QBE Insurance Group Ltd

Good day and thank you for standing by. Welcome to QBE third quarter market update. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 11 on your telephone keypad. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Chief Executive Officer Andrew Halton. Please go ahead.

Thanks, and good morning, everybody, and thank you for joining us today.

As you know, this morning we released our third quarter trading update. On track for another year of exceptional performance, a strong momentum in the business, and we're confident of sustaining strong returns from here. There are three main parts to the release. First, we've announced an on-market buyback of $450 million Australian dollars to take place through 2026. Secondly, the release includes the usual details and performance for the current year. And finally, we've also included some early thoughts for the year ahead. I'm here with Inder Singh, our Group CFO, and we'll take the next five to 10 minutes to unpack each of these points in a little more detail. So let's start with the performance in the current year. Confident of delivering our 2025 guidance for both growth and the combined operating ratio. Strong underwriting result alongside excellent investment performance leaves us well-placed to deliver another return on equity in the high teens, QBE's best performance in well over a decade. Year-to-date growth rate and premium growth was 6% compared to the prior corresponding period, which included X-rate growth of 5%. If we exclude the drag from non-core lines and crop, underlying X-rate growth at 6% is broadly in line with the first half result and continues to be driven by a breadth of profitable growth opportunities across our diversified business. It's worth reminding you that our X-rate growth includes both volume and exposure adjustments, and these exposure adjustments play an important role in managing inflation. Premium rate increases in the year-to-date were around 1.5%. Change relative to the first half was probably driven by commercial property, where market dynamics have been well documented in recent months. And as we outlined in August, competition is more pronounced in commercial property and lawyers, which represent about one-fifth of our premium. Excluding these segments, rate increase was around 4% across the remainder of the business, broadly in line with the first half. It's worth noting the profitability in commercial property in Lloyds is very strong, and when we look to 2026, returns in these areas remain attractive. We now turn to claims. In aggregate, group claims are tracking broadly to plan. Our goal is to deliver resilience and consistency, and I think we've managed this well. The release details our second half catastrophe position. Experience through the four months to October was quite favorable on what was a relatively quiet hurricane season, and our allowance for November and December is around $200 million. We have indeed experienced some local catactivity in November, which will take some time to assess, though as it stands we're likely to be comfortably below our full-year catastrophe allowance again in 2025, which will mark the third consecutive year that we've beaten the budget. This highlights the resilience of our property portfolio and the improved confidence in our catastrophe allowance. We expect a modest reserve release for the year, which I think will mark the first full year release in several years. We spoke in August about our confidence in the quality and stability of reserves from here. I'm really pleased with how cooperative lending on our current assessment will have a current year result, which is slightly ahead of planned. While the overall price and yield dynamics were more supportive this year, the strategic initiatives we implemented over the past 12 months had a tangible impact on performance. And these initiatives will deliver further benefit into the year ahead. Group XCAT claims are a little above plan. At half, we spoke about large risk claims and mix. We've also seen some industry-wide claims frequency in North America's accident and health business. We expect normalization across a number of these aspects into the year ahead, particularly in A&H, given the pricing and terms adjustments anticipated at the upcoming 1-1 renewals. I think we've generally adopted a cautious stance on the current year. We're warranted. And ultimately, with the portfolio in better balance, we're well-placed to manage through any period-to-period variability. If we move to 2026, moving to the year ahead, We've included an early view of our combined ratio outlook in the release today. In 2026, we see another year of strong returns, underpinned by a combined operating ratio of around 92.5%. We've been able to share guidance at this point, given the much improved stability, breadth, and visibility of profits in the business. We'll provide GWP guidance in February with the benefit of some of the upcoming data points for our 1-1 renewal businesses plus crops. Generally speaking, however, we think premium rate increases of the year should track at similar levels to 2025, and we've spoken a lot about our focus on delivering sustainable mid-single-digit volume growth. Touching on some of the key drivers of the underwriting outlook, see three key components driving our outlook into next year. Firstly, catastrophe and large risk costs, where some normalization on the latter should occur, and our absolute cat allowance in dollars will be fairly steady year over year. Secondly, a generally supportive operating environment where we expect some reinsurance savings, operating leverage, and modest operating efficiencies. And finally, core underwriting performance. We expect further margin expansion from performance management initiatives and a reduced drag from non-core lines, notwithstanding rate softening in certain lines. We'll be able to have a better discussion with more detail around these drives in February once we've landed the result and any other outstanding aspects of our 26 plan. Moving now to capital management. We've previously spoken about the uplift in our medium-term planning effort. As it stands today, our medium-term outlook is characterized by mid-single-digit growth, driven more so by the volume than rate, fairly sustainable combined ratios around current levels, and modestly lower interest rates. This outlook returns will remain robust, will generate enough capital to fund growth, and a 50% payout will continue to generate modest surplus capital. Today we've announced a $450 million Australian dollar on market buyback for ordering shares, which we'll fund through surplus capital. If you assume we hold a 50-cent payout ratio for the full year 25 results, the buyback will increase our total shareholder distributions to around 65%. With the approvals required, we may be eligible to commence purchasing shares in late December, but ultimately expect the majority of activity in 2026 and intend to conclude the program in 2026. We remain upbeat about future growth prospects and really see an environment where we can both generate targeted growth but also return a little more capital than we have in recent years. Each year around this time, we'll review the outlook for growth, returns, and the balance sheet, and use active capital management as a lever to optimize performance. So with that, I'm going to finish here. In February, we'll unpack these points, I know, in some more detail. So thanks for joining this morning, and we're now happy to take some questions. Over to the moderator.

