Hannover Rück SE (HNR1) Earnings Call Transcript & Summary

Well, good morning, everyone, and welcome to our earnings call on the first quarter results of 2025. Today's speakers are Clemens Jungsthofel, our new CEO; and for the first time, Christian Hermelingmeier, our CFO. For the Q&A, we are joined by Sven Althoff and Claude Chèvre as in the past. And with that, I hand over to you, Clemens.

Thank you, Karl, and good morning from Hannover. I'm pleased to report that we got off to a very solid start in 2025 despite a significant impact from large losses in P&C reinsurance against the backdrop of absorbing the losses from the L.A. wildfire with a net impact of EUR 631 million. This is very satisfying and highlights the resilience of our diversified earnings generation. With group net income of EUR 480 million, we also remain in a position to confirm our full year target of around EUR 2.4 billion. The strong underlying profitability and the further strengthened balance sheet gives me considerable confidence to be even better positioned in potentially volatile times. In P&C re, revenue increased by 5.1% adjusted for FX. The reported growth number is affected by a refinement in the calculation for the non-distinct investment component. Excluding this effect, the underlying growth would be in the double digits, a level that provides good support for our target of more than 7%. A couple of additions and details on the non-distinct investment components will be explained by Christian later on. Our successful January renewals are reflected in a strong new business, CSM, including loss component of EUR 1.5 billion. The combined ratio of 93.9% reflects the fact that our large loss budget was exceeded by EUR 330 million, mainly driven by the mentioned L.A. wildfire losses. Furthermore, the ratio reflects our prudency in our reserving approach also in the first quarter. Hence, I would really like to emphasize this, the underlying profitability of our P&C portfolio was very strong again and clearly supports our full year target below 88%. In life and health reinsurance, revenue decreased by 4.1% adjusted for currency effects. The main reason is the reducing volume in our U.S. mortality book. Generally, the more important number to measure growth in life and health is really the new business generation. And at EUR 232 million in the first quarter, this has been quite a successful quarter in this regard. The reinsurance service result of EUR 243 million is in line with the overall stable positive trend observed in previous quarters and clearly supports our target for 2025. The investment performance was very satisfactory. The return on investment of 3.5% is comfortably above the target and is based on strong ordinary income. Finally, the capitalization remains strong with a solvency ratio of 273%. This figure includes foreseeable dividends based on a quarterly accrual of the ordinary dividend paid for the year 2024. As you probably saw on the news ticker last week, given our strong capitalization according to all relevant capital models, we intend to redeem a EUR 500 million hybrid bond on the first call date, which is in June. Refinancing of this bond is currently not envisaged. On the shareholders' equity increased by 2.4%. The positive contribution from Q1 earnings was partly diminished by currency translation. The CSM increased by 8.4%, mainly reflecting, of course, the new business generated by both business groups. As you know, the new business contribution from P&C is seasonally high due to the recognition of the January renewals. The risk adjustment increased by further 3.3% driven by new business in P&C and assumption changes in life and health. On a more general note, we are now in the third year of IFRS 17 reporting and observing the progressive growth in the CSM and the risk adjustment gives us a lot of comfort as regards future earnings growth. On that note, Christian, over to you.

