Good afternoon, everybody, and welcome to Zurich Insurance Group's Q1 results call. On the call today is our Group CFO, George Quinn. Before I hand over to George for some introductory remarks, just as a reminder for Q&A, if you'd keep your questions to two each, that'd be much appreciated. George. Thanks, Jon. Good afternoon, good morning to all of you. Thank you for joining us. Before we start the Q&A, just wanna give you a few comments. As you've seen from the press release today, Group's made a strong start to the year with good growth across all the businesses. Strength and resilience of the balance sheet also gives us confidence in our ability to successfully navigate an uncertain macro and geopolitical environment. This performance, combined with what you saw in the last couple of years, means we're on track to exceed all of our targets for 2022, which as you all know, is the final year of this strategic cycle. In the first quarter, our property and casualty business has continued to perform strongly. Topline growth of 8% on a reported basis, 12% like for like, driven by the continued strength of commercial insurance, where we've seen rate increases of 9% in the quarter. In North America, we've seen particularly strong growth with GWP up 17%, driven by a combination of underlying growth, the crop business, and rate increases of 9% in that market. Although rate increases have moderated somewhat from 2021, and I think as we expected, there are signs of stabilization at that high level, and we see that continue into April. We're confident that margins will continue to expand well into 2023 despite the inflationary pressures. Life business also performed well. Our continued focus on unit-linked protection product leads to strong growth in new business volumes. While the new business margin was lower than the high level that we reached in the prior year, this was due to mix effects within our preferred segments. Despite the market volatility, we remain confident that our life earnings guidance for the year will hold. Farmers Exchanges, which are owned by their policyholders, grew GWP by 29%, benefiting from the inclusion of the acquired MetLife P&C business, which was completed at the start of Q2 2021. There's also strong underlying growth in the mid-single digit range in line with the guidance that we've previously given. Balance sheet remains very strong with the solvency test ratio estimated to be 234% at the end of the quarter, up from 212% at the beginning of the year. The underlying development has benefited from the rising yield environment. However, as you will have seen, today, there's a temporary benefit of about nine points from a tactical hedge that we've put in place over the assets, just given the heightened risks that we see currently. With that, I think we can start the Q&A. The first question comes from Will Hardcastle from UBS. Please go ahead. Hey, everyone. Thanks for taking the questions. The first one is just relating to the statement that rates should be running in excess of loss trend well into 2023. I guess firstly on that, just confirming that you're thinking about that on a written basis as opposed to an earned? And what gives you so much confidence despite, you know, what must be elevated inflation levels and I'd assume some pressure likely to arise given investment yields have risen so much? The second one is actually a very high level one. Just can you talk us through the relative attractions right now for commercial versus retail P&C growth? I know. Essentially, it's really thinking about where you'd rather be putting incremental dollars of capital right now, even though I appreciate you've got plenty of capital, so it's not the final constraint. Thanks. Thanks, Will. So on the first one, yes, I confirm that it's a written perspective rather than earned perspective. Why the confidence? I mean, if you look at our numbers, the numbers that we produced internally, we've frequently turned out to be far more pessimistic than the market outcomes. In fact, if you look at this year, we would have expected to be lower in rate terms than we already see in the market. Of course, we had a continuing trend down. As I mentioned in the introductory remarks, I'll give it a few caveats, but I mean, the numbers are the numbers. Things seem reasonably flat from a U.S. commercial perspective through the quarter, and in fact, into the beginning of the Q2. If you look at April numbers. Rate, for the time being at least, seems to be holding around that level. If you look within it, I mean, there are pockets that are even more positive. For example, cyber pricing is showing huge rates at the moment. In fact, if you allow for that, you may actually see a tick up. In fact, if you look at some of the external commercial statistics, I mean, they may have that picture in them. Given the proportion of cyber that we rate, it's not a huge driver for us. I think it's a combination of I mean, what we've seen already through this phase of the cycle, the early trends that we've seen this year that are more positive than we expected. I think also, I mean, we've had some of the more significant U.S. industry meetings. There's tons of discussion around inflation. I think there's interest, some nervousness that people try to be careful around it. I think the inflationary environment will sustain rate for longer than we might have anticipated. All of that is what drives the confidence. Where would we deploy incremental dollars on commercial versus retail? I mean, it's an easy theoretical question and it's quite difficult practical question. I mean, we've talked throughout this hard phase of the commercial market that we have a distinct preference for taking rate on the risks that we know and continue to be cautious about the new risks or the risks that shuffle around the market. I don't think that stance is gonna change. I mean, we obviously have new business in the mix. Mounting a significant push on commercial growth, I don't see us doing that. The market is continuing to bring us quite a