Swiss Re AG (SREN) Earnings Call Transcript & Summary

[Presentation] Ladies and gentlemen, we cordially welcome to our update on the occasion of the 11th Annual General Meeting of Swiss Re AG. All of us agree to meet in person is certainly better than seeing each other through video. But unfortunately, when we sent out the invitation for the Annual General Meeting, it wasn't clear as to whether it would be possible to hold a physical AGM. This is why I would like to welcome you once more online. Jan Muller, our Head of Communication is going to guide us through this update. And he is going to briefly explain the agenda to you and present the participants.

Thank you, Sergio Ermotti. Good morning to everyone. My name is Jan Muller and I will guide you through this event today. On stage with me, apart from the Chairman of Swiss Re, Mr. Sergio Ermotti; we've got the Chief Executive Officer, Christian Mumenthaler. First of all, we are going to be -- hear the presentations from the 2 persons They will highlight on what was important in 2021, what the status of the company is, and they will give us an outlook. And then we are going to hear about the results from the votes at the AGM today. And thirdly and finally, we are going to have a panel debate on the issues that you submitted to us -- on the questions that you submitted to us. We'll show you first a short film on some of the decisive business factors in Swiss Re. [Presentation]

Ladies and gentlemen, precisely when we were slowing moving out from the COVID pandemic towards normality in February, the war in Ukraine showed us how rapidly situations can change. Let's hope that there will soon be an opportunity to return to normality in this regard. 2021 was a year again in which the Swiss financial industry and its place for business was challenged by global competition. Let me mention, for example, the introduction of the minimum tax rate by the OECD on large corporations and the framework agreement with the European Union. Switzerland is the third largest place for reinsurance in the world following the United States and Germany. We need to consistently commit to competitiveness of the Swiss financial industry. Basically, Switzerland is doing well in global comparison. But the situations and conditions are changing all the time. To maintain our competitiveness in the long run, we need first appealing and reliable rules and regulations and standards in Switzerland. And secondly, we need an appealing role that Switzerland can play for the benefit of international positioning of the financial industry. Switzerland can come up with its own proposals and provide contractive contributions to the debate. We need to have an attractive setting to work in. This is important for the future success of Swiss Re. In order to focus on competitiveness and performance of our company, let me say this. I've been the Chairman of the Board of Swiss Re for 1 year now. In my inaugural address a year ago, I said that this company had to reinforce its resilience in order to meet expectations for investors, customers and employees. This is what we've been focused on in the past year. Now within the scope of the existing strategic objectives, 3 areas have been very important to me. First of all, we have to make a turnaround in the field of corporate solutions and in designing our underwriting standards. Secondly, we needed to make sure our internal start up, iptiQ, would continue to grow solidly. And thirdly, we needed to consistently focus on our core business, achieving a high degree of quality for the portfolio and the margins. Now with regard to all 3 areas in the past 12 months, we've had good progress and have reached important milestones. I'm particularly pleased to note that Corporate Solutions has made its turnaround. The strategic measures taken to refocus our business have come to grip. And this inspires me with confidence for the next phase to come. iptiQ continues to do well. In 2021, iptiQ showed appealing growth in terms of existing policies. As opposed to the previous year, its number rose by 144%, up to more than 1.6 million contracts. As we want to focus on the profitable activities in our core business, we decided to get rid of various nonprofitable areas. And this is why we now have clear improvement on portfolio quality. And with regard to our principles for disciplined underwriting. All these improvements are important for us to achieve good revenues in future. So we achieved encouraging intermediary results on our road to strengthening Swiss Re's earnings power in the long run. Excluding the impact of COVID-19, the profit achieved amounted to $3 billion. Unfortunately, we continue to feel the negative impact from the pandemic below the line, and this is likely to continue into the first half year of 2022. Our financial strength in 2021 did not suffer despite the challenges from COVID-19. Swiss Re Group's solvency ratio was somewhere in the middle of the target range between 200% and 250% on the 1st of January 2022. Ladies and gentlemen, although the results reported are not yet in line with our ambitions, our strong financial -- high financial strength and the economic profitability achieved in 2021 allow us to pay out a dividend that has remained unchanged versus the prior year. The Board of Directors, therefore, proposed payout of a dividend CHF 5.90 to the Annual General Meeting. In summary, we can be happy with our performance in 2021, for we are on track. But I'm convinced we need to further improve on our performance, and we can do that in future. With our new financial goals for the coming 3 years, we are setting our sights for a yet better future. For 2022, we're striving for an equity ratio for the group of 10%. By 2024, we want to achieve 14%. Our growth objective of 10% for the economic equity per share will be retained for the 3 years to come. In 2021, we created a new business unit called Solutions. Apart from making available risk capital, it is also meant to offer our skills in the field of data analysis and turn them into concrete added value for our clients. We want to focus on that, and we want to be rewarded for it. We will further implement our ESG strategy in the fields of ecology, social and governance. That is and in particular, for climate goals, we are doing very well, and we are in a leading position. But we also want to provide a lot of diversity, equity and inclusion in our organization for the gender ratio of women in senior positions. In 2021, we achieved the 30% level and on the Board of Directors, I want to have a higher degree of diversity and as much efficiency as possible. Given the total size of Board Directors -- Board of Directors, both aspects are in balance, and we're working on that on this body. I am confident that we are going to strike this balance well. But on the other hand, it is clear that the dramatic international developments will keep us on our toes this year and will be significant challenges. But I'm guardedly optimistic that we are going to stand our ground in this challenging setting. Thanks to the increased earnings power of our business and thanks to our cost discipline. The past 2 years marred by the pandemic were a major challenge also for our employees. And I would like to thank you for your commitment and your work. Our compensation policy is sustainably established and rewards consistently for goal achievement and individual results. Add to this that we continue to invest in basic and further training for our employees, a future-proofed company has to offer appealing workplaces and make investment in innovation. Did you know that Swiss Re is a global leader with currently 70 active InsurTech patents? Swiss Re regularly obtains awards for its innovative products. And we can be proud of that. All of us can be proud of that. Let me again say thank you to our employees. We can be satisfied and happy with 2021 and the milestones achieved in 2021. Let us jointly open the next success chapter in the history of Swiss Re's. The goals we need to achieve to do that are set out in our 3-year plan. Furthermore, I would like to thank you stake -- shareholders and would like to thank you for having given us your trust, which encourages us to keep working for Swiss Re every day, making us more resilient in the world. Thank you very much indeed.

