Good morning, everyone. Thank you for joining us. Now, what you'll hear today is that we are continuing to build positive momentum across the group. In the first six months of this year, we've added $90 million to the top line, of which $77 million has come from our retail business. We're maintaining high-quality growth, and we've delivered a strong insurance result in a more active claims environment. The key to this is the high quality of pricing, risk selection, and cycle management, on which you'll hear more from Joe in a moment or two. This has been combined with a lower expense ratio, and Paul will elaborate on this in a moment. We've delivered a strong and increased profit before tax of $284 million, at an attractive return on equity of 16.5%. I'm pleased to announce a 5.6% increase to our interim dividend.
Now, what you can see here are hopefully themes that resonate and that are familiar to you from when I spoke about our capital allocation philosophy in March. So, as a reminder, first and foremost, we prioritize the proactive deployment of capital in the pursuit of profitable growth. So we're investing actively to capture the long-term structural growth opportunity in retail. And at the same time, we are selectively deploying capital into attractive market conditions in Big Ticket. So, by way of an example, you can see in the top left that our property net premiums have increased by 40% over the last couple of years. Secondly, we maintain resilience and balance sheet flexibility. Our reserves are prudent and robust, and our capital generation has been strong.
Finally, we remain focused on balance sheet efficiency, as demonstrated by our total capital return to shareholders, which has increased by over 150% year-over-year, including the share buyback. Now, let's turn to our business performance. As usual, I'll begin with retail. In our retail business, we're actively investing to achieve high-quality growth, and I'm pleased with the gradual improvement in momentum and the robust profitability demonstrated by our combined ratio. Now, taking a look at each of the businesses in turn, in the U.K., we're seeing a step up in growth rate, albeit that headline rate is moderated by some one-time premium we booked in the second quarter of 2023. The underlying performance of around 6% growth is a fairer reflection of the business performance in the first half and of the momentum we expect to see in the second.
In Europe, we continue to post solid top-line growth. In U.S. DPD, the momentum we were building and have been building during 2023 has continued into this year, with our direct business once again posting solid double-digit growth. Now, overall U.S. DPD growth has moderated in the second quarter, and that's been largely due to some variable performance in our digital partnerships, as a couple of our more established partners, or production from a couple of our established partners, has slowed in the second quarter. Now, we're actively working with those partners to build momentum in the second half. In our U.S. Broker business, revenues decreased by 4.8%, as a couple of our specialist lines continue to face challenging market conditions, and we maintain our underwriting discipline. I expect this growth gap to narrow as the year progresses and as those market conditions ease.
The overall momentum we're achieving in our retail business is the result of many initiatives we've implemented over the last few years. You can see a sample of these on this slide. This is by no means a comprehensive list. Indeed, many of these are already in play and having a positive impact on our business performance. Now, just to pull out a few, across the U.K. and Europe, we're now winning distribution deals at a faster pace than we've done for many years. Now, the deals that we have won over the last 12 months, on full activation, are estimated to deliver in excess of $40 million of incremental new premium in 2025. Our investment in brand will continue to compound. Many of you will have experienced our award-winning brand campaign in the U.K., which we launched last year in September. That's been incredibly successful.
Not only has it won awards, it's increased our brand awareness. Our spontaneous brand awareness is up almost 40%, and it's driving increased flow into our U.K. platform. Finally, we continue to innovate in product, in building out our underwriting specialist expertise, and in the use of new generation technology. I'll come back to this last point in a moment. In London Market, my colleagues have delivered an excellent result, achieving a combined ratio of 86.9% in a more active claims environment. Now, a key underpin to this is our disciplined approach. We are growing where we want to, where we see attractive market opportunities, and we're managing the cycle or the microcycles across the London Market portfolio. We regard the property segment as continuing to be attractive, and I expect this to grow in the second half of the year.
In D&O and cyber, we continue to manage the cycle as rates continue to fall. In Marine Energy Specialty, we regard the power and renewable segment as providing the potential for structural growth. And we're well positioned, given our investment in engineering and underwriting expertise, we're well positioned to lead more business in this space. In Re & ILS, our colleagues have delivered a fantastic result, growing the net book by over 10% at a combined ratio of 77%. We've deployed additional capital into attractive property and retro markets, and the portfolio is well positioned to deliver strong returns in a benign loss environment. Now, as you know, in Re & ILS, we have an established third-party capital management strategy. It's been in place for well over a decade, comprising quota share partners, ILS funds, more recently a catastrophe bond fund, and sidecars.
In the first half of this year, we've attracted $300 million of new money into the funds. Now, this will go a long way toward offsetting the planned returns of capital in this year. Now, the third-party capital management strategy not only gives us scale in our reinsurance business, it's also a key source of fee-based income, which this year has increased from $28 million to $44 million. And as you can see, it's a key contributor to our overall reinsurance profits. Now, I want to spend just a moment longer on our overall Big Ticket performance. Now, our flagship Lloyd's syndicate, Hiscox Syndicate 33, is the longest continuously operating Lloyd's syndicate still trading today. It's over 120 years old. And it's into this syndicate that we write all of our London Market business and almost half of our reinsurance business.
