Münchener Rückversicherungs-Gesellschaft AG in München

Good day and welcome to the Munich Re Q3 Results 2020 conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Becker-Hussang. Please go ahead.

Thank you, Saskia. Good morning, everyone. Thanks for joining us to Munich Re's Q3 2020 earnings call. I have the pleasure to be here in the room with Christoph Jureka, our CFO. and I will directly hand it over to him for his introductory remarks, and then we can go into Q&A as always. Christoph, please.

Thank you, Christian, and good morning from my side. The third quarter's financial development once again reflects good underlying performance in these very challenging times. As we have pre-announced already, further significant COVID-19 related losses, as well as other major losses that were above expectations, left their mark on our P&L. Our Q3 result amounts to 199 million euros, which we think is quite remarkable given the additional 800 million in COVID-19 related claims this quarter. And after nine months, we achieved a net income of around 1 billion, including accumulated COVID-19 claims of around 2.3 billion euros. Of these, with around 2.1 billion, P&C Reinsurance accounts for the largest share. So far, the insurance of large events is the most affected area, and we still expect this to be the case once the pandemic has run its course. Beyond these losses, we have set up material provisions spread across other lines of business. These include in decreasing order of magnitude property, including BI, casualty, and credit. Our reserves, which have been saved in a consistently prudent way like we always do at Munigree, they cover all claims incurred until the end of September. And as mentioned earlier already, reserving for claims not incurred by then, it's not possible according to our accounting standards. So far, the claims actually paid or reported amount to €300 million, and the large remainder of €1.8 billion is then IPNR. In life and health reinsurance, COVID-19-related claims Development in Q3 continued at about the same pace as what we saw in the previous quarter already. So the losses year-to-date amount to around 200 million. S&Q2 COVID-19-related claims were dominated by U.S. mortality. Claims reported from other regions and other lines of business have been very low. Looking at Ergo, COVID-19 related claims at Ergo continued to be insignificant also in Q3 from a group perspective. In P&C Germany, we observed minor additional claims due to business closures and event cancellations. Travel insurance was affected by COVID-19 clearly, but on the health side, we did not see an increased claims activity. Thank you. Now, let's move away from COVID-19 and let me just give you a few comments only on developments aside from COVID-19. As usual, starting with the investment results. The ROI amounts to 2.7% for the quarter and 2.8% for the nine months, and thus supporting our guidance of approximately 3% for the year. Interestingly, in Q3, we saw a difference in the investment return among our fields of business. In reinsurance, the ROI of 3.7% was higher than at Ergo, benefiting from disposal gains from, on the one hand, portfolio turnover, but also from the disposal of some strategic equity investments. At Ergo, by contrast, the ROI was comparatively lower, 2.1%. as we did not have any ZZR financing this quarter and therefore realized a very small amount of unrealized gains only. And there was a negative contribution from equity impairments as well as from derivatives. The regular income on group level declined to 2.4% in Q3, given a lower dividend income compared to the previous quarter, a weaker U.S. dollar and also, of course, the lower interest rates. Reinvestment yield of 1.3%. It was also affected, of course, by the low interest rate, but maybe more importantly, also affected by the high volume or higher portion of short-term investments. Now, in life and health reinsurance, the technical result, including fee income, was €56 million, and this is at a similar level than the last quarter, and again falls short of the pro rata full year ambition. This is almost exclusively owing to the impact of COVID-19. And in North America, we saw some excess mortality claims on top of that in the aggregate. And we also saw some impact from lower interest rates. All of that was largely compensated by strong results in Europe and Asia and also by a better than expected experience in Australia. Organic business growth continues to be healthy across all geographies. In P&T reinsurance, our combined ratio stands at 112.2 for Q3. In addition to the already mentioned COVID-19 related claims, the explosion in Beirut contributed to the high man-made loss ratio of 18.4%. In contrast, the Nutcat loss ratio of 8.3% turned out to be only slightly above or largely in line with the expectations, despite an accumulation of large losses centered in the U.S., in particular several hurricanes, thunderstorms, as well as the wildfires. Our underlying performance remains sound, which I think is very pleasing, including the reserve release of four percentage points, the normalized comment ratio amounted to 97%, which is fully in line with our ambition. In primary insurance, Ergo once again posted a strong net result of €136 million in Q3, and all three segments contributed to this pleasing performance. In German life and health, The net result amounted to 31 million, and in contrast to Q2, the Q3 technical result benefited from the inter-year volatility driven by COVID-19-induced capital market effects. In German P&C, the segment delivered sound earnings of 48 million, and here the combined ratio was exceptionally good, driven by the strong premium growth and also benign nut-cut activity. The combined ratio in the first nine months is fully in line with our full-year guidance of 92%. In the international ergo business, we also posted strong results of 57 million euros, driven by an ongoing sound operating performance. The very pleasing combined ratio benefited from the reduced claims and also from lower large losses in P&C, and then in health from seasonal effects, rate increases, and the favorable claims development. Combined ratio in the first nine months fully supports our full year guidance of 94%. The group's economic position remains sound. Solvency II ratio increased to 216%, still being at the upper end of our optimal range. The eligible only funds now benefited also from the issue of the green bond, which accounted for seven percentage points, while the economic earnings came in below our expectations, of course, due to the COVID-19 losses. The SCR remains stable. Now, regarding the outlook for the remainder of the year, we kept our guidance unchanged for the investment return, which has proved quite resilient, and also for the ergo financials, despite an environment which continues to be very challenging, also for ergo and also for primary insurance in general, I can say. given all the uncertainties we have around the capital market volatility and the second COVID-19 wave running across Europe right now. As the uncertainties are even higher for reinsurance, we still refrain from providing a new net result target. Despite all the additional insight we have at this point in time and also the experience gained so far, it's still difficult to predict the COVID-19 claims for the remainder of the year and beyond. there's a very wide range of possible paths that the pandemic can still take. Assuming normalized large losses, Munich Re would have been very well underway to achieve its 2.8 billion net income target. Over the last few years, we've accelerated growth and we have further strengthened the earnings power of our group. And this together provides a very good basis going forward for the consistent execution of our strategy and new financial targets which we will communicate at our investor day in December. With that, I'm looking forward to answering your questions and now hand back to questions.

