Okay, 10:30. Good morning, everybody. I'm Mitchell Todd, Head of Investor Relations and Rating Agency at Zurich. A very warm welcome to Zurich Insurance's Investor Day for 2025. I'll just take a quick moment to run through the running order for today. I'll shortly invite Mario Greco, Group CEO, and Claudia Cordioli, Group CFO, to provide a strategy update. We'll have a very brief break after that to get the stage set for a fireside conversation with our new global head, Head of Global Specialty, and Mario and myself. That will be followed by three breakout sessions. The first will be middle market before lunch, followed by retail and farmers. You'll have opportunities to ask questions both in the fireside and the breakouts, and then we'll convene at the end of the day for a broader Q&A session. We'll invite Mario and Claudia back onto the stage as well.
Some logistics around the breakout groups. We'll divide you into two groups. Those of you with a yellow badge will be staying in this room and in the auditorium. This will be webcast live for the entirety of today. Those with a green badge will be guided to a room just adjacent to this one. Plenty of people on hand to help you get across here, but it's not too far of a commute. For Q&A sessions, we ask you please keep to two questions just to make sure everyone else can get a chance to engage with the leadership team that's here today. Thank you very much for your participation. I know a number of you have traveled in early morning flights to get here. We really appreciate it. With that, I'd like to hand you over to Mario Greco and Claudia Cordioli. Thank you very much.
Good morning. Thank you so much for coming over. It's a real pleasure for us to have you here. Remember, this is really a presentation to provide you information details, so ask any question. Now, Claudia and I will try to do this with four hands, which we never tried before. Let's see how this works. The purpose of our session is to give you an update on where we stand one year after we launch the new three-year plan. We feel good about it. First of all, we kept ourselves highly concentrated. We kept working on the strategy, no matter the noise around the world and the dangers that emerged. We kept working on what we needed to deliver.
The way we see it, mid-November, so still 40 days to go to the end of the year, is that we feel very good against our targets and we feel ahead of where we wanted to be by this time of the year. The growth is coming, and the growth is coming where we wanted to go for that, which is mid-market specialty life protection. All three lines of business are, I cannot say, surprising us, but they're delivering what we expected. The profitability is coming, so the margins are improving as we expected. Retail is back, as honestly we expected it to be this year in 2025. It is back with an excellent profitability, but it is also back with very strong growth. We still see that the liquidity, the cash creation is very supportive of a greater holder value at the end of year.
That is a very good first year, but let's now understand what happened and how we got at the end of this first year so strongly. What are the targets? I mean, we indicated the four business targets last year. Commercial, which of course was in focus when we presented the plan last year. We committed to deliver in excess of $4.2 billion of POP by 2027, and we are committed to surpass the $10 billion mark for middle market gross written premium. Both are still seen very much as achievable targets at this point in time, one year into the plan. Retail returned to long-term profitability. It is what we see today. Retail will continue improving next year, but again, we see that this is very much achievable. Then accelerate on customer loyalization.
We have some interesting data on customer loyalty retention, even if we kept improving, increasing the rates and improving the profitability. Life protection, life is growing nicely. You know that there is some noise, as always in life, especially for the Brazilian performance of our partner, Santander, but that's a temporary issue. The growth that we see coming is very, very strong and supportive of this target. Farmers, just as an introduction to the job of Raul later, Farmers is not a turnaround story. Farmers is a transformation story. What's the difference? The difference is that what you see today is the beginning of improving speed, benefits, changing results of Farmers over the time, because this transformation will produce more and more benefits over time.
Again, it's an impressive start of the year, and it's an impressive delivery of a full transformation of an organization by Raul and his team.
What does it mean in financial terms? When we launched the plan a year ago, I was keen to stress that all the targets that we've defined for 2027 were not a series of financial KPIs that we define top down. This was the product, and it's still the product of bottom-up plans that have been prepared by the business leaders with very concrete and tangible actions in the background to execute. This is the exciting thing about today. You'll hear directly from those business leaders in the breakout sessions about what their plans are, how they're executing, and the progress that they've made to date. We'll hear about mid-market, and Mario has just talked about that, and how it's driving superior margins in our commercial franchise. We'll hear about specialty, which is already one-third of our book, and we want to grow further.
We'll hear about the transformation of Farmers and how from here, the team around Raul and Ken are going to deliver mid to high single-digit growth. All of this is fueling the targets that we talked about, and we are absolutely confident in 2027 that we will achieve them. EPS compound growth above 9%, a cash remittances cumulated of above $19 billion, and I'll come to that afterwards, an ROE in average of above 23%, and we'll keep doing that, staying comfortably above the 160% SST threshold and floor that we define. Very comfortable about that, and the progress is what we are going to take you through in the course of today.
Now, what is the market that we see out there today? Again, strip off the noise, strip off the worries and the news. That is the market which is out there. There is strong growth out there for infrastructure and construction, even in Europe. Yes, even Europe has a long opportunity, long-waited opportunity for growth, and now this is growth that we know very well what it is. Claudia and I will touch on this because construction and infrastructure is our core competence and core business. Energy demand and energy transition, again, renewables are something that we've been investing heavily. These are competencies that we have in the team. This is good news for us. AI data centers, U.S., Europe, Asia, business that we have been opening, developing, following.
We'll give you data on how much of this business we have already insured and developed together with the clients over the past years, and this is a great opportunity for us in the future. Supply chain repositioning to regions, same story. It's about creating infrastructure constructions in the different regions of the world. The increased risk complexity means that our services to prevent, mitigate, anticipate are in high demand, and our customer service is highly appreciated. Finally, we're living in a world which remains also interesting for protection demand because welfare is coming down everywhere in the world, but worries and concerns of people are not, and this is boosting the protection. Now, what has been the answer that we gave to it?
Let me first of all clear one thing that could be in mind because I'm going to spend a few minutes on why we did the organizational changes, what was the reason, what's the purpose, and why is that related? Why was that related to what I just mentioned? The organizational changes have nothing to do with the 2027 targets. The 2027 targets are kind of already in the books. You will see at the end of the year how strongly we perform. The results of 2027 by this time next year will be in our books. What is not in the books will be just the natural catastrophes of 2027 that we cannot predict and some action on the costs. These trends, these trends here, they will last much longer than 2027.
We start today acting, or with the new organization of 2011, we start acting for the future of the organization past 2027 to give us further drive and further advantage after we finish the 2027 target. Now, specialty is the core of all these things here. This is where the growth is. It is going to be in specialty, and it is going to be in specialty crossing mid-market too. We thought about what do we need to really build today a competitive advantage to really be the beneficiary of this growth in the next years. We need a different organization where we can invest more in skills, where we can deploy more resources where needed, and where we can create a real competitive advantage in a skill-based business like specialties against the peers.
Thinking about how we do that, we said, okay, let's revolutionize our current organization. Let's organize specialty as a global business, which is sad. We're sitting there, and then you'll see it in the fireside chat. We'll take the lead of it starting 2011. We also strip off and simplify the commercial insurance organization in three divisions: specialty, international division, and the U.S. business, of course. Sierra takes direct responsibility also for the U.S. business, and of course, she maintains the commercial insurance responsibility, sadly in specialty. International divisions will be led by Luciano Cirinna, who has many years of experience and competence in the commercial space. Again, the purpose is to capture a significant portion of this growth and to create an unbeatable competitive advantage for us in the market.
We also changed the organization in life, going back in a sense into history, even though not precisely like that, by creating one responsibility for life under Alison Martin, because it's again, it's a skill issue. We need to buy, bring, develop life skills more than we have done so far. If we want to continue creating again the success story that we want to create for the next many years, we need to have the skills that we need in life. In order to do that, we need to centralize it and to start investing from the center. On retail, we progressed on the pioneering development that Carsten and the German team has done on retail and underwriting, and we want to bring it globally. After we tested, I mean, initially I started asking Carsten and his team, can you do it for us?
It doesn't work. A country cannot do it. A country has to run itself and doesn't have the time to run the rest of the organization. Now, still with the help of the German team, who is more advanced than anybody else, we want to standardize retail and underwriting on a global level under Christoph Terryn's leadership of the retail organization. These are the most important changes in the organization. Again, it's a long-term view of where the market is going, and it's adapting the organization to the market opportunities. If you have any other questions now or later, please ask questions on that. Let's move on now to the businesses. If I can make the clicker work. Okay, let's start with commercial insurance. Commercial insurance is naturally our biggest business, and it's also where we have the biggest market share, the biggest leadership position worldwide.
It's highly diversified. As you see it in the center, it's diversified. This is practically how the organization will look like in 2011. Out of, let's say, $30 billion of premiums at the end of last year, one-third roughly is in specialty, $9 billion. International, it's roughly $6 billion of premium. And then the rest is the U.S. business, so roughly 50% of it is in the U.S. business. Or you can read it by customer size. Mid-market is roughly one-third of it. The other part is a combination of direct and captives, which fall under Alex in the U.S.. So you'd see them also in the mid-market U.S. numbers and crop. And then corporate is 49%.
In terms of profitability, coming back to something that Mario has said that it's extremely important, we want to build an unbeatable competitive advantage. This is done not by being static and just following what the market is doing on rates and loss trends. This is done by dynamically managing the portfolio through peaks and lows in a way that it brings competitive advantage and it brings superior margins. I'm looking at Sierra, who's here in the audience today.
The team around Sierra have done an impressive job over the years, as you see on the screen, to improve the combined ratio step by step, year by year, just shaping the portfolio in a way that was able to capture the best parts of the market, was able to build a franchise like Mario has explained around specialty, around mid-market that we want to grow further in places where the margins are higher, are more stable and predictable. This is not by chance. This is not just going with the market. This has been a conscious strategy of building a competitive advantage. This is why specialty mid-market is so important for us right now in commercial, because this is what we want to do. We want to dynamically and proactively manage the cycle.
I would expect the combined ratio to continue to improve and stay on a very high level, on a very good level, because, as I said, the team is managing this proactively and choosing the parts of the market that are more stable, bringing better margins and have higher barriers at the entry. They require unique and very deep knowledge like specialty does.
Specialty has been the focus of our growth efforts and development since 2016. For those of you aware at our investors' presentation, the first plan back in 2016, you remember that we mentioned growing specialty and property and growing mid-market. This is where we are today. We are presumably number three globally on specialty size, $9 billion of business, progressively growing year after year. This is a highly fragmented market. You see that the top 10 companies barely control 25% of half a trillion of the business. There is huge space for growth for us, for consolidation, for a brand, and for the experience and the skills of a company like ourselves. Now, what is specialty? Because specialty is a big bucket where the definition matters because every company has a different definition. I will be even more detailed in a second about it.
This is the composition of specialty today. For us, the most important line in specialty, as you see, is construction. Construction and engineering is $3 billion out of $9 billion. This is also where we have a clear lead in skills and expertise. Energy is very significant. Financial lines, as you can imagine. I am going to list what is comprised in these definitions. Credit insurance, part of it goes together with construction because we sell it together when there is an infrastructure project, a development project. You also have a credit line together. Cyber is 4% of it, but of course, there is a high demand for marine, significant. E&S, it is a very U.S. based business, which allows us to do non-admitted business. It allows us to rule our conditions and contracts to the customers instead of being applying and being approved by the states.
Accident and health is 6%.
The reflection of it is obviously superior financial performance. Going back to what Mario was saying before, we want to grow in specialty because it's a line that requires specific competencies. It's much more difficult to attack a player in those areas that require very highly skilled underwriting workforce. We'll go into that later on. You'll hear more in the fireside chat. You need highly skilled underwriting capabilities. You need the right locations. You need to have the right relationships with the customers and with the brokers. This translates into superior financial performance. As you see in the graph on the right, specialty has been performing on a superior level compared to the rest of the commercial book. We expect the profitability to remain in this mid-80% combined space while we are growing it.
Remember that this is a $9.5 billion book, and we want to grow it from there.
Now, what is the definition of these lines? Let's spend a second just to align ourselves. Let's start with financial lines. Financial lines has some coverages that you would expect there, like managing liability, but has some very innovative ones like transactional liability. You might have seen that at the beginning of the year, we acquired an MGA specialized on transactional liability, which is a way for us to internalize the underwriting competencies. That's an MGA which has been in the market for years. Sierra and her team have been chasing the quality of the business that they were writing very carefully. We got comfort that, yes, these people know what they do. Why don't we acquire them and we transform them in our underwriting department for transactional liability? Very specialized business. You need lawyers. You need accountants.
You need experts to write this kind of book. You can't just get the capital and go and write it. That's a suicide. You need to know what you're doing. Professional indemnity, of course, you know what that is. Crime, M&A, which is part of transactional liability. It's a huge new line of business, very interesting for the customers and very profitable. Energy, this is the classical energy, up and downstream, but it's also renewables. On renewables, we've been investing a lot, creating hubs. There is huge demand. You need specialization. You need to know the techniques. You need to know how they work. Otherwise, you're insuring blindly, and you shouldn't, of course, do that. Construction, the core of our competencies is constructional risks, erectional risks, building risks. We'll come back on how sizable is our experience on that.
Accident and health, I'm going to skip that because I think you all understand it. Wholesale is E&S that I mentioned before, the non-admitted. Marine, I think again, marine is pretty straightforward what it is. Credit lines, credit lines are often related to construction and energy. Surety also is about financial guarantees for the obligation of the parties. Cyber, you know what it is. We're very careful on cyber, but we like cyber for SMEs, for mid-market. We're roughly 100 underwriters specialized on cyber today. We want to grow this size. If you want to provide cyber coverages, you need specialized people to do that. You need to keep building their competencies and their knowledge and keep them motivated. Beginning of next year, we will also have a different compensation scheme for all these underwriters. The specialty people need to have long-term incentives.
Their portfolios develop over time, and they must be participating to the success of these portfolios. They must have clear incentives, but equally, they must have clawbacks or financial penalties if the portfolios don't perform. That's another reason why we kind of created an independent unit for them because they will be treated from one one in a different way than the other underwriters, even financially. It's a competent skill-based business where you can't just enter and leave. You have to be there. You have to know what the risks are. You build it year after year over time, which makes it very sustainable for us. This is not a transactional activity. This is a business that stays there for long. Now, as I said, there are global trends which are very important on specialty.
Infrastructure investments in Europe, in the U.S., in Japan, in Korea, all the Western world is rebuilding itself. The amount of cumulative investment is impressive. It is an opportunity for us to lead and do business with that. Technology developments, AI is clearly changing not just the way we live, but it is also changing the investments made by the companies. We can participate to this investment, as we have done already, by contributing with our knowledge to the infrastructure and constructions needed. Energy, demand, and transition, as we said before. These are the lines which are impacted. Construction, I kept repeating we are market leader there. This is the size of our U.S. construction. This has been growing at a 9% CAGR over the past years. This is in excess of $2 billion of business construction in the U.S. only.
We have more than 250 underwriting experts in the U.S.. We have 90 risk engineers. These are all people who have been working for years, senior people known in the market with a unique wealth of experience. We are leader in construction insuring in the U.S.. For what is relevant, we've been awarded Insurance Construction Team of the Year in 2025. We are the first one to offer a parametric solution to construction projects. This has a lot of innovation, competence, experience, history. This is what we can bring wherever these needs appear to be, in Europe, in Asia, wherever they are. We have the people who can provide an answer to that. Hopefully, we will not stay for the day long on this page.
On construction.
Yep. Okay.
There you go.
Finally, you had a significant risk here that you will spend the next four hours on construction. Middle market. Yes, we have been talking middle market for a long time. I think Alex has presented in a couple of investor days our journey through middle market, how we grew our business from close to zero. It was not zero, but it was tiny business to be today one of the leaders, not just in the U.S., but globally. We applied the same recipe in all the different markets. First of all, this is a $300 billion business worldwide. This has been growing 5% as a business altogether. We have been growing close to 10%, 9%. Pretty much the 2027 target is the same rate of growth. It is not, I mean, when we presented, I got comments, is this overambitious?
This is just banking on the fact that we will continue what we have been successfully doing over the past years. The business that Alex directly leads is 60% of this portfolio. You see that we do it in the U.K. significantly, where we started years ago delondonizing our business and opening branch offices and deploying underwriters in the countryside, not necessarily in London City. Now it is 10% of our roughly $9 billion of business that we have today. This is highly profitable.
Yes. It's interesting. Please ask Alex and Andreas all the questions that you've got on the progress they're making on the growth. Do not forget that there's another very strong franchise in continental Europe on middle market that's growing nicely. Countries like Italy, France, Spain, they're growing double digit. With all the infrastructure spend and the support that is coming as well on large initiatives, for instance, in Germany, but also in Italy and in other places, this is a segment that for us is poised to grow globally. As Mario said, 60% is U.S., 40% is the rest of the world. While the U.S. is growing very nicely, I would expect also the rest of the world to at least grow at the same pace, if not in a quicker fashion. Profitability, I mean, you see the combined ratio there. Highly profitable.
It has all the characteristics that we like. For obvious reasons, it's a market that's more fragmented. It is also less exposed to large losses. Frequency is a different topic. Severity is much lower compared to large accounts. We continue to like large accounts and underwrite large accounts. Compared to 10 years ago, where our balance sheet and our exposure was dominated by very, very large customers on the corporate side, we've been changing and reshaping the portfolio. Now, as you saw before, 26% of our portfolio is made of middle market. I would expect that percentage to change and increase as we go into the execution of our plan from here. While obviously we see that margins are holding better than the large corporate space, there's less pressure on prices. Market rates are more stable.
We believe that we have, again, back to the point we made before, that competitive edge that allows us to be able to continue to perform at superior combined ratio.
There is a lot of underwriting work behind these numbers. Do not think that the market runs middle market at 87. You can ask Alex. You can ask Drazen how much underwriting pruning actions they continuously do. When we started back in 2017, for us, middle market was above 100. It took us years to understand where to target, who are the underwriters, how to run the business. We are very pleased today, but there is a ton of underwriting work behind this market. This is not what the market does per se. This is what we extract from the market with the actions of competence and underwriters. Good. This time we moved quickly. Quickly on retail. Retail is delivering what we have been expecting and waiting patiently for three years to see coming from retail, which is growth and it is profits.
Now, we have changed, however, a number of things in retail. We've introduced a lot of pricing sophistication. This, as I said before, has been piloted by our German colleagues and then has been progressively extended and still has to become a global tool. We have worked a lot on claims, on steering the claims and make sure that we take initiative and we direct the claims where they need to go. There is work to be done there and benefits to be extracted. You will see later that we have started using artificial intelligence to deliver better results on the retail performance.
All through this, we have improved retention, which is a very significant benefit that we are extracting these days or we are delivering these days because we manage, through the improved retention, to have the customer accepting a much higher rate, prices, and still be willing to remain with us because the service was outstanding for them.
That's the key point. There are two key points, I think, to take away from a financial perspective. One is the fact that we've been able to improve rates where it was needed in Germany, but also in other countries, from Japan to Spain, Italy, and a number in Switzerland, obviously. We've done that while increasing retention. This goes to the credit of the teams that have done a very strong work on segmentation of the customers, putting rate where it was needed, and making sure that the book goes back to profitability again. The other thing which is remarkable, and please, we've got Carsten and Peter here for the breakout session, ask them how they did it.
They managed to grow the business so that we've got not only better retention on the existing customer book, but they've also been adding a lot of new business through their direct and through other initiatives beyond motor. A very interesting journey that the German team has been on. Now we are sharing these learnings and this strategy more broadly across Europe.
The other difference that we have, yes, is in distribution. We have a very different distribution mix than any of the peers that you can think of. I would say that our distribution is really future-oriented, and it's not built into the past. We do have agents, but not as the predominant force of distribution. We use very well bank partnerships. We're very, very effective and successful on the bank partnerships. We use, of course, brokers, especially for SME business. We also have grown very successfully in direct business. Today, you will hear, especially from Peter Stockhorst, what's the experience, because in a number of years, we have changed the profile of distribution in Germany and being very much now led by the direct growth and profitability.
