean, part of the automation and use of AI and digital should actually be shared with the exchanges more than it is.

So it's a roundabout way of asking, is that 7% fee should it come down at some point because it's costing you less to service those policies? And I'm just trying to get insight into how competitive the expense ratio for farmers is on a fully loaded basis with that 7%. And then secondly, can you just remind me what you're doing in SME?

I know that Zurich has got all these growth propositions in mid-market, the gap is in the SME segment. I've always thought it's farmers that's got first right of refusal in that area. Obviously, now the solvency ratio is much better. Do you have plans to start moving into the SME segment?

Excellent. Well, look, the reality is we shared all our improvements with our customers at the end of the day, right? Because, first of all, important part of the expenses that go into products like distribution expenses, they -- those are part of the expense ratio. those reduces, it just get benefit to our customers.

And also since there is a cap on the way that we operate, all the efficiencies we are getting within the Farmers management services are being shared with the policyholder. And that's why you see -- if you see our results, when you put all expenses together, we have reduced already 4 points on all the expense ratio that now is benefiting our customers, right? This is $1 billion worth of savings that now goes into more competitive products and better solutions to our customers.

To your second question on SMEs, we see a great opportunity there. We are working relentlessly to develop a value proposition that it will fit our agents. And the way we do this is that we try to understand -- I presented last year and Ken mentioned it, this agency economics. So everything we do, every line of business, we are trying to see how it fits the journey of agents, so their efforts invested in selling a new product gives them a positive return.

So we are simplifying the way that we are offering a small commercial, so it doesn't almost need underwriting. It's fully baked based on data. So we are creating those capabilities to be ready in the market in the next months.

It's going to be a progression over it that will allow our agents to -- that they have the relationship with their customers. We know that more or less 20% to 30% of a personal lines customer or a consumer has an enterprise. It has a business, and we want to take advantage of each of them. So that is part of our agenda for the future. And the last thing that probably is worth to mention and why we are so confident is that is the way we develop our solutions.

So it's not just about technology. It's about understanding how things operate in the ground. One of the things we require for every employee in farmers is they need to spend one full day in one of our agencies. And I did it when I became the CEO, I spent the first 1.5 months spending full days in agencies to understand exactly how things operate.

Because if we do that, then we can really cater solutions that they don't just sound technologically great, they are actually great on the market. So all these people that they need to spend one day in the office with an agent, they need to measure time.

They need to see actually how things are done and report back to us. So when the solutions are being developed, they actually -- we have great success in them. And part of the success we have shown so far is that we use that methodology to deliver our new solutions in the market.

Patricia, over to Will, please.

Will Hardcastle, UBS. it feels like the growth is sort of locked in for the plan, massive surplus ratio, a big gap in that combined ratio. I guess coming back to the question from Will thinking about how much pricing could come down to come under pressure.

Is there a number you could say just how large that pricing would have to fall for that to be a threat that you couldn't hit those targets, that sort of 8% to 9% level that you're talking about for '27? And then just thinking about that margin on.

Do you mind to repeat the question because I'm not sure if I'm following.

Sort of really, it's sort of understanding, given you can absorb on your combined ratio, given you can absorb some surplus ratio, how much would pricing have to fall for that 8% to 9% target not to be plausible?

I mean I'm imaging it's a huge number. Your 8% to 9% top line growth target. And then thinking about it on that margin on the discontinued book, are we here talking about business that's only 10, 20 points worse than the rest of the book? Or is it enormously? And so actually, it's giving you an even bigger, better margin underlying?

Okay. So let me start with the end question and see if I can answer the first one. So the question -- so the discontinued operations are small, but we will expect them to run off very quickly. That is why we expect to have a lag on next year and partially the next year, right? So the part is small. So the gray line actually show how small it is, but it's going to run off very quickly.

It does -- it will not have a huge impact in loss ratio or combined ratio. To the second point, look, we feel that we have the most profitable combined ratio in the industry, right? We are around 85% in auto. So we are among the best. And we are, for sure, the best in home.

So we have the -- so I think we may be running around 90% combined ratio when everyone else is probably now running at 95%, 98%, 100%, 105%. So yes, the market could become difficult, but we do have the space to keep becoming competitive. In particular, and also, let's remember that not all the line of business suffered the same level of need for competitiveness, right?

Because our nonstandard business, that's not so elastic business, right? Our specialty business, neither is that elastic. I don't expect home to be such a also such affected so much by competitive rates. Yes, standard Auto will be, but we are prepared for that. We are prepared for that.

Vinit, and I'll come back to you after.

Yes, Vinit, Mediobanca. So just 2 quick ones, please. One is the Gorilla and the GBP 800, so the PIF growth. So if you could just comment a little bit about -- a little more maybe about where it comes from? Is it which kind of products or which -- what's the drivers there?

I mean, I heard about your playbook, but a little bit more about the PIF growth. Second thing is just on -- we haven't -- obviously, the wildfires seem far way, far long gone now. But has there been some boost to the property market that you're expecting this year when you go back into the market, maybe there's a renewal. I don't know the pattern there.

So you could just comment on the property market and home insurance market there. And if I can add just one half a question really here. The niche, the toys that you talk about, are those not risky from a combined ratio point of view? They are growing, but are they not risky?

Excellent. So I will allow Ken to answer the first question on where the PIF is coming. First question is...

Absolutely.

I will take the one on the home market and on the specialty business.

First question is where are we seeing PIF growth? So looking back a number of months, we've been growing PIF in the specialist market for some time. So nonstandard auto is rapidly growing PIF and our specialty business, which includes specialty property and then the toys that I referenced in my presentation, motorcycles, boats, et cetera.

So we're seeing great growth there. And now in the standard market, we're getting a tremendous response from independent agencies on our standard auto and standard home business. And also during my presentation, I shared the 274% growth in new business. That's going to lead into very nice PIF growth as we go into the coming months and quarters.

So I think the home markets will still be a challenged market based by affordability and availability. There are a lot of concerns about what you write and where we write.

The reason we are confident here is because we have invested both in technology and data and in pricing sophistication. And let me give you some context to it, right? Normally, companies -- most companies use ZIP codes as a way to how to price different parts of the business.

We have deployed new capability that look at grids. Those show so if the SIP code on average, is around 15 kilometers, the grid that we look at is 15x more precise. We are talking about 500 meters to 800 meters, the size of the grid. And then we use satellite technology and artificial intelligence to exactly predict the level of risk we are taking. So that's extremely important to us because many risks that other companies will not take, but are good risk, we're going to take them. And actually, that's -- but also, we will be able to protect our books, as you can probably have seen from the last slide on the deck on how we manage exposure management.

So yes, it's going to be a challenging market. I think we will still struggle in terms of availability and rate increases, but I do believe we do have a competitive edge in that business for the years to come.

To your question on whether specialty is a more riskier business, and I would say, no, the other way around. You could also draw a line of parallels and with the specialty business in commercial. These are specific risks. There are not many competitors or there are [indiscernible] many players pricing those risks. These are less elastic business because of that. But you need to have the skills. You need to have the capabilities. You need to know someone who actually knows how to price a counter band and what are the risks that they could go through or how [indiscernible] are the type of -- and that's an area that we really have a competitive advantage. We're probably one of the leading -- the leader leading companies in that space. So we always have shown very, very good combined ratios. And this is a business that I said, right, it's more likely to stick and not shop around.

