Welcome to Zurich Insurance Group's 2021 Investor Day. Thank you for joining us. I'm Jon Hocking, the head of Investor Relations. This is our first investor event since 2019, and we very much hope the next time we run this, it will be face-to-face. We have four presentations for you, then there'll be a short break, and we'll have a live Q&A. With that, I'll hand over to our first presenter, our Group CEO, Mario Greco. Mario.
Good day, ladies and gentlemen, and thank you so much for participating to this Investor Day. You remember that the last time we met physically was at the end of 2019 when we presented to you the targets until the end of 2022. Fast-forward from that meeting for a couple of months and in February last of 2020 last year, the pandemic started. Beginning of March, all the Zurich offices were shut off, and we went in full lockdown mode. One of the first issues we had to face at the time was how to achieve the targets. What's the meaning of these targets? The world was completely changing against our plans.
Our plans were for growth, especially in the retail business, for a steady commercial business, especially in terms of profitability and shrinking in volumes over the next couple of years, and for efficiency and costs to follow the retail path. Investment management was supposed to contribute to the results for 2022. We quickly went into readdressing the issues and finding a path to achieve the targets. Now, here we stand today feeling pretty confident that we will deliver on the 2022 targets. We invested this year and a half in continuing developing customer satisfaction through new technologies and through adjustment of our services listening to the customers. We have been growing actually more than we expected through the combined result of both the initiative we launched and the rate increases.
We still think that our business is better placed than any other business to deliver shareholders returns. We think that our strong, interesting dividend proposition is well-founded on the business composition that we have today. We have made remarkable progress over the last year and a half during pandemic in making our business more sustainable and changing and adapting both what we do ourselves as we run our own company and what we do with our customers. I'll talk a lot about that later in my presentation. Now, what were the targets? I'm sure that you guys remember these four targets.
The BOPAT ROE target in excess of 14%, the EPS growth target in excess of 5%, the SST ratio, the capital strength, in excess of 160%, and the cash remittances above CHF 11.5 billion. What you see there on the right column is where we stand today, or better three months ago. The BOPAT ROE is in sight. The targets were already at 13%, and we will keep improving by the end of this year. The earnings per share, we see them and they're achievable. The SST ratio is well above the target, and the cash remittances are working towards the target. Now, as I said, we have got so far with a totally different set of actions.
We decided to take advantage of the commercial market situation, where following the pandemic, the rates have moved much stronger, much higher than we thought and than we planned. We definitely took advantage of it by growing, restructuring the business. Retail, we have protected and defended and kept the growth as much as possible, but also, we kept improving our business quality. We have further gain on efficiency by adapting our plans very, very quickly. Now, let me focus on growth because our initial plan was really growth-focused. Now, the wonder of this situation today is that we've been growing more than actually we planned originally before COVID. How did that happen? How is that possible? Now, break down our growth between commercial and retail. Definitely commercial is driving the growth with a 13% like-for-like growth.
Now, the majority of it, roughly $700 million, is from rate changes. It is a market opportunity that we have been capturing and that we have been taking advantage of. You also see that we lost $200 million like-for-like in change in exposures, meaning that the customers have reduced their exposures to save some money to acknowledge the budget constraints. $500 million, so almost the same amount of rates less change in exposure, has been the net new business. Net new business that we acquired during lockdown times, again, building on our skills, our competence, our strong capital position, and our credibility in the market, including the strength of the brand. If you turn to retail, we achieved an 8% growth, which is absolutely remarkable considering the pandemic.
Here, the story is much simpler. It's all about net new business. It's all about what we found by either developing the customer relationships or acquiring new customer relationships. Now let me focus for a second on retail, because this is the business that we talk a little less compared to commercial, and I'll come back to commercial in a few minutes. First of all, what is retail for us? Retail for us is made of two different businesses. One is the Zurich retail business, $12.5 billion. Let me also be clear that when we talk about retail, we include SMEs into that. Later on, Sierra will talk about the mid-market business. That, for us, goes into commercial. The conceptual difference for us between SMEs and mid-market is standard policies versus underwriting decisions.
Retail and SME are bundled together for us because we sell policies to customers. We don't make an individual underwriting decision in this business. If there is an underwriting decision, then it goes into Commercial Insurance. Zurich at $12.5 billion, Farmers Exchanges is $20 billion of retail business. Profitability, and of course for that I'm just talking about the Zurich side of the business, is very stable. Very profitable business over time, always staying in the low 90s combined ratio. Over the last years, these businesses grew at a pretty steady single-digit rate, and they accelerated this year, both of them, where Zurich is growing at 8% and Farmers, before the MetLife acquisition, is growing at 7%. With the MetLife acquisition, Farmers is close to 20% rate of growth.
Now, I spoke about SMEs. We've been targeting SMEs. Again, SMEs have been badly hit by pandemic. You would have thought that we gave it away, that we stopped growing SMEs. We didn't. During this year and a half, we kept developing our SME business. These are the three most important markets, and then the fourth one for us is Farmers in the U.S. Now, U.K. kept growing at 3% per year, Switzerland 5%, Germany 3%, again in very difficult conditions. We're very optimistic that we will strongly accelerate as soon as the pandemic conditions ease in the market. Now, how do we achieve such a remarkable result in the conditions we had? One thing which is common to these three markets is that we kept investing on digital platforms, on IT solutions.
We did that in U.K. We did that in Switzerland, where we integrated the SME solutions into the advisory solutions for the agents. We did that in Germany, where we simplified the systems, we simplified the applications. It's easier now to work for us, or hopefully it's very easy to work for us through digital innovations delivered to the customers and intermediaries. The second thing we did in the three markets is we simplified the products. Impressive simplification in U.K., from triple-digit product numbers to just 10 products. We simplified in Switzerland, where we introduced new solutions, some of them absolutely state-of-the-art in the market, like the cyber proposition for SMEs or the new all-risk property product.
In Germany, we halved the portfolio product and we're still in the process of improving and continuing on this product simplification. In all three markets, we worked on the Net Promoter Score. We wanted to improve the satisfaction of the customers working with us. 19 points improvement in U.K., 10 points improvement in Switzerland, and similarly, 16 points improvement in Germany. A similar approach, similar action for a segment which, even in tough conditions, can deliver growth well ahead of expectation and well ahead of the fears that all of us had at the beginning of the pandemic. Now, we also worked to create new opportunities with new customers. This takes two different forms.
Let me start from the right side of this chart first, and then I'll come to the other part of this chart. We work on renewing partnerships. It was very important work done with two banks, with Deutsche Bank and with the QNB Finansbank in Turkey, to renew the partnership with them and to reenergize them. The results of this year show the success of this, and both banks are supporting very well our growth. We also delivered new distribution agreements with UBS in Switzerland, and with the Postbank in Germany. We created also a number of new affinity partnerships in different markets. Some of them, like MediaMarktSaturn, are again in Germany, some others are in other European countries, and some of them are outside of the European markets.
These new agreements give us access to 40 million new customers, and so there is more growth that is gonna come, that will come naturally from the development of these agreements. Now let me come back to who we are today on retail and SME. The distribution portfolio that we have is very strong, but very unusual, and that's why we thought that it was important to spend some minutes on that. If you look at property and casualty distribution mix, 70% of our property and casualty distribution mix, it is with brokers. If you look at agents, which tend to be, especially for European company, the great majority of the distribution strength, for us they're just 14% of our distribution capacity for property and casualty today. Then banks and affinities are 8% and direct is 7%.