Distinguished shareholders, ladies and gentlemen, I would also like to welcome you at this event. In my presentation, I will first talk about the 2021 financial results. And I'll then venture an outlook on the market environments. And I'd like to wind up my speech by sharing my thoughts about climate change, which is the biggest long-term challenge for our company and indeed, our industry. But let me first talk about the annual results. 2021 Swiss Re obtained a profit of $1.4 billion against a loss of $900 million in the previous year. Our premium volume grew by almost 5%. And return on capital was 5.7%. Without the pandemic, net income would have achieved an impressive $3 billion. We were very pleased with the result in non-life property casualty. In Property and Casualty Reinsurance, we posted a profit of $2.1 billion despite the fact that Swiss Re had to cover losses from natural disasters to the tune of $2.1 billion in the same year. We were particularly hit by Ida, the Hurricane Ida in the U.S. and the floods in Europe in summer 2021. Our direct insurance business with industrial major accounts was also brilliant last year. The profit of the Corporate Solutions business unit was $580 million after a loss of $470 million in 2020. The turnaround of Corporate Solutions has been completed. We had to invest a great deal of work and had to take many difficult decisions, but I think these decisions have paid off. An important key figure in insurance is the combined ratio. The lower the combined ratio, the higher the underwriting margin for us. I'm proud that we succeeded in bringing down the combined ratio for P&C Re to 97.1% and to reduce the one for direct business with industrial clients to 90.6%, even. Both values in 2020 was still above 100%. Taken together, across the non-life insurance business, we achieved a combined ratio of 95%. Every percentage point we improve our combined ratio results and a higher underwriting profit to the tune of $220 million. The turnaround at Corporate Solutions and the success at P&C Re is complemented by solid growth of our internal start-up iptiQ and a very attractive return on investment of 3.2% in asset management. Let me now talk about the negative aspects of the 2021 business result, the Life Reinsurance business. One thing is clear. 2021 was the second year of the pandemic. COVID-19 hit us hard in this area, and we incurred a loss of more than $500 million. In the U.S.A., mortality in the third and fourth quarter was substantially higher compared to the years before COVID. The pandemic caused the Life business -- caused losses in the Life business to the tune of $2 billion. And this is not a surprise, of course, because we are the biggest life reinsurer worldwide. Our market share in the U.S. is clearly higher than in our -- one of our direct competitors. It's the nature of our Life business that pandemic has a major impact. And it is our job as a reinsurer to mitigate such a disaster for society. This is what we're here for. We stand by our Life Reinsurance business. Since 2015, our new business has become constantly more profitable. Seven years ago, the economic profit from Non-Life new business was $700 million. Last year, it was even $1.3 billion. Despite the pandemic, we were able to achieve higher prices and better contract terms. The life reinsurance business remains an important pillar of our revenue. 2021 was a turning point, ladies and gentlemen. We strengthened our earnings power. We're on the right track, but we haven't reached the end of the road, and we will continue to follow the track that we've started to take. Let me also comment briefly on the second year of the pandemic with regard to our employees. Working from home was just a daily routine. And as restrictions and lockdowns were eased, we left it up to them whether or not they wanted to come back to the office. The health of our employees always took top priority with us. We learned an important lesson from the past 2 years. We know that with today's digital infrastructure, it is easily possible for everyone to work from home. Several renewal rounds in reinsurance business were handled from the kitchen table or indeed the living room. Because of the pandemic, we were able to reduce our travel activities. 