Dom O'Mahony, BNP Paribas. So 2 questions. Just on the surplus ratio. I mean it's very high. And given the rate of profitability, you'd have to give a lot of margin away for that to start shrinking as I can tell. From a governance perspective, at what point does the Board start to ask how to use that surplus ratio beyond just organic growth, whether that's giving maybe about how it works in the Farmers arrangement, but giving value back to the customers through one-off bonuses? Or could the question have an organic opportunity come on off the table. Is that something that Farmers would consider?

And then sorry, the second question [indiscernible] -- let's just -- all my questions are always long. I'm sorry. So just thinking out that very ambitious of the growth, if pricing really is a bit disappointing. And it sounds like you're still confident in getting to that growth. Is there any operational constraint on how much PIF growth you can do? Can you do 10% PIF growth? Or would there be some sort of operational challenge on that?

Can you repeat the second one on the operational challenge. I'm not sure if followed?

Yes. So let's say, pricing is 0 for sake of argument to get to 8% or 9%. You need to 9% PIF growth. Is there any operational constraint in your ability to deliver that level of volume growth? Or actually, can you just do as much as the customers will buy?

So on the first question, having this strong capital position is an absolute benefit for the future and because it plays out in a number of levels. So let's go for the first one, right? This high surplus ratio allow us to reduce our quota share, right? And we will do that. We already communicated with our key partners. That will reduce our cost of doing business, and we could redeploy that benefit back to a more competitive rate to our consumers, to our customers.

The second thing which is very important is that as you have more capital, as long as the business is priced right, we can optimize our exposure. There are certain areas that we don't have enough capital, you will be concerned about writing. If you have the capital as long as it's priced correctly, right, that the price of the premium much the risk you're taking, you can take those risks in a safe way.

And the third part, it relates to book growth, right? So book growth is like many agents or independent agents, we have a book of business for a career that maybe is not so much interested in the business. Typically, you can take the entire book and potentially, you pay some upfront and you bring the book entirely to the company, right? So those are opportunities that we're planning to take advantage now that our surplus ratio is so healthy.

To your question on acquisition, we don't plan for acquisition. It's not part of our strategy. Of course, if we have a great opportunity at a great price, why not, but it's not embedded in our strategy.

To your question, could we increase operationally more policies, yes, we can absolutely, absolutely, absolutely, absolutely. There's no limit from an infrastructure and technology capabilities that we could not take more policies. If that's what happens, yes.

We're firmly in the territory of half questions. It seems to be you, James, sorry. So you get the honor of this session is half question.

Well, it's always last question actually again. But from memory, the Farmers started to move into sort of partnerships and that had a partnership with Uber, I think that partnership didn't go so well for one of your peers. We've had no update on it since. So just keen to understand what a, what the appetite is to grow a bit more in the sort of wholesale side of things? And b, how that other deal has actually worked out for you guys?

Well, so I have great memory, by the way. So no, look, this has been a very prolific business to us. We were able to manage well, get good arrangement. It's a profitable business to us. I would say, at this point in time, we don't see it as a core focus of our strategy. But it's true, right? Farmers is a huge corporation, and we can really benefit from the scale of some of our capabilities, like no many companies has our claims, capabilities and proficiency across the country.

So we will be more than interested for the right fees and the right conditions to actually extend those services to other companies. So it doesn't necessarily need to be the full end-to-end product value proposition, but the components that we can take advantage of our scale. So if that comes at the right conditions, I don't see why we shouldn't do it.

Okay. We've just run up against the clock. Once again, thanks for the participation and thanks for the good questions and interest in the business. And Ken, thanks for a good presentation as well. That was a final breakout of the day. We have another fast 10-minute break, so coffees, rest breaks and so on. And if you're back in the room by 3:20, please, and we'll finish with the broader Q&A with Mario and Claudia and the rest of the leadership team back on stage. But thank you very much, guys. Good presentation.

And hopefully, you've had a good number of breakout sessions, a good day. The conversation certainly in this room have been really good. So thanks for the questions and just the ongoing interest in each session. It's really appreciated and thanks to the presenters as well.

So we now bring it to a close with Q&A session with Mario and Claudia. And obviously, all the leadership team that you've engaged with during the day are sitting up top as well, and we've got mics in front of them or near them, should they need to get involved. So we're just going to go straight into Q&A from the floor. And if there's anything online, we'll take those questions as well, please feed them through. Who wants to go first. James? [indiscernible] You have as many questions you want this time. James has been on a diet of half questions for the last 2 sessions. So, he's earned it.

My first question, So Claudia, I think I mentioned this to you in the break. But just on the remittances, the remittances over the plan do include sort of one-off actions in that number. And I know you've repeatedly said it's not unusual for a company of our size. The number is about $6 million or $7 billion over the plan period, I think it's what's been like if you just take the remittance ratio and then the difference between over $24 billion on a gross basis. That does seem a big number. It's 25% or so of the gross number. And I know you can't really comment on peers, but it's a lot bigger number than we see appears. So perhaps you could just shed some light on the sort of ongoing management actions, what's in the pipeline and sort of one view on beyond this planned period, how sustainable that kind of level of remittance kind of is.

And then secondly, I did want to have another go, Mario, at the capital stack, it's sort of question -- and that is how you might, over the coming years kind of embrace third-party capital as a means to rounding out your product offering to customers. So i.e., how do you remain relevant to customers while not necessarily retaining all of that risk to yourself?

I go with the first. So yes. So the whole point of the discussion we had before, what I was presenting before, James, is ready to show that while in the past, we've been benefiting from one-offs and very large one-offs actually, like in the previous plan period, we don't plan to benefit from as much as one-off in the next plan period or the current plan period. And this is not because we don't see the opportunity to have some extraordinary management actions, and we had some, right, I guess, the value is somewhere between $2 billion and $2.5 billion. But we've got, as I mentioned, line of sight on that.

The real message behind this is that we have such a highly cash generative business that we can execute on the $19 billion, largely from that core remittances without having to execute other special projects and extraordinary actions on top.

Now on this specific point, we've got reinsurance, which is a dynamic capital management tool, and it's never exhausted. Now we are using quota shares, for instance, to bring capital out of the subsidiaries towards the center to Zurich that can be changed over time. And there are always ways to refine that. There's obviously disposals, transactions, portfolio management actions that we will continue to do, right? So it's not something that we will exhaust. Obviously, the more we execute on that, the smaller the number becomes, right, like we were seeing from the previous plan to the current plan. But there will always be that proportion of capital management actions that will come. And obviously, there's ways for us to execute on that as we go.

So James, I don't know if I'm going to say with this much more than you heard before. But look, first of all, we acknowledge by the way, I mean, with Claudia and I, and I would say that Sierra agrees on that [indiscernible] that our reinsurance structure is probably 8, 9 years old. And that is already for us a push to rethink about it. I mean we have the same retention levels with the same structure that we had in 8 to 9 years past. But of course, we have grown, our balance sheet has grown a lot. So is that the right way? I mean, we're thinking about it. I have no solution yet.

