Good morning, everyone. It's great to see you here, and thank you for joining us. As you'll hear over the next 45 minutes or so, our strategy is delivering growth and profits in every part of our business. Of course, I'm delighted to announce a record profit before tax of $626 million at a return on equity of 22%. Now, our business has powerful profit and capital generation dynamics, and this is enabling us to do three things. Firstly, we've put more of that capital to work in our big-ticket businesses to capture the cyclical growth opportunity. In parallel, we've continued to invest in our retail businesses to support structural growth. Secondly, we've strengthened our already prudent reserves, materially increasing the quality of those reserves and reducing the risk to future profitability.
And finally, we're announcing a 4.2% increase to our progressive dividend and an additional return of capital of $150 million through a share buyback. The significant and positive momentum our business has achieved in 2023 is continuing into 2024. Now, let's turn to some of the components of our business performance. As you can see here on the chart on the top left, our net premiums increased by 11% on a constant currency basis. They're a key driver of earnings power, and they've improved at a reducing combined ratio, reflecting the discipline that we've had within the business and the fact that we grew profitably. This has enabled us to increase our insurance result by 36%, ticking it close to $500 million. And we've achieved a record investment result as our book yield continued to increase off the back of rising interest rates.
Now, it's these factors combined that have enabled us to report a record profit at the highest return on equity for many, many years, and in total return $280 million to our shareholders through a combination of our total ordinary dividend and the share buyback. Now, I would like to spend a moment explaining our capital allocation philosophy. The two primary determinants underpinning capital allocation at Hiscox are, firstly, the pursuit of profitable growth, and secondly, the maintenance of financial strength. Now, turning first to growth, here we maintain a disciplined approach, allocating capital where we see the possibility of attractive returns. And that's where we found ourselves at the start of 2023. So we put more of that capital to work in our big-ticket businesses, most notably in the property lines, and we increased our marketing expenditure in retail by 29%.
We will continue to deploy more of our financial resources to drive profitable growth while maintaining a disciplined approach to cost management across the group. Secondly, onto financial strength, we maintain robust regulatory solvency and ratings agency capital. Our reserves are prudent, evidenced by the long track record of positive reserve development. We're proactive in how we manage our reserves. We take action early, and we further reduce uncertainty through a combination of margin build and LPTs. And once again, that's exactly what we've done in 2023. And as you can see, we've increased our reserve confidence level to 83%. And you'll hear much more on this from Paul in a few moments. The third factor we consider in our capital allocation philosophy is balance sheet efficiency and capital return . Now, clearly, the ordinary dividend is a key barometer of corporate health.
So after the ordinary dividend, any remaining capital is considered for an additional return to shareholders. And again, that's where we find ourselves at the end of 2023 and the additional capital return of $150 million. Now, let's turn to the significant and attractive, in fact, the exciting growth opportunities that we see ahead of us where most of our capital is being deployed, beginning with retail. Now, the opportunity here is truly immense. We have 54 million small business customers across our retail geographic footprint. It's a market where new business formation remains robust so that market continues to grow, and where digital adoption rates are continuing to improve. And it's not just the sheer size of the market that makes it attractive, but the structure.
This is a market that's fragmented, under-penetrated, underserved because of the high cost to service, because of manual processes in insurance companies, and the low financial incentives for agents and brokers. Well, these are problems we've been solving through the use of technology. The digital platforms that we've built, the vast majority that's in excess of 99% of the risks that we write on those digital platforms are auto-underwritten, cutting out significant amounts of cost. It means we can write millions of sub-$1,000 premium policies at an attractive return. And the customer journeys we're building are simple, intuitive, and fast, making us easy to do business with, whether you're an end customer or an agent. And small business customers, just good risks: low policy limits, low severity, and more often than not, lower complexity. Let's turn to our retail business performance.
As you can see here, we've delivered a solid profit of $267 million after strengthening our reserves and increasing marketing expenditure by 29%. Now, looking at or considering the individual components of growth, our European business continues to grow very strongly: double-digit growth. We grew over 10% in 2023. It's a business that has more than doubled in size over the last five years, with that strong growth momentum continuing into 2024. Our US DPD business crossed the $500 million mark at an accelerated growth rate of 9.2% in the second half compared to 7.8% in the first half. And of course, we've been taking action during the course of the year to drive further momentum into that business, which is coming through now into early 2024. We've added more product. We've added more partners.
You'll remember we launched a workers' comp product in the middle of last year together with a partner. That was a soft launch. As of last month, we've now executed and completed a fully integrated digital launch. This means a customer can buy a Hiscox policy and a workers' comp policy underwritten by a partner without leaving the Hiscox portal. We think that's going to drive material flows to our platform over the next few months. For a period of two years, 2021 and 2022, we added no partners to the platform as we were undertaking the technology transformation. Last year, in 2023, we added around 30 partners. Now, we know from our own experience it takes about 12 months for those partners to begin to reach an appropriate rhythm in terms of production. And we're beginning to see that come through in our DPD performance.
Now, when I consider the overall retail growth, in particular in the fourth quarter, it's been below my expectations and, frankly, a little bit disappointing, in particular due to the subdued growth in the UK and in our U.S. broker channel, where we're prioritizing or continue to prioritize profit over short-term growth in the face of falling cyber prices. Now, both of the factors affecting the UK and in the U.S. broker channel are transient, and we've taken significant action that is reversing those trends. In the UK, in fact, as you've just seen, we launched a nationwide brand campaign last year, late September into October. That's been very well received, and that, combined with acquisition marketing, which is going into play at the end of last year and into 2024, is driving increased flow into our UK Direct Channel.
We also signed a number of large broker distribution deals in the second half of 2023. Those are being activated as we speak and, again, driving flow into our UK business. And of course, across the whole of retail, we increased marketing by 29% last year. There will be a further step up in 2024 to drive growth. Now, in fact, when I then look forward, I'm incredibly optimistic and confident that we are best placed to capture that significant growth opportunity ahead of us. And the actions that we put into place over the last 12-18 months are working.
And we can see that in the first eight weeks of trading in 2024, where we've seen a step up in the growth rate of our retail business and our US DPD business, which is now continuing its acceleration trend that we saw in 2023 into 2024, and is now into the double digits. So now, turning over to our big-ticket opportunities. Now, the bulk of the business that we write in London Market Reinsurance and ILS is through our Lloyd's platform. And the Lloyd's market has strong cyclical characteristics. So we don't tend to speak about structural growth opportunities. But it is a market that's best placed for underwriting new and emerging specialty risks. And there's a fantastic new and emerging significant opportunity as a result of the transition to a greener economy that's occurring across the world.
We're building on our existing capabilities through the addition of new teams, including new engineering capability, to create a market-leading underwriting position. Of course, you'll also remember, this time last year, I spoke about the launch of our ESG sub-syndicate. That's exceeded our expectations. We're pretty excited about what we think we can achieve over the next few years in this space. Our London Market business has also been creating or developing new opportunities through innovative use of technology. You'll remember a couple of years ago, I spoke about our FloodPlus platform. This is a tech-based underwriting and risk aggregation platform that we've used to help us open up the private flood market in the U.S. I'm sure many of you have read about our most recent collaboration with Google Cloud to build the first lead underwriting AI-enhanced model.
