Münchener Rückversicherungs-Gesellschaft Aktiengesellschaft in München (MUV2) Earnings Call Transcript & Summary

A very good morning, everyone. Welcome to our call on the 2025 financial outlook. We know it's a very busy day for you, and we appreciate that you join us this morning. And in the interest of time, I'll pass it on to Christoph right away. He will kick it off with a few key messages before we start the Q&A. Christoph, please.

Thank you, Christian, and yes, good morning, everybody. I'll go into the content immediately. But as this is the last call of our year, I will not start before wishing you all of you happy holidays and all the best for the next year. And I do so in the beginning of my call because I'm sure I would forget if I would only do it at the end. Now going to the content. As you can hear already, I'm very pleased to present the outlook today. But before we go into the outlook, maybe just a bit of context out of our 2024 experience. Five weeks back, we released our strong 9 months result of EUR 4.7 billion, which was a proof of our successful earnings path over the course of the year already. And despite the higher than average major losses we saw, we already achieved more than 90% of our initial net income target, which showed that our diversified earnings profile is paying off. Now while we benefited from some tailwinds year-to-date like from the capital markets, our optimism to exceed the initial target of EUR 5 billion for the full year 2024 is to a major extent based on a sustainable improvement of the underlying performance across all lines of business. And this obviously is a very strong foundation also for future success. And on that ground, we are able to announce today that EUR 6 billion is our net income target for 2025. And this is a further strong profitability increase. The expected net income for 2025 is now 20% higher than our initial target for 2024. All segments, as mentioned already are expected to contribute to the substantially higher 2025 targets, and we continue to benefit from our well-diversified portfolio, both on the insurance as well as on the investment side. And as you know, we are reporting in a new segmentation from Q1 2025 onwards, where we will split the current property casualty reinsurance segment into 2 segments: one being Property Casualty and the other being Global Specialty Insurance. Besides, we combine the Life & Health Germany segment and the P&C Germany segment into ERGO Germany, while ERGO International remains unchanged. Please keep that in mind as the 2025 outlook is presented today already in line with the new segmentation. Now some details on the segments. We start with ERGO. ERGO continues to deliver on its ambition and has been steadily growing its earnings year-by-year for some years already. We expect the continuation of the strong operating earnings trends and therefore, once more moderately but consistently higher top line and bottom line. The 2025 outlook, increasing the insurance revenue from EUR 21 billion to EUR 22 billion and the net result from EUR 0.8 billion to EUR 0.9 billion confirms and continues this steady path. We estimate the combined ratio for P&C Germany to remain at a very good level of 89%. And this level is unchanged compared to the updated outlook for 2024. While we are addressing the profitability given claims inflation in motor with the necessary measures, those might be compensated for by reduced interest rates going forward, which result in a lower expectation for the discount. For international, we assumed that the combined ratio remains unchanged compared to our initial outlook at 90%, emphasizing the continued attractiveness of the international markets in which ERGO operates. Now reinsurance. Also in reinsurance, we expect ongoing profitable growth as reflected in a further increasing top line from EUR 40 billion to EUR 42 billion. While we expect to seize further business opportunities in Life & Health reinsurance and in P&C reinsurance in an attractive market environment, our expectation to further grow our GSI business, is even higher. All in all, we expect to deliver an again materially higher net result in reinsurance of EUR 5.1 billion, EUR 0.9 billion or more than 20% higher than our initial target for the current year. This is supported by an expected increase in the total technical result of Life free from EUR 1.45 billion to EUR 1.7 billion as a reflection of the very successful recent business growth and the high portfolio quality as well as by a very strong technical profitability, which we'll expect both for P&C Reinsurance and the GSI segment. An envisaged combined ratio in P&C reinsurance of 79% and in GSI of 90%. The two together correspond to an 83% for P&C reinsurance according to the also the current segmentation. While we expect the underlying profitability to remain more or less unchanged, given our expectation of rates plateauing on high levels, the 1 percentage point increase compared to the 82% combined ratio target reflects two aspects: Firstly, we have prudently considered the recent volatility in interest rates and the uncertainty regarding the discount impact on the combined ratio by adjusting the expected discount from 8% to 7% in 2025. And the second aspect is the expected strong business growth of GSI, so a changed business mix. Let me quickly add that we planned for GSI in particularly -- in a particularly cautious way given that we present the segment separately for the first time. Also, generally, the combined ratio of GSI as a primary insurance segment is higher than the reinsurance combined ratio for two technical reasons without impact on the economic profitability. The first technical reason is that for primary insurance, the discount impact is generally lower. And the second technical impact is that in primary insurance, the difference between gross written premiums according to IFRS 4 and the IFRS 17 insurance revenue and the related impact from the switch from one accounting standard to the other is very small. Well, as you remember, the switch has been significant for reinsurance. All in all, the combined ratios of both new reinsurance segments reflect an ongoing attractive profitability level. Along with the strength of our insurance business, the investment income is expected to increase further as well as the higher reinvestment rates will continue to benefit the running yield. This increase will most probably be less pronounced than in 2024 as the gap between running yield and reinvestment yield has narrowed. As a result, we expect the group ROI to increase to above 3%. Now to sum it up, the performance in 2024 year-to-date very nicely supports our 2025 ambition based on a strong capitalization, a very attractive return on equity and continued earnings per share and dividend per share growth. And as usual, we'll inform you about capital management proposals in February. That concludes my opening remarks, and I'll hand it back to Christian. Thank you very much.

