Aviva plc (AV) Earnings Call Transcript & Summary

What is now our third In Focus session, which we hope will give you a better insight into U.K. commercial business. In 2020, we covered our Canadian and Health & Protection businesses. And we'll continue with further deep dive later in the year to help you better understand how we are transforming our performance to drive sustainable long-term growth. I'm shortly going to hand over to Adam Winslow, who is the CEO of our U.K. General Insurance business; and sitting alongside him, Nick Major, the MD of our Commercial Lines business. Following Adam's presentation, which will last about 25 minutes, he and Nick will answer any questions you have. But before I hand over, a few brief remarks from me. As you know, our disposal program is now complete. Aviva is financially strong, and we are looking to updating on our capital return plans at our full year results in March. This means that our focus is now entirely on transforming of the performance of Aviva so that we can capitalize on the significant growth opportunities across our three markets of the U.K., Ireland and Canada, and of course, Aviva Investors. Our UKGI business is a significant contributor to the group. It has around 6 million customers and acts as an important customer acquisition engine. It makes a material contribution to group financial performance, accounting for 17% of group operating profit from our markets in the first half of 2021 and delivering an attractive Solvency II return on capital of 14% in 2020. Having UKGI as part of the group also provides a significant capital diversification benefit of GBP 800 million. The focus of today's session is, of course, commercial lines, which represents around half of our UKGI business. Over the course of Adam's presentation, you'll see that we have a strong U.K. commercial lines business that is well positioned in attractive insurance market and is already building a track record of delivering profitable growth, which show that there are significant opportunities for further sustainable growth and that we have the core capabilities and clear path to achieve this. With that, I'm going to hand over to Adam.