This is a combination of a Hiscox proprietary AI platform as well as the excellent generative AI capabilities of Google. It's pretty exciting. We're at the proof-of-concept stage at the moment. But for the terrorism line where we've applied this, it reduces our time from submission to bind, from what could take two to three days in what is a highly intensive manual process, to three minutes, which means the underwriter and the broker could be on the phone, and we can provide the broker with a bindable quote. So we're pretty excited, again, about what this could mean in terms of new opportunities for our business. And in Re & ILS, we continue to add to our third-party capital management capabilities through the addition of a cat bond fund earlier on this year and a sidecar to add to our strategic quota-share partnerships and the ILS funds.
Let's turn to our business performance. So our London Market teams have done a fantastic job. We've increased net premiums by 15% at a combined ratio of 83.8%. That's the fourth year below 90%, with much of the growth coming into our Marine Energy division, with substantial inflows from renewable energy construction programs, as I mentioned earlier. A further key driver of growth has been the property division, where we've seen the strongest pricing correction. You'll also remember last year I spoke about managing the cycle in our Casualty division as we were seeing pricing in cyber and D&O begin to come off. And that's exactly what we've done. We've seen premium come down, and we're beginning to see exposure moderate. Turning to Re & ILS, again, the teams here have done an excellent job.
We've seen our net premiums increase by 23% at a combined ratio of 69.8%, with much of the growth coming into retro and North American Property Cat. At $221 million of profit, this is a record for this division, and it's been materially uplifted by the increase in fee income that we've seen from our third-party capital providers, where, as a result of the excellent underwriting, we've seen our profit commission income increase materially by around $50 million. Now, finally, a few words on technology. We see technology as being critical to the success of our business. We continue to invest with three goals in mind. Firstly, to make it easy to do business with Hiscox. In the U.S., we're creating a differentiated, easy-to-navigate customer journeys.
In Europe, which is a broker-dominated market, we're launching digital broker portals, which allow us to ingest new business and to auto-underwrite the more simpler risks. You just heard how London Market is deploying technology. Secondly, the use of technology enables us to better select and price risk, freeing up our underwriters' time to focus on new business development. Finally, technology allows us to scale our business efficiently. Now, the last six or seven years, probably a little bit longer, actually, have been periods of heavy investment as we've changed technology platforms across the group. In this next phase, I expect our operating leverage to begin to improve. With that, I'll now hand over to Paul. We'll take you through the financial performance, and then we'll hear from Joanne providing an underwriting perspective.
Then I shall be back to make final remarks and comments on the outlook. Thank you.
Great. Thanks, Aki. Good morning, everyone. It's great to be here with you today presenting our first full-year results under IFRS 17. It's been a great year with a record profit before tax and a strong ROE, allowing us to make a special return to shareholders. Let's delve in deeper. The group grew net insurance contract written premium by 10.7% in constant currency as we deployed capital in big-ticket and invested in the structural growth opportunities in retail. This translates into an insurance service result of nearly $500 million, up 36.4% on prior year. The group undiscounted combined ratio improved by 1.3 percentage points despite an active year of cat losses for the industry, and after we have proactively strengthened reserve buffers. I will cover this in more detail later.
It's also pleasing to see that the expense ratio has improved year-over-year despite paying good profit-related bonuses and increasing marketing spend. Looking forward, my key priority is both disciplined cost management and realizing the natural operating leverage over time that comes from investing in technology and scale, especially in retail. The insurance service result was supported by a record investment result of $384 million as higher bond reinvestment yields earned through. These contributed to a record profit before tax of $626 million and strong capital generation. This enables us to pay an increased ordinary dividend of $0.375 per share and make additional capital returns of $150 million via a share buyback. Before I move on, it's worth highlighting that due to a change in Bermuda tax law, we have recognized a deferred tax asset of $150 million.
This will unwind over 10 years from 2025 and will reduce the cash tax that we would otherwise have to pay. I will now take you through our segmental results, starting with Hiscox Retail. Hiscox Retail ICWP is up 4.2% in constant currency. Although this is slightly outside the target growth range and the guidance we issued at half-year, there are large parts of the retail business I'm delighted with. Europe achieved double-digit growth of 10.6% in constant currency, and the US DPD growth accelerated in the second half to 9.2%, showing a solid trajectory towards the middle of the 5%-15% range as we previously guided. Although pleased with Europe and US DPD, there have been two disappointing aspects. Firstly, UK growth in the fourth quarter fell below management expectation, following later-than-expected activation of signed broker distribution deals. This is mainly a matter of timing.
And secondly, growth headwinds continued in U.S. broker. This is partially to do with challenging market conditions in cyber, as previously flagged, but also due to the business taking longer than expected to pivot to growth after the book was decisively re-underwritten. We have taken action to resolve this, and Jo will provide further details. As you can see, our retail combined ratio deteriorated by 2.5 percentage points. This is a consequence of us taking the opportunity to increase marketing spend by 29% to drive growth, and also strengthening reserves on our U.S. broker business that we've exited. This business comprises mainly larger-ticket U.S. broker standalone GL, which benefits from some LPT cover for 2019 and prior that the group purchased at the time we decided to exit.
This book is experiencing higher loss trends, and as a result, we have added IBNR reserves for the portion of the book that doesn't benefit from the LPT cover, consistent with our prudent reserving approach. While these actions impact 2023's result with the retail core above where we would want it to be, these actions are the right thing to do at this point in the cycle and put us in a strong position going into 2024. The overall profit before tax of $267 million is a significant improvement on the $130 million delivered in the prior year. Let me turn to London Market, which achieved another great set of results. As you can see, net ICWP is up 15%, with growth accelerating in the second half as we deployed more capital in property and benefited from significant opportunities within renewables and energy construction.
We also maintained our C asualty book as we maintained underwriting discipline, reduced our Casualty book, I should say. Our focus on managing the cycle is providing consistent, strong returns. 2023 marks the fourth year of achieving a Combined Ratio within the 80% range, 2.9 percentage points better than 2022. With this, we have achieved an excellent insurance service result of $176 million, up 43% year-on-year. Combined with a strong investment result, London Market has achieved a profit in excess of $250 million. Moving on to Re & ILS. 2023 was a fantastic year with net growth of 23% as we deployed capital into the hard market. In addition to growing premium and exposure, our underwriters enhanced the quality of the business through improved terms and conditions, increased attachment points, and reduced exposure to aggregate programs.
These actions delivered a Combined Ratio of under 70% for the first time since 2016, and an insurance service result of $136 million, some $80 million better than last year. This is a fantastic result for the business. In addition, our ILS platform delivered record profits for investors. This enabled us to almost double our fee income from third-party capital. Although we've seen ILS net outflows in the year, this has been offset by a combination of new inflows and increased ceded quota-share capacity. At 1/1, AUM was $1.6 billion. I'm now going to talk about investment return and discounting, both of which are impacted by higher interest rates. Our record investment result of $384 million is a significant turnaround from 2022, with the cash from interest and coupon income representing a large proportion of the return.
