Swiss Re AG (SREN) Earnings Call Transcript & Summary

Welcome to Swiss Re's Investors Day here in 2023 live from the auditorium at Swiss Re Next here in Zurich. My name is Thomas Bohun, I'm the head of investor relations. I'd like to say good morning to everyone joining us via the live webcast, and of course, to all of you here joining us in the room. We'll shortly start the morning session with our group CEO, Christian Mumenthaler. You'll then hear from John Dacey, our group CFO; Velina Peneva, our Chief Investment Officer; and Philipp Ruede, our head of Alternative Capital Partners. We'll then break from lunch. Those of you in the room, we also have other colleagues joining us here today. So please fell free to exchange with them. We have the business area CFOs, we have our Group Chief Actuary here as well. We have Moses Ojeisekhoba, the CEO of our Global Clients & Solutions business, and various others. So please fell free to interact as well. We'll then come back in the afternoon and we'll hear from the business CEOs, that will be Urs Baertschi, Andreas Berger and also Paul Murray. And we'll end the day with an extended Q&A session for the analysts joining us via the webcast. You'll have to dial in through the separate Chorus Call line to ask questions. And for those of you in the room who still have a little bit of time, we have an informal uproll at the end as well. So with that, I'd like to welcome Christian Mumenthaler, our CEO.

Thank you, Thomas, and a very good morning to all of you here in the room. It's a pleasure to see you so numerous. Feels back to normality definitely now. And of course, good afternoon, good evening to everybody who might be online in different time zones. Welcome to our Investor Day, and I will take the first part of today and quickly lead you through the key messages of the day. So first one is Swiss Re is well positioned in a very attractive environment, probably the best one we had in about 10 years. Second is all around IFRS. This is the big IFRS day and you might be surprised that there's one company out there that's excited about switching to IFRS. But in our case, we are actually excited. And John will lead you through the details of it but maybe I give you perspective of the CEO, why this is really beneficial to us. I think the first one is that the shareholders' equity is not a function of the change in interest rates. So in GAAP, the asset side is mark-to-market, liability side, not. In IFRS, you have something that resembles mark-to-market on the liability side. And therefore, the shareholders' equity going forward is going to be less subject to changes in interest rates, which, as you know, had wide swings in the past. When it went down, our shareholders' equity is very high, very difficult to achieve decent ROEs and vice versa. Now we are very low, and there is concerns around ratios, debt ratios. So this will go away and therefore, also from the debt ratio point of view, we're going to be back in the pack as somebody of you wrote back into the normal sphere. So the balance sheet, that's really positive. The second one, from my perspective that's really positive is that because we go from U.S. GAAP to IFRS, we had the once-in-a-lifetime opportunity to basically reset the whole life and health balance sheet. So we -- basically, the way it's done is basically we could, as an IFRS company, purchase the old book that we had on the U.S. GAAP and therefore, reset the full balance sheet, all the parameters, all the areas that we have talked over the years that were problematic. And on the U.S. GAAP, we were not allowed to write down. It was written down in EVM, but not in U.S. GAAP and we were dragging it along, this is gone, that's a huge positive. Of course, there's the higher baseline in terms of earnings, a better predictability. I'll come to that later in my presentation. And then the third one is comparability. We have been, I think, suffering from being very hard to compare with others. And finally, we joined the family of IFRS filers in the world. And as we went through the IFRS project, we took great care and put this as a top priority to be as comparable as possible. And as we saw some peers publish this year, we have actually adopted some of our assumptions because IFRS, as you know, has a wider set of assumptions you can take, and so we put a lot of emphasis on comparability. So overall, also, I think just overall, because we have steered the company on EVM for many, many years, which will not be necessary going forward because IFRS is close enough to EVM, we think that the business we have written over time in Life & Health looks particularly favorable also under IFRS. Then I'll go into the P&C reserving philosophy. I'm sure that's of great interest. So we will change the philosophy going forward. We use this transition to IFRS to do this change. And all that leads to a net IFRS net income target of more than $3.6 billion and a multiyear ROE bigger than 14%. And again, with all of that, we aim to return to sustainable dividend growth. So let me go through some of these points. First one is in terms of the market. So as I said, it's probably the best market in 10 years. You have a few indicators here. On the left side, the P&C Re, that's our own nat cat index. So it's risk-adjusted because we can do that. We have all the deals we have written over time. So this is risk adjusted. So this takes into account also the risk models, getting more stringent, climate change being priced and et cetera. So we're back to 2013 level, even though the models, of course, are very different. Then on the Life & Health Re side, you can see a jump in direct premiums, a lot in the U.S., but also around the world as people see the value of life insurance rise after the pandemic or in the pandemic. Corporate Solutions, you're all aware of it. This is the March index. This is not risk adjusted. So I think if it was risk adjusted, it would look more like the P&C Re index. Of course, we're in a very good phase, probably better than '13 actually at this stage. And in asset management, the yields are incredibly positive to be in a high-yield environment. So this is all very positive. I'd just like to remind those who think it's maybe too positive that this is a function of the bad years, of course. So there was a reinsurance had to absorb a lot in the value chain. The COVID stands out as a huge shock we had to absorb, but also nat cats, the whole effect of climate change. We had inflation were the war started in Europe, et cetera, et cetera. So a lot to absorb and the function -- the pricing is a function of everything we had to absorb. And of course, reinsurance needs long-term capital and needs to be viable for their shareholders, too. So this is, I think, just a natural consequence and beneficial for the whole value chain, I would say, at this point in time. Then last Investor Day, I talked about what I consider our strategic advantages, so things that stand out, maybe not versus all reinsurers, but versus a lot of them. So this is just a quick recap. This is not the focus of today. First one is capital strength. I think what has changed in the meantime is capital is back into fashion. So having capital was always one of the pillar, one of the importance why people come and reinsure with Swiss Re. This has been diluted the last few years because with very low interest rate, capital is worth nothing or very little. And now it's obviously very much, very much back in fashion. So it's good to have a very strong balance sheet. Diversification, I showed you some figures last year. It's -- I think this is a very good illustration of the enormous power of diversification, which is, in the end, our business model. So what you see here is actually our nat cat book. First simulation, if we only had a nat cat in our book and how much SST this will cost and therefore how much capital we would have to hold, it will be 8% return. So just about okay, probably not enough, actually. And if you take our full P&C book, the return becomes 25%, thanks to diversification, which allows us to have less capital allocated to nat cat. And with Life & Health in it, it's another huge boost and it's 41% return. So I think this illustrates well the power of having a very big and diversified book of business, which is the key core purpose of a reinsurer. Third one is scale and efficiency. I mentioned it last time. This is something we have worked on very hard over the last 10 years. So you can see the top line has grown quite a bit, while bottom line has stayed more or less stable. We divested from Admin Re but that's just about $300 million. But at the same time, we built up CorSo, we grew Life & Health, we grew P&C, we built up iptiQ, et cetera, et cetera. So this translates into hundreds of millions of savings we had to make during that time to keep the cost as flat as it is. Then ACP, so Alternative Capital Markets. This is a function you're going to hear later that we have built over the years, you're well aware. But by now, it's one of the leading players in the world, has become quite big, not so big in relative size than others, but in absolute size, it's very significant. They have now $3.3 billion of third-party capital, a lot of them long-term partners that are in the back and profiting from our underwriting capabilities and it translates in about $174 million of fee income. So it's basically what comes in minus what comes out. Solutions capabilities is important also. It has always been important for us, but we have made it a bit more commercial now. We're tracking it. It's -- we have 15 solutions. We had 40% revenue growth. That's sort of fee growth, internal fees or external fees. We have about 400 clients on this, and we see this as a very interesting area and may be something for a future Investor Day. And finally, risk knowledge and client access always one of the core strengths, I think, and a differentiator. We have about 800 FTEs in R&D on a lot of different programs. This is one of the reasons some clients come to us for the solutions also and 80,000 annual client interactions, which are all documented and tracked. So as you know, the relationship we have with many clients with direct access, all the big clients. We have hundreds of people on Swiss Re, who interact with hundreds of people at these clients. And this gives more touch points for solutions for discussions around large transactions, et cetera. So this is a summary of what I consider our core strategic strengths. Then this year, we also went through a very significant reorganization. I've talked about it to you in the past, but now looking back, I'm extremely happy how this worked out. You know that we put a lot of focus on these market units. We have 22 market units that will give them more power so that 80% or so of risk decisions can be taken locally. And then we took a whole management layer out. So overall, we reduced the number of managing directors and above by 20%. So it's a very significant cut at the top but we're able to do that without any significant disruptions in the system. So we now have one layer less. It's much leaner. We could also reduce the time we spend in committees, so went through the whole governance, how can we simplify things. So we cut about 40% of hours that we spend in committees in the EC. And these cost benefits that will come through this year, next year, et cetera, but we, of course, counterweigh that with inflationary pressures we have and try to keep the cost line as down as possible. And of course, we have these new units, so global clients and solutions, we have iptiQ, the solutions part, and then P&C and Life & Health. On the cost side, one more slide. So again, looking back 10 years, we have worked a lot on that. We're conscious that we're not in a too good position 10 years ago. So there was a lot of work going through it with some stronger work, I would say, the last 2 or 3 years. Also because inflationary pressures were particularly high in this time. So on the left side, you see operating expense ratios, how they went down and they're much closer to peers now. But actually the one that counts more in our mind is not just our internal cost because some people choose to go through brokers and so you have to add the total cost of doing business, in my mind, is the brokers and how much the client takes, so all the costs, and that's the total cost ratio you see on the right side. And 10 years ago, we were -- we had a disadvantage of 3 points, which means your underwriting has to be better by 3 points. And by now, we're equal to our peers, who have obviously also done a lot of work on this. Now coming to the reserving approach, and I think it's worth -- this first slide is to understand the motivation behind it. So this is a 10-year picture of the P&C combined ratios versus key peers. And you can see, and that's pure luck that it ends up -- we have the same average combined ratio over the same period of time. It's not totally astonishing that it would be close because in the end, we have the same clients, the same lines of business, the same deals. So sometimes we do something better, sometimes worse. And so do the others. So I wouldn't expect this to be exactly the same, but similar but the pattern is very different over time. And what you can see is on the U.S. GAAP, we tried a best estimate reserving approach, which is very challenging, looking back and so you see the years '13 to '16, we freed up a lot of reserves from some of the good times. But at the same time, looking back '14, '15 we didn't know yet that these years will be attacked by the U.S. legal system and that these ratios we had here were actually too low. And so we have the same overall result, but with more volatility with this method. And this is obviously something we have discussed many, many times with all of you, and there was a very strong desire, I think, from all parties to get to something more similar to what our peers have. And so we studied, under IFRS, can we use this transition to also have a transition in reserving philosophy. So this is what we came up with, which I think will, again, in this spirit of comparability, bring us closer to peers. It's still in the logic of best estimate. So you have a wide range of best estimates. Every actuary will tell you that there's a high uncertainty around every reserve you're setting. And this is actually a function of the curve, how people see it. And so going forward, we're going to set the initial reserves higher than we did in the past, but still staying in the best estimate, just higher up in the probability range. And so very importantly, this is just for new business. This has nothing to do with the old set of reserves. This is a philosophy change. It's not a 1-year effort. This is a multiyear effort. And starting next year, we're going to add these reserves to the new business. So how this works is, we still expect our underwriters to cost everything correctly. Obviously, they have KPIs that they need to set the cost ratio -- the loss ratios at the point they think is the right point. But afterwards, we're just going to add reserves on top, and this will shift the probabilities of outcome basically. And so I mean, some of you might say, why don't you just give us the schedule. What does it mean for next year and the year after and the year after, et cetera, that I understand. But we cannot give a fixed schedule because that would not be in line with the philosophy of how actuaries work and how auditors work. So there cannot be a mechanical approach to this. The philosophy is fixed but of course, every year, there needs to be a study overall, whether we're still at the operate of best estimate or if maybe in 1 year, we go above, and then there would be less comfort around this or below, and we need to do more. So it's impossible to give a fixed schedule. What I can say is, of course, if going forward, the underwriters were always correct, so if you just assume this assumption, then, of course, over time, some of this will come back. Some of these additional reserves will come back and you will get into a new steady state. So you should expect this approach to continue on this path, if everything is correct then you continue to put this amount of money away or higher if we have higher premiums, but then things will flow back over time if it's not needed, and you would get into a new equilibrium. So I hope it's clear and transparent as to why it's not possible to give a fixed schedule, but mentally, I think you can understand what we try to do and how this works. And so we can do that now in this hard market. We can do that and grow earnings. And so we felt this is a good time. This transition to IFRS, the philosophy of being more transparent and more equal to others is the right moment in time to do something, which was very much asked from us by a lot of investors because, as you know, there's a high asymmetric perception of reserve going up and down. The last 3.5 years, actually, our reserves have been more or less flat, but not every quarter. And so this volatility is not something that is useful or valued or even necessary fundamentally from a valuation point of view. So very happy to be able to do that in the next phase. The result for next year in terms of target is that we start with the U.S. GAAP, $3 billion. We have an uplift in Life & Health of about $600 million. And all these figures, you have to take them with a grain of salt, we debated whether we show them because not everything is so certain, but we hope you appreciate that this is a transparency that will help you make the bridge. And then on the P&C side, we think that the margins we have now will continue to earn through, plus $300 million. There's also investments. We can use investment uptick, $200 million, but then minus this change in reserving approach. And then the last point here is a bit, an arcane IFRS point which John will explain to you. But basically in the P&C approach too in IFRS you have this issue that you always discount your new liabilities you take on board with the current interest rates. And then you have an unwind of discount from before, and that very much depends on at which interest rate that was locked in at the time. And because our peers went a year earlier, these interest rates were significantly lower, creating a difference versus us who do it now and lock it in at a much higher level, so you don't have this huge gains or losses. Obviously, these figures, if interest rates were to crash down or so, there would be some negative effects on this. But with what we see with forward rates, et cetera, with the moments we see, it should be a pretty neutral effect. So no distortions coming from this slightly arcane point. We also have a multiyear ROE of about 14%. Obviously, I'm conscious that $3.6 billion divided by the equity now is a higher number. So don't take this as a target. We don't try to achieve 14%, 14% has to be seen as a floor. Multiyear is, of course, over the years, we hope to accumulate also some equity. The cycle will not always be as good as that. And so we need to think about that. And so we chose a figure that's comparable to our peers. One more word about Life & Health. So I think we're quite excited and I used to lead Life & Health, and I used to suffer from U.S. GAAP in Life & Health because I think U.S. GAAP is a very bad standard to explain Life & Health. It's really impossible to explain anything in Life & Health. But IFRS is pretty much the contrary. I think it's extremely -- I mean, once you get into it, it's extremely transparent, logical, easy to understand. You see the movements, you see the thinking that is behind the best estimate moves, et cetera. And not only that, but because the amortization, because we could clean up, of course, the portfolio, but more importantly, the amortization of these earnings are much shorter than they were in the U.S. GAAP. The earnings go up, which has, I think, a very beneficial effect on the mix of earnings we have. So it goes up from 30% to 40% and this is obviously not correlated to the P&C cycle, so you have a better mix and diversification. I would expect the volatility if there's a pandemic or so to be similar, but it's starting from a much higher base. So the relative volatility of Life & Health results goes down. So I think that's one interesting aspect of it. The other one is really this more or less predictability of the stream of income. This whole concept of CSM and the amortization of it, you see actually on the right, sort of the, let's say, draft illustration, whatever, is you get the risk adjustment back and the CSM and just over the next 10 years, we expect with what we have in our current CSM, this to be about $10 billion with relatively good predictability. Obviously, you have then reality kicks in, if there's any changes, this would affect this. But you have much more visibility over the CSM than you had before with this U.S. GAAP margins of $25 billion, which were never really very useful and could never be broken down to 2 years. So in my mind, a big improvement in transparency for Life & Health. And then finally, on the capital side, on the left side is a recap of dividend and buybacks. And you can see the SST ratio on top. I think it's important and you're aware of that, that the SST ratio is also very much a function of interest rates because of one feature that is similar to Solvency II, it's called MVM. And so when interest rates go up, the SST ratio goes up a lot. So this is quite sensitive, quite volatile. So we have to always take this 314% with a grain of salt and a bit of caution because as interest rates normalize, this will naturally come back down. But obviously, we're in a very comfortable position from an overall SST point of view. The capital management priority is on the right. We haven't changed them. They're the same for 10 years, and I think we have pretty much followed it through all the cycles. So the first one is, we need a superior capitalization. This is really important for our clients and we definitely have it, then we need to grow the ordinary dividend over time. There's third part is to be able to deploy the capital that we have to the business, and obviously, we're now still in a very positive business environment. So this would definitely be a priority. But as this deteriorates at some stage and if we can't find these opportunities, then repatriate excess capital is the fourth priority, and I think we have a good track record of doing that when it's appropriate. So this is all from my first section. We're going to have a Q&A this afternoon. Looking forward to your questions. And I think now we go into the dry part of IFRS with my CFO. John, I think stage is yours.