bit of growth through rate, and I think we'll continue to focus there. I mean, the only exception to that would be the things that we've identified previously as priorities for the business. The mid-market activity we undertake in the U.S, some of the things we're doing around SME, which is maybe a bit more retail and in particular Accident and Health, as we look to the future. On the retail side of things, it's still a more challenging market. I think. I mean, from a, I mean, I think it's less unpredictable in terms of judging the likely outcomes, but it's also, you know, currently less profitable by some reasonable amount compared to commercial. I think I was probably a bit more optimistic in tone around the February release. I thought we start to see the market respond more rapidly. I think the retail market is still running hard to catch up on inflation. I think you'll still see momentum start to rise around price on retail. I think there is a point in the future where retail will start to become a far more attractive opportunity than perhaps it is right at this moment. Reference would still be for commercial, but we're quite happy to take the rate for growth for the time being. That's great. Thank you. The next question comes from Peter Eliot from Kepler Cheuvreux. Please go ahead. Thank you very much. The first question, I guess, is a continuation of that topic actually. George, you mentioned inflation in your opening comments and again just then. I was wondering if you could just give us a bit more color on what you are actually seeing, you know, on the ground in terms of the various forms of inflation that you think are particularly relevant for your business. That's the first question. Second one on solvency. I mean, I'm sure you're constantly doing a sort of cost-benefit assessment of hedging and your exposure to markets. I was wondering if you could give us any insights into what might drive the decision to move your risk appetite back to a normal level, you know, other than the obvious sort of cost implications. You know, I mean, I guess, you know, when that nine points will disappear at some point, but you've also got potentially 11 points coming from Italy unless that changed slightly. You know, your solvency shouldn't really fall much from the current level. I'm just wondering, you know, how you think of it in that context, you know. Is it too high here? Is there things you can do about it? Mate, thanks. Yeah. Thanks, Peter. Inflation and, I mean, what's relevant for us. I mean, I think from a risk perspective, I mean, you're familiar with, I mean, the classical view of inflation risk, clearly in the context of our P&C book. We don't see a classical inflation scenario impacting our P&C book at the moment. In fact, if you look at the book overall, workers' comp continues to be pretty benign. It's not causing significant stress. We talked before about the changes we've made to mix there to try and take us a bit further away from the risk than perhaps we have been previously. Liability is still dominated by social inflation, which for me is an almost entirely different concept. With the net result that where you actually see it is mainly in short tail lines. You see it significantly in motor hull, so auto physical damage. We see it in property and retail. We actually see it in European markets, which is something we haven't seen for some time. I think the positives for us, I mean, first of all, I mean, we didn't come into this year assuming that the so-called or the expectation of an inflation spike meant that inflation would be behind us already at this point. We carry some pretty significant loss cost trend assumptions into 2022. So we're not caught by surprise by any of this. I think probably the other thing that's important to point out is, especially when you think about the retail business, I mean, half of everything that we've renewed in retail is Swiss. It gives us some shelter from the inflation impact that you would have if you had maybe less of a weighting to this particular market. I mean, having said that, I mean, we're not complacent around the topic. We pay particular attention to it. I think the relevance for me is still more around those long tail topics. We pay far more attention to the risks that we start to see more of it emerge there. For the short tail, we'll deal with that as you'd expect, through pricing. I mean, it's clearly a key topic, and it's gonna remain a key topic for the industry, I think, through the course of this year. Solvency risk appetite. You highlight the numbers correctly. We have nine points of temporary benefit from what we've done from a tactical perspective. One reasonably important comment around the back book topic. I mean, you point out what we've previously disclosed around Italy. I would say that collectively, the market has expectations that you'll see more from us during the course of this year. I mean, just keep in mind that I mean, one of the things that motivates us on that back book is the sensitivity that some of those portfolios give us to interest rates. When interest rates rise, of course, they give us part of the benefit that one of those transactions would give us if we do it in the future. I mean, a long-winded way of saying that if you're anticipating another transaction coming, be careful about double counting it versus the interest rate benefit that we already have. I think overall it's good news because it means that, of course, we have the resources readily to hand when we need them to address, I mean, some of the issues that we need to deal with when we complete one of those larger back book topics. On risk appetite, I mean, no real change from us. I mean, you've heard from us before that, there's an earnings dilution event at some point in the future, we expect. We'll deal with that through capital management. After that, we would prefer to support growth in the business. I mean, we take the ROE goals seriously, and it just wouldn't be our expectation to operate at very high capital levels over extended