Thank you, Amanda. And thanks to you all for taking the time to join us today. Over the next 25 minutes, I'll provide an overview of the U.K. commercial lines market and why we think it's attractive; we'll take a closer look at our commercial business and why it occupies a leading position in the U.K. market; and finally, our strategic priorities to ensure we keep winning in this market now and in the future. There are three key messages I'd like you to take away from this presentation. Firstly, Aviva is recognized as the U.K.'s leading commercial insurer. We have a strong and robust financial track record. This is driven by the breadth of our distribution, underwriting and digital capabilities, which support strong broker sentiment in profitability, aiming to deliver a sub-94% combined operating ratio. Secondly, our U.K. commercial lines business is a key growth area for Aviva, generating important operating profit and cash growth. From 2017 to 2020, the business has delivered a double-digit underwriting profit and gross written premium CAGR. And thirdly, we have a robust strategy in place to win and drive continued profitable growth, supported by investments in both capability and technology. The business will continue to be a consistent profit contributor, targeting over GBP 200 million annual profit by 2024. And we aim to deliver 9% CAGR increase in gross written premium from 2020 to 2024. I'll go into more detail on each of these areas over the coming slides. To start things off on Slide 7, I'll talk through the U.K. commercial insurance market, broken down by the four segments, all of which Aviva compete in, and their different dynamics. In each segment, our approach is centered on the needs of our customers and distribution partners, thereby differentiating our propositions. Brokers still dominate the small and micro segment, but they are seeking to automate processes and generate efficiencies through digital solutions. Aviva are well-placed to benefit from increasing digital synergies with the mid-market sector through our market-leading Fast Trade platform. Moving on to mid-market and U.K. corporate. These segments continue to be dominated by regional, national and international brokers as clients value advice when placing insurance risks. Again, this is a strength of Aviva's with leading broker sentiment and trust scores from the broker community, demonstrating the importance we place on these relationships. We've delivered consistent profitable growth in U.K. corporate segment through considered underwriting appetite expansions, investment in our multinational capabilities network as well as selective hiring of expertise. We further leverage this expertise to grow our global corporate presence in the wholesale and specialty markets. And this market offers considerable headroom for further growth with approximately GBP 15 billion to GBP 20 billion of gross written premium within our defined underwriting appetite that we aren't currently writing. Our business is structured across two divisions. Our SME business manages the small and micro and mid-market risks while our GCS business focuses on U.K. corporates and Global Corporate & Specialty lines. Commercial lines in the U.K. is benefiting from supportive conditions for growth. We are currently seeing hard rates across many lines of business. And as the graph demonstrates, U.K. commercial insurance rates increased by 27% in the third quarter of 2021 versus the same quarter of the prior year. This tailwind supports profitable growth over the short to medium term as Aviva seeks to continue an already impressive growth trajectory. So we expect this period of significant pricing growth to slow gradually but remain attractive through 2022. The right-hand side highlights the number of trends which will continue to shape the market over the coming years and provide further opportunities for growth. I'll highlight a couple of these. Firstly, the rate of digital adoption is accelerating, especially for smaller businesses. This is driving the development of efficient broker solutions and direct-to-customer propositions. Aviva's Fast Trade platform has benefited from this trend as brokers continue to digitize. Secondly, there's increasing importance placed on strong broker relationships, underpinned by excellent service. But significant broker consolidations have created both opportunities and challenges. I'm therefore pleased this is an area where Aviva continues to see favorable sentiment that's materially ahead of our peers based on independent surveys. Now let's look at the strong strategic position of our business. You heard Amanda -- you heard earlier from Amanda on the important contribution our U.K. business brings to the wider group. But turning specifically to our U.K. commercial lines business, we've managed to deliver an impressive double-digit compound growth since 2017, which is projected to reach circa GBP 2.6 billion gross written premium in 2021. Importantly, this growth is a healthy mixture of volume, rate and high retention and delivers a profitable and low volatility combined operating ratio. We've delivered a consistent mid-90s COR through the tail of a soft market, giving us the confidence that we can deliver on our targets as rate and ongoing improvement of the portfolio earn through. This reinforces our strategy of underwriting-led profitable growth, which encourages brokers and customers not only to place but also retain their business with Aviva. This sustained performance positions Aviva as the clear U.K. industry leader. And we were delighted to be recognized by recently winning Commercial Lines Insurer of the Year by both the Insurance Times and British Insurance Awards in 2021. As one of Aviva's core businesses, leveraging mutual synergies with other parts of the group has never been more important and is something we truly focus on. Amanda mentioned the GBP 800 million of capital diversification benefit UKGI provides. This is significant and means UKGI is more capital-efficient than most of the market. You've also heard Amanda previously speak about the breadth of our businesses supports earnings. For example, when commercial lines was impacted by COVID business interruption claims, we were well supported by our personal lines and life businesses, thereby demonstrating the value of a diversified model. There are a few other examples to mention. The customer synergies are clear and supported by a powerful Aviva brand that encourages brokers and customers to place business with us. In claims, our wholly owned Solus motor repair network manages claims for both the retail and the commercial businesses, enabling us to generate scale benefits and efficient supplier relationships in the face of inflationary headwinds. The Aviva Connect platform has been a massive success since its launch in 2020, enabling both commercial lines brokers and life IFAs to access required documentation and self-serve their clients through a single digital portal. This obviously also supports efficiency within Aviva. And finally, we have an ability to leverage shared relationships. For example, through our dedicated client relationship management team, we recently won a new Health & Protection scheme with Marks & Spencer due to an existing strong commercial and personal lines GI relationship. A key priority for the Aviva Group is driving forward innovation. And the focus on the general insurance business is leading the way in this space. We recently launched a commercial property telematics proposition for brokers, which includes a suite of connected sensors to provide early warnings on commercial property perils. This supports reduced claim costs through loss prevention, improved retention and enriched underwriting data. We work closely with our global data science practice, Quantum, in the development of our mid-market Commercial Intelligence Tool. This tool automatically brings together multiple data sources, enabling quicker and more informed decision-makers so that underwriters can produce quotes in seconds rather than hours or even days. We're also leveraging the group's relationship with Founders Factory to provide access to new opportunities and technology ecosystems. And we have pilots ongoing to develop innovative solutions to some of the key issues facing the general insurance industry, such as flooding and supply chain management. An area which is critical to the future success of Aviva is sustainability. There are several examples across the commercial lines business where we're leading the way. As you will have seen in the press, combustible cladding is a real issue for many people living in the U.K. today. And I'm proud that in commercial property, we made a commitment to offer fair renewal terms for all impacted existing customers. And this was at a time when most carriers stopped writing new business in the space. But we paused to understand the evolving risk and were the first in the market to reopen our standard product to new business. To date, over 3,900 leaseholders have benefited from an affordable new business proposal, many of whom were previously uninsured. In the mobility space, where we know innovation and new technology is driving change at a rapid pace, we've partnered with Darwin Innovation Group to launch the first fully electric automated passenger vehicle on U.K. roads. And we'll use the data to help build a future model of motor insurance. We're also investing in our motor repair capability in Solus, ensuring our engineers are trained with the latest skills to meet increasing demand for electric vehicles. In addition to exiting the fossil fuel market in 2019, we focus heavily on growing our renewables portfolio. And we now insure 75 gigawatts of installed renewable energy capacity across six continents. And we're aiming to be a top 3 renewable energy insurer in the London market by the end of this year. The team and I are committed to becoming a net-zero insurer by 2040. And we're building the frameworks to track the carbon intensity of our underwritten assets. So looking at our commercial lines business, starting with the four segments I previously highlighted. We're being deliberate about where we choose to participate with much of our focus on the digital and U.K. corporate segments, where we're the #1 U.K. player, a position which has been achieved through strong capabilities and enhancing our core strengths, which are outlined at the bottom of the slide. As you'd expect, my ambition and our ambition is to be the #1 across all domestic segments we participate in. And I'll come on to our approach to achieve this. We've grown the commercial portfolio in a targeted and measured fashion. This has been delivered across all business lines with motor, property and liability split across our SME and corporate businesses and financial and specialty lines sitting within U.K. and global corporate. We've delivered a growing and balanced portfolio, but importantly, have also taken robust action to close the book where we've seen underperformance. This is including GBP 70 million of strategic exits since 2018 as our focus remains on profitable growth. That said, we've experienced rapid rate-driven growth across financial and specialty lines. And our recent growth in motor has been targeted through mini-fleets, where we've seen strong profit opportunities. I'm confident our motor book will grow further following the launch of our motor e-trade product later this year. Our commercial portfolio is optimized with a healthy mix of short-, mid- and long-tail businesses, supporting our ability to manage volatility to varied risk events. One-off weather events typically impact our asset-based short-tail lines whereas economic factors lean towards long-tail risks. We're comfortable with our tail mix, ensuring exposure isn't overweight in any one single area. While we focus on our gross underwriting, Aviva has suitable reinsurance in place to support this growth and our reinsurance program is essentially managed with our Canadian and Irish general insurance businesses. Less exposure to largest U.K. and overseas perils is significant reduced and provides sufficient cover to absorb 1:250-year risk events. Underwriting-led growth remains our focus. And we have clear separation between our trading and technical underwriting teams. This enables active challenge and independent oversight of our frontline trading decisions, specifically where we can't automate our underwriting. Now about the focus on how we operate across our business segments. We've worked hard to create customer journeys built around their specific needs and feedback. As a result, we've developed market-leading solutions, underpinned by technology and internal and external data. This