Definity Financial Corporation (DFY) Earnings Call Transcript & Summary

Good morning, and welcome to all of you this morning. Today in person, and to those of you who are joining us virtually via the webcast. My name is Dennis Westfall, and I lead Definity's Investor Relations team. On behalf of the entire senior leadership team, we are very excited to have you with us today as we outline why we believe Definity's purposeful growth will lead to enhanced returns. Before we begin, I want to acknowledge that as we are presenting today from Toronto, the land in which we gather is a traditional territory of the many nations, including the Mississaugas of the Credit, the Anishinaabe, the Chippewa, the Haudenosaunee, and the Wendat Peoples, and is now home to many diverse First Nations, Inuit, and Métis Peoples. We also acknowledge that Toronto is covered by Treaty 13 signed with Mississaugas of the Credit and that Williams Treaties is signed with multiple Mississaugas and Chippewa bands. I refer you to the advisory regarding forward-looking statements on Slide 2. And disclaimer on supplementary financial measures and non-GAAP financial measures and ratios on Slide 3. Today's presentation materials will be available on the Investor Day page of our Investor Relations website. Slide 4 illustrates the plan for today. Our first speaker will be Rowan Saunders, President and CEO, who'll provide insight into our strategy and the main areas of focus for the business. Following Rowan, Paul MacDonald will discuss how we intend to profitably scale in both broker and direct channels. Fabian Richenberger will then outline how we intend to continue driving profitable growth across our commercial insurance business. Craig Richardson will provide details on our claims business and its ongoing transformation. And finally, our CFO, Phil Mather, will outline our approach to capital deployment, including organic levers to enhance operating ROE and M&A readiness. We'll pause for 1 of our 2 Q&A sessions when Fabi concludes with commercial insurance. We'll then take about a 15-minute break prior to Craig joining us to cover claims. A second Q&A session is scheduled for the end of the morning. Additional members of the executive leadership team are here and available during the Q&A session. With that, I'll now turn the floor over to Rowan.

Well, good morning, and welcome to our inaugural Investor Day session. We appreciate your attendance, both in the room with us today and those of you online from around the world joining us today. We firmly believe that Definity has tremendous potential and an exciting future ahead of us. After making much progress over the past few years, we're delighted to share some time with you today. We'd like to update you on our strategy, performance and the capabilities that we've built as well, as where we see Definity evolving to over the next couple of years. We're certainly very proud of what we've built to date, yet even more confident and excited for the next phase of our journey, where we get bigger and continue delivering for our customers and create material value for our shareholders. But before we get into the presentation, there are a few introductions that I'd like to make. First, our Chairman, John Bowey, who was instrumental in me joining Definity almost 8 years ago, and has been a tremendous visionary and chair, is here today. We are fortunate to have a seasoned and experienced Board of Directors who have overseen the organization through some unique and interesting times as we progress through the mutualization and our IPO. So please do introduce yourselves to John, as he is available to our shareholders. And John, if I could ask you to stand for just a moment so people know who you are. Appreciate it. Thanks very much, John. One of the most important focus areas when I joined was on developing our executive bench strength and attracting top talent from across the industry. My executive leadership team are here today, and you will hear from a few of them on stage shortly. Others are going to participate in the Q&A sessions. And I would encourage you to engage with them all over the breaks. You'll find a team that's been assembled with deep track records and experience to lead a P&C insurer from commercial and personal insurance business acumen to experience in building talent, high engagement and a strong culture to innovative technology deployments and to sophisticated risk investments and financial management. Additionally, we've got deep bench strengths right throughout the organization. When looking at the top 100 leaders at Definity, approximately 70% have joined over the past 5 years. They have on average 20 years of P&C experience and are seasoned operators with diverse experiences. We're so fortunate to have been able to attract this top financial services talent, and 1 reason has been the desire to join a team that is truly doing something special and building a Canadian insurance leader. I joined this company in November 2016 because I was really excited about the opportunity to transform 1 of Canada's oldest mutual insurance companies into a high-performing, innovative and forward-thinking company. It's been an incredible journey for the company to get to this point, being the first Canadian P&C insurer to demutualize a landmark IPO and consistently robust performance as a public company. We're now the sixth largest player in Canada, and importantly, #3 in the broker channel. We have a team numbering over 3,500 people strong with excellent engagement and a further 1,000 people in our broker platform. Our proven advanced data analytics capabilities have helped enable us to be a leading underwriter. While our outsized investments in innovative digital platforms help differentiate Definity from other markets. We're a multichannel business, which provides us with strategic flexibility. And from a standing start, we now also have a top 10 Canadian broker business. We've not only grown the business materially, but are now more diversified, as I'll touch on in just a moment. As we've grown the revenues from $2.5 billion to over $4 billion, we have been very deliberate in where and how we built the business. We are focused on competing where we have competitive advantages and see attractive markets and segments. Definity has generated top line growth of about 10% annually. That's approximately twice the long-term industry average, and has climbed up the industry rankings from #8 to #6. Growth in premium is driven by strong performance across all of our lines of business. We have thoughtfully constructed our portfolios, and the business mix has shifted over time in favor of property and commercial lines, away from rate-regulated personal auto, and that's to support higher returns. In addition, geographic mix has continued to diversify outside of Ontario as we expand nationally. Within each main line of business, we further focus on higher-margin products and segments. This has then translated into better quality and higher earnings. The stability in earnings has improved, helped by the exit of volatile lines and growth of more high-margin earnings in commercial insurance. The greater contribution from net investment income and the relatively recent income from distribution improves the earnings sustainability. As you can see from the pie chart, the combination of these 2 sources of income represents more than half of our operating income in the past 12 months. Definity has demonstrated a track record with substantial increases in operating profit since the pre-IPO period. This demonstrates the resilience of the business model and flows nicely to strong book value growth year-on-year. With regards to our financial targets, we believe the 3 key areas to focus on that will drive [indiscernible] and a P&C insurer are the revenue growth, the combined ratio and the operating return on equity. These are the 3 targets we have communicated to the market and provide guidance on, and we have consistently met or exceeded. So first, our revenues. We have built a platform with growth engines to grow faster than the market. And over time, that should translate into a level in the upper single digits to approximately 10% range. So far, we're actually exceeding that target consistently. The blending of underwriting and pricing expertise with modern technology provides an ability to outperform the industry on both revenue and margins. We have the organizational resilience to effectively manage the cycle. For example, in personal auto, driving rate and not unit count through the inflationary part of the cycle, where Definity was early and proactive relative to competitors. Double-digit growth in commercial illustrates our capabilities, the breadth of our product offerings and how we optimize rate, retention and market share gains. The digital technology platforms like Vyne also assist in gaining share, helped by the ease of use and integration with broker management systems. Second, our underwriting margin. Despite growing faster than the industry, we still target a solid level of underwriting profitability, with an objective to be in the mid-90s. We're an underwriting-first company at our core, with deep expertise and a relentless focus on assessing, accepting, pricing and managing risk. As mentioned, our portfolio is constructed intentionally as we anticipate shifts in industry structure and market conditions. We used leading technology to combine sound fundamentals with exceptional customer experience. These investments made prior to the IPO are benefiting our underwriting performance. Additionally, we are disciplined capital allocators and unafraid to make bold decisions. For example, exiting the Alberta auto market for the Sonnet brand. And third, our operating return on equity. We're now positioned to sustainably generate double-digit operating ROEs. And we'll spend time today illustrating why and how we have a clear path to approach the low teens organically and mid-teens via inorganic activity. Operating net income growth has led to book value per share growth and will impact ROE until we optimize our capital structure. The recent operating return on equity reflects our current position, where we have excess capital and an unleveraged balance sheet. We expect to deploy this capital in a strategic and accretive manner. So overall, we're very pleased with the delivery of our 3 key financial targets to date. When you grow the revenue strongly and compound a healthy underwriting margin, it translates into an attractive ROE and builds the book value of the organization. When we think about our operating return on equity going forward, there's a combination of factors that we expect will enhance it over the next couple of years. To start with is the continuation of improving our mix of business and growing our core segments, including the expansion of commercial. We're also benefiting now from a stream of reoccurring income from our broker distribution platform that's contributive to our ROE. In addition, there are 3 other significant and controllable levers we have to pull. The first is Sonnet, which includes the path for Sonnet to breakeven by the end of this year. And then it will start being accretive to our underwriting income. As we were scaling and maturing Sonnet, there's a couple of points of drag we've incurred. And Paul is going to provide insights in his section. Although it's fair to say we're on track to our breakeven target on a run rate basis by the end of the year. The second lever, as you've seen in recent quarters, we're gaining some traction on the expense ratio. What's encouraging is when you look at the expense ratio, the year-on-year improvements this year is really all in the operating expense component. The productivity tools that we put in place are working, and there's good expense discipline throughout the business. We're now starting to get a bit of operational leverage in the business after the significant investments made, with revenues able to outpace the growth of expenses. We feel there's the opportunity for 1 or 2 points of improvement over the next couple of years, and Phil is going to provide greater color later in his section on this. Our third lever is our claims transformation. And if you step back over the last couple of years, what we did in terms of transforming Economical in the lead up to our IPO was really around the front part of the business before the claims operation. This really supported the ambition and the growth story. We're now well in flight in the claims transformation, with auto launching on Guidewire in Q2 of this year and property being targeted for the end of 2025. And we think that over time, there will be both indemnity benefits as well as claims expense efficiencies. And Craig is going to expand on this shortly. Now of course, you can't simply stack these all up to get 5 or 6 points of operating ROE improvement. We will be looking to reinvest some of this, as illustrated on the slide. But we definitely feel there is a real opportunity to get a couple of points of operating ROE expansion. We have a high degree of confidence in the ability to capture these benefits and to do so in the near term, that's over the next couple of years. And that's before we do anything inorganic, which would then allow us to deploy the excess capital, get larger and introduce leverage into the balance sheet. Moving on to delivering for our investors. This chart demonstrates the progress made since our IPO just a little less than 3 years ago. And we're pleased with the progress to date. And you can see that we have delivered on all of our commitments that we made through the IPO process. We've acted swiftly in maturing as a public company. We have deployed capital in an accretive manner to build out our national broker platform. We have worked with the federal government to transition into a CBCA company to make sure that we could compete for assets at the same level as our peers. And going forward, we see continued strength in underwriting profitability, combined with expansions in investment and distribution income, supporting an increase in the operating ROE to 10% or more in 2024, then continuing to build. The confidence in our outlook was demonstrated by the more than 16% increase in our quarterly dividend, which delivers on our objective to consistently grow our dividend over time. And while still early in our life as a public company, we've now increased the dividend by a cumulative 28% from its starting point at IPO. I'd like to thank our investors who continue to show their support for our strategy as we have continued to deliver on expectations and produce strong returns for them. We believe we are well positioned to continue delivering value to shareholders as we grow profitably and deploy our capital in a manner that enhances the earnings. So as we look ahead, this is how we see the environment. We see an operating environment that is conducive to executing our ambitions and strategies. We understand how customer preferences are evolving, the importance of technology and digitization, the war for talent and the new skills required. We've assessed the implications on the industry structure and emerging risks that need to be managed. We also believe we are well positioned for these, given the resilient business model and the investments that we've made. There are a couple of trends worth focusing in on today, and I'll highlight our approach, and then the team will go deeper on our plans. So let me start with climate change. We do expect an increasing frequency and impact of weather events. Between increasing asset values and more Nat CAT events, being an excellent underwriter is really important. We have a comprehensive strategy in place for effectively managing these risks. And this incorporates managing volatility by making investments in geographical information systems to manage risk accumulations, leveraging the most current perils modeling to redefine underwriting appetite and influence pricing models in order to adequately fund the risk, enhancing our claims CAT team's capabilities and forging strategic partners with our reinsurance partners, proactively engaging with regulators and industry bodies to help shape climate-related legislation and activities. And lastly, we're supporting customers to prevent and mitigate impact from climate change, as can be seen in our partnering with Wildfire Defense Systems. And second, digitization and technology. Customers and broker expectations are rapidly changing, and modern technology stacks are required to meet those changes, as well as increasing the level of sophistication in the core functions of underwriting and claims. It's important to know that our modern tech stack has allowed us to attract more brokers due to our user-friendly front ends, and this is a major competitive advantage for us. Digital transformation is prioritized to keep our position as an industry digital leader. Our approach balances how we prepare for the future while benefiting the organization in the short term. And in the personal insurance and commercial insurance presentations, you'll see how our technology platforms both differentiate us and enable outperformance. So as we now move on to our strategy. You'll see we've made significant progress over the past 5-plus years to build a leading multi-line, multichannel P&C insurer in Canada. We targeted top 5 position, being the digital leader, delivering strong financial performance and delivering our purpose while being a sustainability leader. We have conviction that our strategic pillars will continue to drive differentiation and strengthen our competitive position. We believe in combining sound fundamentals with exceptional experiences, and we do this by developing market-leading customer and broker centricity and multichannel experience, enhancing pricing and underwriting sophistication using AI and advanced analytics, continuing to enhance Sonnet's digital underwriting, pricing and segmentation and we drive industry-leading agility and productivity through innovation and scalable platforms. We do this by innovating across offerings to bring forward differentiated products using agile practices and technologies, for example, gen AI, allowing for speed and cost efficiencies. We also extract value from strategic partnerships, for example, our partnership with Google. We're leveraging and strengthening our presence and distribution. We really feel we've got unique assets and advantages in distribution. We have a national broker platform with ambitions to become $1.5 billion in premiums. We continue to rapidly acquire bolt-on assets that add scale. We have a digital direct platform in Sonnet that we will continue to scale. And we have an independent broker channel that as we grow our share of wallet with by continuing to build on deep relationships and provide comprehensive solutions to them. Today, you're going to hear more about our personal, commercial and claims operations. In personal insurance, we're the third largest carrier in broker distribution. Our capabilities include excellent broker and customer experience. It's delivered through an automated underwriting platform that's fully integrated into broker management systems, providing ease of use. We have the leading digital insurer in Sonnet that, as mentioned, we expect will mature to run rate breakeven by the end of the year, enabling more growth on a scalable platform ahead as customers increasingly migrate to digital preferences. Our focus on groups and affinities is having tremendous success here. In commercial insurance, we are a market of choice for our broker partners. We have built our capabilities to expand our total addressable market and focus on 3 main segments: that's the SME, Mid-market and Specialty. Our capabilities include digital platforms for SME, a comprehensive product suite, which facilitates low-touch and low-cost delivery. In Middle Market and Specialty, we enjoy deep relationships and experienced expertise to win. And we're going to continue to increase the size and the share of our commercial insurance portfolio in the years ahead. So moving on to our claims business, which is in the middle of a transformation. We've implemented best-in-class practices to manage indemnity and customer experience, yet know with the technology transformation, there are material opportunities ahead. Our national broker platform. This investment is highly strategic for Definity as we secure access to a growing and high-quality pool of business, as well as receive high-margin returns, which helps diversify and complement our earnings profile. The model and the proposition where Definity encourages brokered equity participation is very well received and enjoys a sizable pipeline. We plan to continue investing in this business with bolt-on transactions, in addition to its strong track record of organic growth. When it comes to capital deployment and M&A readiness, Phil is going to elaborate in his presentation, but I'd share that we expect to continue building our equity, as we've demonstrated with essentially doubling the equity of Definity over the past 5 years. We allocate capital thoughtfully. We have a disciplined approach to expense management, are clear on how to increase the returns ahead, and are in good shape to deploy capital inorganically. So we'll now move into the presentations from the business leaders who are going to go deeper into their business and how they see Definity evolving and performing over the next couple of years. Paul and Fabi, who lead our Personal Insurance and Commercial lines business, are well known to many of you as they participate with Phil and I on the quarterly call. I recruited both of them shortly after I joined Definity, and they have played a tremendous role in our success and the journey to date. Today's format allows them to go a little deeper into their business units and share their plans ahead. So with that, I'm going to ask Paul to come on up.

