Münchener Rückversicherungs-Gesellschaft AG in München

and a warm welcome to our Q1 earnings call. Today's speaker is our CFO, Christoph Jureka. And the procedure is very straightforward. As always, Christoph will start with a short introduction and then we will go right into Q&A. And with that, I have the pleasure to hand it over to Christoph.

Yeah, thank you, Christian. And yeah, good morning also from my side. As we announced two weeks ago, Munich Re made a successful start to the year 2024 and the operating performance in all lines of business was better than expected and a favorable capital market environment including forex exchange provided an additional tailwind as well. With a strong net income of above 2.1 billion euros in the first quarter, we have already achieved more than 40% of our full year guidance after just one quarter. As a consequence, the annualized ROE of 27.3% is exceptionally high. Let's look at the Q1 earnings drivers in more detail, starting with the investment result. Supported by positive fair value changes on equities, we posted an ROI of 3.8%. The reinsurance segment in particular benefited from rising stock markets, posting an ROI of 4.5%, while Ergo delivered a very solid return of 3.3%. I'm very pleased that the running yield is further trending up as we are reinvesting new money at an ongoing high yield of 4.6%. Let's turn to the business fields and start with reinsurances. The life and health total technical result of 586 million euros came in significantly above the ProRata annual ambition. Beyond the release of CSM and risk adjustment in line with expectations, the performance was driven by very pleasing new business and positive experience across the board. But also the FinMauri business made a strong contribution. which includes positive currency effects. The stock of CSM increased remarkably in the first quarter, as new business generation, which was particularly pleasing in North America, by far exceeded the release through P&L. All in all, the increased CSM level of 13.6 billion euros provides a very sound basis to continue to support a strong technical result going forward. In P&C reinsurance, we posted an exceptionally good result. While releases on basic losses were fully in line with the expected five percentage points, the very low combined ratio of 75.3% benefited from major claims of only 9.9 percentage points, which is well below our unchanged 14% average expectation. At the same time, the normalized combined ratio of 79.5% was better than our 82% full year guidance. Aside from business mix effects, this seems to reflect an element of earned through of the improved margins. However, we do not yet give too much credit for it and prefer to wait a couple of quarters to better understand to what extent this positive development manifests itself. So please do not consider the very low Q1 normalized combined ratio and U1 rate for the remainder of the year yet. This brings me to the April renewals, where we successfully largely maintained the high profitability and the sound quality of our book. We continue to manage our portfolio diligently to safeguard an optimal risk-reward. We expanded premiums by more than 6%, in particular driven by participation in sizable rate increases in original motor markets, while our nut-cut exposure in Japan slightly decreased. Coming off a particularly high level, the risk and inflation adjusted prices in our total portfolio declined by 0.7%. Excluding business mix effects related to a higher share of proportional business, rates even increased further by 0.6%. From our view, the overall market environment remains positive, allowing us to earn strong margins on the risk we take. At the same time, we were able to defend recently achieved improvements in terms and conditions. In primary insurance, Ergo delivered a very pleasing net result of €252 million. The German P&C and the international business came in strongly, while German Life & Health was somewhat below expectation, but posting a still solid net result of €36 million in Q1. While the CSM release was in line with expectations, we saw elevated claims expenses in short-term health and travel business. The CSM increased driven mainly by capital market-related effects, which exceeded the release through P&L. In P&C Germany, we achieved a good technical performance with a combined ratio of 84.4% in Q1. We benefited from significantly lower than expected major losses and positive seasonality of acquisition costs. In addition, the investment result was strong, driven by the stock market performance. All in all, this led to a very high segment result of Euro P&C Germany of 150 million euros. The international business continued the positive trend of profitable growth, with a net result of 65 million euros. We saw good technical development in life and health business. The P&C business posted a pleasing combined ratio of 89.5%, driven by benign major losses, profitable growth, and a strong operating performance across all major markets. In particular, the Polish business had a very strong quarter due to benign major losses and price adjustments. Just a few remarks on capital management. The group's economic position remains very strong. Resolvency 2 ratio increased to 273% in Q1, as the strong operating performance more than offset the deduction of the $1.5 billion in share buybacks. I would like to conclude with the outlook for 2024, which remains unchanged. we are still anticipating a net result of about 5 billion euros. As already mentioned in our pre-release, surpassing this target has become more likely due to the strong Q1 result. As we still have three quarters to go, we decided not to change other outlook KPIs either. With this, I'm at the end of my opening remarks and look forward to answering your questions. But first, I hand it back to questions.

