Hiscox Ltd

Nice to see you all and thank you for joining us here. 2024 has been another strong year of delivery from Hiscox. We're achieving broad-based growth and positive earnings momentum across the group. We've increased our revenues by around $170 million in the year, of which about $150 million has come from our retail business. And the quality of this growth is is reflected in the undiscounted combined ratio at 93.6% and retail profits of around $300 million. Our effective cycle management in Big Ticket means we've been able to achieve an excellent undiscounted combined ratio of 81.6% in an active last year. With each of our segments delivering strong results, our group for the second year in a row is reporting record profits at $685 million and an excellent return on equity of 19.8%. With the strength of our business performance, and in particular the accelerating momentum and improved confidence in the retail business, this creates the flexibility to pursue multiple growth opportunities and to step up our progressive dividend. We're increasing our final dividend by 20%, which means a full year 15% increase to our DPS, And we're also announcing a further substantial special return of capital of $175 million through a share buyback, reflecting the strength of the capital generated in the year, the robustness of our balance sheet, and the confidence we have in the quality of our underwriting. So taking all of this together, our business performance is such that we can pursue an ambitious growth plan and return 10% of Hiscock's equity to our shareholders. Now, as usual, I'll go through each of our business segments, beginning with retail. We're achieving growth and earnings momentum across our retail business, as the management actions we've deployed over recent years are now beginning to show up in the P&L. For example, our UK business is now growing at its fastest rate since 2018, as management actions on brand technology and distribution are building momentum. Our European business has once again delivered strong growth with a further pickup expected in 2025 as new distribution partnerships come online, including a new bank assurance relationship in Spain. In USTPD, we've once again delivered strong double-digit growth in our direct-to-consumer business as our customer acquisition and cross-sell initiatives take effect. In digital partnerships, we've delivered robust growth, albeit at a more moderate pace, as due to one or two of our more established partners lowering their production. The vast majority of our partners are growing strongly with us, and we continue to broaden and diversify our partnership network. In U.S. broker, the business has contracted in 2024, albeit on an improving trend, and I expect the business will return to growth in 2025. I'm going to focus just for a moment on some of the key management actions that are behind the improving momentum. In the UK, our brand campaign, which many of you will have experienced and seen, has now won 18 awards. But more importantly, it's delivering tangible results. We've seen a material increase in our brand awareness, an increase in our organic branded search, and increased click-through rates to our UK direct portal. In UK and Europe, we're rolling out AI solutions to our broker channels to improve underwriter effectiveness and efficiency. And you'll hear in a moment from Joe on how we're exploring the potential of AI and other technologies to improve underwriter productivity and access new markets. In US DPD, we've deployed a range of marketing initiatives that have helped sustain that double-digit growth rate in direct-to-consumer, and we've added 17 new partners to the digital platform. In US Broker, Mary and the team have deployed a range of initiatives to return the business to growth. including measures to streamline the underwriting process, adding new product, adding new distribution capability. And these are leading to an improvement in new business conversion and customer retention. And across all of our businesses, we're expanding our distribution reach through multi-country specialist MGA opportunities, adding new broker deals and adding partners to our platforms. All of these initiatives will continue to build momentum over time. So lots of great work done in 24 with more to come. Now turning to our London market business, our teams here have once again delivered a strong set of results. This is the fifth consecutive year our London market business has achieved an undiscounted combined ratio in the 80% range. This strong performance is underpinned by a disciplined cycle management, which means we grow where we see attractive opportunities and we manage the cycle in other areas. For example, property has been an attractive segment and we've achieved growth in