Ladies and gentlemen, welcome to the Zurich Insurance Group Annual Results 2022. I am George, the course call operator. I would like to remind you that all participants will be in listen-only mode, and the call is being recorded. The presentation will be followed by Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mr. Jon Hocking, Head of Investor Relations and Rating Agency Management. Please go ahead. Thank you. Good afternoon, everybody, and welcome to Zurich Insurance Group's full year H2 2022 results Q&A call. On the call today is our Group CEO, Mario Greco, our Group CFO, George Quinn. Before I hand over to Mario for some introductory remarks, just as a reminder for the Q&A, we kindly ask you to keep it to two questions each. Mario. Thank you. Thank you, Jon. Good afternoon, everybody, and many thanks for joining us today. Before George and I start asking, answering your question, please allow me to give you a few remarks on this year results. This morning we reported our highest business operating profit since 2007, and also that we exceeded all our financial targets for the second consecutive three-year period. This is despite several tough years where we have had to deal with many unexpected challenges. We remain agile. We focus on our goals. We continue to execute against our consistent strategy to transform Zurich into a simpler, into a more innovative, into a customer-centric organization. I'd like to thank all of my colleagues, our customers, our partners for this remarkable achievement. We ended the most recent cycle with the BOPAT ROE at 15.7%. That indicates the strength of the underlying business performance improvement and significantly exceeds our target of greater than 14%. The combination of robust profitability, strength of capital position, and predictability of cash remittances allowed the board to recommend a 9% increase in the dividend to CHF 24. Which will correspond to a compound annual growth rate in the dividend of 6% over the most recent three-year cycle. In U.S. dollar terms, the compound annual dividend growth will be 8%. As we set out back in November, we will continue to focus on customer needs, transforming Zurich into leaner and more agile insurer that's primed for the future. Results continue to be seen in our growing customers' number and loyalty, with more than 2.1 million net new customers added during 2022 and an increased retention rate of 82%. Let me turn quickly to our business segments and start, as usual, with the property and casualty. Property and casualty today reports an excellent combined ratio of 94.3 and record premium levels. Gross written premiums grew by 14% on a like for like basis, with a strong growth achieved in both commercial insurance and retail business. Lower catastrophic losses and the benefits of earned rate in commercial were offset by the impact of inflation in retail motor and business mix shift towards crop in commercial. While we expect rate increases in commercial insurance to moderate from the 8% seen in 2022, we expect to see further margin expansion in 2023. In retail and SME, given the rate increases that we have already actioned, in 2023, we should see results starting to improve. In key European retail markets like Switzerland and Germany, where January renewals are important, we are seeing encouraging signs. Life. 2022 was another year of significant progress for our Life business. We achieved the highest profit ever, despite unfavorable currency movements due to the U.S. dollar appreciation and announced the complete sale of the Italy Life back book, which boosted the SST ratio by 9 points in the fourth quarter. We also announced the sale of the Life book back book in Germany. That is on track to be completed in the second half of this year. Together, these transactions further reduce balance sheet volatility and enhance our already industry-leading capital light business model. We remain focused on profitable growth in our target segments of protection and unit-linked, with 2023 bringing new distribution opportunities in both Italy and Germany, markets where we remain committed despite our portfolio optimization activities. Farmers now. 2022 was a strong year for Farmers against a challenging backdrop for U.S. personal lines insurance. Gross written premiums at the Farmers Exchanges increased by 9%, driven by the inclusion of the MetLife business for the full year and accelerating levels of rates across lines of businesses. Overall, the Farmers segment POP increased by 18% over the prior year period, also helped by lower COVID claims in the life unit. Given the challenging market environment, the Farmers team l ed by the new CEO, Raul Vargas, are laser focused on improving the underwriting performance of the exchanges, which in turn will help rebuild the surplus. You will have also seen this morning, in order to support the exchanges effective December 31st, 2022, Farmers Re has tactically increased its participation in the Farmers Exchanges all lines quota share treaty. Sustainability. Sustainability continues to be a key focus for Zurich, and we look forward to discussing our initiatives with you in more detail at our dedicated ESG at Zurich webcast, which will be held on the 30th of March. Looking into the future, finally. We remain absolutely committed to deliver the strategic ambition and the financial targets that we set out in Zurich back in November for the next three-year cycle. The new plan looks for us to grow EPS at a compound rate of 8% to 2025, while further increasing the BOPAT ROE in excess of 20%. We also expect to achieve a further step up in cash remittances. The package as a whole should allow us to reward shareholders with continued attractive growth in our dividends. Thank you very much for listening, George and I are now ready to take all your questions. 