As at the end of 2023, the reinvestment bond yield stood at 5.1%, with the overall book yield increasing to 4.3% from 2.7% the year before as we quickly recycled the portfolio while modestly increasing duration from 1.5-1.6 years. Our portfolio remains high quality, with an average credit rating of A. While there is an expectation that rates will start to fall over the course of the year, the investment result should continue to be a tailwind. Turning to discounting on claims. For 2023, the discounting impact was small and largely in line with the guidance I provided in June, with only one point to note. That the impact of discount on recognition includes changes in payment patterns, which is hard to predict and model. As you can see, the unwind of IFI of $131 million was within our guidance of $110-$140 million.
The impact of changes in interest rates was within the sensitivities published, as interest rates changed very little over the course of the year. I know that modeling discounting isn't easy, so to help you, I've provided some guidance for 2024. We are currently estimating the impact of the unwind to be around $120-$150 million for 2024, and we will update this guidance at half-year if any of the parameters materially change. In the appendices, I have added a slide explaining the mechanics of how to model IFI. For rate changes, we have also updated the sensitivity table on the slide. Now let's take a look at reserves. Our prudent reserving philosophy remains unchanged, and we continue to reserve proactively. Duration remains short at 1.9 years. We've proactively protected future profitability by building margin, increasing the confidence level to 83% from 77% at the half-year.
Reserves have been strengthened across the board, including the exited US Broker business, as I explained earlier. We purchased another LPT during 2023. Our LPTs cover over 42% of gross casualty reserves for 2019 and prior, providing protection from inflation and other pressures. Turning to reserve releases. Reserve releases were positive across all segments and in aggregate in 2023. The consistently positive reserve releases demonstrate our prudent reserve philosophy. Across accident years, you can see how our conservative reserving approach is playing out on this slide. From the chart, you can see that reserves have developed favorably for each year. Now a slide that you should be familiar with. In 2023, we generated significant organic capital, more than twice as much as the capital consumed by business growth. As a reminder, the BSCR uses forward-looking data to determine capital requirements, taking into account plans for 1/1.
After the payment of the 2023 calendar year ordinary dividends, we ended the year with an estimated BSCR of 212%. This is a very strong solvency position. With this in mind and consistent with our disciplined capital deployment strategy, medium-term growth ambitions, and the desire to maintain higher levels of financial flexibility, the board has recommended a final dividend of $0.25 per share. In addition, we are returning $150 million of capital to shareholders via a share buyback. As you can see on this slide, following the payment of both the final 2023 dividend and the additional capital return, our balance sheet is very strong. Our pro forma BSCR is estimated at 200%. This leaves us comfortably within the S&P rating, even post a significant stress scenario.
In summary, post-capital return, we maintain strong solvency, a very resilient balance sheet, and significant flexibility to continue to grow our business. I will now hand over to Jo, who will take you through the underwriting performance of the group.
Thank you, Paul. Good morning, everybody. So you've heard how we've grown and delivered a fantastic underwriting result, testament to the hard work by so many of our colleagues across the group. We're executing our underwriting strategy, leaning into a favorable market in our London Market and our reinsurance business, growing 16% and 27% net. We're also executing the structure opportunity we have in our retail business with a net growth of 6%, all in constant currency. The underwriting environment remains somewhat complex, so maintaining discipline was absolutely key. So this slide shows the power of our portfolio, where we continue to benefit from balance. Balance, which gives us the opportunity to grow, but not the necessity to grow, which is really essential for good cycle management.
You can see on the far left, our growth in small commercial was 5%, and I'll unpack on a later slide what we're doing to accelerate that growth. We saw good growth in our Retail Art and Private Client business growing 8%, a combination of rate and policy count. In our reinsurance business, we are executing on the hard market, but we're also maintaining discipline. We've moved our attachment points to a minimum of a 1 in 10-year return period, and we've also retreated from traditional aggregate. In a year of $100 billion of insured natural catastrophe losses, with $50 billion losses from secondary perils, these actions have avoided significant loss. In our London Market business, where we have different portfolios in different parts of the cycle: property, Marine Energy, favorable market, and you're seeing us grow.
In Casualty, after many years of re-rating, where we're getting more premium for less exposure, that market has now started to soften, and we're starting to decrease. So looking at rates, so on the left-hand side, a chart that should be familiar to most is our aggregate rate indexed back to 2018. And you can see once again, we're achieving rate momentum across all of our segments. London Market up 7%, Re & ILS 31%, and that's on top of the already significant rate we've got since 2018, where reinsurance rates have pretty much doubled and London Market not far behind. So as a reminder, early rate increase offset view of risk, but more latterly is improving margin, which is evident in the results for those segments.
In our retail business, which is far less cyclical with regard to rate, rate has been necessary, though, for the last few years as we've been dealing with a higher inflationary environment. So on the right-hand side, you can see the annual inflation assumptions that we're making across the various segments. Our view, whilst past the peak, is still elevated when in comparison to the past. So what we have here is the aggregate inflation that we're applying, but we actually model the individual inflation of economic, climate, and social inflation separately. Obviously, different portfolios that we have across the different geographies are affected to a lesser or greater extent. Looking at social inflation in a little bit more detail. The nature of our portfolio means that we're not as affected as some others. However, we're also not immune to what is a significant market trend.
Our view of social inflation is quite a broad definition. We look at any increase in frequency or severity to a claim driven by a societal factor. That might be legal, it might be regulatory, or it might be an increase to propensity to claim. Me Too is quite a good example of the latter. We look to manage the risk across the life of a policy. First, starting with risk selection. We exited Casualty reinsurance, and we exited our large big-ticket general liability insurance in U.S. retail. Both were good decisions at the time that have actually turned out to be better decisions as those loss trends have emerged through. In our London Market business, line size is absolutely key, and we pick our segments, and we manage our line size very closely.
In U.S. retail, the nature of the customers we write, SME customers, in general buy much smaller limits and so therefore not exposed to the Jumbo Jury Awards. In the UK and Europe, we don't really see social inflation trends prevalent. Then moving on to reserving, you've heard from Paul, we have a prudent reserving philosophy that also extends to holding onto mean loss picks for our Casualty lines in spite of seeing favorable experience. The trilogy of claims, underwriting, and reserving is also absolutely key, making sure those three areas work in lockstep to react to any deviation in assumption. Then lastly, managing the tail. You've also heard that we've bought a number of retrospective legacy transaction retrospective reinsurance LPTs, with over 40% of our 2019 and prior Casualty reserves protected by that cover.
Our claims team, also on an individual claim basis, is very proactive and looks to settle claims where there's a risk of adverse award. So in general, I'm really happy with how we're managing the risk across our business. So moving from risk to opportunity and the opportunity that we have in retail, where we invest for the long term, invest in brand and technology and capability. You heard from Aki how we've some of that investment and also the differentiated capabilities that we're building. And we've got off to a good start in 2024 as we captured the opportunity. Our European business continues this excellent growth momentum. Our UK business, back on track as we're delivering on the fundamentals of trading. In our US Broker business, we're starting to reverse and recover as those cyber headwinds dissipate, and we're starting to make that pivot back to growth.