Thank you, Christoph. Not much to add. Aside from my usual housekeeping remark, we go now into Q&A. And please restrict the number of your questions to a maximum of two, and if you have further questions, then please rejoin the queue. And we can start with the first question, please.

[Operator Instructions] And our first question comes from Kamran Hossain from JPMorgan.

Two questions from me. The first one just on the -- I guess on the new disclosure around GSI and P&C reinsurance and the combined ratios. Just interested in, I guess, at the group level, we can see that you've moved from 82% to 83%, and I understand your comments around prudence around volatility, particularly in discounting. How do the 90% and 79% compared to last year? Is GSI getting better, worse? Is P&C getting better, worse? I assume P&C is probably relatively flat, but I was just interested in kind of how you see those dynamics paying out? And then the second question is just on the investment return. Obviously, you pointed to like an above 3% investment return for 2025. You're reinvesting it about 4.5% over the course of the year. Just interested in how quickly you think that gap should actually face. It's a bit closer but how long will it take for us to get to that 4.5-ish number?

Kamran, thank you. I'll start with the first question, GSI and P&C Re. P&C Re, I think I mentioned rates, the environment is still very attractive, but plateauing on a level, so we wouldn't expect any significant improvement in the operational profitability. As always, there is a large loss element in that number. And if we would look at into P&C Re, obviously, the relevant -- or the relative share of large losses in that combined ratio is higher than in today's combined segment. Therefore, I mean, depending on how one goes and how the final portfolio mix will look like, we would expect 16% to 17% major loss loading in the combined ratio of P&C Re, so the reinsurance new segment and only, while reserve releases are expected to be 6% in that segment. So you see the composition of that combined ratio slightly changed due to the fact that it's a reinsurance-only segment now, but the underlying profitability is very much unchanged. On the GSI side, the 90% I mentioned already is a particularly cautious starting point. Going into new segmentation you have many technical topics to deal with. We shuffle a bit your data flows, your systems behind, who knows if there are any surprises -- let's see. But we thought it would make sense to be a bit cautious maybe with that target, maybe even a bit more than what we traditionally would have been. Operationally, this segment is also in very good shape. The burden this year has been very much on the large loss side. I think we covered Hurricane Helene, that was a big event for GSI, which we wouldn't expect to repeat itself like that next year again. And maybe also to mention that already today, we are not going to normalize the GSI combined ratio in a way like we do it for reinsurance. So we would not regularly talk about reserve releases or major loss expectation versus reality. We would rather do it like we do it for ERGO today. The reason being is that -- yes. Well, in reinsurance, for example, on the reserving side, the uncertainties are significantly higher, which means also the room to maneuver is significantly higher. On the primary insurance side, it's less like that. So therefore, quite naturally, the reserve prudency cannot be as high as in reinsurance. And therefore, also this entire normalization exercise does make less of a sense. And then also the large loss topic is much less significant in primary insurance than in reinsurance, and therefore, also a regular normalization like what we would do in reinsurance doesn't make so much sense. So therefore, the current disclosure, as you know it, with a normalized combined ratio where we speak about reserve releases and the major loss contribution, this is something we'll be very much focused on reinsurance going forward. But primary insurance