Conduit Holdings Limited (CRE) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to the Conduit Holdings Limited Investor Presentation. [Operator Instructions] Before we begin, we'd like to submit the following poll, and I'm sure the company will be most grateful for your participation. I'd now like to hand over to the team from Conduit Holdings. Good afternoon to all.

Good day, everyone. Welcome to Conduit's Full Year 2025 Results Presentation. We appreciate your time today as we discuss our performance for the year. Joining me on the call are Neil Eckert, Chief Executive Officer; Elaine Whelan, Chief Financial Officer. Please note our disclaimer language on Slide 2. I will now turn the call over to our CEO, Neil Eckert.

Thanks, Brett. Welcome to our presentation. As Brett mentioned, I'm joined by Elaine Whelan, our CFO. Today's presentation will cover our business performance for 2025 and our view of the market and January renewals. I will also provide an update on some key actions we have taken during the year. Elaine will provide some additional detail on our financial and investment highlights for the year before closing remarks and time for questions. We have had some significant changes within the executive team over the last 12 months that have brought additional depth and expertise to the organization. Although he is not with us on the call, I'm excited that Stephen Postlewhite officially joined Conduit as Chief Underwriting Officer in late January. Stephen brings a strong CUO background to Conduit and is quickly getting immersed into the business. I have no doubt that he will make an ongoing impact. William Randolph joined as Chief Risk Officer last July. William has settled in well and has made some noticeable improvements to our risk functions already. We've also welcomed new talent in other key functions such as underwriting, modeling, actuarial and claims. We are now up to 68 employees here in Bermuda, and we will continue to hire and invest in the business as we see fit. I would also like to mention some recent changes at Board level. The Board recently concluded its recruitment process to identify a new Chair, and I'm delighted that Nicholas Shott has agreed to take on the role. Nicholas joined the Board in November with a strong background in financial services and advisory roles and is well suited for the role of Chair. I look forward to partnering with him as we continue to move Conduit forward in the execution of our strategy. I would also like to thank Elizabeth Murphy, who will retire from the Board ahead of the 2026 AGM as part of our normal Board succession planning. Elizabeth was a Founding Director and has provided valuable guidance and insight as Audit Committee Chair during her tenure. 2025 was a difficult and transitional year for Conduit that ended with a double-digit ROE after a challenging start to the year. Our portfolio continued to grow with gross premiums written increasing nearly 7% year-on-year to $1.24 billion. We found select opportunities to grow our business as markets softened over the course of the year. Catastrophe activity and risk loss frequency remained elevated in 2025 with approximately $127 billion of insured catastrophe losses according to AM. Our undiscounted combined ratio in 2025 was 101.5%, reflecting our larger exposure to the California wildfires during the first half of the year and a benign second half with no U.S. landfalling hurricanes. We enjoyed excellent investment performance, which delivered a 6.7% return for the year, contributing $119.5 million of income. Our managed investments continued to grow by approximately $380 million over the last 12 months and reached $2.2 billion as of the year-end with a 4.2% book yield, the portfolio is producing strong recurring income. All in all, we produced $116.8 million of comprehensive income for an ROE of 11.1%. This result is below our mid-teens cross-cycle target and our initial expectations for the year, but is a reasonable return after generating a loss during the first half of 2025. Compared to the prior year, our net tangible assets per share increased 11.9%, including dividends, reaching $7.14 or GBP 5.30 per share. We returned $59.4 million to shareholders through dividends and repurchased 2.7 million shares for $12.5 million through our authorized share buyback program, which has continued into the new year, for which authorization expires at the May AGM, where we will seek renewed authorization. Our balance sheet remains strong and our estimated BSCR of 252% at 31st December leaves us well capitalized. Turning to our underwriting results for the year. We continue to grow our top line at a steady pace during 2025. Our growth was driven by a strong increase in Casualty of 23%. Throughout the year, Casualty rates remained