periods. I appreciate that's not a very clear answer, but it's a restatement of what you've heard from us before. That first step around the back book is the most important thing for us. We wanna get that done, and then we can talk in a bit more detail about capital management. Great. Thank you very much. The next question comes from Louise Miles from Morgan Stanley. Please go ahead. Hi. Good afternoon. Just two questions from me too, please. On the first one, it's to do with something that Will said actually earlier. You said in the release this morning, you know, that you expect rates to exceed loss cost trend well into 2023. Does this still mean you expect peak commercial lines earnings to happen in 2023, or has that been pushed out? If peak earnings are occurring in 2023 or around there, does that mean we should assume that any kind of leveling off or decline in earnings there will be offset by growth in the retail lines business? That's my first question. The second one, I think full year results, you said you expected the P&C investment income to decline by CHF 50 million during this year. Is that still appropriate given where rates have moved to? Thanks. Yeah. Thanks, Louise. Yes, it's a good question on the first one. Maybe if I can reframe the question. Apologies for doing this. If you're really asking me, I mean, do we now expect to push out the peak margin point a bit further than we've guided before? The answer would be yes. Now whether that's end of 2023, early part of 2024, I mean, really quite difficult to judge at this stage. I mean, the combination of loss cost trend issues driven by inflation, the more optimistic view we have around rates would cause me to expect to see that peak margin point push out a bit beyond. On retail growth, I don't think it's gonna be all retail growth that offsets some of that cycle effect. I think there are things we can do within the commercial business. I highlighted some of the strategic priorities we have within the business in response to one of the earlier questions. I mean, those remain true for us. We believe we're underweight in a number of these areas, and we do believe that we can profitably grow into them. That will also help deal with some of the cycle driven impacts in the larger end of corporate when that point comes. I do though expect that retail growth will also help. Again, I mentioned earlier when we were talking about Peter Eliot's question on inflation. I think you'll see retail markets respond more strongly to the current trends. I think we're relatively well positioned to benefit from that. On the P&C investment income, it's another good question. We haven't quantified it today, so I'll probably do that for the half year update in August. It would seem clear to me that the drag, the gain to be given around the drag on investment income because of the lower reinvestment yields, that's gonna reduce. That is reducing. I mean, if I look at the current gap on reinvestment versus book yield for P&C. It's about a quarter of what it was last year. The gap is closing very rapidly, which is generally beneficial, I think. Great. Thanks. The next question comes from Michael Huttner from Berenberg. Please go ahead. Fantastic. I was going to say I have no questions. The results are so good. Well done. You must be delighted. I just wondered if one really the high level question, which I suppose shows that I have really nothing. I'm amazed by your results, is what do you worry about now given that everything is delivering. It's not as you're lucky that you have worked very hard. That would be one very kind of boring question, I guess. The other one is a continuation of the previous one on you know when it peak margin. When does peak cash flow? Cause if I think about it, pricing is ahead of, you know, as Will said, written price is ahead of earned price, is ahead of earned margin. Is that, and my guess is that ahead of earned cash. When do we get the higher earned cash? Is it 2024, 2025, 2026 even? Two questions and really well done. Amazing. Thank you. Yeah. Thanks, Michael. On the first one, I mean, probably all the same things we worried about before, to be honest. There's not a particular issue in the company that needs particular attention. In the same way that you have high expectations of us, we have high expectations of the business. I mean, we're doing everything we can to make sure that we support them with the resources they need to take the benefit of the current environment, support clients. It's a bit of a cheesy answer, but I mean, I think you worry about pretty much everything all the time in reality. I mean, given where we are, we're in a good place to have to worry about things. On cash flows, I think for me to answer that question, I'd have to anticipate some of what we will tell you at the Investor Day in November. If you bear with me when we come to November, I'll give you a sense of where we expect cash flows to head. I'm not necessarily sure I'm gonna identify a particular peak cash flow point for you at this stage. Okay. If I try to ask an interesting question, how about this really simple one? What is the IFRS capital? I think scor gave a number, which is CHF 9 billion. This IFRS 17, how much would it be for Zurich? Can I also hang on to that? We're obviously going through our process at the moment. In fact, we've just had, in fact, immediately after Q1, our companies have reported the transition balance sheet. We're going through the process of kicking the tires on that. We'll have our auditor take a look at it. I mean, our plan is to disclose that to you guys somewhere later in the year. I mean, we'll come with, I mean, something that's pretty well vetted and pretty thorough, but we're not yet in a position where I could tell you what it is and explain to you the drivers. Again, Michael, apologies, but we'll come back to that. No, no. It's all right. Not many good questions. Thanks so much, George, and really well done. The next question comes from Andrew Ritchie from Autonomous. Please go ahead. Oh, hi