If you move to life, which is on the other side, again, it's a very unusual picture. Where the banks, the partnership with banks is the most important channel for our sales, equal to roughly 40% of our total sales. Brokers and agents are 33%, and CLP, which is the corporate pension business, is another 26%. With this kind of mix, having partners, developing the sales through affinities, through banking partners, is really fundamental and this is what we have been doing, growing the number of partners, growing the opportunities for us, expanding the access that we have to millions of customers. I've spoken already on the SMEs about customer satisfaction, but we have not been focusing just on customer satisfaction for SMEs.
We also work on customer satisfaction for the retail customers in general. We have been growing the customer satisfaction results all over the world with some markets which really had very impressive improvements. Now, why does it matter? It matters because with higher customer satisfaction, we have a higher retention, and this is what we see. This relationship is what we keep seeing. We improve here on customer satisfaction, and then we get higher retention in Europe, in Asia-Pac, as the numbers show. Eventually, the combination of all these actions together, new distribution agreements, new partners, better customer satisfaction, higher retention, it give us net customer growth. We created 2.5 million customers from the beginning of this cycle to today, which is remarkable because, again, this was a hard cycle to continue growing in the retail and SME space.
Now, how do we improve customer satisfaction? Unfortunately, there is no easy recipe for this. You have to be very detail-oriented. You have to listen to the customers, and if you remember, we started years ago creating a system where we wanted to listen to the customers with the standard system across all our organization. Then you act on what the customers tell you, and then you see the benefits of that, or you keep acting again until you see the benefits. These are just examples. Long claims processing time indicated in Switzerland as something that the customers did not like. We act on that, and we automated the system, and we digitalized the claims processing. 5 points better customer satisfaction, and then higher retention following.
In U.K., long time, long purchasing journey, lead times and non-competitive pricing in the broker channel. Again, we invested in that. We introduce data and systems improvements. We reduced the response times, and we got a very successful double digits customer satisfaction reaction. Service level in Germany, we're all training. There we work on training and we work on the service culture in the front and the back offices. 8 points of improvement, minute work, but time matters here. We started years ago, and now we know what to do and we continue to learn every day. Now, again, what is the relationship? Why all this matters, and why am I telling you so much words on customer satisfaction?
Because in our data, there is a very clear relationship between a satisfied customer, a, what we call a promoter, and a dissatisfied customer, what we call a detractor. Now, the relationship is one to three. You know, the promoters buy three times more than the detractors do, but also, they stay much longer. Altogether, we are creating the basis to activate the retail business, and to grow the retail business ahead of the market for much longer time. Farmers has been piloting some of these initiatives before we started at Zurich, and actually some of the learning and techniques come from the Farmers' experience. Also, Farmers has been working on something different.
Farmers had the need of having a strategic repositioning in the distribution, and we managed to achieve that by investing on Farmers, but also by acquiring through the MetLife acquisition, and a very strong exposure to the independent agent channel into the direct channels. Now, Farmers has been running at 1.4 million, roughly, of new business policies growth before the pandemic. This year, so far, they're running well ahead of that. Now partly because of the acquisition, but also partly because of the actions, the interventions that we took onto Farmers. We spoke a number of times with many of you about what we did on the exclusive agents. On the exclusive agents, you remember that we fully restructured the exclusive agents of Farmers. We created bigger agencies. We added salespeople in their network.
We improved the systems, and we improved the digital support they received from Farmers, and we expanded the product offering. Now, what we see today is that they're growing at double digits, and they're growing much stronger, much better than ever before. On the independent agents here, really the acquisition of MetLife has been strategic. Farmers never had a very strong independent agent channel. We acquired it from the MetLife business unit. Today we have roughly 35,000 independent agents and we brought to these former MetLife agents a much stronger brand, the Farmers brand, and a much stronger product portfolio. We have an opportunity now in direct, especially with the work site management relationship.
We acquired today the possibility to work with roughly 4,000 employers, so 3,800, and they have 37 million eligible employees. We're testing and we brought already to them the Farmers brand, and we're testing ways to become effective and strong in selling to these retail customers. Similar experience on customer satisfaction, but more investments in the independent agents and in direct, specifically for the Farmers' success in the market. I hope that this explains where is the growth coming from in retail, and I hope also that this gives some confidence on our view that this growth will continue, will further accelerate in the next years. Let me now move back to commercial. Commercial has been really the engine that has driven our results through the past years.
As you saw, I mean, we've been working on the net new customers on the growth, but the quality of the portfolio has been our main focus since 2016. This is something all of you probably remember, is the composition of the portfolio by exposures. You remember that in 2016, one of our main targets was to reduce the exposure to long tail in our book. We achieved that by especially reducing the casualty part of the business from 42% to 32%. You will hear later from Sierra and George also about the quality of the casualty exposure that we have today and how much stronger and better this has become over the years.
Now, in these two last years also, we took advantage of the market conditions, of the hardening of the rates and the shrinking in capital to achieve much better quality of the portfolio. Again, later on from Sierra, you will hear other examples and other indicators. This is just an indicator about the European liability book and the deductibles that we have on these books. Now, in just a year, we moved the higher deductible, the one above $100,000 from 24%-31% of the books. Now, why are we doing this? Because we're preparing these books to be stable through the cycles. We don't want to suffer in the soft cycle that one day will come, and we want to continue maintaining the large loss volatility that we've been experiencing as a very limited one over the past years.
Needless to say, the improvement in profitability is the one that we wanted to achieve from the beginning. Later on, you will hear from Sierra and from George a lot about natural catastrophes exposures and how to maintain this impact of volatility in the portfolio in the next years. I'd like to move now to our Life business, which is not the son of a lesser God. Life is one-third of our above contribution year-over-year. It's a very good third because it's very stable and is, I would say, not cyclical at all. Remember that the distribution of the premiums is not precisely the market standard with the banks representing such an important component of it.
Now, this ties immediately on what products we sell, because we fully adapted our life offer to the distribution channels that we use, and over time, we specialized ourselves. Our business mix is predominantly into protection, and even more if you look at the value that we create, where almost 80% of the life value comes from protection business. The unit-linked business is the other piece of the value. The commercial, the corporate life and pension business is a small final piece of value and is 15% of the volumes. Now, this protection business ties naturally into the banking relationship, which are our predominant distribution channel. Over time, we became the third, the fourth biggest provider of protection business worldwide. The share of our protection business is probably second just to one company.
What this means for us is that we have built over time a huge organization for protection. 400 underwriters, 350,000 claims handled each year, a very high internal rate of return. This is a very significant business for us in size of the people who work on it, in the profits it generates, and in opportunities for growth. Even in the very tough pandemic days, life has been growing very strongly. That explains why during the lockdown, the thing that we went doing was renewing or opening new banking distribution agreements, because this is where the value then gets created on the life side.
Let me finally move on what we have been doing in the last two years on the way we run the business and in, and on the way we manage with our customers, their businesses. You will hear later from my colleagues that we took a number of actions to reduce the consumption, the creation of carbon by the organization. We kept working also with our customers, and Sierra later will present further initiatives on underwriting to contribute to the reduction or elimination of the fossil fuels. Things like, you know, the full phase out of thermal coal from our underwriting portfolio, or the fact that we will not underwrite oil and gas drilling and production in the Arctic. Of course, we are completely committed to no longer underwrite any new greenfield oil exploration project.
We are a founding member of Net-Zero Insurance Alliance, and in terms of products, we've been innovating, launching innovative products which are based on net-zero carbon. It's also important to move to the other aspects of sustainability. We've been working a lot on data privacy, and we're working a lot on providing digital security to our customers. One thing which is quite important for all of us is also the work we've been doing on work sustainability, on gender, where we have, I would say, a leadership position on gender diversity in our executive committee and at the leadership level. We have been very innovative in the way it works, in the organization and in training and making our organization a truly learning one.
