Earnings Transcript for HSX.L - Q4 Fiscal Year 2021

Robert Childs: Good morning, ladies and gentlemen. Very good to see you here in this different location for us. I'm very proud of our underwriting team. Led by Joe, we've had the best underwriting result in five-years in what has been the fourth worst catastrophe year. So I think it's a really good result. It's great pleasure to be standing here with our new CEO in Aki, who you'll hear from in a few minutes. I'm so pleased that the transaction has gone so well. And also, you'll hear in our think the passion and the clarity of vision from Aki later on. The future looks bright for us. Is also very satisfying to be paying a dividend. Anyway, I'm going to pass you now on to Aki.

Aki Hussain: Thank you, Rob, and good morning, everyone. It's surely great to see all of you here. I'm sure you've had some navigation to do with the travel additional opportunity, so on so really pleased we've all made the efforts. Thank you very much. We're delighted to be holding this presentation in person for the third time in two years. Now, of course, it's an honor and privilege to be standing here as the CEO of Hiscox, a wonderful business, full of talented and dedicated people. Now, today's presentation is going to be slightly longer than normal. You'll hear from me on strategy and about how I think about our business. Following me will be Liz Breeze, our Interim CFO who'll explain our financial performance and then finally, Joanne Musselle, will take us through our underwriting results and how we've achieved the best results in the last five years. Hiscox is a high-quality business with best-in-class assets and capabilities that position us to drive sustained and profitable growth for years to come. Over many years now, we've nurtured and honed, where I like to call the Hiscox underwriting ecosystem is of course made up of underwriters, but it's also a range of other technical disciplines, including research and risk modeling, pricing, claims, analytics, reserving, and such steep technical expertise. That means we can successfully write the complex [Indiscernible] risks at one end of the spectrum and develop algorithmic underwriting solutions for the simpler risks. Combined with this technical expertise, we've been investing in technology. Over the last few years, we invested over $300 million to re-platform our retail businesses, make them digital ready, and providing faster and better decisions. Over the last 20 years, we've been investing to build a brand. We now have an internationally recognized brand with market-leading brand perception scores in our target markets, and we've been judiciously allocating capital to drive attractive shareholder returns. Now, all of this is underpinned by the unique Hiscox culture and sense of purpose, that binds our businesses together and that binds our people together. Now, this is a graphic that you've seen many times. This represents our long-held strategy of balance; where we balance the greater volatility of our big-ticket businesses against the most stable returns from retail, where we've taken the excess profit for big-ticket to fund the expansion of retail. And [Indiscernible] you will. And you can see the balance has evolved over time, and that will continue to evolve. The concept of balance remains incredibly important to us. But as our markets evolve and as our customer expectations change, how we think about our business will change. And in this next phase of the story for Hiscox, our focus and our ambition is to build more balanced portfolios in each of our segments, and manage the overall group volatility. So tend to how I think about our business. Firstly, we are building on strong foundations with two important changes. Firstly, I think about our business in four segments rather than two. As you can see here, it's retail digital, retail traditional, Re & ILS, and London market. And secondly, our portfolio of businesses is underpinned by a certain group-wide core capabilities and attributes, which you can see in the circle in the center. Just a few words on each of these segments. Our retail digital, this is where we see a more significant long-term growth opportunity. This is where we are growing fast into large and underpenetrated markets using new-generation technologies, data analytics, that enable us to distribute, underwrite, and connect to our partners and customers. But this is not just about deploying funds in new technology, because our underwriters where our underwriting counts, technical rigor and risk management discipline is a basic prerequisite. Technology for us, is an enabler. It's enabling us to access new markets in new ways and drive faster and better decisions. Retail traditional, this is the rest of our retail business, where we interact with our broker-partners through non-digital means. We built this business by specializing in attractive and growing niches, by developing an intimate understanding of our customers, by using our superior risk selection capabilities, and providing first class customer service. London market, this is part of the heritage. This is where we write up more volatile, complex risks through the Lloyd Syndicate. This business gives us the opportunity for cyclical growth, and over the last couple of years, we've used our expertise and the improving market conditions to build more balance into the portfolio. And then finally, Re & ILS. This is where we are short-tail reinsurance specialist with an established third-party capital management capability. And once again, over the last couple of years, we've been using the favorable market conditions to rebounce the portfolio back towards our core areas of expertise. Now, all four of these businesses, all these segments, are underpinned by five core group-wide capabilities. Now traditionally, the underwriting excellence in capital, management, and capital capabilities have come from our big-ticket businesses, and now more recently, the expertise in new generation technologies, data analytics, and auto underwriting has come from retail and driven growth and development across the group. Now, all of this, once again, is underpinned by our people and our culture; a culture that rewards innovation, a culture that encourages a long-term ownership mentality. Our culture is a key source of strength and a competitive advantage. And in executing our strategy, I will be using for overarching performance metrics