Thank you. As a reminder, to ask a question, please press star 11 on your telephone keypad and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by as we compile the Q&A roster. Our first question comes from Kieran Kitney from UBS. Your line is now open.

Good morning, Andrew.

Maybe just starting on the sort of trajectory you're talking about into 26, it does sound like you've encapsulated the roughly 250 mil cap budget beat into achieving this 92.5% guidance for FY25. You've also flagged some modest prior year reserve benefits this year. So on the back of the envelope, if we add those back, it would suggest you'd sitting probably about 94% for this year, X sort of that cap budget beat and reserve release, and you're talking to 92.5% next year. So I just wonder if you can sort of expand a little bit on some of the areas you called out then in terms of what is going to drive that underlying call lower next year, particularly your comments around further margin expansion, where that is coming from, if it is more mixed because of strong growth in these broker facilities, as an example, or how we should think about what is driving that and what your confidence is around achieving it.

Yeah, Kieran, thanks for the question. I mean, I think it's a really important question because, of course, we're managing the company in total rather than in terms various elements. We're trying to deliver this overall consistent strong return with some growth, and that seems to be, I think, quite a noble aim if we can achieve that through areas that can be quite volatile. So we do look at it in the round. So you're right, we've beaten on cap, and we've had some lines of business haven't performed as well as we originally planned, and it nets out to this 92.5. And not surprisingly, we're expecting in 2021 six cap to normalize. So we're not planning for another beating cap. So we don't assume we're achieving the 92.5 in 2026 with the same beat we got in 25. But we also expect the lines of business where we've had more challenge this year to improve. And that can be some of those non-profitable lines that we've been flagging for the past year or two. And we've done pretty good job at lowering their losses, but there's still some more to do, and that's a number of lines across various businesses. The A&H specifically, there is talk in the market that rates will go up by at least 20% on 1.1, and therefore that should counter the fact we've seen X cap in A&H or the losses in A&H be greater than planned. And there's just one or two other lines of business like that. So it ends up being an accumulation of a number of things that brings us down. The large losses have been greater this year. And I was talking to someone the other day about what is going on with the oil refinery world because there seems to be a number of energy losses. And there have been more than normal. And we don't expect that to continue. So we do take a bit of credit. for that into next year. So it is a combination of factors that gives us confidence we're going to deliver a pretty strong return of 92.5 next year, consistently with a 92.5 this year. But one thing is certain, the makeup will be different. One of the things about the company, I've said a number of times, the breadth of geography and product means we should be able to balance it out. So if we do take a deterioration in one line, we can offset it in another. I think it's been one of the challenges of the company in history, but we haven't been able to do that, and we just take the losses and the return deteriorates.