What you can see plotted here is the performance of all the large Lloyd's syndicates, those writing over GBP 1 billion of premium per annum over the last three years. What we plotted here is the profitability and the volatility of that profit. The quadrant on the top right represents those that are the most profitable and the least volatile. And as you can see, the Hiscox syndicate is firmly within that quadrant. Now, this is enabled as a result of our dynamic capital allocation framework, our deep underwriting expertise, and our disciplined approach. This has enabled our colleagues to deliver market-beating results over the last three years. Now, as you know, the sector that we're in is inherently volatile. This is relative volatility. We are remaining absolutely focused. We aren't taking this. We're not being complacent at all.
We're absolutely focused on managing that volatility and maintaining our disciplined approach. Then finally, on technology. Technology is an increasingly important underpin to creating and maintaining competitive advantage. As a specialist insurer, we believe to fully realize our potential, we have to maintain a competitive advantage in at least these four areas. Firstly, the ease and speed of doing business. Secondly, the deep customer understanding. Third, the quality of pricing, risk selection, and cycle management capabilities. Finally, the ability to grow our business, to scale our business efficiently. Now, all of these are enabled and helped by technology. We at Hiscox have been investing for many years to build market-leading capabilities in auto underwriting and in digital connectivity, allowing our customers and intermediaries to place their business with us quickly and efficiently.
Our many years of operating as a specialist insurer and collecting data enables us to develop a deep understanding of our customers and their risk management needs. That data that we've collected is now being superpowered through the use of latest data analytics platforms, which further improves our capabilities to price and select risk, and indeed to develop more products. Of course, there's a long way to go in this area, in this area of using data. And finally, we're just at the early stages of using latest generation technology, or AI, to augment and improve our processes.
There are various initiatives and innovations across the Hiscox group, and one of which you heard about when we spoke in May, which has been the Google Cloud collaboration with London Market, which, if you remember, we had established or built a proof of concept which reduced the time from submission to quote from up to three days for the Sabotage and Terrorism line down to a mere three minutes. Well, since then, the teams have been working diligently, taking that proof of concept to build a production model. I'm pleased to say we went live as of late yesterday evening and have now begun to actively quote business through this new enhanced AI augmented platform. So very pleased and congratulations to our London Market team. We see these innovations as doing at least two things. Firstly, increasing productivity, or secondly, creating new opportunities for growth.
And I look forward to updating you over the coming months and years as these innovations take hold. So with that, I'll hand over to Paul to take you through a more detailed financial analysis of our performance. Then you'll hear from Joe, who will provide an update on underwriting. Then I shall be back to make final remarks on Outlook.
Great. Thanks, Aki. Good morning, everyone. It's great to be here with you today presenting another good set of results. The group grew insurance contract written premium by 3.3%, driven by sustained growth in retail and in big ticket property by deploying additional capital into continuing attractive market conditions. Our focus remains on profitable growth and underwriting discipline. The group delivered a strong insurance service result of $241 million at a 90.4% combined undiscounted in a more active loss environment.
The group is benefiting from its diversified business model with strong and consistent profit contribution from each of our business units. Also pleasing is the continued improvement in the expense ratio, which reduced by more than two percentage points year-on-year. This is partially driven by our disciplined cost control and expense management, partially mix, and partially due to timing. We continue to focus on cost management, including tight headcount control, realizing savings from procurement and vendor management, and driving economies of scale in the business. The insurance service result was supported by the investment result of $152 million, which was driven by higher bond yields earning through. Together, these underpin a strong profit before tax of $283.5 million, which results in a return on equity of 16.5%. Capital generation has continued to be strong over the first half of the year.
We have made good progress with our share buyback, with over 85% completed at the period end. Given the strong performance in the first half, the board has approved an interim dividend of 13.2 cents per share, an increase of 5.6% from last year. Delving into these results a little further, starting with our retail segment. Retail ICWP increased by 5% in constant currency, with growth within the target range and contributing $77 million of the $90 million group ICWP growth in the first six months of the year. We continue to see strong momentum in Europe and U.S. DPD, and a pleasing step up in the underlying U.K. growth. The U.K. headline growth reflects some non-recurring premium recognized in June 2023. U.S. Broker continues to contract, with the rate of decrease slowing in Q2 versus Q1.
The retail undiscounted combined ratio is 93.8%, which is pleasing given our continued investment in marketing to seize the structural growth opportunities. Moving on to London Market, ICWP decreased by 2.8% in London Market. This is driven by three factors: the decision to non-renew certain large binder deals, our proactive management of the underwriting cycle in casualty lines, and a reduction in space premiums as there were fewer risks in the market. We took a decision to reduce line size due to heightened recent loss activity. Despite a more active loss environment, our London Market business delivered an excellent insurance service result of $74.2 million and an undiscounted combined ratio of 86.9%, the fourth consecutive half year in the 80s range. Turning to Re & ILS, we deployed additional capital early to capture the attractive market conditions, with net ICWP growing by 10.5%.
ICWP was up 3.9% as growth from additional quota share capacity and our own capital deployed were offset by a reduction in ILS capital. The market remains disciplined at mid-year renewals, with attachment points and terms and conditions broadly holding firm. While rates on some business have decreased slightly, these were from generationally high levels, and the market remains attractive. This is demonstrated by a strong undiscounted combined ratio of 77.3% for the first half, together with an excellent insurance service result of $43.5 million. As a result of gross capital inflows from new and existing investors of $300 million into our sidecar and ILS funds, AUM was $1.7 billion at the 30th of June. Following a planned return of capital to investors on the 1st of July, AUM reduced to $1.4 billion. Look at investments.