there. Sorry. I had a very basic question to start with. I'm not sure. I don't think it's been asked yet. But George, could you just give us a flavor for the losses experienced in Q1, particularly CAT and large loss? I guess the way to frame it, if you don't wanna give us actual numbers is versus budget, versus expectation, versus planning. Just some sense. That would be useful. The second question, coming back to inflation on a different angle. Firstly, I just confirm, I think it is the case, your renewal rate is pure rate. It doesn't include any natural indexation effects. I wonder if you could tell us roughly what% of your non-life book has what I would describe as natural inflation indexation elements within it. I'm thinking, for example, things like payroll, workers' comp, or property reconstruction value. I'm just trying to get a sense of what. Cause we focus a lot on headline renewal versus loss cost, but in reality, there's a lot of natural indexation going on. I wonder if you just give a sense what portion of your book has that, and I'm assuming that's a particular focus area in renewals right now to ensure the indexation is happening correctly. Yeah, very good. On the first one, loss experience in Q1. I mean, we typically don't break out large from attritional. We've discussed why in prior quarters. I don't see anything particularly unusual beyond what we'd expect to see. I mean, the large component always has a touch of volatility connected to it. I mean, if you compare what our large loss experience is today to what we saw, say, three or four years ago, it's much lower. It continues to reflect more recent trends, the large component. On the CAT activity topic, I mean, do we ever have a normal quarter? I mean, this quarter we're relatively light in the U.S. We are pretty close to expectation in Europe, and we're high in APAC, and that's entirely driven by the eastern floods in Australia. If you look at the totality, I mean, our view is, we would hold to the guidance that we gave at the beginning of the year. We're still expecting about 3.5 points. One of the most important drivers of that is what we're doing in the US. We talked, I think at the Investor Day, and again, back in February, about what we're trying to do on the large end of the business in the US. Christoph and the team have accelerated that activity. We're gonna be ahead of schedule on a number of those changes. In particular, we're trying to push a lot of that through ahead of the relatively important July 1 dates in the U.S. I mean, from where we stand today, no change to what we said back in February. In fact, the increased activity that we've got underway around the U.S. will certainly help us reduce exposure. One last comment. I mean, what we've done on the U.S. over the last nine months or so, that's a concept we're gonna extend out to the entire group. We've just actually a few weeks ago set new targets for capacity usage across all of the territories. They are differentiated given the different risks that the business brings us. We are serious about further reducing the exposure. The aim of this is to try and make sure that we maintain, on average over some reasonable period, a contribution from CAT losses along the lines that we've been telling you to expect. Great. The next question comes from Kamran Hossain from JP Morgan. Please go ahead. Hi. Two questions. The first one is just in Farmers. I guess adjusting for kind of all the, I guess, acquisitions and kind of everything else going on there, underlying growth is about 5%. Just wondering, kind of given the backdrop in Farmers, kind of what we should expect from here. And the second question, just on, I guess, on the hedge that you've put in place. Will there be any dampening effect on investment returns in the near term while that hedge is on? Thank you. Kamran, can I apologize? Cause Jon's just reminded me, I dodged the H2 of Andrew's question. I'm gonna answer that. Sure. Yeah. I'm definitely gonna answer. Okay. I'm gonna try and remember to answer your two questions as well. Apologies, Andrew. Second question was about inflation from a different angle. The indexation effect. I don't have a precise number in front of me. I mean, as you would expect, we have lots of activity taking a look at it. I think, I mean, if you look at the book, it splits into a number of lines that have activity drivers on premium. I mean, there's probably many more lines of business than most people would expect. I think you anticipate it around things like workers' comp, where there's clearly a payroll connection, but even the Swiss accident business also has elements of this similar drivers in it. We even have it in things like crop business because we set that by reference to crop prices for the predominant crops that we cover in February. I think the thing that we're trying to do is to make sure that, I mean, where there are clauses in contracts that they're maybe not formally indexation clauses, but they can be drivers of premium or of exposure. The classic example would be TIV, Total Insured Value on the property book, that we're making sure that that is being automatically updated. We want to make sure that we don't end up in a position where, number one, a client is underinsured because the information's historic. We have been making changes to the internal processes to make sure that the inflation that can be impacting exposure, even in things like property, is properly reflected. I mean, the amount of indexation that's around, beyond the pure activity drivers, it tends to be more of a European topic than a US topic. In reality, most contracts have some form of recognition, mitigation, or other inflation feature. We're just trying to make sure that the underwriting process that we run properly reflects that in the exposure or price that we offer to clients. Appreciate the patience, Kamran. Back to you on your two questions. On Farmers growth from here. I mean, we've given guidance for the full year, including what you've seen in the first quarter of mid- to