Good morning, and I'd like to thank you all for joining today's call with Hiscox full year 2022 results recap. My name is Breaker, and I will be your moderator for today's call. All lines are on mute for the presentation portion of the call, with an opportunity for questions and answers at the end. If you would like to ask a question, please press star, then one on your telephone keypad. I would now like to turn the conference over to your host, Paul Cooper, Chief Financial Officer, to begin. Paul, please go ahead. Welcome, welcome. Thank you for joining me for our IFRS 17 restatement event today. I'm Paul Cooper, the Hiscox Group CFO. I'm pleased to share with you our restated 2022 full year and half year numbers. While getting to this point involved a huge amount of effort to cut through complexity and break some deeply established habits, hopefully, our presentation today will deliver sufficient information in good time for you to rebuild your models ahead of our interim results in August, as per our usual schedule. Please treat our materials today as a build on the December teaching, although, as you will see, our thinking has evolved in some areas following a detailed analysis of our restated numbers and as reporting conventions and disclosure standards start to emerge from peers. As always, please be aware that all numbers presented today are unaudited and may be subject to further change. A few words about the agenda for today. I'll start by walking you through the income statement bridge from IFRS 4 to IFRS 17, including our new written premium APMs, and explain the seasonality of earnings. I'll then talk you through the impact of discounting on claims liabilities, a topic I know you are all keen to better understand for modeling purposes. Next, I'll cover our primary profitability metric, which under IFRS 17 remains the combined ratio. We will look at some of the complexities introduced through the treatment of reinsurance commissions and reclassification of expenses. We will also take a look at the balance sheet bridge, risk adjustment, and new confidence level target range. I will conclude with some key takeaways and comments on outlook. There's a lot to cover, so fasten your seatbelts and I'll begin. As I mentioned back in December, IFRS 17 is merely a new accounting standard. While there are changes in the presentation of our financial results and new concepts to grapple with, notably on discounting claims liabilities, it doesn't change the way we run the business. There is no change to our strategy, economics of the business, investment result in SAA, reserving philosophy, capital, and dividend approach. Let us now look at the full year 2022 numbers. There's a lot to digest, but the changes will start making sense to you as we move through the presentation. As you can see, there are positive movements to PBT, ROE, and the NAV. Discounting of claims reserves of $196 million is the main driver of PBT, increasing from $45 million under IFRS 4 to $276 million under IFRS 17. This flows through to the ROE, getting us into the double-digit territory. Discounting is a material contributor to the increase of $218 million in closing shareholder equity, improving NAV per share by $0.63. At the bottom of the slide, you will see our three segmental combined ratios. In Retail, there is a marked decrease, broadly no change in London Market, and also a notable increase in Re & ILS. There's a lot to unpick here, let's jump straight into explaining the detail to help you understand the movements, starting with growth. As you know, IFRS 17 only presents earned premiums, but to understand the volume dynamics in our business, and for comparability, we feel it is important to give a volume growth measure in line with how it's been presented historically. We have introduced two new Alternative Performance Measures to present written premiums on a gross and net basis, which you would have seen reported as part of our Q1 trading update. What will be helpful to you is that growth trends are broadly consistent with the old IFRS 4 world, and the rate of growth is not impacted on transition. It's just that the starting point is slightly different. This is due to two reasons. Insurance contract written premium, or ICWP for short, is a little lower than gross written premium due to reclassification of inwards reinstatement premiums to claims and inclusion of reinsurance overrider commissions on inwards reinsurance. Net ICWP is 8% higher than NWP, as outwards reinsurance commissions were previously deducted from acquisition costs. They are now offset against allocation of reinsurance premium. This means that on a net basis, things do look a bit different in our Re & ILS segment, meaning there is an uplift to NICWP versus NWP. We expect the gap to track on a consistent basis, subject to any material changes in the reinsurance program. The treatment of reinsurance commissions also has knock-on implications for the combined ratio, which I will come to later on. As you can see, written growth will be relatively easy to model in the new world. Earned growth will be subject to one quirk, namely seasonality. It's important to start by saying that seasonality has no material impact on an annual basis. It is only a half year phenomenon in our big ticket business, and in particular, in Re & ILS. You will see this when I bridge the income statement at half year and full year in a moment. What I mean by seasonality here is that more premiums are earned in H2 compared to H1 in cat exposed lines. IFRS 17 requires us to earn the premium in line with the risk profile of the business, i.e., the period where the risk exposures are concentrated at a more granular contract grouping level. Our Nat Cat business is impacted by the U.S. wind season in H2, giving rise to the shift in earnings pattern. The seasonality impact varies by segment. It is most prominent in Re & ILS, which writes a greater share of the Nat Cat business, where only 29% of written premium was earned in the first half, compared to 44% on a group basis. This seasonality impacts half year profits, but this is just a tilt with no overall change to the full year profitability. For London Market, there is a moderate impact. Finally, for Retail, the path from written to earned premium is linear, as it was under IFRS 4, so no change here. This seasonality impact is important for your modeling of half year versus the full year, so please bear this in mind ahead of August. Notably, we expect Re & ILS's insurance service result to follow the premium earnings profile, and thus will also be lower in H1. This will naturally flow through to the half year combined ratio. Let me now bridge our profit from an IFRS 4 to 17 basis for 2022. Let's start with the full year 2022 bridge at the top of the slide. There are notionally two main changes which result in an uplift to profit of $231 million for the full year to $276 million. In order of magnitude, these changes are: firstly, discounting, which had an overall net benefit on our profits of $196 million. This comprises of three main steps, resulting in $76 million, $18 million negative, and $138 million movements, which I will talk you through on the next slide. This means that the mark-to-market losses in our bond portfolio in our IFRS 4 2022 profit now have some offset because of discounting of claims liabilities. Secondly, FX movements of $24 million. There is now more symmetry in the balance sheet, as unearned premium reserves and deferred acquisition costs are revalued at closing FX rates, in line with the rest of the balance sheet, resulting in a favorable impact on transition. I talked about in December, the impact of onerous contracts on 2022 profit is small. I've prepared a slide on this, which is included in the appendix, as the impact is so negligible. A reminder, we will reevaluate the onerous contract position twice yearly and set up and subsequently run off any new positions as needed. Let's