Thank you, Christoph. We can go right into Q&A. Just allow for my usual remark. Please limit the number of your questions to a maximum of two per person. And then please, for additional questions, rejoin the queue. With that, please go ahead.

Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Questioners on the phone are requested to use only handsets and eventually turn off the volume from the webcast. Anyone who has a question may press star and one at this time. One moment for the first question, please. And the first question comes from Kamran Hossein from J.P. Morgan. Please go ahead.

Hey, morning. Two questions for me. The first one is just on the normalised combined ratio. I know that you don't want to kind of change the guidance now, but it's such a massive swing versus the Q4 number. When you think about this internally, was it just pricing is it business mix is it an inability to add like super normal levels of prudence into your numbers or just something like better loss experience just trying to get a little bit more detail on why maybe you have the massive swing and it's you know coming in a lot better than your guidance and kind of related to that um you know you see the five billion target for the year looks much more achievable now i guess it looked achievable before um but reporting such a you know a large beat and such a sensationally good return on equity so early in the year. Feels not un-Munich-like, but it feels like maybe in the past you might have been slightly more cautious. To what extent, given kind of all the buffers you put away, do you have to show something closer to the real economics of the business right now, which clearly, based on today's results, are excellent? Thank you.

Yeah, good morning, Cameron. Thank you very much for the questions. Starting with the normalized combined ratio, maybe first of all the comparison to prior year. You all probably remember that last year we had a bit of a distortion of the combined ratio due to the on top reserve increases or the reserve buffers we built throughout the year. And then in our last call, In December, I think I mentioned already that we discontinued that. We would not continue to add this extra potency on our reserves. So this is already the first significant difference if you compare to prior year. But that has been built into the guidance. So that does not explain the difference to the guidance. But compared to prior year, and you're talking about a massive swing, I think this has to be considered. Now, if you compare the actual Q1 versus guidance, and I think I said that in my introductory statement already, we have to be a bit cautious here. It's only one quarter. But indeed, I mean, the signs look as if the result would have been even better than what we anticipated in the guidance. And there is an element of business mix in that. There is an element of a few other also maybe a bit technical topics. But the main element is really the margin improvement, the earned through, which we saw now in Q1. But then again, I cautiously said that let's see if this continues into Q2 and Q3, or if not, we will see something closer to the guidance than in due course when we look at our numbers than maybe in September at the end of the year. Yeah, but having said that, indeed, I mean, it's pleasing to see a positive surprise like that. But, again, don't give it too much credibility just yet. The second question on the $5 billion and to – I mean – I understood your question in a way like to what extent are we forced to show the full economic performance as... Yes. Given the fact that we increased the potency quite a bit and I think I even mentioned reserves would be full. I think the wording I used end of last year. And there clearly is an element of that. But are we forced? Forecast is always such a strong word, you know, but we also want to show it. I mean, we are in a very good shape. We are in a very strong capital position. The 2 ratio is very close to record highs. Why shouldn't we show the earnings we achieve from an economic perspective? I don't think there's any good reason why we shouldn't. And this is not a change in behavior. It's just showing how strong the balance sheet is as we speak. So it's not like that we are less cautious, but I think the circumstances are a bit different. So therefore, yes, we are happy to show the economic performance also of IFRS. There's an element of accounting change in that as well. So the IFRS 9 accounting does not really give us any options. So the positive performance on equities, it shows up in your result as it's happening. And if equity markets would drop significantly in the course of the year, then we also would have to book that. So there is this element of probably less room to steer in the new accounting framework compared to the past. But then, yes, we're happy with that because, again, we are in a very strong position. The balance sheet is very strong. And why then not show the performance as it happens? That's fair. Thanks very much. And be mindful of the volatility. I mean, large losses can happen any day in our business. And then, of course, also the equity markets, they will not go up forever. But, yes, in Q1, everything happened in a positive way, and then our performance is as it was shown in our numbers.