Thank you, Rowan, and good morning, everyone. I'm Paul MacDonald. And over the last 2.5 decades of specializing in P&C insurance, I've had the pleasure of working with some really great companies on some really great projects. But 7 years ago today or close to today, Rowan presented me with a truly once-in-a-lifetime challenge. Come to Economical, integrate 4 underwriting companies into 1, completely transform the operating environment of the organization, lead the digital part of our business to be world class in Canada and beyond, help the organization go through a demutualization, help the organization go through becoming a public company, help become 1 of the largest P&C insurance companies in Canada, and not least of which, develop a truly world-class team that can deliver on those ambitions. And so I'm delighted to be joining you here today to give you a bit of insight into our progress along those ambitions and give you a bit of insight into what we hope for in the future. With me today is Donna Ince, our Chief Underwriting Officer of Personal Lines. Stand up, Donna. Donna will be available to answer questions during the Q&A and at the breaks. Let's begin by setting the context for the personal insurance market in Canada, and then I'll dive deeper into each of personal auto, personal property and digital distribution, pausing along the way to provide some specific examples. As you'll see from this slide, the addressable personal insurance market is approximately $45 billion. Since 2019, it has been growing at a CAGR of approximately mid-single digits. Approximately 47% of the market is distributed through intermediary brokers licensed to sell insurance on behalf of multiple insurers. With 11% of the broker market, Definity is currently the third largest personal lines insurer. Approximately 53% of the market is distributed directly to consumers, which includes direct insurers, bank insurers and cooperatives. Definity's direct operations, including Sonnet and Petline, currently hold approximately a 1% share of the market. As a multichannel and multilines personal insurance carrier, Definity is well positioned to capture more of the addressable market share in both the broker intermediated channel and in the faster-growing direct channel. Since 2019, we have successfully diversified the portfolio both geographically and by line of business to reduce over concentration in rate-regulated lines and to support higher portfolio returns. Since the start of this decade, the personal insurance market dynamics have been both challenging and rapidly evolving. Beginning with the pandemic, insurers subsequently have had to contend with dramatic increases in inflation, unprecedented levels of auto theft, increasing regulatory intervention and escalating climate change, among other headwinds. But with a challenge also comes opportunity. By leveraging our capabilities, Definity was able to respond quickly and produce superior relative performance. For example, we invested in talent and capabilities in early 2021, led by a dedicated team focused on building collaborative working relationships with provincial regulators. Definity's growing reputation as an engaged and respectful insurer has been instrumental in achieving a 24% increase in automobile rate approvals. We recognize the escalating rate of inflation in auto physical damage in mid-2022 and responded ahead of the market with numerous rate filings to narrow the gap between loss costs and earned premium. Our focus on growing property at a faster rate than auto as a part of our diversification strategy necessitated investments in geographical information systems and enhanced peril modeling to address areas of concentration within the portfolio, which in turn, mitigated the impacts of increasing catastrophes. The foundation of Definity's personal insurance capability is our digital core operating platform, which leverages elevated levels of automation to enable superior customer and broker experience and rapid scaling of our business. Our customers consistently report satisfaction scores above 80%, and organic growth rates have sustainably outperformed the market average. These platforms also allow for rapid deployment of rate and underwriting changes in response to quickly evolving market conditions. Last year alone, we deployed 193 rate changes, a sevenfold increase over pre-pandemic levels. The depth of our technical talent is significant, with over 200 actuarial data and analytics practitioners embedded across the value chain. This is a 66% increase since 2018. We prioritize investments in analytical tools that drive portfolio performance. Advancements in predictive and technical modeling and leveraging third-party data supports better pricing and underwriting sophistication. Investment in data infrastructure is paramount. Definity has made a multiyear investment to migrate to cloud to access cutting-edge AI tools and to speed up performance. And lastly, innovation is a key strategic capability. Ongoing investments focused on AI and machine learning are driving process efficiencies and productivity. As an example, the recent deployment of gen AI models into our Sonnet Contact Center has improved overall productivity by 15%. Our digital platform gives Definity a meaningful competitive advantage with respect to customer and broker experience and scalability in support of both organic and inorganic growth. With large fixed investments and capability behind us, additional volume can be added quickly at decreasing incremental cost. Our underwriting system is fully automated, meaning customers and brokers experience a frictionless application, binding and policy delivery process, now augmented with AI-enhanced capabilities. Furthermore, additional portfolios or insurance companies can be acquired with little additional underwriting staff required. Our platform allows us to respond to ever-changing market conditions with greater speed and agility to avoid anti-selection as well as capitalize on profitable growth opportunities. The ease of doing business approach to policy transactions has been a key driver of our growth, with GWP increasing by 38% and broker transactions increasing by 34% since 2018. Although still a relatively new company, Sonnet now services almost 170,000 Canadians who prefer to place their insurance with a fully digital insurer. Taking a look at our overall Personal Insurance business, Definity's proactive portfolio management has resulted in significantly improved performance over the last 5 years while navigating through 2 distinct and disruptive cycles, producing low frequency during the pandemic and escalating inflation subsequently. Emerging out of the pandemic period, our ability to take rate and underwriting action ahead of the market resulted in us achieving a softer landing than many competitors. It is important to note that compared to the U.S. market, the Canadian market's overall personal performance was notably less volatile. Definity's organic growth has been consistently strong throughout the period from both auto and property, producing a combined 10% CAGR and a 1.3 point increase in market share. This above-market growth was achieved while diversifying the portfolio away from regulated lines, diversifying our geographic footprint, mitigating impacts of climate change and driving underlying attritional loss ratio improvements through disciplined portfolio management. Now that I've set the broader context of the Personal Insurance market and our overall Personal Insurance business, let's dive a little deeper, starting with Personal Auto. Despite unprecedented industry challenges and the ongoing drag from Sonnet's developing path to profitability, Definity has actively managed its consolidated automobile portfolio to produce favorable results throughout the cycle. While the pandemic period produced better-than-average auto loss ratio performance due to a significant drop in frequencies in 2020 and '21, it also produced a flattening of GWP resulting from mandatory temporary rate reductions and decreased purchasing of automobiles. Post pandemic, the compounding impacts of rapid inflation, increasing frequency, rising theft and the delayed earning pattern of the prior period's rate reductions resulted in elevated cores specifically in automobile physical damage. More recently, the double-digit rate required to address these trends has started earning through the portfolio and is beginning to exceed the rate of inflation, suggesting a more favorable outlook for the physical damage component of this line of business. The exception remains Alberta, where political intervention has capped rates below the rate of inflation, thus leading to downward pressure on automobile margins. As Sonnet was still on its path to profitability when Alberta's rates were capped, we saw no opportunity to breakeven on Sonnet's Alberta auto portfolio in the near term and thus elected to strategically withdraw from this line of business in Alberta. Over this period of volatility, Definity has maintained a 7% CAGR and delivered a 13-point improvement in the combined ratio. To deliver such results, we continuously focus on 3 fundamentals underpinning Definity's proposition to our customer and broker partners across both personal auto and personal property. Under distribution and service, our digital platforms provide a seamless and convenient experience for quoting and binding. They are available 24/7 for customers and brokers. The underwriting process is completely automated, maximizing third-party data to underwrite and rate risks, which makes it efficient, consistent and highly scalable. Our commitment to advanced technology and modernize platforms allows us to take advantage of new technology like generative AI to enhance quality of service and operational efficiency. Within underwriting, pricing and portfolio management, we optimize enormous pools of data, both internally and through third parties, and apply advanced analytics to identify portfolio trends ahead of the market so that we can respond quickly to deploy rate and underwriting actions. And rate deployment is fast. Once auto rate filings are approved by regulators, even complex rate deployments through our Guidewire system can be done in as little as 2 weeks. And in claims, with the recent implementation of Guidewire claims to the auto line, advancements in claims management have been accelerated, leveraging enhanced automation to reduce cycle time and cost while improving the overall customer experience. Turning our attention now to property. You can see that we have generated robust growth while managing the inherent volatility in this line of business. Over this period, Definity has produced a 15% CAGR and a 2.1 point increase in market share in personal property, significantly outpacing the market. Growth was bolstered by firm market conditions, with 55% of growth coming from rate and 45% from unit. Concurrently, Definity has delivered a 4.4 point improvement in the attritional loss ratio as a strategic buffer to expected increases in CAT frequency and severity, thus allowing us to produce a profit despite elevated CAT events. The improvement in the underlying portfolio was driven by underwriting actions to tighten the underwriting appetite away from volatile segments and geographies, as well as targeted rate actions. We have also leveraged reinsurance programs, including our CAT ag to manage volatility from such events. Funding CAT exposure through rate and underwriting for catastrophic risks and accumulation management are critical capabilities to ensuring that we can grow our property portfolio with confidence. The improvement in our core accident year loss ratio was driven by actions and pricing and underwriting to address volatility in the underlying portfolio, with a focus on both frequency and severity. As the graph above illustrates, the use of advanced analytics and technical models aided in reducing frequency by 15% since 2018. On the severity side, fire is 1 of the biggest contributors to loss severity and is a key driver of single loss property volatility. Large loss propensity models and advanced analytics have materially reduced the impact this peril has had on the loss ratio. While these insights allow us to reduce the number of undesirable risks, we are also incorporating these insights to target and grow profitable segments, thereby positively increasing the size and stability of our portfolio. But of course, the biggest contributor to overall property volatility is weather catastrophe. So let us now take a closer look at this aspect. The frequency and severity of recent weather events underscores the need for primary insurers to be ever more sophisticated in their management of portfolios against the impact of climate risk. At Definity, we work across multiple dimensions to minimize the overall volatility of our property portfolio and aim to not exceed our market share on CAT events. Accumulation management is critical to achieving our objectives, particularly since we have been deliberately growing property faster in proportion to auto over the last few years. As an example of the impact of current actions in British Columbia, we have reduced our new business in high wildfire zones by over 30% in 2024. Definity is a strong advocate for supporting and educating our customers on how they can build resiliency against climate risk and mitigating their property exposure. Recently, we have partnered with Wildfire Defense Systems to provide loss intervention services that mitigate wildfire loss for our eligible customers in British Columbia and Alberta. Craig will share more information on this later on in the claims section. And lastly, advocacy and engagement with reinsurers, key industry bodies and regulators affords us the opportunity to influence and shape policy. As an example, we are a member of Climate Proof Canada, a coalition that advocates for building a more disaster-resilient Canadian economy and society. Now that I've shared some details around our product lines, I'd like to provide additional insight into our direct distribution capabilities. You'll see from this slide that the direct market has been growing faster than the intermediated market, and is now larger at $24 billion. Multiple surveys and studies confirm that there is a growing customer preference for convenience, speed and less complex insurance products, leading to increases in digital adoption. In a virtuous cycle, the more digitized and automated the insurance process, the greater the opportunity to drive scale and lower expense ratios, which in turn supports more competitive pricing and ultimately, increased organic growth. For Sonnet, we also see that desirable customer segments like group and affinity customers are more open to the digital channel and increasingly value self-service capabilities. With Sonnet profitability within sight, we believe we are in a solid position to capture a greater share of this growing market. Canadian consumers are very active in purchasing online. By 2025, almost 78% of the Canadian population will be e-commerce participants. And market studies indicate online policy binds are set to grow from 8% in 2021 to 21% in 2030. Customers are driving demand for digital sales channels, particularly for lower complexity products. Sonnet's investment in all areas of the direct sales model, from binding online to online claims, positions it to grow profitably while providing market-leading customer service. Digital platforms allow for a high degree of scalability, producing lower lifetime acquisition costs, reduced operating expense ratios and faster adaptivity to rapidly changing market conditions. Our direct channel is a maturing portfolio, balance between auto, property and pet. But even within these lines, certain segments perform better than others. For example, the Group and Affinity segment offers us the best opportunity for both growth and profitability because of improved risk characteristics, lower acquisition costs, higher retention and higher share of wallet versus a retail customer. Sonnet has grown its Group and Affinity customer base to 30% by successfully partnering with key market players across a variety of industries, including banking, telecommunications and digital partners. We have successfully deployed a nonendorsed capability to attract and capture university alumni, building relationships directly with our customers. Our digital capability and simple customer-centric Group and Affinity offerings, supported by our real-time disciplined underwriting practices, ensure that our customers access the products they need simply and speedily. What sets Sonnet apart from its direct competitors is that from day 1, it was designed as a fully digital direct customer proposition, with each element of the customer journey informing and reinforcing the overall business model. Rather than simply adding digital capabilities to pieces of a more traditional process as many companies are attempting, Sonnet's model fully integrates the front end with the back end, thus simultaneously enabling improvements in customer experience and operational efficiency. Sonnet provides customers with simple to understand products, offered in a seamless process with real-time capabilities. And customers have responded, giving Sonnet an NPS score of over 80% for quote-to-bind transactions and a Trustpilot score of 4.5 out of 5, a remarkable achievement for a new brand. Our digital marketing and customer segmentation capabilities are rapidly evolving, leveraging a partnership with Google to deploy artificial intelligence to maximize the efficiency and conversion of our target customers. And when our customers do have a claim, that digital experience extends to the claims process as well. Sonnet auto customers can report claims themselves digitally, leading to faster adjudication and increased customer satisfaction. Over 35% of auto claims have utilized this capability, an industry-leading adoption rate. Sonnet's path to profitability has been advanced through a disciplined approach to underwriting and pricing, leading to improvements such as a 30% reduction in frequency, a 30% improvement in our risk scoring metric and a 37% improvement in the property attritional loss ratio, to name but a few. This has been accomplished with the use of improved data sets, advanced analytic tools and capabilities and more sophisticated pricing models. But larger data sets and improved technical models alone do not guarantee success. To respond to the rapidly evolving market, an insurer must also be able to quickly develop insights and deploy actions. Sonnet's fully digital model allows us to fast track the impacts and thus gain a long-term advantage over the general market. Since launch, we've been continuously advancing the Sonnet operating model to optimize the balance between fixed and variable expenses and to increase the efficiency of our processes. As you can see on this slide, we have made great progress so far, but we have even greater opportunity ahead of us. At our target state, we are expecting a low 20s expense ratio in our digital business, almost 10 points lower than the intermediated channel. Ultimately, this would enable Sonnet to price more competitively and thus drive additional market share in the faster-growing direct channel. This ambition is underpinned by 3 key pillars. Our digital platforms are highly automated, allowing the portfolio to scale without adding staff at the same growth rate. We continue to optimize our marketing spend through data-driven segmentation, working closely with digital partners like Google. This means focusing our marketing spend more efficiently and effectively. And third, we are continually optimizing our operational efficiencies, including the use of AI, as evidenced by the most recent implementation of call center AI, which has seen a 22% reduction in overall call handle time. In summary, there are 4 key areas that support our ambition to become a top 5 PI insurer in Canada. First, we have invested heavily in our digital platforms, and we'll continue to deliver market-leading experiences to our brokers and direct customers to achieve above-market organic growth. Second, we are well positioned to take advantage of inorganic growth opportunities because our highly automated approach to underwriting lets us scale quickly without the need to scale our workforce at the same pace, taking advantage of having a lower fixed cost base ratio. Third, we remain, first and foremost, disciplined in our approach to portfolio management, adapting to market conditions ahead of others to avoid anti-selection and to capitalize on profitable segments. And fourth, all of this is supported by prioritizing investments and capacity in advanced analytics, modeling and AI to continually evolve risk and pricing segmentation, enhance market effectiveness and drive operational efficiencies. We have advanced the capabilities and infrastructure necessary to achieve a sustainable competitive advantage. And the progress that we have made so far gives us a high degree of confidence in our ability to meet our future goal. So thank you for your attention during my presentation. I hope I have been able to communicate at least a portion of my excitement about how great this organization is and about the opportunities ahead of us. And with that, I'd like to invite someone else who's just as passionate about their business as I am to talk about commercial insurance, Fabi.

