Hiscox Ltd

Well, good morning, everyone. It's wonderful to see you all and thank you for joining us. 2025 has been a pivotal year for Hiscox. In May, we set out our strategy, going deeper into our retail business and making several important commitments. We're executing on that strategy and delivering on those commitments with pace and energy. Our diversified portfolio is built for this market. Growth is accelerating with premiums up $275 million or 6% year over year. This is high quality, profitable growth across each of our businesses, driven by product innovation, expanded distribution and customer growth built on our specialty expertise and technology capabilities. And we're expanding our margins. Our undiscounted combined ratio of 87.8% is the best in a decade. And our record insurance service result is the fifth consecutive year of underwriting earnings growth. And growth is translating into a larger asset base, underpinning a record investment result and contributing to a third consecutive year of record profit before tax. We are delivering excellent returns. with a 12% growth in book value per share and an operating roti of 21%, materially above our target. This strong performance, continuing momentum and execution of our strategy enables us to reward shareholders through a new $300 million share buyback and a further 20% step up in the final dividend per share. As we announced at the CMD last year, This excellent performance, combined with our diversified portfolio, makes our business strongly capital generative. Indeed, over the last three years, we have organically generated over 100 points of regulatory capital, enabling us to deploy capital in an unconstrained way to pursue profitable growth in each of our businesses and reward our shareholders with returns of $1.1 billion over the last three years. Now, turning to our results by segment. Retail added almost $200 million of premium as the pace of growth increased to 6.3%, a continuation of our multi-year acceleration. This growth is broad-based across each of our retail businesses, driven by strong customer growth of 7.5%, and crucially, not rate-dependent. And most importantly, this is profitable growth. The retail undiscounted combined ratio at 92.6% is the strongest since 2016. In London market, we are successfully navigating a competitive environment, returning to growth through product and distribution innovation, while delivering a combined ratio in the 80s for the sixth consecutive year. And in reinsurance, we selectively deployed additional capital to support 6% growth, mostly in specialty lines. And the quality of our reinsurance business is demonstrated by a combined ratio in the 60s for the third consecutive year. Now let's take a look at how we delivered that growth. And frankly, the pace, energy and innovation of my colleagues has resulted in premiums from growth initiatives increasing fivefold in 2025 compared to the previous year. Supported by the launch of more new products than in the last five years and expansion of distribution. As we set out at the CMD, there is a huge structural growth opportunity in retail. And we're capturing this through entering more segments, launching more products, expanding distribution, and more markets. Retail is on a multi-year growth acceleration journey. We grew 4% in 2023, 5% in 2024, and over 6% in 2025, and plan to step up growth to 8% for the full year 2026. we have set the course to achieve double digit growth in 2028. In London market, we are leveraging our deep underwriting expertise to expand into new adjacencies while deploying AI augmented technology platforms to access new markets. In reinsurance, we have captured the opportunities of the hard market, increasing our net premium by 180% since 2020. Now the ability to innovate is a crucial part of our Hiscox DNA. It has and will continue to open up new growth opportunities in every part of our business. Now let's take a look at innovation in action at Hiscox. Now what you can see here is a sample of the initiatives we've taken in the last year to expand our business and drive growth. We're executing on these with pace and energy, launching new products at an excellent rate Some of these you may remember as work in progress at the half year. These have now been launched and we have refilled the pipeline with new products and opportunities that will begin production in 2026. For instance, in the US, one of our largest DPD partners has expanded our access to their agent network. And in the UK, we followed up on the signing of one of our largest ever distribution deals in 2025 with an even larger opportunity that will begin producing premium in the first half of this year. In France, we successfully launched our new cyber product in the fourth quarter. This will be rolled out across all of retail in due course. These actions and many more are accelerating retail growth and enabling us to capture more of the $317 billion target addressable market. And in big ticket, our renovation is moderating the impact of cycle management in certain lines. During the year, we leveraged our existing technologies to grow into SME cargo and US middle markets property. In addition, using our underwriting expertise, we expanded into new adjacencies