Spend a few words on why we thought about announcing a plan a year before we should have done, and what kind of thoughts went behind this decision, which clearly surprised some of you. Now, first of all, the plan that is still running these days is a plan that was launched in 2022, at the end of 2022, which means that we worked on that plan during the tail of the lockdown days. We had very different views on the markets at the time. For example, we expected a recession for this year, a global recession. We expected a softening of the commercial insurance cycles. So a number of the embedded predictions in the plan didn't turn out right, and actually the developments have been far better than we expected.
The situation that we're in today is what you see, that on the four KPIs that we indicated for the current plan, we're pretty much, at the end of this year, delivering them already a year in advance. BOP and the ROE, I mean, you remember we said more than 20%, which sounded very ambitious, but then we have been running constantly from the beginning, from the first semester, well above 20%. Cash remittances, you haven't seen that yet, but this year we will probably reach in the proximity of CHF 12 billion of cash remittances created already. We are able to generate more and more cash from the business, so the CHF 13.5 billion that we set for the end of next year is clearly. It will clearly be exceeded.
And the EPS growth, which is something that you and I have been discussing many times, I mean, the original plan was to reach by the end of 2025 4.4 CHF per share. We're very likely able to reach this already this year. So once again, targets met and then will be exceeded. And the SST, okay, the SST has never been a real constraint for us, and we have run always well above it. So, I mean, if this is the situation, some of you ask me, why didn't you just raise the targets? Well, because there is more than that. We're not just running ahead of the plan and the targets. We understand, and we progressively understood, that there were different business opportunities in the real market development that if we don't address it with the new plan, the risk is that we'll be missing them.
And then we started thinking, why wait one more year, which will make us further missing opportunities. Let's start immediately going after these opportunities as they are. Also, linked is to the fact that over the years we all grow in confidence on what we can do. We know pretty well, I would say precisely, what levers we can activate, how we can reach the desired objectives, and we have great confidence on ourselves at this point. It's a very execution-driven organization. Where are the opportunities? The opportunities, we're going to talk a lot about that, but fundamentally they are in the commercial space where we want to go back to the vision we had in 2017, 2018, 2019 of building portfolios for long-term sustainability, right? We did that quite successfully in those years.
Then we kind of lost a little bit the priority of that during COVID and in the more recent times. There is again a great opportunity these days to do that and to gain a sustainable advantage in the market. Equally, retail, I mean, retail is not just a price war. Now we understand that even there are changes which are quite long-term oriented, like in the motor business. And then we start thinking about what products do we want to offer in the retail space, not just motor, how we organize ourselves for that, how we price underwrite. Let's move quickly to the opportunities. And life, I'm going to talk about life because protection, which is our main business, we have a different view today of how we can run this protection business, again, having in mind sustainable advantage over time.
So when we started really coalescing all these views in one, we started thinking about, well, we should have a different ambition. We have a different mission to accomplish in the market by 2027 than what is embedded in the current plan. Let's start working at the new plan, and really we raised all the stones and we changed practically everything that we needed to change in order to achieve this ambition that I'm going to explain in a few minutes. One thing is completely unchanged and didn't move at all. We had for eight years a strong commitment to shareholder value, and we will maintain that pretty much unchanged.
Our capital policy, which has been so nicely replicated by others, will stick to that, will continue to deliver 75% of profits as dividends, and will continue to create cash and remunerate shareholders as we have done in the past. Claudia will explain also the cash generation and the cash usages. Let me also give you, before I enter into the plan, again, as a background, how we see our journey over the last eight years and how we see the connection between this journey and the next plan. The first plan was launched at the end of 2016, and it was really about fixing, giving ourselves a clear mission and then fixing the things that did not belong to that mission. What's our mission? We're an income stock. We need to generate constant dividends for shareholders. We need to repatriate cash in the pockets of shareholders.
We were not set in 2016, 2017 for that. Why? Because we had portfolios which had embedded a huge volatility, right? So what we started doing there was change the portfolio. This was the big shift that Sierra as Chief Underwriting Officer at the time started. You might remember that we indicated at the time that we wanted to go from a long tail to short tail predominance in our portfolio. We brought down casualty to 30% today of our portfolios. We started growing specialties, and we kept our market share in property. That was a thorough shift that was also combined with a significant reduction in the cost basis. We cut the cost by CHF 1.5 billion nominal that still remains as a major effort in the industry.
As a result of all these things, the large loss volatility really got compressed, and we started delivering dividend increases one year after the other. That brought us to 2019, and this is the BOP pattern in this period. As you see, business operating profits passed the CHF 5 billion mark at the time. We launched the next plan at the end of 2019. That wasn't the luckiest time to launch it because two months after, COVID came and everything in a sense went up in the air. What we could do beside delivering the financial targets was continue to improve the commercial books, reducing the NatCat exposures. Again, already in 2020, we saw the weather changing. We saw the risk of that on our capital, and we started reducing actively the exposure in order to maintain our combined ratio stable.
We also took the time to do two very important developments that today are fundamental. We built a thorough data lake for commercial insurance, and today that's one of the most important machines, what is called Insight 360. A number of you have seen it. It's very important for us to shape the future. And we also work a lot on customer data, customer segmentation, customer insights, preparing ourselves for growth after the end of COVID. And then the current plan, the current plan was meant to face fundamentally inflation and was centered on financial interventions. The idea we had at the time was that the commercial business will be softened. It didn't, but that was the idea. And we wanted to prepare ourselves for softening and for high inflation in retail and commercial. Probably the biggest achievement under this plan, unexpected at the time, is the turnaround of Farmers.
You all remember that a year ago Farmers was considered a big issue. A year later, Farmers is one of our fundamental strengths for the future. Raul and his team have completely turned around and transformed the Farmers' organization. We have today leading combined ratio in home, leading combined ratio in motor. California is back to profitability. Costs have been significantly reduced. Customer satisfaction is increasing again. Farmers has been a masterpiece of transformation, which is still ongoing and will produce the most important benefits over the next years. If you look at this development over the years, the growth of our business operating profit has been well above our European peers at 7% per year, and you see where the others stand, so that's the journey behind. What's the need of a new plan if you have this journey behind you?
The need for a new plan is because we see now all these opportunities in the market. And let me pause on each one of them and explain, and then later on I will expand further. In commercial insurance, we see the opportunity to really take advantage of the very new conditions in the market. And the way we see the conditions is there is no more cycling property. Property is weather dependent. Property is NatCat driven. And I don't think anyone in the market believes that weather is going to be any better. I don't think anybody believes that besides random situation, NatCats will be lower in the future. So property will stay hard. It might stay harder or less hard, but always hard. And this is what we have seen over the last two years.
Double-digit increases sometimes, single-digit increases sometimes, but very hard market for property. There is a need in property to remain very selective and disciplined in underwriting. There is a need to really calculate the capital impact of the exposures we have in property, and we might go again into Cat exposure reductions over time. But property is a very different line of business today than it was in the past. Casualty. Look, our exposure in casualty is today fairly limited through the reduction that wisely we ran years ago. If we look at market share, if we look at the size we have compared with the peers in the U.S., we have very limited exposure there. Now, saying that, we see opportunities to further work on the casualty exposures.
We need to continue to shrink the exposure that we have on the global corporate segment of casualty, which is where the famous social inflation hits, which is where the risks of seeing inflationary development sits, and rather grow it in the mid-market space where casualty is much more stable and much less exposed to the risks of that. So you won't see us in three years' time reporting on a much smaller casualty size in our books, but you will see that the composition of casualty in our books is different by customer segments. Specialties. Specialties offered to us lots of opportunities. We started growing specialties five, six years ago. There is still a lot of growth there out that we want to capture. Specialties are at the center of the reconstruction of the economy that is happening.
And so a lot more can be done in E&S, a lot more can be done in transactional liabilities, a lot more can be done in energy, a lot more can be done in surety. And we want to capture these opportunities over the next years. Moving to retail. I mentioned already we see retail a little bit in a different light these days. We think motor will remain challenging for the next years also because there is an underlying transformation of the motor portfolios of the ownership of the car fleets and the cost of these cars. And so prices will continue to rise, but also this calls for actions on the claims processes, on artificial intelligence, digital understanding, and running of the claims. It's not the same business it used to be, and it will never come back.
There are two areas of retail where we are strongly focused on, and those are SMEs, where today we have roughly CHF 5 billion of portfolio, and we want to grow that over the next cycle, and the travel business, where Cara Morton in the afternoon will speak about the acquisition we made today, we are one of the global leaders of travel insurance. It's roughly CHF 2 billion business. There is an opportunity to grow it further profitably and stabilizing the customer relationships. Life. In life, some of you know that we've been thinking a lot about our life franchise, our life portfolio. It is very special because it's 80% protection. We grew it from scratch almost 15 years ago, and so the natural question for us is, what else can we do there? Now, slowly we found out that there is a lot we can do there.
First of all, we have started internalizing the underwriting of the life portfolios. I don't know if you know it, but it's a current practice in the market. The life protection is outsourced to reinsurers. Being the size we have, we want to open the black box, and we want to know how to do underwriting based on our data. We want to have our data repository, which will allow us to have full control of the risks we're taking in protection, and will also allow us to have more proper pricing, knowing the underlying riskiness of the portfolios. The second thing we want to do is we want to standardize the CX, the customer experience on protection. And so we want to create this as a platform, pretty much as we have done with other solutions, and bringing them to the views to the customers.
And then the views will package it, price it, and develop it in the market. What we expect to have through this is more sales and better margins after that. Farmers. I mean, Raul, we speak later about Farmers. Farmers is a complete transformation. This is something that we should have done. As you probably know it, I would have liked to do it a little earlier. My original plan was to start this transformation of Farmers in 2020, but then COVID hit even that, and we had to postpone it two years later. Raul has advanced in the transformation, but he's not done with the transformation. What is the purpose of the transformation?
The purpose is to build a company which will be a leader in retail space, able to sustainably grow policies in- force and the customer base, and continue to have a strong capital position in the Exchanges, so a very, very different purpose than the one that we had in the past of Farmers, and so far, the results are impressive and are very confirming that this is going to happen, and this is why we're so confident, so what's the vision for Zurich in 2027? It remains as an income stock. It remains as a very capital-rich company, as you probably saw already in the targets we have for cash generation, but we want to have better, stronger, more sustainable commercial portfolios and more profitable commercial portfolio, driving to a full achievement of this movement that we started in 2017, 2018 towards a mid-market, towards smaller scale customers.
A lot of progress has been made, but more progress is needed. We want to rebalance the retail portfolio and achieve technical excellence also in retail, and we want to build this global platform for life. Farmers, I think, will be a surprise for all of us over the next three years. One thing I want to, I've already anticipated a number of things that you find on this slide. One thing that I want to very much focus on is a lot of what we're doing in underwriting, in commercial, in retail is claims-focused. You don't often speak of claims. Claims are super important. In these days, with artificial intelligence, digital, you have opportunities that we never had before. This can help a lot, especially in the way we funnel the claims towards the different steps before the payment.
Ericson, in the afternoon, will give you examples of solutions that we have developed over time and that we are already using and we will more and more use over the next years. I know that you guys think that commercial insurance is overstretched and will not improve. I don't think this is fair. This is the evolution of commercial insurance results from 2016 to today. And let's look at the different phases. I mean, from 2016 to 2019, it's where we transform our portfolio, and we started benefiting from the different portfolios that we built in our books. And you saw that the combined ratio kind of decreased from 97.6%- 95.5%. You remember the discussions that we had at the time. You remember also your skepticism. Is this about the portfolio or is it about you having stupid underwriters? And I always say that's not about the underwriters.
It is about how you build the portfolios. If you want to have a portfolio, a 95% combined ratio, you need to have casualty below 50%. With casualty being more than 50%, no underwriter would be able to deliver you a 95%. So we got there. Then we had the COVID years, which in a sense helped us and reduced the combined ratio because of lack of activity. And then we went fully down to 88%, which was before IFRS 17. That 88% transforms today in an 89.5% under IFRS 17, and we're still pretty much there. So what we have seen is that all through this period, catastrophes included, weather included, social inflation, you name it, all the things that you're familiar with, our commercial business is still running at pretty much a very low combined ratio.
Now, we strive for better, and we strive for better because we're going to do again what we did there. We will start recomposing the books again for better results and more sustainable results over time. So commercial is set for giving us good results over the next years, and it's not at the end of its run at all. We are indicating specific business targets. That's the difference with the current plan, the one that is practically terminating today. We're indicating for 2027 a CHF 4.2 billion BOP contribution from the commercial business. Now, if you step back a second, if you remember the slide before, in 2016, we reported CHF 4.5 billion business operating profit to the whole group, the whole organization. We're saying that in 2027, the commercial insurance only will produce almost the same results.
And this is a growth of 16% over the 2023 results, over last year results. We're also saying that we want to pass the CHF 10 billion mark in the middle market. Today, we are at CHF 7.5 billion. So again, it's a significant growth. In the afternoon, you will hear Kristof and Alex talking about how we are operating in the American market, which of course is a big portion of it. It's not all, right? It's not all the mid-market is Zurich North America, but a big portion is there. We think that this is credible. We think that we can achieve it. Also, you will see in the afternoon how much we invested over the past years, which again, it's a question that many of you were asking me in the meetings, how much are you investing in mid-market? Hugely. You will see the numbers.
I mean, we built our presence. We delivered boots on the ground in the different locations where that was needed. Now we're ready to take the results of it, and we don't need to invest that much anymore to continue growing. The other thing which is important for me to stress in this page is we've been investing a lot in digital solution and AI. It's difficult to benchmark against the others. We believe, but I understand that it's a weak claim, that we're far ahead than the industry on that. But what is most important is not that. It is the benefits that we are achieving for our business purposes through digital solutions and through the use of artificial intelligence. These are use cases that allow the underwriters to better underwrite the risk or the claim settler to better handle the claims, and this eventually means money.
It means profits. Let me move on retail. Again, I know the prejudice that we're not good at retail. I don't think that's very fair. If you look at Farmers, I think that is not a miracle. It's not a coincidence. These are skills that we deployed there to fix the most important retail portfolio we had, which was bleeding, and we fixed it in 12 months, so we will drive and use the skills, the knowledge, the competencies we have in the group to continue improving the retail position. Today, we are especially focused on EMEA Motor. EMEA Motor is not where it should be and not where it will be, and we're confident that we're going to drive EMEA Motor below 96% Combined Ratio over the next years. It's already moving better. It's already improving.
Then we will focus ourselves on growing, as I said before, SMEs and travel. Let me also talk for a second about two other connected businesses. First of all, the crop business, which belongs to Zurich North America, but it's much more natural as an SME business, which for us is retail than it is a commercial business. As I told you many times, we frankly screwed up on crop a year ago. We made the wrong management actions. We took the wrong decisions. We fixed that. We changed management. We reverted back to the things that we wanted to do. And in the afternoon, you will hear Dalynn Hoch, who moved back from Switzerland to the U.S. to lead crop. And crop is, sorry, performing already back well. And it's very encouraging for the next years. It's a good business.
Again, you asked me many times, why do you own crop? Because it's a good business, because it's profitable, because it stabilizes the North American returns, and because we know how to run it, even though sometimes, as everyone, we make mistakes, and then we fix them quickly. The second thing is customers. We've been working a lot on customers, and this is not just a way of saying. We have invested in customer data. We've invested in segmentation skills. We have continued to improve our customer loyalty and our customer retention. That is very, very important in retail for the profits. The profitability is completely different if you look at a newly acquired customer or a fully loyalized customer. There is a lot of machinery behind.
Conny later on will explain all that, and I hope you really have a sense of how much of this is almost, I would say, mathematical versus just being a marketing and words. It's very much data-driven. The progress is visible, and we will continue developing this, especially for the retail segment, but we apply that also to the commercial segment, to the broker distribution, to the broker success. Life. Just quickly repeating what I haven't been clear yet. Protection today for us is a business making CHF 1.3 billion profits a year. I don't know how much of this is fully understood and how much of this is visible, but it's a big contribution in our full year results. Has a 15% margin on gross written premium. So it is a rich business. Some of these margins today leak out to reinsurers, to other providers, to outsourcers.
We want to rein them back, and we want to fully control these margins. It's a well-balanced business in terms of the risks that we're taking and the distribution channels that we are using for this. Geographically, though, there are three units which are completely predominant in protection sales. One is the joint venture with Santander. The second one is our Australian business. The third one is UK. Then we do a little bit of protection everywhere. We do it in South America. We do it in Switzerland. We do it in Japan. And the aim of that is by gaining full understanding and control of the data and full control of underwriting.
By opening the black box of what are the underwriting conditions, we can achieve better margins, better solutions, but also we can grow more our business, especially in the countries where we haven't been very good at creating solutions and delivering them to the customers. Farmers. Look, I know that the Farmers' challenge a year ago was create capital for the Exchanges. Capital for the Exchanges has been created in a year's time, I would say abundantly. The Exchanges are now above historical targets of surplus and capital generation. The next challenge for Raul and his team is growth policies in force. They will. They have been setting up everything to create sustainable growth over time and to restructure completely the Farmers' organization. As you will appreciate later from Raul, Farmers is a huge, complex organization. So the transformation is successfully moving on, but it's far from being concluded.
Actually, the best has to come. The restructuring has touched every lever. Again, Raul will give you a perspective, a sense of that. But what will remain over the next three years is that we will keep protecting the surplus generation for the Exchanges because that works for us. We don't want the Exchanges to come in a situation where there is any doubt that they have the capital to support the growth. I mean, we're still thinking that there is a sustainable agency model in the U.S. It's an evolution. Again, Raul will explain what's our vision for agencies, for captive agents or for independent agents over the next years. It isn't our view that the direct writers will conquer 100% of the market. We will have a space in the market in the next years.
In order to achieve this space in the market, we need to work on the agency organization and the agency structure. This is what Raul has started already, and the benefits will become visible. Definitely, this will drive policies in force growth over the next years. I know that this is not very relevant anymore, probably even less so with the new American government. However, this still matters for us. We're still committed as an insurance company despite paying a lot or too many weather claims, which are related to people suffering and being in distress. We're committed to do something as much as we can do. You probably saw that we published targets and commitment on that, and we will fundamentally work with our customers.
The thing that we'll do the least and we don't like to do is to cancel customers and abandon customers. We will continue to work with the customers supporting them in evolving their industries and becoming fully compatible with the continuation of the planet, and we will continue then to engage, especially with the large customers, and then we will insist on our own reduction targets for the creation of carbon or for the investments in solution for climate. There is a lot of investments needed in that. Technology must help and hasn't helped yet. This is not something that for us has become secondary. It remains a priority, and in a daily business, we understand the importance of this. Now, let me come to the conclusion of this, and let me come to the targets altogether.
So first of all, clearly, these targets raise the bar compared to the current plan. They are above the current plan. But it's not just that. They are different because they have a different business underlying ambition. And this is what I said by we have a vision for how we want this company to be in 2027. We want commercial to continue growing in size, especially in the mid-market, and to grow in profitability. And testimony of that, we want to set targets on BOP, business operating profit for commercial in 2027, and for the size of the middle market premiums in 2027. We want retail to return to the long-term profitability, but also we want customer loyalization to really be the mark of Zurich in the retail space as the unique relationship established with the customers.
Protection, we want to accelerate and grow faster than we've done in the past years through the changes that we're making. And we want also a profit contribution from life. And then Farmers will deliver 5% growth through these next three years, but I'm very confident that this will be predominantly through policies in force and not through rates as it was in the past. All these business targets generate financial targets. These financial targets are core EPS growth 9%, above 9%. That again is the uplift of the current EPS target, core ROE above 23%, and cash remittances above CHF 19 billion in three years. Then Claudia later will explain how these targets compare with our past targets.
And again, I think it's important that you appreciate the journey in making this organization more profitable, more able to grow, more able to deliver over the years, and also what they will mean for shareholder. SST, we changed it after eight years of discussion of what it means to have a target at 160 and you sit at 240. We said, okay, we make it a floor, right? We don't want to go below, under 160. I think you all heard my explanation. 160 is pretty much where the AA rating sits. It's not a regulatory hurdle. It's not the bottom for the regulators. The regulators will easily allow us to go below 160. But the rating agencies is a different story. So that's why we insist on having 160 in sight as a floor for everything we do.
But at this point, that's just a floor, which means that you have to accept that we're running the business with in excess of 200 combined SST and not combined ratio for sure. And that it will stay at high level over these three-year cycles. And we will not try to reduce it at all because we want to have comfort on keeping a buffer over the S&P AA rating. I hope this is all clear, but through the presentation that follow mine, you will have details of each one of these, and then we will have Q&A session later on. And now I pass it to Sierra for a deep dive into the commercial programs.
So good morning. I am Sierra Signorelli. I'm the CEO of our commercial insurance business. It is wonderful to be here with you today to provide you with an update on commercial insurance.
We've had an incredible track record over the last five years, and during this time, we've built strong capabilities in strategic areas that are going to serve us well through the next cycle. There's no question that we've achieved a lot. Mario touched on this, and we are ready to meet tomorrow prepared. Today, our business is a robust and diverse business with leading capabilities. We have a high-quality portfolio. We have a high-quality portfolio that is profitable, and it gives us a very strong platform to build on. We currently also operate in an attractive market, which gives us the ability for focused growth, and that focused growth is going to help to further diversify our portfolio, bringing more stability to our performance. As we look forward, we're going to use our analytic capabilities to make better decisions and to have better portfolio oversight.
And in the coming years, we're going to pursue an ambitious agenda, bringing all of our capabilities to the forefront to deliver an incredible performance. I am very proud of what the team has achieved. Our financial results are proof in our ability to execute and our consistency in our delivery. We've repositioned the portfolio dramatically. We've taken significant underwriting actions in the past years to improve the profitability and the volatility of our portfolio. Through these portfolio actions, we've reinvigorated an underwriting culture. We've invested in data and analytics, and this is going to help us to continue to build deliberate portfolios. We positioned ourselves for growth, and we achieved growth where there was the opportunity to do so profitably. We've been deliberate in what we pursue, and we delivered consistently. We've grown to be 66% of Zurich's insurance revenue for P&C.
We have a strong, long-standing brand in commercial insurance, and we operate at scale with capabilities that few carriers can compete with. We are truly global. We're going to celebrate 50 years of international program business this year, where we are the go-to market for speed and quality. Our technical experts deliver value. Our risk engineering team continues to engage more and more with our customers to help reduce the cost of risk. And our claims professionals are doing an exceptional job on delivering on our promise to pay, with an average TNPS score of 70. We are pioneering digital solutions. We are passionate about taking the friction out of our industry, and we pride ourselves on being a trusted risk partner through the strength of our balance sheet, through our relationships that we have, through the capabilities that we deliver, and the insights that we bring. So that's today.
Let's take a look at what we're going to do in the future. As we look at the next three years, we're going to deliver more than CHF 4.2 billion in BOP in 2027. That's an 18% increase over 2023. We will achieve these results through focused growth in attractive segments that will further balance our portfolio. Growth over the next three years will come from our ability to scale our middle market portfolios. We're going to grow from CHF 7.5 billion to over CHF 10 billion by 2027. We also see opportunity to grow in specialty. 40% of our specialty growth will contribute to the growth you see here on the slide under middle market. Growth in both of these areas, again, is focused on balancing our portfolio, reducing volatility, and ensuring profitability in the long run.
