Swiss Re AG

Good morning or good afternoon. Welcome to Swiss Re's half-year 2025 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 Andreas Berger, Group CEO. Please go ahead.

Thank you very much, and good morning or good afternoon to all of you. I appreciate you taking the time to join us today, so thank you for that. Before our Group CFO, Anders Malmström, walks you through the details of our half-year results, I'd like to start with some scene setting and brief remarks. Today, we're pleased to report a strong net income of $2.6 billion for the first half of 2025, resulting in an annualized ROE of 23%. All of our three business units delivered their fair share, and we also benefited from a solid investment result. The main driver of the fact that we were able to achieve around 60% of our full year net income target of more than $4.4 billion has been the strong underwriting contribution of our P&C businesses. Here, we benefited from relatively quiet second quarter with respect to large losses after a tough start to the year as we all know. Large losses in the second quarter were modest across P&C RE and Corporate Solutions, coming in below $150 million, entirely from main man-made events. This means that we did not consume our NADCAT budget in the second quarter. While this explains the Stronghold Mark Ratio results, we did allocate a reserve for current year losses that may not have the losses that may not have been reported to us yet by the time we closed the quarter, thereby adding an increased level of resilience to our P&C units for the second half of the year. Our P&C reserves remain resilient. The positive nominal reserving result for the first half amounted to around $300 million with the majority in P&C RE. I'm happy with the outcome of the renewals of this year in P&C RE. Market participants largely maintained the discipline on terms and conditions. Overall pricing is still attractive, with the picture across lines of businesses being more nuanced, given the different stages in the cycle that each of the lines of businesses is in. This is very important to us. as not all lines are correlated, meaning there's not just one single cycle. In property, despite a decline in risk-adjusted pricing, we achieved attractive margins, particularly in the NATCAT space. It's important to note that current reductions are occurring from very healthy levels, which puts the observed pricing pressure into perspective. In casualty, we saw nominal price increases in the mid-single to double-digit range, which were largely offset by our prudent loss assumptions. And in specialty, we successfully defended our attractive margins. The outcome of mid-year renewals was consistent with those of January and April, reflecting a continued focus on underwriting discipline and prioritization of margins over top line. We increased volumes in our property and specialty lines by 5%, while further significantly reducing our casualty volumes by 27%. We achieved nominal price increases of 2.3% on our overall portfolio in the mid-year renewals, or negative 2.4% on a net basis, meaning post the impact of higher costing loss picks we have taken. Year-to-date, we have achieved 3% volume growth, while the net price change of a modest negative 1.8% is supportive of our 2025 targets and, again, reflects the overall discipline that we continue to maintain. When you combine volume and price developments, P&C REIT's new business CSM of $2.2 billion in the first six months of the year is unchanged from the same period a year ago. That's a very solid outcome. And to stress again, we have no top-line targets. The focus is entirely on maintaining healthy risk-adjusted margins and a high-quality portfolio. Life and health. Life and health really produced a solid first half result. The $839 million U.S. net income It's just above the pro rata target requirement of $800 million, so overall we're on track. We continue to have some noise from smaller portfolios where experience lags expectations, but this is within manageable levels, and we expect this to fade a few quarters into the future. Importantly, our largest portfolios, most notably U.S. Mortality, are performing in line with expectations. We continue to make progress on our costs. Our admin costs for the quarter are in line with the cost ambitions outlined during our investor event in December last year. Accordingly, we're on track to reduce our cost run rate by around $100 million this year at constant effects, contributing to the overall target of $300 million by 2027. We will break out details on this for you in the future. Now, we're confident, but we remain vigilant as we look ahead. Priority number one is to deliver on our targets. And we remain in a good place to do that with all three business units on track. And I also told you that we have a second priority. which is to increase the overall resilience of the firm. Also here, I feel we have made very, very good progress. The actions we have taken on in-force reserves in P&C RE and Latin L3, the underwriting and reserving of new business, and to focus on operational excellence and efficiency across the firm are all part of it. We will now see what the second half of the year brings. as we enter the peak of the wind season. The macro environment remains uncertain with abundant risks around us. To all of this, our focus on underwriting excellence is unchanged. And with that, I'd like to hand over to Anders to you, our Group CFO. Over to you.