firm, and we deployed our capacity where we saw the best opportunities. Property grew a modest 2% and Specialty was down 4% as market competition increased over the course of the year in both of these segments. Our balance between Property, Casualty and Specialty has shifted slightly, reflecting the strong Casualty growth during 2025, which is now almost 1/3 of the portfolio. Overall, risk-adjusted rates reduced by 3% for the year, reflecting a 5% rate decline in both Property and Specialty segments, while Casualty pricing was more firm and increased by 1%. Industry capacity continues to build with both traditional and alternative capital generating strong retained profits over the last 3 years despite elevated loss activity. This additional capacity is being used to pursue growth strategies and driving more competition in the market. Our 2025 undiscounted combined ratio of 101.5% compares to 97.1% in the prior year. Our result was heavily impacted by the January California wildfires, which added 15.3% to the ratio. We have taken steps to remedy this in the future, which I will touch on in a few minutes. Property gross premiums written increased by $14 million to $659.4 million for 2025, representing a 2% growth over the prior year. After several years of strong growth and rate increases, growth has slowed as price softening over the course of the year. Capacity continues to build driven largely by retained earnings for both traditional reinsurers and alternative capital looking to expand their business. This led to a 5% reduction in risk-adjusted rates on our renewal portfolio. Pricing has come off peak levels but remains adequate in our view. We will approach the market with discipline as we look to gradually rebalance the portfolio. Our undiscounted combined ratio for the Property segment was 97.1%, an increase from 90.2% in the prior year. The higher combined ratio primarily reflects our net exposure to the California wildfires and to a lesser extent, U.S. convective storms. The Atlantic hurricane season was notably active, producing 3 Category 5 storms. However, none made landfall in the United States, contributing to a strong underwriting performance in the second half of the year. During the year, Angus Hampton was promoted to Head of Casualty. He and the team had a strong year engaging with clients and finding growth opportunities. Casualty gross premiums written increased $73.4 million to $392.3 million for 2025, representing a 23% growth over the prior year. Our growth has been focused on the areas of the casualty market that are experiencing stronger pricing, such as U.S. general third-party liability. We have deepened our support for partners that are taking a disciplined approach to managing the cycle. We also wrote some new business that complemented our existing portfolio. Across this segment, rates have generally remained stable after inflation, and our risk-adjusted rate change was up 1% during 2025. Pricing varies broadly across different casualty classes, and we are carefully watching the areas of the market that could show signs of improvement. Capacity for Casualty business is generally stable. The industry continues to face challenges relating to prior year reserve development, which has helped maintain more stable pricing and terms and conditions. Our undiscounted combined ratio for 2025 was 99.3%. In Casualty, we have maintained our consistent approach to reserving, which we regard as appropriate given its long-tail nature. The growth in our Casualty book has also contributed to our strong cash flow and growing investment portfolio as we hold reserves against this business. This has positively impacted our investment leverage and ROE contribution from the portfolio. Specialty gross premiums written decreased $7.1 million to $191.3 million, representing a 4% decline over the prior year. Our contraction in gross premiums written in Specialty reflects our disciplined approach to more competitive conditions driven by overcapacity in the market. The market has shown growing appetite for Specialty business over the last year due to the margin potential and the noncorrelating nature of the risks, and this has attracted new entrants. We have come off business where prices have softened or commissions have increased meaningfully. Across our Specialty business, risk-adjusted rate change was minus 5% during 2025. Specialty is made up of many different classes with different price dynamics. However, softening has become more broad over the course of the year. There are a few classes where pricing has remained firm, such as aviation and some multiline accounts. And we will look to deploy our capacity in areas which demonstrate the best margin. Our undiscounted combined ratio for 2025 was 100.3% and increased from 95.8% in