The large corporate segment is still material and core to us, so we're going to focus on delivering a superior service to those customers with a very close eye on profitability. We have specific actions in U.S. liability and motor, and we'll deliver on those as well. Dalynn will cover crop later today, so I'm not going to touch on that now. Our growth in our capabilities, our growth is going to be tied to our key capabilities, which you see on the right-hand side of this slide, and I will go through today. So let's take a close look at the momentum we have and how we're going to build middle market. So while we're well recognized in the large corporate space, we are also a leader in middle market.
And this is a very important point because this is not a segment that you show up and just decide to be relevant, even if you're a leader in commercial insurance. This has been hard work, and we're seeing the benefits of this. We're delivering profitable growth with more to come. This is a segment that is more resilient to market cycles and less exposed to extreme trends. We will grow middle market across all regions. North America is our largest region, and you're going to hear specifically about the progress we're making in the U.S. from Alex later. And EMEA, we've achieved significant growth in those markets where we've focused and invested with more opportunity to come. Another key lever for the future is specialty growth. Overall, we see an opportunity to grow profitably across a number of specialty lines.
E&S, our E&S platform, is a huge opportunity for us. It is a large segment of the U.S. market, and it is growing. We've also shown that we can build capabilities in other areas. We've done this in A&H, where we've built global capabilities, and we've grown, and we're going to continue to grow that line of business. We're also investing in digital capabilities, and this will help us access the middle market and SME segment. Here, we're focused on marine, financial lines, and cyber, and we're investing in surety platforms as well. We've done this, and we're already seeing the benefits with more to come. As we shape and build our portfolios, it's also important that we keep a close eye on the external rate environment. We've seen a shift.
Historically, the industry used shock losses to compensate for a lack of understanding, a lack of transparency on underlying trends. But now we have a good view on the granularity of those trends, and that drives discipline in the market. Overall, rate remains positive for us, and we see the greatest rate on the portfolios that need it most. We've experienced a long window of cumulative rate increases that have benefited both our top and our bottom line. The pricing environment is important, but what is going to set us apart is our ability to select risk and shape portfolios. Let's look at how we'll do that on the next slide. So there is tremendous value, and scaling insights across an organization as large as ours. It allows us to be deliberate in what we pursue, and it ensures that we execute consistently.
Granular views of profitability help shape our strategy on the business we decide to go pursue, and then when we go proactively pursue that business, we're four times more successful at winning in the market. To win in the market, we need to be responsive, so at Zurich, we push significant authority to the front line. But when we do that, we want to make sure that we're executing within our strategy, and we're doing this consistently, and our tools allow us to do this, so let me give you an example of property. Property, we've done an incredible amount of work. I know you're aware. We've reduced cat exposure, but we've also reduced exposure to large, high-hazard risks as well, and we want to maintain that discipline as we grow.
So we can use our tools to ensure, as we grow, that we're growing in the right geographies, that we're avoiding concentration risk, that we have the right mix of high-hazard and low-hazard risks, and that we have adequate pricing. That's property. Kristof, this afternoon, will give you an example of U.S. motor and liability. These capabilities allow us to be responsive in the market while at the same time building deliberate portfolios. Our success and performance in the market will also come down to having the top talent. So let's take a look at what we're doing there. So we need the best people in the business in order to deliver. And fortunately, we start with an exceptional talent base that is highly engaged. We also have strong capabilities when it comes to building technical talent through recognized programs, and we're going to continue to do that.
The best people in the business, however, want to go where they can be successful. And that's one of the reasons that we've focused on simplifying our processes and connecting our tools. And what we've found is that we can truly accelerate this through the use of AI. We have over 40 use cases that we're currently scaling across the organization to help improve what we do day to day. I would like to give you three examples to bring this to life to show how this is improving our business. First, assessing middle market risk. To win new business in the market, you need to be responsive in middle market. However, if you want to build a profitable portfolio, you still need to focus on selecting risk.
We ran a program in the U.S., bringing internal and external data together and putting that in the front of the underwriter so they could spend their time focused on selecting risk and not on collecting data. We were able to improve response times by 50%. Submission intake. We have done a lot to connect systems with brokers, even with some of our large customers to exchange data, but we still receive a tremendous number of submissions through email, and we can address that through AI as well. As I mentioned earlier, we are a leader when it comes to international program business, and this business is hugely complex. It is prone to errors and misunderstandings if it is not managed tightly. We are really excited about Program IQ.
Let me bring these last two to life for you through a video so you can see what we're doing in this space.
Gen AI offers endless opportunities to supercharge how we work. In commercial insurance, we're piloting over 40 scalable use cases. Today, we look at two examples of how we're using AI across our underwriting value chain to improve response times, reduce leakage, and enrich insight and communication. Our first example looks at submission intake. Smart Intake helps automate submission processing by automatically extracting information from emails and attachments. It can take unstructured data and automatically populate our submission systems and pricing tools. Smart Intake has already delivered considerable benefits. It has been rolled out in 13 countries and service centers, saving over 40,000 hours for our people each year and delivering faster response times. Next, let's look at policy issuance. International programs provide cover for global risks and involve issuing local policies in many countries, which usually have different formats, languages, and currencies.
Program IQ helps the underwriter ensure that local policy wordings have been drafted correctly and are consistent across countries. Program IQ can convert policy currencies and languages to support the review. Let's choose Euros and English for this account. Here, the master policy is in French, and the local policies are in English, German, and Chinese. Manually checking each policy for consistency would require reading over 200 pages of text in four different languages. Program IQ helps automate this by extracting the coverages from each policy and showing them side by side in a common language and currency. Potential inconsistencies between the policies are highlighted. This account has almost 90 data points to review. Imagine how long a manual review would take. Here, the UK policy is flagged because its storm limit is EUR 66 million. This is higher than the master policy sub-limit of EUR 50 million .
Should there be a storm claim in the UK, this could pose issues as it might be unclear which limit applies. The draft policy can now be corrected before being issued. Program IQ ultimately strengthens underwriting governance, improves efficiency, and provides greater contract certainty for our customers. We're excited about the future possibilities Gen AI brings in helping us to reduce manual workload, make more informed decisions, and ultimately provide better service to our customers and brokers.
Hopefully this gives you a sense that this is having a meaningful impact in our business, and there's many more examples across claims and underwriting that Ericson will touch on later today. We strive to support our customers in meeting tomorrow prepared. Through Zurich Resilience Solutions, we do just that. We are supporting our customers in reducing the cost of risk. We also support them with their transition plans. Let me give you an example. Holcim is one of our customers. They are a leading company when it comes to building materials, and we work with them not only to look at their physical locations and to help them build resilience, but as they innovate new green technologies, which is really needed in their industry. We have a video playing outside that we've done with Holcim if you'd like to learn more.
Being relevant in the market is also critical to our continued success. We maintain leading positions with the top brokers. With the two largest brokers, we hold positions of one and three, and with the strategic brokers, we continue to build stronger and stronger relationships, supporting our middle market ambitions and diversifying our broker mix. We are the pioneer when it comes to the Leading Relationship Customer Model, and we have our highest retentions in this segment and robust profitability. We will continue to build on these strong relationships, some of which have existed for over 100 years, which is an amazing testament to how well we deliver to these customers. We are well positioned, and we want to continue to raise the bar when it comes to the customer and broker experience.
So we have a few examples on the right-hand side of how we're doing this through better digital connections. Whether we connect directly with a customer or a broker, or they access information through the My Zurich portal, they can access their policy, claims, risk engineering data, or they can issue their own certificates anytime they want. As I said, we are passionate about taking the friction out of our industry, and we want to focus on delivering value. So, in conclusion, we have a robust and diverse business. We have a high-quality portfolio. This gives us a strong foundation to build on. We have proven our ability to execute against ambitious targets, and we will continue to drive an ambitious agenda. We will deliver more than CHF 4.2 billion in BOP at the end of 2027. We operate in an attractive market.
We continue to find focused growth that will continue to balance our portfolio. We will grow middle market to over 10 billion by the end of 2027, and we will use all of our capabilities to deliver value in everything we do and to position Zurich as the carrier of choice. I look forward to your questions later. With that, I'm going to hand it to Raul Vargas, the CEO of Farmers.
I don't need it. I'm fine. Thank you. Yeah. Thank you, Sierra, and good morning, everyone. So my name is Raul Vargas. I'm the CEO of Farmers for almost two years now. And before that, I was the CEO of Zurich Santander, one of the fastest-growing retail organizations in the Zurich group. So I stood up here a year ago with a plan to return to profitability and strengthen our capital position. The good news is that we have delivered that plan. Actually, we have over-delivered that plan. So now, with our capital strengths, we have the financial flexibility to grow our business. So what I want to do today is to share the plan we have been working on to deliver and to further enable growth, which is basically based on three key pillars. The first one, grow policies in force. Second one, deliver a competitive value proposition.
Third, strengthen the sustainability of our agency force. So, as you know, Farmers is a leader in the personal line space in the U.S. The three pillars that I just mentioned give us the confidence that we will enable growth in the future. So let me start talking about our leading position in the U.S. We are the seventh largest carrier in the personal line space with the geographical diversification. We are skewed to the west. We are number two on the west coast, but also we have at least number nine position in almost every state as part of the MetLife acquisition a few years ago. As you know, our business model is unique, as is capital light, as is fee-based. In 2023, we delivered $23 billion of direct retail premium.
70%, around 70% of that is coming from our 10,000 exclusive agents, further complemented by our independent agent and our direct channel. So, as I said a year ago, I stood up here with a plan to return to profitability and strengthen our capital position. We have delivered every single part of that plan. We promised a 99% combined ratio by the end of 2024, and year to date, third quarter of 2024, we are delivering 20, sorry, 93.5%. So we promised eight points improvement, and we have delivered so far 15. So let me break down this to you, what these 15 points come through. First, our underwriting and claims actions. Second, our expense efficiency program. And third, the way we manage CAT. So, out of the 15 points I just mentioned to you, eight points are coming from underwriting and pricing actions.
We can say that by now, almost every product in every state is profitable now. California, that has been loss-making for the last 10 years, today is profitable. We have achieved record time rate approvals and underwriting actions. And just to give you some perspective, that means 5%-6% combined ratio improvement on overall portfolio countrywide. We also address a handful of unprofitable states, as you know. For example, we exit Florida, and we take it also targeted actions across the country that we also have benefit from. So now let's switch to claims. In terms of claims, we have reduced leakage by around 14% as part of our program focused on accuracy. We are getting much faster to settle claims, avoiding attorney representation, or we are doubling down on our efforts to control our vendors.
This means between one and two points of combined ratio improvement, but trust me, there is so much more opportunity here. So, I just mentioned to you our improvements in terms of underwriting and claims. Let me move now to our expense efficiency. We have already delivered around three points of expense improvement. This can be broken down as first, our labor cost reductions in the third quarter of 2023 for around $500 million. Second, our new commission structure that actually reduces expense cost by one point, but also delivering higher productivity and more profitable business. Third, our three-year plan to reduce vendor spend by $300 million. We have already secured $175 million on run basis. And last, automation. We have a plan now that is aimed to deliver $100 million of run rate expense efficiencies, $50 million more than what I presented one year ago.
So now let's go to our CAT management actions. So first, it's great to see that the rate we push through is well above our loss trends, both in our key products, home and auto, and we can claim now eight consecutive quarters on underlying combined ratio improvement. In terms of CAT management, our actions basically focus in two areas. One is reduce exposure, and the second, reprice our CAT loads. So in terms of exposure management, we are perfectly in line delivering our reduction of 20% of our PML, and we will be done with that by the beginning of 2025. Second, we have increased our CAT loads 15%, so that's around $300 million, which is already included on our pricing in 2024. I think a good example that our strategy is working is the limited impact that we suffer from Hurricanes Helene and Milton in our portfolio.
In summary, the return to profitability is the sum of the actions I just described to you. Eight points of underwriting and pricing improvements in terms of combined ratio, two points in terms of claims, three points in terms of expenses, and the CAT actions and our CAT program that I just explained to you. Now let's talk about our capital strength. The return to profitability brought the capital strength to a 39% surplus ratio, beyond the upper range of our target that was between 34%-38%, positioning Farmers for unlimited growth potential. This is a result of a virtuous circle. Much healthier combined ratios provide sustainable organic surplus. As we get healthier, we get much better reinsurance terms. As a result of that, our intention to reduce our reliance on quota share.
But as we delivered on our commitments, also the rating agencies recognized that. So they moved us from a negative outlook at the beginning of 2023 to a stable outlook at the beginning of 2024, which we have already benefited from. So our recent surplus notes that they were issued, they were eight times oversubscribed and at considerably better conditions. So in summary, as I said, we returned to profitability, delivered every part of our plan at the same time that we were growing premium 5% a year. So now our organic surplus generation paired with our capital strength gives us unlimited growth potential. This is the result of 12 key initiatives, 200 projects across the country, which every single one of them over-delivered. So more importantly, we have built a culture of execution. So let me talk to you about the future of our growth transformation.
I hope I'm getting the water from the right person. We are targeting 5% gross retail premium growth over the next three years, focused on policies in force growth as a result of our new business and retention actions. I think it's important to clarify first that we are already growing in our independent agent space, which is around 25% of our book. I will focus today on our exclusive agency channel, which has the biggest potential and is a lion's share of our business. Our winning formula to accelerate growth in our exclusive agency channel is made of three key components. First, a distinctive value proposition both for customers and agents. Second, a renewed distribution management approach. And third, improving agency economics. We want to double the return on investments of our agents. Let me go into the value proposition.
The Farmers value proposition is anchored in giving the right advice to customers so they can be properly protected, and this is more important than ever, given how complex the insurance industry has become, so think about it, right? If you are a manager or a successful business person and you get involved in an accident, most likely you will have that involves liability. Most likely, you will have high cost and complexity given social inflation and attorney representation. A cheap policy you buy on the internet cannot protect you for that, most likely. Another example, right? If you have a home in a high convective storm area, you will go through the painful process of finding coverage and even more difficult at affordable price. Imagine if you have a second home, right? We have a solution for that.
Our risk-sharing strategy delivered through our agents will give you the right coverage. So the good news is that for every insurance need, we are highly specialized and we have a solution. Auto, home, recreational vehicles that are so common in the U.S. through our specialty company, but also life, business insurance, and our latest acquisition, the broker company. So in terms of specialization, think about it. Home, right? This is a product that has availability and affordability issues. We are open in every state we are in. And we are running it at 93% combined ratio, even the recent this has been a year with high CATs. So now let's move to the value proposition to our agency force.
We want to give our exclusive agents the best of all worlds, which means the brand recognition and the platform infrastructure of an exclusive agent, the conversion ratio and retention of an independent agent through our Choice platform, and the digital capabilities and simplicity to do business of a direct channel, so I just described to you the value proposition. Let's go now into how we are changing and improving the way that we distribute, we manage distribution going forward, so we are targeting higher productivity as a result of how we manage distribution, so first, we are enhancing the accountability of our agency management, so we have reduced the layers from seven to four, giving much more accountability and faster action to react to opportunities in the market. Second, we have made further changes to our compensation system that we already changed a year ago.
What we're looking for is to move from a farming mindset to a hunting mindset. You no longer will be able just to leave out of your portfolio if you don't produce new policies. We also have created accelerating incentives for high-performing agents. We are already seeing the benefits of that. When we see the agents that leave the company and the agents that join us, the ratio is that the new agents have doubled the size in terms of investment and staff, and therefore productivity as well. Third, very important, the data capabilities that we have today. We are able to provide daily performance dashboards that allow us to understand how each agency is performing on a real-time basis.
Outlier management, we can geotag any agency and see how they compare to any other agent five miles around that and see the opportunities to get better, whether it's bundling more, producing more, or getting more staff into their agency. So I talk about our value proposition, how we are going to manage distribution, how we are managing distribution. Now let's go to agency economics. We have made a commitment that we will double the net income of our agency force in the next two years. And you may be wondering, why is that important? It's important because we need more fees to grow, right? We're a fee business. But in order to generate more fees, we need to grow. In order to grow, we need to invest. But not us. Our agents need to invest. And for them to invest, they need to have a high return on investment.
That's why this is so important. Think that these agency forces are self-employed. They are entrepreneurs. So our plan is made of three components. The first one, where we spent a 30% increase in revenue for our agency force, is made of our increase in competitiveness, both in pricing and retention. The second one is how we improve the quality of our offering that should uplift 25%. And last but not least, ease of doing business, where we spent 40% improvement from that. So in terms of competitive pricing, we're expecting around 18% increase in revenue because of that. So think about it, right? We are running at a 93.5% combined ratio. Our capital position, our structure allowed us to run at 99. That means six points of improvement that we can redeploy into to do more business.
As we redeploy these six points into the right customer segments in the target customers we want, that translates into 15%-20% more competitiveness in those customers we want. This obviously helps both for new business and retention. Second, our Farmers Choice platform. Let me describe this to you. I presented last year. Whenever the price of Farmers is not right for a customer, our agents have the possibility to offer third-party carriers. We are expecting at least a 20% increase in conversion and a 20% reduction in cancellations as a result of that. Now let's talk about the quality of our offerings, right? I mentioned about data. We are enriching the leads that our agents have with external data. We have proved already that those have three times higher conversion in targeted products.
So in addition to that, when our agents have those leads and have these target conversations, we have developed a new quoting platform that is able to quote the full range of our personal lines products five times faster. As the conversations on personal lines become easier and shorter, you can bridge to business insurance and life, where we have simplified our offer to really fit that agency channel. So for example, our new life offer will be able to close a life policy from the beginning till the end five times faster. Why? Because basically we are using data instead of exams. So let's go now to ease of doing business. And this is something that is very close to my heart because when I joined Farmers, I spent two months driving around the country, spending full days in agencies just to see how they do business.
We have now a very detailed plan to reduce 14 million hours in how our agents do business. Let me break this down to you. First, we take away the activities that they don't add value for an agent: data collection, validation of documents. We are planning to address this through self-service and our centers of excellence. We expect to save 6 million hours of our agents as a result of that. Second, where the agents do add value, like the underwriting process or the rating questions, we want to make it simpler for them. Integration of systems will make it able to do that much faster. We are expecting around 3 million hours saved as a result of that. Last but not least, we talk about consulting capabilities. We want to augment the consulting capabilities using technology.
So for example, an agent today, given that there are previous versions of existing products, may have 150 products. So we launch a natural language solution that they will be able to ask immediate questions on any detail of those products and get the right answer immediately. We are expecting around five million hours saved as a result of that. This is the first time that we are looking at the agency expenses as they were our expenses. And we have a track record to deliver on that. So I just described to you our value proposition and our winning formula. A unique value proposition revamped the way that we manage distribution and how we improve agency economics. So you may be wondering by now how all these connect to policies in force growth. So we have a line of sight to policies in force growth.
Let's break down into pieces. First, as I said before, we are already growing in independent agent space, which is 25% of our portfolio. Of the remaining 75%, 40% are underwriting actions that are not recurrent, right? Non-renewals, underwriting actions in California, in Texas, or our exit in Florida. Those will not repeat. Of the remaining 35%, what it requires for us is to grow new business by 10% or improve retention by two points, which we feel comfortable that is achievable given the plan I just explained to you. In conclusion, we are excited about the future of Farmers. The second phase of our transformation has already started after the successful return to profitability and capital strength. 70% of the initiatives I just mentioned to you. They have been already implemented.
It's a matter of time to see them flow through our business. As I shared with you, we will focus on growing policies in force, deliver a competitive value proposition, and strengthen the sustainability of our agency force. Thank you so much. Looking forward to updating you on our progress and look forward to take your questions. Thank you so much.
Thank you, Raul. We'll now have a short break. If everyone could be back at 10:45 A.M., that would be much appreciated. Thank you.
Good morning, everyone. Is the mic on? Can you hear me? Yes. Great. My name is Conny Kalcher, and I am the Chief Customer Officer of Zurich. I'm delighted to be here today to talk to you about how we have successfully implemented the customer strategy that you heard about earlier today.
A strategy which is all about delighting our customers and earning their loyalty, so we are transforming Zurich into a customer-focused organization and company, and it's working. We're seeing strong results. We have grown our customer base with almost nine million customers, and the good news is that they are happier. They're more satisfied customers. Our brand strategy is delivering on both value and growth, and we're connecting closer to our customers, transforming the way we sell, and engaging on a higher level with our customers. All of that leading to a higher product density, so customers are buying more with us, but we're not stopping here. In the next strategic cycle, we will focus on adding a few new strategic initiatives to improve the customer experience and accelerate the transformation, so in 2016, we defined in the corporate strategy that customer focus should be one of the strategic priorities.
We also defined that our customer strategy should be all about becoming the preferred insurer of our customers, being really relevant for them, and making them want to buy more products with us. All of it was underpinned by customer KPIs to focus the organization and to drive results. When we looked at this transformation journey, we looked at four areas of levers to drive the transformation. The first one is the brand. We totally refreshed the brand, how we look, how we speak, our tone of voice, our customer value proposition to become much more fresh and relevant to customers of today. Then we looked at our customer experience, and we defined what an excellent customer experience looked like. We defined that through CX standards, so customer experience standards, which we have developed for both commercial insurance and for retail insurance.
Connecting directly with customers is super important when you're in an intermediated industry. So we focused on that as well. Together with our agents and brokers, we can provide them much better service if we do it together. Finally, we looked into how to transform the way we sell, making that process much more customer-focused. And underpinning it all are two enablers. The first one is building very strong customer capabilities in the organization so that the organization knows what to do, how to act. You can't just tell an organization to be customer-focused. You need to help them get on that journey. And the other area that is a key enabler to our journey is like world-class data and data analytics. I'll talk more about these two enablers later on. So is it working? Yes, it is. As you have already heard, we are seeing strong results.
We are growing faster than the market in general retail insurance, but also in life protection. Our customers are more satisfied, as I mentioned, and we measure that by TNPS. TNPS has gone up seven percentage points. We have even managed to balance rate and retention at a time where we put up rate quite dramatically. The same is actually the case also in commercial insurance, where we also have seen strong gross written premium growth across the board, and especially in the middle market, where we've grown with 5%. Also here, we are retaining more of the premium, and we are seeing more satisfied customers. I am going to have a little bit of water. Our investments in the Zurich brand are working. It's paying off. As I said, we're acquiring more customers, but we're also driving higher brand consideration.
So why is that important? Well, whatever brand you are, you need to be in that top set of consideration of your customers. So when they're buying insurance, they need to be thinking of Zurich as one of the brands they want to buy into. So we're not only seeing these results ourselves. It's also being recognized independently by Brand Finance, who in their latest studies are telling us that we've grown the brand value with 35%, which is quite substantial. And also, we are in the top fastest-growing insurance companies amongst the top 20. Both of those are results that we are really happy about. But let me bring this to life. So how is this brand becoming more relevant to customers today? How is it becoming more visible? How do our customers see ourselves in the market on an ongoing basis?
So if you could roll the video, please. So as you could see here, we are becoming much more visible, much more relevant, and we're even growing extremely fast in social media because we've changed our approach to social media. It's not so much about what we want to push out there. It's about having a conversation with our customers about topics they are interested in. But it's not just about the brand. As you know, today, customers don't look at a company on only their product or only their brand. It's a holistic experience. So it's also about the customer experience. So to define excellent in customer experience, we defined a vision for it. We said that we should be all about creating a meaningful relationship with our customers. And that means speaking both to their minds and to their hearts.
Since we don't have that much interaction with our customers in traditional insurance, we need to make every interaction matter. We built that relationship with them. We have 33 standards for retail insurance. A typical standard defines what excellence is, and a typical standard would be it must be easy for our customer to find details of how to contact us. I'm sure you all know how irritating it is if you want to contact a company and they buried the phone number somewhere on the website you can't find. That's not the company we want to be. We want to be accessible. We want to engage with customers when they need us. We are transforming these CX standards mainly through digitalization across the organization. I brought an example here, which is an example in WhatsApp.