Thank you, Paul. I'm not sure that using passionate and Swiss in the same expression is a good idea. Good morning. It's good to see you all. So I really appreciate the opportunity to be here as well. We never have an opportunity to address a large group of people. I have this urge to explain what my stellar accent is all about. Born and raised in Switzerland, I started my career in the Swiss banking industry. And I guess you will be pleased to learn that I was indeed on the UBS side of things. I then joined Zurich Insurance and a number of senior leadership positions across Europe and also spent 4 years in the U.S., 2 years in New York and 2 years in Chicago, always in the commercial and specialty space. I have been in Canada now for over 20 years, and I joined our company 20 -- joined our company 7 years ago. Joining me today to present our commercial insurance business is Obaid Rahman. He's our Chief Underwriting Officer for Commercial Insurance, and he will be glad to answer any questions that you may have later on as well. So the big picture is that we are obviously very pleased with what we have achieved in our commercial business over the past few years. We have been very diligent in building a well-diversified and well underwritten commercial portfolio that has strong underlying profitability. We believe that our commercial portfolio is well positioned to sustain our combined ratios in the low 90s as a result of the comprehensive capabilities I'm going to present to you today. Before I do that, I thought I would share with you how we are assessing the commercial insurance marketplace overall. As you can see on this slide, the commercial insurance marketplace generates about $35 billion in premiums on an annual basis. The size of our addressable market is around $27 billion. This means that we are quite deliberate in underwriting business in classes that have either a poor return profile or loss volatility that is outside of our risk appetite. Long-tail U.S. casualty exposures, environmental liability or aviation exposures would be good examples for our decline classes. So we are targeting industry segments and product lines that we understand well and that we believe we can underwrite for long-term success. We are focusing on small business, middle market and specialties as our main strategic segments. We have built a differentiated and market-leading value position for each of these 3 segments that is well supported by the marketplace. We have a market share of about 6% in small business and 4% each in middle market and specialties, and we feel confident that we can continue to grow our market share across our businesses. This confidence is also a function of the market insights that we are showing on the right side of this slide. What you see here is that about half of the commercial marketplace is still quite fragmented, especially in the specialty line segments. While there has been a fair amount of consolidation with the 10 largest companies writing about half of the commercial business in Canada. The other half, as I just mentioned, of the marketplace is still underwritten by a highly fragmented and large number of specialty and niche players. We believe that this is creating meaningful organic growth opportunities for us and likely some inorganic opportunities as well. All right. Moving on to the next slide. As I mentioned, we are very proud of the strong track record that we have achieved over the past few years. As you can see on this slide, our combined ratio has been around 90% quite consistently since 2021. Our good results are a function of the strong underwriting discipline we have across our business, and obviously, we have benefited from firm market conditions as well. Our compounded growth rate of 16% is market-leading, and is in line with our aspiration of achieving twice the industry growth rate. As you would expect, we are making the point to drive more growth, doing far more competitions and more modular growth if more competitions become more competitive. We expect that the industry growth rate overall will decrease from a high single-digit range to a mid-single-digit range. This is mainly a function of inflation moderating and loss trends normalizing to pre-COVID levels again. With that, the need for rate is normalizing as well. The marketplace has also become more competitive this year, but we continue to be able to cover the loss trend that we have in our portfolios with adequate rate and inflation adjustments. If you want to take our Q2 growth rate of 13.8% as an example, about 40% of the number is due to inflation rate adjustments. And as I mentioned, that gives us a great deal of confidence that we're continuing to cover the loss trends in our portfolios adequately. As you see on this slide, we have proven that we can achieve growth rates that are typically twice the industry growth rate. With that in mind, we are very confident in our guidance of low double-digit growth rates and combined ratios in the low 90s. All right. The next 2 slides give you a little bit more context of the confidence that we have in our growth and our profitability outlook. There are a number of building blocks that you need to have in place if you want to operate and grow a commercial portfolio in a successful manner. I'm going to spend a little bit more time on the 3 most important ones. We are very fortunate that we can rely on a capable and very dedicated underwriting team across our business. We have close to 600 employees in commercial insurance, and about 75 of them are in key leadership positions. About 2/3 of the leadership group, we've been able to attract over the past 4, 5 years from other leading commercial insurers since I joined the company back in 2017, so we're benefiting from a vast amount of expertise, insights and capability. The second building block that we are having outlined on this slide is a comprehensive value proposition to our target segments. That value proposition includes market-leading digital capabilities and great support from our broker partners. We are very pleased with how our customers and our brokers are responding to our approach overall. And let me come back to that when I review the strategies for our main customer segments in more detail. And then the third building block is an effective operational and risk management framework. You see the relevant details on our next slide. We believe in understanding the fundamentals of our business as well as we can. We are benefiting from a comprehensive operational and risk management framework to do that. This framework gives us all of the required data points and loss trends so that we can make the appropriate underwriting decisions in a timely manner. To manage our net exposures to an acceptable level, we have a well-structured reinsurance program in place. We have about 50 actuaries and data experts in commercial insurance. So 1 in 10 of our commercial employees has an actuarial or analytical background. We are also leveraging AI-powered machine learning capabilities to gain additional pricing and segmentation benefits. And then we are using AI capabilities at the front end of our business as well. As an example of that, any given year, we are receiving about 200,000 submissions. We are putting those submissions through an AI-powered intake filter that free uses those accounts where we have the best opportunity to win and write profitable business. This capability is increasing our response time and our hedge ratios, and is also driving better productivity and expense ratios. So let's go a little bit deeper into each of our strategic segments, starting with our small business segment. As you can see on this slide, we have about $470 million in premium in this segment, and our market share is about 6%. We have built the market-leading digital capability that allows our broker partners to quote and bind over 50% of their small business in an automated manner. In relation to that, rate and retention numbers tend to be higher in this segment. Our strong digital capabilities for our broker partners and our broad corporate solution for our customers tend to mitigate the impact of price quite effectively. All of this is driving good growth and good profitability in this segment. The next slide, you see more insights on the market opportunity we have in this segment. As you can see here, there are about 1.2 million small businesses in Canada, and the addressable market size for us is about $8 billion out of an overall market of $10 billion. To succeed in this segment, you need to offer the following: a low-touch, low-cost digital solution for brokers; a comprehensive coverage solution for customers at a fair price; and the strong claims service proposition. Our solution is addressing all of those needs in a very effective manner and is getting great support from the marketplace. We are also pleased with the pricing sophistication we have built in this segment. We are benefiting from a vast amount of actuarial data that we leverage to sustain our margins. And then we are also using credit scores in our underwriting process. There's a strong correlation between the credit score of a small business owner and the loss ratio and the loss propensity of his or her business. As you would expect, ease of doing business is very important to win in the small business space. And the next slide shows our approach and our service standards. If a broker uses our digital channel, it takes them less than 2 minutes to get the premium estimate for a small business customer. And if they choose to submit the small business account to us the old-fashioned way, which is typically by e-mail, we commit to get the quote back to them within 45 minutes. I thought I will show you now a quick video that gives you good flavor by our broker partners like our small business solution so much. [Presentation]