The opportunities for us continue to remain important because even the best bank partnerships, like the one with Santander, has so far hit a very strict minority of their customer potential. There is much more that we can achieve with the banks. Equally, the direct growth is so reassuring that now, from Germany, Peter and his team are expanding into the rest of Europe. On life. Life is important. It matters. Life is close to the same profitability of Farmers. I understand that it takes a little bit more capital than Farmers does, but not that much more. It's completely undervalued. When people talk about Zurich, talk about commercial insurance, Farmers, and everybody forgets life. Life matters. It's a big addressable market. It's growing very nicely for us. Now, look at what is the contribution that we have.
Of course, we have the bank partnerships, Santander, but also the Sabadell partnership in Spain. Then we have Australia, which is a very strong market for us where we have a leadership position. U.K., historically, U.K. has always been a very strong life market for us and highly profitable. Switzerland itself, we do incredibly well in Japan. Now, we're growing with unit-linked business. Life can grow more than it did in the past years and can produce more BOP. That's the purpose of the changes in the organization regarding life.
Here as well, highly profitable business that we like. Unlike some other life books that you might see from the rest of the industry, highly cash generative. A large portion of the book is short term. You will hear from Claudio afterwards directly on Santander, the performance and how he plans to continue to grow that. 17% BOP margin is extremely high. We want to continue to grow the business, keeping that margin at that level. Very important franchise for us is a fourth of our BOP, as you know. We expect it to continue to grow in the years to come.
All right. Farmers have said it's a thorough transformation of a big organization, which needed a thorough transformation, not a fix. So what were the issues that Raul needed to tackle? Management, balance sheet, distribution, cost basis, and quality of the products. Am I forgetting something, Raul? Claims, maybe, even claims management. He tackled all of these things at the same time. What you see today is the initial impact of the changes that he has brought into the business by tackling each one of these single issues at the same time. This will continue to drive the growth, the improvement of Farmers for a long time. They changed completely the balance sheet positioning. They changed completely the profitability of the business, renegotiating aggressively with the states, but also changing the product mix and the product conditions.
They changed the distribution model by growing very effectively the independent agents, but also working on the captive agents, on the exclusive agents, who are finally starting in the last months to come back to positive in-force developments. The growth of the top line, it is significant and will accelerate because now it's based on the policies in-force growth. I think where we see today, Farmers are delivering 40,000 new policies per month on a net basis. This is a significant increase, not just against the past, but it's a significant increase against the basis of the policies in-force. This means that there is roughly 4% of growth that comes from the increased number of customers on a net basis that they are generating. Progressively, this will become kind of the basis of the growth for the next years, on top of which you will have the rates.
This is why when we were at H1, we kind of uplifted the expectation for Farmers that Farmers will be growing the business, not at single digits, but at high single digit numbers for the rest of the three-year target and then for the following years. We're moving? No.
It's coming.
Okay. Now you stay with Farmers.
Under construction.
Stay in good space. This is our mid-market. Look, what is at this point in time, one year into a three-year plan, what is our assessment of these targets? We feel very good about it. On the core ROE, we're clearly running ahead of these targets. This year, if nothing catastrophic happens in the next 40 days, we will clearly deliver well ahead of the 23% mark. If we look at cash remittances, Claudia will comment later on that. We gave the message already at H1 that we were running ahead of our plans for the year. Great confidence that the $19 billion will be achieved or exceeded. Core EPS growth, again, the development of this year is very, very positive for us. Claudia will comment about it again.
On SST, okay, I do not say anything on SST because you know the story, and I do not want you to have questions on SST.
Going back to what I consider to be the most telling KPI on our performance between now and 2027, core EPS, I mean, as you know, this is the direct reflection of what BOP does. As Mario mentioned, we have made great progress nine months into the year on all targets, all indicators, and EPS is one of them. In terms of what happens between now and 2027, what gives us confidence that we will be hitting our target? 80% of our achievement is expected to come from underwriting, which is what we do best, as you know. There are two areas here. One is the work that the teams have done and will continue to do on underperforming portfolios to make sure that they perform better.
All the work that we've been talking about on reshaping the portfolio, re-underwriting some parts of it, pruning other parts of it, this goes into here. That's 40% of the delivery. Like it's indicated on the right, this is the part that I think we are advanced in a way that's probably beyond what we had expected in 2025. That's a reflection of the retail work that has been done by the teams in continental Europe, but also the advancement in the commercial space. If I think of commercial auto, the crop business in the U.S., there are some areas that are really, really progressing well. Insurance growth. We spoke at length about middle market and specialty, not only that, but obviously the retail piece that you'll hear more about later on.
That all drove the top line to grow 8% in P&C at Q3 and more to come in 2026. Life, 11% top line growth to date. As we said before, Santander is coming back to stronger growth. We have all the reasons to believe that this will pick up even more strongly. Farmers, Mario mentioned already the transformation, and you'll hear more directly from Raul and Ken afterwards. The positive turning point on top of all other aspects on the PIF has been remarkable. This has come earlier than we had expected and the Farmers team had expected. Already in the second quarter, so between Q2 and Q3, effectively in six months, the team has been able to add 103,000 new policies. We have indications that October has accelerated further compared to September.
All of this underpins Raul's target to grow mid to high single digit from next year on. We expect also contribution from investment results. As you know, we run a very conservative, very prudent asset liability allocation. This will continue to be the case. We expect a solid contribution to our BOP from the investment activities, with obviously the expected as well increase in the unwind that will come through. Perfect. Diving a bit deeper into the portfolio quality points. The two biggest contributors to the EPS growth that I mentioned before. We've been talking about profitable growth at length on middle market, specialty, and retail. I will not go back into that.
I want to spend just a moment on the portfolio quality actions because, as I said before, I believe that here we are on track, if not ahead of our targets in a number of areas. You'll hear more from the German team about the work that has been done to reshape the motor portfolio. EMEA at Q3 has been improving five points year on year, and Germany was significantly ahead of that. That's definitely a place that, while it's improving for the whole market, I believe Zurich has been at the forefront of that. In the U.S., the commercial auto portfolio has seen a lot of actions as well. As we've been open with you last year, we wanted to fix a number of areas. We were overexposed to some commercial auto relationships in the U.S. program and the captives area.
The work to prune this exposure is 95% complete as we speak. This has been a drag to the commercial premiums in the U.S. for 2025. We do not expect to see the same extent of drag in 2026. This has also been a very important contributor to the commercial combined ratio improvement that you saw before. We've been growing less than expected in some areas in E&S, specifically large customers in property, where we saw that the rates were not up to our expectations. In crop, also a lot of actions have gone into reshaping the portfolio, making sure that the outside exposure that we had to certain states, to certain underlying exposure like hail, livestock have been decreased. Right now, the exposure to the private part of the portfolio versus the MPCI has decreased. As you see, 20% of the premium have come down there.
We expect it to be compensated on the more profitable side of the book. I will resist the temptation to make any comment on the crop profitability at this stage. You know that it's too early for us to do that. In terms of underwriting actions of the portfolio work, expense control, everything that the team has done has been really, really good and allowed us to progress well on the substance of the portfolio. Last but not least, and I made a comment on that also at H1, natural catastrophe exposure was obviously one of the drivers of the good performance year on year. This is not just good luck. While everyone in the market had less events or financially impactful events in 2025, there has been a lot of work from a portfolio management perspective to reduce the exposure to natural catastrophe.
As an indicator, we've been reducing our average annual exposure to U.S. hurricanes by one-fourth in four years. By the way, in the deck, we've also put one slide on Farmers, who has been on a very similar journey and actually has been reducing significantly the market share. You can see it on the example of the wildfires in California, which is significantly lower than the rest of the market in proportion to the market share that Farmers have. This is the result of underwriting work. One comment on our balance sheet and the cash-generative nature of the business. We mentioned before that we are running a book in life and in P&C that is generating cash quickly and in a reliable way. As you can see on the left-hand side, this applies to all the businesses we run.
This is really the result of a lot of work that has been done to shape the portfolio and the business model in such a way. For every $100 of NIS that we generate, roughly 85 generate cash in a very quick fashion. That is an average number. The point that I think is important for today is twofold. On one side, Mario said that already we have a very good line of sight of where we stand on cash at this stage of the year, as you would expect. We are executing very well against our $19 billion target for the three-year. We are ahead of the target as we speak in terms of the portion that we had allocated for this year.
The other important point for us to consider is that the core contribution to the $19 billion target over the next three years is coming from the core earnings generation. There is less reliance on extraordinary projects and management actions on things that are on top of the ordinary cash generation. There will be some for a balance sheet of our size. You always expect, obviously, that there are opportunities for us to repatriate excess and surplus capital. There will be regulatory changes. There will be transformation in the entities' structure. The core of it is generated by earnings. We have obviously a very robust plan between now and 2027 on how we exceed that $19 billion target. Okay. I think wrapping up, this is to introduce the next sessions, which we have already done, I would argue, Mario.
You'll hear from the business leaders that represent and are responsible for 50%-60% of our BOP and the initiatives that are most relevant in terms of achieving our three-year target. You'll hear from Mario and Saad on specialty in the fireside chat in a moment. You'll hear from Alex and Drazen on the middle market growth. You'll hear from Claudio, Carsten, and Peter on the retail space, P&C, and life. Last but not least, Raul and Ken on Farmers. Take the opportunity to understand the business, understand the progress, and what the plans are for this plan period, but also beyond.
Thank you all. Let's move to the fireside chat.
Thank you.
Thanks for that. I have now failed my Swiss proficiency test by losing track of time. I think citizenship is now dead to me. Good session and thanks for the good discussion. I suggest we take a 10-minute break to get the stage set up so that we can proceed with the fireside chat. If you want to grab a very quick coffee, rest break, please do so. Make sure you're back in here 10 minutes sharp, please. Thanks very much.
Y ou still sit on the right?
Yes. You two are the star of the show, not me. I'm just the... Okay, let's get started. Welcome back, everybody. Really pleased to welcome Mario and Saad Meret back to the stage. Saad is our new CEO of Global Specialty. As you heard in the earlier session, a really interesting and exciting opportunity for Zurich Insurance in the months and years ahead. We thought it would be interesting just to start with a very brief fireside conversation, introduce Saad to the group, and then also just tee up the discussion that comes after. We will open the floor to Q&A. That will be open to those of you who are joining on the web as well. Please submit questions, and we'll put those to my colleagues to the left. Maybe just to kick off, Mario, on a question for you. Zurich's created this new global specialty unit.
Can you talk to the reasons why? Just share what you think is so special about specialty.
First of all, specialty means for the next years an impressive amount of growth in the market. In order to capture this growth, you need to have the skills, the size, the investments, the resources now in order to capture the growth in five to ten years forward. Second, specialty, we like specialty because it is a very sustainable business where you cannot simply enter. You need to plan, you need to invest, you need to create the conditions. The composition of the market is very, very interesting and stable. This is why we prefer specialty to other lines of business.
Saad, turning to you, first, congratulations on leading this exciting new unit. You've passed the interview, but you've still got your boss with you here, so no pressure. Can you tell us about your priorities in this new role and just the vision for the specialty business we're coming from here?
Thanks, Mitch. Thank you. First, on a personal note, this feels like coming home to me. Specialty is where I started my career, and it has been an important part of who I am today as an insurance executive. I am super excited to lead this journey for Zurich and leading this great business forward. The priority is actually fairly simple. The first and foremost is really to focus on strengthening the Zurich franchise globally on specialty. As Mario mentioned earlier, we are a top three player, but we still feel that, and we believe that we have room to grow and improve this business. The second priority is around our people. We have an amazing team, world-class talent, but we need to keep investing in that talent.
We need to expand that talent, invest in them, invest in the technology to support them so that they can thrive out there in the marketplace and grow Zurich for us out there. Third, I believe that we need to really foster a greater culture of innovation and collaboration. I think the global business model that Mario described a few minutes ago will help us bring a sense of cohesion to that team globally and to allow us to really be more compelling to our customers and therefore strengthen our franchise globally.
One of the points that we touched on in the prior presentation was just the attractive margin that we see in this business. Claudia talked about a mid-80s level. I guess one of the questions we've received more recently is just how do we think about the medium to long-term margin profile of specialty? Maybe you could talk us through that.
Yeah, specialty is a bucket of many different things. What makes the margin stay is not the market trend, but it's the composition. Every year you accelerate some business and you decelerate or even shrink other businesses. That's the case, for example, this year, E&S, which is clearly an important part of the specialty bucket. This year we decided to slow it down because we didn't see the same margins that existed in the past years. Vice versa, should the condition change, we will be ready to accelerate again. You have to understand that with specialty, per se, it's not a uniform line of business. You don't have a specialty price. You have a combination of many different trends which are pretty much independent of each other.
What you have to decide is how much you want to push on one or the other in order to keep the margin steady. Over the past five years, we kept pretty much the margin steady by playing on the acceleration-deceleration of the good products and the less good products on a yearly basis. This is not about the long-term trends. It's just about the claims experience of the past year that then creates the condition to accelerate the year after and vice versa.
Mitch, I would just add to that that Mario earlier and just now just mentioned a number of what makes specialty special and what's unique about it. I think all those contribute to barriers to entry as well. That gives us a bit of a defense. I think those barriers to entry, based on the secular trends that Mario discussed earlier, are actually getting higher. First and foremost is really around talent. We have 1,200 great underwriters around the world, expert underwriters, super experienced. They're backed up by 400 risk engineers supported by over 4,000 claims examiners and claims experts. That team is supported by a decades-long investment in data, and a huge amount of progress has been done on our data lake the last few years and the use of that data lake.
That's become a true superpower for us and a clear differentiated IP for us. Of course, leaning onto our multinational account servicing, our ability to serve customers globally, it's really uncontested in terms of our leadership in that space. All those really contribute to a moat around that business that really gives us confidence for the future.
Just before we move to the floor and online for questions, I mean, this is a business that's existed for a long time for Zurich, but we did talk about some of the newer, more secular structural trends. Maybe you could just help frame the growth opportunity for this business and the different drivers. Again, over a medium to long-term perspective, how should investors and analysts think about it?
Yeah, I think intuitively you all value what's going to happen on infrastructure and constructions all around the world. It's also immediate to understand the power of the data center opportunity that exists in the market. Kelly Kinser, who is our Head of Construction and Surety globally in Saad's organization from 11, I think she told me that last year we did 250 data centers in the U.S., construction of 250 data centers. I don't think that there is another company who has such a track record. I don't think that there is another company who has such an experience and credibility to bring to the customers. I see this as huge opportunities, which, by the way, it's a theme that I want to repeat. I mean, everybody is scared of what's happening in the world. Everybody asks me about geopolitics. I see immense opportunities instead.
I mean, geopolitics is something I can do nothing about. But I was born during Cold War. And what I remember when I was a kid is nothing compared to the anxiety that I hear these days. These are cycles, and the world is not a safe place. It's not a stable place, but it's not a safe place either. I don't consider this world a very dangerous one. I've seen worse conditions, but I consider this situation as full of incredible opportunities. And this is what we want to go after. These are precisely the things that we want to go after. One final thing. We had a session with the board on energy. And can an energy transition exist, or is that just impossible?
I don't know what the answer is, and I don't know if Michelle has an opinion on that, but for sure, there is an immense amount of investments in energy. Again, we know what to do there. We know how to tackle it. We have the risk engineers. We have the people. This is what Saad and the team have to take as an opportunity for them.
Okay, good jumping-off point. Let's go to the floor and see if there's any questions for... Okay, lots of hands. William, should we just start on the bottom right-hand side here? Patricia, William Hawkins.
Thank you. It's William Hawkins from KBW. You've done a fantastic job defining how you see specialty business, but when you're looking inside the business, how straightforward is the distinction between what is specialty and what is non-specialty? Presumably, there's quite a gray area, and that could lead to a lot of management tension in terms of, this is all the great stuff. We want to grow this other stuff. We're not so keen on that. I can imagine a lot of people are going to be saying, well, this is specialty. Oh, no, it's not. How do you manage any internal channel conflict at the front end between standard and non-standard lines? Secondly, please, on slide eight, the pie chart that you show, the mix that you walk through, if you look forward in five years' time, how might that pie chart be different?
I mean, you've implied that E&S near-term could be a bit smaller, but I'm wondering if there's big shifts in that pie chart or if it's going to look roughly the same. Thank you.
Yeah, look, on the internal conflict, William, it's a very good question. First of all, Saad is not going to run an independent P&L independent from the countries. The purpose for us of doing this is to have the capability to centrally invest in direct investments where we think these investments should be, that the business will be run on the country's papers. The underwriters will sit in the countries. Germany has the biggest surety business, credit insurance business today in Europe, and the team stays there and continues to run it on German paper. If we believe that it's an opportunity to hire five experts in renewables for Germany, now Saad will have the capability to do that. Today, we have to go and negotiate the space in the German expense budget and in the German priorities.
Sorry if I'm using Germany, but just because we are in first row. That's why people sit in the back. That's the advantage for us. I don't imagine that we are creating conflict on who's going to do this because it is the team who have done it so far. They continue doing it. It's more about the new investments. It's more about saying, if we want to have 20 more cyber experts underwriters, where we want to deploy them, that's Saad's decision. Saad will send the people with the budget coverage already to the countries, and these people will write the business that Saad wants them to write. I don't really imagine that. So far, this hasn't been raising conflict issues or worries in the countries. On where this will be in five years, to be honest, I don't know.
I mean, I presume that we will get some surprises. I think cyber is going to grow much more than it is today. I think businesses like energy will grow even more than they are. I still think that construction and infrastructures will lead our pie. This is just a guess. It's fascinating to see this happening for me, for us. Let's just play along with it.
Okay, next question. It's Cameron down in the bottom here, Joe.
Hey, it's Cameron Hussein from J.P. Morgan. Two questions. Just really interested in what you think about whether a Lloyd's business would provide value, like a franchise there. I know you used to have a physical box at Lloyd's, not a syndicate, but you used to have a box there. Just interested in kind of your thoughts there, whether the corporation seems to be encouraging people and whether that would make sense. The second question is just, I guess, in terms of the specialty business, how much of it is syndicated? If there's any of it at all, how much of it do you lead? Thank you.
Yeah. Okay, on the Lloyd's, look, Sarah and I have been in touch with the Lloyd's for a long time. Look, we do not need distribution. We have every access. One of the typical reasons why people go to Lloyd's is that because they do not have distribution. We have distribution. We do not need that. We also appreciate that there are businesses that do not go outside the Lloyd's platform. By not being present on the Lloyd's, we might be missing a portion of the business. That has to balance against the costs of the Lloyd's platform and the time needed to set up and start the syndicate. We are open to consider, but we have not concluded any decision.
If we will eventually find out that the benefits in terms of a business that we do not have an access to today are bigger than the costs and the time needed to start it, we will start a syndicate. If not, we will continue as we are doing today. It is a very, I would say, practical consideration that we are giving it to. On leading conditions.
I'll take that. Look, it's hard to be a top three player in this world with $9.5 billion in premium without having a propensity or even a majority of our programs where we are the lead. That percentage will change from specialty line to specialty line, obviously, and from market to market, geography to geography. By and large, we are a lead underwriter, and we take pride in doing that. That's how we deploy our resources, our skills, our talent. That's why we have invested so much in those resources.
Okay. Vinit, just on the front.