Thank you, Christoph. We can then go right into Q&A. And as always, I would like to ask you to limit the number of your questions to a maximum of two per person. Please, Saskia, go ahead.

Thank you. Ladies and gentlemen, if you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off for your signal to reach our equipment. Once again, that is star one for your questions today. Our first question today comes from Emmanuel Muzio from Morgan Stanley. Please go ahead.

Good morning, and thanks for taking my question. I have two questions. So the first one, could you please tell us what is your outlook on rates and how this might impact your growth prospects in 2021? And maybe in the same context, could you please give us some elements about your view on buybacks and dividends? And secondly, second question, in your press release in October, when you anticipated the COVID-19 losses of 800 million for the quarter, you referred to an cancellation of the line of life. Could you please give us your view on casualty post-COVID-19? What do you expect in terms of claims and how comfortable are you with current loss estimates in casualty?

Thank you. Emmanuel, thank you. First of all, outlook on rates. I think what I can say is that the environment continues to be very constructive for a number of reasons. including the elevated cut activity over the recent years, including also COVID-19 claims, including alternative capital behaving differently than maybe some years ago, including also reserving topics, casualty developments in the U.S. So there's a number of reasons which makes us think that the environment continues to be very constructive. And in that sense, we are looking pretty optimistic towards the renewal at year end. Now, can I give you a number or something? No, I can't at this point in time. It's too early. And then we'll talk about that, obviously, then in February once the renewal came in. But as I said, the environment seems to be pretty constructive. On the buyback side, dividend side, that's something we generally decide, as you know, in January anyway, only once the year end has been reached. You know our capital management strategy, which is basically that the dividend is something really very important to us. We did not decrease the dividend for the last 50 years. The whole organization is very proud of that, so that's something which is extremely important to us. So we are going to fight with everything we have for that. On the buyback side, that always has been meant as a very flexible tool, and that's the way how we look at it anyway. Casualty. Yeah, I think you were referring to COVID-19 and casualty, and there we have some claims. We have set up some reserves for that, but looking at other lines of business, I would continue to say that casualty is not the most heavily affected line in that area.

