Conduit Holdings Limited

Good day, everyone. Welcome to Conduit's full year 2025 results presentation. We appreciate your time today as we discuss our performance for the year. Joining me on the call are Neil Eckert, Chief Executive Officer, Elaine Whelan, Chief Financial Officer. Please note our disclaimer language on slide two. I will now turn the call over to our CEO, Neil Eckert.

Thanks, Brett. Welcome to our presentation. As Brett mentioned, I'm joined by Elaine Whelan, our CFO. Today's presentation will cover our business performance for 2025 and our view of the market and January renewals. I will also provide an update on some key actions we have taken during the year. Elaine will provide some additional detail on our financial investment highlights for the year before closing remarks and time for questions. We have had some significant changes within the executive team over the last 12 months that have brought additional depth and expertise to the organisation. Although he is not with us on the call, I'm excited that Stephen Postlewhite officially joined Conduit as Chief Underwriting Officer in late January. Stephen brings a strong CUO background to Conduit and is quickly getting immersed into the business. I have no doubt that he will make an ongoing impact. William Randolph joined as the Chief Risk Officer last July. William has settled in well and has made some noticeable improvements to our risk functions already. We also welcome new talent in other key functions such as underwriting, modelling, actuarial and claims. We are now up to 68 employees here in Bermuda and we will continue to hire and invest in the business as we see fit. I would also like to mention some recent changes at board level. The board recently concluded its recruitment process to identify a new chair and I'm delighted that Nicholas Schott has agreed to take on the role. Nicholas joined the board in November with a strong background in financial services and advisory roles and is well suited for the role of chair. I look forward to partnering with him as we continue to move Conduit forward in the execution of our strategy. I would also like to thank Elizabeth Murphy, who will retire from the board ahead of the 2026 AGM as part of our normal board succession planning. Elizabeth was a founding director and has provided valuable guidance and insight as audit committee chair during her tenure. 2025 was a difficult and transitional year for Conduit that ended with a double-digit ROE after a challenging start to the year. Our portfolio continued to grow with gross premiums written increasing nearly 7% year-on-year to $1.24 billion. We found select opportunities to grow our business as markets softened over the course of the year. Catastrophe activity and risk reduction loss frequency remained elevated in 2025, with approximately $127 billion of insured catastrophe losses, according to AM. Our undiscounted combined ratio in 2025 was 101.5, reflecting our larger exposure to the California wildfires during the first half of the year and a benign second half with no U.S. landfalling hurricanes. We enjoyed excellent investment performance, which delivered a 6.7% return for the year, contributing $119.5 million of income. Our managed investments continued to grow by approximately $380 million over the last 12 months and reached $2.2 billion as of the year end. With a 4.2% book yield, the portfolio is producing strong recurring income. All in all, we produced $116.8 million of comprehensive income for an ROE of 11.1%. This result is below our mid-teens cross-cycle target and our initial expectations for the year, but is a reasonable return after generating a loss during the first half of 2025. Compared to the prior year, our net tangible assets per share increased 11.9%, including dividends, reaching $7.14 or £5.30 per share. We returned $59.4 million to shareholders through dividends and repurchased 2.7 million shares for $12.5 million through our authorized share buyback program, which has continued into the new year. for which authorisation expires at the May AGM, where we will seek renewed authorisation. Our balance sheet remains strong and our estimated BSCR of 252% at 31st December leaves us well capitalised. Turning to our underwriting results for the year, we continue to grow our top line at a steady pace during 2025. our growth was driven by a strong increase in casualty of 23%. Throughout the year, casualty rates remained firm and we deployed our capacity where we saw the best opportunities. Property grew a modest 2% and specialty was down 4% as market competition increased over the course of the year in both of these segments. Our balance between property, casualty and specialty has shifted slightly reflecting the strong casualty growth during 2025, which is now almost one third of the portfolio. Overall, risk adjusted rates reduced by 3% for the year, reflecting a 5% rate decline in both property and specialty segments, while casualty pricing was more firm and increased by 1%. Industry capacity continues to build with both traditional and alternative capital generating strong retained profits over the last three years, despite elevated loss activity. This additional capacity is being used to pursue growth strategies and driving more competition in the market. Our 2025 undiscounted combined ratio of 101.5% compares to 97.1% in the prior year. Our result was heavily impacted by the January California wildfires, which added 15.3% to the ratio. We have taken steps to remedy this in the future, which I will touch on in a few minutes. Property gross premiums written increased by $14 million to $659.4 million for 2025, representing a 2% growth over the prior year. After several years of strong growth and rate increases, growth has slowed as price softening over the course of the year. Capacity continues to build, driven largely by retained earnings for both traditional reinsurers and alternative capital looking to expand their business. This led to a 5% reduction in risk-adjusted rates on our renewal portfolio. Pricing has come off peak levels but remains adequate in our view. We will approach the market with discipline as we look to gradually rebalance the portfolio. Our undiscounted combined ratio for the property segment was 97.1% and increased from 90.2% in the prior year. The higher combined ratio primarily reflects our net exposure to the California wildfires and to a lesser extent, U.S. convective storms. The Atlantic hurricane season was notably active, producing three category five storms. However, none made landfall in the United States, contributing to a strong underwriting performance in the second half of the year. During the year, Angus Hampton was promoted to head of casualty. He and the team had a strong year engaging with clients and finding growth opportunities. Casualty growth premiums written increased $73.4 million to $392.3 million for 2025, representing a 23% growth over the prior year. Our growth has been focused on areas of the casualty