Thanks. Yes, Vinit from Mediobanca. Two questions, please, again. One is on competition, and one is on just a bit of strategy. I mean, you emphasize very clearly that the entry barriers are quite high in specialty lines. Somehow, and forgive me, from the outside, a lot of insurers say that they want to focus on these areas, specialty lines, middle markets as well. Is there a sense that competition is also seeing some of this? Or is your position that, yes, for example, construction, we are the leaders by far, so we can relax a bit? How do you see the competition from the outside coming in? The second question was just for Mario as well. Last year, we spoke a lot about middle market, and now this year, we're talking a lot about specialty lines.
I just want to check, is it just because you think there's a shift in how you think between these two buckets, or is it just the same, but you want to just emphasize another aspect of your strategy today? Thank you.
Yeah, let me start from this because this is maybe more fundamental. First of all, specialty and mid-market, they are overlapping each other. A big portion of what the mid-market colleagues do, it is in specialty. The reason we are talking more specialty this year is it is because we felt we needed to make an organizational change about specialty and run it in a different way. That is the only reason. Since 2016, we have been pushing to grow mid-market and specialty, and we continue looking at this as a couple, not as one or the other. There is no shift in emphasis at all. On competition, look, I think everybody can claim whatever they like, but I think we show you the numbers. I mean, today, we are number three globally on specialties. Everybody can claim they are number one, number two. We are number three.
I mean, they're just too big compared to us. It cannot be 10. Everybody who wants to come, feel free to do it. It's a market where the top 10 make less than 25% of the total. I'm not afraid of whoever wants to grow. I want to quickly start growing ourselves even faster in order to concentrate more of the market because this is a market about skills. The bigger you are, the better. It's not a market where you can invent much. You need the size. You need the numbers. I don't know how many of our competitors have more underwriters than we have. How many have more than 250 underwriters for construction? How many have more than 100 underwriters in cyber? This is just a size game. You can play if you have five. You do nothing.
When we started renewables years ago, when Sarah and I decided, okay, let's go into renewables, we started hiring the underwriters in dozens, not in units. I mean, you do nothing with one or two. No, I'm not afraid of competition. In mid-market, again, Alex has explained many times how you need to go for mid-market. You need to establish local presence. You need to just not just have an office and not just deploy the people there, but you need to be intimate. You need to be local there. It takes time. You don't establish yourself in Denver and you get the business the day after, right? Because you need to get to know the brokers, the customers, establish the claim service, the risk engineers. It takes time. I mean, we have gotten where we are today nine years after. The numbers you see are nine years after.
As I said many times, everybody can be better than us, but they won't make it in a year. If they're better than us, they can make it in eight years and seven and a half. But that's the time frame. What you see, our numbers is nine years after. Just have that in mind always.
Okay. Just to add a couple of comments. I mean, just quickly, you used the word relax. I think that's something we don't—that's a word we don't use at Zurich, especially under Mario's leadership. I just want to make sure that's clear. The mid-market specialty, you used the word interplay. We look at it as mutual support. Then Alex and Drazen will have some great examples. One of the sort of the strengths of our mid-market offering, which you'll see, is you push to industry verticals, for example. It's hard to be compelling in industry verticals with specialties being at the table and sometimes forefront of the table. You'll hear more on that at the breakouts.
Just Will is patiently waiting beside you. Appreciate your time.
Thank you. Just by separating out the specialty, will this change your approach at all to the reinsurance buying? Any extra leverage this could maybe drive or manage volatility? Are you going to keep managing volatility at the total P&C level? I guess just within that, what is a sort of a normalized cat for specialty, or is it zero? Thank you.
On reinsurance, honestly, we do not know yet. This is something especially Claudio and I considered in the past months. We discussed it also together with Sierra. Yes, you can also go into different reinsurance protection schemes for specialty. It is too early, and Saad still has to start. I am sitting here, but he still has 45 days to go as the Head of Canada. Let us talk in a year's time about that.
Yeah. Yeah.
Great answer.
Normalize cat.
It's now zero, for sure. It's the same approach that we use for the rest of the business. I mean, the construction infrastructure part of the business, of course, is cat exposed, as the energy is, as the marine is. We apply the same principles that we apply in the rest of the business. It's definitely not cat immune, not at all.
As Claudio mentioned earlier, I mean, the robustness of the framework in terms of how we manage cat right now is working for us, and that's something we want to lean into in a major way.
Just Dom over here, Patricia. Hey, Joe, sorry. Dom is on the side.
Thanks. Dom O'Mahony i, BNP Paribas. Can I just follow up on the data center point? I mean, I did not even know the 250 data centers being built. Could you help us just size the opportunity here? Can you give us any sense of the percentage of the construction book that is data centers? I am trying to work out, given that is going to be a massive growth area for the economy, how big a tailwind is this for your business?
Yeah.
It is massive. I have in mind something that this was, yeah, it's here on the page. It's $350 billion worth of investments. Now, the question is, how much of this is business that we will capture ourselves, right? I mean, we're not the only insurer ready there to make an offer to the construction, to the builders. I can't really speculate on that. It is a gigantic opportunity for us, and it's an opportunity that we don't want to miss.
That 10% policy count is actually 14% of our business risk in the last period on average. What's interesting about what we've done in the U.S., for example, which is the biggest source of the investment right now, and that's projected globally, by the way, at $7 trillion by 2030, which is around the corner, literally. All these projects have been announced, sometimes already permitted. A big chunk of the $7 trillion is in the U.S. for obvious reasons. What's super interesting for us is that we've been, because of our proposition, because of our reputation, because of the skill sets that we have, we've been on every hyperscale project as well. We can't mention names here, but I think you know who they are. That's really a testament to the team and a testament to the brand.
Part of this, by the way, is the benefits. It is the ultimate beneficiary of the geopolitics tensions. Because since nobody wants to be at risk of losing their data on how the data is stranded or hijacked somewhere, every country wants to build their own data centers to storage, to have local clouds. Again, that is a fantastic opportunity for us. That is business. And it is good business.
We've got a question online, and we might be able to squeeze one more quick one after that. It's from Andrew Green, who obviously we missed today. I hope your ankle gets better. How does the specialty market concentrate? We talked about the specialty market being fragmented. How does the specialty market concentrate, and what role do we play in that hiring underwriters, etc.? The second part of the question is, are there any specialty lines that we're not exposed to that we would like to have exposure to?
Yeah. I mean, on the second one, not really at the moment. I mean, we can reassess it. Frankly, also, we're opportunistic in growing or shrinking. Years ago, we had no presence on E&S, and now we are a decent player in E&S. At the moment, we do not plan to enter into other specialty lines. How is the market going to concentrate? A lot of this is underwriters' acquisition, is hiring, retaining, growing, maintaining your underwriters. This is the competitive advantage. This is where the value is. It is in the people. This is a people business. You hire underwriters not only because you can pay them, but also because you can give them credibility. You give them a brand. You give them systems. You give them reinsurance. You give them capital capacity. You give them an ecosystem where they can work well.
I think we're pretty competitive on that side.
So we've got three minutes left, which probably means half a question. James Shuck, if you can do half a question for the last three minutes. I saw your hand up earlier.
Whatever that is, James.
Thanks. It's James Shuck from Citi. There'll be half a question in three parts, probably. Actually, it is just one question. When it comes to global specialty, there's a number of different business models out there that have been successful. In particular, I'm thinking about the use of third-party capital. My question really is, does it make sense for Zurich to always retain the underwriting risk? Or could you do more by offering a more holistic offering in the specialty space and introduce third-party capital into that? I suppose the second part of that question would be, Mario, how are you thinking about the potential use for reinsurance captive rather than reinsurers? Thank you.
Maybe. It's the half answer to the half question. Yeah, I mean, these are all things that we're considering. Again, behind the decision to create a global specialty unit, we saw that opportunity now to use these tools ourselves. We thought, if we have a global specialty unit, we can really make this kind of decisions. Without it, it will be practically impossible. These are things that we will consider next year. Let's see how far we go with that. Yeah.
Okay.
You're spot on.
Great point to finish on. We have a short break for 10 minutes coming up after this session. Just a reminder, the green badges will move to the next room for the breakouts. Yellow badges, stay in this room, please. On your way, collect coffee, etc. Just maybe a short appreciation to Saad and Mario for our session. Thank you.
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Okay, welcome back, everybody. Thank you for keeping on time as well. Really appreciate that. It helps us keep the day moving. A real pleasure to introduce the first breakout session. We'll have about 45 minutes, so we'll finish on one o'clock. The first session up today is Middle Market. Alex Wells, who heads up our U.S. business, and Drazen Jacsic, who heads up our U.K. business. We'll talk for 10-15 minutes or so, 15-20 minutes, sorry, and then we'll break for questions after that. Over to you guys.
Great. Thank you, Mitch. All right, let's talk about Middle Market. As Mitch said, I'm Alex Wells, and I run Middle Market in the U.S.. I'm joined by my good friend and colleague, Drazen, the CEO of our U.K. businesses. Together, our businesses represent over $5.4 billion in Middle Market GWP, or about 70% of Zurich's Middle Market business globally. I joined you last year in London to discuss the success we had had in the U.S., Middle Market, and the platform and capabilities we had built. Drazen and I are here this year to give you an update against our progress on the 2027 strategic plan and give you a view into our two largest Middle Market books of business.
Spoiler alert, we are executing globally against our strategies, and we have seen double-digit growth in a majority of our Middle Market businesses this year, including in our core U.S. and U.K. business. We feel good about achieving the $10 billion target that was laid out in the 2027 plan. As Mario mentioned, the global Middle Market is a large segment with higher growth, better margin, and less volatility than other market segments. In many places, it is also experiencing broker consolidation that offers targeted opportunities for accelerated growth. Zurich has built a strong technical and operational foundation and expanded geographic footprint and distinctive capabilities that create a competitive advantage in many of our markets. We also have a demonstrated record of success, and we are executing against a strategic plan to gain market share both in a consistent and disciplined manner.
Zurich has an established global Middle Market franchise with nearly $8 billion in gross written premium and a combined ratio in the 80s. Since Mario laid out the original Middle Market strategy almost a decade ago, we have consistently grown this book at an above-market pace and with strong profit margins. We are confident in our ability to continue that trajectory through this strategic cycle with a 9% CAGR. We are continuing to invest in smart Middle Market growth around the world. Our technical expertise, strategic portfolio expertise, and disciplined expense management will continue to provide a differentiated combined ratio that is accretive to our overall commercial book of business. Let's talk a little bit about the Middle Market in the U.S. The U.S. has the largest Middle Market with a conservatively estimated $120 billion in GWP and a strong projected market growth of nearly 6% annually.
The top six carriers only control about 25% of the market, with no one carrier in a dominant position. Zurich sits among those top six carriers, and we've been gaining market share consistently over the last five years with an outsized 14% CAGR. Zurich is an acknowledged leader in the U.S. Middle Market with differentiated growth. However, we still see significant market opportunity with only a 3%-4% market share currently. The fragmentation of the market that Mario spoke about, combined with broker consolidation and the regulatory and operational complexity to entering this market, give established top carriers such as Zurich a natural growth and margin advantage in the next cycle. As you can see, we have nearly doubled our book of business in the last five years while improving the margin in our book to a consistent sub-90s combined ratio.
We're now committing to growing this book by an additional $1.4 billion during this market cycle while maintaining a strong profit margin. 2025 has been another proof point year of execution in the U.S. with projected double-digit growth in our core business and a combined ratio once again in the 80s. Zurich is one of few carriers with a consistent demonstrated execution culture and a full suite of capabilities necessary to have success in the competition for individual accounts and book consolidation. We have outperformed the market for the last five years. We're outperforming the market this year, and we expect to outperform the market in the next strategic cycle. Geographic expansion and specialty underwriting are core pillars to our strategy in the U.S. Middle Market. Creating local relationships by putting more underwriters closer to the broker and customer have been crucial to our success.
The value of local underwriting is a uniquely Middle Market proposition, with accelerated growth and improved profitability consistently the result. Our expansion offices have grown three to five times as fast as our mature offices, with a better portfolio mix that leads to better profit margins. Since 2020, we've expanded the number of offices in the U.S. from a core of 13 to now nearly 35, and now generate almost half of our new business from those expansion offices. 2025 alone saw us add five new offices in the U.S., and we have plans for five additional offices in 2026. Key to our geo-expansion is hiring talent. We talked about that a little bit last year, as one of my friends just reminded me. We've hired over 70 new underwriters in 2025.
30% of those came in our new expansion offices, and 40% came in our focused industry specialization. Focused industry specialization is our second strategic advantage that we've leaned into. As we discussed last year, we've built 12 industry verticals that cover nearly 90% of the U.S. economy. All 12 of these industry verticals bring unique insights and value to both our customers and our brokers. The six focus verticals that you see on this page are those in which we've made outsized investments, including in dedicated underwriters and unique claims and risk engineering capabilities. These are the verticals that are both growth engines to the U.S. economy and have shown that they value differentiated expertise and service in their financial partners.
Our growth in these focused industry verticals over the last five years has been nearly twice as fast as the rest of our book of business, with a loss ratio of 5/10 points better in each one of those verticals. We lean into these industry verticals, and they give us differentiated growth, but they also help drive our combined ratio lower year-over-year. This slide gives you two examples of how we've combined our geo-expansion strategy with our industry vertical strategy. On the left is one of our first expansion offices—excuse me—Charlotte, North Carolina. We've established that in 2021. Charlotte started as a $5 million office and will finish 2025 above $20 million. That's a 32% CAGR through 2024, with continued growth this year.
Charlotte is a financial and banking hub in the U.S., and one of our recent successes is a good example of the types of accounts that we're writing out of this territory. This is a financial consulting firm with about 100 employees. We have a dedicated financial institutions underwriter based in Charlotte, and they knew this account, solicited it from one of our new relationship brokers, and we were successful in securing the order, taking the account from a 20-year incumbent because of our local relationship and our dedicated specific underwriting expertise. On the right is San Diego, a newly opened expansion office this year in 2025.
We've always managed our San Diego territory out of our Los Angeles office, but because of our new product capabilities and our life sciences industry vertical and our knowledge of the concentration of that type of business in the San Diego territory, this year we decided to base several underwriters physically in the San Diego office. Our new business this year is six times the production we had experienced last year when we were trying to handle San Diego out of our Los Angeles branch. This account is an exact example of the type of business we expected to write by making this investment in the San Diego territory. Lastly, I want to give you a little bit of a sense of what we're doing with AI in our Middle Market operation in the U.S.
We touch over 10,000 Middle Market accounts, which is about 50,000 lines of business annually in the U.S.. Our success is often predicated upon our ability to bring smart solutions to our clients and our brokers faster than our competition and with less questions. We know that our underwriters spend a lot of time collecting, summarizing information, waiting for data, and lastly, trying to reconcile that against our underwriting appetite and our underwriting guidelines. The three AI-driven solutions you see on this slide were specifically developed to address non-productive friction points in that process. The work was done collaboratively with both internal and external AI specialists and with our underwriting community. It was developed, piloted, and rolled out inside of the last 12 months. These are all live tools that we're using now to make our underwriters and UAs more efficient.
We expect that this is going to add 20% to our efficiency for both underwriters and UAs without having to change our customer-centric and consultative underwriting model. This is the future of what we will be doing in the United States by using AI. In summary, we've built a multi-billion dollar franchise in the United States in the Middle Market. What we've built is special and different. We have a proven track record that our model and our culture is successful, and we have room to continue to grow without giving up margin. With that, I'm going to turn the mic back over to Drazen to talk to you a little bit about the U.K., and then we'll be back for questions afterwards. Thank you.
Thank you, Alex. You have heard from Alex in the U.S., and I am going to tell you how in the U.K., through our service delivery capabilities and then particular focus on international and regional brokers, we are looking to outperform the market. U.K. Mid Market is large and growing, and conservatively, it was valued at $15 billion in 2024. Zurich has about a 5% share, and we are in the top five providers. The market is fragmented, as you would imagine, and the top 10 carriers have about half of the market. The rest is then split amongst numerous providers. It is not uncommon to see at broker panels as many as 30 providers of capacity. Alex obviously talked about why Mid Market presents significant growth potential, but it is obviously due to rate resilience.
That's a critical one, profitability, but also due to this fragmented nature of the market, which, of course, gives us an opportunity to increase our share of growth, market share. However, to succeed in this market, it is just not enough to compete on price and product. You have to have really great technical and operational capabilities and service, which is particularly critical. Of course, that is difficult to build and creates a barrier to entry, but it also provides a competitive advantage for us. Brokers now expect to transact very quickly and often digitally and sometimes even self-service, using the self-service platforms, which is more aligned with the SME segment. At the same time, they also want the ability to speak directly with technical experts and have more tailored solutions from the corporate segment as well.
In reality, they're really looking for the best of both worlds in this case. We've been building these capabilities over the past several years. I think just like in the U.S., we also expanded geographical presence. We increased the number of offices from seven to 11 offices, but then again, supported with increasing that local technical expertise. We're proud to say that 99% of all of our underwriting decisions are made locally, which means that it really enables us to respond very quickly to broker queries. We've also invested in building digital solutions and now have the ability to quote and bind policy within 24 hours. We've introduced also a rapid renewal process where, at a request from broker or customer, we can renew, bind, and issue policy within the same day.
To give you a sense of scale, in 2024, about one-third of our Mid Market portfolio was renewed through this rapid process. All of these improvements have led to strong growth both in our London and regional portfolios over the past few years. Particularly, our regional portfolio has grown at double the rate of our London book, with a combined ratio consistently below 90%. If we look at 2025, it is another strong year with double-digit growth across the board despite the competitive market. How do we know that brokers like what we do? If you look at our TNPS scores, particularly for our regional business, it has improved from + 33 in 2021 to + 75 in September this year, which is considered world-class. All of this was driven by this buildup of capabilities and service.
To top it up, this year also, we achieved a five-star rating in Insurance Times Commercial Lines Survey, which is conducted by 850 U.K. brokers. We are one of the only three insurance companies in the U.K. who have that rating. Now that we established the strong foundation, we are ready to—thank you. We're ready to capitalize on this drive to grow further. Overall, the market is projected to grow 4%-5% CAGR over the period. We aim to outperform the market with the most significant opportunity, again, in our regional Mid Market portfolio and still maintaining our sub-90% combined ratio. The main focus will be on increasing share of wallet with international and regional brokers, particularly in the regional areas.
We're also making further investments into online broker submission tools to enable them to submit their requests through their normal usual trading tools as well. Just like in the U.S., we're piloting some of the AI capabilities, such as Sixfold or Guideline IQ as well. I also talked a little bit about how brokers want the best of both worlds. We want to leverage our SME servicing capabilities just to differentiate our service further. I'll give you an example of a live chat which we use in the SME. We handle about 10,000 live chats with brokers every month. We respond, and 60% of those live chats are answered within 30 seconds. Brokers love it because they can get an immediate answer to some of their queries.
Just to close this slide off, if we could grow the share of the market with the share of the wallet with international and regional brokers to the same level that we have with our major global brokers, that would present significant material opportunity for us for growth for the next few years. Just to close off, you have heard the—thank you. Mine is not clear. You heard the U.S. story, and then, of course, now the U.K. The Middle Market for us is large and growing. It is profitable, and it has lower volatility. In most markets around the world, it is fragmented, which, of course, gives us an opportunity for growth. Zurich has an established profitable franchise of almost $8 billion and have built—we have built platform and capabilities to create competitive advantage and barriers to entry.
We have already proven that we can grow Middle Market book profitably. In 2025, we are going to have another strong year with double-digit growth in all of our major countries, including, of course, the U.S. and U.K., with sub-90% combined ratio. With that, we have every confidence in our ability to leverage our competitive advantage and meet our 2027 target. Thank you.
Okay, thanks, guys. We will go straight to Q&A now. Just a reminder to those of you participating online, please submit questions as well, and they will come through to me as we go through this session. Who have we not had yet? Over here, Joel on the side, please, just tune in. There we go.
