Hiscox Ltd (HSX) Earnings Call Transcript

Good morning, everyone. It's great to be here to present another set of strong results. Hiscox is built to deliver through the cycle. Our diverse business portfolio and effective execution of our strategy are delivering growth at attractive returns in an increasingly complex trading environment. We've grown premiums by 10%, our insurance service result is up 30% and we've delivered an attractive combined ratio of 90%. Our underlying investment income continues to benefit from strong yields and a growing asset base. And we've achieved a return on tangible equity of 20%, materially above our mid-teens through-the-cycle target. This drives strong capital generation and supports a 17% increase in the interim dividend. And over the last 12 months, we have returned $460 million of capital to shareholders through dividends and buybacks while growing the book value by 9%. Now looking at the performance of our businesses in more detail, we have built a multiyear track record of delivering growth and strong profitability. In retail, we have now achieved 3 consecutive years of accelerating growth and margin expansion. Since 2023, our growth rate has doubled, driven mostly by policy count and reflecting the quality and breadth of our customer propositions. And today, we are upgrading our 2026 retail growth guidance from 8% to 9% for the full year, a material step-up from the 6% we achieved in 2025. Retail margin continues to expand as we gradually and consistently improve within our 89% to 94% target range as guided at the CMD last year. In London Market, the diversification in our portfolio has again resulted in the business delivering a solid combined ratio after absorbing the impact from the Middle East conflict. This is consistent with our long track record of disciplined underwriting and profitable growth. In reinsurance, we have once again delivered an excellent combined ratio of 70%. This follows 3 years of achieving outstanding combined ratios in the 60s. Our disciplined underwriting and risk selection continue to be recognized by third-party capital providers, driving the top line in the first half. Now turning to the profile of our growth. Our momentum is underpinned by dynamic capital allocation as we deploy or indeed pull back depending on the quality of the opportunities we see in front of us. Retail is leading our growth, adding $174 million of premium, almost as much as in the whole of 2025. We're capturing a structural growth opportunity by combining our competitive advantages in brand, marketing and technology with a market-leading underwriting and claims ecosystem and a business builder culture. In London Market, we continue to navigate micro-cycles. And for the moment, growth in some existing lines and our selective expansion into adjacencies is offsetting targeted reductions in business that no longer meets our return thresholds. To bring this to life, we have launched structured solutions and downstream energy. Both are growing nicely. And at the same time, we shrunk major property premiums by 24%. And you'll hear more about this combination of expansion and cycle management from Joe in a moment. In reinsurance, we grew our top line by matching strong third-party capital demand with high-quality opportunities our underwriters are able to access. At the same time, we continue to manage our net exposures in line with the guidance we set out last year. Now looking at the initiatives driving this growth. Over the last few years, we have materially increased the pace at which new initiatives are launched. You can see here a selection from the last 6 months as well as some in our pipeline, which we continually top up. We're expanding surety across Europe and personal accident in France, leveraging significant experience we have in these lines across the group. In addition, we are continuing to expand into more and more specialist niches, such as podcasters, streamers and even rage rooms, while building and strengthening our partnerships to get more products to more customers. We now offer commercial auto in U.S. DPD, underwritten by a highly reputable multi-line U.S. insurer and one of our largest existing partners. Now looking ahead, we have added another top 15 U.S. carrier to our partnerships, who, in the second half will begin selling our products through their extensive agent network. These opportunities have significant potential to drive premium growth and fee income as they scale over the next 18 months. In London Market, we are continuing to grow our established digital auto underwriting capability through FloodPlus, complementing it further with a new product we call SURF, targeted at larger, more complex U.S. flood risks. And finally, we are expanding our geographic footprint. We've now received a branch license in Italy and appointed a Managing Director. And we're continuing to innovate using disruptive technologies to drive growth and redefine the customer experience. As you know, a core underpin of our DPD business in retail has been the use of machine learning. This business is almost entirely auto-underwritten, an essential feature to generate satisfactory returns on policies averaging less than $1,000 in premium. We're now augmenting this with AI across distribution, underwriting and claims. Through technology innovation, we can sustain our growth momentum, opening new markets and creating new products while redefining the customer experience through a more frictionless service at every touch point. This is about using technology to drive growth, expand our reach, improve customer service and help our colleagues maximize their potential. And we're already making tangible progress. Across our retail business, we are now in the process of rolling out new front-end portals for our customers and brokers based on a common modular technology. These will open up new self-serve capabilities and expand our ability to deploy AI tooling. We have launched self-service options in our U.S. DPD contact center. Customers calling our general inquiry line can now discuss their insurance needs and submit a claim with SARAH, our AI voice agent, whose voice you just heard a moment or 2 ago. Feedback so far has been excellent. Around 30% of the calls taken by Sarah are completed with her with a high customer satisfaction score of 88%. SARAH joins HARI, our agentic solution in London Market, already deployed across middle market property. HARI receives submissions, reviews them, identifies missing information, assesses the risk against our underwriting appetite and provides recommendations to our underwriters. And in a first for Lloyd's, London Market in collaboration with Google Cloud is developing an agent-to-agent protocol, which will allow HARI to interact directly with a broker as they develop their own agents. We plan to make the protocol open source to accelerate the market's adoption of agentic trading. But we're not stopping there. We are continuing to invest and build new capabilities and solutions with some exciting developments to come in retail over the next 12 months, and I look forward to updating you next year. Now with that, I'll now hand over to Paul, who will take you through our financial performance in the first half.