Yes. Thank you, Clemens, and good morning, everyone, also from my side, pleasure to guide you for the first time through our figures. Our P&C business is growing nicely on a diversified basis, including a strong contribution from structured reinsurance. The top line growth is slightly below our 7% target for the full year. As Clemens already mentioned, the reported number is impacted by a refinement in our accounting. We have adjusted the approach to calculate the non-distinct investment components from a written to an earned basis as this is more in line with the earning pattern of the other components of the reinsurance revenue. However, this modification was not reflected in Q1 2024, and this results in a one-off effect when comparing the revenue numbers for the individual quarters. Excluding this base effect from Q1 2024, the reinsurance revenue would have increased by more than 10%. The healthy growth trends are additionally confirmed by the underlying premium growth also being in the double digits. Last but not least, the ceded business is not impacted by the refined NDIC calculation. Hence, the impact on reported growth in the net revenue is a bit more pronounced. In summary, I would like to emphasize that, firstly, there is no impact on earnings because there are corresponding effects in the service expenses, offsetting the impact on reinsurance revenue. And secondly, on an underlying basis, the growth trends are very healthy and well in line with our plan. The accounting impact on reported growth will decline over the course of the year. The combined ratio of 93.9% reflects the impact from large losses that ended up EUR 330 million above our quarterly budget. Apart from the LA wildfires, the overall large loss experience was benign. Excluding the impact of large losses exceeding the budget, our combined ratio is well in line with our target of below 88%. This means that the underlying profitability was, again, very healthy. Furthermore, I would like to emphasize that despite the impact of large losses on the results in the first quarter, we have not changed our prudent reserving approach for the current and prior underwriting years. Finally, the combined ratio includes a discount effect of around 8%. This is still higher than the interest accretion in the reinsurance finance results, but our prudent initial reserving should reflect the difference. The strong investment results primarily stems from the increased ordinary income from fixed income securities and very solid returns from alternative assets. For the sake of completeness, the amortization of our inflation-linked bonds added EUR 42 million. The other result includes positive currency effects of EUR 66 million. The main contributor to the P&C service result is the CSM release, reflecting the recent renewals in a very attractive market environment. As in 2024, the CSM release includes some catch-up effects due to a prudent release in previous periods, but the impact in the first quarter was minor and will remain so throughout 2025. The experience variance mainly reflect the [ L.A. ] wildfires, pushing total large losses clearly above our quarterly budget. The run-off result was an overall minus EUR 167 million and continued prudency is the reason why this number is negative. The underlying reserve runoff was positive as expected. The loss component from new business is quite low, confirming the attractive rate environment in P&C reinsurance. The CSM growth is mainly determined by our successful January renewals, resulting in a strong new business CSM of EUR 1.5 billion, as already mentioned. Compared to the previous year, the number increased moderately. This development mirrors our renewal reporting growth at slightly lower risk-adjusted prices and the reduced session rate to our retro program. Changes in interest and its rates had a smaller effect overall. Let's move now on to life and health. Here, the reinsurance revenue decreased by 4.1%, largely driven by U.S. mortality. Growth was mainly recorded in U.K. longevity. The reinsurance service result lines up well with a rather stable and good profitability in previous quarters. The mortality experience has been favorable, including a positive one-off of around EUR 20 million from client recapture offsetting a negative effect from increasing the risk adjustment for our morbidity book in Asia. And this again highlights the benefits of our diversified portfolio. The contribution from financial solutions and longevity continued to be strong. Overall, the reinsurance service result of EUR 243 million provides good support for our full year target of more than EUR 875 million. The investment result mainly reflects good ordinary income from fixed income. Altogether, the EBIT contribution from our life and health business group was EUR 253 million due in the first quarter. Looking briefly at the IFRS 17 components of the service results, this CSM release is the main profit driver and the release in Q1 is within the expected range. The risk adjustment release was extraordinary low in the first quarter. We expect a normalization over the course of the year. The experience variance is clearly positive, mainly driven by our mortality book based on a diversified contribution from different geographies. This mitigates the negative impact from the loss component of EUR 77 million. The new business loss component was a minor EUR 8 million, the main driver being an increase in risk adjustment for our morbidity business in China. This is not based on new trends resulting in assumptions changes, but the overall level of profitability in life and health allowed us for more cautious positioning with regards to our critical illness book in Asia. Altogether, the reinsurance service result is slightly ahead of our expectation. The CSM development on the right side is negatively impacted by currency effects. The CSM generation, which includes the new business CSM and also extensions on existing contracts amounted to EUR 232 million based on a diversified contribution from financial solutions, morbidity and mortality. Changes in estimates did not have a material impact in the first quarter. Altogether, the total CSM remained almost stable. The development of our investments was again very satisfactory. The ordinary investment income reflects the continued rollover in a higher yield environment and a strong operating cash flow. Inflation-linked bonds contributed, as mentioned, EUR 42 million, in line with our expectations. And additionally, the contribution from also alternatives was very solid in the first quarter. As you can see on this slide, all other line items in the investment income had no real meaningful influence on the results, particularly with regard to impairment and the change in expected credit loss. This highlights the strong resilience of our portfolio. All in all, the return on investment of 3.5% marks a good start to the year and is above our 3.2% target. At the bottom of this slide, you can see that the unrealized gains within the OCI have changed materially in the category others. Let me explain this. This reflects our participation in Viridium that has now to be accounted as an asset held for sale and so just is reclassified in the reporting. As the annual reserve review by Willis Towers Watson has been concluded, I'm happy to share and provide you with their final view on our reserve adequacy at year-end 2024, and the final number is EUR 2.523 billion. This means that the reserve resiliency has increased more than initially indicated in March. We are always cautious, of course, in predicting the outcome of an independent third-party review. So this does maybe not come as a real surprise. Still, it provides additional comfort for our reserving approach and future assumptions and particularly for the long-tail lines. In light of a generally uncertain claims environment, we even more prefer to be here on the cautious side. This is also visible in the loss triangles for 2024, which we have published today on our website. The increase in prudency is clearly visible, particularly there in the long-tail lines. The underlying trends in the development of all loss ratios are largely positive, but specific underwriting years in the liability segment also includes a limited increase in our best estimate reserves. Generally, we feel very comfortable with the current reserving position. At the end of 2024, the overall prudency level of resiliency reserves plus risk adjustment stood at 7.7% of nominal net reserves. Going forward, our unchanged reserving approach for new business and the in-force book should fuel further growth in our resiliency reserves in absolute terms, reflecting the increase in business volume. To conclude now my remarks, while the L.A. wildfires had an impact on our quarterly results, there is still substantial loss budget available for the rest of the year. Our business model is designed to absorb the volatility from large cat events, moreover, with our strong P&L and balance sheet and the fact that we have confirmed our profit guidance for the year underlines our ability to do so. And on that note, I'll hand back to you, Clemens, for some comments on the outlook.