market that are experiencing stronger pricing, such as US general third-party liability. We have deepened our support for partners that are taking a disciplined approach to managing the cycle. We also wrote some new business that complemented our existing portfolio. Across this segment, rates have generally remained stable after inflation, and our risk-adjusted rate change was up 1% during 2025. Pricing varies broadly across different casualty classes, and we are carefully watching the areas of the market that could show signs of improvement. Capacity for casualty business is generally stable. The industry continues to face challenges relating to prior year reserve development, which has helped maintain more stable pricing and terms and conditions. Our undiscounted combined ratio for 2025 was 99.3%. In casualty, we have maintained our consistent approach to reserving, which we regard as appropriate given its long-tail nature. The growth in our casualty book has also contributed to our strong cash flow and growing investment portfolio as we hold reserves against this business. This has positively impacted our investment leverage and ROE contribution from the portfolio. Specialty growth premiums written decreased $7.1 million to $191.3 million, representing a 4% decline over the prior year. Our contraction in gross premiums written in specialty reflects our disciplined approach to more competitive conditions, driven by overcapacity in the market. The market has shown growing appetite for specialty business over the last year due to the margin potential and the non-correlating nature of the risks, and this has attracted new entrants. We have come off business where prices have softened or commissions have increased meaningfully. Across our specialty business, risk-adjusted rate change was minus 5% during 2025. A specialty is made up of many different classes with differing price dynamics. However, softening has become more broad over the course of the year. There are a few classes where pricing has remained firm, such as aviation and some multi-line accounts. And we will look to deploy our capacity in areas which demonstrate the best margins. Our undiscounted combined ratio for 2025 was 100.3% and increased from 95.8% in the prior year. The specialty segment was impacted by a greater frequency of risk losses in 2025, including aviation events. A small proportion of the California wildfire also sits within the specialty book. Our team had another successful January renewal season. We worked hard in the lead up to renewals, in essence, beginning at Monte Carlo in September, spending significant time with clients and brokers to clearly communicate our appetite and make sure we receive a strong flow of business. Our reception in the market was stronger than it has been, and we saw a significant number of attractive new and renewal opportunities for our portfolio. As expected, pricing was more competitive at the January renewals, with overall renewal pricing down 5% across our portfolio. Property and specialty risk adjusted rates were down 7%, while casualty was down 1%. We have seen increased capacity in the market from traditional and alternative capital, particularly for property risks and specialty risks reflected in these figures. We have previously communicated our appetite to grow the balance of excessive loss within the property portfolio. We have started to write more excessive loss business and our treaty count has increased in this area. We have also found select new quota share opportunities with attractive pricing that we added to the portfolio. Our overall balance of excessive loss and quota share has not changed meaningfully as this is an ongoing process that will take time. Casualty conditions remain more stable. Primary rate increases in US general and third-party liability are starting to decelerate but continue to benefit from price corrections. In casualty, our team is working to identify new partners and opportunities to diversify the portfolio. At the January renewals, we wrote several new treaties and also increased our line size with select clients. Terms and conditions have generally remained stable for the US accounts. while international business has displayed more competition. Our casualty business is and will remain largely quota share, which is how Seedence approached the casualty market. In specialty, we saw an increase in new business, including excessive loss opportunities. We have remained highly selective of rates continue to soften at 1.1. Capacity remains strong, and we continue to see new entrants in the market, which has impacted signings. We participated on several new specialty placements, including a couple of new aviation deals where pricing has been lost. As we said previously, we expect the rebalancing of our portfolio to take several renewal seasons and we are pleased with the new excess loss opportunities that we've added to the portfolio. The market is dynamic and we are deploying our capacity based on the strongest opportunities we see rather than strictly following preset targets. As the market develops, we will adjust our appetite to find areas producing the best margin. Another critical piece of Conduit's transition has been our increased focus on reducing earnings volatility and better management of our net exposures. In 2025, we increased the size of our exposure management team. The team works hand in hand with underwriting and risk to monitor and manage our portfolio exposures, against preset tolerances for a variety of perils and regions at different return periods. With our results, we are disclosing new PML zones at the 100 and 250-year return periods. Our refined approach provides a more conservative and transparent view of exposures as they capture broader geographic zones. We believe this gives investors a more complete view of risk, particularly for extreme events. You will notice that we have experienced a year-over-year reduction in PMLs across almost all peak zone perils at both the 100 and the 250-year return periods. This primarily reflects our expanded retrocession coverage and increased limit that we purchased in January 2026. Our retrocession program also provides improved protection from secondary perils. which includes cover for wildfire, convective storm, floods and freezes. The California wildfires in 2025 highlighted the need for us to have more comprehensive coverage for these types of events. In 2025, we purchased additional retrocession cover following the wildfires to specifically address coverage for secondary perils. Our retro spend has increased for 2026, with this increased protection, but we believe that we have a program that will reduce earnings volatility and better protect our balance sheet from extreme events. As an example of this, if we apply our 2026 retro program to our gross loss for California wildfires, we believe our net loss would be reduced by at least 50%. I will now hand the call over to Elaine to go through our financial and investment performance.