is more straightforward, and we will mostly talk about the combined ratio in itself. And coming back to GSI. And with the huge amount of large losses we saw this year, particularly due to the Hurricane Helene, I would expect this year's full year number to be a bit higher than our 90% target. Obviously, early days, still the fourth quarter still ongoing. So I'm only guessing here, and we really don't know it yet. And we will release the final, let's say, numbers in the new segmentation than with Q1 next year. So the Q4 release will still be based on the old segmentation, then we will need also some time to do the work internally to restate all the numbers in the new segmentation and we'll release them together with our Q1 results next year. Running yield. Yes, well, the running yield, there's two drivers to that. First of all, how do capital markets develop? I mean this year, we have been reinvesting at a high rate. But there's a second driver, and this is how many unrealized losses are we really realizing? And this is something which still remains to be seen until year-end. I think in the Q3 call, I mentioned already that we wouldn't rule out to do a bit more in the fourth quarter. So this is ongoing work and we'll have to see what we really will do. And this will also very much drive, of course, the running yield. On the other hand, the ROI target is always also affected, obviously, by more volatile items in the investment return. And this is the reason why we're always saying above 3% because, obviously, there's some volatility to be buffered as well. And particularly in an IFRS 9 context where this volatility is higher. And just to remind you, we're also fully accounting mark-to-market for equities for derivatives anyway. And also for a bigger share of our fixed income universe now. So volatility is a bit higher. And therefore, again, what you do is as Munich Re, you have a target which stays above 3%. But in there, of course, there's a certain buffer of volatility already included. And yes, and the reinvestment will see then finally really how much losses we are still going to realize this year and how this will affect next year's running yield.

And our next question comes from Andrew Baker from Goldman Sachs.

First is just the GSI book. I think you've previously given an insurance revenue target of EUR 10 billion. Is that still a sort of number you're looking towards? And then secondly, on the Life & Health rebook, we've seen a couple of peers now take some negative -- fairly sizable negative assumption changes in sort of back end of '24. Are you expecting anything on this front?

Yes, GSI, EUR 10 billion, yes, more or less, why not? But that's the target, and this is unchanged. Life Health Re, obviously, reserve review, as always, is happening in Q4 for us. But at least until Q3, I think the performance was very positive. And in the reserve review, I'm not aware of anything particularly bad at this point in time, but it's ongoing. We'll talk about it in Q4. But as you can see in the guidance for next year already, we are very positive about our book. The quality of our book is, as we think, really outstanding. And I have no reason to believe that this is not the case anymore.

The next question comes from Ivan Bokhmat from Barclays.

I've got two. The first one, just on GSI. Christoph, you mentioned that you don't expect a repeat of the high large losses in 2025. Could you perhaps elaborate on that? Does that mean that as a stand-alone business, you've changed the underwriting or perhaps there are going to be some external reinsurance being purchased? Maybe some color on that would be useful. And secondly, just thinking about the Life & Health, maybe to follow up on the previous question. Clearly, in 2024, the run rate so far suggests a very strong beat over the initial guidance. And I think you've alluded several times during the year. I'm just wondering, how would you characterize the conservatism of that new target for 2025? Is that comparable, better, slightly less?