Thanks, Aki. Good morning. It's great to be here with you all today presenting another strong set of results. We have delivered a strong underwriting performance underpinned by profitable growth, underwriting discipline and the emerging benefits of our change program. ICWP increased by 10.1% to over $3.2 billion with profitable growth in all 3 business segments. Net ICWP grew by 6.8% to $2.3 billion, reflecting continued momentum in retail alongside disciplined underwriting management in big-ticket. The insurance service result increased by 30.2% to $255.4 million, demonstrating the quality of the portfolio and the benefit of improving operating leverage. The undiscounted combined ratio improved to 90.4%, an improvement of 220 basis points year-on-year. And this reflects the benefits of the group's diverse business model, a smaller impact from large losses and the emerging benefit of our change program. In relation to the Middle East conflict, the group has prudently reserved an estimated net loss of $60 million with $40 million in London Market, reflecting our specialty exposures. This was offset by a benign natural catastrophe loss experience in the first half. The investment result was $128.2 million, lower than the prior year, reflecting mark-to-market movements on fixed income assets. And these are expected to unwind over the next 18 months as bonds mature and pull to par. These are excluded from operating profit. The adjusted operating profit before tax was $331 million, up 26.3% year-on-year, generating a 20.2% operating return on tangible equity. And this includes a 2.2 percentage point benefit from the recognition of $64.5 million of deferred tax assets. We have taken management action, enabling us to access historical tax losses that were previously unrecognizable. This is expected to reduce future cash tax payments, but is not expected to have a material impact on future P&L tax charges. Turning to shareholder returns. We have increased the interim dividend by 16.7% to $0.168 per share, consistent with our policy to set the interim at 1/3 of the prior year total and follows a 20% step-up in the 2025 final DPS. The $300 million share buyback is progressing well with 32% completed in the first half. And these results demonstrate continued delivery of our growth and change agenda and disciplined cycle management in big-ticket, all delivering attractive shareholder returns. Moving to Retail. Retail continues to deliver accelerating growth and expanding margin. ICWP grew by 12.6% to $1.6 billion or 8.2% in constant currency, ahead of guidance. Growth continues to be broad-based and volume-driven as the policy count increased at a faster rate than premiums with rate up modestly at 1%. The insurance service result increased by 16.6% to $149.2 million, supported by profitable volume-driven growth and improving margins. The undiscounted combined ratio improved to 92.1%, benefiting from a lower loss ratio and the emerging benefits of the change program. Based on the continued momentum we see, we have upgraded our 2026 Retail growth guidance to 9% for the full year in constant currency. Retail continues to execute well against its multiyear growth strategy and remains on track for double-digit growth in 2028. Turning to London Market. We continue to operate with a disciplined approach to cycle management while investing in innovation and selective growth opportunities. The reported ICWP growth of 9.8% benefits from prior period premium adjustments, mainly in property binders. The business was written in previous years, and we have adjusted where growth came in slightly higher than initially estimated. So on an underlying basis, ICWP increased by 5.3%, reflecting expansion into adjacencies and new business opportunities. Net premiums grew by 3.2% with higher reinsurance sessions as we benefit from lower reinsurance pricing. The insurance service result was $44.1 million compared to $61.8 million in the prior year. This primarily reflects the impact of losses from the Middle East conflict and a softer rating environment in some lines. As such, the undiscounted combined ratio increased to 93.8%. London Market is well positioned with a diversified portfolio, continued innovation and strong underwriting discipline. Turning to Hiscox Re. ICWP increased 6.4% to $944.5 million, driven by additional third-party capital deployment. Net premiums declined by 7.4% as we maintain discipline in property catastrophe and retro lines, reducing exposure in areas where returns fail to meet our profitability hurdles or target volatility profile. And this was partially offset by growth in specialty and pro rata lines. The insurance