Swiss Re AG

Good morning or good afternoon. Welcome to Swiss Re's Annual Results 2022 Conference Call. At this time, I would like to turn the conference over to Christian Momentala, Group CEO. Please go ahead, sir.

Thank you very much and good morning, good afternoon, everyone here, from me as well. I'm here with John Dacey, our Group CFO, Moses Ojezehoba, our Reinsurance CEO, and Thomas Pohun, our Head of Investor Relations, to talk you through the Annual Results 2022. So let me maybe start with just a few points. 22 was obviously a tough year with a lot of factors that affected our results, like the war in Ukraine, inflation, the financial markets, NACAT losses, COVID, et cetera, et cetera. I think it's important to stress, of course, that Q4 was a good quarter, a clean quarter for all the businesses, but a very good combined ratio in P&T REIT. And that's while taking some actions on the economic inflation front. We had good results in life in the three, 200 million approximately, and hope definitely to of the three quarters to see the pandemic go behind us. We had Corso good performance, 93.1 combined ratio, which is the same for the full year. So they continue to perform well. And then we saw increased improvements on the investment front with higher reinvestment yields. And all of that leads us to believe that next year, overall, the recurring investment yields should lead to about 400 plus millions compared to this year, to 2022. And then we had a strong capitalization, which supports a dividend of 6.4 U.S. dollars. As you know, we switched to U.S. dollars because it's our currency in which we report and is also underlying from an economic perspective, a currency that is very important for Swiss Re in contrast to Swiss Francs. So we also had a successful start into the new year. You have seen the renewals data. We're personally very excited about that. We think we had a very good renewal. We're happy about the results. But I also need to stress that it was needed. It was needed for the reinsurance industry. the price increase in the industry have historically lagged behind what we could see in the primary insurance space and the corporate solution space. So it was really needed. And you could also see last year, 22, the underlying combined ratio actually deteriorated because of the high inflationary pressure. So it was needed, appropriate, but we're still very happy of how we could navigate the situation, get through some volume growth, very high price increases of 18%, of course, eaten up partially by inflation and model updates of 13%. So a net 5% improvement, which should translate into an improvement of the combined ratio of the underwriting year of about three points. We were also proud that we had actually investors coming in, and towards the end of the year, they saw the underwriting performance as good and wanted to participate. So we're also able to increase our sidecar funds to almost $3 billion. And the reason I mentioned that is because of the trust is an important sign to us and our underwriting that we've got these investors coming in. In terms of all of that makes us optimistic in terms of the targets and where we want to go. We didn't change the multi-year targets. So the with this 14% group ROE, which is on the normalized equity basis. And of course, we will have to translate that into an IFRS ROE, and we intend to do that at the investor day at the end of December of this year. And there's no change to the message that the IFRS equivalent should benefit from higher earnings on the life and health side, while shareholder equity also expected to be significantly higher than where it is now in U.S. GAAP. Then when it comes to Twenty-three, P&C moved to a reported combined ratio target. So if you look at the quality of the portfolio we have now and everything else, if you're comfortable to do that. So the target is less than 95%. The starting point, of course, is impacted by the inflation. So we think something like 96% is probably the starting point. And then you take into account the renewal we had so far. the three-point improvement on the underwriting basis, which gets earned through, of course, through two years. And that gets to a sense of how we got to the 95, less than 95. On the Life and Health RE side, we increased the target from 300 to 900 billion. There's still a bit of COVID in that, assuming, as we could see, the last three quarters, but much more subdued. And also, as we had communicated previously, see less of a drag or expect less of a drag from the pre-2004 business in the U.S. So this explains this number. And of course, we improved one point of the target ratio compared to last year to less than 94. And I think it's important not to forget that there's also inflationary pressures around us, including in the U.S., as evidenced in the results, the Q4 results of other primary companies. And although reinsurance got more expensive, fortunately, But, of course, this has an impact on the expectations for the combined ratio of Corso. And then all of that, of course, leads to this target of more than $3 billion of net income. We used to have an RE target, but we felt that there were concerns in this community what an RE target means in US GAAP in this rate environment with rapidly increasing rates. And so we, for this year, switched to a net income guidance, so to say, And then next year we intend to go back to ROE since the IFRS equity is much more stable than the GAP one. So clearly I think a very different and more optimistic place we start from this year compared to 2022, but we also stay vigilant and focused on all the risks we see around us. And I think with that I hand over to Thomas for Q&A.