Then also, we appreciate the fact that in lines like specialty, you can have a kind of different structure. Again, we're evaluating this. Because on the other side, we're not constrained on capital. We have all the available capital internally to be deployed in businesses which are accretive. And so the question is, which one is more convenient to deploy capital or to use external capital, at what conditions from home, for work and of businesses.

So I very much understand your question. I don't have an answer yet. This is something that will trigger thoughts and possible actions next year as it will be about the structure of reinsurance. So you can be pretty sure that over the next 2 years, we will come with different factors of reinsurance or different limits, again, because you can remain for 9 years with precisely the same structure and the same limits. The world has changed a lot. And probably today, we over reinsure ourselves to compare with where we were 9 years ago. And there is no reason for that. I mean that's not something that we get to because we need to.

Maybe 1 point on reinsurance also to address, I think we had a question earlier this morning. I think as we go and expand more into specialty, reinsurance and third-party capital could be an interesting instrument for us to address volatility that might be coming from some areas of the book. So that's something that definitely in the analysis that you mentioned is interesting for us to look at.

There are interesting and innovative structures out there. So that's something that we would like to take a look at. It's important to have alignment of interest. So we, as Zurich, our gross underwriter is right, by definition. This is what we do, and we want -- from any source of capital that we might be able to attract, we want to have alignment of interest over the long term, especially if we enter into structures that might be multiline, might be requiring a long tail of that alignment of interest is absolutely important that it is there.

We've got a question online from Andrew Crean. I want to paraphrase it a little bit just to shorten it. So apologies, Andrew, if I don't capture it fully.

You're saying, Andrew, was too long?

It's quite long. Broadly, the question is, can we comment on the broader commercial business aside for middle market and specialty where we've given a good outlook? How are we thinking about the broader commercial business from a revenue growth and margin standpoint [indiscernible] medium term?

Margins is my favorite one. So look, I repeat myself because I know that the belief is that the margins are falling and they're disappearing. This is not what we have seen in our books. So let me repeat what we said sales in the Q3 call, what we see today is that the property margins are -- not the margin, sorry, the rates are coming down, not the margins because there are no significant natural catastrophes.

The thing which I want you to consider is [ property ] is indexed to natural catastrophes. There is no cycle there. It's an indexation. There is an event, there is a catastrophe. There is an immediate reaction on the rates. There are no events, there is an immediate reaction on the rates. This means that there will be volatility, not cyclicalities in the property rates. Casualty for us is above the level of last year. So the rates are not softening. They're not reducing. Rates are higher than last year. Commercial auto is particularly the same level as last year, around 15% increases. It hasn't softened.

Market scope is marginally better than last year. Specialty, now specialty okay, we can spend half an hour. But altogether, our definition of specialty makes higher rates this year than last year. This is the picture we have on the margins, right? Now if you remember a year ago -- sorry, not on the margins, on the rates. Now you remember a year ago, we said that we planned, we forecasted an improvement in the commercial margins. We are seeing this. The commercial margins are improving and are improving in the attritional and are improving also because of the lighter catastrophes. But we see commercial performing as we expected, better than in the past.

Now part of this, it is because of the mix of business. So it is not luck. It's not god. It is the way we compose the book of business. The growth of mid-market and specialties against the rest of the business means that the combined ratio is decreasing. It's improving for us, right? Now they'll make it forecasting. I mean we've been very careful in revising the pages of the presentation to avoid anybody able to guess what's going to be the combined ratio in 2027. I've been through this already, and I don't want to go back to the quarterly movements of the combined ratio.

But the margins in commercial are improving. If we close the year today, you will see a visible improvement of the attritional and the combined ratio of commercial for the reasons I said.

Growth, it's -- look, we care about the total growth of commercial. We care about growing the mid-market. This was the target. We care about the profitability of commercial together, but not, frankly, the growth. So if a property will see margin softening, then we will decelerate there because there is no reason for us to go after growth. We don't need that. That's not the situation we see today. But we will not stress to the colleagues growth altogether. We want to grow in mid-market in specialty, in life protection. We are happy to grow retail, but we don't have a target to grow commercial altogether.

Okay, we'll come back to the room. Kamran?

Kamran Hossain from JPMorgan. Just intrigued about -- earlier this morning, you said the 2027 profit is kind of on the books already. You kind of the -- you're doing very well. You're hitting your return on equity target. You're hitting -- you're on track for cash returns, [indiscernible] risk, everything is working. When I look at your SST ratio, it's a little bit higher than maybe you might like it to. But given that you're on track for everything else, does that matter at all? If you were going to look to intent with some use of surplus capital, would you rather kind of inorganic growth or kind of any other capital return to shareholders? It doesn't feel like a problem. It's -- it's a nice to have, but just interested in kind of what your views would be there?

Look, if you remember last year, we said that the plan will accumulate cash and capital. We were aware of this, and we say you can expect us to take some actions whatever these actions are, most likely towards the second part of the plan, not at the beginning of the plan. And this is what we're thinking of. I mean, acquisitions are a possibility. We keep scanning the market. And every year, we've done something, right? And I think you can see from the track record that whatever we did make sense in both a decent financial considerations for us and produce returns.

Should we not find solutions? Yes. I mean we will -- if we keep accumulating cash and capital, we will take actions towards the end of the plan. I think we stay in this position at the moment, and there is no need for us to anticipate decisions now. This is still year 1. We still have 2 years to go. And yes, the books are formed to deliver 2027. Everything we're doing is to deliver 2027. But these are the kind of things that you do at the end of the plan when you have full visibility on where you stand and what you have in your pockets.

It's Simon from [indiscernible]. First question is on artificial intelligence. From a group perspective, where do you see AI currently as being the most impactful? And could you elaborate on the cooperation of the 2 Zurich Universities, what you're trying to get out of these cooperations?

And then a second question on reinsurance pricing in the January renewals. And I know it's going to be different geography -- by geography and business line -- business line, but say you can negotiate a 5% price reduction, you rather take the price reduction? Or will you lower attachment points?

I wouldn't know this.

Should I comment on that?

Please.

So on reinsurance, we've got our largest CAT renewals in April, so it will take some time to get there and who knows what happens, right, to Mario's previous comments on CAT. Look, I think it wouldn't make a lot of sense for us to now go and increase attachment points. I mean the market is supportive, we have seen improvements over time on our underwriting. So we've got a lot of interest from reinsurers to be -- to be on our panels, continue and even increase. So I think it makes sense for us to get support from the insurance market. If we can get some more at attractive prices, we might want to do that, especially because we are expanding our book.

And back to what we were saying before, specifically on some lines of business where we might get a bit more volatility. It might be interesting for us to maybe ramp up a bit of the insurance spending. That said, we want to take advantage of all the possible structures and all the possible sources that are out there. So we need to do a total analysis before we get there.

Look, AI -- AI has produced a number of interesting results for business. And you saw through the presentation, some examples of that in the joint venture with Santander in mid-market. However, AI is supposed to be more impactful, more revolutionary than this. So the question is how can we -- how can we make this really visible, beneficial? And what is the size of the benefits that we can get from it. That's why we made recently also an organizational change. There is a colleague sitting in one of the last roles, his name is Carlos Ray. Carlos has joined us beginning of November to drive business transformation using technology, using artificial intelligence. Carlos has a long experience in business.