service result increased to $62.5 million, reflecting strong underwriting performance and a benign natural catastrophe environment compared with the prior year. As such, Hiscox Re delivered an excellent undiscounted combined ratio of 70.4%. We continued to see strong demand from third-party capital with assets under management increasing to $2.9 billion, of which $1 billion is in our cat bond fund. Fee income from third-party capital was $53 million in the first half. Overall, Hiscox Re is delivering disciplined underwriting results and generating attractive fee income through our capital partners platform. Turning now to our change program. We are seeing ongoing tangible progress across the business. Our productivity is increasing. ICWP per FTE is up 10% in retail. And in London Market, the number of submissions processed is rising materially, up 50x across sabotage and terrorism, cargo and middle market property as we deploy digitally augmented underwriting. And through the deployment of automation and AI, we are responding to our customers faster. 70% of total retail premiums are now auto underwritten and the average submission to quote time in London Market has reduced by 15% in middle market property. Savings from claims recoveries have almost doubled and are recognized in the P&L. We've also achieved a similar increase in claims fraud detection, which is prudently yet to be recognized in the P&L. As we execute our resourcing strategy, 9% of roles have been outsourced with a higher proportion in impacted functions. In areas like technology, we have in-sourced a further 96 roles since the full year, many in Lisbon with similar or better capability in a lower-cost location. Pleasingly, following a deliberate program to upskill our staff, our teams are embracing the power of AI with a 69% adoption rate across the business. And we are continuing to optimize the number of applications, suppliers and property footprint. In addition to unlocking growth and expansion, these changes are driving further efficiency and operating leverage across the group. In the first half, we delivered $45 million of P&L benefit against the 2024 baseline and incurred $39 million of costs to achieve. Around 1/5 of the benefit is driven by improvements in claims recoveries, which are recognized in the claims line on the P&L. Improvements in our expense base are driven by savings with strategic suppliers and a greater use of outsourcing. With strong progress being made across a wide range of initiatives, we remain on track to deliver $75 million of benefit in 2026 and $200 million in 2028. Our growth and change agenda is driving positive operating jaws. Premium growth is outpacing underlying expense growth. As a result of the change program, underlying expenses have increased by only 0.4%. This reflects the P&L benefit more than offsetting underlying inflation, investment in the growth initiatives Aki spoke about earlier and an increase in brand spend, which will fuel retail growth over the longer term. This is favorable when compared with ICWP growth of 8% in constant currency. In turn, this is driving an improvement in the group admin expense ratio, which has improved 80 basis points to 16.1%. Turning to investments. The investment result reflects continued strong cash and coupon income, supported by a growing asset base. As noted earlier, the investment result reflects mark-to-market movements on fixed income, which are expected to unwind over time as bonds mature. Our assets remain conservatively positioned with a high-quality bond portfolio, average credit rating of A and a short duration of 2 years. Turning to reserves. We continue to exercise a conservative reserving philosophy. This enables our long track record of favorable reserve development with $174 million of positive development in the first half. These releases are broad-based and from all segments. At the same time, our confidence level remains strong at the 86th percentile above the target range of 75% to 85%. The risk adjustment of $355 million is an increase of $10 million since the full year. The balance sheet remains robust. Organic capital generation of 14 points is driven by underwriting performance across all segments and returns from the growing investment portfolio. Our capital position remains very strong with an estimated BSCR ratio of 224%. On a pro forma basis, post announced returns, our BSCR stands at an estimated 210%. This strong capital strength supports continued profitable growth, investment in new capabilities and attractive shareholder returns. With that, thank you for listening, and I will now hand over to Jo for an update on underwriting.