Okay, thank you.

Thank you. We now move on to our next question from Vikram Gandhi from Societe Generale. Please go ahead.

It's Vikram from Societe, and thank you for taking my questions. First is really on the quantification of exposures and claims. I remember at the first staff results presentation, the group had flagged that contingency claims was the biggest risk, and we see that coming through in the third-bottom numbers. However, I think the market will... some sort of quantification of the potential risk exposures going forward, since it's still a source of potential future claims. The other quantification that I was looking for was a break of $2.1 billion figure, where you'd have a reasonably good picture of the loss drivers. And the second question is more of a clarification. I've read in the press articles, several of them, saying Munich Re is going to stop offering pandemic coverage However, I'm not sure I understand whether that relates to the pandemic coverage for BI risks or for the event cancellations or both. So it would be to have that confirmation, please. Thank you.

Yeah, thank you, Vikram. Yeah, first of all, contingency. How do we look at that? Obviously, we have an exposure which has been underwritten in the last couple of years. Most of the policies are one-year policies, but there is exposure beyond that with some multi-year contracts, which we also have. So therefore, it's an exposure which will also affect 2021. Now, the way we look at it when we reserve for claims, as soon as we are aware of a claim, we reserve for it. So this means that either an event has happened already until Q3, then obviously we have to set up a reserve or even wait. pay out the claim already, although if you look at our numbers, paid out pretty limited so far. But also if we are aware of a future event being canceled, then of course we set up a reserve already in MQ3. Or in the future, so if MQ4 would be aware of an event next year to be canceled, we would set up the reserve in MQ4, right? So that's the way we do it. But as long as we do not have any indication if a future event will happen or not, then we have no grounds in setting up a reserve. But as soon as there's an indication that the event is not happening, we are reserving for that. And that's the way our numbers are being derived. And I think... By looking at these explanations, you'll probably understand why there was another increase of reserves now in Q3 for contingency, because obviously there we became aware of events we weren't aware of before, events to be canceled, postponed, or whatever happened to these events. So that's the way we look at it. Exclusion of pandemic, a second question, pretty much across all lines of business.

If I can just come back on the first point, I appreciate what you say in terms of the approach towards reserving, but how do we get a sense of the scale of exposure that's there for the potential future claims is really my question.

First of all, as I said, there are some multi-year contracts available. But also many of the majority is one-year contracts. So the exposure will decrease over time. That's something where I can give you assurance already. But as I said also, it's not gone in 2021. It will still be there to some extent at least. The difficulty in measuring the exposures in these lines of business always is that it's not one or zero if you have a claim or not. But there are many in-betweens, depending if really an event is giving notice early on, then the claim is different than if you really get a notification of a cancellation very late. a postponement is different than something being cancelled right away and so it's not about the exposure but really the question is what really the impact or the actual claim is and That's a lot of gray areas between the zero and the one. That's what makes it a little bit more difficult to assess. So in that sense, I can only tell you it will be shrinking over time, the exposure. But as long as there is a second wave or potential third wave, we will continue to incur claims.

Okay. And the breakdown of 2.1 billion figure for the nine months?

Well, as I mentioned already in the beginning, I cannot give you detailed figures, but the biggest number is contingency. The second biggest is property, which is BI. And then other lines are smaller. Okay.

Thank you.

Thank you. Thank you. Kamran Hussain from RBC has our next question. Please go ahead.

