Zurich Ins Group S/Adr

Ladies and gentlemen, welcome to Zurich Half Year Results 2025 conference call. I am Valentina, the Colo School Operator. I would like to remind you that all participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing STA and 1 on your telephone. For operator assistance, it is best STA and 0. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mitchell Todd, Head of Investor Relations and Rating Agency Manager. Please go ahead, sir.

Good afternoon, everybody, and welcome to Zurich Insurance Group's first half 2025 results Q&A call. On the call today is our Group CEO, Mario Greco, and our Group CFO, Claudia Corleone. Before I hand over to Mario for some introductory remarks, just a reminder for the Q&A, please keep questions to a maximum of two. Over to you, Mario.

Thank you, Mitch. Hello. Good afternoon, everyone. Thank you for joining us today. Before we take your questions, I'd like to share a few brief reflections on our half-year results presented this morning. Zurich has delivered another outstanding performance through the first half of 2025, continuing the strong performance delivered in the past years. There are three important aspects of our results which I would like to highlight. Group business operating profit reached the record U.S. dollar 4.2 billion, up 6% year-on-year with each of our geographic and business segments showing positive progression. And this result underscores the strength of our diversified portfolio and the discipline execution across all business lines. Second, core ROE climbed to a highest ever 26.3%. Over the last decade, this represents a sizable 15 percentage point increase and talks to the ongoing optimization of our capital allocation. And lastly, our financial resilience underpinned by an SST ratio of 255% at the end of June, coupled with the high cash conversion of our earnings positions us strongly to continue generating attractive, durable returns for investors. Let me briefly touch on the performance across our individual business segments. And I start with property and casualty this time. There we achieved an all-time high BOP of US dollar 2.4 billion, up 9% year-over-year. The combined ratio improved by 1.2 percentage points to 92.4%, driven by strong underwriting results in both commercial and retail. Now, looking at commercial insurance specifically, we delivered further improvement to profitability, with a 90 bps decline in the combined ratio to 90.5% for the half year. We continue to see favorable growth opportunities in our preferred segments, such as specialties and middle markets. We're also very happy to see the U.S. commercial auto performance showing strong margin improvement after all the underwriting actions we took last year and in these six months. The property market is showing a reduction of the hard rates of the past years, but remains attractive and profitable. The liability market, however, despite strong rate increases, is still not profitable enough, and we underwrite it with great discipline and attention. Retail property and casualty had a notable progression with a 2.4 percentage point improvement to a combined ratio of 94.1%, supported by rate momentum and underlying improvements to the motor and property portfolios. EMEA Motor, in particular, saw an 8 percentage point increase in rate. We continue to see pricing conditions supportive of profitable growth across our property and casualty business. You will see in our half-year materials we have provided you with additional details on our sizable specialty business. In the first half of 2025, this portfolio generated U.S. dollars 4.9 billion of gross return premiums at a highly profitable 86.5% accident-year combined ratio, excluding CATs. We believe our underwriting skills, data availability, strong customer engagement across a range of diversified business lines differentiate us in the specialties business. This is one of our preferred growth engines. We will tell you more about the strong opportunity we see for our specialty business at our investor day in November. In short, the property and casualty market gives us a multitude of opportunities to execute on value-enhancing growth, in the medium to long term with our usual underwriting discipline. Turning to life, we sustained last year record BOP of $1 billion, which actually grew 4% year-on-year on an underlying basis, allowing for the one-off contribution of 2024 from the conclusion of our German life back book sale. Cross-written premiums up 14%, New business premiums up 20% on a like-for-like basis. They point to a solid foundational platform for future growth prospects. We are particularly excited about the traction of our new global life protection unit. We see a structural opportunity to accelerate growth of capital light, high-margin protection solutions addressing the prevailing protection gap across our key markets, with a widened offer for customers. Our protection sales grew 3% over the period, at an expanded margin of 15.7% during the half year. And finally, turning to the considerable improvement underway at farmers, they delivered its strongest half year ever, with BOP at 4% to U.S. dollars 1.2 billion. The farmers' exchanges reported a combined ratio of 90.5% despite exposure to the California wildfires. Most impressively, the exchanges returned to policy count growth in Q2 for the first time in over a decade. Strong underlying profitability combined with a surplus ratio in excess of 45% sees the exchanges raise their future growth ambition to a meet to high single-digit percentage growth rate. Farmers Management Services and Farmers Re both contributed positively. with agency brokerages showing strong growth in fee revenues and bulk. The agency brokerages are proving themselves to be a valuable tool both to generate new business and to retain existing customers. Looking ahead, we entered the second half of the year financially resilient and with a strong underwriting culture focused on driving continued momentum across our businesses towards our 2027 financial ambitions. which I just remind you of now. A compounded annual growth rate over 9% in core EPS from the 2024 baseline of $40.1 per share. A core ROE in excess of 23%, cash remittances exceeding 19 billion cumulatively. Thank you for your attention. Claudia and I are now happy to take your questions.