a number of portfolios. Our market-leading crisis management teams have generated substantial growth against the backdrop of geopolitical uncertainty. In contrast, in our casualty division, where market conditions have been less attractive, we've taken proactive action to manage the cycle there. And those actions have meant this division has remained profitable throughout the period. And in marine energy and specialty, our growth has been impacted by a decision to exit the space class of business, where rates and terms have not evolved in line with underlying risk and complexity. Once again demonstrating we will grow and shrink based on our view of risk and our assessment of the medium-term prospects of the market. Turning to RIA and ILS, our teams here have delivered a fantastic result. We've increased net premiums by over 11% and delivered a combined ratio, undiscounted combined ratio of 69%. In RE&LS, we've more than doubled our net premiums since 2020 as we've grown into the hard market. And since the end of the year, we've had a good January renewal season, where again, we've deployed incremental capital and achieved solid net premium growth. Now, as you know, as part of our RE&LS business, third-party capital management is And our strategy to manage that has been integral, an integral part of the business model for many years. And during the course of the year, we attracted $460 million of new inflows into our ILS strategies, which have gone a long way to offset the planned capital return. And we continue to broaden and deepen our quality share partnerships. Not only is this strategy integral, it's a material contributor of earnings to our re- and ILS business. And in the year, we recorded record fee income of $128 million. I want to spend a moment just to reflect on how our business has grown and evolved over the years. And as you can see here, we've grown our retail business to $2.5 billion of premiums during the course of the year. And we've grown faster than the market. And indeed, growth momentum is now picking up again after a period of consolidation, a period during which we've added new leadership, We have reinvigorated the brand, we have replatformed much of our technology and we've added capability to our distribution. And we're also benefiting from favourable external secular market trends, including strong new business formation, the emergence of new professions and increased digital adoption. All trends that are set to continue over the long term. So this is an incredibly exciting time for us at Hiscox, where we have more certainty and greater confidence to capture that structural growth opportunity in the US, in the UK and in Europe. And in our big ticket segments, we've captured the opportunities of the hard market in a disciplined way. In RE and ILS, we've increased our net premiums by 159% since 2020 as we've grown into the hard market. In our London market business, where the business is much more diverse, we've been managing, proactively managing the micro cycles to optimise returns. Again, for example, property has been an attractive segment over this period, and our major property premiums have increased by 45% since 2020. In contrast, D&O and cyber is where we've seen multiple years of rate declines. We've reduced our premiums by around 30% over the same period. It's this discipline which underpins the profitability of London market over many years. The Hiscox business model is unique with that balance between our cyclical big ticket businesses where our entrepreneurial culture, our underwriting pedigree combined with effective cycle management leads to periodic surges in growth and profitability. And our retail business where again our entrepreneurial business building culture combined with our specialty underwriting capability, our brand and our broker and digital platforms position us very well to capture the long-term structural growth opportunity and the benefit of compounding through the insurance cycle. And over the years, our business has grown and evolved such that today, retail profits make up 44% of the group's total compared to 34% 10 years ago. And this gives us the confidence to pursue multiple growth opportunities, and to step up our final dividend by 20%. So in summary, it's another strong year of delivery from Hiscox, a year in which we've delivered high-quality growth, record profits, accelerating momentum in retail, substantial capital generation, a significant step up in our progressive dividend, and a further substantial return of capital to our shareholders. An exciting time ahead for Hiscox. On that note, thank you. I'm going to hand over to Paul to provide an update on our financial performance, followed by Joe to provide an underwriting perspective, and then I shall be back to wrap up.