And in our US Digital business, that acceleration continues. From 2023 into 2024, where for the first two months, we're seeing double-digit growth. So how are we doing this? Well, we're doing this in a couple of ways. Firstly, doing more with the existing customers we have, and also converting more of the potential customers that are already finding their way to Hiscox looking for a solution. Launching new products and propositions, things like our sustainability consultant product in the UK, our next-generation cyber product in Europe, and there's more in the pipeline for 2024. Also doing more with existing customers. Our technology enables us to service more of our customers' needs in a single policy. In UK direct commercial, we sell well over two covers for each customer. In US Digital, 1.2, but growing as that technology beds in. And then also building out our retail ecosystem.
Expanding our proposition to cover mitigation and resilience. Selling other people's products in our own journeys, and also embedding our own products in other people's journeys. So LeakBot is a good example in the UK, which mitigates escape of water claims. You've heard about our workers' comp partnership in the U.S., where we're selling a workers' comp product in our own portal. And also, we've embedded our own product, a freelancer, in a recruiter's journey in Europe. And our focus around underwriters and partners is around three things: ease, value, and growth. Ease of doing business, automatically underwriting the small business to free up our underwriters to add value with their specialisms to grow the larger and the more complex business. And then growth. As we grow our appetite and as we grow emerging sectors, then obviously, it enables our partners to grow their footprint too.
So having been on this retail journey from pretty much the start, I'm really excited what we're going to achieve in 2024. So moving to big ticket, where our strategy is different, it is to grow or shrink depending on the market. Knowing where you are in the cycle is really key, and being able to manage it is essential. You're having the courage to lean in and out if the market changes. So in order to do this effectively, we have an active portfolio management framework that you can see in the top left of the slide. We add to this some lessons from the past, which you can see in the top right. I'm sure we'll make some new mistakes, but let's not make the same mistakes. And you can see the outcome of that framework evident in a couple of ways. Firstly, casualty.
As I mentioned, Casualty has been re-rating, repricing for a number of years, and we believe we have a very well-rated and well-managed portfolio. However, that market is in transition. Rates are starting to soften, and this is where our discipline comes in. We're doing that. We shrunk the portfolio 12% in 2023, and we'll do that similarly if the trends continue into 2024. Then, property. Well, properties are a different part in the cycle. We still believe it to be an attractive market, and we're deploying our own capital in both insurance and reinsurance to take advantage of that opportunity. That additional risk is balanced by a few things. First, additional profit. We're getting paid more to take that risk. Secondly, we balance that risk against a very diverse and well-rated non-natural catastrophe portfolio. Thirdly, the balance of retail.
So let me show you some of the risks. So what you have here is a U.S. hurricane, and it's our mean modeled loss adjusted for inflation. It is at two return periods. The first, the top line, a very extreme event, equivalent to a 100-250-year return period. And the bottom line, a much smaller event, equivalent to a 5-10-year return period. What you can see is we took more risk in 2023 and more again in 2024, all within the confines of our group appetite. But the bottom line shows that the terms and conditions that we've achieved, particularly attachment point, has meant that the increase has been far, far more modest in comparison to our past. So moving on to the future.
So the future, technology, and generative AI will play a big influence on us as both an underwriter, but also as an insurer. You've heard from Aki how we look to augment our underwriting, utilizing technology to do a few things, improve our customer experience, augment our underwriting, risk selection and pricing, and create that operational leverage. The partnership with Google being the most visible, but there's many other examples across our business when we're doing this. But as an insurer, the nature of the risks we insure are also starting to change. As our insureds and third parties adopt, then they could give rise to new risks. They could make some risks actually become better, some that were prone to human error may disappear. And there may be some existing risks like IP or breach of privacy that become more prevalent.
But with risk, there's opportunity, opportunity for us to develop new products to cover these risks. And of course, this multi-billion industry of specialists and consultants will all need insurance. So with that, I'll hand back to Aki.
Thank you very much, Joanne. Turning to the outlook for 2024, we're excited about the opportunities in 2024 and beyond. The group is well-positioned to deliver high-quality growth and earnings across the portfolio. The 2024 outlook for retail is positive. The actions we've been taking over the last year are working, and the business has got off to a strong start. Retail growth has improved, and in US DPD, growth has continued to accelerate into double digits. The retail growth opportunity ahead of us remains extraordinary, and my primary focus is to capture it with a determined focus on execution and delivery. We expect to deliver full-year growth within the 5%-15% target range and to operate within the 89%-94% combined ratio range.
In the London Market, we continue to see attractive growth opportunities in property and energy and remain focused on managing the cycle in Casualty. Reinsurance market conditions have stabilized after the significant improvements in 2023 and remain very attractive. We have allocated additional capital to Re and ILS at the January 2024 renewals, and we will continue to deploy capital where we see attractive returns. So to conclude, we finished 2023 on a high with some records under our belts, a stronger balance sheet, highly engaged and inspired colleagues, and with plenty of opportunity within our grasp. So with that, we'll now take questions. Okay, shall we start with Andrew?
Hi, it's Andrew Ritchie from Autonomous. The first question, just a simple one. The LPT covers 40% of casualty reserves 2019 and prior. What is that of specifically the U.S.? I think it's higher. I think you're referring to the whole of casualty reserves there. And maybe just remind us, I'm not sure you're going to give us the number, but just reassure on any limit that is there within the LPT, because one assumes the underlying loss experience in 2019 and prior is also worsening slightly. The second question, the marketing spends up 29%. I guess I'm curious, in the past, over however many years I've covered Hiscox, there's always been an obvious uptick in trend of growth in the year after there's an uptick in trend of marketing spend. You're not advertising that at this time.
You're talking about growth in retail 5%-15%, but I appreciate there's some negatives in that. So I'm just curious, do I think of it the same way? You can inject marketing spend today, and there will be an obvious, and you expect an obvious additional momentum and return on that marketing spend within the next 12 months, or is it simply costing more to keep the engine going to the same degree? And then the final question, slide 29 has an interesting box which talks about lessons learned. I wonder, maybe this is a bit harsh or unfair, what would the same box look like for retail? Because we've had a few stop-starts over the years in retail and some issues hitting targets, either growth or profitability. Let's put COVID to one side. That's forgivable, clearly. But what would that box look like for retail?
Okay, thank you, Andrew, for that multi-part question. In terms of LPTs and limits, Paul will take that. In terms of lessons learnt, Jo will provide a perspective on that. Let me kick off with the question on marketing and growth. I guess, as I just reported slightly earlier, we are seeing a step up in our retail growth momentum. It is not entirely driven just by marketing. There have been a number of actions that we've taken over the last 12-18 months, which include adding more product, undertaking more marketing, adding more partners. We have new heads of distribution in both the U.S. and the UK, who are bringing a new intensity of rhythm to those businesses.