now have a look briefly at the half year bridge at the bottom of the slide. You can see the $18 million negative impact of seasonality I talked about a moment ago on the half year profit, which is largely earned through in the full year result, as shown in the full year walk. Having just seen the material impact of discounting on profit in 2022, $196 million at full year and $119 million at half year, it is worth spending some time to unpick the core components. Well, isn't IFRS 17 complicated? As I showed you on the previous slide, there are three steps to discounting. Let me talk you through how each one works and what the impact is on the numbers. Starting with step one, this is the initial discounting of claims on recognition. You can use the weighted group discount rate and duration to get the estimated PV of the incurred claims and initial discount benefit to claims. In 2022, the average weighted group discount rate was 2.9%, with a duration of 1.9 years. This gets you to a $76 million favorable impact from initial discounting. The size of the impact is dependent on the prevailing interest rate in the period. In 2023, the initial favorable impact from discounting on claims recognition will be larger than 2022, due to an expected higher blended rate. As a reminder here, the discount is applied to net earned claims in the region of $1.3 billion in 2022. Moving on to step two, which is the unwinding of the initial discount over the settlement period of the claim. Opening reserves unwind at the opening forward interest rate, and new claims in the period unwind at the prevailing forward interest rate in the period. You can think of this as removing the appropriate portion of the discounting benefit that has already been applied. This will have an unfavorable impact on profit. In 2022, the size of the unwind was -$ 18 million. In 2023, we estimate the unwind will be a negative in the region of $ 110 million-$ 140 million. At half year, this is expected to be in the region of $ 60 million-$65 million. The 2023 numbers are significantly higher due to the impact of higher interest rates. Finally, to step three. This is the impact of discount rate movements in the period. For 2022, the circa 4% rise in interest rates led to a $ 138 million favorable impact. This is recognized in the IFI. To make 2023 estimates, we suggest you use the sensitivity analysis set out on the slide. The overall impact of discounting is the sum of the three steps. In 2022, it was a positive $ 196 million impact. Please do remember, this is a non-cash item. Let me turn your attention to the combined ratio. As I noted at the start of the call, combined ratio remains our key profitability KPI. Although our thinking on the definition has evolved since December, as reporting convention starts to emerge, we have taken the decision to adopt a net-net definition of the COR, which I'll define on the next slide. Many of our peers are arriving at the same conclusion. There are limitations with either approach, ultimately, the KPI should be a fair reflection of our business model. Our big-ticket businesses make extensive use of reinsurance as a risk management tool, IFRS 17 doesn't deal with this in an intuitive way. Let's take a look at the new definition. The combined ratio comprises the insurance service expenses, less amounts recoverable from reinsurers as a proportion of insurance revenue, less allocation of reinsurance premium. Before I talk about the IFRS 17 impact, the transition to own share presentation increases group COR by 1.7 percentage points. As some of you who have followed us for many years may remember, a 100% basis was introduced to present the Hiscox's combined ratios when our ownership of Syndicate 33 was moving notably from period to period, thus introducing comparability issues to our KPI. As our ownership of Syndicate 33 has been relatively stable for a while, it appears appropriate to now streamline disclosures and align COR presentation with the income statement. Without going into too much detail, the difference between 100% and own share basis is down to the mix of Syndicate 33 business across net premiums and net claims. This change in definition resets our starting point for the IFRS 17 walk. Moving from left to right. The first two bricks, the 0.6 percentage point increase due to change in treatment of reinsurance commissions, a 1.4 percentage point decrease due to reclassifications of some expenses as non-attributable to outside the COR, arise from a one-time step change in definition. I will explain in detail how this works on the next two slides. The next two bricks represent movements which continue to occur period on period, but as you can see, these are very small. Onerous contracts are a smaller benefit to COR in 2022, as some of the loss component has unwound. Lastly, there is a 2.4% benefit from discounting, which in the interest rate environment is favorable, given the relatively higher interest rates in 2022. A point to note is that not all of the lines necessary for the calculation of the combined ratio are included on the face of the IFRS 17 income statement, we will be providing some additional disclosures to help you calculate it. Before we look at how reinsurance commissions impact the ratio, a point of housekeeping: The impact of LPTs has been reclassified in the definition as they net to nil in the insurance service result, but would have created volatility in the net COR as they distort earned premiums. Before I move on to talking you through the claims and expense ratios, it's worth me explaining the impact of change in reinsurance treatment and reclassification of expenses to non-attributable. Firstly, reinsurance. This slide uses IFRS 17 numbers to illustrate how IFRS 4 and IFRS 17 standards treat reinsurance side by side. Please bear in mind that what you see on the screen will not reconcile to the published IFRS 4 numbers. This is just for illustrative purposes to show you the mechanics. Under IFRS 17, fixed reinsurance commissions are no longer deducted from acquisition costs. Instead, they are deducted from the allocation of reinsurance premium. While the impact on profit is identical and the economics of our reinsurance contracts are unaffected, it can have a material impact on the COR when extensive reinsurance, such as in our Re & ILS business, is used. Splitting this out, for the expense ratio, reinsurance commission has moved from the numerator in the old definition to the denominator in the new definition, increasing the ratio. For the claims ratio, it has the opposite effect. Reinsurance commissions now appear in the denominator, and so the claims ratio decreases. The move of reinsurance commissions from the numerator to denominator means that we are rebasing the COR to a higher number. This is rather counterintuitive, but the more reinsurance or third-party capital we use, the higher the combined ratio. This bears no relevance to the underlying profitability of the business. Moving on to reclassification of expenses. As you can see, the classification of non-claims expenses is slightly different under IFRS 17. As a reminder, attributable expenses relate to costs associated with writing insurance contracts and are included in the insurance service expense. We have non-attributable expenses being the other operational expenses line in the income statement, such as brand marketing, a portion of overheads, and training. Unsurprisingly, corporate center expenses are deemed to be non-attributable. Where judgment comes into play is with partially attributable expenses, such as management time and IT expenses. Under IFRS 4, we previously included the vast majority of these in the underwriting result, but they have now been redistributed between attributable and non-attributable expenses. The vast majority of the expenses are attributable and remain part of the insurance service result. As I told you on an earlier slide, this improves the COR by 1.4 percentage points. Looking at non-attributable expenses, our corporate center costs will be carefully controlled, and we expect to continue with increased investment in brand to support growing the business. I have explained the main building blocks of the COR transition, I will dive into claims and expense ratios individually. As you can see, it is 5.7 percentage points lower than our reported claims ratio. 