The investment return is $152.4 million, or 1.9% for the first six months of the year. Coupon income and cash returns increased by nearly 50% year-over-year. The reinvestment yield has risen to 5.2%, with the book yield increasing to 4.8% from 4.3% at year-end as we continue to reinvest the portfolio. We have also extended duration to 1.9 years to lock in higher yields for longer. The strong investment result should continue to provide a tailwind in the second half of the year. Moving on to the highlight of today's presentation, IFRS 17 discounting of claims liabilities. For the first six months of 2024, the net discounting impact was $26 million. As you can see, the IFI unwind is $79 million. This is at the higher end of our previous guidance issued in March.
We are continuously refining our IFRS 17 forecasting processes, and as a result, we are slightly updating our full year 2024 guidance range to $135 million-$165 million. We have updated the sensitivity to interest rate changes to reflect market conditions and the balance sheet as at the 30th of June. Looking at reserves, our conservative reserving philosophy remains unchanged, with a confidence level of 82% within our 75%-85% range. The risk adjustment is $262 million. In addition, our LPTs cover over 42% of gross casualty reserves for 2019 and prior and provide protection from inflation and other pressures. Turning to reserve releases, reserve releases of $51 million for the first six months of the year continue the positive release trend. Our long track record of positive reserve releases demonstrates our prudent reserve philosophy. And finally, an update on capital.
The balance sheet remains strong, with an estimated BSCR of 206% following the deployment of additional capital into property, payment of the final dividend for 2023, and completion of over 85% of the buyback at the reporting date. And as you can see, capital generation remains strong in the attractive market conditions. This is a strong solvency position. I will now hand over to Joe, who will provide you with an update on underwriting performance and priorities.
Thank you, Paul, and good morning, everybody. As you've heard, we've grown and delivered a solid underwriting performance, a combination of the composition of our portfolio, the actions we've taken, and market conditions. We continue to benefit from a portfolio of both balance and choice, enabling us to lead in a favorable way to the attractive market in our reinsurance and our London Market, and also execute, and in parallel, the structural opportunity we have in retail.
If you look at this chart, this is a chart of our segments, and what we go through is from a small retail commercial, we've grown that 6%, and we continue that year-on-year compound growth. Art and Private Client is up 7%, and that's a combination of both rate and exposure. Both of those portfolios are adding net new customer growth, and we have now well over 1.5 million customers globally across retail. In reinsurance, we're continuing to execute on the most favorable market in over a decade, and we're growing our top line 3% and our net over 10%.
London Market property is also favorable, and we'll look for growth in the second half as we continue to deploy our aggregates. In our London Market specialty lines, we're growing terror, kidnapping, ransom, and personal accidents, and we're executing discipline in product recall as we react to some wider market conditions and claims activity. Marine energy, favorable but competitive, but we do see a growth opportunity in our power renewables, and we're investing in our lead underwriting capability. In global casualty, we've spent many years building a well-rated and well-managed portfolio. We're now exercising discipline as some of those segments start to soften. So overall, I'm really pleased with our portfolio management and the underwriting performance it's delivering. Moving on to rates. The rating environment remains positive. London Market rates are up an additional 4%, and the attractive reinsurance property rates are holding.
As a reminder, earlier rate rise in these segments offset view of risk, but more laterally has improved the margin, which is evident in the results. Retail is up a further 3%, and whilst generally a less cyclical portfolio, rate has been necessary over the last few years as we've dealt with a heightened inflationary environment. You may recall we priced for a robust view of inflation with claim assumptions multiples of the historic past. But what we can see is whilst claims inflation, actual claim inflation is a lagging indicator, we're starting to see the emergence of that come off through our portfolio at a slightly lower rate than those assumptions. And this is an example on the right-hand side of some example portfolios across our group.
While claim inflation has moderated, the claims activity has actually been pretty busy, and the landscape in the first half has been busier than this time last year. So managing and paying claims is exactly what we're here for. Some of this will have been headline news, others not, but our proactive management of all is really vital to the customers that we protect. We have exposure to the Baltimore bridge disaster, and we've reserved $28 million net based on the $2 billion industry loss. The first half has seen significant natural catastrophe activity, with sources putting insured loss above $60 billion and higher than the 10-year average. We ourselves have claims from the Dubai floods, the severe German weather, and Hurricane Beryl, and we've also been dealing with a number of risk losses through our specialty portfolios.
So whilst it's been a pretty busy six months, it is not without, but it is within expectation, and there's nothing on this page that we don't contemplate when we underwrite our portfolio. Our job is to understand risk, the exposures they represent, and price for them, starting with the decades of data that we have. We add to this the latest digital and technology capability to augment this experience. In our big ticket businesses, we dynamically allocate capital through the cycle depending on the market conditions. In retail, the vast majority of our portfolio is automatically underwritten, which enables us to put through prices or product changes at scale and remain nimble. Then technical excellence. This is our build-out of processes and frameworks to enable us to take a forward-looking view of risk.
And all of this underpinned by people, you know, technical excellence with experience through the cycle and across the whole value chain from risk selection to claims management. And it's the combination of all of these that is responsible for our underwriting performance. So what you have here is the last 10 years' disclosed combined operating ratio for the group as a whole, but also our reporting segments. And maybe I'll make a few observations. So the first is we operate in a volatile sector, and we don't always get it right. The second is the composition of the group over this last 10-year period has delivered a combined operating ratio of 93% excluding COVID and 94.6% including COVID, despite many of those years being a recognized soft market.