high-single-digit. I think as we go into next year, it's a bit harder to tell. I certainly don't think it will slow down. I mean, the auto market in the U.S. is in quite a bit of turmoil at the moment. You've seen frequency and severity, I mean, come back in spades. The entire market is scrambling for rate. I mean, you guys, you understand how the rate system works in the U.S. In almost all states, there is some kind of process around that to varying degrees of complexity and difficulty. I think in some markets, it's gonna take quite a while before rate catches up with the current loss cost trend. I think there's a very positive aspect for us, which is the impact that's gonna have on growth. Quantum for next year, I don't have a view on that today, but I certainly wouldn't be guiding lower than the underlying level that we're seeing for this year. The one note of caution, and I think you see this again across the entire market. I mean, even the largest players are quite cautious at the moment. There's less interest in new business. There's more interest in making sure that the rate is adequate. I think it's generally a good position for Farmers. I think the rates, in particular, will help. I guess short answer to your question is I would expect growth to be at least in line with a more normal kind of mid-single digit territory for Farmers for next year. Right. Effect of the hedge on investment income. Of course it's not free. It won't actually run through investment income. You'll see it essentially. I mean, the premium paid will, in theory, if everything is fine, simply wind down through mark-to-market and the realized gain losses over the course of this year. I mean, the cost of it is not, it's not that huge, and I expect we can manage that within the normal gains that pop up through active management of the portfolio, but no impact on the reported yields, at least. Thanks, George. The next question comes from William Hawkins from KBW. Please go ahead. Hi, George. Thank you very much. Can you give us a bit more information, please, about how you're booking your statements about Ukraine? Are you obviously you haven't published a number. You're saying it's insignificant, but I mean, are you making these considerations with regards to expected ultimate or are you booking these things as they're incurred? Cause at the end of the day, you know, I appreciate this may not be significant, but most commentators are still talking about a $10 billion kind of, you know, mid-sized CAT event. So I'm assuming that there are, you know, losses that Zurich is getting. You know, in your statement you're drawing a clear line between the industry and Zurich. Can you just remind us some of the key differences of why you might be in a better position relative to the average for the industry? Then secondly, please, thanks for all the stuff you've said so far about inflation. Could you come back and just talk a bit more specifically about social inflation? You mentioned it but didn't talk much about it. I mean, my take from, for example, the litigation finance players is that to all intents and purposes the U.S. courts are still shut. Which is fine for now, but it may mean that there's kind of a dam that is building up ready to burst. I don't, kind of, know how you feel about that. An adjunct to that question, we don't often talk about it, but what is Zurich's house view about litigation finance as an asset class? Is it something that you completely steer away from because it's a systemic risk for claims inflation? Or is it potentially a tool for you to be hedging your exposures over time? Thank you. Yeah. Wow. That's the first time I've had that question. So on the different components, on Ukraine, first of all, I mean, you can take my comments as a view to ultimate, rather than a, we haven't heard anything yet, maybe some events in the future. Why would we have that perspective? I mean, if you look at what's expected to drive losses, I guess the most commonly identified ones would be, I guess the issues around the aircraft leasing, which of course is well beyond our expertise because we're not present in that market. Political risk, which is a business we've been running down since, I mean, actually two or three years ago. I mean, credit to some degree is gonna be impacted. War risk, which again is a specialty line of business. I mean, I think in the end, it's a reflection of decisions we've made in the past about how many things we're capable of underwriting or not, as the case may be. That's just led us to conclude that, I mean, obviously with no particular foresight that we're gonna have Ukraine, but that we would opt out of some of these lines of business. I expect us to avoid any significant effects from it. I mean, that would be the short answer. On the inflation topic, yeah, I mean, it's a, I don't know that I'd completely agree that the courts are still basically shut. It's still slow, I think. I think the, There's an expectation, which I think is well in line with common sense, that as we see the activity build, I mean, you will see the more likely winning cases come through first. I think you are likely to see some type of bump early in the process around social inflation. Trying to draw a conclusion of what that looks like through the unwind of the entire backlog. I think that there'll be a difficulty for the entire industry. Bottom line, I mean, there is no evidence currently that there's an entirely different outlook for social inflation. I mean, I accept that there's not a lot of evidence yet to prove it one way or the other. On the litigation finance topic, I mean, it's an interesting issue. I mean, in general, I mean, where litigation finance shows up in significant amounts, I think our primary considerations are probably about the underwriting risks rather than about the asset class as a hedge. Of course, I mean, it'd be a bit like biting your own tail if we were to throw a lot of money into it. I don't see it as a topic where you would see us come to the conclusion that there's an upside