Swiss Re AG

Good morning or good afternoon. Welcome to the Swiss Reef 9 Months 2023 Results Conference Call. Please note that today's conference call is being recorded. At this time, I would like to turn the conference over to John Dacey, Group CFO. Please go ahead.

Thank you and good morning or good afternoon to everyone on the call. I'm here with Thomas Bowen, our Head of Investor Relations, to talk you through the 9 Months 2023 results. Before we go to Q&A, allow me to make a few quick remarks on the release that we put out this morning. We're reporting solid results today for the first nine months with a profit of $2.5 billion. We're on track to achieve the full-year target of more than $3 billion of net income. All businesses contributed to a strong third quarter. P&C REIT's third quarter combined ratio of 93.7%, absorbed $421 million of large NACCAT losses related to various events and a busy NACCAT quarter for the industry. We added significant amounts of assumption-driven reserves, therefore in the form of incurred but not reported reserves, to the U.S. liability portfolio, reinforcing overall reserve strength. The majority of the liability reserve additions were once again offset by releases and other lines, while the remainder was compensated by a strong underlying margin. As a result, PNC remains fully on track to achieve a better-than-95 reported combined ratio for the full year. Premiums earned in PNC REIT were up 5.4% at cost and FX rates for the first nine months. Property and specialty... Excuse me. 5.4% at constant FX rates for the first nine months. Property and specialty gross premiums written are up by about $700 million year-to-date, supported by the significant price increases we achieved through the year. Looking just at the third quarter, gross premiums written were lower by about around $400 million. The main driver of this is the fact that in the third quarter, Gross premiums written are more heavily driven by the recent July renewals where we accelerated our continued pruning of casualty lines. Premiums are therefore developing in line with our portfolio strategy. Corporate Solutions continues to deliver quarter after quarter with nine months reported combined ratio now at 91.3, well on track to achieve the better than 94% full year target. Importantly, Corso achieved risk-adjusted price increases of 5% in the third quarter. Life and Health reproduced net income of $241 million, closing some of the prorated gap of the first half relative to the $900 million full-year net income target. We continue to target a full-year net income of this amount. We had a very strong return on investment in the third quarter, of 4.8%. On the one hand, this was driven by an increase in the recurring income with the recurring income yield now at 3.7%. We also sold selected real estate positions and offset the majority but not all of these gains with targeted sales of fixed income instruments to further improve the recurring income. Group items benefited from an accounting treatment change on our FWD investment. Part, but not all, of our equity investment in FWD was at an operating company level. As a result of FWD's corporate restructuring in the third quarter, this investment, along with all others, was consolidated at the holding company level. And as a result, Swiss Re is no longer judged to have, for accounting purposes, significant influence at the holding level of the company. Therefore, this portion of the investment will now be accounted for at fair value instead of the equity method, which had previously been valued at. The carrying value in our books before this change was close to zero. The current carrying value for the fair value method of all of our equity investments in FWD is now approximately $700 million. And the P&L impact under the change of the accounting treatment in Q3 can be seen in slide 23. under the realized gains in group items. Our SST ratio of 314% as of the 1st of July remained very strong. We recently bought back $1.5 billion of subordinated debt, thereby accelerating the deleveraging plans of management. The impact of the buyback is around minus 10 percentage points on the current SST ratio. Despite this, because of changes of interest rates, we estimate that we remain close to the mid-year number. Our capital management priorities remain unchanged. Our primary focus remains on achieving our financial targets and returning to sustainable dividend growth. With that, I'll hand over to Thomas, who will introduce the Q&A session.

Thank you, John, and hello to everyone. All of you from my side as well, as usual, I could ask you to limit yourselves to two questions, and should you have any follow-up questions, if you could please rejoin the queue. So with that, operator, could we please have the first question?

The first question comes from Andrew Avicii with Autonomous. Please go ahead.