So we moved a claims experience onto WhatsApp in some of our markets. And why do we do that? Well, the times are over where you get your customers to come to you for everything. You really need to be in the channels where they are. So we've moved this claims experience onto WhatsApp, and we see extreme improvements in the satisfaction. You can see the rates compared to a traditional analog process is 28% higher in one country and 22 percentage points higher in Spain. So it's really working. Being where customers want to engage with you is important. And the same is the case for commercial insurance, where we also have standards. Here we have 18 of them defining what excellence looks like in commercial insurance. We already have a strong position in commercial insurance, but we still think we should keep on continuing improving that experience.
A typical standard for commercial insurance would be that we need to inform the broker if our risk appetite changes six months before we take the action, so in case of commercial insurance, it's not just customer experience standards. It's also broker experience standards because they're a key part of the journey, so Sierra has already mentioned the strong results from our broker surveys and how we are rated the preferred insurer amongst seven out of eight global brokers and our high scores in TNPS and RNPS, so I won't go into that any further, so connecting directly with customers is important because we are in an intermediated industry, and to do that, we have launched apps and portals around the world.
Today we have 7 million connected customers, and we keep on growing that number to have that direct contact with our customers so we can add value to their experience. We've just launched Zurich One, which is the ultimate experience of a customer app. We launched it in Italy in the summer and in Switzerland here in the fall. It's coming to Brazil. It's coming to Spain next year early. And we will have it in more and more markets. That's really the gold standard of what that experience should look like when you are on an app. And you can see it's rating extremely highly in the app stores. So customers are really liking the experience. It's playing on a loop here in the break. So have a look at it.
It's a very good experience, and it helps our customers to do claims, to connect with agents, to connect with us, to see their policies, to change their data, all of the things that they would like to do. So for them, it feels like a seamless experience. So underpinning this, as I said, is capability building. And we do capability building through our Customer Academy. So we are training everybody in the organization to understand more about customer insights, more about the customer experience, and more about our brand. We've just added a new element to that. That's called empathy training. So why do we want to train our people in empathy? Well, we learned from feedback from our customers that we can be a bit technical. We can be a bit functional in our contact with them.
So we set out to actually create some tools and some processes to help our people to connect better with customers when they're in the front line so that they can actually deliver on creating a meaningful relationship with our customers. We've implemented this training in four markets, and we see extreme improvements of helpfulness of the agent, but also of the satisfaction of our customers. Actually, after the training, we jump more than almost 20 points, almost 30 points up in the scale of satisfaction. And what our frontline people are saying to us, it's not only improving their connection with the external customers, but it's also making them work better together because they have a better understanding of how to use empathy in that process. So we set out to transform how we do sales and distribution. And we do that through a project we call Customer Centricity.
Mario mentioned it earlier, and it's all about segmenting our customers. You can see our segmentation model here, and once you've segmented your customers, we segment them in the marketplace, and we also segment our internal data. And then we marry it up to a hybrid segmentation model. Then we use that segmentation to better understand our customer needs, deliver better leads to the agents that are relevant to the individual segments. We improve our campaigns. We target our campaigns so they are based on the needs of these individual segments, and we also change our product portfolios to be more reflecting these segments that are some of them are more key segments to us than others. We have rolled this out in 13 countries, and we are seeing the impact of it. We're measuring success of how policy density goes up, and we have improved that with 3%.
So we're really happy with the progress. And as it gets embedded more and more into these organizations, we'll see more and more results coming out of that. But we want to be more refined in our understanding of our customers. So we've created this model, which is called the Loyalty Pyramid. And the Loyalty Pyramid really segments our customers on a level of how loyal are they, how engaged are they, and how well connected are they to us. And then the strategy is really for the sales organizations to move customers up this pyramid. And we want to move them up the pyramid because it makes economic sense to do so. So we know that customers that are up in the two higher levels there, in the core and the connected customers, they stay longer with us.
We have 3%-8% higher customer retention depending on what market we are talking about. But even better, they are also more than twice as inclined to buy more products for us so we can service more of their needs. So in essence, the higher you get up into this pyramid, the more satisfied customers are. They spend more. They recommend more. And it all makes a lot of sense to us. The segment of connected customers is extremely important so that we need to grow. And you can see in this example, we have grown the connected layer in that period with 5%. And of course, the apps and portals play a big, big role in that. So we feel we've come quite far. We're very excited about the results we are seeing, but there's still more to be done.
For the next strategic cycle, we will be focusing on a few key initiatives that will improve the customer experience and accelerate our journey. We will focus on supporting the key growth areas, the life protection, the middle market, and also the SME growth strategies. For these three areas, we will refresh and improve our customer value propositions and create differentiated customer experiences so that we can stand out in the marketplace. That's the first initiative. The second initiative is to introduce an app ecosystem to make seamless journeys for our customers. We will upgrade Customer Centricity to Customer Centricity 2.0. I'll go more into that in a minute. We're introducing a new KPI, which is net revenue retention, which will enable us to understand the value creation that comes out of having a customer strategy.
But let me go a little bit more into detail about these three last initiatives. So traditionally, we have launched many different apps. We have service apps. We have insurance apps. We have health and well-being apps. We have cyber apps. We have partner apps. There's no way customers can understand all of these apps. And in reality, what we have been doing, we have been sending our customers into silos where it's been difficult for them to move from one to the other. We want to stop that. And instead, we are now creating a single sign-on between these apps so that customers can move seamlessly from one to the other. So it's just making it easier for them to maneuver. We continue to build our data capabilities, and we know a lot about our customers.
As you can see here, we keep on building the customer data platform that we have. It's kind of a customer brain. We call it the Customer Intelligence Platform, and we're now also adding external data into this platform. We used to use it mainly to report on our customer KPIs, so how well were we doing, and also to improve on the customer experience. In the next strategic cycle, we will take that to the next level. It will be all about how can we drive better actions, better decision-making based on this data. So it will lead into informing pricing, underwriting, proposition development. And as a Customer Centricity 2.0, it will also have an impact on how we work with the agents.
So we will have better lead generation coming out of this data, and we will create a front-end tool for the agents so that they have a better overview of their own data and a seamless link from their data, from our leads, into connecting and engaging with their customer base, driving AI-supported campaigns and communication directly with their customer base. So this will take that to a whole new level of how we're using the data on an ongoing basis. As I mentioned, customer KPIs have been core to driving this transformation. We keep on measuring TNPS, so that's the transactional TNPS, whenever we are in contact with a customer, because from that we learn about customer satisfaction, and we need to keep on improving it. We also drive brand consideration going forward to stay relevant for our customers and understanding where we are compared to our competition.
As a new KPI, we are introducing NRR, net revenue retention. It's actually a new metric developed by Fred Reichheld, who also came up with TNPS. And we are one of the first companies to actually implement it. So let me take it through this in detail. So when we look at net revenue retention, we look at the full year revenue. Then we look at the value we lost from losing customers. Then we look at the value of the revenue we lost from losing products. And then we have the retained customers, which is the value that comes from renewals and price increases. And then we come to the bit that's less about retention, but more about servicing new needs of our customers, cross and upsell, if you will.
We look at how did we service more of those needs and what value did we create by that. We get to revenue retention, and we take that over the starting point, and then we have net revenue retention. What we are having here is a much more refined model of understanding how we are creating value with our customers. It enables every market to understand which lever to turn in order to make up their numbers. We can do in this customer walk all the way out, and we can also look at customer acquisition and then have the whole revenue picture in one. That allows us to make sure that we balance the value we are creating from loyalizing our customers and from customer acquisition. This is a powerful new tool that will help set direction for the business.
As Mario said earlier on, our customer strategy is not only about softy, softy things. It's really about hard financials. This is a model that we have developed together with Claudia and the team in finance. It will enable us to say after three years exactly what is the value that this customer strategy has created for Zurich. I can't wait to get back to talk to you about that in a couple of years' time. We continue to set stretched customer KPIs, the internal targets we are setting. As you have seen from the previous period, we are really driving constant improvement from this work and from these KPIs. I'm super pleased about where we are, how far we've come with the customer journey. We are transforming Zurich into a customer-focused organization. We are seeing the results. We're seeing happier customers.
They buy more products from us, and they're engaged with us in a direct way. The strategic priorities for the next strategic cycle will help us accelerate this journey. And as I said, I can't wait to come back and tell you more about it. Thank you. Oh, and I should introduce Claudia, who's now coming up to talk about financials.
Thank you, Conny.
There you go.
Good morning, everyone. A very warm welcome from my side as well. I'm Claudia Cordioli. I'm the Group CFO, and I'm delighted to be here with you today, and I'm delighted to be sharing the financial details of our new three-year plan.
Now, when I took the decision to join Zurich a bit more than one year ago, I knew that I would be taking on a challenge, and not simply because Mario continued to repeat that to me every time we met, but also because Zurich, as we know, is a very well-run company. It's a company with an impressive track record, as we've been hearing from all the presenters early on. And the shareholders rewarded us for that. And yet, we want to raise the bar. We believe that to be successful is one thing, but continue to be successful and raising the bar, this is really what the best companies can do. And we want to be able to do that. So this plan is about raising the bar, but it's also about today showing to you how we will execute. The plan is about winning in the market.
And one thing that I would like really for you to take away from today's presentations is that this is not a top-down plan done by Mario and myself based on financial targets. This is a plan that's derived by bottom-up ideas, initiatives, clear course of actions by our business leaders. And the fact that you will hear from all our business leaders that are really key to the execution of the plan in the course of today is intentional. This is a business plan that will result in superior financial returns. So we will continue to deliver earnings growth. We will continue to be absolutely committed on our capital discipline, and we will absolutely continue to deliver on our cash-generative business. So the starting point of this plan is an industry-leading delivery.
Our total shareholder return, as you can see on the left-hand side, has been absolutely top, not just in terms of the magnitude, 17% over eight years, but also the low volatility it has come with, and going back to Mario's presentation earlier this morning, when you saw the three phases of development of Zurich, it is the result of the transformation of Zurich into a company that has been focusing on segments, on businesses that are low volatility, high return, and translate into high cash generation. This is the result of it, and we are extremely proud of our dividend track record. Over eight years, we've been delivering a steadily growing dividend, 24.5 billion CHF of dividend, on top of nearly 4 billion CHF share buybacks, and we've been investing 10 billion CHF in M&A operations to accelerate the growth of the plan and the delivery.
So let me touch on a couple of things that, as incoming CFO, as new CFO now in the role for nine months, I was able to go through and really confirm and that I believe are distinctive of Zurich as a company. Number one thing, which might seem obvious, but I think it's worth recapping that quickly. Nearly 30% of our earnings in 2023 came through fees. And this is a fee stream that's not correlated with financial markets' volatility. The lion's share of it, obviously, is Farmers. And you heard from Raul everything about his plans to actually go over and above that. And then there's some additional fee business in our life business, as you know. We've got the travel business that we are actually growing through the acquisition of AIG Travel. We've got Zurich Resilience Solutions that Sierra talked about. This is all generating fees.
That gave us an extremely steady and predictable basis for our earnings, and it translates, as you can see on the right-hand side, into an industry-leading ROE, which in the plan, we are actually committed to continue to grow, and this industry-leading ROE is not just industry-leading in terms of the magnitude, but also how steady and predictable it is. So let me spend a couple of minutes on the things that I think really are distinctive of our earnings profile in addition to this in terms of steadiness and predictability. One thing we've been talking a lot about in the past is our CAT exposure. Through the work done by Sierra, Kristof, a lot of the teams in the regions, we've been able to tightly manage our CAT exposure, and this is about gross underwriting. Make no mistake, this is about gross underwriting. Reinsurance comes on top.
But from a gross perspective, our teams have been on a journey to manage tightly our CAT exposure. So you can see on the left-hand side that we've been able, in a period where inflation alone would have risen our exposure by 15%, we've been able to grow, sorry, we've been able to lower our net exposure by 5%, both in terms of AAL and PML. And in one of the scenarios that we've been discussing in the past with you, namely U.S. hurricanes on the right-hand side, we've been decreasing over the last three years our exposure, again, on the gross side by 20%. And as I mentioned in our Q3 call two weeks ago, I've asked the team to go back and simulate what the impact of Hurricane Helene would have been had the hurricane happened two years ago.
It would have been a considerably higher amount than the CHF 160 million loss that we have estimated in our Q3 numbers. The teams have estimated that the relevant impact on wind, so the relevant exposure to wind, has gone down by 30%-40%, with flood and storm surge risk going in a similar direction. Very, very significant reduction. Another distinctive aspect of the way we manage our business and the predictability, the steadiness of delivery of it, is reserving. We've been talking about this in the past, you know that this is a feature of the philosophy of Zurich, and it's built really on two pillars. One is the way we do reserving on a regional basis through the legal entities, through our portfolios and businesses out there.
And the third graph you see here, which is a reflection of the paid-to-ultimate losses for the U.S. liability business, I know that this is on top of mind for most of us. You can see that we've been quicker and more proactive than the rest of the industry to recognize the adverse trends. This is based on Yellow Books, so it's public information. This is what we do on a portfolio level, what we do on a regional committee, regional reserving committee level. On top of it, we've got group governance on our reserving that results in us recognizing an allowance for limited historical experience, which is a way for us to address loss trends, adverse scenarios that are low in frequency but high in severity. And you see some examples in the slides. So litigation risk, latent claims, inflation, and so on and so forth.
And as you can see on the left-hand side, this reserve, which again is held centrally and is under group governance, this has been increasing slightly over the last five years. So we are absolutely committed to keep our approach to reserving as cautious as it was in the past. This has resulted in a steady and positive delivery of PYD, as you can see on the right-hand side. The last point I'm going to make about our profile as it is today, and Mario has talked about protection earlier in the morning, is about the protection business. This, again, is the result of 15 years' work that we put into transforming the portfolio in life and making it much more protection-driven. We like protection. Why is that? We really believe that it speaks very much to our strengths. It's an underwriting business. We are insuring biometric risks.
You don't need huge asset management capabilities to run it. It's really about risk pricing and risk selection. Today, this business delivers roughly 60% BOP contribution on a gross basis out of the life business. And this is the business that we want to grow under a global umbrella, as Mario was mentioning earlier this morning. So on a strategic basis, this will become more important to us than it was in the past. It's a business that delivers today roughly CHF 8.5 billion of premium, gross premium, and contributes CHF 1.3 billion BOP to our bottom line.
There are some businesses that are very relevant to this, including the UK, including the joint venture between Zurich and Santander, and we'll have the two CEOs of those businesses talking to you this afternoon. This is a business that comes through as capital light with a very good conversion in terms of cash.
As you know, roughly 75% is translating quickly into cash and very steady and predictable. But enough about the past. Now let's dive into the future. We mentioned that we want to raise the bar through the new plan. And as you can see that this is going to translate into three key financial targets: core ROE over and above 23%, core EPS of 9% or above, compound growth over the three years, and cash remittances of over CHF 19 billion. We have unified the definition of core ROE and core EPS based on the underlying profits. So it's more consistent with the rest of the industry, and it really comes down to what we can control and the business execution discipline that we are promising to you today. Starting from the core ROE, it's going up, and we commit to deliver above the 23% over the planned period.
Now, if you compare it to the planned cycle, 2016- 2019, it's almost double, and granted, this is based on a different IFRS standard. Now it's IFRS 17. Back in 2016, it was IFRS 4. However, make no mistake, the biggest difference, the biggest gap between the two has actually been driven by the business delivery, by the changes in the portfolio that Mario has been talking about, together with capital discipline. This is what the growth is about, and this is what we're committed to continue to maintain. EPS. EPS will result from the contribution of all the businesses, and I will go through that in a moment. Over 9% compound growth. Cash remittance, CHF 19 billion and above. This is 40% higher than the current planned cycle. Mario mentioned earlier today that we expect to be able to deliver CHF 7 billion this year.
As you can see, we are already well into the CHF 13.5 billion target that we have defined for the full plan. We are not defining a target for expense savings, but rest assured that we are extremely focused and we remain absolutely disciplined on expenses. The plan will be delivered with funding the investment from a business perspective so that the operating expense ratio will actually slightly decrease over the planned period. Extremely disciplined on expenses. Solvency. Mario mentioned that we continue to operate at a very strong level. 160% SST is what we see as a floor, but certainly we won't go below that, and we are looking to retain our SST level at a much higher level. How are we going to deliver the EPS growth? As you can see from the slide, we've changed slightly.
I know you were used to ROE walks in the past. We decided to update the tradition slightly. Now we moved to EPS walks. I hope you find it useful. The EPS is, from my perspective, the key KPI that we need to deliver on for the next period. And that's why we've been breaking it down into the individual pillars that will contribute to it. We have added, for simplicity and to give you an anchor point, the 2023 level on a comparable basis. I mentioned before that we are going to deliver on a core EPS basis, which is slightly different than the definition we had in the past. So we hope that having a value for 2023 will help you there. Back to 2023, just to give you another anchor point, our combined ratio was 94.5 across both commercial and retail.
If you exclude PYD and CAT, the underlying combined ratio was 93%, which is a very attractive level, even considering the fact that we had some underperforming businesses, including Crop, including Retail Motor, including Commercial Auto in the U.S. So delivering on a better performance on those portfolios across the planned period, we expect we'll deliver 600 million additional BOP by 2027, which is an amount that we add as a run rate in our BOP delivery. From an underwriting perspective, the two decisive businesses, as you can see on the slide, are commercial and retail. In commercial, we plan to grow and grow profitably, as Sierra mentioned earlier this morning, in targeted areas. Because it's true that the business continues to be very profitable, that we continue to see good underlying opportunities, but this will not be across the board.
That's why we want to be very conscious and very targeted on where we invest and where we want to grow. So this is the big contribution that you will see from commercial, and you will see also an improvement, obviously, through the retail portfolio on the work that we're doing on the underperforming portfolios, particularly in EMEA. That's what the first pillar is about. The second pillar is the volume effect that you will see from us growing in different areas, including as well life and commercial middle market, as we mentioned before. We haven't based the plan on any particular macroeconomic scenario. We're not betting on any interest rates or spread scenarios, and this is a plan that's purely organic, so let me just dive a bit into the drivers by business unit and by segment.
Commercial and retail will be the lion's share and continue to be the lion's share also of the businesses in terms of bottom line in 2027. Commercial is expected to come in at roughly 40% of our group BOP, excluding the group operations and functions. We expect the growth to come in at roughly mid-single digit across the commercial portfolio. But again, as Sierra said, it will be a selected growth. We've got some work to do on Commercial Auto and on Crop. The work is already underway. And as you will hear more from Kristof and from Dalynn this afternoon, we expect already to see, especially in Crop, first results in 2024. Now, retail is a bit of a different story. So, as you can see there, the biggest quantum of contribution across the planned period is coming from restoring the profitability in some of the portfolios.
Mario mentioned earlier this morning that we want to bring EMEA Motor to a profitability level below 96%. This is what you see there. Together with some growth in some of the portfolios where we said that we would invest, namely SMEs, for instance, in the UK and in other countries in continental Europe, but as well the travel business that Cara will talk more about in the afternoon. Life and Farmers. They're expected to contribute in the aggregate roughly 40%-45% of the BOP in 2027. So, more or less in line with where they stand today. Now, on life, Mario has already mentioned protection earlier today. This is really the lion's share of the business and also what we want to continue to grow, and 8% compound is what we look at in terms of protection premium growth over the planned period.
The margins are really good, and we are actually committed to maintain them. We also see some growth from unit- linked, and in that respect, our bank distribution is key. We also have our financial advisor network in Italy, in Ireland, that will help us grow that business as well. When it comes to Farmers, you heard from Raul earlier this morning all the actions that the team has lined up to be ready to go back to growth in 2025, so we expect the contribution that Farmers give to the group BOP to be fairly in line with what it is today. What does that mean in terms of cash? We've been very successful in the past in running a business that has resulted in industry-leading payout ratio, and this is what we want to continue to be.
So you see on the left-hand side, the cash generation profile of our business is, on average, 85%. Now, if you go back and look at the average of what we have delivered in terms of actual cash generation in the past five years, it's closer to 93%. And we have actions lined up to continue to be above that average also in the planned period. To give you just an example, in 2024, the cash remittances, and Mario hinted at that, that we expect to get CHF 7 billion bottom up, contributed by our key businesses. But we've also used the full range of options when it comes to deployment. We've been paying CHF 4.2 billion in dividend. We've been returning CHF 1.1 billion by a share buyback to our shareholders. We have executed on two bolt-on M&A transactions in India and in the travel business.
We've used some cash as well to redeem a note in September. This gives you just an example of how we think about cash and cash deployment. What about 2025- 2027? We expect an excess cash generation of above CHF 24 billion through our businesses. CHF 5 billion is what we plan to retain in the local legal entities to be able to grow the business and deliver on the plan. The net number of cash remittances that will be brought to group, ready for deployment, is over CHF 19 billion. On the right-hand side, you see our priorities in terms of that deployment. Number one, we continue to be committed to grow our dividend in line with our earnings growth.
Number two, wherever we see the opportunities in the business to accelerate the growth from an organic perspective through opportunities in the market, we will do that. We will bring back capital to our legal entities for them to accelerate that growth. If we see opportunities through M&A to accelerate that growth over and above the organic chances that we see in the market, we will also take those opportunities. Once we have exhausted those opportunities or we don't find attractive ways to deploy the capital in the business, it goes without saying we will return the capital to our shareholders, like we've done in 2024. A word on our capital strength. This is important for us from a shareholder's perspective, but it's also very important in the market. This is a differentiating feature.
We are very happy about the recognition through Moody's and the upgrade that came earlier this year. This testifies to the strength and the discipline in the way we run our capital basis. We're happy about our leverage ratio. It's roughly in the middle of the Moody's range for AA. We expect it to decrease during the planned period as we grow the balance sheet on an absolute basis. SST ratio, I mentioned before, we run a very strong SST ratio. We expect it to grow over the planned period as we generate more capital that we deploy in the business. But we're also conscious that SST, as an economic measure, is very sensitive to interest rate volatility and to financial markets. That's why we feel comfortable at the level we are today.
We continue to assess opportunities, as you know, to mitigate and bring down that sensitivity, particularly to interest rates, and we'll continue to do so during the planned period. Now, on a dividend side, what is our policy? It's unchanged. It's unchanged because we believe that this is extremely attractive. As I mentioned before, we want to grow our earnings, and through that, we want to grow our dividend, so we continue to be committed to pay 75% of our sustainable NIAS as dividend to our shareholders, taking the prior year, respective prior year dividend as a floor. Any share buyback will be on top of that, so to conclude, we have a track record of going from strength to strength, and yet we are never satisfied. Today's plan is about raising the bar.
I've been in the business myself in my previous career, and I know that raising the bar in the business is not as easy as drawing numbers on the slide. Hence, today, we've been bringing to you all the relevant business leaders that will be behind the execution of this plan. And as I mentioned at the beginning, this plan is put together as a series of initiatives and course of actions and investment through the business units. So I hope that gives you a sense as well about the commitment that we have and the focus on execution. We're ready, so with that, happy to take your questions.
Thank you, Claudia. So we're going to take a few minutes to set up the Q&A session. So while we're putting the chairs on the stage, maybe we could do a little bit of admin for this afternoon ahead of time. So on your badges, you should have a colored dot. So I must get this right, otherwise Patricia will be really upset with me. If you've got a blue dot on your badge, you're staying in this room immediately after lunch for the Q&A, for the breakout session. If you've got the two other colors, yellow and green, you'll be taken up to the first floor for the breakout session. So effectively, you'll be in the room, and then the presenters will rotate. So if you're blue in the ballroom, the other two colors, you'll be on the mezzanine floor, and people will take you up after lunch.