Liz Breeze: Thank you, Aki. And good morning, everybody. It's a real privilege to present to you today. My name is Liz Breeze and I'm the interim CFO until Paul Cooper joins later this year. It's the first time that many of you are meeting me, but I've spent the last 10 years working at Hiscox across a range of roles. It started in Group, I did a UK Retail Finance roles, and most recently, as the CFO of our Re & ILS division. Now, turning to our results. The group delivered a strong 2021 result in what was a heightened year of natural catastrophe activity. This is testament not just to the balanced business we've created, but the balanced portfolios in each of our business units. Particularly pleasing is the group underwriting profit of $215.6 million, the strongest in five years, despite 2021 widely being reported as the fourth largest catastrophe year. All divisions have generated an operating profit. This isn't luck, but the direct result of consistent underwriting actions across the group over the last four years, which are now bearing fruit. We've also put our capital to work and taken advantage of growth where we see we have a right to win, such as our globally traded lines in Hiscox London Market and small commercial business insurance in our U.S. Direct and Partnerships business. Our balance sheet remains strong. We continue to be prudently reserved against COVID-19, where our net claims estimates have not changed materially. We've been able to generate surplus capital and absorb the strengthening [Indiscernible] in our BMA regulatory capital requirements. We've increased our undressing exposure and we have recommenced dividend and I'm pleased to announce a $0.23 per share dividend subject to shareholder approval. I will now take you through each of the different divisions in a bit more detail, starting off with Hiscox retail. Hiscox retail gross premium return grew 5% to $2.29 billion or 1.5% in constant currency. With the business benefiting from positive rate momentum in all geographies. This includes the impacts of over $100 million of larger U.S. retail broker business exited in 2021. The underlying growth is good at 6.8% in constant currency. Our Darex and partnerships business delivered $694 million of course, premium up 18.2% in prior year in constant currency and now serves over 910,000 customers globally. And as you heard from Aki earlier, we see this as a key opportunity for future structural growth. The business achieved an underlying combined ratio of 97.3%. A 2.6-point improvement on prior-year. This excludes the impact of the loss portfolio transfer completed during the first half of the year and COVID 19 net losses. Portfolio re-underwriting action and profitable growth all contributed. As did the largely benign non-catastrophe loss environment in our UK and European business units. This keeps us on track to deliver guidance of a 90% to 95% combined ratio in 2023. Now, a bit more color on the individual markets. The UK business delivered a resilient performance. With gross premium written up 9.9%, or 2.9% on constant currency basis. The commercial business showed strong growth of 9.9% in constant currency, improvements coming through from rate and strong retention. In personal lines, which includes our art and private clients and direct home book, we've taken deliberate action to re-balance the portfolio and non-renew some of the high commission business. But ultimately, this action should improve returns. Hiscox Europe delivered another strong top-line performance, growing gross premium written by 9.8% in constant currency, with particularly strong performance in Germany, Spain, and Benelux. In Hiscox year [Indiscernible], we have now exited over $100 million of large cyber standalone general liability and other broker channel business, which is no longer within [Indiscernible]. So excluding the effects of course correction actions in 2021, Hiscox U.S.A, grew its underlying portfolio by 9.2%. Our U.S. digital partnerships and direct business continued to deliver an excellent performance with top-line growth of 25.5% to $424 million. Looking ahead to 2022, in the second half of the year, we will re-platform this business onto a new digital platform. During this period, we do expect a deliberate slowdown of growth, meaning for the full-year. The Direct and Partnerships business is expected to trend between 15% to 20%. Moving on to our Hiscox London Market business. They delivered a strong performance in 2021, despite the above mean industry natural catastrophe losses. Gross premium written grew by 5.6% to $1.2 billion as we continue to create top property binder portfolios and build a more balanced and resilient portfolio to whether any future soft markets, which Joe's going to tell you more about shortly. Importantly, net premiums written grew by 9.5%, two times faster than Top Line as a strong rate momentum made retaining more premium attractive and we were able to put more capital to work. Our investment in digital innovation in London Market is paying off as you heard from Aki earlier, and we were able to achieve 46.5% growth writing in excess of $100 million of premium through this platform. Our London Market business also achieved a very strong combined ratio for the second year in a row, at 89.1% as we continue to feel the benefits of the 60% cumulative rate increase since 2017, alongside active portfolio re-balancing. This was in spite of $68 million of natural catastrophe losses in 2021, mainly from hurricanes Ida, the U.S. tornadoes, and storm Erie. Finally, Hiscox's Re & ILS. Our Re & ILS business had an excellent performance in 2021, despite the net natural catastrophe losses of $122 million. An exceptional combined ratio of 68% was aided by reserve releases from both natural catastrophe and other non-catastrophe lines supplemented by benign in year loss experience from our specialty reinsurance business. Net premium written grew by 42.3%. A consequence of modest increase in net exposure for catastrophe lines, rate increases, and a different mix of reinsurance protection. This allowed us to take advantage of the hardening market in lines where we consider pricing to be adequate. Our third-party capital management strategy continues to work well for our business, delivering capital light fee income of $40 million. We've got a good track record with our investors, and this has allowed us raise $217 million of AUM at this year's 1/1 renewal. And this part line's looking strong for the rest of the year. This takes total ILS AUM to $1.6 billion for our managed ILS funds that we continue to cede business too. Moving on to our investment performance. Investment return for the full year was $51 million, representing a return of note 0.7% on our invested assets. We started 2021 with a bond portfolio yield to maturity of note 0.4%, and therefore, modest expectations of returns for the year. Through the second half of 2021, we witnessed a rebound in global economic activity and inflationary pressures meant interest rates started to rise sooner than expected. As a consequence, bond [Indiscernible] have increased generating temporary mark-to-market losses in our bond portfolio. Our diversified risk assets portfolio of equities and investment funds performed well, generating returns of 11.6%. Now, looking at '22. Central banks have reaffirmed their intentions to tighten monitory policy. Government bond yields have shifted sharply higher at short-term maturities, and there has been a consequential result of further temporary mark-to-market losses on our short day to bump portfolios. But this will mean a material dent in our 2022 investment result but the opportunity for 2023 is great and reinvestment opportunities are there and we expect the returns to continue. Now, look at our balance sheet where reserve resilience continues. We continue to take a robust approach to reserving, holding $372 million of margin, which is 11.7% above the actuarial best estimate. This chart shows the loss experienced by [Indiscernible] year, and you can see a downward trend on every single one of those lines. This means all years experienced favorable development in 2021. This resulted in a $149 million of reserve releases or 3.7% of our opening balance of net reserves. The remaining development is broadly spread across business lines, with all operating segments seeing favorable development. You will hear [Indiscernible] shortly, how active underwriting portfolio management has contributed to our strong results. We have been equally focused on balance sheet management. In 2021, we concluded two loss portfolio transactions. One, covering the majority of the Hiscox USA 's surplus lines broker business for 2019 and prior years, and the other, covering the runoff of the Hiscox Re healthcare book. Yesterday, we added a further transaction to our balance sheet, spine protection for our casualty reinsurance book, covering an additional $95 million of gross reserves. Of the 2019 net reserves we held at year-end, 18% of those are now covered by a protection from adverse effect deterioration. And when you include yesterday's transaction -- sorry, including yesterday's transaction. And this will give us protection for up to one in 200-year risk scenario. These deals not only strengthen our balance sheet, but limit downside profit volatility from the back book of reserves. Finally, let's look at capital. As at the end of 2021, we are robustly capitalized at 200% of the BSCR. The balance sheet actions we took by purchasing 2 LPTs during 2021 added 13 percentage points, more than offsetting the strengthening of the calculation rule set by the BMA on Group Financial Regulator. 2021 was the final year of raw strengthening, which has added 34 percentage points over the last 4 years, when comparing our 2021 position on a like-for-like basis. Our business is strongly capital-generative, adding 17 percentage points net of the interim dividend to our 2020 position. This is well in excess of the extra capital we've consumed to increase our underwriting exposure in 2021. Under the BSCR rules, the final proposed dividend is not captured in the year-end position. So when factoring in the proposed final dividend of $0.23 per share, the year-end position will reduce by 6 percentage points. This leaves us comfortably positioned to take advantage of further growth opportunities, and be able to withstand severe downside risk scenarios without compromising our SNPA rating. So I'll now take you through a couple of the key external changes that will impact our business going forward. Partly in December 2021, SNP published a proposal detailing significant changes to their model used to assess capital adequacy. We expect these changes to be introduced during 2022. The precise model has not yet been released, but we have done some modeling internally to anticipate the potential implications. Our ratio view is the outcome for us will be overall positive as the model will recognize, for the first time, the benefit of diversification in our portfolio across lines. Secondly, from 2023 we will be reporting our results to the market under the new IFRS 17 accounting standards. Ultimately, these changes will not impact the underlying economics of our business. However, they will change how we talk about performance and the key measures which we used to run our business. Consequently, we will be looking to help educate the market and share insights on how this will change performance review in the second half of 2022. Finally, the likely emergence of a global minimum tax. And at the end of December, the OECD published a set of modal rules which are intended to provide a baseline for domestic legislation globally for all countries adopting the Global Minimum Tax under pellet two of the based erosion and profit shifting proposals or BEPS. The EU, UK, and U.S. are all in the process of drafting legislation. So this regime is ready for phased implementation in 2023. So what this means is it's very likely Hiscox will be subject to a global minimum tax in the next three to four years. And the likely impact would be an increase to the effective tax rate on a steady-state basis to around 15% or above. I'm now going to hand you over to Joe, who will take you through the underwriting performance in more detail.