Okay, thank you, Mario. We'll take it to Q&A now, please, operator. As usual, please try and keep questions to a maximum of two so we give everyone a chance to ask a question. Thank you.

We will now begin the question and answer session. Anyone who wishes to ask a question or make a comment may press star and one on the touch-tone telephone. You will hear a tone to confirm that you've entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use only handsets while asking a question. Kindly limit yourself to two questions only. Anyone who has a question or a comment may press star and one at this time. The first question comes from Andrew Sinclair from Bank of America. Please go ahead.

Good afternoon, everyone. First question for me. Farmers doing really well. Guidance, I said, rising today. Just really wondered how that affects your target for mix of profits with 55% to 60% to come from P&C in 2027. Is that still valid? I know, Mario, you previously said you thought P&C consensus was way too low, and it has certainly moved up since you said that. Do you still feel that way? So that's question one. And then question two is just on P&C expenses. I get there's usually some seasonality on expenses. I get the AIG book might have slightly higher expenses. But really, the increase was probably still quite a bit more than I expected. Just really wonder if you can help unpack that higher expense ratio for us and where that goes from here. Thank you very much.

So, look, I mean, quick answer. On expenses, you have two different phenomenon. The ARG component, which impacts the retail expenses, but then benefits the loss ratio, right? So you have two sides of it. So expenses would be redefined with that, but also the loss ratio is redefined. TravelGuard business runs at a very low loss ratio, but has something like 300 million of expenses that we might be able to reduce over time, but not eliminate for sure. There are also some investments in the commercial part of the book in order to grow specialties in mid-market, so we've been hiring underwriters, so we've been expanding our capabilities. Of course, we don't have yet the revenues and the profits from that, so I can't tell you if the expense ratio in commercial would say At this level, it will go lower. Chances are it will go lower, but I can tell you by how much. But these are the two main impacts that we have had on the expenses, and they're both not regrettable ones. On property and casualty, look, I mean, we never change targets, and we never change what we say, even because we say that already. I am, as you can, as you could have heard from my comments at the beginning, I'm quite confident on property and casualty continuing to grow and continuing to delivering profits. And, you know, if anything, these six months raised my confidence.

Maybe to add on farmers, your question, right, the fact that we are projecting mid to high single digit growth and it's definitely a consideration based on the acceleration of growth that we have seen coming through right so in Q2 actually earlier than we had expected we've seen farmers going back to policy enforced growth we expect them to continue on this path and that's the basis for increasing our view on the potential growth next year

The next question comes from Michael Hutner from Berenberg. Please go ahead.

Thank you very much. I have two, one on German life and one on pricing. On German life, I think two years ago you stopped the, or it was stopped, I don't know how to, the back book sale of $30 billion, so it's going to be quite a big deal. Now your partner has changed ownership, so their ownership is now, more acceptable to regulator and I just wondered how you're thinking about that back book sale and also what the economic drives are because even back then the cash benefit wasn't going to be massive and I think as interest rates normalized you were saying that the solvency benefit wasn't going to be huge but I think there is another moving part and I just wondered whether you could kind of explain and then on pricing I know you You're so positive on non-life Mario, which is fantastic. But for me, poor analyst, looking at the pricing, I'm kind of thinking, hmm, pricing is down from four to three overall, probably in commercial lines somewhere around two. And I'm just wondering, yeah, but it's great to be positive on the outlook, but the pricing doesn't kind of support that. I just wondered if you can give us kind of, you know, how we can square the circle here. I think you kind of alluded to it in lots of ways, but I'm still a bit puzzled. Thank you.