2021, we had 93% less in air travel compared to 2018. For many members of staff, it wasn't easy, though, to work from home. And I would like to extend my gratitude to everyone for their impressive commitment. Let me now take an outlook. The impact of the war in Ukraine cannot be assessed in all details. COVID-19 will continue to keep us busy in 2022. Now we do see that there is a transition from a pandemic to an endemic phase, which, in a way, corresponds to the situation becoming normal again. But a new more aggressive mutant of the virus could very easily turn everything upside down again. The economic aftershocks of the pandemic will continue to be of concern in 2022 as well. And we need to pay particular attention to inflation which has picked up markedly in the United States and in Europe. As a result, central banks have announced interest rate hikes. Well, finally, you are tempted to say as an investor and as someone saving money, last year with low and negative interest rates -- the last years with low and negative interest rates were very difficult. Now we need to strike a balance and -- between exposing ourselves to higher inflation in insurance business and improving room for -- room for maneuver and in -- with regard to returns. The pandemic will also leave a mark in 2022, particularly because of the North American Life business. We assume that excess mortality in the United States will persist for some time. And we also have to handle price increases in property and casualty. With the renewal rounds at the beginning of the year, we achieved gratifying price increases, particularly with regard to cap cover. On the market, we will continue to build on the strengths that set us apart. A strong capital base, excellent long-term client relationships and our widely acknowledged risk expertise. We will continue to engage in partnerships if possible with innovative companies to develop new products to strengthen our business model and to extend the limits of what can be insured. I'd like to close with a few comments on climate change. We can feel the impact of climate change worldwide ever more clearly, wherever you go, we can see that the forecasts are becoming true. Heat waves, droughts, strong rain, heavy rain, floods. Climate change has started to hit our lives. More and more people are beginning to protest and investors expect companies to make a contribution to reducing global climate warming to 1.5 degrees centigrade. For more than 15 years, I have been involved with climate change. In 2005, I was Chief Risk Officer. And at that time I talked to government officials and economic leaders, and when I talk to them about climate change, they told me very clearly that they were not interested in the issue. Now this has changed fundamentally. People have begun to listen. This is an issue which is absolutely crucial for our future, the future of our company, our industry and our planet. And I commit myself publicly together with IKEA's CEO. I chair the WEF Alliance of CEO Climate Leaders. If you want to join, you have to commit yourself as a CEO to make your company carbon neutral by 2050. In actual practice, this means that the company all suppliers, all products may no longer emit any carbon dioxide. The alliance comprises more than 100 companies. If the alliance were a company, it would be the third largest in terms of emitting greenhouse gases behind China or the United States. 2021, we were represented at the COP Climate Conference in Glasgow to talk about the role and the contribution a private enterprise can make to achieving climate neutrality. The participation at this year's climate conference is still outstanding. The private -- private industry is taking an initiative -- is taking the first steps. And it's inspiring to see that it is the interest in long-term revenue that drives this development. Ladies and gentlemen, distinguished shareholders, 2021 wasn't an easy year. But I believe it's fair to say that it is a year of breaking new ground. And I'm very confident about the future. In order for us to be able to work, we need risk capital, venture capital, and this is what you make available to us. This is why I would like to close my remarks by addressing you very explicitly indeed distinguished shareholders. And I would like to thank you very cordially for your trust and loyalty and support.