That's the admin. Maybe if we have everybody for the morning session to come up on stage for the Q&A. Raul, Sierra, Claudia, Conny, Mario. If you're on the webcast, please put questions into the chat, and we'll answer those as we get the opportunity. Okay, excellent. Who would like to go first? Andy. Just wait for the microphone, Andy.
Thank you very much. Thanks for all the presentations as well. I assume we're sticking to two. I'll go for two. First, slide 80, I thought was a good summary of leverage and stock of SST today, and you've given some really good color on flow of cash as well with the remittance targets. Just wondered how we should think about the stock of cash that's already available today. I mean, we know SST is not a binding constraint, but how should we think about the stock of excess cash and liquidity in the group today before all the remittance to come, and the second question was just on Farmers and the 5% GWP target. Just probably a couple of things.
It probably struck me that the 35% contribution from the exclusive agents to the move to positive PIF growth seemed a little bit lower than I'd have expected, given that's the majority of your premiums. How much more scope to go there? And just if you could look at that 5% target, how does that break down between pricing and volume growth? Thank you.
Can you hear me?
Yeah.
Okay. On the cash available today, Andrew, I showed on purpose 2024 to show that we've been very active as well in the way we've been deploying cash in 2024. Now, obviously, we retain some cash on a group level, similar to what we've done, what we have shown for the planned period, and this is what we're using typically to grow the business, to fund the business, so I would really refer to the trajectory that we've projected for 2025 and 2027 as guidance and priorities as well.
If you tell Andy, I mean, we need to have anything between CHF 3 billion and CHF 5 billion to run the business with comfort. We wouldn't like to go below CHF 3 billion of cash in the hands unless it is for very transitory periods, and we have no need to go above CHF 5 billion to run the business, and whatever we hold is in that kind of bracket.
Business as usual.
Yeah, at any given time.
I'm sorry?
Within that range.
Within the range that Mario mentioned.
Okay, thanks. Don't ask us to close treasury tonight.
Raul?
So yeah, I was not expecting that question at all. So look, on the 5% growth, right, this is a mix of policies in force and rate over the next years. We could expect that we need to understand this is a change of trend that has been going on for more than a decade, right, of growth in the 1% or 2% range and with policies in force decreasing, right? So next year, we're going just to start that transformation. So I would expect that policies in force will grow, but as the three years go by, there will be a higher share of policies in force over rate, right? We still see that there will be inflation going through the rates as the years do come. So it's going to be a mix, right? So I think that's the point.
On your question on the different components, so I'm not sure if I understood the question properly, but the way we see this is 25% of our independent agents are growing already, right? So that part, 25%, sorry, of our book that is distributed through our independent agents is growing already. Most of the actions that we took this year obviously have created a reduction of policies in force, but those will not happen again, right? We exited Florida. There are no policies to be lost in Florida next year, right, so I think that's why we captured this piece, and then on the remaining part, yes, we need to do an effort through the rest of the book, right, in terms of new business and retention, but I'm not sure if that was your question.
Next question, Will.
Thank you. Will Hardcastle, UBS. You mentioned the plan isn't too macro-sensitive. I guess just with IFRS 17, we've got a bit of movement with interest rate sensitivity. Just assuming what we're implying the interest rates do or your yields do over that plan in the greater than 9%. And then in terms of it's still a little bit interest rate sensitive comment, but just thinking about the SST, I guess a large Swiss reinsurer just announced something in terms of that sensitivity, and they took action to reduce the sensitivity, and they linked it with a bit of a FINMA conversation, actually. And it looks quite expensive for the actual SST percentage points, but they do reduce the sensitivity. I guess how should we think about actions that you might take to do that? You mentioned there that you'll look at that going forwards. Thanks.
Thank you, Will. So on the interest rates and the macro picture, we prepared the plan based on the forward curve, so the market assumptions in September. So you should expect, if anything, that given what interest rates have done since then, it would be probably a light upside compared to what you've seen here. But what I meant is exactly that. So we haven't bet on any particular scenario. I think if you refer back to the slide that we've been showing at full year 2023 in terms of unwind and discount effect, I will still go back to that on the unwind. I think it still applies. That would be the range that I will still look at. So that's embedded in the plan. Clearly, we'll see headwind from that perspective.
But also the sheer effect on volumes through the growth will lead to a positive impact between NII discount and the unwind. So I hope that addresses your question. On SST, definitely. So we also saw some actions from our neighbors, Helvetia and Baloise. As I said, we are reviewing with the teams right now two courses of actions in parallel. One is the business side, right? And as you know, we've been looking into some of the most interest rate sensitive portfolios like Germany, like Chile. So in Chile, we are executing. We've been mentioning that earlier, sale, and we hope that to come through potentially in the fourth quarter or now. That will have an impact on SST. Germany, you know about. So we have been executing on the biggest portfolios, but we continue to look at what other opportunities we've got.
At the same time, as you said, there are methodology discussions that we are having, and we are also engaging with the regulators on that, and we might see impact in the quarters to come.
Michael.
Thank you very much. I'm cheating because I've just arrived. So sorry about that. My question is going to be a little bit one like me, really. The first one is, Mr. Greco, Mario, I take it you did the plan now for two reasons, and maybe so that's a kind of double question, really. Firstly, that you don't want to retire in 2028, but maybe 2027. The second is that it's an easier base year to take 2024 than 2025, which might be extraordinarily profitable. The second is really quite aggressive, really. I was just in the U.S., and a lot of people did kind of wonder a little bit about if Baloise were to become available, would it blow a hole through your plan? Thank you.
Michael, look. I mean, neither of the reasons you mentioned for the plan are valid. The plan has nothing to do with my retirement, which will happen one day, but has nothing to do with launching this plan. And not even has to do with what's the best basis for the plan. We keep growing. As I said before, we felt a sense of urgency. We were missing opportunities in the market. And every month that we would not act on this would be a missed month for us. You guys also have to understand that an organization as tightly disciplined as we are follows plans. And if we don't change the plans, the organization doesn't react. You can just tell the people, go and grow specialties because they have precise KPIs. They have budgets. They have targets.
If you don't change them, if you don't modify it, people will not do that, and it's precisely what we want because in order to keep the discipline, that's the way you need to run the organization. Look, on Baloise, I don't know anything about it. I mean, I said already Q3 that there has been a lot of noise in the market, and I got regular calls from a media company almost on a daily basis saying, are you making an offer? No, we're not making any offer. I don't know what's going on there. We will use the same judgment criteria that we always use. If there is something accretive and if it is real, we will look at that. If not, we'll do nothing. I mean, it's clearly non-strategic for us. So it must be accretive if it exists.
Now, what I hear is that it doesn't exist. I have no signs that Baloise is up for sale, except what some media companies try to report.
Dom.
Thanks very much. Dominic O'Mahony, BNP Paribas Exane. Two questions. So the first, one of the things that I find really exciting in this plan, something that I wasn't expecting, was the ambition to improve the attritional performance in commercial. I mean, that's been a business that's doing so well. And you're going further. Could you help us just break down the sort of the drivers of that a bit? I understand that some of it is remediation. So for instance, commercial auto, I think, presumably earns through a bit beyond 2024. There's also the mix shift, which you mentioned, and towards mid-market. What are the other components driving that? If you could just give us some color around that, that'd be really helpful. The second question, Farmers Re, I think in one of the slides is described as growing with Farmers.
I'd maybe anticipated that at some point, the quota share would return to Farmers. The other portfolio that I might have thought would be coming out would be German life, if you're able to do something with that. If and when either of those two things happens, how would you respond within your plan? Thank you.
Can I start? And maybe, Sierra, you can add. Look, on the breakdown, Dom, we can't really give you the precise, but I guess the point we're making is you improved the combined ratio either because the oil industry is improving or because you compose your books better than you had before and maybe the average industry has. Ours is the latter case. We know by experience that there are portfolios where we are overrepresented. The classical example, and we have been talking a lot about this, is commercial auto. We started pruning and reducing our share in commercial auto already at the beginning of this year. We're continuing by year-end. We will have a significant reduction in the number of policies or in the exposures we have in commercial auto.
Now, the premiums are sustaining the gross written premium size of it, but the number of policies are shrinking month after month. And there are areas where we will also do that beside commercial auto. The other one I mentioned is casualty global corporates. These are exposures that we will continue monitoring and decreasing. On the other side, we think that the growth in mid-market, the growth in specialty, which will overperform the rest of the portfolio, will continue to rebalance the performance of the portfolio for better, for lower combined ratio. But I cannot give you a mathematical proportion of all this. And by the way, I don't think that over three years this will hold.
I thought that was pretty comprehensive.
Thank you. That's a compliment. Thank you. Look, Farmers Re. We made profits a year ago. I say that not with too much of a loud voice on it. We're making more profits this year. We kind of like that, to be honest. Now, we're also aware that we cannot exaggerate with it. And we're also aware that the Exchanges will be implementing a reduction in their reinsurance programs over the next years, and we support that. It makes perfect sense. So we will follow what the Exchanges want to do. But honestly, we don't feel we have a pressure today to reduce it because it is really contributing to our profits. So again, I don't have a clear answer for this year-end. If we can, we will try to hold it since it is profitable.
But if it is for the benefit of the best of the Exchanges, we will accept the reduction.
Maybe, Dom, if I can comment from a plan perspective. Raul mentioned that as they grow the results, the Farmers Exchanges and the surplus position will be placing less reliance probably on the quota share. So you might see slight changes also on us, even indirectly, right, depending on what the Exchanges decide to do, but also the overall size of the quota share. Now, a few points change will not do anything to the plan. So we have assumed 10% in the plan, but should that change slightly, it will not have an impact on the plan. Your second question on the German backbook, we continue to be absolutely focused on executing on the sale. The plan has been, again, defined on the basis that we keep the portfolio because we currently have it. Now, should we be successful over the plan period, which I really hope in executing?
In terms of BOP, that business comes through with a mid-single digit, sorry, mid-double digit amount of BOP contribution, so not material in terms of what the plan will give. In terms of SST, impact is also not a very relevant one. What it changes is the sensitivity to interest rates, which is the very reason why we want to execute on that. So that's where you will see the impact. The rest of the plan will not be impacted.
Thank you. Ash, next to Dom.
Thank you. So a few questions on Farmers. So in the past, peers of Farmers have outgrown pretty much due to their direct-to-consumer distribution models or the independent agent channel. Obviously, you're more leveraged to the exclusive agent channel. So just wondering at this next part of the phase, how do you plan to compete with the peers on the PIF growth, especially as all of them are starting to pivot to growth as well? Second question, just hoping that you could provide a little bit of an update on the three agencies that you acquired last year and how they actually fit into this plan. Thank you.
Thank you. Thank you so much. So look, I think this is a very interesting topic, right? Because when we started this transformation on Farmers, we almost were forced to think about is one channel or the other one, right? And our approach was to say, no, why we need to get into one specific bucket? So why we don't give our agents, our exclusive agents, the best of all worlds? We give them the possibility to offer other products as well when the Farmers' price is not right, that this will start to fuel the way that they do business, right? The higher conversion, the higher retention, the more they can invest. And the more they can invest, the more they grow, right?
And in addition to that, we are adding the capabilities of a direct carrier, right, in terms of technology, data, even the way that they start to market the business to their customer base, right? So that is our approach. We don't get into whether it's exclusive, independent of the reg. We just give them; we free them up to actually be able to get the best of all worlds. So I think on the brokers, brokers are doing fantastic. They are doing absolutely fantastic. I think we have a very aggressive plan, and we are already above that plan. I don't know if it's 10%-20% in addition, what was the business case. So we are really confident on the future of the Farmers, sorry, on the broker business.
Can I add a point just for clarification to everyone? You have to remember or to consider that for years, we've been running losses in California, which is 30% of our business. That meant that the rest of the business needed to subsidize California, which meant that we had to keep prices very high outside of California in order to cover the losses of California. And that was the main issue. It wasn't the preference of the customers who did not want to work with agents. But our agents were practically out of market with their prices because they needed to compensate the losses in California. That was the reason that last year, probably the most important, the highest priority for Raul personally, and then his team, but really Raul took it on himself, was fix California.
Because if we didn't fix California, then it would be a completely different ball game. And it would just be impossible to be competitive in the other states. Also, if you look at the other states' performance, they all produce profits, right? So it was a completely skewed book of business that needed to be fixed. But Raul said this morning, California today is profitable. So we're participating now to a different sport than the one of the past years. So I understand your question, but I don't think that it's an issue about what channel you have beside that we're integrating the channels. The real issue is, can you be competitive where there is growth opportunity and how can you be with some loss-making portfolios? They're not there anymore. Or by the end of this year, they will almost be eliminated completely.
So for the underwriters of Farmers, it's a new era.
Thank you.
Thank you, Andrew.
Thank you. Andrew Baker, Goldman Sachs. First one, so one of the attractions you mentioned on the mid-market was less exposure to U.S. social inflation. Just curious, have you seen any evidence of the social inflation phenomenon working its way down from large corporates more to the mid-market? And what gives you confidence that won't happen going forward? And then secondly, just to confirm, there's no sort of change in your view on NatCat budget going forward? And again, any sort of thought around that going forward would be interesting as well. Thank you.
Yeah, I think Kristof and Alex this afternoon will cover this extensively. But it also makes intuitively very common sense. I mean, if you want to have a nuclear verdict, you're not going to have a nuclear verdict against, I don't know, a mid-sized company, but you want to have a nuclear verdict against one of the big companies, the big names. They really concentrate all the attention of the judges and the people there. So yes, I mean, there is evidence, and there is also evidence in the fact that we're suffering less than the peers for social inflation because of that. And that's, again, the confidence that we have in writing casualty for mid-market. But again, you'll hear much more about this in the afternoon from them.
I would only just add to that. I mean, the segment shift is not the only thing we're doing to address social inflation. I mean, we look at our underwriting appetite, which industries we insure. That comes into play. You'll hear from Alex later on that. We've looked at our claims practices. We've tripled the number of claims adjusters in claims in our technical space in order to respond faster. We're also doing a lot around safety and vehicle safety to help reduce our exposure. So we're taking many, many steps to address social inflation, and our mixed shift is just one of them.
Cap, no, I mean, we have not made changes. So far, even though this year is a little heavy, it still works. But it's something that we regularly look at. We look at, I mean, we've become very, very, how can I say, detailed in looking at that. I mean, one of the things that Kristof looked at in the past has been the geographical concentration, not just the aggregate numbers, but almost county by county, what exposures we have. We will continue looking at that. But at the moment, we're not planning changes.
Maybe just to add, last year we've been, for instance, below our Cat budget. This year we're likely to be at the top end, as you know, just the sheer fact of where hurricanes and severe convective storms in the U.S. left us to date. So as we grow the business, obviously, in absolute terms, the Cat budget will increase, but it will not necessarily, as Mario said, in terms of the percentages. It's interesting, and it would be interesting to see how the renewal season goes because given what happened, especially in the U.S., but also in Europe in terms of secondary perils and catastrophes, it's interesting to see that the largest burden of the losses is staying with primary companies, right?
Despite everyone having covers for one in 10 and also lower than one in 10, it doesn't seem to touch too much the reinsurance budgets, sorry, the reinsurers themselves. So I think it will probably give some space for a conversation around the balance between reinsurance and primaries and who covers those types of losses in the future.
Mr. Crean, third row back. So two rows in front, Patricia. Sorry. So we'll come back to you in a minute. Sorry.
It's Andrew Crean at Autonomous. Can I just do three questions? Firstly, what is the accident year loss in commercial and retail that you're targeting in 2027? I suppose ex NatCat.
We're not going to answer that. Tell you right away, we're not going to answer that.
Okay, so two questions then.
Yeah. Move on.
Could you give us a sense of the share? You're trying to grow earnings per share more than 9%. Could you give us a bit of, I'm sure you won't give us 25, 20, but a shape of that because you've got a recovery underway in retail crop and commercial auto, which I think you're saying is pretty advanced. That would suggest to me quite a powerful 2025 and then a more normal 2026, 2027 growth rate. Would that be a fair assessment? And then on Farmers, could you tell us in terms of the PIF growth, either nine months or full year for this year, could you give us a sense of the same store PIF growth? Yes, you've been exiting lines, you've exited Florida. If you looked at a same store position, what was happening to your policy count?
Okay. I'll start, Andrew, with the EPS trajectory. You're right on the fact that some of the actions will already start to benefit in the earlier years of the plan. Dalynn will be talking about the crop actions that she has been taking since she's the CEO of this business. Crop being a short-tail business, you start to see them coming through relatively quickly. There is a part of it. I don't want to steal the thunder from Dalynn's presentation, but there's a part of it that will come through later on as it takes more time to earn through, but a significant improvement you should see already in the earlier years.
On the commercial motor side, and again, Kristof will talk about it in the afternoon. It will take a bit more time to see the actions run through fully and come through the IFRS 17 performance, even though on an attritional basis, given that we are seeing rates over and above 15%. I guess 17% is what your team is seeing right now. This is over and above the loss trends. So that starts coming through, obviously, on an accident year basis, but there's still some impact from prior years that is also coming into the combined ratio. So that will take a bit more time. On retail, also here, rates are improving. They've been improving already in 2024. We expect to pull through relevant changes in Germany in 2025 and Switzerland as well on a more targeted basis.
Also here, it will take some time to see it come to full fruition in the combined ratio, but it should be already visible in 2025 in terms of attritional improvement.
So if I understand correctly your question, right, you're saying what would have happened if we would not have taken those actions, right? That was the question. So if you see the graph, right, so it's 45 and 35, right? So 45% is what we say non-recurrent actions. So that means that the 35, right, is what would have remained. So in a few words, that means that 60% of the policies we have lost, we would not have lost them if we wouldn't have taken those actions, right? Which is pretty much the 45, 35. Just since you asked this question, let me just say something that I think is really, really important on California, right? Because the biggest share of this is California. We become the first company that is 100% open for business and the only one that is 100% open for business right now.
So that's why, you know, and 60% of that drop, right, you see 60%, 20%, 20%, right, that's California. So that's the one we are very confident we actually started to recover right now because now we are fully open for business and our portfolio is healthy to keep growing in the years to come. And the weather is great, by the way. Sorry.
There is.
Yeah, thanks. So if I can sneak in three questions, please, sorry. So the first one is just on the cash remittance, Claudia. You mentioned two numbers there. One is the normalized, which is 85, and then you said it's been running at 93. And I think at least to my point of view, the surprise in the plan today to the market was a higher cash. So are you expecting, sorry, why are you expecting more cash from the same businesses going forward? Or are you expecting some one-off-ish effects that we should be careful about? So the first question on cash. Second question is on life. So I noted the 8% protection and also Mario, your comment that too much margin goes to reinsurance. But then in. Don't say too much. Just say that whatever it is.
Some margin, sorry.
Yeah. We want to keep it for ourselves.
You want to keep it. I mean, reinsurance and mortality, for example, have had some issues. And if you keep that margin, you might also keep some more risks. So I'm just wondering whether that is a clearly thought-out risk strategy for life mortality. And then last question just one for Sierra for mid-market. I mean, I think the mid-market, middle market has been used at least once before in a plan and maybe even a bit more than that. And I think we have heard that it is about break-even in the U.S. now.
That's not break-even. It's profitable.
It's profitable.
Yeah.
Okay.
Give respect to the work that Alex and Kristof have done because they make profit or they made profits since a couple of years ago. So no, no, it's not break-even. It used to be break-even, but many years ago. No, no.
Okay. Thanks. Thanks.
Actually, Patricia, you're bringing the mic to Kristof in the front row. Thank you.
I do have to react to that. So our middle market business has a lower combined ratio than the overall combined of North America. So when we talk about growth and changing the mix, I mean, that's why we're excited about it, so.
Okay. Then I take the life question. Look, I mean, I didn't discuss reinsurance strategy. What I was saying is that today, every company, us included, takes the underwriting as a black box from reinsurers. Now, there is no real reason to do that because we have enough data to run the underwriting choices by ourselves, and based on that, then we will decide on our reinsurance strategies, but that's a proper distinction between a primary and a reinsurer, so I didn't say that we're not going to reinsure ourselves. I just say that we want to open the black box and be able to understand the underwriting factors and understand if they're right, which today we don't have a possibility really to do that, and then run it by ourselves.
Of course, there is no reason to cede margins for things that we can do ourselves probably as well or even better than the outsourcers from whom we buy it. So I don't think you can imply that our risk profile is going to change, and I'm sure that my risk colleagues will have a say on that, but we never implied that. We just want to be able to, as we do everywhere else, to run the business based on our data.
On the cash point, so the CHF 19 billion are based on the earnings trajectory and the 85% that I was mentioning as the normalized rate. There is a component there I mentioned during my presentation that we have more actions lined up for the plan period, but this is nothing that you would consider extraordinary in a company of our size and the balance sheet of our size. So there's nothing extraordinary that we will do to extract cash in great dimension over and above the organic path.
And also be mindful that now at the end of this year, we will be two years in this plan, which is a 13.5 target, and we will be already around 12. So the run rate is what it is, right? And so 19 doesn't look much distant from the current run rate of cash generation.
Thank you. Rhea? Yeah.
Thank you. Rhea Shah, Deutsche Bank. The first question is, you've given the business mix indications for 2027, but how do you expect the geographic mix to change as well? And then the second question is, one of your priorities of cash deployment is bolt-ons. It's the third priority, but it's still there. So I know this is an organic plan, but where are the gaps that you could fill using bolt-ons? Which business lines and where geographically?
Okay. I'll take the M&A question and leave you, Claudia, the other one. Look, on M&A, we have covered India, which has been for a long time a strategic priority for us. We have covered finally all we wanted to do in travel with this last acquisition. I mean, out of the different geographies, probably the one that I'm still looking actively at is Indonesia Life. Indonesia is the third big Asian countries there. We don't really have a strategy in China. India mentioned Indonesia is the one where we want to continue growing. We made an acquisition in property and casualty, which we're happy with, but we are nowhere in life. So should we find opportunity that I would consider those strategic to conclude our presence in Asia and give us a strong foothold for the next years? Other than that, there is nothing strategically important at the moment.
Every acquisition, I mean, would just be look at is it accretive? Is it supporting our target or is it not? And if not, we will not go into it.
Beyond the geographic mix of the plan, on the commercial side, and you'll hear much more about that in the afternoon from the North America team, we expect commercial to grow mostly in North America. So it's a combination of the U.S., which is the lion's share of it through middle market that Alex is leading, Canada, E&S as well is mostly a U.S. proposition and specialty. We'll also see some growth in Europe throughout the plan. Germany is one of the markets where we are quite strong, and we intend to grow middle market there as well. In terms of retail, we've been signaling mid to high, actually, single-digit growth. A relevant piece of it is coming through rates, and it's coming through rates in the EMEA markets most of all. So the biggest share of the growth that you see in the retail space is coming from Europe.
And I did have a slide in my presentation that showed the breakout of the growth. It gives you an indication. So all regions are growing, but just given the scale of the U.S., there's a lot there.
Yeah. Any more questions? James.
Thanks. It's James Shuck from Citi. Just a couple left on my side. I saw the chart that you're going to you'd like to reduce the debt leverage in percentage terms. You make the valid point that the book value will grow. Are you planning any net debt issuance over the plan period? I know you've got about CHF 1 billion coming up, which is callable in 2025. Clearly, you could still net issue, but that ratio comes down. Just keen to see how that filters through into the remittances as well. And then secondly, I can understand why you've done it, but you've shifted the EPS kind of definition slightly. And I really just want to get some insight into the non-operating items. So what are you expecting in terms of kind of restructuring charges, realized capital gains, these sorts of factors?