Yes. So the first question with the large losses on GSI, maybe a very general remark. It's maybe so obvious that I would not have to make it, but still, if you look at our various businesses, from ERGO Personal Lines business, to reinsurance with the big cut covers we are offering there and GSI being in between. I think one thing you really have to realize, the lowest cat loading or cat losses expectation is clearly in ERGO, the highest in reinsurance and GSI has to be expected to be somewhere in between. So not as independent as ERGO, not as stable as ERGO when it comes to large losses, but also, of course, not as volatile as reinsurance P&C. Now what happened this year is that Helene, we had an event and I think we talked about it a bit in Q3 already. We had an event which particularly affected the GSI business due to the nature of this particular hurricane, which went into Georgia into the Carolinas, high north and on a path, which is rather unusual for hurricanes making landfall in Florida. And along that path, we had a significant exposure in GSI, much more, by the way, than what you would have expected in Florida, for example. And this is rather unusual -- has been a rather unusual event. And I would not expect that to repeat itself next year, again already -- and this is the reason why my conclusion was next year, I would expect the cut to be lower than this year on the GSI side. Now naturally, there's volatility, so I can be -- could be proven wrong, but this is clearly my expectation that next year, the cat volatility will be smaller in GSI than what we have seen this year. Life & Health, and I think your question was the level of conservatism. Now, maybe I answered that question more generally even when it comes to our outlook or our internal planning process, which is really the backdrop for the outlook we are giving today. And I think there, I can confirm it's very much unchanged. So it's an internal process. We do a planning. We go through all the Board. We take decisions and then we publish the results. But I wouldn't say it has been in any way neither more conservative nor more positive this year compared to prior year. So very much the same. Now on Life & Health, please keep in mind, last year, we have been benefiting from a few large transactions which are hard to predict. They're a bit bumpy, either you get them or you don't get them. And this is what happened last year and increased the Life & Health result compared to initial guidance quite significantly. So when extrapolating now our guidance here into what you think next year is really going to happen. Please bear in mind, who knows if these kind of large transactions will happen again next year. And as always, to some extent, they are reflected in the guidance already. But if we would have more than expected, obviously, the result can be higher than what we have in the guidance, if less than lower than the guidance. And again, last year, it was particularly good in that regard. And who knows what is going to happen next year -- or this year was particularly good. And who knows what is going to happen next year. But again, the level of conservatism and the entire methodology completely unchanged compared to prior year.

Our next question comes from Will Hardcastle from UBS.

First one is, what's the assumed investment gains and losses for 2025 in this guidance? Is there any? And -- is it possible to say what that was in the '24 numbers as well in absolute numbers, just to get us that moving part. And then thanks for giving us the P&C Re net cat load of 16 to 17 points. So I was just trying to understand, is that the cat load, including large losses as well? Is it possible to get those for both P&C Re and GSI? I mean, we can work that out, but that would be helpful with that. And do the combined aggregates of the two move year-on-year, because GSI is growing more? Or is the mix shift not big enough for that?

Yes. Well, on the investment result, I'd rather not break it down any further it's so market dependent. And as I mentioned before, there's always also this element in there that we deliberately sometimes decide to realize some losses or not or even in the past, but a few years ago or maybe more than a few years ago, also decided to realize some gains. So therefore, I can't give you any breakdown. But again, I think methodology generally is pretty much unchanged. So we do not include in our financial planning any top-down measures. And when portfolio managers do some trading, obviously, it can result in realizing some losses or some gains. And these effects we include in our planning. So we -- in a way, it's an operational planning without any management overlay from any additional steering. So which means it's pretty comparable to what we had the prior year. GSI, the -- or let's start with the reinsurance loading 16% to 17%. Obviously, that's subject to what's going on in the 1/1 renewal. And as always, we will do the assessment based on our book as it will happen to be after the 1/1 renewal. And therefore, 16% to 17% is rather a range than a more precise number today. What you have to keep in mind that the 16% to 17% is just a mechanical or mathematical translation of our old 14% guidance and the 14% related to the combination of GSI and reinsurance P&C. And if you then take out GSI, just mathematically, obviously, for reinsurance P&C, the number has to be higher because for GSI, it's intrinsically lower. And mathematically, if you take the 14% and you look at the volumes, GSI versus P&C reinsurance, you mathematically end at 16% to 17% and then again, subject to what's happening in the 1/1 renewal. The same in the reserve releases. We had 5% for the combined segment. Mathematically, you end up at 6% for the reinsurance P&C segment and for a different number for GSI. And as I mentioned before, going forward, we will not talk about the normalization for GSI. And therefore, I'm a bit reluctant to mention now the mathematical outcome of the exercise for GSI neither on the major loss side, nor on the reserve release side because it's not something we'll focus on very much going forward as the numbers are significantly smaller. And also for ERGO, we don't do it. It's primary insurance and there you just steer and you look at your book in a different way than for reinsurance. But in reinsurance, this normalization matters quite a lot. Maybe the last remark, when I talk about large losses, it's the usual definition of major losses, so above EUR 30 million. That's unchanged. And it's, as always, the combination of man-made major losses and natural catastrophe losses. And the split between the two is also something we'll only be able to provide you with after the 1/1 renewal.