Oh, hi there. Could you give us some color, first of all, just on the nature of the assumption updates in casualty? I mean, is it related to recent years, the soft market years, expectations? I mean, presumably this is a sort of social inflation effect, but just a bit more color would be helpful. And within that, am I assuming this also applied to Corso lines as well as P&C RE? That's the first question. The second question. It looks like your risk assets went down again in Q3. You invested a bit more in credit, but there was further sales of equity, principal investments and public equities. So could you just give us a sense, do you still feel sort of de-risked relative to where you would be on a normal basis from an asset risk point of view? Thanks.

Sure, Andrew. I'm happy to try to answer the question. So On the assumption updates, this was not any sort of special event. What it was is our actuaries doing their job, working through what we've seen in the industry and obviously some of the information that came through in the first half of the year. The years where we made a more pessimistic pick on ultimate cost, are largely the soft markets 2014 through 2019. The adjustments were largely on liability, probably some commercial motor on areas where social inflation remains problematic. On the businesses themselves, this is much more an event for P&C RE then for Corso, the Corso reserving that we'd done in 2019 seems to be largely holding up. You're keenly aware, I think, that there is a position with the adverse development cover where some small losses coming over from Corso in a couple of those years but not a big deal. And again, with respect to assumptions, all these reserves went into the IV&Rs related to the year. So I think we're in pretty good shape for now, and we'll continue to evaluate what might or might not be required in future periods. But this is obviously an attempt to be deeper into a best estimate position with this additional IB&Rs that cut across these years. On the asset portfolio, on e-risk, the biggest single piece was our sale in principal investments of the CPIC position. We maintain a very small piece, but we've largely exited The investment we made for the London-based GDRs, in doing so, the numbers have fallen by probably about $600 million in that case. I think overall, we are at a risk-off position. The listed equities are close to zero. We have picked up some but not a lot. In part, the spreads on investment grades still seem pretty tight, given the potential downsides in the broader economy. So I think the answer is we're taking advantage of the higher fixed income interest rates across the yield curve, including on the short end. And at some point, we will – be more comfortable picking up some additional asset risk. But for the moment, we're comfortable where we are.

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

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

Hi, afternoon. Two questions for me. The first one is just coming back on the reserving side. I mean, I'm just trying to work out how the assumption changes into play with I guess, the 3 billion or more target and also as well kind of positive reserve development that you've seen elsewhere. And I guess if you haven't seen positive reserve development in property and in specialty, do you think you would have made similar assumption changes or do you think there's no relationship between, I guess, those things? The second question is, you know, you're well on track for the 3 billion or more target for this year. Your SST ratio is remarkably high. You know, should we be thinking about share buybacks at some point, or is there a need to kind of repair hard capital and maybe kind of, you know, in later years might get back to share buyback agenda? Thank you.

So your first question in some ways is fairly hypothetical. I think the way I would answer is we believe our reserves are in a very good position space overall. That means that there are places where we'll have redundancies and places where we might see the opportunity to reinforce. And that's effectively what you've seen us do during the entire year in 2023. Mid-year, I think the net prior year was minus 30. We felt more comfortable living with the minus 150 in the third quarter. But the position, I'd say, is we think our reserves are in a good place. The geography may need some adjustments, and that's what we're doing. The assumptions reflect, as I said, a more pessimistic view on ultimate outcomes for U.S. liability in particular. And The other thing I'd say is our targets are important to us this year, and there was a reason that we moved from a normalized combined ratio in P&C REIT to a reported combined ratio. We wanted to be sure that we captured all the movements that might occur during the year, and that includes whatever adjustments to reserve. So I think you should understand that being better than 95 is a clear and ambiguous target for us in addition to the 3 billion. On the capital, what I can say is our capital priorities have not changed and will not change. We believe in a very interesting market for reinsurance. We expect to continue to write well-priced business into 2024, and so the utilization of capital for our actual business is is clearly an objective. In the meantime, what I can also say is, you know, after we get past the first objective of being very well capitalized, and I think nobody would challenge that starting point, our goal is to increase the dividend or at least maintain it. The last couple of years where the earnings have both on a GAAP basis, but frankly on an economic basis, which is the source that's more important, have not been very good. We've still managed to maintain that dividend. In a year where the earnings rebound strongly, and currently the economic earnings are doing very, very well in addition to U.S. GAAP earnings, you should expect us to return to an increase in dividend position. I think that's the starting point. It's probably premature to start talking about share buybacks. Let us close the year, have the discussion with the board, and sort through what the capital plan that makes sense over the coming years looks like.