Hi. Morning. The first question is just on, I guess, total COVID reserves. I guess you're kind of 85% IBNR and P&T. At this stage, is that kind of a relatively, are you surprised about, you know, kind of how few case reserves or how many clients have kind of advised you of losses at this stage? Or is that normal? I'm just trying to work out if we've got normal Munich Re conservatism, you know, kind of plus 4% reserve release on top of that, or you've got Munich Re plus plus, given this huge range of uncertainty. And then the second question, coming back to kind of Vikram's point on quantifying some of the losses, I'm sure you have worked this number out, but if you assume that all events are cancelled for this year, for 2020, that have not already been counted, what does the number look like there? Is it smaller than Q3 or not? Thank you.

Yeah, your first question with the 85% IBNR, surprised or normal? I think that's a very subjective question, so I can only give you my personal thought, and I cannot guarantee that there's not other people having other expectations and would be surprised by other things than I am. But the way I personally look at it, I would have maybe expected some more notifications already coming in now after three quarters. So in that sense, yeah, I'm a little bit surprised. If you look at the business, I mean, you know, in this 85% IV&R, we cover both primary as well as reinsurance because you know that out of the second reinsurance, we're also running primary business. And especially on the reinsurance part of the business, I would have expected more notifications to come in already. Primary, we are in closer contact with our clients anyway. But on the reinsurance side, so we talk to the primary insurers. I probably would have expected some more information or some more notifications already at this point in time. The second question was the exposure until year end. I can only give you a structural answer. And the structural answer is that for this year, as I said, we reserved for all the events we are aware of already that they will be canceled this year. So structurally, that should cover a lot of events happening in Q4 already. On the other hand, in Q4, we'll have to make up our minds and look at the information we will be getting about events next year. And this might then also increase the necessity to set up reserves in Q4. So that's a twofold answer to your question. For this single year, I would expect less in the fourth quarter, but then there will be the need to set up reserves for 2021. and there I would expect also a quite significant number.

Yeah, that's great. Thanks very much.

Thank you. We now move on to Andrew Ritchie from Autonomous Research for our next question. Please go ahead.

Oh, hi there. If I could change topics, Christoph, and take you back to your old job at Ergo. Could you just give us perspective on any impacts to earnings power and, in particular, any sort of additional impact this year from increased CDR contributions at Ergo's life and health business and whether that will, I guess, be a positive or a negative. It could be a positive because of higher gains to be realized. But I just would like an updated perspective, given the low-rate environment on Ergo life and health, if possible. And the second question, do you have any sense as to the trajectory of the Munich Re AG distributable reserves this year? I guess you'll benefit from equalization reserves being drawn down, albeit there aren't as many of those back in contingency as, say, property. So I'm struggling to work out, you know, how resilient the AG profit should be this year relative to a sort of heavy cat year. Thanks.

Yeah, Andrew, thank you for your questions. Ergo, live backbook. First of all, I think the headline would be that the live backbook is profitable in the foreseeable future and largely immune to further distortions as we see from the low interest rate phase. Why is that? A number of reasons for that. First of all, we have a big stock of ZZR already. The increase this year is expected to be of the same order of magnitude than last year, so not significantly be bigger. And the stock we had already end of last year was more than $6 billion. We would expect to be at the end of this year at around $7 billion. So quite a significant number, which helps, of course, to drive down the average interest rate guarantee anyway. On top of that, we have been applying hedging measures, swaptions, already for more than a decade or more than 15 years in the meantime, thereby mitigating the effect of the lower interest rates consistently over time. Reinsurance measures are applied very regularly there, and there we are benefiting also from from knowledge and expertise we're having on the reinsurance side, which helps us to stabilize earnings and hedging the guarantees of our back book. So in that sense, I think I can take away some of the concerns you were raising just by the fact that this book is being stabilized very much, and that's the way how we look at it also. into the future. Distributable earnings. First of all, as you know, we have a stock of distributable earnings And the way we manage local gap anyway is in a way that we are not overly – do not look too much on the single year results as we can balance due to the stock of distributable earnings we have anyway. For the current year – You're right. There are a number of effects we mentioned. First of all, yes, the equalization reserve will help in many lines of business, but there are other lines like contingency where there's not a big stock. So claims will also be visible in local GAAP, at least to some extent. At the same time, I also remind you that also the investment result is very much different in local GAAP to IFRS. So also there are some differences to be expected. Overall, I think it's too early to speak really about the year-end local gap result. But do I see anything holding us back from sticking to our capital management strategy? No, not at all.

