QBE Insurance Group Limited (QBE) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to QBE Third Quarter Market Update. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Chief Executive Officer, Andrew Horton. Please go ahead.

Thanks, and good morning, everybody, and thank you for joining us today. As you know, this morning, we released our third quarter trading update. On track for another year of exceptional performance, with strong momentum in the business, and we're confident of sustaining strong returns from here. There are 3 main parts to the release. First, we've announced an on-market buyback of AUD 450 million to take place through 2026. Secondly, the release includes the usual detail on the performance of the current year. And finally, we've also included some early thoughts for the year ahead. I'm here with Inder Singh, our Group CFO, and we'll take the next 5 to 10 minutes to unpack each of these points in a little more detail. So let's start with the performance in the current year. Confident of delivering our 2025 guidance for both growth and the combined operating ratio. Strong underwriting result alongside excellent investment performance leaves us well placed to deliver another return on equity in the high teens, QBE's best performance in well over a decade. Year-to-date gross written premium growth was 6% compared to the prior corresponding period, which included ex-rate growth of 5%. If we exclude the drag from noncore lines and Crop, underlying ex-rate growth at 6% is broadly in line with the first half result and continues to be driven by a breadth of profitable growth opportunities across our diversified business. It's worth reminding you that our ex-rate growth includes both volume and exposure adjustments, and these exposure adjustments play an important role in managing inflation. Premium rate increases in the year-to-date were around 1.5%. Change relative to the first half was prominently driven by commercial property, where market dynamics have been well documented in recent months. And as we outlined in August, competition is more pronounced in Commercial Property and Lloyd's, which represent about 1/5 of our premium. Excluding these segments, rate increase was around 4% across the remainder of the business, broadly in line with the first half. Worth noting the profitability in Commercial Property and Lloyd's is very strong. And when we look to 2026, returns in these areas remain attractive. We'll now turn to claims. In aggregate, group claims are tracking broadly to plan. Our goal is to deliver resilience and consistency, and I think we've managed this well. The release details our second half catastrophe position. Experience through the 4 months to October was quite favorable on what was a relatively quiet hurricane season, and our allowance for November and December is around $200 million. We have indeed experienced some local cat activity in November, which will take some time to assess, though as it stands, we're likely to be comfortably below our full year catastrophe allowance again in 2025, which will mark the third consecutive year that we've beaten the budget. This highlights the resilience of our property portfolio and the improved confidence in our catastrophe allowance. We expect a modest reserve release for the year, which I think will mark the first full year release in several years. We spoke in August about our confidence in the quality and stability of reserves from here. I'm really pleased with how property lending on our current assessment will have a current year result, which is slightly ahead of plan. While the overall price and yield dynamics were more supportive this year, the strategic initiatives we implemented over the past 12 months had a tangible impact on performance. And these initiatives will deliver further benefit into the year ahead. Group ex-cat claims are a little above plan. At the half, we spoke about large risk claims and mix, and we've also seen some industry-wide claims frequency in North America's accident and health business. We expect normalization across a number of these aspects into the year ahead, particularly in A&H, given the pricing and terms adjustments anticipated at the upcoming 1/1 renewals. I think we've generally adopted a cautious stance on the current year where warranted. And ultimately, with the portfolio and better balance, we're well placed to manage through any period-to-period variability. If we move to 2026, moving to the year ahead. We've included an early view of our combined ratio outlook in the release today. 2026, we see another year of strong returns, underpinned by a combined operating ratio of around 92.5%. We're able to share guidance at this point given the much improved stability, breadth and visibility of profits in the business. We'll provide GWP guidance in February with the benefit of some of the upcoming data points for our 1/1 renewal businesses plus Crop. Generally speaking, however, we think premium rate increases for the year should track at similar levels to 2025, and we've spoken a lot about our focus on delivering sustainable mid-single-digit volume growth. So touching on some of the key drivers of the underwriting outlook. We see 3 key components driving our outlook into next year. Firstly, catastrophe and large risk costs, where some normalization on the latter should occur and our absolute cat allowance in dollars will be fairly steady year-over-year. Secondly, a generally supportive operating environment, where we expect some reinsurance savings, operating leverage and modest operating efficiencies. And finally, core underwriting performance. We expect further margin expansion from performance management initiatives and a reduced drag from noncore lines, notwithstanding rate softening in certain lines. We'll be able to have a better discussion with more detail around these drivers in February once we've landed the result and any other outstanding aspects of our '26 plan. Moving now to capital management. We've previously spoken about the uplift in our medium-term planning effort. As it stands today, our medium-term outlook is characterized by mid-single-digit growth, driven more so by the volume than rate, fairly sustainable combined ratios around current levels and modestly lower interest rates. With this outlook, returns will remain robust, we'll generate enough capital to fund growth and a 50% payout will continue to generate modest surplus capital. Today, we've announced a AUD 450 million on-market buyback of ordinary shares, which we will fund through surplus capital. If you assume we hold a 50% payout ratio for the full year '26 -- full year '25 results, the buyback will increase our total shareholder distributions to around 65%. With the approvals required, we may be eligible to commence purchasing shares in late December, but ultimately expect the majority of activity in 2026 and intend to conclude the program in 2026. We remain upbeat about future growth prospects and really see an environment where we can both generate targeted growth, but also return a little more capital than we have in recent years. Each year around this time, we'll review the outlook for growth, returns and the balance sheet and use active capital management as a lever to optimize performance. So with that, I'm going to finish here. In February, we'll unpack these points, I know, in some more detail. So thanks for joining this morning, and we're now happy to take some questions. Over to the moderator.