for us to be a heavy investor in that topic. That's great, George. Thank you. Thank you. The next question comes from Thomas Fossard from HSBC. Please go ahead. Oh, yeah. Good afternoon, George. Two questions left on my side. The first one would be on the underwriting margin trend. Could you focus a bit more on what's going on in EMEA in Europe, where you are showing, and especially on the retail side, where you are pointing to 2% rate increase, which seems to be running significantly below where cost inflation is trending at the present time, especially maybe in the UK. Just wanted to better understand, you know, what was your view, and if you were to expect any pressure on underwriting margins in the short term, in your European book. The second question would be more related to the U.S., and regarding to your own cost related to a wage inflation. I mean, how things are going there, how can you resist the wage inflation in your own company? Are you subject to the Great Resignation in the U.S., and what about the talent pool? I mean, how things are going and shaping up in the U.S. for your own business? Thank you. Yeah. Thanks, Thomas. I mean, I think if you look at all of Europe and you think of a 2% increase and you think of the headline inflation rates, I mean, I would agree that there's no way that's positive for margins. However, I think there are a couple of things that you need to bear in mind. I mentioned earlier that I think it's almost fully half of the premium that we've renewed year to date is Swiss. So of course, I mean, while even in Switzerland, inflation is maybe a bit higher than we've been accustomed to in the past. It's not like the U.K, it's not like Germany. Of course, strength in the Swiss franc acts as some offset to some of the risk of imported inflation here. I think when you look at Q1, just be a wee bit careful you don't extrapolate it too much because it's a very significant portion of what we're reporting here. I think the other thing that continues to help at the margins, too many margins in this answer, but, continues to help, I guess we still see, I guess what we used to describe to some degree as frequency benefit. I'm not sure I'd call it frequency benefit anymore. But there is still some absence of a frequency in the actual loss cost experience, compared to what we would have anticipated at the point of pricing. I think it's this combination that for the time being means that retail doesn't suffer the effects that you may expect if you take a 2% rate increase and maybe take a loss cost trend or inflationary pressure that's probably more than two times that. I think it's the combination of mix and continued benefits on the frequency side of the claim experience that means that it's not actually putting pressure on margins. What it does put pressure on is growth in some markets. We would be cautious around some of the European retail markets at the moment. Would probably tend to shrink some of the marquee, say, retail auto, retail motor, markets, and look more towards some of the mass consumer business that we have in Europe that has a bit less of the same issue. Second part of your question, operational cost inflation. Yep. It's a challenge. I don't think I necessarily limit that to the US. If I look at what the US team has done, I think they've handled it in a relatively smart fashion, given the pressure. I mean, we've put through what, by historical standards would be a pretty significant increase across the board. We've added on top of that a more targeted increase for particular high demand skill groups, the obvious ones being. Excuse me. People who are involved in the underwriting process, so underwriting and some of the pricing actuaries, to avoid that, we suffer unwanted attrition. I think we've also been helped in the U.S. that, I mean, some of the things that, again, Christoph has done there around some of the restructuring, that's taken place, that has created some natural expense benefit. We can't do that every year, but it's certainly enabled us to weather some of these inflationary trends that you see that would impact the operational cost levels. I mean, it's a challenge and we are trying to manage it as best we can. Thank you, George. The next question comes from James Shuck from Citi. Please go ahead. Thank you. Hi, George. My two questions, firstly, just coming back to the ROE for 2022. I think you have an illustrated target of about 15%. I think longer term it's 14% and growing. When that target was given, I think the outlook for P&C has probably improved overall. I think you're talking about overall margin growth, and that is allowing for some of the headwinds on the retail that's perhaps a little bit offsetting some of the stuff on the commercial side. I guess just relative to the initial planning of where we are now, is that 15% you know starting to look a little bit conservative or are there offsetting features to consider? Second question around crop insurance, and really it's just sort of trying to understand this business a little bit better and understand some of the risks in it. If you are underwriting premium, I think you mentioned February and then the crop center yield later in the year, and that affects the earned pattern of the premium. How do we think about the risks when it comes to commodity price increases when you've potentially underwritten in February and then taking on the risks of those commodity prices actually increasing quite materially? How should we think about the risks around kind of low yields and potentially under fertilizing due to high costs and, as an impact on the yield outcome later in the year? If you're able to give me anything on the earned premium and expected combined ratio for 2022, that'd be helpful as well. Thank you. Yeah. Thanks, James. On the first one, I mean, maybe apart from the financial targets, we could have skipped some of the content back in November 2019, cause it hasn't really turned out the way that we would've expected. I think we've invested a lot strategically to prepare