One indicator that I do care a lot is about how many of the open position in the organization are covered with internal people and people who we hire, train, develop, and then grow with promotions, and how many are covered with the need to go externally. The offer to our customers has reflected all this. Sierra will talk later about what we call the resilience services. We try to work with our customers to help them transition and transition smoothly and well, and for that, we created a unit of specialists who work with our customers on that. We have been also working very closely on innovative solutions for renewable energies and for innovative solutions for energy creation. Equally, on the unit-linked side, as I alluded before, we have introduced new products.
Now, none of these things, not what we do internally for ourselves, neither what we do for the customers per se, is sufficient. We're completely aware of the challenge we have, but we're taking also the opportunity to work together with the customers and together with our employees and start creating with these actions a different sustainable working model and a different sustainable society for the next years. Let me now wrap it up and also, I'd like to give you a view of what's gonna follow this presentation, through the day. We stand in front of you today confident that we will achieve the targets at the end of 2022 through a very different set of action than the one that we planned for during 2019.
We think we have responded in a very agile way to the completely unexpected challenges of the market, and we think we have found a path to maintain our strategic ambition now to grow the organization in the different conditions that we're facing. Also, be mindful of the trajectory of the organization, where in the first three years we wanted to fix the portfolios, and we wanted to restore the efficiency of the organization. In these three years ending up in 2022, we wanted to grow the portfolio and grow the customer bases, and then we're gonna talk in one year time about the next commitments for the next three years.
We've been investing a lot on innovation and services to customers, and we've been improving a lot in customer satisfaction, and this has shown the benefits already in the results we're achieving. We think we will remain delivering a superior shareholder return over this cycle, and we're committed, and George will come back to this, to act on capital to provide a very strong evidence of that to all our shareholders. Finally, we feel we're leading the sustainability actions by acting both on our internal operations and by acting on the customer side. Now, the next presentation will be from Ericson Chan. Ericson joined us a little more than a year ago from a very different experience in Asia.
Ericson leads our IT and operations, and together with Jack Howell, he is the mind and the engine behind the digital innovation and the digital solutions that we are providing to our customers. Sierra has been with us since 2017. She will follow Ericson Chan. Sierra's been our Chief Underwriting Officer all through this portfolio transformation, and eventually became the Head of CI a year ago. Now she's driving the CI population, the CI colleagues through this hardening of the market cycle. George will give us the final view of all this from the financial side of the company and also with a specific lens on the capital situation and the capital actions we're taking.
We'll talk about some challenges in the market and how we address these challenges and how confident we are about having a solution. At the end of it, there will be plenty of time for Q&A, and I look forward to discussing with you later. Thank you.
Hi. Great to be here. First time for me to speak to you all. Very exciting to be here. I have been here for just over a year. Today, I want to share some of my views and my plans going forward. First of all, I am very pleased to find that we have a very strong foundation built already. This is because particularly of the effort that was spent since 2016. Just to recap, our data center has been streamlined from 70 to 13, network provider 140 to 1. This is not easy, but this is very, very necessary for the infrastructure to do this before we take our technology function to the next level.
Now, lying ahead is plenty of opportunity using tech to drive growth, to have better customer experience, and offer a different engagement model with our customers. Now we have a very clear set of directions, and there are five of them. Three of them is about digitalization. First one is digitalizing our commercial business and for our corporate clients. Second is digitalizing our retail business and for our retail customers. Third, of course, is ourselves. How can we make ourselves more streamlined, agile, easy to work with, and relook at some of the services, how we offer end-to-end? Fourth is about data and data intelligence. That is something we need to drive everything we do. Fifth, the last one, very exciting one, is about the platforms.
H-platform is about how we connect with our partners, with our customers, and other value-added service providers with us, so that we can offer service-first model, which I will get into. With these five key focuses, we need to make some structural change to make that happen. The three structural change will be about our governance model, our capabilities, and our investment shape. All of this has to be underpinned by our strong foundation. The foundation, I already talked about data center network. Naturally, the next step is to leverage cloud technology. We have just identified 1,000 applications. We'll start to leverage cloud technology in 2022. We are already working with one of the hyperscalers to do so.
It will make us more agile, speed to market, and scalable. Okay, let's talk about the five key area focus, and I will spend a bit more time on the commercial business and the retail one. For our commercial business, of course, we need to equip our underwriter with all the information that they need, not only historical data, industry trend, but also insight, so that they can make informed decision, they can have better conversation with our customers, and also, we can give better risk advice. I am very excited because we already have a platform, it's called Insight360. Within that, there are many different modules. One of them is the Location 360. It is tailored for our property underwriter, so that not only analyzing loss trends, but all the relevant insight using geolocation, integrating the Nat Cat risk can be easily visualized.
We have other modules like Policy 360. It's for our market-facing underwriter. This is exciting. This is part of the vision that you will hear later on, by Sierra. Technology can go quite far, but with a forward-looking vision on how to leverage technology by someone, by a business head like at Sierra, it makes our focus a lot more results driven, so that we can make sure whatever we are doing is value driven. Not only to help our underwriter, we're using emerging technologies to help our clients. We are using, for example, some of the early successes.
We're using IoT sensors that is already installed in our customers' site to monitor machinery health, so we can forecast when the machine is going to break down so that we can do preemptive preventative maintenance in advance. Instead of relying on a very rigid scheduled, regular interval maintenance. It's a lot more accurate and also save some cost on maintenance costs. Other areas, IoT driven, for example, building structural health. It's monitoring especially for the buildings that is in the earthquake prone zone, like Mexico City. We're also using IoT sensors to forecast if there's any electrical related fire risk. We are using different mechanism to enhance our risk engineering solutions. These are early success case. We just need to do a lot more and scale ourselves up.
In addition to that, when risk engineers get on site, capture all the observations and what needs to be done, all this information is fully transparent. It's also available through our Zurich Risk Advisor app for our customers to use. Our customer can see what they need to do to mitigate the risk, and also has a self-assessment capability. That it's almost like to have a risk engineer on site all the time. Instead of just talk to them during the visit, we are there virtually all the time, even in between the visits. This is how we engage our customer differently using technology going forward. Let's talk about retail. You will see a similar theme. For retail, we need to equip our agents with all the information that they need. It's like single customer view at the fingertips through, again, a mobile device like an iPad or tablet.
This will also guide the agents with a structured advice approach. This is focusing on, it's a need-based conversation instead of a product introduction alone. Of course, with the iPad, we will have all the leading-edge technology built in, like OCR, electronic signature. This will allow us to capture information at source so that it gives the agent more time, spend more time to talk to our customer, engage our customer better. Early successes. You would have heard from Mario earlier in Switzerland that we are seeing positive feedback. We can even see from the NPS result improved by six points. These are just early successes. Going forward, we need to make sure we will get it implemented across the group. In addition to equipping our front line, also, we will offer more online services, not only claims and service, but also sales and quote.
The experience will rival any internet business. We have done this before. We know how to do it. Besides commercial and retail, it's ourselves. We will do it similarly, how to digitalize ourselves using technologies like intelligent RPA. Recently, we start to use process mining. Process mining is an AI modeling like we have an army of black belts ourselves. We know how to streamline our process in a very efficient way. In addition to that, we also need to look at our service offering end-to-end. We already started to allow our customers upload the car damage photo through an app, so that in the back end, our AI model can use cognitive AI to assess the damage level. This is not new. Uploading a photo is not new.
To integrate it with the accurate AI model and handle it end-to-end to deliver results, that is the key. We already have another early success case in Latam. We have shrunk the entire process from days to within an hour. Of course, there are some savings also. These are just early success. Again, we will scale it up going forward. Fourth, about data intelligence. In fact, I already have covered the data intelligence in earlier sessions because how we do that, we need to integrate in everything that we do. For the retail, while the agent is talking to the customer, we will also use data intelligence to give them what is the next best product, what is the customer truly need through our data modeling.