Thank you, Christian, for appropriately setting the tone. I know we're late to the party. You've heard a lot of IFRS 17 presentations in the last 12 months. I'm going to start with a very similar starting point which is the disclaimers. These numbers are illustrative. I remember Giulio at Allianz spend about 5 minutes in his presentation in December exactly a year ago, talking about what illustrative meant. I'm assuming you're all familiar with the concept. We believe these numbers are pretty solid, but they're not necessarily final and they're not audited. And so what I show you today both on the opening balance sheet in the first 3 or 4 slides and then subsequently in the numbers which are coherent with where those targets that Christian just put on the slide are, these are strongly indicative but not necessarily the precise numbers that you will finally see when we publish final results. I hope our external auditors are happy with that starting point. So just Christian has mentioned a couple of these points, but I think it's worthwhile walking you through. We will be closer, both to our SST and certainly to our philosophical basis at Swiss Re Group on EVM. And the reason that matters is because our core underwriting activities have been focused on this economic basis, not on a U.S. GAAP basis for 15-plus years, and it's going to be much closer aligned to the reported results under IFRS, not precisely but much closer. The comparability Christian mentioned, you already see that. And again, right now, we've got this interim year where everyone has moved already. We're going to be a year later, but things like the combined ratio of our P&C Re business this year look a little awkward compared to our reinsurance peers in Europe. That will disappear next year. The market consistent valuation, Christian also mentioned, again, we think this is exactly the right way to think about our business and the better reflection of Life & Health's earning power. I'd also focus on the right side of this page. It's very important. The cash flows and underlying economics of our business do not change because of this accounting change. We see no indication that the business strategy will change as a result of this. And as important, as Christian said at the very end of his section, the capital priorities also do not change. A couple of thoughts about Swiss Re's specific adaptation and adoption of IFRS 17. First, we've made a choice of using the GMM, the general measurement model for the entire group. So we have a single standard rather than splitting the primary business around the reinsurance business. And it's fairly straightforward in the way that it comes together, all right? We have the future cash flows both in and out. So premiums come in. We have claims. We have expenses. We have other charges against that. That's under #1 in this page. As Christian said, there's a discounting impact and again, and I'll reiterate this about 4 different times because it's important compared to our peers that went a year earlier. On January 1, 2022, discount rates or the 10-year U.S. government bond was trading at about 150. At the end of the year, it was trading at around 390. 240 basis points of change during 2022. What we've got here -- sorry, during 2021. So the starting point -- let me get this right. '22. I was right. Thank you. The starting point was for all our competitors, a move of 240 basis points during the course of their year from their opening balance sheet. For us, that move is about 40 basis points, and it turns out to be fairly trivial in the impact. And I'll get to a couple of slides specifically on this. But it's important to note that there's a balance that we're going to see when we start reporting next year that some of our competitors this year have not had necessarily. Over time, it will all balance out with the unwind. But there's been a bit of a windfall for some of the competitors in this calendar year. The risk adjustment is another movement down, and you'll see our numbers are significant, largely driven by our large life in-force portfolio. The contractual service margin, which then allows us to show the earnings stream, effectively the earn out over time that people would expect. And lastly, the loss component for onerous businesses. And at the moment, we think that these numbers are relatively modest in the overall picture, but it's part of the calculation to get us where we need to get to. On the right side, the accounting options that we've chosen some of them very similar to our competitors. I don't think many of them are very different. But the discount methodology using a risk-free rate is consistent with the Swiss solvency test. Just to give you a sense of numbers, this is 3.5% of a 200 percentage calculation, the bottom end of our range for a Swiss solvency target. When you were to back that out into the -- where we would be at 100%, it would obviously be 7% discount rates here. Embedded in that is a figure for 0 for the liquidity premium, again consistent with our Swiss solvency test approach. The discount rates, I've mentioned other comprehensive income, not a big deal for us compared to anyone else, I don't think. On the risk adjustment, we talk about this. We've got 3 different factors for Life & Health; the trend risk, pandemic risk and the parameter risk that we see in this portfolio. On the P&C side, it's dominated both by reserve risk and some specific very large risk given the nature of our portfolio on the P&C Re. The transition approach, again, we've used fair value for the majority of the portfolio. I think Paul has got a slide later in his deck on Life & Health, which explains how we've grown over decades, the Life & Health business. The reality was it was -- the granularity that's required to get a full retrospective approach is very complicated for a reinsurance business generally and certainly for a reinsurance business that's been built by acquisitions. And therefore, what you see is we've done most of it on fair value, 15% on a modified retrospective and 10% on a full retrospective. Again, illustrative numbers, but are largely where we expect to land on the opening balance sheet as of January 1, 2023, so the beginning of this year, which will be the starting point. Our balance sheet will be smaller than that under U.S. GAAP, which was about $170 billion, at $135 billion. Investments, relatively unchanged. And you'll see this with Velina's explanations in greater detail. Reinsurance assets of between $10 billion and $15 billion, depending on some final decisions on the bookings, other assets of $19 billion in this left side of the balance sheet. On the right side, liabilities are what tend to drop in the related important shifts or reduction of the insurance assets and insurance-related liabilities. It just shrinks both sides of the balance sheet down by approximately $35 billion. To get to the shareholders' equity, and this is a walk again indicative. You start with the U.S. GAAP numbers of $13 billion, which was the December 31, 2022 number. The change in economic valuation adds approximately $35 billion to that total. We reduced that by a contractual service margin. Here, you see a range, $21 billion to $23 billion. In addition, an $8 billion risk adjustment. That brings you down to a shareholders' equity of approximately $17 billion. In addition to the $17 billion of shareholders' equity under the categorization for IFRS 17 total equity, we add back the $2 billion coming from perpetual debt, which gets us to the figure of $19 billion. During the course of 2023, we've continued to increase the economic value of the group. We believe the shareholders' equity will trend towards $20 billion at year-end. We'll see where the final number is when we close the accounts. More specifically on the contractual service margin, what you see again is the dominance of Life & Health. Approximately 90% of this $22 billion, I'm picking the middle number of the range, is defined by our Life & Health book of business, and that is dominated by the mortality. And Paul will give you some additional information about that in the details of geographies across. P&C Re, a relatively small piece, and this is actually surprisingly coming mostly from the nat cat book, not the liability book. Corporate Solutions, a pretty small number as well, and Group Items, fairly trivial here. On the risk adjustment, a slightly different split, but directionally similar. Life & Health, again, the most important piece. And again, given the long duration of this large book of business, those risks that I mentioned, the trend risk, the pandemic risk and the parameter risk also dominating the calculation of this $8 billion. On P&C Re here rather than the nat cat, it is the casualty book and our liabilities, which are -- the liability book of line of business, which is influencing this 20% that gets attributed. Again, Corporate Solutions a fairly small number and the Group Items also. One of the interesting numbers on Christian's chart was the net income, more than $3.6 billion. How do you get there? And again, this is a pretty straightforward walk for us. We've got insurance revenues, a smaller number under IFRS, then gross premiums written, and I'll come through each of these. But largely, what we're seeing, we have insurance service results of approximately $5 billion. The associated charges coming through the [ IFI ] of approximately $2 billion. Our investment result attributed to investments of $3.5 billion. That number is a little smaller than some people might otherwise anticipate because some of the investment results will be -- a little less than $0.5 billion will be actually dropped into the insurance service results. Other income and expenses, financing costs and finally, income taxes bring us down to the $3.6 billion. Again, indicative numbers, this is going forward for 2024. This is not retrospective. So these numbers have not appeared in any balance sheet or any P&L yet. Let me walk you through the pieces. I mentioned, we expect these to be lower. It's largely the exclusion of the ceding commissions in P&C Re and unearned premiums as well. So the P&C Re dimension is what you see shrink the most. CorSo doesn't get affected in the same way largely because the commissions are paid to third parties, not to the counterparty in the business, and so that's relatively stable. Life & Health also relatively stable given the in-force books dominance over the new business. The Life & Health insurance service result. And again, Paul will give some additional color to this. But what we've got here is a new business CSM, which we think will be largely covering the CSM release. Graphically, you see in this indicative set of numbers, it doesn't completely cover. But importantly, when the interest accretion is added back, what you see is our CSM will grow over time in Life. That's our expectation today with what we know and where interest rates are. We'll also be releasing the risk adjustment associated with that year's business in Life & Health. We give on the right side some indications of the amount of release for the CSM. We should be modeling somewhere between 7% and 8% of the opening balance. For the risk adjustment a little higher percent, 8% to 9%. There will be some new business which might be booked owners on day 1. It should be relatively small in the context of the broader set of activities we're trying to underwrite profitable value enhancing business. The insurance result, we, therefore, would estimate somewhere approaching USD 2 billion. If we subtract from that the IFI, the insurance finance result, add back the investment income, others, including taxes, brings us back to this estimated 2024 indication of $1.5 billion. And again, that should be viewed in the context of the 2023 target we have for Life and Health earnings of $900 million under U.S. GAAP. So an increase of $600 million year-on-year, largely driven by the recognition nature -- our underlying recognition activities of IFRS 17 compared to GAAP as well as the adjustments to the balance sheet which we've been able to put in place to remove any negative overhang from prior years. P&C, a fairly straightforward walk. And again, we've combined CorSo and P&C Re on one slide here, no disrespect to either businesses. But I think the way it works should be the same. The new business, CSM release is stronger here, a more important part of the business as we write contracts on a yearly basis. The in-force business also contributing the risk adjustment release and again we seen the amounts that you could model both for P&C Re and CorSo identified on the right side. The loss components for new business are a little higher. Here, this is going to be affected by the additional new business reserving that Christian talked about. So as we add positions on top of what would have been the underwriting best estimate for costing, we will, in fact, find that some of the businesses which we believe underlying are still good businesses end up in the owners bucket with this additional charging that we're adding. The IFRS service results, we would expect for P&C Re to be about a little less than $2.5 billion, for CorSo $700 million. A CFO dream. I have 2 different calculations for a combined ratio within the group. And we're doing this on purpose because we think it's a better way to think about the businesses vis-a-vis their competitors. So under U.S. GAAP we've used the same calculation, claims plus cost, acquisition and operating expenses over net premium earned are standard across all businesses, primarily as well as reinsurance. What we've seen in the marketplace is our reinsurers have chosen a net approach, and we will mimic that for our reinsurance business. So insurance services expenses net over insurance revenues. And when it says insurance services expenses, we would expect that to be smaller than our insurance revenues. And on the Corporate Solutions side, we'll be consistent with the way that we're seeing most of the primary peers operate and deliver their combined ratios, which says that the math is going to give you a number which is actually fairly similar to what you currently see under U.S. GAAP. You should be able to calculate either combined ratio in either basis, at least with full year disclosures. But I think for now, you should assume that we're going to be showing a better and materially improved combined ratio, thanks to this adaptation for P&C Re and a similar on Corporate Solutions. And specifically, when we get to the P&C Re business, we start with an expected GAAP combined ratio and again, that GAAP combined ratio if you apply in 2024, the same kind of additional reserving charge on new business that Christian spoke about would be bigger than what we currently show in 2023. You take off of that the commissions, a discounting impact, which is real, but again, contained at 6.8%, again, with the windfall that we've seen some of our competitors achieve on a discounting basis in 2023, expenses of another 3 points, which is moving from part of the expense base outside of the directly attributable expenses, a new concept under IFRS, and plus or minus a few things gets us to a much better position. And this is consistent with the target of better than 87%. On Corporate Solutions, less impact, again, because of the different calculation methodology. The gross versus net is actually going to have a negative impact. As a starting point, the discounting will be in place for CorSo as well, a shorter average duration. And again, on the P&C Re business, we've got a bit of a barbell duration between the nat cat portfolio and the specialty and liability portfolio on CorSo. The strong property book and much less longer tail exposures means that this discounting effect is less than half of what we would see in P&C Re. Expenses are not going to be materially different in the way we calculated this on the gross basis, and we expect the combined ratio to be similar as a result of the pluses and minuses. Again, indicative numbers, but we think directionally, this is a pretty good way to think about the future for these businesses. And this is why we think the combined ratio targets for Corporate Solutions remain robust even when we're dropping dramatically the combined ratio target for P&C Re. One small thing which you'll appreciate, the seasonality that we've had in our business, the light gray bar, which is the U.S. GAAP basis, which says because our nat cat exposure have a seasonality in particular, to the hurricane seasons in the third quarter, where we've attributed most of the premiums earned of that book or a disproportionate part of premiums earned in that book to the third quarter. And been a bit of an outlier, it played out just fine this year, right? Our third quarter earnings of $1 billion under U.S. GAAP were partly the result of this. On an IFRS basis, you're going to see the dark blue bars a much flatter distribution across the year. And so we won't be talking about seasonality to you. Back to discounting, again, not to beat the horse but compared to what you're used to this first year, it is important. So discounting will have a positive result, but the interest accretion occurs in following years. And what we think, on the next slide, maybe just to cut to the chase, is when we look at the in-force business and the distribution and assuming that interest rates at the end of this year and into next year do not radically change from what's implied by forward rates, we don't see any sort of big positive impact coming through the earnings. There will be a benefit as we saw in the combined ratio, but it will be offset by that interest accretion both in 2024, which is on the left side, and in 2025. These are projections. There are obviously indications for what we know now. But we don't expect then that you will see a big positive here. On the other hand, we don't have a big liability coming through that this accretion will be a cost to us more than the benefit from discounting in future years. There's no catch-up that we have to worry about because we don't have the upfront benefits. On earnings volatility, we don't expect a particular increase. There are 2 reasons to this. One, as Christian mentioned in his opening discussion, which is Life & Health will be a more important part of total earnings. And as a result of that, the fairly predictable Life & Health delivery of earnings should help overall group. On this page, what we talk about is the asset side. And the one difference we have to everyone else who's gone through to IFRS 17 and IFRS 9 this year is we've already been marking to market large parts of our investment performance. If you remember, U.S. GAAP made this shift 3 years ago. It was somewhat painful for us. We had to show that volatility coming through on listed equities, in particular, but by comparison, we think overall, the balance sheet will be less exposed to mark-to-market positions. And overall, the total earnings volatility should not be higher for us than it has been under U.S. GAAP. Another distinction compared to U.S. GAAP is a separation of expenses between non-attributable and specifically attributable. We see at the overall group level a 60-40 split, that's pretty close to where we are in P&C Re, Life & Health a little less, in Corporate Solutions even less. The fact is that there's more group items that are difficult to attribute to a specific business that's written in some of our reinsurance business than in the primary business where it's all pretty straightforward. And group items, not surprisingly, is largely non-attributable. Our debt leverage, I don't think it's dramatically different from what you've seen the path today. We've gone ahead and reduced some of the outstanding debt during the course of 2023 already. Overall, our leverage ratio based on the new shareholders' equity of 17% should put us smack in the middle of peers on a going-forward basis, and we'd be very comfortable. The buyback of $1.5 billion in October was consistent with our view that absent the need for the subordinated positions, we should reduce both our debt financing charge but also the overall leverage in the company at that point in time. And my last slide, just to reiterate, our capital position is robust, and we've been talking about this. This is as of the 1st of July. So it includes the first half results. Economic earnings, the biggest driver for how -- why we've increased from where we were at year-end to today, you see a couple of other movements on capital deployment. Part of that is the new business we've written, but another part of that is the reduction of some of the hedges that we had at the beginning of the year on both the equity portfolio and some of the credit portfolios. And so we've not gone risk unnecessarily at midyear, but we've gone -- taken some of the protective hedges off between July 1 and [Audio Gap] little more conservative in our positioning versus listed equity. And so that would reverse some of this charge. On the other hand, we've also reduced the debt that was relevant for the available capital, and that would balance out largely. We'll see where we are with year-end interest rates. Obviously, they've been moving fairly aggressively here in the last 4 weeks. But at 4.3%, we're still 40 basis points above where we started the year. And I think that's my last slide, unless somebody surprised me. So I will turn this over with a minute to spare to Velina.