3.8% of this benefit is due to the changes to treatment of reinsurance, which I've just talked you through. Discounting is the only other material movement. You will note there is no impact of reinstatement premiums or RIPS in the claims ratio walk, as these were immaterial in 2022. However, it is worth mentioning that under IFRS 4, RIPS formed part of the denominator, as they were included in net earned premiums, whereas under IFRS 17, they are a part of the numerator, as they are netted off against incurred claims or amounts recoverable from reinsurers. Moving on to the expense ratio. To start from an obvious point, please note that the expense ratio is not impacted by discounting. As you can see on the slide, it's 3.8% higher from our previously reported expense ratio. This is mainly due to the change in treatment of reinsurance, driving 4.4 percentage points of increase, so more than the benefit to the claims ratio I mentioned earlier. On a positive note, there is a 1.4 percentage point favorable impact from the reclassification of non-attributable expenses. Let me walk you through the combined ratios by segment. Before I jump into the explanation of how IFRS 17 impacts the Retail combined ratio, let me remind you, there is no change to the economics or expected profitability of our Retail business. We're not introducing any new guidance today. There is no change to the outlook. To the Retail combined ratio walk, shown on the slide. As you can see, the starting point has increased by 0.8 percentage points from the previously reported 94.8% in 2022 as we move to an own share presentation. This is not an IFRS 17 change. This is due to the impact of business mix, with the own share having a lower weighting of business written on Syndicate 33, including our U.K. fine art book, which in most years will operate at a lower combined ratio than the average for our Retail portfolio. Please note that the 0.8 percentage points move is not a fixed number and will vary according to the performance of the Retail business written in Syndicate 33. As you will note, this change from 100% to our share doesn't change the profitability of the Retail business. It is purely a ratio change. There are three components under IFRS 17, which will drive the undiscounted ratio going forward. The largest moving part is the benefit from a reclassification of non-attributable expenses, as required by the standard, out of the combined ratio, which results in a 1.6 percentage point reduction in full year 2022. This is a presentational change to the COR, which leads to no change in PBT. Again, it is important to note here that 1.6 percentage points is not a fixed number, and it may be higher or lower period to period, depending on the level of non-attributable expenses. The other two building blocks relate to a change in reinsurance treatment and onerous contracts. These, in aggregate, reduce the ratio by a modest 0.3 percentage points in 2022, but will vary from period to period. Overall, the impact of IFRS 17 change on the Retail combined ratio in 2022 was a decrease of 4.6 percentage points, of which 2.7 is due to discounting. Moving on to the Retail combined ratio target range, which is 90%-95% under IFRS 4 on a 100% basis. We are planning to release the quantified target range in new currency with our half year 2023 results in August when we report under IFRS 17 for the first time. However, to avoid any confusion, I am happy to confirm three things today. Firstly, that this range will be on an undiscounted basis as we have no control over interest rate movements. Secondly, that it will incorporate the directional benefit of expense reclassification I have just highlighted. Thirdly, our expectations of ultimate Retail profitability and cash flows remain unchanged. Let's move on to London Market. The London Market combined ratio is broadly consistent between the two standards. You are now familiar with all the building blocks. The only thing I would note is that the impact of discounting is slightly less than Retail due to the business mix of shorter tail cat- exposed lines and longer tail casualty lines. Another point to remind you about is seasonality. You won't see it on the slide, but there is a moderate impact at half year, which becomes negligible by full year. Let's turn to Re & ILS. In contrast to London Market, there is a step change to Re & ILS's COR due to extensive use of third-party capital. To give visibility on this, we will be calling out the drag on Re & ILS's combined ratio from the impact of reinsurance treatment. The offsetting benefit from discounting is also less pronounced due to the shorter duration of the Re & ILS book. As a reminder, the half-year combined ratio will be impacted by seasonality, meaning you should expect a higher combined ratio in H1, returning to expected levels by the end of the year. Let me be clear that this is not a reflection of any change in the underlying profitability of the business, but rather an outcome of the earnings pattern, where we earn around 2/3 of our premiums in H2. In contrast, expenses continue to be recognized in a linear fashion, and the expense ratio is increased by the treatment of reinsurance in H1. Looking at the closing balance sheet, it is important that you understand our change in equity for calculation of return ratios. There is only one point to draw out. There is a $ 218 million increase in closing shareholders' equity, mainly due to discounting, driven by steep interest rate increases in the period, accounting for $ 196 million of the movement. This will reduce our leverage ratio accordingly. It is worth noting that our previously reported full year IFRS 4 2022 ROE never benefited from initial discounting of claims. As we have now moved to IFRS 17, you will see the unwind negatively impact our ROE and earnings in future periods. As this is the only slide that touches on tax, it is worth a brief mention here. The increased tax charge for 2022 is purely due to timing differences on taxable versus accounting profit. For 2023 onwards, we do not expect a meaningful impact to ETR as a consequence of adopting IFRS 17. I will now take you through the impact of IFRS 17 on our reserves. As I mentioned earlier, there is no change to our reserving philosophy, and we remain conservatively reserved. Just as a reminder, in old money, our best estimate was measured as a mean estimate of expected losses, and our reserve margin represents an additional buffer to compensate for the uncertainty in the timing and amount of claims. The risk adjustment of $246 million replaces the IFRS 4 reserve margin, with events not in data or ENIDs being reclassified from margin to best estimate. Overall, net reserves have increased by $178 million, with a reclassification of $534 million of legacy portfolio transactions, or LPTs, more than offsetting the decrease from discounting of $250 million. As a reminder, IFRS 17 requires LPT to be reclassified into the asset for remaining coverage. To be clear, the economic benefit of the LPT does not go away, but just moves to a different part of the balance sheet. To the new IFRS 17 KPI of confidence level, which represents a measure of reserve conservatism in the new world. In reality, the concept of confidence level is not new, and our actuaries have had visibility of this internally. What's new is that there is now a requirement to disclose it. The overall confidence level is very similar between IFRS 4 and IFRS 17. Roughly speaking, in eight out of ten years, our reserves should be adequate, and there has been