Thank you, Christian. Before we start, if I could just remind you to limit yourself to questions, and then should you have follow-up questions, please rejoin the queue. With that, operator, could we have the first question, please?

The first question comes from the line of Cameron Hossain with JB Morgan. Please go ahead.

Hi. Afternoon. Two questions for me. The one is on the combined ratio target in P&C RE, where you've moved to this reported basis rather than the normalized basis. Just in that change, is this a sign you've got more confidence overall in delivery or a change in the way that you're doing things? I just think about kind of course when you move from having a normalized ratio to a reported ratio, suddenly it felt a little bit more robust. And dare I say it, there's probably fewer opportunities to give excuses for not hitting the target. So just interested in the thinking around why you've moved from normalized to reported in P&T REIT. The second question is on the economic uplift to profitability from the first of January news, which I think you said was 0.8 billion. It's around half of the book. What do you expect for the remainder of the year to bring in terms of market conditions? Should we expect something similar or is it just a little bit too early to sell? Thank you.

Yeah, I'll maybe take the first one, Cameron. I think you're right. Part of it is a cultural thing. We want to just make sure externally and internally that we have the confidence and that we want to see the reported figure as we did in Corsair. I think that's healthy. It also means people have to really think through the volatility around this number. What helps it, of course, Corsair can buy a lot of reinsurance, which they did, and they can protect some of that this way. It's a bit harder for reinsurance. But the fact that we increased the attachment points, a lot of programs, I think on average about 50% means that we move a little bit away from this frequency losses that have hit us again and again the last three years. So of course, we're still exposed to significant losses, but this combined with the price increases just gives you more room to maneuver. And in that spirit, we felt this is a transition we should do now. And it's indeed the combination of all of these factors, but there's definitely a signaling element to that. And it's also more market practice. So I think that's probably the answer. And then, Moses, maybe on the rest of the year.

Yeah, I mean, for the rest of the year, the factors driving what shape January 1st renewals remain for the rest of the year, which is the need for attachment points to move up and the need for rates to move to match up with the risk that's been taken. Clearly, this looks different. uh depending on which part of the region you happen to be in keeping in mind that january 1st uh was dominated by europe uh and as you get into april first it's japan you get into latter part of the years the us you know but the underlying thesis is uh similar the rate changes will be slightly different depending on the market and uh they move towards uh attachment points there they have different starting points but the underlying message across The rest of the year is simply the same thing. Attachment points need to move up. Rates also need to move up to match up with the risk we're taking.

Thank you, Cameron. Could we have the next question, please?

The next question comes from the line of Andrew Ritchie with Autonomous. Please go ahead.

Hi there. Could you just walk through why the NAPCAT budget or assumption for P&C really has been kept the same I think the moving parts are underlying exposure in terms of limit deployed actually went down slightly, although it may change the rest of the year. There is some underlying inflation, but then attachment points have shifted it as well. But I don't know if you could give us some sense as to the robustness of why the 1.9 doesn't change year on year, even allowing for the better underwriting such as attachment points. The second question is, Just to clarify, some of the true-ups or adjustments in the liability lines, you talk about reflecting higher wages and medical expense inflation. Do I assume that that's a true-up to the state we're in at this point, or should there be further changes? wage and FedEx inflation. Is there a further adjustment? Would there be a further adjustment required, particularly in the current year of profitability? Maybe just clarify that.

Thank you. Andrew, I'll take the first point around the NAPCAT budget and why it hasn't shifted. Our starting point always is the portfolio that's up for renewal. And then we make adjustments driven by a combination of the retro placements that we have together with the view of the losses that are under the threshold of 20 million, and then a couple of other adjustments. And here, I think we've been prudent by saying the Up for Renewal portfolio, we expect some growth in exposure in that Up for Renewal portfolio, which we factor into the NAPCAD budget, and that's why we feel comfortable that it's better we stick with the $1.9 billion same as we had last year.