So it's the convergence of all of these factors coming together over a period of time where we are now seeing a step up in that growth rate in 2024. Across the portfolio, we're seeing that in the UK I also mentioned that we are seeing increased flow of traffic to our UK Direct Channel as a result of the brand campaign that we ran last year. And we're seeing our U.S. DPD business rise into the double-digit growth rate in the first eight weeks. Overall, I expect the retail business to continue to operate within that 5%-15% range for 2024. So we are not actually seeing at the moment necessarily the cost per increase. The increased marketing expenditure over time will simply drive more volume. Paul, can you cover the LPT and the limits?
Yeah, so just as a reminder, we've got five LPTs that we've entered into. You can see that we've mentioned that it covers for 2019 and prior, 42% of the casualty reserves. Andrew, your point around the US, we've not disclosed it, but there is a meaningful aspect of coverage for the US business. I think it's important to bear in mind the reasons why we have taken out those LPTs. It's not just the sort of reserve protection. You've got to think about when we've entered into those, there are good reasons. Either we have exited the business, and therefore, as a consequence of that, either the underwriting expertise has gone. What happens over time is really the claims handling expertise would naturally erode because people don't tend to want to be associated with a run-off part of the business in a live environment.
So there's an aspect of taking protection where the underwriting expertise or the claims handling expertise is leaving the business. The other aspect, and this is on some of the LPTs, is that we've got capital benefit. And when we are seeing attractive market conditions, it does make sense to recycle capital out of the reserving risk that it takes protection of, or you're putting capital up for, and recycling that into the underwriting side of it. If you look at those five LPTs in aggregate, the headroom in terms of limit is very significant.
Then from a retail point of view, I think I'd probably start with we've grown our retail business from a standing start to well over $2 billion and profitably. So I think a lot has gone well in our retail business. I think if I was going to pick up a couple of sort of lessons learned, I think outside of UK and Europe, very strong in terms of underwriting. If I look at our U.S. business, it was actually going back a few years. It was actually a hybrid. It was retail business, small SME, direct, digital, but it also had some quite large-ticket, volatile business. And obviously, that behaves more like a London Market. And we obviously took the action to exit that business. We've exited well over $160 million of that business in 2021.
I think that the lessons there is actually exiting in retail is problematic. We shouldn't be looking at that. Our retail business should be much more about what I call sort of constant course correction, small tweaks and changes that actually would be invisible to you. The underwriting, we've always maintained underwriting discipline. There's always going to be assumptions that turn out to be different in reality. So you're always tweaking and changing your portfolio. But that big large-scale, wholesale correction, that best sits in our traded business where we see the market. I'd say that would probably be a lesson that we've taken from retail.
Okay, I think I'd probably add a couple of other lessons, certainly, which I certainly take to heart. Firstly, the retail business is heavy in operations, lighter on capital compared to our big-ticket businesses. And therefore, you can grow too quickly because there's a big operational heft that's required to deliver the business, even in a world where there's lots of automation. And the second piece is, and this is frankly not a new lesson, not in any way specific to Hiscox, but technology change is difficult. It's challenging. And during that changeover process, which is frankly necessary in order to grow the business and to capture the significant opportunity, but that changeover does create issues within the business. Thankfully, we're over most of that now. Let's go to Will.
Thanks, Will Hardcastle for UBS. First of all, is it possible to get any sort of quantification on the reserve prudence moving up from 77 - 83rd, what that sort of roughly equates to in dollar amounts? And what was the driver there, just linking with that for the material risk adjustment uplift as well? And the second question is, just linking with the retail, we're in the 96s for this year. I guess there was higher marketing spend. There was reserve uplift. I guess, is it possible to do a sort of a bridge and to see where we roughly are clean of those for 2023?
Okay, so in terms of reserves prudence, etc., Paul will cover that. Just very quickly on the Retail Combined Ratio, adjusting for the actions that we've noted in the statement, marketing and reserve strengthening, the business was within the range that we target.
Yeah, and then in terms of the risk adjustment, I think it's important to know, and you can see it on the slide, but we started out in a strong position. I mean, we were at the sort of 77s at the half-year. We've moved to an even stronger position at year-end, so up to the 83rd. That amounts to around 60-something in terms of the quantum, well, in terms of the addition. Now, I think if you stand back and say, well, that's an even stronger balance sheet position, you've got to bear in mind that actually after that addition, our reserve releases were coming out of each and every segment and in aggregate. So I think the position is very robust, and it comes back to the point I made earlier on.
We have a very proactive and a very conservative reserving position that's borne out in terms of the balance sheet strength. And what you can see is one or two slides further on, we've got a consistent history of reserve releases, and that's coming out through each of the accident years over history. So very pleased with the position we're in.
Just a quick follow-up, if possible. I guess on that, I think it's the next slide, slide 20, it showed the accident year development. And there was effectively nothing taken out of 2022. Is that where that extra prudence has gone in, or is it not as easy to work that out?
Yes, there's an element of the risk adjustment going into the 2022 year.
Thanks.
Hey, it's Kamran Hossain from JP Morgan. A couple of questions. I'm just really intrigued by the kind of Google Cloud news that you announced towards the end of last year that you talked about in the introduction. What do you think the end game is? I mean, obviously, it's proof of concepts at the moment. It's very early days. Sounds quite exciting. Is this an ambition to basically churn out more quotes, or to take a bit of efficiency to where you think this might end up, assuming it's successful? The second question, back on the reserving piece, do you think if this year hadn't been as strong, you would have also taken the opportunity to increase the confidence level?
Do you have an ambition if 2024 ends up being a little bit better than assumed, that that might go up to the kind of top of the range, so 85? Thank you.
Okay, Paul, can you take the reserving question? In terms of the developments with Google Cloud, or frankly, the range of different technological innovations that, in fact, you heard Jo talk about earlier, Google Cloud collaboration is celebrated because it's in the public eye. But if you just think about what we do across our business, as I mentioned earlier, across our digital platforms, we already use AI, machine learning. We've been doing that for some time. In excess of 99% of the risks that we write are auto-underwritten, creating huge efficiencies that enables us to write those small-ticket premium businesses and generate an attractive return. But specifically in terms of what we're trying to do with the technology, I think time will tell exactly what it will deliver. I think it's very exciting. It's way too early to figure out, is this going to deliver more business, more efficiency?
What we do think it's going to do is deliver a much better service to our brokers, which is positive. It will create more time and opportunity that could result in actual significant increase in productivity, with the same underwriters delivering much more business. I think it's early to say. We'll come back when we've industrialized this process, but we're very excited.
Yeah, and then back to your question in terms of the reserves. So again, I'd sort of start with the Q1 was very strong. Independent of the 22% ROE that we had for the group, I think that decision really just helps add to the overall reserve strength of the group. And part of the way that we think about it, it was referenced by Aki, is it does give future protection to the future profitability of the group and helps sort of de-risk the future. It's pretty much the way that we would think about it. I think going forward into 2024 and beyond, I mean, that sort of 75-85, it's a range, but it's not something that we're slavishly adhering to.