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 their touchtone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the queue, you may press star and two. Participants are requested to use only handsets while asking a question. Anyone who has a question or a comment may press star and one at this time. The first question comes from the line of Andrew Sinclair from Bank of America. Please go ahead. Thank you very much. Two for me, please. Firstly is on the reinsurance program, just really wonder if you can talk through the changes here in a little bit more detail, both in terms of cost of the program and in terms of what it means for earnings volatility protection from the group, and I suppose how much is actually renewed on 1st of January versus how much is still to renew through the year? That's my first question. My second question is just looking at slide 27 of the pack, the commercial lines accident year combined ratio ex- cats and ex- COVID, flat year- on- year at 88.2%. Just really wondered if you can give us an idea of what that would be ex crop as well, how much improvement we'd have seen. I guess I'd expect to see a bit of improvement given pricing momentum and given we saw 1.7 points improvement year-on-year in H1. Just what are we seeing really, ex crop? Thanks. Andrew, it's George. On the reinsurance program, first, we've made two changes. Two changes to the cat piece of the program. I think as I'd suggested prior to the end of the year, we haven't renewed the cat aggregate. We couldn't find a reasonable economic proposition. In the end, we've kept that. I mean, that believe or know the expected outcome is actually a small improvement to the expected result, but at the expense of slightly more volatility. I mean, it's a relatively immaterial change, but the volatility could be ±$150 million. Having said that, though, what we're doing on the to reduce cat capacity on the incoming side, I think that's more significant than that. If you look at the more recent estimates on the events like Ian or Elliott, I expect that the efforts that we're undertaking to cut cat exposure on the incoming side are probably more significant than the small negative impact from giving up the cat aggregate. At the same time, we've added a bit more coverage at the top of the program. That's always, it's not a replacement for the cat aggregate, and it's more us thinking about in particular events we haven't seen yet. Things like quake and where our covers exhaust, and particularly in the context of very significant events. Having looked at that, with some support from some advisors, we concluded that we wanted to have a bit more coverage up top. I mean, overall for us, I mean, we've seen a relatively modest change in the reinsurance program. I mean, most of what we've done is non-cat January 1, with the exception of the two things I've mentioned, and they're not really that significantly impacted by the current market conditions. I mean, probably the key date for us is April 1. That's when we renew the U.S. tower. I mean, you guys already have seen the impact on some of the U.S. companies that renewed January 1. I mean, as you'd expect, I mean, the argument that we advanced to our reinsurers is that again, the actions that we're taking on the incoming side of cats means that there's already a fairly significant reduction in exposure. We would expect that to be part of the consideration when we look at the renewal of our U.S. cat tower on April 1. Still to renew that piece, but so far, I mean, no significant impact and certainly no impacts in excess of what we assumed when we put the targets together back in November. Any solvency impact as well, George? I mean, they'd be tiny. I mean, if you look at what we pay for cat cover overall, I mean, a 10% rise in, I mean, what we pay is something like 10 basis points on a combined ratio. I mean, you need massive changes to have massive impacts on the group's numbers, and we just don't see that. We're not dependent on reinsurance in that way. Yeah, commercial year-over-year. If you look at crop, I mean, crop has actually had a decent year. It's slightly higher than we would have assumed in our plan. Maybe we are about 100 basis points higher overall. There's a small issue of first half, second half comparison. There's a bigger issue of 2022 versus 2021. Last year was actually a pretty good year for crop. If you look at the gap between last year's outcome and this year, you've got about a 200 basis point difference. If you allow for the fact that crop is, I mean, somewhere about 12%, 10%, somewhere 10% - 15% of premium volume across all the commercial, you're gonna end up with somewhere in the mid-double-digit basis point impact. If you take it 88.2, we would be in the high 87s once you adjust for crop. Not, not a bad year for crop, but certainly a weaker one than we had last year and a weaker one than we'd expected. Thank you very much. The number on the page you mentioned is includes crop. It does. Yeah. Just to be completely clear on that. The next question comes from the line of Michael Huttner from Berenberg. Please go ahead. Good afternoon, and thank you. Well done for beating all your records. I had two questions. The first one is on cash remittances. I was actually hoping for more. It seems a tiny improvement. I know I'm being really demand, I mean, probably wrong or headed or something, but $4.4 billion rising to $4.6 billion doesn't sound like a record year in many of your business lines. I just wondered if you can give some color of what drives the cash remittances. The other thing is also a very general question. 265% something, w hat are you going to, you bathe in this every morning, I mean, I would love it, but what are you going to do with all this money? I saw on the tape, m aybe I misread, but buybacks are not your big thing, so that's fair enough. I just wondered if you. I know you did have a couple markets there, and then you kind of addressed this, but 265% is extraordinary. Thank you. Thank you, Michael. On cash remittances for us, yeah, I'm a bit like you. I always want more remittances as well. I think if you look at last, I mean, I think the outcome overall was really good, so we've certainly landed where we wanted to land. I think there were upsides that we have not yet taken on the cash side. If you look around some of our businesses, and some of you who've been on this call for longer will know that we've certainly got one business that just seems to have a slight structural issue around being able to remit all of its earnings in the form of cash out to one of our more significant businesses. It means that periodically, we go looking for a special dividend from that business. That's something we're still working on. That offers upside to 2024 and 2023, I hope. I think on the, I mean, it's not a big negative, but one of the small challenges actually in a rising interest rate environment is that some of the local statutory balance sheets on the life side can end up being a bit long. Therefore, this can exert