allows us to efficiently service customers through our broker relationships. In the small and micro market, this is built around our digital Fast Trade extranet platform and growing range of e-trade products, which between them support over 250,000 policies. We've delivered profitable growth in this segment due to efficient digital solutions that enable low-friction broker journeys. In mid-market, our Commercial Intelligence Tool offers high levels of automation and efficiency through the use of data. Even when this doesn't allow full automation, it augments the underwriting process and enables our regional trading teams to focus on assessing complex cases and apply their expert judgment. This tool has helped our underwriters assess over 50,000 policies in the last 12 months and better understand our customers' needs to tackle underinsurance, highlight key gaps in cover and support higher retention. In the GCS space, there's a greater reliance on the technical expertise of our underwriters due to the complex and bespoke nature of risks. And we've recruited significant market talent over the last 24 months, adding 18 corporate underwriters in 2021 alone. Additionally, our workflow management system automates processes, enabling underwriters to focus on risk assessment and client engagement. Turning to SME, where we have a track record of delivering profitable growth across our small and micro and mid-market businesses. We delivered a gross written premium CAGR of 5.5% from 2017 to 2020. And plans are in place to achieve an 8% CAGR out to 2024. This will be enabled by our key strengths, including faster seamless broker journeys driving strong satisfaction scores strategy and a winning distribution strategy focused on client relationship management and supporting our key brokers. Regional brokers are critical to our SME success. And we really value these relationships, which account for around 60% of the SME portfolio. There is an opportunity to further capitalize on these relationships and the leading broker sentiment we have. And we'll accelerate regional growth through initiatives such as enhanced sales and underwriting capacity and expand the high-margin specialty lines product offering. These products can be seamlessly cross-sold by our regional trading teams via our automated Commercial Intelligence Tool. Profitably growing regionally traded business is a key focus area for commercial lines moving forward. As I mentioned before, digital solutions play a key role, and they've underpinned our succes in the small and micro segment. Aviva are a key leader in this space with over 70% of our small and micro business transacted digitally today. We have two clear strategic focus areas to increase this figure while ensuring we adapt and stay relevant as digital adoption gathers pace. Firstly, we must continue to digitize our existing business. This includes further developing our award-winning Fast Trade extranet platform and expanding our e-trading product suite. We will increasingly digitize the customer value chain to deliver a smooth and cost-effective solution for brokers that encourages them to place their business with Aviva. However, the distribution landscape is evolving with the market being increasingly disrupted by new entrants, modernizing traditional players and changing customer buying behaviors. Aviva is responding to this through the development of an agile IT technology stack that I'm convinced would enable us to efficiently distribute products via new digital partners. This will also provide the capability to deliver a new direct-to-consumer proposition, should the market present a sizeable new business opportunity in the future. This initiative will allow us to protect existing business as well as generate incremental growth. And we're targeting for over 90% of our smaller premium business to be transacted digitally by 2023. Our U.K. corporate and Global Corporate & Specialty business has also delivered a well above market growth in recent years with GBP 1.1 billion gross written premium in 2020, making it the fastest-growing business in UKGI over the period. This success is built on our underwriter-led trading model for bespoke and complex risks, supported by strong broker relationships and leading technical capability. It's important to note, this growth is being delivered through a combination of targeted underwriting expansions, increased rate, underlying new business growth and strong retention, which was 89% in 2020, supported by our client relationship management model. There's a clear opportunity to accelerate this business organically. And we'll invest in technical expertise to meet broker demand and optimize underwriting processes through an improved use of data whilst maintaining top-quartile efficiency. I believe gaining access to a greater share of in-appetite business by broadening our distribution capabilities is also a key lever for growth in this segment. So I've touched on some of our core strengths. And now I'd like to focus on the areas that we believe drive a competitive advantage and are critical to our commercial business remaining the U.K. market leader. Our distribution part of our relationships are a key strength and differentiator for us. It truly is one of the standout areas for Aviva commercial lines. Our separated distribution function sits outside the P&Ls, enabling end-to-end visibility across intermediaries and provides a single point of contact for each broker across all business lines. We treat our intermediary relationships as partnerships. And being the clear partner of choice is due to the value we place on the role of the broker. And they will continue to advise their clients on insurance and risk management requirements now and in the future. We've invested in these relationships, such as specialist distribution capability to suitably manage broker needs or through the Aviva Future Leader Programme, which promotes independent broker talent and supports them to become qualified. And I think the results speak for themselves. In a recent broker survey, Aviva were ranked #1 across every single sentiment metric, validating the service we provide. And this sentiment and unrivaled trust ensures Aviva are consistently presented opportunities to underwrite broker business as they know we will deliver. I've spoken at length about growth. However, our expense management over the same period is equally impressive. We've played a key part in the overall group expense reduction program and believe commercial lines is more efficient than our local market competition. The top graph on this slide demonstrates the benefits of increasing scale in 2020 as our newly recruited underwriters have generated improved gross written premium per FTE. This growth has been supported by an increase in digitization and automation across the business to simplify and streamline processes where we can. This enables underwriters to focus on complex risks and reduces manual tasks. Our digital business is already a market-leading and low-cost operation and will naturally improve expense efficiency as we continue to grow and scale this channel. We've also reduced FTE through the consolidation of our regional underwriting centers, focusing on where we can generate the most business whilst maintaining broker sentiment. Expense management will remain a key focus for our business, driving structural efficiency and low-cost growth. And our near-term ambition is to deliver a sub-12% net expense ratio, which we believe is market-leading. Clearly, one of the main roles of an insurance company is to be there for our customers when they need us most, either at the point of claim or preferably helping to mitigate risk in the first place. Our commercial lines claims team supported claims costs of GBP 1.3 billion in 2020 during what was a difficult period for everyone. This team provides highly skilled in-house capability and focuses on delivering superior indemnity management and great customer outcomes. We use data and technology to directly manage claims costs, which in turn supports our continuing fight against fraud. For example, we recently implemented a new screening fraud tool to assist in the validation and quantification of claims. And for bodily injury claims, we use automation technology to scan medical reports and remove human error in the evaluation process. During COVID, we were able to flex our claims capacity to respond to increasing instances of big demand. For example, in the face of major storms, when we received almost a year's worth of claims in a single month, we were able to maintain the claim service we're proud of, supporting our brokers and customers in their time of need. Turning to risk management and prevention. We have an award-winning Risk Management Solutions team of 120 consultants providing technical support and guidance across all business lines. Our offering ranges from digital self-serve functionality for smaller businesses through to customized client support for more complex risks. And this has enabled the team to handle around 40,000 engagements and review over GBP 1 trillion worth of assets in 2021 alone. And this capability not only helps our clients better manage and understand their risks, a service which they genuinely value, but also generates primary insight for Aviva to enhance and improve underwriting risk selection. Central to the performance of our commercial lines business is a comprehensive suite of controls and processes to ensure that growth is controlled and profitable. We have a clearly defined underwriting strategy by segment, product and geography. And we monitor our portfolio against this appetite. Underwriting strategies are overlaid with a robust governance and oversight process, which has multiple levels of challenge and review. We also continue to review the performance of the portfolio to ensure any emerging claims trends are captured within our pricing models. And one example of active performance management is through our tiering strategy, whereby we've differentiated rate increase and retention targets, depending upon the current pricing, performance, industry segment and risk factors of our renewing book. While we've invested heavily in bringing in underwriting capability across the business, we've also invested in developing our exposure management systems and have dedicated wordings, pricing and business intelligence teams in place. Our focus, as I said earlier, is primarily on our gross underwriting, but we also use our scale to buy cost-effective reinsurance cover and manage net exposures. This reinsurance provides adequate protection as we look to further scale our commercial lines business. As part of the UKGI business, we have a collective GBP 150 million net retention for a U.K. cat weather event, which brings significant capital benefits. Additionally, our exposure to an overseas cat event is capped at GBP 25 million. In both instances, we buy sufficient reinsurance to adequately cover a 1:250-year risk event. So before I leave you with some key takeaways, I'd like to recap our targets to deliver profitable growth and further transform the performance of our U.K. commercial business. As you've seen, the underlying results of the business have been strong over the last few years. And we expect 2022 to continue that trend. We'll leverage the hard market over the short to medium term whilst continuing to invest in our digital underwriting and distribution capabilities for longer-term profitable growth. We're targeting over GBP 200 million of IFRS operating profit at a sub-94% COR by 2024. And I'd like to reiterate that this is a strong proxy for cash generation for the GI business. Our ambition is to establish Aviva as the clear U.K. market leader across all commercial line segments we participate in. So in summary, our UKGI business is a key contributor to the group, consistently providing cash, operating profit and gross written premium growth while also supporting mutual synergies. Within that, our commercial lines business is the U.K. leader with strong underwriting capability and a track record of delivering profitable growth. I outlined why we believe this is an attractive market with clear opportunities. And we have robust plans to capitalize on these, including continuing to scale our efficient digital business; delivering against the strong reputation we hold in the regions to boost mid-market growth; and organically growing the corporate segment through our underwriting-led trading model. This is all underpinned by our unrivaled strength in domestic distribution and the fantastic relationships we have with our brokers. So thank you for listening. And I think it's a good time to open up for Q&A. So back to you, please, Amanda.