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

The next question comes from Ronald Priyakong with Bank of America. Please go ahead.

Hi. Good afternoon, and thanks for taking the questions. Just Following up on the reserve strengthening and liability, so it seems like there's been a bit of an acceleration in the strengthening in liability versus Q1, Q2, and driven by assumption changes. Has there been a change in reserve philosophy and prudence here, or is this more of a catch-up effect? And secondly, just on the life and health business, it feels like it's still running behind the run rate needed to hit your four-year target. And heading into Q4, from what I understand, it tends to be seasonally weaker due to winter mortality. What gives you the confidence in reaching this 900 million target? And are you seeing any potentially concerning claims trends in the book? Experience seems to have been quite negative this year. Thanks.

Thanks for the two questions, Freya. With respect to the reserving, I don't think this is an acceleration, and it's certainly not a catch-up. Again, these are our senior actuaries evaluating the trends on these soft market years and trying to predict the bending of the curve on the loss triangles. And so our view is that the ultimate is likely to be a higher charge than we clearly wrote the business and even when we probably finished last year. the trends going on in the United States continue to be sort of systematically bad. And that's not for Swiss Re, that's for the industry. And as a result, we've just proactively adjusted these assumptions ahead of any specific claims information for a good chunk of the book. On the life and health aspect, You know, again, $240 million, if that was, you know, we hit that every four quarters, we'd obviously be at our $900. The first half of the year had lower earnings in part because of a frequency, especially in Q1 on U.S. mortality. What we saw in Q3 was not a very big deviation on frequency, but a accumulation of large dollar claims. We don't think this is any way a trend, but simply just some bad luck where they were reported together in the quarter higher amount than we would normally expect in a quarter. So that's not a particular concern to us. To your point, we do have to make a little more money into four to get to 900. $270 million. We think that's well within the possibility. You should remember that every quarter we go through, the investment income continues to be enhanced by the fixed income returns in the portfolio. And then, as is not unusual in life and health, there's some opportunities for some specific transactions with clients where they're interested in closing it before year end And we're capable of bringing these things, transactions home, which oftentimes have a nice positive earnings effect for us. So, again, there's no guarantee, but the $900 million we think is within reach for life and health.

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

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

Good afternoon, everyone. Thanks for taking the questions. The first one is on premium growth. Sean, you touched on growth rates and premium. I was looking at the net earned as well year on year and it declined. We were sort of flat in property and it was down 7% in casualty. This is just Q3 discrete. I guess what were the drivers there? I'm just thinking because of the earnings versus the return, that wouldn't be because of that and shouldn't be seeing this accelerate in light of the hard market benefits. The second one is just thinking about if it's possible to get the breakdown of the 150 million or so PYD between casualty strengthening and the releases. With the amount of strengthening, it's more of a high level question but with this amount Do you think the reserves are now less likely to need further strengthening than you perhaps saw three months ago? I know you mentioned it's mostly IBNR, but I think it was largely IBNR in H1 as well. And have there also been specific notifications in the quarter that have driven this increase? Thanks.

So let me react to the second set of questions first. In the first half of the year, I think we said it was a mix of experience and some assumptions, but the clients actually provided an H1 considerable set of notices about increased losses to us, again, typically from these same years. That's flipped. There were some client activities. But as we've said, the vast majority of what we did was assumption based here in the third quarter. Obviously, we closed the first half year thinking we were at the time when we closed it. We were clearly in the best estimate range. What we saw was. this work done by our actuaries, which, again, has taken a more pessimistic view of ultimate cost, and that's why we've added the IBNRs and put them in place. By definition, that means it's less likely that we'll need more money later, but the expectation is that we probably do need or will need these reserves at some point in time, not in Q4, not even next year necessarily, but as reserves for this book, you know, continue to migrate from IV&Rs into case reserves, we'll continue to evaluate overall the positions. So, that's the, again, the view that we're comfortable With the reserves we have, we think these assumptions put us in a better place and we'll continue to monitor. On your first question, the premiums earned, you know, down on casualty, our removal or reduction in casualty is not new at mid-year 23. We've been de-emphasizing this book for a number of quarters now. and will continue to do so. The price increases in the industry have been directionally correct, but we don't necessarily believe they're sufficient and will continue to come off risks systematically on some of the US casualty lines. I think overall our view is we will grow strongly where the prices are adequate in 2024, the property and specialty lines, the price in most of these is in pretty good shape. There are some adjustments we need to make to our expected losses, some related to inflation, some related to actual modeling, and need to be sure that we cover those increases in expected loss costs by price increases as well.