[Operator Instructions] Our first question comes from Kieren Chidgey from UBS.

Maybe just starting on the sort of trajectory you're talking about into '26. I mean it does sound like you've encapsulated the roughly $250 million cap budget beat into achieving this 92.5% guidance for FY '25. You've also flagged some modest prior year reserve benefits this year. So I mean, back of the envelope, if we add those back, it would suggest you're sitting probably about 94% for this year ex sort of that cat budget beat and reserve release and you're talking to 92.5% next year. So just wondering if you can sort of expand a little bit on some of the areas you called out then in terms of what is going to drive that underlying core lower next year, particularly your comments around further margin expansion, where that is coming from, if it is more mix because of strong growth in these broker facilities as an example? Or how we should think about what is driving that and what your confidence is around achieving it?

Yes, Kieren, thanks for the question. I mean I think it's a really important question because, of course, we're managing the company in total rather than in various elements. We're trying to deliver this overall consistent strong return with some growth. And that seems to be, I think, quite a noble aim if we can achieve that through areas that can be quite volatile. So we do look at it in the round. So you're right, we've beaten non-cat, and we've had some lines of business haven't performed as well as we originally planned, and it nets out to this 92.5%. And not surprisingly, we're expecting in 2026 cat to normalize. So we're not planning for another beat in cat. So we don't assume we're achieving the 92.5% in 2026 with the same beat we got in '25. But we also expect the lines of business where we had more challenge this year to improve. And that can be some of those nonprofitable lines that we've been flagging for the past year or 2, and we've done a pretty good job at lowering their losses, but there's still some more to do, and that's a number of lines across the various businesses. The A&H specifically, there is talk in the market that rates will go up by at least 20% on 1/1. And therefore, that should counter the fact we've seen ex-cat in A&H or the losses in A&H be greater than planned. And there are just 1 or 2 other lines of business like that. So it ends up being an accumulation of a number of things that brings us down. The large losses have been greater this year. And I was talking to someone the other day about what is going on with the oil refinery world because there seems to be a number of energy losses and they have been more than normal, and we don't expect that to continue. So we do take a bit of credit for that into next year. So it is a combination of factors that gives us confidence we're going to deliver a pretty strong return of 92.5% next year, consistently with the 92.5% this year. But one thing is certain, the makeup will be different. One of the things about the company, as I said a number of times, the breadth of geography and product means we should be able to balance it out. So if we do take a deterioration in one line, we can offset it in another. I think that's been one of the challenges of the company in history that we haven't been able to do that, and we just take the losses and the return deteriorates.