And just to clarify to others, I presume you're not counting on any reserve release at this stage into next year, and also you touched on cost.

No, you always plan with nothing. into 2026 so you plan with that the only area where we do contemplate every now and then is whether we're lmi because it's generally reserved relatively conservative but no you you have to plan on nothing because if you know about it now you have to take it now so you can't really plan to have something you don't know about yep and and finally the last sub component of that question andrew just on the cost sort of remarks you made you know what what sort of like how you think about the cost space

across the organization, particularly if we're going through a softer part of that cycle.

Yeah, we're planning on growth. I mean, growth this year has been greater than our growth in expenses, and we're planning to repeat that into 2026. So that brings the expense ratio down a bit. So I think I'm looking at, we're talking about up to half a point-ish, we hope.

Yeah, so Kieran, as we project forward, obviously we have, good line of sight of the net insurance revenue for next year, given we've written quite a lot of the premium that it's going to earn in the first half at least of next year. So we're sort of seeing the growth in net insurance revenue as being higher than the growth in expenses, and therefore we're seeing positive jaws that are contributing. And I guess at the margin, we're also baking in some level of savings from reinsurance year on year when you think about your bridge that you're trying to construct.

All right, I'll leave it there. Thank you. Thanks for that.

Thank you. Next question comes from Nigel Pitaway from Citi. Please go ahead.

Good morning, guys. So first of all, if we just sort of maybe delve a bit more into this A&H, and obviously you're talking about 20% rate increase at 1st of January. I mean, is there an element to which you feel you've been pretty conservative in taking those loss picks through into this year? Because it does look as if, you know, if you look at almost following on from Kieran's question, I mean, if you look at the ex-CAT attritional loss ratio, there must be a fairly big negative offset in that, given you've got 260 favorable on CAT. You know, you're saying crops better than expected. You've got favorable prior year releases. So can you talk a little bit more about that?

So on the ANH one, Nigel, it's definitely been market-wide and been talked about a lot in the market that many of the ANH insurers have, I'd say, been surprised, have taken a reasonable amount of extra loss in 2025, and that's why the market moves quickly. I mean, on the positive side, it's a relatively short-term class. You see the claims pretty quickly, and therefore you can respond to it. On the possibly negative side, if you don't respond enough on Jan 1, you've got problems because 70% of the business is written on January 1. So if you find out after January 1 you should move more, you have to suffer that year until you can move again on to January 1 the following year. That's been the main change. I don't think we've been conservative in taking it, and we're very in line with others, and we see others who write this line report similar things to us.

Yeah, I mean, it's hard, you know, because we're reacting to claims trends. If you look back in a couple of years ago, we saw an uptick in Q3 claims activity. We then picked our inflation loss picks higher. And then we found that didn't actually hold as true as we thought. But this time around, we have seen some of that claims activity actually come through. So I wouldn't say it's necessarily conservative on ANH per se. But we are trying to obviously make sure as we exit one year into the next that we're not seeing, you know, changes in our lost pigs, especially on short tail lines. So we are trying to be thoughtful, I'd say, across the piece. But ANH is a specific one we're just wrestling with as is the industry.

And then the other comment that I'd like to make, we've said a number of times, we're trying to make the balance sheets more robust. by setting what we think are sensible reserves from medium to long-tail businesses and not adjusting them based on seeing short-term benefits to them. It normally takes three years and beyond to get good insight into where the reserves should be. So I don't know what year we're into of doing that, year two or three of doing it. But, of course, if you see something deteriorate against it, you have to take the deterioration. So you take the deterioration, you don't take the credit to year three or beyond. So we're trying to get into a position of a more robust balance sheet where we don't get prior year top-ups and there are potential things to take against it. So I'm not sure that's conservatism or just good common sense in the balance sheet.