Great. Thank you for taking my questions. It's Andrew Beck, Goldman Sachs. I guess both are on the U.S. sort of growth in underwriters. The 100 added by 2026, I guess if you add that, if you count the full 100, do you have a sense of whether the market share by underwriters would be higher or lower than the 3%-4% market share that you show on the slides, which I'm assuming is GWP? Then second, I guess, is the 100, is that a net number? So it includes added and underwriters that left. Do you have to give a sense of sort of how that breaks out and then how we should think about premium added on a go-forward basis? I appreciate it will take some time to ramp up, but sort of premium per underwriter, any metrics there would be really helpful. Thank you.
Yeah. So it is a net number. That number that we gave of 100 new underwriters was net across the three-year cycle. So net in the U.S., we still have, as Mario said, 40 days to go, so fingers crossed, but we're sitting a little bit above 50 net new underwriters in our core Middle Market business. As we've talked about earlier, there are some other parts of our business that are also defined as Middle Market, and they sit in specialties. We've added 20 net new underwriters in our construction space as well in Middle Market construction. The 70 is really a net from those two combined areas. It does take a little bit of time to ramp up our underwriters. We actually dedicated two staff positions during 2025 because we knew we were going to add this type of new underwriters.
We added two underwriting positions specifically to help onboard our new underwriters and get them productive faster. We have cut in half the amount of time that it takes for a new underwriter, an experienced new underwriter that is coming to work for us, to get their letter of authority. It was about six months, and now it has been about three months over the last two quarters. We have really shortened the amount of time that it takes for our underwriters to become productive in the market. I think that we have changed that cycle from about two years to get fully ramped up for an underwriter to something under a year. Yes, a lot of these underwriters that we invested in in 2025, they are built for 2026, 2027, and as Mario said, really beyond even this market cycle.
We're investing in strategic talent in order to grow differently. I didn't mention we also have an underwriting trainee class that we add every year. This year, we had the largest trainee class we've ever had in the Middle Market. That is something that many of our competitors have done away with over the years. It takes a lot of time and effort to bring new people that know nothing about insurance into the world. We believe in it, and we believe we get better underwriters over time by having those folks. We really started that almost six years ago, and the people that have graduated through that program are now some of our top-performing underwriters in the U.S..
Just Dom next. Just over here. Sorry, Joe. Thanks.
Thank you, Dom O'Mahony , BNP Paribas. Firstly, thank you for the presentation. Just two questions. I wonder if you reflect on the growth that the Mid Market business has delivered, very significant GWP growth, also growth in offices and people. Is the driver really people? Is this really about growing the number of people because actually the amount of business being done by each individual underwriter or each individual office is essentially the driver? Or have you also been getting the operational leverage of more business per underwriter? Could you just help us break down? Is it number of people, volume, and price, those three things?
Yeah.
Then the second question is, I think one of the messages that you folks have given us over the last few years is Mid Market, a lot of it is about location. It is about being in San Diego, not just in LA. Could you just help us understand why that is? I mean, a lot of the people here are based in London. We serve international clients. When you are just a phone away from our clients, why is it you need to be that local? Firstly, what is the value of that from a commercial perspective? Also, what is lost, if anything, from the fact that if you are in San Diego, you are not sitting with your healthcare colleagues in, say, Pennsylvania? Thank you.
Yeah. We make strategic growth decisions on people knowing that we have to earn into those over time. We earn into them fairly quickly, but as we're on a growth trajectory, we have to have more individual underwriters in the marketplace against the new businesses that they're writing. As they mature in a market, they gain enough market share relative to their book size for that to make sense. I'm a finance guy, so I measure both of those things, right? I know I have to have more bodies in the marketplace to drive that type of new business growth, but we also measure the efficiency of our underwriters and our ability to handle bigger books of business over time. We have a number of tools that we've put behind that. We know we have established underwriters.
If we take our established underwriters and look at the average premium that they're handling on an ongoing business basis in a mature market, we've actually recognized about a 30% efficiency gain over those five years against those underwriters. Now, when we invest into a new underwriter in a new geography, we seed them with some part of a book of business, but most of their time and effort is spent around new business and being relevant in that marketplace. That brings back the average. If I look at the established underwriters, I understand where we will be once we mature into all of those businesses. Now, with regard to your question about the importance of being local—oh, go ahead, sorry.
I'll just jump in. Slightly different story in the U.K., for example, where we don't recruit anywhere near as large numbers as they do in the U.S., but our focus is completely on service and some digital aspects of it. Where we get to, even when we get new underwriters in, we're able to expand the portfolio that they're writing over a period of time. It's not for us. It's not so much of putting tens of new underwriters in, but training them. Of course, we'd always add new ones, but training them and then just plugging into some of the digital services. I think that's a kind of slight nuances to different markets.
Absolutely. The second part of your question about the regionalization or the geographic expansion, there are 50 city jurisdictions within the U.S. that have over a million people in them, right? When we start looking at the geographies across the U.S., there are a lot of opportunity in places that we do not have any of our large competitors sitting in them, right? When we look at the opportunity to add a physical presence in more of these locations, we see greenfields. We see competition. I mean, we compete and take business from our major competitors, and we have to. We are good enough to do that. I think we have got a differentiated model.
When we go into some of these smaller markets, we're competing with far lesser levels of competition relative to sophistication, ability to handle business across even state lines, much less multinational or international. Even in the Middle Market in the U.S., as you think about the size of those individual accounts, most of the time they have multi-state exposures, and often they're going international, right? We bring a differentiated level of expertise into those marketplaces. The brokers that are based there are provincial. They want to do business locally whenever they can. They will do business at a centralized level going into another city if they have to, but their preference is to stay local. Their preference is always to give local relationships their best business, right?
They protect their best business locally because they believe that if they know the person that's providing that underwriting, that that underwriting is going to be more consistent and more stable over time, which helps them manage their relationships with their customers individually. Yeah.
Hadley, I do not think we have had a question yet. Hadley on the right here.
Hi, thanks very much. Hadley Cohen, Morgan Stanley. Just on the theme around hiring talent and what have you, can you just give us a bit more color around where you are hiring these people from, how they are incentivized to come over to Zurich, and I guess how they are remunerated, what are the KPIs that they are focused on, and does that vary by line or industry, presumably? The second question is around AI. It is always very interesting to hear companies talk about their AI initiatives and what have you, but from an outside perspective, it is very difficult to see what is different to what other companies are saying.
Do you have a sense of how you are differentiated from an AI perspective and to what extent, or is it just that you need to be doing this to keep at pace with your larger peers in the space?
I'll talk to you about the talent management first, right? I mean, we've built a reputation, and that's the first thing that we go into any hiring situation around, right? We build our reputation as being a place that good underwriters can be successful. Unfortunately, in the Middle Market broadly, that's not true with all of our competitors, right? There are a lot of expectations in other places that underwriters just follow rules. Just go and follow these portfolio rules and write this business, just color by numbers, right? We talk a lot about the fact that we expect underwriters to be professional decision-makers, and that's appealing to the best underwriters in the market, particularly the specialists in the various industry specializations that we've built. We've taken folks from our major competitors. We take folks from regional competitors.
When we go into a new market, sometimes we're hiring somebody that's worked for a regional insurance company in the U.S. and is looking to expand their footprint and work for a bigger company. It really kind of depends. In the major markets, it's often the top 10 carriers have folks that we go after. We look for talent, drive, and an ability to think about their business differently, and that's how we hire. We've been very successful. I don't think that there's another Middle Market carrier that's hired as well as we have or as consistently as we have over time. In terms of remuneration, we have an underwriter scorecard that we use, and it's differentiated by specialization. It's got 15-20 factors that we talk to people about.
Certainly, growth is one of them, but there's a lot of book mix and other technical components to it. I think we pay very fairly for a merit-based type of underwriting approach. Yeah. I'm sorry, what was the second part of the question?
Yeah.
Oh, the AI.
Yeah. I mean, there is a certain level of AI you have to start to embed into your business that I think everybody is doing. Again, I think we think about it a little bit differently in our Middle Market space than some of our competitors do in that I'm looking to enable smart decisions by my underwriters. I think some of my competitors are trying to make decisions for their underwriters using AI. I think that the secret sauce in the Middle Market is this combination, and Jasmine touched on this, of there's individual account underwriting, there's portfolio underwriting, and you need to give underwriters insights into both of those things. I need to give people a better understanding of the individual account that they're working on and how that fits in the portfolio.
The trick is whether those underwriters can combine that information through their own expertise to make good decisions, avoid bad accounts in good portfolio classes, and write good accounts in maybe some struggling portfolio classes, right? That is how you differentiate yourself from a sub-80s combined ratio versus a 100 combined ratio, which is where the general market runs. I mean, Claudia touched on this, right? This is not just happenstance. This is not just the market runs where we run. We run much better than the general market does. Yeah.
Vinit, over here, Joe.
Thank you. Alex, thanks for the underwriter battle for talent field that you're giving us. I'm just curious that your outperformance on combined ratio versus the market, I mean, how much of that is a little bit being put at risk by aggressive hiring practices or not aggressive, but enthusiastic hiring practices? Sorry, I'm being careful of the words. That's one quick one. Second one is just sorry about the chart 26, but I seem to remember that Middle Market was $7.3 billion or $7.5 billion in 2023.
2024.
It's 7.7 in 2024. I mean, that doesn't look like a growing fast-growth business unless the definitions have been revised differently from last year. So maybe it's more CFO could.
Yeah, I think maybe we have to reconcile those numbers for you. I mean, we've seen a 9% CAGR globally against our Middle Market books since 2016, and that's a continuation into the next strategic cycle, and I think we're comfortable with that against it.
Why don't we pick that one up at the end when we do the group and stick to the U.S. and U.K. for this one?
Okay. U.S. was one question for you. Second question, the U.K. was you left us with that teaser about how it could get much better. I'm just trying to take your words from it where you said if you could grow the share of wallet for international and regional as much as the globals. I mean, is that something like an upside or is that part of your assumptions for planning or what should we think about that?
I mean.
I mean, it's absolutely part of our strategy. We have a number of quite strategic relationships with those brokers, and you would have seen consolidation of their expansion in the market. By virtue of their consolidation, we automatically kind of get opportunity to write more business with them. It goes beyond just new business. We do a number of other things with them, joint professional developments, etc., etc. There is a much deeper relationship with those brokers. Our share of wallet with international and regional brokers is about half of that that we've got with our major global brokers. It's a really significant opportunity for us as we go forward.
Anything of that?
Yes, indeed. Yes.
Oh, the talent. Whenever you bring new people into the organization, you have to train them and make sure that they're doing things the way you want them to do it. I mean, we're hiring experienced, talented people, often referrals from people that already work for us. Our job is to bring them in and train them and make sure that they're able to do what they do well according to the sort of Zurich model. Again, we're just trying to do that faster, right? We do not give somebody a letter of authority as soon as they show up and let them go do whatever they want to do. They have to go through our process, and we check and make sure that they know what they're doing. We're hiring talented people, and we need them in the marketplace.
We're trying to do that faster.
Will.
Thanks. Will Hardcastle , UBS. I guess you touched there just quickly on the U.K. broker consolidation. I think the broker consolidation was more broad as a first point. Just thinking about that in the U.S., perhaps, you do highlight that it's working in your favor. Are you specifically saying there versus the tail of the competitors, or are you also saying versus your bigger competitors? I guess why? The second one is there seems to be a lot of businesses talking and trying to grow U.S. Middle Market. It's clear you've got a very strong franchise here. I guess how can we be so sure, though, that the increased supply of capital won't drive more competitive pricing in the environment and therefore deteriorate margin, or is that somewhat assumed with the efficiency benefits being eaten into? Thank you.
I think the broker consolidation, there's certainly the tail to all of the carriers out there. I mean, when I talk to our broker friends, they'll tell me that they do business with hundreds of carriers in the U.S., and they're trying to shorten that tail to a couple dozen, right, that they really want to do business with. Certainly, I think there is an automatic opportunity that happens because of that. I think that we also can compete. We can be very competitive with our top carrier competitors, and we expect to win more than we lose when we start talking about also that top of the consolidation chain. I think it's easy to just let the trend happen, but we expect to outperform the trend as we think about it.
With regard to the competitive nature of the marketplace and the capital, I think there are different trends that are going on in the U.S., and I think there is capital coming in on the property side, and I think there is a lot of pressure in the liability lines to raise rates, and we are seeing uplift on that and profitability increases against the casualty lines of business. I think on balance, the Middle Market is more stable than most other market segments. I mean, we still see rate above overall trend across all of our lines of business for 2025. There is pressure, but this is what we do. The reality is good carriers beat the market on upcycles and on downcycles.
My expectation is that we've hired the right people, and we're managing them in a way that we're going to beat that cycle as we move forward as well.
We'll stay on this side, and then we'll move after. Will, just over here, Patricia, just two at all.
Thank you. William Hawkins from KBW. Could you talk a bit more about how you're managing growth versus profitability with regards to the investment spend that you're implying in all of this growth? I guess the first question just is all of this investment spend immediately booked in the combined ratio, or are you capitalizing it in some way? I have no idea about the scale. Is this a big deal of investment or just lost in the rounding? Related to that, when you're thinking about the balance between the two, it's lovely to have a combined ratio in the '80s, but you could be sitting there saying, "Why don't we have a combined ratio in the '90s?" and then we could open 10 offices a year rather than five. I don't know how you're thinking about the optimal growth rate.
Depending on how you answer that question, does there come a point when you sort of say, "Okay, investment has now reached its maturity, so we can step down the combined ratio," or is it always going to be a continuum in how the business evolves?
Yeah, yeah, sure. The immediate investment that we're making in these underwriters, it probably impacts our book half a point to a point, something like that in terms of the expense ratio. We'll grow into that. I'm not really concerned about the initial investment against that. Your question about growth versus profitability, I mean, that's what we do as underwriters, right? We're constantly balancing and looking at our book of business and saying, "Should we be growing faster? How do we grow faster in the most profitable parts of our business?" Because our business isn't a monolith, right? We have a lot of different sub-segmentation strategies. We talked a little bit about the focused industry practices. The faster I grow those and the better I am at delivering that expertise to that clientele, the better my combined ratio is going to be, right?
Because those inherently have a better combined ratio in my underlying book of business. We lean into those. As you saw, a lot of our investment in people is in places that we think have a better combined ratio than in other parts of our business. We think about that strategically every time we hire a person. We say, "Is this accretive to the book of business?
Joe, just in front of you there, James.
Thanks. James Shuck from Citi. Interesting. I mean, mid-market is defined on the slide earlier for the market as a whole was turnover up to $300 million. Just curious if that's the same threshold that you have for mid-market. And kind of moving on from that, how important is it to have a cyber product for the mid-market offering? Because I know Zurich as a whole is quite reticent to underwrite cyber. I would think that having a holistic product that is anchored around cyber would be an important unique proposition that's kind of increasingly needed. And then sort of just a final point is just what's the opportunity? I'm not sure if this is a question more for larger corporate, but is there an opportunity in AI insurance? So obviously, it's a massive market and growing, and it's a liability line.
I've seen some quite attractive numbers in terms of the size of that market over time.
Yeah. I mean, I think your question about cyber, we want to write cyber in the middle market, right? That's the target area of our cyber initiative. We certainly partner between our P&C lines of business and our cyber line. I don't think that's at odds. I think we've got the right appetite in our cyber space for the middle market, especially in the U.S., and I know the U.K. I don't think that there's any problem with that. I don't know that there are a lot of accounts where cyber is the lead line on a relationship or a discussion. In the U.S., it usually centers around the traditional property and casualty in the middle market, and then the cyber is an ancillary and supporting line of business. You asked about the size of account in the middle market.
Yes, there are different definitions around the world. In the U.S., it's generally under $1 billion in turnover or revenue would fit within the middle market space. Some of our competitors will define it a little bit less than that. We certainly have some very straightforward, more vanilla risks where that turnover is a little bit higher than $1 billion. I think in the U.K.,
it's up to $300 million, and then you will find in Asia-Pac, in many countries, it will be up to $150 million, for example, just because of the nature of the local markets. I would just say we're looking forward to working with Saad on some cyber for mid-market, right? That's right.
I think the AI space, I think everybody's still trying to figure out what the ongoing AI exposure and opportunity to provide insurance is, right?
Like right now, it's all about how do we build it? Then we'll see as that becomes a more mature operational exposure how we participate in that. I think you're right. It certainly starts at a large global corporate level that we're going to have those conversations. A lot of our business in the U.S. is tech business, and we see an increasing number of tech middle market accounts that are AI-oriented, right? They're all shifting into this, and we're understanding it as we go along too.
James, just a reminder that we put this slide in at the half year with the breakdown of the specialty business mix, and circa 4% of that $9.4 billion was cyber dedicated. In and of itself, it is a pretty large number, and also within a market context as well. That obviously goes right across the business.
Is that all retained by you as well, or is it just fronted by Zurich?
They're pretty much retained.
That's also one of the reasons why we made some investments like Cowbell, for instance, which gives us the support and services on top of the underwriting to be serving.
For people online.
Yeah. Okay.
Sorry, I was just mentioning that this is one of the reasons why we've made investment in Cowbell, which gives us the foundation not only to be good on underwriting to support middle market, but also cyber services all around.
Okay. That is taking us up pretty much to the close. You will get an opportunity to speak to the team, obviously, at lunch and at the end of the day as well. Thank you very much for the questions. Really good questions from the floor. Thanks to the guys for a good presentation as well. We're going to truncate the lunch, so we will come back at 1:40. We're conscious that some of you have got flights to catch, so we do not want to be responsible for not getting home to see families and friends and so on. Can I ask you to be back in the room at 1:40 sharp, please? For everyone online, 1:40 European time, we'll be back online live. Thanks very much to the guys for a good presentation, and thanks for the questions.
I love you, baby.
If it's quite all right, I need you, baby. To hold a lonely night, I love you, baby. Trust in me when I say, "Oh, pretty baby, don't bring me down, I pray. Oh, pretty baby, now that I found you, stay and let me love you, baby. Let me love you." You're just too good to be true. Can't take my eyes off of you. You'll be like heaven to touch. I want to hold you so much. I've long lost love has arrived, and I thank God I'm alive. You're just too good to be true. Can't take my eyes off of you. I love you, baby. If it's quite all right, I need you, baby. To hold a lonely night, I love you, baby. Trust in me when I say, "Oh, pretty baby, don't bring me down, I pray.
Oh, pretty baby, now that I found you, stay. I love you, baby. Trust in me when I say, "Let me love you. Let me love you." Mother, mother, there's too many of you crying. Brother, brother, brother, there's far too many of you dying. You know we've got to find a way to bring some love in each day. Father, father, we don't need to escalate. You see, war is not the answer, for only love can conquer hate. You know we've got to find a way to bring some love in each day. Pick at lights and pick at sides. Don't punish me with brutality. Talk to me so you can see what's going on. What's going on? Yeah, what's going on? Oh, what's going on? Mother, mother, everybody thinks we're old. Oh, but who are they to judge us simply because our hair is long?
You know we've got to find a way to bring some understanding here today. Oh, pick at lights and pick at sides. Don't punish me with brutality. Talk to me so you can see what's going on. Oh, what's going on? Tell me what's going on. What's going on? Now, baby, come on. Don't claim that I love you. Never let me feel. I should have known you brought nothing real. Come on, be a man about it. You won't die. I ain't got no more tears to cry, and I can't take this no more. No, I gotta let it go. And you know I'm out of love. Set me free and let me out this misery. Just show me the way to get my life again. You can't handle me. Said I'm out of love. Can't you see? Baby, you gotta set me free. I'm out of love.