Okay, thanks.

Thank you. We now move on to Michael Heade from Commerce Bank for our next question. Please go ahead.

Hello. Good morning to everyone. Two questions, both, I think, on Ergo. First of all, the FX loss of around $100 million in the third quarter, the majority of which is at Ergo. Can you explain where this FX loss has come from and the devaluation of the U.S. dollar? And if I understood correctly, you also incurred a derivative loss at Ergo. Does this come from the lower interest rates? Second question, I did not see any figures in regarding new business generation and ergo life in the third quarter. Can you tell us, can you give us a little bit of sense of how new business generation, even in the nine months, how it worked?

Michael, thank you for the question. First of all, ethics. Overall, you're right, 100 million loss, the bigger share at Ergo, and the Ergo FX development is indeed U.S. dollar-driven. The reinsurance FX development is not U.S. dollar-driven. The Ergo piece is U.S. dollar-driven. You have to be careful looking at our numbers. The Ergo FX result, as we show it in our IFS P&L, is a pre-policyholder share number. So only 10% of that are really affecting net income. Just the way we present it in the IFRS where P&L is a little bit misleading here. Therefore, I would say it's not a big topic at Ergo. Where does it come from? It comes from investments Ergo does in U.S. dollar. So no liability impact or anything. It's really on the investment side. And Ergo applies a collar strategy in hedging the FX. So around a midpoint, there is a certain range in that the FX effect is fully at risk or fully visible in the P&L. And beyond that collar, then, it's hedged. And Ergo is doing that so to reduce hedging costs, obviously. And the volatility, as I said, 10% of the amount only is affecting the P&L. This is something Ergo can digest, and it's completely within the risk appetite at that area. On the reinsurance side, the FX loss has to do with emerging market currencies, not with the U.S. dollar, which is maybe a little bit surprising given the fact that we have a lot of business in the United States. The point is that here I think the exposure management of our colleagues worked pretty well. Second question was, I think, new business at Ergo.

Yes, Ergo Life and Health.

Ergo Life and Health specifically. Oh, sorry. I think overall what I can say is that we are happy with new business at Ergo. I would say it's across all lines of business. It's pretty stable compared to prior year despite COVID-19. And then there are certain ups and downs between the different lines of business, where life insurance is probably falling a little bit behind P&C. But overall, I think it's a very good result that Ergo was able to stabilize new business, given the lockdown situations we have now for the second time already in Germany.

Okay, thank you very much.

Thank you. As a quick reminder, to ask a question today, please signal by pressing star 1. We now move on to Vinod Mahaltra from Mediobanker for our next question. Please go ahead.

Yes, good morning. Thank you, and I hope everybody is well. My two questions, first one will be on the realized gains. I can see $321 million in fixed income in this quarter. And it's quite similar to the AFS fixed income move of around $306 million. Then when I look at in context of the sharp fall in reinvestment yield, 1.3% now. Also, I note comments that you're increasing infrastructure, private equity, ABS. I mean, the whole picture seems that how are you balancing realizations of gains and the reinvestment? plus some re-risking. If you could comment a bit about this whole asset side, it would be very helpful. Second question is, just on life mortality, I mean, recent trends, at least last few weeks, if you have any views. I mean, the thing is, I'm trying to understand if we know that the portfolio and the population are different different things, but has the difference been increasing in your experience recently in October, maybe, or would you still say that it's sort of similar and one should keep expecting that? And in that context of life, I could also ask, your Australian positive comment was quite remarkable given we've seen some of your peers' reports. how they were under pressure in Australia this quarter, if you could also comment on that. Thank you.