Thank you, Andreas. And again, good afternoon or good morning to everyone on the call. I will make a few remarks on the results we've released this morning. before we go to the Q&A session. Andreas has taken you through the highlights of our overall strong first half results. Let me add a few further details. On revenues, the group's insurance revenue amounted to 20.9 billion US dollars in the first half, down from 22.2 billion dollars last year. Please note that we have adjusted last year's first half revenues down by just below $300 million to reflect the updated methodology on netting profit commissions. Last year's first half service expense has changed by the same amount with no net impact on the P&L. This provides for a better like-for-like comparison. The $1.3 billion decline has a few major drivers, most of which were already highlighted in the first quarter. The termination of an external retrocession transaction in Lightning Head 3 with no bottom line impact, which inflated last year's first half revenues by about $0.4 billion. In corporate solutions, the non-renewal of the Irish MedEx business accounts for a 0.2 billion reduction in revenues versus last year. And the decrease of 0.7 billion US dollars in P&C RE is driven by the pruning of the casualty book and increased revenue seasonality between first and second half of the year in property and general multiline. For the second half of the year, we currently expect, subject to FX movement, revenues to be higher than in the first half by around 1.5 billion US dollars. The main driver here is the seasonality of expected NatCat claims in P&T RE and corporate solutions. You will hear us continuing to stress earnings are what matters, and we continue to see good resilience here. Despite some pressure on rates across our P&T businesses, The new business CSM production of the group remained healthy at 3.1 billion US dollars in the first half of the year, up marginally from last year's $3 billion. Let me move on to the insurance service result of our businesses. In P&T RE, you will continue to notice a decline in the CSM release versus last year's period. The $1.4 billion 1.4 billion release in the first half is down from last year's 1.8 billion. The decrease is driven by the earn-through of prudent initial loss picks, including the impact of new business uncertainty allowance. Experience variance and other, as we call it, and which includes all variances relative to initial reserve assumptions, amounted to a positive $102 million in the first half. This figure was negative after Q1, largely as a result of the high large NATCAT and manmade losses. The low large loss burden in Q2 drove a positive 242 million overall experience in Q2, and this has resulted in an overall positive first half. Total first half large NATCAT losses of 556 million almost entirely from the LA wildfires, were below the first half budget of 778 million US dollars. Large manmade claims amounted to 213 million US dollars, which is still slightly higher than what we would normally expect to see in an average first half. The overall positive experience on large claims was partially offset by current year reserves we set up for attrition losses of more than $200 million that may not yet have been reported to us, which reflect a cautious stance we are taking as we enter the second half of the year. Importantly, we benefited from a positive prior year result. Nominal reserve releases in P&C RE amounted to around 250 million in the first half. In terms of the combined ratio, P&C RE's the first half results of 81.1% is well below the 85% target we have for the year, strongly hedged by the 76.3% of the second quarter. Moving on to corporate solutions, the first half CSM relief of $451 million is above last year's $440 million, driven by higher in-force margins. Experience variance and others was positive at $65 million. This reflects favorable underlying performance and a positive prior year reserving result, partially offset by an allowance for expected claim seasonality due to late reporting. Large NAPCAT claims of $60 million were driven by the LA wildfire loss of $50 million, below what we would have expected for the first half. Large man-made claims in the first half amounted to almost 200 million, which is slightly above average, offsetting the good luck on large NatCat. Proper Solutions 88.2 combined ratio for the first half compares to our target of less than 91% for the full year. So clearly a good base to take into the second half of the year. Finally, Life and Health III. The first half CSM release of $846 million is below last year's $918 million, mainly because of the assumption reviews carried out and booked in 2024. Experience variance and others amounted to negative $197 million in the first half, which primarily reflect impact of selected assumption updates in onerous business and volume updates. Overall, actual claims experience was slightly positive. We are focused on reducing the noise from some of our smaller portfolios where actual results have lacked expectations. Our goal is to achieve a neutral experience variance in the near future. Life & Health Reef net income of $839 million, as Andreas already mentioned, is just above the prorated $800 million share of our $1.6 billion portfolio. full-year target. We benefited from solid investment results with the ROI of 4.1% slightly ahead of last year's 4%. A large part of the increase is due to the realized gain we achieved on the sale of our definitive stake in Q1, which was partly offset by targeted sales on fixed income securities. Recurring income remains healthy, standing at $2 billion in the first half. Lastly, a few words on capital. We estimated the group SST ratio at 264% as of 1st of July, 2025. This is seven points higher from where we started the year. That's where I will leave it for now, and I'm happy to hand over to Thomas to kick off the Q&A.