a wee bit of pressure on life cash remittance. I mean, overall, I mean, we're really happy with the outcome. We've still got a number of pockets, well, pocket, I mean, they're not small pockets. We've got a number of pockets that we need to address and increase the cash remittance going forwards. There's room for more, but I think we're pretty happy with what we achieved last year. On the capital topic, I mean, you're absolutely right. It's a huge number. It doesn't yet include obviously the impact of Germany, which is still to come. I mean, again, I think you've probably read on the wires commentary that was entirely consistent with what we said back in the Investor Day in November. As everyone knows, we've got a buyback that's underway to address the expected dilution from the sale of the German business. There's a bit more to go on that. We were not quite halfway through that by the beginning of February. I mean, beyond that, our preference would be to deploy it on growth. I mean, we've talked before on these calls, about the dynamics of SST and the extent to which organic growth drives it. It's nice to have the option. Given what we expect in terms of growth over the course of the next 3 years, I don't expect it to be that capital intensive. That again gives the business freedom to look at other ways to deploy capital, again, to support growth. To deliver more in terms of earnings and deliver more in terms of dividend. Our preference beyond what we're doing at the moment is growth. Is growth. Lovely. Thank you very much. The next question comes from the line of Andrew Ritchie from Autonomous Research. Please go ahead. Hi there. First question, just on the underlying accident loss ratio, 60.8% in the full year. I just want to understand if there's anything I should do to that as a starting point. I think it looks like crop was running at around 96%, so there's a small adjustment down if I assume crop is mid-90s normally. Is there anything else? I mean, for example, was there a particularly, you know, maybe a conservative booking on some more inflation exposed classes in the second half? Or I guess maybe, you know, was there any particular negative one-offs on retail? Really it's just to understand is that the right starting point? Obviously adjusting maybe 50 basis points for crop. The second question on Farmers. I'm just trying to understand why is 8.5% the additional quota share the right number? I mean, it looks like you're just replacing a third party reinsurer who's come off. Is therefore 35% surplus. Do you think that's fine from this point for Farmers and you're confident there's organic capital generation from here? Do you still think there's more capital actions need to take place rather than just waiting for the earnings to come through? Thanks. Okay. Thanks, Andrew. On the, on the underlying, I mean crop would be the obvious thing. I think on the loss picks around what we booked. I mean, we haven't deliberately been any more conservative than the commentary I gave already at the half year. We maintained the stance we had around things like GL and commercial auto, so we didn't change direction on those topics. I mean, the only one that needs, It's a small number, but it's quite hard to judge, and that's first half, second half on commercial. If you look at the two halves, second half is about 100 basis points higher. I mean it looks as though that's just the kind of natural fluctuation of the book, given that we can still see underlying improvement on the loss reserve picks versus loss cost trend. Maybe on commercial the answer is somewhere in between H1 and H2. I mean it's gonna be a small impact to the end. I think crop, assuming we take the CATs out of the equation and we adjust for the COVID topic in the prior year, which is also quite small, that I think is a reasonable indication of what the underlying is. There's no reason to think crop isn't still a mid-90s business? No. [crosstalk] Our view hasn't changed. We planned this somewhere around the 94% level. It's about more than 100 basis points higher than we would expect currently. I mean, last year we were about 92%. We've been lower than that and we've been higher than that over the course of the last 5 years. On Farmers. Yep, we have increased our participation on the quota share. Obviously the market is a bit more challenged for the Exchanges currently. I mean, I think in the end, I think our view and I think the view of the Exchanges too, is that in the end, this is not a surplus issue, this is a profitability challenge that they need to solve. And by solving that profitability challenge, all the other things that connected to the Exchanges that would, including the surplus, which would be quotations at 35%, they go away at that point. I think our view is that there's no need unless there was a. Maybe if I explain what the Exchanges is doing and then I'll come on to the more positive side of it. Obviously the entire U.S. auto market has a bit of an issue. There's lots of rates being pushed through at the moment. You've seen already in today's release what we see in terms of what the Exchanges have been doing. The Exchanges have a bit of a challenge as anyone would that's got more of a concentration in California because that's a bit slower on rate approval. I mean, having said all of that, I mean, we can see the, I mean, we can obviously see trends on a shorter time horizon than the ones that we publish. We start to see some improvement, although it's still got a long way to go, on the Exchange. Therefore, us supporting the Exchange to the capital level that we are targeting, I don't think it needs more than that. If on the other hand, and I think I said this at the investor day already, I mean, if the Exchange get to the point where they're in line with their profitability targets, and to put it in context, I mean somewhere around 101% is kinda neutral. You need somewhere closer to 98% for the growth. If there was a really attractive opportunity for growth and the exchange needed support for that, then obviously that would be something we would consider because of the benefits that would bring us. We're not at that point today. Just to be clear, do the Exchanges renew its CAT program at midyear? The exchange has a staggered CAT renewal. You'll see that get renewed over the course of several years. They're not completely exposed to the impact in a single year. Okay. Thanks very much. The next question comes from the line of Peter Eliot from Kepler Cheuvreux. Please go ahead. Thank you very much. Two for me, please. The first one was on the outlook. I guess I was just a bit surprised that you refrained from giving your sort of, you know, many of your usual outlook items. I know we've got IFRS 17. Even given the change in framework, I'm sort of thinking year-on-year comps are probably still relevant for premium growth, investment income, et cetera. I'm just wondering if you could sort of elaborate on your thoughts there and in particular, whether there's any help you can give us on the life outlook. Second one, non-core. Just really what you did say in the outlook? It just sort of sounds like you're possibly expecting further reserve strengthening, given the comment of, you know, less negative. Just wanted to check whether that's the right understanding? It's likely very cheeky to ask for clarification on the commercial, George. 