Over time, this will drive our product density, product per customer to strengthen our engagement, our relations between ourselves and the customer. Fifth is about platform. This is exciting. This is allowing our products to go to where the customers are today instead of having them to come to us. We're also allowing different service to be integrated to our total proposition. First is about embedded insurance. We already built different SDK software development kit to be integrated with our partner, like airline. Last month, we have worked with Costco to integrate our products with them. Now we are also working with one of the world largest travel and accommodation internet business portal, and hope you will hear about that very soon. Besides embedded insurance, we are also using OpenAPI platform to allow third-party digital service, value-added services to be integrated with our total proposition.
For example, digital health. Digital health is beyond counting number of steps. Digital health, we are looking at the total well-being from physical to mental, even financials. We will move to even chronic disease management over time. We have seen some early successes, how we bring this to life to our existing customer. With OpenAPI platform and embedded insurance SDK, this is all underpinned by Insurance-in-a-box. That is how we architect our system, the full tech stack, in a modularized fashion. From policy admin to claims, system, they all can be plug and play, so that going forward, we can offer different product and service quickly, to our in every different BU. These are the five key area of focuses.
We have seen a number of early successes, but if we want to scale it up, we have to make some structural change, and there are three of them. The first one is about governance. How can we make sure we are clear who needs to do what, so to maximize our investment? For the area like cybersecurity, infrastructure, cloud, they must be done consistently in a unified manner to leverage the scale and the footprints that Zurich has. In other area, we will pick the best of breed across the group because we have such a vast amount of use cases within Zurich Insurance. We'll pick the best use case, productize it, and let it adopt across the group. This will increase reuse so that our return of our investment will be better. Second is about our own capabilities.
I'm very happy that we already have a number of industry leaders, industry tech leaders, has come on board. For example, Frank is a fintech founder. He's already starting to drive our platform, strategy. Peter Kasahara is came from a big tech company, is already driving the data intelligence across the group. We have another gentleman who will help us to drive, strengthen our IT infrastructure coming from one of the largest international bank. In addition to have leaders coming from different industry, we need to be clear how we resource ourselves. We have to make sure we are right-sourced. What it means is the key roles, specialist roles, the roles that can make a difference to generate, differentiated solutions has to be done in-house. Data scientists, domain development, they will need to be done in-house.
This doesn't mean that this is increasing the total resources. We just need to be clear what needs to be done in-house so that we can keep our intellectual property, we can keep our experience, so then we can offer better solutions going forward. At times, we will look at startups also in certain niche area to complement the skills that we have. For example, AI specifically, some of the AI modeling skills and also process mining skills, we'll be looking at different startups to invest or maybe even acquire. Lastly is about our investment shape. We need to be clear what is run budget and what is the change budget. We need to over time to make sure our run budget is running more and more efficient. I mentioned about cloud earlier. Cloud will help us to do that.
By having a more efficient run budget, then it will give us more room to do change. This is not changing the size, but it's changing the shape of our investment budget. You have heard about the five key area of focus and the three structural change. This is exciting times. We're building on top of the success we already have. We are making a number of structural change. We'll use technology to drive growth and make ourselves more efficient. More important is allowing a new engagement model for us to address our customer ultimate needs, not only from sales to service, but from service to sales. Thank you.
Hello, everyone. I'm happy to have the opportunity to be here with you today. Today, I will share where we've come from, the foundation we are building upon, and how we will continue to leverage our capabilities to deliver the commercial strategy for the group. When I joined Zurich as the Chief Underwriting Officer of Commercial Insurance in 2017, we were in a very different place. We had a number of challenges in our portfolio that we needed to tackle. As a group, we worked to create transparency where we had issues, and we methodically tackled them. I mention this because the results you see today are not simply the rate from the last two years flowing through the portfolio. These results come from hard work and discipline across the team over the past five years.
I would also stress that it is difficult to grow, reduce volatility, and improve profitability all at the same time. I am incredibly proud of our team for being able to deliver on all of these aspects. Today, I talk about maintaining underwriting discipline, which to me means focusing on risk selection and quality, properly structuring programs, and applying the right terms and conditions. In commercial insurance, the large premiums can be tempting in the near term, but price alone is never sufficient for a lack of underwriting and can leave insurers with a horrible hangover in future years. It is critical that Zurich and the industry continue to maintain underwriting discipline. As we think about today, it's a very interesting time for commercial insurance. We have the positive impact of the current rate environment, and we're generally seeing discipline across the market.
Climate change poses both a challenge and an opportunity, and we see a greater interest from our customers in not only transferring risk, but in preventing losses as well. Let me start with where we are today. Zurich has the scale and capabilities needed to be successful. We have demonstrated underwriting discipline and focus over the past several years to deliver an outstanding result. We are a leader in the commercial insurance space with a profitable, well-balanced, and at-scale portfolio. Our distinctive capabilities are not easily replicated. We have delivered outstanding results through underwriting actions over the past years to improve the quality of our portfolio. We have improved the combined ratio by 14 points from 2017 through the first half of 2021. We have also improved the quality of our portfolio.
We've successfully shifted the product mix over the past years, reducing our casualty exposure while selectively growing property and specialty lines to better balance our portfolio. In 2020 and the first half of 2021, our results demonstrate our ability to capture rate and balance growth. We grew net earned premium by 10% in the first half of 2021. We will continue to focus on risk selection and risk quality to maintain a sustainably profitable portfolio through the cycle, and overall, we're well-positioned in the market to capture opportunities. Through the sustained profitability that is complemented by our breadth of products, distinctive capabilities, and superior service, we will continue to be a preferred and predictable insurance partner. We will continue to pursue profitable growth, at the same time leveraging all of our capabilities to support our customers in managing their risks.
Scale and capabilities matter in commercial insurance. As a top three commercial insurer, we have scale. We also have a well-diversified portfolio and truly global footprint. Why else do customers come to us? We are a long-standing expert in the international insurance programs. We issue 50,000 local policies across more than 200 territories every year, covering all major lines of business. Cross-border business is complex. There are not many companies that can do this, let alone do it well. We do it very well. These capabilities are important as they provide Zurich with a greater opportunity to lead programs, which mean we set the terms and conditions, and we earn a fee for the service we provide.
For nearly 30 years, we've been a leader in the captive market, servicing captive customers with broad capabilities for life and non-life programs. Our captive business goes hand in hand with our international program business as over 50% of our international program customers own captives. What is different about captive customers? They share in the risk with us, and so they're more often focused on managing risk. In the hard market, we've seen a growth in captives as customers look to retain more of their risk to reduce costs. Our capabilities have been critical in supporting their needs. We have a leading risk engineering franchise. Helping customers with prevention is at the heart of what we do. We have helped customers to mitigate risk with our risk engineering capabilities for over 80 years.
With almost 1,000 experienced risk engineers, we carry out over 60,000 assessments annually, giving us a deep understanding of risks across industries. We also continue to evolve our capabilities by investing in areas including climate change, supply chain, and cyber advisory services. We see prevention becoming increasingly important to keep companies operational and to keep more challenging risks insurable. We have a unique relationship engagement model with 750 of our large corporate customers who make up about $3.4 billion in premium. This model allows us to drive discussions firsthand, which has been incredibly important as we've navigated the hard market. In this segment, our retention is 14 points higher than the rest of the portfolio, and on average, these customers purchase nearly 5x as many products from us. Obviously, broker relationships are important.