Thank you, John. It is a pleasure to be here today to share some highlights of our investment portfolio. I know I'm a new face on the executive team to all of you having taken over from Guido Furer as CIO this spring. My start coincided with the U.S. regional bank crisis, the fall of Credit Suisse, all in the context of elevated inflation, higher interest rates and highly uncertain geopolitical environment. Unfortunately, one cannot choose the firsthand that their doubts, but we can make sure to make the best out of any situation, and this has been our focus for 2023. So let me maybe start a bit with the macro environment. It has been quite uncertain. The last 3 years, financial markets surprised us in many ways. And that was, in large part, driven by COVID-19, the impacts from the policy decisions made and the historically -- 40-year historic high inflation that we experienced. Just a few highlights of what we saw. First, we lived through 3 consecutive years of negative bond returns. And this is unprecedented. We have never had 3 consecutive years of negative bond returns. On average, we expect bonds to decline once every 5 or 10 years depending on the time frame you take. Second, we saw the end of the lower for longer narrative. U.S. Fed rates moved from 0.1% to 5.3% in a matter of 2 years. And they topped 5% for the first time in 16 years. And then equity markets. Equity markets were quite volatile. Last year, the S&P 500 was down over 20%. This year, it made a fast and furious comeback, and we have seen 9% S&P increase just in the last month. So what does this mean for us going forward? On the right-hand side, you see some of the trends that we are following and some of the risks we are concerned about in our portfolio. First, inflation. Inflation tops our list because while you've been following markets and you see that U.S. inflation has gone down more than expected, yesterday, we got European inflation numbers and those also went down more than expected. We believe it's too early to declare victory here, and we also believe that the market narrative of soft or no landing at this point is overly optimistic. History tells us that labor markets need to crack and correct for inflation to go down sustainably which means we should be expecting a downturn or a recession in the next 12 months. Second, geopolitics. We have seen geopolitical risks not only not abate, but actually spread, which creates continued global instability. We're also looking at the impacts of energy transition, AI, which, yes, they create risks. But for us, are also investment opportunities. With all this in mind, let me move on to our performance and why I believe we're well positioned to navigate these markets and take the best advantage of them. Asset Management has had a strong track record and has been a consistent contributor to Swiss Re's group net income. We have delivered on average 3.4% ROI over the last 10 years. We manage a portfolio of about USD 100 billion in assets, effectively, all of which is under ESG considerations. If you look at the first 9 months of the year, our net investment income was at an all-time high. This was driven in large part by the fact that we reinvested at higher yields as our bonds matured. Our realized gains also contributed to our ROI this year, even though we had a meaningful program of targeted turnover of lower-yielding volumes in the fixed income portfolio. And that was not just lower yielding, but also lower quality. And this uptick in realized gains was mainly driven by selective sales in our real estate portfolio. If I move on to what our portfolio looks like on the next page. Here on the left-hand side, you can see comparison of our portfolio today versus 2022. And given our cautious market outlook, we have been positioned relatively conservatively and have capacity and cash to add financial risks as opportunities arise. You can see that our credit investments increased from 40% at the end of the year to 46% today. And we modestly decreased our exposure to alternatives and equities from 12% to 10%. We took a few specific actions. First, we increased investments in high-quality fixed income, which includes investment-grade corporate bonds and senior securitized private debt. And on the former, we added credit both in a higher interest environment, but also during times of the year where spreads were significantly higher than they are today. Second, we significantly reduced our public equity portfolio, something that John has covered in our quarterly discussions, and that is driven by the fact that we believe valuations at this point are quite rich. Third, we rightsized our exposure to our principal investment and acquisition portfolio with the sale of CPIC in the third quarter. And then finally, we took some selective exits from our real estate portfolio at what we consider to be attractive valuations in the current environment. The right-hand chart illustrates the result of these actions on our recurring income yield. It is currently at 3.5% compared to 2.6% at the end of 2022. And that translates over the first 3 quarters in $600 million of additional recurring income, which is ahead of our guidance of $700 million for the full year. And again, this move has been driven by our active reinvestments at higher interest rates. So in addition to focusing on adding credit, our focus has also been on portfolio quality, and we find that important in this current macro environment. So the next 2 pages, I'll give you some highlights of what I mean by higher portfolio quality. First, looking at fixed income. Our fixed income -- our corporate credit portfolio makes up more than half our fixed income exposure. And it is a key contributor to our recurring income. And you can see here that in the last 4 years, we have moved significantly away from high yield and also emerging market credit to investment-grade credit in developed markets. We have a hybrid model in how we invest in corporate credit. So we use proven external managers to manage our securities, but also have an in-house team that oversees the portfolio, which allows us to react swiftly to sectoral risks. And I can give you 2 examples there. For example, last year, we took targeted actions on our Chinese real estate developer bonds and we exited a large part of those before the market dislocation. And this year, we were able to significantly derisk our U.S. regional bank bond exposure well before the March crisis. A result of these actions is our low impairment rate. So if you look at the total over the last 10 years, it totals $168 million, which averages to below $17 million a year. Another area that illustrates the focus on quality is in our private assets portfolio. First, in private debt, we invest predominantly in investment-grade equivalent senior secured financings in real assets, and those include infrastructure debt and CMS. We expect to commit around $1.6 billion in those markets and are taking advantage of opportunities given tighter liquidity that we see both from banks and capital markets. Second, in real estate, our portfolio is really geared towards cash flow generating assets with limited development risk. 70% of our portfolio is in Switzerland and Germany. And that part of our portfolio is managed in-house where we invest the full -- where we control the full investment process. We have less than 20% exposure in the U.S., and our U.S. portfolio is well diversified where we have both regional diversification, but also good diversification by property type, including multifamily and industrials. And then finally, our private equity platform is largely focused on buyout. We have very little venture capital exposure, which has experienced the highest valuation corrections in the last couple of years. Here, we focus on primaries, secondaries, co-investments, together with managers that have proven track record. And also here, we are well diversified. We own positions in over 2,500 private market companies. So maybe let me wrap up with a few parting thoughts. Asset Management is well positioned to continue to deliver strong and reliable income to Swiss Re Group. And I believe we have 3 key strengths that enable us to do that. First, we maintained a balanced and high-quality portfolio with no outsized positions and a focus on investment-grade credit. Second, we remain focused on recurring income. And looking ahead at '24, we expect to add another $300 million of recurring income from our portfolio. And last but not least, we maintain flexibility through strong capitalization which means that we have the capacity and the liquidity to invest in the market during dislocation times. These factors differentiate us from competitors and also position us well in what we consider a continued challenging macro environment. Thank you very much. And now I will hand over to Philipp Ruede, who will provide update on alternative capital partners.

Thank you, Velina. So good news. This is the last session before the break. Alternative capital partners. So before we go to our small corner of the investment universe, it might be useful to remind ourselves that what we're talking about here is typically for the investors part of their alternative allocation. And with what happened in the public markets, it's pretty obvious that a lot of those investors are now overallocated in percentage to alternatives. And this macro factor has an important impact on the overall inflow and outflow of what we call the alternative capital markets. Now it's been dominated from the beginning to 2017 with relatively benign nat cat period, and we saw the rise of collateralized Re during that time. And since 2017, I would say the industry has faced its first significant challenge. And as any industry when faced with challenge, there is change, there are winners, there are losers. And so even if at first glance, one might think this looks flat and boring, underneath, there's actually significant reshuffling in that industry. And we see the part that is most directly competing maybe with reinsurance, collateralized Re declining. We see the cat bond space continuing its steady growth to be [Audio Gap] stable but also within the sidecar, we've seen shifts to what we would call more aligned offering shall we say. Now even when we look within the cat bond space, and we define a bit arbitrary the top as being below 2.5% expected loss and the bottom to be below 2.5% expected loss, then you actually see that even within the cat bond market, there's a shift towards the upper layer. The bottom layer actually has been decreasing while the top half has been increasing. And so the idea that I would like to leave you with as my personal opinion is that this market is reverting to being more complementary rather than competing with the reinsurance industry. Now unsurprisingly, we ourselves opted for a strategy that positioned ourselves to be complementary and it's a pleasure to update you on the progress so far. So our ultimate goal is to reduce the cost of equity for Swiss Re, simple goal. And the first manner in which we can contribute is to help us to grow in a controlled manner. And in the spirit of exposure management, we would then take a basket of our peak perils and ask investors to participate alongside us in a very transparent and aligned manner. And so we've been able to quadruple our assets under management in this space and are receiving positive feedback on our principle of skin in the game. The second way we can contribute is by improving the capital efficiency of Swiss Re and what you see on this chart is a figure of 19%. The interpretation thereof, should be that if we ceded every single business, and we call that a 100, then we are now at 19 in the sense of what would be the maximal potential overall and how much do we reduce our group economic risk. So as an example, in the public space, the group stop-loss covers that we did would fit in that but also the diversification benefit that you've seen earlier in Christian's presentation on the nat cat part of it, that diversification benefit comes from cutting the peak. Now we've been active in this market for 25 years as a structure, but also as an investor. And this has really provided the foundation for this build-out. So we currently have increased our investment to $1.3 billion as we thought the market was quite attractive recently. And last year, we decided to open up this to investors as well to invest alongside us. Now a different lens on the same thing is to look at our total expected loss in nat cat. As you can see, we have grown the gross figure by $1 billion over that period and approximately half of that growth was supported by ACP. You will also note that the figure for the current year has been lower to $1.7 billion from earlier in the year $1.9 billion. The 2 main drivers of that were that we increased the attachment point and that lowers the expected loss as well as on ACP side, we moved from more tail protection to proportional protections and these 2 effects combined means a lowering of $200 million. So with ACP support, we can continue our long-term growth path in nat cat. And on the next slide and last slide, you can see here that we have roughly doubled every 2 years our fee and commission revenues. I'll quickly explain what's part of that. So that would be the ceding commission, all the profit commission, all the fees as a percentage of assets under management, all the fees as a percentage of collateral plus the fees that we earn for structuring and arranging cat bonds. So you can see on this slide that in 2018, we were below $30 million and far away from our competitors in this space [Audio Gap] with our peers and for the last 12 months, so until Q3 [Audio Gap] continue but probably not at the same pace. And with that and a bit earlier, I hand it over to Thomas to close.