Thank you, Andreas. Thank you, Anders, and hello to all of you from my side as well. As usual, before we start, if I could just remind you to limit yourself to two questions. And then if you have additional questions, kindly rejoin the queue. With that, operator, could we please start the question?

The first question comes from Kamran Hossain from JP Morgan, London. Please go ahead.

Hi, afternoon, everyone. Two questions for me. The first one is just, I guess, looking at profitability and P&C, you know, I think it's pretty clear that there's a healthy difference between what you're targeting, you know, the best in 85 and where you're running underlying. Just noting like Andreas's comments around resilience increasing the business, what's the potential for maybe the gap between the underlying and what you're targeting to get a little bit smaller? Just interested in kind of your attitude towards that or, you know, or are you happy with 85 to the right number, keep delivering that and, you know, see upside wherever you can. The second question is on the life and health book. Just intrigued about the comments about you wanting to become experience-variant neutral. What's the journey towards doing that? Is that some negative hits on the way in terms of timing? Kind of what does that look like? Just interested in kind of how you get to that position. Thank you.

Thank you, Cameron. Let me start with P&C and maybe you want to take the last one. So first of all, We're not managing, you know, the reserves towards the profitability. It needs to be defendable. And we explained previously already how we changed our reserving philosophy. So that's the one aspect. And the second one, the question is really whether an 85% combined ratio is a good one or not. Of course, 85% combined ratio is a very good one, particularly in comparison to the history and in particular the soft market cycles that we came out from. So where is the right level of combined ratio? That obviously depends on the shape of your portfolio. We see that we have reduced significantly our casualty book. We are very well diversified in our portfolio. We see that the lines of businesses that we're in, not all of them are correlated. So we then also see that the trends that you can see maybe on the pricing, on the rate developments, are not valid for all individual part of the portfolio. So an overall 85% or we said better than 85% is very good. We also said at the end of the year, last year, when we talked about the visibility suddenly of the earnings power of our portfolio and the underlying quality of our book that we shouldn't look at it as a run rate. So we are in a volatile market and we need to manage volatility And if you now are in a cycle where you show below 85%, or actually they are in Q2, a 76% combined ratio, that is very good. But that quarter, as we said, didn't show any net cut, only large man-made losses. And even there, it was all within our expectations. So that's all I can say. If we are better than the 85 towards the year end, that's exactly what we targeted. And we always said, first priority is hit our target. Second priority is increase resilience of the group. And we're happy with the position we have at the moment.

Okay. And maybe just a few words on life and health overall, and then I can go into a detailed question. I mean, overall, we feel comfortable with the reserving. we had positive claims experience over the quarter and actually the half year and we also had on the large portfolios we actually had positive experience so US mortality was positive so that's good but we have some smaller portfolios that we're going through right now that are not meeting expectations means that the experience is not as we expected and we had to change the assumptions and we're still going through further and smaller portfolios and so that's why we kind of foreshadowing that there will still be a few quotas where we will have some volatility. It doesn't mean we expect anything right now because we don't know, but just experience told us that the smaller ones can also have some experience variances. That's exactly what we do now. But the key point is the large ones are performing as expected, and the overall reserving is fine and comfortable with.