Okay. Secondly then, just on the dividend, I mean previously you sort of hinted that the sort of interim dividend would be about 30% of full year payout, which does imply sort of a payout ratio maybe a little bit above the 50% that you're sort of hinting at in today's release. So I mean I guess there is Initially, that raises the question as to whether or not the buyback is sort of being taken, at least in part, from the dividends. Can you just sort of maybe expand on that a bit?

Just to clarify, I think we've consistently said that our planning assumption is that we pay out a full year ratio of 50%, right? Now, what we've said is at the first half, we would probably... be a bit at the lower end of that, just given CAT and CROP and other variables in the second half. But we then true that up through the second half payout ratio. So I'd look at the commentary as being consistent around the full year being struck at 50%, and I would see the buyback sitting alongside that. So a 50% payout for the full year 2025 plus the $450 million Aussie dollar buyback in addition to that, which then takes the payout ratio If you want to look at that, back to Andrew's comments, around that 65%, 66% for the full year.

It just implies that the growth you got in the interim might not come through in the final if you take 50% literally, but obviously the EPS is another variable. All right, and then maybe just on, obviously one thing you haven't disclosed, which you've disclosed in prior quarters, is your group rides. rate movement for the third quarter. Is there any reason why you haven't disclosed that? And is it possible we could get the number for this quarter?

Nigel, definitely I'm the driver of that because I think looking at one quarter and one quarter in a mixed insurance business doesn't mean much in itself because it depends what we're writing at any point in time. And I am... I mean, the rate increases of interest to us and the rate increase versus inflation is sort of vaguely interesting, although I think we're being cautious on inflation rates are what they are. And that's the reason we're not doing it, because I think it's relatively well known where rates are going down is property, where they've gone up a lot. and Lloyds to some extent where the margins are good. But a lot of the rate decrease has nothing to do with inflation at all. It just purely has to do with the margin everybody's making from these at this point in time. So I think we're getting very stuck on a quarter on quarter. It makes some sense year to date. Quarter on quarter, not sure what it means because we then have to explain how much of every line of business we wrote in that quarter because it's a completely different mix per quarter. They're not comparable.

Where we can be helpful going forward, Nigel, is talking to you about full year, year-to-date rates. We'll continue that. And we'll also just then provide some color on various product lines to give you a better sense of what is actually happening in the lines of business so you can get a sense of where margins might be heading, which I think is more consistent with the way we look at the business internally, and then we can be a little bit more constructive around the dialogue around that.

So, I mean, is it possible to say whether rate increases are still positive in 3Q?

Rate increases are positive in a number of lines and rates are not positive or flat in property and some of the Lloyds lines, which I think we've flagged. I mean, that's exactly what we're trying to do. So, yes, we've flagged property in the London market being the most challenged and everything else seems sort of okay. Okay. But even in the everything else, there's going to be some going up and some going down within that.

Yeah. I mean, it's just the market that seems to focus quite a bit on this at the moment. So it's an important number.

Yeah, I know. I get it. I get it. But it's not how... What I'm really trying to do is reflect how we look at it. And we don't look at it like that. So we can talk about it. It's not that meaningful to how we're running the company. That's the challenge we have. So I'm trying to get it into how we actually look at the company. And not surprising, we're focusing line by line, estimating inflation line by line, although inflation, you know, a few years ago, no one really estimated inflation line by line. It's only while inflation kicked in. So that's what we're trying to reflect. So definitely flag that property is a challenge. Property is a challenge from where it was, but it's still much higher than where it started from. And people are still making a reasonable amount of money from writing property business. So it doesn't mean it's a negative line to write. It's just not as super profitable as it would have been a year or two ago if everything else was the same, which it isn't.

All right, great. Thank you very much.

Thanks, Nigel.

Thank you. Next question comes from Afraya Khan of Bank of America. Please go ahead.