'Cause you said, you know, H2 commercial 100 basis points higher than H1, which is natural fluctuation. I'm just thinking, I mean, given the margin expansion that's flow through, you know, I would've expected that to be lower, but more than 100 basis point though. Maybe just if you could just would be very helpful. Thank you. Yeah. On your sneaky question, you have something right. I guess I would characterize it as slightly more than 100 basis points. You would expect to see more. On the first two questions, I mean, the challenge on outlook is nothing to do with our clarity or visibility of where we're headed. In fact, of course, that's incorporated in what we said back in November. It's just that we're dealing with different metrics, and combined ratio for people, which mathematical. We'll have that all in front of you, come Q1. I think that's just an easier point at which to get a bit more detailed around where we're headed from an IFRS 17 perspective. We avoided doing it today, not because of a lack of clarity of where the business is headed. It was really that we'd be talking a slightly strange language, I think, for most people who are not yet familiar with it. I think on the life topic, I mean, again, we'll cover it in more depth when we get to Q1 so that you guys can prepare for the first half. I mean, there's a relatively simple logic. I mean, in the current models, the insurance companies supply under IFRS. You've got a combination of a book of business that's pretty locked in, generally pretty stable. There's a consistency to that that flows into the new system, albeit in a different way. Volatility is also dampened. The dynamics around that piece I don't really expect to be vastly different from what you've seen today. I guess that most people are setting up to try and make sure that they've got the right risk adjustment to make sure that we don't get unexpected amounts of volatility from CSM and amortization. I mean, the thing that is different, well it's different now, I think over time it converges. Again, a pretty consistent characteristic of life business is the impact of management actions. I guess it's analogous to PYD on the P&C side. That part will get smoothed. Eventually, once you've smoothed enough of it, you'll get a similar impact to what you see today. You don't have it in the starting point. I think the way to think of this is there's an underlying core component that I think behaves in a similar but not identical way to IFRS 4. It will take time to build the same effect from management action as you have in IFRS 4. Having said that, One of the comments I made back, I think already in September, was that if you look at the group overall from an earnings trajectory, I'm not expecting a significant change. You might see some change, relatively modest changes between the segments. Non-core, I think we just inartfully worded the commentary. If you look at what we've got in non-core, you've got two components that are driving the outcome today. We've got something that I think you've seen in the past from us. There's a DI book in there. It's got some market related features. So there's a, there's a wee bit of market volatility. I I mean, typically it's been relatively modest. We're talking low tens of millions, positive or negative in any given year. I think what's different this year, so you saw it in the first half, we moved a book of business into non-core with the intention of disposing it during the pandemic. Well, not disposing it during the pandemic, but we had moved it during the pandemic with the intention to dispose it afterwards. I think what we discovered there is that the experience that that book had during the pandemic was not as representative as we would've liked it to be of future claims experience. It's taken us a couple of bites to correct that this year. I think at this point, I don't expect to see a surge on this topic. Thank you very much. The next question comes from the line of Will Hardcastle from UBS. Please go ahead. Hi. Afternoon, everyone. Thanks for taking the question. I guess, first of all, just thinking about motor on the retail side, could you talk through those geographies that are causing the greatest strain in motor inflation? Is this parts or bodily injury related? I guess, what is it that's changed reasonably significantly 2H versus 1H here? As an extension to that, but I will let this be the second question, are you able to give any updates on the outcomes of the major renewals at January for Switzerland and Germany in these retail portfolios? Thanks. Thanks, Will Hardcastle. I'm going to focus the comments on motor retail. I think there are similar issues on commercial. You could read across. But there is one reasonably significant difference. Anyway, more retail. I think the big driver, it continues to be the CPI, the inflation driven component, which means it's still mainly a whole or issues connected to whole issue. I mean, we're not as big in some of the other markets where there are BI severity issues. For example, if I look at a market we can see data on, which is the U.S., but we don't have the direct exposure to, maybe the mix of, maybe the issues that are driving the market are slightly different to what we see in Europe. I guess that's probably more a function of the health and legal system there. Europe, mainly a very traditional challenge. The reason you see deterioration in the second half, it's just a continuation of trends that we saw in the first, and