Thank you.

Could we have the next question, please?

Yeah, sure. The next question comes from Andrew Baker from Goldman Sachs. Please go ahead.

Great. Thank you for taking my questions. First one, just on the revenue outlook for the second half, can I just confirm what I think you're saying? So I think you're saying life and health RE broadly in line with the first half. Then you get the $1.5 billion second half benefit from PNC RE, of course, and the majority of that is PNC RE. And I guess is that based on where sort of FX levels are today? So just confirmation there would be great. And then secondly, just staying on the insurance revenue on the PNC re-side, what's driving the increased seasonality between the first and second half in property and the general multi-line that you call out in the slide? Thank you.

Okay, maybe I'll start with the second question first. I mean, what really drives the seasonality is the NATCAT experience because NATCAT has seasonality. Usually in the normal year, I think you see much more nut cut coming in the second half of the year, which then gives you a higher revenue that comes out of the reserves for the second half of the year. That's really the seasonality that drives. The first question, yes, this is a constant FX. So we obviously assume that FX will not move. And then the... On life and health, you're completely right. I think you can expect that to continue, P&C-RE, exactly the 1.5 that we mentioned. And of course, I think it's also, you have some seasonality there, but I think this is partly upset by the increased impact from the Med-X and non-renewal that we had.

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

The next question comes from Wilhard Castle from UBS. Please go ahead.

Oh, hi. Thanks for letting me ask the question. The first one, just verifying, actually, just what you just said there. That premium move is that constant FX. It won't move. Do you mean year over year it would be the same as 1H last year, or it would stay as that spot is broadly today? The second one, probably the more important one, just really thinking about moving parts in that potential combined ratio number. You said a lot about where net pricing is, et cetera. I'm just trying to think about that business mix shift and implication onto it. What would be the spread broadly between the casualty and the rest of the book? And then, I guess, with the renewal impacts and when that revenue change, what mix reduction do you anticipate to be for casualty relative to the rest of the portfolio? Thank you.

So maybe the first one, yes, is spot FX. Basically, what we're doing with FX is where it is today. I think that's what we meant. On the second one, your question is if casualty reduces in the mix, how does this impact the overall combined ratio? I think that's the question, and obviously I think this will improve the combined ratio going forward, and that's what we would expect. The exact number I think we will see. over time, but I think clearly improvement in profitability for the full book through that mix.

It's important to note here also that we try to manage the tail. So we have a duration of our book that is significantly reduced now. So we can be much more reactive and quicker in addressing unprofitable pools also unfavorable developments, A versus E, that is much quicker now to be addressed in a book that has a tail that is much shorter.

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

The next question comes from Shanti Kang from Bank of America. Please go ahead.

Hi, yeah, thanks for taking my questions. So I was just thinking about the forward growth path from here now that you've done all the pruning work on the casualty book. How should we think about your appetite going forward and what your growth strategy is, given that prices have started to come down a bit? Maybe you could talk a little bit about the underlying dynamics, which would make certain lines more attractive than others. And then I don't think I heard this or you mentioned it, but on the life and health side, it looks like there was some assumption updates on the onerous contracts for this quarter. Could you just help us understand those tweaks? and the underlying drivers for those. Thank you.