Thanks, Christoph.

And the next question comes from Freya Kong from Bank of America. Please go ahead.

Hi. Thanks for taking the questions. On life and health, The FINMO re-fee income was very strong, even after I adjusted for positive one-offs from FX. Is this underlying print of over $140 million per quarter a fair run rate to assume going forward, or is there anything lumpy in the numbers that we should be aware of? And just secondly, on the loss assumption you've taken for the Baltimore Bridge, can you give us some color behind this? I assume it was most of your man-made loss burden in the quarter. Thanks.

Good morning as well. Indeed, there was a bit of an ethics in there. If you deduct that, it was 90 million, the ethics. If you deduct that, you're above 100, but not above 200 million. In that business, a certain amount of volatility is always happening in a single quarter. So I would not necessarily say you can just multiply the number times four for the full year, but obviously it was a very good start. And if we continue to deliver like that, nothing can be ruled out. But, yeah, there's a bit of volatility in those numbers as well. So also here we have to be a bit cautious, but Q1 was great. The Baltimore Bridge, yeah, I mean, first of all, it's a very, very complex loss or a complex claim. And already the question which line of business is affected or the question on all these legal topics on coverage and these kind of things are very, very complicated. So... Frankly, it's very early days to really understand what's going on. And, you know, the CFO is in a bit of a difficult position because I have to book something, or we have to book something in Q1 at a point in time where really uncertainties are extremely high. So what you do is you build the best estimate based on the kind of information you have at that point in time, and then that's the best possible number to be booked, of course. But then you are still aware that the range around that best estimate is significantly higher than it would be usually with some of our man-made losses, which means the number could be significantly lower or significantly higher than what we booked. It's just uncertainties are very high at this point in time. And this is the reason why we said, well, it probably doesn't make sense at all to mention a number today because it can only be misleading because it would signal that we would understand the situation, which we frankly do not do very well at this point in time. And therefore, please understand that I will not be able to give any further detail at this point.

Okay. Thank you. And the next question comes from Faizan Lakhani from HSBC. Please go ahead.

Hi there. Thank you for taking my questions. The first one is just coming back to your comment around the fact that some of the improved basic loss ratio may have come from business and exchange. Just wanted to understand the fact that you've been able to write business with a lower basic loss ratio but still being able to keep your large loss ratio the same. How does that happen if you could sort of explain the mechanics behind that? And if possible, could you maybe spit out how much has come from business mix versus the earn-through rate within that? The second question is coming back to the fact that, you know, you posted a very strong set of results at Q1. But it's interesting to see that you've had limited disposal losses this quarter, whereas my sense is in the past you've taken advantage of that and booked some losses in your fixed income portfolio. Is that something that you would look to do possibly at Q4?