Yes. Thank you, Christian. So a quick glance on the renewals. It's fair to say that the April renewals were characterized by a market environment quite similarly to -- quite similar to the January renewals. We have not observed any meaningful inflow of new capital, but reinsurance capacity was generally available. In this market environment, we observed some pricing pressure, most pronounced in property business. Casualty pricing on the other side remained more stable as reinsurance rates continue to provide us with attractive returns above the cost of capital. We made the most of the healthy demand for our security and grew our premium volume by 10.4%. The growth is diversified by region and line of business with a particularly strong contribution from the U.S. With an overall risk-adjusted price decrease of 2.4%, the quality of our portfolio remained strong. As the business development in the first quarter supports our expectations for 2025, we've kept our guidance unchanged. We continue to expect growth in revenue in P&C of at least 7%. The combined ratio is expected to come in below 88%, also accounting for the L.A. wildfires, the remaining large loss budget provides significant room to absorb losses in the remainder of 2025. And if needed, the underlying profitability and our balance sheet strength will further support the target achievement. The life and health service result is expected to come in above EUR 875 million, and we are targeting a return on investment of at least 3.2%. Altogether, we are quite confident that we will achieve our net income guidance of at least EUR 2.4 billion. This concludes my remarks, and we would be happy to answer your questions.

[Operator Instructions] The first question comes from Michael Huttner, Berenberg.

Congratulations on, as you said, solid results. I really only had one question, and it was on the solvency, the 273%, which is well ahead of consensus, I think 262%. I just wondered if you could walk us through the moving parts, particularly the earnings contribution. My feeling is it's a little bit ahead of what you might have expected, but it's hard for me to kind of split it out because there are lots of moving parts. I imagine currency also played a role. And then the only other question, which is a very lightweight one is, given your 3.5% investment return in Q1, investments fairly stable thing. Why didn't you change the guidance? Anyway, that's it.

Yes. Thanks, Michael, for your questions. Let me start to elaborate on the solvency ratio. As you will have seen in the footnotes on the slide, we start to present from now on the solvency ratio with the quarterly accrued ordinary dividend, as Clemens also mentioned, the regulatory Solvency II figure would be 265%. But this, nevertheless, is more or less around 4% increased compared to end of last year. And the main drivers here are in the own funds, the very positive new business that was written actually a bit better than expected. And we have to have in mind here that in contrast to IFRS, this is fully reflected in the own funds. So there is no CSM or the like deferring this. Second, the actual versus expected experience in life and health, so coming from mortality as we also already saw some minutes ago was positive for the own funds and the economic impact was with some minor ups and downs in total, more or less balanced. The SCR also decreased a bit despite the growth. And here, the main impact comes from the FX exposure as the euro appreciates, it's more or less in comparison with all major currencies and this was the driver for the SCR. So both numbers are going down, but the SCR a bit more than the own funds and this makes up the increase.

Michael, on the ROI, just -- well, short answer, it's really too early in the year to be honest, to change our guidance on that. Happy to take the 3.5% ROI when we come to it in Q4. But keep in mind that we have a couple of elements in the P&L, in the investments that are -- that can provide volatility, of course, that particularly the private equity and real estate portfolio is valued through the P&L, and that can come with some volatility as we go through the year. But it's fair to say that we went off for a good start on our investment result.