ourselves, for things that haven't yet come. We talked a lot about what we were doing around retail. If you think back to, I mean, both the strategic commentary and the financial commentary, there was an expectation that we would see that become a much more significant contributor. The obvious change that we've seen over the course of the last, almost two and a half years now, is this big switch, towards the opportunity that commercial has afforded us. I mean, Life has been pretty stable. Farmers has been pretty stable doing what we expected it to do. Really that trade off. If you ask me, I mean, does the 15% portray a lack of ambition? I don't think so. I think. I mean, if you think of how we presented last year's numbers, we didn't adjust anything. We told you what the headlines were. We compared that to the goals that we had. I think we're happy with the progress that we make. I think on ROE improvements, I mean, I would expect that, I mean, further steps really come from what we do around the back book more than anything else. The price trends are really helpful. I mean, at some point in the course of the next couple of years, we are gonna see, I mean, a different environment for commercial. I expect retail to step up as we discussed earlier. I expect other parts of commercial to help us. In terms of more significant change in ROE, I think it really has to be capital allocation around the back book. On the crop risks. Yeah, I mean, it's an interesting business. Obviously, we're very U.S. focused. It's very U.S. centric. It's run in a particular way. The federal government is heavily involved. Most of our crop clients will buy essentially what amounts to Revenue Protection. Covering a combination of issues around yield and price. Of course that means that the commodity price side of it itself is not always the best pointer to the risks that you can face. Because, of course, yield and price, I mean both interact when it comes to revenue and one can push the other in opposite directions. I mean, obviously the significant growth in premium is simply a reflection that commodities are priced at a much higher level over the course of the last two years. We charge a price that's based on that level. I mean, there is risk that the harvest price deviates significantly from the base price that we set in February for the key commodities. I mean, that's something that we price for in the product. I think the interesting thing, I mean, obviously we pay a lot of attention to it currently. Partly because of some of the things you point to. For example, I mean, are the potash issues gonna be relevant for the use of fertilizer in the U.S.? I mean, the feedback we get is if you look at how the U.S. farmers source the materials they need for the growing season, it tends to be quite domestic. Either domestic to the U.S. or domestic to North America. There's an expectation, and in fact, an obligation on farmers that they continue to follow prior practices. We wouldn't expect to see people, especially when the potential payoff from a price perspective is so strong, look to try and cut some of the inputs as part of this process. Of course, if they do, then that potentially raises challenges in the settlement process. Overall, I mean, our view on combined ratio as the historical indicator is pretty much unchanged for the business. We do continue to actively select the risks that we will cede to the federal government. On some of the risks that are triggered by commodities other than crop or sorry, some of the input commodity topics, it looks as though the U.S. industry at least is somewhat sheltered from these, at least for this year. Other than the much higher price, we don't perceive a particularly different risk in the business. That's great. Thank you very much, George. The next question comes from Dominic O'Mahony from BNP Paribas. Please go ahead. Oh, hello. Thanks for taking our questions. Two, if that's all right. One is just coming back to the back book topic. Clearly, since you first sort of started talking to us in detail about your ambitions, the interest rate environment has changed quite a lot. The macro environment has clearly become quite volatile. Just wanted to get your sense of whether any of that changes your appetite, the bits of the book that you're most interested in addressing, whether there might be further opportunities. Anything that's changed in terms of your perspective on how best to approach the back book topic. And indeed, same question for the counterparties. Whether you've seen any change in what they're interested in, pricing, and so on. Just one brief second question. George, towards the beginning of the call and the questions, you were saying, if I heard you correctly, that while the retail P&C business is pretty tricky right now, you're actually very optimistic, you know, sort of the medium term. I'm just wondering whether that's whether there's a specific reason you expect that, or whether this is sort of a matter of what goes down must go up, and at some point, that business will become more attractive, and then you're ready to participate. Thank you. Yes. Thanks, Dom. On the back book, I mean, of course on the face of it, you could take the view, well, hasn't the problem largely gone away? I think the problem isn't the absolute level of interest rates. The problem is the interest rate sensitivity. That I think the current environment is actually quite helpful for us to deal with this. It does need to be dealt with because it's not a good allocation of capital for us because it's relatively poorly rewarded capital given the risk that it's covering. In terms of counterparties, I don't perceive a radical change in how they see things. I don't think it alters the level of interest or the supply of capital that's available to help us deal with some of these issues from our perspective. Short answer would be no real change here. We're gonna continue to do what we had planned to do. The only thing I would emphasize again is one of the things I mentioned earlier, just I