Thanks, Aki, and good morning. It's great to be here with you today presenting another great set of results. The group is delivering on its promise. We're achieving high quality growth with insurance contract written premium increasing by 169 million as growth momentum builds across our retail business. Pleasingly, this was achieved with an excellent undiscounted combined ratio of 89.2 in an active loss year and an insurance service result of 554 million with strong results in each segment. We continue to make good progress in improving our expense ratio. This has fallen by around one percentage point for the second consecutive year as we continue to manage our costs carefully. Other operating expenses are up 19%, reflecting continued brand investment, which increased 25%, investments in efficiency savings, and a one-off cost relating to the sale of DirectAsia Thailand. The group's profitability is supplemented by the investment return of £384 million, as cash and coupon income continues to grow. The growing underwriting profits and the strong investment result has delivered a profit before tax of £685 million, up 9.5% on last year's record profits. This has resulted in substantial capital generation, an excellent return on equity of 19.8%, and an estimated BSCR of 225%. Our high quality growth and building of momentum in retail supports a step up of our progressive dividend with an increase in the final dividend of 19.6%. In addition, the substantial capital generation allows us to make a special capital return of 175 million in the form of a buyback. Our strong financial position enables us to make this special capital return. despite the tragic events in California in Q1. The group estimates a net loss from the California wildfires of around £170 million, at an industry loss of £40 billion. This will be booked in the first quarter of 2025, with £150 million expected to be recognised in Rhian ILS, and £10 million in each of London Market and Retail. The buyback together with the total 2024 dividend, means that we plan to return around £320 million, or 10% of 2024's opening equity, demonstrating our disciplined approach to capital management. And you can see the benefits of this in NAV per share, which has grown by 14% year on year, driven by a combination of strong earnings and the capital returns completed during 2024. The Bermuda corporate income tax came into force on 1 January 2025, and this will increase the group's effective tax rate to between 15% and 20%. In relation to this, we have recognised a £155 million deferred tax asset. However, under new OECD guidance published in January, the future benefit of up to 80% of this asset is uncertain. Following new BMA guidance, we have recognised 20% of the DTA in capital for 2024. Delving into these results a little further, starting with our retail segment, Hiscox Retail ICWP grew by 5.1% in constant currency to £2.5 billion, driven by continued good growth in Europe and USDPD and improving momentum in the UK. U.S. broker continued to act as a drag on retail growth, shrinking 4% in the year, and we expect U.S. broker to rotate back to growth in 2025. The retail insurance service result increased by 39% to 247 million as a result of an improvement in the undiscounted combined ratio of 2.8 percentage points to 93.6. To achieve this level of profitability while continuing to invest in growth is a pleasing result and reflects the quality of growth being achieved. In 2024, we concluded the sale of DirectAsia Thailand. The remaining DirectAsia business is held for sale and won't be reported within the retail results going forward. Moving on to London Market. ICWP declined by 2%, reflecting our proactive cycle management within casualty and our exit from space as the group remains focused on risk-adjusted returns. And this is evidenced by an undiscounted combined ratio of 88.6, marking the fifth consecutive year in the 80s range, despite an active loss environment, with several US hurricanes making landfall and a number of man-made losses. Turning to REE and ILS, Net ICWP is up 11.1% as the business has continued to deploy additional capital into attractive market conditions. The strength of the portfolio we have built is demonstrated by an insurance service result of £166 million and an undiscounted combined ratio below 70% for the second consecutive year. An excellent performance in an active loss year. This is recognised by our third-party capital providers with new ILS inflows of £460 million and growth in outwards quota share capacity. These alongside higher profit commissions following the fantastic underwriting results in both 2024 and 2023 have resulted in record fee income of £128 million. Looking at investments. Returns from coupon on cash have continued to grow as higher yields have earned through delivering an investment return of 384 million or 4.8%. The reinvestment yield has fallen slightly to 4.6% while the quality of the fixed income portfolio remains high with an average credit rating of A. Through the course of the year, we have extended the duration of our assets to 1.8 years to more broadly match that of our claims liabilities. And these strong investment returns should continue to provide a tailwind for the group. Moving on to discounting. The net discounting impact from IFRS 17 was a positive 16 million in 2024. The IFI unwind of 154 million is in the middle of the guidance range of 135 to 165 million. And for 2025, we expect the unwind to be between 125 and 155 million. we've updated the interest rate change sensitivity to reflect market conditions and the balance sheet as at the 31st of December. Looking at reserves, our conservative reserving philosophy remains unchanged with a risk adjustment of 267 million and a confidence level of 83% within our 75 to 85% range. In addition, our LPTs cover over 37% of gross casualty reserves for 2019 and prior and provide protection from inflation and other pressures. Turning to reserve releases, the group has continued its long history of favourable reserve development with a release of 146 million or 3.7% of opening reserves for 2024. The group's prudent reserving has delivered sustained releases with all recent accident years below the initial estimate and continuing to run off favourably. Finally, an update on capital. The group has generated significant capital in the year, reflecting excellent profits, the recognition of 20% of the Bermuda DTA, as well as the benefit of some technical optimisation. The group remains strongly capitalised, even after the impact of a significant loss scenario. And as you can see, This strong BSCR position means we are again able to announce a special capital return of $175 million via a share buyback after taking into account our ambitious growth plans and capital required to maintain a strong balance sheet. Even after the impact of the new buyback, the step up in the ordinary dividend and the expected loss from the California wildfires, the group's pro forma BSCR remains strong at 198%. The step up of our dividend reflects our high quality growth and building momentum in retail. And going forward, we expect to return to a more steady period on period increase in DPS growth. I will now hand over to Jo, who will provide you with an update on underwriting.