And, Will, on property in Q3, there is a muting effect from a reinstatement premium that we had last year, which did not recur this year. So that's probably – that's one of the reasons why in Q3 the property premiums look a bit lower compared to last year. But overall year-to-date, as John mentioned in the opening, gross premiums written between property and specialty are up 700 million year-to-date.

Yeah, I mean, the reinstatement related to – Hurricane Ian, the pop-up at the end of the quarter last year.

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

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

Hey, guys. Good afternoon, everyone. So I've got two questions, both on casualty again, I'm afraid. The first one, Could you maybe talk about what have you seen from your students so far? Is it patrons getting a bit longer or anything at all that you can point to? I suppose, do you feel that at an industry level, there's more of a catching up to do across the private primaries? And then secondly, just in terms of the more recent underwriting years, Did you adjust your logistics there as well? I guess are you still confident in the underwriting margins for some of these more recent underwriting years? Thank you.

Yeah, so what I can say in the third quarter is we didn't see any increase in actual claims being presented to us from prior quarters. So there doesn't seem to be any acceleration, and again, reiterating that our assumption-based reserving was an extrapolation from a broad set of data the actuaries were able to spend real time with. I think I wouldn't be able to say whether the industry is systematically under or over-reserved in this. What I can say is On our own book, again, we think these adjustments, not only the assumptions in Q3, but the other strengthening done in the first half of this year on top of the inflation reserves we set up last year, are all putting us in a much more robust position on a going forward basis. And I apologize, I didn't write the second question. lost picks on more frequently. Yeah, sorry. In recent years, we've systematically taken a more prudential lost picks on initial costing and then even made some adjustments on what we would refer to as APLRs to continue to be sure that we're correctly booking the years from 2020 forward. 2020 continues to be a bit of an odd year affected by the pandemics of the actuary struggle probably a little more than otherwise, but I think we didn't leave ourselves exposed in these recent years the way that with hindsight we were exposed in the soft market.

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

The next question comes from . Please go ahead.

Hi there. Most of my questions have been answered, but I've got two. One of them is what brought me on the outlook for NACAD reinsurance. Obviously, we've seen lots of losses in Europe this year, and undoubtedly, These are causing some pain to the primary players. So I was interested in how do you see the dynamic between demand for more protection and capacity going into renewals. I guess, would the primary players want to buy more insurance or do they treat these storms as sort of one of, and if more demand is actually sought by primary players, would it mean that attachment points will need to come down in order for this to get fulfilled? So I'm just interested in how this can play out. And the second one is your thoughts on Hurricane Otis and what's your thoughts on potential losses coming from that? Thank you.