Next question comes from Andrew Baker, Goldman Sachs.

First one, just on the P&C reinsurance revenue target of 7%. I appreciate that this is still in place on the new definition. But I believe it's prior to FX. Given where we've seen sort of the U.S. dollar weakening, do you still think the sort of greater than 7% is achievable after FX based on what's happened year-to-date? And then secondly, just on the P&C reserve runoff, are you able to split the underlying reserve runoff that you saw in the first quarter with the reserve strengthening? And then as we think about the sort of reserve runoff as we go through the year, how should we expect this to develop just given, as you said, your prudent reserving on this side?

Let me take the revenue question. I mean, we were able to report double-digit growth if you include our structured reinsurance at both the 1st of January and now at the 1st of April renewals. So this, to give you a simple answer to your question, gives us confidence that we will achieve our 7% guidance, including FX effects.

And Andrew, on the runoff results. First of all, Q1. So I think it's fair to say that in a normal quarter, we would expect a triple-digit positive runoff result. And we have seen not really anything that would be detrimental to this in -- also in Q1. So this is, to a large extent, really attributable to resiliency build, which we did in the first quarter, which is also to be read in connection with the strong underlying profitability of the P&C book and the tailwind that we have from currency results. So this is really resiliency build to a large effect. And this is how we would expect this to develop over the course of the year. So usually, for a full year, we expect clearly a mid-triple-digit to high triple-digit number in terms of run-off losses on a discounted basis, and this is still in line with the expectations, subject to any reserves resiliency buildup that we will see in 2025.

Next question comes from Kamran Hossain, JPMorgan.

Two questions from me. The first one is coming back to the prudence. So I'm just trying to think this through. So 93.9% for the quarter, a drag of 167, and you say you should normally have a triple-digit million positive. So kind of delta is probably like 267. Should we take that off plus the excess cat and that's kind of what you're kind of printing at the moment on an underlying basis on combined ratio? Just a little bit confused on kind of how these things add up and also kind of why in a very heavy cat loss quarter or large loss quarter you added to kind of prudence and kind of thinking behind that? The second question is just on the views on pricing at the midyear. Obviously, it sounds like kind of April went down a little bit, but still reasonable levels. What's the view on kind of how things will shape up heading into the midyear renewals.

Yes, Kamran. Let me start with your second question. I mean the pricing we saw at 1st of April was very much in line with the development at 01/01. So this would imply that also for the midyear renewals, we will see a relatively similar picture through retained earnings. There's a particularly strong supply of property capacity. So we have to expect that property pricing will continue to soften at the midyear renewals. When it comes to the U.S., I'm certain that the wildfires will be taking into account, and we'll have a little bit of a dampening effect for the midyear renewals, but it will not change the overall trend. When it comes to the other classes of business, we expect that renewals are going to be more stable than on the property cat side. Again, that's what we saw at 01/01 and at 01/04. So no reason for us to assume that the midyear renewals will behave any different.

Kamran, on the prudency in the first quarter and the read sort of the combined ratio, I think it's a fair calculation that you've come up with. So again, we would expect a positive runoff result, which we would have seen also in the first quarter. So no major distortions to that. So if you do the math, then I think you land where you were coming with your underlying profitability of the P&C book. The question why in a loss-heavy quarter, why have we built resiliency in the first quarter where, first of all, we have seen quite some tailwind on the other income in the P&C reinsurance results, so mainly the currency result. Secondly, the strong underlying profitability of the book allowed for it. We will, as always, share this with you how much resiliency we've built. It's always good to have some buffers in these days, particularly looking at the cycle overall. So being prepared for resilience as we go through the cycle is part of the consideration.

The next question comes from Iain Pearce, BNB Paribas.

The first one is just on the California loss, where the level of retro protection you're getting on that loss seems pretty high compared to previous loss episodes. So just a couple of questions on that. So firstly, if this creep on California, do you expect that you will continue to see losses there? And then is there any impact on retro for the remainder of the year given the size of the loss that your retro partners have taken already. And then the second one was just on the currency result. I was pretty surprised to see that being positive given the U.S. dollar movements. If you could just talk about expectations for that number for the remainder of the year, given what we've seen in currency markets, that would be very useful.