The thing that you heard also through the presentation today is that changes must be business driven. This is not a question of technology. Technology can do wonderful things, but if business doesn't need them or doesn't know how to use them, technology is useless.

The purpose of the AI laptop we're setting up with ETH University and [indiscernible] University is to develop and experiment to business solutions that can be beneficial for business. And we need to have the support of engineers. This is what ETH does in management people from St. Gallen. And hopefully there, we can really test different solutions. I mean, bear in mind that this is an industry having a business model which was set up centuries ago. And fundamentally, over the last centuries, this industry has replaced papers and fountain pens with computers, but the business model less remained the same.

Now possibly today, we can change the innovative business model, but this must be proven. Must be proven right and must be proven also with consistent application. That's the idea behind the lab. But we are deeply committed to do that, and I'm confident that it's not going to take months or just a year, but I'm confident that we'll be able to deliver significant business improvements through the use of technology. At this moment, this is what it becomes possible.

Yes, Vinit from Mediobanca. So just on Slide 18, please, and thank you for that slide. The thing I would say is that, might be a little bit nitpicking because I think people in the market are convinced about the 51.9% it appears to be. It's more -- where is the potential, the greater than I'm going to work at? I mean it could be that, for example, that this slide, I think it was 7 where you had the specialties line in the middle [indiscernible]. But one of the slides shows that 1/3 overlapping number, and then you see we can kind of work out that about [indiscernible] of your premiums are growing and delivering mid-80s.

So I'm just curious if you had to think about which of these buckets, is it the first one that could positively push it above or where could you -- I mean, I appreciate it's nitpicking, but we're trying to look for the incremental positive as well. So just trying to see where you think it is?

Should I go? There's bits and pieces in every bucket. So I don't think it's black and white, right? There are places in the first one in the portfolio quality where things have actually to date have been proceeding quicker and faster and better than we had expected. Will that continue over the 3 years? Maybe, maybe not, but there might be other things that will come in and deliver, right? We have seen -- I mentioned before, crop, right? We are keeping the assumptions at plan at this stage. So we are waiting for the end of the year to see how actual results come in. They might be coming in better than planned, might not, but they might, right? Because the underwriting actions have been taken. And once the portfolio is on a much solid, much more solid ground, it might be giving us better results that we actually expected in plan.

Same on retail motor, we've seen a massive acceleration. Will that continue? If so, there might be some upside to plan. I mentioned on growth, right, that 2025 was dampened a bit by the fact that we had some pruning actions, specifically in the U.S., right, that led the growth to decrease on a net basis. We're not expecting this to come through in 2026. Maybe we'll manage to go a bit more than expected in middle market and specialty come through the way that we hope they will.

We heard from Claudio about Santander and how the growth has been picking up in October, that as well could be an upside to plan and then Farmers. I think you heard very clearly in the message that Raul and Ken was saying. So I think nothing of this is black and white, but there are multiple sources that might potentially taking into account all the risks, of course, that the market is closing as well, but there might be potential upsides in different pockets.

Yes. I mean can I make a comment on top of this? Look, I mean, in the past 3 years plan, nothing went precisely north or as expected, except that we always deliver it or exceed it. I mean you keep adjusting. Every day, you'll find something new in the market. And we're not driving an automatic machine. We were acting, steering, changing every day. And you probably heard it from all the colleagues through today. I mean, there are continuous actions which are taken and eventually delivers the results. And yes, many other things can happen positive and negative over the next 2 years. And we will try to compensate, take advantage, change. This is active stealing day by day.

Hadley Cohen, Morgan Stanley. Actually, we might go back to Slide 18. It's a slight extension of Vinit's question. But Mario, you're talking about how large parts of the business aren't cyclical, and all companies are sort of focusing on customer retention, Net Promoter Scores and what is. At the end of the day, insurance is a long-term business. And I appreciate that you need to have 3-year targets, so these investors and those analysts and what have you. But presumably, you must have a vision from a longer-term perspective of where the company is going. So be useful to sort of get your thoughts around that.

And I think if I -- in the context of this slide, if we look at the component parts, your -- the momentum on the growth side is clearly very, very strong. And the business is clearly in very, very good shape. But if I think about the sustainability of these current targets, the piece that's potentially the most under pressure on a longer-term point is the portfolio quality and efficiency, that 40% component, which you -- it's quite clear that you're on a very good track to deliver that over the next 3 years. But I'm just wondering how you think about the sustainability of the earnings growth beyond the current plan in that context?

You want us to start talking about the next plan. That's quite a question, right? Look, what's the vision behind? The vision is that we're trying to move ourselves into a sustainable and defensible space in the market where we can hold and maintain a competitive advantage for a long time. This is what we're doing. I mean if you think about what Zurich was in 2016, Zurich was mainly operating in the large corporate market. There is no way that you can defend any position there, because that's a very transactional space of the market, where everybody can enter and leave and where there is full transparency full competition, right?

So there, you're app in the wind and you follow the wind there, right? Progressively, over the years, we have been moving ourselves to much more cozy, defensible, protected, to sustainable areas of the markets. And so it's not by coincidence that then our profitability has been improving. And this is still what we are doing. And the more we get there, the more benefits we get, which will mean that then we will be more able than others to invest to continue building on the competitive advantage and continue building distance. That's the simple vision we have to -- I mean, you're kind of right. I mean, we announced 3-year targets for the investors. But to be frank, also for ourselves because we need to keep the energy, the motivation, the action high.

Probably the thing that scares all of us in the management team, the highest is complacency. And then you fight complacency by continuously running higher targets through the organization and repeat to the people, the past doesn't matter, just look in to the next target and deliver the target. But the vision behind is to keep moving this company in a space where it will have a continuous competitive advantage and you can thrive on that. Because we're getting to -- in these markets, we're moving in, getting to points where really size matters, and it's very, very difficult to keep chasing gas. You can do it, but you need to really invest. And then you need to have a long-term vision, which often competitors don't have. So this is what we're doing besides hitting those targets. And then presumably, we will have new financial targets after we reach the '27 ones, but I think the journey to place the company in a safe profitable space in the market will not change, not even after that.

Dom O'Mahony, BNP Paribas. Thank you for all the presentations today, really informative and educational. There is one follow-up question and then a sort of a slightly more [indiscernible] question. Just on the remittances. I was curious, just a follow-up on James' question about the management action component. I don't know if you got the slide there, but I think in the '22 to '24 period, I just wanted to understand your diagnosis of how you manage the cash over the last 2 years, '22 to '24, an awful lot of management action, even excluding the Farmers Life piece. I'm not sure the core remittances would have covered the dividend costs. Did you deliberately hold back the cash because you were delivering so much on the management actions in that period [indiscernible] is there spare cash in the operations.

And then the grander question, Zurich has done an extraordinary job of improving profitability, economic profitability over the last 10 years. So the sector is as well, I think, direct more, but the sector has improved as economic profitability massively. What is your diagnosis for what's allowed that to be sustained? Has something changed in the industry? Is it something to do with the financial market? Is it something to do with the market structures that gives you the confidence that actual market conditions can allow that level of economic profitability to be sustained in the long term?