Because those have been kind of pushed to one side. Thank you.
Thank you, James. So on the debt number, the plan is assuming that we will grow the leverage more through the size of the balance sheet. So we'll continue to be also tactical in the way we assess opportunities in the market and the needs that we've got. So we'll see. We haven't planned active reduction at this point in time, but if we see the opportunity to be there to do that, yeah, we might do that. But the plan doesn't assume now an active reduction. As I said, it will come more through the growth of the balance sheet. On the second point, on the non-operating segment, I will refrain from giving you a guidance like we've done in the past on the 800-850 or so million on GFO.
I would expect as we grow the size of the business to see also a growth in absolute amounts that will come through the non-operating segment. Now, in terms of restructuring, we will not see big differences from where we are today. If anything, again, the growth of the business will determine a slight increase, but there's nothing exceptional lined up that we would give as a new guidance, as a new magnitude.
One last question before lunch. Are we all done? Andy is going to be very unpopular. Andy in the front here.
Sorry. Other people asked three, so I just felt the need to come back for more apologies. This is Andy Sinclair from Bank of America again. Just on specialty goals, you mentioned I think you only mentioned SME cyber was something that you mentioned. I feel we've always been pretty cautious on cyber at Zurich. Just any message on kind of cyber thoughts as a whole? Is it still kind of cautious on the larger end in a cyber interesting? And just also, if you could give us a comment on workers' comp, which are we still expecting releases there? What's the outlook for workers' comp for the next few years? Thank you.
So on cyber, we do have a conservative approach. We cap how much growth we want on the cyber side. What we do want to do, though, is rebalance our portfolio so that we don't just have large risks. And we've done that pretty successfully in recent years, and we're going to do that further. And that's why we're investing in digital capabilities. And it's not just for cyber. It's for financial lines and marine, and we see growth in all of those areas.
On workers' comp, Andy. So we have continued to see positive experience. Whenever we release or we take through some positive effects from workers' comp, we try to repurpose like we've done earlier this year where we see potential other pockets where we want to be extra cautious like we've done through commercial auto. So we don't want to release reserves just like that. We tend to repurpose them like we've done earlier this year. So for now, the experience is positive. It continues to be very positive. We know that from a rate perspective, rates are moderating, but they continue to be in line or above the loss experience. So we are happy about the way workers' comp is performing, definitely.
Super. Thank you. So we'll break here for lunch for 45 minutes. We'll start again at 1 o'clock, and just a reminder, if you've got a blue dot, please come back here. If you have the misfortune of not having a blue dot, if you wait outside, we'll be taken up to the first floor. Thank you. This is close. Exactly. Yeah, I don't know that this is the ideal setup, but. That's what we have now. We're not on the webcast yet, are we? Or are we? No. Or the microphones are not on. Sure? Yes. Yep. Yes, we are.
This is video go? Or just quick? Oh. All right. So welcome, everybody, to the North American breakout. You've heard from Sierra this morning on the overall commercial insurance strategy, and obviously, North America is the major driver of that for the group.
Now, we've been busy over the last few years, I mean, changing the shape of our portfolio, shifting the business towards lines with lower volatility, better profitability, and in doing that, we've been able to grow double digits and improve our overall profits. Now, I think what is more important in all of this is that at the same time, we've built a platform for long-term growth by investing in middle market and specialties. I mean, these are businesses with lower volatility, better margin, and I think most importantly, they just have very good long-term intrinsic growth potential, so that's what we're building our strategy on for the future, but before I do that, let's have a look at past performance, so we look at over the last three years, I mean, we've grown our profits significantly.
I mean, we've added CHF 1.3 billion, and profits grew at about 26% year over year over the last three years. A couple of things have driven that. I mean, first of all, as I said, we've invested in lines that have just much better profitability, particularly specialties and middle markets. We also had to turn a few things around. I mean, one good example of that is Canada. Now, Canada, back in 2019, was a loss-making business. Last year, we made close to CHF 300 million in profit. And at the same time, we roughly doubled the size of that business, improved the combined by 20 points. So we also had to take some strategic portfolio actions. I mean, you've heard both Mario and Sierra talk about the things we've done on property. We reduced our PMLs. We reduced peak exposures within that property portfolio as well.
We've seen a similar improvement in the combined ratio over the last couple of years. Work has gone very well. Important as well. I mean, we continue to see good profitability of that book with a combined ratio below 80%. Finally, we had a couple of headwinds during that period as well. Motor, we've talked about. I mean, that's an industry-wide phenomenon. I mean, we're taking the right actions on motor, both in terms of portfolio actions and rates. Then we talked about crop, which had some weather-related impact, but really was mostly a portfolio mix issue. Dalynn will talk about that later in her section, but actions are already well underway to tackle that part of the portfolio.
So let's dive a little bit deeper into two of the drivers of that profit growth, I mean, top line, and then the things we've done on the portfolio management side. So from a top line perspective, we grew CHF 6 billion over the last three years, with a CAGR of 12%, which is slightly ahead of the overall market growth. But I think what is most important on this slide here is, and I've taken out crop because crop is really driven by commodity prices. I mean, we've seen about 20% growth year over year in our crop business. But when you take out the impact of crop, then actually more than half of our growth over the last couple of years came from specialties and middle markets. So those areas that we really wanted to grow. I talked about Canada, which we doubled in size.
I think it was probably even more important. We moved from a position of ninth in the market to fifth in the market. Alex will talk about middle market. That's another of the core middle market US business. We doubled as well over the last four years. So those are just some examples of the growth that we've seen over the last couple of years. Now, on the portfolio management side, I mean, this is the example of property. I talked about AAL reduction and some of the strategic actions we've taken there. I think what's important as well is that we continue to invest in timeliness and granularity of data. So really understanding portfolio at that very detailed level and continue to invest in our capabilities, which is important, but I'll talk about casualty later on.
But the example that you see on this slide here is property and actually the flood-related risks. And the reason this is important, I mean, if you think about it, over the last few years, I mean, the impact of precipitation, I mean, the average weather front now has 10%-15% higher humidity, is critical to understand. And we, as did the entire industry until about 2021, we used FEMA government-provided maps that predominantly focus on river as a cause of floods. We've invested in our own proprietary data to overlay a pluvial or precipitation-driven flood risk on top of that. And what this actually has led to is a better limit profile, higher deductibles. And to just give you an example of that impact, between 2021 and 2023, we've seen a reduction of over $1 trillion in aggregate limits for our flood limits in the U.S.
So those are just examples of what we've done on the growth side, what we've done on the portfolio management side. So that's what we're building on for our strategy going forward. So when I look at the next three-year cycle, a couple of things that we will be focusing on. I mean, we're going to accelerate growth in the targeted area. So that's middle markets again and specialties. We're also going to maintain our large corporate business in line with the market, but at the same time, shift the LOB mix towards those lines of business that show better profitability. Now, we also need to drive some rate actions and granular portfolio management. I mean, we talked about casualty and motor in particular. Claudia mentioned it this morning.
I mean, year to date, we see 17 points of rate, but probably also more importantly, in the lowest performing tier, we've seen a reduction of 10% in the retention of our motor book. Finally, we're going to get crop to below 95. I mean, Dalynn will cover that in detail in her section. And then lastly, on the efficiency side, we continue to invest in automation and AI. And that's not just to drive efficiency. It's to improve underwriting productivity. It's to improve also the connectivity with our distributors and our customers. So let's have a look at the growth side. So over the next couple of years, we are targeting $3.5 billion of growth in those target areas. I mean, $2 billion of that in our middle market segment.
And that for us is about a $5 billion segment when you add up our program business, our Canadian and U.S. middle market business. And I put E&S in this as well. The reason that E&S has now become a middle market business is because that is the type of customer that we're targeting. It's really become a specialty business targeted at the middle market segment, so $2 billion of growth on the middle market side. I mean, Alex will cover some of the things we do in the core U.S. middle market business. We'll set out to double that again over the next few years. And then on the large account side, really two target areas. I mean, one, Canada has a better profitability profile. And then particularly specialties.
I mean, so for us, that's A&H, that's energy, construction, surety, which will drive the majority of the growth in our large account business. So let me just drill down a little bit on one example of that, the E&S market. Now, the reason that we like the E&S market is because it is now 25% of the overall US P&C business, but it grows at three times the rate of the admitted market. It has a better profitability profile as well. And that is predominantly driven by the fact that you have freedom of rate and form. So you have a lot more flexibility to quickly adjust, I mean, to restrict coverages, I mean, flexibility on pricing. Now, Zurich stood up a dedicated E&S business unit now just over two years ago. I mean, prior to that period in time, it was predominantly focused on large accounts.
And so rounding out capacity needs for national accounts, that was not available in the admitted space, but that inherently made it a more volatile business. So we've completely turned that business around and refocused it on middle market customers, dedicated propositions, more restrictive coverages, automated the underwriting, and built really good connectivity with the wholesale channel, which is exclusively through which we sell this business. And you see it in the numbers. Now, we've turned around the overall profitability. We made over $100 million in operating profit last year. But I think what's more important is when you look at the average policy size, I mean, that is trending now closer to $100,000 this year, so much more of that middle market profile. And in the core middle market part of our book, we're growing close to 20% this year.
So I'm confident based on that that this is a part of our book that we can double again over the next few years. So that's on the growth side. When I move on to portfolio management, I mean, this is really, really important. It's the ability to understand the profitability drivers of a book. And so on the casualty side, I mean, that is jurisdiction or state that you're in. It's the class or the SIC code. It's the limit profiles, attachment points, quality of the risk. I mean, to just name a few dimensions.
And so being able to really understand that book at that level of granularity and then making these dashboards available to portfolio managers, underwriters, so they can understand what really drives the profitability of the book, take actions on where do we need to have different terms and conditions, where do we target submissions as well, so that you can shape the book and continue to improve the profitability. But let me make that come to life with an example of what we've done on the construction side. So construction for us, specialty business, we're leader in the market, $1.6 billion business overall. Now, what we saw in the period of 2018 through 2022, we saw some pockets, particularly on the casualty side, some pockets of deterioration of the overall profitability.
When we did the detailed analysis, I mean, the main drivers of that were really predominantly state jurisdiction, class or industry code, and then to a lesser extent, actually limits attachment points. We set out on a strategy of targeting the right risk in the right state with the right deductible. The outcome of that has been that over the last four years, so basically between 2020 and 2024, we've seen a shift of the green, so right class industry mix from 50%- 75% of that book. We've also seen the limit profile improve, and we've seen a four-point improvement in the overall loss ratio of our construction book. We haven't just tackled the portfolio composition.
I mean, the other thing that we've done at the same time is we've looked at how we can use innovation and technology to continue to bring down the loss cost, particularly on some of the more challenging parts of the book. And so what you see here is an example of what we do on New York construction sites. I mean, we now impose AI-powered cameras on New York construction sites. And so what they do, they target critical movements of workers on the site or operations of a lift, to just name a few. They look at where there are pockets that need to be addressed that actually cause incidents. I mean, we share best practices with the construction manager, and this stuff works. I mean, we've seen up to a 90% reduction in the incident rate on these construction sites.
It has, of course, the added benefit. I mean, we can use the footage of these cameras to help settle claims, prevent fraud. These are just some examples of where we're targeting growth, how we continue to invest in portfolio management. I mean, it is what will drive our strategy going forward. If I have to summarize the overall strategy here, I mean, I think first of all, we've proven over the last few years that we can grow double digits, that we can improve the profitability. We're going to continue to shift the mix of our portfolio towards lines with a better profile. We have a growth target of $3.5 billion, north of $3.5 billion for our middle market and specialties businesses. Then finally, we continue to take action on the overall portfolio management side, continue to improve granularity, timeliness of data.
And then we have some targeted rate actions, particularly on casualty, motor in particular, and the crop business. So that's North America overall. And with that, I'll hand it over to Alex, who will talk about our growth plans in middle market. Alex.
Thanks, Kristof. Good afternoon, everyone. I'm Alex Wells, and I head middle market in the U.S. for Zurich. I joined Zurich five years ago from Chubb to lead a newly formed U.S. middle market team as part of Zurich's global investment in the middle market. And I arrived with a pretty clear mandate from Mario, as you'll imagine. He's pretty clear when he gives somebody a job. And that was to leverage Zurich's capabilities and core brand to build a world-class middle market operation in the United States.
The foundation that we've built over those five years has returned a $4 billion portfolio with some pretty exceptional results, including an 18% CAGR on our core P&C business and an overall combined ratio in the mid-80s. We now have a team of dedicated expert middle market leaders and underwriters who understand this space very deeply and have created competitive advantages that are difficult for anyone to match. We have built a middle market brand that is best in class, and we have a lot of momentum going into the next strategic cycle. With no carrier in the U.S. in the middle market space having more than a 10% market share, and given the consolidation that we see in the broker marketplace, we expect to have a lot of opportunity over the next cycle to continue our growth and accelerate it.
We have continued growth expectations within this team, even though we grew at an 18% rate over the last five years. So when we began this journey, we examined our portfolio and our underwriting model. And frankly, we realized that our underwriting was too centralized to be responsive in the middle market space and lacked enough expertise to differentiate ourselves on the very best business. This hindered both our growth and our profitability and frankly led to our core strategy as we moved through the last five-year cycle, one of geographic expansion and industry specialization. We strategically grew our footprint of offices from 13- 30 offices because we knew it was critically important to be local if we wanted to write the best middle market business.
We also focused our investment on geographies that were organically growing in seven key high-margin industries, namely construction, technology, life sciences, private equity, financial institutions, manufacturing, and professional services. We know from experience that these targeted industries carry a loss ratio 10-20 points better than the market. We also know that the new geographies that we chose have a loss ratio 5-15 points better than the rest of our portfolio, with a reduced and diversified impact on our CAD exposure. During that time, we grew our underwriting teams in the field by 65%, and 80% of those new additions to our team came in either the new geographies and/or the specialized industries that we were targeting. The result was, as Kristof said, that we doubled our book of business over that five-year period of time. We've had four consecutive years of double-digit growth.
Our geo-expansion offices grew at five times the rate of our legacy offices, and our targeted industries grew at twice the rate of the rest of our book. And lastly, and most important, we shrunk our combined ratio by 25 points and reduced volatility. And this was not just a result of a portfolio mix change, which I know everybody likes to talk about portfolio mix. It was also an absolute dedication to individual account underwriting expertise. We hired underwriters that understood the space, and individually, they out-underwrote the rest of the market. We now have a portfolio, a geographic footprint, and a field underwriting team that I put at second to none. And we're positioned to significantly grow in our highest margin areas across the United States. So knowing where you want to grow and building a field organization that's oriented to that is critical.
But you also have to have an organization behind those field teams that provides a sustainable competitive advantage. We know in the middle market space that to be successful and win on the best business, your underwriters have to be smarter, faster, and easier to do business with than the competition. We built such a dedicated middle market organization around our underwriters, staffed with deep experience and expertise across 12 industry verticals, not just the six or seven that we were focused on, covering 85% of the economy and across every line of business. These experts are bringing customized products and capabilities very specific to the needs of our middle market customers. And they're found not just in our industry specialists, but also in our regional underwriting managers, our property directors, and our central line of business managers.
We've embedded these experts throughout our organization and made them a central part of our teams. We've also built a dedicated distribution team of more than 30 regional and territory leaders that understand our brokers very locally and manage our relationships. And lastly, we invested in technology that streamlines our process and gives our underwriters the best starting point for their underwriting decisions. As Sierra mentioned this morning, that's allowed us to reduce the number of underwriting systems that our underwriters have to touch from 10- 3, and it's halved the amount of time that it takes for them to produce a quote on any given submission from a broker. We now have a foundation of middle market underwriting excellence and differentiated capabilities that is going to allow us to accelerate our growth into the future.
Our future means accelerated investment in the growth areas of the economy and the continued investment both in technologies, including AI and predictive analytics, to support our brokers and customers, and an expansion of geography in our targeted high-margin industries. We will leverage our strengths to grow in the most preferred areas of the economy and in the insurance space. And we're going to bring all of that to life through our underwriters. We're planning on hiring 100 new underwriters in the next cycle. And we believe with absolute belief that we have a competitive advantage when we hire, train, and develop our very best underwriters in the industry. In conclusion, we are a deeply expert underwriting organization built for strategic growth. We have built a strategic competitive advantage over the marketplace, and we will leverage that advantage to grow profitably at an accelerated rate into the next market cycle.
I look forward to your questions. And with that, I'm going to turn it over to Dalynn to talk about her crop business. Thanks, everybody.
Great. Thanks, Alex. As the person who actually wrote the check for the crop insurance business back in 2016 when I was our CFO for North America, I am as convinced today as I was then that this is a great business for Zurich. And as our head of group mergers and acquisitions for the last five years, it is an acquisition that is actually more than paid back its $700 million purchase price. RCIS is a strong business as a top three crop insurer today. And we're focused on growing profitably and further improving our portfolio mix. Crop insurance is a great business for Zurich because we have the unique attribute.
Our $3 billion of premium is uncorrelated to the rest of Zurich North America's Property & Casualty business, and that generates an important capital diversification benefit for the group. Our business, also in its design, it's less volatile because it's written through a public-private partnership with the federal government and a reinsurance program with them as well. This partnership reduces the volatility for this business, and it enables us to deliver consistency in our Business Operating Profit. As you know, we experienced significant losses in 2023 in our private products. It's clear to me that we overgrew our market share, and we became concentrated in certain states. We are taking actions to improve this book, to right-size our market share in the private products, and to decrease our liabilities.
With 85% of our portfolio in a business that's producing the last four years' low 90s combined ratios in our multi-peril product, we can grow from a position of strength, and there's opportunity for us to continue to improve that state and crop mix to improve those profits even further, while at the same time, we do decrease our loss ratio and our liability in the private products, and this enables us to more consistently be able to deliver a combined ratio below 95, as Kristof said, for this business. Over the last nine months, the team has conducted a deep profitability analysis at a crop, at a county, at a product level.
It has generated granular data insights that we haven't had before that will enable us to focus our growth and make our portfolio management decisions that enables us to be able to drive further profit and continue to reduce the volatility of this business. We're equipping our frontline staff then with a new dashboard that takes our existing sales field insights that we have and combines them with this new enhanced underwriting data. And it will support them in really being focused on the right business, in driving discussions with the agents, and improving the efficiency and the effectiveness of our agency servicing model. To fix our private products' performance, we have decreased our Crop -Hail liability and our loss ratio. We've done this through taking significant actions in rate, through appropriately adjusting our commissions.
We have made clear decisions on the agent selection for whom we license to sell these products for us. We're already taking additional action for 2025. There are certain products that we will no longer offer. There are other products that in their design, we're adjusting them, such as we're separating our wind endorsement from our hail coverage and increasing the deductibles on that. We will continue to file for new rate and additional rate increases in certain states and in certain areas. We need to offer private products. They're an important risk management tool for our farmers in addition to the multi-peril product that they already buy through the government program. These actions that we've taken will complete our key efforts to bring these products back to break-even in 2025 and have a further expectation of returning them to profit by 2027.
Having grown up on our family farm and in the agricultural industry, it is awesome to be back. I understand the government program, the products, and I know personally how important crop insurance is to the flow of capital for our customers because it secures the operating loans that we all need to take at the beginning of the year before we have any profits. It secures those loans for the banks to be willing to give those to our customers. It's a product that helps ensure food security for all of us. And it's something that Zurich's really proud to be a part of. RCIS has the opportunity to be the preferred crop insurer in this industry. Over the last nine months, I have spent significant time out in the field, sometimes literally, with the agents. And as I listen, it's really consistent, the feedback that I hear.
They love our people, our sales team, our underwriters, our claims staff, and that's great to hear, and I also hear that we have to become easier to do business with, and we will be relentless on the review of our end-to-end processes and improving that ease of doing business with us. As an example, our transfer process. The transfer process is an agent's first experience with us when they move their business to RCIS. Our transfer process, it takes too long. It's complicated. It's not a great first experience, so in January, we will roll out a new improved transfer process, which takes fewer steps. It has fewer suspensions in it, and it takes less time for our agents. We also have to continue to invest in our technology, especially in our agent-facing systems.
We've just rolled out an enhanced quoting system for our agents and also a beta version of our new policy administration system, which brings with it enhanced user experience for our agents, better interfaces, and speed for them to enter their acreage reporting. Acreage reporting, it's a really important and time-consuming activity for our agents. So it's important that we make that easy for them to do. We've assessed our talent, and we made a number of changes in our management team in 2024. We have the right team. We have a family-style culture. We're focused on our skill development of our team. And we have strength in the RCIS b rand that will lead us to grow this crop insurance business, to deliver increasing business operating profits, to continue those strong diversification benefits for the group, and to continue to reduce the volatility of this business. So thank you.
And we will open up for questions.
I'm doing the pointing again. I was good at it last time. Ash.
Two questions on the middle market business. I get it that large corporate risk is probably the segment that sees the most social inflation pressure. But peers who pretty much write the middle market, such as Travelers and Selective, have also seen some casualty pressures as well, taking reserve charges this year. So just wondering, one, how do you get a little bit more comfortable around the casualty space and the middle market? My second question is, in terms of your more local expertise with the brokers and the more local brokers, can you sort of maybe, I don't know, qualify the competitive advantages that you have over some of the other peers?
I.e., I know that some of your other peers are also pushing that narrative, such as Hanover or maybe Selective as well, as far as the local expertise. But just wondering, how do you compare against those? And if anything, is there anything in terms of maybe more broker wallet share or seeing the business or trends sooner than others that you can qualify as well? Thank you. Sorry, very long-winded.
Sure. I think I wrote it down, so I'll try. So with regard to the casualty book of business, right? I mean, casualty isn't a monolith. There isn't a single thing that causes all types of casualty to have the same social inflation, right? So there are people that are more exposed. So commercial automobile is more exposed just generally. That is a relatively small part of our middle market book of business, mid to high single digits.
We have a strategic plan to keep that under 10% even as we grow. You can see certain classes that have heavier auto fleets attached to them that exposes you. You also have different limit profiles in terms of the types of limits that you put out into the market. Now, middle market as a whole generally has some smaller limits. When you get the smaller limit, then you don't have to pay out at the top end of that, right? A $30 million, $50 million, $100 million nuclear verdict doesn't impact you if you only put a million dollars out, right? It's the same exposure that you have. You've got some of those aspects to it, class of business.
And if you look at the classes of business that we're most focused on, many of them have a very light touch exposure within sort of what I would call consumer classes, right? There isn't an opportunity for the public to be exposed. So when we do manufacturing, it's generally more in the space of industrial manufacturing. It's not consumer product. I'm not selling something that you'd go on Amazon and buy and put in your house. I'm trying to ensure other things. Technology generally doesn't have quite as much. Professional services, financial institutions, all of these areas, again, it's a mixed question of how you manage into that. It doesn't mean that it's not there. It's just that it's muted within the middle market space. And then competitive advantages. We have a very bifurcated market in the United States, right?
You have some big players, and then you have some of the smaller players that you mentioned. And what we've tried to do is bring the advantages of a big global organization into a local relationship that we can leverage, right? Now, that's both for the client's benefit. We have the ability to do things that a Hanover can't do or a Selective can't do. A very large percentage of middle market clients in the United States have an international exposure, right? These are relatively big clients in the scheme of what you'd see across the world. And they travel abroad, and they buy abroad, and they sell abroad. And that's a big advantage we have, which frankly, even with our bigger domestic competitors, they don't have a great answer for that, with the exception of one.