As you can tell, we are getting tremendous support from our broker partners, and that is not only the case in small business, but across our company. We have close to 700 contracted brokers with about 3,000 locations across Canada. And many of them prefer doing business with a Canadian operated company. In our second strategic segment, Middle Market, we have about $390 million premium and a market share of 4%. As you can see from this slide, it's a very well-diversified portfolio as well. The main segments we are focusing on are construction, manufacturing, fleet business and commercial realty. Typical account size in this segment is in the range of $50,000 to $200,000. We service this business with regional underwriting operations across Canada so that we can be closer to our brokers and to our customers. Going from East to West, we have underwriting offices in Halifax, Montreal, Toronto, Waterloo, Calgary, Edmonton and Vancouver. This also helps us understand local exposures and local trading dynamics much better. As you would expect, we have the majority of our business in Ontario. As we show on the next slide, you need to have the strongest underwriting and governance model in place in Middle Market, as it is the least homogeneous segment in the commercial space. In light of that, we've built a comprehensive underwriting and operational framework that we call QUEST. And QUEST stands for Quality Underwriting Every Single Time. It has a number of key components, which you see on the left side of this page. Clear underwriting guidelines of how we want our underwriters to price and assess our risk exposures, clearly defined underwriting authority based on skill level and a robust referral framework, line guides and capacity management by type of exposure. Risk inspections to mitigate the potential for an unexpected loss and monthly reporting of key data points and trends, which includes an underwriting quality score by underwriter. We are also able to manage the expected margin contribution down to a single policy level and allows us to guide our underwriters who have gone to price the business they are working on. We are closely monitoring the application of our best practices, both at the portfolio level and the individual risk level, and we provide our underwriting teams with regular feedback and coaching. This comprehensive underwriting and pricing framework has demonstrated its effectiveness by generating solid results during the past few years. We have no segment or line of business that we are concerned about in our Middle Market segment, and we are pleased with our growth and profitability prospects in this segment. And then our third strategic segment is Specialty Lines. Historically, we didn't write a lot of specialty business, and then there was a strategic gap that we need to fill, as specialty lines typically generates better than market average loss ratios. Specialty business is also an important part of a comprehensive value proposition to our broker partners and clients. We now have a market share of about 4% and $380 million premium in this segment, and the profitability is very strong. To grow our business further, we continue to hire experienced underwriters with deep market relationships, and we are comfortable with our growth prospects in this segment. As I mentioned, I spent the majority of my career in this space. We also have dedicated loss engineering teams in this segment, which are interacting with our clients directly. This is an important capability for us to have, which allows us to understand which risks to write and which risks to avoid. In many cases, this team consists of individuals who have an engineering background and have joined us from risk management teams of large multinational companies. Moving on to next slide. The key segments we underwrite in specialties are listed on this slide: large property, energy agri business, sharing economy, professional lines and surety. As I mentioned, each segment is led by an experienced team that has been underwriting these exposures for many years and are well respected by our brokers, by our partners, by reinsurers and by clients alike. The next slide gives you a deep dive in 1 of our largest segments in specialties, which is energy and property as a case study of how we've been building our specialty capabilities. Here as well, we hired an entire team that has been underwriting this class of business throughout their careers. Many of these individuals either follow Rowan or myself from prior companies, and they bring very strong underwriting judgment to Definity. The focus of this segment is typically on large Canadian companies. What is important to note is that we focus on providing public coverage and that we don't write high-risk casualty exposures in this space. We've had good growth and very good profitability in this segment. And more often than not, we participate on large schedules with all the commercial insurers to manage our risk exposure. This also gives us an opportunity to pick the layers on touch on points that we like the most from a risk and return point of view. All right. In summary, we feel that we built a strong commercial business for our company and for our shareholders that is well supported by our brokers and by our customers. Our goal is to achieve a top 5 market position within the next few years. This will require a CAGR around 10% going forward, which is in line with our aspiration of achieving twice the industry growth rate. We believe that we can do that without compromising on our profitability thresholds. And that is really a function of the strong underwriting culture that we have in place across commercial insurance. As importantly, most of that growth will be generated in our existing core segments. And we will do that by leveraging the capabilities we have built in small business, middle market and specialty lines. All of this is giving us a great deal that we'll continue to deliver on our guidance, which is low 90s combined ratios and growth rates in the low double-digit range. With that, I'm going to pass it back to Dennis for our first Q&A.

Thanks, Fabi. Just give us a minute to set up on stage, and we'll start our first Q&A session. Great. We do have about 20 minutes for the session, followed by a 15-minute break. I'll remind you that we have another Q&A session following Craig and Phil's sections later on. The team is now gathered on stage. I will ask that you try to focus your questions on the topics covered in the sessions that we've already had today. Donna Ince will join Paul to handle personal insurance questions, while Obaid Rahman is here to help Fabi with commercial insurance. To ensure everyone in the room and on the webcast can hear you properly, please raise your hand and wait for the mic runner to bring you the microphone. We'll then -- and please also identify yourself and your organization. With that, Rowan, I think you had a few opening comments?

Yes. Thank you. Well, firstly, looking forward to getting into the Q&A. And just really a quick introduction for Donna and Obaid. So Donna, as you've heard, is the Chief Underwriting Officer of Personal Insurance. So that includes the broker business as well as Sonnet. So it's pricing and underwriting of that, works very closely with Paul. Donna's been with us for a little over 3 years, where she joined us from RSA. And Donna and I actually have worked together for many, many years, I won't say how many. So we were delighted to have Donna join Definity. And she's got a very deep background in personal insurance, but as well as M&A and specifically integrations of mergers and acquisitions. So great to have Donna with us here with Paul today. And then Obaid is the Chief Underwriting Officer of Commercial Insurance, but also leads the commercial operations. So him and Fabi have worked very closely over the years and have done an incredible job of building the business that Fabi just took you through on the slides. Obaid has been with us for 6 years now after joining us from Intact and clearly has played a tremendous role in the journey we've come. He's got a very deep background on the actuarial as well as specialty insurance. So it's great to have the 2 of them joining, Paul and Fabi, with me for the Q&A session. So...

Great. Let's start. We have a couple on this side. So I'll start with Paul and then we'll go to Brian and John. So the first mic here, please?

Paul Holden, CIBC. So 1 question on personal lines and 1 on commercial. So starting on personal. Paul, you made a lot of references to diversifying into less regulated, more profitable businesses. So maybe you can expand on that? Because when I hear that, I think Quebec auto. But I didn't hear any references to Quebec auto. So maybe you can touch on sort of the expansion and success you've had or not had in Quebec and what may lay ahead there? And if it's not Quebec, where else have you expanded where you've had success?

Yes. Thank you, Paul. So we are diversifying, but I don't want that to come across as we're shrinking our regulated auto. In fact, that continues to grow quite healthily. What I'm saying is we're growing the other lines even faster to help that diversification. Certainly, Quebec auto is 1 area. But of course, we've been a bit cautious in that space because given that it's predominantly a physical damage jurisdiction that got hit disproportionately hard over the inflationary period that we've just had. Also, we are expanding into areas like pet. As I mentioned, we have a pet business. But predominantly, we're expanding our property holdings. We were about 30-70 property to auto a number of years ago, which we felt was disproportionately low. And to optimize our portfolio, we wanted to get that closer to 40-60, and we've taken great pains over the last little while to do that. So we've grown the portfolio pretty significantly into property. And 1 of the things that is important to highlight when we do grow into property is, as I mentioned, how do we manage catastrophes. And so we wanted to make sure that we're balancing our portfolio to get the best possible portfolio returns. And maybe I'll just turn it over to Donna for a moment to talk to us about we manage the property portfolio to gain profitability.

So some of the things that we like to think about in terms of property and CAT losses specifically because that's really what brings the volatility to the portfolios to think about it over the long term. So we have years where we have a lot of cats and then there's other years we don't. So it's really important that we are outperforming on the attritional loss ratio. And I think you saw that in 1 of the graphs that Paul presented. So really focusing on that so that we can have those years where we have some buffer built in. I lead the Chief Financial Office. We think about cat risk a lot, and we think about it really across really 4 dimensions. The first dimension is underwriting and product. We spent a lot of time internally, especially our underwriting experts around how do we put those property packages together so that we're not attracting more exposure, particularly CAT exposure. So I'll give you, for instance, that we've just recent -- not recently done, actually, we did it a number of years ago. It was really how we offer hail in the market. So our coverage to hail is actually not embedded in our policy wordings. It's actually sold as an endorsement. And so we feel that the fact that we sell that way, which is different than many of our competitors that sell it right in the base wordings that, that has really helped us to be below our market share in the Alberta hailstorm, and that would be the case for other hailstorms as well. Second thing we think about is pricing. So obviously, that's a huge lever in how we fund our CAT losses. We've been very successful in pushing through high single-digit as well as low double-digit rate plus indexation over the last 3 years. And overall, the Canadian market has been firm for probably almost a decade, and there's been times when it's actually been hard as well. So we feel pretty confident that we can push that rate through and again, continue to fund those CAT losses as they come through over the long term. Maybe just the last point I'll raise would be accumulation management, and Paul referenced it. This is really -- a really important capability. And I would say we're in a position right now that is giving us a bit of a competitive advantage. So we've -- over the last 2 or 3 years, we've invested pretty heavily in geographical information systems. And what that really means is we break down our portfolio into really small grids and understand where our concentration of risk is, and then we map that against our CAT concentration. So we've been very proactive in the last number of years, but in particular, the last 12 months, really identifying where we have issues from those insights, and we've been quite proactive in producing our exposure in concentrated areas, particularly in BC, which Paul referenced. We've reduced that by about 30% in our new business. So we take CAT risk very seriously, particularly because we do want to grow the property portfolio. And it's giving us more confidence as we continue to evolve that sophistication on the underwriting pricing and the aggregation management side that we can continue to deliver those mid-90s core over the long term.

Maybe Fabi?

Yes. One question on commercial. So you've done a phenomenal job growing market share as you highlighted. But I'm kind of surprised you've been able to hit the margins you have while growing market share at such a high rate. Because usually what we see as you gain market share sort of year 1, year 2 loss on new clients tends to be your highest loss years. But you seem to have kind of avoided that phenomenon. Is that because of all the strategies you've laid out here? Is that just because mix shift has kind of overwhelmed that? So just trying to get a better sense if you've been able to bring on new customers by -- and avoid that higher year 1, year 2 loss or if it's something else?

Yes, it's a great question, and I'll pass it over to Obaid in just a minute because he deserves the credit for having developed that operational framework. And to give you a high-level answer, what we do is that we understand the margin contribution literally down to a single policy level, and that applies both to our renewal book of business and our new book of business as well. And given the fact that we have a portfolio that is more skewed to the lower end of exposure and account size, rate and retention is quite sticky. So our retention and our renewal book is very profitable. And like it is an effect in commercial insurance, you pay a bit of price to write new business, but we understand the correlation between the new business cost and our overall profitability quite well. And then we have a very strong risk selection and quality framework that allows us to manage the margin of new business as effective as possible. Maybe Obaid, you can expand on that a little bit?

Absolutely. Thank you, Fabi. Maybe I'll address Paul this 2 ways. I think just first, maybe just touching on the pricing. I think as we've said at the top in the presentation, we have 50-plus actuarial analytical professionals in there. We probably got about 1 billion rating cells, which go into the segmentation of our pricing. And that accuracy sort of helps us. We're looking at the margin at a single account level. We're making decisions even on the new business, every account, which comes in. What's the margin contribution. And then overall, we're always balancing this at the portfolio level. So the part which you're talking about, you see the bump. This is something we're conscious of or looking at it constantly, what is the margin contribution and expansion coming from, say, the renewal book versus the new business generally comes at a discount, and we're always trying to keep that in balance. I think the other point I would make on this is that our value proposition, which we put to the marketplace, it's not predicated on price. So a lot of times where you get into those margin issues is when you are competing on that, we're not competing on that. We stay disciplined in underwriting and pricing. It's fundamental to our operating model. We're getting traction mostly coming from -- depending on the segment, but service is a big part of it. Claims, Craig is going to talk about it soon. The customer service, which we're providing to the broker on the transactional business is the digital capabilities we put forward to brokers. That's given us sort of that -- the sudden growth traction over the past few years. And then when you get into the middle market and the specialty business, it's the trading relationships, it's the stability we give with the underwriting expertise, which is there. And just generally, the partnership model that we've built with brokers, which is very much based on mutually beneficial outcomes. The differentiator for us is really how you bring all of these together, and it's how we execute on them, how we operationalize them. It's resonated really well in the marketplace. And I think as we've seen and you've pointed to, our track record kind of speaks to that, getting that strong growth, low 90s core. And we think the runway is fairly long on this. So it's a $27 billion addressable market for us. We have 5% market share, and we're continuing to enhance and invest in these core capabilities of pricing, underwriting, trading relationships, digital assets that we're building, which we think this will continue to give us double the industry growth rate at a low 90s core going forward.