Look, on cash, Dom, I don't -- it was undermined by predecessor. So not probably a lot that I can comment there on the details that were put in place. But in general, it's not as black and white the same, we're holding that cash, right? There would always be plans in the background where you're looking at your core remittances and you're looking at some of the extra management actions that you've got lined out side to make sure that you've got a cash way you need it right at the center. So that's basically the philosophy that Zurich has been following for a number of years. We've been always tried to pull the cash centrally, make it as fungible as it can be and over time, shape the portfolio in such a form that it has the highest cash generative contribution.

On top of this, in the last plan cycle, there happened to have been a couple of actions on top and important disposals have been used as well to fund share buybacks and actions on top. I mean it's really the strong message that I'm keen to -- sorry, to reiterate again is really that for the next plan and actually from there on, we are not counting on extraordinary one-offs and actions on top of the core generation. As I mentioned before, there will always be some actions. You can always trim and optimize our capital structure. We can do more on the insurance, we can certainly restructure our legal entity set up. We can always optimize, right? And there will be transactions of any kind. But the core remittance and the core cash generation of our business is super strong, and this is what is behind our dividend plans.

On the market profitability, I think the market, Dom has change a lot. First of all, as I keep repeating often, I don't believe that the market has 1 cycle anymore. The market has probably many cycles or like property doesn't have a cycle, it's simply indexed to weather. This doesn't exist years ago. So you have a different influx of capital into the market. Years ago, the capital was following this underwriting cycles and was kind of predicting then the return on capital that will come. Today, it's much more difficult to mean the investors who provided site capital solutions to the damages of Melissa, they are probably -- now we're thinking about to do it again. It's a different market.

Second thing, COVID changed the structure of the market. A number of companies abandon after the losses of COVID, and we haven't seen them reentering. Before COVID, the market was intoxicated by a lot of window dressing players. Players who didn't know what they were doing there, but they were completely backed by reinsurers. 1/3 the reinsurers have lost enough money. And fortunately, they still have memory of that, to be willing to play that again. And then as I said, we're moving into different areas of the market, which are much less cyclical.

You can look at 10 years' profitability in the specialty in the mid-market space, you hardly find a combined ratio above 95% there, hardly. Now you still need to know what to do there. You still need to be a pro there, but these are not cyclical markets. They have long-term trends where the profitability is quite stable for the reasons we said before because they are -- there are barriers to entry. There are obstacles to get into these markets in play. You can't decide today that you want to play tomorrow. You won't be able to. So this is where we think that we will manage -- we will keep managing the profitability high. Then this doesn't mean that the combined ratio will constantly improve every year one after the other. We think we can manage it. We will not mainly go high again, and we think we have to choose to do it and especially we have the books to do it.

[indiscernible] So you've got James's [indiscernible] of the last half question.

I think you touched on the subjects obliquely, but I think throughout today, we haven't used the word inflation once, and it doesn't actually appear in your presentation, which I think is really interesting and maybe a sign of how well things are going. I'm just kind of wondering, when you think about inflationary trends and what they mean for your business through the end of this plan, could they actually be becoming maybe a positive because they're so entrenched that the whole industry keeps pricing for them. Or are we still nervous that that's a trend risk because insurers are typically behind the curve on inflation. And again, for all the repositioning of our portfolio, presumably things like tort inflation and that kind of thing are still in your mind even if they weren't in the presentation. So what are the main bullet points we should be thinking about, if anything, about inflationary risk?

I mean you're right. I think this reflects the fact that in -- I mean, they will even force the real threat for us is recession. It's not inflation. Recession is super bad for an insurance company. Inflation, I mean, we know it. We know what it is. There is a good impact. I mean, high inflation, cheaper inflation, very fast inflation is bad, but normal inflation, which is what could possibly happen over the next years here. I mean, I cannot say it's good because that would sign disrespectful because for many people it will be bad. But we know what to do. We're prepared for that. It's not something that scares us. We've been through it, and we will know what to do and we're monitoring.

I think Raul has mentioned, leasing the breakout where I was said, we're waiting to see if there would be some claims inflation because of the tariffs and because of the supply chain. We monitor it very, very carefully at Farmers. We monitor it in Europe. We monitor it all around the world. We are prepared. My real nightmare cost is recession, that's [indiscernible] recession is very bad for us. But luckily, I mean, there is no recession in sight.

From a balance sheet perspective -- not on the balance sheet, but also the way we price the business and the way we booked the business when we take it into our books. We are taking an assumption on what inflation will be, right? And past experience in recent years. We've been very prudent on expected loss ratios to reflect inflation. So will that eventually be positive? We don't know, of course, but we've been taking prudent views on the assumptions when we took the business on the books.

And as you know, on top of it, we are holding a group level reserve that's there to take into account all the risks where we don't have -- or we have limited evidence in data, including inflation over and above what we estimate in the business, social inflation risks as well. So we are very well equipped should inflation go up from a balance sheet perspective as well.

Mario, we're right on the clock. So maybe I'll pass it back to you to close out the day with everyone.

Just, first of all, again, thank you so much for having taken the time and also the pain to come over with early flights and all the challenges that we know about the airport. Thank you very much, much appreciated. And thank you also for having given sense and relevance to all the presentations that we put together.

I mean, we wanted to give you the impression that the reason a coincidental thing happening here. Everything is planned is forecasted, is adjusted. And we have plan A, B, C, D, et cetera, and this comes with a long-term vision and with short-term adjustments to it. And there is an entire management team, not just the people you see here, but all the other colleagues who haven't joined this time who are working to deliver every day the single pieces of it. We feel that this is a great first year. We have had a very different start -- actually very bad starts. I remember terrible first years of the plans, and we still made it in the following years. This is a great start of the plan. We feel we are in a very strong position today better than we expected. But we know we're prepared should things change to deliver for 2027.

But in the meantime, we have taken already with the changes in the organization the steps to continue growing the company after 2027. And so we're already working for [indiscernible], continuing to deliver on the vision we have for the business. Thank you again, very, very much. And I hope you enjoyed the day as we did. Thank you.

Just for those of you staying, there will be drinks outside, so please feel free to hang around and mix with the team as well. And thanks again for the questions.

Ladies and gentlemen, welcome to Zurich update for the 9 months ended September 30, 2025 Conference Call. I'm Valentina, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast.

At this time, it's my pleasure to hand over to Mitchell Todd, Head of Investor Relations and Rating Agency Manager. Please go ahead, sir.

Good afternoon, everybody. A warm welcome to Zurich Insurance Group's Third Quarter 2025 Results Q&A Call. On the call today is our group CEO, Mario Greco; and our Group CFO, Claudia Cordioli. Before I hand over to Claudia for some introductory remarks, just the usual reminder, please for Q&A. We kindly ask you to keep to a maximum of 2 questions. Claudia, over to you.

Thank you, Mitch. Good afternoon, good morning, everyone, and welcome. Thank you for joining us today. I'm here with our Group CEO, Mario Greco.

Before we take your questions, I'd like to share a few reflections on our results for the first 9 months of 2025. Zurich has delivered another outstanding performance with strong group-wide revenue momentum at excellent levels of profitability and returns.