Our size, footprint, breadth of cover, and overall capabilities support us in maintaining a strong position with the global brokers. Portfolio balance has been a key focus of our strategy, and here we show you that we have a well-balanced portfolio. As we look forward, we will build on this foundation. The current opportunities in the market outweigh the challenges and our current priorities continue to position us for success through the cycle. We will continue to maintain a balanced portfolio through focused execution of the underwriting strategy and maintaining a disciplined underwriting appetite. Focus on growth in middle market in key geographies to reduce volatility and bring greater consistency to our portfolio through the cycle. With rates at 13% for the first half of 2021, the current market conditions continue to present an opportunity to improve our portfolio.
As I mentioned in my introduction, having oversight over our portfolios and understanding portfolio trends is important. We will continue to invest in data and technology, working closely with Ericson. We will use technology to continue to simplify our engagement with customers and brokers to allow us to spend time on the tasks that add the most value. Through data and analytics, we can better equip our underwriting teams to make more informed decisions on individual risks, to understand trends across portfolios, and to use this information to have a more robust discussion with customers and brokers. We will continue to find ways to put tools in the hands of our customers to help them better manage risk. Talent matters in commercial insurance. We have great people. We continue to create an environment to retain and attract market-leading talent to increase our competitive advantage.
We will continue to focus on the customer. We know that we can't lose sight of the basics. We must issue policies correctly and on time. We need to pick up the phone when customers call, and we must deliver a fair and prompt claim service. This may sound overly simple, but often we win new business because another company has failed to service the customer. In the middle market segment, where we generally don't have direct engagement with the customer, we'll continue to develop compelling propositions to ensure we meet the needs of the industry in which they operate. I'll come back to this in more detail later. We will continue to find new ways to operate that work for our customers' business models. For example, we work with a large shipping company, and we have seamlessly integrated the purchasing of cargo insurance within their platform.
Now when their customers set up a shipment, they can simply tick a box and add our cargo insurance at the same time. Executing on our priorities is proving to deliver the results we want, as you will see on the next slide. We've achieved an outstanding result for the first half of 2021, and we have a positive outlook for the full year. As you see here, we have effectively balanced growth and profitability improvements while managing down the volatility of our portfolio. We've managed steady improvement of the combined ratio with all lines of business and regions contributing. In year-over-year, we're increasing our contribution to group BOP. Through our actions, we have strengthened our position relative to peers with higher growth, improved profitability in 2020, and a loss ratio that is almost six points lower than the peer group average.
Our market position and strong financial performance is the result of actions taken over the past years. Let's take a look at the results in more detail. One of the key drivers of our strong performance has been our laser focus on underwriting actions. As you can see evidenced here through a more balanced portfolio within our underwriting appetite. In this environment where rates might seem tempting on the surface for CAT-exposed risks. It's worth noting that as we grew our property portfolio, we did not accelerate our cat exposure. We have been actively managing cat exposure in three ways. First, through modeling, we continuously enhance our models using recent claims data as well as external scientific data sets. Second, through our underwriting, we have strengthened risk assessment, tightened terms and conditions, and enhanced portfolio management with actionable insights.
This has allowed us to reduce critical flood exposure, rebalance U.S. windstorm, and reduce our exposure to wildfire. Third, through risk engineering. We've engaged with customers to help them mitigate their exposure. We've also improved the quality of our portfolio through terms and conditions, which will strengthen our portfolio now and in the future. To take a few examples, COVID reinforced the importance of clarity in policy wording, both for us and for our customers. This is particularly important for Zurich when we consider systemic risks, which is why we've had an intense focus over the past several years on removing unintentional silent cyber in our wordings. We've reduced cyber in our property wordings by 90%. With the cost of insurance going up, our customers are often looking for ways to offset some of this cost through increased retentions.
This benefits us as it creates a greater sharing of risk and a reduction in attritional losses. We focused on strategic capacity deployment. We take a thoughtful approach based on a number of factors, including risk quality, industry, and type of coverage to help us manage volatility, in particular in cyber, D&O, and liability. As a result, we've reduced the maximum limit deployed on any one risk and the average limit deployed across the portfolio. Through this, our goal is to build a portfolio that is profitable in any cycle, and with today's favorable market cycle, we see opportunity. The current rate environment is important for two reasons. First, it continues to present an opportunity to grow and improve the position of our existing portfolio. We are in the second year of double-digit rate increases in the U.S. and Europe.
Second, rates continue and remain well above loss cost trends, so we continue to improve margin on our portfolio. We monitor claims inflation risk closely by line of business. Here we give you a sense of what it looks like for North America. In looking at property as an example, while property claims can be impacted by building supplies and labor costs, it's important to remember that we haven't seen significant claims trends yet, and we can reprice this business fairly quickly to address this should it happen. You will hear more from us about inflation in George Quinn's session, so I won't dig into it any further now. Instead, let's take a look at the progress we've made improving the combined ratio across lines of business and the opportunity for growth.
In our property and energy portfolio, we've delivered a 20-point improvement in the combined ratio in the first half of 2021 versus 2017. How did we do that? We improved risk selection, standardized policy wordings, captured rate, and reduced line sizes. We see opportunity for growth outside the U.S., and we will continue to focus on this while we reduce our cat exposure across the portfolio. In casualty, we've delivered seven points of improvement from 2017 to the first half of 2021. We've achieved this through many actions in addition to rate. Let me share a few with you. We've increased attachment points. In 2017, the average attachment point for U.S. excess liability was $5 million, and in 2020 it was over $10 million in the U.S. large casualty portfolio.
We returned motor to profitability, and we focused on European-based companies with U.S. exposures to ensure an alignment of pricing as well as terms and conditions with the U.S. market. As we look at the specialty lines, in financial lines, we improved rate adequacy, adjusted capacity deployment, and elevated limits on large programs. In EMEA, our average limit reduced by half from 2018 to today. Given our size in this line of business relative to peers, we also focused on selective growth, mainly in the U.S. and the U.K. We continue to see opportunity in these markets. In cyber, we've seen large rate increases. Our largest portfolio is in the U.S., where we see year-to-date rate increase of 47% and the average policy limit is less than $5 million.
We've achieved growth in A&H as we've strengthened capabilities, hiring talent, improving servicing capabilities and technology for our customers, and expanding our product offering. Let me now move to the opportunity that we see in the middle market. What attracts us to the middle market segment and why? The middle market segment is a very large market that we estimate to be about $200 billion in premium annually, and for us, it represents a sizable growth opportunity as we only have about 2% market share globally. That being said, we're not starting from scratch. Today, Zurich writes about $4 billion of premium in the mid-market, which represents about 23% of the total commercial insurance premium. Our definition of middle market considers a number of criteria, including program structure and servicing requirements, which help us to align our distribution to the needs of the customer segment.
Middle market risks are case underwritten and do not include our SME business. In general, we see customers with revenues between $25 million and $500 million falling into this segment. Our focus is to continue on building scale and key capabilities in the markets that present us with the largest opportunity, and where we also have an established presence in core capabilities. For us, this means the U.S., the U.K., Canada, and Germany. In addition to market potential, we're focused on this segment because the pricing cycles are less pronounced than large corporate, helping us to bring greater stability to our portfolio through the cycles. Distribution is dominated by regional or national brokers, which provides us with an opportunity to support these brokers with additional capabilities while also continuing to balance our distribution mix.
While our execution is local, our approach follows globally consistent principles, underwriting expertise, distribution, tailored propositions, and efficient operations. On the next slide, let's take a look at the results we've delivered using the U.S. portfolio as an example. The U.S. Middle Market leadership team is continuing to execute on their strategy with positive early results made along the four principles. Underwriting expertise by improving the underwriting capability, we've achieved higher new business per underwriter while also improving the result. Increased distribution focus on regional brokers in middle market, it's important to be close to the markets that we serve, so we've expanded the U.S. middle market presence from 12 office locations to 19 from 2018 to now. We've also delivered tailored industry solutions.