Okay. Michael, I start with pricing and then I pass it to Claudia for the German life and what we're doing there. Look, on pricing, give me a few minutes of attention because it's going to be an articulated answer. So, first of all, we're moving our books. If you see, we're moving our books towards specialty, towards mid-market. We're reducing the impact of liability. What we did in the motor books was, for example, in commercial auto, was a pretty decisive cancellation of policies and contracts, partly contrasted by high rate increases. But we're moving the books, and we moved the books to businesses which have a much better combined ratio. And as proof of it, you see that our combined ratio in commercial is improving. But of course, if you have a combined ratio in the 80s, it is quite difficult to imagine that you're going to have double-digit rate increases. Second, in property, which is often discussed, we see a very stable combined ratio in the 90s. And yes, I mean, the rates are slowing down, but understandably so if you have been for four years in the 90s. So property is still very interesting and profitable, even at this rate. And then the future will be decided by the catastrophes in the next month. Depending on what happens, we would see if the rates hike again or continue this trend. Where we are very cautious and actually we don't want to grow is in liability because although the rates are quite high, but also the claims cost is high and the combined ratio stays too high. And so there we will continuously prune and reduce, especially if it is in the global corporate space. Retail is much easier because the retail is rebounding, rate increases are strong, and they are just growth-oriented and we think that it will remain as profitable as it is for the next visible time. Did I fully answer your rates in commercial, Michael? More than I heard. Thank you. Okay. Thank you.

Just to give you a data point because this is a super important element in our release today. And I think the few of you on prices is a bit simplistic. Just a data point, Michael, on our property book in US, right? There are valuation adjustments on the underlying exposure that are still north of 7%. This is coming on top of what rates are doing, right? And this is to allow for inflationary pressure, for cost increases. So it's over 7%. deductibles are holding up very nicely. There's no erosion there. We've got average net limits that are coming down. So it's a combination of things that allow us to still print in property a combined ratio below 90, including CAD, like wildfires happening in January. So yes, race is one thing, but you need to look at the aggregate, and the aggregate is a very, strong margin that we are still able to generate.

Fantastic, thank you.

On the German Lifebook, so as you said, the completion of the medium gives certainty to the market. It was important for everyone now beyond the individual transaction to get certainty on the ability to execute Black Book deals in continental Europe. So now there is that certainty in the market. We mentioned before that we continue to be focused on finding the right transaction structure and the right partner for the sale. So we're actively working with the German team to prepare and, you know, get through all the necessary steps. There is interest in the market, so we continue to look at our options. We'll update you in due course. Your question on valuation, yes, it's true that interest rates are higher, so the underlying is different compared to two or three years ago when we started looking into this. However, also keep in mind that there has been a runoff on that book, so that also needs to be taken into account on the valuation of the book. So we are going through that exercise. We'll update you in due course, but we continue to be strategically focused on this.

Brilliant. Thank you.

The next question comes from . Please go ahead.

Hello. Thank you very much for taking my questions, and thank you for the additional disclosure on middle markets. I was just looking at Friday, and given, again, the rates that you have shown and the combined ratio, do you still expect that 87% combined ratio to hold in the medium term? in middle market and specialty. And the second question on EMEA Motor, it's turned around very quickly. Could you comment upon your expectation of the turnaround and what has accelerated it from the November CMV, where we're looking at below 96%, like 27? Thank you.

Look, on mid-market and specialty, Let me answer it this way. We have no evidence that the profitability is going to come down. Now, I didn't answer your question because your question is, is this going to hold for the long time? And I don't know that. I mean, markets can change. I have no evidence markets are ready for a change. And this is also driving us to... insist on growing mid-market, small and medium enterprises, and the specialty business. I mean, they partly overlap each other, right? Is that clear? I mean, this is not a MISI set because partly mid-market does specialty, so you cannot sum up the two numbers. Can I ask Claudia to take care of your first question?