Thank you, Paul, and good morning, everybody. When people think about underwriting, they often think about pricing risk. But more than ever, the job of the CUO is about change, anticipating it, understanding and responding with speed and discipline. The world is changing at an accelerated pace, driven by geopolitical tension, technological advancement, economic uncertainty and climate change, and this creates both risks and opportunities. And our job as underwriters is to help our customers navigate through that uncertainty whilst protecting the long-term performance of Hiscox, performance which is increasingly being driven by underwriting actions rather than market tailwinds. And I think our first half results are a good example. So in the first half, there were several industry losses, most notably from the conflict in the Middle East. We have prudently reserved $60 million net across both London Market and Reinsurance. Sadly, those tensions are ongoing. We continue to support our customers writing business reflective of the risk environment. Outside of this, industry natural catastrophe for the first half was below our 10-year average and losses across the attritional was well within expectations for the group and consistent with last year. And all of this has combined to give a group undiscounted loss ratio of 43% as we benefit from our portfolio construction, exposure management and our diversification. The strength of Hiscox lies not in any one individual class, but in the diversification of the portfolio, and you can see that on the left-hand side. Retail compounds, London Market balances growth with cycle management and Reinsurance flexes between our and third-party capital. The retail growth opportunity gives the option but not the need to grow our big-ticket businesses. And because these portfolios are highly traded, we're able to manage the various micro-cycles that exist. And you can see that on the right-hand side. We lean in when conditions are favorable, but we step back when excess capital erodes returns. So where are we in the market? So this next slide, hopefully, a familiar slide to you. The chart on the left is our rates indexed back to 2018 for our 3 core segments. Retail, which is purple, demonstrates the stability of a highly diversified portfolio. We're now serving over 1.7 million customers and rating across U.K., Europe and the U.S. is strong. Our big-ticket businesses have moved from a rate acceleration part of the cycle into a now more moderate phase and rates have come down in 2026, although much of the gains have been retained since 2018 and attractive underwriting opportunities still exist, although it is becoming more differentiated, and you can see that on the right-hand chart. So as a reminder, adequate means pricing capable of delivering attractive returns in a mean loss environment, adequate plus is margin in addition, and low is still profitable, but just below our targeted return hurdles. As you can see, despite the pressures, the position is broadly consistent with the position we gave you at the beginning of the year, and that's for a couple of reasons. One, the market has evolved in line with our expectations; and secondly, our cycle management actions, which you can see on the next couple of slides. So our London Market strategy is made up of 3 components. First, manage the cycle. We actively reduce exposure where risk and reward is not commensurate. And you can see in the first half, we've non-renewed 17% and 23% of major property risks and renewables risks. Added to this, we've reduced line sizes in places like general liability and product recall. The second component of our strategy is build out for adjacencies, adjacencies where we have existing expertise and capability. We're extending our property capabilities into U.S. mid-market. We're relying on our financial lines expertise for financial institutions and our terror expertise for aviation hull war. And then the third part of our strategy is leaning into structural market changes. So facilities and MGAs are now an established part of the distribution landscape, and we have invested in structured solutions, global MGAs and beta follow to build the strategic portfolio solutions capability to support select parts of this market profitably. So the headline underlying growth for London Market is plus 5%, but that's actually made up of minus 8% from cycle management, offset by plus 13% from existing and adjacent lines where we see attractive opportunities, and this has moderated further on a net. Our reinsurance strategy is similar with 3 components. First, manage the cycle. We selectively deploy our capital in line with our high return hurdles and our volatility profile. And you can see we've reduced exposure in the first half, reducing the property cat and retro by 11% and 35%. Secondly, we're scaling into our non-catastrophe lines, things like pro rata and specialty, where we benefit from client relationships and our expertise and further diversifies our portfolio. And lastly, scaling Hiscox Capital Partners. So third-party capital gives us both relevance in the market, but it also enables us to deploy more of our underwriting capability than our own balance sheet will allow, and this builds attractive portfolios for our partners and fee income for ourselves. So having significantly increased our net retained in a hard market, we're now just moderating that position as conditions evolve. And then moving on to Retail, where our active portfolio management is underpinned by a specialist underwriting ecosystem across the whole value chain. And our focus now is on next generation of underwriting capability through data, technology and further automation. So we're rolling out a new pricing engine across U.K., Europe and the U.S., and this has given us greater segmentation capability, but it's also allowing us to respond to trends with greater precision and speed. We're enriching our data. We're adding third-party data to our own proprietary data, again, multiple benefits from risk segmentation and selection, but also it makes us easier to do business with. As an example, our new Cyber Accelerate product has reduced the number of questions we need to ask our customers by over 60%. And then further automation is driving productivity, freeing up our underwriters to focus where their judgment matters. We have a new AI augmented solution that we've rolled out in a part of our U.S. broker business. And this is increasing or decreasing the time it takes to process a quote from submission to quote by 80%, and we're now going to roll that out for the rest of retail. So taken together, these all support profitable growth at scale. So as I look forward, my focus is clear: manage the cycle, continue to reshape our portfolios in line with the evolving market conditions. Secondly, accelerate innovation, continue to invest in sectors, in products and distributions that will all define our future growth. And then lastly, elevate our underwriting. We're going to equip our underwriters with data and tools to really amplify their specialty expertise. So I have no doubt the market will evolve and risks will change, but I'm really confident in our ability to adapt. In a world defined by uncertainty, a strong underwriting capability is a competitive advantage. Thank you. I'll now hand back to Aki.