And next one with a question is Craig Sinclair from Berenberg.

It is his colleague, Michael Huttner. And I had two questions. The first one is at the dinner, Joachim Wenning very kindly explain the rough profit mix of Munich Re. So ERGO, I think he was looking forward, maybe '26 or something, but ERGO was EUR 1 billion now, you've given EUR 900 million. And then he did split and then you've given Life & Health at EUR 1.7 billion. And then there was also a split given for the -- between GSI and Reinsurance. And from [indiscernible], GSI was about EUR 1.5 billion, which would then imply that -- trying to do the math here very quickly, that reinsurance P&C Re would be EUR 1.7 billion, which feels very low and conservative, but these are all guesses. The feeling I have is that P&C Re is really 40% of the group. So I would be more expecting a figure in the range of EUR 2.5 billion. So I just wondered if you can -- I know you're not Joachim Wenning, but you obviously sit in the same Board. So maybe you can discuss how you see the general profit mix, not just '25, but going forward, this huge diversification benefit, which it gives you. And the other question on the volume growth, can you -- just looking at P&C Re, can you give a feel for what figure it is? Implicit, I think from your peers, we're seeing figures of 3% to 5%, which to me sounds very low given the demand for cover, that would be interesting.

Yes. Well, thank you for the question. I think your first question is referring to our diversification and the split of the various earnings sources. And maybe we talk about it in more detail once we are able to also really show you the GSI numbers, but maybe one remark ahead of that. It always depends a little bit on which earnings number you're looking at. If you look at the GSI business, we talked about the combined ratio target today. I think we talked about volume today already. So deducting a technical result from that seems to be a bit straightforward, more straightforward than talking about net income already today. And this is also what we are working through when we look into our segmentation today. The one fact I would like to mention, though, is that if we look at our investment strategy, you can already see today in the various segments, we are having that the amount of risk we are taking is different or differing between the various segments. So if you look, for example, into the investment yield, we have in ERGO International, you will see that it's smaller than in, for example, ERGO P&C Germany or in the reinsurance P&C segment. And likewise, also in the GSI segment, we have generally taken less investment risk for operational reasons. And when you take less risk in investments, you also have less investment return usually. In other words, technical result is one thing and bottom line is another thing which also depends on other parameters, which we'll be able to discuss maybe in more detail than beginning of next year when you will be -- when we will be able to show you the full P&L. But particularly on the investment side, the GSI result will be a bit dampened by the fact that we don't take a lot of risk in these legal entities, which are part of that segment. That's something we have to keep in mind. And therefore, also the distribution between the various segments will vary. If you look at bottom line net income or if you look at the technical insurance service result or total technical result, for example, so that remark matters. In any case, the diversification is significant. And if you look at our primary business is Plus Life & Health Re, and that's something we established already. This is easily covering for dividends nowadays, which is important because those stable segments are nowadays financing the dividends, which they didn't do 10 years ago. And then we have a bit more volatile P&C Re business, which obviously helps you to -- helps us to make additional money, which then eventually is able to finance share buybacks or a nice on-top return, but of course, at a higher volatility. And in this segment, as you can also see, the number is still our biggest ones, but the other have been catching up significantly and the earnings footprint of us overall is a significantly different one compared to 10 years ago. Volume growth, there your question was, if not our assumption is potentially a bit modest compared to peers. So now I'm in no position to talk about what peers are telling you. I think what you always have to keep in mind is that in our reinsurance organization, nobody, not a single person has a volume target. We don't care about volume. We care about bottom line and profitability. And therefore, the volume number in our plan is an outcome. It is a number which just happens. And frankly, we don't care. And we don't give any emphasis to that number. And maybe you shouldn't either, would be my recommendation at least.

Can I just ask that what was the revenue figures for GSI? I missed it, sorry.

Well, I think we talked about the target already. The details of the P&L, including revenue, is something we are not in a position to be able to disclose today. We'll do that together with Q1.