Thanks Neil. The California wildfires in January of 2025 gave the industry a bumpy start to the year and Conduit in particular felt the effects of that event and experienced a larger loss than we would have liked for that type of event. The rest of the year was, however, relatively quiet for us from a loss perspective. Our investment portfolio performed well and we also had a benefit from tax credits from recent legislation passed in Bermuda, our sole location of operations. All in, we produced a reasonable ROE of 11.1% in a challenging year. We recorded $1.24 billion of gross premiums written for the year compared to $1.16 billion for the prior year, almost a 7% year-on-year increase. Our reinsurance revenue, which broadly speaking is IFRS 4 gross premiums earned, less seeding commissions, was $897.1 million for the year, compared to $813.7 million for the prior year, a 10.2% increase year-on-year, reflecting our continued but moderating growth strategy. As you will see in our segment notes or financial statements, we classed some business this year between our three divisions. After those reclasses, all three divisions still show growth in reinsurance revenue, with property and casualty showing growth in gross premiums written, and specialty slightly down on the prior year. Overall, the growth year-on-year reflects our view on the markets. Heading into 2026, we do expect growth to moderate further as the market softens, although pricing remains broadly adequate and there are plenty of opportunities to pick our way through. Seeded reinsurance expenses, which you can see in our R&S and are essentially our seeded premiums earned excluding reinstatement premiums, were $119.1 million compared with $93.7 million for the prior year. Our outwards cover has increased year on year as the Emirates book has grown in addition to price increases at the January 1, 2025 renewals, plus additional cover purchased during the year to address secondary peril exposures. That seeded reinsurance expense brings our net reinsurance revenue to $778 million for 2025, versus $720 million for the prior year, 8.1% year-on-year growth. On the loss side, 2025 was another active year in terms of industry losses, but with a different makeup of those losses than in 2024. where 2024 losses resulted from a broad mix of events, 2025 was very much characterised by the January California wildfires. Our undiscounted net loss after reinsurance and reinstatement premiums for that event was $119.1 million, a 15.3% impact on our undiscounted loss in combined ratios. For the prior year across Hurricanes Helene and Milton, we had a net impact after reinstatement premiums of $68 million, which had a 9.4% impact on our undiscounted loss and combined ratios. Our net undiscounted loss ratio for the year was 89.9% versus 84.4% for the prior year. The difference being driven by the larger impact of the California wildfires this year versus the numerous smaller events in 2024. Our net discounted loss ratio was 77.5% versus 73.3% for the prior year. you can see a higher impact from discounting on the 2025 ratio as compared to the 2024 ratio, driven primarily by the higher loss ratio. Just a reminder here that we made a policy decision to use opening rates to discount our non-specific incurred losses, but date of loss for material-specific events. Our combined reinsurance operating expense and other operating expense ratios were 11.6% versus 12.7% in the prior year. In the fourth quarter of 2025, the Bermuda government passed legislation introducing tax credits for companies that have a substantial presence and investment in Bermuda. Conduct benefited from this new legislation and we recorded credits of $6.9 million in our income statement, offsetting reinsurance and other operating expenses. Adjusting for the tax credits recorded this year, the ratio would be 12.5%, broadly in line with the prior year. Our combined ratio on a discounted basis was 89.1% versus 86% for the prior year, and on an undiscounted basis was 101.5% versus 97.1%. Our net reinsurance finance expense for the year was $77.2 million versus $30.8 million in the prior year. Our interest accretion was $61.1 million compared to $37.6 million in the prior year. and the impact of changes in discount rates was an expense of $16.1 million versus a benefit of $6.8 million in the prior year. You can see these numbers in our R&S and our financial statements. The accretion has increased in line with expectations as a relatively new company with growing reserve balances. We also had higher incurred losses in 2025, so more discount from those to unwind during the year also. The re-measurement to current discount rates reflects the changes in yields. Our net investment return was 6.7% for the year versus 4% in the prior year. I'll come on to investments in a bit more detail in a moment on the next slide. But just to wrap up on this one, our comprehensive income for the year was $116.8 million for an ROE of 11.1% versus the prior year of $125.6 million and 12.7%. So here's the investment bit. Book yield is now at 4.2% compared to 4.1% at the end of 2024, so reasonably consistent. As our asset base and investment leverage grows, the portfolio earns more income. Investment income is $80.7 million compared to $65 million in the prior year. With the reduction in yields in the year, we booked a net unrealised gain of $39.2 million versus $1 million in the prior year. As noted on the previous slide, our investment return for the year was 6.7%. Otherwise, around the portfolio, we continue to nudge duration up a little, but remain relatively short, and our focus continues to be on maintaining a high-quality, highly liquid portfolio. Duration is currently 2.8 years versus 2.7 years on our net reserves. Average credit quality is AA, and you can see the usual pie chart here with our asset allocation. This slide demonstrates what I just mentioned. You can see that as the business continues to grow and we remain highly cash generative, our invested assets also continue to grow. As our portfolio has become higher yielding over time, we produce more income, and as our investment leverage increases over time, that contributes more to our ROE. I'll now hand back to Neil for additional comments.