the prior year. The Specialty segment was impacted by a greater frequency of risk losses in 2025, including aviation events. A small proportion of the California wildfire also sits within the specialty book. Our team had another successful January renewal season. We worked hard in the lead up to renewals, in essence, beginning at Monte Carlo in September, spending significant time with clients and brokers to clearly communicate our appetite and make sure we receive a strong flow of business. Our reception in the market was stronger than it has been, and we saw a significant number of attractive new and renewal opportunities for our portfolio. As expected, pricing was more competitive at the January renewals with overall renewal pricing down 5% across our portfolio. Property and Specialty risk-adjusted rates were down 7%, while Casualty was down 1%. We have seen increased capacity in the market from traditional and alternative capital, particularly for Property risks and Specialty risks reflected in these figures. We have previously communicated our appetite to grow the balance of excessive loss within the Property portfolio. We have started to write more excessive loss business and our treaty count has increased in this area. We have also found select new quota share opportunities with attractive pricing that we added to the portfolio. Our overall balance of excess of loss and quota share has not changed meaningfully as this is an ongoing process that will take time. Casualty conditions remain more stable. Primary rate increases in U.S. general third-party liability are starting to decelerate but continue to benefit from price corrections. In Casualty, our team is working to identify new partners and opportunities to diversify the portfolio. At the January renewals, we wrote several new treaties and also increased our line size with select clients. Terms and conditions have generally remained stable for the U.S. accounts, while international business has displayed more competition. Our casualty business is and will remain largely quota share, which is how cedants approach the Casualty market. In Specialty, we saw an increase in new business, including excess of loss opportunities. We have remained highly selective if rates continue to soften at 1/1. Capacity remains strong, and we continue to see new entrants in the market, which has impacted signings. We participated on several new Specialty placements, including a couple of new aviation deals where pricing has been more stable. As we said previously, we expect the rebalancing of our portfolio to take several renewal seasons, and we are pleased with the new excess loss opportunities that we've added to the portfolio. The market is dynamic, and we are deploying our capacity based on the strongest opportunities we see rather than strictly following preset targets. As the market develops, we will adjust our appetite to find areas producing the best margin. Another critical piece of Conduit's transition has been our increased focus on reducing earnings volatility and better management of our net exposures. In 2025, we increased the size of our exposure management team. The team works hand-in-hand with underwriting and risk to monitor and manage our portfolio exposures against preset tolerances for a variety of perils and regions at different return periods. With our results, we are disclosing new PML zones at the 100- and 250-year return periods. Our refined approach provides a more conservative and transparent view of exposures as they capture broader geographic zones. We believe this gives investors a more complete view of risk, particularly for extreme events. You will notice that we have experienced a year-over-year reduction in PMLs across almost all peak zone perils at both the 100- and the 250-year return periods. This primarily reflects our expanded retrocession coverage and increased limit that we purchased in January 2026. Our retrocession program also provides improved protection from secondary perils, which includes cover for wildfire, convective storm, floods and freezes. The California wildfires in 2025 highlighted the need for us to have more comprehensive coverage for these types of events. In 2025, we purchased additional retrocession cover following the wildfires to specifically address coverage for secondary perils. Our retro spend has increased for 2026 with this increased protection, but we believe that we have a program that will reduce earnings volatility and better protect our balance sheet from extreme events. As an example of this, if we apply our 2026 retro program to our gross loss for California wildfires, we believe our net loss will be reduced by at least 50%. I will now hand the call over to Elaine to go through our financial and investment performance.