Yeah, Vinit, thank you for the questions. First of all, realized gains. I think the general remark is we don't realize gains for increasing our earnings. So we only do that if there is need to do so, either because we have to fund something on the liability side, so the ZZR at Arrow is the most famous example, or we do so because it's unavoidable in case we want to restructure our asset portfolio. In that sense, the realized gains on fixed income instruments are more happening in a sense unavoidable than they are really steered in order to achieve a certain result. Having said that, I think you mentioned a lot about the investment activities which are ongoing. We have been selling some German fund briefs or covered bonds from Germany in order to go into riskier assets, some re-risking also on that side. We increased slightly our equity exposure again. That's something we did, and we, of course, continue to increase our engagement in illiquid assets, and that's also an ongoing activity. Overall, I think it's still fair to say that the asset risk is overall stable. We rely a lot on diversification here and across all the various books we're having. but this increased diversification is particularly important given the low-yield environment you have also been mentioning. Life mortality, your question was if the difference between our book and the general population, if this has changed. I think that my answer would be no. It's pretty stable. It's pretty in line with what we expected in the first place. And then your question on Australia, indeed, this quarter was a benign one in Australia. But I just remind you, we also had already other quarters this year. So I would not extrapolate that too much. But enjoy with us that we had a good quarter in Australia this time.

Thank you.

Thank you. We move on to Thomas Fockart from HSBC. Please go ahead.

Yes, good morning all. Two questions. The first one would be on Solvency 2 versus IFRS related to COVID-19 losses to the risk of restarted discussion of Q2, but could you refresh our mind how your Solvency 2 ratio at Q3 is forward-looking in terms of taking into account some of the expectations for additional COVID-19 losses, especially on the life side. And the second question will be related as well to COVID. the outlook for life and health re-COVID-19 losses. In your slides, in your slide back, you're pointing to potential disability claims and some offsets from UK longevity. So could you help us to put some numbers behind, especially for 2021, and how UK longevity could be an offset in the coming quarters? Thank you.

Yeah. Okay. So first Solvency II versus IFRS. I start with life. On the life side, we did not – set up an additional reserve for Solvency II if you compared with IFRS, also looking into the future, why didn't we do that? We have an on-top reserve, which anyway easily covers potential developments going forward, and therefore just didn't see any need to set up an additional reserve. So it's all fully covered. We have an additional bike reserve. That's how we call it anyway, for example, covering mortality risks overall. On the P&C side, the situation is quite similar, I must say. Also, we enjoy bulk reserves, which we have, and which are also easily covering adverse developments. By the way, these reserves are not only booked in Solvency II. We also have them for FOS purposes. So in that sense, we didn't see any need setting up additional reserves for Solvency II purposes where Theoretically, you would need to look a little bit more into the future because we were so highly confident that the reserve level we are having is in any case more than sufficient. Sorry. Disability and mortality, wasn't that?

Yeah, no disability. Okay.

Yeah. Yeah. Yeah, so I think what we have in our presentation is a remark that at least so far in the UK we are enjoying diversification between longevity and mortality, which is more or less setting off each other, so no big impact on our UK business. at least until today. And a similar remark on disability, so far we did not see any increased disability claims. Of course, you cannot rule that out. although the link is obviously a little bit more indirect than for mortality claims because what's happening is usually that you have some economic downturn, higher unemployment rates, things like that, and then disability comes in. That's something we do not see yet, but obviously there's a risk, and that's why we wanted to mention that risk on our slide. Thank you.

Thank you. We'll take another question from Ivan Bokmat from Barclays. Please go ahead. Your line is open.