Yes. On the wildfires, I mean, out of the EUR 1.3 billion of gross loss, EUR 438 million is coming from our fronting activities on the ILS side. So the gross loss we have written for our own account without the fronting activities is EUR 868 million. Out of the EUR 868 million, we have calculated that we will recover roughly EUR 230 million on the retrocessional side as the U.S. is covered peril under our proportional K recession. Most of the recoveries will come from the K facility with only a minor collection calculated from our whole account event tower. So this also gives you an idea of how this is impacting our retrocessional program for the rest of the year. There's hardly any impact on the nonproportional covers. So there's still considerably limit left. It also means that if the gross loss should deteriorate, we will be able to collect from both our K facility and from the whole account protection, which would mean that the increase of our net loss would happen on a slower basis compared to the increase on the gross side. So we feel well positioned with the reserve position, a, because we started with a robust assumption for the Q1 exercise and, b, even if we should have some deterioration, we have good retro protection in place.

Yes. To your question regarding the currency result, generally speaking, we see here a general mismatch in accounting. So as you will know, there are nonmonetary items and the revaluation with FX go through the OCI and not through the P&L. And the second, when looking at the Hannover Re figures, you have to see that we see with a quite disciplined asset liability matching and hedge the currency risks. But we do this with regards to the economic value of Solvency II and not with IFRS. There are slight differences. So we might see here also some up and down going forward, but we have to see how the rates develop.

The next question comes from Shanti Kang, Bank of America.

So just 2 questions for me. So the first one is, last week, we had from a company that was able to secure aggregate cover, which is expected to buy in a 1 in 4 or 1 in 5 type scenario. So I was just curious if you could tell us more about your participation in aggregate cover markets today? And then the second question was on pricing. So obviously, with the 2.4% decline in April, it seems that pricing is coming off peaks. But I'm just curious how far they continue to decline before you'd stop pushing for growth.

On the property cat side, we certainly have a preference to write event towers. But on the other hand, we also prepared to write some aggregate covers. It's a smaller part of our portfolio. We would have the preference to write at higher return periods from a retention level point of view. So we also observed that there is more capacity available in the market to write those covers. But as I said, we are not a major player in aggregate covers, but do entertain them from time to time in the context of an overall client relationship. When it comes to your second question, I mean, I would remind you that the loss component we have shown is still at a rather marginal level, which gives you an idea that we feel that despite the softening most of the business we are writing is still over and above our capital hurdle rates. So from that point of view, we continue to be comfortable growing in this pricing environment. Of course, much too early to think about how the pricing environment may look like at the 1st of January renewal, because particularly the volatility in the capital market and of course, the major loss burden from natural catastrophe and manmade side will play a role here. So assuming that things are similar to where we are today, it would not necessarily immediately make us stop writing the business and we may continue to grow. But if reductions start to become more meaningful, then this dynamic may change, but that's too early to really tell. Right now, most of the business we are writing is at a good level of profitability.

The next question comes from Will Hardcastle, UBS.

Can you remind us again, please, on where the reserve resilience rests relative to history in percentage terms, when also you consider risk adjustment? And in what circumstances would you look to build that beyond even this level and beyond reserve growth, I guess? And what's the minimum level you'd be willing to have it at? And that's not for now, obviously, but I'm just thinking for the future, particularly given CFO change as well. And the second one, it's another reserve question, but it's just you mentioned there, we'll see clear evidence on the reserving triangles of this. I guess, can you point us in the right direction before we all drill down into these of what we should be looking for?

Yes. Maybe on the first, the resiliency reserves, if I understood this correctly, you asked on the relative reserve resiliency level including the risk adjustment. So far for year-end 2024, this would be the EUR 2.5 billion Willis Towers Watson is showing and then we add the EUR 1 billion, so EUR 3.5 billion, and this would be 7.7% of the net reserves. That's the status. So the overall -- and we mentioned that philosophy here is to grow the resiliency in line with business growth, but we will, of course, have a look at the overall results in the remainder of the year, and we are preparing for a cycle, have to see what exact reserves buildup. We will do then later. And just be assured, there is a change in CFO, but not a change in reserving philosophy and approach here. This will be continuously done also in the future like in the past.

Just a quick follow-up on that, if that's okay. I guess semi sort of wondering is, is it possible to go higher from this level as a percentage before you start getting knocks on the door? Is that plausible?

Yes, that is possible. There is no clear limit or a special figure where it ends. We feel comfortable with the level we are. There would be room to maneuver also above that, but it's too early to say if we will steer in that direction.