The second thing that maybe I'd say is the volatility of the different segments, our reinsurance being the most volatile and our retail business being the least volatile. The next observation is the power of the portfolio, how that volatility is moderated at a group level, giving us the opportunity to deliver returns through the cycle. And then maybe lastly, the last observation is the most recent past, where we've had both an improving and a consistent performance, moderating the volatility of our results, which has been our ambition. So that's what we've done, but what about the future? Well, this slide is probably where I envision spending the majority of my time over the next 12 months, you know, firstly on emerging trends.
We can't predict the future, but staying half a step ahead is vital, reacting to those emerging trends in the future landscape from both a risk and an opportunity point of view. Building out the future of underwriting, so that's continuing our investment in technical excellence and also our underwriting academy, which is our training program for underwriters. And then lastly, disciplined profitable growth is about doing two things. It's about growing in a disciplined way, the portfolio that we've already built, but also delivering new, saying yes to more customers who are already seeking solutions from us and building out our products and our propositions for the future. I'll now hand back to Aki.
Thank you, Joe. So through the strength of our diversified portfolio, we remain well positioned to deliver high-quality earnings through the rest of the year and beyond. In retail, the last couple of years have been about laying the foundations for the long term. Now, looking out to the rest of this year, growth momentum will continue to build gradually into the second half of the year as management initiatives take effect, although this momentum is not expected to be linear.
I expect London Market to return to moderate growth in the second half, led by the property division, and in Re & ILS, we have now written over three quarters of the business for the year, and I expect the strong net growth, which you've seen in the first half, to continue to exceed ICWP for the rest of the year. Now, going into the Atlantic hurricane season, the group is well capitalized with a high-quality portfolio, well underwritten at attractive rates.
And so to wrap up, we remain focused on achieving high-quality growth and earnings using the strength of our diversified business portfolio. As ever, thank you very much for listening, and we'll now open the floor to questions. Right, there's some roving mics, so please use a mic when you're asking questions so that we can, so people who are listening on the webcast can also hear you. So we'll begin with Ivan.
Hi, thank you very much for the presentation. I think my first question would be related to growth in retail, and maybe if you could first comment a little bit more on what you mean by non-linear acceleration. And secondly, I mean, clearly linked to the ramp-up in the marketing spend, I'm just wondering what's the relationship there? Do you need to spend a lot more to get to the higher end of the 5%-15% range? Are there any other reasons that stop you from getting there, especially as rates might moderate with inflation moderating? Because right now you've been growing at 6%, rates contributed half to that, if I'm not wrong. Maybe secondly, just also related to retail, you've mentioned the tech innovation.
Are you seeing your peers coming up with new products, new solutions that make your existing platform, you know, make it more difficult for you to compete?
Okay, thank you for those questions, Ivan. So in terms of non-linear, you know, it's simply that growth is not metronomic. In terms of marketing, we, as you can see, we have substantially increased our marketing this year. Again, for the first half, we spent $50 million, which is up over 30% compared to the same time last year. Now, the vast majority of this increase is on brand marketing. Brand marketing doesn't have a one-for-one relationship immediately with growth. This is part of laying the foundations for the long term.
As you know, over the last preceding few years, we've really cut back, and it's time to reinvigorate the brand in all of our territories. We have seen a step up in momentum compared to, say, the period pre-2022. I'd expect that momentum to continue to build slowly over time. And we're very pleased with the recognition that we're getting for the brand investment in the U.K. We will continue to compound this investment. Pleasingly, we've been able to do that while delivering a robust profit outcome for the retail business with a robust combined ratio.
In terms of tech innovations, look, we've, if you think about our business and how we've executed our strategy over many years, there have been certainly over the last decade or so two constant pillars. One is the investment in underwriting and underwriting capability, and secondly, the investment in technology to ease the use of, sort of ease how people, customers, intermediaries can do business with Hiscox. So we're trying to do two things here through the use of technology: make it really easy for customers to place business with us, but also to further augment our underwriting, pricing, and risk selection. Those are the kind of key drivers, as well as being able to build scale efficiently. I would say in tech innovation, in many, many places, we have been ahead of the market and continue to be ahead of the market.
In terms of our ability to auto-underwrite, that's been at the heart of the success of our retail business because we've been able to give customers a fantastic experience, being able to respond to their submissions and their requests for quotes in seconds as opposed to hours and days. The innovation that London Market has been leading again is ahead of peers. This is the first lead algorithmically underwritten platform in the London Market, so we're very pleased with that.
Sorry, can I just follow up on the 5%-15%? What do you expect to be then that range this year and next? Sorry, on the 5%-15% range?
I expect to be within the 5%-15% range for this year.
Upper or lower end or no comments?
Within 5%-15%.
Yeah.
Faizan?
Hi, Faizan Lakhani from HSBC. Thank you for the detailed presentation. You mentioned in your comments that you've seen slowdown in some of your key partners and you're investigating that. Could you give sort of an early indication of what potentially drove that and if that's more sort of transitory or do you think there's something more structural there? And second, on the new partnerships, qualitatively, can you provide some sort of indication of what the economics are relative to your key partners? And effectively, what does that mean for your acquisition cost ratio going forward? Thank you.
Okay. Again, thank you for those questions. The slowdown in the digital partners sort of segment essentially is transitory, we believe. These are the same partners that delivered double-digit growth for us in the first quarter. So I think, as I've mentioned in the past, for some of our most established and large partners, they can be very, very large corporations with a core corporate asset, and what we present for them is a very healthy, almost risk-free income because they get effectively a commission, a clip on the business that we end up writing.