Yes. Great insights. And maybe just to close out your question. What I'm most proud of is the teams that we've built. So you could reach out to literally any of our underwriting team, so they are in Vancouver, in specialty in small business, and they would tell you the same story because we are monitoring those outcomes on a monthly basis and we are promoting underwriting discipline and underwriting culture. And I think that's a big differentiator for us, that we not only have individuals who wait, who can think about it the right way and develop right strategies, but we found a way to install the underwriting culture across our commercial business overall.

Brian?

Brian Meredith, UBS. A couple of questions on Sonnet. I think the first question is now that you're going to get down to a 100 combined ratio on it. How do you think about balancing growth and profitability in that business going forward, particularly relating to the expense ratio, right? So ad spend, I always think is a huge, huge part of growing a direct distribution platform, and you've still got relatively small market share. So how do you think about that? And then maybe a second question is, what is that expense ratio, that low 20s expense ratio ex-ad spend? And how does that compare to your biggest competition? Are you competitive with them from an operating efficiency perspective? And will that give you the ability to kind of grab market share?

Thanks, Brian. So for the first one, absolutely balancing profitability and growth is key. And I think what you've seen from us in the last little while is a real focus on making sure that, that balance is appropriate so that we can reach that breakeven point by the end of the year. We are disciplined and we intend to be disciplined moving forward. So we're not going to be chasing growth at the expense of profitability into the future. But you've accurately highlighted the difference in the direct channel, particularly around that expense ratio. So for the last few years, we've been focusing very much on that loss ratio and making sure that the underlying quality of the business is at a desired level. We feel we're close to or near that amount right now. And so as you've mentioned, the real issue for us is how do we scale our way out of that expense ratio, part of which is made up of that large upfront fixed cost investment. I think as you know, we're getting to that breakeven point by the end of the year. So obviously, we're getting closer to that balance. But the future, the real opportunity for us in the near to medium term is optimizing expenses. And I mentioned earlier around we've taken quite a bit of focus on optimizing expenses, including ad spend. But moving forward, the natural growth that will come at a lower incremental expense ratio will allow us to achieve that gap. And so the next few points of overall core improvement will absolutely come from the expense ratio components. So that means scaling the business. But we want to be cautious around how we do that. With regard to your second question around that balance, it's hard to get a real insight into competitors' ad spend, particularly because there aren't that many -- there certainly aren't digital direct insurers in Canada like Sonnet. We believe we are comparable in terms of around 5 to 6 points of overall GWP is focused on that. But if you would break that into 3 components, 1 is the generalized branding activity that will occur. That will occur for your new and renewing portfolio. The second component is search engine optimization, which is all about getting the eyeballs in. And then the third one is really around targeting, which is really around particular segments. So we're looking to optimize all 3 of those. What's interesting about that is as we scale the business, we don't feel we need to dramatically increase that first 1/3 that I mentioned. So even within marketing, we have an opportunity to gain leverage as we scale the business. And lastly, as we continue to get more sophisticated, the expenditure that we have on those other 2 categories will become more targeted and, therefore, more efficient for the volume that we bring in.

We'll go to John next.

This has been quite a journey for us. And as Paul says, we're now at the stage where the first task was to get this model fully functioning and at the breakeven level. There's a big investment. And I think that we feel that we've managed this well given how we kind of stack up and compared to global competitors. But we do feel that we've learned a lot along this journey. And for the true digital model that Paul's described, effectively, we think we've got a bit of a moat around us. This is an opportunity for us to lean in. And so job 1 was get it to work, make sure that we can get the profitability, the loss ratio in the right area. So very much it is now about the next size of scaling up. And I think that if you think about what's happening in Canada and Personal Lines consumer purchasing behaviors, we think that's an increasing line of business. And so the hard yards we've done in the next couple of years that we'll look to build that. I get the real question for us is once we reach breakeven, the long-term way we think about combined ratios or returns. They're the same in each business. Do we drive this to a mid-90s like we do the broker business? Or do we lean a bit harder into growth in the short term? And we do think that there's an opportunity in the next few years for us to gain more market share. The personal insurance marketplace is a big one. And as Paul said, it's the direct-to-consumer has actually been gaining share overall. So we like the position that we're in. And as we roll into the next couple of years, we look to build that business at a faster rate than we have in the last couple.

And before John, any questions over here, we can start teeing up the mics. Okay. So John, and then Tom.

John Aiken with Jefferies. Paul, I'm keeping on with you, and I guess the flip side of the coin to Brian's question, you talked in your presentation about best-in-class digital offering. I wonder, can you talk about how you benchmark that? And like who are you comparing yourself to? And how can you measure against this? Is this actively yourself? Are you bringing consultants to take a look at everything? Like how do you benchmark yourself in the digital?

It is difficult because, as I mentioned, we're the only 1 that's fully digital, integrated end-to-end in Canada. And actually, there are very few examples of that globally. And so we've looked, I've traveled to the States, I have traveled to Europe. I've met with a variety of different insurance companies. We actively engage with consultants repeatedly to gain that understanding and benchmarking. So we benchmark the marketing capabilities, the digital capabilities. Our partnership with Google allows us to get some insight. We, of course, benchmark our underwriting performance. There are some well-publicized examples in the marketplace in the States that are not performing quite as well as we are in terms of the profitability component. But it is very difficult to benchmark ourselves when you're the leader and frankly, 1 of the only options in the market. One other way we benchmark is we've, I think, now won 3 global awards for our capability in Sonnet and Vyne and our move to cloud. So we're punching well above our weight globally. And I've had calls from very large global P&C carriers saying, how are you doing this? What are you doing? How -- what insights can you offer into this space? So it is an exciting space to be doing that. But of course, the benchmarks that matter the most are the financial results at the end of the day, and that's the 1 that we're most focused on.

And then, Paul, are you able to talk about customer satisfaction surveys through your digital lines versus through -- customer satisfaction through the broker channels?

Well, we -- the claims capabilities, which Craig will speak to this afternoon are offered to all of our customers, be they direct or intermediated. On the digital side, we do the satisfaction surveys at multiple points of the customer journey online and through the contact centers as well. So we are very diligent about measuring that and making sure that we continuously maintain those high levels. At the end of the day, what we're competing on is the service experience and the claims capabilities. So that's really what we're trying to understand how happy are those customers with those experiences. And so far, we've been very positive about it.

Time for a couple more. Tom, I see you next. And there's a...

Tom MacKinnon, BMO Capital. Just a question on Sonnet and then a follow-up. Just with...

Sorry, can we make sure Tom's mike is on, please?

With respect to Sonnet, have we -- it's all about scaling up, yet you have a slide here that shows $428 million in gross premiums written for 2023 and that being the same as 2022. So like how can you prove to us that you've really scaled this up just over the last 18 months? We don't really have any -- has it -- how much it has grown in the first half of 2024? Can we -- in order to breakeven, it seems that you have to scale up more, but we haven't seen the scale up at least in the last year in 2023 versus 2022. So is there any additional data points you can give us to show that you've scaled up more in Sonnet?

Yes, good question. Thank you. So it's important to understand a little bit, first of all, as I mentioned earlier, we've been very focused on making sure we hit that technical profitability line. And so we've been deliberately throttling down some of our growth in the face of these market trends that we've experienced over the last while to ensure that we get to that profitable stage. Secondly, it's important to remember that what we've been doing is withdrawing Sonnet auto Alberta. And so we've been, as I mentioned in many analyst calls, we've deliberately removed marketing almost 2 years ago now and redirected that to other areas. And so you have to look at that overall growth net of that element. We've been growing at about high single digits outside of that territory, which is probably a little bit lower than we'd like in the long run, but suitable to ensure that we maintain our path to profitability while we address the concerns of the marketplace. Remembering, in a time where you're not yet profitable, inflationary trends, theft trends, these other things can have a deteriorating impact on your portfolio, which is why we've had to respond. But now that those things are ameliorating, we think we're in a good position moving forward.

Okay. That's great. And then the follow-up, I think when Definity demutualized, the goal was being top 5, you're #6 now. You're growing twice the rate of the industry, and the goals, both personal and commercial lines presentations laid out was to be top 5 organically. You also laid out a path to low-teens ROEs organically. Do you think that you can achieve all this stuff that you talked about initially when you demutualized low-teens ROE in top 5? Do you think you can achieve that all organically now?

I'm happy to take that, Tom. Yes, I think that the path to a top 5 is on track. I mean I think that's the direction of travel. If you look at where we are, we moved up from 8 to 7, 7 to 6. There's about $1 billion difference from that. And so when we think about our organic growth rate, we know we're growing at about twice rate of the industry. So over time, we will mathematically get there. But to get there in the next couple of years, we still will need some form of acquisition, inorganic acquisition. And that would clearly put us into a top 5 position. So I think that we're working hard on building the business organically as well as thinking about deploying capital inorganically. So that's the first kind of part of the question. I think the second part of the question is, do we think with our organic levers we can get into the low teens. And the answer is yes. And in my presentation, I talked about a path. In the next couple of sessions, you will hear from Craig about what we're going to do in claims and Phil, what we're going to do in terms of the operating expenses. And so when you add those 2 to the journey that Paul and Donna have taken Sonnet on, we think that there's an organic path to get into the low teens over time there. Of course, if we can then optimize the balance sheet ideally through inorganic activity, we can go higher than that. So Phil is going to talk a bit about that in his presentation. But I think we feel very comfortable saying we're still on track and perhaps even a little better than we had anticipated for those IPO guidance targets.

We have time for 1 more. And I'll start with you on the second session. So Phil Hardie, last question for the session, please.

Yes. So Phil Hardie from Scotia. I think analytics or advanced analytics and AI, I think was a theme across both personal and commercial. I guess my question is going to go to you, Rowan. And then, I mean, how do you think about strategic advantage of, call it, in-house proprietary machine learning and AI applications versus a focus more on agile deployment of third-party technology applications?

Yes. Look, I mean, I think that I'd go back and say 1 of the very pleasing parts of Definity's capability when I joined almost 7 or so years ago was the investments in data, advanced analytics, the amount of talent we have in that area. So we talk a lot today about gen AI. But in fact, for the last decade or so, Definity and prior to that Economical has spent a lot of time and effort and focus on building deep capabilities in all of the AI trends. And so whether it's on attraction of customer, whether it's on informing underwriting appetite, whether it's on claims optimization, fraud detection, et cetera, there's been a big investment in that area. So I think when we think about it, we have some natural advantages. We're leaning in. We're also using partnerships. And so I think it's a combination of the 2 for us, Phil, that we don't think that everything made in-house is the only way to play. But this is a core capability. So there are elements of it, whether you think about our magic source, which is our underwriting, our pricing algorithms, that's all proprietary. But what we do use is other third parties to help accelerate that. And I think 1 of the examples we've used is Google as a partnership, and that's helping to certainly accelerate and industrialize some of our deployments. And we're working on a number of use cases, which I think are going to be very material for us. So it's a top priority for us, both in personal and commercial, but also in our claims operations.

Okay. If I could just ask 1 follow-up related to that. Maybe just give us a sense of maybe the tax spending over the next 3 years, either dollar value or percentage of top line and maybe how that compares historically to the, I'll call it, a regular run rate trend?

Was the question on tax spend?

Tax spend, yes.

Yes. So I think there are 2 things there. Firstly, we have a CapEx budget which is meaningful, and we believe in being a digital leader. So we've made big investments. Those big outside investments, and when you think about that mean outsized as a percentage of our total revenue, are largely behind us. But that being said, there's a very healthy CapEx budget every year. That's all in our capital guidance and expense targets. We're spending on technology, let's call it, 4.5% of revenue, which we think is a very healthy spend and a spend required. And I think the important thing for us to think about is we look at that in a number of lenses. Certainly, how does it compare to peers and the competitors. But also, you've seen our expense ratio coming down. And essentially, we're becoming a more digital and more automated technology. Some of the ability to win the hearts and minds of customers and brokers is the technology user face. When you think about personal insurance, not just the digital business, the broker business as well, that efficiency, that full integration into broker management systems is really a big differentiator for us. So we're fine with a fairly healthy technology spend, and we think that's actually a very appropriate investment for it to be a leading insurance company. All of that and all of the ongoing expenses are all considered into our run rate and the guidance we're giving on the expense ratio going forward.