Thanks, Neil. The California wildfires in January of 2025 gave the industry a bumpy start to the year and Conduit in particular, felt the effects of that event and experienced a larger loss than we would have liked for that type of event. The rest of the year was, however, relatively quiet for us from a loss perspective. Our investment portfolio performed well, and we also had a benefit from tax credits from recent legislation passed in Bermuda, our sole location of operations. All in, we produced a reasonable ROE of 11.1% in a challenging year. We recorded $1.24 billion of gross premiums written for the year compared to $1.16 billion for the prior year, almost a 7% year-on-year increase. Our reinsurance revenue, which broadly speaking, is IFRS 4 gross premiums earned less ceding commissions was $897.1 million for the year compared to $813.7 million for the prior year, a 10.2% increase year-on-year, reflecting our continued but moderating growth strategy. As you will see in our segment note of financial statements, we reclass some business this year between our 3 divisions. After those reclasses, all 3 divisions still show growth in reinsurance revenue with Property and Casualty showing growth in gross premiums written and Specialty slightly down on the prior year. Overall, the growth year-on-year reflects our view on the markets. Heading into 2026, we do expect growth to moderate further as the market softens, although pricing remains broadly adequate, and there are plenty of opportunities to pick our way through. Ceded reinsurance expenses, which you can see in our RNS and essentially our ceded premiums earned, excluding reinstatement premiums, were $119.1 million compared with $93.7 million for the prior year. Our average cover has increased year-on-year as the average book has grown in addition to price increases at the January 1, 2025 renewals, plus additional cover purchased during the year to address secondary peril exposures. That ceded reinsurance expense brings our net reinsurance revenue to $778 million for 2025 versus $720 million for the prior year, 8.1% year-on-year growth. On the loss side, 2025 was another active year in terms of industry losses, but with a different makeup of those losses than in 2024. Where 2024 losses resulted from a broad mix of events, 2025 was very much characterized by the January California wildfires. Our undiscounted net loss after reinsurance and reinstatement premiums for that event was $119.1 million, a 15.3% impact on our undiscounted loss and combined ratios. For the prior year across Hurricane Helene and Milton, we had a net impact after reinstatement premiums of $68 million, which had a 9.4% impact on our undiscounted loss and combined ratios. Our net undiscounted loss ratio for the year was 89.9% versus 84.4% for the prior year, the difference being driven by the larger impact of the California wildfires this year versus the numerous smaller events in 2024. Our net discounted loss ratio was 77.5% versus 73.3% for the prior year. You can see a higher impact from discounting on the 2025 ratio as compared to the 2024 ratio, driven primarily by the higher loss ratio. Just a reminder here that we made a policy decision to use opening rates to discount our nonspecific incurred losses with date of loss for material specific events. Our combined reinsurance operating expense and other operating expense ratios were 11.6% versus 12.7% in the prior year. In the fourth quarter of 2025, the Bermuda government passed legislation introducing tax credits for companies that have a substantial presence and investment in Bermuda. Conduit benefited from this new legislation, and we recorded credits of $6.9 million in our income statement, offsetting reinsurance and other operating expenses. Adjusting for the tax credits recorded this year, the ratio would be 12.5%, broadly in line with the prior year. Our combined ratio on a discounted basis was 89.1% versus 86% for the prior year and on an undiscounted basis was 101.5% versus 97.1%. Our net reinsurance finance expense for the year was $77.2 million versus $30.8 million in the prior year. Our interest accretion was $61.1 million compared to $37.6 million in the prior year, and the impact of changes in discount rates was an expense of $16.1 million, which is a benefit of $6.8 million in the prior year. You can see these numbers in our RNS and our financial statements. The accretion has increased in line with expectations as a relatively new company with growing reserve balances. We also had higher incurred losses in 2025, so more discount from those to unwind during the year also. The remeasurement to current discount rates reflects the changes in yields. Our net investment return was 6.7% for the year versus 4% in the prior year. I'll come on to investments in a bit more detail in a moment on the next slide. But just to wrap up on this one, our comprehensive income for the year was $116.8 million or an ROE of 11.1% versus the prior year of $125.6 million and 12.7%. So here's the investment bit. Book yield is now at 4.2% compared to 4.1% at the end of 2024, so reasonably consistent. As our asset base and investment leverage grows, the portfolio earns more income. Investment income is $80.7 million compared to $65 million in the prior year. With the reduction in yields in the year, we booked a net unrealized gain of $39.2 million versus $1 million in the prior year. As noted on the previous slide, our investment return for the year was 6.7%. Otherwise around the portfolio, we continue to notch duration up a little but remain relatively short, and our focus continues to be on maintaining a high-quality, highly liquid portfolio. Duration is currently 2.8 years versus 2.7 years on our net reserves. Average credit quality is AA, and you can see the usual pie chart here with our asset allocation. This slide demonstrates what I just mentioned. You can see that as the business continues to grow and we remain highly cash generative, our invested assets also continue to grow. As our portfolio has become higher yielding over time, we produce more income. And as our investment leverage increases over time, that contributes more to our ROE. I'll now hand back to Neil for additional comments.