With respect to the liability for OPS, Andrew, I think there was a chart that Christian spoke to and the deck which showed over the previous years how much we've actually added to reserves and liability year on year. And that's been a decreasing positioning, but we did the inflation adjustments in 2022 in particular, although we started in 2021 with IBNRs. And our view is that we've closed this year with very strong reserve positions for inflation broadly, including for wage, medical, and other dimensions which might affect some of the longer tail lines. with an expectation of continued elevated inflation in 2023 returning down to some more normal levels in 2024. So we don't necessarily expect to start to have to do a lot more here. Obviously, the reality of what we face in future years of inflation will have some influence over where we are. potentially positively or negatively, but our view is we're well positioned, and it actually goes back to part of the answer to Cameron's question. By using a reported combined ratio, not a normalized, this is going to include any prior year development that might be necessary, and the fact that we're comfortable saying less than 95, I think correctly reflects that we believe that we've got the right starting point not just for year-end 2022, but for the expected inflation that's coming at us.

If I could add maybe on the NACAP side, just because I remember you asked a similar question I think last year, Andrew. This is very much a bottom-up number, so it's hard to decompose it into some of the easy factors. This is basically the whole portfolio once at the end of the year with all the expected losses and everything. adding up to 1.9 billion in terms of overall loss. So it will be, of course, a combination of shifting layers up, writing some more business, including the inflation, the change in models, all of that. But we don't have a decomposition of that. And also the frequency profile changes a little bit. So you would have less exposure in higher frequency and and more in the rest. But I think it's an interesting idea. We maybe look at that internally, but we don't have that decomposition. On the inflation side, I hope it was very clear. Of course, our actuaries and our economists make a prediction of where the inflation will be in all these different inflation indicators and lines. over the next few years, and then you bring that back into the reserves. If, of course, next year there was a totally different assessment both ways, and certainly if it was much higher, you would, of course, have to add reserves. I think we just feel comfortable with the parameters we have taken and what we have chosen, but this is an analysis that is done once or twice a year by the actuaries based on the forward-looking curves of all of these inflations.

Thank you. Andrew, could we have the next question, please?

The next question comes from the line of Freya Kong with Bank of America. Please go ahead.

Hi, thanks. Just following up on Cam's question on moving to the reported target, this seems to now give you more credit for reserve releases, which have been historically more of a drag than a benefit. Can we interpret this as you are now building in more confidence and prudence into reserving, hopefully to generate some positive PYD in outer years? And just following up on the cap budget question as well, I'm still not clear on the moving parts. I know it's a bottom-up view, but if you're growing, you've got inflation, you're growing exposure, why hasn't that increased as well? Thanks.

Sophia, maybe I'll come back. I think it's premature to to expect that we would be planning material reserve releases into the PNC renumbers in the coming quarters. But I do think it does reflect the confidence we have that the reserves we start the year with are in very good shape. And we'll release our triangles in March with our EVM numbers, but you'll be able to come to your own judgments. But we're obviously 1.1 billion stronger than we have been before these inflation IBNRs were put into place. And the other thing I would say is on the Corso side, not the point of your question, we've had some positive reserve redundancies come through the P&L for the last two years. A lot of that in 2021 in particular was related to a lower frequency driven by some of the lockdowns around COVID. We're back to a more normal position in 2022. And again, with Corso, we're very confident about the overall positions of the reserves, but we're not counting on releases to get us to the better than 94.

On that side, maybe, I mean, we didn't grow exposure. Our estimate is that exposure is flat to actually slightly down. So the 20 plus percent growth is pure price.

I mean, and maybe just on the moving part, as you mentioned, I mean, even though we moved exposure away from the frequency layers, I think you have to look at the countering factors there around prudent view on inflation, as well as the view we now have on loss model as well. If you take those two things, they actually end up countering for the growth we're showing in 1.1. Clearly, as we move throughout the course of the year, if the growth trajectory is any different, it may also have a bit of an impact on the budget itself. But for the growth we have right now, we feel the prudent number to put out is the $1.9 billion.

Thank you, Freya.

Could we have the next question, please?

Next question comes from the line of Will Hardcastle with UBS. Please go ahead.

Hi. Thanks for taking the question. Part of my question is quite numbers-based. Now, we're not getting that financial review pack. So on the reserve development, can you separate the Q4 reserve development by line of business? So just the Q4 part between motor property and liability, that would be great. And just on the flat premium in Americas, It's really helpful, Carla, thanks, on the exposure discussion you've just done there overall. Could we maybe get some color specifically on the Americas? Because we've got flat premium here. I'm wondering if there's exposure reduction, or it's just where you're operating has resulted in the same exposure, better price, but flat premium. That would be helpful. Thanks.