Thank you, Paul. And good morning, all. So you've heard how we've grown and delivered an excellent underwriting profit as we continue to benefit from a portfolio of quality, balance and choice. Our effective cycle management and our underwriting strategy of cyclical growth in our big ticket business and structural growth in our retail business gives us the opportunity to expand profitably through the cycle. Looking at our business in more detail, retail growth momentum is building. Commercial is up 5% in constant currency, with improving US DPD growth. In UK, we've got pleasing double-digit growth in general liability and commercial property, and in Europe, emerging PI and general liability. Our accelerated growth in art and private client continues, and we've grown that 8%, with UK high-value household a standout at 18% growth, as we benefit from our expertise in and an AI solution rolled out to help our underwriters. And then reinsurance, the market remains favourable. We have incrementally deployed our capital. We've grown 4% growth and 10% net, leaning into things like international and proportional where we've been underweight. And London market, attractive but more nuanced by line as we manage the cycle in some portfolios and react to market trends in others. As an example in specialty, we've exited the space market. We didn't believe that there was a route to profit because we believed the risk had fundamentally changed. In product recall, it's challenged and we've exercised discipline. Outside of these, specialty has grown 6% and London market terror 16% as we see attractive market opportunities. In marine and energy, hull and renewable operations have grown well. Liability and renewable construction have been affected by market trends, the latter because there were just less construction projects in the market in 2024. And in casualty, DNO continues to shrink, continues to soften, and we have shrunk 13%. General liability, we're still taking rates, and it's growing. But overall, I'm really pleased with how our London market team continue to manage the various microcycles in their portfolio, delivering another undiscounted combined operating ratio within the 80s. So moving on to rate and market, the graph on the left-hand side will be familiar to you. This is our rate index back to 2018 for our various segments. And the attractive rate environment sustained in 2024, London market rates up 2%, the reinsurance rates hold in, Retail at 2% are most generally less cyclical with regard to rate. Taking rate has been necessary in our retail portfolio over the last few years as we've dealt with a higher inflationary environment, where we continue to see a positive delta between claim inflation and the assumptions that we took. As you know, 1-1 is a key renewal date for us, and we typically write about 45% of our reinsurance business and about 20% of our London market business in January 2021. And for the first year in about seven, we saw some rate decline at 1-1 renewals. So rates were off about 3% in London Market and about 8% in our reinsurance property CAT. Now, what we've shown on the right-hand side is a view for you of our view of rate adequacy within the portfolio. And you can see the vast majority of our portfolio is priced to deliver attractive returns in a mean loss environment. Whilst we're a net beneficiary of reinsurance rates, we're also a significant buyer of reinsurance, and our Outwards team did a great job at 1-1 of placing our own programme at substantial savings. So moving on to claims, and the very busy first half continued with a very active second half. Managing and paying claims is exactly what we're here for and how we earn our reputation. Like others, we look at our claims through the lens of attritional, large, and cash. From a traditional point of view, frequency was slightly up, returning to more normal levels. From an underwriting point of view, it's all about anticipating current and emerging trends. It's all about understanding inflation and then ensuring both of those are taken into account and reflected in our rates and our terms. We were also notified of many large risk losses in 2024, well over 200 losses notified to us of claims in excess of a million dollars. And that's about an 8% increase year on year. From an underwriting point of view, it's all about spread, it's all about balance and diversification, and then managing our exposure through both line size and risk sharing with our partner reinsurers. And then catastrophe, you know, 2024 was a very active NatCat year with over 145 billion of insured