Thank you, Philipp. We're just a bit early, but we'll break for lunch now. [Audio Gap] also the webcast will resume. Thank you. [Break]

All right. Good afternoon, and welcome back to everybody online. Welcome back to everybody in the room here as well. We hope you enjoyed the lunch and have plenty of energy for our afternoon sessions. We're going to get deeper into our businesses here. I will kick you off on P&C Reinsurance, then Andreas is going to talk about Corporate Solutions, Paul about Life and Health Re. And then we'll get into our Q&A sessions later on. So P&C Re, let me summarize it as follows. We have a strong franchise, we have a good market and we have a clear strategy. We like the structured solutions business, and we're cautious on casualty. We're going to [indiscernible] some of these topics here a little bit. I'll start out at a higher level, and then we're going to go do a deep dive into nat cat and into U.S. liability. Let's start out with the size and the diversification of our business. This is a big business, $25 billion, approximately 10% of a global market that we expect to continue to grow at a healthy pace over the next 10 years. We're well diversified on a regional basis and a line of business basis. You see that at the bottom of the slide here in the bar chart. So you don't have to take out your ruler. I'm going to tell you a little bit order of magnitude on a line of business basis about a little bit more than half of our capital goes to the property business, about 1/3 to casualty and the rest to speciality. And regionally, just under half goes to the Americas, about 40% in the EMEA region and then the rest in the APAC region. So this is what we do. Now to how we do it. We are channel agnostic. The client picks. We can engage with the clients to a broker or directly, and it's about a 50-50 split. What is important to us that we're close to our clients. And this is why we have about 1,000 colleagues globally in underwriting and in claims that are spread across 40 offices. And the reason this matters is this is how we show up to our clients. This is why they rank us #1 in their views. When we engage with our clients on a frequent basis, we increase the share of mind. And we often are the first [ port of call, ] and this is why we get access to some business that some others do not. Now let me tell you a little bit more about our portfolio, where we are and where we're going. I'm going to have to take you back about 18 months ago. And what's been happening in our industry is a very significant rebalancing of the risk sharing between insurance companies and reinsurers. For a long time, actually, insurance companies were able to gear their own balance sheets and pass off a lot of the more attritional losses to reinsurers, and that stopped earlier this year. And so you saw a very dramatic shift actually in structures, terms and conditions, attachment points and price. And what this has meant for our own portfolio so far through the first 9 months this year, we've been able to increase our prices by 18 percentage points. We've also increased our own loss pick. And this is a combination between underlying values, inflation exposures on the one hand, and model and assumption changes on the other hand. The delta between the 2 plus what we're getting on the higher yields is generating economic profits more this year of greater than $1 billion. Now it's not on this slide, but I know you want to know about renewals, so let me preempt the question and talk about this right now. I'm going to repeat what we've been saying about our expectations on the market environment because it's still true. So what we've been saying is that we would expect an orderly renewal. This is in contrast to the chaos that we had in the market last year. We said that we would expect a continuation of the discipline and the focus by the reinsurance industry. We've been saying that there is actually enough capacity for most risks out there, but it's about risk appetite, and we expect that to continue to be disciplined risk landscape and adequate rates for the risks that are being taking on end-to-end in the value chain, right? This is still very much our expectation of the market environment. I can give you a little bit of a flavor of where the renewals stand right now? It is early. In Continental Europe, about 1/4 to 1/3 of the market has now FOTs. So it's a little bit further along. U.K. London market maybe around 10%. The U.S. is just getting started and different markets in APAC as well. So overall, it's still early, but you can start seeing a little bit of a flavor for what's going on out there. I'm going to bring you back to our own portfolio here and just go through the journey that we've had in our portfolio mix over the last few years here. And essentially, what you see here from 2019 through this year, it's a flip-flop of the focus around casualty and nat cat. And when we look forward, we like the cap business. We like property as well, more generally speaking, specialty, and we're cautious on casualty. Now we're going to go to do the deep dive in nat cat first, and then we're going to go to U.S. liability hereafter. In the nat cat sector, we need to start out with the development of insured losses. The new normal in the nat cat base is insured losses in excess of $100 billion. That's been the case on average for the last 6 years. This year is another active year. And it's been growing at a clip of around 5% or 7% per year. And what's behind this is demographic change is migration, urbanization, increasing values, increasing exposures, people living closer to bodies of water, and this is increasing, a trend that we actually expect to continue. Now we also see on here the price index for the nat cat business. 2017 was sort of a recent low in the cycle. And since that point, we've increased prices by 40%, and it's about back to somewhere in the 2010, 2013 area, as Christian already alluded to a little bit earlier. Now I'm not going to go into the details on the slides, but they're in your pack. These are some of the drivers behind the increased exposures and the growth of the natural catastrophe market opportunity. But I do want to talk about secondary perils. Secondary perils. So here, you have severe convective storms or tornadoes. You have wildfires, drought, flood. And they make up about half of all the insured natural catastrophe losses over the last 30 years. They tend to be a little bit smaller on a one-off basis. They tend to be a little bit more localized, but they do add up. And what you see here as well, they can make up a very important part of the overall insured losses. Actually, when we go back to the slide here, the dark part of the bars, those are the secondary perils. The light blue are hurricanes and earthquakes. And you see there, obviously, in 2017, this is when we had Harvey, Irma and Maria. And since then, secondary perils have actually been more than half. Now this matters also -- clearly, we picked up a larger part of this over the past few years, but we've seen a dramatic change in the share that comes to Swiss Re in 2023. Going a little bit further into our nat cat business, this is good business. We make good money at it, a combined ratio on average over the last 10 years of 69%, $9 billion of underwriting profits over the same period of time. It's a very well-diversified portfolio. And if you look at the map on the left, the bubble sizes represent the size of the expected losses and the various colors represent the various perils in the nat cat space. Of course, when we think about unexpected losses, but more extreme loss scenarios, earthquakes and hurricanes will take up a bigger part of that share. And that's what we saw in 2017. And you see this on this list as well here. Again, this was the [indiscernible] years. This is a good business. We like it. Another good business that we like is our specialty business. I'm not going to spend a whole lot of time on this, but we need to just recognize for what it is. We've been growing it at over 10% per year for the last 5 years at an attractive [Audio Gap] engineering, marine, aviation, credit and surety and cyber. And it's also well diversified from a regional perspective. It's a little bit bigger here in the EMEA region because some of these lines get written out of the London market, but fundamentally, we're talking about a global portfolio that we like. This brings us to U.S. liability. We are very cautious around this segment and we want to do a deep dive. Let me just frame the casualty topic for you. It is not all created equally. So there's different pockets here that we need to focus on, different regions and different lines of business. Fundamentally, there's liability motor, financial lines and workers' comp. We're focusing right now on the U.S. liability market overall. This is where we've seen the biggest problems. Now we're going to talk about the market overall. This is not Swiss Re, and there's 3 points I would like to emphasize here. The first one is this topic of social inflation has been around for quite a while. And it really actually started with a social sentiment. So this idea that juries would go and vote on the verdict against large corporations and maybe not be so positively incline has been around for a while. It got worse. This is the middle upper chart here. The second topic is around the activity in litigation. It is up very, very strongly. And you can look at different measures. You can look at the number of court filings, the number of class action suits, the number of click through on ads from lawyers, the amount of litigation funding, the average verdicts, the nuclear verdicts and so on. They're all trending in one direction, up. And so when you have this combination between a social sentiment and an increased litigation activity, that means losses are up. I'm going to bring you to the right side here in the chart. This is the primary liability market in the U.S. The blue bar charts are the initial loss picks. The pink additions above that, that's a difference to the current ultimate losses. We got those from the U.S. staff filings. When you look at [Audio Gap] and you see that also represented by the dark blue line here, which is the loss ratio trend. The yellow line on the same book is the loss ratio for the reinsurance industry. It's quite a bit higher. And the reason behind this is twofold. On the one hand, there's nonproportional covers. And when verdicts go up and it's only going to the [ XOA ] layers, that's where they sit. The other thing is they've been overriding commissions of several points that come out of the loss ratio for the primary insurers to go into the loss ratio for the reinsurers and that's what you see here. All right. You see a fairly problematic trend, and we actually expect most of this to continue. Now let's go to Swiss Re. We've identified one of the principal drivers in our own experience, which is the ultimate client segment and policyholders that we're ensuring. And there is a very significant difference in the loss ratio experience between large corporations and everybody else. 30 percentage points over the measurement period here. And the large corporations, these are what we would identify from the list of the Forbes Global 2000. That's how we measure our limits. That's how we track our exposure. And you can see the experience is very significantly different. So what have we done about this? Step number one, we have vastly reduced our limits to this segment, right? So large corporate risk segment limits, we have decreased that from the 2019 level to today to more than 70%. Second thing is we have doubled the prices for this business. And the third thing is we're also benefiting in total economic turns, not insignificantly from the higher yields. Need to talk a little bit about reserving. Okay. I'm actually going to start you out here in the upper right corner. You remember this page here, the pink bars from the market overall and what we've talked about 2015 through 2019, the increases to loss pick from the original ones, it's a very similar story right here. Then I'm going to go take you to the left here. And what you can see here, and this is probably not surprisingly, is that there are higher IBNRs in some of the more recent years. But what is important is that across all of the reserves for U.S. liability of $11 billion, 75% is in IBNR. And then you can say, how does this sort of compare this year to last year? And that's going to get you in the lower right corner here. If you go back and look at various points of 3 years back, 5 years back, 7 years back, what was the IBNR percentage at that point and what it is today? And it is, in most cases, a little bit higher today than it was last year. I'll take you to the field that is 2018 when you had an IBNR percentage of 68%. So 5 years back last year was 68% IBNR. This year, the IBNR 5 years back is 73%. That's what the slide means, and that gives you a bit of a flavor around our reserves for U.S. liability. I'm going to do a quick walk-through here of the IFRS target. Our combined ratio, John has already given you most of these numbers, but just to illustrate a little bit more here. The changes under IFRS from a recognition perspective, expenses, the first box is around 5 points. And we talked about the discounting, that's a range between 6 and 8 points. And we do expect a little bit more to come through from a margin improvement, but it's also a factor of how much we're thinking about increasing our own loss picks. And of course, there's the reserving philosophy change in here that we're not expressing as a percentage but as the numbers that Christian had articulated a little bit earlier. I'm going to wrap it up here before turning it over to Andreas. We're well positioned to increase the resilience of our earnings. We've got a strong franchise. We've got a good marketplace. We like the nat cat business. We like the specialty business, and we're cautious on casualty. I look forward to the Q&A. Until then, thank you.

So thank you, Urs. PC Re first and CorSo second, that makes full P&C for Swiss Re. Let me see the slide. Good. So Corporate Solutions is part of Swiss Re Group, integral part of Swiss Re Group's strategy. Then we need to state that again and again, so that we remind ourselves. But I would like you to take away our 3 key elements today. Number one, we're going to continue to be disciplined. We can grow profitably and we apply a stringent target liability portfolio approach. Secondly, we invest into differentiated propositions to avoid the commoditization of our product and to fall into that commoditized trap software soft market. And thirdly, we're going to continue to increase the relevance of course in the group to contribute further to the group net income. So that's the message that we wanted you to take away. We're operating in a very attractive market. The commercial insurance market is attractive. We estimate a 5% growth. And it is a target market of USD 300 billion as it stands. And our target market comprises 40,000 corporate groups with all their affiliates, obviously. And we subdivide them into the mid-market. It's actually upper mid-market and then the large corporates. This is our space. And if you want to be a specialized risk partner for the medium and large corporates, we can go to the middle of the page, then we want to shift away from just being an excess and follow player. So we have 2 categories, that's the core and then it's also the differentiated. Within the core, we used to be known as the wholesale market player, where it's very much broker-driven and you can be exchanged very easily. And there's a lot of pressure then on price when there's more capacity coming into that space. Two, then the primary lead capacity. That's the story that we told all the Investor Days since the turnaround. And I think just to remind yourself, in that space, primary lead, the competition is tough, but there are less competitors than in the success and follow market. And also, you can see that on the right, the differentiated part, there are assets or differentiation, uniqueness that we can bring to the party, where the number of competitors even further shrink. Those are international insurance programs. Those are innovative risk solutions, in particular, now with the hardening of the market companies go more to self-funding to the risk financing on their own with captives. And here, we are market leading to provide solutions for the captives, but also for parametric solutions. Now you can see that 60% of our premium year-to-date is already coming from the primary lead base. So I think that's the good news. And that's the follow-through from what we said in the first Investor Day after the turnaround. This is an interesting picture. In the early stages of CorSo, we had extreme volatility in the combined ratio. It ranges from 88% to 150% between 2014 and also 2015 -- '17. Since then, we had an average of 91% combined ratio, and we could take away the volatility here, and it's also due to the rate increases. You can see that we had more than 50% risk-adjusted rate increases since 2017. The market helped us, that was tailwind, but has also discipline and also clear risk selection and proper portfolio management and the granularity of the portfolio management. Secondly, we addressed the expenses. We were overly expensive, but we also built an infrastructure. That was an investment. And as we build the infrastructure, that makes sense then to move away from the excess market into the primary lead where we can then deploy all the infrastructure and the expertise we have. And lastly, we changed our reinsurance program. Remember, we said the attachment points were too high in the past. So all the losses that came through ended up in our net, and it was an inadequate reinsurance protection. Now we are more comparable to markets. Our net positions are more like market net positions, and we are comparable, and we can then focus on the profitable underwriting. In order to stay robust and resilient also for the next soft market cycle, we said we need to address the portfolio steering. What do we do if rates decrease in property, for instance, we are overweight in property, and this will happen at some point. At the moment, we see very healthy strong rates. The hardening is moderating a little bit, but I think we still see rate increases in property. If property goes down, we need to be resilient. That's why we look at the composition of the portfolio with a forward-looking view, 5 years. We take market trends into consideration. And then we see how do we behave and what portfolio shape do we need to have in order to achieve the financial KPIs that we promised to achieve. So property will always be overweight. This is our anchor liner business. That's the reason for us to be. That's why customers come to us. And then we look at attractive specialty segments, in particular, engineering. It's a nice growth area. But still, the pricing cycle still correlate. On the casualty side, as you have heard from Urs, for CorSo, since the turnaround, we have been very cautious. We cleaned our portfolio. It's the history. It's not here anymore. So we're not underwriting large corporate risk in the U.S. on general liability, at least not as long as I'm here. Secondly, we can still find some attractive subsegments in casualty, where we would like to grow. So in particular, general liability EMEA, that's an area where we feel comfortable. We are underweight. And if we have a prudent approach with the right costing tools in place, then this is an area where you can expect us to be a bit more present. But then the last 2 lines of business is excellent and health and credit and surety are the lines that are decorrelated to the property pricing cycle. And that's why we like it. And that's why we say we would like to have focused growth, in particular in those areas. So that doesn't mean that we're not growing in the other areas. But here, we're focusing on growth and also this addresses the diversification, the scalability of our book because A&H is nicely reducing the average expense ratio of the overall book. And then credit and surety is decorrelated as I said, a line of business where we have performed very well, where we have demonstrated that we can cycle manage well. So that's the area we would like to be in. Let's turn to the 3 differentiating propositions that I was mentioning. International insurance programs is becoming one of our key features. If you remember, the -- I think it was the last Investor Day, where we promised to have 600 international programs by now. We are at 650. You can see it in the next slide. This is an area that we also feel very comfortable. It's mainly property but also liability and the other lines are a bit smaller, but this is very healthy business. It is based on a very global reach. So we have a 150-plus network. We have compliance and laws and taxes all built into our platform, into our tool and data and technology is the differentiator that we bring to the party. People are switching international programs to CorSo, not because of underwriting or price. It's because of the service, superior service. On the innovative resolution side, this is, I would say, the flavor of the year because due to the hard market, people are thinking, should I pay the high premium or not? And as they start to take more control of their risk and understand risk and risk management and risk financing, you will see that there will be more creations of captives. You will see the association, the foundation of the -- or the creation of the association of captive insurers in France. There will be more competition around captive regimes and regulation. And this is something we would like to accompany. We are market leading. Swiss Re has always been very strong in that space, even before CorSo was created. And we have 3 main propositions. And I would like to maybe use the captive as an example. So take a captive, so we can sit with structured fronting in front of the captive. We can sit within the captive with insurance, reinsurance solutions and structuring or parametric solutions. And then we'll sit behind the captive, so that we can strategically embrace the captive from all sides and be a long-term partner to captive managers. And last, but not least, and it's linked to also the first 2 differentiating propositions, we bet on data. Data technology, in particular, data analytics and risk insights. We have developed a platform, which is called risk data services, and we forward integrating into the customer space, the corporate space, and we deploy the models that we have, the insights that we have so that they can start to take more control of their risk and manage also a risk transfer together with a broker in a much more effective way. So this is the differentiation of just a few numbers. As I said, we are at about 650 with international insurance programs to date. And the premium development is very healthy, very good. So this is an area where we feel very happy. It's also helping us to diversify, in particular, also to be ready for the soft market cycle. That's a very sticky business. It's a business that our customers like because they only have little choice. So partnerships are long term. This is very good for us. And then on the innovation of risk solutions side, we're counting from 2021 because that was the start of the initiative. Yes, it existed before. But since then, we have added 430 IRS accounts, which is quite impressive. And here also, from a gross written premium perspective, this is business that's healthy. Just on the bookings side, there's a lot of fee business that's coming through, ceding commissions that are coming through. And under IFRS, you will see the different treatment of those. There's no premium that's coming through. You will see insurance service results. The RDS fees are software as a service. So that's a subscription fee, and you'll find it under other operating income under IFRS 15. Quick walk, like -- John, you gave all the numbers. I'll just walk you quickly through like Urs did. So 94% and then we will announce a target of 93% -- better than 93%. I'll just walk you through. There's not much change. We're applying the definition of all key premium on the U.S. GAAP side, which now is the gross insurance revenue side on the IFRS. The denominator is then the difference in the calculation of the combined ratio. This is quite substantial for us, also due to the increased expansion into primary lead business, but also the expansion of the reinsurance program. So that's this part. The opposite direction is then the discounting of the cash flows under IFRS 17. You will see that it's not as pronounced as with competitors, for instance, but also P&C Re because we have a shorter tail. So a shorter tail or nature of our business is then reflected in the discounting, the smaller discounting. If you look at the portfolio composition of large American incumbents for margin improvements in the 9 months results, you could see that we still generate a risk-adjusted 4% rate increase year-to-date. So still healthy. It's very good at a very high level already. And in addition, we have a stringent, strict expense management in place. So that is all factored in here. And then you heard from Christian and also Urs the change in reserving approach. And here, we must say CorSo started already in 2022 with this prudent reserving approach, which now is also applied at group level. In summary, the takeaways. We're focusing on cycle resilience and diversification. This will make us more immune for the next of market cycle, which will come. We don't know when. We'll try to keep it as stable as it is at the moment. Differentiating propositions, as I mentioned, are very key to us in order to avoid the commoditization trap and then also continued productivity increases. Expense management for us has to be strategic. And then lastly, we will increase the contribution to group net earnings -- net income. And beyond the net earnings contribution, I'm happy to say also that on a qualitative level, we also are lighthouse initiatives in certain areas [Audio Gap] group, but also the smart circle in order to create a more robust underwriting technique and approach in the business. So that's CorSo. Thank you very much, and over to you, Paul, on the Life and Health side.