What you've got to look at, and the 83 or wherever we end up, is a component of what's the composition of the reserves and how does that look. So clearly, if you take we write quite a bit of cat business, if there's that has a lot of inherent volatility to it. If there's a cat late in the year, clearly we'd like to add quite a bit of margin to protect that cat from adverse development.
Abid?
Morning, it's Abid Hussain from Panmure Gordon. Three questions, I think. So just coming back onto the reserves again, it feels like you've quite obviously shored up the reserves with a lot of prudence in there. I just wanted to ask the opposite question. Was there any trends on inflation or anything else which played on your thinking while you were essentially beefing up those reserves? So just was there anything that was worrying you at all on the reserves? So that's the first question. The second one is on Re & ILS. Look, clearly, the rates there are still very attractive. Just wondering, can you grow incrementally on your own balance sheet? Is that something that you're looking to? And then just finally, just on the AI, the augmented AI, it feels like it's too early to start linking the expense ratio to the rollout here.
Just wondering sort of how quickly is this rollout coming, and sort of should we be thinking about improving expense ratios in sort of three years' time, or is it five years' time?
Thank you for those questions, Abid. So in terms of reserves and considerations around expense ratio, Paul will take those. But don't pencil anything in for AI for the moment. So we're still in the learning phase at the moment. In terms of our ability and desire to grow Re & ILS, we've allocated more capital to the business. As you know, in 2023, we grew 23% net. I expect, if market conditions persist and January 2024 was very good, it was a good renewal period, I expect our net book to grow. So we have the ability, and we've created the flexibility for that to occur.
Yeah, and then your question in terms of the reserves, so we come back to it, is I repeat the point that we have this proactive and conservative reserving approach. And so we took the opportunity to build margin. Now, if you cast your mind back from an inflation perspective, we talked about that quite extensively, I think, the summer of last year. And if you look at it from a sort of reserving perspective, and then also how the underwriting flows into it, we talked around the backbook and said we proactively took out the $55 million of additional net strengthening there. That was a proactive measure. We add substantial margin over the best estimate. The risk adjustment now you can see is very, very strong from that perspective.
Then also the LPTs, when you've got 42% of the 2019 and prior covered, I would argue that from a reserve perspective, we are very well protected. So that'll give you a sense from a reserving perspective. Again, I'd just sort of hold in your mind that sense of protecting the future profitability, and the margin build goes towards that. I think from the underwriting point of it, I mean, Jo talked about it. We were, again, for the last couple of years, and you actually can see it on the chart, how we have been pricing and taking account of inflation quite considerably. We were very prudent way back in terms of our inflation assumptions and pricing assumptions when this started to emerge. In terms of the expense ratio, the way that it's very much a focus of mine.
So the way that I look at this is to say we want very tight cost management and cost control. And that's borne out by the headcount recruitment. It's very tightly controlled. We're starting to really industrialize procurement and vendor management. We see further opportunities for shared service centers, which are more prevalent around the sector, but we think that we can make more efficiency gains there. And then if you look at sort of the retail opportunity, it's very significant from a growth perspective. I want to continue to invest in that. If you look at the technology investment, the heavy platform investment has been largely done. We talked a bit about it where Europe has a bit to go.
But all in all, once we get that machine really humming and the scale efficiencies that come out of the retail business, not only will you get scale from a marketing perspective, but also that technology, the throughput that comes naturally through that, will mean that the unit cost will start coming down over time. So the operating leverage over time will start to come through.
Thank you.
Okay, Andreas?
Yes, thank you, Andreas von Embden from Peel Hunt. A question about the Lloyd's market and Syndicate 33. You're showing some of the fastest growth across your business within Lloyd's on a gross basis. I just wondered how much capital or capacity you want to allocate to the Lloyd's market in the next two to three years. I know it's not sort of a structural growth. It's cyclical. But we are in one of the best points in the cycle at Lloyd's, and Lloyd's is doing quite well. Just want to, can you share some thoughts about that? The second question is about your property book. I think it was your fastest growing book. Could you maybe comment about what's driving that growth and your thoughts about putting more capital to work within the property book, particularly in the U.S.? Just some thoughts about the U.S. E&S market.
Some of your peers are putting more capitals to work there. Just wondering what your thoughts are. Thank you.
Okay. In terms of, I guess, the overarching view of Lloyd's, Syndicate 33, etc., I'll cover that. And Jo, if you can cover specifics on property book and how we're thinking about that. We closed the year, 2023, with strong growth in our London Market business, as you saw, and with a very robust capital position. So we have capital available, and we're willing to deploy more. And as you know, the way we operate with our big-ticket businesses, which is absolutely underpinned cycle management, again, as you heard from Jo earlier, is that we have the flexibility to grow, not the necessity. Now, we've seen the growth in 2023. I expect there will be some more growth in 2024. But we'll see how the market develops. But we are willing to allocate more capital and did have done.
Thanks, Aki. And yeah, looking at the property portfolio, as I said, we grew in 2023. The market was very attractive. Rates up, but also terms and conditions heightened. So we grew in both our London Market insurance and also our insurance division, putting more of our own capital to work. As you've heard from Aki, capital is not a constraint for that business, and we are looking to take more advantage of that opportunity in 2024. However, there's always going to be a limit to how much we put because of the managed volatility apart from the rest of the group. I said we're obviously taking a larger natural catastrophe bet, and that's balanced by we're getting paid more to do it. So it's balanced by additional premium.
We've also got a very diverse portfolio across the rest of London Market and Re, and then also the balance of Retail. So yeah, capital's not going to be the constraint. It's more within our own appetite with how much do we want to put in this space. But it remains an attractive market.
What are you doing in U.S. E&S? What's your thoughts around that?
Yeah, so I mean, the areas that we write in from a London Market is on what we call our sort of binders portfolio, and that would be commercial and homeowners, and then the fine art portfolio. We saw significant repricing of that fine art portfolio last year. Rates are up, nowhere near what they were last year, but they are continuing to tick up. And we're seeing strong rates hold in that smaller binder portfolio. So the market is attractive. But I say, when we look at the peak peril, there is going to be a limit to how much we deploy on that peak peril, given the nature of the rest of the group.
Okay, Aashiq, and then Freya (uncertain).
Yeah, thank you. Good morning, Aashiq Mohamad from Morgan Stanley. Just a couple of questions. So first of all, going on to the capital return. So thanks a lot for the buyback. But I just want to understand your thinking around the dividend and buyback, the combination. I mean, if I think about year-on-year, 2023 versus 2022, I mean, your top line is much stronger across the board. Your underwriting is improving everywhere, and investment income is substantially higher. And you grew the dividend by 5%. So what needs to happen to think about a step up in the dividend at some point rather than doing buyback? I mean, we'll take the buyback as well, but just want to get some sense on how do we think about ordinary dividend. That's the first one. And the second one is just on retail.
I mean, 96% combined ratio, your guidance for 2024 is still 89%-94%. So is it fair to say that we should be thinking more around 94% for 2024 rather than going to the midpoint? Because it might still take some time to get the broker business on track to be good profitability? Thank you.