industry losses. Again, from an underwriting point of view, it's all about us being focused on understanding that change in nature of peril, utilising our own view of risk and marrying that to the external science and models on a forward-looking basis. And also we're a utiliser of third-party capital and reinsurance for both relevance and also to protect our peak volatility. So in summary, 2024 was a very active year from a claims point of view, but we served our customers well, and our portfolios demonstrated resilience. So whilst not in our numbers, California had a devastating start to 2025 with the Los Angeles wildfires. And of course, our thoughts are with all of those who were affected by this event. Our number one priority is to support our customers and sedents. and we have already paid over 70% of losses presented to us. We understand our loss and our exposure through both a top-down market share analysis and also a bottom-up analysis working with our customers and sedants. And as you've heard, we've estimated our loss for this event to be $170 million, and that's based on a $40 billion industry loss. The vast majority, $150 billion in our reinsurance segment. We then look at a post-event evaluation and we check the loss against our models and then we look at our capital and reinsurance. Our loss is within modelled range. We were an early adopter of the version 12 model change, which was at the back end of 2024, which saw a significant uptick for wildfire. You heard from Paul, our capital remains very, very strong. And in terms of reinsurance, our London market programme intact, And we've reinstated our retro program and we've bought some additional protection on both a second loss basis. And also we placed a 200 million catastrophe bond out of our retro one one savings. And then lastly, the future of this event on the market. Clearly, our own customers will need reinstatements, potentially backups. And we'll see as we progress through the mid years, the effect in terms of the market and rates. So in summary, whilst an extreme tail event, this is modelled and within contemplation and our ability to execute our own plans for 2025 and our appetite is unchanged. So this is a slide we showed at the half year about how we're investing in technology across all of our business to do one of four things. Firstly, ease and speed of doing business, understanding our customers, helping us to risk, select and price And then lastly, operational scale and leverage. And whilst we've got many, many pilots running across our group, I thought I'd showcase the ones that are in underwriting. So we've been a user of technology in retail underwriting for many, many years. And in our digital space, over 95% of our business is automatically underwritten. But we've now turned our attention to our traded business. So what you have on the slide is green, where we've had pilots. amber, where we're scaling them next, and then grey when they're on a broader implementation roadmap. So just to pick out a few examples. So top left, so this is our submission automation tool that we've built in our London market. As you heard, we piloted it in terrorism. It's now rolled out and it's in production, and it's helping our underwriters and contributing to that 16% growth that I talked about earlier. We've now scaled this to major property, And it's on the broader roadmap to roll out to our London market lines. And then bottom left, a couple of retail examples. The first, the one that I mentioned earlier, in our UK high-value homeowners, we built an AI tool to assist our underwriters to basically automate the submission and to triage. And again, that is contributing to the growth in that line of 18% alongside our E-Trade capability and our expertise. Same number of underwriters are quoting about 50% more business. We have another similar example in our US business where we're rolling out a pilot technology to assist our cyber underwriting from what would be hours in terms of producing a quote to minutes. And then clearly we'd like to roll out both of those technologies across the broader retail franchise. And then lastly, top right, contract comparisons. We've rolled this out in our reinsurance business. So this doesn't just save our underwriters time, but it immediately highlights any change in terms and conditions and coverage. And clearly that has very broad applicability across the whole of our business. So we will look to roll that out more broadly. So here's just some examples, but I'm really excited what we're going to achieve in this space. I'm back to Aki.