From time to time, they can change their marketing focus, and we believe that's what's happened in the second quarter. We're actively engaged with those partners, and frankly, it's just one or two partners to develop joint marketing campaigns for the rest of this year, and I would expect that momentum to begin to come through, but it will be gradual over the year. In terms of economics for new partners, they're pretty much the same as existing partners. It's a clip that they get on the way in as we write business, and that effective commission rate is broadly the same for all partners. I'll just keep going along, Anthony.
Thank you, It's Anthony from Goldman Sachs. Actually, my first question coming to the large ticket business: how should we think about the undiscounted combined ratio from here given your microcycle or disciplined growth there? And then secondly, it's just on the reserve. Can you update any, can you give us an update on any update on the loss peaks, including, say, the casualty lines? Thank you.
Okay. So in terms of reserves and loss peaks, I think somewhere between Paul and Joe, they'll cover that question. And in terms of big ticket undiscounted combined ratio, okay, as you can appreciate, I'm not going to give you a forecast on that. We believe the market conditions in both London Market and reinsurance continue to be attractive. The way I describe our reinsurance business is that 2023 was the best market in over a decade. 2024 is the second best market in over a decade, and conditions continue to look positive as we look out from here. London Market, again, I would describe overall as being in a good place. London Market, due to the nature of the business, is just more complex.
They're more diverse. There's more diversity in the lines that we write, and there are pockets that are continuing to harden. So the property segment continues to see rate increases, and we're positive about that. D&O and cyber is a continuation of the trends that we've seen over the last few years. I think from its peak, D&O for us, we've seen the rates fall by almost 30%. Cyber, I think around 20%. So these are still rate adequate given the very large price increases we saw prior to that. It's just not a time for us to grow in those segments. It's time to take a foot off the gas. And the remaining divisions, again, we remain positive on. So it's an overall positive market. Loss peaks on casualty?
Yeah, so maybe I will start. I mean, from a reserve point of view, I mean, you've seen the results. You know, there's nothing new to report. We've obviously gone through our reserving exercise, and we've had another year of positive reserve releases continuing our, I think, unbroken record of reserve releases. And then also, you know, above that, we're holding the 82nd percentile in terms of our risk margin.
I think more broadly in casualty, you know, as you know, we, whilst not immune to those sorts of social inflation trends that you see more broadly, you know, the majority of our portfolio is not as affected. You know, we don't really see that trend in the U.K. and Europe. Our U.S. portfolio is very much focused on that SME, that micro segment, and so we don't really see that trend in the same way. You know, where we have seen the higher inflation is in our London Market casualty, and of course, that's the sector that Aki has been referring to, which has been significantly re-rated over that period. So from an underwriting point of view, pretty pleased where we are in terms of the loss picks.
And I think maybe just the last thing to say, just in terms of casualty reserves, is we've also entered into, as you will recall, a number of loss portfolio transfers. Predominantly, they were in casualty lines of business, and so we have significant protection for 2019 and prior for that sort of casualty inflation.
Okay. Sorry, it's a little bit dark in here. I think that's Will over there.
Good spot. Will Hardcastle, UBS. Just following up on the U.S. DPD, just what does actively working with the partnerships mean exactly? That's my naivety. And how much of this is in your control? So sort of driving growth versus it's dependent on what they're focusing on at any given time? And just linked with that, you know, this week's been a bit violent from a market perspective. U.S. macro growth, potential slowdown. I guess how comfortable are we with the targets in that context? Second question just about, sorry, is the ratio on the FEV investment result, it's changed by 100 basis points. Is this because you've increased the duration on the asset side, or is it something else? And what was the mistake, or something's changed clearly in that new guidance for this year? What was that related to? Thanks.
Okay. Thank you. Thank you for those questions, Will. Paul is delighted to receive the question after IFRS 17.
Thank you, Will.
On the U.S. DPD, simply speaking, we're working with the partners. We have developed some joint marketing activity, which will be going live, I believe, imminently or in the next few days and weeks. And we expect that to begin to rebuild the momentum. That's in essence what it means. And then in terms of how much control, but this is, you know, like any business, it's about account management. And we are, you know, we continuously work with our partners.
The value that we bring to them is being able to provide a better and more comprehensive service to customers that come to their portals and the opportunity to create a high return on equity income stream. So it's in their interest to work with us. And we also deliver a fantastic service. We're one of the very, very few companies that can provide pretty much instantaneous quote for what is complicated insurance for small businesses. So that we have joint interest and there's goal congruence for that to occur.
In terms of your other questions about the U.S., I guess, too, recent site-specific or macro concerns, you know, I don't think you'd expect me to, and I'm not going to stand here and say, no matter what happens, you know, everything is going to be good. We are not immune to the economic volatility. But there's two, three things I would say. Firstly, new business formation in the U.S. remains particularly strong. Over the last 12 months, right up until the end of June this year, it's increased by a further 4.5%. So we now have around 33.5 million businesses to target in the U.S. The U.S. economy has been remarkably dynamic, particularly the SME segment. And I would apply the same description actually to U.K. and Europe as well. This segment tends to remain robust.