Yeah, thanks for the questions. First of all, business mix, I mean, obviously, just to give you an example, it makes a significant difference if you write an excess of loss contract or a proportional treaty where basic losses would completely be addressed in a different way. And then also the lines of business, there also the amount of basic losses can vary significantly from one line of business to the other one. So therefore generally as soon as the business mix changes, you would expect an impact on the combined ratio. And obviously also in our guidance we reflect that. But then if in reality the business mix turns out to be different to the guidance but maybe also different than you expected, or if one of those businesses is showing a different behavior in the claims experience than what we assumed, then there's still potential for deviations from the guidance, also from the business mix perspective. And this is basically what we saw in the first quarter. based on the renewals of last year. Just to remind you, in the last few renewals, I think excess of loss was clearly a focus of our underwriting activities compared to proportional business, particularly last year. Q1, disposal loss is indeed limited. So what we did do this quarter is basically that we did not impose any restrictions on our portfolio managers to do what they need to do in order to manage their portfolios professionally. And if they then sell some bonds and those bonds have unrealized losses, then they are being realized. So this happened in Q1 like it did in last year as well. What we did not do this Q1 is to... to have a management overlay in steering to request to realize even more losses just for the sake of dampening the result. That's something we would not have done in Q1. First of all, it's early in the year. Why should we dampen already now? Secondly, as I said before, we are happy with our economic performance. We are very strong, so why should we do it? And then going forward, would I rule out anything? No, I wouldn't. It all depends on the result development. If it would exceed or would be exceedingly high at some point, we might reconsider. But at this point, we were very happy to just show you one quarter with our actual and, yeah, very transparent performance.

Thank you very much.

And the next question comes from Daryl Goh from RBC Capital Markets. Please go ahead.

Hey, morning Christoph. Maybe first one, I guess just going back to your comment about the normalized combined ratio and Q1 not being seen as a runway for the full year, in your words, just yet. I guess what are you waiting to see? And maybe some comments around the lost cost trends that you're seeing across the main lines of businesses. I guess, you know, particular property and maybe you have casualty as well. whether that has trend up or down from last year. And my second question, it's on your investment positioning for reinsurance. It looks as though the duration dropped quite a bit from year end. I'm not sure if that's purely down to high interest rates or maybe you're shifting some of your asset positioning. If you could elaborate, please. Thank you.

Yeah, thanks for the quick questions and good morning. I'll start with the second one. The second one is mainly a passive effect, so interest rates driven. So that can be very quick. So no real different positioning than a quarter ago. The yet in the NCR really is a bit of, yeah, we have to be cautious. I mean, the actual development obviously can vary from one quarter to the other quarter. Normally less in reinsurance than in primary reinsurance, as in reinsurance a lot of what we book is assumption-based or has to incorporate some assumptions as we are not getting so frequently the claims notifications in. But in primary business, obviously, we very often get in – we regularly get in new claims information, and this can vary from one quarter to the other. So therefore we have to wait and see if what we have now seen in the first quarter, the very positive normalized and traditional combined ratio, if that continues into the third quarter or if not there is either a catch-up effect or a normalization up to a slightly higher level. that that remains to be seen. I would in any case not expect it to be significantly higher. That's also not something, so you shouldn't assume it to be in the next quarter at numbers significantly higher, but somewhat higher, why not? There is this, I mean, there's also actual bookings in an actual quarter, so there can be deviations, and obviously a performance in the second quarter can differ from the first.

And the next question comes from , from . Please go ahead.

Hi there. Good morning, Christophe. The first question is on , we clearly, you know, the result is sort of very strong there. And it looks like some of the key drivers could be sustainable, you know, that fantastic new business system goes, and that's going to achieve through the results. Is there any reason you haven't sort of changed your guidance in ? Can you maybe remind us of what assumptions you have baked into that guidance that would prevent you maybe from doing so? I mean, whether you expect any to come later in the year. The second question is on the last component on the PMCV. That was somewhat lower than I had anticipated. Is this a function of better pricing ? That might be leading to somewhat lower or better current year initial loss peaks that could be driving this. Any thoughts would be appreciated.