Okay. So in terms of capital return, firstly, the ordinary dividend, as I said earlier, is incredibly important to us. I know it's incredibly important to our stakeholders. We have to balance that and how we grow that with, frankly, the fantastic opportunities that we see ahead of us. We believe we're striking the right balance in deploying that capital for growth across the different franchises that we have. And right at the moment, all three franchises are in growth mode. So we think we're striking the right balance between deploying for growth, maintaining financial strength, and then returning capital in a way that maximizes the flexibility for the group, and frankly, for the benefit of the shareholders. And you should expect that sort of capital discipline and approach to continue. In terms of Retail Combined Ratio, we have a range. We're going to be within the range.
Thank you.
Freya?
Hi. Freya Kong from Bank of America. In retail outside of US DPD, can you just remind us now how much of your business, particularly across the UK and Europe, is written digitally and therefore automatically? And given these two regions are growing quite well, is most of this growth coming from the digital business or more traditional broker channels? And secondly, if you could share any color or commentary around the pipeline of distribution deals and how dependent your growth outlook in retail is dependent on signing these deals, given it seems to have had an impact in Q4. And then just last question, double-digit year-to-date growth in US DPD, any reason why this might be clouded by one-offs or timing, or are we now seeing the true underlying growth of the business? Thanks.
Okay, so I'll have a go at all those. In terms of digitally underwritten business outside of the U.S. and outside of the U.S., look, our UK and European businesses have a different balance. The European business, as I mentioned earlier, is broker-dominated, so traditional intermediated brokers. However, even there, we see a non-trivial amount, it's not the majority, of business that is auto-underwritten. I spoke about our digital broker portals. We had some earlier, but now with the new technology replatforming, we're going to have a uniformity of digital broker portals across the European franchise, which will increase the efficiency with which we can write the business and indeed improve the broker experience as well. Similar approach in the UK, where the business is dominated by the traditional broker relationships. Even there, we launched our e-trading platform last year. That is gradually gaining momentum.
But even here, we have auto-underwriting that crosses both our digital, where it's almost entirely auto-underwritten, and in the broker channel. In terms of growth, the broker channel growth is strong in both UK and Europe, and frankly, competes very well with the digital businesses. So it's a different sort of mix compared to the U.S. In terms of how dependent are we on new distribution deals? A little bit, but not that much. If I build on what Jo was saying earlier, we have a number of initiatives in place, which is to sell more to our existing customers, initiatives to further improve our retention ratios, which are already very high, as well as sourcing new business. And sourcing new business comes through a range of different opportunities, one of which is broker distribution deals. That's just one of the levers that we have.
And finally, US DPD, no, no one-offs as far as I can see. This is the culmination of a number of initiatives that we've had in play for a while. The re-platforming is complete. As I said, and I said earlier, one of the lessons of re-platforming is there's always bugs. There's always issues. And as those get ironed out and people get more accustomed to the technology and there's greater adoption, frankly, internally, as well as with our partners, then we've seen production increase, and we're very happy with that. And it's been further boosted by more product, more partners, and just greater momentum within the business. And you're seeing, frankly, in the U.S. economy, new business formation continues to be extremely robust. So it's a positive market backdrop, but really importantly, the actions that we've taken, which I've kind of listed, are driving that growth. And we're very pleased.
Trif, and then Darius.
Yeah, thank you. Tryfonas Spyrou from Berenberg. Just coming back to the US DPD outlook, I guess I just wonder whether you can give some more color on what that has become. And this is coming back to Andrew's question, more expensive to grow policy account or maybe customer acquisition costs per premium. Appreciate that in the space, you've got more players now in short-terms, throwing money at growing there. You've got bigger balance sheets participating in that market. So any comments you can give as to whether it's coming out more difficult to compete in that space? The second question is on capital. And I think slide 21 shows 15 points capital consumed. Appreciate the strain from capital deploying in January is taken into account, and it's in the number. That compares with 13%, I think, a half year. So I guess only 2% more capital growth coming in.
Can you maybe help us reconcile the two? And how should we think about that in the context of your growth outlook and whether growth has become less capital-consumptive given the business mix? Thank you.
Okay. Paul will take the question on capital. In terms of US DPD and growth and whether it's becoming more expensive, there is more competition, but much less than you'd think. This is still a massive market. And as I mentioned earlier, the operational heft, the building of the brand, the ability to auto-underwrite is critical. Because when you're writing policies that are, on average, less than $1,000, there ain't much available to allocate to underwriting activity. So it's not impossible, but difficult to enter the market and frankly, then stay in the market for a number of years because you don't make profit on day one. But nonetheless, there is a little bit more competition. We're not seeing a discernible increase in our cost per policy in terms of acquisition. And that'll be a number of different factors.
Firstly, the marketing expense per acquisition, frankly, it varies on a day-to-day basis. But to the extent we do see any inflation in that trend, we are certainly being able to offset that through natural search, search engine optimization. And frankly, as the brand, as the Hiscox brand builds, and we're slightly less dependent on particular search terms, when you add all of that together, the average cost, frankly, is not discernibly increasing.
And then on capital, thanks for flagging that. I mean, the important point is one of the key drivers of the capital consumption is going to be the amount of cat bet that we put on. And if you think about the business, we write a significant amount of our property cap in 2011, 2014, 2016, 2017. So it's very much weighted towards the first half of the year. And therefore, that's why you have that weighting of a first half, second half, mainly occurring into the first half of the year. I think you can see next to it, you've got the capital generation of 35 being more than twice the capital consumption. That sort of more appears much more sort of evenly across the year.
So if you take those two things in comparison, one thing to look out for, and it's the same every half year, as long as we sort of weight the level of reinsurance that we write into the overall portfolio, you should expect a slight dip coming into for the overall BSCR. And then clearly, we'd expect it to rebound for the full year.
Okay. Darius and then Nick.
Hi. Darius Satkauskas, KBW. A few questions, please. So the first one is, could you give us some color on how your extra marketing spent was split between the segments, particularly how much is driven by the additional spent in the UK? Second question is on ILS funds. What's your outlook for your ILS funds? I mean, do you expect inflows to occur at some point throughout the year, or is it still a year of sort of difficult conditions in the alternative capital space? And the third question is on LPTs. I appreciate it's been beneficial for Hiscox and other players having LPTs in place. But given the trends in social inflation in certain liability lines, at what point do we start to worry about the counterparty risk? Thank you.
Okay. I'll take the first two questions on marketing and ILS. In terms of LPTs and social inflation, I think you've already heard from Paul that we have substantial limit over the LPTs. And I think, Jo, if you can cover the social inflation aspect, Paul, maybe a word on counterparty risk and how we due diligence that. In terms of the extra marketing and how we split that between the different countries, no, we're not providing that detail. It's still a 29% increase. It's in all territories because we see the opportunity for growth in all territories. In terms of the ILS fund outlook, look, we have several strings to our bow in our Re & ILS business in terms of how we manage that third-party capital base. So we've had a traditional quota share strategy for well over a decade.