the inability to take rate to offset it. I mean, to some degree, that's what we expected to see in the second half of the year. Anyway, that's how we get to the second half of 2020. What about 2023? I mean, at this stage we've got pretty good insight into renewal for Germany and Switzerland as of Jan 1. I mean, for both of those books, we've got a reasonably significant renewal. We've got a good understanding of where we think it's headed. I'll take Germany first. I mean, the way I would characterize Germany would be that, assuming that we see inflation levels that are similar to what we saw last year, Germany has achieved a price increase that will address that and will start to address part of what we saw last year. I think it's a mostly a multi-year process. Maybe there's a couple of years of rate increase required to get this business where we think it needs to be. There is a significant step in Germany as of Jan 1. It's what we expected, so it's not a surprise to us. It's obviously, we're very pleased to see it take place in reality rather than forecast. Slight different. In Switzerland, it obviously hasn't seen the same levels of inflation that we've seen in other European markets. Now, we said that by Swiss standards, we've seen some pretty chunky numbers, but we're talking 2.5%-3% rather than 9%-10% in other markets. The team here, they've taken a more targeted approach to the renewal. Again, they've put some fairly significant rate through for some key parts of the portfolio. It's a pretty significant proportion of the portfolio overall. Again, expect that also to address what will happen this year plus start to catch up on what we saw in the prior year. In both markets we expect more price action required. The first steps we've seen on January 1 this year, I mean, it's a good sign of where the retail market is headed. That's great. Thank you. The next question comes from the line of James Shuck from Citi. Please go ahead. Yeah. Hi, good afternoon. I just wanted to spend a bit more time on that retail, deterioration, at full year, please. The full year accident year loss ratio, in retail, up 1.9 points, at full year, and I think you're saying that's due to frequency and inflation and some of which you talked about just now. That's up from the 1.3 points at 1 H. At 1 H, you really called out a near expenses and loss ratio actually being better. I'd just like to focus a bit more on the discrete second half of the year, because it seems as if the crossover between rate and claims inflation seems to have happened the most at that time. I hear the comments about the outlook going into 2023, but I guess my fear is that you're seeing nominal rate increases but not rate in excess of claims inflation once we adjust frequency as well. The second question was just returning to Farmers. Again, on the 8.5% quota share, why is it you've chosen to do a quota share? Because it, Farmers is a volatile business and, you know, 10 points plus or minus on that combined ratio is not an insignificant number to the Zurich Group earnings. Can you just talk us through, is that a multi-year quota share? Why you settled on that and why you didn't do other alternatives such as surplus notes, for example? Perhaps I'm also interested in why it didn't actually require any extra capital in the, in the target capital that you have in the denominator of the SST? Thank you very much. Thanks, James. On the first one, I mean, to put it, I don't really want to quote a number today in Germany, but it's in double digits. Not high double digits, but it's in double digits. In our opinion, it's enough to deal with nominal frequency and part of the prior year. Not enough, though, to put Germany in a position where we would be satisfied with the return we're getting on that line of business. The German team themselves identified that in the conversations they were having with us last September. There's definitely been... There's definitely more to be done, but we think it not only addresses what we're currently seeing, it addresses part of what we had last year. We feel pretty confident about that. On the Farmers question, maybe I'll start from the end. It's a very good question. Target capital, it will have a relatively small impact on target capital, but it will build as the reserves build. That's why you're not seeing it yet. We're talking, something that's in the up to mid-single digits impact on SSTs. It's pretty small overall. On the why this and not something else. I guess that if you cast your mind back to 2015, which was probably the last time we were a very significant participant on the quota share, some of you will remember that we actually had some pretty significant amounts of capital up against that. Again, I think many of you are aware that the nature of that contract has changed significantly over the years, because of discussions between the exchanges and their reinsurers, and the particular form of that contract that works for both the exchange and for the reinsurers. I mean, the nature of the risk that the contract carries is a bit different than it was before. Therefore, the amount of capital required would be more modest than it was in 2015. It would also be reflected in the fact that the potential volatility would be more modest than it had been previously. In particular, CAT is capped, and CAT is now more dealt with through the CAT covers that the exchanges place. I think from an overall Zurich perspective, I mean, this is probably the simplest, the most straightforward. Certainly Zurich will benefit from the way the exchange and its reinsurers have changed the structure of the contract over the course of the last several years. I think that combination is really why we've done what you've seen us do. It's a simple and straightforward way of addressing the challenge that they currently face and gives them some time to deal with the plans around the improvement in the combined ratio. Okay. Thank you very much, George. The next question comes from the line of Kamran Hossain from JP Morgan. Please go ahead. Hi. Afternoon, everyone. Two questions. The first one is on just back on the Farmers quota share. Could you maybe talk about the profitability assumptions you've made in, I guess, the increase there? Is it 101%, as you mentioned, as kind of the target level, or is there something else there? The second question on the commercial line cycle, could you talk about the impact