And so when we go into a local marketplace, we're selling big, and we're operating small, right? We have the ability to be in that market and differentiate ourselves in that space. And then lastly, I would just say, and I mentioned this in my opening around broker consolidation, the relationships that we have with the top 10 to 15 brokers that do business in the United States is an entirely different relationship because of our global footprint and everything else that we do for them than many of these smaller carriers that are in the market. They need us. They want us in that space because they're looking for options relative to consolidation of that book of business. And we can consolidate a lot more of that business than many of our smaller competitors would be able to.
With all budget involved, I think this is one of the things that will actually position us well. I mean, you've seen the amount of consolidation that happened among regional brokers, national brokers. They can't deal with 100 different carriers when they roll up other brokers. So I think that is where we come in. We have the investments in technology, connectivity, automation. And that's how we get increasing share of wallet as they consolidate.
We've gained market share with 14 of the top 15 brokers in the last five years and on a consistent basis every year.
You did it. Oh, I'm sorry. Your point. Yeah. Andy? Sorry. Wave to the mic, please, Andy. Thank you.
Thanks, Andy Sinclair from BofA. First, just on Canada, just interested that scenario for Focus.
I guess Canada is probably one of the markets that's maybe been a little bit more NatCat exposed, I suppose, particularly this year, but even the last few years. Just how you think about the volatility for that market, if that's an area of focus. And the second was just on possibly a silly question, but just on the crop private market. I mean, with the aim of getting to 100% and then longer-term goal for 99%, is this market one that you really have to be in? Is that something really to write the profitable part, you have to be in that business? Or is that something you think, well, is 99% really good enough for long-term goal? Thanks.
Let me quickly take the Canadian market. So look, the Canadian market is a very attractive market. I mean, it's shown some very good profitability.
It also has a very different casualty market than the U.S. So you don't see the similar pressure and the social inflations that you see in the U.S., with the exception, of course, when you insure Canadian customers with some of the U.S. exposure. On the particular NatCat point, we have exactly the same discipline that we've showed in the U.S. So there as well, I mean, we see the increase longer-term of frequency and severity. I think it's also what will put a bottom under the property market. But we have exactly the same granularity and strategy in terms of reducing that volatility. And now let Dalynn answer the private product.
Great. Yeah, I mean, the private products, they're an important risk management tool for our Farmers.
So the multi-peril product that they buy through the government, in and of itself, that's not adequate for their risk protection, particularly in certain states and certain areas. So we do need to offer it. Our peers all offer it. Many peers still lose money on it. We will just bring that into profitability so that it does not detract from our profitable multi-peril business. But it really does enable that growth through the multi-peril. The key is having good balanced books of business with your agents. That's where we got off track. We got over-indexed on the amount of share that we had in private products as compared to the multi-peril. So that's what we're right-sizing back.
And we will be able to use that, especially as it moves into that, just into profitable, to really allow us to continue to grow our business, particularly into a number of states where we don't have as much market share today. And we have a lot of room for growth.
Thanks. Dom, BNP Paribas Exane, and I've got lots of questions as well. I'll stick to two to start. So one is a big chunk of the middle market premium is other. I think the majority of it in 2023. The footnote says it includes joint underwriting units and programs. Maybe you could just spell out a little bit of what's in there and what you're doing there. And then the second was just on the point about E&S. Your slide shows an increase in the proportion going to the non-admitted market.
I've heard that described as a technical thing rather than a trend. Is your view that actually you'll see a continued trend of further E&S share of the total, as it were? Or do you think that actually that will settle down and maybe there is a cycle that turns?
So I think I'll take the E&S question, and then I'll leave the middle market question with Alex. I think that is a long-term continued trend on the E&S market. I mean, think about the fundamentals now and this whole freedom of rate and form and the flexibility that it gives you. It's much easier to get into even some of the classes that show pressure. I mean, I can be much more restrictive on the coverages that I provide. I can immediately adjust.
I can exit a market when I don't like it, which is not always the case on the admitted side, so it is a market that will continue to see shift. Now, is some of the past growth driven by a cyclical movement? Yes, particularly on the property side, but I think that even when you take that out, we will continue to see a shift of the market towards the non-admitted side.
And relative to the information that was provided and the other bucket, that's really a management structure question for us. It's all middle markets. Part of that is our programs unit, so that entire $3 billion reports into me as well and is part of and is managed by my team, and we look at it in a variety of different ways, but programs is part of that.
But our construction industry practice sits within there, our professional lines, surety. There are several smaller businesses that we look at separately from our traditional package business, which is the $1 billion that you see on that. But we just lump it into other, which is a little lumpy.
Andrew?
I'm Andrew Crean, Autonomous. Can I just get a sense of scale here? You're looking for the commercial profits overall to grow by 0.6 billion to 2027. From what I can see, crop looks like a 0.2 billion turnaround, something of that order if you hit 95% combined. And presumably, there's quite a turnaround. I'm thinking about sort of 0.1 billion out of your commercial auto business. Would that be the right kind of shape that of the overall growth, half of it is coming from recovery in these two lines? Is that fair?
So I don't think we've shared an overall BOP target, particularly for North America. But you will see two things now. One is obviously the growth. I mean, if you think about CHF 3.5 billion of growth at better margins than the rest of the book, I mean, you can put a number on that. And then, yes, there is still portfolio margin improvements. But what the exact balance is going to be, I mean, we'll see.
Yeah. But also remember that some things will go back.
Yeah. Yeah.
And so we will need to be able to compensate for that, right? So if everything else stays equal, you're pretty close to be right, but nothing will stay equal.
Yeah, I think there's one thing that we've learned over the last few years that, I mean, we can still have unexpected events and still deliver our plan.
So yeah. That's right, Michael.
I had three questions. You mentioned market shares in mid-market. I just wonder where you are and where you aim to be in three years' time. Secondly, in commercial motor, why is it taking so long? I remember George talking about it. I remember at the beginning of the year, I think somebody said you were cutting the portfolio by 23%. Now the number seems cutting by less. And it just seems to take such a long time. Maybe you can give some color on that. And then on the crop, a similar question. I do remember George saying the loss would be eliminated. But here's my memory. So maybe I'm ascribing things to people I shouldn't say. But it should be eliminated by the end of this year. And it feels like it's a longer process.
You're talking about 100% combined, I think, this year or maybe next year. And then actually your new profit in that private later on.
Sorry if I jump in. But I think what you refer to is only the private clients, which is the little thing on the top. I mean, crop is going to be back to good profitability already this year. So George was right. But Dalynn has done an exceptional job of fixing the issue in very few months. Then she will also fix the private portfolios, which have been bleeding before. But that takes a little longer. The rest.
I to look on motor. I mean, clearly, this is something the entire industry has been struggling with. I think some of the impact that we've seen is still post-COVID understanding of what some of the trends were and both frequency and severity coming back.
I think we're taking all the right actions to bring that book back to where we wanted to see. But a lot of that is really portfolio management. And you don't shift a book overnight. You have to think really carefully what state, what class again. I mean, deductible strategy, you name it. But we do not write any unsupported motor business. These are part of broader client relationships. So you need to think really carefully how do you reshape that portfolio. And then on market share in middle market, I'll let Alex answer that one.
So as I'm sure you all know, the definition of middle market is not universal. So the problem with saying exactly what the market share is is difficult. We know that none of our competitors, even the biggest ones, have double-digit market share in the U.S.
We feel like we're pretty solidly in third place in market share with a gap that we're working on closing. It's going to take us a little while. Frankly, closing that gap is less important to me than being the best in the market. The market share will come by being the best.
Last question.
Thanks. It's along those lines on middle market. I guess, can you just give us a rundown of the competition, the global competitors, the larger ones? It feels like there's been a big trend towards middle market. I'll bet on the E&S. There's a big trend towards E&S as well. I guess if it's better profits, less volatile, it all makes sense. But at what point is that a danger that competition eats into it? I guess that's more leaned on E&S than middle market.
How confident are you that margins remain here?
So I'll let Alex answer on the competitors. But one thing that I really want all of you to understand is that you do not build a middle market business overnight. I mean, this has been a six, seven-year effort of building up teams, industry specialization, I mean, regional footprint, automation platforms. I mean, you name it. So when competitors come out and say, "We like the middle market," I'm like, "OK." I mean, it will take you a very long time to build something that I need to be scared of. So that's on the middle market side. I mean, E&S, look, E&S for me, it is really, again, it's a middle market play. And it goes back to some of these same things. I mean, you need to build the platform. You need the dedicated underwriters. You need the expertise.
I mean, yes, we'll probably see some competition. But again, I mean, these are not overnight plays that you can just decide to pursue.
On the E&S, sorry, just an extension on that. Are you seeing competition for underwriters as well? Because there's lots of new startups trying to pick up teams.
So absolutely. I know this is probably one of the things that we've been most focused on, I mean, in this market. And of course, I mean, both middle market and specialties, I mean, given the success that we've seen, given the teams that we've built, I mean, of course, we see pressure from the outside market. But I think how we counter that is we have a success story. We have a position in the market. We invest in our underwriters. We invest in their career paths. I mean, you go and join an MGA.
That's a very volatile proposition. I mean, you join Zurich, you sign up for a long-term career. And so we've seen attrition coming down to levels that are absolutely manageable. But that pressure is absolutely there.
Thank you very much. So if there are outstanding questions, we've got to wrap up Q&A session at the end. But we've run out of time, unfortunately. So that's the end of this session. Thank you.
Thank you very much. Excellent. Welcome to the next session. It's called the Life Protection Panel. So I'll hand over to Alison Martin. Alison.
Thanks, Jon. So I'm Alison Martin. I'm the CEO for EMEA. And I'm also responsible for the global bank distribution and life businesses. So. My pleasure to welcome you to the Life Protection Breakout.
Now, as you heard from Mario earlier, we have a very successful life business and, in particular, a very strong protection business, which we see opportunity to grow, leveraging the capabilities of our large businesses, as well as growing some new capabilities. Today, I'm joined by Tim Bailey, who's the CEO of the U.K. business, and I'm also joined by Claudia Chiesa, the CEO of Zurich Santander. So they represent different channels that we operate in: the independent channels in the U.K. and the bank channel in the case of Zurich Santander. You'll hear from both of them their successes to date and also the expectations they have for the future. Now, as you heard earlier, at Zurich, our protection business is our largest business. It's also very well diversified.
Now, today, while we're going to talk about EMEA and Latin America, actually, we have a very significant business in Asia Pacific, in Australia, and in Japan. The business grows from us delivering on the customer-centric strategy that you heard from Conny earlier, and also delivering on a strong distribution management. The margins in our business, which Claudia referenced as being 15% of our premium, those are delivered by technical excellence. That's in medical underwriting, it's in pricing, claims, in force management, as well as underpinned by operational efficiency. The benefit of the margins of this type of business is that they're relatively stable, so we don't see the same volatility from financial markets as you would see from savings business. That makes this an attractive part of a diversified portfolio. Now, we see opportunity for us to grow our protection business, 8% top and bottom line.
Now, how are we going to do this? Well, it's going to be through using the levers of the business that I've talked about. So whether that's customer-centricity, distribution management, as well as delivering on technical excellence. Now, we start from strong foundations. So we expect to be able to grow our customer TNPS further. We've already grown from 28- 50 over the last five years, and we see opportunity in areas like further empathy training and also tone of voice that you heard from Conny earlier. Also, as you heard, our strategy on the customer side is very much around building customer loyalty. So we see this through broadening out the engagement that we have with our customer and also through leveraging technology.
You'll hear from Ericson about how we're using large language models in our call centers, for instance, to support our call center agents in how they manage customers. It also has the benefit of improving our retention. If I turn to technical excellence, so as you heard from Mario, we're looking at developing medical underwriting capabilities further, developing our own medical analytics team, leveraging medical data both internal and external. We have implemented automated underwriting systems in our larger protection businesses. These offer point-of-sale decision-making, which is better for risk selection, and they also provide a much better customer and distributor experience. We have pricing and experience analytic tool capabilities already today, and we'll continue to develop those, leveraging the data from our largest protection businesses to improve competitive position and pricing around the world.
Claims is a really important part of the protection business, from what we can do on prevention to what we can do for rehabilitation of our customers. Technology plays an important role here as well in the accuracy and the speed of decision-making, and also in areas like fraud detection, which again, Ericson will touch on later. Finally, on distribution management, the old saying that life insurance is sold rather than bought is largely still true, and that does make distribution a really key part of our growth strategy. Now, you're going to hear today examples from the independent and the bank channels, but that doesn't mean we're not investing in our own proprietary distribution.
We are, whether that's in holistic advisory tools and training or some of the advanced analytics that you heard Conny speak to earlier, to develop more ability for our agents to deliver next best offers, improve their conversion through better CRM capability. So with that, I'm going to hand over to Tim, and I'll come back later.
Thanks very much, Alison. Thank you. Good afternoon, everyone, and welcome to Zurich UK, a large and profitable business with excellent market positions across both P&C and life. We've grown total revenue by 34% over the course of the last three years, and we've done so by targeting specific market segments and building and deepening top five positions in each of those segments. From a P&C perspective, in large commercial, we are a market leader. We insure the vast majority of FTSE 100 companies, many multinationals. We have a large and profitable and balanced portfolio. We've built top five positions in mid-market, in SME, and high net worth. We're a market leader in the public sector segment through our Zurich Municipal business.
Alongside this, building on our long-standing presence in the UK life market, we have established a top three position in the protection market, and that's my focus with you today. It's taken a lot of hard work to really transform our position in the UK protection market and really build a process and system which enables us to constantly improve and drive further growth. In 2018, we relaunched our retail protection proposition on a new platform alongside our group protection business, which was already growing successfully. We brought top talent into the organization, specifically recruiting Alex Kozlowski as our head of life and appointing key roles such as head of retail protection. That, in turn, enabled us to bring more talent into the team to improve our technical skills and capabilities.
We built a proposition roadmap of how we wanted to improve our group and retail products and services, and we've executed on that roadmap. We've launched new propositions, we've improved existing propositions, and we've improved our pricing capabilities, enabling us to target specific customer segments where we want to be particularly competitive and enabling us to reprice more quickly. Now, all of that has enabled us to grow our presence in the IFA channel. We've grown through gaining new panel positions in the market and through increasing our share of wallet with existing partners. Alongside that, we've transformed our operations, significantly improving our service proposition to both customers and to financial advisors and distribution partners.
As part of that, we've implemented tone of voice and empathy training, as you heard about from Conny earlier today, and this transformation has been particularly important in retail, and I will come back to that. Now, all of these things have enabled us to grow new business, to drive really strong retention, the strength of our pricing capabilities. All of these things mean we're competitive in the market. We are winning in the market. That enables us to continue attracting and retaining top talent within our team, and so we continue on this very positive cycle that we have developed, and it's working. We are consistently growing our group and retail protection businesses. I'll come to our group business first. As you can see, we are consistently growing both GWP and market share in group.
We're doing so whilst consistently improving our TNPS, which has improved very significantly over recent years due to our overall service proposition and the value-added services that we provide to our customers. This is being noticed in the market. In fact, for three years in a row now, we have been awarded the best group risk provider at the Corporate Adviser Awards, and we continue to make improvements to our proposition. Our customer base today is mostly large and medium-sized employers, but in 2023, we launched an SME portal, which has enabled us to start driving growth in the SME segment, a new source of growth for us. Just last month, we launched a group critical illness proposition. That closed a proposition gap for us, again opened a new source of growth.
Early next year, we will bring all of our value-added services together onto a single Zurich app, again improving our proposition further to our customers. So in group, we are improving and building from a position which is already very, very strong, and it's a similar picture in retail. In retail, we are growing GWP and PVNBP very consistently. We particularly wanted to focus on growing our position in the term protection market, where we've historically been underweight. As you can see, we improved our market share from just over 5% to over 7% by the end of 2023. It's now over 8% in 2024, and in fact, we have grown our term protection market share now for 10 consecutive quarters. And we're continuing to improve our overall proposition in retail protection. In 2023, we relaunched our critical illness offer to the market.
Just earlier this year, we launched a supplementary health proposition, which provides access to earlier diagnosis and treatment for certain conditions, and that's landed really well in the market, and so we continue to improve our proposition, which again has been noticed in the market. We've seen a number of industry awards or received a number of industry awards, including well-deserved personal recognition for Louise Colley, our Head of Retail Protection. A really important part of us being able to grow in retail has been transforming our operations. In 2022, we insourced 200 roles in our retail protection business. That's enabled us to drive a much better interaction between distribution, underwriting, new business processing to provide a much quicker turnaround time, much better service to both customers and financial advisors, combined with increasing our straight-through processing rates, so again, we're building from a really strong position in retail.
Overall, two key things really driving our growth. Firstly, enhanced propositions and that being those distributed through a broader distribution footprint. In terms of our propositions, with the changes we've made, we have a really strong offering in the market today. We continue to make improvements. For example, we will improve our retail income protection product over the course of the coming months, and that's enabling us to access a wider range of customers. This is combined with a broadened distribution footprint. We've won panel positions with a number of IFA networks over the last two years, examples Quilter, Primis, and Stonebridge, and we've significantly increased our share of wallet with the largest IFA networks. So enhanced propositions through a broader distribution footprint equates to market share growth, and I'm very confident that we will drive that term protection market share beyond 10% by 2027.
So if I bring all this together, we have already built a top three position in the UK protection market with really strong positions in both retail and group, and we're really well placed to continue a very positive growth trajectory. In group, that will be driven through our entry into the SME segment and through critical illness alongside our existing propositions. In retail, it will be driven through the enhanced propositions that we have and continue to improve through a broader distribution footprint. With our people, our reputation in the market, and the quality of our proposition, I'm very, very confident that we will continue to grow both retail and group over the course of the coming years. Thank you, and with that, I will hand over to Claudia.
Thank you, Tim. Good afternoon, everyone. Very glad to be here and share the significant opportunity Zurich Santander represents. This joint venture has consistently delivered value since its creation 13 years ago, and I'm personally convinced that thanks to the disciplined implementation of our transformational plan, which we have built in full alignment cooperation with Banco Santander, and that is focused on four strategic pillars that I'm going to explain in a minute, this joint venture will continue growing in the future. So what is Zurich Santander? It is a joint venture built at the end of 2011 with a 25-year duration, which allows for the exclusive distribution of all life, P&C, savings, and pension products in Santander's five largest countries in Latin America.
Santander is a leading bank in the region with a top five position in each of the geographies, and the joint ventures has achieved a remarkable 17% growth in BOP annually since the start, and we are on track to reach approximately CHF 900 million of BOP in 2024. The numbers you see there are all represented at 51%. At Zurich Santander, we have a large and successful P&C business as well as leading position in life, and today I'm going to focus on our life business, where we are a top three player in four markets and number four in Mexico with remarkable market shares, as you see in the slide. The largest business at Zurich Santander is clearly life protection, and we also have a highly growing savings unit-linked and pension business with, at the moment, approximately $20 billion in asset under management.
This is in addition to a growing health portfolio. So, as said, thanks to our discipline, I'd say implementation of the strategic plan that we launched in 2022, in coordination with our partner, Banco Santander, growth has accelerated further over the last three years, and at the same time, maintaining a market reference profitability with a combined ratio in the mid-70%. Now, let me move from what we have done so far to what gives us confidence that we will keep growing over the next years. So, as said, we are implementing four strategic priorities. Firstly, we want to become market reference in the intelligent use of data. Secondly, it's focusing on fast growth in alternative channels. Thirdly, we are expanding and completing our value proposition, and fourthly, we are implementing what we call our holistic approach to the customer journey management.
With respect to data, over the last few years, we have worked together with a bank to build the technological infrastructure to fully leverage the potential of the banking and insurance data combined. We have also agreed to the governance rule to allow it, and we have built in each of the markets teams of data analysts to run the models. At the moment, the most important models are around the full personalization of our offer based on customer characteristics. This is in terms of type of cover, sum insured, pricing. In most cases, it's already pre-quoted, which means without the need to ask any additional data to our customers. Secondly, we are working on what we call proactive and reactive retention models, which are based on customer lifetime value and retention probability.
According to the specific characteristic of each customer, we activate a very specific and personal lines retention action, which might be either explaining the product characteristic and features, giving a discount, a voucher, or other incentives. In alternative channels that, as you can see from the slide, is becoming a very, very important source of new business already today for us. We are optimizing our inbound and outbound telemarketing capabilities. As a reference, in 2023, we have sold 700,000 policies through this channel. We are also optimizing our capabilities in generating what we call qualified leads. These are either from inbound calls of the bank. The bank receives approximately 4 million inbound calls every single month, or from digital traffic of our customers. We then transfer those leads to a network of outbound specialists who finalize the sale in a few hours.
We are also developing new journeys in alignment with Santander distribution affinities, including point of sale device sellers who are proposing in combination to the device business or business owner products. With respect to value proposition, we are growing in product lines which have significant growth potential, such as savings, health, and SMEs. We launch unit-linked and pension products in all the three major countries, which for us are Brazil, Mexico, and Chile, achieving significant growth as visible in the graph. We are also exploring all opportunities in the health space, especially in Mexico and in Chile, where we launched recently our personal and complementary health offer. In SMEs, what we are doing is we are investing in industry and sector-specific value propositions, along with the development by the bank of a network of sales specialists for this segment, which is pretty new.
The bank is developing specialist channels, and SMEs is one of them. Now, flipping to the fourth pillar, which is what we call the holistic management of the customer journey, what I personally believe is most innovative is that that requires a cross-functional end-to-end management of the customer journey, which in practical terms means having the teams working, for example, on data to fully personalize our offer, to work on lead optimization, on next best offer models, on propensity models. It also means giving full flexibility to our customers to the payment methods. Our customers can now pay by bank account, Santander credit card, and also credit cards of other banks. In claims, we are focusing on digitizing for our customers end-to-end the customer management and also focusing on fast track. As of today, already 50% of our claims are paid in less than three days.
Also, very important is what we call proactive and reactive retention models. So, in proactive, we proactively contact customers who have a higher probability of canceling, and then we sort of explain once again the value and the content of our products. In reactive, we deviate to retention center specialists who basically, according to the customer characteristics, as described before, are activating a specific retention action. As of today, already approximately 80% of all cancellation requests are managed by our retention centers. This is a significant value generator for us. If you consider that a 5% improvement in persistency generates approximately CHF 50 million of additional premiums and CHF 6 million of BOP. In 2024, we are improving 7% compared to last year, while at the same time reaching a remarkable 67-point in TNPS. This strategy is already proving to be effective.
Let me show for a second how the implementation of our pillars is impacting our results in Brazil. Brazil is our largest country, which represents approximately 50% of our business with more than 10 million customers in insurance. There, we are already retaining more than 30% out of the 84% cancellation managed by our retention centers, up from 41% last year. Our personal lines and pre-quoted offer that we launched at first movers in the market has allowed us not only to increase the number of sales, but also average premium by 11%. The focus on pension products in the improvement of the product, in setting up the right incentives, is allowing us to reach almost CHF 1.5 billion in net inflow this year, up 40% from last year.
Finally, the use of artificial intelligence models on fast track and super fast track claims is allowing us to reach record timing in claims payments. As of today, already 50% of our claims are paid in less than 10 minutes, with the ambition to get to 20% in less than 10 minutes next year. In conclusion, based on the results we are seeing in Brazil, but also in our other markets, and thanks to, once again, the very disciplined and focused execution of our strategic plan built in alignment with Banco Santander's focus on the four strategic pillars which I've just described, I'm confident we will keep growing both in terms of GWP and in terms of BOP at 8% annually over the next planning cycle. With that, Alison, back to you.