Well, before John and Moses answer your question, so we will obviously publish all these details on March 16. You will also get the reserve triangle, so you will have all those details. We just decided not to publish the financial review as announced in Q3 in order not to have too many documents out there, and also as we're focused on the transition to IFRS to make sure that we are focusing on the right things this year. But I hand over to John and Moses.

Yes. So maybe on the reserve movements on Q4 for PNC REIT, again, for the quarter, we had a positive approximately $20 million. Related to the inflation numbers that we put up, the casualty was roughly minus $300, property plus $200, and specialty plus $100. It gives you a sense of where that was. Within the casualty, some of it was motor, but a good chunk of it was some other casualty lines that were reflecting with longer tails on the wage and medical inflation in particular.

And with regard to the flat premiums in the Americas, I mean, two main factors. We moved fairly aggressively. The retention is upwards and clearly in the lower part of our a program, you have more premiums loaded into that space. So once you move further up, clearly you lose some of that premium. The second factor is we also, in the casualty part of our portfolio, we continue to reduce our exposure to the large corporate risks as well. So these are the two main reasons why the Americas premiums are flat. Thank you, Will. Could we have the next question, please?

The next question comes from the line of Vikram Gandhi with Societe Generale. Please go ahead.

Oh, hi. Good morning. Good afternoon. Just a couple of quick ones from my side. Can you remind us on the latest position on COVID reserves? Has the group released any of it? What's the latest IVNR and the latest IVNR on Russia Ukraine reserves as well? So that's question one. And secondly, is there any change to Corsos reinsurance structure? I think the net retentions were down to $200 million and $35 million respectively for NATCAT and man-made losses the last time we saw that. So those are my questions. Thank you.

On the COVID, we actually were able to settle some of the outstanding positions with some of our larger clients and bring down the IBNRs. They're still material, about 30% of the overall positions for PNC REIT, but we expect most of this to be cleaned up during the course of 2023. There's some regulatory slash legal positions in both Australia and the UK, which are resolving themselves. And once those are clear, I think the primary companies and Swiss Re or the reinsurers more broadly will be able to land this one. So still material. With respect to Russia, we did do, excuse me, some modest increase in positions in Q4, both for PNC Re and for Corso. There's about 330 million total set up. The vast majority of this is IBNRs. There are relatively few paid claims related to this. And again, as it was the case from the first quarter but continued through the year to date, most of those IBNR reserves are related to the aviation lines for Swiss Reef. Or maybe more precisely, the largest single position is related to aviation. And the second question was Corsos reinsurance program. Corsos is paying more for reinsurance, but the details, I don't think we're planning to deliver. They've got the combined ratio that they've targeted that they need to hit. I would say the you know, what they're paying is market rate, mostly to Swiss Re but not exclusively.

Thank you, Vikram. Could we have the next question, please?

The next question comes from with Mediobanka. Please go ahead.

Yes, good afternoon. Thank you very much. So just my first question is on slide 16, the renewal slide. And I'm just curious that, I mean, motor inflation, Motor is a topic. Sorry, it's not slide 16. Apologies. But it's the renewal data, slide 13. The motor inflation, I mean, motor insurance inflation is a topic very much in focus, we say. And I'm a bit surprised that in casualty, we see quite a chunky increase here, almost equal to the Matt Cantt increase in dollars, increments in the renewals. And you mentioned here increase in Asia motor. Can you just comment a little bit? I'm just curious. Maybe you see the trends are different there or better there than Europe, presumably. So just a quick comment on that, please. Second thing is, just on the slide 16, I mean, I am a bit surprised that the earn-through of the business you have assumed seems at least optically not very high. I mean, is it because

of you expect a bit longer on two of that three percent or is it just the slide isn't labeled and that's why uh we are seeing that that kind of effect thank you okay i'll take the first question around uh the the growth in casualty uh motor forms are part of it but uh the the largest part of our growth in casualty comes from structured contracts and structured deals which have protections around them. And the second piece that I think is important to keep in mind on the casualty would be longer duration for the reserves that you hold from an economic standpoint with interest rates rising. These deals that we're costing are actually very attractive for us. That's why we were willing to grow them.