no significant change to this as a result of IFRS 17, as you would expect. Our long history of reserve releases bears this out. For 2022, the risk adjustment of $246 million equates to a confidence level at the 78th percentile. Let me talk you through the confidence level in a bit more detail on the next slide. As I mentioned on the previous slide, the risk adjustment, plus best estimate, is equivalent to a confidence level of 78% under IFRS 17. The ENID reclassification I've just talked about means that for the same confidence level, the risk adjustment will be a smaller percentage of a larger best estimate than under IFRS 4. Our business is made up of segments with different volatility profiles. For example, our big-ticket reinsurance business typically has margin held against specific cat or other events, which tends to lead to a higher confidence level. Conversely, our more stable Retail business would have smaller event-specific reserves, which trends towards a lower confidence level. Based on this, going forward, we expect to operate in the range of 75%-85% under normal business circumstances, demonstrating our prudent reserving methodology. This means that the pattern of consistent reserve releases you are used to seeing would be expected to continue, barring unforeseen circumstances. Our Retail business is less volatile than big ticket. As its share grows, the 75th to 85th percentile range becomes even more robust, with a high likelihood of positive run-off. Just to remind you, confidence level ranges are not really comparable company to company, as different insurers have different reserve volatility. What would make more sense is to compare how Hiscox's reported confidence level moves from period to period. The nature of our business means we expect it to move. We will certainly explain it if it falls outside our target range. You will be pleased to hear we are nearing the end of the presentation, so let me run through key takeaways. For those of you who started to drift off during the presentation, now is the time to wake up and refocus your attention, as I'm about to summarize the key points to remember from today. The overarching message you should take away is that there is no change to the economics of our business or cash flows. The slide is a little busy, so let me briefly touch on each key takeaway. Firstly, discounting. As you've seen, this is by far the most significant factor on our restated numbers, and I've talked about it in some detail. It's been introduced to represent a more economic view of claims liabilities on the same discounted basis as assets, which ultimately reduces volatility in the income statement. An important thing to bear in mind when you come to do your modeling is that discounting gives a non-cash benefit to the income statement, which will unwind in future periods. In other words, the overall impact is simply timing. The initial recognition of discounting is now included within the combined ratio, with the unwind and rate change through the IFRS. As we have already flagged in December and recapped today, the impact of seasonality is skewed to H2 for Cat-exposed business in line with the risk profile of the business, particularly in Re & ILS. This results in lower profits and a higher expense ratio in H1, but there will be minimal impact at full year. For the avoidance of doubt, this will be the case going forward, and you should build that into your expectations for each set of H1 and H2 results split. There is a new treatment of reinsurance commissions, which are now offset against premiums, increasing the combined ratio, notably for Re & ILS, with no change to profit. Remember the LPTs net out in the income statement, but would have distorted the combined ratio view, so we reclassified them for the definition. There is a change in how expenses are split under IFRS 17, which is between attributable and non-attributable, with the latter excluded from the combined ratio. This means the expense ratio decreases, thus partially offsetting the deterioration caused by the change in reinsurance treatment. Finally, reserving in our confidence level. Our reserves remain robust. There is no change in measurement, although there is now greater transparency through presentation of our risk adjustment and confidence level. What does this mean for our 2023 numbers? On discounting, as I outlined earlier, on discount unwind, we are currently forecasting some $110 million-$140 million unfavorable impact for the full year, which is, of course, much higher than the $18 million we saw in 2022. At half year, the equivalent number is around $60 million-$65 million. This will be a non-cash drag on profit, so please bear this in mind. On growth, all the guidance we issued in March is unchanged. On combined ratios, as I mentioned earlier, the Retail target is new currency, will be released with the half year results. It will be on an undiscounted basis and will incorporate the directional benefit of expense reclassification seen under IFRS 17. Another point I want you to keep in mind for half year is that seasonality of earnings will depress Re & ILS's underwriting result and combined ratio in H1 versus H2. This is not a drop in underlying profitability, but a matter of timing. Finally, on confidence level, I have now stated our target confidence level range of 75%-85% under normal business circumstances and expect to travel within it in 2023. That concludes the presentation. I'm now going to hand over to the moderator for Q&A. Thank you. Thank you. If you would like to ask a question, please press star one on your telephone keypad. If you change your mind at any time, please press star two. We have the first question on the phone line from Andrew Ritchie of Autonomous Research. Hi there. Good morning. Thanks very much for this presentation. It's definitely one of the most comprehensive we've had. Just a sort of methodological question. I would have expected the current year benefit from discounting to be closer to the IFRS, even in 2022, given the short duration of your business, and I don't think you locked in any discounting at transition on the reserves. I'm just curious why there wasn't more convergence, because there was only a tiny IFRS expense compared to the $76 million current year benefit. My assumption when I look at your forecast for 2023 is I'm gonna end up with a very similar current year benefit, and IFRS, roughly. Would you accept that? Broadly, it should be on a steady state anyway. Maybe just confirm that. Just some other quick questions of clarification. I don't think there's been any real change, but just clarify, what is other income in the new income statement? Just remind us what that is, and has it changed? You mentioned the tax rate, but you didn't remind us what the ETR is long term. Just clarify that. The other question is, when I look at your IFRS 17 presentation last year, you said you were not going to come out with a target confidence interval, but you are now. What changed your mind? Great. Thank you, Andrew, for each of those questions. I think it's useful to go to page 8 for the sort of discounting points that you make. If you look at each of those components, I think what you can see is really what drives the level of discounting, both on initial recognition and then during the year, and then for the unwind, is really 2 aspects. 