Thanks, Adam. So now we're going to move on to Q&A. This is the technical bit. And I'll explain quickly how we're going to work this. [Operator Instructions] The last thing I want to say before we open up is obviously today, the event is about our U.K. commercial business, so if you can try and focus your questions on this business as much as possible, please, and we'll try and get through as many questions in the time that we have. So with that, our first question, I think, comes from Farooq. So Farooq, can you -- we'll open the line for you. Can we have your question, please?

Sorry, I just unmuted, apologies for that. In terms of your top line growth ambition, could you explain your underlying pricing assumptions and what you see, particularly in property, in terms of pricing trends in the next kind of year and what you're seeing from the ground?

Okay. Thanks, Farooq. Nick, perhaps that's something for you.

Sure. So with regards to -- regarding top line growth, as you've seen, it's a good mix right the way across the portfolio in terms of the growth that we've achieved to date. And that will continue going forward. In terms of sort of pricing, I'm not going to give specific details around rate plans. But I think it's fair to say we're in a hard market environment for most lines of business. We expect 2022 to see a softening of the rate environment. But still, it will still be a very, very attractive rate environment for acquiring new business and also for renewing our existing portfolio. To come on to your specific point around property, I think it's fair to say that the wider property market, particularly the international property market, has been challenged in '22 due to a number of nat cat events. So I think that will continue to provide solid rate pressure regarding some of the loss activity that we've seen in that segment.

Thanks, Nick. Thanks, Farooq. Maybe with the next question will come from Barrie Cornes.

Can you hear me?

Yes, we can.

I've got three. First of all, over the years, Aviva has blown hot and cold over large U.K. and multinational corporates, particularly in the London market. So the question really is what makes you think you've got it right this time? Secondly, on Slide 15, you show the mix between short-, medium- and long-tail risks. And if I'm trying to get a feel for the size of the liability book within U.K. commercial, could you give me a percentage split perhaps on that? And the last question is in terms of the broker consolidation that you've mentioned, is this putting downward pressure on the rating environment, either the rates or terms and conditions? And on the flip side, is it increasing pressure on your terms of business?

Thanks, Barrie. Adam, maybe you can take question three first. And Nick, then we'll come to you to do questions one and two.

Thank you for the question, Barrie. We do think broker consolidation will remain a trend certainly for the foreseeable future. As you've heard me say during the presentation, actually Aviva are very well placed with regard to our broker sentiment and the way we work with our brokers. Is that leading to a downward pressure on rates? No, I don't think we see that. I think, as Nick has just said, we see a very positive rating environment. And we have an underwriting-led trading model. So no, I don't think broker consolidation is, at the moment, presenting us any challenges to our business.

And on the terms of business, Adam.

And on the wider terms of business, I think, look, we have a very commercial relationship with all of our brokers. We trade effectively with them. Terms of business do differ by the size, scale and shape of brokers. But I'm pleased with the position we're in.

Thank you. Nick?

Sure. I think -- so the large U.K. corporate market and its attractiveness and why we think we can do it well, I think in 2016, we started to invest, particularly in our GCS business. It has been underwriter-led. It has been very cautious in terms of appetite expansions. As Adam has alluded to, we have a continuous re-underwriting approach all the way across the portfolio but particularly within GCS. We've seen a number of portfolio rationalizations in terms of exiting business that we don't feel is sustainable. We have a very cautious approach when it comes to our approach to weather perils. And also, for example, in the lines of business that we choose to write, with regards to North American exposure, we don't write in the U.S. -- long-tail U.S. casualty risk. So it's very controlled, it's very cautious and it's led by, I think, market-leading expertise in terms of the talent that we've recruited into this business with a very, very, very tight framework, as we've alluded to, of checks and balances and control to make sure we're executing those very clearly defined, documented strategies. And also, we've built significant broker relationships and improve the breadth of those relationships in the marketplace as well. And I think it's been mutually beneficial. We've come in at a time when capacity in certain areas have been strained. So we've been able to grow profitably in our chosen segments. I think the final question around short-, medium- and long-tail risks in the casualty proportion, I think you can see on Slide 15, we're saying it's about 20%. And in that 20% of long tail, you've got EL, you've got professional indemnity, a bit of FI, latent defects and legal indemnities. I'm not going to give a further split than that. Just to say, I think it's a very, very well-balanced portfolio between short- and long-tail risks. And you'd expect us within that long tail to have an element of EL in respect to disease. But again, we've got no major concerns over that split.

Okay. Thanks, Barrie. And Larissa, if you can unmute -- or we'll unmute you, your question next, please.

I have three as well, please. The first one on -- is on your commercial lines. What is your outlook for premium pricing strength in line of inflation, growing CPI? The second one, still sticking to the small and medium segment, are you expecting any regulatory influence in the same manner that we saw in personal lines? And then the last one on your expense ratio, you did say that you wanted to be 12%, currently 13% and that you expect digital scale benefits to be core to reaching that target. What else needs to be done to reach that? And would that require a capital commitment?

Thanks, Larissa. So maybe, Nick, if you could pick up question one. And Adam, if you could pick up two and three.

Sure. So the outlook for sort of premiums and rate with regards to inflation, so our expectation in '22 is that we will continue to see positive rate, certainly in the U.K. mid-market and in the global corporate segment that will comfortably exceed the inflation predictions that we've got built into plan. So I think that rating environment is sustainable.

And on the second question on regulation, look, I think with things like consumer duty coming down the track, I think we do see an increase in regulatory pressures. But actually, I think they are more probably heavily focused on the intermediary side of this business. Bear in mind, the bulk of this business is intermediated. And consequently, when it comes to sort of customer outcomes, the role of a broker there is clearly the primary factor from a regulatory perspective. And on your third question on the expense ratio and sort of scale benefits to digital, look, when you say capital commitment, are we continuing to invest in digitizing and simplifying and automating our business? Yes is the answer to that. We don't disclose a precise number. But we are making investments, partially because we see the whole market wanting to digitize in the smaller end in the way we've described. And so clearly, that's a very cost-efficient business for us to play in. And then in terms of developing a new digital next-generation solutions for the wider insurtech and fintech ecosystem, we are making investments in our digital next-generation platform. All of those, as we continue to scale the size of the business, will generate enhanced expense efficiencies.

Thanks, Adam. Thanks for those questions, Larissa. Maybe next, we can move on to Greig Paterson, please. Greig, we'll just unmute you.

Can you hear me?

We can.