Our resolute focus on execution, coupled with a uniquely diversified business model contribute to the long-term delivery of shareholders' returns in the top quintile of the broader industry. There are 3 important aspects of the results that I would like to share with you. First, Property & Casualty achieved record gross written premiums of $38.9 billion, up 8% year-on-year with all regions contributing positively.

Retail delivered exceptional growth with gross written premium up 16% year-on-year and 7% on a like-for-like basis. A strong environment for rates is complementing the management actions that we are undertaking to sustainably elevate profitability. Greater sophistication on pricing, customer segmentation and claims management are all combining to enhance our retail margins. This is an area that we will explore more at our upcoming Investor Day. However, we observed already profitability progressively -- progressing strongly with a combined ratio improving approximately 2 points year-over-year.

Our motor book continues on an improving path with a combined ratio better by almost 5 points year-on-year. Similarly, our broader German retail business recorded a combined ratio decrease of more than 11 points. Our Commercial Insurance business continues to grow profitably. Supported by superior risk selection, our focus on global specialties and middle market units as well as the benefits from portfolio management actions taken over prior quarters. Specifically, with respect to specialty middle market, we have invested over a multiyear period in those 2 key strategic priorities. An important pillar is the targeted recruitment of underwriting talent widely across our business.

In the U.S. alone, we have hired more than 100 middle market and specialty underwriting professionals, all operating out of an expensive network of more than 30 locations. The underlying strength of our middle market business has also offset ongoing actions to prune parts of our U.S. program business, which didn't meet our strict underwriting standards. It is important to recognize the truly global complexion of these businesses. For example, our middle market footprint at the 9-month stage is 40% international in terms of gross written premium.

And here, we are earning positive rate across the portfolio. In EMEA specifically, revenue grew at low double-digit percentage rate in the first 9 months of the year. To capture the full market potential of specialty lines, we are establishing a dedicated global specialty unit. This team will operate out of London and integrate and leverage our global capabilities to drive expansion of our approximately $9 billion portfolio of diversified exposure.

We believe the high barriers to entry and prerequisite risk expertise in these business areas will drive attractive long-term earnings growth and shareholder returns. We look forward to presenting you with an opportunity to meet our leadership teams from both specialty and middle market at our upcoming Investor Day. Across our broader Commercial P&C business, we still observe stability on industry terms and conditions and ongoing opportunities for capital deployment to attractive margins and returns. Aggregate commercial rates remain in positive territory.

North America, our largest region, grew rates by 2% and EMEA at minus 0.8%. Thanks to our targeted growth strategy and a proactive portfolio management in areas such as U.S. programs and crop, we have driven sequential improvement in the combined ratio from the half year to the third quarter while growing our business. We benefited from a lighter natural catastrophe experience during 2025 versus our expectations of a normalized annual cost load of 2.5% to 3% range.

Set against the devastation recently observed from Hurricane Melissa, it is a timely reminder of the elevated climate risk and wide protection gap affecting many global communities. With this climate risk profile in mind, we have structurally reduced our U.S. hurricane average annual loss exposure by 25% over the past 4 years, contributing to our strong performance on U.S. hurricane loss experience.

Turning to Farmers Exchanges. We see further evidence of a meaningful transformation. Gross written premiums advanced 5% to $22.6 billion. I want to draw particular attention to the significant transition to underlying growth of 103,000 new policies in the last 6 months. October results indicate that policy growth outpaced the average policy growth achieved during the third quarter. The fundamental repositioning of the Farmers Exchanges is manifesting in organic growth for the first time in over a decade.

Additionally, an exceptionally healthy surplus ratio of 50.9%, up more than 500 basis points from the half year means the exchanges have established a fantastic platform to achieve the mid- to high single-digit growth ambition announced earlier this year. Lastly, our Life business continues to deliver profitable growth. Gross written premiums rose by 11% to $26.8 billion and fee revenues increased by 17%. Growth was driven by strong demand for capital-efficient savings and protection products.

New business continued to show attractive margins at 6%, up from 5.7% reported in the first half. This led to $879 million of new business CSM, the highest 9-month level since the introduction of IFRS 17, with a sequential acceleration in the third quarter. Protection continued to grow profitably with gross written premium up 6% in EMEA and APAC on a like-for-like basis.

Furthermore, a robust sequential improvement was evident in Latin America in the third quarter as bank distribution sales activity in Brazil returned to more normal levels. Populations are aging, government debt is burgeoning and increasing levels of wealth accumulation gives us a lot of confidence there is highly attractive long-term opportunity to address the sizable life protection gap. This further augments our earnings generation and is consistent with our focus on capital-light, high cash conversion insurance profile.

Now let me briefly touch on our capital position. Zurich's SST ratio remains very strong, estimated at 257% as of September 30, reflecting profit generated in the period and positive financial market performance, partially offset by dividend accrual and the redemption of subordinated debt during the month of October. This balance sheet solidity is a direct consequence of our disciplined capital management approach, high return earnings and prudent reserving philosophy.

Looking ahead, we entered the final quarter of the year with strong financial resilience and a clear focus on executing against our 2027 financial ambitions. At the 9-month stage, we have made a strong start to the new financial plan. Our diversified business model, disciplined underwriting and capital strength all positions us well to capture future growth opportunities and deliver attractive industry-leading returns for our shareholders. Thank you for your attention.

Mario and I are now happy to take your questions.

[Operator Instructions] The first question comes from Andrew Sinclair from Bank of America.

Just a couple for me on Farmers, if that's okay. First, I just wanted to understand what's been filed on prices for Farmers just to understand that, could see that we're getting the policy count growth, but just to understand as well what's the picture for pricing?

And second question, I guess, is kind of similarly related to that, 50.9% surplus is just a great number, but how is that going to be used? How should we think about the combined ratio Farmers should be running with? And are you happy to see that? And would farmers be happy to see that surplus go back down again?

Andrew, thank you for your questions. On the points on your first question on the rates that have been filed, not much change compared to the first half of the year. They continue to see positive rate development in the homeowners and in the auto space. That hasn't changed significantly. For the time being, as you've seen from the press release, but also the combined ratio disclosures we've made in H1, the exchanges are seeing very high profitability. So the rates they are getting are sufficient to address the loss cost ratios.

On the surplus, definitely #1 priority for them is growth at this stage. So this is the first and foremost use of the capital surplus they've got. You should also expect from the conversations the exchanges are having with insurers, including ourselves that the quota share might go down. So those are all discussions that are ongoing. It's too early to make any disclosures, obviously, subject to negotiations, but that's also directional, the thinking.

The next question comes from Michael Huttner from Berenberg.

Fantastic. One is on credit and one is on the granularity of maybe the pricing maybe. On credit, so we had first brands, and I never know the right name, is it Two-color or Tricolor. Can you talk a little bit about how your credit portfolio is positioned and whether that was a risk and whether you've changed things as a result?

And then on the granularity of pricing, I think I understood you to say that North America commercial up 2%, EMEA commercial down 0.8%. So that would mean 1% for commercial. Is that right? And could you possibly -- and I know you've never given this before, so -- or maybe you'll give it on the 18th of November, I don't know. give us a feel for the different areas of pricing.