Thank you very much, Jo. I'd like to leave you with a few key messages. So Hiscox is built to deliver growth and returns through the cycle, led by broad-based acceleration in retail and complemented by disciplined expansion and cycle management in big-ticket. Through our change program, we're building a stronger and more efficient Hiscox, launching new capabilities and increasing our operating leverage. We are achieving consistent and attractive returns in evolving market conditions, underpinned by dynamic and proactive capital allocation and an expert underwriting ecosystem. Our strong and sustained capital generation allows us to reinvest in growth in an unconstrained yet disciplined way while delivering attractive distributions to shareholders. So turning to our outlook. Well, our outlook is positive. Retail growth continues to accelerate. So today, we're upgrading our 2026 full year guidance to 9%, and we remain on track for double-digit growth in 2028. With a return on tangible equity of 20%, we're ahead of our mid-teens through-the-cycle target. Our change program has realized a $45 million P&L benefit in the first half, and we're on track to deliver a $75 million benefit for the full year and $200 million in 2028. Our shareholders are benefiting from our delivery through a 17% increase in the interim dividend and our ongoing $300 million share buyback, which continues at pace. As ever, thank you very much for listening, and we'll now take questions. All right, Ben?

Ben Cohen from RBC. Two questions really on retail. Firstly, could you just talk a bit more about what has driven the confidence in terms of the 9% growth now for the full year? And secondly, in that context, is it -- are you now maybe a bit too conservative in terms of only hitting a double-digit growth rate in 2028? What do you see as the drivers into 2027 to enable us to assess the likely growth rate then?