such as tech E&O and financial institutions. The blend of technology and underwriting expertise gives us the confidence to pursue new opportunities with more initiatives set to appear on this list over the coming period. Now let's turn to the transformative force that is beginning to reshape our industry. Now with the advent of generative artificial intelligence, we are seeing the beginnings of profound changes in society and our market. The way consumers and small businesses are buying insurance is beginning to evolve. Large language models, LLMs, are increasingly a key part of the buying process. Now, with our decades experience of providing specialist insurance directly to customers, we have an established competitive advantage from our trusted and distinctive brand to our leading net promoter scores and high quality service. These objective strengths stand out even more in the world of AI, where AI agents can evaluate a policy quickly on more than just price. We've been investing in technology for many years, building out our core systems and improving data quality. We have a leading global digital platform for small commercial insurance, now approaching $900 million a premium and almost 900,000 customers. These investments enable us to implement AI tools relatively quickly at a modest cost. We're excited about the efficiency and growth opportunities that AI brings, and we're not standing still. This year, we will begin to roll out new, more powerful customer and broker portals in the US and in Europe. These will enable us to personalize the purchasing journey and help customers identify their insurance needs and simplify and speed up processes for brokers. As of this month, in fact, I think it's today, we are deploying AI agents into our US customer contact centers to create real-time feedback loop for our operations and marketing teams on customer experience and sentiment. And if a customer wants to make a claim, an AI agent will be there to help. We are embracing generative AI for the benefit of our customers, our colleagues, and our shareholders. And I believe Hiscox is well positioned to win. Now turning back to today's results, we've delivered on our promises in 2025. Retail has grown 6.3%. This growth will accelerate in 2026, building to 8% for the year before reaching double digits in 2028. Our operating royalty of 21% is materially above our mid-teens through the cycle target. The change programme has delivered a P&L benefit in year of 29 million and is on track to deliver $75 million of benefit in 2026. Paul will provide further details on this. And our shareholders benefit from our growth and earnings with a 20% increase in the final dividend per share and a new $300 million share buyback. With that, I'll now hand over to Paul.

Thanks Aki and good morning. It's great to be here with you all today presenting another strong set of results. We have achieved high quality growth across each of our segments with ICWP up 275 million or 5.9% against the backdrop of falling rates, demonstrating the strength of our diversified growth. Importantly, we have delivered excellent profitability alongside this growth. The undiscounted combined ratio of 87.8 drove a record insurance service result of 614 million. The group's profit is supported by the record investment result of 443 million, underpinned by increased AUM following stronger premium growth. Our superb underwriting and investment results have translated into a record profit before tax of $733 million, up 6.9%, and delivered an attractive roti of 20.9%. This is despite a 2.5% drag from the increase in the effective tax rate. The group's excellent profitability has driven substantial capital generation with a year-end estimated BSCR of 233%. And this is after returning over $400 million of capital over the course of 2025. As a result of our strong capital generation and balance sheet, the board has ratified the 20% step-up in the final dividend per share announced at the CMD. In addition, we will be returning 300 million to shareholders through a new buyback, resulting in total returns of over $450 million in respect of 2025. Delving into these results a little further, starting with our retail segment. In line with guidance, retail ICWP grew by 6.3% in constant currency to over 2.6 billion. This growth has been broad-based across all markets as management actions delivered results. Growth has been accompanied by an improvement in the undiscounted combined ratio to 92.6, partially due to early benefits from the change programme. Importantly, retail growth is transforming the shape of the group's earnings profile, with retail representing nearly half of the group's PBT, up from just over 40% in 2023. Moving on to London market, London market returned to growth with ICWP increasing by 1.6%. In a competitive market, the business benefited from product innovation and opportunities arising from London market's diverse portfolio. Profitability continues to be strong with an undiscounted combined ratio of 85.9. This is testament to our underwriting discipline, risk selection and pricing as we navigate the market's micro cycles. turning to reinsurance. Net ICWP grew by 7.9%, driven by growth in pro rata and specialty lines, including our climate