Hi. Good morning. Thank you. I've got two questions. The first one would be on the frequency benefits that many of the primary insurers have seen from the COVID and now that might continue with the second lockdown. Just wanted to see how you think about that, whether they are stored away in some buffers on the balance sheet or whether due to the nature of the business, you're right, it's not And secondly, just to follow up on those life mortality questions, just trying to understand this run rate of 100 million of COVID provisions in the life and health book that follows the mortality experience, is it therefore rational to expect it in the coming quarters until we have some form of resolution for the pandemic, whether a vaccine or something else?

Sure. So let's start with the second question. I think what we can see is that the development of our claims is pretty much following the reporting you can also read in the newspaper. It's very much focused on the US. So To some extent, of course, it's not precise, but to some extent, if you follow what happened in the U.S. so far and extrapolate it in the future and then look at our claims numbers, I think you would not be completely misled by doing that. Yeah, that's what I can say on mortality. Can you remind me of your first question, please?

It was in the frequency benefit in P&T. Oh. Where do you see it? In ergo, where do you see it in reinsurance? How do you account for that?

In reinsurance, we don't see a lot. The reason is that we have in many of our proportional 3D sliding scales which means that the frequency benefits remain with the primary insurer. On Ergo's side, we see some of these, but then you have to look at them in the light of the COVID claims Ergo also has. So my overall commentary was COVID-19 insignificant at an Ergo level, which includes on the one hand side COVID claims, on the other hand, some offsetting benefits also from the frequency side.

Thank you. Thank you. And we take a follow-up question from Vikram Gandhi from Societe Generale. Please go ahead.

Hi. Thank you for the opportunity. Just one from me. I'm a touch surprised that despite significant reserve buffers, the group never really utilizes them to smooth the P&L. I appreciate you don't want to really weaken what is the essence of a strong balance sheet, but I guess it would be good messaging to the market that the management is willing to dampen the volatility where necessary. So perhaps a word on that topic would be helpful.

Well, I mean, I think we could have a long debate about that. Is it good to maintain a strong balance sheet or is it better to use it sometimes? I think either way you could be in favor of either of the two ways. So, I mean, I'm glad we agree that we are having a very conservative and, you know, very reserved, strong balance sheet in the first place. Would I easily use that? No, I wouldn't because in case additional downside would occur, I would probably give up my options, and I don't see any advantage in that. So, I mean, we've been seeing many, many developments in the past which we were easily able to digest based on that reserve strength. And all these discussions around solvency, too, we don't have to have them because our reserves are strong enough anyway. So I think it's a very comfortable position and a very good place to be at.

Thank you. And we have a further follow-up from Andrew Ritchie from Autonomous Research. Please go ahead.

Oh, hi there. unconnected to COVID, you'll be glad to know, or maybe differently connected. There's been a lot of talk about increased cyber losses across the industry over 2020, and especially Q3 ransomware losses in particular, given your sizable market position in cyber, it doesn't appear to have affected your results. But can you give us any sense So whether you've observed that or whether it's caused any issues in the profitability of your cyber book, that would be helpful. Thank you.

Yeah, well, thank you for the question. Yeah, I must say we hear that as well, but only in a sense we hear it from rumors or trade press or something. So we do not have any indication in our book of this development. neither on the primary side nor on the reinsurance side. And you know we are a writer of cyber cover in both our primary as well as on the reinsurance operations. On the primary side, we are also that close to the customers and to the clients that we in any case should know it already if it would affect us. On the reinsurance side, there might be potentially a delay. So maybe there is something we don't see yet. But even if there was something, I think the profitability of our book overall would be fully intact.

Great. Thank you.

Thank you. And that concludes today's question and answer session. I would now like to hand back over to Mr. Becker-Hussong for any additional or closing remarks.

Thank you very much. Nothing to add from my side. Thanks again for joining us. Happy to help with additional questions as always. Hope to see you or hear you at least all soon again at the latest at our investor day in early December. So very much looking forward to that. Until then, please stay healthy. All the best and goodbye.

This concludes today's call. Thank you for your participation, ladies and gentlemen. You may now disconnect.