Great. Thank you for that question. The retail growth journey, as you know, has been a multiyear growth journey. We've been -- we've seen accelerated and delivered accelerated growth over the last 3 years. And each year, it's been accelerating, and we've been expanding margins. The really pleasing thing is it's not one factor. It is a multitude of factors. So we tend to call it a broad-based growth. So we're seeing growth accelerating in every business unit and practically every single channel. And we laid out last year at the CMD, we set out the market opportunity. That market opportunity is vast, it is structural and it's continuing to grow. So the background is constructive. And what we've seen over the last -- I think most certainly the last 6 months is whilst that market has been growing, certainly in the U.S., France and Germany, we're seeing new business applications increase further. So that background is very constructive for us. Secondly, as we laid out, we are launching new products. You heard about streamers, podcasters. There's a range of other variations of new niches that we're going into, new products that we're launching. You heard about the cyber product from Jo just a few moments ago. We're investing in distribution, adding more partners, winning new distribution deals. And I guess when you kind of pare it back, what we are seeing is a significant uplift in each of our channels. So if I think about our direct commercial business, which has been supported by extensive marketing over the last few years in building our brand and so on, that is now growing at 14%. And that's been accelerating. That's our direct commercial business across the retail business units. A couple of them, particularly in the U.S., that's growing even faster. So that's going really well for us. Our distribution deals that we've signed over the last 3 years, you've heard me say previously that they take about 18 months to really get to scale, well, those are beginning to really kick in. We've spoken about the high net worth business in the U.K. where we've been deploying technology, market-leading customer service where the NPS scores are in excess of 80 and the wide coverage that we provide, we're a genuine market leader there, and we've seen double-digit growth there in practically every single quarter, I think, for the last 6 to 8 quarters. So there's a multitude of factors that are driving that. And we guided to 8% this year, by the end of this year. Frankly, we achieved that ahead of our expectations in the first quarter. And another 3 months on the visibility that we have to the end of the year gives us the confidence that the momentum will continue to build from here and enables us to increase the guidance to 9%. And that gives us even more confidence that we will hit the double-digit growth rate in 2028. As far as 2027 goes, I think we'll update you at the full year. Ivan?

It's Ivan Bokhmat from Barclays. The first question would be another one on Retail, please. Just wondering, looking at your presence, we're seeing a little bit of a deceleration of rates. And of course, the markets are s becoming more competitive. I was just wondering how you think about retail becoming a headwind in the next few years? How much of a headwind could that become? My second question is on London Market. I think it was very interesting to see you expanding your kind of MGA solutions and at the same time, getting some tailwind from the binders this year. Can you talk about how much of your underwriting right now is delegated authority? And how do you think about risks of that in a softening market? And maybe the final question, just related to reserve releases. I mean, how strong would that be? Should we expect that to be? And I think, Paul, you've mentioned some of the claims efficiency gains. Is that something that's specific to first half? Or what kind of a run rate for those extra initiatives within reserving or elsewhere should we expect?

Great. Thank you, Ivan. So Paul will cover the reserve releases question. In terms of how much of our portfolio in London Market is delegated and how we think about it, Jo will provide some insight on that. In terms of retail headwind, absolutely not. Just let me remind you about the retail sort of portfolio. We -- yes, the rate tailwind is decelerating. The Retail portfolio is much less cyclical than London Market and Reinsurance. And if I kind of -- if you cast your mind back to pre-COVID, this is a portfolio where typically year-over-year, it was plus or minus 1% or 2%. That is our normal expectation with the Retail portfolio. What we had was a post-COVID inflation spike. And as a result, we did see rates go up. I think in 1 year, they might have gone up 5% or 6%. But this is now reverting back to a more normal environment for the Retail business. The Retail business is about operating leverage and providing best-in-class service and getting growth through volume. And that is exactly what we're doing. In fact, if you were to draw the 2 curves, the rate has been decelerating for the last 3 years as we have come out of that COVID -- the inflation spike. And that has coincided exactly with the retail growth accelerating. So actually the volume growth that we've been delivering in retail has been ahead of that rate deceleration every single year, and we're very confident of achieving that, which is kind of further reflected in the higher guidance that we provided for 2026. Jo, do you want to comment on the delegated authority and then Paul?