resilience portfolio, mortgage and surety. The quality of our risk selection is demonstrated by an insurance service result of 189 million and an undiscounted combined ratio of 67.4%. Fee income of 109 million is very healthy, above 100 million for the third consecutive year. And we continue to see strong interest in our ILS funds, with more than 330 million raised in the last year and a robust pipeline for 2026. ILS AUM on the 1st of January 2026 is 1.5 billion. As we continue to see strong capital inflows from third parties while managing our own net exposure to property cap perils, the earnings mix between fee income and underwriting will continue to evolve. Moving on to our change programme. We're making strong progress. On this slide, you can see examples of achievements against our ambition and some of the actions that will deliver benefits in 2026. We have significantly increased fraud detection rates through new capabilities, representing a real cash saving in 2025. However, given our conservative reserving philosophy, much of the benefit is yet to be recognised in the P&L. We have insourced over 100 roles in our Lisbon tech hub, enhancing the capabilities that drive our competitive advantage, while leveraging the use of a lower cost location. In 2026, we will build on this, rolling out more centres of excellence and further extending the scope of outsourcing, where we benefit from the greater scale that specialist partners provide. In procurement, we have reduced our property footprint and continue to consolidate our suppliers, enabling us to negotiate better terms. Over the coming year, we will double down on this, increasing the number of strategic partnerships and preferred suppliers, while better managing demand within the group through improved cost governance. Finally, in technology, we decommission 20% of our applications in 2025, while launching new automation tools across the value chain, which will help to drive scale into the business. This will continue in 2026 as we launch new automation tools that will deliver efficiency benefits alongside driving revenue growth. Looking at the benefits, we're on track with our change program and we have achieved the benefit of 29 million at a cost of 24 million. And while we're slightly ahead of our 2025 benefit guidance, there is no change to our targets. We remain on track to deliver a 75 million benefit in 2026 as we optimize processes, sourcing and procurement, fraud detection and recoveries. We expect the cost to achieve to be 75 million, which includes costs associated with insourcing and outsourcing, legal expenses and tech implementation costs, including some of the exciting new capabilities that Aki referred to earlier. and these will help to deliver a $200 million P&L benefit in 2028. Let's look at how this is impacting the P&L. Disciplined cost management and savings from our change program means that our underlying expense base has increased by just 6 million. This is despite inflation and changes in variable comp and the investment in growth and technology initiatives highlighted by Aki. This in turn is driving improvement in our operating jaws with a 0.8% increase in underlying expenses, comparing favorably to a 5% growth in premium in constant currency. Overall, this is very pleasing progress. Now turning to investments. Our record investment result benefited from strong yields and increasing assets under management as growth in the business translated into more assets on the balance sheet. As we go forward, that increase in AUM will help to offset the small reduction in the reinvestment yield to 4%. As such, strong investment returns should continue to provide a tailwind for the group. The quality of the fixed income portfolio remains high with an average credit rating of A, and the business is conservatively positioned on the asset side. Looking at reserves. Our conservative reserving philosophy is unchanged with a risk adjustment of 345 million, representing an increase in the confidence level to 86%, slightly above our target range. And this is despite a healthy level of prior year releases and reflects the point where we are in the cycle, the quality of our underwriting and the conservatism of our reserves. Over time, we expect the confidence level to return to within the 75% to 85% range. The conservative nature of our reserving has enabled us to release 293 million, or 7.2% of opening reserves for 2025, continuing our long history of uninterrupted positive reserve development. All accident years are below the initial estimate and continue to run off favorably. Finally, an update on capital. The group has delivered outstanding organic capital generation of 34 points. This has supported both investment in the business and returns to shareholders of 22 points of capital, resulting in a year-end BSCR of 233%. Following the payment of our final 2025 dividend and our new $300 million share buyback, we have a pro forma BSCR of 211. This compares favorably to our through the cycle operating range of 190 to 200, providing us with the flexibility to capture opportunities as they arise in a rapidly changing market. Thanks for listening. And with that, I will now hand over to Joe, who will provide you with an update on underwriting.