So on the first one, I think it's not just Europe, although we've seen in Q3 lots of weather events and obviously in the Q4 across Europe. But the U.S. has also seen a – enormous number of secondary peril events which typically have been left on the P&Ls of the primary companies. There may be some reinsurance recoveries, but not many. And in this context, I think the hypothesis underlying your question is exactly right. The This is not a light-knock cut year. The preliminary estimate from the Swiss Reinstitute has us at least $80 billion at nine months on for another $100 billion-plus full year. And in that context, there's clearly been a larger burden carried by the primary industry given the change in attachment points of reinsurers and the renewals to date. So we do expect a very strong demand from the primary market. It's not clear that we're going to be able to meet in the layers that they might be most interested in getting covered. And so I think there's a lot of discussions to be had between now and January 1 and then during the course of 2024 to figure out what both price levels but reasonable attachment points might be for the industry. What I can say is to date, we seem to see a good discipline by the providers of reinsurance to make sure that the economics continue to be adequate for what we're booking and we'll be able to say more in the coming months. With respect to the Mexican hurricane, it's too early for us to even have our own loss, much less an industry loss on this. I think the fascinating dynamic there was the velocity of the intensification from a tropical storm to a Category 5 hurricane. And the nature of the hurricane was... structurally different than many, the overall size was quite limited, and unfortunately for the citizens of Acapulco, it was close to a direct hit there, but I think it just reiterates that ocean temperatures matter, and the development we saw with this but also with Idalia, which formed on the west coast of Florida in August, means that the models need to continue to be evaluated and potentially adjusted for the damage. I think on the Florida case, the industry was just plain lucky for where landfall was made. in the Big Bend Wildlife Reserve, the damage of a level three hurricane in Florida probably should be expected to do a lot more in terms of insured losses than what this one actually did. So, yeah, I think there's reason for people to be concerned.

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

The next question comes from the line of James Shuck with Citi. Please go ahead.

Thank you. Good afternoon, everyone. John, my first question, you mentioned in the opening remarks about accelerating deleveraging plans. I'm sorry, I missed it, but I wasn't entirely aware that you had any deleveraging plans. Perhaps you could just elaborate a little bit on that. The 1.5 debt buyback. I presume that should be balanced up with alternative, which would be a share buyback. So when we're thinking about an ROI on those two things, then it seems to me that they shouldn't be mutually exclusive. But perhaps you could just clarify that. Second question was around the other expense ratio in PCE. It went up, I think, 90 basis points in Q3. So 5.1 to, sorry, 9 months, 5.1 to 6. You mentioned adverse currency. You also mentioned higher variable compensation. Perhaps you could just sort of revisit what you're doing in terms of cost control and maybe matching, you know, versus your actual revenues and earnings because that's quite a big jump. And I guess my question is how sticky is that 6.0? Is it going to rebase back down again going forward? Thank you.

Sure. So on the first one, on the leverage, we've got another $1.3 billion maturing or callable during 2024. And I think we've been fairly clear that we would be retiring a decent amount of that debt. The acceleration on 1.5 I think is all very comforting and brings us down to a overall level after next year's calls or maturities, which would put us at the lower end of the range that we've publicly indicated. So I think that's where we'll likely stand for some time. I agree with you that the you know, the overall capital strength of the group allows us to do that when you start at mid-year 314% SST, where the changes in the S&P capital market capital model have clearly been beneficial to large diversified groups like Swiss Re. So I don't think... moving on this debt will have a big impact on the way we think about the potential for share buybacks or other capital repatriations. On operating expense, we're, again, 12 months ago, with the losses that we had on Ian, it became clear that we were going to miss all targets in the group. The net income, the P&C REIT, of course, was able to weather it fine, but it was a dramatic shift from where we thought we had been at mid-year, and so that we already reduced dramatically the budget for variable compensation based on the strong expectation of a big miss. Instead, with the delivery of the billion of profits and the quality of the earnings through nine months here, we're feeling pretty confident about our ability to get back into a positive momentum on variable compensation. And so that's been a big swing year on year. It wouldn't have been a big swing or nearly as big a swing from last year if we hadn't reduced the accruals based on the nine-month loss that we had. Overall in cost, we remain committed to keeping core costs flat in spite of the premium growth in all three of the businesses, and so you should expect that we are able to maintain a strong cost control for the non-variable dimensions.

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

The next question comes from . Please go ahead.