So I'm asking a lot, but just in case North America commercial in Q3 stand-alone, I guess that's quite negative. But then you've got mid-market specialty crop, I'm not sure you could define pricing for that and captives. And I just wondered whether -- how are these various portfolios looking at the moment?

Michael, so on credit, just to give you a broader -- from a broader perspective, 40% of our asset portfolio is invested in sovereign and cash. And as you know, we run a very prudent ALM to the level that one could define that boring, I guess. We only allocate 5% of our strategic asset allocation to private credit. This is a portfolio of high quality that has been built over a long period of time across different geographies, sectors, largely investment grade.

So nothing for us to change there. I mean no exposure of note to the names you mentioned. And yes, that's an exposure that I absolutely feel comfortable with and no need for us to change anything in the allocation. On the granularity of pricing, yes, so we in average across many lines of business and market segments, as you said, we are observing 1.5% increase in rates for North America commercial. Europe is slightly negative.

And actually, even there, you see a difference between Continental Europe that's still positive and actually holding very nicely compared to the U.K. that's starting to moderate in a few lines, particularly in property, same as the U.S. So there's quite a difference between lines, as you said, between different products and different customer segments. The overall rate moderation is driven by the profitable lines, namely property and more visible in the E&S space and large corporates. When it comes to motor, excess liability, primary liability, rates are still positive. In motor, we are still seeing 15% and excess liability is also double digit up.

Obviously, as we said in previous calls, there's also loss trends to be addressed here, but we are seeing a very positive profitability there. Financial lines looks in the third quarter to starting to slowly ticking a bit less negative. We see whether this is a durable development or not in the quarters to come. But to summarize, we are seeing very attractive margins across the book. This is what gave us the opportunity to actually improve our underwriting performance.

So in terms of loss ratio, we've been sequentially improving attritional ex cat, ex PYD loss ratio, both in EMEA and in North America. We're very confident that we can continue to grow. And this is not an easy and obvious thing, by the way. The teams have done a great job in continuing to grow the top line while improving the loss ratio, and I'm very happy about that.

Michael, if I can add a point, if I look at our line, and I'm talking for U.S. now, property is the only one which has a reduced path of rates compared to last year. Liability is hardening. Motor is as hard as it was last year. Specialty is hardening and workers' comp is slightly better than last year, but I would say it's fundamentally unchanged. Property is the only one where there is softness, and this is just reflecting the nat cats. It's going to change with nat cats because the margins remain very high. And then if the season continues like this, property will remain weak at when we have the first natural event, property will turn around.

You were asking about the segments as well, Michael. So on mid-market, overall, we are seeing a 3% rate improvement and zooming in into North America is actually 4% -- so it's still a very positive rate environment across all the lines there. North America large accounts is actually showing very good profitability, increasing significantly year-on-year as a result of cat experience, but it's also the result of the rates that we are getting through in excess liability and motor. So both very profitable, as Mario said.

The next question comes from Andrew Baker, Goldman Sachs.

First one, just on the sequential improvement in the commercial loss ratio that you just mentioned. Clearly, there's quite a lot going on here beneath the service of the pricing environment, the portfolio improvement on the commercial auto and crop side, you've done other pruning. You've got mix benefits coming through for the mid-market specialty. I guess, directionally going forward, are you still expecting an improvement in that commercial loss ratio going forward?

And then secondly, on the LatAm PVNBP, can you just clear up, so I know in the second quarter, there was the issue of Brazil and the incentives at Santander, which sounds like it's now behind us. And then it looked like there was an unfavorable assumption update. Are you able to just pick me apart what's going on for that LatAm PVNBP number?

Thank you, Andrew. So on the sequential improvement of the loss ratio, the teams are working in that direction and the fact that we've got some pruning actions that we've started to take in the second half of last year and are starting to earn through the combined ratio gives a strong foundation for that. That said, we'll have to see how crop plays out. This is still, at this stage, an unknown, obviously, yields and prices are not set yet. So we'll have to see.

In terms of underwriting actions that have been taken in the U.S. program space, in the captive space, in the motor book more broadly and crop, all the meaningful actions have been taken. So I would expect the improvement to continue to play through the combined ratio. As I said, subject to some factors in crop and in other lines that at this stage, we don't know about.

PNVP is Brazil is Santander, which is recovering but hasn't completely recovered yet. They need time to go back to the volumes. They have corrected the organization. They have corrected the reasons, but the numbers are not yet back. All other countries are positive, double-digit positive. The only negative one is Brazil.

The next question comes from Kamran Hossain from JPMorgan.

First question is on hiring and kind of where you've expanded the underwriting footprint. I thought the color you gave this morning was really useful. Could I just ask in terms of how much you're spending on that at the moment? Obviously, you have to bring people in, they have to put the business on the books, so it takes some time. Any idea on the impact on the expense ratio or the cost to achieve that from hiring new underwriters would be really helpful.

The second question is just on, I guess, middle market overall. I know you've kind of disclosed today about the core portfolio growth. Just wanted to understand if the U.S. program and the E&S trimming is finished now and what size -- what the absolute size of the business is now versus the $10 billion target?

Thank you, Kamran. So on hiring and the expansion of the footprint, we gave some indication at year-end. Now we are in the middle of the hiring and the opening of, I believe, 5 new offices this year in U.S. So we'll give an update at the end of the year. As we mentioned in the first half, this is visible in the expense ratio. I expect the teams that are coming on board to start actively producing business next year.

And I think we said from a middle market perspective, each underwriter would be expected to bring premiums between $8 million and $9 million. So it's substantial what these people will bring onboard.

And this was all budget for us. This was all planned, budgeted and it's moving according to the plans we had. And so for us, there are no surprises into these numbers into these developments.

Exactly. So I would expect the OE ratio to improve accordingly, Kamran, next year. On the core portfolio and the actions that we've taken, on the motor business, roughly 95% of the actions have been taken. So there's only small things that are still being undertaken. The vast majority has happened. So from a GWP perspective, the biggest chunk of the reduction has been coming through. It will earn through insurance revenues, say, over time.

The next question comes from Vinit Malhotra from Mediobanca.

So just my 2 questions. The first one would be this very interesting remark on construction where you've talked about the technology investments and infrastructure. I'm just curious, is there -- I mean, some of these are kind of newish maybe data centers or I don't know, how have you thought about the risks here? I know the current combined ratio you noted is very strong. You said it's even better than the 85% for specialty lines.

So just curious to know about this line and also about risks there. Second question is just wanting to hear again, the commercial management of margin strategy, just so that I'm fully on board, there is -- I mean, you see -- other than property, the pricing seems to be holding up okay. but you're still pushing on with the middle market and specialty lines such that even when the main commercial market other than these 2 falls in margin, then the margins are offset in the middle market and specialty. Is that still the plan?

And is your confidence in that plan even more so now? Or I'm just curious to hear your thoughts on it. Of course, we might hear more at the Investor Day, but just more today.

So look, Vik, this is Mario. Construction and Infrastructure is a line of business where we're probably world leader. We have many hundreds of specialized underwriters, risk engineers. We do it worldwide. The risks are the risks of every construction and infrastructure building. It's about building the plant, the factory, whatever you're building. There is no special risk about data center.