Thanks, Elaine. To close out, I wanted to quickly reflect on some of the key achievements over Conduit's first five years. From a standing start, Conduit is now writing more than 1.2 billion of premium annually with a diverse portfolio of property, casualty and specialty risks. We focus on classes that we know well and where we understand the risks. We have established strong client and broker relationships and have become a trusted market. Our portfolio is supported by a large renewing book and a strong flow of new business that we carefully select from. As market conditions change in any given line, we can shift capacity to areas where we see stronger pricing conditions. As we have deployed capacity, our growth has resulted in increased operating leverage for the business. Our gross premium leverage is 1.1 times our shareholders' equity, and our managed investments are up to two times our shareholders' equity. We have paid a steady dividend since inception, providing an attractive yield on our shares. Dividend payments through 31st December 25 have totaled over $267 million, or nearly $300 million with the final dividend declared today. That will be paid in April. In addition, we initiated a buyback program during 2025. We expect to continue to provide attractive capital returns to our shareholders, through dividends and buybacks going forward as market conditions and capital requirements warrant. Lastly, we have strengthened the team as we move beyond that startup phase. Our business has grown and now requires different skills and expertise. Our team has increased to 68 staff here in Bermuda, and we will continue to grow and invest as needed to move our business forward. We have generated profits in each of the last three years, not at the level we think we can achieve, But all in, we believe that our business is now well positioned to deliver attractive returns for shareholders through dividends, repurchases, and growth in net tangible assets per share. In closing, we are pleased with the progress we have made post the California wildfires. We have maintained our presence on select lines we regard as price adequate, whilst we have also exited some treaties that no longer meet our pricing requirements. Our return on equity of 11.1% was slightly better than it could have been, given the size of our exposure to the California wildfires at the beginning of the year. The benign hurricane season led to solid underwriting results in the second half of the year, which was supported by strong investment returns. During the year, we have taken steps to improve the execution of our strategy, and we believe this leaves us well positioned for 2026 and beyond. We have strengthened our leadership and underwriting teams by attracting new talent to the organisation. These individuals bring additional expertise and fresh perspectives that will improve the resilience of our business. As the market softens, we remain committed to finding profitable opportunities. We are happy to walk away from business that does not meet our requirements and have demonstrated this during the January renewals. Having said that, conditions are dynamic and we've also found select opportunities for growth and new business. We are committed to reducing volatility as we gradually rebalance our portfolio and maintain a more comprehensive retrocession program. We believe that we are well protected from severe peak and secondary perils based on our modeling. Our balance sheet remains strong and we are returning excess capital to shareholders through dividends and share repurchases. which will continue to be a focus as we prioritize capital efficiency and prudence. Thank you, and we are now ready to take your questions.