Joanne Musselle: Thank you Liz, and good morning, everybody. Given the market conditions, we had a plan to grow where we see opportunity and we've done this. Across the portfolio, we've increased our gross written premium by 6% on 100% basis. Our plan was to retain more net in big-ticket -- deploy more of our capital in the favorable market. And you can see on the slide, Re & ILS has grown its net written premium 44% and lend market 10% in comparison to 9% or 5% growth respectively. In retail, as planned, we have successfully exited over $100 million of U.S. business, as we have refocused our U.S. retail portfolio to small revenue customers. Excluding these exits, we've seen good underlying growth of over 6%, with growth in our digitally traded business at 18%, with U.S. Digital and Partnership at 25.5%. So whilst a favorable market, active portfolio management remains key. The refocus of our U.S. business cyber remediation across the portfolio, in addition to our [Indiscernible], has progressed really well. I'm pleased to say we are improving our underwriting margins year-on-year. As you've also heard from Liz, active portfolio management is not just on the go-forward portfolio. We've successfully completed three legacy reinsurance transactions. This free up -- this reduced reserved volatility, they free up capital and also management time to focus on the go-forward opportunity. Rate momentum continues, and we can see this on the next slide. This slide is looking at our rate momentum and our big ticket lines of reinsurance under and into market and it's satisfying to see an upward trajectory. In London market, the blue line, it continues its dramatic rise where rates up 13% overall this year, accompanying rate growth of 60% since 2017. Now, early rate rise has offset our increased relative view of risk, but the rest significantly improve in the underwriting margin. Whilst overall [Indiscernible] continues, lines are hardened at different rates. So Cyber as an example, has hardened significantly over recent months, while rates in casualty still continuing but at a slower pace as we benefited from dramatic rise as earlier in the cycle. Overall, our rate [Indiscernible] in London market remains solid. The red line, our reinsurance rates has also improved in this line with an average increase of 8% across the portfolio and that's a cumulative rate rise of 35% since 2017. So similar to London market, early rate rise has offset and increased relative risk but whilst the rest hasn't contributed to the underwriting margin improvement. We do, however, view additional rate necessary to see satisfactory returns through the cycle. Our next slide, retail. Retail is much less cyclical with regards to pricing, but on the whole, consistent rights deliver margin throughout the cycle. But we are achieving rates across all business units. The U.S., our green line, is up further 6% this year, and that's 15% in total since 2018, UK, up 7%, 9% since 2018, and Europe, 4%, but we've seen accelerate momentum at 1/1. As retail is a collection of about 50 different portfolios across ten different geographies, it will be no surprise that the underlying data is far more nuanced. Rates have been consistently adequate in Europe -- in UK and Europe, driving good returns through the cycle. And cause correction and commutative rate, is now driving efficacy in the U.S. in all go-forward lines. All-in-all, another year of positive rate rise. But how do they fair against the hot [Indiscernible] if we're increasing claim inflation? Are all these rights enough? There are many inflation factors that affect lost cost on both businesses we're yet to write, and also claims we're yet to pay. Taking these into account though, is just part of our normal planning, pricing, capital, and reserving cycles. As an example, cost and wage inflation. This is simply the same claim costing more tomorrow than it did yesterday, due to increases in maybe construction or materials, or labor costs. So how do we mitigate? Well, we mitigate by reflecting the actual and rising exposures, the exposures that our rates apply to, things like sums insured, wages, turnovers. So if I use property as an example. So we may insure a property for a rebuild of $1 million and use a rate of 0.2%, which gives us a premium of $2,000. The same building in a different inflationary environment could cost us $1.1 million to rebuild. Of course, if we will have left the sum insured for $1 million, the policyholder would be under insured. So we utilize what we index linking to increase the sums ensured, to say $1.1 million. The rate actually stays flat at 0.2%, but now our premium is $2,200, so a 10% uplift on the same risk to counter the increased cost of a claim. So other inflationary pressures are less about the same claim costing more and more about an increase in number of claims. So as an example, if I take climate, is climate change increasing the frequency of events in the future compared to the past, whether that be physical on our property portfolios or litigation on our casualty. And here, it's really about understanding what we call the future risk. We call it the Hiscox view of risk. And we invest heavily in this across the group. We utilize experts, we buy external models, we augment this with our own data and research to reflect the evolving nature of these perils. It's safe to say our view of climate risk has increased and over recent years leading us to an increase frequency of the U.S.A. hurricane, Japanese Typhoon, and California wildfires. Once we update our view of risk, obviously then we need some reflect that in our underwriting, we do that with regard to changes in our underwriting appetite, or maybe towards conditions. So you can see reflected inflation is really part of our normal portfolio management and we have many tools in armory to take this into account, in addition to the increase in rates that you've seen on the previous slides. With these actions and rates, I believe we're achieving premium growth in excess of our inflation expectations. And moving on to my thoughts by segment. In London market, we've not just leaned into hardening market. The results are a combination of this, plus many years of hard work. When I look at the portfolio, it's one of balance, quality, and well-position for control. In the top half of the slide, you can see that the quality of our portfolio has improved. In aggregate, we're growing our premium whilst reducing exposure. Since 2019, we have reduced our open market exposure by 11% on our line side, but we grew our premium by 19%, more premium for lesser risk. We are near completion of all remediation of all property buying to portfolios.