Sure, yes. So as you say, I mean, delegated underwriting is not new to us. We've done this for many, many, many years across all of our business. I suppose the longest example would be in our London Market business where we have a binder portfolio, and I think that's a 5-decade track record. I think the key to delegating underwriting authority is you're certainly not delegating underwriting performance or accountability. You're just managing it in a very different way. You're managing it more on a portfolio basis rather than on an individual risk type basis. I mentioned in the presentation, we are leaning into some of the sort of structural changes in the market and particularly around things like global MGAs and beta follow. But we're doing that in a Hiscox way. We're doing that with underwriting discipline and we're doing that with technology. Technology plays a key feature here. Data really shortens the distance between portfolio management and action. So we're partnering with people who absolutely share our underwriting ethos, who have an alignment of interest in terms of that underwriting ethos. We're definitely partnering with people who have data and technology at their core, who are really leaning in, investing in the same way that we are. And then lastly, that longevity of relationship. Lots of things that we do, we do for the long term. We want to partner with people who have a longevity of relationship. So yes, we're doing a little bit more of it. I think you can see from that pie chart that I showed, it's still a modest part of what we do. But yes, a growing part because that is a growing part of the market, but we're definitely doing it in Hiscox way.

Sorry, can I follow-up? Within the like managed premium in London Market, how much is delegated authority in general?

So Ivan, I think -- I mean, I'm not going to give you a number. But I think what I would say is there's lots of parts of our business that we do delegate. So what was historically called alternative risk, I think that is an area now that's morphed into the portfolio solutions. So you can see that there's delegation there in our binders business, so that predominantly is in the property segment of that London Market business. So that would be commercial binders, high net worth binders predominantly in the U.S. So there is a proportion that is delegated. But as I said, I mean, we've got a 5- decade, I think, track record for managing that business.

Maybe just to add to that, the previous statistic that we have provided is on the proportion of business we lead in Lloyd, and we continue to lead the majority of the business that we write.

Yes. And then on reserving and reserve releases, I mean, just talking of track record. So our track record on reserve releases is something like a 20-year unbroken positive PYD for the group. So that's a great starting point. And really, the way to think about it is we have a very conservative reserving approach on the way in, and you need that to experience the reserve releases on the way out as these claims mature and come to maturity. So from that perspective, what you've seen, and you can see on the slide is the confidence level is up at 86%. So it's modestly above the 75% to 85% range. And despite the reserve releases, we have added to the margin in the first 6 months. So we've built that up by a further $10 million. So that gives us the confidence of ongoing reserve releases on a prospective basis. Now in terms of the change program, you're right to highlight it. What we have been doing is industrializing really the processes around both claims recoveries, but also claims fraud detection. And I'm pleased to say, you've seen the level of detection rates or recoveries has gone up quite meaningfully since 2024. That's manifested itself in the half year with a $10 million benefit from a claims recovery perspective, that's in the P&L. From a fraud detection perspective, we've been a bit more prudent on that basis and haven't changed our loss picks. So that will come through over time.

Shanti and then Michael.

Yes, just 2 questions. It's Shanti from Bank of America. So the first one is just on the Middle East reserves that you've taken action on today. That $60 million, how are you thinking about that? Is that a one and done sort of view or are you trying to build a stronger reserve position on uncertainty for that? And then the second question is just on underlying attritional loss trends, mainly at London Market and Re. So before I came here, I tried to work out for the group, the underlying attrition, which seems sort of flat year-on-year on a group basis. But I'm just curious to know within the segments of Re and London Market, what the trends are looking like there? Are you seeing any deterioration in attritional for those 2?

Okay. Thank you. So in terms of the attritional, Jo, do you want to comment on that? In terms of Middle East, this is a -- it's a prudent reserve. As you -- I mean, you just heard from Paul in terms of our reserving philosophy that continues to persist in every aspect of our business. So we set aside $60 million, which is our loss estimate. That is currently about 25% incurred or was at the end of June. So 75% remains an IBNR. And this is -- we're reserving to the ultimate on the basis of actually known events and market estimates. So you'll have heard the sort of same narrative as we have. The market estimates for losses are in the region of $3 billion to $4 billion. So we kind of apply that analysis and use our own proprietary data, they don't come up with a number. Of course, it is a live event. So things could change. But this is -- regard this as a prudent estimate of what the position is today.