Thank you very much. A lot of my questions have been addressed, but quick ones, please. Just on the motivation to understand the future risk to casualty reserving. I'm just trying to understand, is this 3Q specific charge more linked to the younger years like 2018 and 2019 or would you say it was kind of equally or widely spread in the 2014 to 2019 range you indicated? So that will help us understand if something new was added and then we can kind of feel more comfortable that this is nearing the end of current cycle of reserving so that's the first question second thing is just on the sales of bonds at a loss that now you're doing should we expect some kind of a pickup in the quarterly run rate that investment income will produce or will it take some more time say a year or two before we start seeing more of it just a bit of clarity on that thank you

So, in your first question, I mean, I think, again, over the last couple of years, we were surprised by the strong negative development in 2014 compared to what had been much better behaved previous years to that. And, you know, material reserve increases made along the way. I think on the assumption basis, it probably is weighted more towards the 17, 18, 19, as the curves of 14, 15, and even 16 are flattening out, which is not to say there won't be claims that still come from these years. But we've got IBNRs in place, and I think we're feeling better about it. I'm not sure I understood exactly the question on the investment income.

On the realized losses we took, it will have a small positive impact, of course. It wasn't a dramatic amount, but it will continue to benefit the recurring income yield. I think we've guided to around 700 million pickup in the year. We were at 600 after three quarters, so slightly ahead of plan.

And I think part of that is obviously the long end of the curve has been very interesting most recently, but even in the short end, our ability to invest consistent with the ALM matching that we obviously pursue has just helped us a lot. So we're looking at 100 to 120 basis points on new fixed income investments compared to where the current rate is, and it's going to be helpful every quarter. I don't think the actions we took will have a dramatic acceleration in that, but directionally it will provide us some additional funds next year.

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

The next question comes from Elena Fervas with BNP Paribas. Please go ahead.

Hello, just one from me, please. Again, on US casualty, but it's a question on pricing. Clearly, pricing on the property side has been much better this year, but I assume you haven't been able to carry sufficient rates in the casualty areas where you've cut back. I'm wondering, do you think you'll have to shrink the casualty book to get it to a sustainable combined ratio? or you may be a bit more hopeful that market pricing will start to turn more favorable to help you reprice where you need to?

So the primary market has seen, and we see this with the European part, of course, so casualty rates have improved for primary markets. players. There was some confusion over the last two years, I think, about what should happen to commission rates for reinsurers, and I think that confusion has disappeared from the market. I think the losses that are coming through make it very clear that rates need to continue to move up, and the conditions on which reinsurance is provided should not be at disadvantage compared to where the primary companies are booking their positions. That said, we remain very cautious on U.S. liability in particular and some of the other U.S. lines where social inflation remains a unsolved problem. And so we will continue to be very particular in what lines we extend and what economics. We are a large casualty underwriter. We're not abandoning the line of business, but we will be much more selective in where we expose our balance sheet as we go into the 2024 renewals.

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

The next question comes from Ivan Vaknat with PowerCliff. Please go ahead.

Hi, good afternoon. Thank you very much. I've got a couple questions on property, actually. I was just wondering if maybe, firstly, if you could define on why has there not been more capital raising in the sector? What do you feel holds back players from deploying more capital at the NAPCAT and broader property businesses? And secondly, given your own quite positive experience so far this year, would you expect to deploy a lot more in 2024? Would you expect to deploy more of your own capital or we should continue for you to utilize ACP quite extensively?

Thank you. Well, thanks for the questions and thanks for moving on from casualty. I think there hasn't been a lot of capital raised for two reasons. One is most of the players in the market today have adequate capital to write more business should we choose to. And so it's not been a constraint for traditional reinsurers typically. What has been somewhat of a constraint is the price being charged by – in the ILS market for retro covers for people that are highly dependent on retro. We're not one of those players, and so we feel less constrained, I think, but everyone knows that we've got the level of capital to be able to deploy should we choose to. I think the biggest issue here is the layers in which we're comfortable participating on, and while we could book large amounts of premiums if we were to dive down into lower layers. We don't think that's economically smart, and we'd rather stay close to the positions we have today in the various towers. Now, to the degree that asset values continue to increase and primary companies need more cover in the higher layers as well, we're happy to expand the positions there in the first case. The deployment, as you say, looks awful attractive in the current year, given the mine ratios we're showing in property. I think we shouldn't confuse ourselves. There is some positive underwriting impact that's showing up in that rate. But we've also been, as I said, a little lucky this year. The difference in the losses associated with Idalia and Eden on a market basis is probably 30 plus billion for the industry. And so, you know, a similar hurricane hitting different places on the west coast of Florida has this massive impact. So I think that plus the appropriate concerns on secondary referrals is probably keeping a fair amount of people on the sidelines recognizing that these losses are in the market right now being carried by the primary companies and and we'll see how the discussions for the January 1 renewal will turn out.