Maybe on page 16. Of course, this is not pure mathematics. You have a starting point, which here it says 96.9, but that includes Ukraine. So it's a question, is it in or out, or do you expect anything else? And then this is earned through. And the business written in 23, I think we write in a different place, that the portfolio written now, we expect a three-point improvement in combined ratio. but only half of that gets earned through in the first year, but it's the shorter tail line, so it's not exactly half of that, but the first year should be a one and a half to two points improvement that this contributes to. And then this earned flow of what we wrote last year, which of course had to be reviewed because of inflation, so this was also subject to these APLRs plus cost discipline. Technically, I think it's correct. It's less than 95, but 95 is not a mathematical outcome.

Thank you, Vinit. Could we have the next question, please?

The next question comes from the line of Harsik Nusadi with Morgan Stanley. Please go ahead.

Yeah, thank you, and good afternoon, everyone. Just a couple of questions. So, first of all, with respect to your capital position, I mean, you printed even a higher sst ratio now 280 and that is certainly helping you uh to pay the dividend but how do you see the dividend outlook going forward especially in light of i mean continuing improving economic earnings because i mean even now you mentioned that the renewals that you are seeing is leading to 800 million of higher economic sorry higher economic earnings so So how do we think about that? That's the first question. And secondly, if I look at your guidance for full year, 3 billion net profit, I mean, with the improvement that you are suggesting with respect to combined ratio and the new business you have written this year, shouldn't this 3 billion be more, or is there something we are missing that this is just a conservative number or you're, uh, expecting some, some headwind somewhere. So, Yeah, these are kind of two questions I would say.

So, Shikha, on the first one, yes, the January 1st SST number we expect to be above 280. That's flattered a little bit by a very low risk position on assets that we had at the end of the year, purposely a series of hedges on higher risk assets which we may determine during the course of this year to remove. So I think the starting point should not be over-interpreted. There's reasons that both the jump in interest rates during 2022 and the relatively low risk position on our asset side, which made this number big. We're comfortable operating at a relatively high level given the macroeconomic uncertainties. the geopolitical risks that surround us. And on top of that, I think what we showed on January 1 is the ability to write a very profitable, actually, new business. And so this capital will also be a source of supporting the growth opportunities for the rest of the year. So that's where we are. On the dividends, I don't want to overstate, The economic earnings, which will display in March, also are going to be affected by a lot of the things that affected our gap earnings. And so maintaining the dividend at around 590 Swiss francs for this year was important for us. I think as we deliver against the targets we've put out for 2023, we can evaluate the dividend policy to be paid in 2024. But for now, I think we're comfortable maintaining the stability of the dividend for this current year, and let's have a different discussion 12 months from now when we've got these earnings actually delivered. For the target, the $3 billion, We do think there are positives that should help us get there, whether it's on the investment income or what we expect to be a much better performance in the P&C re-business in the course of this year. But again, we've taken off the guardrails of normalization. So in that number, we need to absorb big shocks that might come from our NACAP portfolio. We've got $1.9 billion to absorb it, but other places, and I think we're more protected today than we were on the asset side, but there could also be, during the course of the year, some challenges there. So I think We're comfortable saying we believe we've got the levers to deliver $3 billion. If we deliver more than that, which is implied by the sign in front of it, that will be a good answer for all of us, and we'll give you an update quarter by quarter on how we're doing.

Thank you, Ashit.

Could we have the next question, please? The next question comes from the line with HSBC. Please go ahead.

Yes, good afternoon everyone. The first question will be related to Corso. Could you maybe elaborate a bit more about what kind of pricing environment you're seeing into 2023? How does it compare to lost cost inflation? And in this context, how should we expect Corso to grow or not grow in terms of premium income in 2023? The second question will be maybe more for Christian. Christian, you just announced recently a significant restructuring or change in corporate structure of the group. Maybe you can drive us through the benefits you intend to extract of it, and maybe it was not the intention initially of the legal restructuring, Maybe there are some cost savings associated to this one, so maybe if you could say a word about this.