Liz Breeze: And we've reduced our premium by 26% for our exposure by 39%. Reducing our exposure to forward the wins by 11% in household and 34% in commercial. And it's not just the underwriting results and quality of the portfolio that has improved. As Aki mentioned, you can see in the bottom half of the slide, we have positioned our portfolio to take control in a changing market. We now lead around 70%, which is a 30% uplift since 2017. In delegated underwriting authority, we have less than 10%. And this together with our investment in data and analytics, will be key in making sure that we are in control of rating, and terms and conditions, in a changing market. For Re & ILS, it's a case of refocus, drive rates, and relevance. At the top of the slides, you can see how we have repositioned and refocus the portfolio over the last 5 years. Since 2016, Re & ILS has exited, or non-renewed, $378 million of non-profitable business. We've exited the longer-tailed classes of healthcare and casualty, and corrected our aggregate product. In addition, as you've heard, we've purchased significant legacy reinsurance on that long term line to limit the volatility, free up capital, and also, the management time for the go-forward opportunity.

Joanne Musselle: On the top right, rate continues to be driven through all segments, and you can see this in the pie with momentum continuing again at one, one. And similarly to London market, you can see in the bottom half of the slide how we are well-positioned for the future utilizing our third-party capacity strategy through ILS and quota-share for both relevance and also capital efficient fee income. And again, all underpinned by our investment in data, analytics, and view of risk. On retail, resell, we're looking to accelerate the small business with automotive underwriting and driving consistency. Across the U.K., Europe, and the U.S., we now have well over 90% of our commercial customers that by our definition are Nano or micro and this means they have less than a million dollars, pounds or euros in turnover. These customers are often buying insurance for the first time and they tend to buy smaller limits. Whilst it's really difficult to see in the slide because it's now such a small segment, we have pulled out the blue and you can see there are reduction in the larger customers has been significant between 2020 and 2021. There's been a 78% reduction in what we'd call mega customers as we have refocused our U.S. portfolio and also remediated our Cyber. You can see in the bottom part of the slide, and you've heard from Aki, our progress on automated underwriting. And whilst over 90% of the digital business is automatically underwritten, there's also been some really good progress in our broker business. And now, across retail, in commercial, about 50% of all of our risks are automated underwritten. Why is this important? Well, for a variety of things. First, it drives consistent results. The second, it allows us to do response at scale. And all of this is an addition to the efficiency that, of course, automatically underwriting our portfolio brings. So as I look forward to 2022, our corrective action is largely behind us. You may recall this slide from last year when about 4% was in that gray. We're now at just 1%, which is the finish of our -- or the completion of all small business acceleration in the U.S. and the completion of our cyber remediation. The quality of our portfolio has improved, and that's been demonstrated in our underwriting results. We are well-positioned across all of our segments to capitalize on the opportunities that are in front of us, and all of this is underpinned by investments in data and analytics, and active portfolio management. I will now hand you back to Aki.

Aki Hussain: Thank you, Jo. So to conclude, the world remains a somewhat uncertain and unpredictable place. But notwithstanding that, the outlook for our business remains strong. As you've just heard, for our big ticket businesses, they're now more balanced, well-controlled, and better priced, and well-positioned to drive strong profits and take advantage of cyclical growth opportunities. Our retail business will return to strong growth in 2022, in the middle of that -- in the middle of the 5% to 15% range, and a portfolio reunderwriting actions. Operational improvements are working, and we're confident of reaching the 90% to 95% combined ratio by 20 -- or in 2023. The balance sheet is strong, providing us with flexibility to invest in attractive opportunities as they emerge. I wanted to leave you with some final thoughts. I joined the business in 2016 as a CFO, and I joined the business because these are the people that I met, they saw the culture that I was exposed to. I was joining a business that was close to the start of this journey, with a long and exciting road ahead. And I was joining a bunch of people who wanted to transform insurance and how it was done. Now in 2022 standing here as the CEO, I feel exactly the same. We have a long and exciting road ahead of us. Thank you for listening. We'll now take questions. Now, for the benefit of people who have dialed in on the audio, could you please state your name and firm, and let's try and restrict it to two questions at the most. Thank you.

Q - Cameron Hussain: Good morning, it's Cameron Hussain from JPMorgan. The first question is, there's kind of a running theme, or to me, through the presentation, which is the reduction in volatility and wanting to make the business produce more predictable returns, especially compared to the last few years. Does it still make sense to be in reinsurance? I guess with that kind of, as your thought, a big kind of picture strategic question. And then the second question is just around, I guess the 60% rate increases in London Market in the last few years. This isn't, you know, it's a macro change, everyone's had price increases. But where do you think that 60% has gone, because whilst margins are improving, some of that has disappeared. So I'm just interested in thoughts on that. Thank you.

Aki Hussain: Thank you. Cameron. In terms of the 60% rate increase and where it's gone, Joe, can you take that? And I'll address the point of volatility. First, you're right. The ambition for our business is to produce somewhat more consistent returns and reduced overall volatility. But not to eliminate volatility. The business that we write is inherently volatile. We are but building more balance portfolios in each of the segments. Each of our businesses is a critical and key driver of our strategy and 4 portfolios that I spoke about earlier, make us stronger and give us optionality in various parts of the insurance market. It's not about it eliminating volatility. It's managing the volatility. You should expect more consistent results from us in the future. But there will still be volatility.

Joanne Musselle: Yeah, we can go on to the 60% rate increase that we've seen. I think, as you can imagine, it's far more nuanced underneath the aggregate headline figure. As we've seen through the cycle, things have hardened at really different times so the early rate rises where our casualty portfolios, followed by property, and more latterly our specialty. So as an example, I mentioned cyber significantly hard over the last six months. Later, it's gone, some of it is definitely offset an increased view of risk. I think as I mentioned, we do foresee an increased view of risk during that period and some of that definitely has offset the increased view of risk. But now since then, more latterly, it is significantly improving margins that you can see it in the London market. Obviously from 2017 when we were at the depths of the soft cycle, those rates increases plus the other feature which is the tightening of terms and conditions. Often in a soft market We got loosening of terms and conditions in hardened market. We tighten those two things together is significantly improved in the results that you see on a revenue. And obviously from an underwriting year, we had very closely cut year this year, fourth cost-based cut year, but even notwithstanding all of that, we've got good underwriting margin returns in all under-market portfolio.