Thank you, everyone, for your participation in that session, both on stage and the audience. We're going to take about a 10-minute break and come back with some more sections afterwards. Thank you. [Break]

Well, welcome back, everybody. I hope you enjoyed the first part of the Q&A and the first session. And as you can tell through the Q&A we just went through, we definitely feel Definity has got an excellent personal insurance and commercial insurance business. The platforms in Personal Lines like Vyne and Sonnet we feel do set us up very nicely for the operating environment ahead of us. And the commercial business has truly been transformed into a one-stop shop for our broker partners. And we think it's going to feature very prominently in the years ahead for Definity. So the next topic we'll cover today is our claims operations. And claims is really the front end of our business. It's where the customers are taken care of and experience the reason why we even exist. As mentioned, we feel Definity and through Economical has a long history of protecting and helping our customers. The teams do an excellent job of this. And that being said, we do feel that as we continue to transform and modernize the claims technology, there's big upside for Definity, our customers and shareholders. So Craig Richardson is our Chief Claims Officer, and has joined us from TD Insurance about a year ago. Craig has over 20 years of experience in the industry. He brings outstanding leadership, a wealth of expertise and industry knowledge, and he's the person leading the claims transformation. And I must say that I'm delighted with the progress that we've seen there to date. So Craig, over to you.

Thanks, Rowan, and good morning, everyone. I'm very happy to provide an overview of our next area, which is claims. I have the privilege of being the Claims Officer here at Definity. And as Rowan mentioned, I joined our organization roughly a year ago and have over 20 years of experience in the insurance industry in several senior executive roles. Like other functional areas, claims has a very strong leadership team with approximately 1,200 employees in offices across Canada. And claims is the moment of truth. And in line with our purpose of helping our customers adapt and thrive, we are very proud of how we take care of our customers when they have a loss. We are achieving strong NPS and customer satisfaction scores and are very proud of that. Now with this critical proof point in place, our focus is continuing to transform our claims operations so that we can build additional capabilities and drive incremental expense and indemnity savings. This will allow our claims operations to make meaningful contributions to our ROE goals. So I'll start things off by providing some context of the current claims operating environment in Canada. Overall, driving patterns have largely returned to pre-pandemic levels, resulting in normalized new claims volumes. And while theft claim frequency has stabilized, it remains elevated compared to pre-COVID. The access to repair capacity post-COVID has improved, and the availability of parts has normalized, which helps to improve cycle times and managing our claims costs more effectively. Auto claims inflation is back down to the mid-single-digit range, which is consistent with the industry experience pre-pandemic. And as you know, last year saw an active cat season, with this year clearly also being elevated. To be able to respond to these events quickly and to effectively mitigate the financial impact of those cat losses, we have dedicated cat teams across Canada. And as I mentioned earlier, transforming our claims operations is an important priority for us, not only from a customer experience point of view, but also from a profitability and margin enhancement point of view. And I'm going to expand on each of these topics in the upcoming sections. So claims plays a critical function in any insurance company, as it has a significant impact not only on our brand with customers and brokers, but is also accountable for most of our cost base. We believe claims also represents an opportunity to create up to 2 ROE points of additional economic value derived from the transformation agenda that we have in place. And to capture this value creation opportunity, our focus is on 3 distinct areas: the customer experience and satisfaction, operational excellence, and lastly, transformation. And I'm going to go a little bit deeper on each of these 3 topics. So we're doubling down on our efforts of delivering a highly responsive and effective customer experience while prudently managing our costs. We know when customers have claims, and they're satisfied with the experience that they're more likely to renew their policies with us and recommend us to others. We've introduced several best practices to drive higher customer engagement, loyalty and NPS scores, and we are pleased with how our teams are executing on our game plan. It's all about timely communication, coupled with effective and fair claims settlements. Our adjusting and call center employees are checking in with our customers regularly, and we are also leveraging generative AI to identify negative customer sentiment in real time. This market-leading capability is analyzing e-mails to identify customer concerns and escalating them to our adjusters and team leaders in real time so they can resolve concerns quickly. And it's a great capability for us to have. And then we also have dedicated cat teams in place across Canada. These teams are doing an exceptional job taking care of our customers who are impacted by cat events. And our cat teams are also doing a very effective job in mitigating and preventing additional losses in these types of situations with emergency repairs and other loss mitigation activities. We're also benefiting from strong partnerships with our strategic vendor partners to mitigate or even prevent the impact of cat losses. As an example of this, we have recently partnered with Wildfire Defense Systems. They have a great track record of protecting properties from approaching wildfires by closing any openings in the home and clearing away any flammable material from the residences' perimeter. Even in a cat situation, most of our claims are typically handled by our own adjusters and get repaired through a preferred vendor network, which typically results in better customer experiences with lower indemnity and expense outcomes. Clearly, these actions are resonating with our customers. Our auto NPS results are up 22 points year-on-year and are above industry average. For property, our NPS scores are up 15 points year-on-year and are top quartile when compared to our peers. And we're very pleased with these results. And I'd like to close the customer satisfaction section by hearing from one of our customers. This video tells the story of a couple from Nova Scotia whose lives were devastated by Hurricane Fiona in September of 2022. To provide some context, while cat events represent a small percentage of our overall claims volumes of around 5%, it's critical that we handle these in a timely manner. Doing so provides a positive customer experience while prudently managing our claims costs. And this is one example of many, which demonstrates how Definity regularly stands with customers during difficult times. [Presentation]

And clearly, a great testament from one of our customers. So operational excellence is another area of focus for claims in creating additional economic value. We have embedded a strong performance culture across claims. We have built a comprehensive operational framework that allows us to drive productivity gains and better indemnity outcomes for each of our lines of business. The main building blocks of this operational framework are captured on this slide. The most important ones include end-to-end process improvements to gain additional efficiencies, best practice guidelines for claims handling and adjusting to reduce claims leakage and indemnity cost, robust quality assurance reviews and enhanced training for our adjusters, significant investments in our fraud and SIU capabilities, increased in-sourcing of claims for enhanced cost management and comprehensive SLAs for our strategic vendor partners. We are leveraging generative AI capabilities here, too, that scan initial claims notifications, routing them to the most appropriate skilled adjusters and provides an initial assessment for further review and handling. Our enhanced operational framework is generating the desired results, and I'd like to share a few proof points with all of you. A 4% reduction in loss adjustment expenses over a 2-year period, which is outperforming our industry average. Cycle times are down between 10% to 20% for our lines of business. Our fraud prevention results are up 50% over the last 2 years. And leakage capture has improved by about 30% on a year-on-year basis. Clearly, we're very pleased with the traction that we're seeing. Preventing fraud is something that we are also very focused on. Our fraud investigations teams are focused on mitigating these risks across our entire business life cycle from initial submission of the quote, to binding, to claims handling. And our teams are prioritizing the early identification of broad risks before the claims are filed to minimize both our risk exposure and the associated remediation costs. We're also leveraging advanced data and analytics and AI to identify fraud risk exposures associated with their policies or claims in an automated and sophisticated manner. Our strategies in this space are consistently evolving to combat the ever-changing fraud tactics. We provide continuous training to our claims staff and optimize our analytical capabilities to stay ahead of the curve. And as mentioned, mitigating fraud activities represents a significant economic value creation opportunity, and we are well on our way to capturing this based on the expanded capabilities we have built in this space. Now in line with the comments I just made, having a robust vendor program with strong relationships is critical as it secures the required capacity for our customers, which is even more important during large cat events. This also typically provides higher-quality repairs at a more competitive price point, and customers who use our network actually have higher NPS results. The NPS scores of customers using preferred vendor network is about 30 points higher than those who don't. And the average repair cost is roughly 6% lower, which is quite material. And so based on this, we're very pleased with our vendor capabilities and are consistently focused on increasing our customer referrals into our preferred network based on the positive outcomes it delivers for our customers as well as our organization. And now the third topic from a claims perspective to help support our ROE expansion goal is our claims transformation strategy. While we've been executing that strategy over the past 2 years, we have just started to capture initial benefits this year, with more value creation opportunity ahead of us over the next few years. We are implementing a comprehensive transformation agenda for claims with multiple benefits, including a best-in-class operational platform enabling us to achieve our growth aspirations and drive scale benefits, improve expense and indemnity management, better customer satisfaction, enhance employee engagement and increased accuracy, better data management and analytical insights, enhanced fraud prevention and more efficient vendor partner integrations. And as a result, this is a very important undertaking for us here at Definity. Earlier this year, we launched our Guidewire Claims Center for auto line of business, and our digital claims intake capabilities for Sonnet have been live for a couple of years now. These are big projects which we delivered on time and on budget without any major glitches, demonstrating the impressive capabilities of our claims and our technology teams. To underscore, these capabilities provide an enhanced customer experience, stronger NPS scores, increased productivity and better indemnity outcomes. And I'd like to share a couple of proof points with all of you. We expect our auto adjusters to handle about 30% more files because of this new technology. And over 35% of our Sonnet customers are taking advantage of our digital claims notification capabilities, which is market-leading. This also allows us to effectively refer these customers into our preferred vendor network and capture the benefits I mentioned earlier. And we expect to implement Guidewire claims for our property and casualty business by the end of 2025 and achieve similar benefits from that of auto. And our last claims slide shows we have also integrated additional capabilities into our processes, included photo-based estimates and drones. These capabilities are resonating with our customers, as they provide a seamless claims experience while improving productivity and lowering our expense and indemnity results. In closing up the claims section, we believe the capabilities we are building are industry-leading in Canada. We view them as an important proof point on how we will deliver our aspirations to making insurance better for our customers while improving our financial performance. We will continue to leverage these new claims capabilities to drive enhanced customer satisfaction scores while benefiting from better productivity and indemnity outcomes. We are confident that claims will make an important contribution to the growth aspirations we have in our company and contribute in a meaningful manner to our ROE expansion goals. And so with that, I'd like to turn things over to our CFO, Phil. Come up to the stage. Thank you.