And in that regard, let me ask two questions. One is I'm trying to understand what you think the drivers are for continued rate hardening in 2022, what are the key industry and what you think the rate situation will be in 2023. And second of all, it's a more sort of high-level question. You are facing in SME sort of segment, a whole bunch of fintech digital players. And in the sort of more higher commercial lines, larger-ticket commercial lines, all the commentary that you were making, if I listen to one of your competitors about how they would improve, they're making the same noises. So I'm trying to understand what the sort of magic gold dust is that you guys have. What is unique about Aviva that allows you to, a, get -- take advantage of the rate but also gain share? And what is the key -- three key differentiating factors that others aren't doing in commercial lines?

Thanks, Greig. So maybe, Nick, if you could pick up what's driving the continuing rate hardening for 2022 and then your view on '23. And Adam can pick up the SME question.

Yes. So I think there are a number of factors that will feed into this. So we've already touched on more broadly claims inflation, particularly kind of the U.K. SME environment. I think there's also still some performance concerns. We touched on that earlier on when I commented on property, particularly international property, but I mean, if you think about U.K. flood events that we had in July this year as well. So there's a couple of factors there. What's going to maintain a positive rate outlook? I think there is still a lot of discipline in terms of the deployment of capacity. There is no shortage of capacity outside of very select areas, such as cyber and perhaps some large towers on some D&O or potentially PI risks. So I think the market is maintaining that discipline. There are pockets of underperformance, some of it driven by cat perils. You've got general trends around inflation. So I think there's enough -- there's good mix of reasons that different segments of the market are going to maintain a positive outlook in '22. When you get into '23, I think we're assuming that, that will soften back to sort of a longer-term inflationary levels. But there will still be certain segments that will be challenged. I mean, take cyber at the moment, we know that large corporate is experiencing rate increases of over 100%. And you see that coming through. And it skews some of the overall figures that we showed you before in the Marsh index, which is again skewed towards the large corporates and would have a chunk of cyber and big D&O policies in there.

Okay. Thanks, Nick. Adam?

Thanks for the question, Greig. On the SME front, appreciate the point you're making. I think there are a few advantages Aviva has. I think the first is a macro one. I think our brand is better-known and people are more aware of it. I think you see that in some of the presentations Amanda gives in terms of brand awareness and sentiment more generally. I point to our broker relationships that I previously talked about as being a differentiator. And then I'd point to our data science capability, the Quantum team, the fact that we have a number of effectively proprietary data sources across that diversified model I've talked about that I think does give us an opportunity to underwrite SMEs potentially more effectively than some of our competitors. And the fact that we have both the personal lines and the commercial lines business means that a lot of the digitization trends we see are actually a pickup of a trend that's been in personal lines for probably a decade, if not longer. So I think it's that combination of factors that actually does allow us to potentially compete more effectively in this space than others might be able to.

Thanks, Adam, and thanks for the questions there, Greig. Next is Oliver Steel, please. Oliver, if you can just unmute your line?

So two questions. The first is just coming back to Larissa's question about the investment you're making into this particular business. Is that included within your expense ratio target? Or should we see any element of that as exceptional expenses? And actually linked to that, can you confirm that the progression from whatever it was, 13% to sub-12% expense ratio is a sort of straight line rather than any sort of particular lump of investment in the near term? And then the second question is on cyber. What's your attitude to cyber as you expand into the London market? And do you have a sense of -- well, can you give us a net exposure figure for any cyber losses as well?

Okay. Thanks, Oliver. Nick, maybe if you could start with cyber. And then Adam, you can pick up the investment question.

Sure. We have a very cautious approach to cyber. Our proposition is really focused on supporting our SME customers in this space. So the limits that we have at are relatively modest. It's a segment that we think we can appropriately underwrite and understand the risk. And also, we can provide services that wrap around those customers in terms of advice, protection and support. We have kind of pushed our appetite up into sort of the mid-market space, again, very, very cautiously. We have significant reinsurance in terms of our net position with regards to cyber. I don't anticipate us moving aggressively into the large corporate cyber space anytime soon. Although, of course, the rating environment is increasingly attractive in that space. But for us, this is a very, very cautious approach driven by relatively modest limits and an area of the market that we understand supported by very significant reinsurance. So our net exposure is, I'll say, modest.

Thanks, Nick. Adam, on the investments?

So I think the easy answer to your questions is yes and yes. Yes, in that all the investments we're making are in the numbers I have shared with you. And yes, it is a linear progression rather than lumpy. There are no exceptionals and everything is in plan.

Thanks, Oliver. Okay. We're going to go to Autonomous now. We don't actually have a name. It says London [indiscernible] Autonomous. Andrew, I'm assuming that it's going to be you, but perhaps you can just let us know that.

Yes, it's me. It's Andrew Crean. And thank you for doing these series of presentations, really appreciate and are very useful. I have a number of areas I wanted to just ask about. The first one is what is your actual market share in U.K. commercial? Is it a fragmented market, where you could benefit from inorganic as well as organic growth? The second question I wanted to ask was to unpick a little bit this GBP 200 million profit target for '24. Because GBP 3.2 billion premium in '24 with less than a 94% combined actually means you'll get an underwriting profit of GBP 200 million. So where is the investment income in that target? And related to that, you're already at a 93.6% combined in the first half of '21. So if you're improving the expense ratio, are we actually talking about you deteriorating the claims ratio from this point out to 2024? Is that what your thinking is? Thirdly, just within that, I think U.K. has gone to reserve strengthening, which is always something of a concerning sign. And I was just wondering whether you could talk a little bit about that and this should reassure us as to why we're not about to see a large pickup in reserve strengthening kind of a bit like Canada a few years ago. And finally, a detailed question. I know that Michael Gove is trying to invade all the building industry and I think talking about invading the insurance industry into paying for the replacement of cladding. Is that a thing -- an issue you've had discussions with the government about? And is it something which the insurance industry may need to pick up some of the bill for?

Okay. Thanks, Andrew. I think I've got five questions there. But I'll just make -- would just make sure that we go through them all. So maybe we can pick up, first off, the market share point, Adam, on U.K. commercial and then we'll just go through them one at a time.

Thanks, Andrew. It's actually quite difficult to get to specific data here because everyone thinks about the market slightly differently. For example, how people describe the mid-market versus the corporate market does vary by firm. Based on our data analysis, we show we've got a sort of a low single-digit share of each of those separate parts of the market. And we're looking to grow that share progressively over time in the way I've described.

Okay. Thank you. Did you say low single digits there, Adam? Yes, thank you.

Sorry, low double digits.

I was going to say you did say single digits. I did want to correct you, but I...

Sorry, apologies. I'm glad you called me up on that. So a low double-digit share. Apologies for that, let's get that right.

There is a bit of a difference.