Success in middle market requires a clear understanding of our preferred risk appetite and clear value propositions so that it can be consistently communicated and targeted. You also need efficient operations to keep costs low, supporting a competitive offering in the market. We've transformed our core underwriting platform to simplify and streamline the underwriting process. We've established a centralized submission intake center to drive consistency and efficiency while reducing back and forth with brokers. As a result, we're delivering 25% higher productivity measured by number of quotes per underwriter and improved service levels, meaning faster time to quote and in turn a higher hit ratio. So far, we've talked about the underwriting actions and results that we have delivered, as well as the capabilities that set Zurich apart and the opportunities in the current market. All of this would not be possible without the capabilities of our people.
Commercial insurance is closely linked with the quality of available skills in the field. We've invested to improve the day-to-day environment for our underwriters and invested in their development. Through this, we've seen a significant improvement in the eNPS for the underwriting population. You see the results for the two largest commercial markets on this slide. In the current competitive market for talent, where our talent is often pursued, we will continue to keep an eye on the needs of our people. Through data and analytics, we can better equip our underwriting teams to take more informed decisions on individual risks, understand trends across portfolios, and use this information to have more robust discussions with customers and brokers. Through our efforts, data is no longer trapped in functional silos.
Pricing, policy, customer claims, risk engineering, and cat data is all mapped to a common environment and can be viewed and interrogated at the portfolio, customer, or policy level. The ability to see all of this data in one place allows our teams to investigate trends or portfolio actions in real time. Natural language processing also allows us to access unstructured data fields to better enable us to use the full breadth of our data and to make connections within our portfolios that have not yet been possible. In addition to deep portfolio insights, account-level underwriting is simplified through the ability to benchmark similar industries, automate deductible recommendations based on historical performance, and highlight challenging characteristics or areas needing the underwriter's attention, such as aggregate exposures, elevated cat exposures, or claims alerts.
As I mentioned earlier, we're a leader when it comes to international programs in risk engineering, and here's why it matters for our business. We have leading capabilities in the international program space. Through our tools, trained experts, and network, we help our customers navigate what we see as an increasingly complex global environment. This is an area where we've struggled in the past with profitability, and it is a good example of where we can use our capabilities to turn things around. The challenge was with companies based in Europe, but with liability exposure to the U.S. We are fortunate that we have deep expertise when it comes to the U.S. market, and we use this expertise to align our appetite in pricing for those European customers with significant exposure to the U.S.
As I mentioned, being a successful international program insurer is important to Zurich as it allows us to lead insurance programs, setting the terms and conditions. There are fewer competitors in this segment of the market, and we can also use these capabilities to distinguish Zurich from local competitors in the middle market segment. While we've delivered risk engineering services for our customers for over 80 years, we see their needs changing. As a result, we've launched Zurich Resilience Solutions to support our customers with their traditional risk engineering needs and to better enable us to continue to build capabilities for the future. Through Zurich Resilience Solutions, part of our strategy is to continue to digitize capabilities to support our customers with new offerings and to reach a broader customer base.
We will build on our existing digital capabilities, including the Zurich Risk Advisor, which is an award-winning digital tool that supports our customers to better identify and manage risk. When in doubt, they can schedule a video call with a Zurich risk engineer to work through the issue together on an app. We also know that prevention will be critical to keep risks insurable and businesses operational, so we are equally focused on providing practical risk mitigation advisory services. Through recent cat events, we've seen that appropriate preventative measures that do not require huge investments can reduce physical loss and business interruption by $10s of millions at an individual location. Investment in prevention is going to keep businesses operational and certain risks insurable. As we look to keep risks insurable, climate change is one of the most important sustainability topics for CI.
For us at Zurich, we're aware that sustainability presents both risks and opportunities, and that for our customers, ESG can mean different things. To accelerate our engagement, we need to understand how we can best support, so we continue to do our homework and engage with our customers. We recently completed a detailed review of the sustainability strategies of over 100 customers. This has helped us to understand what is important to these companies and industries and how we can better prepare Zurich to ensure we have relevant solutions to help support our customers with their goals now and in the future. Not surprisingly, two of the biggest challenges for our customers are the energy transition and the increasing impact of climate change on physical assets. We continue to mitigate transition and physical risks within our underwriting portfolio while leveraging opportunities.
Through our analysis, we have begun to identify strategic actions to mitigate the impact of transition risk within our portfolio and will continue to build on this into 2022. We will look to have a consistent view of carbon intensity and increased transparency in reporting through our efforts as a founding member of the Net-Zero Insurance Alliance. Let's now look at the success we have had to date and the next steps to support the energy transition. We have successfully executed on our commitments on thermal coal and oil sands through the proactive engagement with our customers. Of the 270 customers subject to our policy, 39% have fallen under the threshold as a result of our engagement, and 20% have credible transition plans that we will continue to monitor.
As we look into 2022 and beyond, we will continue to take a leadership position with regard to tackling climate change. While fossil fuel exposure makes up a relatively small portion of our portfolio, we will look to replicate the thermal coal engagement approach with oil and gas companies. We will proactively engage with our oil and gas customers over the next 24 months to understand and support their transition plans. In the absence of meaningful transition plans, we will start by no longer underwriting new greenfield oil exploration projects. In support of the transition to a low-carbon future, we will phase out thermal coal from our underwriting portfolio by 2030 for OECD countries and the remaining E.U. 27 countries. To complete the position, and conscious of the environmental sensitivity of the Arctic, we also commit that we will not support oil and gas drilling production in the Arctic.
At the same time, we will increase our focus on renewable energy. We recently committed to expand our alternative energy solutions from January first. We already have a number of solutions, strong capabilities in this area, which we will use and expand to support complex solar and wind projects. To bring my section to a close, we are in a strong position at Zurich thanks to the actions that we have taken, and we will continue to take. We are maintaining our underwriting discipline. That means focusing on risk selection and quality, properly structuring programs, and applying the right terms and conditions. It is critical that Zurich and the industry continue to maintain underwriting discipline. It is a very interesting time for commercial insurance. We have the positive impact of the current rate environment, and we've generally seen discipline across the market.
Climate change poses both an opportunity and a challenge, and we see greater interest from our customers in not only transferring risk, but in preventing losses as well. We will continue to invest in our capabilities and people as they make a difference. With that, I will hand it over to our Group CFO, George Quinn.
Good afternoon, everyone. It's been a while since we last spoke, and I'm sorry that it's still not easy to meet in person. Hopefully soon. I have a few topics to cover today, but just a reminder before we start that this is an update, so you'll need to wait till next year's Investor Day for the 2023/2025 ambitions and goals. Having said that, I know there are quite a few areas of interest, and I hope that we can cover a few of these for you today. November 2019, which was when we set the targets for the current period, almost seems like a different era. It may not be the most important thing, but it's worth remembering how the targets were viewed then, mainly because they were not seen in the same way that they're seen today. They were viewed as aspirational, occasionally contradictory.
I only mention this to underline our confidence in delivery and to recognize the efforts of all of the people who work here and have delivered despite everything else that's happened. I'll also touch on capital allocation. This is obviously a priority, and we're focused on the topic. The larger changes are still to come, but I thought I would use today to make sure that we have a reasonably consistent understanding, particularly about our motivation and the financial effects. Inflation is obviously a topic, and I'd like to give you a sense of how we manage and protect ourselves against this risk. Natural catastrophes too, given the recent frequency. Here I'll touch on our views of trends and what we're doing to make sure that this is not an ever-increasing feature of our business.