Thanks, Andreas. Hello, everyone. The headlines of today, the big one, our net income under IFRS will move from the 2023 GAAP number of $900 million to $1.5 billion next year. That's the big one. Alongside that, as we transition into IFRS, we were able to strengthen our balance sheet. You'll see the CSM that is generated as a result of that is significant and because of the long-term [Audio Gap] for group earnings. We also anticipate through our franchise that we can grow that CSM. So lots of good news for Life & Health. And what it means for us as a group is that Life & Health becomes a much more significant contributor to earnings at a group level, increasing our contribution from around 30% to around 40%. So let me tell you a bit more about our business. This is a very large global diversified business. We take about a 15% share of the reinsurance market globally. And this is a market that's anticipated to grow by a very steady 5% per annum for the next 10 years. Our footprint is across 29 offices. And after a restructure that includes 680 people in our market units, 8 market units around the world. They now have a powerful blend of impairment and accountability. And they're supported by more than 300 underwriters who provide the backbone, who put the systems in place, who put the frameworks in place and to help decision-making on the more complex matters. We own our direct -- our client relationships directly. 95% of our client relationships are direct. We have a small dependence on brokers. And our clients regard us as the #1 in our target market. That's the vast majority of the life reinsurance market around the world. So we're well positioned. The business is also well distributed across the 3 main territories of Americas, EMEA and Asia as we look at the world. And also increasingly diversified by product, which I'll show you in some detail shortly. Now as the big message today is around IFRS, it actually helps to understand a bit of the history of the Life & Health business to know why our numbers are the way they are. If we go back to the late '90s and early 2000s, Swiss Re completed a number of significant acquisitions, starting with M&G, Life Re, Link & Re and more recently with the GE business, which had a significant Life & Health component. More recently, having established that significant balance sheet from these acquisitions, we've grown organically, and we've grown at a good pace. And that's been underlined by growth in the underlying risk market as well as our expansion into Asia Pacific region, a very steady expansion into that space, growth in longevity and also fairly quick growing transactions business throughout that period. That's the history, and that's why our balance sheet is where it is today. Our strategy operates across the whole value chain, and we have footholds in the value chain, which are carefully selected to fit with our expertise, married up with where our clients tell us they need our support. On the distribution space, our product development, the ideas we bring to bring new products to break down the protection gap is central to decision-making on who clients pick for the reinsurance partners. Our underwriting remains at the forefront. Our Life Guide is the #1 manual in the world. It's accessed well over 20 million times a year. And of course, given that it's quite a manual process, automation is playing an increasing role in this through our tools that we provide to the market. Our automated tools provide support for 15 million decisions a year as well. Of course, at the core of who we are is taking risk. We take risk on new business as business flows on, as new policies are written, but we also support our clients on their balance [ sheet ]. And these transactions typically are in blocks of in-force business where our clients might want to reduce capital deployed or to optimize capital deployed. We're able to do that very effectively and very efficiently using reinsurance paper that's underlined by our capital strength, which is supported by our diversification, and our low-cost base enables us to find a price point that works. A big part of who we are, being a long-term business is our in-force. So how we manage that, both ourselves and with our clients is also a big part of our strategy. We help our clients to manage their in-force. We have tools we can use to help them optimize retention. We also look at where [Audio Gap] options. We can do recaptures, we can do rate reviews. There are a number of different things we can do. And our use of analytics helps us understand where the business is performing well and where to direct our attention across the complex animal that is our in-force. What about our new business? Well positioned for the future. The margins on our new business since 2020 have grown by 4 percentage points on -- in return on capital terms. That's something we're very proud of. And let's remember, that's a period during which we've had one of the great pandemics in human history. And that was driven by a recognition that our business is at risk, and we should get a good return for the capital we put at risk. And there is a perception that what we do [Audio Gap] supply of capital and optimizing where we deploy it. We've been able to create a significant shift in returns on new business. I'm also happy to say that we managed to do that on top of charging for the expected cost of pandemic for the new business we wrote during that period. So I think it's a great success story. In 2023, we anticipate writing new business with an economic value well in excess of $1 billion. And in the middle, you can see how our portfolio mix is changing over time where our history is -- shows the weight of the mortality business on the left-hand side. And our new business with a bigger shift towards Asia, where the health business is more significant, shows it was a better balance between life, health and an increasing share of longevity and financial solutions. Our outlook is actually positive across all lines of business, but with some subtleties underlying that. In mortality, as we're quite heavy in the U.S., we'd like to have more balance. So we're looking to grow more in other parts of the world. We see great opportunities in Asia, particularly in the Southeast Asia region. Longevity, we like. It provides a reasonable offset for us. But the pricing is quite challenged. So we're selective, and we make sure we get a good return for the capital deployed there. Health continues to be a strong growth area, particularly in Asia. We have strict risk controls in place there, and we continue to do that with significant underlying discipline. And lastly, financial solutions. This is a large marketplace. And we have combined capability here that we bring together across our biometric skills as well as our financial markets platform, hedging optimally and fully wherever possible to bring solutions to our clients that help them manage their risk across both biometric and financial risk. We anticipate growth in this area, but we'll be careful. Now to help understand the CSM that we present. Actually, there are some figures we released in our 2022 annual report, which provided a good grounding. And of course, we've moved from a blend of -- a mixture of EVM and GAAP into a world where we'll be purely IFRS, with IFRS being a close cousin of EVM. And GAAP, of course, recognizes earnings year-by-year, whereas EVM and IFRS recognize all future earnings as you write business. So in GAAP, what we try to do, and this exercise was to say, what's the embedded future margins in our GAAP balance sheet, which is the $25 billion number there in the middle of the page. And that actually translates very well to the IFRS balance sheet [Audio Gap] billion mark, and I'll show you how that breaks down in the next slide. So similar margins overall is just constructed in a different way. Now as we transition from GAAP into IFRS, this is, of course, a complex systematic change. But from an actuarial and insurance risk management point of view, we have to make sure that we set up the balance sheet for success. So there's a tremendous amount of work still ongoing to make sure that we hold the right numbers for all our business. So we do a line by line, treaty-by-treaty review. And through that process, we aim to get to an end result of a robust balance sheet that will stand the test of time. But that means that some of the liability in the CSM figures that we hold are a bit different from what it would have been under the GAAP world. And there's a couple of examples. Our [Audio Gap] U.S. business was an earnings drag on [Audio Gap] against it. We can anticipate an earnings contribution from that business going forward. There's other book of business where we actually unlock and it all balances out to give us the $25 billion. So a robust process, and I think we end up with a robust balance sheet. The margins are spread, as shown on this slide, so you can see the CSM, the Americas still dominates, but also a significant CSM in Asia as well. Just to connect back the $25 billion number, if you take the bottom end of the range of the CSM shown there and add it to the risk adjustment of the $6 billion, that gives you the $25 billion. Now the amortization rate by region and also between the CSM and the risk adjustment are a bit different, and I'm sure you'll have questions about that, but you have to understand the runoff and the shape and the profit profile of different markets, the different products around the world is what drives this. And the difference between CSM and risk adjustment is due to the different carrying profile within IFRS of the way they run off. I want to take a little detour into mortality improvement. So thinking about the risk that we take on our book. So as we've gone through this process of appraising, do we have a robust balance sheet? This is the biggest item that we consider. How are we doing with mortality, life expectancy, looking to the past, looking at what we've been through during the pandemic and contemplating what the future may hold. If we look at the past, we've seen dramatic improvements in life expectancy over decades. And if you look under the surface, you can see that the sources of that mortality improvement have come in waves from different contributing factors. And these are the bubbles that you can see on the chart on the left-hand side. In recent years, troubling times as we went through the pandemic. Wherever the lines here for the U.S. and the U.K. or above, that's when we had excess over time. And if you have -- if you can see close enough towards the right-hand side of the chart, you see it's coming write-down close to zero. And that is our expectation that the mortality and the lethality of COVID dissipating. It's evident in population mortality. And we -- our outlook reflects an anticipation that, that will be the long-term position. During the COVID period, I mentioned to you that we managed to generate more new business margins. The number is there, $700 million to $900 million of extra underwriting margins. But we also, during that period, even from the first indication that there was something problematic here, we scaled back our new business exposure to the lumpier risks. And we're still a little bit cautious on that in the market in the meantime. But what about the outlook? So this is the key part that drives our balance sheet. And if you remember, we talked about -- I talked about the waves of sources of improvements from the past. Well, as you look to the future with our large research teams, we see multiple sources of improvement ahead of us as well. And some of these, you can start to see some emerging research that support that there will be dramatic things to come. We've all heard about the impact that mRNA vaccines had during the pandemic, but their use has not really been explored beyond the experience of the last few years. And we're already seeing some tremendous prospects of combinations of mRNA and immunotherapy techniques to address cancer risk. So there's a lot of reason to be optimistic and what that all adds up to for us is that we anticipate mortality improvement [Audio Gap]. In the short term, we reflect the fact that recent headwinds from COVID will take a bit of time to dissipate. But in the long term, we think we'll return to a level of mortality improvements around the world, which is coordinated in all our assumptions. But they -- we project that they will be below the historical long-term trends and we believe that's on the prudent side. Back to the CSM. So this big $25 billion asset with the CSM and the risk adjustment in combination. We talked about the stable contribution to earnings that, that should provide to the group over time as that asset develops. As we write new business, we replenished the runoff. And as John said, we replenish that at a faster rate than it runs off. This is important for us. We want to be able to show a growing CSM. And when we put our business plans together, we do anticipate that as we layer new business tranches onto our CSM, over time, we will be able to project a growing balance sheet asset under IFRS there. Factors that drive that? Well, the protection gap is still enormous and actually grows every year. Underlying economic growth also supports our ability to continue to write good flow business. We see growing opportunities to transact with companies on capital-motivated opportunities as well. So there's plenty of positivity, I think, as we look forward. So in summary, the big story of today is that we announced this $1.5 billion for next year. And to break it down a little bit from the GAAP number to the IFRS one, a big part of the contribution is the in-force. The new business contribution increases going forward because of the profile of recognition [Audio Gap] aggregate leads to a faster recognition of earnings. So our franchise is strong. Our industry position is very strong. Clients open their doors for us. We're very positive about this increased earnings potential. And I just underlined with that also the [Audio Gap] of contribution. Our outlook on long-term mortality is positive, and that's supported by a strong balance sheet that we've been through a thorough review of. And we see scope to build resilient sources of new business from a wider range of products going forward from all regions of the world. Thank you, Thomas.

Thank you, Urs, Andreas and Paul. We just need around 15 minutes to set up for the Q&A session. So we'll try to start a bit. [Break]

Welcome back. We now start the Q&A session. We have all speakers on stage. We'll start with questions in the room and then also go on to Chorus Call line if there's questions there. I would just like to ask that you introduce yourself before asking the questions so that everyone, especially also on the webcast has the benefit of understanding where the question is coming from. So if we can start in the room, who would like to start, Ivan?