And our next question comes from Vinit Malhotra from Mediobanca.

Two questions. My two questions will be on combined ratio, please. One on ERGO, Germany and one on P&C Re. And just probably the easier to ask the ERGO Germany 89% combined ratio. I'm just curious what's driving sort of the worsening? I know that currently, we are at 89% for '24, but we were at 87% for a while. So I'm just wondering if the 87% to 89% has something that you could point out, maybe motor insurance or something that. On the P&C Re, so when I say P&C now, I mean, the entire old segment. The -- if I -- I mean, one way to look at it is that you had 80.4% normalized at 9 months. And then obviously, you commented that you're going to add prudence in 4Q. So I'm just curious, if you did not add prudence in '25, then really the starting point is 80.4%. And from there to get to 83%, you said GSI growth and discounting. Is there also something else? Like maybe you mentioned plateauing markets? Or is there something else that you could help us with the walk from 80.4% to 83%, please?

Yes. Thank you. I'll start with the ERGO number. Vinit, ERGO, yes, we increased the guidance for this year due to the difficult market environment in motor business. You mentioned that. And obviously, ERGO is implementing a significant amount of measures in order to cope with the situation and is expecting improvement from those measures. At the same time, the discount will be lower next year according to our assumptions. And this is offsetting these measures quite a bit. In the combined, while economically, of course, it isn't because for the discount, you always have the offset and the IFIE then. So therefore, by and large, unchanged. And this is why the target is on the same level like the updated outlook with the 89%. But by the way, that's still a very attractive level in the German market, I would like to add. P&C Re, the walk. Well, I think you mentioned the main drivers already. The discount is one and then the shift in the portfolio mix where we have -- we expect more GSI business next year than this year. I'd like to maybe add that this year, we had a particularly good Q1 and Q2. And the prudence we add now is also a reflection of those very good quarters, and we had in Q1 and partly also in Q2, where it's maybe not 100% clear if you can expect that to happen again. So sometimes even with books of our size, you have unexpectedly good quarters, where you do not immediately assume that they are sustainable in a way or repeatable like that easily. But maybe there was an element of luck in those quarters as well. And then, of course, you wouldn't project them immediately into the future like that. And then you take the opportunity to put some additional prudence into your numbers like discussed.

Our next question comes from Faizan Lakhani from HSBC.

The first one is, I'm just trying to bridge the gap from EUR 5 billion to EUR 6 billion. I know you've given a lot of the moving parts, but if you could maybe break it out into sort of absolute numbers in terms of what's coming from investment ERGO and the 2 reinsurance large segments as well, that would be helpful. I know you can't give the full details, but rounded up, that would be helpful. Secondly, within ERGO as well, your net result has been lifted by EUR 100 million, yet your combined ratio for Germany has deteriorated. Again, how are we getting that EUR 100 million uplift?

Yes, I'll start with the second question. It's obviously not coming from the combined ratios because one is stable and the other increase. So it's very much driven by the ERGO Life & Health segment. and also partly by the investment return. Speaking about investment return, the bridge from EUR 5 billion to EUR 6 billion investment return is a significant driver in that upside. On top of that, you have around EUR 100 million improvement in ERGO, EUR 0.1 billion from ERGO. You have the Life Re improvement. You have a stable technical result in the entire so combined P&C Re and GSI segment based on some growth, which would also help grow the earnings there. And the remainder sort of the missing piece is an increase in the investment result and finally. So ERGO Life Re, P&C Re, all better and what you're missing then is investment.

So just to clarify, are you saying the P&C Re underwriting result is relatively stable and the growth isn't really coming from that in terms of the net result guidance?

No, I'm saying the relative profitability as we are talking about the plateau level generally in those markets is stable, and that's also what you see in the combined ratio outlook where we, as mentioned, go from 82% to 83%. But the 83% that the difference based on the change in discount where you have a compensating effect in IFIE. So therefore, that's largely stable, but the volume is growing, and this then would lead as a result to even some higher income or a higher result also in the P&C Re segment. And then you have Life Health and you have ERGO, and all the segments are benefiting from higher investment income.

I appreciate that. Sorry, just one slight follow-up on that. You mentioned IFIE. How do we think about that for next year?