On DMR combined ratio, yes. So it's true that it's coming through very quickly, especially in Germany, the actions taken by the team are striking, right? They've been going through very, very fast into the combined ratio. There's also... a comment on the market to be made. The whole market has turned because there was an industry issue, as we repeatedly mentioned in the past. So they literally left no stone unturned. They've been acting on pricing in a very sophisticated fashion. They've been increasing new business double-digit on their direct platform, which is also very nice, and it's improving profitability. They've taken a number of action obviously on the book, on the retention and the repricing. So that's what's guiding the improvement. We've seen also some improvement in the UK book which is SME, not retail, but it's classified as retail in our disclosures. Switzerland has been improving very nicely and Italy too. It's a concerted action. A lot of it went through pricing, and you know that retail is relatively quick to reprice, so it's something that can be done on an ongoing basis. The way the teams have been acting to segment the customer's basis and make sure that they could pull through the right degree of rates in the right segment has been really strong, and we are seeing that coming through the numbers.

And if you go back three years and you look at the notes, we say three years ago that we expected in 2025 retail to be below 95. So to me, the anomaly was last year, not this year. This year is going exactly as we expected three years ago. Last year was the anomaly with Germany worsening instead of continuing the improvement. And then Switzerland also not improving enough as we expected. This year they are following the track that we expected for retail a while ago. And so it is not a surprise for us this.

Thank you.

You're welcome.

The next question comes from Andrew Baker from Goldman Sachs. Please go ahead.

Great, thank you for taking my questions. First one, can you just remind me the premium now associated with the North American motor business? Given, I guess, the turnaround here and the further rate coming through, where do you think that combined ratio can get to? And then secondly, on the middle market growth, I guess the year-on-year growth was held back by the US programs where you highlight obviously the focus on profitability. Just curious, was that profitability improvement work anticipated in your 10 billion GWP target for 2027 or does that create a bit of a headwind there? Thank you.

So once again, I take the second question and I pass the first one to Claudia. On mid-market, yes, we knew that we had an issue on the program business, and we knew that we would act on the program business. And so we're committed to the target as we were before, and we're confident that we're going to get there. And if you see the growth has been accelerating in both U.S. and EMEA, And actually, we are ahead of our plan to invest in mid-market resources. And so, again, we're confident that the results will be visible. So nothing really unexpected there.

Yeah. And from what we're seeing in July, Andrew, on the middle market, both, you know, the core middle market, as it's disclosed in the slides, so ex-U.S. programs and ex-specialties, it's actually accelerating the growth. So the team expects to be able to grow double digits. So the, I guess, important thing to keep in mind is that the work to prune part of the U.S. program book has been done between last year and the first six months of this year. So you will not see this degree of GWP decrease in the second half, right? So the pruning actions have been largely taken. Obviously, they would still work through the combined ratio, but in terms of cross premiums written, the bulk of it is done. What we expect to see in the second half is a pickup in the core middle market premiums over and above what we've seen in H1. On North America Motor, it's roughly 2 billion premium books So it's sizable. You've seen in the deck the year-on-year improvement. Keep in mind that last year the combined ratio was also, and it's what we are showing in the slide, also included some reserve strengthening, which we've been communicating about, right, to make sure that we are equipped for potential adverse experience, so that obviously increase the combined to the 120-ish that you see in the slide. We are very pleased that this year so far actually average to see has been slightly positive and we've been, you know, prudent in the way we have defined the expected loss ratio in the book given the past experience.

Great. Thank you. We expect this book to remain around to this level of profitability by year end.

The next question comes from Wilhard Castle from UBS. Please go ahead.

Hi there. Thanks. Let me take the question. I guess there's just one left actually. Can you help us to understand the mix of farmers between motor and non-motor and then let us know what current price adjustments are on each of those? I guess what we're really – what I'm trying to get to is sort of understanding in that high – mid to high single-digit growth, what is the sort of PIS growth that you're sort of implying in that? Thank you.

I suspect we need to come back to you with these numbers because I don't think we have it offhand. So we will come back to you with an answer to that.

Maybe what we can already say, Mario, is that the growth that we've been seeing is supported both by motor and the specialty products that they're selling. So it's a mixed growth. There has been an acceleration on the specialty side of things, which is one of the reasons why the gross premiums written are increasing more than the earned, right? It takes more time for the specialty policies to run through. There are 12-month policies. So it's growth in both areas. will come back on the exact mix. And it's, by the way, it's something as well that's being defined dynamically, right? It cannot be perfectly predicted.

But they're working on this. Yeah, absolutely. Thank you very much. Thank you.

The next question comes from Vinit Malhotra from Mediobanca. Please go ahead.