Yes. And then on the reserve study and our triangles will -- I mean, it's, of course, the long-tail classes we were talking about earlier. So where you will not see a lot of movement is on U.K. motor. We have not taken the more positive Ogden rate development into account when setting our IBNR levels. So this translates mostly into additional prudency. On the other hand, we've taken a slightly more prudent approach when it comes to U.S. casualty. I mean, where we had data points that were indicating that would support a slightly more prudent best estimate approach, we have done so. You will not be surprised that this, of course, mainly happened in the soft underwriting years '14 to '19. But overall, in most classes of business, most territories, the underlying reserve development was trending positive. But where we had the data points, we were also willing to take a slightly more prudent approach.

The next question comes from Vinit Malhotra, Mediobanca.

Most of my questions have been asked. But I have one. I mean, I'm still a little curious that how do you perceive the relation between building even more reserve redundancies and the cycle softening? I mean, is your expectation that when the cycle softens further, you will be leaning on these reserves to meet profitability objectives? And do you think that's what the rough plan is? I'm just curious mainly on that.

Vinit, happy to answer this. And as Christian has luckily clarified that there's no change in reserving policy. So prudency and resiliency build is clearly part of our model. As you know, providing stability over the cycle. So we always look at our earnings mid long term, and we want to really provide stable, increasing stable results over the cycle. That's why we stick to the reserving philosophy. And briefly coming back to Willis' question. Is there a ceiling? And I'd say, I would confirm what Christian said, not yet. So if you purely look what the EUR 2.5 billion is an equivalent of EUR 5.5 billion of nominal reserves and then you add the risk adjustment, as Christian mentioned, which is also very strong and very high, I'd say, conceptually. So if you look at the EUR 5.5 billion just sitting in the liability for incurred claims, there is more room for resiliency build. And we are able to and we are willing to utilize this resiliency in it in case of the financial year where we see large loss burden in excess of our budget or as we go through the cycle to really keep our guidance stable.

And just to clarify, the trigger for this quarter build, was it the 2.5% price cut in April? It doesn't sound like it was a surprise or a shocking number. I'm just curious as to was there a trigger or you just said let's do this for the medium term and see?

Yes. We were happy with the outcome of the Willis Towers Watson report, as Christian mentioned, so this was fully in line with what we expected. And the Q1 was really about, as mentioned earlier, strong underlying results and some currency tailwinds in the quarter. So we've taken that opportunity to actively -- proactively build a bit of resiliency also in Q1.

The next question comes from Ivan Bokhmat, Barclays.

I have a couple of questions. The first one is about the new business, CSM and P&C. So if I look at this number that you report on Slide 8, the EUR 1.5 billion compared it to last year first quarter, we're talking about approximately 4% growth year-on-year. So I'm just wondering if you could perhaps talk about the large books behind it of where do you think -- what do you think was the bigger contributor to that growth? What changed year-on-year? Is it property? Is it structured reinsurance, maybe you could help put it into context? And also, when I think about let's say, you have an 88% combined ratio guidance. So you have like 12 points of margin. Now prices are down 2 to 3 percentage points. So as we think about this new business, CSM, should we think about that price headwind is like a 10% weighing down on the CSM offset by the exposure growth. Is that the right way to think about it? Maybe I'm completely off. And secondly, I have a question on life and health re. Also about the new business, perhaps. I'm just wondering whether -- in the past 12 months, let's say, there's been several large transactions brought to the market, whether you've considered them attractive to what extent you've participated. And also, whether the changes in interest rates that we're seeing, the volatility, whether that makes the finsol business more or less attractive to CSM as we go forward?

Let me start with your CSM question. And the growth compared to Q1 in the previous years, to our calculation, more like 6% than the 4% you have mentioned the 2 positives, which are helping in that increase is the general growth in the business and the fact that we did buy less retro compared to the previous year. On the other hand, this is somewhat counterbalanced by the decline in reinsurance pricing, where, as you will remember from the one renewal was close to 3%, now 2.5%. And this, of course, also has a bearing on the quality of the profitability in the business. So 2 positives, one slightly negative. The grow -- the component parts are as diversified as the premium growth. So most of our regions, most of our product lines are growing and are positively contributing to the CSM development. So no difference compared to the revenue growth here. When it comes to the 88% combined ratio, which is one percentage point lower compared to the previous year, the main driver behind this, as we explained on previous occasions, really the fact that we have bought less retrocessional coverage in a general relatively stable incoming price environment that made us feel comfortable to reduce our combined ratio target from 89% to 88% despite the fact that we were expecting a slightly softening market environment.