1 is the size of the reserves, and then the second aspect is what's going on with the yield curve and interest rates. Generally, what you can see is, and what we've tried to highlight and why you have a difference between initial discounting and the IFI, is that the initial discounting is on the incurred claims. I mentioned earlier that the incurred claims for 2022, as an example, were around $1.3 billion. I know that on a sort of forward basis on 2023, you would be modeling expectations around the overall group combined loss ratio, as an example. However, in terms of the impact of sort of rate changes and what's already sitting on the balance sheet for discounting, that's going to be reflective of the circa $3.5 billion that we had in, on the balance sheet at year-end undiscounted. The first aspect of why you would get a difference between the two is, one is the incurred claims, which typically should be lower than the actual, call it the reserves bank, on the balance sheet. That would be one driver of differences. The reason that you're seeing sort of such a change is obviously rates increased quite significantly in 2022 from, you know, around 100 basis points to 400 basis points. That's really why you're seeing, I think, two things reflected on page 8. One is for 2022, the unwind coming through is only $18 million, so that would really be the sort of discount rate, the discount that was embedded at 2021 sort of unwinding, along with the unwind of any claims that are incurred in 2022, but are unwinding in 2022. Obviously, that's a lot bigger, and that's why we've guided you in 2023 for a far larger amount, because you're essentially sitting on a larger discounting element, and that's the sort of $110 million-$140 million that is expected to unwind for the full year 2023. That $110 million-$140 million is obviously a lot higher, and you can see that through the sort of step 3 on page 8, where that change in interest rates that I mentioned drove up the IFI quite significantly, the $138 million. If I draw your attention, so what does that mean in the round for 2023, and indeed, on a prospective basis? You can infer that 2023's initial discounting, notwithstanding the size of the incurred claims, the discounting element should be higher than the $76 million in 2022, by virtue of higher interest rates as they currently stand. Clearly, there remains a degree of uncertainty around interest rates. The, the big unknown is this sort of bottom right, around the way that the yield curve will move throughout 2023, and that will flow through to the IFI accordingly. You know, what we've tried to do on that page is give you the sort of building blocks and the principles. Albeit, I recognize that it's quite challenging to actually forecast the impact on discounting because of those variables. I think what is helpful is. Can, can- Yes, carry on. Yeah. Sorry, can I just check, the current year discount is the weighted average over the year or a period end for the current year effect? The current year will be the weighted average discount. As the claims are incurred- Yeah ... over the year. Indeed. Okay, fine. Right. Indeed. Yeah. That, and all I was going to suggest is if you look at, I mean, this is obviously 2022, but will give you an indication of the sensitivity of the discount rate for rates changes as well. Hopefully, that'll help in terms of the approximation, in terms of how rates will impact the IFI. I think that's. Can I just clarify that? Yeah. You will provide a discount benefit on the current year? It's not in the spreadsheet. There's no, it doesn't... I know you've given us it in the one of the slides, but you will systematically give us the discount benefit to current year. I think that's the, I think you've got to go back to the building blocks that I mentioned. It would be, you know, what's the weighted average discount rate, you know, assumptions around the remaining payout pattern, and obviously, the discount rate, so that they're applicable, that are, you know. No, I don't mean for forecast. I, we can forecast it. I, but I think it's important that you give in, when you report financial results, you should give us the discount impact on the combined. The current year discount impact. You can. Well, what you will certainly see is the difference between discount and undiscounted. That is disclosed in the annual statement. Okay, right. It's a requirement. Okay. It's a requirement. Okay. Okay. I would suggest it should be on interim, on every financial period, you should disclose that, as your peers are doing. Well, we will take that away, Andrew. Thank you. Look, that was part one of your question. I think the second part was around what's other, in other income. Generally, there are sort of several dynamics to that. There is commissions on sort of business that we write on behalf of others, so sort of third-party commission. There is the elements of both revenue and profit commissions that we receive for the Syndicate 33 share that we don't own. Then the last aspect is ILS, and the ILS fees would be the third component. One of the changes that you will see in the bridge is that if you look at IFRS 4 and how things were incorporated within the underwriting result, what we used to have within the underwriting result is some of that other income. That's now been reclassified out of the insurance service result, but it's on its own line as you move from the insurance service result to PBT. You'll see that clearly on the income statement. Then the last part about confidence level, I mean, I think There's two things. It's really a question of, you know, if you sit back, one, the first thing is that the standard requires a confidence level. What we think is important is to illustrate the range within which we expect to travel, because, and I think this is consistent with what we said at December, is that we are not expecting to land on a target a specific point estimate. I think what this shows is two things. One is that the reserves, as I said, in my sort of presentation, the reserving philosophy remains the same, and the reserves are conservative. The 78th percentile is robust. It does mean, around eight and 10 years, those reserves will be sufficient, and indeed, the range that we have selected, so the 75th-85th percentile, we think is also a conservative range. You know, to bring that to life, if, you know, if we travel towards the bottom of that range, then you shouldn't automatically expect that we will strengthen reserves. That range in itself is conservative, and what we were trying to articulate is two further things. One is around, you know, you will know that we are growing the Retail business, that have reserves that are typically less volatile, and therefore, what you can expect is, as those reserves grow as a proportion of the total, you can imagine that the overall reserves become less volatile, and you can expect, therefore, at the 78th percentile, to have a higher probability and a higher level of reserve runoff through time. We have had that history of reserve releases, over history. The last aspect, I know there's always the temptation to draw comparisons with others and other companies, but the fundamentals are what dictates the confidence level is the profile of volatility and the underlying portfolio of business that's written, that gives rise to those reserves. There isn't a direct read-across between any company. What is important, I think, is, you know, the point estimate that we have year on year, where that's moving within the range and the drivers for it. The last point, sorry. Okay. You mentioned ETR. Tax, yep. Yeah, there's. Mm. You know, we don't provide guidance, but you can see that there isn't- Mm ... a sort of material change from that reclassification. As I said, in December, the underlying tax is still driven by the underlying GAAP reporting. All that happens on a group basis is you have a degree of deferred tax washing through. There's timing. Okay, thanks. Thanks very much. Thank you. We now have Will Hardcastle of UBS. You may proceed with your question. Hey, I'll echo Andrew's comments. This is really comprehensive. Thank you. First one, in the document, you give a good explanation of how you get that discount rate, being the swaps and then an adjustment to get the illiquidity premium. I think it's using spread on AA bonds. If I back it out, the illiquidity premium looks really small, except sterling. I guess, it looks almost negative as well on one-year rates. Do you agree with that? Why would it be negative for one