Thank you. If you are dialed into the call and would like to ask a question, please press bar followed by the number one on your telephone keypad. We will pause for a moment to assemble the queue. We'll take our first question from Abid Hussain from Tanvir Liburum. Please go ahead.

Oh, hi, everyone. I've got three questions, if I can, please. The first one is on pricing. I know you've given quite a lot of color there, but I just wanted to ask you to step back and just give us a sense of how you would characterize the overall pricing environment for 2026. And do you feel there are indeed enough lines adequately priced and and then just how quickly does it usually tip over to that sort of inadequate territory based on your past experience is it sort of like a cliff edge or does it actually take quite a bit of time so sorry for that that's a long first question and then the second one is just on casualty just wondering what's your thinking on on growing in in that line

then finally on the share buybacks um could you just talk to under what conditions you may increase the share buyback thank you right um thanks a bit so um in terms of pricing there are um plenty of areas which we regard as rate adequate the market is still priced well above levels that it was priced at when we did the ipo and Yes, the market has made a lot of retained profits. There is pressure, downward pressure on rating. But there is not this cliff edge that you've alluded to. At least I would not expect to see that. There are disciplines, there are guardrails, there is... a stage where pricing has a technical level at which people will start coming off business if it hits that technical level. So my view is there is not a cliff edge coming. There is overcapacity. That's as a result of the capital derived from retained profits. But by and large, we see terms of conditions holding, we see deductibles holding, and we see a market that's priced well above where it was when we IPO'd. So we see plenty of rate-adequate business. Casualty, you mentioned, that's been one of the strongest of the three segments, rating up over the last year plus one after inflation and adjustment for terms and conditions. It was off one at 1.1. We continue to see a good showing of business. We have taken, we've come off some accounts, you know, if there's any concern over rate adequacy on those accounts. And casualty is a broad spectrum of business. It's the general liability where we see rates strongest. Rates have come off on financial lines, D&O. But we have been able to selectively increase the portfolio. We believe that our reserve strategy on casualty has been utterly consistent and the casualty account is one of the reasons leverage and can achieve the good results in the good results we've had on investment returns. Share buybacks. We did publish a strategy on share buybacks back at the interim stage and We have been buying our shares and the R&S has been extremely active every time we buy shares that will be announced. We announced the 50 million authorisation and we are working our way to buying stock which that authorisation is in force until May. We will seek to renew that authorisation. We did temporarily suspend the share buyback program as we went into the hurricane season. We regarded that as prudent at the time. And then as we got through the hurricane season, we resumed that repurchase. In line with the strategy that we published, where we have surplus capital after we've paid dividends, we will buy our shares and we've been doing that. And we said in this announcement, we continue to have appetite. So within the bounds of prudent management, we have appetite to buy our shares.

Our next question comes from the line of Michael Hutner with Derenberg. Please go ahead.

Fantastic. Thank you. And these are lovely results. I had three, four. So on Vetro... Maybe I'm wrong, but I heard that the total cost of retro is actually up, 26 versus 25. And I just wondered whether, because I thought that buying the secondary apparel kind of retro within the whole account would be a little bit of a saving. I just wondered, I'm clearly wrong, but maybe you can provide some comment. On the buyback, when you say renew, does it mean just the same old 50 million whatever hasn't been used or would it be an extra 50 million? And also maybe you can tell us the figure today. I know if I added up the NS, but it takes a long time, so I'm sorry. On the investment income, I wonder what the best ways of calculating kind of a number for 2026 are. So I just use the 4.2%, which seems to be the market yield, and multiply by whatever guess I have of investment assets, which are growing nicely. And then the final one, I'm really sorry, I'm hogging the line a bit, but casualty, the profits release kind of profile, it feels like in 2025, On the underwriting side, you had a combined ratio close to 100, so nothing released. But I just wondered when that might change. Thank you.