Thank you. Thomas, I'll take both of them. Of course, obviously, being part of the corporate insurance part of the value chain, has experienced huge price increases since the low point, as you know. So they're very large, cumulative. And then last year, we saw a decline in the increases. So still increases, but much lower ones. So we had several years of double digits. Last year was more like 3% or so on our portfolio. And so in view of the results also that were published by a lot of corporate solutions players, you can definitely assume that pressure is on. I think what helps the corporate insurance market is the inflation, indeed, that is coming through. And you see it in the numbers of the corporate insurance players. So this is a negative, but it keeps rates up. And the other one is reinsurance prices now becoming bigger. So to a certain extent, you could say this is good because it keeps the discipline going. And so while we don't see big increases, we're also not seeing decreases. I have to qualify that there are some line of business where, unfortunately, there is some decreases. And Corsair has full licenses to cut wherever we are. We're not dependent on premium volumes. But overall, I would say the environment is still a very constructive environment for Corsair and conducive to growth. but at a flattish level. And that's just for Corso. Remember that we're not in U.S. casualty or the lines, which maybe show bigger growth, so don't compare us to others. But in terms of our portfolio, we see a flattish, slightly positive pricing environment, net pricing environment. On the reorganization, I mean, you have covered this for a long time. You probably remember when in 2012, we created the current structure, which is a bit unusual, but there was Corsair, there was Adminry, there were several businesses, and the idea was to have a flexible structure where we could have potentially investors in some of them, grow some of them, etc. But of course, Adminry has been sold, and so the structure as it is now is heavy for what it has to cover, and it's probably we felt one layer too much for what is needed. So we, of course, there was a strong sense internally that we want to simplify that and fit into a structure that would lead us for the next five to 10 years. I mean, I'm a strong believer that every, at least every 10 years, you need to change some of these structures just to keep the company fit. And so, but in this case, we came to a conclusion, we can take out about a layer, we can or should empower some of these market units that we have. We're not changing them that much, but they basically or one level closer to me, so it's three layers to two layers. And this was only possible by splitting reinsurance into two entities. So this is more towards the top. It becomes leaner and some decision power for some of the decisions, the easier ones, going to the front. And that's all based on other analysis. I mean, we have looked at all the successes and mistakes of the last 10 years. what works, what not, which type of controls are necessary for good underwriting and what is not necessary. And so this sort of embodies that. So the complex transactions will still be priced by the central function in these two units, while a lot of the smaller business, which is much less dangerous, will be more delegated down to these market units. And that should make them quicker and more client-centric. We expect some cost savings, obviously, from that, but it's not a cost-saving program. A cost-saving program, you start with a number and then you allocate it everywhere. Here we start with making the organization more nimble, and then we will, as you go through that, add up all the consequences we see on the cost side and communicate that, I guess, by Q1 or so, give you an update on where we are. But we see this as basically contributing to ambition to keep the cost flat and grow the top line. I think I showed a slide in the investor day last year that over 10 years, which we had grown the top line by 6% and the cost line by 1%. So this basically improves the competitive position. Of course, the competition is also improving that. And so this is something we have to do and need to do to become more nimble and more efficient, have a higher productivity as we go forward. So this exercise will contribute to this ambition, which is a high ambition in this high inflationary environment, obviously. So I hope this gives you a bit of a sense, and so yes, definitely there's going to be some contribution from that to this ambition.

Thank you so much. Could we have the next question, please?

The next question comes from the line of Darago with RBC. Please go ahead.

Hi there. Afternoon, everyone. Two questions, please. The first one is on the lost model updates. Can you say what kinds of risks were the updates for, and if if it's possible to split the 13% between inflation and the model updates. And my second question is just going back to the SST. Did the loss assumption changes impact the SST at all? And can you say what amount of premium growth or capital usage for 2023 you've assumed within this 280%, please?

Thank you. I'll take the first one on the loss model updates. In terms of the split between inflation and loss model updates. It's roughly two-thirds, one-third is the split, so inflation about two-thirds of the 13% and one-third on the loss model update. And the loss model updates really is driven across most lines of business, so not just property. We also have model updates in casualty and also in specialty, and they reflect just our view of risk, you know, in terms of from the standpoint of both severity as well as frequency. So if you take a an event like the hailstorms in France, which sounds like you ended up with losses that have a return period that were much longer than we expected. So we go into the models, we make adjustments to reflect that. Same exact thing for a lot of secondary perils, floods, things of that sort, and also on the casualty side, you take the same exact view for frequency severity of events from a motor standpoint. So all of those we load into our loss models, and that's the driver of the loss model updates.