Ashik Musaddi: Hi. Thank you. And this is Ashik Musaddi from Morgan Stanley. Just a couple of questions. If I look at the retail rate change, it's about 5% and you're still 2.5% away from your guidance of 90% to 95%. How's the rate change evolving in 2022, and 2023, that will feed into that 90% to 95%? And what I'm trying to understand is, what's the possibility that you do 90% to 95% in 2022? What has to happen for you to deliver that? That's the first question. And secondly, if I think about the capital you're generating in 2021, you said 17 points were generated, 6 points were deployed in growth. But then, there is another 6 points that went out to those dividend, basically, so 12 points of use of capital. Is this a good run rate to use going forward? You are generating net, 4, 5, points of capital every year or am I missing anything in that puzzle? Thank you.

Aki Hussain: Thank you, Ritchie. So in terms of the retail guidance, I'll take that and [Indiscernible] the capital. So in terms of the path to getting to a 90 to 95, that is primarily driven by operational improvements. So you recall the many conversations we've had over the last two years and also by -- through the re-underwriting of the portfolio. And those actions are working and progressing well so we're confident of reaching the 90 to 95 in 2023. There is no further guidance at the moment. The rate -- we're pleased with the rates that we're getting but for the moment I should pencil in 95 in 2023.

Liz Breeze: Thanks. And then from a capital perspective, we were pleased to finish the year really strongly capitalized at 200% of our BSCR requirements. I would say that that is a strong position for us to move forward from going into the future. We don't target a specific percentage and you could see it fluctuate from there. So in terms of where we decide to invest in the future, in terms of taking different exposures, we're in a great place to build from but no further guidance in that area.

Unidentified Analyst: Hi, [Indiscernible] Credit Suisse. I just have one question on the retail business firstly. You talked about the digitally distributive retail business not contributing significantly to profits for the next five years. Could you just talk about the different profitability trends between the traditional and the digital business in retail, and if break-even is the right assumption for the next five years. And then just following on from that, what sort of investment assumptions should we be assuming in the retail digital business in order to assume a break-even flat period? Thanks.

Aki Hussain: In terms of the profitability of the digitally distributed business, we're now approaching $700 million in terms of top-line revenue. And the business makes money. So the way we would think about it and the way we think about it is primarily in terms of loss ratios. The overall business generates attractive loss ratios; loss ratios within our range of tolerance. The reason that the aggregate profitability and over the next five years, it will not be the major provider, firstly, it's a much smaller part of the business. Base roughly 20% to 25% as opposed to 70% to 75%. And secondly, we have an opportunity in front of us to capture growth, and it is profitable growth. So we are running the business at a slightly higher expense ratio that comes in the form of investment in technology and in marketing, but is below 100%, it makes money.

Ben Cohen: Good morning, it's Ben Cohen. I got a couple of questions. For my first, will -- you took reducing volatility going -- looking forward, just wondering with not that could apply to the investment portfolio given the mark-to-market losses last year. And second question, I had just really your view on the outlook for the reinsurance rates. You talked about additional rate being required. Will you look to reduce your reinsurance portfolios if that rate doesn't [Indiscernible] coming through in the year? Thank you.

Aki Hussain: Okay. Thank you, Barry. So in terms of outlook for reinsurance rates, Joanne, can you take that? In terms of volatility on the investment portfolio, it's purely accounting, it's not real. What you see at the moment is interest rates going up and the value of the bond portfolio declines. That's not something we can manage. We have to follow the accounting conventions and the vast majority of our funds in -- are in bond portfolios. What you will see is post-implementation [Indiscernible]. Its overall P&L volatility from interest rate changes should moderate because the reserves will also be discounted.

Joanne Musselle: reinsurance rates. I mean, as I shared, we've refocused our portfolio. We've re-looked at where we're attaching, and actually, our view is at the moment, our rates are adequate and is driving the margin. My question was more about go-forward. So if we want to generate returns through the cycle, our view is that we need additional rate. Now, that momentum's continued at 1

Ivan Bokhmat: Hi, good morning. This is Ivan Bokhmat from Barclays. I have a couple of questions. The first one is on inflation, and specifically I wanted to drill down on retail. So I was just wondering how you think about the rate of claims inflation at the moment across your portfolio. I think last year you got 5% rate increase, do you think inflation is running above that? And how you factor that in the midpoint of the growth range for next year. So that will be the first question. How easy it is to pass on the cost inflation to customers. And the second one would just be on the developing conflict with Russia and Ukraine. Maybe you could put some numbers around your exposures. And specifically, I wanted to perhaps draw a question to your cyber exposure. As usual in your presentation, you've got the range of between $100 million to $600 millions of losses. What scenarios does either end imply? Thank you.

Aki Hussain: Thank you, Ivan. So that's a question on inflation and on the conflict in Ukraine. I think, Joe, can you cover those two please?