Okay. So, Michael, I'll deal with the retro question. Then I'll pass back to Elaine for the...

investment side, and then we'll deal with the casualty question. It's a much more comprehensive programme, and that's reflected in the PMLs that we publish, and we have got secondary apparel coverage throughout the entire programme. The cost of a reinsurance programme is a function of the overall premium income, and our income is up So in percentage terms, it will not be a million miles different, but it is a much more comprehensive program. And I would suspect that on an ongoing basis, it's reached an equilibrium level. You know, we flagged growth obviously will moderate. We flagged where pricing is. But I'm pleased with the retro program. We don't disclose exact costs. There are commercial reasons for that. But we try and disclose net exposures. And that's really as far as I can answer. On investments, Elaine.

Yeah, on investments, Michael, yeah, I'd use your market yield. We do expect to see some rate cuts this year, but I think that's a reasonable starting point. You might just want to nudge that down a little bit as a result. I'm just going to go back to the question on the share repurchase as well. We tend to ask for a kind of standard authorisation at the AGM. have done over the last number of years. So that's the bit that we'll repeat. In terms of what size we want to determine for going forward, we won't be announcing that until May, so that you'll get that from us then. And then on the casualty side of things, our reserves are still fairly young on the casualty side. It is still fairly early stages in the development of the first few years of the company. And in that kind of five to seven year period, stages when we start taking a closer look at those. 21 and into 22 were still fairly small years in terms of the casualty portfolio as well. We were writing and earning out premium fairly slowly at that point, so it's not such a sizeable impact in terms of the book at that point as well, but it is still fairly early stages. And just a reminder that in our reserving approach, we do put a risk adjustment on top of our reserves as well, and that tends to be, a larger chunk of that tends to go towards accounting to put than other books.

If I... Yeah, sorry.

Go on, Michael.

No, no, I was just asking, Elaine, would you have the BIVAC as of today?

Yeah, so as at today, at year end, it was 12.5 million. As at today, it's 17.8, part of the overall. And we continue to be active, which you will be able to see on a daily basis on the R&S.

Thank you. Our next question comes from the line of Andreas van Emden from Wilhelm. Please go ahead.

Yes, hello, good afternoon. I have a question around the pricing environment. You say that terms and conditions seem to be coming under some pressure across the industry. Could you maybe highlight where you're seeing this across your own portfolio? And if there is some slippage in terms of conditions, how are you trying to address this as you renew your book? And the same actually for seeding commissions. You sort of mentioning increasing seeding commissions, which would sort of push up your acquisition costs. Is this something you can mitigate within your underwriting program? And then finally, just going back to the California wildfire losses, Mercury General yesterday published results and they showed that they are planning to recover significant losses from the from the Eton exposure. You're talking about a recovery of 55% to 70% of their incurred losses. I'm not sure whether mercury is part of your insurance program or not, but would you, if some of your insureds or cedents would be able to recover from the Eton section of the wildfire, would that be a positive for Conrad Rhee? Thank you.

Right.

Yeah. On the pricing environment, you specifically referenced terms and conditions. I think we basically feel the same. The US reporting season has happened. People were basically saying, while rate is off, terms and conditions have largely held up. What is most important is... underlying attachment points. The market attachment points elevated as the market hardened and were driven away from the action. We see that still largely holding up. There have been a few instances of expansions of cover in sort of areas such as specialty. I don't want to go into class specific within specialty because that's quite sensitive. Seeding commissions, very often it's reflected in the performance of the treaty where you have a very good performing treaty. The client will be asking for more seed. Seeding commissions rising are a function of a softening market. There are plenty of accounts where seeding commissions are actually held stable. So it's some and some, but the way we price business is on a net basis after taking into account all seeding and acquisition costs. California wildfire. We are aware of the subrogation, particularly as it relates to Eton. Our number, we have held stable at this junction. We have not taken into account substantial subrogation. What I would say is that the market is more exposed to Palisades than Eton, where the expectation is there will be less subrogation. So at the moment, we are taking a watching brief. We've held our number at around the 118, and that's our position for now.

Our next question comes from the live is Joseph Tins with Autonomous. Please go ahead.

Hi, good morning to Bermuda. I was hoping to get some clarification, I guess, on the retro program within the property book. When you say that that increase in 2026, is that relative to the one-on-one timeframe in 2025? Or is that another increase following the increase, you took postal wildfires. So it's just a case of understanding whether it's sort of, we're seeing an additional, I suppose, increase in a retro cover that you've purchased. And then the next question I've got is just in terms of the property book, can you give some kind of flavor in terms of how much new business you've written relative to cancellations? You know, did you... cancel more business than you wrote. And, you know, how much of the, you know, how much of that you cancelled was in the quota share relative to the XOL business. Thanks for answering my questions.