Well, IFIE, obviously, the -- it's a mechanical thing. So it moves with the interest rates, but with a certain delay. And in our assumption is that the combined effect from discount and IFIE is largely stable. It obviously will depend then on the details. So if interest rates move 1st January or at the end of the year will make a significant difference, how much of that you see in the IFIE already or not. So there's many technical aspects to be considered, which are, I think, by far, too detailed to be covered in a call like today. And therefore, just maybe the general message, you would expect the discount plus IFIE element by and large, unchanged.

And our next question comes from James Shuck from Citi.

It's James Shuck from Citi. Firstly, I guess, kind of an observation really. It would be good if you could sort out your tit for tat with Swiss Re and get your reporting dates on separate days that just would be helpful. It shouldn't be too difficult. But looking beyond that, one of my main questions just been asked by [indiscernible] interested in the guidance of 85% to 86%, but I think you've answered that as best you can. So that just leaves with the one question. And that's on the P&C Re kind of core combined ratio, so the 79% on the face of it, that's a really strong number. I'm just kind of keen to understand, is there anything structural in that number when we're trying to compare it with peers. Obviously, it looks better at the headline level and just kind of anything you flagged in terms of, I don't know, structured or fabricated business or anything about the lines of business that you're playing in, that means that, that number is just optically a little bit better?

Well, James, thank you. I take note of your remark with the reporting dates. Obviously, it's unfortunate. But for one company, there's only so much you can do. We'll do our best going forward to avoid clashes like that. But -- sometimes it's really hard to avoid that, but apologies for that. The combined ratio, I'm not sure what really to comment on here. Obviously, these things always depend on mix and the more nonproportional business you have, the lower the combined ratio tends to be. And -- but fundamentally, our book is so big that we are confident enough to plan for a number like that, which, by the way, also depends on interest rates and other external effects. So if you plan for a number like that, there are many uncertainties, which we don't know anyway, and therefore, also, we don't know what's happening in 1/1. And -- but we think we can deal with these uncertainties and are confident that 79% is a stable enough number to be able to give a guidance today. And there's -- so therefore, nothing specifically I can highlight today. I maybe only repeat what I said in my introduction already that, of course, structurally, you have to expect combined ratios in reinsurance to be significantly lower than in primary insurance due to the always higher discount you have in reinsurance and due to the fact that you will have a significantly bigger difference between the old premium definition and the insurance revenue definition, which also leads to a nominal reduction of the combined ratio number without -- and both effects do not impact the economic profitability. It's just the presentation in the combined ratio leads to lower combined ratio numbers. And this is, I think, important to note is that the 79%, if you were a primary insurer, would be a higher number without any change in the economic profitability. This is, I think, maybe the most important aspect here.

Our next question comes from Iain Pearce from Exane BNP Paribas.

I just had a quick question on the discounting guidance. Obviously, you're guiding to a reduction in the discounting benefit. And historically, you've spoken about sort of the conservatism embedded in your discounting calculation. Sort of looking at where rates are as we stand today, European rates ahead of where they were last January, Japanese rates ahead of where they were in April last year and U.S. rates not far off where they were in sort of June and July. Just wondering why you're expecting the discount rate benefit to fall by 1 percentage point? Is that all mix? Or are you assuming a sort of reduction in rates across the course of the year? I'm just trying to understand that guidance, if any sort of comments there would be helpful.

I think the answer is quite straightforward. If you do a planning at some point, you have to take an assumption. And -- since then, interest rates, of course, continue to move up and down and maybe in the U.S. more up than down. But they can go in any direction, anyway next year as well. So therefore, we just took the assumption that the discount is a bit smaller. And yes, in theory of at least, if interest rates continue to move up, it would be significantly higher than what we assumed in the course of our planning process. This would mean that the combined ratios might be lower than what we currently expect. It will very much depend on the interest rate indeed. But yes, the initial assumption was somewhat in the course of the year, we had to take these assumptions and we looked into the capital markets back then. And the conclusion was that the discount would be lower based on the markets back then.

And next one on the line is Derald Goh from RBC Capital Markets.