Maybe again, let's split it up. I'll take the first question. Anders can take the second one. So we believe that we are operating in a very attractive market environment. We see increased demand for reinsurance, not only in CAT, but also in CAT. And I think that's good news. What we do is we manage the cycle and we manage the exposures. And that's something that we are very happy with and proud of, that we increase the discipline in managing these cycles, in addressing the right KPIs and translating them into our costing and then bringing it into a price in the market. So we believe that if the market stays disciplined, there is great opportunity for us. There's plenty of opportunities. We call it the target liability portfolio where we We'll have a five-year forward-looking view on how markets are developing, particular rates are developing per line of business. And then we look at focused growth areas that do not correlate with those lines of businesses where the rates are actually going down. And that's exactly where we're focusing on. So that's a product lens. But then we also overlaid with a territorial lens, geography. And you can see it also in our numbers. We have seen a decline. or a stable U.S.-America portfolio. Why? Because of U.S. casualty. You see that property specialty in particular are very, very attractive areas where we see growth opportunities, and this is almost across the board in specialty. And this is true for basically all P&C businesses. You might see it also in the market. Yes, there are others who also see this as an opportunity and attractive growth area. So expect more there. So I think it's good. So we deploy capacity where it's attractive, and we look at the mix of our portfolio that we are consistently delivering on what we target.

On the life and health side, you know the assumption updates, and I mentioned that before. when we talked about the potential volatility in the result, it's really small portfolios that we have that we updated in EMEA. It's mostly on the health and disability side where we have them updated. But it's really the small portfolios that I mentioned before. That's where we updated assumptions.

Can I maybe just add one thing on the growth areas? Because you can see that as the rate were hardening, the professional buyers and sophisticated buyers of reinsurance have obviously looked at their own resilience and risk financing structures. And you see some of them actually taking premium out of the market and managing themselves. They have very solid balance sheets. But that, again, creates an opportunity for us to provide solutions, structured solutions. And the same happens, by the way, also in the primary commercial space. where the large captive owners take premium out of the market because they feel it's too high. But then, again, with our leading position in the alternative risk transfer space, we can provide a full one-stop shop service for captives, fronting for the captives, structuring within the captive and sitting behind the captive as a reinsurance proposition. So that's a pretty attractive proposition that not everybody can provide.

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

The next question comes from James Shack from CT. Please go ahead.

Thank you, Anne. Good afternoon. I have one observation and then two questions. The observation is just on the insurance revenue in PCRE. I think there's a little bit of confusion for us here because we're trying to track how you're growing over time, particularly through a soft cycle. But I think in the accounting, particularly because you're not under PAA, approach makes it pretty difficult to do so. So the observation would be, you know, it might be helpful to disclose the gross written premium and the net written premium so we can actually track that more meaningfully. On my two questions, firstly, I just wanted to return to the life and health review, just be crystal clear about what you're saying on the experience and other variants because that was obviously a very negative figure in 2024. It's still negative. When you're saying that, you know, you're expecting that to go to neutral, a little bit of volatility in the coming quarters perhaps, is there anything else, you know, inherent structurally in that number? Or should essentially that 832 that we saw in 24, should that just go to zero? So that's the first question. And then secondly, just a very simple one really. On P3, the new business CSM, which as you say is kind of flat, you know, at 1H, Can you just comment on your ability to grow that in absolute terms through the current cycle, please? Thank you.

Okay, maybe I start again just on the life and health. I mean, the way you should really think about it is that we have multiple larger and smaller portfolios. The large one, they're all performing really well. I think the mortality business what we see right now is positive. And that is by far the biggest one. And that was the problem child over the last few years. I think that's fine. And now we're going through the smaller ones. And we just want to make – and you update the assumption constantly. And I think we're now going through the smaller ones. And ultimately, we want to be in a position where we are on the prudent side. Similar to what we discussed on the PMC side, you want to have the best estimate that is slightly above the mid-range. so that you have a positive experience or a neutral experience over time. And I think that takes usually a bit longer on the life and health side than it takes on the P&C side. That's exactly where we're going to go. And now we just have to go through the small portfolios, which also take time, just because there's many different smaller portfolios. But we want to be exactly the same situation where you have... kind of north of the midpoint of the best estimate range to have a positive or neutral experience. And then on the European theory about the new business CSM, I think first of all, I mean, this is maybe also a comment to your comment, because I think what we try to tell you is revenue is probably not the right measure to think about the real impact of new business growth. it's really the CSM. And the new business CSM, I think, really gives you what ultimately, what value is generated to new business. And what you see here is that even though people talk about, you know, a weaker environment, I think what we're actually showing you is the CSM is exactly the same as the year before, which means I think we are able to generate growth in that environment because we kept the value of the business the same despite having a more conservative approach, and I've lost it, we have an uncertainty load, that all goes into the new business CSM, and then will over time return as a profit back to the bottom line. I think that's really how we think about it. That's when we say we don't manage top line, we manage bottom line, we actually manage new business CSM. That's what we really manage.