We've had an ILS fund strategy that we deployed about a decade ago. Then laterally, we have a cap-bond fund, which we launched earlier this year. And then we have other vehicles as well. So for instance, we launched a sidecar for a very specific investment strategy. So we have a multitude available to us. And what we saw in 2023 is that whilst we saw outflows from our ILS funds, the overall third-party capacity actually remained broadly flat, just different mix. For 2024, I expect that there will be continued outflows from ILS. But we've also started to see new money coming in, not material. There's no billion-dollar checks at the moment, but there's few tens coming in. So we expect to see whilst some outflows, but maybe balanced with some inflows.
But in terms of total third-party capacity, we expect that to remain broadly flat, maybe slightly up. But we will be supplementing our Re & ILS business with our own capital. So we do expect the net portfolio to grow if market conditions persist. And for the moment, they look very good.
Yeah. So from a loss portfolio transfer point of view, you're right. We've entered into a number over the last few years. I think when you think about it, we do it for a number of reasons. The first would be when we've exited a line and we lose the expertise, it makes sense to put in place some form of retrospective cover. The other considerations that we've had is capital. You're clearly going into an improving market, recycling your capital from reserves onto the go-forward opportunity is a factor. And then thirdly, reserve volatility. And quite often, they're put in place for a combination of all three. I think where we've put those LPTs in place is obviously in casualty. We put a whole account sort of casualty reinsurance as soon as we exited that line. We put an LPT in place.
In our U.S. business, so this is the E&S business, the broker business in our U.S., again, whole account 2019 and prior. And then the other areas that we've taken some LPTs is in our London Market casualty business as well, again, on the historic. So we're really well covered on those loss portfolio transfers. And as Paul said, we have significant limits remaining in. I think the other thing I'd just say on inflation is we're doing it from a position of strength. I think we've spoken a lot I've certainly spoken a lot about inflation. And we were out the gates early, as Paul said. And I think we took some pretty robust inflation assumptions within our portfolio that we then baked into our pricing really early on. And be clear, the inflation assumptions that I showed you, that's not what we're seeing in the portfolio.
Actually, the claim inflation that we're seeing is less than this. This is the assumption that we've taken in our pricing. And obviously, we've covered that, as you can see, with our rate increase. So from a social inflation point of view, I mentioned it, we're not really seeing trends prevalent in our portfolio. The two areas that you will see inflation, and indeed, we have, Casualty reinsurance, but I'm talking more broadly in the market. We've exited that line. We've got a full LPT in place. And then in our larger ticket, GL, in our U.S. retail, again, we exited that line. We put a 2019 and prior cover in place. So we've got one uncovered year. So social inflation trends, we're not seeing more prevalent. And the work that we've done on inflation is really more from a position of strength.
And then the counterparty aspect. I mean, I think there's two components to this. There's one, which is the overall governance around credit counterparty risk is very strong within Hiscox. So there are formal governance committees that they're subject to and evaluated on. And then more specifically, if you look at the specific LPT counterparties, they are all very robust. Either the counterparty has a very well-rated, very, very strong balance sheet, or they also have the fallback ability to call on the central fund because they're Lloyd's syndicates. So the credit aspect of that is pretty, pretty, pretty strong.
Okay. Nick.
Could you pass it along, please?
This is going to be an awesome question.
Thanks. No pressure. Hi. It's Nick Johnson from Numis. The first question's actually a really familiar one from me, which is U.S. DPD growth January, February this year. You said double digits. I assume that's partly price and inflation indexing. So I wonder if you can give us a feel for the growth in policy numbers within that double digit, please. And the second question is on the retail expense ratio. I mean, obviously, as you say, there is a lag between marketing spend driving premium growth. Just wondering if we should expect the retail expense ratio to tick up in 2024. You've talked a lot about the component parts, but just wondering if you could bring it together in terms of the expense ratio number. Thanks.
Okay. Paul, can you address the expense ratio question? In terms of US DPD, some of that will be pricing. But we are seeing volume growth as well. Again, I won't be disclosing that level of detail today. I think you're going to have to wait until May when we do our Q1 trading update. But the momentum is strong. It's a continuation, effectively, of what we saw in 2023. So we're very pleased.
In terms of the expense ratio, Nick, it sort of really relates to the earlier comment I made. So I'm not going to sort of give a specific target on 2024. But directionally, if you just think about the balance that we're trying to strike and will strike is invest in marketing to drive growth and counteract that with efficiency gains either and really tight cost management control with the expectation that over time, you'll get that operating leverage.
Okay. Anthony.
Thank you. Anthony Sheridan from Goldman Sachs. The first question is coming back to retail. Just looking into 2024, are there any other partnership in the UK that you may still perceive as non-core? And then also in the US Broker, aside from cyber, are there any other lines that could come as attract your attention as an issue? And then second is just coming to large-ticket business. I think I appreciate the comments on claims inflation, assumptions, and the pricing commentary. How should we think about the margin looking into 2024? Is it more stable versus 2023, or maybe some further improvement there? Thanks.
Okay. In terms of the question around, I guess broadly, do we have any further concerns in the retail portfolio? Jo, can you take that? Regarding margins in big-ticket, we've seen a significant pricing correction in 2023 in the property lines in reinsurance and insurance. You've seen the sort of results that we have delivered. I expect the 2024 margin to be similar to 2023. We are continuing to see rate increases, but slower rate increases, frankly, not to be which is not a surprise to us because the market overall is in a very good position.
So yeah, in terms of your question, there were a couple of non-core partnerships in the UK that we've exited, but that's now lapped. I think the subdued growth in the Q4 for the UK was because we were exiting some non-core partners. And actually, we had signed up some others that activation didn't come on until this year. So there was a bit of a timing issue. But in terms of the non-core partners, no, that's been lapped. I think the headwinds that we've been dealing with in U.S. broker within cyber, it's all been about price. And just to give you a bit of a sort of a headline, I think our view in cyber is it remains a reasonably volatile class. It's a part of our portfolio, an important part, but a modest part of our portfolio.
What we saw more broadly in the market is post-Russia-Ukraine frequency dropping in our cyber claim frequency as, like, the rest of the market. Now, our view is that's more temporary and not structural. And so therefore, we didn't build that into our pricing. I think others maybe have taken a slightly different view. And so that has meant that we've been uncompetitive. And this is particularly in U.S. cyber and in our broker business and also in our London Market business, just less visible than in our U.S. retail. And on both of those, we always exercise underwriting discipline. So if it's a choice of growth or profitable growth, we always choose profitable growth. But those headwinds are dissipating because clearly, if we've been facing them now for over a year, that book is becoming a smaller part.
So therefore, it's going to have less drag as we go into 2024. Outside of that, we are actually seeing profitable growth in other parts of the portfolio in our US Broker. It's just that that cyber headwinds have sort of subdued that growth.
Okay. I think. Okay. Oh, there's a question on the phone. So again, could you state your name, firm, and ask the question, please? Yeah. We may have to take this offline then.
Yeah. Sorry. Yeah. We will do that.
All right. So I think unless there's any more? I think we are done. So guys, thank you very much. I guess final words from me. It's been a strong end to 2023 and an even stronger start to 2024. So thank you very much. See you in a few months' time.