Joanne Musselle: With regard to inflation, I think it's specifically on retail, as I laid out in the presentation, we obviously take this into account ordinarily in terms of our planning process. And I'd say in 2022, we've really doubled our expectation for inflation. We've taken that into account, and of course, reflected that in our underwriting and our pricing. I think there's two things I'd say, maybe [Indiscernible]. One of them is, yes, rates are important. And you can see that the rates that we're getting in our retail. But more important, is to reflect the underwritten exposures. I gave the example of the building with the sum insurers, then your rate can remain flat. But if you've reflected the fact that that building is going to cost more tomorrow than it did yesterday to repair, then of course, you need to inflate those sums insured, to make sure that you're being paid the premium to that. Even though rates might stay flat, premiums in that instance would go up. So those premiums all being reflected on [Indiscernible] backhaul. And it's not just on the sums insured, there are clearly things like turnovers, wage rolls, etc. Again, that's an area that we would look to make sure that we're keeping accurate to reflect those increase in costs. I think in terms of the second question, obviously, our thoughts, our first four months with those affected. With regard to ourselves, we of course, are keeping a close eye on the developments. I think we're really thinking about potential exposures in three areas. The first is what I would call sort direct exposure. You might see that manifest itself in all portfolio in Altaira on political violence portfolio. What I would say that is we're not expecting a disproportionate loss, more significant buyer of reinsurance, both [Indiscernible]. Other areas that you may expect some loss, but not in our portfolio would be political risk. That's a portfolio that's been running for us. Aviation haul, again, that's a portfolio that's been running for us and obviously on the trade credit side, when we have very minimal negligible exposure in that area. Other direct exposures not a financial loss, but into our [Indiscernible] portfolio, we've done we with our partner control risks. We've been able to assist our insureds. As I said in our financial loss, but we've been able to evacuate those that [Indiscernible] obviously in the previous weeks. So that's what [Indiscernible] of the direct. Across the rest of the portfolio, I would say minimal negligible. We then look at this will the second part that we're thinking about, and that's really around functions on that really would affect our premium. Again, we've looked at across our whole portfolio, and compared to our grosses and premium, it is a tiny portion that would be subject to sanctions, albeit really small, the biggest area would be in our London market, and we're clearly working with Lloyd's on that in terms of sanctions. Again, across the rest of the portfolio, it's pretty negligible in terms of premium income. And then, the third part, is what -- we've called that indirect exposure. Aside from being the obvious one, retaliation and how could that affect our portfolio? I think, on [Indiscernible], it really is too early to be definitive or speculate how this could emerge. I'd say there's a couple of things. One, we have a variety of war exclusion and infrastructure exclusions across all of our portfolios. But of course, it will come to how this unfolds. And obviously, the attribution, so that's the exposure in terms of Cyber. I think, when you reference the hundreds of the $600 million, at the back of the portfolio -- back of the deck, it is those extreme events that would give that sources very large -- I would -- if I look at our 2 biggest RDSs on a shorter return period, which would be a Cloud outage or a mass of ransomware. We have exposure of around the 300 to 350 for those types of scenarios. As well as lastly, the other thing that we're thinking about from an indirect point of view is, again, pressure on inflation. So commodity prices driving an increase on inflation and, obviously, as you heard, that's something that we already take into account. But that just means that we will clearly make sure that those -- any increases that we see or any pressures that we see are reflected in our pricing and [Indiscernible] underwriting.

Will Harcosly: Thanks, Will Harcosly, UBS. First of all, just thinking about the USB-PD business you touched on the retail digital there about current profitability. I guess the exiting part is the opportunity that exists beyond. Is there any way to sort of frame what sort of underwriting margin this can get in a more steady state, albeit steady state is sometime away, just so we can frame that thinking? And then second one is on the LPT. The new casualty transaction, just so I understand it clearly, does that trigger as of reserves as of today? And so any deterioration from today, they get passed on. And any specific geography or line of business, I know you said casualty, that we can take some comfort from? Thanks.

Joanne Musselle: Okay. Thank you, Will. In terms of the LPT, Joe will take that. In terms of steady state margins, we won't give a forecast right now as to what those margins might be. But you've certainly heard us here. We target retail business to operate within the 90 to 95 zone. That's where we expect to be as we have refocused our U.S. portfolio and also remediated our Cyber. You can see in the bottom part of the slides and you've heard from Aki, our progress on automated underwriting. And whilst over 90% of the digital business is automatically underwritten, there's also been some really good progress in our broker business. And now across retail and commercial, about 50% of all of our risks are automated underwriting -- and automated underwritten. So why is this important? Well, for a variety of things. First, it drives consistent results. The second, it allows us to do responsive scale and all of this is an addition to the efficiencies that [Indiscernible] automatically underwriting our portfolio brings. So as I look forward to 2022, our [Indiscernible] faction is largely behind us. You may recall this slide from last year when about 4% within that [Indiscernible] we're now at just 1%, which is the finish off our -- completion of our small business acceleration in the U.S. and the completion of -- completion of our Cyber remediation. The quality of our portfolio has improved, and that's being demonstrated in our underwriting results. We are well-positioned across all of our segments to capitalize on the opportunities through [Indiscernible]. And all of this is underpinned by investments in data and analytics and active portfolio management. I will now hand you back to Aki.

Aki Hussain: Thank you, Jo. To conclude, the world remains somewhat uncertain and unpredictable place. But notwithstanding that, the outlook for our business remains strong. As you've just heard, for our big ticket business, they're now more balanced, more controlled, and better priced, and well-positioned to drive strong profits and take advantage of [Indiscernible] growth opportunities. Our retail business will return to strong growth in 2022 in the middle of that 20 -- in the middle of the 5% to 15% range. And a poll for the Re underwriting actions and operational improvements are working and we're confident of reaching the 90% to 95% combined ratio in 2023. The balance sheet is strong, providing us with flexibility to invest in attractive opportunities as they emerge. I wanted to leave you with some final thoughts. I joined the business in 2016, as a CFO. And I joined the business because I was the people that I met because I saw the culture that I was exposed to. I was joining a business that was close to the start of its journey with a long and exciting road ahead. And I was joining a bunch of people who wanted to transform insurance and how it was done. Now, in 2022, standing here as a CEO, I feel exactly the same. We have a long and exciting road ahead of us. Thank you for listening. We'll now take questions. Now, for the benefit of people have dialed in, and on the audio. Could you please state your name and firm and let's try and restrict it to two questions at the most? Thank you.

Joanne Musselle: Inflation into in terms of -- in terms of retail. Obviously, we spoken about on the pricing side how that's taken into account with regards to the inflation around the expense ratio, which was your question. As part of looking at our retail portfolio we all looking at ways that we can simplify our business, and that is both structurally, internally as we -- as you know, we grow not resale business. With that has been an enormous success, but also has been certain complications both internally, as we're looking to simplify that model and we do think that drive the expense ratio, which will negate some of the inflationary expectations that you have. I think on the retail, as I said, that headline figure is just such an aggregate number. And years behind it, it's really nuanced in terms of business we touch, businesses we don't touch business for very risk various lines. I think what I would say in terms of the next level down with what's really pleasing is that excluding Cyber, were seeing that puts right momentum across all of the portfolio. So I don't know the figure off the top of my head. If I take Cyber Ark its entirety. But what I do know is across all of our portfolios in UK and in Europe and the U.S. on all of the other lines we're seeing that rates increase come through. The other thing I'd say, is during 2021, that momentum continues. If I look at the first half of the year, it was more like a full percent, second-half of the year was more like 6%. And we're seeing that continuing into 2022, as well.