Said how many times have I tried to turn this love around? Every time you just let me down. Come on, be a man about it. You survived. Prove that you can work it out all right. Tell me yesterday, did you know I'll be the one to let you go? You know how I love you. Set me free and let me out this misery. Show me the way to get my life again. You can't handle me. Said I'm out of love. Can't you see? Baby, you gotta set me free. I'm out of love. Let me get over you. The way you got a know of me too, yeah. Seems like my time has come and now I'm moving on. I'll be stronger. Set me free and let me out this misery. Just show me the way to get my life again.
You can't handle me. Said I'm out of love. Set me free and let me out this misery. Just show me the way to get my life again. You can't handle me. Said I'm out of love. Can't you see? Baby, you gotta set me free. I'm out of love. No matter how hard I try, you keep pushing me aside, and I can't break through. There's no talking to you. It's so sad that you're leaving. It takes time to believe it. After all is sai
Sit around and wait for you? I can't do that. There is no turning back. I need time to move on. I need love to feel strong. 'Cause I've had time to think it through. Maybe I'm too good for you. D
I can feel something inside me say, "I really don't think you're strong enough." No, sitting in the morning sun. I'll be sitting when the evening comes, watching the ships roll in. I watch them roll away again. I'm sitting on the dock of the bay, watching the tide roll away. I'm just sitting on the dock of the bay, wasting time. I left my home in Georgia, headed for the Frisco Bay, 'cause I've had nothing to live for. Look like nothing's gonna come my way. I am just gonna sit on the dock of the bay, watching the tide roll away. Just sitting on the dock of the bay, wasting time. Look like nothing's gonna change. Everything still remains the same. I can't do what ten people tell me to do. I guess I'll remain the same.
Sitting here, resting my bones, and this loneliness will not leave me alone. It is two thousand miles I rode just to make this dock my home. I am just gonna sit on the dock of the bay, watching the tide roll away. Sitting on the dock of the bay, wasting time. I am still a pain even though I was salty. Hate to see you whistling, "Mother burner, are you happy?" Hate to see you happy if I am not the one driving. I am so mature. I am so mature. I am so mature. Got me a therapist to tell me this other man I do not want. No, I just want you. If I can have you, no one should. I am right. I might kill my ex. Not the best idea. This new girlfriend is next. How did I get here? I might kill my ex. I still love him, though. Rather be in jail than alone.
I get the sense that it's a lost cause. I get the sense that you might really love her. This takes some BI vitamins. This takes this evidence. I tried to rush and reach. You know my wrist, no pounds of passion. Damn, you was out of reach. You was out of the farmers market, which I perfectly peach. Now I'm in the basement, planning home invasion. Now you're laying face down, got me singing "Aber Abbey." I'm so mature. I'm so mature. I'm so mature. Got me a therapist to tell me this other man I don't want. No, I just want you. If I can have you, no one will. I might kill my ex. Not the best idea. This new girlfriend's next. How'd I get here? I might kill my ex. I still love him, though. Rather be in jail than alone.
I did it all for love. I did it all on no drugs. I did it all this sober. I did it all for us, oh. I did it all for love. I did all of this on no drugs. I did it all this sober. Don't you know I did it all for us, oh? I just killed my ex. Not the best idea. Kill this girlfriend next. How'd I get here? I just killed my ex. I still love him, though. Rather be in hell than alone. It's a human sign when things go wrong, when the scent of it lingers and temptation's strong. Cold, cold heart, hearted by you. Some things looking better, baby, just passing through. Oh, no, no, no, no.
I think it's gonna be a long, long time till touchdown brings me 'round again to find I'm not the man they think I am at home. No, no, no, no. This is what I should have said. I thought it, but I kept it here. Oh, no, no. Cold, cold heart, hearted by you. Some things looking better, baby, just passing through. Oh, no, no. I think it's gonna be a long, long time till touchdown brings me 'round again to find I'm not the man they think I am at home. No, no, no, no. This is what I should have said. I thought it, but I kept it here. Oh, no, no. Cold, cold heart, hearted by you. Some things looking better, baby, just passing through. Oh, no, no, no, no.
I think it's gonna be a long, long time till touchdown brings me 'round again to find I'm not the man they think I am at home. No, no, no, no. This is what I should have said. Touchdown brings me 'round again to find. I thought it, but I kept it here. Oh, no, no, no. Oh, no, no, no, no. Oh, no, no, no, no. It's not unusual to be loved by anyone. It's not unusual to have fun with anyone. When I see you hanging about with anyone, it's not unusual to see me cry. I wanna die. It's not unusual to go out at any time. When I see you out and about, it's such a crime. If you should ever wanna be loved by anyone, it's not unusual. It happens every day.
No matter what you say, you find it happens all the time. Love will never do what you want it to. Why can't this crazy love be mine? It's not unusual to be mad with anyone. It's not unusual to be sad with anyone. If I ever find out you've changed at any time, it's not unusual to find out I'm in love with you. Here you come again. Just when I've begun to get myself together, you waltz right in the door just like you've done before. That right in my heart by your little finger. Here you come again. Just when I'm about to make it work without you, you look into my eyes and lie those pretty lies. Pretty soon I'm wondering how I came to doubt you. Oh, I let it do, this smile, that smile. There go all my defenses.
Just leave it up to you and in a little while, you're messing up my mind, filling up my senses. Here you come again, looking better than nobody has a right to, and shaking me up so that all I really know is here you come again. Here I go. All I gotta do is smile, that smile. And there go all my defenses. Just leave it up to you and in a little while, you're messing up my mind, filling up my senses. Here you come again, looking better than nobody has a right to, shaking me up so that all I really know is here you come again. Here I go. Here I go. Here I go. Here you come again. Here I go. Here I go. Here you come again. Mister, your eyes are full of hesitation.
Sure makes me wonder if you know what you're looking for. Baby, I wanna keep my reputation. I'm a sensation. You try me once, you'll beg for more. Oh, yes, I'm a boogie, but I need a certain song. I can boogie, boogie, woogie all night long. Yes, I'm a boogie. If you stay, you can't go wrong. I can boogie, boogie, woogie all night long. No, sir, I don't feel very much like talking. You're neither walking. You wanna know if I can dance? Yes, sir, I already told you in the first verse and in the chorus, but I will give you one more chance. Oh, yes, I'm a boogie, but I need a certain song. I can boogie, boogie, woogie all night long. Yes, I'm a boogie. If you stay, you can't go wrong. I can boogie, boogie, woogie all night long. Yes, I'm a boogie.
If you stay, you can't go wrong. I can boogie, boogie, woogie all night long. Yes, sir, I can boogie, but I need a certain song. I can boogie, boogie, woogie all night long. Yes, sir, I can boogie. If you stay, you can't go wrong. I can boogie, boogie, woogie all night long. Yes, sir, I can boogie. If you stay, you can't go wrong. I can boogie, boogie, woogie all night long. Yes, sir, I can boogie. If you stay, you can't go wrong. I can boogie, boogie, woogie all night long. Ain't no sunshine when she's gone. It's not warm when she's away. Ain't no sunshine when she's gone, and she's always gone too long. Anytime she goes away, wonder this time where she's gone. Wonder if she's gonna stay. Ain't no sunshine when she's gone, and the stars just ain't on.
Anytime she goes away, and I know, I know, I know, I know, I know, I know, I know, I know, I know. I ought to leave a young thing alone. There ain't no sunshine when she's gone. Only darkness every day. Ain't no sunshine when she's gone, and the stars just ain't on. Anytime she goes away, anytime she goes away, anytime she goes away, anytime she goes away, anytime she goes away. Holding me back, gravity's holding me back. I want you to hold out the palm of your hand. Why don't we leave it at that? Nothing to say when everything gets in the way. Seems you cannot be replaced, and I'm the one who will stay. Oh, oh, oh. In this world, it's just us. You know it's not the same as it was.
In this world, it's just us. You know it's not the same as it was. As it was. You know it's not the same. Answer the phone. You know you're not that alone. Why are you sitting at home on the floor? What kind of pills are you on? A ringing the bell, and nobody's coming to help. Your daddy lives by himself. He just wants to know that you're well. Oh, oh, oh. In this world, it's just us. You know it's not the same as it was. In this world, it's just us. You know it's not the same as it was. As it was. You know it's not the same as it was. As it was. As it was. Go home, get ahead, light speed, internet. I don't wanna talk about the way that it was. Leave America, two kids, follow her.
I don't wanna talk about us doing it first. Go home, get ahead, light speed, internet. I don't wanna talk about the way that it was. Leave America, two kids, follow her. You know it's not the same as it was. As it was. You know it's not the same as it was. I'm giving you a night call to tell you how I feel. I wanna drive you through the night down the hill. I'm gonna tell you something you don't wanna hear. I'm gonna show you where it starts, but have no fear. There's something inside you. It's hard to explain. They're talking about you, boy. You're still the same. There's something inside you. It's hard to explain. They're talking about you, boy. You're still the same. I'm giving you a night call to tell you how I feel.
I wanna drive you through the night down the hill. I wanna tell you something you don't wanna hear. I'm gonna show you where it starts, but have no fear. There's something inside you.
Okay, welcome back, everybody, to the second half. Hopefully, you have been well fed and watered. Good conversations. We move on to the second breakout session. To give you true value, we're giving you not one, but two for the price of one. We have Carsten Schildknecht and Peter Stockhorst to talk about our German retail business, and Claudio Chiesa to talk about Zurich Santander. Hugely interesting part of the world. Demographically, obviously interesting in terms of medium and long-term growth profile. Not something that we get full questions on all the time. It'd be great just to get interest in both of these sessions and good questions after.
With that, I'll hand over to the team. Thanks very much, guys.
Thanks, Mitch. Good afternoon. It's a great pleasure to be here today. Peter and I would like to share with you how we succeed in the German retail market through leading digital and technical capabilities, and how this ultimately leads and translates into doubling the BOP in the next three years in the German retail business. My name is Carsten Schildknecht , and I'm the CEO of Zurich Germany.
I'm Peter Stockhorst, Head of Digital Business and Partnerships in Germany.
Two years ago, at the 2023 Investor Day, I was talking to you about our very successful turnaround between 2018 and 2022, and how we wanted to continue this successful journey going forward. We delivered on our promise. In the last two years, we could keep and enforce the momentum of the turnaround.
Let's talk about the market first. The German retail insurance market is one of the largest insurance markets in Europe, in P&C number one, in LIFE number three. A very sizable, stable, and attractive market in which Zurich Germany generates 83% of the total premium volume across LIFE and P&C retail. In both segments, Zurich is a top 10 player. This is now very important. In specific, very fast-growing segments, we are top three in P&C, with the third largest direct player and own the number one insurtech in the German market. We're also leading in partnerships. In LIFE, we are a top three player in UnitLink and also in the banking channel. In the last seven years, in both segments, we were able to outgrow the German market. Our P&C premium grew 7% compared to 5% market growth.
Our LIFE new business grew 12% per year in the last seven years compared to a market of 1%. Simultaneously, we brought customer and partner satisfaction, measured in NPS, and employee satisfaction to record levels, which are already reported back in 2023. The momentum of the turnaround continues. Growing above market share has become a competitive edge in the German retail market. Based on the track record, we can lift the BOP in the German retail business by $220 million, nearly doubling the 2024 results. This is driven by continued top-line growth of 7%, well ahead of market, which is expected to be 3%-4%. In addition, we will significantly increase the P&C margin by reducing both loss ratio and expense ratio driven by underwriting claims and efficiency measures. The LIFE business continues its very steady BOP growth.
The P&C retail business will fully recover from the difficult year 2024, which was negatively affected industry-wide by inflation, claims frequency, and cat weather. There are two important proof points for this significant BOP uplift, which is mainly driven by the P&C retail business. First, the ongoing profitable growth above market, and you can see that in the middle chart, is driven by our top competitive position in the fastest-growing segments of the market, direct and insurtech, as well as partnerships. Whilst we are holding a top 10 position in the slowest-growth, more conventional P&C business through agents and brokers, we have gained top positions in the fast-growing segments in the recent years. This already was and will be a source of above-market growth and ongoing BOP generation because these businesses are very, very profitable. That's also unique in the market to own a profitable insurtech.
Secondly, this dynamic is, as we speak, already in force. Year to date, we see continued strong top-line growth of 12%, well ahead of market, which we estimate to grow at 7% this year. This is not only driven by rate change, but also by new business. In addition, as a proof point for the expected strong margin improvement year to date, we could reduce the combined ratio in P&C retail by 11 percentage points, a very strong recovery from last year. Let's review these four segments and highlight how leading digital and technical capabilities are the ultimate source of this successful development. Year to date, our more conventional P&C business through agents and brokers shows a strong recovery from last year. The premium volume is up 7%, of course lower than the 12% because of the composition of our mix in retail. Motor is up even 12%.
As a result of rate change and portfolio steering, we could improve the exit-year combined ratio by 7%. We excluded here PYD and CUT to highlight the recurring improvement, which are coming from management action and concrete measures in underwriting, claims, and expenses. Despite higher rate changes in both years, 2024 and 2025, than in the previous years, retention did not drop. Churn did not increase. Industry from 2023 to 2024, the insurance industry showed an uplift in churn in the German market in the motor business of 40%. Our churn stayed flat despite high rate changes. This is clearly the very tangible result of our leading data analytics and pricing capabilities. Based on our scalable cloud-based tech infrastructure, we were able in recent years to develop fully automated real-time platforms for risk modeling and price delivery using machine learning.
Also, our portfolio steering significantly improved, taking line-of-business profitability and customer lifetime value into consideration. Going further and forward, we will further accelerate the build-out of these capabilities. At the back of this, we can improve our exit-combined ratio further by 4 percentage points until 2027. For the fast-moving segments in the retail market, I h and over to Peter.
Thank you, Carsten. Let's talk about direct. Our strong and profitable growth in direct with even more great opportunities in the future is based on our digital excellence. With direct, we have reached top three in the German direct market with double-digit growth last year. Now we are even accelerating, seizing additional opportunities in the hardening motor market with our digital capabilities along the whole customer journey, whether pricing, sales, or services.
Let me highlight our dynamic pricing, which is definitely cutting-edge in the German market today, optimizing margins and conversions in real time at the various points of sale. If you look at the numbers, you can see our actual growth, 30% in motor this year with a combined ratio of 96. Based on our leading pricing skills, we see even more potential in other European markets. Therefore, we are now entering additional markets by partnering with Omnimo and insurtech, focusing on dynamic pricing. Here we already started in the last weeks in three countries: Poland, the Netherlands, and Sweden. That is a message for direct motor: strong and profitable growth in Germany, expansion in Europe. Direct is more than motor. Let's talk about non-motor and our digital health business, our number one insurtech in the German market.
From zero to 100, starting from scratch, we have built a profitable business of more than $100 million with our own insurtech Getolo, acquired in 2019 and raised to number one in Germany. We started with dental insurance. Then in 2021, we launched our pet insurance. You can see our continuous growth from the beginning, continuous and profitable growth with a sustainable combined ratio below 90%. This business is based on a completely new own IT platform for the entire value chain, fully digital and highly customized, with a new way of marketing using social media and hundreds of sales funnels to attract new target groups and to optimize the conversion rates. With a 100% app offering for our customers, usually confirming a claims payment within 30 seconds. Let me highlight, it's not a one-shot.
It's a growth engine generating growth week by week and day by day. Based on our track record, we see a lot of potential for our pet insurance in other European markets with low penetration. As a first step, we launched our pet insurance in France this year, scaling from Berlin with the French team. The next step is in planning and will follow next year. That is a message for direct non-motor, unique growth in Germany, scaling in Europe. Now to B2B2C with exclusive partnerships, another engine of profitable growth. Here we are creating value with tailored solutions, especially for leading consumer platforms. First of all, MediaMarkt Saturn, Germany's leading retailer number one in consumer electronics, launched in 2019, focusing on extended warranties offered at the point of sale, whether online or offline at the branches.
This is maybe the largest corporation of its kind in Europe. We were able to extend this partnership for 10 years until 2035. With Booking.com, we started in 2021, offering travel products, also deeply integrated into the booking process. Now, this year, we have won a new partner with Kaufland, part of the Schwarz Group, which is the owner of Lidl and retailer number one in Germany. Here we are now launching our first products. Based on our leading capabilities with our existing partnerships, we have already built a profitable business of about $400 million. There is tremendous potential for the future in this market with tailored solutions for existing and new partnerships. That is my story today: strong and profitable growth in direct and partnerships with leading capabilities in fast-growing markets. Thank you.
Yeah, to sum up, we have developed in recent years leading game-changing digital and technical capabilities in Germany, which do both expand the margin of the more conventional business to record level, as well as being able to grow in the fastest-growing segments in the German retail markets with top market positions. With that, I hand over to Claudio Chiesa.
Thanks, Carsten. Good afternoon, everyone. A very pleasure to be here once again to present the leading position and progress at Zurich Santander. First of all, I'd like to draw your attention on today's four key messages. Zurich Santander operates in fast-growing markets. Bank assurance is where you have to be in those markets, as it is the main channel by far for life distribution, but also an important one for P&C.
Zurich Santander is the bank assurance leader in the region, having consistently outgrown the market since its creation in 2011. We still have a huge growth potential, expecting double-digit growth in BOP over the next years. Now, elaborating a bit more on those statements. Zurich Santander, our joint venture operating in life, savings, pension, and P&C, is active in five fast-growing countries in Latin America, whose growth has been double-digit over the last five years. How could we outgrow the market for such a long time? We have done that thanks to a very clear strategy, implementation agility, as we are a large company in terms of results, but relatively small in number of people and organizational layers. We decide fast and we implement fast. Finally, thanks to innovation. We have pioneered the market in many areas.
We were first in launching fully automated quotations, first in using AI in retention, first in launching standalone products in credit journeys. We are convinced that we will continue leading the market by focusing on innovating in two very specific areas: in increasing our share of wallet in the Santander customer base, currently at approximately 25% only, with product personalizations and with synergies between distribution channels, and in increasing our portfolio persistency with a holistic end-to-end approach to retention, massively using AI. This will allow us to keep growing double-digit in BOP over the next years. Let me now remind you what the essence of Zurich Santander is.
Our JV, which has a full range of P&C and life products, with the exception of motor for retail and SME customers, distributes through any Santander channel in the region, made of more than 4,000 branches and all other alternative channels, such as digital, telephone, chat, ATMs. As said, we have significantly outgrown the market since 2012 with 18% growth in BOP versus 10% approximately of the market, with a very healthy combined ratio of 74%, and reaching $2.5 billion in protection premiums and over $4 billion in saving inflows, and servicing more than 20 million customers. Also in the second half of 2025, confirming again a very strong growth trajectory.
We are the largest bancassurance group in Latin America, with leading positions in each of the geographies in which we operate, and with still significant growth potential over the next 12 years of our partnerships, thanks to our focus on growing our customer share of wallet and persistency using data AI, as we are going to see over the next slides. One of the most important data models we have developed is around personalized customer proposals. More in detail, we structure the following three steps. First, we prioritize customers with higher expected persistency according to our internal models, which are based on insurance and bank data. For those customers, according to product propensity models, we propose the best product to each customer. Thirdly, we make pre-quoted personalized proposals according to each customer-specific characteristics.
In terms of type of cover, some insured pricing, we have no need of questions for them. Additionally, payment means are already pre-charged, and the whole sales process requires maximum three steps. All these have allowed us to reduce the churn by 15% and improve premium collection, which is a critical topic in the region, by 20%. This way generating more than BRL 150 million of additional premiums in Brazil only. I'd like now to turn in the next slide to how we are dealing with the substitution of contact with customers in branches, as number of branches and visits of the customer to the branches keep decreasing every year, with touch points in remote channels. We have learned that in alternative channels, we need more than one interaction with our customers to finalize a sale.