Yes, good afternoon. Thank you very much. I have actually only one question left after all these questions were asked. That's just a clarification on the expenses because I'm just curious to know your gut reaction to this. Is this something that is worrying you a bit because from where we sit we see obviously the underlying loss ratio improving a lot but the expenses eating some of that because of commissions or investments and is that something that you would have anticipated or we should have anticipated? Is that something you're quite comfortable with? So I'm just curious to hear your thought on that because that's obviously been the focus in an otherwise very strong underlying loss ratio result.

So look, the retail component of it, it could have been anticipated by all of you and definitely it was anticipated by us because as I said, I mean, We bought Travel Guard, which has roughly 350 million of expense basis, but then has a 20-something percent loss ratio. And overall, this is a very profitable business. It was well known. The commercial component, it was budgeted by us. You did not know that. but it's precisely though we were fully and we were supportive and, you know, we think this is absolutely the right thing to do. So, I don't see anything worrying that and, you know, the central expenses are under control and are coming down. I mean, every other expense item is absolutely under control and will come down. For us, this is not new and it's not unexpected and it's not boring us at all.

The commercial part of it is 60 basis points, which includes the investment in the market that Mario was mentioning before. So it's a much smaller piece of the overall increase in expenses. The majority of it is the travel guard. impact, and the Indian contact inclusion in retail, which is partly set up and partly is the run rate change that Mari was referring to.

Yes, thank you very much. And if I can get my second one in, the slide nine is very helpful on the speciality line. Thank you very much. I'm just curious, between these lines, there must be a lot of moving parts, because obviously the AYCR on the left hand of the chart is flattish to small up. Is there any commentary that you'd like to share on this right-hand slide, which lines you're focusing more on? Is it construction? I presume not financial lines. Is there any commentary there that we could use? Thank you.

But look, I mean, construction is our backbone. I mean, we are leaders in construction and engineering. So that remains a point of strength of Zurich in the market, and it continues to be a growth engine for us. Then credit insurity also is something that we have been doing very well over the past years, and we are thinking about how we can globalize that and bring it to other customers. Energy is also important. quite important for us. We're very active in the energy transformation. We've been investing on many of the new energy sources. I think we're very competitive there. ENS had a kind of setback this year because of rates. It was very interesting in the past two years. This year we're not growing that aggressively because we see that the market is softening of rates and the profitability might not be at the same level of the past years, and so we don't plan to grow it. Yeah, the other lines are what they are. I mean, you know our view on cyber. It's a very special line of business. We do cyber for SMEs and some of mid-markets, so we don't go above that. Yeah, and financial lines, not much to say about that. Okay, thank you so much. I appreciate that.

Thank you. You're welcome.

The next question comes from Kamran Hossein from JP Morgan. Please go ahead.

Hi. I've seen two questions from me. The first one is just on the life CSM clearly kind of came in better than I think I'd hoped at least. I guess given the relatively large move, should we think about the amortization pattern being any different to how you kind of described it before? And the second question is on, I guess, the areas that you think you can improve in P&C. Clearly, in your business, there's a mixed shift, there's the middle market, and thanks for the disclosure there. But, you know, you called out the commercial motor and the piece improving today. Are there any other areas that you think, you know, you have ability to remediate to kind of keep that combined ratio coming down a little bit more outside of kind of rate and mixed shift? Thank you.

Yeah, Cameron, usual sequence. I start with your last questions, and then Claudia takes the first one. Yes, I mean, of course. We always have something that we're working on. You know, the program business was known to us, and we acted upon that. We want to see this year crop. Crop is an area where we had two years ago bad results. Last year was better, but still not okay. We have reformed the crop portfolio this year very carefully, and we want to see if this produces the results. And then, as I mentioned before, it's especially important for us to continue pruning liability portfolio. We're not pleased with the liability results, with the profitability. I heard that other companies are happy with that. We're not. And so we will continue taking actions, either on rates or on canceling some accounts. But we're pretty pleased with the profitability of mid-market, broadly speaking, specialties, and even the property portfolio is generating very good returns at the moment.

On the life system question, Cameron, it's fair to assume that the 3% amortization rate that we've seen so far will continue, that will continue to be the range.

Thanks so much both.

Thank you. The next question comes from Dominic from . Please go ahead.