Thanks, Elaine. To close out, I wanted to quickly reflect on some of the key achievements over Conduit's first 5 years. From a standing start, Conduit is now writing more than $1.2 billion of premium annually with a diverse portfolio of Property, Casualty and Specialty risks. We focus on classes that we know well and where we understand the risks. We have established strong client and broker relationships and have become a trusted market. Our portfolio is supported by a large renewing book and a strong flow of new business that we carefully select from. As market conditions change in any given line, we can shift capacity to areas where we see stronger pricing conditions. As we have deployed capacity, our growth has resulted in increased operating leverage for the business. Our gross premium leverage is 1.1x our shareholders' equity and our managed investments are up to 2x our shareholders' equity. We have paid a steady dividend since inception, providing an attractive yield on our shares. Dividend payments through 31st December '25 have totaled over $267 million or nearly $300 million with the final dividend declared today. That will be paid in April. In addition, we initiated a buyback program during 2025. We expect to continue to provide attractive capital returns to our shareholders through dividends and buybacks going forward as market conditions and capital requirements warrant. Lastly, we have strengthened the team as we move beyond that start-up phase. Our business has grown and now requires different skills and expertise. Our team has increased to 68 staff here in Bermuda, and we will continue to grow and invest as needed to move our business forward. We have generated profits in each of the last 3 years, not at the level we think we can achieve. But all in, we believe that our business is now well positioned to deliver attractive returns for shareholders through dividends, repurchases and growth in net tangible assets per share. In closing, we are pleased with the progress we have made post the California wildfires. We have maintained our presence on select lines that we regard as price adequate, whilst we have also exited some treaties that no longer meet our pricing requirements. Our return on equity of 11.1% was slightly better than it could have been given the size of our exposure to the California wildfires at the beginning of the year. The benign hurricane season led to solid underwriting results in the second half of the year, which was supported by strong investment returns. During the year, we have taken steps to improve the execution of our strategy, and we believe this leaves us well positioned for 2026 and beyond. We have strengthened our leadership and underwriting teams by attracting new talent to the organization. These individuals bring additional expertise and fresh perspectives that will improve the resilience of our business. As the market softens, we remain committed to finding profitable opportunities. We are happy to walk away from business that does not meet our requirements and have demonstrated this during the January renewals. Having said that, conditions are dynamic, and we have also found select opportunities for growth in new business. We are committed to reducing volatility as we gradually rebalance our portfolio and maintain a more comprehensive retrocession program. We believe that we are well protected from severe peak and secondary perils based on our modeling. Our balance sheet remains strong, and we are returning excess capital to shareholders through dividends and share repurchases, which will continue to be a focus as we prioritize capital efficiency and prudence. Thank you, and we are now ready to take your questions.