Finally, a reminder of our approach to shareholders, particularly around how we will ensure that our shareholder rewards are aligned with the delivery of our earnings targets. Not the first time that you've seen a picture like this. I think we've been good at dealing with the risks that haven't worked out as we expected, particularly in P&C, but we've not been as quick to address similar issues in our life business. You know that most of the capital allocation issues are in our life back books, principally in Europe. While this is almost certainly true, we also have room for improvements in some parts of our P&C business, and we haven't lost sight of this.
When you look at this picture, it's also important to remember that our life business is a much more significant capital consumer than either of the other two main businesses. The opportunity is substantial, but it's not without challenges. We don't make capital allocation or reallocation decisions based on short-term financial trends, but it's more focused on strategic priorities. The financial elements need to be judged over longer periods. The good news is that while the capital requirements in some of our life businesses are high, and actually in some cases quite volatile, this is not true of earnings or cash flow. The decision process is actually more straightforward than it is for P&C, even if the preparation and execution steps are much more complicated. The one thing that they'll have in common is that they will be ROE accretive.
Given that the earnings contribution from the portfolio is impacted is not negligible, the first priority for the additional flexibility that we gain is the elimination of earnings dilution. The second will be growth in earnings that will lead to growth in dividends. Some caveats before I start on this slide. We're not entirely masters of our own destiny, and we are reliant on buyer interest, the support of partners, and in some cases, regulatory approval to achieve our goals. This is not mission impossible, and we and others have done this before. Also worth adding that none of these projects is about a market exit. In all cases, we expect to continue to have a significant market presence, and this is about portfolios within our businesses. I've picked out here some of the topics that we're particularly focused on.
I know that this will lead to speculation about who or what these things are, but my main priority today is to align expectations, make the motivation clear, and give you some sense of the financial drivers and also some sense of where we stand in the process. I've started with something that we've already done. We've removed the risk of asbestos and environmental from our U.K. and U.S. portfolios. Given the industry effects from the recent market updates, this has been very important as it has removed something that could otherwise have been a significant loss. It's worth adding that there tend to be very few common drivers, unrewarded volatility, sovereign credit, investment priorities, and more positively, an opportunity to partner with others in a way that provides a more compelling proposition for our customers.
I won't go through all of these, but I'll focus on life one. The basic problem in this portfolio is the difficulty of achieving and maintaining a good asset liability match. The local statutory system doesn't recognize the issue. This means that our local business produces consistent low to high single-digit returns on the capital held locally. Seen from the group, the picture is very different. The capital requirement that we superimpose can be a multiple of the local needs and can vary, as we saw last year, by billions in relatively short periods. At its heart, this problem is about a definition of market consistency. We have our own perspective, and others have theirs. This is why we believe a solution exists. The benefits of finding that solution are substantial. In this case, it's not about cash because the additional capital is an overlay.
We already have the cash at the group level. It is about capital, but it's more about volatility and sensitivity to interest rates that this business creates. That's a key input into our target capital levels. While a transaction doesn't change the floor, it would have a substantial impact on the level of capital that we are required to hold in normal operating conditions. I've chosen Life 2 to detail a bit more. As you can see, if we successfully conclude a transaction, we significantly reduce our exposure to what I can only describe as a less preferred asset risk. The impact on the group overall, through a combination of the capital release and the cash returns, is modestly positive. Of course, there is no free lunch.
This type of transaction typically occurs at a small discount to own funds or book value, and this will likely translate into a small gain on the group as positive, and we'll be able to reuse the released capital in a manner that's consistent with the priorities that I outlined earlier. So far, the themes have been about capital, and this all naturally leads back to the obsession that we have with achieving an attractive risk-adjusted return. This chart, I'm sure it will be familiar to you. It has the same outcome as we laid out in 2019, but different drivers. We've been able to pivot from a retail-led growth ambition to a relentless focus on the opportunity in commercial. As you've heard from Sierra, this opportunity is likely to remain with us for some time, and it will continue to be a priority.
This doesn't mean that we haven't built a better retail foundation, but the effects of this will become clearer in the next strategic cycle. It's fair to say that we've generated capital a bit more quickly than we would have assumed, and this may have put a little more pressure on the ROE than originally planned. Investment income, too, has probably been more of a headwind than we anticipated. That's the end of the bad news. We've grown more. We continue to be focused on efficiency. Price and portfolio changes have been far more positive than we expected. The last step here is capital allocation. I don't really expect this to be a primary driver in the next 12 months, but it offers an interesting possibility at the very end of this cycle, and perhaps more importantly, a terrific opportunity as we start the next.
A few comments on expenses. We've come a long way since 2015. We've delivered a near 20% improvement in expense efficiency. There's no doubt, though, that the industry continues to be too expensive and there's a collective need to further improve efficiency. There are many challenges which can easily become excuses, but we've been focused on outright cost reduction for most of the last six years, and this makes a significant difference to competitiveness. Our local businesses have worked hard to deliver these savings, and many of them now find themselves in a complete role reversal of where they were four or five years ago. One of our local competitors would have been the benchmark. Not so much anymore.
One of the questions that I get quite frequently is whether the ambitions that we have for the customer and the way that technology enables them requires substantial additional investment. It's obviously not free of charge, but you've had a chance to hear from Ericson earlier. My experience of our work together so far is that he must be at least a little bit Scottish. His ability to find savings to finance his or our priorities seems to have no limits, even if I know it does. While 2017, 2019 was very focused on expense reduction and our story for 2020 through 2022 was more about efficiency, we have not lost our appetite to cut unnecessary costs from the system. Again, this together with growth has delivered a near 20% improvement over the last five years.
There's a part of me that would like to tell you that this is a mission accomplished, but it's not. We believe that there's still an opportunity to do something transformational around efficiency, and this will be one of our themes for next year. On a switch from the capital and cost efficiency topics to some risk management topics. This part of the presentation is gonna focus on workers' comp for what I think will become obvious reasons. I don't plan to discuss workers' comp product design and how this mitigates claims risk, 'cause that would extend the presentation substantially. If you've got a deeper interest in the topic, we're happy to cover this with you separately. On the surface, we appear to carry more long-tail exposure than the average, mainly due to a perceived position in U.S. workers' comp.
As a result, when we see inflation spikes, like now, or even some of the early fears that we saw around COVID last year, we tend to be a topic of interest, and unfortunately not in a good way. Although the outcomes, I think, have been good, there will be a continuing feeling that this has not been stress tested. For the next few minutes, I'm gonna focus on portfolio management or underlying structural position and our approach to reserving the risk. Business mix is important to us. It's defined by our customer proposition and by our risk appetite. It defines our starting point and the risk that we then need to manage. It's not something that's static, it's strategic, and therefore, I wouldn't expect it to change significantly over short periods of time.
We made reshaping the portfolio a priority in 2016, and we've taken it a long way since then, reducing long tail lines within our portfolio by 14 points. So far, so good. All workers' comp portfolios are not created equal. The exact mix of the book is also very important, and we've progressively moved the book away from the more inflation exposed guaranteed cost product to the high deductible product. Over 10 years, this has moved from half to about three-quarters of the book. Workers' comp has a long duration, so it will take time for the reserve picture to catch up with the premium mix. But we did not start this yesterday. We've been working on it for a decade.
This shift trades ground up inflation exposure for credit exposure and a bit of a lack of linearity, but we like this trade-off as we can much more easily manage these risks. It has a big impact on sensitivity. I don't have a past inflation example, but I can show you how the initial views on COVID last year developed into real numbers. The summary on the right is from the initial studies that WCIRB California conducted last year. I'm not showing this to be critical of WCIRB's work. We've used this because they were very transparent about assumptions and drivers, and this makes it relatively simple for us to run the scenario on our own portfolio. If you think back and remember the initial market reaction, it was not only fear about California, but it was generally extrapolated to the other 49 states.