Thank you very much. Ladies and gentlemen, the Corporate Secretary of Swiss Re, Mr. Felix Horber, is now going to inform you of the results of the votes of the AGM today.

I am pleased to announce to you as deemed shareholders, the results of the votes conducted at today's Annual General Meeting that took place just prior to this update. The independent proxy represented all votes as the shareholders had no way of physically being present. We had a total of 61.5% of votes represented. Well, I can tell you right now, all motions by the Board of Directors were approved by the shareholders at comfortable majorities. Let me mention some details about the results. First, regarding the motions relating to financial year 2021. You, ladies and gentlemen, have approved the annual report to share a vote of 99.4%. And in a consultative vote, you approved the compensation report at 91.1% of yes votes. And 99.1% shareholders approved the proposed dividend of CHF 5.90. The dividend will be paid out after deduction of withholding tax of 35% on 21st of April, free of charge to all shareholders registered on 14th of April 2022. From 19th of April 2022, the share will be traded ex-dividend. Furthermore, the Annual General Meeting approved the total amount of variable short-term compensation of the members of the Group Executive Committee for the 2021 financial year as proposed by the Board of Directors. And the share of yes votes was 88.7%. And finally, shareholders approved, giving discharge to the members of the Board of Directors for the 2021 financial year at 97.9% of votes. Now with regard to the motions related to the 2022-2023 financial year: First, elections of members to the Board of Directors. The Annual General Meeting has approved election of all members of the Board of Directors in separate elections, Sergio Ermotti fetched 79.2% of votes to be reelected as the Chairman of the Board. The Annual General Meeting then elected all the members of the compensation committees of the vast majorities in separate elections again. And the independent proxy as well as the statutory auditors were elected at yes votes in excess of 90% of all votes. The Annual General Meeting, furthermore, approved total compensation for the Board of Directors for the next term of office ending at the 2023 AGM at 86.4% of the vote and the Annual General Meeting, again, in a separate vote and as proposed by the Board of Directors approved the maximum aggregate amount of fixed and variable long-term compensation for the members of the Group Executive Committee for the coming financial year 2023 at 87.8% of the vote. A final item on the agenda related to 2 amendments to the Articles of Association; one, relating to the introduction of tenure limitation of 12 years for directors. And the second was about delegation to grant signatory powers. Both amendments have been approved by shareholders at the majorities of 99.3% and 98.7%, respectively. So much for summary of the results of the votes and elections at the AGM today. You will find detailed figures on our website. As from today, I would like to thank you for your kind attention.

Ladies and gentlemen, we now have an opportunity to talk with Mr. Ermotti and Mr. Mumenthaler about the questions that you submitted. It's not going to be only about looking back on 2021, but also on an outlook business development and diversity, sustainability and compensation. To get started. Let's look at some of the events that marked the year of 2021. Mr. Mumenthaler, let's start with something that is of concern to all of us, the war in Ukraine, what Swiss Re's position vis-a-vis Russia? [ Mr. Briner ] , our shareholder is interested in knowing about this.

Well, first of all, the war in Ukraine is a humanitarian disaster for the world and Europe, it's a disaster with strong implications most probably for decades. Swiss Re has never taken a strong position in Russia, Belarus. It was always a secondary market. We have about $100 million premium volume, which is low and following the invasion, we've cut all the business. We're not writing -- underwriting any new business in Belarus and Russia.

Mr. Ermotti, we heard in your presentations that the 2021 annual results were gratifying and yet Swiss Re is maintaining the dividend of CHF 5.90 we paid out last year, representing a lot of our shareholders, probably Mr. Kerberger asks, why is that so? And will the dividend rise again?