Thank you. Good morning. I start with a life and health question. Maybe very high level to start with. Of course, there's volatility possible in life and health as well. But I have to admit that the probability to exceed the guidance is probably nowhere else as high as in life and health. What are now the potential sources of volatilities? I mean, ethics, we discussed it already, so that the Q1 result was increased by ethics. That could go the other direction in the next quarter or so could compensate the positive Q1 effect or go beyond that. We could even have volatility. Losses on the ethics side, that is something which could happen there. We could have large losses as well on the life side, which happens sometimes. We had positive variances in the first quarter. Who knows? Could be different in the next quarter. So there's a number of reasons why, at this point in time in Q1, It's a bit early to already increase the guidance, but that, again, having said what I said, confirming what I said initially, the probability that we're going to exceed the LIFO guidance is particularly high. On the loss component in PNC-UE, I think what's happening is, again, I start with the high-level messaging before I go into the technicalities. The high-level messaging would be it's an expression of conservative booking. Again, you would probably add. Now, what's happening with the loss component is that, as you know, if you – so the renewal was at stable – let's say stable rates, more or less. So you would expect the loss component to – to not really be affected by that. But then those stable rates, they are a mix of rates which improved and rates which deteriorated. And now the way we book the loss component is asymmetric. So if in certain areas of our book the profitability goes down, then we might end up building an additional loss component While in other parts where the probability goes up, there's no compensation for that in the loss component due to the fact that we slice our business in such small pieces, so many group of contracts, that more or less every single small element of our portfolio is looked at individually when we assess the level of the loss component. So a huge number of group of contracts. And then bear in mind the assessment of the loss component fully includes our reserve potency. So simplified example, if you write something with a 96 combined ratio, we add the 5% potency, you add 101, and immediately the business gets a loss component. And this is then, again, just a reflection of the potency in the business. So therefore, long answer, short summary. Short summary is some of the business... We did write one for renewal, significantly improved, others deteriorated. For the deteriorated one, you build a bit more of a loss component, and due to this asymmetry, the loss component is a bit higher than expected.

Okay, thank you.

And the next question comes from Ivan from Barclays. Please go ahead.

Hi, good morning. Thank you very much. I've got two questions, please. So one is just relating to your very strong capital generation. I just was wondering if you could maybe expand a little bit on how you would want to deploy that organically. Are there any new risks that you may be thinking of adding to the roster? I mean, one that I was thinking specifically was the investment risk on the life and health portfolio. I think you've done a large annuity transaction that was publicly announced recently, so maybe you could expand on that appetite. And the second one, just you're suggesting optimism for the summer renewals for June, July. I don't know, maybe you could talk a little bit more about which portfolios you're more interested in, how you think about the changes and attachment points for property catastrophe covers, any specific geographies. Thank you.

Yeah, let's start with the first question. Indeed, capital generation is very strong, but nothing really surprising in here if you look at the very positive IFRS performance. And then also, of course, the Dolphin Z2 performance is equally good, so the economic earnings equally good. And so it's basically all organic capital generation out of the profitability of our business. even going beyond the deduction of the share buyback. So this is indeed very pleasing and supporting our capital management strategy also going forward, which is very nice. As you know, we are on a long-term track to increase the leverage. I mean, in quarters like that, these targets become a bit more difficult, but we still will strive for higher leverage. in order to optimize ROE a bit more going forward. Or in other words, obviously capital generation is always potential for the future for additional also either buybacks or dividend or increased dividends, absolutely. Now, inorganic growth, also risk-taking. I think what is very important in our business is that we are disciplined on the underwriting side as well as on the risk taking on the asset side and I think discipline is really one of the key ingredients which brought us to where we currently are with a very strong balance sheet and a nice profitability so therefore obviously we will continue to be disciplined I think that's Absolutely key also then going forward into the June-July renewals, but now I get to your second question because it's highly related, obviously. And therefore also lower attachment points or these kind of things is clearly nothing we would want to go into, but rather really focus on maintaining the improved terms and conditions and then continuing to write business at the attractive levels price level where we currently are. It seems as if we are on a plateau level for 1.1 and 4, 1.4 now from a pricing perspective where supply and demand met each other at very reasonable terms and I would just assume that continues. But then again, our appetite to weaken some of our T&Cs or to be looser on the underwriting side, the appetite is absolutely zero, and the discipline needs to be maintained going forward.