That's great. Neil, Elaine, thank you very much indeed for updating investors. [Operator Instructions] I'd just like to remind you a recording of this presentation, along with a copy of the slides will be available to you shortly after the meeting has ended. Neil, Elaine, thank you once again. There's been a number of questions from investors. Thank you to everybody for your engagement this afternoon. Perhaps I can start off with the first one here. Are softer conditions actually creating opportunities for disciplined players like Conduit?

The principal area that we would benefit from slightly softer conditions will be in the purchase of our own reinsurance. And that enables us to manage our net position in these types of markets. So that does create some opportunity. We'd obviously prefer markets to be hard, it's [indiscernible] expanding capacity in that market. I think I'll leave that answer there.

That's great. Let me just turn to the question. How should we think about capital allocation priorities over the next, say, 12 to 18 months?

So where we see profitable business, we would allocate capital towards that and we have seen at year-end. But the other issue with capital allocation is to use capital where it's responsible for share repurchase and share buyback and specific [indiscernible] we have continued appetite and we are ready in the market buying our stock. So there was a slide at the half year on capital strategy, I'd refer people to the presentation on the website. But either allocation for the most profitable business or using the capital where the surplus capital is to buy in our own shares.

Great. let me just take another question, if I may. Use of AI in bifurcation trials, bad faith claims, liability and damages separation. I don't know if you can take that question there, Neil.

Well, we sort of -- yes, I understand the question. It's where a trial is bifurcated into 2 to try and keep things simpler. I mean AI litigation is fairly new. But the first stage of the trial [indiscernible] then they have a separate trial to establish the potential liability. We have been looking carefully at AI as it relates to Casualty. I don't want to break down here, but we are not technology specialists. We don't specifically need [indiscernible]. The other thing we've seen with technology moving is some very big data center coverages from a physical damage perspective, there's huge limits being required in the market that could create business opportunity. The risks themselves are complex, and we will look at them very carefully before we participate. So there's a mixture of potential risks we need to be aware of, such as AI litigation and also opportunities such as the insurance of the new physical infrastructure that's required.

Great. Thank you very much indeed. Question from Richard. Richard asks, what area of the portfolios are you most excited about?

Well, it's more excitement as it relates to balancing the portfolio, increasing exposures in some territories where we regard ourselves as underweight. We still see more than adequate pricing. [indiscernible] The account that is from a rate perspective probably nevertheless is Casualty. In terms of using the word exciting, it's more a cautious approach to taking risk. So excitement is [indiscernible]. But there's still good opportunity. We like certain parts of the Specialty account. We obviously like our Property portfolio. We only write business that we consider to be rate adequate. So those are the areas, Casualty is where we posted the strongest growth. That also is a big driver of the investment income. One of the areas that once again if excitement in the right way, but I do think our investment performance in 2025 was outstanding. And our gross assets under management are growing all the time. We started after the IPO of $1 billion. We're now well past $2 billion of AUM. So that starts to create a bedrock of recurring revenue for each year that we're in [indiscernible].

Thank you very much indeed, Neil. A question here from Andrew. Andrew asks, the company trades at a discount to its NAV. This contrasts with the situation elsewhere, Beazley, for example, has commanded a substantial premium to NAV. Could you let us have your thoughts as to this discount valuation?

Yes. So the Beazley scenario is -- I mean, Beazley is one of the leading specialty markets in London. It was subject to a takeover bid by Zurich. I've seen takeover bids in the previous cycle that got up to 2.4x valuation such as [indiscernible] when it got taken out. We -- our share is traded at a heavy discount after the Los Angeles fire, and we've had a year of substantial change. The share price was actually about GBP 2.75 earlier in the year. This year has been about stabilizing, sorting out the reinsurance to move forward. Discount has [ flaws ]. I think we just need to establish and get the stabilization and start printing results. The result today, ironically, probably ahead of analyst forecast. So there is evidence of stabilization. We're obviously aware of the discount and that's one of the [indiscernible] being in the market buying our own shares.

Question here from Bruno. As rates softened with fewer opportunities to achieve adequate RoTE, are you more likely to increase shareholder distribution via dividends and share buybacks?

So we do -- I think that that's the same theme as previous questions. We are in the market. Every time we trade, every day, we have the RNS. So investors see the shares that we're purchasing. And so long as the capital models allow us, and we did publish our capital strategy, we will use that capital to purchase stock. And that's the answer, yes. And we are clear -- I was clear in my quote and in the presentation that we are buying our shares and are doing so on a daily basis right now.

Could you let us have your thoughts on where we are in the insurance cycle? Do you think rates are now stable? Or will they decline over the next year or 2? And how much do you expect?