year? Presumably, you're using year-end rates. I'm just trying to understand, there's an averaging effect in it. The second one is just understanding the transition rates that you've used, how far back... If we're sort of backing out that iffy tail, would going back two to four years give us enough data effectively, or are the casualty lines much longer? I guess in that context, is there any possibility we can get that duration, I guess, for the Retail versus the London Market in Re and ILS? The final one is there any possibility I didn't see the PYD numbers at the group level that you've disclosed for H1 and full year? Is there any possibility for when we're modeling going forwards, we'll need to try and get those, I guess? Is there any possibility, this may be cheeky, but getting that disclosed divisionally next year? I guess, what's the logic of not providing that? Thanks. Great. Thank, thanks, Will. Hopefully, look, I can, I can take each of those in turn. You're right. I mean, one of the things, you know, that if you look at the way that we have, applied the discount rate, we've adopted the bottom-up approach. It really is around the risk-free rate, adding on an illiquidity premium. You're right, given the very short duration nature of our book, you know, it is growing at roughly 1.9 years on average. That illiquidity premium in general is pretty small. I mean, it's pretty negligible, just as a, as a guide. I think the sort of the negative aspects we can look into, but I don't think it's really a big feature. Really, I would focus on the risk-free rate as a, as a good guide. Really, it's not about. The important point is I think people get hung up on the spot rate. It really is the yield curve and the forward swap rate that is giving an indication of discounting, because obviously, what you're doing is looking forward in terms of that payout pattern for your claims. In terms of the prior year development, and what you will see in the half year and the standard requires it, is we will show loss development triangles. It will be, I would hasten to add, on an undiscounted basis. The other thing to think about is it will incorporate, because of the nature of the presentation that IFRS 17 requires, things like reinstatement premiums being embedded within the loss triangle. That's something to be aware of. The other aspect is that the standard avails you to a five-year loss triangle disclosure initially. As I said, in December, what we'll do is start with those 5 years and then add a year as each progresses, so that you cumulatively get up to a 10-year level of disclosure, five years hence. Then from a divisional disclosure perspective, noted, we continue to be happy and satisfied with the group level of disclosures that we provide. Okay, thanks. Thanks, Will. We now have Freya Kong of Bank of America. Hi, Paul. thanks very much for the restatements and helpful presentation. a couple of questions, just following up on Andrew's question: Did you lock in the discount rates at transition in 2021, and that was the reason why the unwind was so low over 2022? Because isn't the unwind meant to be at the forward interest rate each year, and this gap between the discounting benefit and the unwind, should this close over time, or will there always be some sort of small lag effect, creating either tailwinds or headwinds, depending on interest rates? secondly, how should we interpret any changes in your risk adjustment confidence level year on year? Will you clearly explain changes due to volatility of business mix versus actual changes in underlying prudence? This is quite hard for us, otherwise, I think, to see. The 75 to 85 percentile range is set to allow for normal volatility in claims. Oh, yeah, sorry. Yeah, that sort of rounds off the question. The last question is just on normal business circumstances, this range holds. What sort of scenario would make you go outside of this range? Thanks. Yeah, Freya, can I just ask you talked about locking in the reserves. The second part of that first question, I didn't fully catch. Could you just repeat that? Yeah, sure. There was a locking in- the difference- Do we lock in the interest rate? There was a second point about some offset. Yeah. The difference between the discount benefit and the unwind, should that close over time? Will there always be some sort of small lag effect? Yeah, okay. I get that. Look, let's talk about sort of reserving. Again, I think page eight is probably the most useful slide to talk about. Really, all that's happening is your opening reserves are sort of reflective of your, call it, your prior year prevailing rates that have been applied to discounting. You almost need to think that they will vary through... As you're setting up your sort of incurred claims, that sort of prevailing, call it the weighted average interest rate, will drive your discount on your incurred claims, but it will also adjust the balance sheet reserves that are on balance sheet each year. There isn't a sort of lock-in to the interest rates that stays fixed throughout the unwind, the full unwind of the discount. That's why you can see such a dramatic change in 2022 on step three. The $138 million is showing how that rate hasn't remained locked in. It has varied. As concerns the lag, I think it's really interesting and you will get. The general principle, unfortunately, is you've got those three moving parts that are absolutely interconnected, but you are getting that sort of lag effect come through. The rate change on step three is pretty instantaneous. The incurred rates on step one, I've sort of mentioned. The lag effect is the constant unwind of step one, and step three is really what lags through. The degree to which they offset, there isn't a. You shouldn't expect them to absolutely match in any calendar year because of the nature of the lagging effect that occurs. The one important point to note, and we should, we did try to emphasize this, but I want you to take it away, is that 2023, we'll see that drag on profit. It's non-cash in the region of $110 million-$140 million because of the unwind that's coming through on balance sheet. Now, the initial benefit of that, of course, in 2022 and prior, hasn't occurred because we reported under IFRS 4. We were under a different regime. That is a sort of transitional adjustment, I think, that we would encourage you to sort of take note of. In terms of just moving around in terms of the, your second point around reserves. You know, we have talked about the range that we expect to travel within, and I think that, you know, as part of explaining around what's going on in terms of that of confidence level, I think it'll come through in terms of what's happening in terms of performance. You know, to mind, I think that there is... Excuse me, you're gonna have a, I'll wait until the fire alarm goes off. I'll just go on mute. Hold on. Bear with us. Hi. I think it's almost over. Right, sorry about that. You'll be pleased to know the building is not on fire. That was a regular test. Sorry, Freya, just to continue on your question. We talked about discount rates. I think there's two things that we'll bring out. Obviously, the sort of performance in the year and the nature of what's going on from a volatility perspective in the reserves, you would expect us to talk about. And, you know, we have commented on that in the past around reserve releases, you know, cat events that are new, et cetera, that would drive that point estimate. We also disclose under the analysis of change, the movement of the risk adjustment. You will see those components. As to going outside the range, as I said, the, you know, the range has been set as conservative, and we'd expect to travel within it, as I've said, and should we go outside it, we'll have to see what gives rise to going outside of that range. We'll see whether any, you know, management action is warranted, were that to occur, either, you know, above the 85th or below