mean, please. I know there's lots of optimism out there. Please be careful about adding the old number on top of the current SST number because of course, some of that interest rate benefit is in the 234 already. Again, I think that's a positive because that means we have that resource on hand, and we don't need to wait for it to pass through some kind of sausage machine before we can do something with it. On retail, I mean, yeah, really good question. Is it blind optimism or do you have a theory? Probably somewhere in between, I think. I mean, I obviously can see trends in a number of markets. I can see how businesses are behaving. I can see some of the competitive trends, and I think there's gonna be increasing pressure for people to address the weakness. I think if you look at the U.S. market, it's probably the most clear to me at this stage. Now of course, that's not a traditional retail market, but I'm not sure that other markets are gonna face very different dynamics in the end. You've seen huge increase in frequency and severity in claims in retail auto in the US. Everyone has to address it to make a reasonable return. You can see from the activity around rate filing, that that's exactly what everyone's doing. Now in Europe, that process is quite different because of course, typically in most cases, you're not in a tariff market. It's not as easy to see quite as clearly. The inflationary trends may not be quite as pronounced as the US, but they're also not normal. As we discussed earlier, I mean, if we were running a business that was not Swiss, but say it was maybe concentrated in the larger EU markets, and we were seeing a 2% rise in price, I mean, that's not gonna cut it, is it? Somewhere in between, Dom. Brilliant. Thank you. The last question for today's call comes from Vinit Malhotra from Mediobanca. Please go ahead. Yes, thank you, George. One thing is, and apologies, I missed a little bit in the beginning, so I don't know if you addressed some of this. The first one is just on the pricing moderating trend. You know, we talked about it in the summer last year, but it's happening now. How much of this do you think is sort of a base effect, and how much do you think is something changing in the market in terms of how much can clients bear or any other risk demand topics? I'm just curious how much is base effect of this moderation. Second topic is, in the life book, there's a commentary about not very favorable business mix driving down a little bit the new business margin. I'm just trying to square that with what I remember from full year was a more optimistic view on life. Is it something we should be thinking about or is it just a blip in a quarter or something like that? Thank you. Yeah, thanks, Vinit. On the life topic, I mean, that was really a coded way of saying that we had a large single transaction in the same quarter a year ago, and that slightly distorted the numbers. I don't think it's particularly directionally relevant for the business, so it's not a source of concern for us. You'll see it naturally move around from quarter to quarter. If you look back in time, Q1 this year doesn't suffer by comparison to prior Q1's other than last year, which of course unfortunately is the one we have to compare it to. If you're asking me is it relevant for consideration for the remainder of the year? I don't think so. On the pricing trend and kind of what's driving this base effects, how much can clients bear? I mean, it's obviously a very difficult question to answer. I was talking to Alison Martin, who runs our European business. She's been at a number of client events recently talking to risk managers, CROs, CFOs about how they perceive things. I mean, there's quite a lot of feedback in the system that the extent of rate rise is challenging for clients, particularly given the experience they had prior to this phase of the cycle. I think most of them are gonna appreciate that there's clearly an inflationary trend. In fact, I look at the activity of some of our largest clients who fairly regularly announce price increases for their client base simply because of the impacts that they face. Of course, I mean, we're not insulated from that. The fact that the increased price in itself drives a bit more risk into the insurance relationship. I mean, interestingly, the clients also complain about the lack of capacity, so there's a feeling that across the industry, risk appetite is still not growing, which I guess also has some impact on pricing trend and potentially again helps sustain it for longer than we might have expected otherwise. I mean, having said that, I mean, these client relationships are extremely important to us. I mean, we do try and differentiate within our portfolio for our clients who are very active around risk management and can demonstrate from the demonstrated outcomes that that provides significant risk mitigation, you'll have a different outcome. In fact, I think, I mean, already for, I think at least a year, I mean, for clients that have had that different experience, they've had a different outcome of pricing already. I mean, the pricing trend might look like the one we saw towards the end of last year, but I think it continues to be much more differentiated. If you're perceived to be a poor risk, you're gonna have a problem. I think if you're a good risk, it might still not be precisely what you want, but we believe it would more reflect the risk that you bring. Pricing trend, actually we would be slightly optimistic. I mean, given the comments I made earlier, we're seeing the current trend sustain that for a bit longer. We are aware of making sure that we try and support our clients in the best way that we can. Thank you. I appreciate the feedback. Thank you. Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Jon Hocking for any closing remarks. Thank you very much for everybody for dialing in. We're aware there's a few questions outstanding. The IR team will be available shortly to answer them. With that, thank you for your time, and good afternoon.