Yes. Maybe to your 2 questions on life and health, many thanks. I start with, with the change in interest rates. What you have to understand is the change in interest rates has an impact on our seedings on the direct business, mainly on savings business. And we're not in that type of business. So for us, the change in interest rates is not that relevant thus for the direct insurance company. So no change from our side. The second question you have was on the big deals. Yes, we have seen big deals in '24. Most of these big deals, they came from the longevity business, and we looked at them and we didn't believe that they were attractive enough. The profitability of these deals were attractive enough to participate. So we haven't participated in any of these big, big deals.

Next question comes from Jochen Schmitt, Metzler.

As a follow-up question on reinsurance pricing on Slide 17. You state abundance of capacity twice on this slide. But in your remarks, you also mentioned no meaningful inflow of new capital into the industry. So would you consider the aforementioned abundance of capacity to be only particularly referring to individual regions or submarkets of the global reinsurance market? Maybe you could provide a bit more details here. That's my question.

Yes, we see the high levels of supply really in parts of the world, in all product lines. It's mostly coming from existing market participants. So that's why we say we are not seeing particularly new capital coming into the market. But obviously, the profitable -- profitability journey of the industry has been strong over the last 9 quarters. So to the extent, not fully dividended out. Of course, the retained earnings and the fact that the market is more comfortable with today's pricing and retention level is leading to this supply situation. But it's really in most territories. It's particularly strong on the short-tail classes. So properties, some of the specialty classes, it's less evident in casualty and particularly U.S. casualty, which are the more stable parts of the market right now.

Next question comes from Roland Pfänder, ODDO BHF.

I would like to come back to the life and health business. Could you touch on the financial solutions business in China. I think you mentioned that there were some regulatory changes or challenges, which might just fade out midyear. For the first quarter, you reported quite healthy new business. So what is still in place or are things moving? So could you provide maybe an outlook on this? And secondly, on the longevity business. You did mention it in the first quarter reporting. Could you indicate a view on your pipeline, what you see for longevity business you might be able to write in the near future, let's say. And maybe secondly, just housekeeping questions. Could you mention the running yield and reinvestment yield of your fixed income portfolio and investments?

Yes. Let me start, Randy, with the Chinese financial solutions business. You're right. We said that there was a regulatory change going on in China on the FS business, and I mentioned that already in the last call. We're still working on it to find some solutions for our clients, which are also feasible for ourselves. So we're still working on the solution there. On longevity, maybe just the second question on the pipeline on longevity business, we do see still a good pipeline on longevity business, not only in the U.K. by the way, but also a diversified pipeline geographically from other regions. But as you know, these longevity deals, they're all transactional. They were quite big. So it's very difficult now to say what probability of success we're going to have here.

And briefly to your fixed income question. So the running yield was 3.5% and the reinvestment yield 4.3%.

The next question is a follow-up question from Michael Huttner, Berenberg.

I have 2. The first one is on Slide 11, you talked about EUR 81 million experience variance mainly from mortality. I just wonder if you can give us some detail how this crazy theory that the new obesity drugs are starting to make a difference, and I'm probably wrong. And then the other one, you talked about property pricing and aggregate covers and stuff. Should I take this to mean that the, what I call, attachment points are beginning to soften?

I mean [indiscernible] the experience variances on the life and health side, EUR 81 million. Yes, this is coming from mortality, and it's coming mainly from our South American and Southern European business.

And on the property retention, they're mostly stable. I mean there's less inflationary pressure and underlying value. So therefore, we are not seeing them go up, but we're also not seeing them go down for the most part. But of course, in a market where there is an oversupply of capacity, some clients are testing the market in the sense that they are looking to buy underlying coverage, either on an event basis or on an aggregate basis, but the core programs are stable from a retention point of view. We don't see a trend in addition to the pricing trend of the generally reduced retention levels.

The next question comes from Faizan Lakhani, HSBC.

I have 2 questions on life and health re. One was on the risk adjustment release. I mean you mentioned you expect to normalize in future quarters. Will there be a catch-up from Q1 into the rest of the 3 quarters? Will there be a [indiscernible] normalization? And secondly, on Greater China, you mentioned that there is no change in trend or worsening experience for you to get opportunity to increase risk adjustment. Should we assume that when you have a quarter of positive experience variance that you will take actions like that to offset that? Or is this just a one-off?