There is a big difference. You're right. So yes, a low double-digit share that will rise in single-digit percentage terms over time. So we are looking to grow, as I said, both the small and micro, mid-market and U.K. corporate, GCS side of the market.

And Adam, did you also want to pick up the investment income point on the GBP 200 million profit by 2024?

Yes. I mean, look, we are an underwriting-led business. That's where we expect most of our profit to come from as opposed to sort of long-term investment income. We are obviously looking at how we optimize our LTIR at the same time. But I'm very happy to guide you towards that the vast majority of our profits will come from our underwriting.

Thanks, Adam. And Nick, maybe you could pick up the deterioration on the claims -- or if there is a deterioration on claims ratio and the reserve strengthening.

So I think the indication we gave at half year of 93.6%, I mean, obviously in H2, we would have seen some impacts from weather events. But I think that the outlook for sub-94%, I think, is consistent with our underwriting appetite and strategy that we've set out. It isn't just driven by expense. Clearly, there's an element of expense improvement 1, 1.5 points as we've alluded to. We are also targeting, obviously, an improvement in claims ratio. So how much we can put out of the rate environment and the improvement of claims ratio, claims indemnity, et cetera, potentially might deliver some further improvement on that target that you've talked about.

Okay. Thank you. And Adam, do you want to pick up the last two points on cladding and reserve strength?

Yes. So on the reserves, you're right, Andrew, we did see some very, very small strengthening at the beginning of the first half of last year. We know exactly what that was. That was COVID-related. I would guide you towards the fact that there's nothing in the second half that I would want to flag. And there are no systemic issues that I would want to flag. So from my perspective and our perspective, our reserves are entirely adequate as things stand. And on the cladding issue, actually, I think the insurance industry wasn't drawn into effectively the remediation debate, if you will, in the same way that the buildings industry was. And so whilst I absolutely believe the insurance industry has a role to play in the way I described earlier, then no, from a remediation perspective, we aren't in scope.

Could I just follow up on one side? Apologies. If you're already at 94%, you've got 1, 1.5 points of expense savings and you further believe that you're going to get further benefits on the claims side, why aren't you shooting for 94%?

Maybe I can take that. So we're not going to set target in today's session, Andrew. And obviously, we are -- well, we sort of said we would like to be below 94%. I think Nick pointed out the fact that the market -- that we will not get as much rate through the market as we go on. The market is competitive. We've got inflation that needs to be built in as well. And I think we're just trying to manage everybody's expectations that we believe that a below 94% combined operating ratio would be a good -- that would be a good outcome. We'd also like to see some growth in some of the areas. So I think we're just sort of trying to manage expectations. Okay. Thanks. Next, maybe Steven Haywood, please.

I've got three questions as well. It's a quite impressive target to more than triple your underwriting -- your average underwriting results from around the GBP 50 million level that you've achieved for the last few years. Can you describe what's different this time? Or what was the problem in the past as to why you couldn't achieve those levels? Secondly, your 2021 premiums were up about 15%. What amount of this was from rate changes? And what amount of this was from a number of policy increases? And then thirdly, obviously, the average U.K. commercial rate increases were higher in 2021. You've got a chart showing that it was well over 20%. Does this mean that you are losing market share because the average rate increases are higher than yours? Or is there something -- some nuances going on underlying this?

Okay. Thanks, Steven. Nick, could you pick up the last two points there around the difference between rate and new business and the average rate increases? Then Adam, I'll come to you for the first one.

Yes. I think the rate increases shown in the slide deck, particularly 27%, as I said, that's actually a Marsh index, that's not our data. So we are clearly below that at a portfolio level from 2021, running at about 10% across the business and about 14% within GCS. We're very nicely aligned to the data points on there when it comes to the property and casualty rate strength that you've seen in the market. So I think we are performing and tracking in line with what we've seen in the wider market in terms of our rate gain.

And for 2021, just between rate and new business.

Yes, sure. It's about 55% rate, 45% volume in terms of '21. I think as we move into '22, we expect to see that switch, and we expect to see greater new business volumes obviously as the rate environment starts to soften from its current levels.

Okay. Thank you. Adam?

Now look, in of our underwriting results and sort of history versus where we are, I think focusing on where we're going to deliver our projected growth, you heard me talk about the underwriting talent, particularly in GCS and mid-market. And I think leveraging that underwriting talent to grow our book and then see the rating environment earn through, those will be two areas where we'd expect to see a positive return in our underwriting results. The expense base efficiency I talked about, particularly with an eye on digitization, is another area that will obviously benefit our underwriting results as well. And using things like our Commercial Intelligence Tool to identify underinsurance, drive better customer outcomes and potentially cross-sell some of the sort of specialty lines, GCS classes, into the mid-net-worth book. I think a combination of all of those things is where we will see profitable growth coming from. And all of those things have required investment. And I think probably historically, it's in the recent past, we have invested and seen the benefits of that investment come through in our commercial lines business.

Thank you, Dom. Sorry, thank you, Steven. Now we're on to Dom. Heads up there, Dom. We're going to just take you off mute, please, any questions from you.

Thank you so much for this presentation, really helpful in getting under the skin of the business. I've got lots of questions, but let me stick to three. The first is one of the interesting things that you highlight is the strength of your relationship with your brokers. From the outside, one might look at a broker channel and think, "Well, the reason customers use brokers is to get a good price and good terms from whichever insurer"...

We've lost you.

Offers the best terms. I just -- sorry, I've a call which cut me out. It would be hopeful if you could give us some examples of how you translate that strong relationship with brokers into commercial benefits for yourselves. What are the points in that relationship which actually create new business or create profit? The second question is on the target, so 7% growth in gross premium, which is very ambitious. And I was just curious whether you have the same target for net written premium. Clearly, reinsurance pricing is going up, but net is what drives the profit and the capital generation and so on. And then a third question, I guess, related to that, Adam, you said that the operating profit is a good guide to cash generation. Now I would have guessed that actually the high level of growth would consume quite a lot of the capital. And so that, in turn, would have some impact on your ability to remit. So let's say you're growing the risk in the business by 7% a year, if your ROE is 14%, that will be consuming about half of the -- just funding the growth would consume half of the profit. So are there other factors to think about when thinking about the remittance capacity that means that actually your sort of payout ratio, as it were, is more like 100%?

Okay. Thanks, Dom. So maybe, Adam, I think if you can start with the strength of the broker relationships. And then Nick, if you can pick up the GWP growth and then back to Adam.