And maybe, Darrell, on the SST, again, this is a preliminary indication that we are providing those sort of above 280. We're actually giving you the precise number on March 16th when we come out with the economic report, and there you'll see. But just to partially answer your question, these estimates include what we believe, based on our plans and trued up for January 1, the exposures, the risk exposures that we expect to have in the next 12 months from January 1. And so, in some ways, indicating if we go faster or take some additional liability risks, that would affect the measure. And as I mentioned before, if we reduce some of the hedges and take additional asset risk, that will also affect the number. Thank you, Daryl. Could we have the next question, please?

The next question is a follow-up from Ms. Kong, Root Bank of America. Please go ahead.

Oh, thanks for taking my follow-up. On the positive development you saw in property and specialty lines, could we get more color on this and how much of this was COVID provisions being released? And secondly, could we get an update on your exposure to the earthquakes in Turkey and Syria? Thanks.

I can take both of them. On the releases, I don't think we're providing sort of the very specific detail of where it comes from. As I said, the major reduction of IBNRs for the COVID was related to actual settlement with our major clients along the way. So that's an important piece. On Turkey, unfortunately, the reality is the economic losses and the human tragedy of this event is huge. At this point of time, the insured losses seem to be an unusually small fraction compared to other natural catastrophes. For Swiss Re itself, we're in contact with both government agencies, including the people that organize a pool in Turkey for earthquake risks, but also our primary companies were not able to quantify Our specific losses yet will be coming out, obviously, in Q1. If we can provide more update in our March release, we will. Thank you, Freya.

Could we have the next question, please?

We have a follow-up coming from Mr. Hathcastle with UBS. Please go ahead, sir.

Oh, thanks very much. Two quick ones. Can you give the NACAP price increase standalone in January, if possible? And the second one, you mentioned a more cautious approach to cyber in January. I guess just a bit more color on what's driving the more cautious approach.

Thanks. I'll take the price increase one. I mean, Will, I think, you know, we cannot give you an exact number. I think suffice to say, for the non-proportional parts of the NatCat covers that we knew, the increases were quite substantial. reference the broker reports. I think there's a bunch of reports out there that gives you a bit of a sense of how the overall market did.

I think on cyber, obviously, we had a portfolio, I think, about $500 million. The price increases were significant, about 50%, but we ended up at $600 million. So both is true. We had growth in premium and we cut exposure in cyber. And It's really the environment you see. One thing is the kind of events you saw in the past, but this is an event of, I think, a heightened risk when you think about the geopolitical tensions that are existing. And so we have already the accumulation potential in cyber, which has been one of my worries and needs to be controlled. And so we cannot grow without limits. on this, and we took a cautious stance at this point in time.

Thank you, Will. Could we have the next question, please?

The next question is a follow-up from Mr. Gandhi with Societe Generale. Please go ahead, sir.

Hello. Thank you for the opportunity. Just one last from me. Can we get a sense of the expected level of NatCat premiums, given that the budget is constant YOY?

Yeah, so thank you for that. We will provide that update sometime in mid-year because it's so dependent on the upcoming renewals. We started with a portfolio of about $4.2 to $4.3 billion. So if you take the volume growth of January, that gives you a good sense that we're now at $4.5 or above that. And we'll provide an update after April and July, which will then be comparable to the $1.9 billion budget as well. Thank you for that. Could we have the next question, please?

The next question comes from the line of e-involvement with Barclays. Please go ahead.

Hi, good afternoon. Thank you very much. My questions are related to alternative capital partners, but also your view on the cycle. Thank you for this helpful detail in the presentation. I was just wondering, how do you assess the pipeline, the undeployed capital that you think may be waiting to come to the market? And with that, perhaps you could express another view of how you think the cycle will play out, the current hard market in reinsurance. Thank you.