As a result, you may remember numbers that were multiples of the ones listed here. The initial study arrived at a scenario for the industry with an estimate of $11 billion. Some observers took this figure, used statutory market share data to arrive at outcomes for the various participants, and this implied about $600 million for us just for California. Although again, the figure discussed last year was much higher as it had been extrapolated beyond California. We modeled a gross loss estimate on the same basis, of $106 million for California. Our actual gross loss is $18 million. I know that inflation dynamics are not identical and the factors such as the proportion of healthcare workers in the portfolio are much less relevant, but we're just not as exposed as you would think from the headlines.
Now we've decided on the product offer. We've minimized the risks that we don't like, and now we reserve the risks that we've accepted. Our aim is to maintain a consistent and as far as possible, predictable approach to reserving, despite a consistently unpredictable and pretty unreliable world around us. We've delivered positive reserving outcomes, pretty much a metronomic 1.5%-2% over the past five years, and there is no negative correlation between our reserve development and Nat Cats, and there is no negative correlation between reserve development and the profitability of the current accident year. We are not using reserving to fill in earnings gaps. We're probably all a bit cynical, but I'm going to ignore Tom Cruise's maxim in A Few Good Men. I can't prove it to you mathematically, but I'll show you what we believe.
Our ultimate reserve position has two main components. The first is the actuarial central estimate. I can't tell you for sure that we do this in exactly the same way as every other insurance company, but we use the same techniques. Our actuarial team looks at the trends, the products, selects a variety of chain ladder, Bornhuetter-Ferguson, and other techniques, giving more or less weight to the data and trends that they see as more or less important. We don't have our own Williams-Burrell technique. As a result, I'd expect that most independent actuaries that look at our approach would likely conclude that our outcomes for the actuarial central estimate fall within a range of reasonable estimates. This has been our experience when external actuaries have looked at it. Now, we all know that not all of the risks in the current portfolio are reflected in past claim trends.
COVID outcomes, changes in U.S. tort trends, opioid claims, changes in state legislation such as Reviver statute, are not necessarily well reflected in past claims outcomes. We add reserves for these other risks. We refer to this as reserve strength or management IBNR. The final step we take is to measure how our reserving position is varying within the range of best estimates. I can tell you two things. Management IBNR is a larger part of our reserve estimate today, and our total reserving position, we believe, is higher in the range of best estimates. The chart on the right is a simplified look at our approach to workers' comp reserving. You can see the trends and loss development factors in the sloping line, and we've added the 10-year and five-year averages.
The purpose is not to suggest that I think the five-year line is the right answer and that the hundreds and billions of dollars in difference between that and the ten-year line is future profit. The real purpose is to make it clear that we can see a sustained mean reversion in workers' comp, meaning inflation, without adverse reserving outcomes. Please also remember that the primary factor in workers' comp is medical cost. Wage inflation and CPI are generally a bit less important. Natural catastrophes have been an obvious theme this year. It's been an extraordinary year with no letup in events in the first nine months of the year. If you look at the global industry experience, we've seen an increasing trend over the course of the past few decades.
Part of this is driven by the growth in the global economy, but the last four or five years have seen some large events, but also a much higher frequency. Although the time series is short, this is also reflected in our experience. The frequency component of our reinsurance protection is the part that's been hit several times in the last five years, with no Nat Cat losses triggering our main Cat reinsurance terms. We don't believe that reinsurance can be a solution for frequency issues. Our aggregate cover is already a marginal trade-off for price and terms versus the depth of protection that it brings us, and it's unlikely to become cheaper anytime soon. This means the solution has to be in our own hands. Earlier in the presentation, I made the comment that we've shifted the business mix towards shorter tail lines.
This, as you saw in Sierra's presentation, has not come at the expense of disproportionate growth in cat exposure. In fact, growth in cat exposure has been much lower than growth in the property portfolio overall. Despite this, all indicators suggest, while the trends are not linear, we are likely to see more of these events over time. This is not really our business, nor is it consistent with our investor proposition. Growing cats at a lower rate than the rest of the portfolio will help, but it's unlikely to be enough. Earlier this year, we've introduced new requirements in underwriting. These are initially focused on U.S. risks that are likely to drive frequency, such as critical geographic zones for severe convective storms, new KPIs to promote the reduction of average annual loss, and some additional requirements at the account and location level.
Overall, we expect this to reduce average annual Nat Cat loss by about 10%, with a much larger reduction in the particularly exposed segments. like-for-like, this is a meaningful reduction in the expected Nat Cat loss for the group. This is likely to become a recurring theme over the next several years as we try to stay ahead of trends in Nat Cat losses. We've worked hard to reduce the volatility of the group's results, and we don't intend to give this up. Nat Cat risk capital is another scarce resource. As the risk increases and the demand rises and the supply shrinks, we'll deal with this in the same way that we manage other challenging risks. The available capacity will be allocated to our most important clients, and after this, it doesn't matter what happens to the market price for the risk.
We don't intend to manufacture more. Not really an accident that the story on Nat Cats is followed by our commitments to decarbonization. There's a risk that as a financial services company, we look at our own carbon footprint and conclude that we are not the problem. This would be a huge mistake. Our key role is in supporting our clients as they plan their transition. To have credibility in that role, we need to demonstrate that we live up to at least the same standard. This is why we set very ambitious internal goals. We operate today in a way that was inconceivable only eighteen months ago. We can't squander the opportunity of the lower carbon footprint that we've achieved in our response to the pandemic. There will be a cost to this.
estimated today, we model that our investment income will fall by about $60 million by 2025 as we deliver on the reduction of the carbon intensity of our investment portfolio. The number can change as we re-estimate the expected outcomes of the issues in the portfolio. Time, though, is short, and the consistency of the commitments by the investor community highlights the increasing risk of stranded assets. Our priority is, and will continue to be, to support those that are on the same journey. Cash or dividend return is at the heart of our value proposition. We've done pretty much exactly what we committed to. The only obvious topic is the dividend path. You know from prior discussions that we look through temporary volatility when determining the sustainable NIAS starting point. This then becomes the basis for a 75% payout.
In some years, this has meant that we paid a bit more or a bit less than headline earnings would have implied, but we did not increase the dividend last year to reflect the prevailing uncertainties. We also made a commitment that investors should benefit directly from rising earnings through growth and dividends. Given the confidence that we have in delivering targets, we need to make sure that that growth in earnings is fully reflected in dividends. We need to make decisions about the impact of differences in foreign exchange, but there is a gap. This is more likely to be a topic for 2022 than it is for 2021, but it is a topic.
Finally, the efforts of all of our colleagues across the group have put us in a position today where we can confidently say with more than a year to go, that we expect to deliver targets. I can't make a stronger commitment to discipline capital allocation short of signing a legally binding contract, and in fact, that's something I hope to see us do soon. Reserving is about consistency and protecting the group from adverse outcomes. We prioritize this over earnings and in fact have further strengthened the group's reserve position. If we don't build this reserve strength now in the middle of this hard market, when will we? Protection from natural catastrophes is something that our clients need, and we will continue to support them. But this is already a scarce resource and our appetite has not changed. There may be increasing demand, but this is not our role.
Finally, dividends. We're not confused or in any doubt about priorities, and this is not gonna change. Even the current attractive growth levels are utilizing less than half of the organic capital that we generate after dividends. Earnings growth is not constrained. We expect dividends to grow, no ifs, no buts. Thank you very much for watching or listening. We'll take a break now, and we'll start the Q&A at 4:30 CET.