The first question is a broad one. I'm just trying to get a sense of how that EUR 6 billion target is set considering the growth on the actual '24 number thinking about how this ROE come into play? And how this also the LTE earnings is presumably you still want to be growing earnings well into out years as well. So that one is quite broad. The second question is, will you be giving an ROE for P&C Re and GSI? And maybe can you give us a sense of what are the relative ROEs between those 2 segments. I'm asking because obviously you're growing a lot more in GSI, which suggests to me the return on equity is high in GSI, but I'm not sure that's the case.

Yes. Thank you for those questions. So the ROE target is unchanged, but we're outperforming it regularly right now. We will have an Investor Day next year to talk about our next strategy phase, which -- the current one lasts into 2025 -- until end of 2025. So obviously, the question is what will come thereafter and what will be new targets. But this is something we will be communicating on the end of next year. And I think the Investor Day date is set already. So therefore, my apologies, I will not be able to talk about long-term ROE targets today. Short term, the target is the same, but obviously, we have been outperforming it for a while now. So I would expect it to be outperformed again next year based on these IFRS targets as we have been communicating them today. Your question was how do we come up now with the EUR 6 billion target if it's clearly above the ROE. So ROE obviously was not the guiding element here. But what we did basically is we did an operational planning very much bottom-up and looked into our various business lines across the globe, across all segments, and added their operating performance potential for next year added that up and came up with that number. And so it shows if you want the operational improvement, the shift from the EUR 5 billion to EUR 6 billion target really shows the operational improvement we have been seeing in the course of the year and are projecting it now into next year. This is really what's driving the EUR 6 billion. The split of the ROE between P&C Re and GSI, it's nothing we are able to talk about today and also will not be able to talk about it with our Q1 release when we give you the detailed P&L on GSI as well as on P&C Re, because we define the 5-year plan with a target of 12% to 14% and then updated it to 14% to 16% for the over overarching combined segment. And now this target or the strategy last until end of next year, and then we'll update it and come out with a new guidance. But to give an interim update just for the last 9 months or so, it's not really meaningful, so we wouldn't do that really. So please keep that question in mind for December next year, and then I'll be very happy to talk about it.

Yes. And just quickly clarifying this, the EUR 6 billion target, I think you might have mentioned earlier as well, it's not more or less prudent than before. Does that mean that you'll be -- you are including any reserve buffer building within that number or not?

No, the way we do the planning is always very much the same in line with what we did in prior years and no management overlay included.

And now we are having a follow-up question from Craig Sinclair from Berenberg.

Fantastic. It was really very light. It's Michael Huttner again. Sorry about that. Can you remind me the net cat, the 16% to 17%, just give me the comparative outlook or guide or expectation for 2024? Would that be possible?

But again, the 16% to 17% is a mechanical reflection of the 14% we have for the overarching segment today. So if you want just a volume kind of reflection or a proportional reflection or -- so therefore -- so there's no new information in that number if I would put it that way potentially. And therefore, the 14% guidance was the 14% guidance for the entire book for this year and is unchanged for the plan for next year for the GSI plus P&C reinsurance combined segment. And the 16% to 17% range is the correct guidance for this year as well as for next year with maybe minor differences because GSI is growing more. So the volume mix is shifting a bit, but this 16% to 17% is a range anyway. So I would say more or less same number for both years. And again, the intelligence in a way looking into our portfolio after 1/1 renewal and then potentially update the number and precisely say, if it's 16% or 17% and whereabouts between the two maybe, this is something we'll be able to guide on next year anyway, as we always do. So just to remind you, the process is always after 1/1, we do a bottom-up analysis of our book. And based on all our cat models, statistical methodologies we apply, we then come up with what the actual number is for the book after 1/1 and what the real then final large loss expectation for the year is going to be. And this process is unchanged. And so therefore, I think at the latest with Q1, we'll be able to talk about what the precise number then really is. So the 16% to 17% range is really very much the same for both years.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Christian Becker-Hussong for any closing remarks. Please go ahead.

Yes. Thank you very much, and thanks to everyone joining this call this morning. Thanks for your questions. Happy to follow up on the phone. If you have further questions, otherwise, we will now let you run to your next appointment. And also from my side and from the IR team, happy holidays and hope to you soon. Thank you.