Morning, team. Thanks for taking the questions. Can I just ask on the XCAT ratio for 2025, maybe asking Kieran's question another way, would you be able to give us the breakdown of where the deterioration has been driven from this year versus last year, so between non-core business mix shifts and the high XCAT losses?

I mean, it's not really in the non-core business. So it's not there. It's definitely in the A&H as we've flagged. I'm not sure I can go into any more detail than we've done, but it's not in the non-core. It's in the core business rather than non-core, isn't it? I don't think non-core has caused us too much of a problem.

Yeah. I mean, I think it's those drivers we've been very consistent about through the first half. We've seen elevated large losses, you know, and that's, you know, more broadly speaking, but particularly pronounced in the international business. We've talked about some of the mixed shifts. ANH is definitely a contributing factor. So those are the three main elements, Freya, in terms of, you know, then we've got obviously the improvement into next year along the lines that Andrew has laid out where, you know, we see the opportunity to improve the underwriting performance of a number of cells which are either still slightly unprofitable or not meeting their hurdle rates.

Okay, great. Thanks. And then just on accident and health again, given the deterioration you've seen this year, is it influencing your business plans for next year? Because I know this line was an area of targeted growth.

I think it's a good point. I mean, it's definitely made us think whether we want to volume growth in the A&H rather than remediate. So it's a bit like how we looked at the crop business in 2025, that we weren't really pushing them to grow. What we really got them to focus on, how do they ensure they hit a good combined ratio? So I think it's going to impact. It's going to impact the non-rate volume growth. That said, it wouldn't surprise me if they grow just as much as we thought because the rate's going to be higher than we planned. So on the non, on the stuff, not new stuff, the renewal, they need a larger rate increase. So we'll see A&H grow. It's just the exposure probably won't grow as much as we would have planned earlier on in the year. So rather they focus on margin rather than looking for new business at this point in time.

I'd probably look at it, we're thinking about it short to medium term, so You know, we remain frail of the view that we've got one of the finest businesses. And over the medium term, we should be able to grow it. We've got some really nice competitive positioning. It's a very data-driven business, so you can actually start to segment where you've got the business, where you're seeing some of the lost trends and some of the actions you can take. And these are industry-wide issues, so, you know, they're not very idiosyncratic to QBE's book. So I'd say... Medium term, still strong conviction as an attractive growth area. Short term, we just need to make sure we're on top of some of these claims trends.

I completely agree. And don't remember, we've also been involved in the business for 25 years and it's been a fantastic performing business for us.

Okay, great. Thanks. And sorry, just last question on other areas of growth in 2026. I think previously you've called out cyber reinsurance as well. Do the fairly significant price declines in the market maybe change the plans or are you Do you still see them as very adequate and good areas to grow?

So the three areas, in addition to NIH, we've been talking about are cyber, QB, RE, and facilities. So those are definitely still areas in focus. Got to remind ourselves, remember, QB, RE is only a third property. a third specialty and a third casualty. So it's the property areas generally where the pricing is under pressure. So there's still growth opportunities and we start from a lowish base. So that's fine. On the facilities, the facilities will just naturally grow because we started some in 2025 and therefore we've only been on them for half a year or a period of year. So in a full year cycle, they will grow. And we're still seen as a leader in this space. Generally, they're performing well because they have good balance. Again, they're not purely properties. They're writing different lines, and they perform well. So I think you can see the facilities continue to grow. QBRE continue to grow. Cyber, we've got to be wary of because pricing is not brilliant. It looks as though it's flawed and is coming back a bit. But remember, we started from a relatively low base on cyber, and we've done well at growing out consistently across the QBE portfolio. So, yeah, still expect that. And then we're looking for other areas. I mean, we've got good margin in a number of lines of business. We've mentioned before Australia is quite competitive at this point in time, but the business has performed really well in 2025. Therefore, we're looking at brokers and how can we support them. into 26. Technical pricing generally is pretty good across the portfolio. So we still want to look for growth opportunities if we can. We have got to be wary because every other insurer company on the planet seems to be looking for growth opportunities as well. So we need to play to our strengths. And that's why those four areas were the ones we flagged for 25 and continue to be positive about them in 26 and beyond.