And when faced with challenge, and we saw that during the course of 2020 and 2021, many businesses pivot because they tend to be the main breadwinners in the home. This is not a, you know, this is their business, and you don't give up that lightly. And finally, the product that we provide is not a luxury product. It's almost a prerequisite to undertaking business. So people don't give up their insurance easily. So while it's not immune, we feel good about the business. Paul?
Yeah. So your IFRS 17 question, Will. So I mean, as a reminder, it's only 18 months old. So it's still a relatively young standard. And you can see sort of the middle bar was where we came in sort of from the top of the range of our forecasts. So in essence, you know, the main reason we put this slide up is just to help you guys model out sort of expectations for the various component parts of what is a complicated calculation. So, you know, the IFI unwind, it's dependent upon rate, it's dependent upon opening reserves, and it's also dependent upon payout patterns. And quite simply, what we've been doing is improving our forecasts over time. So in essence, you know, the previous guidance that we put out was $120-$150.
Given where we came out, we've refined our forecasts as we will continue to improve this process. And hopefully that standard will mature and firmly bed in across the whole sector. But we've moved it from $120-$150 up to $135-$165.
Andreas?
Thank you. Just had a few questions on the reinsurance business. I can see you're changing the mix of third-party capitals. You're doing more quota share, and obviously you're paying back your third-party capital investors. Is that changing the risk appetite within your reinsurance book? i.e., does that change the mix between what you want to write in CAT and non-CAT reinsurance? And the second question is, your commissions and fees are quite attractive coming through that ILS third-party capital structure. Moving more towards quota share, are the ceding commissions you get on the quota share book equivalent to the fees you're getting on the ILS capital, or is it going to be a mixed shift in that fee income structure? Thank you.
Okay. Thank you, Andreas. I guess in short, there is no change in risk appetite as a result of the changing mix in third-party capital. So there's no change there. Our main focus has been for many years property and retro, and it continues to be property and retro with some additions. In terms of fee income, the fee income that we receive from ILS funds or indeed quota share partners, the exact quantum or basis points is different. The structure is very similar. And there is not a significant difference between what we would receive regardless whether it's quota share or ILS for equivalent performance. Nick.
Thanks. Thanks. Good morning. Nick Johnson from Deutsche Numis. A couple of questions. Firstly, on marketing investment. So the $50 million spent against $77 million of premium growth in the first half. I mean, at face value, that doesn't seem like a great return on investment. How do you think about the lifetime value of growth from marketing investment? Is there a magic ratio? So how much you spend versus lifetime value you expect to achieve? And secondly, on London Market, you mentioned second half this year, we should see some further growth in London Market from property. I think that's right. Do you see that growth continuing into 2025, or is 2024 likely to be the peak of a top line on London Market? Thanks.
Okay. Thank you, Nick. I guess in terms of marketing, the $50 million-$77 million is not an appropriate way to think about it. The $50 million is made up of what we call acquisition marketing, where there is, frankly, a one-to-one relationship, and what we're driving is immediate growth. And for brands, that's about laying the foundations for a much longer-term strategy about reinvigorating the brand, creating that brand awareness, which over time actually makes the acquisition cost more efficient.
The most significant increase in expenditure actually last year and this year in particular has been in brand spend, rather than what we call acquisition marketing. So the relationship is a little bit different. But in terms of lifetime value, that's exactly how we think about it. With the retail business, one of the significant benefits driven by our specialist nature and frankly the service that we provide is that retention rates tend to be pretty high, which means if once customers join us, they stay with us for quite some time. And therefore, from a lifetime value perspective, which is a key measure for us, we're satisfied with the money that we're spending and the investment return that we're achieving. In terms of London Market property, rates continue to hold up well. We're very pleased, and I expect the business to grow in the second half of the year.
As far as what will happen in 2025, I think we'll give you a much better update later on this year. Perhaps you can ask Paul when we do the Q3 update. Tryfonas.
Thank you. Tryfonas Spyrou from Berenberg. I just want to come back to the sort of partnerships retail. I appreciate that obviously the comments you made, some of your partners obviously getting risk-free income. So you talk about you together driving marketing, so you want to obviously drive more growth. So it doesn't feel like they're not doing their part of sort of driving that. So I guess my question really is whether there's any structural difference between some of the products they're selling on your behalf versus what you're doing on the direct side, because clearly there's a discrepancy between the two growth rates.
So the second question is on, I guess you touched on it, there are London Market growth plans for next year. I was wondering if you have any sort of early comments on whether you're going to look to expand the capacity under Syndicate 33. Clearly, you showed us the profitability being quite strong, and I appreciate capacity. Stamp capacity has been flat over the number of years. So any thoughts on you potentially growing that next year? And then last question, maybe one for Paul. How much limit or headroom do you have still available on the LPT, and how has your U.S. liability reserve position touched that move during the first half? Thank you.
Okay. Great. Thank you for this question, Tryfonas. And Paul, you'll cover the question on LPT.
In terms of products, there is no difference in the products that we sell direct to customers or through the partnership channel. It's the same products. In terms of London Market growth and Syndicate 33 capacity, we have a headroom in the capacity currently. And we'll see how the rest of the year unfolds and how the market outlook looks like for 2025. I think the key thing is, as you've heard from Paul, is that the capital position remains very strong. We will deploy capital where we see attractive opportunities, and if needed, we will increase the capacity.