Well, in 2021, we achieved solid economic profitability. But as I pointed out in my presentation, we haven't achieved all our revenues objectives. Our priorities in capital management are clear. First of all, we want to retain our financial strength. Secondly, we want to increase ordinary dividend payout. And thirdly, we want to be able to invest our growth. So this is a mix of financial strength, appealing return for shareholders and profitable growth. We need to strike a balance. As you have seen on the basis of our 3-year plan, we have to pay a dividend that is in line with long-term revenue development, and it is likely to increase in future.

Well, Mr. Mumenthaler with regard to the 3-year plan, how can Swiss Re achieve the 14% goal for equity ratio in 2024?

Well, I think we've already done a lot by making the turnaround in underwriting, the underlying figures as well. We -- this is one of the best settings since 2013 as far as underwriting and underwriting margins is concerned. The major charge resulted from COVID, and we are assuming that the pandemic is going to move into the endemic state. And so we're already covering most of the gap. There is a series of other factors that were highlighted at the Investor Day last week, but some of the most one -- some of the most important ones remaining is that cost is growing, and we need to keep a discipline on cost control. We've done that very well in recent years. Top line grew by 6% -- 7% every year and cost by 1%. So that's a hard piece of work. But unfortunately, we'll have to keep doing that in the next years.

Talking about strategy, Mr. Ermotti, is Swiss Re well positioned with your business model -- well positioned for the future? And will be address -- will we be able to address opportunities well?

Well, in the past year, Swiss Re maintained its financial strength in highly challenging conditions. The strategic measures we have taken in recent years are coming to grip. There is positive momentum and we want to benefit from that. So basically, we are expecting at least 2 reasons for growth in our business. First of all, in the next 10 to 20 years on the back of GDP growth of the world, we are expecting growth in our industry, the insurance industry. And secondly, and just as importantly, risk awareness has grown around the world in recent years, and this is certainly positive for our sector. Now given our know-how and given our capital strength, we want to make the world more resilient, as we said, but we also want to create more value for our shareholders. I'm seeing a lot of potential yet to be tapped into in order to monetize or capitalize on our knowledge by providing customer-focused services, but also through disciplined use of our capital making investments that are necessary to fund our growth. Well, capitalize on knowledge more effectively does not we want to keep developing our business model? Well, that's certainly appropriate because the core business is good. But 100 years from now, we will need reinsurance. The natural disasters will not go away as a result of technology. There will be accumulation of economic assets and on -- along the coast lines and -- so reinsurance will be in demand, 100 years from now, someone has to absorb the shocks. But what we're seeing is that returns over long cycles were too low in primary insurance or reinsurance, at least in the final phases. And at the same time, we have different assets in our company that we can capitalize on. We have a lot of risk knowledge. Risk knowledge is at a premium today as you can imagine, and we're only offering it as a bundle with reinsurance. There are many clients that want to have risk insurance only. We can't do anything, but it's something that we need to look into in the years to come. There are considerations about capitalizing on individual aspects of our knowledge.

Well, another issue that is in the headlines today is inflation. Mr. Ermotti, our shareholders would like to know how you assess the situation with regard to inflation?

Well, above average inflation is a result of the economic recovery following the pandemic. It's not unexpected. It's due to the expansive monetary policy of central banks in recent years on the one hand, and on the other hand, high energy prices are playing a role. Add to this, the war in Ukraine, that is heating up the momentum. So high inflation in combination with low and or even negative nominal interest rates is highly problematical, and we're going to see whether this is only a transitory phenomenon or not. If the inflation is to be with us for a longer period of time, central banks will get under even more pressure. And that will certainly be a big issue for the months to come. For us, as far as we're concerned, it certainly means that we need to and will adjust prices for new business to the current setting. So we're well prepared.

Let's come back to an issue to do with society. Diversity is on everybody's lips and it's become a big issue with us as well. Revised Swiss company law foresees that as of 2026, 3 to 4 years ago, 30% to 40% of seats of listed companies needs to be held by women. For many investors or proxy services think that this is going too far. And the consequence is that as far as the proxy voting services are concerned, they would vote against reelection because you chair the Governance and Nomination Committee, what is your take on this?