And I can repeat the comments that I did, I think, many times before. To grow in our industry is not a problem. But to create value and to grow in the right areas, that is the challenge, and that is a challenge that we're taking on. So that's why we're focusing on the new business CSM rather than pure top-line numbers.

Just been asked to clarify some of the introductory comments on the revenues. So for H2, we are basically saying that revenues we expect currently to be about $1.5 billion higher than H1 this year, roughly at the current FX, where FX is today. So subject, of course, to any future changes. Thank you, James. Could we have the next question, please?

The next question comes from Vinit Malhotra from Mediobanca. Please go ahead.

Yes, good afternoon. Thank you. So my two questions, one on P&C re-reserving, please, and one on corporate solutions profitability. So on the P&C re-reserving, I appreciate the resilience from last year. It's higher, of course. But, you know, when we see the casualty 27% cut, I'm just curious, What's driving that? Whatever has driven that, does that mean that the results are still fine for casualty? Because obviously you must have seen something worsening which has prompted such an aggressive pruning. And then I presume the results are still fine for casualty. So just a little bit more assurance on that or positive messaging on that would help. Second question is on corporate solutions. So I noticed the risk-adjusted rates is quite a big worsening in 2Q. I think it was minus 1 in 1Q and it's about minus 7 in Q2 or something like that. And there's also mention of stringent portfolio steering. So obviously, we see corporate solutions running below the 91 already. But with this kind of a price cut, any comments on that? And then how are you sure of, how are you confident about the target when you see a 7% price cut as well? Thank you.

Just first question, were you seeking assurance? Yes, I can give you the assurance. We said last year that the decisive actions on the reserve increase should give us comfort And I mentioned that now I can sleep easily. And that's something I would like to confirm again here. The reduction of our casualty book is just a consequence of understanding where we stand around rate adequacy and the A versus C analysis. We have done plenty of analysis, detailed analysis, on where are the healthy portfolios and where not, the risk pools. And we have seen that in certain areas we would like to really reduce our exposure because we do not have very good comfort levels around the A versus C analysis. So assurance, yes, and the fact that we're forward-looking, moving into prudent territory and not stopping underwriting. So we believe that after the pruning situation in the casualties. We are actually where we wanted to be from a peak 17% market share now to around 5%. I think that's a good area to be in. And going forward, we have addressed the costing and we'll see whether the rate adequacy can be achieved in the market. If not, we stay away from it. So that's the situation on the P&C resilience of the casualty side. You want to take the causal one, not the profitability, because I think the causal profitability is actually very good. And you can look at it from all angles. Rate reductions, again, as I said before, for the overall P&C businesses, we are in a very healthy environment. And you just have to then distinguish between the individual lines of businesses. There are some lines of businesses that have more rate reductions than others. And it also depends on the area where you're playing and where you're on the right. We do a very granular, almost alpha play on where to deploy capacity and where the attractive markets are. In property, you will have some loss-prone portfolios. There definitely the rates are going up. But you have portfolios where the risk is actually quite limited. And that's typically the area where the rates are reducing. So I wouldn't draw the conclusion that this is an overall statement on the profitability of Corso. The cycle management works at the moment really impeccably well. The shape of the portfolio is very healthy. And Corso has all reason to be confident to achieve the re-earned target. Going forward and beyond that, we will address all levers. So there is obviously the loss peak that we have to consider, but there are also expenses that we have to consider. And so we have further streamlined the organization to increase the speed of decision-making but also further reduce the complexity and to increase proximity to clients. And that all should play positively for the future.