And just to clarify [indiscernible] I presume you're not counting on any reserve release at this stage into next year? And also, you touched on...

Yes, you always plan with nothing into 2026. So you plan with that. The only area where we do contemplate every now and then is whether LMI because it's generally reserved relatively conservatively. But no, you have to plan on nothing because if you know about it now, you have to take it now. So you can't really plan to have something you don't know about.

Yes. And finally, sort of last subcomponent of that question, Andrew, just on the cost sort of remarks you made, what sort of -- like how are you thinking about the cost base across the organization, particularly as we're going through a softer part of the cycle?

Yes. We're planning on growth. I mean, growth this year has been greater than our growth in expenses, and we're planning to repeat that into 2026. So that brings us -- brings the expense ratio down a bit. So I think I'm looking at -- we're talking about up to 0.5 point-ish, we hope.

Yes. So Kieren, as we project forward, obviously, we have good line of sight of the net insurance revenue for next year, given we've written quite a lot of the premium that is going to earn in the first half at least of next year. So we're sort of seeing the growth in net insurance revenue as being higher than the growth in expenses, and therefore, we're seeing positive jaws that are contributing. And I guess at the margin, we're also baking in some level of savings from reinsurance year-on-year when you think about your bridge that you're trying to construct.

Next question comes from Nigel Pittaway from Citi.

So first of all, if we just sort of maybe delve a bit more into this A&H. And obviously, you're talking about 20% rate increase at 1st of January. So I mean, is there an element to which you feel you've been pretty conservative in taking those loss picks through into this year? Because it does look as if you look at almost, following on from Kieren's question, I mean, if you look at the ex-cat attritional loss ratio, there must be a fairly big negative offset in that, given you've got 260 favorable on cat. You're saying crops better than expected, you've got favorable prior year releases. So can you talk a little bit more about that?

Yes. So I mean, on the A&H one, Nigel, it's definitely been market-wide and been talked about a lot in the market that many of the A&H insurers have been surprised, have taken a reasonable amount of extra loss in 2025, and that's why the market moves quickly. I mean on the positive side, it's a relatively short tail class. You see the claims pretty quickly, and therefore, you can respond to it. On the possibly negative side, if you don't respond enough on Jan 1, you've got problems because 70% of the business is written on January 1. So if you find out after January 1, you should move more, you have to suffer that year until you can move again on to January 1 the following year. That's been the main change in the -- I don't think we've been conservative in taking it, and we're very in line with others, and we see others who write this line report similar things to us. I don't know if there's anything you want to add, Inder, to that?

Yes. I mean it's hard because we're reacting to claims trends. If you look back a couple of years ago, we saw an uptick in Q3 claims activity. We then picked our inflation loss picks higher. And then we found that didn't actually hold as true as we thought. But this time around, we have seen some of that claims activity actually come through. So I wouldn't say it's necessarily conservative on A&H per se. But we are trying to obviously make sure as we exit 1 year into the next that we're not seeing changes in our loss picks, especially on short-tail lines. So we are trying to be thoughtful, I'd say, across the piece. But A&H is a specific one we're just wrestling with as is the industry.

And the only other comment, Nigel, I'd make, we've said a number of times, we're trying to make the balance sheet more robust by setting what we think are sensible reserves for our medium- to long-tail businesses and not adjusting them based on short -- seeing short-term benefits to them because it normally takes 3 years and beyond to get good insight into where the reserves should be. So we're -- I don't know what year we're into doing that, year 2 or 3 of doing it. But of course, if you see something deteriorate against it, you have to take the deterioration. So you take the deterioration, you don't take the credit until year 3 or beyond. So we're trying to get into a position of a more robust balance sheet where we don't get prior year top-ups and there are potential things to take against it. So I'm not sure that's conservatism or just good common sense in the balance sheet.