that the reinsurance market changes, you know, changes in terms of price structure, et cetera, is likely to have on that market? I think at the Investor Day in November, you said you expect the cycles to probably, you know, tail off in, you know, by the time we get halfway through 2023. Do you still think that will be the case with all the changes in the reinsurance market? Thanks. Yes. So thanks, Kamran. I mean, I want to avoid that I end up giving out the plan for the exchanges on the combined ratio. I think probably the best way to look at this would be that, I mean, we've significantly increased our participation in the quota share, but we're still a small minority compared to the others. The others are there because they expect to make money. So maybe if you combine that with the comments I gave earlier around where the neutral point is, that gives you some sense of what the market anticipates from the exchanges. On the second comment on the, or the second question on rate. I think if you go back to the comments that I made earlier, around the, I mean, the more differentiated view of what's happening on rates at the moment. If you look at, I mean, what we see in the market towards the end of last year, I mean, somewhat presentably, property is the one that maybe sees the, maintains a fairly strong trend. And in fact, if we look at our numbers from a North American perspective, we would see property rate ticking up at the end of last year. That may be partly connected to reinsurance, may be partly connected to the continuing, concerns around, risk of inflation at that point. I mean, difficult to attribute it entirely, but you certainly see the line of business that it probably impacts the most. In the strongest position. I mean, I think, I mean, in general, one of the things I think as we look out through the remainder of this phase of the commercial cycle, it's gonna get very differentiated. I think I mentioned this earlier. If you look at the different lines, things like property, motor, I mean, they're still in pretty good shape. Excess GL also in good shape. Workers' comp, specialty, they're around the same positions they were at before. I mean, slightly negative, fairly flat, towards the end of last year. You've got primary GL somewhere in the middle of all of that. The, I mean, the more negative one is financial lines, in particular D&O. That is softening currently. It's probably the part of the market that saw the biggest run up. It's not the biggest part of our book, so we're not as exposed to it. That part of the business, or that part of the market, is showing a different price characteristic to most of the other lines at this point. Thanks very much, George. The next question comes from the line of William Hawkins from KBW. Please go ahead. Hello. Thank you very much. George, is there any evidence that you point to for building prudence into your current accident year loss picks? I mean, normally that's very much what we would be expected at this stage in the hard market. When you've been discussing, you know, the flat commercial lines combined ratio or the underlying loss ratio, I haven't really kind of heard you emphasize that potentially quite positive point. Could you talk a little bit about prudence and how it may or may not be changing in the loss picks? Then secondly, please, on slide 21, we've now got the 6% rate increase across the book. Can you tell us a comparable inflation figure that we should be netting off against that? Just to make sure I'm gauging it correctly, I think this time last year, that 6% was 7%. If you could remind me what the inflation equivalent would have been a year ago as well, please? Thank you. Yes. I didn't understand the second part of the question. You said the 6% was? Yes. 6% on slide 21. What's the inflation? Can you just remind me the inflation equivalent a year ago? Okay. All right, I got it. On prudence, apologies, I should have spent more time on that topic. I mean, again, I mean, to take you back to the some of the reserving decisions we made at the end of Q2, end of the first half. I mean, we touched a number of, again, probably the more social inflation exposed lines of business, not necessarily because we saw experience that was a source of concern, as a precautionary step. I think I may have mentioned earlier, primary GL and commercial auto were two targets for that, and we haven't changed that stance through the end of the year. I mean, it's also a characteristic part of our reserving process that we don't accept as a basis for reserving, the loss pick chosen by the underwriter. We, and certainly for most of the last two, three years, have added a margin to that. That's designed to build up within a range of acceptable levels of prudence, additional assurance, that we have less exposure to the risk that we see adverse development on some of the reserve lines. Then finally, if I, if I tell you the usual workers' comp story. I mean, I think you know from the prior conversations that we've had that, I mean, the, i f you look at rate on workers' comp, again, for the end of last year, beginning of this year, it's kind of flattish, slightly negative. If you look at loss cost trend for in the mix that we think is relevant for our book, something similar to that, so not vastly different. We've still maintained a relatively long run view on the parameters that we choose to include for the reserving decision. If you chose a shorter term perspective, so say you took five years rather than 10 years, that's a very significant surplus to reserves. I think the traditional areas of prudence that you're familiar with in our book, continue to be there. We continue to follow the same processes around trying to make sure that we add appropriate prudence to the assumptions that the underwriters make when they write the business. In terms of our overall philosophy, nothing has changed. We're doing the same things in the same way. On the inflation topic, it varies a lot by line of business. Maybe if I focus on the area where I think it's probably you have most transparency for all of last year, we've talked about the fact that for the U.S. business, we've got a loss cost trend. Sorry. We've got a rate increase that's around 8% across all lines of business. Inflation, if, and if I exclude exposure changes from that, and so look purely at severity and frequency excluding, I mean, we still see it somewhere around the 5% mark