Hello, folks. Thanks for taking our questions. My first question is just on the financial result within P&C. I'm looking at slide 13. I was a bit surprised that the investment income here, the 1, 2, 7, 6, didn't increase more. I'm looking at the book yields on the right-hand side here. I think the book itself grew at a fair clip as well. Can you just help me bridge from what looks like, you know, a book yield that should imply a sort of a 10% increase on top of a growing book back to a smaller increase in the investment income? What are the other moving parts? And I suppose relatedly, I'm going to try and shoehorn this into the same question. The IFE, if you're going to grow the IFE for full year 25, 200 million on full year 24, that implies a really sizable increase in the IFE in the second half. Is there a special reason for that that I might have misunderstood or missed? The second question is just a very simple one. You've been very explicit in saying that life off profit is expected to be in line with last year at 2.2 billion. When you gave that guidance, the dollar was in a different place. I have been expecting that that's a bit of a tailwind to the life off profit. Is your 2.2 sort of adjusted for the FX? Thank you.

I don't think we're just for the effects and especially I don't even know where the effects will be because there is volatility there and I wouldn't predict the effects level by year end. I wouldn't even try to do that. So I wouldn't try to adjust. I mean, we'll stick to the guidance and then we'll manage to come as close as possible or even better than that.

Keep in mind, Dom, that we had last year 150 million one-offs, so the fact that we plan for the full year to be in the same range is actually a substantial increase, right? Not taking into account anyone else, and we didn't have any positive one-offs in H1, unlike last year. So it's quite an ambitious target, I would say. On your first question on the NII for P&C, there's one main driver for the increase that's not as high as expected, and that's hedge fund performance. So a significant chunk of the hedge fund holdings we've got is reported through and it's part of the NII, and while it's positive in terms of market-to-market and gains in H125, it's not as high as last year. So it's roughly 100 million, a bit less than 100 million year-on-year, and that's the main explanation for the NII gap, if you will. Your second point, sorry, was on EFI on the 200 million, right, on the full-year guidance, is that right?

Yeah, that's right. Just to reach up on the former point, Claudia, and forgive me if I wasn't clear, I'm looking at the 1, 2, 7, 6 on page 13. If I've understood correctly, the hedge fund gains are within the 36. So I understand the point about that. I'm just a bit surprised the 1, 2, 7, 6 didn't go up any more.

Yeah. There's no particular reason, actually. There's some... Some ethics that comes through as well on some US dollar denominated items that have been held in the Swiss balance sheet. But there's nothing more substantial than that, Dominic.

Okay. Yeah. And on the EFI?

On the EFI, so the unwind of discount is roughly $70 million year-on-year for the first half. For the second half, it probably won't sum up to 200 million. It would probably be somewhere below there. Probably a bit higher than the first half.

Thank you so much.

Thank you.

The next question comes from James Shack from Citi. Please go ahead.

Hi there. Good afternoon. At the risk of focusing on negative things, there's lots of positive things there as well, but Mary, I just wanted to get your kind of insight into U.S. commercial kind of large accounts versus other. There's been a bunch of commentary that it's large accounts that are seeing the cycle turn off a little bit more abruptly. Are you seeing that in your book as well? And if you're able to give us an indication of how much you would classify of your North American commercial premium, how much of that is large account, that would be helpful. And then secondly, just returning to specialties, The mix you've given is very helpful. I guess I'm looking for just a bit more of a strategic outlook here. I know you'll give an update later in November, but specialty can mean many things. And, you know, there are a bunch of listed players that do specialty insurers and subsets of conglomerates as well. What are you thinking in terms of kind of Lloyd's platform, the NIDA platform, how much you're actually integrating MGA's into the specialty book? Just really kind of a bit more strategic view for the output that would be helpful. Thank you.