Faizan Lakhani: Morning, Faizan Lakhani from HSBC. Thank you for the detail today. I just wanted to pick up on the UK business. From what I understand, the growth was driven from three aspects. You had some strong growth in commercial, but now was offset by remediation actions onto the finance broken to some COVID impact. How does that evolve next year? And I guess my question is more broad-based. What do you need to ignite growth in that UK business next year? And the second is on coming back to the reserve margin. You have a substantial amount of COVID losses for some business interruption cases, that's had time to evolve and [Indiscernible] now. How much of the idea do you have left in there? How much confidence do you have to potentially release from that next year as well? Thank you.

Aki Hussain: Thank you Faizan. Liz, can you take the question on reserve margin. In terms of the UK growth you're right. We -- the headline is around 3% constant currency, but there are pluses and minuses there. The commercial business has continued to perform really well, around 10% up. And as you noted, we've taken deliberate action in the APC doubts in private client business, primarily where frankly, commissions were right at the upper end and beyond our appetite. That work is done. So why -- the APC business will grow. Our expectations it will grow in 2022. Commercial business should continue from where we finished. We are also after effectively a two-year hiatus, we'll be going back into the market, building our brand, investing more into our -- into the marketing of the UK business. So I do expect the UK business to grow substantially greater than in 2021.

Liz Breeze: Sir, I can take the margin question on COVID. We had COVID losses across our business during 2020. And if I think about UK retail part of our business, that those losses offset selling within our best estimate, and we remain comfortably reserved for that. Turning to the other area of exposure we had, was on our reinsurance portfolio. And obviously, the time to settle those secondary implications is longer, and so we need to hold on to prudent, some margin, etc, for an extended period of time, to ensure we're settling appropriately within those numbers that we published previously.

Aki Hussain: We just want things to settle that because there are a number of questions on reserves buffer. It's an uncertain world at the moment, and we don't feel any particular compulsion or need to reduce the prudence in those reserves. But those uncertainties, they are either crystallized, in which case we will use the reserve buffer, or they won't, in which case, it will be released. I think as they said 10,15 minutes ago, you should expect a moderation in that reserve buffer over time.

Andreas Van Embden: Andreas van Embden, Peel Hunt. I had a question on your London market business and Hiscox Re. On London market, after this significant decline in exposure over the last few years. And you mentioned in your release that you've reached rate adequacy across most of your London market book, particularly at Lloyd's. What's your thoughts on exposure growth in 2022, and 2023, here at Lloyd’s? And moving to Bermuda and Hiscox Re. There's great use of fungibility of capital within the Hiscox Re business and you have reduced both your trade capital quota share usage in the last few years, and ILS as well. What are your thoughts of that usage of third-party capital going forward and the mix? Thank you.

Aki Hussain: Okay. Thank you, Andres. So in terms of London market, so we have seen the exposure reduce over time and that's been likely the portfolio corrective actions that Jo has been speaking about earlier. Most of that has not been done, there's still more to do on the property binder book. So you'll see some continued decline in exposure there. We have the flexibility to grow where needed. And you should expect to see, I would say moderate increase in exposure, nothing particularly significant. We will take rate wherever we can get it. For instance, just to give you a couple of examples. For Cyber we are towards the limit of our appetite in London market. For [Indiscernible], we're approaching, and that's our current price is. Now if the pricing environment changes if the rates go up dramatically from here, obviously our appetite changes. So modest increase in exposure, but we'll take all the rate. In terms of Re & ILS and how we think about third-party capital. We -- third-party capital, as you heard from Jo, gives us relevant, reduces our cost of capital for the reinsurance business. So it's a core part of our strategy. And we continue to see inflows in our ILS funds, so I am expecting the ILS business to continue to grow. The front-ended management to continue to grow in 2022. And again that's a function of the performance of the Re & ILS team in our flagship fund, if you reinvested in the ILS business, despite all the challenges over the last seven or eight years, particularly the last four or five, you've not lost money. And you are beginning to see, I think, not as much as I would have hoped, but beginning to see some bifurcation and a flight to quality, but only some for the moment. So we continue to see third-party capital is a core part of our strategy and you will see that continue to grow, certainly the ILS front early next year. Alan, I think you had a question.

Alan Devlin: Thanks. Alan Devlin from Goldman Sachs. Two questions. Right at the start, you said the excess profits are near the big ticket businesses we're funding the growth and the retail. Is that cross-subsidization finish now? And if it is or when it is, is it any point that you consider splitting the business up given the very different plans and volatility and in the end, [Indiscernible] in both doubles, earnings multiples? And then secondly, just [Indiscernible] openly ILS point you made. How is that market evolving when you do have increased volatility in weather losses and higher interest rates and QE reducing unless money being pumped into the system? You'd expect that market is still the group over the medium-term or are we at peak levels now? Thanks.

Aki Hussain: Thank you for those questions, Alan. So I guess going back to the point you raised. Have the excess profits being used to fund the expansion of retail, has model run its course? No. No, what we're talking about is, unfortunately what we've had over the last few years is we haven't had the excess profits. And the model and the strategy that we're employing here is we do expect to generate those excess profits. We have more balance, we have more margin, it's better controlled. We're using our expertise more often rather than designating it to others. So my expectation in the next few years is that the businesses Re & ILS and London Market will generate excess profits, which will provide us with -- continue to provide us with the balance to drive the growth in retail. Now, the Retail Traditional business itself is also getting bigger and bigger and becoming capital-generative. So the model is evolving, but it's certainly not running scores. And in terms of the overall sort of businesses, they're all a core part of our business. We have greater optionality across the whole of the insurance sector because of the capability that we have, and there is a huge amount of cost virtualization. The underwriting ecosystem that I talk about, which is absolutely core to our strategy and to the core of our being as Hiscox, technology is fantastic, but it's an enabler. It codifies our knowledge, it codifies our experience, our appetite. Technology isn't an end in itself, it's simply a vehicle to allow us to do even better than what we do already. That is not restrict -- that is not segmented by a business unit. That's a Hiscox thing. Those -- the actuaries, the risk models, the claims analytics people, the ubiquitous across the whole group, is a community that helps us underwrite and hopefully beat the market more often than not. So each of those businesses remain a core part of our strategy going forward. In terms of ILS, I don't know. I don't have -- I have not got the crystal ball. So you can imagine a scenario where if interest rates go up, some of these [Indiscernible] and pension funds, etc. start pulling their money out. But the crawlery of that is, you would expect -- so you're making more money because interest rate, investment income is going up, and you would expect your reinsurance of reinsurance rates also to go up, making it much more capital efficient. And we put more on to our own balance sheet. Frankly, as we have done over the last year. But I don't know. We'll see what happens. Okay. So we have a number of questions on the phone too. Okay, so I guess there is an operator somewhere, can we have the first question?