Well, diversity regard to gender representation, age groups, nationality, ethnicity, that is one aspect. We also need to look at capabilities and experience particularly when we fill seats on the Board of Directors. The Board of Directors works hard on meeting requirements with regards to diversity and inclusion, particularly promoting women in leading management position, including the Board of Directors. Way before the recommendation was made by ISS, we had a plan. In March 2021, the Board of Directors decided to increase the representation of women for the Annual General Meeting in 2023 and set the figure to 30% at least. So 3 years before the actual law will come into force in 2026 to take such a step and to do something about this situation. We are aware of the problem and of course, there are other advisers and a large number of shareholders, as you may have seen, who take a different view, but many have fully understood what we wanted and support us in our strategy. We certainly don't just listen to 1 company who just wants to make the headlines. By the way, we also need to bear in mind that many of our shareholders are obliged to follow the recommendations by the proxy services. And I think we are very satisfied with the result we have been able to achieve. And we will now hear in a video, what inclusion is all about. [Presentation]

Well, the age of our board members is something that keeps our shareholders busy. [ Baba Singh Jacob ] would like to know about the rejuvenation projects on the Board of Directors. Are there any specific plans?

Well, it's only natural that experience is, of course, very important for a director in the company on the board. Ideally, a Board member already has had a successful management career or has extensive expertise, which adds to the knowledge of the Board. If younger colleagues have all those qualities, we will certainly take them into account and consider them for these positions. But for the Board of Directors, this is a process, which always needs to be guided by the final objective to find people with the right qualifications and experience to create additional value for the company. We always want to be as diverse as we can when finding new members. And of course, if we can choose younger colleagues with the right profile, we will certainly consider those candidates, but we try to rejuvenate our bodies on a regular basis, which is why we've also decided to introduce a limit to the tenure on the Board of Directors with 12 years. So that on a regular basis, there will be a rejuvenation.

We've already talked about age and diversity. Now there's another issue that shareholders would like to hear something about compensation. Mr. Bossard has asked a question. How can you justify the decision to increase the compensation of CEO and Board members?

Well, first of all, we need to bear in mind that we have a performance-based compensation, which means the long-term development of our business has an impact on the money paid to our colleagues. Is the business very volatile? Is it not? And our system creates an incentive to sustainable and risk-adjusted growth. So we need to clearly bear this in mind. Then we also have our Compensation Committee, which looks into compensation and tries to make sure that the compensation system, the business strategy, the risk appetite and the corporate value are all taken into account when determining compensation. That's the first aspect. The second aspect is as follows: the amount of compensation paid is based on clear parameters. We look at the annual results according to U.S. GAAP, but also economic value management. In other words, the profitability expected over time. This is, in summary, the principle of our model. But when we look at 2021, in specific terms, we need to distinguish between nominal and actual compensation, nominal compensation to 61% is delayed for a period of 3 years. So the money will only paid out after 3 years. The actual amount paid out depends on the business results and the share price over those years. So in case of the group CEO, we disclosed the compensation on a voluntary basis in the compensation report in 2021. Compensation was $4.1 million which is 22% less than 2020. And this is a point we need to acknowledge. There is a link between the interest of the company and the interest of the shareholder. So all the compensation is based on the different components, and we haven't really achieved the targets there, which is why this has had an impact on compensation. For 2021, the nominal compensation of the CEO is set at $7.1 million from 6 -- up from $6.1 million. This additional $1 million with a leadership share background just to illustrate the link between the company's interest and shareholders' interest. Actually, this is the first time that we've increased this share since Mr. Mumenthaler was appointed CEO in 2016, and it's in line with the targets -- with our targets. Compensation paid to the Group Executive Committee for 2021 increased. And there are a few points that I'd like to highlight here. This development is based on the degree to which we have reached our target levels. The maximum amount of compensation or bonus to the members of the Group Executive Committee has gone up by 6% as a result of the favorable business result compared to the bonus pool of all employees, which is increased by 10%. And members of the group executive committee didn't receive as much more as everyone else on average. So it's not a significant increase. And in this case, as with the CEO, we need to be aware of the fact that the compensation promised to those members of management will not necessarily be the compensation actually paid out at the end of the day. You also asked about fees for Board members. They have remained unchanged since 2018. In 2020, there was a slight adjustment. I was a member of the Board for a very short time. This position no longer reappeared in 2021 and for 2022 we will go down from 13 board members to 12 board members, which means for 2022, we will have lower compensation for the Board of Directors as a whole, as we -- which is in line with what we presented to shareholders. Ladies and gentlemen, let's move on to the third and last part of our panel, and we'd like to talk about sustainability. What's the development there with regard to Swiss Re's business position? What ambition does Swiss Re have with regard to climate neutrality? And let's start with a new -- with a short video. [Presentation]

Mr. Mumenthaler, Swiss Re, time and again has to cover major losses caused by floods, storms, hailstorms and we get the impression that the frequency is rising. What adjustments is the company taking to its business model to be able to support the share price in the medium term and create added value? [ Mr. Briner ] our shareholder is asking this question.