Well, thanks for the question, Dom. It's not an easy one to specifically answer because I think it does vary a little bit by the size and scale of the broker and the part of the market. So an example to try and bring to life the question you've asked would be things like sharing risk appetite with the brokers. So as we've moved into different parts of the market, particularly some of the specialty lines, we may have worked with a certain broker for a number of years. But actually, because we know them so well, then spending time with them to understand and explain our risk appetite, make sure they know our underwriters and understand what risks they should be showing to us, I think, is one element of sort of efficiency in the relationship. In the mid-market SME businesses, the vast majority of that is regionally traded business. And I think one of the huge advantages we have there is our regional underwriting center spread, as you will have seen on the slides, across really the whole of the U.K. footprint. And it's those local regional relationships with the broker and, more often or not, with the client that actually creates then the opportunity to succeed.

GWP versus NWP, so NWP will track in line with GWP. I mean, we're a gross line underwriter. We take -- we look at the gross exposures. Obviously, we have a reinsurance and a fronting component within that. So it will track in line but slightly below.

And then Adam, on the cash generation?

Yes, look, we aren't a very capital-intensive business in the way most general insurers aren't. And I think the benefits of the diversification that we've talked about in the presentation do help us in that respect. I think it might be easier to discuss this more during our full year results, in our upcoming full year results, where there's probably more detail we can share at that point with you.

Okay. I would just add one other thing to the point around why we can -- why we do so well. I mean, as having been a competitor of Aviva for so many years and sort of looked in envy as to the strength of the relationships, things like the team do a brilliant job with the Future Leader Programme, where they take a succession in brokers' offices around the U.K. and they train these ladies and gentlemen for their new CEO roles or new leading roles in the brokers' offices. I think the loyalty that, that brings is absolutely huge. And you can't put a [indiscernible] on it or you can't put a percentage of business written on it. But I do think that it does mean that there's a huge loyalty and a real appreciation of supporting those regional brokers as they go through the growth. So I just thought I would add that because I think it's just -- it's a very soft point, but it's a really important point. Thank you. Will Hardcastle, please, if you can just unmute?

I guess, firstly, on inflation, can you help us to understand how you're managing the inflation rate beyond just pricing, perhaps on claims management, procurement? And what reinsurance protection you have in place to mitigate the risk on longer-tail lines specifically? Secondly, you've given some color there on cyber earlier. One data point that might be helpful is what would a clash reinsurance cover limit the exposure to, to any one event perhaps? And finally, you've broken down the tail risk between short, medium and long. I guess, is it fair if we put some numbers to that, thinking about average tail for our investment assumptions would be somewhere between maybe 4 to 5 years? Is that a fair assumption?

Okay. Thanks very much. Adam, will you pick up the claims inflation point? And then Nick, you can pick up the side around the tail risk, please?

Thanks for the question, Will. Look, we're watching claims inflation very carefully. It's an industry issue rather than an Aviva-specific issue. We're looking at it. We're using the data in the data science practice I've talked about to understand it first. We're obviously moving across into our pricing models. And I do think we have some additional levers like the fact we own a motor repair network in the form of Solus that allows us effectively to mitigate, if you will, some of the inflationary headwinds you've been asking about.

Nick?

Yes. In terms of cyber and potential clash events, so clearly, we've got element of what's called silent cyber, which can sit within some core policies of the new portfolio, which actually we've been underwriting out actively for the last couple of years. And as I said, we've also got very specific reinsurance on our affirmative side of products. But I think it's fair to say for -- on an RDS, Realistic Disaster Scenario, our retention would be in line with what our numbers we've given for cat events. And man-made cat would be the same as that on perils.

Okay. Thank you. On the tail risk?

So this was just a question again, I think, about reinsurance?

It was the average length of the tail risk.

Very difficult to give a detailed answer on that. It's going to depend by individual line of business, I'm afraid. So I don't think it's something we could give a proper answer to here now.

Okay, thank you. Thanks for the question there, Will. Next up, Ashik.

Can you hear me?

Yes, we can.

Just one question I have is around the GCS market. So I mean, GCS is a space where a lot of other large companies have got things wrong, largely because people have written specialty and liability lies. So can you give a bit more color on what your plan is around GCS? Is it mainly -- I'm talking about international GCS rather than just U.K. domestic GCS. Are you planning to do specialty liability? Or is your focus mainly on the tax side? And what sort of combined ratio are you expecting? Because going back to Andrew's question, if you're trying to flag a flattish combined ratio between now and 3 years out, is it largely driven by your targeted growth in the GCS space? Because GCS most likely should be a higher combined ratio business. Or is it like your growth is mainly diversified? So just trying to get a bit more sense around the GCS line.

Nick will be able to give you the types of business that we write and what the focus areas are and what the sort of expected COR. Nick?

Yes. So you're right, look, the COR has been slightly higher than the SME business. In terms of our appetite in GCS, again it's a very balanced across a number of lines of business and segments. I said we've got a very, very detailed underwriting strategies. There are some areas we don't play in. And we've actually said we've exited the fossil fuel market. When it comes to North America, we really only write first-party risk to that sort of property, construction, marine cargo, renewables. We don't do any long-tail third-party U.S. classes. We have a very limited appetite to geographic risks in Latin America, for example. So I think it's a very tightly controlled, conservative approach. There are certain areas in the wider market we've chosen not to enter, areas like aviation, marine hull, trade credit and political risk. We've been really clear and controlled in terms of where we want to play. And also, we've chosen to rationalize that portfolio as we've been growing, putting significant exits in certain areas where we've seen underperformance both from a pricing or a loss perspective. So you're going to see a conservative approach to growth in areas that we understand and in geographies that we understand.

And just one follow up on that, like would you say that the average reinsurance program in GCS would be a higher -- a lot higher compared to your SME book? Or would you say there's not much difference?

There is not a huge -- we intend the core products made to property and casualty we buy the benefit from the purchases across GI as a whole. For our sort of specialty lines, so construction, marine cargo, renewables, we have again a pretty modest net retention position, which we would expect to continue. And the same for our financial and professional lines area, which we've obviously been growing very rapidly but again with pretty conservative net. So in terms of are we aligned with the wider market, I would say we're in the mix, but absolutely in the mix in terms of what our competitors would be retaining and what their reinsurance structures would look like. We're not the most aggressive, we're not the most cautious.

Thank you. Thanks, Ashik. Next up is Blair, please. I think you might still on mute.

Just a couple left for me. Just maybe coming back to the question that Andrew asked earlier, you're targeting 9% premium growth, which is quite impressive and 1 point improvement in the combined ratio. But I think the profit growth is only expected to be about 8%. So are you anticipating lower investment yields or any change to the reinsurance strategy that's linked to profit growth is lagging somewhat? And secondly, just on the 9% target, I was slightly nervous when a company has growth -- has top line growth targets in P&C. But I'll give you the benefit of the doubt. Just on that 9%, how much of that is coming from the London market venture that you just started. And finally, just going back to the point that Ashik just made about the GCS market, there's a lot of big players out there, truly global P&C players have struggled in that market. So what do you think gives Aviva the right to win in that market?