It's a construction like anything else, and we have specialized engineers and risk assessors to do that. I think you probably had in mind kind of liability risks, but that's a totally different story. Construction and Infrastructure is about realizing the plant. And there, again, I mean, we have a ton of experience, and this is a great opportunity these days, and it's a line of business which is growing very high double digits around the world.

On -- I mean, the benefits that we see coming to us as improvement of loss ratio and combined ratio, we think they will continue to be visible because we are more and more moving our portfolios towards middle market specialties, and they have a lower than the other lines. So this is what's driving our constant improvement of profitability, and this will continue because we will continue growing in these lines. And even the fact that we now organize ourselves with the global specialty unit in London means that we will further double down on the growth opportunity that exists in these lines.

Okay. And on construction, just -- and please, Vinit, join us for the Investor Day, Saad Mered, who is leading the new specialty global unit will talk specifically about construction and U.S. construction as a bit of a deep dive. But to give you a sense of what Mario was saying, I mean, what industry-leading means, they are working on 250 data center projects. It's a very large franchise in terms of expertise. It's been growing 10% year-on-year. So it's definitely a major business line for us. It's one where we see great potential to grow.

The next question comes from William Hawkins from KBW.

First of all, could you be clearer, please, about where we are relative to budget for 9-month catastrophes? Because you were already 1.8% at the first half, which was already way below the budget, as you said, and 3Q does feel like it's been very, very benign. So we could be talking easily about a 1, if not a 2 percentage point tailwind to your underwriting performance?

And related to that question, I guess the more important one is, to the extent that it does seem clear that this is a tailwind, how are you thinking about using that to smoothen performance through to the end of this year? So is it an opportunity for higher loss picks or lower reserve development? Or do we just get excited about a onetime boost to profit this year? And then the second question, please. You've alluded to it, but could you be clearer about the Farmers combined ratio in the third quarter? It really does imply that it's been extremely low even after the 91% great result you had in the first half.

And again, I'm just kind of reflecting again how this should be changing my thoughts for the outlook because I think your legacy guidance is still to be better than 100%. And obviously, you're smashing that at the moment. And I don't really know if that's just -- we get excited about some very short-term great improvement and the normalized figure is still closer to 100% or if you're now much more confident that the turnaround does mean that a sustainable combined ratio is more in the low 90s or even 80s?

William, the combined ratio improvement is very visible even after cats. And yes, I appreciate that so far, the season has been for us benign as a result of events, but also as a result of our selection of cat exposures. But we are improving our margins even irrespective of this. Now unfortunately, we're not giving these numbers. They're not audited. So I'm not going to go into the details, but please stay on my words that it is improving irrespective. We don't do window dressing on that.

So you shouldn't expect us to cook up in any possible way the numbers by year-end. We do very final value assessment of the claims each year. And we have been building reserves, but that was very evident and declared over the past years, but we're not planning any kind of window dressing by year-end. On Farmers, look, farmers continue to run at a mid-90s combined ratio. They -- that's very good because it will give them space to continue growing the business without impacting -- without damaging the surplus of the exchanges.

And look, guys, I mean, honestly, neither us nor the exchanges have any plan to go back to low 30s in the surplus. We need the buffer because different from what many of you have thought, if the exchanges run short of surplus, we don't have -- we can't help them. So the only way to avoid any possible risk for us in limiting the growth is to keep the surplus well above the minimum levels. And so we're fine with the surplus at high level. This means that our growth ambitions can be supported and the combined ratio of Farmers is further helping this surplus stay high.

The next question comes from Dominic O'Mahony from BNP Paribas Exane.

Most of them have been addressed already, but if I can ask 2. One was, Claudia, you very helpfully gave a lot of very granular data points in your opening remarks. And I just wanted to check on one of them. I think you said there was a 2-point improvement in combined ratio. Was that -- is that 9 months? Is that 3 months? Is that normalized -- not normalized for cat? Is that discounted? Is it undiscounted?

Sorry for the detailed question, it would just be helpful. And then secondly, there's been some discussion in the industry about frequency benefits, in particular, in European motor, good weather, I think, meaning people have been crashing less. Could you make a broader comment about what frequency trends you've observed, whether you recognize what I just said about motor frequency -- and indeed, if there's been any particular trend worth calling out in North America?

Thank you, Dom. So going back to your -- to the first question, the 2 points that comprehends everything. But it's not only the cat piece that drives it. There's also a significant improvement on the attritional side. So that's really an underlying profitability improvement story. On the frequency, I mean, in line with the comment on attritional, we are seeing actually improvement on frequency. We're seeing sequentially that going -- becoming better throughout the year and year-on-year.

We now have a follow-up question from Michael Huttner from Berenberg.

Fantastic. I have 2 questions. One, please, can we have a full hour for the call because it's lovely to listen to you. Sorry, I'm panicking a bit here. But the more real question is on German Life. So I saw on the tape that you -- Claudia, you're saying that you're still interested in selling or in discussions, whatever. I understand from the past that it doesn't actually boost your solvency because it's only a tail risk. It doesn't have an immediate impact. But I guess it changes your thinking about how you look at your own capitalization.

And my question here is, let's assume, and I'm assuming here that the benefit in your own mind kind of thinking broadly would be -- let's put a number, let's say, $20 billion portfolio, let's say, 15%, so that's $3 billion. I know I'm exaggerating, but how would you allocate that? And I know it's a leading question, but we were in Switzerland last week, the guys there, the PMs there would love to see a little bit of a buyback. Would you -- could you kind of give maybe $1 billion to buyback and $2 billion to deals? Or how are you thinking? Anyway, there we are.

Before Claudia answers you, I just want to remind you that we already did a buyback for this transaction.

That is true. Accepted.

Answers the question. So it's still interesting to us and actually strategic. So we still want to, over the short to medium term, find a solution for the book, Michael. So we will most likely see an impact and benefit in the SST ratio and not as big an impact on the cash side, which is, I mean, going back to the question on the buyback sort of motivates the reason why we're not planning a big share buyback after that.

Very, very clear. But there is a follow-up. Sorry, I was kind of bearing it, but I'm pushing my luck here. How are you thinking on deals? So the way I see you fix everything, everything is looking pretty good, maybe commercial lines could be better, but who knows. And if I were you, I'd be doing this on the table and thinking what can I buy? Are you thinking about that?

Any idea you have?

I don't know. No. I don't know. It was just a question.

We are always looking at opportunities, Michael. So we are very focused on organic growth, as we always said, but we're always looking at opportunities. They just need to be attractive and accretive. That's the thing. And it's not so easy to find good targets at reasonable valuations these days, but happy to get ideas.

Ladies and gentlemen, this was our last question. I'd like to turn the call back to Ms. Claudia Cordioli for closing remarks.

Thank you very much. So thank you for the questions and the interest in Zurich. Before we close the call, just to reiterate a couple of points that we just discussed. Zurich has delivered an outstanding performance in the first 9 months of the year, and we are very proud of what the teams have achieved, both in terms of growth and underlying profitability across all business segments.

The financial resilience of the company with an SST ratio of 257% and the high cash conversion profile positions us strongly to execute our 3-year targets in the best long-term interest of all our shareholders. Thank you very much.

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.