Okay. Secondly then, just on the dividend. I mean, previously, you've sort of hinted that the sort of interim dividend would be that 30% of full year payout, which does imply sort of a payout ratio maybe a little bit above the 50% that you're sort of hinting at in today's release. So I mean, I guess there is -- initially, that raises the question as to whether or not the buyback is sort of being taken at least in part from the dividend. So can you just sort of maybe expand on that a bit?

Nigel, just to clarify, I think we've consistently said that our planning assumption is that we pay out a full year ratio of 50%, right? Now what we've said is at the first half, we would probably be a bit at the lower end of that, just given cat and crop and other variables in the second half, but we then true that up through the second half payout ratio. So I'd look at the commentary as being consistent around the full year being struck at 50%, and I would see the buyback sitting alongside that. So a 50% payout for the full year 2025 plus the AUD 450 million buyback in addition to that, which then takes the payout ratio, if you want to look at that back to Andrew's comments around that 65%, 66% for the full year.

Okay. It just implies that the growth you got in the interim might not come through in the final if you take 50% literally, but obviously, the EPS is another variable. All right. And then maybe just on -- obviously, one thing you haven't disclosed, which you've disclosed in prior quarters is your group rate movement for the third quarter. Is there any reason why you haven't disclosed that? And is it possible we could get the number for this quarter?

Yes, Nigel, definitely, I'm the driver of that because I think looking at 1 quarter or 1 quarter in a mixed insurance business doesn't mean much in itself because it depends on what we're writing at any point in time. And I am -- I mean, the rate increase is obviously of interest to us and the rate increase versus inflation is sort of vaguely interesting, although I think we're being cautious is on inflation, rates are what they are. And that's the reason we're not doing it because I think it's relatively well known where rates are going down is property, where they've gone up a lot and Lloyd's to some extent, where the margins are good. But a lot of the rate decrease has nothing to do with inflation at all. It just purely has to do with the margin everybody is making from these at this point in time. So I think we're getting very stuck on a quarter-on-quarter. It makes some sense year-to-date, quarter-on-quarter. I'm not sure what it means because we then have to explain how much of every line of business we wrote in that quarter because it's a completely different mix per quarter, but are not comparable.

Where we can be helpful going forward, Nigel, is talking to you about full year year-to-date rates, we'll continue that. And we'll also just then provide some color on various product lines to give you a better sense of what is actually happening in the lines of business, so you can get a sense of where margins might be heading, which I think is more consistent with the way we look at the business internally, and then we can be a little bit more constructive around the dialogue around that.

Okay. So I mean, is it possible to say whether rate increases were still positive in 3Q?

Rate increases are positive in a number of lines and rates are not positive or flat in property and some of the Lloyd's lines, which I think we've flagged. I mean that's exactly what we're trying to do. So yes, so we flagged property in the London market being the most challenged and everything else sort of okay. But even in everything else, there's going to be some going up and some going down within that.

Yes. No, I mean it's just the market that seem to focus quite a bit on this at the moment. So it's an important number...

Yes. No, I get it. I get it. But it's not how -- what I'm really trying to do is reflect how we look at it. And we don't look at it like that. So we can talk about it. It's not that meaningful to how we're running the company, and that's the challenge we have. So I'm trying to get it into how we actually look at the company. I'm not surprising, we're focusing line by line, estimating inflation line by line, although inflation, a few years ago, no one really estimated inflation line by line, certainly while inflation kicked in. So that's what we're trying to reflect. So definitely flagged that property is a challenge. Property is a challenge from where it was, but it's still much higher than where it started from, and people are still making a reason amount of money from writing property business. So it doesn't mean it's a negative line to write. It's just not as super profitable as it would have been a year or 2 ago if everything else was the same, which it isn't.