Okay. Thanks, Blair. I mean, Adam, would you pick up the first two questions, then we'll come back to Nick on the GCS market?

Thanks, Blair. Look, no material changes in our reinsurance, being as Nick described, I think we believe our program is absolutely the right structure to enable us to grow in a controlled way and manage our net retentions. I think from an LTIR perspective, again I'm not going to front-run sort of 2021 numbers here, but certainly, there are investment return -- returns rather on our investment book. And we are obviously looking to continue to optimize, if you will, the risk and reward balance of our asset allocation strategy. I think in terms of the second question, which was...

The London market venture.

London market venture versus mid-market. I'd actually guide you towards -- and we're not providing a split between where our growth is coming from. But there is more mid-market SME growth in the plan than there is London market growth in the plan. So if that's helpful to sort of calibrate, if you will, your own analysis, that's what I'd guide you towards. And I think that probably helpfully segues into the GCS question and our [ right to win ].

Yes. I mean, it's driven very much by the appetite that we've defined. So we are not trying to do everything for every quarter here. I think some of the global players have come unstuck trying to do that. For example, when we're writing and targeting multinational, we have a non-owned network to be able to service those. But we're very, very clear in terms of what our appetite is. It's going for not the major, major globals that are very bespoke service globally, it's the next tier down, where we can have much more of a standardized approach and model. And actually, it's a segment, in my experience, which has been far more profitable than the true major globals. And then when it comes to appetite, it's about discipline and being really clear what you're prepared to write and where you're prepared to write it. And I think, as I said, we have documented strategies for every line of business, also driven by geography. And we review that in terms of how we're growing and where we're growing. And it is very tightly controlled, linked to the reality that this is not just a top line game, this is all about delivering underwriting profit. That's how we're all incentivized. And that will underpin our growth agenda, which includes, as I said, significant exits, where we see profitability challenges or underperformance across the GCS portfolio. So our approach, think of us as a multi-niche player rather than doing everything for every one player.

Is it possible -- just to come back on the first question, could you square the circle between the 9% top line improving margins and only 8% bottom line? Does that just mean there's fat in your bottom line targets -- or slack, sorry?

So as Amanda said, we're not providing an updated COR view during the course of this presentation. We're guiding you towards a sub-94% COR. And again, I think that's a question we'll be happy to revisit in the full year numbers.

Blair, I think there probably will be more information in the full year on that. So I mean, obviously, today was more of just an update on the business itself. And we'll talk more about targets and how that all fits together. And yes, you don't have that long to wait, so only 5 or 6 weeks.

Yes. Sorry, I'm just looking at the targets that you have given today on Slide 26, your combined ratio is going from 95% to below 94%. You've got a 9% top line target and an 8% bottom line target. I just -- I think I'm missing something, but happy to come back to in a few weeks.

Yes. Okay. We'll also potentially come back with some more information. And the team will come back with you to explain that. And I'm looking at Rupert, he'll give you a call. Okay. And then the final question today is from Alan Devlin, please.

Just a couple of questions for me. First of all, you've talked about aggressively re-underwriting -- willing to re-underwrite your book, and that's on certain lines of business. Is there anything material that you're currently thinking about for 2022 that we should bear in mind? And then secondly, I'm not sure you answered on Greig's question on the potential for inorganic growth in this business. Is this an area you could see you invest potentially to drive inorganic growth as well as the organic growth? And then finally, just what is the -- obviously, you write more GCS business, it's a more kind of volatile business. What is the appetite at the group level, particularly as you're now a smaller business overall to kind of increase those more volatile lines? And I know you do write a lot of reinsurance as well to protect yourself. But what's the kind of group appetite to grow that business and increase the potential volatility of that business?

Okay. Thanks, Alan. So Nick, if you pick up the first question, Adam, pick up the second question and I'll pick up the last question.

Yes. So the re-underwriting approach to our portfolio, what's kind of coming in '22, just to break it out in two aspects. We've got the tiering, which effectively is driving incremental improvement in our existing renewable portfolio. And then we've got -- are there any specific exits? I don't want to get drawn into too much detail. But I would say that there are certain areas in the wider market where there is still ongoing underperformance linked despite significant rates. We are looking at our PI, professional indemnity portfolio. There will be an element of rebalancing within that portfolio, relatively modest in the context of the size of that portfolio. And I wouldn't say there were no other specific areas where you're going to see wholesale exits or changes. This is more around tweaking than it is any fundamental change.

And then your second question about inorganic growth, I mean, all the plans we shared today are based on organic growth. Does that mean that we wouldn't look at sort of bolt-on opportunities, where we could acquire skills, capabilities, size, scale or share? We would absolutely consider those in the proper way as and when they present themselves.

And then the final point around the group appetite, so I mean, I think, first of all, to say, Alan, just to reiterate, and what we're talking about here is selective areas of growth in areas where we know we have expertise and where we believe that there is an opportunity. The growth isn't all new business-driven. It's a combination of rate and new business, as Nick has outlined. And very, very importantly, that it's the disciplined approach. And what I've been impressed with since I've been here is whenever I ask Nick, "What is your street price versus your required technical price," he can always answer that question immediately by line of business and by individual risk even. So we always know when we're pricing against the technical -- what the technical price is and what the street price is. And we're always above 100% to make sure that we've got good scope in that. So I think that there's a real discipline. We don't -- the trading teams, as Adam stressed, are separated for the underwriting teams. So we have that sort of, if you like, friction between the two. And so from a group perspective, we're comfortable with the areas that Nick and Adam have decided to move into. We're obviously protected by reinsurance. It is a disciplined approach. It is not an all -- let's dive into everything-type approach, which I think we've seen others do and fail at. And we don't -- we definitely don't want to be part of that. And this isn't new. I think the move into GCS is not something that we are choosing to do in 2022. It's something that we've been doing, I think, carefully over the last for 4, 5 years. And I think we've seen a really disciplined approach to that. So I don't really see anything to get massively excited about. I mean, I know on these calls, there's always a lot of focus on that GCS space. But I don't think we should look over the fact that we are a significant SME and mid-market player in the U.K. And we have -- that's really where the bulk of our exposures are. And we've come through soft markets pretty well. And now the hard market is giving us some sort of rate benefit as we move forward. So the group is very happy with that. So on that, I think that is our last question. Thank you so much for that. There's certainly been a lot of questions there. Hopefully, we've been able to answer the vast majority of them. If there are some areas of clarification, then clearly you can pick that up with the team, with Tegan and with Rupert. But today, thank you to Adam and Nick, very much appreciate all the work that goes into putting that together. And we look very much forward to speaking to you on our full year results, which are on the 2nd of March. So in the meantime, everybody else, keep safe, and have a good day. Thank you.

Thank you.