Sure. So we were successful in bringing additional capital into our sidecar, as we've indicated. And I think part of that is because a very strong alignment of interest that we've got between our own positions and the people that come and invest with us. The market conditions are supportive for that, but I also think in the last five years, enough people have been burned by losses coming, frankly, from some vectors which they didn't expect, whether it's P&C losses related to the pandemic, the secondary apparels loading up a series of losses on people that were in retro programs. Clearly, reaching back even to 2017 with three major hurricanes, name perils also affecting not just the Katmong side, but almost everybody's retro programs. And in that context, with Hurricane Ian, I think there are people that were not really committed to this space that have decided to step out. And we don't think they're necessarily flowing back in anytime soon until the concerns around climate change impacts on that are better addressed. I think Swiss Re is addressing them and I think that's why we're able to get the funds coming in. My own sense is the supply of capacity will through 2023 continue to be limited and so the market conditions that we saw on January 1 will be maintained for the April, June, July renewals. It's probably premature to try to project into 2024 already But what's clearly emerging is there's a series of professional investors that are willing to work with people that have a shared risk profile. And there's a group of people that feel that they've been somehow taken advantage of, whether that's true or not, and are probably not going to return anytime soon.

Thank you, Ivan.

Could we have the next question, please?

The next question is a follow-up from Mr. Possar with HSBC. Please go ahead, sir.

Yes, thank you. Just wanted to check with you if you could provide an update on the loss or claims environment since the start of the year, how it went so far, if you want to flag anything that we should have in mind. And the second question will be related to the target of 14% return on equity. I fully understand that actually you don't need to change the target at the present time, but I was trying to compare the implied net income of the 14% return on equity compared to your above 3 billion for 2023. It looks to me that the 14% has been set in very different environment, both for underwriting profitability and investment income. Maybe you can help us to reconcile the two KPIs.

Thank you. Sure. So if I understood your first question, you're asking about the current quarter?

Yes, current quarter so far into the year, yes.

Yeah, so I think it's premature as we're exactly halfway through to start talking about the current quarter. But the... In general, we think the renewal has given us a good start to the year. We think the investment side has also been supportive quarter to date. Maybe that's as far as I'll go. With respect to the 14%, you're exactly right. We came out with that midterm target a year ago when our shareholders' equity was in a very different place. and when we gave a target for last year, which obviously we didn't achieve, of a 10% return on equity. The nearly $10 billion swing in our fixed income portfolio due to the unrealized losses on the investment changes or interest rate changes have adapted that. What I think is, we've left this on the page because it's, directionally where we would want to be with a normal shareholders' equity, if you will. And so we will update this in December when we give you a clear indication of where we think we're landing on IFRS. What we said in the past is our IFRS starting point on shareholders' equity, we expect to be materially above where we currently are with US GAAP. And that will be one big change between the two accounting standards. The other big change is we expect the earnings coming from our life and health business to be materially above where they are unused to Scott because of a different profit recognition envelope. And so we'll give you details later in the year on both those. But I think the way to think about the 14% is a sustainable return on equity on a more normal equity base rather than the shareholders' equity we're currently reporting, which, you know, inched up a bit here at year-end to 12.7. But, yeah, you're right. If you take the $3 billion on the current shareholders' equity, you get to an ROE of above 20%.

Thank you so much. Could we have the next question, please?

We have a follow-up from Mr. Malhotra with Mediobanca. Please go ahead, sir.

Yes, Graf, thank you. Just on the organizational chart, Christian, so also if I can ask, you know, there was a high profile moving out of in the top management and the CEO. And would you, should we expect some changes to how C3 perceives MATCAT or secondary perils, or would you rather say no, no changes?

business as usual and this is just it so just wanted to hear that yeah just to be clear no changes i mean you know we we are very close to the risk uh underwriting is the core of who we are and and of our future success uh that there's been some mistakes made in the past there's some also some successes obviously we we all learned the lessons and so we are totally focused to keep underwriting as strong as it is now i mean underwriting is not just one person obviously it's a It's a whole huge organization, and I'll be happy to introduce you to our new chief underwriting officers when the next opportunity shows. So, no change.

Thank you, Vinit. Do we have any more questions?

There are no more questions at this time.

Thank you for all the questions asked, for your interest. I'd just like to remind you that we will release our annual report on March 16. We then have our management dialogues on March 17. at our offices at Swiss Re London, so we hope to see many of you there. With that, thanks again for attending the call, and we wish you a nice weekend. Thank you all.