Thanks. And on the life insurance appetite? Yes.

Well, generally, our appetite to grow is big. You saw that in the new business CSM numbers where we, for two quarters in a row now, we're having very nice and exceptionally big new business numbers based on large transactions we were able to achieve or to sign with our clients. You seem to refer to a specific transaction, and there, my apologies, we generally do not comment on single transactions.

Sorry for being persistent. I was just rather thinking about whether you would consider moving away from biometric risk on life insurance towards more investment risk.

There's nothing planned like that at this point.

Thank you very much for that. Detailed answer.

And the next question comes from Vineet Malhotra from Mediobankar. Please go ahead.

Thank you, Mr. Officer. I'll try to keep it to very quick ones. So one topic is renewals, one topic is PNCV loss, and one follow-up, one more, please. On the PNCV loss, There's no mention on the Italian situation, the Italian hailstorm losses. Is it something that you've done but it's not quantified for us or was it already conservative enough? Any qualitative color even would help there. Second thing, just moving on to the renewals, two quick clarifications, please. One is the July outlook sort of slide has NatCat exposure rather high at 32%. And last year, for example, you estimated 27%. Now, why do you think NatCats are increasing in July? It's important because this could help change the picture on the pricing a bit. And just staying on the April renewals, please, the increasing motor exposure and proportional price development, but you say that that affects pricing a little bit negatively. Is that because commissions on proportions are higher and because of competition? And last, very quick follow-up is the Finmore FX effect. It seems quite high for that business. Is it because of some active position on the dollar in that investment book or any clarification on that? Thank you very much.

Let's start with the third one because it's a simple one. This is just accounting mechanics in a way. We generally hedge our ethics risk, as you know, but for the FinMuri business, we didn't get the approval from our auditors to take out the ethics risk and move it into the currency result line. and the offset happens in the currency result. So, therefore, if you want an accounting volatility, but no real economic volatility in that business anyway. But, yeah, it can be quite significant, and the reason is not that we take positions actively, but the reason really is that we are doing that business more or less only in currencies other than the Euro. So there's only very limited business volume in Euro in that business anyway. And therefore, quite naturally, you have a fluctuation with FX. And again, it's generally hedged, but the hedge result would show up in the FX result and not in the line where we show the FinMori result. So that's what's happening there. Your question on the Italian hailstorms, I think that relates to events which happened last year already, so clearly not in Q1. And therefore, just a very general remark, we usually do not comment on the runoff or potential reserve strengthenings of events in the past. They are part of our core business. Sometimes our reserves go up. Most of the times they rather go down because we take the initial steps the initial loss assessment very much from a conservative or cautious perspective. So therefore, I cannot rule out that there are some movements in the tail storm as well, but I would not want to comment on that because then we have to start commenting on each single event every quarter, what really happened there, what did not happen. I don't think that will happen. add any value to our discussion, so therefore please accept that I will not further comment here. Nut health exposure in July, I don't think there is anything spectacular to be observed there. The statistics you can see in the deck are more or less just the current view we have on our book, and if there are any changes, then they are more or less the in the outcome of the last few renewals, but nothing really spectacular. The numbers are what they are.

And the next question comes from Ismail Dabo from Morgan Stanley. Please go ahead.

Hey, good morning. Sorry to beat a dead horse here, but I just want to come back to the normalized combined ratio. I was wondering if you could quantify basically the gap between the normalized combined ratio and what you were expecting. How much of that is due to business mix? How much is due to the earn through rate? And additionally on that, I'm trying to figure out why wouldn't it be sustainable through the rest of the year? I know you said that it could come up here and there and to be cautious on it, but just really trying to figure out why that is, given you said that there doesn't seem to be much variability from quarter to quarter. And additionally, my second question is more so, you know, high level, what is your view on the sustainability of the reinsurance pricing environment, I guess, even into 2025? What would make reinsurance pricing essentially perfect? I think that's a little bit of a fear there. Or do you think that it would be more of a soft landing on pricing through multi-year period? Thank you.