Yeah, and then on LPTs, still loads of limit. If you have a look across all of the contracts that we've got in place, in aggregate, lots available. And then as sort of Joe referenced earlier when we touched on the earlier comment, nothing significant around U.S. reserving. You could see that from the combination of where we end up from the confidence level, similar to last year at year-end, and reserve releases still remain strong coming out.
Okay, I'll keep going along. Abid.
Hi, morning all. It's Abid Hussain from Panmure Liberum. Thanks for taking my questions. I've got two questions. The first one is on capital. You just referenced the capital position is very strong. It does from the outside feel like it's very strong. Just wondering if you have a sort of target range that you'd like to operate to and how quickly you might want to get down to that target range, whether that's through deploying for growth or perhaps through additional capital distributions. So that's the first question. The second one is slightly left-field question. It's on cyber rates and the outlook there.
Just wondering, post the CrowdStrike outage, if there's any stabilization in rates or if margins are looking sort of attractive enough for you to pursue that as an avenue of growth going forward.
Great. Thank you, Abid. So Paul will cover the capital question, and Joe will address the cyber rates question.
Yeah, so capital, as we've said, remains strong. You can see on the chart, we're very pleased with the 206% BSCR position. We don't have a range. So we've been operating in and around the 200%, but we don't have a target. What we have been very clear on, and particularly around last year-end, if you can cast your mind back around our capital management policy. So very much deploy the capital for growth, and you've seen that we've done that last year and this year.
That's not only to drive the retail business, but also to deploy into attractive market conditions. So from a reinsurance perspective, we've grown that net business double-digit. Last year, it was strong similarly. We maintain a strong balance sheet. You can see the strength of that. We've got the scenario up on the chart around the stress around it. It's a pretty extreme scenario. Continue to pay a progressive dividend. I'm pleased around the 5.6% increase. And then consider any surplus to return. So we are pretty much mostly through the buyback that we announced at year-end.
And then from a cyber point of view, so yeah, I think the global IT outage in July was a timely reminder that this type of risk shows no sort of geographical or indeed industry boundaries. And so a lot of people were affected at the same time. I think a couple of interesting things on that event. Firstly, it was non-malicious. So not all cyber policies respond to non-malicious events. Our own retail core policies don't respond to non-malicious events as an example. I think the other thing that was quite interesting was the geographical.
It came on a time basis, a time update. And so Asia-Pac was most affected, and then into Europe. And then obviously, it was largely done and dusted by the time the U.S. woke up. Again, from our own point of view, we have very little in Asia-Pac, and the majority of our business is written in the U.S. and obviously in Europe. And I think there were other things about that event, which was quite interesting. One was obviously it was contained really quickly. Both Microsoft and obviously working with CrowdStrike come up pretty quickly.
So most people who were affected were up and running on the Saturday, actually. So maybe one-day outage and again within the markets and obviously our own policies, there's waiting periods. So from our own point of view, we might anticipate a bit of activity, but our London Market business is written, high excess. So significant sort of waiting periods before it would be affected. But I mean, to your question about price, I think it probably does two things. I think it absolutely drives the need for cyber. I think consumers, customers, businesses will be looking at that and thinking how reliant they are on technology. And so I think the propensity of people to buy will increase.
This event, I mean, the sort of CyberCube, who are sort of one of the main vendors here, are coming out with sort of an industry loss of between $0.4 billion - $1.3 billion. So while not a significant event in terms of some of the RDSs. So that has two schools of thought. It can either drive people being more cautious because they've seen this test in terms of this aggregation, or they may say, well, actually, it tested it, and actually, it's not going to be a significant market industry loss. And so therefore, that might fuel. So I think it's difficult to tell, but I think it definitely will drive propensity of people to buy this product because it really highlighted the risks.
Okay, Kamran.
Hey, so it's Kamran Hossain from JP Morgan. Just want to touch back on the partnerships again. Just intrigued about the partnership concentration risk that you really have. So I think you've got, I mean, it's very difficult from the outside to see whether this is a small handful of partners that had maybe a disproportionate effect on volumes in Q2 or not. So just interested in that. The second question, just kind of thinking longer term about DPD, you referenced, I think it was 33.5 million potential customers. I know you're probably not going to give us your market share, but do you think that's gone up or down in the last five years as the market kind of directionally wedged in that score? Or a number would be amazing.
And the third question is just coming back to a slide that Joe put up, which basically showed you've got a really diverse mix of business. You've got reinsurance, you've got London Market, you've got retail, but you stick it all together and you come up with a very smooth result. At what point will you move to a single combined ratio guidance for the group? Thanks.
Thank you for those questions, Kamran. In terms of partners, we have at last count over 150 partners. I think the way to think about it is it's a typical Pareto sort of distribution. There will be sort of 20% that account for, these aren't the specific figures, but 20% account for 80% of the income. So the distribution is no different from that. But we are, I think we're quite happy with actually, I would say over the last few years, the diversification within that partnership capacity increased.
If you go back, if you go back a few years, it was perhaps more concentrated, but we've added more and more partners. A few of those have become quite established and large with us. So we're pleased with that. In terms of market share, I guess the short answer is I can't give you a stat, but I will tell you it's gone up because our growth, if you compare it to, I don't know, whatever period, 5, 6 years ago, our growth rate has been a little bit faster than the market growth. And then in terms of single combined ratio, not yet. Darius, and then we'll go to Freya.