It's Ivan Bokhmat from Barclays. I would like the first question to be on the reserving change which I think is a very welcome one. But I was wondering specifically, if you could comment on the back book reserve confidence. Maybe if you could outline what's the right range? Should we refer back to the 60th to 80th percentile we spoke before. Where are we within that range? And maybe specifically on U.S. liability since we -- you have had a bit of a focus on that, maybe a similar comment. And my second question, if I may, just relating to your nat cat business, which looks pretty phenomenal with a multibillion book, probably at least $2 billion of underwriting profit this year, if I look at your figures. Just wondering, do you consider the result of this year to be, to some extent, products of luck, given the loss distribution or you think that it could be sustainable going forward at the scale?

So reserves, we've obviously -- and the slide showed it that Urs has put up, had some material actions during the course of 2023 in addition to reserving that's been done over the previous 2 or 3 years, including, but not limited to inflation. I think an important piece of the discussion that we highlighted at the 9-month results was a material amount of these increases have gone into IBNRs. So there has been some case increases based on information that arrived from some of the primary clients. But we have positioned ourselves, I think, in a very comfortable place on the reserves with the information we know today. When we get to the full year and lock down the final numbers for the year, we'll be prepared to sort of be a little more explicit about the reserve positioning. But I think you should be comfortable that we remain in the upper half, even if we have some increased loss picks during the -- for the years that have been problematic in particular. Those have been covered and then some. And so I'm comfortable that we're in good shape and obviously, a much better shape than we would have been at the beginning of the year or even a couple of years ago which is not to say that -- I can not say that we will never add reserves for those years. But I'm very comfortable that anything that we might still have in front of us is entirely manageable, and we're in a good position with the information we have today.

I'll take the nat cat combined ratio question here. So as you recall from the conversation over the last 10 years, the average U.S. GAAP combined ratio has been 69% for this portfolio through the first 9 months of this year, that's in the [ mid-50s ]. Now that's our book versus the market overall. What I would just remind you and point to is the overall level of nat cat activity as represented in insured losses. The average has been over $100 billion for the last 6 years. It's another active year, and you will see that also reflected in some of the results of the primary insurers. In terms of sustainability, obviously, the market is dynamic. This is representative right now for the attachment points and the structures and the prices are right now.

Tryf?

It's Tryfonas Spyrou from Berenberg. I've got 3 questions. So one is on ROE. I just wanted to clarify the base on for shareholders' equity is $17 billion to $19 billion. And I appreciate Tony said that the 40% is a flow but one back now the profitability it appears to be structurally lower in terms of net income than the current target. So any comments on how to think about this would be appreciated. The second one is on capital management. Slide 13 looks like growth comes in the fourth quarter, which I think is the last one. Does it mean we get more dividends and buybacks? Maybe you can elaborate on how you prioritize returning capital and deploying capital for growth in light of the hard market conditions? And third one on U.S. liability, more of a market question. I'm just wondering why is it not more urgency but the Reinsurance market to push down seating commissions and hopefully for [ spent rates ] to reprice further given that you guys have shown that you incurred a bigger share of the losses. Do you think the current rate environment is adequate enough to allow you to get payback over and above the past pluses?

Okay. Maybe I'll take the first one, second, third. So on the ROE, I think you -- we said $17 billion, but that's the beginning of this year's balance sheet. Of course, next year, when we start, it's going to be a hopefully a higher number as John has alluded to. And obviously, 3.6 divided by that is a much higher number. It's just that we wanted not to have another 1-year target. We have a 1-year target, which is very precise, but then we wanted to have something over the cycle much longer term and something that is more to be seen as an ambition floor and something that is in line with what competitors have. And so that's how you have to understand it. There's no hidden message for next year. This is more thinking about sustainability over a multiyear horizon, and that therefore is choice, yes.

And on that point, I just might add it because I didn't mention it when I was walking you through the start -- opening balance sheet. That $17 billion included what I think are some prudent choices about positions that we had some ability to adjust before we landed on it. And so in particular, if you remember in our Life & Health business, we could have made -- or we did make some choices, which were relevant for the EVM balance sheet, did not affect our U.S. GAAP P&L, but then came through as a potential reduction in the shareholders' equity that we show as of January 1, 2023. So there's already a build in, I think, a certain level of conservative to $17 billion. And therefore, that's one of the reasons why it won't be surprising for that number to build up modestly at least over the coming years. On the capital priorities, I do think our shareholders expect us to live by the -- what we've written and the -- there's -- we understand maybe a little bit of frustration in recent years that the dividend has not grown. I'd argue that we've been paying attention to be sure that it's been at least maintained even when the economic earnings of the group have been weak. In addition to the GAAP earnings due largely to COVID, but not only. And so as a result of that, I think getting back to a not a huge, but a clear and unambiguous growth of dividends in the near term is consistent with the expectations that we frankly put out over the years. What happens after that? I think a little bit depends on how we see the actual development in 2024 of these IFRS numbers. I continue to emphasize the illustrative and indicative nature of these numbers. Our targets are there because we believe we can hit them. When we do hit them for the full year 2024, I think we can probably start to think about what the macroeconomic conditions are and how we think about the capital structure. But for now, I think the focus should be on the first 3 boxes of that quadrangle, which is, we want to be very well capitalized. We want to return to a growing dividend, and we want to grow our business and deploy the capital that we have.

You had a question around the relationship in the U.S. liability market between reinsurers and insurers and what we're expecting to see there. I'm going to take this opportunity to expand slightly and start with the dynamics that's happening at the primary market because that's a driver of what's ultimately coming into the Reinsurance market. And principally speaking, insurance companies can decide how much they cover. This is the limit how they cover or what they cover. These are terms and conditions and structures and what they charge for it, the price, right? And what you have seen over the past few years in the primary liability market in the U.S., you've seen terms and conditions tighten, you've seen prices increase and you've seen particularly limits come down. So previously, in a GL lead, you would have on a general liability lead, you would have had a $50 million or $75 million and up kind of a lead. Today, the lines out, there are much, much smaller, 5s and 10s and 15s, but the corporates can still buy the tower, same limits, there's just more names on it. And so as a result of that, it's a much more diversified market. The underlying business is better too, structurally than it was before. And then that gets us into the reinsurance market. What we have said, and I'm talking specifically about the Swiss Re book here, what is important for us is to the reduced exposure and limits to the large corporate space, the increases in the prices. And on a going-forward basis, we have been out there and saying that some of the commission overwriters need to change. Now we don't know how the market is going to react here. We're obviously in an active situation, and we'll have to see. But directionally, this is one of the pressure points that you're pointing to as well.

If I could build on that because I think it's quite important. There's a huge uncertainty in all of that. So I think Urs showed you all the negative factors why it's going to continue. But of course, on the other hand, you have 100% price increases. You have all the actions the primary companies have done, and you have an interest rate environment where it's significantly higher and on the duration of 5 years, 6 years, 7 years, that makes a huge difference. So I can understand that somebody else could take the other side of the bet and say this is enough. The challenge is just it's quite difficult to say whether it's enough. And the uncertainty around it means that from the positions we are in this market, we want to continue to reduce. It doesn't mean that per se, we're 100% sure, it's not going to perform. It's just that the uncertainty, I think, is too high for a significant position.

Andrew?

It's Andrew Ritchie from Autonomous. I haven't quite got a question for all of each of you, not quite anyway. Just starting off with the IFRS equity transition Slide 18. I was surprised there wasn't a loss component. I mean, almost all your peers have had one. Well I guess it might be in other I just want to clarify, is the one, first of all, I thought there would be one, especially on some of the legacy life business. And I'm just concerned what we should do to roll forward to the end of '23. Obviously, I'm not asking for a number, but I mean -- we know where the economic earnings are, we can have a guess what the IFRS earnings are, but is there some additional further, I don't know, true-up on a best-estimate basis that would create a loss component as we roll forward to the end of the year, that means we'd get very wrong on thinking what the end of '23 equity would be. The second question, just on the reserving philosophy change. I'm just trying to understand one of your peers has also done a similar thing and described it as a sort of philosophy change throughout the organization. In terms of how they think about -- even how they think about what kind of business they want to write, and how they might price it as well as a pure reserving compliance exercise. I'm just -- maybe it's a question for Christian, how you can really frame it. Is it a cultural change. Other question on CorSo. There's quite a lot of optimism you expressed Andreas about further margin improvement. I guess there's a debate because some large commercial writers are sort of saying, well, commercial margins can be defended here, but not really [indiscernible] because price increases have tailed off a little bit. There's a bit more headwinds on FinPro. And I'm just -- you seem unusually confident that there's still an underlying margin improvement, forget accounting, just talking straight underlying. I'm just curious on that. Final question on Life & Health, do we expect more volatility than under the U.S. GAAP? Because obviously, you're running best estimate. I guess there must be blocks of business where you could end up in an onerous position which would then have to be reflected in the P&L. So just give us a sense as to the sensitivity not so much -- well, partly the CSM, but partly the -- to the extent it becomes onerous then in the P&L to any sort of mortality sort of assumption changes.

So I think the first one is aimed at me on Page 18. There actually was a loss charge. It's incorporated in the -- what you see is this positive $35 billion, the change to economic valuation. There's about $1 billion of losses incorporated in that. It's reasonably equally split between P&C Re, Life & Health Re and actually group items where a bit of the iptiQ charge would drop into that number. Your other question is can you predict what 2023? Again, indicatively, I suggested that we would expect the shareholders' equity to be migrating from the $17 billion you see here to something that's approaching $20 billion. I'd say that should include some choices we might make on the Life & Health business of continued reinforcement of a couple assumptions to be sure we've got a very comfortable and prudent starting point as we go into 2024 and a couple of portfolios, which have been challenging over recent years. But I think that would be the only place where I could imagine positions. What I did show on the other slide on P&C was in 2024, there -- when we do this addition of x percent for the reserving to give us a more comfortable uncertainty reserve on new business. There will be some modest bookings that look onerous, nothing that concerns us.

You're talking about $17 billion or the $19 billion?

Yes. The $17 billion.

So on reserving, so this is not a cultural change. So the way we look at this is, for years, our obsession is or the ideal is that all underwriters have the proper costing that it cost precisely. And obviously, in '14, '15 in casualty, they underestimated, but it was not visible, but they underestimated the ultimate loss because then there was this attack by the hedge funds and the legal system, et cetera. So -- and also through the soft side, there's sometimes a bit of an optimistic bias. And so to close that gap between the a versus z, so the actual versus expected, has been the top priority over the last few years. It's unrelated to the reserving piece, just to make sure, and that's how underwriters get measured. We're going to measure over time, how accurate they're in predicting the correct loss ratio. So that's, if you want, that's not -- that was not a cultural change. It's just good underwriting. That's what we need to have. This is on top. So this is once you have everything coming up at the top level, this is going to be done per line of business, of course, and according to how I actually think it makes sense is to add something on top of this loss ratio. And the rough amount is what we can give you today. And so the idea is also going forward to do the same every year. So this amount you put on top would be similar to your growth as you grow different lines of business, et cetera. But every year, there will be this check whether you're still within the best estimate and only if it's acceptable, you would continue with that. What you would also have or expect if the underwriters are precise and correct is that over time, some of that comes back. So it would start to flow back, of course, not in year 1 because we wouldn't -- want to be sure that's there, but it would start to flow back over time. And so you basically reach a different equilibrium over time. But this is not something we roll out to underwriters. They shouldn't be confused. They have to -- as much as possible, as much as humanly possible, determine the right loss pick.

And maybe more specifically, Andrew, address your onerousness question. I think factually, yes, it's a more volatile system than GAAP because of the onerousness risk. The question is how you manage it. So I think on the balance sheet, first of all, I explained we're very careful in taking this opportunity now to make sure we establish the balance sheet on a robust basis. It's kind of a once in a number of years of opportunity for us as we go through line by line, a very deep review making sure anywhere we're uncertain, we put a bit more on the business to make sure we're confident that the risk of tripping into onerousness is low enough or manageable. And then on the new business, we're very actively monitoring the margins by line of business. So we look at the profile of that by every market unit. And wherever it's below 5% or so, we take action and make sure that the business is lined up properly. So the risk there is low. In aggregate we have very little in force at the moment, and I think the risk across the new business is also relatively low from where we stand.

Just on CorSo, a margin improvement the optimism that I had. So I talk about the overall margin improvement. So what we do is the target liability portfolio approach. So we look at various scenarios, and we ask underwriters, what do you expect to happen with the rates, for instance. And then we've got various scenarios. And quite frankly, underwriters were quite conservative. So the reality was actually not reflecting that conservatism. So we saw actually rate still increasing now also due to the Reinsurance situation. So the pressure from the Reinsurance side was increasing net retentions went up. So your technicality on the underwriting was more tested. So the granular steering of portfolios where you play, where not that worked quite well so for. So I think as long as we stay that discipline, I'm quite confident. Second is, it depends on the line of business. So we always call it the insurance clock. So at what pace is each line of business in the cycle, and the composition of our portfolio seems to be favorable at the moment. We see some lines of businesses like, for instance, FinPro, as we mentioned, where we think we have a negative outlook. So they are starting to actually maybe go into a softer cycle, we see D&O in particular, but we also see other lines of business as sublines business where we're careful. And lastly, it's the expense ratio, yes. So managing expenses is absolutely our mantras in particular, in the areas where you don't have the large complex deals so where you have smaller average premium per policy, there we need to significantly improve internally also. That's something we're working on. So we're measuring it. And we're not only by adding A&H, Accident & Health, reducing the expenses but also within the process management, that's something that's high on our agenda.

Vinit in the back.

Vinit from Mediobanca. So spoiled for choice, but I'll try to pick up the top 3. That's hard work than I thought. Just on the reserving, if I can just ask in another way. And Christian, I appreciate you said there's no schedule here that you're presenting. But I would say that if we go back to, say, COVID period, you're already probably changing some of the reserving fuels and how stable we could see some of the numbers. And so I'm just trying to understand that maybe we are not really in year 0 now of this change in reserve because if we are not in year 0, then maybe we don't have to wait too long for the benefit to come back as well. So I'm just going to try this in this way, but I think it's not year 0 now. So even if you could comment a bit on that, that will be helpful. Second thing is just for Velina and maybe the reserving side again. But you mentioned, Velina, somewhere that your inflation outlook is probably different from the market. And it could suggest that maybe some of the forward curves, which have been used by the liability side guys, in your own view, might actually need to go up. And that could be some upside also for discounting, also for the liability side, but also for you, your $300 million might even be a bit higher. So I'm just looking for -- has there been any deliberate, hey, let's be careful with these numbers? Or is it likely that if your inflation outlook turns out, then some of these numbers would be stronger? And lastly, for Andreas, the Corporate Solutions, thanks for the walk on the combined ratio. But if I start from another place, I'm just curious on that walk, which is the current number being 91%. And you stated on the slide that many years has been 91% combined ratio. How do we get to 93%, I mean, unless there is something we don't know?