This is why it's so important that we are able to generate synergies between channels and generating a lead or a sale opportunity in one channel and be able to close the sale in a second channel. We have already implemented a number of best practices on that, but today I'm going to focus on two examples. In Chile, we leverage the enormous amount of inbound calls to the bank, approximately 1 million per month, at the end of which the customer service agents make a proposal to the customer. For example, after having blocked a lost credit card, we would command to the customer that we notice that his or her house is not insured, and we have a very interesting proposal. Then suggesting to be referred to an insurance specialist.
Those customers who accept to be referred, and one in two on average accepted, are then immediately transferred to an expert to close the sale. With that, conversion rate has jumped from below 5% of a traditional outbound to 20%-25%, in addition to a significant increase of the average premium. In Argentina, we are embedding insurance proposals real-time in a number of customer journeys, such as credit card payments, new bank account opening, new credit card issuing. Thanks to the preloaded offers and hyper-simplified process, we are achieving up to 5% conversion ratio, which might look lower than in the previous case, but this applies to a massive business made of hundreds of thousand transactions every month.
Let me now shift on how we are focusing on retention, as we are very proud of our innovative and unique way to manage persistency, which consists in an end-to-end approach to the customer value chain. Or in other words, it's a coordinated and consistent management of all touch points. I'd like to focus today on the evolution of our retention centers. Those are sales or specialized agents who manage cancellation requests of our customers. Over time, we have exponentially increased the number of cancellations redirected from the branches to the retention centers, from 24% at the beginning of last year to 82% now. We have introduced AI to detect the best retention arguments and select the best retention solutions. Thanks to AI, we have seen a nearly 30% improvement in retention effectiveness, from 30%-32% to 42%.
This just described the holistic approach to retention has led to an accumulated approximately 15% improvement in the churn since the start of the journey and generating $20 million of additional BOP. Now, talking about the customer experience, let me now explain to you how we are innovating our core activity, claims management. We are increasingly using AI to speed up our claims sending process, as this generates cost efficiencies as well as an improvement of DTMPS. With respect to simple claims, thanks to AI, we either deny immediately, already 20% of all our denials originates from the FastTrack process, or after an analysis, which is based on a number of key variables, we proceed directly to payments. Already more than 20% of all our claims are processed end-to-end within 15 minutes. We are in the process to roll it out to more complex claims.
Customer experiencing FastTrack claims show an almost 30 percentage point increase in DTMPS, which in turn translates, as at Zurich Santander, we measure everything, in approximately 20% increase in persistency and in $40 million of additional premiums. In conclusion, thanks to our clear strategy, implementation agility, and innovative approach, we believe we have set the foundation to keep growing faster than the market, especially focusing on the increase in penetration of our share of wallet in the customer base and in portfolio persistence improvement. With that, I'll hand over for Q&A session.
Okay, thanks, gentlemen. Let's open it straight up, and we'll go under over here. We're Joe. Just a question here.
Thank you. Andrew Beck, Goldman Sachs. Two on Zurich Santander, if that's okay. First, are you able to just give an overview of some of the disruptions in Brazil life sales in the first half?
I guess should we assume that this is now behind us in terms of the turnaround? Is there anything you can say on sort of Q4 and the run rate versus last year there? Secondly, I guess my understanding is that the life protection business is booked on the PAA. I guess the benefits of growth as it comes to the P&L quicker than GMM business. You have obviously talked about the double-digit BOP growth. You have got the retention targets coming through as well. Does this imply that your GWP growth is above or below the group protection GWP target of 8%? Thank you.
With respect to life sales in Brazil, yes, what happened is that at the end of last year, there were a number of changes all at the same time in the commercial structure in Brazil, including change of leadership in some of the territories, change of incentive systems, and this hit us for the first half of 2025. Over this time, we had continuous conversation, of course, with the bank to restore that. That was pretty unprecedented. A lot of changes were implemented starting from 1st of July to revert the situation. What we have seen was a very fast recovery. I was expecting a bit more time to fully recover because clearly you need to regenerate this sort of familiarity of the salesforce with products. In reality, the pickup was very quick. Since August, we have seen record results.
We expect to close the year with very strong growth. When we look quarter against quarter, my expectation is fourth quarter will be well ahead of last year. With respect to the accounting of life, you're absolutely right. Our business is a short-term business, highly cash-generative. We are in the process right now to discuss the next planning cycle with the bank. I think we have some tailwinds there. We are expecting certainly the visibility and the relevance of insurances increasing within the bank. We have exp ectation for significant growth of the new business. My expectation is that we might contribute significantly to the growth target of the group, especially for protection.
Okay, we'll stay on this side. James.
Thank you, James. Shuck from Citi.
On Santander, I just kind of wanted to get a feel for bank insurance kind of more broadly in the region. It seems to me in other territories that reward systems are something that the direction that banks are going in. To have insurance very separate from banking, which is what the JV essentially is, seems to me to be a source of kind of channel conflict. I know there's still 12 years or less to say on it, but I'm just keen to get your insight into the growth of reward schemes in order to drive customer behavior between banking products and insurance products, and ultimately how you manage that.
Secondly, I just wanted to push back a little bit on DA Direkt, which I know is profitable, but it has been in the market for a number of years, and it is still only generating $400 million of premium. It does seem as if Direct in Germany is a challenge, and obviously there is an annual renewal period that makes it more difficult to grow. Whether it is Zurich Connect or previous incarnations of Direct, they never seem to quite work for Zurich in Germany. Perhaps you could just help me understand why after a number of years it is only $400 milli on of premium. Thank you.
I am going to start with the first question. It is a very, very interesting question because that is a real point.
The challenge in a joint venture is trying to benefit from the advantages of having an insurance partner which can bring you the best in terms of skills and competence with the full integration in the bank. That is the real. That is the reason why our offices are in the bank. We are fully integrated into the bank. We are integrated into the bank system and not in the Zurich system, by the way. We discuss and prioritize and align every single day with the bank. The new strategic plan I was referring to before is done exactly forehand, taking into account the bank priorities and insurance priorities in order to align them.
In reality, yes, there is always a competition for shelf space in the branches like any other product because also credit cards, loans, etc., they fight for this shelf space in the branches. I think one of our advantages is that we try to align every singl e day. We have a specific governance to align every single day into that. Yes, but I think the way our joint venture is structured allows us to take a fair share of priorities in the bank.
On DA Direkt, I'll make a start and then pass over to Peter because he's running the business. When we took over in 2018, the only thing about DA Direkt, which was direct, was the name. It was still at the branch network, and also a lot of the capabilities were neither digital nor advanced.
It took us the last couple of years to build all these pricing capabilities, to build all these digital capabilities, and in addition, to diversify away from motor and to non-motor. These are the true kind of sources why we believe that this is now starting through, is the digital technical pricing capabilities to drive the motor business going forward, and then the diversification into the non-motor space. If you look at DA Direkt in three or four years from now, it is half-half, motor and non-motor. That is the future. Maybe Peter, you want to add how we did the two things.
Yeah, it takes time, yeah. As Carsten mentioned, I joined the group, Zurich Group, end of 2018, and we defined a new strategy for DA Direkt with two strategic directions.
First of all, to fully transform the value chain in motor, and then to enter new markets with our digital health business. To give you a feeling for that, when I joined DA Direkt, we had branches. We closed that within some months, and then we started our digital journey, if you like, launching dynamic pricing in 2019. We built a new sales channel. We built new service channels. We are running AI pilots at the moment and so on. Also important for the motor market, you need the right timing. I think you know all the insurtechs which failed in the last years with the wrong timing and a soft motor market. Now motor market is hardening, and we can here realize our potential in motor.
Second direction, digital health business, yeah, we started from scratch, and we see a lot of potential for the next years with growth rates of 40% at the moment. You have seen that. In total, we have a growth rate of 30% this year. The next $100 million from $400 million to $500 million, we are already number three in the market. Yeah, if we maintain our current growth rates, we will reach our first billion within the next years. Yeah, that's the outlook for the next year.
The reason the German Direct market is going nowhere is because we were one of the few who defined '90 in the strategy in-state course. I expect the strategy, you see a lot of players going in, going out, and with the wrong timing, with the wrong capabilities.
That's the reason why the Direct market in Germany is underdeveloped. It's not the demand which is not there. It's just that the player didn't stay course.
Okay, I'll bring it over to this side. Hadley, I think your hand was up.
Thanks very much. Hadley, Cohen, Morgan Stanley. Just on Germany first, please. Can you give us an indication of how much of your portfolio renews in January? I guess I'm asking because you might have some idea of pricing expectations going into January and how they compare with loss cost trends at the moment. I guess I'm just wondering, you've got a four-point, you still want to improve the combined ratio by four points by 2027, but presumably actually you might be able to achieve that next year, 2026.
Yeah, I think that we are completely different than industry.
Two-thirds of our portfolio is not renewing on January 1 because that is when the competition is highest. That is a big advantage for us. In DA Direkt, it is similar. It is even higher, the ratio, which is not renewing January 1. We have been moving out of January 1, which is a big advantage.
Okay, but in terms of general pricing versus loss cost trends at the moment, I mean, do you think you could potentially achieve the additional four-point improvement in 2026?
We said 2027.
Yeah.
Yes. Yes. I mean, look, what we see now live in Germany in terms of these very sophisticated technical, analytical, and pricing capabilities, the first time we developed this, the first time we applied this was in 2023 renewal, then the 2024 renewal. We already see a big advantage we have with our competition.
Of course, the entire industry had to change rates in motor. We were the only one, one of the few who could keep the churn ratio completely flat while the churn in the industry increased from 2023 to 2024 by 40%. With the same rate change, we kept the churn flat. That is exactly the advantage of the superior pricing capabilities. We just do not have technical pricing, but also behavioral pricing, mixing it up, supported by machine learning. We are finding for the right risk, the right price, optimizing churn and retention. That will drive also the combined ratios further down.
Okay. Thank you. Sorry, my second question on LATAM, and apologies, it is a bit of a broad question, but often when we talk to investors and we talk about LATAM and what have you, people associate that with high risk and what have you.
What could actually go wrong in the LATAM business? I mean, the growth and the profitability is incredibly impressive. You're showing a 74% combined ratio. I mean, it's very impressive. What are the potential risks there in that space?
For me, number one, it's clearly the evolution of the commercial model, meaning even more quickly than in other geographies, customers are shifting from going to physical locations and interacting with remote channels. Just to give you a rough number, for example, in Brazil, visits of customers to the branches from pre-COVID have decreased by approximately 60%. That means that the service model is changing, and that's what we are trying to lead there. That requires to do two things. On one side, to provide a more specialized service model in branches, and we are accompanying this strategy.
On the other side, we will be able to replace that with alternative channels. Clearly, this is what I was trying to explain, that it's impossible to have the same type of interaction in which you had your customer in front of you and sell one policy in one interaction. That's the mastering of the different channels and the blend of channels. We're not talking in general about omnichannel or multichannel. Now, we are very concrete as to what are the paths of our customer from one channel to the others and prioritize those. It's not that any channel has the same role. The paths are very, very well structured. For example, a typical one is, for example, from digital to telephone. Sometimes it's from the branch to digital. We are prioritizing those.
My main challenge is going to be to lead and stay ahead of my competition. That is why we started three years ago investing in that. It is why we already have a number of best practices because I need to stay ahead of the competition in the ability on getting to my customers through any alternative and remote channel.
We have time, half question and half answer if we can.
Yeah, thanks. Very short question on the German part of the business. How do you use aggregators? Do you apply this dynamic pricing because you are selling through aggregators, or is there another reason?
That is a question I have to leave to Peter because with Zurich, we are not present on aggregators because we do not need them for the Zurich brand. In DA Direkt, there is obviously a very sophisticated usage of aggregators.
Yeah, of co urse.
We work with aggregators, but it's a minor channel for us. For example, in motor, it's a third of our business, just a third. Two-thirds come from our own sales channels. The digital health is less than 5%, so near zero, yeah, because we are focused on making a lot of business with our own insurtech.
That's also the difference. Coming back to the other question about the direct market in Germany, a lot of these new players who were entering the motor market, they were having 80%-90% with the aggregators, which is not sustainable from a profitability perspective. That's exactly one of the advantages we have. We use for competitive reasons, for price reasons, etc. Aggregator is important to know where we are in the market.
You want to control the share of your new business coming from aggregators because it's not a highly profitable business.
Great. Okay, we'll wrap it up there. Thanks for the quick question and keeping on time, gentlemen. We have a 10-minute break now before the final breakout with Farmers. Following that, it'll be the broad Q&A, and then that'll be a wrap after that. Thanks for the questions and interest in both the retail businesses. Really appreciate that. Thanks to the guys for a good presentation. We'll be back here at 2:30.
O kay, welcome back, everybody. Again, thank you for keeping on time. I know it's quite a fast pace, and it's a quick espresso during the breaks, but I appreciate the effort. Thank you. We move into the last breakout session for today. It's great to finish on a high.
You heard Mario talk earlier about just all the hard work that's gone on in Farmers over a number of years now. Hopefully, you'll now see it in live action with the team to talk through just the growth trajectory that's in front of this business post a really extensive turnaround. Raul, Ken, over to you. Thank you.
Thank you so much. Good afternoon, everyone. I'm Raul Vargas. I'm CEO of Farmers Insurance, and I'm joined by Ken Walton, our President of Distribution. We are delighted to share with you our progress over the last 12 months. Let me start saying that at Farmers, we have developed a playbook for success, which means we define key opportunities, we put the plan in place, and we execute flawlessly. With discipline, we allow the results to flow through.
Over the last 24 months, we have deployed more than 200 initiatives worth more than $2.5 billion of economic value. This is not just a quick fix. This is a complete transformation of this business in every level. We'll be talking about product pricing, exposure management, distribution performance, operational efficiencies, claim security, and more. Proof of that is our story. Two years ago, we shared a plan to return to profitability and strengthen our capital position. At that time, the initiatives were in place, and we just needed time for the results to flow through. One year later, they did. We delivered 14 points combined ratio improvement, restoring profitability, and we strengthened our capital position for more than 7 points. With that strong foundation in place, we moved to the next chapter, addressing the $800 gorilla, growing policies in force. Today, that moment has arrived.
For the first time in a decade, Farmers is growing beef, and we are doing it in record time. Premiums are growing 5%, but no longer by rate, driven by competitiveness, customer appeal, and flawless execution. Our surplus ratio now stands at 50%, the highest in our history, giving us the strength and flexibility for a new cycle of accelerated growth. We need to turn page to the next part: sustain mid to high single-digit revenue growth. We have built three fast-growing business models: our exclusive agency channel, our independent agency channel, and our direct business. All of them are growing today exponentially in terms of new business, which in time will translate into accelerated gross retail premium growth. Just as we have done it before, we are applying our proven playbook.
The initiatives are in place, the engines are built, and now it's time to let the results flow through. Let's look at how all these initiatives have translated into compelling performance. We are a leader in profitability with a combined ratio improvement of 15 points, reflecting our underwriting discipline and our operational control. Since 2022, we have delivered more than $1 billion in run rate savings in terms of business efficiencies. We remain focused to deliver our $300 million ambition on savings for 2026 in terms of vendor management and AI-driven transformation. Just to give you some context, today we are already running at $207 million of run rate savings. All these gains almost have doubled our surplus from $6 billion to more than $10 billion. This is a 79% increase and puts our surplus ratio at more than 50% above our targets.
In short, we have rebuilt profitability, restored strength, and created the capacity to invest in growth. The playbook delivered. Farmers Exchanges' gross retail premium is growing at 4% CAGR. For the first time in many years, policies in force are growing. We reversed a 10-year decline in record time. This turnaround came from three core capabilities that will serve us in the future. First, financial strength to invest ahead of the curve. Second, a competitive product offering. Third, a winning execution culture. This is a team that plans, acts, and delivers. In just two years, we have rebuilt competitiveness, reignited growth, and laid a solid foundation for the next chapter. The next chapter is about sustaining mid to high single-digit revenue growth. The engines are built, and the levers are channel expansion, product sophistication, and enhanced customer and agent experience boosted by technology.
With these components, we have built three powerful, fast-growing channels: our exclusive agents, which are entrepreneurs, but they have the choice to third-party products; our independent agency channel, where we are the only company that can provide the full suite of products; and our direct business: digital speed, but with human touch. To tell you more about that, I will pass it over to Ken, that will take you through each of these in more detail. Ken.
Thank you, Raul. Good afternoon, everyone. Let me now share with you details around three powerful businesses we've created and our plans for each in the exclusive, the independent, and the direct channel. The good news is that our performance is strong, and we have tremendous growth opportunities within each channel. First up, the exclusive channel. We've transformed the model for our Farmers agents, and the strategy is generating significant growth.
As you'll recall from last year, Raul shared with you how we're on track to see agency owners double their net income through four pillars, as shown on the charts on the left. The first pillar is product and pricing. We've expanded our appetite and implemented a more sophisticated pricing approach, which is generating higher conversion rates. The second pillar is distribution. Here, we've launched our choice model, which is giving Farmers agents the opportunity to sell third-party products and gain access to additional customers. Next is retention uplift. Here, we are leveraging our customer retention team to help retain our best customers, those that bundle or purchase multiple products from us. Last, under expense efficiency, we're eliminating friction from the agency and customer experience, making it more efficient for agents to sell and service customers.
All of this great work is resulting in significant growth in new business and gross retail premium for our most engaged agents, which you'll see in the middle column there. What does this mean? It means more of our unengaged agents are willing to invest in their business and become engaged in growing customers. It also means we have a tremendous recruiting opportunity because we now have a proven and validated model. We have the best small business opportunity in America. We've successfully shown that we can take a recruit, an entrepreneur who has $100,000 or more in liquid assets. We can offer additional training and insurance. We can educate them on ways other agents have run a successful business and see them generate a significant return in a very short time period through owning a Farmers agency.
Based on all of the above, this winning model will produce growth rates in the 4%-6% range for the 2026 to 2027 period. Let's now move to the independent agency channel. Let me start with a bit of color on the U.S. market. The personalized U.S. market is split into two primary segments: the specialist market, which includes non-standard customers, and the standard market. Farmers has strong market share in the specialist market. This market represents 20%-25% of the total market and is characterized by non-standard customers as well as customers who own toys, recreational vehicles, motorcycles, and boats, for example. We've experienced strong growth in this segment, and we expect continued growth due to additional investments in product and pricing. One of those investments that I'd like to highlight for you today is in data.
We're leveraging our data science team to improve our segmentation as well as to identify high-propensity cross-sell opportunities in this market. The standard market, on the other hand, is much larger, representing 75%-80% of the total market. This market has higher lifetime value customers. These are customers that pay their bills on time and generally have fewer losses. Farmers has low market share in this market, and this represents a gigantic opportunity for the company. We've taken learnings from the specialist market and are applying those in the standard market to expand and grow our business. One of the ways we're doing that, we've built an entirely new model to service the standard market. This model includes new product, new technology, new servicing capabilities, and a new approach to distribution. We've launched this new model in 22 states, and we're seeing a significant 274% increase in new business.
We expect this level of new business growth to continue as we launch into remaining states into 2026. In the independent agency channel, we're taking advantage of newly built capabilities to grow 15%-20% next year. Let me now move to the final piece of the puzzle, the direct channel. Farmers has a powerful brand, one of the most recognized brands, not just in insurance, but in all industries. We're leveraging our brand to take advantage of the organic traffic that comes to us through farmers.com, through our call centers, and through our employer and affinity groups. We've invested in farmers.com to improve the customer experience, making it easier for a consumer to obtain a quote and to purchase a policy. We've enhanced our call center to become more efficient and close more accounts through the use of artificial intelligence.