So regarding the risk adjustment release that was prudent. This is indeed to be on the prudent side, there has been some observation of positive development that might be just temporary. So this adjustment neutralizes this and we have to monitor this and look throughout the year if this effect becomes sustainable or not, and then we will accordingly use also this risk adjustment to steer that. So therefore, we think it will normalize through the year. It's just prudency. It's not a trend underlying that.

And maybe on your question on Greater Chinese morbidity. I mean, as Christian already said and Clemens also, we don't see any further negative trends on this business. There was no negative claims experience in Q1 that we have seen, and it was really for pure prudence and resiliency that we have done this. Now what you need to understand is that this is long-term business. So I don't expect us to release any reserves based on quarterly movements that we observed that would be really a short-term view, and we really have a long-term view on this business.

[Operator Instructions] The next question comes from James Shuck, Citi.

I just had a few things left. So firstly, I just wanted to ask about the debt outlook. You mentioned that you're going to redeem the EUR 500 million of debt in Q1. How do you think about the debt leverage? Is it a bit higher versus peers? So just keen to understand if you intend to reduce the debt profile or keep it stable and grow the book value to reduce that debt leverage over time. That's my first question. And then secondly, I know you said in the comments that the SCR in Q1 decreased a bit from FX. I'm a bit surprised to hear that given the amount of growth that's coming on the books, even if we adjust for FX, let's call it stable. I'm particularly interested in capital allocated to P&C re for underwriting risk, if you could perhaps tell me how that developed in the quarter? And just remind me how you think about it when it's forward-looking on a 12-month basis, I think. And finally, just quickly, I know you've had lots of questions on the resiliency reserve. So I'm not going to go back into that. But I would just like to know of that 5.5%, excluding the risk adjustment, does that translate into some form of reserve percentile that you can tell us?

James, this is Clemens. So just on the debt. So this is really just sort of -- and we have quite stable capital now under all rating regimes, et cetera. So this was really just taking advantage of the strong capitalization under S&P, AM Best and then Solvency II, so this is just for now. Clearly, we'll always look at capital efficiency. And if the market allows and if need be, we will look at our leverage ratio in light of -- clearly in light of any debt, in light of dividend policy, et cetera, but that's just for now. On the resiliency, the 5.5%, would you mind just repeating the question on that. I'm not sure if I fully captured the question, James.

No, absolutely. So I mean a lot of reinsurers when they reserve, they reserve inside they 80th or 90th percentile around about that. So what does that 5.5% translate to for you?

Yes, we don't have it at hand, and we -- I don't have a number off top of my head how that will translate into a confidence level. The confidence level that we provide will be a diminished number between P&C and life and health as part of the disclosures, but I don't have any at hand, James, for P&C, standalone. However, I'd say with the 5.5%, as we always said, we are consistently at the upper range of potential best estimates. So we are really consistently prudent. Again, is there room for further increase in resiliency? Yes. So these are quite prudent and robust reserves that we're looking at, and there's still some room to further increase those. But again, if we look at the overall P&C resiliency, you should always take into account also the risk adjustment that clearly goes on top.

Okay. And that is just a question on the underwriting risk rate [indiscernible].

James, we don't have an answer for that yet. So we follow up on the SCR development in detail and come back to you on that.

The next question is a follow-up question from Michael Huttner, Berenberg.

Sorry about that. On Viridium, can you say how big your stake is and what the valuations in your balance sheet now?

Yes, Michael. On Viridium, it's an equity participation. So it's just shy of 20%, the participation. And so there are -- it's a mid-triple-digit number in terms of valuation. The deal has not been closed yet. So please bear with us but it's a mid-triple-digit number for our part that we're looking at part of the OCI, and we will see how that number will develop when the deal is closed, which we expect to be later in the year. We will see it in the balance sheet line item, as Christian alluded to, as assets held for sale or up for sale. So there's a line item in the financial statements, and that should provide the exact value that we are carrying at the moment. I don't have it off hand.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Clemens Jungsthofel for any closing remarks.

Yes. Thanks very much. Thank you for your question, for your participation. I hope we have delivered the message that we have built resilience even not only in 2024, but also in the first quarter, in fact, both in P&C and in life and health, as you've heard. So we feel very confident given the resilience in our balance sheet given the underlying profitability to deliver on our targets and clearly to meet our guidance for 2025. Thank you again, and have a good day.