Yeah, I start with the second one, maybe, reinsurance pricing. I mean, what we currently see is a plateau. I wouldn't even expect it at this point to go down further. Why should it? We have an equilibrium of demand and supply at a very high and attractive level for reinsurance. and then it remains to be seen what happens really, and this will depend very much also on the claims team of development in the second half of the year, particularly, of course, the hurricane season to come then in the third quarter. So therefore, at this point in time, I think we can only comment on what we did observe, and that was more or less stable price levels and, yeah, discipline in the market. I think that's really what we saw. And discipline not only on prices, but particularly also on the terms and conditions side, which sometimes matters even more than the price. On the combined ratio, I mean, what could be volatile here? Just as a reminder, how we define our normalized combined ratio or what goes in as a traditional part of our losses, our large losses start with 30 million upwards. And obviously, there can always happen events with 29 million easily. They would not show up as large losses, but they would affect the normalized combined ratio because we do not normalize for them. So if you have a few of them in a quarter, obviously a ratio could be higher or could be lower. So there's – I mean, it's attritional, but attritional for a big, big reinsurer where the large losses only start at $30 million. So there's still some volatility possible there. And this is why we were saying being a bit cautious does make sense because at this point – The number is just very good, also compared to guidance, and a bit lower even what we would have expected internally. And then I think it's our nature that we rather warn to wait another quarter or maybe two until it further realizes, like it did in the first quarter, and not start celebrating already after only three months. Having said that, a further breakdown into mixed effect and all that, I don't think at this point it would add any significant value to the discussion because then also the question is in the guidance to what extent did we assume what kind of business mix movements and there's also, I mean there's always kind of uncertainties in that and so it's not an exact science in a way and therefore I'd rather refrain from breaking it down further. But yeah, I mean, there is a business effect in there. But on top of that, as I said before, there is this element of earn through and potentially even also that element of some volatility which you also do have in the basic losses.

Okay. Thank you very much.

And the next question comes from James Shook from Citi. Please go ahead.

Hi, Christoph. Thanks for the questions. On the stock of excess capital, obviously very strong earnings in Q1. You alluded to before that you're kind of close to record highs on the solvency ratio. The plan is kind of 175 to 220 on 272 currently. I mean, how do I think about how you actually deploy that excess, that stock of excess? A lot of the kind of share buyback and dividend commentary is really based on flow rather than stock, and you're still adding to that stock. each period. And when I look at the organic growth of the businesses, it's very difficult to see how you deploy organically SCR to bring that ratio back down. So is this something that you'll look to address at year end? How reliant is it on S&P and the mix between hard capital and soft capital? So that'd be my first question. And then secondly, on the Light and Health Readbook, obviously, I mean, we mentioned this a little bit earlier on with Ivan's question, but the The new business is 1.2 billion again in one quarter. That was also 1.2 in Q4. That's 10% of the CSM each quarter that you're growing that stock at. I mean, that's not just lumpy business. That is a step change in the growth profile, adding sort of 20% or so of CSM in the space of two quarters. How do you think about the outlook for further growth there? And how are you thinking about the concentration risk when you're taking on these rather large books? Thank you.