On employer and affinity groups, we are the exclusive or preferred provider of personalized products to thousands of large U.S. employer groups, as well as to hundreds of university alumni groups, which give us access to tens of millions of employed prospects. We'll continue to leverage these capabilities both in the web and in our call center to expand the number of endorsed relationships we have, as well as to target new consumers within those groups. Within direct, the summary is we're optimizing our capabilities to take advantage of our significant brand power, and we'll grow 15%-20% in the direct channel next year. In conclusion, these three engines give us the comprehensive ability to meet customers where and how they choose to engage with us, whether that be in the exclusive, independent, or direct channel.
With that, I'll turn the program back over to Raul to share with you plans going into 2027.
Thanks, Ken. As this business gains momentum, we see a clear path to sustain mid to high single-digit revenue growth. Across every channel, we see accelerated growth. Our exclusive agents are expected to grow 4%-6%. Our independent agents are expecting 15%-20% growth, and our direct business also within 15%-20% in the years to come. Meanwhile, these continued operations continue to run off, gradually removing drag for the overall growth of our business. Over time, the math plays out naturally. Over the next two years, we'll be on track to deliver 8%-9% underlying gross retail premium growth. To bring it all together, we have mastered the discipline of execution with record results.
We strengthen our capital position through disciplined underwriting, creating the capacity for accelerated growth. We achieve policies-in-force growth in record time. Our next chapter is sustained mid to high single-digit growth, enhanced by our value proposition and our channel expansion. Last, let's not forget our capital-light fee-based model, which delivers durable and predictable earnings with a very high cash conversion. That is the Farmers playbook in action. We size the opportunities. We define key initiatives. We execute them relentlessly. With discipline, we allow the results to flow through. Thank you so much, and open for questions.
Okay, thanks, gentlemen. We will start on this side, Patricia. Will, William, sorry.
Thank you. William Hawkins from KBW. First of all, congratulations to you and the team on the turnaround you are implementing relative to the conversation two to three years ago. Well done.
Thank you.
The balance in the gross retail premium growth between PIF growth and premiums per policy, I'm getting a lot of incoming that as the U.S. market softens, premiums per policy could be a headwind to your growth ambitions. Can you talk a bit about how the 8%-9% breaks down between PIF growth and premium per policy, please?
Yeah, great question. The reality is that we will need to adapt to the reality of the market, right? Right now, we're thinking that more or less we are running at 4% PIF growth. Mario mentioned it is around 40,000-45,000 policies. The remaining part, you could expect that to come from rate, but it will depend because it depends on market conditions. The good thing is that our combined ratio is really healthy. It's probably, if not the best in the market.
That allowed us to actually be more competitive as needed in order to get the additional inflow of policies and therefore matching to that level of growth. It is difficult to say right now because we do not know what exactly is going to happen in the market. As we all know, we are expecting impact from tariffs, right? Those will put some pressure in terms of severity. Also, we have benefit from the last 18 months of a very low frequency. We do not believe that it is going to stay forever, right? Answering to your question, I think we have a very strong basis on our PIF growth now that we will expect to keep improving over time. Finding the right balance is something we will address through the speed of action and flexibility we have in Farmers.
Cameron.
As Cameron Hussein from J.P. Morgan, just echo Will's comments. It is a spectacular turnaround. Two questions for me. The first one is on the health of the competition at the moment. Clearly, Farmers are in a really very good place right now. How is the competition? If you're willing to be a little bit more competitive, do you think that they will be too? The second question is thinking maybe 20 years out. Autonomous vehicles, I'm not sure I'll still be here in 20 years. I might be. Autonomous vehicles, what's the sense on how Farmers are prepared for that? Clearly, as a California-heavy company, it's something you see a lot more of than you do in Zurich or London for now, but I'm sure it will spread a little bit wider. Just interested in kind of how you're prepared for that. Thank you.
Okay, so starting first with the market, it's difficult to guess, right? Because you saw it, right? All the companies are showing very strong results, and you could expect that that is going to be a, would expect some investment of that health in rate. The reality is that a few things, right? We have focused our strategy on creating value with our customers. So we see that our customers are less elastic to those changes, right? We typically try to provide the full value proposition to a customer, which is just not the car, but the home, the toys, and if they have a business, the business as well. That positions us in a segment that probably doesn't shop as much as the overall market. The second topic is we do have space, right? Our surplus ratio, our capital position is very strong.
We are coming from a very, very healthy combined ratio, and this will help us to take action as we see the market moving, right? That also gives us the confidence that we could keep changes in the market. The other thing that I think is important is that an important part of our business is this specialty business Ken mentioned about. That business, which is about toys, motorcycles, jet skis, camper vans, as well as the non-standard market, is less elastic, right? It does not suffer so much from price, right? When we put all this together, we feel confident that we will take advantage of the opportunities that we see in the market as we go through. The other question related to autonomous vehicles, right? I think if I am not wrong, the inventory of cars in the U.S., it will take 15 years to change, right?
We still do not see full autonomous vehicles ready to be on the market yet. The time frame is, but yes, if that happens, right, it will be a change between the personalized part to the commercial part of the business. We are confident that we keep building a very solid foundation with our customers through all our solutions, not just Auro, but actually also through home. We are a leader in the home space. We have been expanding our appetite. We have proven that we are able to write business in a smart way. This is what we see, that is where we get the most loyalty to the customer. It is too early for me to predict 20 years from now.
What I do see is that I think we will still have a vibrant market, and the fact that we are able to round the customer with a full value proposition is going to give us a competitive advantage wherever we land in the next 20 years.
James.
Thanks. It's James from Citi. Are you able to tell me what the fully loaded expense ratio is at Farmers? Because the reason why I ask is obviously there's a 7% management fee that's been unchanged forever. My concern is that Farmers, I mean, part of the automation and use of AI and digital should actually be shared with the Exchanges more than it is. It's a roundabout way of asking, is that 7% fee, should it come down at some point because it's costing you less to service those policies.
I'm just trying to get insight into how competitive the expense ratio for Farmers is on a fully loaded basis with that 7% in. Secondly, can you just remind me what you're doing in SME? I know that Zurich's got all these great propositions in mid-market. The gap is in the SME segment. I've always thought it's Farmers that's got first right refusal in that area. Obviously, now the solvency ratio is much better. Do you have plans to start mo ving into the SME segment? Thank you.
Excellent. The reality is we shared all our improvements with our customers at the end of the day, right? Because first of all, an important part of the expenses that go into products like distribution expenses, those are part of the expense ratio. If those reduce, it just gets benefit to our customers.
Also, since there is a cap on the way that we operate, all the efficiencies we are getting within the Farmers Management Services are being shared with the policyholder. That is why you see, if you see our results, when you put all expenses together, we have reduced already four points on all the expense ratio that now is benefiting our customers, right? This is $1 billion worth of savings that now goes into more competitive products and better solutions to our customers. To your second question on SMEs, we see a great opportunity there. We are working relentlessly to develop a value proposition that will fit our agents. The way we do this is that we try to understand, I presented last year, and Ken mentioned it, this agency economics.
Everything we do, every line of business, we're trying to see how it fits the journey of an agent so their efforts invested in selling a new product gives them a positive return. We are simplifying the way that we are offering a small commercial so it does not almost need underwriting. It is fully based on data. We are creating those capabilities to be ready in the market in the next months. It is going to be a progression over it that will allow our agents to, that they have the relationship with their customers. We know that more or less 20%-30% of a personalized customer or a consumer has an enterprise. It has a business. We want to take advantage of each of them. That is part of our agenda for the future.
The last thing that probably is worth to mention and why we are so confident is the way we develop our solutions. It is not just about technology. It is about understanding how things operate in the ground. One of the things we require for every employee in Farmers is they need to spend one full day in one of our agencies. I did it when I became the CEO. I spent the first month and a half spending full days in agencies to understand exactly how things operate. If we do that, then we can really cater solutions that they do not just sound technologically great. They are actually great on the market. All these people that they need to spend one day in the office with an agent, they need to measure time.
They need to see actually how things are done and report back to us. When the solutions are being developed, we have great success in them. Part of the success we have shown so far is that we use that methodology to deliver our new solutions in the market.
Patricia, over to Will, please.
Thank you. Will Hartcastle, UBS. It feels like the growth is sort of locked in for the plan. Massive surplus ratio, big gap in that combined ratio. I guess coming back to the question from Will, thinking about how much pricing could come down to come under pressure, is there a number you could say just how large that pricing would have to fall for that to be a threat that you could not hit those targets, that sort of 8%-9% level that you are talking about for 2027?
Then just think about that margin on those continued.
Do you mind to repeat the question? Because I'm not sure if I'm following. Sorry.
It's sort of really, it's sort of understanding, given you can absorb on the combined ratio, given you can absorb some surplus ratio, how much would pricing have to fall for that 8%-9% target not to be plausible? I mean, I'm imagining it's a huge number. Your 8%-9% top-line growth targets. Then thinking about it on that margin on the discontinued book, are we here talking about business that's only 10-20 percentage points worse than the rest of the book, or is it enormously? Actually, it's giving you an even bigger, better margin underlying. Thank you.
Okay. Let me start with the end question and see if I can answer the first one. The end question.
The discontinued operations are small, but we will expect them to run off very quickly. That is why we expect to have a lag on next year and partially the next year, right? The part is small. The gray line actually shows how small it is, but it is going to run off very quickly. It will not have a huge impact in loss ratio or combined ratio. To the second point, look, we feel that we have the most profitable combined ratio in the industry, right? We are around 85% in auto. We are among the best. We are for sure the best in home. I think we may be running around 90% combined ratio when everyone else is probably now running at 95%, 98%, 100%, 105%. Yes, the market could become difficult, but we do have the space to keep becoming competitive.
In particular, and also let's remember that not all the line of business suffer the same level of need for competitiveness, right? Because our non-standard business, that's not so elastic business, right? Our specialty business, neither is that elastic. I don't expect home to be also affected so much by competitive rates. Yes, standard auto will be, but we are prepared for that. We are prepared for that.
Vinit, and I'll come back to you after, John.
Yes, Vinit Malhotra, Mediobanca . Just two quick ones, please. One is the gorilla in the 800 lb house. The PIF growth. If you could just comment a little bit about, a little more maybe about where it comes from, which kind of products or what's the drivers there. I mean, I heard about your playbook, but a little bit more about the PIF growth.
Second thing is just on, we have not obviously, the wildfires seem far away, far long gone now. Is there been some boost to the property market that you are expecting this year when you go back into the market? Maybe there is a renewal. I do not know the pattern there. Could you just comment on the property market and home insurance market there? If I can add just one half a question really here. The niche, the toys that you talk about, are those not risky from a combined ratio point of view? They are growing, but are they not risky? Thank you.
Excellent. I will allow Ken to answer the first question on where the PIF is coming.
First question is coming. Absolutely. First.
I will take the one on the home market and on the specialty business.
First question is, where are we seeing PIF growth? Looking back a number of months, we've been growing PIF in the specialist market for some time. Non-standard auto is rapidly growing PIF in our specialty business, which includes specialty property and then the toys that are referenced in my presentation, motorcycles, boats, etc. We're seeing great growth there. Now in the standard market, we're getting a tremendous response from independent agencies on our standard auto and standard home business. Also during my presentation, I shared the 274% growth in new business. That's going to lead into very nice PIF growth as we go into the coming months and quarters.
I think the home market will still be a challenge market based by affordability and availability. There are a lot of concerns about what you write and where we write.
The reason we are confident here is because we have invested both in technology and data and in price and sophistication. Let me give you some context to it, right? Normally, most companies use ZIP codes as a way to how to price different parts of the business. We have deployed new capability that look at grids. If a ZIP code on average is around 15 km, the grid that we look at is 15 times more precise. We are talking about 500 m - 800 m, the size of the grid, right? We use satellite technology and artificial intelligence to exactly predict the level of risk we are taking. That is extremely important to us because many risks that other companies will not take, but are good risks, we are going to take them.
Actually, that is, but also we will be able to protect our books, as you can probably have seen from the last slide on the deck on how we manage exposure management. Yes, it is going to be a challenge market. I think we will still struggle in terms of availability and rate increases. I do believe we do have a competitive edge in that business for the years to come. To your question on whether specialty is a more riskier business, I would say no, the other way around. You could also draw a line of parallelism with the specialty business in commercial. These are specific risks. There are not many competitors or there are not many players pricing those risks. These are less elastic business because of that. You need to have the skills. You need to have the capabilities.
You need to know someone who actually knows how to price a camper van and what are the risks that they could go through or how a jet ski, what are the type of, and that's an area that we really have a competitive advantage. We're probably one of the leading companies in that space. We always have shown very, very good combined ratios. This is a business that I said, right? It's more likely to stick and not shop around.
Gotcha. Dom next, John.
Thanks. Dom O'Mahony , BNP Paribas. Thank you for the presentation. Two questions. Just on surplus ratio, I mean, it's very high. Given the rate of profitability, you'd have to give a lot of margin away for that to start shrinking, as far as I can tell.
From a governance perspective, at what point does the board start to ask how to use that surplus ratio beyond just organic growth, whether that's giving maybe, I don't know how it works in the Farmers arrangement, but giving value back to the customers through one-off bonuses? Or could the question of inorganic opportunity come onto the table? Is that something that Farmers would consider? Sorry, the second question.
That's just one. Okay.
Yeah. All my questions are always long. Sorry. Just thinking about that very ambitious level of growth, if pricing really is a bit disappointing and it sounds like you're still confident in getting to that growth, is there any operational constraint on how much PIF growth you can do? I mean, could you do 10% PIF growth? Or would there be some sort of operational challenge on that?
Can you repeat the second one on the operational challenge? I'm not sure if I follow.
Yeah. Let's say pricing is zero for sake of argument. To get to 8% or 9%, you need 8% or 9% PIF growth. Is there any operational constraint on your ability to deliver that level of volume growth? Or actually, can you just do as much as the customers will buy?
Thank you. On the first question, having this strong capital position is an absolute benefit for the future because it plays out in a number of levers. Let's go for the first one, right? These high surplus ratios allow us to reduce our quota share, right? We will do that. We already communicated with our key partners.
That will reduce our cost of doing business, and we could redeploy that benefit back to a more competitive rate to our consumers, to our customers. The second thing, which is very important, is that as you have more capital, as long as the business is priced right, we can optimize our exposure. There are certain areas that if you do not have enough capital, you will be concerned about writing. If you have the capital, as long as it is priced correctly, right, that the price of the premium matches the risk you are taking, you can take those risks in a safe way. The third part, it relates to book rolls, right? Book rolls is like many agents or independent agents who have a book of business for a carrier that maybe is not so much interested in the business.
Typically, you can take the entire book and potentially you pay some upfront and you bring the book entirely to the company, right? So those are opportunities that we're planning to take advantage now that our surplus ratio is so healthy. To your question on acquisition, we don't plan for acquisition. It's not part of our strategy. Of course, if we have a great opportunity at a great price, why not, right? But it's not embedded in our strategy. To your question, could we increase operationally more policies? Yes, we can. Absolutely. There's no limit, no, from an infrastructure and technology capabilities that we could not take more policies if that's what happens. Yeah.
Okay. We're firmly in the territory of half questions. It always seems to be you, James. I'm sorry. You get the honor of this session's half question. Half question guy.
That's me.
It's always a half question, actually, again. But from memory, Farmers started to move into sort of partnerships, and it had a partnership with Uber, I think. That partnership didn't go so well for one of your peers. We've had no updates on it since. Just keen to understand, A, what the appetite is to grow a bit more on the sort of wholesale side of things, and B, how that Uber deal has actually worked out for you guys.
Yeah. Yeah, you have great memory, by the way. No, look, this has been a very prolific business to us. We were able to manage well, get good arrangements. It's a profitable business to us. I would say at this point in time, we don't see it as a core focus of our strategy. But it's true, right?
Farmers is a huge corporation, and we can really benefit from the scale of some of our capabilities. Not many companies have our claims, capabilities, and proficiency across the country. We will be more than interested for the right fees and the right conditions to actually extend those services to other companies. It does not necessarily need to be the full end-to-end product value proposition, but the components that we can take advantage of our scale. If that comes under right conditions, I do not see why we should not do it.
Okay. We have just run up against the clock. Once again, thanks for the participation. Thanks for good questions and interest in the business. Ken, thanks for a good presentation as well. That was the final breakout of the day. We have another fast 10-minute break. Coffees, rest breaks, and so on.
If you're back in the room by 3:20, please, we'll finish with the broader Q&A with Mario and Claudia and the rest of the leadership team back on stage. Thank you very much, guys. Good presentation.
Hopefully you've had a good number of breakout sessions, a good day. The conversations certainly in this room have been really good, so thanks for the questions and just the ongoing interest in each session. It's really appreciated, and thanks to the presenters as well.
We now bring it to a close with a Q&A session with Mario and Claudia, and obviously all the leadership team that you've engaged with during the day are sitting up top as well, and we've got mics in front of them or near them should they need to get involved. We're just going to go straight into Q&A from the floor, and if there's anything online, we'll take those questions as well. Please feed them through. Who wants to go first? James?
Not last this time. Four and a half questions this time.
Yeah, yeah. Have as many questions as you want this time. No. James has been on a diet of half questions for the last two sessions, so he's earned it.
My first question.
Claudia, I think I mentioned this to you in the break, but just on the remittances, the remittances over the plan do include sort of one-off actions in that number, and I know you've repeatedly said it's not unusual for a company of our size. The number's about $6 billion or $7 billion over the plan period, I think, is what's been—if you just take the remittances ratio and then the difference between the over $24 billion on a gross basis. That does seem a big number. It's 25% or so of the gross number, and I know you can't really comment on peers, but it's a lot bigger number than we see at peers.
Perhaps you could just shed some light on the sort of ongoing management actions, what's in the pipeline, and sort of one view on beyond this plan period, how sustainable that kind of level of remittance kind of is. Then secondly, I did want to have another go, Mario, at the capital stack sort of question, and that is how you might, over the coming years, kind of embrace third-party capital as a means to round out your product offering to customers, so i.e., how do you remain relevant to customers whilst not necessarily retaining all of that risk yourself? Thank you.
Should I go with the first?
Yes, the whole point of the discussion we had before, what I was presenting before, James, is really to show that while in the past we've been benefiting from one-offs and very large one-offs, actually, like in the previous plan period, we do not plan to benefit from as much as one-off in the next plan period or the current plan period. This is not because we do not see the opportunity to have some extraordinary management actions, and we had some, right? I guess the value is somewhere between $2 billion-$2.5 billion, but we've got, as I mentioned, line of sight on them. The real message behind this is that we have such a highly cash-generative business that we can execute on the $19 billion largely from that core remittances without having to execute other special projects and extraordinary actions on top.
Now, on this specific point, right, we've got reinsurance, which is a dynamic capital management tool, and it's never exhausted. Now, we are using quota shares, for instance, to bring capital out of the subsidiaries towards the center, to Zurich, that can be changed over time, and there are always ways to refine that. There are obviously disposals, there are transactions, portfolio management actions that we will continue to do, right? It is not something that we will exhaust. Obviously, the more we execute on that, the smaller the number becomes, right? Like we were seeing from the previous plan to the current plan, but there will always be that proportion of capital management actions that will come. Obviously, there are ways for us to execute on that as we go.
James, I do not know if I am going to say with this much more than you heard before, but look, first of all, we acknowledge, by we, I mean Claudia and I, and I would say that Sierra agrees on that herself too, that our reinsurance structure is probably eight, nine years old. That is already for us a push to rethink about it. I mean, we have the same retention levels, we have the same structure that we had eight, nine years past, but of course, we have grown, our balance sheet has grown a lot. Is that the right way? I mean, we are thinking about it. I have no solution yet. Also, we appreciate the fact that in lines like specialty, you can have kind of different structure. Again, we are evaluating this because on the other side, we are not constrained on capital.