Next question comes from Freya Kong of Bank of America.

Can I just ask on the ex-cat ratio for 2025? Maybe asking Kieren's question another way. Would you be able to give us the breakdown of where the deterioration has been driven from this year versus last year, so between noncore, business mix shifts and the high ex-cat losses?

I mean it's mainly in -- it's not really in the noncore business. So it's not there. It's definitely in the A&H, as we've flagged. I'm not sure I can go into any more detail than we've done, but it's not in the noncore. It's in the core business rather than noncore. I don't think noncore has caused us too much of a problem.

Yes. I mean I think it's those drivers we've been very consistent about through the first half. We've seen elevated large losses, and that's more broadly speaking, but particularly pronounced in the international business. We've talked about some of the mix shifts. A&H is definitely a contributing factor. So those are the 3 main elements, Freya, in terms of -- then we've got, obviously, the improvement into next year along the lines that Andrew has laid out, where we see the opportunity to improve the underwriting performance of a number of cells, which are either still slightly unprofitable or not meeting their hurdle rates.

Okay. Great. And then just on Accident and Health again, given that -- given the deterioration you've seen this year, is it influencing your business plans for next year? Because I know this line was an area of targeted growth.

I think it's a good point. I mean it's definitely made us think whether we want to do volume growth in the A&H rather than remediate. So it's a bit like how we look at the Crop business in 2025 that we weren't really pushing them to grow, what we really got them to focus on how do they ensure they hit a good combined ratio. So I think it's going to impact the non-rate volume growth. That said, it wouldn't surprise me if they grow just as much as we thought because the rate is going to be higher than we planned. So on the stuff, not new stuff, the renewal, they need a larger rate increase. So we'll see A&H grow. It's just the exposure probably won't grow as much as we would have planned earlier in the year. So I'd rather they focus on margin rather than looking for new business at this point in time.

I'd probably look at it -- we're thinking about it short to medium term. So we remain, Freya, of the view that we've got one of the finest businesses. And over the medium term, we should be able to grow it. We've got some really nice competitive positioning. It's a very data-driven business. So you can actually start to segment where you've got the business, where you're seeing some of the loss trends and some of the actions you can take. And these are industry-wide issues. So they're not very idiosyncratic to QBE's book. So I'd say medium term, still strong conviction as an attractive growth area. Short term, we just need to make sure we're on top of some of these claims trends.

I completely agree. And we've also been involved in the business for 25 years, and it's been a fantastic performing business for us.

Okay. Great. And sorry, just last question on other areas of growth in 2026. I think previously, you've called out cyber reinsurance as well. Do the fairly significant price declines in the market maybe change the plans? Or you -- do you still see them as very adequate and good areas to grow?

Yes. So the 3 areas in addition to A&H, we've been talking about, are cyber, QBE Re and facilities. So those are definitely still areas in focus. Got to remind ourselves, remember, QBE Re is only 1/3 property, 1/3 specialty and 1/3 casualty. So it's the property areas generally where the pricing is under pressure. So there's still growth opportunities, and we start from a low-ish base. So that's fine. On the facilities, the facilities will just naturally grow because we started some in 2025, and therefore, we've only been on them for half a year or a period of year. So in a full year cycle, they will grow. And we're still seen as a leader in this space. Generally, they're performing well because they have good balance. Again, they're not purely properties. They're writing different lines and they perform well. So I think you can see the facilities continue to grow. QBE Re continue to grow. Cyber, we've got to be wary of because pricing is not brilliant, although it looks as though it's flawed and it is coming back a bit. But remember, we started from a relatively low base on cyber, and we've done well at growing out consistently across the QBE portfolio. So yes, still expect that. And then we're looking for other areas. I mean we've got good margin in a number of lines of business. We've mentioned before, Australia is quite competitive at this point in time. But the business has performed really well in '25. Therefore, we're looking at brokers and how can we support them into '26. Technical pricing generally is pretty good across the portfolio. So we still want to look for growth opportunities if we can. We have got to be wary because every other insurer company on the planet seems to be looking for growth opportunities as well. So we need to play to our strengths. And that's why those 4 areas were the ones we flagged for '25 and continue to be positive about them in '26 and beyond.