Thank you, Paul, and good morning all. So our underwriting results reflect discipline cycle management, profitable expansion, and a strategic investment in both data and capability to continue to build a balanced and diversified portfolio, which you can see on this next slide. Our retail compound growth is anchored in profitable underwriting, delivering a core of 92.6. In the UK, private client is at double digits as we continue to benefit from our market leading expertise. Commercial growth is due to an expanded customer base and a sharper sector focus. In Europe, France and Germany are leading the charge as we continue to go deeper into our chosen segments and deliver new products tailor-made to our customer needs. And in the US, digital direct is continuing its excellent growth. Momentum in partnership is building and Broker is once again expanding as we have delivered improved service delivery and a slightly broader appetite. Turn into the London market where our ability to manage those micro cycles has remained a key differentiator. And we've once again delivered a combined operating ratio in the 80s. So property has seen some growth fueled by a US high net worth portfolio. and a tech-enabled expansion into mid-market. And this is offsetting some intentional cycle management in major property and commercial lines. We've seen some modest growth in casualty. We've had some rate tailwinds in general liability and a successful launch of financial institutions and technology E&O. And this is mitigating some declines in cyber and D&O as those markets continue to soften. And then lastly, reinsurance, a slightly softer market in 2025, but still a really favourable market. And despite another year of over £100 billion in industry losses, our risk selection, our robust reserves and a benign second half has enabled us to deliver a core in the 60s. So where are we in the cycle and how favourable is the market? So this next slide, hopefully a familiar slide to you. So the chart on the left is our rates indexed back to 2018 for our segments. The purple line, which is retail, is just less sensitive when it comes to the rate cycle. Rates are up in aggregate 2% and pricing across UK, Europe and the US remains strong. 2025 for the first year in many saw aggregate rate declines for both London market and reinsurance, although we remained in an attractive market. So the blue line is our property cat reinsurance. Rates come down 4%. This moderated as we went through the year as our mid-year renewals, particularly those loss affected, attracted some rate increases. Across the whole of the reinsurance segment, rates were down about 5%. but still up 83% since 2018. And we saw a similar story in London market, a 4% dip in 2025, but still up 67% since 2018. And that softening has continued in 2026. So our January renewals saw London market come down another 4% and reinsurance down 13%, particularly in the areas of property, cat and retro. So the chart on the right gives you an indication of what we believe that does to the rate adequacy of our portfolios. So as a reminder, adequate means we believe it's adequately priced to deliver a good return in a mean loss environment. Adequate plus means we've got margin in addition and low, still profitable, but just below our target underwriting reserves. And you can see, despite the softening, we believe that much of the portfolio is still really well positioned to deliver a good return. And we've benefited from some tailwinds in our own outwards reinsurance purchasing. So mastering changing markets and managing microcycles is not new to us, and we continue to have many different portfolios in many different parts of the market. And you can see this on the next slide. So the London market's rating environment is highly nuanced, both at a line and a divisional level. And you can see the divisional picture on the right-hand side is quite different to the London market headline. During this period, casualty rates have declined. whilst property rates have seen significant gains, and we've acted decisively. So during this same period, our average exposure per policy and casualty has reduced by 20%. And more recently, we've added over 100 million of property income. This laser focus on exposure management and profitable expansion has been the key to that consistency in that combined operating ratio. So we've learned from lessons of the past and our enhanced cycle management is really focused on four things. Firstly, a forward-looking view of risk. Really understanding those inflationary trends, whether they be economic, societal or climate. A market in transition framework. This is a framework that's honed to capture the position of each one of our lines in the market and proactively respond to evolving conditions. Exposure management, we absolutely need to know when to trim, when we don't believe we're getting paid to take that risk, but also when to expand, when we believe the expected returns justify the exposure. And lastly, new. Of course, we want to actively manage the portfolio that we have and seize new opportunities for profitable growth. So this next slide gives you a little bit more information on our marketing transition framework. So what you can see here, each bubble represents a line of business in London market. So this is a proprietary framework. We built it around 10 quantitative type metrics, things like technical index, exposure, deductible. And we add to that five more subjective metrics on the market. These could be things like broker interaction or terms and conditions. So for London market, we're monitoring 285 metrics on a quarterly basis. And we have a very similar framework for our reinsurance business. Now, each metric has an expectation or a tolerance and flags for investigation if it's outside of that. Now, not all investigations will result in underwriting action. Most often when we look, the underwriting action has actually already been taken. But when it is required, responding really quickly is key. And that could be reducing your line size, as an example. So in summary, a transitioning market, but a largely attractive market. So unlike our big ticket businesses that flex with the cycle in retail, we're looking for compound growth through the cycle, all anchored in consistent profitable loss ratios. And you can see that from the chart on the left hand side. We've built out a specialist underwriting ecosystem from risk selection through to claims management, all interpinned by investment in brand technology and capability. Our focus is squarely on customer value. We invest in our segments for the long term. We maximize value through market leading retentions and product penetration. After decades of investment, the majority of our retail customers already benefit from being auto-ender written, but we have ambition to go much further. And lastly, new. We want to deliver new products and services to existing customers, go deeper into our segments to attract new, and boldly go into new markets. So as I look forward to 2026, my three priorities are clear. Firstly, a relentless focus on managing our portfolio, knowing when to trim, but also knowing when to expand when the outlook is compelling. Turbocharge innovation. We want to find quicker ways to bring new products, new services, and expanded appetite to market. And lastly, capability. We want to blend humans with the best humans with advanced technology to really amplify our specialist underwriting expertise. And we want to train our underwriters for skills for the future so they've got data fluency and a practitioner at their core. Thanks very much. I'll now hand back to Aki.