Thanks, Craig, and good morning, everyone. Before I discuss the efforts we've made on readying the company for an acquisition, I'll cover our approach to capital management and go deeper on our actions to sustainably increase operating ROE. Definity has transformed its capabilities and talent over the past several years and readiness for life as a public company, and this is well represented by our financial performance. Substantial growth has been delivered over the past 5.5 years, with premiums up over 70% to $4.3 billion, making Definity the sixth largest P&C insurer in Canada. Substantial progress has been made in diversifying our insurance portfolio, with commercial lines growing from around 1/4 of our book to almost 1/3 and an improved balance between property and auto within personal lines. This improved diversification and investments in our business has driven a substantial improvement in our underwriting profitability, with core outperforming our mid-90s target over the past 12-month period despite elevated cat losses. Along with a more balanced insurance portfolio, substantial progress has been made in further diversifying our operating performance by growing our net investment income while adding a new source of revenue and distribution income driven by our majority ownership of what is now the tenth largest P&C brokerage in Canada. The transformation in our operating performance has led to a substantially stronger financial position, with total equity exceeding $3 billion and double where it stood just over 5 years ago. Combined with the transformation of our ownership structure, we now have approximately $1.35 billion in financial capacity despite the deployment of $750 million into our distribution network, over $160 million in dividend payments and the required capital needed to support the substantial growth in our premium base. The depth and breadth of our balance sheet capacity and access to expanded forms of capital has positioned the company to advance its organic and inorganic growth strategies with a robust excess capital position and significant debt facilities in place, which remain relatively untapped. While this robust capital position prevent -- presents Definity with the opportunity for inorganic expansion, there are several operating levers available to us to drive further operating income growth. We believe effective execution on these levers, along with sustaining our strong existing underwriting performance, can drive our operating ROE upwards towards the low teens on an organic basis. You've already heard our confidence in driving Sonnet to a breakeven run rate basis, which would alleviate the current drag on results. We've also made progress in optimizing our operating expense base and continue to pursue additional productivity efficiencies while maintaining a disciplined approach to expense management. Alongside this, our claims transformation is at its early stages with also recently deployed onto the Guidewire platform, but property is still in progress. We believe these levers, which are more controllable by their nature, can provide increased earnings opportunity while presenting us with additional capacity to reinvest in our business. We are confident in the actions already taken and in flight as we look to sustain double-digit operating ROEs and drive to the upper end of our target range before capital optimization. Digging deeper into the operating expense lever, we are focused on continuing our trend of optimizing our expense base and reducing our operating expense ratio over time. Our focus on expense discipline and capturing the scale benefits through our double-digit growth rates in premiums written and earned has driven efficiency improvements over the past 18 months. Along with harnessing this growth momentum, we continue to capture additional efficiency opportunity across our operating model without disrupting the strong growth pattern and capabilities we have deployed. Our philosophy is to manage our operating expense growth to 50% or lower of our net underwriting revenue increase. This focus on efficiency and cost optimization helps position us for future operating ROE enhancement and synergy opportunity via M&A. Ultimately, we are targeting to glide toward an 11% operating expense ratio or lower over the next 2 to 3 years and the confidence in this trajectory given the actions already taken and in flight. Beyond our organic plans, we continue to believe the P&C market in Canada will consolidate over time, as has been the pattern over the past 10 to 15 years. Our strong operating performance, core capabilities build, scalable and modern platforms and robust access to capital positions us well to participate. The progress we have made in our broker platform build-out evidences our appetite and capabilities in deploying our capital accretively, and we remain focused on carrier M&A within Canada. We believe the optimization of our excess capital and leverage position achieved via deployment through inorganic means and the synergy and scale opportunity that can provide can add 2 to 3 points to our operating ROE targets and position us sustainably into the mid-teen range. We reiterate our capital priorities, which remain focused on capital deployment opportunities over return of capital. Along with our focus on capital deployment, we have also proactively grown our annual dividends since our launch as a public company, with over $160 million in dividend payouts over the past 30 months. This represents a cumulative growth of 28% since our IPO, growing in double digits in each of the past 2 years. And as you can see by our operating expense -- operating payout ratio, which is at the low end of our comfort range, we are well positioned to continue to grow our dividend over time, which remains a key priority for the organization. One of the benefits of the demutualization process was starting life as a public company with a very robust and totally unlevered balance sheet. This remains the case today, as we've been able to self-fund the significant capital deployed into our business and our distribution platform via the substantial operating earnings generated over the past 3 years. This unlevered position provides us with a strong deployment and capital optimization opportunity, which we would ideally exploit via accretive M&A. Post optimization, we would target a leverage ratio inclusive of debt, preference shares and hybrid structures at approximately 25% of our capital position. We've already taken steps to position the company effectively for future issuance with an $800 million largely undrawn debt facility, strong credit ratings with both DBRS and AM Best and the shelf prospectus in place to expedite any future issuances. While we may exceed the 25% ratio in the short term, depending on the scale of any capital deployment, our goal would be to manage back to the 25% position and sustain our strong credit ratings in support of our business strategy and future deployment. Our proactive management of the fixed income portfolio in recent years has enabled us to capture significant incremental yield in the rising interest rate environment. This has enabled us to generate over $190 million in net investment income over the past 12-month period as book and market yields converge to approximately 4% for the portfolio as a whole at the end of Q2. As the interest rate environment has now shifted, we are focused on preserving portfolio yield as much as possible while growing future net investment income through the investment of new cash flows into the portfolio. While the company is exposed to interest rate fluctuations, the offsetting impact of discounting on our claims liabilities provides meaningful insulation to the balance sheet and our capital base, as illustrated. Just shifting gears for a moment. I want to make a few comments on our risk management and reserving practices. Reinsurance remains an important part of our business model, and we think about the use of reinsurance in 3 broad ways: to protect the company's balance sheet and capital position from large events, primarily reflected by our traditional catastrophe treaty and for risk placements; for tactical purposes, including managing our entry into new lines, individual programs or individual large exposures. And for this, we may utilize quota share agreements or facultative purchases and for volatility management. We continue to believe reinsurance has a role to play as part of our volatility management for our core insurance business. This is best reflected by the historic use of aggregate covers, but also plays a part in our levels of retention and coinsurance on our reinsurance structures. We have robust risk management practices in place, which given the placement of our reinsurance purchases, ensuring only high-quality, sufficiently capitalized reinsurers are used and that concentration levels of coverage are appropriately managed. As we continue to grow our property and commercial businesses, maintaining efficient and cost-effective reinsurance programs, along with appropriate access to growth capacity, is a key area of focus for us. We believe our track record of incurring catastrophe losses at or below market share, including with the most recent events, positions us well and provides a strong opportunity to our reinsurance partners compared to our peers. While we do not provide guidance on expected levels of prior year development, either as a whole or by line of business, we have a long track record of generating positive development annually in the 1 to 2 points of loss ratio range. Our reserving practices are built with a view to preserving a positive outcome over time, and our philosophy remains unchanged. As we approached our IPO and continue to build out our commercial capabilities, we invested in enhancing our internal reserving practices and procedures, including increased focus on large and catastrophe loss management. This increased focus and the investments made in our underlying claims processes and more recent modernization of technology has enabled us to maintain this positive track record and generate positive outcomes in our claims management and settlement practices, as noted earlier. And before I talk about our inorganic strategy and capabilities, I want to provide a brief update as we near the end stage of our demutualization benefits distribution. In any transaction involving a large distribution of funds, some portion of recipients will not claim the benefits. This can be for a variety of reasons, like death, relocation, a different business or personal circumstances. It is common to provide finality and certainty as part of the transaction framework by establishing a sunset for financial entitlements. In our case, the conversion plan that governed our demutualization made provision for lost recipients, basically eligible recipients that we've been unable to connect with as part of our demutualization process. The conversion plan requires the benefits to be recaptured by the company after 35 months. And that anniversary is coming up next month on October 23. Definity has been very successful to date, with over 90% of the demutualization cash amounts distributed, which we believe compares very favorably with other transactions. That success has been due to significant and sustained efforts over many years, including a structured multiyear program supported by a third-party professional firm with extensive experience in asset unification and which remains active today. The entitlement of lost recipients to unclaimed benefits ceases after the claim deadline, and any remaining cash benefits become available to the company for general corporate purposes. Based on how the program has performed over time, we expect the amount of such unclaimed benefits to be approximately $180 million as of the claim deadline. We are currently assessing the tax implications, if any, associated with that amount, and the net balance will be reflected as an increase to book value and retained earnings in our year-end balance sheet. We will provide updates on this estimates in our Q3 and year-end financial reporting. And now turning to M&A. As we have clearly indicated, pursuit of inorganic growth remains a key element of our strategy. While we've been very successful in building out our distribution platform, providing complementary support to our insurance operations while diversifying our operating income, we remain focused on carrier acquisitions in order to accelerate towards our stated top 5 objective. We continue to believe scale is a vital component of long-term success as a broadly distributed multiline writer that the industry conditions remain conducive to further consolidation activity. Our priority remains in Canada, with a preference for commercial lines to supplement our strong existing franchise, but with strong synergistic capabilities to absorb personal lines volume also being the key attribute. And while carrier deal activity has been quiet over the past few years, it is worth recalling that of the top 25 companies by premium in 2010, 8 were acquired in the next 10-year period. This represented over 25% of the top 25 premium base at that time. We believe that many of the factors driving that industry consolidation remain relevant today, supporting our expectation of a further 10% to 15% of market share changing hands over the next several years. And while we will also consider nontraditional opportunities such as vertical integration on the claims side, carrier M&A remains our priority. Alongside our transformational capabilities, which support our confidence in successfully integrating acquisition opportunities, we see a number of strong business fundamentals, which should underpin sustainable value creation for the future. Strong broker relationships remain a key element of Definity's success and should support our inorganic strategy, helping preserve acquired books of broker-distributed business post-transaction announcement. Our ability to manage dislocation of business post deal is a key element of success. And we believe our investments in building strong broker relationships will help mitigate this area of dissynergy. The superior broker experience and ease of business provided by the Vyne platform should also help us integrate, maintain and grow acquired premium and customer base, as we believe this remains an important differentiator in the marketplace. The significant investments we've made in our underwriting and pricing capabilities is an important driver, not only of our organic growth and profitability, but also in how it can be applied to acquired businesses. And finally, the strong corporate culture we've worked hard to build and sustain supports our attraction, retention and development of key talent, another important success factor for M&A. As a key element of our corporate strategy, we are focused on delivering a range of outcomes necessary for accretive M&A. In order to successfully realize these outcomes, we continue to invest in our core capabilities and use our time effectively to prepare the company for integration. Alongside the deep internal expertise we've already built on the dealmaking side, as demonstrated through multiple successful transactions in distribution, we've also built integration management capabilities with supporting talent, frameworks and toolkits. The investments made in our technology platforms and leadership talent should also enable effective deal execution and synergy capture. We believe a key and proven capability of Definity is our ability to execute and complete large-scale complex transformational programs over multiple years. This is perhaps best demonstrated by the implementation of the Vyne platform in support of our personal lines and small commercial business, which included the amalgamation of 4 broker operating companies into 1. The transformation involved a complete rebuild of our existing policy admin platforms for those businesses, involved an overhaul pricing, underwriting, risk selection and technology perhaps more complex than a significant integration would entail. This was completed while in the midst of the demutualization process, a complex undertaking also requiring significant management time and attention. And since then, we have moved on to make significant transformative technology investments across our business, successfully listed the company and implemented the IFRS 17 standard while driving improved operating performance. We believe this pattern of success and the significant change management capabilities developed as a result, strongly position the company to be successful with future M&A integration and synergy capture undertakings. And in summary, I want to leave you with a few key messages to take away. Firstly, we believe we have a robust operational foundation in place, which has driven significantly improved operating performance. Combined with the transformation of our ownership structure, we have the benefit of a strong and growing balance sheet and significant levels of untapped financial capacity. While operating performance has improved, we believe there are several levers available to us to continue to drive performance, all of which we perceive to be more controllable in nature, and for which progress is already underway. This provides us with the confidence we can drive our operating ROE to the upper end of our 10% below teen range on a purely organic basis. Our strong performance continues to contribute healthy levels of capital generation, which has been more than sufficient to support our strong organic growth levels and dividend increases, while also funding our significant broker investments. We continue to focus on our core investing capital management, risk and reserving practices and capabilities, a critically important part of maintaining a strong and secure financial institution. And lastly, we remain focused on pursuing carrier M&A in support of our corporate strategy to grow into a top 5 P&C insurer in Canada and believe our track record of successful transformational activities and the talent, technology, underwriting capabilities and broker support we've invested heavily in should position us to be a successful integrator of other Canadian P&C businesses should the opportunity arise. In short, our strong fundamentals, combined with our proven transformative capabilities and significant investments already made, give us confidence we can be a better owner of other insurance Canada's -- other insurance carriers in Canada. Combining our organic growth plans and the catalyst of capital optimization through accretive M&A provides us with the opportunity to deliver sustainable mid-teen operating ROE over the medium term. Thank you for listening. And with that, I will hand the podium back to Dennis for our final Q&A session.

Thanks, Phil. Once again, just one moment while we set up some chairs. And as I mentioned, I cut off the last one a bit short, so Mahmood will start with yours. And I started in this business about 20 years ago, research at Merrill, and my eyesight was much better back then. So Jaeme, we'll go to you second. Sorry, I missed your hand earlier. Great. Mahmood?

Thanks again, Dennis. Appreciate it. Mahmood Reza from Panthera Global Investors. So thank you again for the presentation and the time to learn more about the company. Rowan, I think when we met 2 years ago, we talked about your aspirational ROEs, kind of what the long-term goal was, and you've now laid out kind of an ROE walk to kind of the below teens to, let's call it, 12 just to make numbers simple. And the walk has a reinvestment period. So some of the other -- the 3 other components that sort of accumulate to 600 basis points are sustainable, like persistent. And I'm curious about the reinvestment component. In other words, is that reinvestment component also sustainable, meaning you need to continue reinvesting roughly 2 to 3 points into the business to drive your growth higher organically? Or is that sort of a temporary 2-, 3-year reinvestment period that kind of get to that next level of growth?

Sure. Go ahead, Phil.

Yes. The way we think about the reinvestment is kind of 3 components. The first one is actually investing in some of the platform to help drive those benefits. So if you think of the claims transformation as an example, obviously, we're building out Guidewire, investing some capital funds into that platform. Some of that will go through the income statement sooner, but some will actually spread over time. So there will be a time components of the amortization of that and the underlying platform. So there's a component there that's reinvestment in the core business. The other aspect we'd say is pricing. So as we get more efficient and effective from an operating standpoint, some of that gets reflected back within the pricing on regulated lines. It's an embedded part of the pricing structure. But also it helps and enables us to be more competitive in the marketplace. So on that one, we'd say that's actually a good news story in that we can be more efficiently priced. Therefore, we can be more competitive. And then you should get us a virtuous circle where we can win more than our fair share of the marketplace overall, while preserving the margins. And then the last piece of it, we'd say is actually the required capital required to fund the growth of the business. So that isn't actually impacting the combined ratio per se, but it would drag your ROE back a little bit because you have to grow your balance sheet to kind of opposite that. So there's different flavors there. But generally speaking, we'd say it's part of the infrastructure, the cost competitiveness and that kind of continued capital base to support that outlook. But generally speaking, there's ranges around that. We think it's helping us to sustain the overall performance because one of our key goals is once we get ourselves into those operating territories, stay there. So there is a key element in making sure we have that sustainability in the outlook.

Just one quick follow-up. How do you think about ROE sustainability in a less favorable insurance pricing environment?

Well, I missed the last part of the question, sorry.

Just in a less favorable insurance pricing environment, how do you think about ROE sustainability?