Okay, so overall, there has been, the retro program is much more comprehensive. It includes secondaries all the way through up to a very high level. We do publish on a more comprehensive basis our PMLs and have changed the basis we report to a North Atlantic windstorm as opposed to Florida. The North Atlantic will cover all territories on a multiple basis. The return periods or the losses at the 100-year and the 250-year return period have come down year on year. We did purchase more coverage after the wildfire, but some of that was specific to protecting ourselves against wildfire exposure. At 1.1, we we now have a more comprehensive programme. I shall leave it at that because we don't disclose specific limits and cost because of the fact that that is commercially sensitive. But I would refer you to slide 11 on the PMLs. In terms of property, we have voiced a desire over time to limit or to rebalance the portfolio. That will not occur on casualty. Casualty, the clients purchase quota share by and large. So the casualty, but then again, in casualty, you don't get the natural peril accumulation. On property, we have come off some quota share and we have written a reasonable new amount of excessive loss. It's work in progress. It will take time, but we are coming off quota shares and writing. And in the announcement, we haven't published details of what we've come off and the amount of new excessive loss we've written. We want to get through the year, but it is work in progress.

Okay, thank you. If I can just ask, it's a bit jiggy, but if I can ask a quick follow-up question about the PMLs. If I look at the financial statements, the reported PML for the North American windstorm was 16.6%, and in slide 11 it's 10%. Is that reduction completely due to the increased retro cover or is it some of it also to do with sort of the nat cat risk that you've taken on that has reduced relative to sort of last year just trying to get an understanding of the shift there Hi Jo it's 31-12 versus 1-1 and yeah most of that change is driven by our hours programme Okay great thanks for confirming that

Our next question comes from the line of Ivan Bokhmet with Barclays. Please go ahead.

Hi, good morning or good afternoon. Thank you very much. I've got two questions. The first one is regarding the ROE outlook. You're suggesting that clearly you haven't kind of maximized the potential in 2025. So I'm just wondering if you could maybe outline the medium-term trajectory within the context of what we're now seeing as a softening reinsurance market. You think getting back to that 15% is a possibility up until the market has reached the bottom and turned? And then the second question is going back to the 1.1 renewals. I was just hoping that you could talk a little bit more about whether if you compare the volumes at renewals, have you actually grown the book? And as you think into 2026, do you anticipate growing the book at further renewals? You've referred to some growth slowdown. Maybe you can try to help us understand what degree of slowdown are we talking about? Thank you.

So In terms of ROE, what we have discussed in the past is through the cycle, mid-teens, there will be, there's two things. There'll be, even in a hard cycle, there'll be different loss patterns. We're in the fortuity business. At soft parts of the cycle, one would expect the ROE over time to be below that figure. And there'll be years when the market will publish rates above that. We are in a softening part of the cycle. We made 12 in 24. We made 11 last year, although it was impacted by that one particular event, California. So, I mean, I don't want to get into outlook. We are aware of analyst consensus and and that's where I'll leave it. In summary, parts of the cycle will be less than 15 and there'll be years will be more to an extent it's fortuity and market loss driven. In terms of growth, we flagged the fact that the emphasis is not on growth. The emphasis is on capital management quality. We will be very mindful of price adequacy when we are looking at business. We've had a good year end and We are coming off business where it doesn't mean we're writing new excessive loss business. We did say the year end has been good. We are aware of what analysts are saying in the market. And I mean, it sounds like I'm being evasive. I just do not want to give a forecast for the year on premium. It's early days, other than to say we have had a good year end.

Thanks, Neil. Maybe I could just also follow up on the subsequent renewals during the year. Do you expect the dynamics to change in any way in terms of price or in terms of terms of conditions or some classes of business that could shift?

No, what we've seen is we've seen overall pricing, and that's a function of the capital supply into the market. Different parts of the market have held up better than others, casualty being the market that has softened the least. I don't expect radical shift. In individual underlying classes, there could be impacts. There are losses that may settle out that are in the market, which could impact individual contracts. Overall, I would expect a continuance of conditions, a holding up by and large of discipline as it relates to attachment points in terms of conditions, and a continuing softening in pricing not dissimilar to the levels we saw at 1.1. Thank you very much.

Our next question comes from the line of Ben Cohen with RBC Capital Markets. Please go ahead.