We have all the available capital internally to be deployed in businesses which are accretive. The question is, which one is more convenient, to deploy capital or to use external capital at what conditions, from whom, for what kind of businesses? I very much understand your question. I do not have an answer yet. This is something that will trigger thoughts and possible actions next year, as it will be about the structure of reinsurance. You can be pretty sure that over the next two years, we will come with different structures of reinsurance or different limits, again, because you cannot remain for nine years with precisely the same structure and the same limits. The world has changed a lot. Probably today, we over-reinsure ourselves compared with where we were nine years ago. There is no reason for that.
I mean, that's not something that we get to because we need to.
For me, one point on reinsurance, Mario, to address, I think Will had a question earlier this morning. I think as we go and expand more into specialty, reinsurance and third-party capital could be an interesting instrument for us to address volatility that might be coming from some areas of the book. That's something that definitely in the analysis that Mario mentioned is interesting for us to look at. There are interesting and innovative structures out there, that's something that we would like to take a look at. It's important to have alignment of interest. We, as Zurich, are gross underwriters, right? By definition, this is what we do.
We want, from any source of capital that we might be able to attract, to have alignment of interest over the long term, especially if we enter into structures that might be multi-line, might be requiring a long tail. That alignment of interest is absolutely important that it is there.
We've got a question online from Andrew Creed. I'm going to paraphrase it a little bit just to shorten it. Apologies, Andrew, if I do not capture it fully. You are saying Andrew was too long? It is quite long. Broadly, the question is, can we comment on the broader commercial business aside from middle market and specialty, where we have given quite a good outlook? How are we thinking about the broader commercial business from revenue?
growth and margin standpoint, looking at medium term?
Margins is my favorite one. Look, I repeat myself because I know that the belief is that the margins are falling and they're disappearing. This is not what we see in our books. Let me repeat what I said in the Q3 call. What we see today is that the property margins are—not the margins, sorry—the rates are coming down, not the margins, because there are no significant natural catastrophes. The thing which I urge you to consider is property is indexed to natural catastrophes. There is no cycle there. It is an indexation. There is an event, there is a catastrophe, there is an immediate reaction on the rates. There are no events, there is an immediate reaction on the rates. This means that there will be volatility, not cyclicalities, in the property rates. Casualty for us is above the level of last year.
The rates are not softening, they're not reducing. Rates are higher than last year. Commercial auto is practically same level as last year, around 15% increases. It hasn't softened. Workers' Comp is marginally better than last year. Specialty—now, specialty, okay, we can spend half an hour—but altogether, our definition of specialty makes higher rates this year than last year. This is the picture we have on the rates. Now, if you remember a year ago—sorry, not on the rates. Now, you remember a year ago we said that we planned, we forecasted an improvement in the commercial margins. We're seeing this. The commercial margins are improving and are improving in the attritional and are improving also because of the lighter catastrophes. We see commercial performing, as we expected, better than in the past. Part of this is because of the mix of business.
It is not luck, it's not God, it is the way we compose the book of business. The growth of mid-market and specialties against the rest of the business means that the combined ratio is decreasing. It's improving for us. Now, don't make it forecasting. I mean, we've been very careful in revising the pages of the presentations to avoid anybody able to guess what's going to be the combined ratio in 2027. I've been through this already and I don't want to go back to the quarterly movements of the combined ratio. The margins in commercial are improving. If we close the year today, you will see a visible improvement of the attritional and the combined ratio of commercial for the reasons I said. Growth, it looks—do we care about the total growth of commercial? We care about growing the mid-market. This was the target.
We care about the profitability of commercial altogether, but not, frankly, the growth. If property will see a margin softening, then we will decelerate there because there is no reason for us to go after growth. We do not need that. That is not the situation we see today. We will not stress to the colleagues growth altogether. We want to grow in mid-market, in specialty, in life protection. We are happy to grow in retail, but we do not have a target to grow commercial altogether.
Okay, we'll come back to the room. Cameron?
Hi, it's Cameron Hussein from J.P. Morgan. Just intrigued about, earlier this morning you said the 2027 profit is kind of on the books already. You've kind of thereabouts. You're doing very well, you're hitting your return on equity target, you're hitting, you're on track for cash returns, your cumulative cash returns, everything's working. When I look at your SST ratio, it's a little bit higher than maybe you might like it to, but given that you're on track for everything else, does that matter at all? If you were going to look to address it with some use of surplus capital, would you rather kind of inorganic growth or kind of any other capital return to shareholders? It doesn't feel like a problem, it's almost, it's a nice to have, but just interested in kind of what your views would be there. Thank you.
If you remember last year, we said that the plan will accumulate cash and capital. We were aware of this. We said you can expect us to take some actions, whatever these actions are, most likely towards the second part of the plan, not at the beginning of the plan. This is what we're thinking of. I mean, acquisitions are a possibility. We keep scanning the market, and every year we've done something. I think you can see from the track record that whatever we did made sense and was decent financial considerations for us and produced returns. Should we not find solutions? Yes. I mean, if we keep accumulating cash and capital, we will take actions towards the end of the plan. I think we stay in this position at the moment, and there is no need for us to anticipate decisions now.
This is still year one. We still have two years to go. Yes, the books are formed to deliver 2027. Everything we're doing is to deliver 2027. These are the kind of things that you do at the end of the plan when you have full visibility on where you stand and what you have in your pockets.
Simon, over here, Patricia.
It's Simon from [Von Torvald]. First question is on artificial intelligence. From a group perspective, where do you see AI currently as being the most impactful? Could you elaborate on the cooperation with the two Zurich universities, what you're trying to get out of these cooperations? Second question on reinsurance pricing and the January renewals. I know it's going to be different geography by geography and business line by business line, but say you can negotiate a 5% price reduction. Will you rather take the price reduction or will you lower attachment points?
I wouldn't know this.
Should I comment on that?
Please.
On reinsurance, we've got our largest CAT renewals in April, so it will take some time until we get there and who knows what happens to Mario's previous comment on CAT. Look, I think it wouldn't make a lot of sense for us to now go and increase attachment points. I mean, the market is supportive. We have seen improvement over time on our underwriting, so we've got a lot of interest from reinsurers to be on our panels, continued and even increased. I think it makes sense for us to get support from the insurance market, and if we can get some more at attractive prices, we might want to do that, especially because we are expanding our book.
Back to what we were saying before, specifically on some lines of business where we might get a bit more volatility, it might be interesting for us to maybe ramp up a bit of the reinsurance spending. That said, we want to take advantage of all the possible structures and all the possible sources that are out there, so we need to do a thorough analysis before we get there.
Look, on AI, AI has produced a number of interesting results for business, and you saw through the presentation some examples of that in the joint venture with Santander in mid-market. However, AI is supposed to be more impactful, more revolutionary than this. The question is, how can we make this really visible, beneficial, and what is the size of the benefits that we can get from it? That's why we made recently also an organizational change. There is a colleague sitting in one of the last rows. His name is Carlos Rey. Carlos has joined us beginning of November to drive business transformation using technology, using artificial intelligence. Carlos has a long experience in business. The thing that you heard also through the presentation today is that changes must be business-driven. This is not a question of technology.
Technology can do wonderful things, but if business does not need them or does not know how to use them, technology is useless. The purpose of the AI lab that we are setting up with ETH University and St. Gallen University is to develop and experiment business solutions that can be beneficial for business. We need to have the support of engineers. This is what ETH does, and management people from St. Gallen. Hopefully there we can really test different solutions. I mean, bear in mind that this is an industry having a business model which was set up centuries ago. Fundamentally, over the last centuries, this industry has replaced papers and fountain pens with computers, but the business model has remained the same. Now, possibly today, we can change and innovate the business model, but this must be proven.
Must be proven right and must be proven also with consistent application. That is the idea behind the lab. We are deeply committed to do that, and I'm confident that it's not going to take months or just a year, but I'm confident that we'll be able to deliver significant business improvements through the use of technology. At this moment, this is what it becomes possible.
Vinit?
Yes, Vinit from Mediobanca. Just on slide 18, please, and thank you for that slide, Claudia. The thing I would say is that it might be a little bit nitpicking because I think people in the market are convinced about the 51.9, it appears to be. It's more where's the potential, the greater than sign going to work at? I mean, it could be that, for example, that the slide, I think it was seven, where you had the specialties line and the middle market, or maybe it was 21, but one of those slides shows that one-third's overlapping number, and then you see we can kind of work out that about 15 or 14 odd billion of your premiums are growing and delivering mid-80s.
I'm just curious that if you had to think about which of these buckets, is it the first one that could positively push it above or where could you? I mean, I appreciate it's nitpicking, but we're trying to look for the incremental positive as well. I'm just trying to see where you think it is.
Should I go? There's bits and pieces, Vinit, in every bucket, so I don't think it's black and white, right? There are places in the first one, in the portfolio quality, where things have actually, to date, been proceeding quicker and faster and better than we had expected. Will that continue over the three years? Maybe, maybe not, but there might be other things that will come in and deliver. We have seen, I mentioned before, crop. We are keeping the assumptions at plan at this stage, so we are waiting for the end of the year to see how actual results come in. They might be coming in better than planned. Might not, but they might, because the underwriting actions have been taken, and once the portfolio is on a much more solid ground, it might be giving us better results than we actually expected in plan.
Same on retail, motor, we've seen a massive acceleration. Will that continue? If so, there might be some upside to plan. I mentioned on growth that 2025 was dampened a bit by the fact that we had some pruning actions, specifically in the U.S., that led the growth to decrease on a net basis. We're not expecting this to come through in 2026. Maybe we'll manage to grow a bit more than expected if mid-market and specialty come through the way that we hope they will. We heard from Claudio about Santander and how the growth has been picking up in October. That as well could be an upside to plan, and then Farmers, I think you heard very clearly the message that Raul and Cam were saying.
I think nothing of this is black and white, but there are multiple sources that might potentially take into account all the risks, of course, that the market is posing as well, but there might be potential upsides in different pockets.
Yeah, I mean, can I make a comment on top of this? Look, I mean, in the past three years' plans, nothing went precisely smooth or as expected, except that we always delivered or exceeded. I mean, you keep adjusting. Every day you find something new in the market. We're not driving an automatic machine. We're acting, steering, changing every day. You probably heard it from all the colleagues through the day. I mean, there are continuous actions which are taken and eventually delivers the results. Yes, many other things can happen, positive and negative, over the next two years, and we will try to compensate, take advantage, change. This is active steering day by day.
Hadley in the middle, please, Patricia.
Thanks very much. Hadley Cohen, Morgan Stanley. Actually, we might need to go back to slide 18. It's a slight extension of Vinit's question. Mario, you're talking about how large parts of the business aren't cyclical, and all companies are sort of focusing on customer retention, net promoter scores, and what this. At the end of the day, insurance is a long-term business. I appreciate that you need to have three-year targets to please investors and other analysts and what have you, but presumably you must have a vision from a longer-term perspective of where the company is going. It'd be useful to sort of get your thoughts around that.
I think if I, in the context of this slide, if we look at the component parts, the momentum on the growth side is clearly very, very strong, and the business is clearly in very, very good shape. If I think about the sustainability of these current targets, the piece that's potentially the most under pressure on a longer-term point is the portfolio quality and efficiency, that 40% component, which it's quite clear that you're on a very good track to deliver that over the next three years. I'm just wondering how you think about the sustainability of the earnings growth beyond the current plan in that context.
You want us to start talking about the next plan? That's quite a question, right? Look, what's the vision behind? The vision is that we're trying to move ourselves into a sustainable and defensible space in the market where we can hold and maintain a competitive advantage for a long time. This is what we're doing. I mean, if you think about what Zurich was in 2016, Zurich was mainly operating in the large corporate market where there is no way that you can defend any position there because that's a very transactional space of the market where everybody can enter and leave and where there is full transparency, full competition. There you're up in the wind, and you follow the wind there. Progressively, over the years, we have been moving ourselves to much more cozy, defensible, protected, sustainable areas of the markets.
It is not by coincidence that then our profitability has been improving. This is still what we're doing. The more we get there, the more benefits we'll get, which will mean that then we will be more able than others to invest, to continue building on the competitive advantage and continue building distance. That is the simple vision we have. I mean, you're kind of right. I mean, we announced three-year targets for the investors, but to be frank, also for ourselves, because we need to keep the energy, the motivation, the action high. Probably the thing that scares all of us in the management team the highest is complacency. You fight complacency by continuously running higher targets through the organization and repeat to the people, "The past doesn't matter.
Just look into the next target and deliver the target. The vision behind is to keep moving this company in a space where it will have a continuous competitive advantage and it can thrive on that. Because we're getting to, in these markets we're moving in, we're getting to points where really size matters, and it's very, very difficult to keep chasing us. You can do it, but you need to really invest, and then you need to have a long-term vision, which often competitors do not have. This is what we're doing besides hitting those targets. Presumably we will have new financial targets after we reach the 2027 ones, but I think the journey to place the company in a safe, profitable space in the market will not change, not even after that.
George has Dom in the middle, please.
Thanks. Dom O'Mahony i, BNP Paribas. Firstly, thank you for all the presentations today. Really informative and educational. Sort of one follow-up question and then a sort of slightly more woolly question. Just on the remittances, I was curious, just to follow up on Jamie's question about the management action component. I do not know if you've got the slide there, but I think in the 2022 to 2024 period. I just wanted to understand your diagnosis of how you managed the cash over the last two years, 2022 to 2024. An awful lot of management action, even excluding the Farmers Life piece. I'm not sure the core remittances would have covered the dividend costs. Did you deliberately hold back the cash because you were delivering so much on the management actions in that period? By implication, is there some spare cash in the operations?
The grander question, Zurich's done an extraordinary job of improving profitability, economic profitability over the last 10 years. The sector has as well. I think Zurich more, but the sector has improved its economic profitability massively. What is your diagnosis for what's allowed that to be sustained? Has something changed in the industry? Is it something to do with the financial markets? Is it something to do with the market structures that gives you the confidence that actually market conditions can allow that level of economic profitability to be sustained in the long term? Thank you.
Look, on cash, Dom, I mean, it was under my predecessor, so not probably a lot that I can comment there on the details that were put in place. In general, it's not as black and white as saying we're holding back cash. There will always be plans in the background where you're looking at your core remittances and you're looking at some of the extra management actions that you've got lined up to make sure that you've got cash where you need it at the center. That's basically the philosophy that Zurich has been following for a number of years. We've been always trying to pull the cash centrally, make it as fungible as it can be, and over time shape the portfolio in such a form that it has the highest cash generative contribution.
On top of this, in the last plan cycle, there happened to have been a couple of actions on top and important disposals that have been used as well to fund share buybacks and actions on top. I think it's really the strong message that I'm keen to reiterate again is really that for the next plan, and actually from there on, we are not counting on extraordinary one-offs and actions on top of the core generation. As I mentioned before, there will always be some actions. You can always trim and optimize your capital structure. We can do more on reinsurance. We can certainly restructure our legal entity setup. We can always optimize, and there will be transactions of any kind. The core remittance and the core cash generation of our business is super strong, and this is what is behind our dividend plans.
On the market profitability, I think the market almost changed a lot. First of all, as I keep repeating often, I don't believe that the market has one cycle anymore. The market has probably many cycles or like property doesn't have a cycle. It's simply indexed to weather. This didn't exist years ago. You have a different influx of capital into the market. Years ago, the capital was following these underwriting cycles and was kind of predicting then the return on capital that would come. Today is much more difficult. I mean, the investors who provided side capital solutions to the damages of Melissa, they are probably now rethinking about doing it again. It's a different market. Second thing, COVID changed the structure of the market. A number of companies abandoned after the losses of COVID, and we haven't seen them re-entering.
Before COVID, the market was intoxicated by a lot of window dressing players, players who didn't know what they were doing there, but they were completely backed by reinsurers. Third, the reinsurers have lost enough money, and fortunately, they still have memory of that to be willing to play that again. As I said, we're moving into different areas of the market, which are much less cyclical. You can look at 10 years profitability in the specialty in the mid-market space. You hardly find the combined ratio above 95 there, hardly. Now, you still need to know what you do there. You still need to be a pro there. These are not cyclical markets. They have long-term trends where the profitability is quite stable for the reasons we said before, because there are barriers to entry. There are obstacles to getting to these markets in play.
You can decide today that you want to play tomorrow. You won't be able to. This is why we think that we will manage, we will keep managing the profitability high. This does not mean that the combined ratio will constantly improve every year, one after the other. We think we can manage it. We will not let it go high again. We think we have the tools to do it, and especially we have the books to do it.
We're right up against the clock, William. So you've got Jamie's honor of the last half question.
Thank you. I think you've touched on this subject obliquely, but I think throughout today we haven't used the word inflation once, and it doesn't actually appear in your presentation, which I think is really interesting and maybe a sign of how well things are going. I'm just kind of wondering, when you think about inflationary trends and what they mean for your business through the end of this plan, could they actually be becoming maybe a positive because they're so entrenched that the whole industry keeps pricing for them? Or are we still nervous that that's a trend risk because insurers are typically behind the curve on inflation? Again, for all the repositioning of your portfolio, presumably things like tort inflation and that kind of thing are still in your mind, even if they weren't in the presentation.
What are the main bullet points we should be thinking about, if anything, about inflationary risk?
Yeah. I mean, you're right. I think this reflects the fact that inflation, I mean, the real evil force, the real threat for us is recession. It's not inflation. Recession is super bad for any insurance company. Inflation, I mean, we know it. We know what it is. There is good and bad. I mean, high inflation, super inflation, very fast inflation is bad. Normal inflation, which is what could possibly happen over the next years, yeah, I mean, I cannot say it's good because that would sound disrespectful because for many people will be bad. We know what to do. We're prepared for that. It's not something that scares us. We've been through it, and we will know what to do. We're monitoring.
I think Raul has mentioned, at least in the breakout where I was, that we're waiting to see if there will be some claims inflation because of the tariffs and because of the supply chain. We monitor it very, very carefully at Farmers. We monitor it in Europe. We monitor it all around the world. We're prepared. My real nightmare ghost is recession. That's very bad. Recession is very bad for us. Luckily, I mean, there is no recession in sight.
With that, from a balance sheet perspective, not only balance sheet, but also the way we price the business and the way we book the business when we take it into our books, we are taking an assumption on what inflation will be. Past experience in recent years, we've been very prudent on expected loss ratios to reflect inflation. Will that eventually be a positive? We don't know, of course, but we've been taking prudent views on the assumptions when we took the business on the books. As you know, on top of it, we are holding a group level reserve that's there to take into account all the risks where we don't have or we have limited evidence in data, including inflation over and above what we estimate in the business, social inflation risks as well.
We are very well equipped should inflation go up from a balance sheet perspective as well.
Mario, we're right on the clock, so maybe I'll pass it back to you to close out the day with everyone.
Yeah. Just first of all, again, thank you so much for taking the time and also the pain to come over with early flights and all the challenges that we know about the airports. Thank you very much. Much appreciated. Thank you also for having given sense and relevance to all the presentation that we put together. I mean, we wanted to give you the impression that there isn't a coincidental thing happening here. Everything is planned, is forecasted, is adjusted, and we have plan A, B, C, D, etc. This comes with a long-term vision and with short-term adjustments to it. There is an entire management team, not just the people you see here, but all the other colleagues who haven't joined this time who are working to deliver every day the single pieces of it. We feel that this is a great first year.
We have had very different starts, actually very bad starts. I remember terrible first years of the plans, and we still made it in the following years. This is a great start of the plan. We feel we are in a very strong position today, better than we expected. We know we're prepared should things change to deliver for 2027. In the meantime, we have taken already, with the changes in the organization, the steps to continue growing the company after 2027. We are already working for what comes after, continuing to deliver on the vision we have for the business. Thank you again very, very much, and I hope you enjoyed the day as we did. Thank you.