Yes. Look, I mean, I think we do, as an industry, go through cycles, and the cycles obviously have some impact. But I think that as you heard in the commercial business, we don't necessarily compete on just price. And so our proposition and the way we structure the portfolio thinks about that. If you think about, for example, in Personal Auto, we went through a pretty tough period for a couple of years, and we're able to kind of manage our way through that. We're now allocating more capital and going to unit count growth as well. So I think when we give those kind of targets, we're thinking that, look, that's through the cycle, but the degree of variability will be quite limited. In fact, it's one of the ways we think about how we deploy our capital, is that there are some segments that are much less volatile than others. And so if you think about even the net investment income, when you have very high degree of confidence level than what your net investment income is, we like broker distribution. One of the reasons why we've invested the $750-odd million is the repeatability and the consistency of that. So you're much less exposed to the underwriting cycle. And then even within the underwriting cycle, we structured the portfolio. That -- look, there will always be some years where the combined ratio is a little higher than the other years. But we're pretty comfortable that those are sustainable targets that we can deliver in most years.

Jaeme Gloyn from National Bank. First question, maybe going a little bit back to this morning as well. But talking about Personal Auto, a lot of conditions are favorable right now, firm pricing environment, you've got benefits of scale flowing through. There's efficiencies that are building from a distribution and a claims perspective that Craig just got into. So why won't Personal Auto deliver up better than mid-90s combined ratio over the next several years?

Yes. And look, I think that there's always a little bit of variability into that target. And I think the way we look at it is the first thing we would say is we've got a pretty mature high-performing broker business. And that broker business does have the ability at times to deliver sub the 95%. In the shorter term, as you know, we've been bringing Sonnet down. So even in the next, let's say, year, Sonnet will be breakeven, but above the 95% combined ratio. So that's going to drift you up a little bit. I think the bigger view is that when we give guidance on automobile, the regulatory environment in Canada effectively moves you to about a 95%. They have about a 10% ROE cap. So there will be years where you can outperform that, but we don't believe on a sustainable basis just because of the market structure and the market environment. So it's not to say that we don't think we could go sub-95% at certain times. I think what's more likely for us in the short term is that we'll be mid to upper 90s as we continue to grow Sonnet. We had one question earlier this morning, and we think what does the digital market look like. And we could slow Sonnet's growth and push it towards 95%, or we could keep it up in the upper 90s still contribute to underwriting income, but take share. And we think the next couple of years is going to be a nice opportunity to do that. So I think that's the real kind of reason for that. Of course, there are times when you can do better than that. But I think if we look at this through the cycle, the regulatory cap has an impact on that. It's also why one of the things we're saying is that we're focused on growing the other parts of the business at a rate faster. If you go back in our history, we had about 55% of economical business in Personal Auto, it's down to 42%, and we think it will go less than 40% in the next few years. And that portfolio construction allows us to generate higher returns and sustainable returns as well.

Okay. And then second question focused on the broker acquisition strategy, fairly active over the course of a year from '22 to '23, but it has seemed somewhat quiet over the last year. So maybe unpack the conditions that are -- you're currently seeing in the broker M&A space. And then the follow-up there is with those acquisitions that you made, have you seen any benefits to Definity's premiums within that broker platform? Are you seeing an increase in your share? And in what lines are you seeing that flow through?

Yes. So firstly, I'd say that we were delighted to be able to build such an impressive set of assets so quickly. So we're now from really a standing start, a top 10 broker in Canada. We were more active because we had 3 sizable transactions. But in total, we've done now 11 transactions. And so this stage is now much more bolt-on or programmatic acquisitions. We're -- it's lumpy, and we're seeing a very healthy pipeline. So I think that the ability for this business to continue to grow in the upper single digits organically is that's their track record. But there's a healthy pipeline. And so I think, Jaeme, what you'll see there is some lumpiness in how that moves forward, but quite a nice capability for us to significantly improve that. In terms of the contribution to Definity, we're one of the leading underwriters in that business. As they get bigger, there's more business, more profitable business that we could participate in. And I would say that in the past year or so, whilst we benefited as being one of the leading underwriters and we are growing with that asset, most of the growth has actually come in the commercial lines side of things. So it really is helping that part of the business grow forward. But the philosophy that we bring, and I think this is quite an important differentiation in the marketplace is the first thing we say is we like the brokers themselves to have skin in the game. So our model is not 100% ownership model. It's roughly 75%. And that it keeps great succession. It allows the entrepreneurial spirit to continue and significant wealth creation for that group of brokers. And the other thing is we continue to operate this as a truly independent broker, meeting lots of markets, lots of choice to customers. And so we don't steer business to Definity, where we have the best proposition and are competitive. We win, but we like them to operate in the traditional independent model. We think that, that's the right way to build that business. So I think we're quite bullish on that. It's really gone quite well. It's clearly making a nice contribution to our earnings. We've given some guidance that I think we're tracking very strongly against.

Steve Boland, Raymond James. Maybe just a claims question. I'm not sure if you disclosed this, I apologize if you did. How much of your claims do you adjust internally versus using outside?

Go ahead.

Great question. We have really moved towards more of an in-sourcing model. And just over 95% of our claims, we handle internally and in-source that, which provides better quality outcomes, better customer experience and a better indemnity results as well. So that's why we've really focused on bringing that in.

Has that number changed over a year, 2 years, 5 years?

It's actually quite improved where a lot of the insurance industry was outsourcing a greater proportion, and then we've certainly moved to in-sourcing a lot more now.

Okay. And then a question for Rowan I guess. You talked about consolidation. Can you just -- like we haven't seen a lot of consolidation on the insurance company side. The broker has been fairly active over the last few years. What do you think is the catalyst to get that consolidation restarting again here in Canada?

Yes. I'd say that we've had a fairly unusual period of time if you go back to the last couple of years. We had COVID, which locked us all down, and that changed many people's operating capabilities and philosophies. We then went into a rapid inflationary period. And I think we're kind of normalizing and stabilizing now. For us, this means that we have the thesis that we will return to a more historic pattern of consolidation. And if you look back over the last couple of decades, approximately 1% to 2% of market share changes hands every year. So that would lead you to believe 10%, 15%, 20% will again continue to change hands. And some of the drivers for that are the need for scale technology. You heard today from Paul and Donna talking about how to run a personal lines operation, the importance to brokers of digital interaction, the ability to have data and scale and sophistication, to manage CAT accumulations. I think all of these things are starting to drive the need for size and scale. I think when you look at commercial lines, what you heard Fabi and Paul talk about is how they built through 3 segments. But one of the very interesting and high-growth segments for us has been in the specialty. And until literally a few years ago, specialty was the domain of international insurers. There were very few domestic insurance companies that have the capability to operate in that area. And now we've got a couple of strong domestic players that operate and brokers would prefer to deal with those insurers. And so I think that you're seeing them flatlining, their future looks less promising than before. I think they look at things like Nat CAT environments, the greater dependency on reinsurance. The smaller you are, the more you need reinsurance support, that's going to get more difficult. So we're pretty confident that we'll start to normalize and there'll be more opportunities coming from M&A in a couple of years ahead.

I'll sneak one more in. Are you surprised that you -- I mean, I haven't seen it, but maybe any other insurers do mutualize -- do mutualizing? Like has there been any speculation or rumors that you've seen or heard?

No, there hasn't been that we could see. I think we felt we're in a fairly unique possibility. We're delighted with what -- how it's turned up for ourselves, but we're not in the market that I'm aware of seeing any other mutual companies pursuing that at this stage.

Tom MacKinnon, BMO Capital. You talked about integration readiness, but maybe you can talk a little bit about integration experience. Probably not as a team, but maybe individually, you may have had it in former lives, but I think you can share with us that.

Yes. So I think in terms of the individuals, so one proxy we often talk about within Definity is the big transformational program experience. So obviously, a lot of this leadership team within Definity has managed through those programs. So a lot of inbuilt capability, claims communication management teams, kind of the right governance, kind of practices in place. So Definity kind of core experience has been pretty high on dealing with some of these large complex transformational activities. We then supplemented that with the build-out of an integration management office. So we have a distinct team rooted up under the Chief Strategy Officer, where we brought in individual talent into those teams with past M&A experience and integration experience. So that's a dedicated team of practitioners. And they are working within the organization to build playbox, toolkits. We've done scenario analysis of what it would take for different types of organizations, different mixes of business -- classes of business, complexity in back office or is it straightforward bolt-ons. We've actually run scenarios within that. And then the last thing I'd say is with the transformation of the leadership team that Rowan has led, if you look across the leadership group of the key people within Definity, even though they may have not had the M&A experience with Definity as a company, they've had it in prior experiences. So Rowan obviously has lived through a number of transactions, led those transactions on the integration aspect. So [indiscernible] have several people across the leadership team. And then as they built and brought talent from other organizations, we've had a lot of followers of that talent. And so actually, we'd say, look, if you looked across the top 100 leaders in the organization, the majority of those individuals have M&A experience in other organizations. So we think we've got a really nice blend of Definity transformational experience, the supplementation of the IMO office and now talent that's come across who've experienced those situations before.

Feel free to raise your hand if you have any other questions. We have one up here, Brian?

Brian Meredith, UBS. On the brokerage business, I'm just curious how much as a percentage of earnings do you think that can be longer term? Kind of what do you think about? And how does that factor into your upside ROE math that you kind of threw into for your presentation?

Yes. I think, first of all, when we look at the -- we had the question earlier around stability. So over half now of our operating income over the last couple of years has come from the combination of net investment income and distribution income. Distribution income itself maybe 20% to 30% in the nearer term, we think is a reasonable target. And if you look at what we've done with the size of that business, that we've gone from $0 to $1 billion, and now we're trying to drive to $1.5 billion over the next few years. And we see that quite linear. So with the good margins that we've got within those operating platforms, if you could scale it by 50%, we think the dollar contribution could be pretty equivalent to that level. But then on top of that, we also see the underwriting lift that we can get. So there's a pure distribution income component, but if we can then grow the market share, win the business more effectively and then you'll have the operational efficiency that at the end of the day, we're paying ourselves from a commission aspect that will also help drive the combined ratio. So you're only seeing 2/3, 70% of the contribution when you look at distribution income as a whole. The rest of it is embedded within the operating -- the underwriting results as well. So it can be quite meaningful in terms of contribution.

And I guess where I was going with that question, I would have thought that -- to the extent that's a bigger part of the earnings mix, it's very ROE accretive because there's really not much capital that is associated with the brokerage distribution income. So that's what I was kind of curious, is there upside to that 12% as that grows?

Yes, you're absolutely right. So the capital impact comes, obviously, when you do the first transaction. But not only can you grow those businesses without additional required capital, the business is very cash generative, they're very capital generate too. So you can get into a really nice self-funding cycles with those operations. And so that's for sure, we see as an area of opportunity. And I think what we're saying with the ROE walk is there's a lot of levers there that we feel very confident in. And so certainly, our objective is to drive to the high end of that range, but there's certainly opportunity to outperform from that perspective. So -- and each lever has a range of opportunity around it, but that is an area that we've got an excellent platform. The team has been really capable. And when we lent in and did the first transaction there, we were very focused on buying a leadership team as well as the platform. So the quality of that team is super high. They're very experienced with M&A in their own realm, and they've built a really strong franchise. So certainly, for sure, we're very supportive of that. We see that as an area of upside expansion.

Any other questions? Seeing none. Thank you for joining us for the Q&A. As we exit the stage, I'll ask Rowan to stay and make some closing remarks.

Thank you. All right. As we come to the end of the session, I hope you found it valuable and have a clear view of Definity's opportunities and plans ahead. I really hope that each of you take away a number of things from the presentation today, and here's what I'd love you to take. In our core business units, we've truly built a high-performing and capital-generative machine with a winning culture. We're able to outperform in the industry and gain market share. Our platforms are well received by our brokers and customers and enable rapid deployment of our expertise. We built a platform for a larger business and enjoy tremendous broker support. Our engaged employees and quality talent give us great confidence in our execution capabilities. When looking at our financial performance, we have high confidence in the revenue, the combined operating ratio delivery. We're already built to deliver a double-digit operating ROE, but we won't be satisfied until we could substantially and sustainably reach the mid-teens. Multiple initiatives shared with you today have been implemented or underway or planned. And the 3 areas of Sonnet's expenses and claims transformation are high probability levers that will deliver in the near term. We do have a thesis that the P&C industry will continue to consolidate and we've proven that we can be a better owner and run a high-quality insurer. Our platform is ready. Our team is the experience, and we have the financial capacity to be a consolidator in Canada. So thank you very much. Thank you all for joining us today and for the interactive session as well as your interest in Definity. I'd like to thank all of our shareholders for your support. It's very much appreciated. We'll close the session now. And for those of you that are able to join for lunch, we welcome continuing the discussion. So thank you all very much, and have a great day, everybody. Thank you.