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

As a reminder, if you wish to register for a question, please press star and 1 on your telephone. Star followed by 1. And we have a follow-up question from Mr. Malotra, Mediobanca. Please go ahead.

Oh, thank you. That was great. So for me, the one question remaining is on inflation reserving because, you know, I think in the 1H region, I think, John, you'd mentioned that some of it was conservative and, of course, inflation is kind of maybe coming back into control. I know wages aren't, but I'm just curious whether there's anything in these 3Q reserves on inflation. And then if I can use this chance to follow up on this primary debate, is there a risk that you know, the market or the prime reason are hurting and they want something and then the insurance don't provide it and then they find some other solutions or becomes a missed opportunity or are we still not yet there, you think? Thank you.

So on your second question, we're, you know, our teams are working very, very closely with, you know, 14,000 primary insurance companies around the world to figure out how we can be helpful in managing their risks. I think we won't always give them the answer they want, but generally speaking, we try to be constructive and helpful in working through some of the challenges. I think part of it is just reflecting, given our view of risks and appropriateness of pricing, the fact that the primary companies, broadly speaking, need to continue to get rate for properties exposed to secondary perils in particular. And so if you're going to include a flood rider on a homeowner's policy, that you need to charge something appropriate. And when you do that, then you can buy the reinsurance behind it. Again, there might be some issues with attachment points But that's an easier problem to solve if the overall view of price is in order. With respect to inflation, again, we did a massive reserve additions in 2020 to cover it forward. We evaluate every quarter. What's required, some of what we reserved probably didn't, wasn't actually needed in a couple of the lines. As you say, the inflation in a number of sectors is reducing and may not have been as severe as we originally expected. We continue to roll it forward for any new inflationary pressures, but obviously it's All the business we priced this year has been priced with an inflation component already built in. What I think is important is the vast majority of what we explained at six months was a remaining $1 billion of inflation. IBMRs is still in place. So we've not done any giant release here. This will earn out over the coming months. quarters. Some of it's related to some mid to longer tail lines. Some of it's still the remnants of shorter tail lines, which in the next two or three quarters would probably exhaust themselves. But what happens is you simply move these over into the case reserves with a certain level of I wouldn't say automatic migration, but something close to that.

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

The next question is a matter of follow-up from Mr. Bachman. Bach, please. Please go ahead.

Hi, thank you very much. Two rather small questions, but actually related with what Vinit just asked. We have had two large cases where, you know, you've added significant reserves. One was COVID, where you have been providing us a breakdown of case versus IPNR. And the second one was the Ukraine conflict. Maybe here specifically, if you can comment on the recent settlements in the aviation space, do they do much to your loss estimates? Thanks.

Yeah, so we're observing the actions in the aviation space on Ukraine. At this point of time, I don't think they're broad-based enough for us to have a position which would change. I think, again, we've put up approximately 400 million of reserves. Most of those are, or the vast majority are, and aviation is the largest single category in which those reserves exist. We'll watch the space. There's nothing that's happened that has given us cause for concern that we would need additional reserving, I think is the right way to think about it for the moment. I don't know if there was a question around COVID. No, okay.

Just observe that we provide information. Thank you, Ivan. Are there any more questions?

I don't know more questions, sir. Back to you for closing remarks.

Thank you for all the questions. Should you have any follow-ups, please do not hesitate to contact any member of the IR team. We have our Investors Day in four weeks and we of course look forward to welcoming as many of you there as possible. It's taking place here in Zurich and it's a hybrid event. So with that, thank you again for your questions and we wish you a nice weekend. Thank you.

Thank you all for your participation. You may now disconnect.