Thanks, Claudia, and thanks, Tim. So, as you've heard, we see opportunity for us to grow our life business by 8%, top and bottom line in the protection business, using the levers of delivering on our customer-centric strategy, using strong distribution management and technical excellence. So, with that, we look forward to your questions.
Michael.
I only had one stunning performance. If, sadly, Mario is here, but if Mario came to you and said, "What do you need to transform the 8% into, say, 12%?" what would you say?
More distribution. I mean, I could be very quick. I mean, life, as I said, the old saying is still true. Life insurance is sold, not bought. So, you do need to have distribution. Now, I mean, we could talk about macroeconomic levers that could make conditions more encouraging of credit, and Claudia can talk to that for the banks, and that can help us on kind of increasing volumes. But broadly speaking, it's about increasing distribution. Now, Tim already spoke to what he's doing to improve the positioning that we have on distribution panels, but the absolute volume of distribution matters.
Andrew.
Great. Thank you. Andrew Baker, Goldman Sachs. So, just two, please. So, when you're thinking about new business, I guess that left-hand chart there, do you have a preference for short-term versus long-term protection, just given the different earnings profiles? Do you think about that at all in terms of, obviously, the PAA business coming straight to earnings, whereas long-term not? Or are you reasonably agnostic in that regard? And then secondly, you just touched on it, but what would be the sort of ideal macro scenario for both the UK as well as the LATAM business from a new business perspective? Thank you.
Okay, so I'll leave the second question to Tim and Claudia then to comment on. So, your first question, yes, we are reasonably agnostic. I think they have different profiles and different characteristics. One of the real strengths, I think, about protection business is it's very well diversified, whether you look at it from geography, whether you look at it from channel, if you look at it from product, if you look at it from duration. And I think we do benefit from that. So, Tim, do you want to go first?
Yeah, thank you. So, I think in terms of we're basing our plan based on limited market growth, and we've seen a relatively stable market, certainly in retail over the last few years, while group's been growing. If we were to see positive market growth, then I think the opportunity is stronger. That could be driven by a healthy mortgage market, for example. On the retail side, on the group side, if we were to see average earnings increase by more than our sort of core assumptions, so those would be helpful factors to enable us to grow even quicker than we are projecting.
In our case, clearly the macroeconomic is bleak. It's not positive at all. That's also affecting a part of our business, which is the part of business which is more linked to credits, because in some cases we propose an insurance product into the credit journey, and this is clearly affected. That's why we need to increase the sophistication of our business, and this is the whole plan about the four pillars that you see: increase sophistication so that we are way more effective, more able to understand the need of our customers in what we call the pure standalone products.
So, the ideal macro conditions would be a better credit environment for us, just to be clear.
Rhea.
Thank you. Rhea Shah, Deutsche Bank. Two questions. So, the first one goes back to retail protection in the UK. I think some peers have been seeing some weakness this year and last, but you've managed to grow the top and bottom line. So, I was just wondering what's helping you drive that growth and market share, essentially. And then the second one, not related to life, but because we've got the UK CEO, going to UK P&C or retail P&C, if you could just talk about how you were positioned versus the market in terms of pricing, retention, claims inflation, both in the home and motor books.
Certainly. Okay, so I'll take the life one first. So, yeah, from a new business perspective, the market's actually down a little bit this year. As I mentioned, we're consistently growing market share. We've grown market share now 10 consecutive quarters in a row. That's really being driven through the fact that we've broadened out our propositions over the last couple of years. So, for example, refreshing or relaunching our critical illness proposition in 2023, and the fact that we gained new panel positions through 2022, 2023, and 2024. So, that's IFA networks, with whom we've had a very low share in the past that we're now really growing that share with, and the fact that we've really significantly enhanced our service proposition over the last few years. So, you put all of those things together, and we've got a really healthy trajectory of market share growth.
As I say, we're growing, even though from a new business perspective, the market's actually declined a little bit this year. A positive scenario going forward, if we started to see the market recover in terms of new business volumes, then we could see even stronger growth based on the market share growth that we're projecting and seeing. If I come on to the P&C side of things, I think your question is predominantly a personal lines question. We took the decision in 2023 to exit the broker personal lines market. We were a very small player. It was a very small part of our premium, small part of our business, and we had a low market share, and it's obviously a very competitive space.
Our business today, we're focused really on commercial mid-market, SME, and public sector, apart from some niche parts or some specific parts of the personal lines market being high net worth and travel, and we see actually positive rate in those spaces. But I wouldn't comment too much on the home and motor personal lines market, given we don't really focus in that space.
Andrew.
Great, thanks. Hello, it's Andrew Crean, Autonomous. A couple of things on the UK. What's the FCA doing with this protection review? I ask everyone this. Oh, it's not a problem for us, but they're obviously reviewing something. Secondly, with the budget increasing the NICs, do you expect that to have an impact on your group protection business with corporates just going, "Actually, there's a limit to how much we can pay?" And thirdly, what you're proposing here across the piece is 8% growth in top line and 8% growth in bottom line. How does the bit about looking at assuming more risk fit into the bottom line? I mean, one would naturally epect that to be an additive to margin.
Do you want to take the first question?
Yep, okay. Yeah, so the FCA protection review, so we've had initial engagement with the FCA. We would expect that engagement to continue over the course of the coming months. I think from our perspective, we've obviously just gone through Consumer Duty and implemented Consumer Duty in our portfolio. As part of that, we've gone through fair value assessments, etc, so we're very confident in terms of the products we're providing and the channels that we're providing them through, so we don't see it having a material impact. Obviously, we'll engage with them over the course of the coming months with the FCA over the course of the coming months, but we don't see it having a material impact on our business.
I think on the National Insurance contributions, I think there's a slight risk there, but by and large, the employers that we work with have got well-embedded group risk schemes. It's a core benefit that they provide to their employees, and we're reasonably confident that we wouldn't see material change in that based on the changes in National Insurance.
And then to your third question around the relative kind of growth of top and bottom line, I think Mario answered partially the question earlier around, so essentially, are we going to withdraw from using reinsurance? Because I think the answer is that there's still going to be a place where reinsurance is maybe the appropriate answer if you do not have enough credibility of risk data, and it will take us some time to be in a position where we would feel confident that we have sufficient data, experience, credibility that we would want to make a different choice than we do today.
Dom.
Thanks. Dominic O'Mahony, BNP Paribas Exane. My first question was really just about distribution model in the UK. I've had it put to me that banks might be trying to take more share or bank distributed product might be trying to take more share in the UK. One of the large banks with an internal insurer seems to be thinking about this quite hard. What's your perspective on channel mix for protection, and I guess in particular on the retail side in the UK? And is there anything you can go at? Are there any partnerships available, or is that tied up? Forgive me, is this in your remit, the Asia and Australia protection markets? If it is, can I ask a question about it?
So, it depends on the question. So, from a technical perspective, but it depends on the question.
Fine. I was really just going to ask for a quick update on the ambition there. I mean, I'm guessing the showcase on UK and Santander is because these are markets you see as very high potential. Do you also see similar levels of growth opportunity in those markets?
Maybe I'm happy to give a quick answer to that one, I think, and then if you answer the U.K. bank one, so we would expect our Asian businesses to grow strongly as well, yes. Now, in Australia, given the nature of the product, that's more a step premium type product, so it's less about new business, it's more about increases as policyholders age, but that does contribute strongly to the growth that we have, and we also see strong growth in our Japanese business. I think Mario already talked about opportunities we might see in other markets, so.
Yeah, and from a distribution mix in the UK, so the independent channel's dominant today. Actually, we see that continuing to be the dominant channel. That's our primary focus. I think we would keep the option open of exploring other channels, but our core plan today is really built on the independent financial advisor channel, which dominates today, and we would see it dominating going forward.
Andy.
Sorry, Andy Sinclair from Bank of America. I suppose just building on Crean's question, just the 8% top and bottom line, just why isn't the bottom line growing faster? Why have we not got a bit of operating leverage coming through just from that level of growth? And then just thinking about protection products more broadly, I mean, we've seen more discussions about kind of data collection through wearables and kind of becoming a more holistic, shall we say, welfare type product in places as well. Is that something that you see as becoming actually tangibly making a difference, or is this just really about a product that's price and ability to buy it?
Okay, so maybe on the first, maybe Claudia, if you talk a bit to the elasticity point on price and what really matters, and I think, Tim, you can add something then on the wearables and more of the wellness side, and then I'll pick up the first question.
Sure. Well, one of the issues why we do not see in these numbers an effect of scaling up is pretty simple because there is a component there which is investment return, and we are not expecting net investment income to grow at the same speed as the top line. So, in reality, there is some efficiency gaining built into this plan and also technical profitability, which is growing more than proportionally, but is partially eaten, let's say, by the net investment income.
Yeah, so in terms of wearables, wellness, etc., it's quite a broad topic. So, if I take purely a U.K. perspective at the moment, it's predominantly to group customers that we provide those benefits, and they're really important, actually, as part of that overall proposition. In terms of that being more broadly leveraged in retail, Cara, I think, will talk about LiveWell as a proposition that we have across the Zurich Group, and it's used in many markets. It works better in some markets than others because in some markets, you've got the opportunity to reflect what you see in terms of behaviors into pricing discounts, and in other markets, that's more difficult to do, and some markets are more price-sensitive than others. So, it's nuanced in terms of where we deploy it, but that is a really strong proposition which is deployed in a number of markets.
So, we do see it as something which is important, yeah.
Michael.
Could you remind us on the progress of a reinstatement of the German Life back book sale? I think the Viridium transfer of ownership could be quite imminent, and that would free BaFin to reapprove it as well. And then the second is I was really curious, more for my own benefit, this point of sale decision-making. I just wondered if you could give an example. When people call me and I can make a decision instantly, I'd be so happy, but I did not quite understand how that works. Thank you.
Okay, so I think on the German back book, I think Claudia was pretty clear earlier. I mean, once a sale could happen, we would look to pursue that. We are waiting, though, to see if the German market environment would mean that a sale could be completed. On the automated underwriting system, this is point of sale decision-making for distribution. Usually the key to enabling a good customer and distributor experience and good risk selection is making sure you're asking the smallest number of questions you can so that you give the right experience, but the largest number of questions you need in order to get the risk selection right. That's kind of the secret sauce. If everyone is answering those questions in a way that you've calibrated the engine correctly, you can increase your straight-through processing.
For instance, with the raw calibration we did in one of our markets, we were able to increase straight-through processing from 55%- 77%. So, and the higher the straight-through processing rate you have, obviously the better conversion rates you have. So, that's why they're so important.
My comments was around, let's say, the significant opportunities we see in what we call alternative channels, which are not only the alternative channels of the bank, but we are really exploring all the possible, what we call the ecosystem of the bank. So, the bank has a number of affinity distribution partners. One which is very important for us is they own a company which makes and produces the payment device system, right, for shops and small businesses. So, those network people, when they go and are proposing the device, together with that, they're proposing an insurance product which says, "Why are you not considering protecting your business from business interruption or other events which may occur?" And together with that, also protecting either the business owner or the employees of the. And conversion rate in this case is significantly high, significantly high, and very effective channel.
Well, last question.
Thanks, Jon. I think, and I might be wrong, the protection weighting probably makes you less vulnerable to aspects such as Danish Compromise. I guess in terms of industry thoughts or any sort of comments to make there, and I guess any banc assurance JVs that you have that might be a bit more susceptible.
So, I very much agree with your hypothesis. I think that if you think of Zurich's life business generally, not just the protection business, but it is very capital light, and the Danish Compromise typically is weighted more to those who have capital-heavy businesses because you need a lot of Tier 1 capital tied up for the math to make sense. Now, I mean, there are complexities, and each banking situation is unique, so I'm generalizing, but it does mean we're less exposed to it, yes. I think the most important thing that we can do on any bank relationship is to be as effective as we can in working in partnerships in the interest of our shareholders and that.
I guess the last part of it was any JVs that you have that might be more susceptible.
No, because our JVs are based on the same. I mean, if you think we have two JVs, we have Santander and we have Sabadell, and both of them are capital-light protection businesses.
Okay, excellent. Thank you all very much. So, that's the end of the protection session. So, we'll start the next session at 3:00 P.M. Thank you. Okay, last panel session. We're in the home stretch. So we're going to end on a sort of high-energy high with Ericson and Cara. And then we've got this short wrap-up Q&A session after a short break. So, Ericson.
Thank you, Jon. Good afternoon. Three years ago in the Investor Day, I talked about how we approach digital transformation. Three years on, we have made significant progress. So very happy to today share that with you. Today, myself and Cara, Cara Morton, CEO of Zurich Global Ventures, we talk about how we use, one, digitally, and two, a platform approach to help retail growth and improve retail profitability. I will cover three key progresses we have made.
One is how we have accelerated innovations. Two, how do we leverage the scale of the entire group of Zurich? Three is how we continue to lead in AI usage to deliver business value. So let me go to accelerating innovation first. Obviously, this is something that we all want to do. But before we can do that, we need to reduce the complexity that we have so to improve our efficiency to innovate. We have established an open API platform. We call it Zurich eXchange. What does this platform do? It decouples the complexity of our backend systems. And it also allows us to simplify the connectivity between many systems of ours. So before this, we have well over 8,000 point-to-point connections. And that is a many-to-many. And reduce to less than 2,000 of them is the API connections. What does that mean?
When we introduce products and services, we only need to establish this connection once. Even when we make changes, we don't need to do it again. This is very critical, and also, at the same time, we managed to change our technology investment mix so that we can put more emphasis on front-end and innovations. As a result, we have a lot of modularized solutions, easier integration. Let's talk about partnership. When we do partnership, it used to take us months to build connections. But with this approach, it will only take us days. This is important, and honestly, this is not new. In an e-commerce world, this is how e-commerce online retailer will do this architecture. But for the insurance industry, it might have been new, so we have taken the e-commerce approach in this case.
Besides that, we have built many different plug-and-play solutions, digital solutions, so that we can do value-added services for our customers, such as cyber services like from BOXX, our well-being loyalty service like LiveWell. And Cara will talk about it, how we use this digital service to loyalize and engage our retail customers. So besides accelerated innovations, then I want to talk about number two is how we leverage the scale of Zurich Group. So we take the best digital assets within the group. It could be from any markets. We take it out, and then we productize it. And then once we productize it, we put it on a platform so that we can deploy the same solution to every single market of ours. This is a platform approach. We have a number of these platforms already deployed across the group.
For example, our cloud platform, our employee engagement platform, they have been deployed to every single market of ours. Not one market, two markets. It's every single market of ours. And then we also have our global procurement platform. With that, we can truly leverage the global purchasing power of ours. So besides this digital platform, functional platform, we also have a number of business digital platforms, such as the Insight 360 risk engineering platform that Sierra would have talked about earlier today for commercial insurance. On the retail side, we have a Customer Intelligence Platform already mentioned by Conny earlier today. And right after me, Cara will talk about our global travel platform. So this platform approach is very critical because we can build once and use many.
So we can use it many, many times so that we can achieve a lot more with a similar level of investment we make. So this is about efficiency on our investment. So besides, we have this platform approach. Also, it could be new in the insurance world, but it is very common in a technology product company. So we use the same approach so that productize our solution internally. So besides accelerating innovations, using our scales, now I want to talk about AI. AI is a hot topic. But AI is not new for Zurich. We have been using AI for many years. That is for our modeling, for our forecasting. But GenAI, GenAI is new. So what's the difference between AI and GenAI? AI is more on numerical analysis. So it's doing number crunching. But GenAI is about text analysis.
It's able to consume a huge amount of text, documents, extract key information, and make sense out of them. So in a nutshell, this is about knowledge management. So this is why it is perfect for a company like Zurich. And earlier today, you have heard some of the solutions, like Program IQ, Sierra talked about this. This is built Program IQ, Guideline IQ, Policy IQ. These are solutions already in place for our commercial insurance. So we have other solutions in place, such as Zurich Chat, Lex IQ. This solution is for all of our employees, all of them, to make their work more productive, have become more efficient. But our focus is not only about efficiency gain. Our focus is how do we deliver additional business value. So such as Agent IQ, Voice IQ, Claims IQ, these are solutions built for our retail business.
We do have a video to bring them to life. Can you play that, please?
With Zurich's bespoke generative AI solutions, we are fundamentally changing our retail business with focus on retention, claims accuracy, and leakage, as well as sales capacity. Introducing Voice IQ. Voice IQ is our generative AI-driven solution designed to elevate service center performance and increase customer retention. It listens to 100% of customer calls, providing deeper insights into every interaction. It understands over 25 languages, knows our products, and has access to our knowledge. By analyzing 100% of calls, we see patterns of success from our top-performing agents, allowing us to apply this knowledge to improve performance where it's needed most. By working in tandem with our agents, Voice IQ offers personal lines product and service recommendations, boosting sales and retention. Introducing Claims IQ, our generative AI-driven solution for retail claims.
Claims IQ extracts insights from numerous documents per claim, identifying inconsistencies and anomalies with precision. It helps our claims handlers tackle intricate claims by analyzing both unstructured and structured data from sources like police reports, garage repair shop invoices, third-party sources, and more, speeding up the process. Claims IQ conducts thorough coverage and bill checks, reducing the chance of errors and overpayments while improving claim settlement turnaround times. In addition, it enhances detection of fraud and image tampering and highlights recovery opportunities for our experts. By working with Claims IQ, we are improving settlement turnaround times while optimizing accuracy, boosting anomaly detection, and strengthening our fraud-fighting capabilities. Introducing Agent IQ. Agent IQ is our generative AI bot that provides essential knowledge and details on comprehensive products and services for agents and brokers. Historically, selling pension fund solutions, life insurance, and savings required expert knowledge.
With Agent IQ, more agents and brokers have access to this expertise, understand product information in their native language, and receive immediate answers. With increased confidence and knowledge, any agent can sell life products more effectively, expanding our sales capacity. With our AI and GenAI solutions, we are driving growth opportunities in retail and improving profitability beyond efficiency gains.
So these are some of the solutions we have in place for our retail business. Earlier in the earlier slides, you have seen we are quite very proud that we have been rated as the number one European insurer in AI usage. But honestly, having this kind of a rating is good, but then it's more important. It's not about the rating; it's how we use GenAI. That is the key. And you can see from some of these examples, it's not just for efficiency gain. It's like Agent IQ.
Agent IQ is to use this to expand our sales and distribution capacity. So like Voice IQ, Voice IQ is to make every single service center agent of ours to perform as the best-performing agent in the center. Claims IQ. Claims IQ is able to consume huge amounts of documents and do checking to have the accuracy level like never before so that we can reduce our claims leakage. So this is a focus of our AI is beyond efficiency gain. So in addition to what I mentioned earlier, our accelerated innovations, how we leverage the scale of Zurich Group as a whole, and how we continue to lead AI usage to generate business value, we are well positioned to continue to enhance our retail growth and improve our retail profitability using digital capability.
Now I'm going to pass it on to Cara to talk about how we use the business platform to do the same for retail business. Cara.
Thanks, Ericson. I just thought I'd introduce myself for those who don't know me. So prior to being the CEO of Zurich Global Ventures, which I began earlier this year, I was the CEO of the Cover-More business, which is Zurich's wholly owned global travel business. I led that business through the COVID years, and I actually began my career with Accenture, where I spent almost 25 years in global transformation programs. This afternoon, I would like to share with you the exciting proposition that Zurich Global Ventures represents and the importance of the acquisition of the AIG Travel Guard business in that context. Zurich Global Ventures is a global platform business.
So it enables products and services to be distributed and serviced in a globally consistent manner. We also invest and build digital propositions and service propositions, which enable us to engage and loyalize and retain our customers. And Connie talked to this earlier today. The AIG acquisition will accelerate our aspirations that we have in global platforms, enabling us to go beyond travel lines into other areas such as life protection and cyber. Within the Zurich Global Ventures platform today, we have two key platforms. One is travel, and that's our Cover-More business. And two is our corporate life and pensions business. And we have strategic plays for both these platforms. So first, through the AIG Travel Guard acquisition, that's our travel play. And in life, we're going to build a life protection unit, which will bring together our fragmented life businesses across the group into one business.
We've already begun building distinguished capabilities around underwriting with medical analytics. We're going to improve the customer experience as well. I know that you heard about that in a previous session. Beyond these two platforms, travel and life, within Zurich Global Ventures, we also have some stakes and investments that we have in other predominantly service companies, such as Box, which is a cyber services company, and LiveWell, which is our own in-house built health and well-being app. How do we work within the Zurich Group? We build and sell retail propositions that have global applicability, such as travel. We build these propositions in a way that they can be a product or a service so that local business units can use them to bundle with their products to drive customer value, to drive loyalty and retention. Take, for example, the Australian business unit.
They currently use the LiveWell app with their retail life product to drive customer engagement. And they're actually seeing a 20% improvement in lapse ratio when these products are bundled as opposed to not. We also enable our products and services to be distributed through other Zurich channels. And our BOXX cyber services are currently being distributed through the Farmers Exchanges. So we're distributing SME cyber services through the Farmers Exchanges. The largest global platform business that we have is our travel business. And travel is a really attractive proposition. Since COVID, the awareness of travel insurance has really accelerated. And we're seeing high single-digit growth projections with travel insurance. It's also a product that enables us high touch points with our customers, pre-trip and on-trip. And another thing we've seen since COVID is on-trip, we're seeing a lot more assistance questions around medical and health.
Prior to COVID, basically all the assistance was around, "I've lost my bag. I've lost my passport. My plane's delayed," but now we're seeing that really change and a lot more assistance questions coming up on-trip around health and well-being. Sorry, Cover-More was acquired by Zurich in 2017. It was then basically a predominantly Australian-New Zealand business. We then went on and made acquisitions in Latin America with the Universal Assistance business, North America Travelex , and in Europe, two companies, Blue and Halo. We connected all these together to form our global travel business, and then during COVID, we basically invested in digital capabilities, which really increased the way that we engage with our customers, and we came out of COVID with record levels of sales and also profitability, so you might ask then why the AIG acquisition.
Cover-More is a strong global company built on its local capabilities and local partnerships like Commonwealth Bank of Australia, Costco in the U.S., Despegar, which is the biggest OTA in Latin America, but the Travel Guard is a global company built on true global partnerships like the airlines, United, Qantas, Emirates, Lufthansa, and credit card businesses, Amex, Visa, and Mastercard, so what this gives us is basically not only these global partnerships, but the really exciting part of this acquisition is the global platform, so we actually get one global underwriting platform, claims servicing platform, and a whole network of globally connected assistance centers, and so that's what we're truly excited about with this acquisition, is bringing these two strong businesses together. Following the close, which we're aiming for in a couple of weeks' time, we will have a business that is basically around two billion.
We will be a significant player in the retail travel insurance and assistance market. We will go from a predominantly Australian and New Zealand-based business with obviously positions in LATAM, the U.S., and Europe into a business where the footprint is predominantly North America. We'll have a much stronger platform within Europe to grow our European business. Obviously, we're going to leverage off the strength of the Zurich brand in this market as well. We expect during the planned period to have almost double-digit growth. We're going to do that through leveraging the existing partnerships, growing new partnerships, and also basically doubling down on our direct-to-consumer propositions, which we invested in heavily during COVID and changed our book to basically a 20% book in our direct-to-consumer. We will aim during the period as well to have a combined operating ratio low- to mid-90s.