Well, I think the natural catastrophe business is one of our core competencies. And compared to other reinsurers, Swiss Re is privileged to have around 50 scientists or experts doing their own models. We don't rely on external models but use our own. And these scientists indeed have found that the frequency, and that's also a consensus among scientists that the frequency of certain events has really increased. Same goes for amounts of losses. So thanks to our own troop -- our troops of scientists, we've been able to adjust our models, and we have done so massively in recent years. In terms of business, we are fortunate to be able to adjust our prices so the models have a direct impact on the underwriting at last week's Investor Day, we presented this over the past 10 years in years such as the last one with high catastrophe losses, we still have a combined ratio below 80%, highly profitable. Last year was one of the best thanks to our diversification. So it's really a business in which we know what we're doing, where we can adjust. And of course, we need to quickly adjust these models that emits a signal to society, where to build and where not to build, for instance, Swiss Re has committed to climate neutrality by 2050. And it is being observed where we stand.

Ateris asks what the current status is in your view.

Well, it's a long way to go. No question about it as early as 2003, we started by CO2 certificates and reducing our own footprint in our own operations. We are at about minus 2/3 per employee compared to 2003 by a lot of measures, such as purchasing green energy, improving buildings and so on and so forth. Air trips is still the highest factor in our own operations, which we can reduce. So the aim this year and in the next [ 2 ] years is to reduce flights by half. Flying remains important. We need to meet with our clients, but maybe less regularly. We also have an internal carbon price. Everyone who takes a flight will have to pay the carbon price $100 per tonne of CO2, and the centrally managed budget helps us to take certain measures to further reduce our CO2 footprint. And as far as flying is concerned, hopes are that airlines will find better fuels, but that will take decades. And we also support airlines in their efforts. The 2 other main areas, the Scope 3 areas as they are referred to, where we're not directly impacted, but have a lot of control over is in terms of asset management. We've got about $100 million assets in underwriting and asset management. You can measure the footprint by now. There are measurable variables, and we have massively reduced our footprint in recent years. And from the last year to '25, we want to reduce it by another 35% and have an impact on society as well. As bondholders or shareholders, we are talking to various companies and demand that they jump on that bandwagon of reaching net 0 by 2050. It's more difficult for underwriting because there is no universally accepted method of measuring the CO2 footprint. We are with an alliance trying to find out at all. It will be an important milestone. To measure that, we can do that in certain businesses, but we need to have more progress along the way. And once we've got it, we need to coach the whole world on the path to net-zero, and we need to have annual goals. What we're also doing, while we are looking for the variables is to emit policies and state where we want to opt out or where we want to be in. We want -- we are part of the society, though, an important part of the society. And we need to have an impact on society to make sure more people understand that we need to jump on this bandwagon towards net zero.

Well, more specifically, for 2021, how satisfied are you with achievements regarding sustainability and climate goals in the past financial year? And where do you spot any gaps?

Well, we've become a lot more stringent, and we've had specific objectives that have an impact on compensation as well. So we're taking this seriously, and we set our goals for the past 2 years, a whole series of goals that will be assessed and will have an impact on compensation. Well, goals that we've achieved well, are external goals -- our goals measured by external companies with MSCI, we've got a AAA label for sustainability and Dow Jones Sustainability Index that includes a lot of factors. Over the ESG spectrum, we're #2 in the primary and reinsurance businesses. So we have got good marks, but it's only one aspect of the long journey. It's going to be a long journey, and it will take more work every year, and we are highly committed.

Ladies and gentlemen, thank you very much for submitting your questions to the 2 gentlemen on the panel. Thank you very much for this discussion. And let me hand it over to Mr. Ermotti for the final words.

Dear shareholders, ladies and gentlemen, this brings us to the end of our update event today. As mentioned at the outset, I do hope that we're going to meet again physically next year at the AGM next year. Thank you very much for your attention, and see you again. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]