for commercial. The picture in Europe is different. I mean, in the conversation I had earlier with James Shuck, I mean, he highlighted the fact that obviously, retail in Europe in particular deteriorated in the second half of the year, which is a sign that loss cost trend is in excess of the pricing that we're achieving here. That's probably the best guidance I can give you. 5% is the same as what you would have said a year ago for North American Commercial, isn't that strange? Shouldn't it almost inevitably be higher? If you break out where we were on commercial last year and you look at the loss picks we've added to, it's still around 5%, but we've added 1 point to commercial auto and 1 point to primary GL. Got it. Okay. Thank you. The next question comes from the line of Dom O'Mahony from BNP Paribas. Please go ahead. Hello, folks. Thanks for taking questions. I just got a couple of questions on capital generation. I'm on page 45. Just looking at economic profit business growth, the first thing I just wanted to check on is the AFR generation, $5.0 billion this year. I think it was $5.5 billion last year. That's declining despite the op profit, you know, I guess going up. I wonder if you could help me bridge why one is going down a bit and the other one's going up a bit? Second question is on the target capital. George, I think earlier, you were saying that you expect the growth to be pretty capital light. I think actually the target capital are down a little bit in H2, is up $0.5 billion in H1. On a run rate basis, are you expecting this sort of $0.4 billion to be roughly flattish? I realize that the quota share will increase it in 2023, but is it, is the rough expectation that this will be flattish? More broadly, does this matter for cash remittances or is actually the sort of solvency lens not really very useful to think particularly about your cash remittances? Thank you. Yeah, thanks, Dom. On the second question first, obviously part of what's driving the dynamics that you see on AFR versus target capital is impact of interest rates. It's part of what impacts the first half of the year. It impacts it again in the second half of the year. If we end up in a reasonably in a slightly more stable environment, I think it would be flattish. I'm not sure we're gonna be in an entirely stable environment. I guess the outlook seems to anticipate that we'll see a bit more rise, potentially followed by some reduction at some stage in the future. If we don't see it at the same pace as we've seen with some of the historic changes we've seen last year, it should be pretty flat. On SST, I mean, SST is a good guide to the, I mean, the overall risk appetite perspective the firm has and how we manage capital from a consolidated perspective. It doesn't say much to cash remittance, certainly in short-term periods, 'cause of course, those cash remittance numbers are typically driven by the local statutory requirements, and they can, and frequently do deviate significantly from SST. Over time, though, again, in a stable environment, if we keep interest rates relatively stable, given the relatively short duration nature of the book, the two things should be more in sync than perhaps we've seen last year. On the capital generation topic, $5 billion AFR versus where we are from a reported profit number. I mean, you can obviously get a number of differences at the margin. I think the way I would look at this, I mean, I would probably work off of the operating profit number and tax it. The impact of, in particular gains that appears in the NIAS number can really distort this because of course we've got a mark-to-market perspective on AFR. I think if you work off of the bulk number, you'll get something that's probably a bit closer, is my expectation. Thanks. Thanks, George. Just to understand, I mean, given the bot went up, but the AFR went down, is that just an anomaly to do with rates or is that something else? I mean, rates are gonna have an impact on that because of what you saw in the prior year, I mean, partly through the impact of discounting. I mean, that's likely to be the main driver, but I need to look at it in more detail and come back to you with a better answer. Thank you. The next question comes from Ashik Musaddi from Morgan Stanley. Please go ahead. Thank you, good afternoon, George. Just a couple of questions I have is, first of all, again, sorry, going back to this retail inflation topic. I agree Italy and Spain is relatively small for you, the combination, both Italy and Spain, has gone up significantly in second half versus first half. Could you just give us some color as to what is driving that? Is it just like general auto, industry or is it anything specific to Zurich here? That's the first one. Second one is, going back to the capital question again. I mean, clearly you have a very big solvency ratio at the moment, 265%. What is your view of excess capital in that? And I would say excess capital which is fungible as well, not necessarily just a ratio perspective. If you want to deploy some cash to do M&A, I mean, how much cash you can extract out of that 265%? The reason why I'm asking is, I mean, your leverage looks like more or less full, at least on the current IFRS 4 basis. I just want to understand how much of cash liquidity you can gather within the business? Yeah, these two questions. Thank you. I need to tell you that we're all smiling here on the other side of the at your question. Yeah, because we're probably all thinking of ways we're not gonna answer the second part. Yeah. I mean, obviously we ask questions at the risk of, yeah, with this, but yeah, worth trying, I would say, for us. Yeah. Let me try and be more helpful than just go straight out. I'm not giving you an answer that way. Let me start on the retail thing. I don't think it's different from the store. I mean, there are some local dynamics in both businesses that are relevant. For example, in Spain, we have a pretty significant investment program running in the business to try and expand, and it's just increased our geographic coverage in the market. In Italy, it's probably more the traditional effects that we're seeing elsewhere, driven by loss cost trends. In both markets, inflation is likely to be the principal driver of what you're seeing in the second half of the year. It is auto that's prime. I mean, home, there's not much definition. If you look at Germany in particular, you don't