Okay. Vinit, I start on reserves. So I think what you probably heard the last 3 years, I mean, this is -- just imagine a large organization going through the soft cycle, having negative surprises. So obviously, there's a reaction by everybody to tighten things to be a little more conservative. But this was all done within the philosophy that we had, the best estimate philosophy. But clearly, I would expect this to be pervasive that everybody is a bit more cautious. The underwriters are more cautious, our clients are a bit more cautious, reserving actions are a bit more cautious. So -- but I wouldn't mix this up with what we try now. This is a bigger step that we take now that this is sort of a proactive will to be at the upper end. We'll lock ourselves in a little bit into a new type of philosophy and which we will have to follow up over the next years. There's no -- there's another one-off. This is something that's going to be a change. But I think it's fair to say that, of course, within -- after the shocks, there was a movement generally in CorSo, et cetera, to be a bit more conservative. But it's, as I said, within the rules we're currently under.

On CorSo...

Velina?

So maybe on your question on inflation, I wouldn't say that our inflation outlook is necessarily out of consensus. So if you look at -- I mean, the interest rate projections of SRI, they're probably slightly higher for next year than what the market is currently pricing in, probably not so high based on what the market was pricing in 30 days ago. So I would not go as far as saying that we're completely out of consensus. We do -- what I was trying to say on inflation is we're not declaring victory on it yet, right? And which means that we believe the Fed will be patient and the ECB will be patient until they see a sustained decline. And they will only see that sustained decline in our view once they see softer labor markets.

On CorSo, the average 91% combined ratio since '21 is partially due also to exceptional reserve releases, and particularly due to COVID in the property line of business. And I think that's an effect that you can see then. If you look into the future, you can definitely see that claims activities are back to normal. That's something we see in all lines of businesses. There was a delay also in casualty. So we see things coming through now, but also in property on the large man-made side. We've seen a slowdown of claims count notifications actually beginning of the year. But as you can expect, towards the end of the year, it's picking up. And then when we do the projections into next year, the plans, bottom-up plans. So there is activity in the market, and that's how we get action to that number. We've got an overweight in property. So then 90%, 93% combined ratio better than 93% is reasonable, still stretched, but there is still volatility in the market and uncertainty also.

Kamran?

It's Kamran Hossain from JPMorgan. Three questions. The first one is just on, I guess, the -- I think considering IFRS 17 and then cash flow, I guess the IFRS 17 benefits pretty dramatic to earnings or definitely positive to earnings. Is there -- how do you think about cash flow in that context, particularly in the light of kind of capital returns, et cetera, maybe not for this year, but in future years? The second question, just to clarify on the reserving side, a little bit similar to Vinit's question. If we assume that the assumptions that you're making right now are correct, should we assume that the cycle back to that may be being returned to the income statement is similar to the length of the liability. So you said it now the duration is 5 years and 5 years' time, we get the release or the unwind of the conservatism. And the third question is just on the life book. On GLP-1, is that -- what's the kind of current view at the moment? Is this positive? Is there a benefit? Or does it -- is this just really kind of -- it doesn't have any impact at all?

Kamran. On the first one, I think your question on cash flow is actually at a macro level, not an individual contractor or business level. So again, things shouldn't change on cash flows. What I can say is we start the transition and a very strong liquidity position. We believe that we will maintain that strong liquidity position going into 2024 and what the modeling that we've done under IFRS has no negative impact on that. We obviously will no longer be reporting after 2023 as year-end and EVM set of numbers. And so when we talk about the capital accretion in the first case, it will be under IFRS and the only other two constraints, which are not constraints, but the places where we think about our one sort of where we stand with rating agencies. I think it's fair to say that we're pretty comfortable with where we stand and the capital benefits coming out of IFRS are being recognized by a number of the rating agencies. So that's strongly positive. And two, on a statutory basis, the lead Swiss carrier is also developing fine. So I don't think you should expect that we've got any imposed problems from IFRS compared to where we've been under U.S. GAAP on a going-forward basis. And again, I'm -- the overall level of the group's capital is very, very strong. The overall liquidity position is strong and our ability to deploy the capital to new risks across our core businesses in an organic fashion is one of the things we're looking to the business is for.

On the reserving side, this is a -- since it's a reserve philosophy change, it has to apply to all lines of business. We cannot leave out some line of business. The exact allocation will be up to the actuaries, of course, to decide. But it's going to be across. So therefore, also, if you want the runoff or finding out whether we needed it, we'll also follow that pattern. So some of it will be faster. Even though we clearly steer not to expect it next year because it will take a bit of time even on the nat cat side to be sure. But it will -- some of it will flow back quicker, some of it lower and some of it over a very long period of time. So I don't think I can give an average. But it's -- yes, probably the -- if you want an average duration, I don't know if it didn't make sense in the whole thing, but it would be something like the average duration of our book of business. And since there's quite a bit of short tail line and then a bit of long tail line, I think you get a -- you would have some of it coming quicker first, and then it will be very long until you're in a complete equilibrium.

Paul?

Yes. GLP-1s, do you mean weight loss stocks? Can I check? Yes. Okay. Yes. Well, this is one of the factors we take into account amongst a wide basket of things when we're looking at our mortality improvement assumptions. We've released some thought leadership on the topic and said, we firmly believe the right path is not to look at drugs [ just of it ] for weight management, but rather lifestyle changes. There is potential upside. So it's on our chart of potential sources of mortality improvements going forward. But I think it's way too early. And also, if you look at the cost of these drugs at the moment, they're not really accessible to the general population. For us to see the benefit of them in our Life & Health portfolio, it needs to be accessible to the general population. So I think that puts it in context. Good question. Thanks.

Faizan?

Faizan Lakhani from HSBC. My first question is on the work that's been done on the Life & Health balance sheet. It sounds like you've gone out and looked at the assumptions, but when I look at the EVM and your IFRS 17 balance sheet number, they're pretty similar. So how do I judge the fact that you've added prudence there? And I guess, the overall sort of theme or question is how to ensure that you are confident you can deliver for next year? Or where are there pockets of prudence across P&C and Life? Second question is just to understand with the reserving, how should I think about split between P&C Re and CorSo in terms of the philosophy of this uplift, is it going to be allocated to lines of business where there is still some uncertainty? Or will it sit on top and sort of like management [ IBR ] effectively? And third question is, in terms of capital returns, when I think about it, interest rates are going to be less impactful on the equity, as you mentioned, you've been able to sort of cap your nat cat exposure using third-party capital, your SST sits well above 300% now. So what is the missing piece for us to go you can return capital from here. What do I need to see for that to sort of happen on the trigger point?

On the EVM versus IFRS and the similarity in the net result, which is an excellent question, underneath the surface, there's actually quite a lot of change. So I mentioned earlier on the strengthening of the period for reserves, but there's 2 or 3 other blocks, particularly in the U.K., Canada and some in Asia, where we've actually been able to release some of the locked-in GAAP margins. So there's some reasonably chunky movements underneath the surface net result, just so happens, comes out the same. In terms of how do we ensure prudence, there's no guarantees, of course, but we've been through a very thorough process now over the course of this year and reconstructing our -- this balance sheet and building it. And that's not just in terms of the mechanics, but the actuarial work that goes in behind that. I think you have to think in our mindset, this is our chance to set up this balance sheet for success so that we can be confident we're going to deliver the income over time. That's what we want to do. So me and my management team are very focused on thinking about where are the risks? Where do we need to strengthen, et cetera. And I think the two things I highlighted mortality improvements today, morbidity deterioration would be the other one. We spend a lot of time on that, and we're reasonably confident we've got to a point that will be quite stable.

There was a broader question on sort of overall confidence of targets. I think it's fair to assume that we've gone through as a management team the entire set of targets that we put out here, not just the net income but the segmental targets, try to get a parity, which means that all of them have a little bit of stretch into them. But I would say, as of what I see today, none of them are at a particularly high risk. We want everybody to be stretched. We want everyone to feel, they need to absolutely positively perform in 2024 to be able to deliver this. But we've put out targets that we think are achievable in the round and our -- the nature of our business may come and bother 1 or 2 of them during the course of the year. But for now, I'd say we're confident we can achieve them all.

Yes. On the reserving, I'm not sure I can add much to what I said before. So this is going to be a philosophy change for both, of course. And it's going to be added as IBNR because there's no concrete claim behind it. But we're not providing any split, but it's going to be the same philosophy, per line of business everywhere day 1. I don't know if you have any...

No, I think that's right. And I think to Christian's earlier point, this is new on top of what we've been doing. I think when you look at Page 61 of the CorSo results, you won't be surprised the CorSo may have been a little closer to some of this than what we've seen in P&C Re, but generally speaking, it will apply across the board, all lines as a top off to what we expect to be correctly costed business in CorSo and P&C Re -- sorry, capital returns. What else do we need to see was, I think, your question. I'd observe a couple of thoughts. One is, yes, the SST ratio is high. We think macroeconomic conditions have elevated it at the moment. And so as my Chief Risk Officer will often remind me, that number has the wind at its back. And it's one of the reasons why we're very comfortable with it being well above the upper end of this sort of long-term target of 200% to 250%. After 5 years of stable interest rates, you'll see a natural revaluation that will play. And if the spreads on investment-grade credit return to something more normal than where they are today, you'll also see some sensitivity adjustments there. Secondly, in addition to the macroeconomic conditions being a little unsettled and in Velina's observations on inflation is not dead yet. The global geopolitical situation remains a challenging for all of us. It's the moment we're having more capital, not less capital is in our interest as a global reinsurer, responsible for tail risks in the insurance industry. And so I think the starting point is that capital, we would like to maintain at these levels or around these levels in the near term. Over time, we might be more comfortable if everything settles down and we get to a much more specific situation in financial markets also towards the 250%, but that's not in the next quarters at all. The second thing I'd say is we've not been able to increase that dividend for 3 years running. Give us a chance to get that part right. We've hit our targets for the first time or we have -- we're on track to hit our targets. I don't want to predict the year-end, but we're on track to hit our targets for the first time, and I think 5 years. And so let's deliver, let's adjust to what we say our stated capital goals are, and let's go into what is going to be a completely new regime for us. And I can't overstate the complexity of us moving from U.S. GAAP to IFRS 17 is a bigger step than my colleagues in the industry that have gone from one version of IFRS to a new different, but still version of IFRS. And so we'll lock this down. We hit these targets, and we'll be able to have a different conversation a year in a couple of months from now about where capital could and should be. Ultimately, the Board is in charge.

Roland?

Roland Pfänder from ODDO BHF. Two questions from my side. First, Life & Health, I would like to discuss a little bit your diversification you mentioned that you try to move mortality more into Europe or outside U.S., let's put it like this. But if I see longevity in financial solutions, is there a chance that these two business units are growing more meaningfully and diversify the rest a little bit better and how long would that take? Second question about your P&C specialty business. You were quite positive on recent growth and profitability. There are other players in the market. You are a little bit more risk off. So could you maybe comment on the status of the industry and why you are still very positive on the further development?

So in terms of diversification of the Life & Health business, yes, so we're looking to expand our mortality book more rapidly outside of the U.S. It's a very mature and attractive market in the U.S., but it's better for us in aggregate, if we have mortality around the world so that we can get a more predictable outcome overall. That's the theory. There's a good source of growth in Asia, as I mentioned as well. We just need to position ourselves, we're in the right spots at the moment with our clients to get access to that. We don't, of course, only think about mortality as the sort of diversification. The other main one is health, right? And in terms of diversified sources of growth, health is a very important part of that site alongside mortality. And both of them are now at a scale where they're providing that for us. Longevity and FinSol, Financial Solutions are somewhere behind. Longevity, I would love it if it was bigger, it does provide a decent offset to mortality. As you know, the markets are very concentrated. So it's mainly the U.K., a little bit in the Netherlands, and there may be some opening up of pensions risk in the U.S. that we're watching very closely. But there's not quite the scale that we can get access to, to fully offset mortality. We take the philosophy that we only take that risk on where we can also make a margin. So we're not doing it for diversification purposes in and of itself. So we want to get a good return on capital deployed. And Financial Solutions, I think I would just position that at the moment as a diversified source of earnings that we will grow over the coming years. It will be a meaningful contributor, but we want to be a bit careful and take the right steps within our controlled risk appetite to do the right thing there. So I think that's one that we can talk about more over time.

So in the specialty business here, the reason why we like it, it's growing, it's profitable, and it's well diversified. So if we look a little bit below it, so we've got engineering, marine, aviation, agro, credit and surety and cyber, and they're not exactly all the same. So for example, we do like the engineering business. We like what's happening in the marine and in the aviation space. But for example, on cyber, we continue to be cautious and we're not looking to grow our market share there. So it's a mix.

Phil in the back.

Phil Ross, Exane BNP Paribas. First question on Corporate Solutions. You mentioned the noncyclical part of the portfolio. Slide 62. What does the build-out of the Accident & Health and Credit & Surety look like there that you suggested you will focus on? And maybe what sort of share would you see that noncyclical portfolio growing to from the 27% we see on the slide? If you can comment on that, please. Second question on Life & Health on Slide 77. And maybe this overlaps a little bit with the previous question, but you highlight the growing protection gap over the last decade. Can you expand on where you're seeing increased demand? Are there any particular trends? And then additionally, can you maybe give us a teaser or an example of where you see opportunities for new products as well that you mentioned on the page?

Just on CorSo, the target liability portfolio approach. A&H, we have to say we're close to, A&H is a big space. but we're operating in the employees stop loss business in the U.S. And we can expect maybe some growth there and building on that basically not going into areas where we don't have any appetite. So as far as the sharers concerned, you could definitely see this staying double digit going into the 20 percentages on Credit & Surety. We have already a good platform here. And there, we're quite inquisitive around specific areas within the Credit & Surety. You know that we're not in trade credits really, but we have very attractive areas in the surety space and bank trade infrastructure space. So here, I would expect this to be double digit, and see how the opportunities look like. The organic plans that we have for the next 3 years show them growing healthy. But obviously, we're watching the situation watching cycles and adjust as needed, like we did in FinPro, for instance.