Right. A large corporate, I can't give you a precise number of splits, but we have been shrinking large corporates in percentage terms and in nominal terms now since 10 years ago. You remember that 10 years ago Zurich was mainly a large corporate rider. Now the problem with that was A, that the combined ratio was relatively higher because of the competitiveness of large corporates, but B was the volatility because, of course, if you're serving a large corporate, you have a large corporate claim too. And so when we announced back in 2016 that we wanted to stabilize and reduce the volatility of the business, We also indicated very clearly that we will grow mid-market and SMEs. And we're still there. We're still growing. Where we are today, mid-market and SMEs, is the result of 10 years of investments, growth, and shifting of the portfolio, and we're continuing that. So I don't see changes. I mean, there are long-term structural reasons for us to grow somewhere else than in the large account category, and there are also tactical short-term reasons to do that. And this has remained the priority for us. Then your second question is on the specialty composition and the Lloyds platform. Look, do we need a Lloyds platform? I don't know. I mean, there are some businesses that don't come if you're not annoyed. Do we badly need these businesses? I doubt it. I mean, we don't feel we are limited by that. But, yeah, it's something that we keep looking at, and we're open without having made a decision. On the definition of specialty, I completely understand what you're saying, and that's why we put in the page a breakdown of what are specialties for us. Because, as you said, specialties mean many different things, but you see from there what it means for us. Where we have competences, where we have underwriters, where we have data, and this is what we're planning to keep growing and develop. Does that answer your question of specialties?

Yes. Thank you very much. Okay. You're welcome.

The next question comes from Andrew Queen from Autonomous. Please go ahead.

Hi. Good morning, everyone. A couple of questions for me. Firstly, on farmers, given the strength of the surplus ratio, which is well above your 34-38 target, could you talk a bit about what kind of combined ratio the exchanges would be happy to accept and whether they'd be happy to go above 100 in order to grow the volumes and sacrifice some of that excess capital. And then secondly, slide four, the cash remittances, I noticed your full year 25 bar is more than a third of your wage, 19 billion. Could you talk a bit about that and whether that is just additional cash remittances in for year 25 or whether that's indicating that it's a run rate where you might be 19 billion over the three years.

So the purpose of that is simply to tell everyone that we feel very safe and confident on the dividend of this year. We have the cash And we have even more cash than we should have had according to target for 27. The dividend is pretty safe. That's the message. And then, you know, let's see. As you know, over the past three plans, we have always exceeded the cash remittances targets. And whenever we announce targets, You know, we don't just plan to meet the targets. We always have the ambition to exceed the targets, but it is very early. This is the first semester, and we have a lot more ground to define the targets. On combined ratio and exchanges, look, I think it's not just the exchanges. It's also us. I mean, we want to... keep the exchanges with the proper surplus. As you might remember from the discussion of a couple of years ago, we have no lever to act on the surplus of the exchanges except for the combined ratio, except for the checking for profits. And so we don't mind them having excess surplus, if I can say so. and we don't mind having the combined ratio in the 95 to 100 kind of range. I think probably we're more careful than them, because remember, the exchanges are not professional people, and they might not understand completely the volatility and the fluctuations that are possible in the market. We will keep the combined ratio in a in a candle range, 95 to 100. And we will try to avoid the combined ratio going above 100.

Okay, thanks.

You're welcome.

We now have a follow-up question from Fahad Changhazi from Pepe Chevro. Please go ahead.

Thank you very much. Sorry, just one follow-up on when you're talking about effects. If I look at the life bulb, the non-controlling interest increased Could you just comment, is that in part related to FX? It's probably related to LATAM, so I'm just wondering if 234 is in part related to FX in addition to just higher earnings. Thank you.

I don't think this is driven by FX. Let us come back to you on this one.

We're puzzled by your question. We will think back. and come back to you with an answer. Can I ask myself a question and give you the answer because I'm surprised it didn't come. We had a specific effect in life in Latam because sales in Brazil were down because of a transition at Santander in their organizational model and incentives. This has been fixed. and it will be recuperated or contrasted in the second half of the year. But that's one of the reasons why the growth in protection was below what we expected, but at the same time, it also says why we're very confident on the protection growth, because we saw this already corrected by Santander, And they were as disappointed as we were by their sales results in Brazil. And I think they even mentioned that in their call.

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

So, all right, thank you all for questions and for the interest In our results, before we close the call, I would like to reiterate our key messages for today. We have delivered an outstanding performance in the first half of the year with the record operating profit and record core return on equity, supported by strong progression in all our geographic and business segments. In our financial resilience with an SST ratio of 255%, coupled with high cash conversion, positioned us strongly to execute in the best long-term interest of our shareholders. See you all in the next weeks and then in November at Investor Day. Thank you.

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