the 75th. I think it's a sort of, wait and see what circumstances drive that. Okay, thanks. Thanks very much. Thank you. We now have Tryfonas Spyrou of Berenberg. Oh, hi, good morning, Paul. I have three questions. The first one is on the LPT transaction. Can you perhaps comment as to whether there'll be an impact going forward, and if, and if any, could you elaborate on how can this evolve so we can better understand how to model this? The second one is on the confidence level again. I guess you're sort of around the 78% at year-end. How should we think about this in the near term? I mean, given your comments, it's fair to expect that this could trend upwards, given the growth dynamics we're seeing in Hiscox Netherlands, on the market, versus the Retail, I guess, in 2023, which is somewhat lower. I guess, yeah, any comment there? The third one is on the brand costs you consider to be attributable in Retail, so, but I guess that's moving below the line. How should we think about this, given that you have said in the past that this obviously is driving growth in customers, and with the could in theory, be somewhat considered part of the acquisition cost? Maybe if you can elaborate on this, that'd be helpful. Thank you. Yeah, great. Thank you. In each of those questions, the LPT, there's a long answer to this and a short answer. The long answer, I'm happy to sort of take offline and explain it. The accounting is actually quite complex, I think the things to bear in mind is firstly, Essentially, what the standard is encouraging, you to do is to move the balance sheet as the sort of gross claims run off and are paid out, you're essentially moving the balance sheet from, call it unearned, the ARC, as it's currently classified, to the AIC. That's just a balance sheet reclass, it's net nil, so you can, to some degrees, ignore it. The other point, we will start disclosing this, it's actually in the RNS, you'll see that disclosed on a prospective basis, is the standard gets you to essentially recognize as those claims run down, a net nil P&L impact. You have a gross up of your reinsurance recoveries on one side of the P&L that benefits claims, and then in another part of the P&L, you have a gross up on earned premium, on reinsurance earned premium. The latter point, the reinsurance earned premium, is where you get quite a bit of distortion, because obviously, you can see from the presentation, that a number of the KPIs have earned premium as a denominator. That impact is net nil. Really, all you're seeing is, and what we've done for all of our KPIs, and what we'll give you the information, is. We'll show it on a net basis, and we'll provide you and show you the adjustments that we've made. It is distorting. I think it's an unfortunate by-product of the construct of the accounting standard. The only other aspect where you will see for the existing LPTs, in terms of a P&L impact, is if there is a gross deterioration. Obviously, the LPT is doing its work and recognizing the protection that affords, and will, on the one hand, recognize the additional recovery, but on the balance sheet, the recovery actually goes through as a credit on earned reinsurance earned premium. Again, you, the standard in that aspect, if you think about the impact, what's happening is your gross claims are deteriorating. We are recognizing the recovery, but the credit goes through earned premium, which is, I personally, I think, very counterintuitive, but it's just something that we will disclose to enable you to understand the moving parts of that. That was the first question. The second point about the confidence level, 78%, I think that's just a reiteration of what I've said before. You can see, you know, the reserves are robust. You've got to bear in mind this is, you know, a translation from what we had previously. In essence, you can see, you know, the way that that point estimate might move around within that range, depending on the composition and underlying volatility of reserves. It's, it's outlined on page 20, as an indication of travel. Clearly, you've got to look at the overall group portfolio and not just look at, and extrapolate from any one driver. You've got to look at the reserves as a whole. Excuse me. Then on the third component about brand. Yeah, I mean, it's a really good point. Essentially, what you have is the standard IFRS 17 drives you to define attributable costs, where you have costs that are associated with writing or generating insurance contracts. It is specific in that brand is non-attributable. Albeit what you would understand and what we have said is, in order to drive growth in the Retail business, in particular, and capture that opportunity that exists within Retail, we will continue to invest in marketing. We did so in 2022, and we will increase that in 2023, 10%-20%. That component will break down. That marketing strategy consists of both, you know, call it paid search, you know, banner advertising, and brand, and you've got to look at it in the whole. It's just the standard that really sort of breaks it down and gets the brand component to be disaggregated and put outside of the combined ratio. Okay, that's very helpful. Thanks, Paul. Thank you. We now have a question from Nick Johnson of Numis. Your line is open. Hi, Paul. A couple of questions, please. Firstly, I think the move to presenting combined ratio on an owned share basis, I think is pretty positive because that's what's attributable to shareholders. I just wondered if you're gonna still give a 100% level data for premium income, so we can get a feel for the sort of scale of the overall franchise. Secondly, on combined ratio, I might be being thick on this, but can we calculate the combined ratio from numbers in the disclosures or does that require additional disclosures to get to the combined ratio? Thank you. Yeah, thanks, Nick. The second one, first is, you, if you just followed the strict rules of the standard, you wouldn't be able to really understand the combined ratio. That's where we're gonna provide you, and I said in the presentation, with the appropriate disclosures to enable you to calculate that thoroughly. The reinsurance commission aspect that I mentioned is a good example, whereby the standard requires you to disclose a single net number, i.e., the reinsurance premium, netting off the reinsurance commission to get you a lower number. Obviously, we will show you that greater element so you can understand the distorting effect that that has as an example. I think the other aspect in terms of the 100% own share for premium, we don't intend to disclose that prospectively, but, you know, clearly you've got an understanding of, you know, Syndicate 33 and, essentially, you know, that will show the absolute size in the sort of syndicate accounts, et cetera, of both the stamp, but obviously the premium that's written for that business. You can get a sense of the own share to a 100% level. That is the key driver of the 100% controlled premium and absolute size of the business we control. Okay, great. Thanks, Paul. Thanks a lot. Thank you. We have another question on the phone lines from Andreas van Embden of Peel Hunt. Hello, good morning. Yeah, I just had a question about actually the investment portfolio. You've always managed the investment portfolio as having a shorter duration than your liabilities. I appreciate your liability is now at 1.9 years. They're shorter than I thought they were. I think you're still managing your assets versus liabilities still on a short duration basis. I just wonder whether in the future you will try and match that duration between your investment portfolio and your liabilities to get a better matching of that interest sensitivity to your assets and liabilities. Is this just not relevant for your business model because you just want to make sure you've got a very liquid investment portfolio, so there will always be this sort of mismatch? Thank you. Yeah, that's a great