Next question comes from Julian Braganza from Goldman Sachs.

Just a couple of quick questions for me. Just in terms of the budget for next year, I think you mentioned sort of flattish. Just thinking maybe we expect a reduction given the runoff of the noncore portfolio, the losses coming from that? Can you maybe talk about that and maybe that improved resilience further in the budget [Technical Difficulty]?

Julian, your line is very untidy. If I understood the question, you're asking about the dollar value of the cat allowance being flat given the unwind of the noncore. Is that right?

That's correct. So should we have expected a benefit there to come through or have you improved the resilience further?

Yes. Obviously, net insurance revenue is growing, Julian, so we are growing the business overall. And what we're doing is, in essence, the benefit we're getting from some of the exposure runoff in noncore is then supporting some of the growth in the business more broadly. So we're not changing, I'd say, the settings in terms of cat. We've talked about broadly holding a high level of confidence around that cat pick. So we're not necessarily changing our settings. That's just a roll forward of where we're seeing, in essence, the net exposure change, obviously, taking into account where the business is growing, noncore running off and kind of the changes in the reinsurance program that we're assuming at the moment.

Sorry, it also encapsulates change in the reinsurance program. I'm sorry, you're saying that, that would be an uplift to the cat budget? Can you share some initial views of how your reinsurance program might change?

Yes. No, I think what we're saying is that there are minor assumptions we've made in and around the reinsurance program. We'll have to see how that lands ultimately, right? But what we're saying is that the net cat budget is set on the basis of broadly similar confidence levels from a planning basis and the rest of it is just a roll forward of the business mix.

Okay. Okay. That's fine. And then maybe just to be very clear, just incrementally, the cat beat was about $180 million from the third quarter, that's the last 4 months versus the first half result. So just to be very clear, it all -- it's largely been offset in terms of just A&H and the inflation that's coming through. Is that all largely coming through that third quarter period? Is that how we're sort of seeing that's offsetting it just that the 92.5% is being retained? Just want to get the clarity on the timing of this inflation that's coming through in A&H, specifically over that third quarter period.

Yes. I mean, look, I wouldn't get too hung up on the quarter-on-quarter, but your analysis is right that what we're looking at for the full year in terms of our full year guidance commentary of 92.5% assumes that we will have a cat beat along the lines you have said, right, which is you take the first half cat beat and kind of the year-to-date where it's tracking. It is offset by some of the trends we're seeing in ex-cat, which we have highlighted, which includes A&H as one of the components.

Yes. Okay. So it's the A&H is quite material over that third quarter. And it's all coming to the claim payments line as opposed to anything we've set on reserves. Is that fair? Is it all on the claims payment line and it's paid claims? Is that that's coming through in the third quarter?

Yes, yes. So it's -- as we talk about ex-cat, we're talking about current accident year. On the reserves, we are saying that we're assuming a modest release for the year. And if you look back at the half year, we had a modest release at the half year, right? So I mean, the reserve development half-on-half is not materially different.

Just to be super clear for that third quarter, it's a combination of current accident year reserves as well as claims payment, it's not all claims payment is what you're saying?

I'm just struggling to understand your -- can you just repeat that again?

No, I was just wondering, the claims inflation coming through an Accident and Health over the third quarter that's offsetting some of the sales beat. Is that all -- it's very clear that what you're saying is that it's not all paid claims, it's also a combination of higher reserves for current accident year...

Yes, that's right. I mean yes, I mean, obviously, it's loss picks even in short tail lines. So we're sort of making assumptions in the 92.5% reiteration of full year guidance, Julian, the best way to think about it is we are making a series of assumptions around loss picks for A&H that we will just have to see how that seasons over the first quarter, the second quarter of 2026.