Hi, Darius, KBW. Two questions, please. In your BSCR waterfall, you've showed that the dividends and the buyback were not covered by the net capital generation in the first half. Is this because you execute most of the buyback and should we expect the repatriations to be fully covered by the year-end, or some of the buyback should be expected to come from the excess? That's the first question. Second question, I think you showed that as a percentage of reserves, your reserve releases have been coming down from 1.8%-1.3% over the past few years. At the same time, your confidence level did not increase. It actually slightly came down from last year. I would have thought that the harder insurance markets would have allowed you to increase the overall buffers. So what is driving this when the reserve releases were actually coming down? Thank you.
Thank you, Darius. I think both of those questions are for Paul.
Yeah, so I mean, you've got to think, and this slide is really about the first half. So what you've rightly highlighted is the share buyback. 85% of it is in the first half of the year. So we've still got the second half to go. Capital generation, we still expect to be strong. All things equal, we've got to get through the wind season to be strong in the second half of the year. The interesting thing on the chart is if you look at the sort of capital consumed, because this is very driven by property CAT and both in reinsurance and in the primary basis, a lot of that is weighted towards the first half of the year. So more than 75% of the reinsurance business has been written as at the sort of 30th of June.
So the capital consumption for the second half, we expect to be relatively modest, capital generation to be strong, and therefore the overall capital generation overall will more than offset both the buyback and the dividends. That's sort of the first aspect. And then I think from the second component around sort of reserves confidence level, I think it's a combination of different aspects. So you've not got to just look at the sort of the rates and the hard market. You've got to look at the underlying composition of the reserves themselves. The proportion of CAT versus non-CAT will play a part. But I come back to the same part. We conduct every quarter a comprehensive reserving review with our actuaries. We are at the top of that range. 82nd is pretty consistent. And just reflective, you think about the hard market conditions.
Just as a reminder, if you go back to the half year last year, we were at the 77%, and that was the first time when we published it. So there has been a meaningful increase in terms of the overall confidence level. And Joe mentioned at the earlier questioning, the track record of reserve releases goes back 20 years or more. So we're very comfortable around the reserving position.
Hi, thanks for taking my questions. Freya Kong from Bank of America. Just back to the retail momentum pickup you expect in H2, does this factor in your plans to work with these larger partnerships which have fallen short in Q2, or is this reliant on the pipeline of partnerships that you have already planned to come online? I guess a follow-up to this is, how hard do you have to work each period to bring on new partners in order to sustain growth? And the second question is more on the market outlook. Given that inflation seems to be tracking below expectations for yourselves and probably for peers, do you expect this could put downward pressure on pricing over the coming months?
And on pricing adequacy, it seems like your comments seem to match peers, that it's quite satisfactory in most lines. Any comments you can share on the competitive dynamics you're seeing across the different lines of business? Are we going to expect a plateau in rates or a peak in the cycle? Thanks.
Okay, so I'll address the question on momentum pickup on retail. I think Joe will provide a perspective on pricing adequacy across our portfolios. In terms of momentum pickup in the second half of the year, as I mentioned, we expect it to be gradual. I expect it to be non-linear, and I expect it to be broad-based across our retail business, not specifically or entirely driven by DPD. We are working, as I mentioned, with our partners on improving momentum in the second half of the year. I would say that this is not the flick of a switch.
Plans are in play. They'll be implemented, and then momentum will build over time. As far as adding partners to our portfolio, we're very pleased. As I said, we have over 150 partners, and we have actually a pretty healthy pipeline of prospects, both sort of large, medium, and small opportunities that we're looking at. And frankly, this is just part of the business proposition that we provide. We are not dependent hugely on those to maintain growth rates. They are a welcome addition and have definitely made an impact on our business performance in the first half of the year, but they're not the key drivers of short-term growth.
Yeah, and then maybe in terms of rate adequacy, if we want to flick up the rating slide, because I think this brings it to life. I think from when we look at our portfolio, the vast majority of our portfolio is in a really attractive market. What you can see on this slide is those markets have been repricing for many, many, many years and driven by a combination of lots of different factors. So unlike other sorts of cycles that have maybe been driven by a single catastrophe loss that drives that reinsurance that then flows into insurance, what we've seen here is a low interest rate environment, which meant underwriting profit has been essential, soft market, so there's been losses, so people are driving up their prices.
We've geopolitical instability. There's been so many different factors, and obviously more recently a high inflation environment that has driven up these prices. I think the most important thing that you can't see on the chart is actually this is just relative in terms of up or down. The most important thing is how adequate is that portfolio? It's fine to take off 5 points off a portfolio that has 20% in addition to rate adequacy. Clearly, it's different if it was just rate adequate, and so therefore you would sort of reduce the margin.
So I'd say, from my point of view, most of our markets are in very attractive parts of the cycle. Rates are adequate, and you can see that. It's evident in our results, the results that we're posting. Of course, there's always going to be parts of the portfolio that are stronger than others, and we talked about some of those sort of microcycles. But that's where we exercise our discipline. We've done that before, and we'll do that again. If we believe that the market is not priced inappropriately, that is when we shrink, that is when we reduce. And obviously, you can see we've done that in some segments that are on the softening. But yeah, overall, the market remains pretty attractive.
Okay, I think we have addressed all the questions. Okay, so thank you very much for listening, and thank you very much for your questions. I guess just to reiterate, we're very pleased with the performance of our business. We're growing where we want to. We're delivering robust profitability across the group. The last couple of years have been about laying the foundations in our retail business, and we're beginning to see that momentum build in the first half, and that will continue into the second half. So thank you very much.