So part of that is what's going on right now and the other half of the question is crystal ball gazing. I mean the rating environment is a function of available market capital. And since 2022, the market has -- market balance sheet overall has increased substantially. That is creating appetite for risk. Returns were above the normal rate of returns in the insurance space across '23, '24 and rates have been declining since the end of '24. We saw a 7% decline in Property and Specialty, Casualty is holding up. We would expect that trend to continue. I can't predict how far that goes. But there is discipline in [indiscernible]. At the moment, we see the market rate adequate pricing is at about 22 levels. It's above where it was when we IPO-ed. So that's where we see things. But at the moment, the trend is more softening.

A question from Graham. Thank you very much, Graham, for your question. Your results today are above market expectations and the overall market is strongly up today. Why do you think your share price has fallen by 5%?

Yes. I mean it's frustrating. We did post ahead of expectation. Other companies in the sector have also declined. So the insurance sector, not just in London, also in the U.S., Bermuda is off today. Maybe that reflects outlook. But I mean, I keep a close eye on the trading activity in our market's been elevated volumes today. Yes, I agree with the observation that we came in above forecast. It's not just us, it's across the sector. We have fallen more than other companies in the sector. But that's where we are. That's the stock market.

Thank you, Neil. I know we've touched on the discount, but just a follow-up question. As the shares are trading at a 30-ish percent discount to NAV, which management actions are you implementing to narrow the discount?

So that is a variation on the theme of the previous question. And the one thing we will do, as a management team, one is how you manage risk, we would have an appetite to buy in our shares in preference to writing business. So those are the management actions. It's capital discipline.

And then I guess a final question from Robert. How would you differentiate your businesses from the competitors?

So Conduit is a pure-play single location reinsurance company. And most of the purposes in the reinsurance market are in some cases, global. We took Swiss [indiscernible] in some cases, multinational, [indiscernible] in Bermuda. London is a truly global market. So our pitch was to set up a very focused pure-play just writing property, casualty, specialty reinsurance, that is the differentiating factor. One of the differentiators is our tax rate. The multinationals will be paying corporate tax rate. Some of them are on a temporary exemption at the moment because we are single location, we have 0 tax we've actually got sort of small benefit from a -- Elaine, maybe you can comment on the payroll situation.

Sure. In December of 2025, the Bermuda government passed some new legislation around tax credit, which is really to encourage further investment in Bermuda, so to the extent that we have employees based in the [indiscernible] and that's being implemented in stages, so it's 50% this year, 75% next year and then 100% the following year. We disclosed a $6.9 million benefit in our expenses and from implementing that this year and then we expect to get a benefit from those increasing percentages [indiscernible] benefits offsets both reinsurance operating expenses and other operating expenses.

I think the other differentiating factor is the age of the company. It was a new balance sheet in 2021 we did not have exposure [indiscernible].

That's great. I think that concludes -- there are -- sorry to and check, there are no further questions, I think. So thank you once again to everybody for your engagement this afternoon. Neil and Elaine, I know investor feedback is particularly important to you both, and I'll shortly redirect investors on the call to give you their thoughts and expectations. But perhaps before doing so, Neil, I could just ask you for a couple of closing comments.

Yes. So '25 was a transition year. And I stepped in the CEO during the first half. We've significantly strengthened the management team. The first half of the year was really defined by the events in California. We subsequently purchased reinsurance to address that issue. That's true on an ongoing basis. One of the numbers that we do allude to on Slide 11 of our presentation is applying the '26 retro program, our California plan will be less than half what it actually was in '25. So there's the emphasis on risk management reinsurance purchase, which market conditions remain rate adequate. The market is softening. We acknowledge that. And we posted a decent result. We are in the middle of a share buyback program. I think that sort of defines the current activities. By the way, thank you all for your interest and for attending the presentation.

That's great, Neil, Elaine, thank you once again for updating investors. Ladies and gentlemen, please can I ask you not to close the session as we'll now redirect you so that you can provide your feedback in order that the company can better understand your views and expectations. On behalf of the management team of Conduit Holdings Limited, we'd like to thank you for attending today's presentation, and wish you all a good rest of your day. Thank you.