Operator: Of course. First question comes from Freya Kong at Bank of America. Please go ahead.

Freya Kong: Hi. Good morning. I have 2 questions, please. Re & ILS, the combined ratio was 68% for the full year. That's very good. How much of this was driven by reserve releases versus a very strong attritional? And to what extent can we extrapolate this into 2022? Second question is on the U.S. DPT re-platforming. Could we get a bit more detail on this in terms of cost, benefits, and timeline? And would it be fair to say, that 2023, growth outlooks for retail could be higher than 2022? Thanks.

Aki Hussain: Okay. So, very nice can we repeat the 68%, [Indiscernible]. So I guess the way to -- rather than go into that detail, the way to -- I think I would encourage you to think about our business for Re and I that is. What is our normalized expected combined ratio given our view of the risk we're writing and the margins that we're expecting to generate? So at the moment we're writing Re & ILS portfolio, what we believe to be a low eighties combined ratio. So that's our expectation in normalized CAT environment. But, of course there's lots of variables in that, but that's the expected margin on a steady-state basis at the moment. As rates go up, then we may, we'll see that improve. In terms of U.S.- TPD. As you noted we are undertaking a re-platforming of the business later on this year. So you've heard us speak about this many times. We've invested a lot of money across our very sweet old businesses. One of the lessons that we learned from re-platforming in the UK is it's really difficult to do. You have to slow down the business. These are retail businesses where you're undertaking hundreds of thousands of transactions and pieces of data moving around. Okay. So when re-platforming from a legacy system onto a new system, what we plan to do in the second half of this year is to deliberately slow down new customer acquisition. It will be temporary, a quarter to two quarters, and therefore, relative to the run rate in 2021 of 25% growth in DPD, USDPD. We expect that to be somewhere between 15 and 20. Now the new system brings a huge number of advantages for us. Much more increased processing utility front [Indiscernible] Systems were pretty difficult to change any pricing on the old systems. We collect much more data, more agility in terms of product cycle, putting new product type to customers. So it brings a huge number of advantages and will give us [Indiscernible] in time. I don't plan to give a revenue forecast for 2023 at the moment for you. Okay. I think there's another question on the phone.

Operator: Yes, our next question is from Ben Cohen of Investec. Please go ahead, Ben.

Ben Cohen: Oh, hi guys. Thank you very much. Most of my questions have been asked and answered. I just wanted to ask on the investment side is if you could comment on your risk asset performance year-to-date. And also in the context of I guess rising bond yields, what your plans would be for the 18% assets allocation to cash should we expect you to be to be reinvesting that in the near term? Thank you.

Aki Hussain: Thank you, Ben. This relates to investments. So what was our risk asset performance in 2021? And might we invest some more of that free cash that we're holding into bonds given the rising yields.

Liz Breeze: Sure. Hi, Ben.

Ben Cohen: No. Sorry, in 2022.

Aki Hussain: Sorry, [Indiscernible]

Ben Cohen: We know what it was last year. But this year [Indiscernible]

Aki Hussain: Thank you, Ben. It's been a long morning.

Liz Breeze: It's been a long morning. In terms of our return on the risk asset portfolio in 2021, we achieved 11%. That comes from a mix of different asset classes in the risks sector so we don't just have -- of equities exposed the S&P. It's a global portfolio with some hedge funds in there, etc. So it's a balanced risk taking portfolio that we have. In terms of going into 2022 what the opportunities there that lie ahead for us, you're right, there are a lot with the rising interest rate environment. And we're not looking to change the shape of the portfolio at the moment and that doesn't mean we won't. But obviously, we will be reinvesting into high-interest rate products going through the year.

Aki Hussain: Thank you, Liz. Maybe just --

Ben Cohen: -- Sorry. And the risk asset portfolio performance year-to-date in 2022?

Aki Hussain: Ben, I think we leave that for another day. The investment income in the first couple of months has been quite volatile, as you can imagine. So I wouldn't pencil in a particularly large figure for 2022 for the moment. I think there is, sorry, we'll take one more from the room. Chris.

Unidentified Analyst: [Indiscernible] I just have one question on London market. I appreciate you now gone into the whole process, remediating portfolio, you've done a great job with that. At the same time, rates of cumulative come up a long way. The expected potentially, go up more. Is it the time to add more exposure to the book now? I appreciate you mentioning you're not looking to do that. Very curious to get your thoughts on that. Thank you.

Aki Hussain: Thank you Chris. The question is, why not increase exposure? We will be increasing exposure. The question was, are we going to grow this exposure by 10% or 20%? No. There are select lines where we believe we are either on the way to, or we're getting significant risk-adjusted returns. We will be growing that. Earlier I mentioned that we will be growing our Flood Plus portfolio. That's a portfolio that we've been writing for 67 years. It's been well tested given the hurricane -- the very wet hurricanes that we've had over the last few years. And it's come through pretty well. The team have done a fantastic job. We will grow that. Exposure will go there. But we're not going to grow exposure everywhere. The portfolio we building is bounced. It is well-priced. And that's what we want to continue to do. There's a question on the phone, so maybe one more?

Operator: Yes, we have a question on the phone from Derald Goh from RBC. Please, go ahead.

Derald Goh: Hi there, morning, everyone. Just three short questions relating to the S&P model changes please. So the first one I think you mentioned it'll be the first time that you will recognize diversification benefits across the segments. Anymore comments around that? Is it specifically diversification from [Indiscernible] risk? And the second question, I think relative to the Bermudan solvency ratio, you previously said that an equivalent level would be 160%. What would that be allowing for the S&P change? And the third one is that allowing for this S&P change again, how might that change your risk appetite within big-ticket compared to current levels? Thank you.

Aki Hussain: Okay. Liz, I'm going to save you from this one. Derald I think as far as the S&P is concerned, the details are pretty sparse at the moment. What we do know from what they've said so far in terms of the consultation, is that it's likely to be positive for us. This are all very good questions but I think these are questions that we can answer once we have more detail from SNP. So we are up against the clock. Thank you very much for those questions. I think we've got time for one more if there is any more, otherwise, we'll call it a day. Okay. Thank you very much, guys. Thank you very much. Great questions.