By 2027, have around CHF 2.5 billion in premium. We basically run the full value of insurance, the full value chain. We're a fee-income business whereby we offer our claims, customer service, and assistance services. This is one part of the book where we basically offer this to corporates. Obviously, we're a full travel underwriter. We will operate this business as one global business under the Zurich Cover-More brand, although locally in the markets, we'll continue to use the brands that are quite significant to us and that we'll get with the acquisition, such as the Travel Guard brand in the United States. We will have one global, as I said, sales and underwriting capability.
And this is really where we will be able to shine in the market because it will give us the ability to go after global players who really want a consistent global experience for their customers. So global airlines, global hotel chains, credit cards, etc., they want to be able to offer all their customers a consistent experience wherever they travel. As well as having global operations capability to deliver consistent claims and customer service, one of our true differentiators is our assistance. We're one of the few that have full in-house capability in medical assistance and security assistance. And in fact, that's one of the strengths of our model is that we're able to service beyond the retail market into the corporate A&H market, which we've seen and we're expecting that to grow in double digit.
We're able to service that market through the capabilities that we've created in our global operations and security network. So the key benefit that I see to the Zurich Group with this acquisition is definitely the acceleration of our global platform business. We're really going to have the ability to bring different products and services onto this one global ecosystem. Currently, the types of customers that we deal with in Zurich Global Ventures really come through in three different ways. So we have travelers that engage with us around safer journeys. We have connected living where we offer cyber services to basically protect mainly families and make their lives safer from cyber services, and healthy futures where we deal with a lot of employees in companies which come to us through corporate life and pensions solutions that we offer on a global basis.
So the opportunity that this global platform will provide us is we'll be able to offer all our customers products and services in contextual ways at times that matter to them. And this will really take our relationship with them beyond a transactional one that we have in a lot of cases today to one where we're much more connected and much more basically loyalizing them. And if I take for a moment like travel and I put it into an example of what I mean, travel insurance is normally bought to protect a trip. Only 6% of people claim and less than 1% of people use the assistance services. So you've got 94% of people that you have no way of loyalizing. Now, we've begun to do that by basically adding pre-trip and on-trip advice and creating digital ways to connect with our travelers during their journey.
We've also created technology which is able to tell if our customers, sorry, if our travelers are actually riding a motorbike and if they haven't got the motor cycle insurance, we're able to push an offer to them and they can add it on-trip. Now, going beyond that and thinking about what this new global platform will enable us to do, we're going to be able to offer cyber services as well. Cyber's becoming much more threat, obviously, not only when you travel, just when you travel around and you leave your home. You've got Wi-Fis in coffee shops. You've got QR codes, etc. And then taking that a step further into health and well-being, we know that when people travel, quite often they're looking to kickstart their health and well-being. So we can offer services around that.
Initial research has shown us that basically 20% of people are willing to buy their life protection products from their travel insurance companies. I hope with these examples, I've brought to life a bit the opportunity that Zurich Global Ventures has to drive retail growth within Zurich. I mean, having this globally connected platform with a number of different products and services is really going to enable us to offer to our customers different opportunities and really move from beyond that transactional relationship to one which is much more meaningful and much more relevant to their life. I'll take questions.
Who'd like to go first? Andrew.
Thank you. Andrew Baker, Goldman Sachs. So just a quick question on LiveWell, if that's okay. You mentioned it helped improve retention. Is it integrated into your protection products? Have you seen any sort of lower mortality, morbidity, or is it purely an engagement tool at this time?
Yeah. Sorry. Is it Andrew?
Yeah.
Hi. No, at the moment, basically, it's purely an engagement tool. So we're basically bundling it. We started it in Australia. We've got a pilot going in Germany. So at the moment, it's just we're working on bundling it with propositions. But as we grow out the life protection unit, that is definitely our intention is to basically build it into the products.
Ash.
Hi. Probably a little bit of a weird question, but I know that parametric insurance is becoming a bigger thing in travel insurance, especially with the adoption of AI. Just wondering if you guys were doing any investing in that, whether organically or inorganically.
We're not at the moment. It's something that we have looked at. But look, in fact, in Latin America, we actually already have implemented elements of that whereby when your flight's delayed by more than four hours, you automatically get a voucher for a lounge. Some small examples of that we've implemented, but not globally yet.
Michael.
Can you talk about your business in relation to your main competitors? I know of two in Europe, which would be Generali and Allianz, but just to give a feel for where you are in the global marketplace.
Sure. Look, our businesses are very different, and it's very difficult to compare them, and I'm not exactly sure which part of the business you're talking about because there's the ventures. There's like in Allianz, for example, there's Allianz Partners, and then there's Allianz X, right? And if you take Allianz X and you compare it to, if you're saying that the venture part of Zurich Global Ventures, we're not a venture, right? So basically, whatever we look to invest in, it's where we're bolstering up, where I can see there's an opportunity for capabilities that we can or services that we can bundle in different propositions. So it's very different to Allianz from that perspective, and then if you look at comparing us to Allianz Partners, we don't have any home or roadside assistance. They don't have the corporate life and pensions business in there.
So we're quite different businesses.
Dom.
Dom O'Mahony from BNP Paribas Exane. One question for each, if that's all right. Just on the technology side, as you're thinking about using more and more artificial intelligence to deal with customers, how has your engagement with regulators worked on that? What's their appetite for allowing the technology deployment into how you deal with customers? And are there any risk areas that you're having to manage? Just on the travel piece, you said you're aiming for 92%-94% combined ratio. I think last time I saw travel on a slide, it was something like 95%. So it looks like maybe there's an improvement in the underwriting profitability there. A, is that right? And B, what are the levers you're deploying? Thank you.
I'll go first.
You can go first.
All right. Yeah. So I think AI, same as all the new technology. So we treat it very carefully, cautiously. Regardless of what's the regulatory requirement, we do do that already. And then the regulatory requirement is very different in different jurisdictions. So it's more important how we handle it ourselves. So when we use AI, particularly in Gen AI case, when it first came out at the beginning of 2023, so we quickly deploy our own Gen AI platform on top. The reason we did it lightning fast by April, May time in 2023, we already have the Gen AI platform for the entire group to use. The key one is not just about business benefit. That is, of course, is one of the key is so that we can make sure we can use it, all markets can use it safely.
Because the way we build it is built in a private environment, so all the data is still within ourselves. And we know this is we have all the risk assessment mechanism already. So this is a key way technologically how we govern that. And besides that, when we deploy all the use case, we still keep human in the loop. So even those all the solutions you have seen so far, it is to assisting our existing process to become more efficient, but also able to add value. But it does not go directly communicate with the customer. And then there are additional safety feature we build in. You haven't asked about this, but one of the common risks that everybody worry is how can you know if it is generating the right answers and hallucination?
Because the way we build it is the answer coming out, we build annotation, citation capability so that when the answer come out, we can trace back how the engine come out with this answer, which document, which paragraph that is based on to come up with these answers, so we're very, very make it very confident that we can use this kind of technology in a scaled way, so this is even beyond what the regulator has asked us to do so far, but I'm sure the regulations will continue to get evolved, so as the technology itself.
I'm not sure what period that 95% was, but one of the things that we've really focused on is our global medical network, and particularly in the U.S. in setting up relationships, which are basically seeing having better purchasing parity from that perspective. So I'd say that'd be one element that would be driving it down, but I need more information around that. Is that time frame?
Michael.
It was just two questions on your lovely slide, the Voice IQ and Claims IQ. So Claims IQ, I saw the 2% reduction in claims leakage. And I just wondered, it seems such a low number. I just wondered if you can talk a little bit about that. I would have thought it would be more efficient. And then on the Voice IQ, I was just curious, does it mean does it replace my voice? Does it make me sound better?
No. But because your voice sounds pretty good already. So I think Voice IQ, what it does is it analyzes all the conversations when customer calling in, and then to know how our service center agent, how do we respond accordingly. And then because of the engine, this kind of process actually is already existed.
Because normally the service center manager will go through the recording, but that is random sampling, right? And it's like it will be 0.X% of random sampling. But what we can do is a very structured way and cover 100% of our call. We can analyze why certain service center agent can perform the best, especially if I use example when customer calling in and then when we need to do customer retention process. The engine can analyze that what steps, what kind of information we give back to the customer so that we can improve our customer retention performance. Has our service center agent described our policy and the benefit that come with the policy clearly to the customer? Have our service center agent able to offer different payment scheme to our customer?
Some of these, as the engine keep learning, will be able to give this kind of feedback back to the rest of the agents that hasn't used this kind of practice, so to elevate the entire call center become the best they can be. It sounds like an army here, so the best they can be. So that is what Voice IQ is for. So in Claims IQ, Claims IQ is using the inherent capability of a large language model, which is comparing documents and the text content. So when there is a claim, if I talk about a personal line, then you have the policy, and then you have the terms and conditions. And then if it's motor, then you have the garage invoices, and then it might even involve police report.
And then if it's household, then every year your house maybe have some addition, you'll have addendum to your policy. So the number of documents a claim adjuster need to check for the right level of deductible, what should be covered, what should not be covered, and how should they be covered, pay or not to pay. So this is a very daunting task for every single, even for a very experienced claims adjuster. So with the inherent capability of LLM, and then when we program on top, we're able to extract the key information to give a very good analysis for our adjuster to make a very sound decision, far more accurate than ever before. So that is what Claims IQ is about.
Andrew.
Very brief question, Andrew Crean with Autonomous . What was the Zurich travel business making in 2023 against the base? I mean, because you had 1 billion of gross written premiums. Were you sort of 95% combined at that point or?
In 2023?
Yeah.
I can't actually tell you that information because basically the way that Cover-More ran was not as we didn't basically have the full P&L capability because we had the underwriting result was actually in the business that wrote that. So in Zurich Australia or Zurich North America, for example, right? So only when we moved to this new Zurich Cover-More will we have the full underwriting result.
You're looking at about nearly a $200 million business there if you do 92 for.
We're looking at CHF 2.5 billion top line, 92%-94%. So you can do the math. Yeah.
Well.
Thank you.
Thank you. AI, Gen AI, it certainly seems like you're ahead of a lot of the competitors, and there's some nice data points there about efficiencies. Are you allowing these to drop to bottom line, or is that just a constant reinvestment at the moment? And I guess as you do in the reinvestment, it's probably setting yourself further and further apart from some competitors that are not investing. I guess at what point, or is there a product, is there a geography, is there a line where you start to think that that relative edge over the others starts to shine through earlier and others start to drop away?
Okay. You said dropping the bottom line? Okay. So, I think this space, what we are doing is to, because we already articulate our new plan target earlier today. So, what Gen AI is able to deliver is to give us capability and with high confidence to deliver that plan. So, it is not about we need to investing a lot more to begin with. And then, when you mentioned about comparing ourselves or for those, I don't know if others are investing or not. But then, honestly, I don't think in this space is about how much investment is more is how you do this, how we do this. And why we are so well positioned to leverage this comparatively is because what I mentioned earlier is because the platform approach, we already reduced the complexity. We already have all of our data, quality data in place.
So when 2023, that time Gen AI came out, it's a perfect timing for us. Well positioned, we were well positioned to leverage that. So I think it's more so is the how, if you have the foundation to leverage it, and then how do you develop it, build this use case. And then selecting the right use case is the important. Then we need to work closely with our business partner prioritizing, like working with Sierra on which area will deliver the best benefit. So then the benefit will be is already embedded in the plan that we articulate earlier today.
I suppose a bit of a follow-on to Will's question. Sorry, Andy Sinclair from B of A. Just longer term, maybe I simplistically think about this, that the insurance sector has maybe not been wonderful innovation, but has tended to be quite good at being fast followers. How much of this ultimately just gets passed on to customers versus boosting the P&L for the companies that invest in this tech? I'm not saying that's a bad thing. It still builds up the industry's competitive advantage, but ultimately, does this just lead to better pricing for customers over the longer term?
It will be better in all aspects. And then you will see the plan that we have articulated. So that you can see because of the plan we mentioned is already much better for our customer in terms of different aspects. I think Gen AI is to enhance that, will make it more capable to deliver those plans. So yeah, I think it's not an addition. So beyond what we have just mentioned earlier, though.
I mean, I think in travel, we're now using technology to prevent things from happening, right? So basically, I mean, I see it across more than travel that we're hoping to use AI and the data we're getting to be able to put up offers that are going to prevent incidents from happening. So I think it's a great thing.
We talk about value adds to lower the customer risk. That is, Cara mentioned a fair bit on the retail side, but there's not only retail, even how we use technology to help lower our corporate customer risk. So we do have AI model to do even with the water flow sensor for buildings. So we can have like hotel chain, we provide water flow modeling capability so that we can not only that if there is a water damage early alert or preventive measure. This model is add extra value to our customer in cases we have seen. This model even help our corporate customer to lower their water consumption bill. So to help them day-to-day manage their own operations better and in addition to lowering their risk. So it's not just about beyond pricing, the value we can add on top.
Super. Ericson, Cara, thank you very much. So 4:00 P.M. wrap-up Q&A session, half an hour, then we're done. Thank you. So we're going to start the Q&A session. Ok ay, welcome back to the final Q&A session. It's been a long day for everybody. So we've got 30 minutes set aside for any final questions you might have that you've not had the opportunity to ask. So we've got Mario and Claudia. We've also got all the presenters here. So anything that remains unanswered, now's the chance. Michael.
So A, the starting point, and B, how much can I add to the 9% if we have buybacks? What's the starting point in EPS for 2024?
I don't have a crystal ball, Michael.
But how can I phrase it? So I spoke to one of your wonderful IRs who suggested a figure based on consensus minus CHF 200 million for the events.
That would be CHF 7.6 billion. That gives you 5.6, which after share count is about CHF 39 a share. If I work the other way, which is I'm optimistic and I say where the starting point could have been CHF 8.5 billion, I get closer to somewhere around 40. Maybe a kind of feel would be lovely, but I understand if you crystal ball. Then on the 9%, how much have you baked in there for buybacks? Or if you haven't, how much can I add for buybacks?
We have not. I mean, the 9% is clean of buybacks. It is just through the profits. You know, as we repeated many times, we cannot commit to regular buybacks with the 75% payout rule. Whenever we have excess cash and we feel that it's efficient to return it to shareholders, we have done it.
We have seen this behavior in the past.
We've cut on the starting point.
On the starting point, really, Michael, you need to bear with us for another six weeks. I'm afraid, but many things can still happen. For now, it looks good, but many things can happen.
Hopefully, they will not happen.
Yeah. Next question, anyone? Andrew.
Hello, it's Andrew Crean at Autonomous. I wanted to get closer to the retail recovery. I think you said EMEA Motor aiming to be below 96%. Where is that now? I mean, in terms of improvement in the retail business underwriting over the period, what are you really looking at in terms of sort of improving the combined?
It is showing an improvement, but it's not there yet. And there is more work that we need to do on motor European performance.
The improvement is visible already, but it's not there yet.
I wonder whether you could say where you are on EMEA Motor. Which areas? Can you talk a bit more detail about, I assume Germany is a large part of that improvement? Yes. And a bit of, well, a bit of U.K. possibly.
Yes. Yes, I mean, Germany is kind of the troubled child at the moment of the European economy, not just of motor. But there are also other markets which will do better than what they do today. I mean, to achieve less than 96% is not only Germany who has to deliver that, but also the other European countries have to improve. They have made improvements, but they also have a job to finish.
And Andrew, expanding that to retail overall, so moving away from motor as a single line, we've been seeing now in Q3 already an attritional improvement, both compared to the first half of the year and compared to the second half of last year, which has gone through significant weather losses. So the trajectory is definitely positive. Much more to be done, especially motor and especially in Germany. But the trajectory is the right one.
James.
Thank you. James Shuck from Citi. I just wanted to ask about MGAs as a potential new distribution channel. I saw that the Cowbell thing you did, and it just struck me as slightly unusual that you're providing panel capacity in that format. But equally, I'm just wondering whether that could be a potential new growth avenue for you in terms of new distribution channel.
Then secondly, in terms of, I mean, it seems like everyone's kind of talking about growing in specialty. We had some really good presentations today, and thank you for those. Beyond kind of the E&S market and the mid-market, have you thought about developing kind of new underwriting platforms either out of Lloyd's or from Singapore or Zurich or Bermuda?
Look, let me start with this. Specialty is an ocean, and there are many, many things inside that. Some of the specialty products are particularly interesting for us. Again, we are a big construction underwriter these days. Adjacent to construction, there are a number of specialties like infrastructure, but also renewables. Then again, I mentioned it before, the surety business, which is close to that. These are all things that we really like.
There are things that we've been interested in for a while, and Sierra has been testing them with some external MGAs like transactional liability or M&A insurance. We're not really writers at the moment of that. We might do something more on that. Marine, we have been very limited in the way we pursue marine over the past years. We might be doing more of that. But equally, there are things that we don't plan to start doing. I mean, aviation, we haven't revised our views on that. There are parts of the energy business which we're not familiar with, and we're not going to enter into that. I mean, it's a theme that means lots of different things for lots of different companies.
And so we will try to progressively become clearer, not just talking of specialties in general, but of sub-products that belong to specialties and what we're doing for those products. But there is a lot of activity there, and there is a lot of customer's demand. So that's the reason we're so interested in it. On distribution, look, James, I mean, the thing is the size of the group has grown considerably. So I appreciate all innovative distribution channels. But in order to deliver these numbers, we have to go for big things. We're not going to achieve these numbers with a tiny experiment. I mean, this is not time for experimenting much. We need volumes, we need profits, we need to deliver the targets. We're not going to do that through innovative experiments. We'll go for safe things.
William.
Thanks. It's William from KBW.
Can I come back, Raul, to what you were saying about the Farmers' investment? I may have misunderstood, but I just want to understand. Did I understand correctly that your investment in agency will be pushing up the combined ratio of the Exchanges again? So that will take us from 93%- 99%. And if I did understand that correctly, why does that profile exist? Because I would have thought you'd kind of be managing to invest across the business plan so we'd stay at 99%. And I don't understand why we go down to 93% and then up again.
Yeah. So just first of all, right, just to get to 93% was really exiting the really bad business. So that was the right thing to do. You have a number of businesses like Florida was running, I think, around 60%-180%.
So as you get out of that business, your underlying business becomes more healthy. That is part of the transformation we went through. So now you're healthy that you say, well, now let's start to try to be more competitive with better rates pretty much across the country because we are profitable everywhere. So that will, over time, as you become more efficient, pass that benefit to customers with better pricing or better coverages. And we are already filing rates that are more competitive looking at next year. That answers your question?
Yes, it's done passing the three points.
Michael.
On top line and on reporting, on top line, many, many years ago, there was, well, Hannover Re also used that sentence, but targets for top line in insurance can sometimes be, you sometimes acquire less profitable business. And today, we have many top line targets.
Does this reflect a change of your view that topline now is actually safe? In other words, the industry is rational in pricing, and maybe you can kind of explain your thinking here, if I'm right. And then the second one, reporting. So we've heard about many, many different business lines, whether it's travel, protection, of course, and then mid-market. I'm not sure all of them are specifically highlighted in the reporting at the moment. Is your thinking maybe to expand the reporting, or will we live with what we have?
Michael, on topline, I think the only target topline that we gave, which is sensible to what you said, is the mid-market size target. But then you have to combine that with the CI total BOP target. So the two of them go together.
In life, yeah, we gave a target of 8% growth, but with a 15% margin on gross written premium, I think there is no doubt that the more we grow, the better we will be there, and yeah, that's about it. I mean, I understand what you're saying, and I share your view. We're not going for volumes. We're going eventually for BOP and for EPS growth, but in order to get there, you also need to be able to grow the profitable business and rebalance the books that we have today.
So in the organization, we will cascade the targets as combined ratio targets. People know exactly in Sierra's organization, in the business organizations, Kristof and everyone else, they have combined ratio targets and BOP targets. Obviously, it goes without saying, but it's not at all a topline push, Michael.
Maybe on the reporting side, so for now, we don't plan to revise the segmentation and what we report externally on ZGV, so Zurich Global Ventures. When the critical mass is achieved and the businesses get over the 10% IFRS level, then we might, I mean, at that point in time, we will certainly do that. I think for now, it doesn't provide a lot of added value.
James. Sorry, just in the front.
Thank you. Just on Farmers, so you've reiterated the 7% net margin. Has that changed on the gross level? Because I kind of always felt that at some point with Farmers as digital and other initiatives and you become more efficient, that actually that should actually be shared with the Farmers Exchanges more than it is now.
So you have to break that out into the kind of percentage of premium versus the kind of cost income to get you to that 7%.
So if I understand correctly the question, right, we do have a cap to a 7% margin. So as we get more efficient, which we did, just the transformation of expenses is already starting to pass competitiveness back to the Exchanges. We are writing dollars to the Exchanges. And that allows us to be more competitive. So yes, we are becoming more efficient as part of automation, how we have simplified the organization. And this year started to already yield probably around almost one point of additional expense competitiveness to the Exchanges.
That's helpful. Thank you.
Then, Claudia, just in terms of the solvency generation, so just from business kind of delivery over the planned period, what's the SST kind of organic capital generation? And how do you think about the target capital? There's a lot of growth on the books here. How capital efficient is it in terms of absorbing AFR generation over that period?
As I mentioned this morning, we see actually the trajectory increasing, even though we've got the capital actions and dividend policy and capital policy that I mentioned. We expect the plan to be generative in terms of SST generation. And if you look at our ratio just in Q3, just to give you a sense, we saw eight percentage points through the organic business generation. So we expect to continue to generate capital at that level and grow it, obviously, as the business is growing.
Any last questions?
Michael, last one.
Just on the, sorry, I've forgotten. Going back to the dividend, can you kind of give us a little bit of a ray of hope? You've been raising the dividend. I know you have a 75% payout, etc., but it's actually been growing at two a year very regularly, which is very nice. But can we expect a step change quite soon?
That's a decision that we'll have. Well, first, we need the year to finish, and then we'll have that conversation with the board. We've got our chairman here. So Michael, you will appreciate we can't make any statement on this before we have discussed with the board.
But you can ask the chairman.
There was one. Traditionally, when one has a, traditionally, normally when there's a capital markets, you always expect restructuring costs. And I know you said there were not any extra restructuring expenses.
But we did hear about AI, and normally I would expect AI to lead to also cost reductions. Is there anything you can say on what I think is a bit of the plan which you haven't spoken about, but which might be there?
The two things that we have assumed in the plan is we will accelerate investments in the tech space, as Ericson was mentioning in the breakouts. And with that, we'll also accelerate the decommissioning of some of the older architecture that we've got. So the two things will happen during the planned period. We will try to accelerate it, especially in businesses where we need to, as we said, get quicker in the turnaround with the customers and so on and so forth. So this will happen. You will see restructuring for some of those actions to potentially increase on a short-term basis.
But again, we don't expect it to be wide above what we had in the past. It will grow with the business.
Thank you for the questions. I'll hand over to Mario to close. Mario.
All right. Let me get out of here because it's very funny to be hidden there. So look, guys, first of all, again, thank you so much. Long day. I appreciate your patience. I appreciate your attention and all your questions. This is a thorough plan. We are fully committed to this plan. We believe that the vision we have for 2027 is a powerful one, and we want to implement it. This is why we brought you, all the colleagues, that in one way or another, will be part of this. One final comment on my side is we're not artists. Everything we do is data-based and grounded. We're scientists. We're risk managers.
So we like to have three possible solutions for every event that can happen. We like to be prepared for everything. And I hope that you got a sense of this through the day, how much of alternative solutions we have ready and how much preparation there is to manage different events. And then let's talk again in 2027. Thank you very much.