Again, I'd like to start with a second question. I mean, clearly, please don't extrapolate what happened in Q4 and Q1. Those were really exceptional transactions, quite a few of them. Growth outlook is still positive, but of course we cannot assume something like that to happen every single quarter and maybe not even every single year. So that was really extraordinary. and very strong, and in a way showing our capabilities that we can also offer solutions like that to clients in an attractive way. So there's a lot of deep knowledge necessary to be able to do business like that. And I think being able to do it and then even two quarters in a row, you're right, is a very good, good proof point of what we are able to achieve and to deliver as an organization. Concentration risk, I mean, these large transactions very often cover big, big blocks of business which are well diversified by themselves anyway already. So, of course, we look at that, but we are not particularly concerned at all when it comes to concentration risks. But clearly, I mean, before going into large transactions, your risk management is even more looking into all the various risks and drivers, and we really try to do whatever we can to assess everything. but not only from a pricing and expected value perspective, but also really from a perspective of what potential deviations could be and incorporate that in our risk management, of course. Capital management. Yeah, you're right. We had a very strong capital position, and after Q1 in a stronger place than what we would have expected at the beginning of the year. I can confirm that. Having said that, our capital management strategy always has been and always will be a more long-term strategy. So we never wanted to just pay out excess capital at once, but incorporate it into a more long-term capital repatriation strategy. With the additional target... to over time gradually even increase the leverage, which in a way implies even higher paybacks than if you would not have that target. This is all unchanged, so in a way the very strong capital position we are in currently is increasing the potential for capital management in due course going forward into the mid-term, long-term future, but then obviously also depending on the performance. And three quarters to go with a potentially also happy hurricane season to come. It's a bit too early to distribute the wealth already, I think, and we just announced a significantly increased dividend and also a significantly increased buyback. But clearly, I mean, if the year continues to perform as it currently does and if our stock of capital is still the same at the end of the year, there is plenty of potential for, again, attractive repatriation. Where else could we deploy the capital? Obviously, M&A. We are always looking into M&A targets, but we are strict and disciplined also in that regard. So, therefore, in the past, not many transactions happened, really, at least not sizable ones, which would then have a significant impact on the stock of capital. That basically never happened. Organically, we have been growing quite nicely, and capital deployment did increase here and there quite a bit. I mean, we're talking about those live transactions. I mean, you need capital to do transactions like that, so it's good to have it. But then at the same time, obviously, our profitability is equally increasing, and therefore the deployment is nicely offset also by the profitability of our book and by the earnings we make every single quarter. So therefore, in a way, a happy problem at this point in time, but the target remains the same, increase leverage over time, let shareholders participate in a very attractive way in the capital we have, in the flow as well as in the stock, and long-term our target of 175% to 220% solvency to ratio increase. is unchanged and it's called the optimal range because it is the optimal range. So therefore over time we will strive for getting the number down to 220.

And the next question comes from Darius from KBW. Please go ahead.

Good morning. Thank you for taking my questions. The first one is, what's your view on the NAPCAC season this year based on internal modeling, and does it align with what's being speculated in the press, i.e., that it's expected to be an active season? My second question is, what have you seen in regards to social inflation trends in your U.S. casualty book? I mean, are the negative trends still ongoing, but it's not as material for Munich Free, or are the trends getting better? Thank you.

I think the predictions consistently are pointing at an intense season or quite a busy season. Obviously, all those models do not incorporate if there's landfall or not because that's highly difficult to predict. But looking at the sea surface temperatures and looking at a potential La Nina development, you have already two signals which would imply a busy season. And this is something I think we would confirm or would also see like that, like what you can read in the press, so no deviation there. But then again, the question is landfall and how many hurricanes will develop. I think that's a bit more open at this point, of course, and you can't know that. Social inflation, we continue to be concerned with social inflation and have been for quite a number of years, also reducing our exposure quite a bit over time. Also, we think there are quite a number of areas where the pricing is still not adequate in primary as well as in reinsurance markets, so we continue to be very cautious in that regard. And also the development itself in the U.S., I do not see any – why should it dampen at all? I don't expect that to happen. So it will continue to be – an issue where the industry will have to deal with in a very diligent way and has to be very careful going forward. Given the long-term nature of the trend, that's very difficult. But it is what it is. We will all have to deal with that. And again, I don't think we are there yet as an industry overall.

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

Yeah, nothing to add from my side. Thank you, Moritz, and thanks to all of you for your questions and contributions. If there are further questions, please let us know. Very glad to help. Otherwise, hope to see all of you soon and have a nice remaining day Thanks for joining. Goodbye.