question. I think it's useful to start from an ALM perspective of what gives rise to differences, and you can see it again. I think it's quite useful to see the sensitivity outlined on page eight of the difference of a 100 basis point change on investments, along with a 100 basis point change on the liabilities. The two differences are, of course, the absolute size. What's gonna drive difference from that perspective is, you know, crudely, we've got about $3.5 billion at the end of 2022 of reserves. You know, if you look at the investment and cash portfolio, drawing on your point about liquidity, you know, we've got about $ 1.3 billion of cash and about $ 5.4 billion-$5.5 billion of bonds. Obviously, the rate changes are gonna be driven on that bond portfolio. Given we hold capital in order to write business, you know, clearly the asset side of the balance sheet is greater than the liability side. I don't think from an ALM perspective, you're gonna have that matching in the first place, purely from the difference in size. I know that feels somewhat intuitive, but I think it's important to point out. The second aspect and what really gives rise to that change is the composition of the sort of bond portfolio. Helpfully, I think what you can see is, you know, if you look at the IFRS 4 basis, where there were mark-to-market changes last year because of interest rates, under IFRS 4, you only obviously saw the one subject impact. We had the mark-to-market losses going through the P& L. Helpfully, what IFRS 17 does, and one of the advantages of it, is you're now discounting the liabilities, so you do have less volatility in the P& L as a result of that. The, the second component is, as you said, duration. You know, I personally think at 1.5 years on the asset side versus 1.9, there's not, you know, there isn't a big spread, but you're absolutely right. You know, I think personally, I would like them to be closer together. We will be monitoring and evaluating the ALM. The important point to note, though, is that the yield curve's been inverted for a period of time, and therefore, sort of extending duration at the moment on the asset side, albeit modestly, doesn't make complete sense to me from a returns perspective. You know, I think, Andreas, we'll sort of look to all of those components and manage them accordingly, but I think it's also just having a sense of sort of what the yield curve is doing accordingly. What we have said, and as a reminder, is from a sort of investment strategy and an SAA perspective, there's no fundamental change. Yeah. Okay, thank you very much. In the case you would want to extend the duration of your assets in the future, that primarily would be done through the bond portfolio. Given where the forward curve sits, what would make more sense to expand your investment portfolio into sovereigns, you know, government bonds, or would you be willing to take on more spread risk on your investment portfolio? Thank you. Yeah. Again, great question. I think the obvious thing and to me is that certainly what you've seen arguably in the last two years, if not longer, is, you know, there is just sort of volatility in the macro mix and trends and, you know, left field aspects in terms of, say, wars or conflict. I think what we'd be doing is, you know, evaluating all of those on a regular basis and positioning the portfolio accordingly. I don't think you can say at this point of time, given the externalities that prevail, and that may prevail into the future, of how we'd set up the SAA. Okay. Thank you very much. Thank you. Thank you. Thank you, Andreas. We now have Faizan Lakhani of HSBC. Your line is open. Hi there. Thank you for taking my questions. The first one was On bridging IFRS 17 to sort of Bermuda SCR, and what sort of bits and pieces we should be thinking about when trying to do that. The second is on disclosure. In the past, you provided a breakdown of expenses at the full year. Will you still do that, and will you bucket that into sort of attributable and non-attributable expenses? Thank you. Yeah, thank you. Look, the second one first, on just in terms of disclosures. You'll still see, you know, the buckets of costs. That's, you know, that remains the same, how they then split down into attributable and non-attributable isn't. It's, it's an extra step that, you know, we think isn't necessary. You can see, what you will see is by segment and, in aggregate, is the difference between attributable and non-attributable. I mean, just put it in context for some, I mean, I think it was on page 19, I'm guessing, what you can see is, the amount of non-attributable costs actually isn't that significant. You know, it's something like $60 million, part of, you know, $1.6 billion. To some degree, you know, it'll be very explicit, but I've told you sort of the components of what's in there to help you. I think you can sort of infer what we'll disclose in terms of the total and elements that belong in, let's say, the non-attributable bucket. Bridging from IFRS 17 to BSCR and capital, I think in broad terms, but the way to think about it is if you start with our NAV, that's obviously discounted under IFRS 17, you then increase capital for the sub-debt, and then knock off intangibles that don't count. Those two, if you look at 2022, are broadly sort of, they net roughly off one against the other. Then you've got three drivers really for the other differences in broad terms. There's a difference in discounting. The BSCR actually has currently a higher, it's mandated, but it has a higher discount rate, and therefore, the benefit is slightly higher compared to IFRS 17. The second aspect is the risk adjustment. The risk adjustment is different for IFRS 17 versus the BSCR, again, I think the BSCR is slightly lower, so you'll see a pickup there on the risk adjustment. Then, the final component is capital really is sort of worked out on a written basis versus an earned and unearned, and essentially the profit that's embedded in the balance sheet from an unearned basis effectively gets recognized for capital purposes for the BSCR. That would be the sort of third big driver of the differences between the two. Right. In terms of trying to model the flow of capital, would it make sense to sort of take the new form of written premium, apply sort of a combined ratio to that, and then assume that to sort of net income, plus sort of other income expenses? Would that be the right way to do it? Not really. exclude iffy and everything. Well, no, so you can get from the NAV to the capital bridge, as I've mentioned, that's one aspect. Yeah. The other thing to mention, just on a prospective basis, though, is, you know, I said that capital is very much on a, on a written basis. You take into account your, for your available capital, your call it your expected profitability. Your loss ratios, et cetera, are not a bad basis. Not take into account changes in risk adjustment, not take into account changes in discount rate, but then the other component from a required capital is what's happening in terms of our exposures, and that's also on a written basis. What you've written and have exposure for the policy period forms part of your considerations around underwriting risk and therefore required capital, and that latter aspect is obviously harder to model because it's, you know, it's not sitting within financial results, et cetera. That's the theory, yeah. The business plan. Yeah. Okay. Okay, I'll have to think about that. Thank you very much. Thank you. Okay. I can confirm- Sorry, carry on. I misheard that. Sorry, I can confirm we have no further questions, so I'd like to hand it back to yourself for any final remarks. Great! Well, thank you all for dialing in, and I hope you found that helpful, and thank you for your very thought-provoking questions. I apologize once more for the fire alarm that went off in the middle of the Q&A, but overall, thanks very much for your attention today. Thank you.