Thanks so much.

Thank you. Next question comes from Julian Braganza from Goldman Sachs. Please go ahead.

Good morning, guys. I've got a couple of quick questions for you. I think you mentioned some slashes. I'm just thinking maybe we expect a reduction given the runoff of the non-corporeal four-year losses coming from that. Can you talk about that and really improve resilience further in the budget in 2016? Thanks.

Julian, your line is very untidy. If I understood the question, you're asking about the dollar value of the CAD allowance being flat given the unwind of the non-core. Is that right?

That's correct. So we should be expected a benefit there to come through or have an improvement in the insurance.

Yeah, obviously, net insurance revenue is growing, Julian. So we are growing the business overall. And what we're doing is, in essence, the benefit we're getting from some of the exposure runoff in non-core is then supporting some of the growth in the business more broadly. So we're not changing, I'd say, the settings in terms of CAT. We've talked about broadly holding a high level of... confidence around that cat pick, so we're not necessarily changing our settings. That's just a roll forward of where we're seeing, in essence, the net exposure change, obviously taking into account where the business is growing, non-core running off, and kind of the changes in the reinsurance program that we're assuming at the moment.

Sorry, it also encapsulates change in the reinsurance program. I'm sorry, you're saying that that would be an uplift to the cap budget from initial views of how your reinsurance program might change?

Yeah, I think what we're saying is that there are minor assumptions we've made in and around the reinsurance program. We'll have to see how that lands ultimately, right? But What we're saying is that the net CAAT budget is set on the basis of broadly similar confidence levels from a planning basis, and the rest of it is just a roll forward of the business mix.

Okay, that's fine. And then maybe just to be very clear, just to incrementally the CAAT piece is was about $180 million from the third quarter, the last four months, versus the first half as well. So to be very clear, it's largely been offset. In terms of this ANH and the inflation that's coming through, is that all largely coming through that third quarter period? Is that how we're seeing it, that's offsetting it, such that the 92.5% is being retained? I just want to get the clarity on the timing of this inflation. that's coming through in ANH specifically over that third quarter period.

Yeah, I mean, look, I wouldn't get too hung up on the quarter on quarter, but your analysis is right that what we're looking at for the, you know, for the full year in terms of our full year guidance commentary of 92.5 assumes that we will have a, you know, a cat beat along the lines you have said, right, which is you take the first half cat beat in kind of the year to date where it's tracking. It is offset by some of the trends we're seeing in XCAT, which we have highlighted, which includes ANH as one of the components.

Yeah, okay. So it's very interesting. So the ANH, in fact, is quite material over that third quarter. And it's all coming through the claim payments line as opposed to anything we've set on reserves. Is that fair? Is it all on the claims payment line? Is that what it's coming through?

Yeah, yeah. So it's, you know, as we talk about XCAT, we're talking about current accident year. On the reserves, we're saying that, you know, we're assuming a modest release for the year. And if you look back at the half year, we had a modest release of the half year, right? So, I mean, you know, the reserve development half on half is not materially different.

I'm still trying to be super clear. For that third quarter, it's a combination of current accident year reserves as well as claims payment. It's not all claims payment. Is that what you're saying?

I'm just struggling to understand your... Can you just repeat that again?

Oh, no. I was just wondering, the concentration coming through an accident health over the third quarter that's offsetting some of the sales fees, is that all... It's always right here that it's not all paid claims. It's also a combination of how you've reserved. Yeah, that's right.

I mean, obviously, it's lost picks, even in short-tail lines. So we're sort of making assumptions in the 92.5 reiteration of full-year guidance, Julian. The best way to think about it is we are making a series of assumptions around lost picks for A&H claims. that we will just have to see how that seasons over the first quarter, the second quarter of 2026.