Okay. Got it. That's clear. And then just specifically on the -- for FY '26, just what's your view of underlying inflation assumptions that -- you mentioned rate increases holding in line with -- I think you said rate increases holding in line with 2025. Confirm [indiscernible] if that's correct. I just want to understand where that confidence is coming from given the trends that we're seeing on rate and arguably going more into the negatives territory? And then secondly, your inflation assumptions, underlying inflation assumptions ex-cat, ex large losses, how you're sort of thinking about into '26?

I mean we -- on the inflation assumptions, we can -- to Andrew's point earlier, when we look at the lines of business where we are seeing some inflation, areas like, say, motor, for example, or in parts of the world or even areas where we're assuming some level of continued elevation in claims, for example, in casualty, we are seeing that we're getting rate that is compensating us for that. The rate in property lines that's coming off is a margin issue, not a relative to inflation issue. So as we look into 2026, we've been pretty sensible about our inflation picks year on year on year. So as we said sort of in the low single digits for 2025, we're sort of moderating that a little bit into 2026 at an aggregate level. And where we are seeing inflation, we're getting some rate to cover that. But the rate versus inflation at an aggregate company level is not -- is imperfect science.

Next, we have Simon Fitzgerald from Jefferies.

Just wanted to unpack the trends that you're seeing in property just a little bit more. But firstly, Andrew, if I could just reiterate the weighting of property. I remember in the first half '25 presentation, it says about 34% of GWP. But I think I heard you just say Property and Lloyd's would be about 1/5 of our business. Can you just elaborate on that firstly?

Yes. I mean I think because we're trying to put in the large commercial property in there -- the cat exposed -- I mean, where we're seeing property rates fall a lot is the large cat commercial property and a reason that in the U.S. So Europe is not seeing the same sort of rate decreases everywhere else in the world. And this is one of the challenges with everybody is bucketing it all together and saying we're in a soft market because cat commercial property is coming off when it's a subset of a subset. So that's what I'm trying to do. So we can in theory break obviously in the commercial -- in our property book, we have the retail business here, which is property, we have more than just purely cat.

Yes. Okay. And then just on the pricing, I remember a comment that you mentioned at the first half '25 results as well, where you said property could fall by about another 25% before we would not be interested in that sector. When certainly, we look at some of those larger accounts, second quarter, third quarter, we've seen minus 5% to minus 10% in terms of rate renewals. So for some parts of your business, you're going to get there pretty quickly, I would have thought in terms of down 25%.

I mean that's right. So you take evasive action. So if you go below your technical adequacy, you start questioning why you're writing it. You can write it for long-term relationships and all that sort of stuff. But generally, you'll wright. I mean if you look -- an example of this is standing up our excess and surplus lines property business in the U.S. in 2025. That's not surprisingly, they're quite a long way behind budget. But when we first formulated this idea, so we're just writing less of it. We're doing exactly what you say. For accounts where we're not happy with them, we don't write them; for accounts we're comfortable with them, we do.

So you're letting some business slip there. Could I also just get your comments just with the reinsurance renewals on 1 Jan. Obviously, we've seen a really good cat climate for reinsurers and primary carriers as well. But just interested to know what your sort of thoughts are at this stage in terms of what you might see?

I mean we've got really good reinsurance support. So our aim is to renew a program that's very similar to what we had in 2025. And the view is, not surprisingly, the market view is rates are going to come off by 10-plus for cat-exposed property. Obviously, we renew some other non-cat property programs, and they will not come over 10-plus. That does not mean the whole reinsurance program goes down by that amount. But for property, it's definitely going to come off by more than 10%.

This concludes our Q&A session. I will now pass back to Andrew.

I'd just like to say, once again, thank you for joining us this morning. I, of course, look forward to our results in February. So I'll speak to you all then, if not before then.

This concludes today's conference call. Thank you for participating. You may now disconnect.