The portfolio’s holdings are on track to deliver another excellent round of operational performance in 2025, posting a third consecutive year of book value growth of 20%.

Looking ahead to 2026 we expect book value growth, the long-term driver of stock performance, again to be meaningfully higher than the 10.5-11% per annum historical average. Given their liquid and conservative investment portfolios, non-life insurers continue to benefit from the increase in bond yields since 2022. Combined with excellent underwriting profitability, current earnings power continues to be the best we have seen for many years.

Underwriting markets remain attractive with most lines of business still seeing premium rate rises. Top-line premium growth is slowing versus recent years given good margins, but remains strong. With a lower level of profits needing to be retained to support growth, management teams continue to take advantage of their compelling valuations by aggressively repurchasing stock which will boost future book value growth.

Combined with excellent underwriting profitability, current earnings power continues to be the best we have seen for many years.

Non-life insurance remains a defensive sector in an increasingly uncertain world.

The positive outlook for investment income combined with strong underwriting markets means our companies’ earnings power is materially above historical averages. We believe this is not being properly recognised in company valuations with the portfolio’s performance this year significantly lagging book value growth. This has resulted in a large fall in price-to-book valuations. An expected mid/high-teen book value growth outlook implies cash-on-cash returns of 11%, materially higher than the c8% long-term average.

We are excited about the prospects for the years ahead.