So on the questions on Life & Health, first of all, on the protection gap, I think the way I'd encourage you to think about that is that it's going to grow in line with economic growth. So where there's economic growth the need for insurance grows and often the pace of economic growth that exceeds the insurance penetration growth. So that's where the opportunity comes in. And if you look at the outlook for economic growth around the world, the combination of that and the growing protection gap actually provides opportunity in many places. I think the one that's going to be a little bit slower going forward that we -- our expectations on have come back a bit is China just in the light of their economic slowdown. So as you know, we have a good presence there and a good proposition and a good team. But our plan for that country in particular is a little bit lower, still growing. But offsetting that, very interestingly, the Southeast Asia region is now growing extremely well. We're seeing that in a number of countries in that region. So we're well positioned to take advantage of that. In terms of a couple of interesting new products, we've done one in the FinSol space and maybe one more traditional one. One thing we've been able to do in the financial solutions space is trade duration where we are on one side of the duration asset liability and the client is on the other side. So we can use Reinsurance structures to end up in a win-win where there's a better match for duration overall, a really nice idea that's easy -- relatively easy to do. And on the more traditional space, sustainability is very important for us and where it becomes very relevant is making sure people get access to insurance -- otherwise get access and our underwriting approach which plays a huge role in that. So many years ago, we were one of the first to give access to people for life insurance who have HIV. And in the last year or 2, we then expanded that to provide health products to people with HIV. So if it's well managed and well rated, that's possible. So I think it's just a good example of saying there's a sector of society that's not getting access. And now we help provide that access and we continue to look to ways to grow that.

Two questions, please. Just one thing on the top-down approach to a more conservative reserving philosophy, the long-term nature of many of the client relationships. What's the sort of mechanism that is going to exist internally to make sure that ultimately, you actually get the pricing right on these things? And because isn't there a danger that if you take reserving further away from the actual pricing. And secondly, sort of a rather technical question. In the choice of the net combined ratio for the P&C side, can you just explain how you think about the accounting for the alternative capital and any retrocession? Do you treat that as part of a sort of retrocession insurance result? Or is that actually something that comes through the investment line as is the case with a number of your competitors.

I'll try the first one because this is actually nothing to do with the new reserving philosophy or it shouldn't because it's not going to be transparent to the underwriters. The art, how you pick the right loss pick is, of course, a hugely challenging depending on line of business. If you're in the nat cat field, you try to get all the geo coded, the exposure of people and you have pricing tools and you get to certain distribution and therefore, an expected loss. In other lines of business is more due to general trends, inflations. You look at the past claims of a client. And this is underwriting how it's been done over the last decades and nothing should change that. It's just a constant -- constantly trying to get better and better at it. And looking more forward and bringing in certain factors, et cetera. But the reserving philosophy should not play into that. It's not going to be transparent to the underwriters. The underwriters are going to say, I think this is a 60% loss ratio. That's how they're going to see it in their system. It's just that at the end, we, at the group level, will add these fixed amounts to every line of business, which means that if the line of business develops as the underwriter had expected, this will come back out. But as we could see in the past, this has not always been the case in particular when they were unknown unknowns, things that people haven't thought about. And this reserving philosophy just helps to mitigate some of these negative developments should something have been forgotten at the point of costing.

And your second question, the -- as it is today, the economic results of ACP flow back into underlying businesses where they're associated with we've got parts that are in the P&C, parts of it in Life & Health. The specific geographies of where it shows up, depends a little bit on the nature of what happened. So part of the income that comes from the cat bond portfolio that we operate effectively as a broker-dealer. It would show up in the investment result rather than in the results of the P&C Reinsurance per se, on the technical side, the parts of the clear risk hedging on the P&C side would make their way into a net combined ratio.

Maybe I'll see if someone else has a question in the room, and then I first take it to the phone line. On Chorus Call, if we could have James, are you there?

Can you hear me okay?

Yes.

Perfect. So I have a few questions, please. Coming back to the reserving situation. Just the underwriting year development you're showing for U.S. liability. Just very interested to see adverse development on the 2020 to '22 years because pricing has increased quite significantly. You pulled back on the large corporate business. So keen to understand the drivers there. And I guess a similar question relating to 2014, '15 because I would have expected that to largely have season fully at this stage. Returning to the question you had earlier on about the percentile. I can hear you that you're leading up towards the higher end of the percentile range of 60% to 80%. I think when you last commented on U.S. liability, you said U.S. liability was around the 50th percentile. Can you just confirm if that has also moved up towards the higher end of that range, please? Additional question, some more broadly. I think just taking a step back on the casualty reserve additions overall. Obviously we have a significant adverse development precautionary, call it, what we want in 2023. Have you drawn a line under this? Will we actually expect additional precaution to come potentially in Q4 and into 2024. It'd be helpful to have a comment on that. Next question just help me understand...

Sorry. James. If I can stop you just there, and we handle these 3. Sorry. Thank you.

That's one, isn't it?

A nice try. So I think you are speaking to Page 56 [Audio Gap]. You're right, the right side of this to the most recent years might surprise some people given the price increases that have occurred in the underlying P&C market as well as what Urs has said is our reduction of the large corporate risk. What I can say is, you should expect that the IBNRs have had a distribution across years, and we've not limited ourselves to everything, which is the true problematic years of '14 through '19. And so some of it's probably come over the top. I don't think we've got any experience that says the picks that have been in place are deficient. But I think what we're saying and what you heard her say is this entire line of business on U.S. liability is problematic, it's not going to get better and better safe than sorry. And so if we added a little bit to the outyears, so be it. If we don't need it, that will be a lovely reality. But for the moment, I think this is a distribution which made sense to us. The same thing in 2014 or '15, yes, these years have seasoned. If you look on the left side of this, what you see is most of what we find there are paid losses or even in case reserves, but we continue to see some places where a long drawn-out litigation has a need for being sure that we've got adequate reserves put in place, and that's what we've done in terms of making additions along the way. And so if we added a little bit to these out years, so be it. If we don't need it, that will be a lovely reality. But for the moment, I think this is a distribution which made sense to us. The same thing in 2014 or '15, yes, these years have seasoned. If you look on the left side of this, what you see is most of what we find there are paid losses orders, but we continue to see some places where a long drawn out litigation has a need for being sure that we've got adequate reserves put in place, and that's what we've done in terms of making additions along the way. So I'm -- I don't see that we are we've got any years which have not been addressed to a good level at this point of time. Your question of where we are in the ranges, I think -- what I did say is for the entire book, we're in the upper end of the range when we finish the year, we'll have the data in hand to be able to be a little more specific about line of business or other positions. So I wouldn't go so far to say any line of business is particularly over reserved at 82% or sitting at 51%. What I would say is we're very comfortable that these additions in addition to end of 9 months, in addition to the other reserving actions have been taken in P&C Re in 2019, '20, '21, '22 put us in a pretty comfortable place. And we'll -- can I guarantee nothing will be added in 2024. No, I would never do that as a CFO, but I mentioned before that at least what we see today, there's nothing that appears unmanageable in the context of the achievement of the goals that we said we have in the new targets for 2024.

James, do you want to go with the second question?

If that's okay, I'll try and be a lot quicker at this time.It's more on the combined ratio for itch in P&C Re that I'm keen to understand. So the target for -- the target was below 95% for '23, and it's now going to below 87%. [indiscernible] a 5-point indication for about 2 points. So if I fast that through, I get kind of below -- well get 85.5%, and you're kind of saying below 87% and the 85.5% that I'm showing here doesn't include any margin kind of benefit. So I guess my question really is, what is that below 95% in '24 on the kind of old basis, if you like, not on IFRS 17.

Sure, James. And yes, I probably wasn't clear when I explained the slide. Better than 95% is what we've got in place for 2023. But Christian's observation that we're going to be adding an uncertainty reserve on top of that means you can do it at the beginning or at the end, but some place, you need to add this loading into the target. And so you're exactly right. If you did the math, as we've laid it out here, you get to a target that's materially below 87. When you add back in $0.5 billion, which again is a mix of CorSo and P&C Re, but you should assume that for P&C on a stand-alone basis, it's the vast majority of that you should get yourself back into a number, which says [ 87 ] is not a cape walk Again, it's achievable. We expect to achieve it. But that's the missing link compared to the walk that we've -- when you started only at 95%.

Thanks James. Will, are you there?

[Audio Gap] and it's deciding currently improving. It's likely important so we can understand when it rolls in that. I guess is it -- on a broad range, is it might be closer to quarter or half as of the [indiscernible] that would be released by year 3 of development. Maybe that's a good place to start, at least as a topic. The next one is whether you're able to say what P&C revenue growth is assumed for '24 in the net income guidance.

Yes. So Will, I understand it's frustrating. We're not trying to frustrate everyone out there, but I think as we introduce this uncertainty loading, it's probably premature to give specificity on to a potential release pattern associated with the loading. I think as Christian said, we will be surprised if there's not redundancies that develop as a result of this. We think our actuaries in part because the actions taken over recent years and certainly recent quarters have got a costing combined ratio that is -- should be adequate. And so if there's uncertainty reserve redundancies and ultimately releases. But we're not at a moment in time we're going to be speaking explicitly about those year-end 2024, I hope to be able to say either this uncertainty was needed because, in fact, the world became uglier than we thought or start to see some of the short-term lines where you've got a positive impact. And I apologize, what was the second one for me, too?

On revenue growth for next year.

On revenue growth growth from P&C Re.

Yes, I can address this. So we're actually not guiding to a specific top line target growth. As you might have heard us say in the past, the correlation between the bottom line profitability and the top line in our business is quite low. So we're focused on the profitability, as expressed by a better than 87% combined ratio. Freya, are you there?

Sorry to come back on to reserving again and move to more conservative best estimate -- how do you or your actuaries assess this or new business going forward? And how do you reconcile it with an overall view of reserve strength on the historic years why wouldn't you want to move your existing reserves to a more conservative range of best estimate as well? Or as you allude to, are you happy to let this equal Librium arrive naturally over the next few years? Secondly, is the cautiousness on casualty being driven by the deterioration you're seeing in your historic underwriting years or the inadequacy of pricing in the primary market, given that loss picks do seem to be improving in recent years, does this not mean liabilities a lot more profitable now? Haven't primary rate increase in an awful payback? Or do you simply not trust these recent loss picks? And thirdly, just quickly on social inflation. Do these trends remain limited to the U.S. given that there are very similar sentiment shift we're seeing in the U.K. and across Europe and also increase in litigation [Audio Gap].

Let me give another try on reserve. Look, I think, Freya, your question is absolutely legitimate. We think -- and you've seen us squirm a little bit in recent quarters that we actually have increased materially the reserving positions in many lines of business that needed to be made. And the good news is we've actually had in our portfolio, redundancies that we were able to release to fund most of that. And so trajectory from what we disclosed in midyear plus what we've showed for an overall loss ratio of U.S. Casualty would, I think, reasonably bring an outside analyst to a guest that you've probably added $1 billion to U.S. liability in 9 months, and that wouldn't be something we would argue with. But prior year development has only been minus 180 for P&C Re for the full 9 months. And so we've had some offsets but we've materially increased the in-force reserves. And so what we're doing with the uncertainty, the margins that we're adding on top of a going-forward basis is just being sure that we're not facing a moment 3 years from now, where we have to do the same sort of catch-up that we've actually executed against on the in-force. And so that's the position. And if, in fact, our costing has been improved, and we've learned some lessons along the way and we're appropriately paranoid about U.S. liability. As I think you've heard or suggest that we are. Then this uncertainty reserve will not necessarily be needed or at least not be needed for all lines of business and then what we manage with we'll see. On case, maybe I'll turn the doors, but just to reiterate. We think there are people in the U.S. market who are able to make money on the primary side with casualty by being very selective in the risks they take and the positions, which they've assumed in terms of relations with their primary clients. We believe that there's an important casualty business around the world that can be profitable partly because of the price increases we've seen over the last 3 years in the market, partly because of our willingness to work with those better underwriters and that's what our objective will be on a going-forward basis, but as over said, with caution. I also think it's important to understand that even if prices for large corporate risks have increased dramatically. We're not absolutely convinced in that space that you're to a point where the risk is appropriately rewarded, and that's why we're down 70% in our exposures. And so we will not go back into this market tomorrow just because prices have managed to increase by whatever percentage points they've increased. I think we're or has thought this through not just within the P&C routine, but with everybody in the group, and we will be cautious as we go forward. But maybe I want to add also whether it's in the U.S. or other places.

Yes, I'll address the last question that you have of. Are there elements of social inflation outside of the U.S. And Social inflation is an element of our business, and it can represent itself through social sentiment, there can be political pressures, regulatory changes. And so that's part of the overall business. What is very distinct about the U.S. liability space is the U.S. legal system and of litigation activity here. And we don't see this at this level in other parts of the world. But of course, there are certain selected instances where there could be some elements of this as well.

Great. We'll take one last question or 2 from Darius.

I'm sorry to come back to the reserves and I had a question combined ratio. So I'll start with the combined ratio. So if I think about the usual cycle management done by insurers companies aim to build reserves in the hard cycle can release during the soft part of the cycle. Now reinsurance rates are already stabilizing and could begin to deteriorate in the medium term. since you will be strengthening rather than releasing from the reserves during this time, are you confident that you'll be able to maintain your 2024 combined ratio target in the medium term? That's the first question. And on the reserves -- so you've been strengthening U.S. liability books for a while. And I think you said you added about $1 billion in 9 months this year. Since you've now committed the reserves ranking more broadly over $500 million in 2024, that it will continue. Will you provide disclosure to see how those additional buffers are developing in order for us to be confident it's not something that will be eaten by the loss development in lines such as U.S. liability.

Shall I try?

[indiscernible] you a break on the [Audio Gap] will do next year. And I think there's a series of you who have done analysis based on that and came to conclusions I think, pretty close to what our own actuaries come to, and that's not random. That's because of the same information. And none of us has the crystal ball where we see future losses, but what we see is the trends that we had. And I think the challenge this year is really that you have these deteriorations of this year '14 to '18 over the last few years. And in the midst of that, we had COVID. And in COVID, the courts closed. And so there was no activity for a while and they reopened and they did criminal cases first. And then came back to these cases. So from an actual perspective, this is really challenging. You have a discontinuity. It's really hard to judge. You don't know how much of the claims that came now are if there's any compressed or any element of -- that is much higher than the new norm, et cetera. So it's -- and nothing -- we know none of us has information that will help us navigate that. We just have to make guesses. And so I would just say we have our local reserving teams. We have our reserving control team that's directly reporting to the Chief Risk Officer. We have actual team. And then we have , you guys out there already looking at the same data and coming to similar conclusions. And as none of us can read the future. But we always try. And I think everything I've heard from you from KPMG from everybody is that our reserves are currently in the best estimate range. But there's unfortunately no guarantee any of us can give about the future.

And in terms of specificity, we will publish again at the end of March with our annual report [Audio Gap] It will be notable is how much some of those triangles have moved year-on-year. And I would argue that in the context of industry positioning, we will be robust is my expectation.

Thank you, Darius. Thank you to all of you for asking questions for joining the Investor Day. Thank you for coming here. For those of you here in the room. With that, we wish you a nice weekend. Thanks again.