see a very different outcome on home. I would pick out both of those lines of business as the prime factors. On the SST topic, I mean, again, given the comments that I made back at the Investor Day around our ambitions around leverage and the fact that we're probably likely to de-lever a bit given that the cost of financing is increasing. I mean, we don't have an awful lot that's maturing over the course of the next year or two, but it's gonna get more expensive to run that. We've certainly got enough cash to leverage that option if that's what we choose to do. I mean, more generally, I mean, the company obviously has significant flexibility given the way we generate cash across the group. I mean, obviously I want to avoid, I'm gonna get into a number that I need to specifically update on a regular basis. It's a feature of the group that we tend to. I mean, we have a strong preference for businesses that we can measure not only in terms of the actuarial judgment, but also in terms of the cash they can provide to the group to underpin that actuarial judgment. That's not something that's gonna change. I think when you look at us, I mean, certainly from an earnings perspective, it's pretty clear how much of what we generate, we distribute. I mean, you're getting 75% more or less back on a regular basis. We retain the additional piece, and we also retain, of course, any cash we generate in excess of the earnings levels. I think I mentioned earlier in response to Michael's question that, I mean, we regularly undertake exercises to, I guess I would say, liberate cash that's not needed in the various businesses and bring it back to the mothership. I mean, as you would expect with such a significant capital level, we have significant flexibility. Okay. Very good. Thank you. The last question comes from the line of Vinit Malhotra from Mediobanca. Please go ahead. Thank you for the opportunity. Last question, sorry. The Life side, just I often ask this, George. Your life numbers frequently hit the ball out of the park, particularly when you look at the guidance. Again, it's happened again and again, the guidance is very weak, it's very light, very cautious looking. I'm just curious about the Life guidance, but also, you know, the sharp fall in NBV based on the assumption changes. Are you not happy with the mix of, I mean, selling protection, and, you know, are you trying to de-emphasize protection a little bit in this high interest rate environment? That's one on Life. Just very quickly follow up, just slide 25, the 60.8 underlying cost ratio. I mean, when I compare to 59.8 discovered last year, this 1% seems to be mostly explained away by crop. Then there's also motor. There's also, you know, effects of pricing. I mean, how should we think about this? Sorry. I mean, just to be clear, 60.8 minus 1 point of crop. Like, is that how we should think of it? Then we apply some margin, or how should we think of it at this point? Thank you. I think the last part of your question, more or less, yes, would be the approach, I think. To the first part of your question, I mean, it would imply a lack of satisfaction with the life business if I was to agree with any of it, and I don't suffer from that. I mean, I think we're really happy with how the life business performs. We're really happy with the transformation that the life business has undergone. If you think about it, I mean, what the firm, I mean, what our life business has achieved against what they were doing alongside, supporting the clients, I think it's a fantastic outcome. I mean, again, I think the implied criticism around the life guidance is entirely valid. But it doesn't make me any less happy about the overall outcome. On the fall in NBV, that's really a 2021 topic in the end. If you think back to the end of 2021, we talked about the fact that we were positioning AFR for IFRS 17 because of the requirement for a certain level of consistency in best estimate assumptions. We were trying to make sure that, yeah, we had the life AFR in exactly the place that we wanted it, and we produced life AFR at that point. That then gets caught up in the new business models that come into production for Jan 1 in the following year. Part of what you're seeing in the fall on new business value is really, that decision that we made in 2021. There's a secondary impact. I mean, with interest rates rising, there's a bit more competition around the, you know, linked business, so that has a bit of pressure. I think if you look at the new business margin, even after the change, it's still, we think, pretty good. It's pretty strong. From a, from a mix perspective, I mean, given that we make a big song and dance every time we produce a presentation about the mix of our life business, it's a sign that we actually really like it. And we've got no intention to de-emphasize protection. I think in our philosophy to emphasize underwriting, whether it's P&C or in life, and therefore we like protection in life, where we get the chance to underwrite it in the right way, that's our strong preference to do that. Really happy with life. I think the caution on the guidance, I mean, just going back again to, I think it was Peter's comment. I mean, it's got nothing to do with what we expect for the year and just the fact we've got a change of metrics coming up in about, I was thinking it may be in 3 months. It's probably a bit quicker than 3 months. I mean, you've seen now hopefully, the supplement, at least the structure of the supplement we're gonna hand out. You've got a sense that even if the business is not changing, some of the ways that we describe it are about to. Rather than pump out some IFRS 4 guidance, which, I mean, I'm sure most of you could probably interpret, I thought it's just more helpful to give you more general guidance. Lean on the fact that we've given you already an outlook as far as our targets from last November are concerned. Then we can have a more detailed conversation when we get to Q1, and we actually have the new structure in front of us. Thanks. I appreciate that, George. Thank you. Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Mr. Jon Hocking for any closing remarks. Please go ahead. Thank you all for dialing in. If you've got any outstanding questions, please get in touch with one of the IR team. Thank you very much. Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. 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