Okay, got it. That's clear. And then just to be specific, for FY26, just what's your view of underlying inflation assumptions? You mentioned rate increases holding in line with, I think you said rate increases holding in line with 2025, right? I can tell you that's correct. That's why I'm saying where that confidence is coming from, given the trends that we're seeing on it, and arguably going more into the negative strategy. And then secondly, your inflation assumptions, underlying inflation assumptions, X GAAP, X large losses, how you're sort of thinking about it in the 26th.

I mean, on the inflation assumptions, to Andrew's points earlier, when we look at the lines of business where we are seeing some inflation, areas like, say, motor, for example, or in parts of the world, or even areas where we're assuming some level of continued elevation in claims, for example, in casualty, we are seeing that we're getting rates that is compensating us for that. The rate in property lines that's coming off is a margin issue, not a relative to inflation issue. So as we look into 2026, we've been pretty sensible about our inflation picks year on year on year. So as we said, sort of in the low single digits for 2025, we're sort of moderating that a little bit into 2026 at an aggregate level. And where we are seeing inflation, we're getting some rate to cover that. But the rate versus inflation at an aggregate company level is imperfect science.

Okay, got it. That's clear. Thanks so much for that. That's all my questions. Thank you.

Thank you. Just a moment for our next question, please. Next, we have Simon Fitzgerald from Jefferies. Please go ahead.

Hello there. I just wanted to unpack the trends that you're seeing in property just a little bit more. But firstly, Andrew, if I could just reiterate the weighting of property. I remember in the first 25 presentation, it says about 34% of GWP. But I think I heard you just say property and Lloyds would be about one fifth of our business. Can you just elaborate on that firstly?

I think because we're trying to put in the large commercial property in there, the cat exposed, where we're seeing property rates fall a lot is the large cat commercial property. And I reason that in the U.S. So Europe is not seeing the same sort of rate decrease as everywhere else in the world. And this is one of the challenges with everybody's bucketing it all together and saying we're in a soft market because cat commercial property is coming off. when it's a subset of a subset. So that's what I'm trying to do. So we can theory break, because obviously in our property book, we have the retail business here, which is probably, we have more than just purely cap. Yeah, okay.

And then just on the pricing, I remember a comment that you mentioned at the first half, 25 results as well, where you said, property could fall by about another 25% before we would not be interested in that sector. When certainly we look at some of those larger accounts, you know, second quarter, third quarter, we're seeing minus five to minus 10% in terms of rate renewals. So for some parts of your business, you're going to get there pretty quickly, I would have thought. in terms of down 25%?

That's right. You take evasive action. If you go below your technical adequacy, you start questioning why you're writing it. You can write it for long-term relationships and all that sort of stuff, but generally you're right. An example of this is standing up our excess and surplus lines property business in the U.S. in 2025. That's not surprising. They're quite a long way behind budget. But when we first formulate these ideas, we're just writing less of it. So we're doing exactly what you say. For accounts where we're not happy with them, we don't write them. For accounts we're comfortable with them, we do.

So, yeah, letting some business slip there. Could I also just get your comments just with the reinsurance renewals on 1 Jan? Obviously, we've seen a really good cap climate for reinsurers and primary carriers as well. We're just interested to know what your sort of thoughts are at this stage in terms of what you might see.

I mean, we've got really good reinsurance support. So our aim is to renew a program that's very similar to what we had in 2025. And the view is not surprising. The market view is rates are going to come off by 10%. for CAAT exposed property. Obviously, we renew some other non-CAAT property programs, and they will not come over 10 plus. That does not mean the whole reinsurance program goes down by that amount, but the property is definitely going to come off by more than 10%. Yeah, that makes sense.

That's really helpful. Thank you very much, Andrew. Thanks.

Thank you. Thank you for all the questions. This concludes our Q&A session. I will now pass back to Andrew.

I'd just like to say once again, thank you for joining us this morning. I, of course, look forward to our results in February. So I'll speak to you all then, if not before then.

This concludes today's conference call. Thank you for participating. You may now disconnect.