Oh, hi there. Hello, everyone. And I just had two questions. Firstly, I just wanted to follow up on Ivan's question about the ROE outlook, because I think you had said earlier that the market pricing is still better than you had assumed at the time of the IPO. So I just wonder why you couldn't be confident that you're going to hit a mid-teens ROE this year, obviously allowing for sort of weather volatility. And the second question was, I think, going back to my notes, you had previously been giving an outlook of a sort of low 80s combined ratio. Thinking about rolling that forward, are we really looking at kind of price and then the additional cost of retro in terms of where we would come out for 2026 or other material things that you would want to flag there?

So if I take the ROE outlook, I can really only reiterate what I said.

Yes, at the time of the IPO, we expressed the desire to hit mid-teens ROEs. What we did know at the time of the IPO was that we were in a rapidly hardening market, and that did come to pass. fueled both by investment losses and hurricane in 2022.

The market conditions are at or above 22 levels.

We are just being, I think, prudent.

The retro cost is not a factor that would drive different approach on ROEs

at this time. What we have got is market conditions and loss experience and analyst forecasts are assuming a combined ratio that is well above low to mid 80s on the old basis. So there's a lot of change. I mean, Elaine, would you like to comment on in terms of combined ratio prospects?

Yeah, sure. Hi, Ben. I think previously when we were talking about those levels, we were talking about that as being emerging. It was in the underlying book and did always remind people then about how we reserve, which is to add a risk adjustment on top of that. And bear in mind our reserving approach in there as well. I think also we have seen some changes in the mix in our book. We have stayed a little bit longer with quota share than we perhaps anticipated, and we are riding more casualty, which tends to be higher ratio anyway and tends to be where more of our risk adjustment sits. So that all has an impact as well, plus a little bit extra in terms of outward spend.

Okay. Thanks very much. That makes sense. Our last question comes from the line of Michael Hutner with Berenberg. Please go ahead.

Lovely. They're really short, I think. One is, you talked about risk adjustment a few times. Is there a figure we can see or a feel for how it's increased year on year? The second is, you mentioned alternative capital. There's a bit more of that. I know some of your peers or competitors actually kind of use that. They almost like a fee basis, so they kind of use that as kind of add-on extra capacity, and they take a fee, and I just wondered, have you looked at that? And then the last point, the feeling I have is that you're incredibly strong, I mean, much stronger than in our models, I keep having to raise them in terms of investment income, investment assets, and you start the year basically making a lot of money before anything you have to do much. Is that something which... I don't know how to phrase the question because it's a bit forward-looking, but is it something that people are kind of underestimating? I don't think people on our side, because we're kind of... I'm a bit kind of... but your counterparts, the brokers, when you speak to them and you deal with them, are they incorporating the fact that you're making a lot of money in investment income and so saying, well, you don't need that much, or is that the investment income something you get to keep?

Elaine, do you want to deal with the risk adjustment?

Yes, sure. Michael, you will find that in our financial statements. We have a loss note in our financial statements, note 15. It was $78.9 million last year. It's $123.4 this year. It tends to be a fairly consistent percentage of our overall reserves.

Good. Thank you, Lynne. So it's increased year on year by about $50 million. In terms of alternative capital, there are... Alternative capital manifests itself in the form of ILS funds, insurance linked securities. And we do ourselves by some retrocessional coverage of some of those funds. There has been a growth in the amount of capital in that area of the market. So that has created the plentiful supply. Well, it's contributed. It hasn't created. It's contributed to the supply of retrocession funds. There are some companies in the market that actually manage ILS funds. One particular London-based here, and there's several traditional P&C carriers in Bermuda that also manage third-party funds. We do not do that.

We write conventional property cash to specialty through our licensed carrier. We buy retrocession, protecting that account, and we do buy it from some alternative capital markets.

So that's my response on that. Yes, the investment portfolio, I mean, we can't be more plain and clear as to the amount of gross assets we have under management. That is partially clear. a function of the reserves we carry against our casualty. And we comment on the basis on which we reserve, which we regard as consistent. I think on previous questions, we've covered the duration of the tale. And what I would say is as the book matures, if you look back to the early years, it was much smaller. So initially the releases will flow more cautiously. And I mean, but over time, that aspect will develop. But for now, yes, you're right. The gross assets are there.

We have investment leverage.

Okay. There are no further questions on the conference line. I will now hand over to Neil for closing remarks.

So thank you for attending, and thank you for the questions.

We look forward to a further update at Q1, and then we have our AGM around that time in May. I'd like to thank the board of the company, the management team. We have worked hard through 2025. It was an interesting and difficult start to the year, but it's turned out H2 was satisfactory. Thank you all. We will see many of our shareholders face to face over the next few weeks and quite a few of the brokers. And that's it for now. OK, cheers.