Swiss Re AG

Good morning or good afternoon. Welcome to Swiss Re Annual Results 2023 conference call. Please note that today's conference call is being recorded. At this time, I would like to turn the conference over to Mr. Christian Mummentaler, Group CEO. Please go ahead, sir.

Thank you very much, and hello, good morning, good afternoon, good evening, depending on where you are. I hope you are well, and thank you for joining this analyst call. So as usual, I'm going to make a few starting remarks before we go into the Q&A. Obviously, at the start, I can report that I'm very happy to have achieved all of our targets we set for ourselves in 2023, and that this allows us to actually grow the dividend by 6%. You can imagine that after the last few years, this is a very good feeling. I got feedback from Thomas and the IR team on topics that are of particular interest and where we get a lot of questions. So I thought I'd just deepen a little bit three topics here. One is reserves, one is the general renewal, and one on this new business, uncertainty load. So first on reserving, we have obviously added significant reserves to our P&T casualty, mostly U.S. liability book for up to 23%. The large majority of this was offset by significant releases in property and specialty lines, and this overall has been a theme for the last four years. Cumulatively, we have had near neutral reserves development at the group level since the beginning of 2020. Given the actions we took in 23, our casualty reserves are in a significantly stronger position than they were. We'll publish reserve triangles on March 13, together with our annual report. And these should show prudence on ultimate loss ratios and IBNR ratios. But of course, you will be our judge. And I know that every year, several of you look at those in detail, make your assessment. So we would very much welcome that. As already shown on Investors Day, we have added reserves to most U.S. liability underwriting years with the large majority in the years 14 to 19. We had some choices around where and how much we could add. but it was important to us to be prudent while delivering on our financial targets. On the P&C renewals, we achieved the attractive volume growth of 9%, nominal price increases of 9%. The price increases are shown as a function of claims, while volumes are based on premiums. So net, there was exposure growth in the lines we liked. You have seen, and it was much discussed, the 11% increase in loss picks. Roughly half of that reflects a prudent view on inflation, while the other half represents choices we made around updated model views and loss trend assumptions. The net negative implied price change was mostly driven by loss trend assumptions we are incorporating on our initial loss picks in casualty lines. The implied minus 2% point price change is also fully consistent with our communicated combined ratio target for 24, which is to be below 87%. Overall, the last four renewals that we had in 2023 have significantly improved the quality and resilience of our portfolio, but we're also making clear that we need to continue to get paid for the elevated cost of risk we see out there. A few words on the Uncertainty load we introduced in the investor day, about 500 billion, which again is compatible with our net income target for the year to be above 3.6 billion US dollars. I mean, important to state, but obviously uncertainty load is not reflected in the 11% loss peak increase in the general renewals. It's a separate reserving action that comes on top, and that's an additional layer of prudence to the underwriting picks. So if the underwriting picks are accurate, you should see or you did expect this uncertainty load will be released over time. We're not guiding to reserve release at this stage, as you can imagine, as we aim to position the overall reserves at the higher end of the best estimate reserving range. And the reserving result will be dependent on that. So there will be yearly assessment by actuaries where we are in the range and whether we can increase. But the pure mechanical impact of the uncertainty load should reduce by about $100 million per year at the beginning and then going down to $50 million thereafter, then stabilizing just above zero. And this is, of course, a function of the duration of our claims because we're going to add it to all lines of business. Some lines of business run off very quickly, and so we will know pretty quickly whether we need this additional layer of prudence or not. Again, this is a mechanical illustration and not a guidance on actual reserve leases. The priority overall is to deliver against financial targets with no separate targets for reserve movement. Maybe one word on operational expenses, operating expenses. They were up compared to 2022. The large part of that is the increase, of this increase reflects the increased variable compensation assumptions. So we obviously missed targets last year. This year we're on target. So this is a big part. You then have an FX part. and some one-off costs related to our completed reorganizations. If you take these variables away, core costs are actually flat, despite the pressures of inflation, which were very substantial. So we continue to work very hard on costs and will continue to do so in the next few years. So with the successful 23 targets delivered, we are now focused on achieving the same for 2024. And with that, I hand over to Thomas for the Q&A session.

Thank you, Christian, and hello to all of you from my side as well. John Dacey, our CFO, is also here in the room. As usual, if I could remind you to limit yourself to two questions and then rejoin the queue if you have additional questions. With that, operator, if we could start the question.