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

The next question comes from Chris Hartwell from Autonomous. Please go ahead.

Good afternoon. Just a couple of quick questions from me. First of all, on the cat side, I was just wondering how your appetite is potentially changing in the sense of the type of cat business you might be writing, if there's particular risks that you're I guess, shying away from within the broader cat book at the moment. And then secondly, I was just a very simple matter. I'm just wondering if you can help me bridge the SST movement since January 1. Thank you.

On the cat side, I can say we're a leading cat player. We have a very well-diversified cat book, so all types of cat apparels that you can imagine. We have a a strong team that continuously takes in all the information, new events, new information, and enhances the models. We deploy capacity, and where we can achieve the rate adequacy, that's a very nice situation to be in. It's not just the U.S., it's a global catwalk, and it's a global diversification, and that's why prime insurers actually seek reinsurance from us, because they can see really that they benefit from our diversification benefit. So that's on the cap side. So we see increased demand, but I think one word maybe also on the structures. We're not a frequency reinsurer. We are shock absorber. We take the peaks, but we help primary insurance companies to handle and to manage also the frequency levels. We provide data. We provide models. And we can see now an increased effort also on the primary insurance side to address their net position. And here, that's an area where I said there are structured solutions that can be provided, but also the dialogue to the ultimate end consumer, end customer, the ultimate insured. That is the area where the primary insurance companies are focusing on to increase the resilience even of their customer base. So appetite is there.

Is there maybe just quickly on the – and I can give you a high-level summary of the movement of the SST. I mean, SST was at 257 at the end of the year. Now it's at 264. Obviously, what you have to take into account is the earnings that we generated, and we have now six months in, and then also the accrual of the potential dividend. That's how we usually do it. And actually, if you do a rough calculation and say, okay, the IFRS 4.4 billion – earnings target, and we have now with more than 50%, if that would translate directly into SST capital, which is not exactly the case, but as a good proxy, that would actually generate 28 points. And if you then assume you take half of it off as a dividend accrual, you get to 14 for the full year. And if you then prorate that for half a year, it's actually exactly 7. It's exactly what we see. Now, this is the simplified view. There's a number of other small points, but I think this gives you directionally what you can expect as the capital generation in a, what I call, a normal year where you don't have too many market movements and not too many FX movements.

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

The next question comes from Darius Satkauskas from KDW. Please go ahead.

Hi. Thank you for taking my questions. Just two, please. One on the life and health. So I assume you'll be looking at smaller portfolios because the experience has not been fully satisfactory, even if these portfolios are on a smaller side. So I assume the way you increase the odds of positive experience is by adjusting the assumptions to be more conservative. Are these CSM levels in those portfolios somewhat below the rest of the group? And if so, do you see a risk of a bit of T&L volatility on the back of this exercise? So that's the first question. The second question is just on the P&C combined ratio. How much benefit do you expect the business mix changes to have, and do you think it's enough to have said the rate change you saw year-to-date? And just on that, are there any lines that you write that are both price adequate and actually seeing positive premium rate increases, or is the stuff that's seeing positive momentum not price adequate? Thank you.

Yes, so let me start with the life and health free. I mean, what I said before, we're going now through the smaller ones because with the change to IFRS, I think we have to go through all the portfolios because it's important that we understand also under IFRS. You obviously started the big ones. We did all of that. We're now going through the smaller ones. And exactly as you say, we see that some of them are not performing. And so we adjust that. It has impact on the P&L. If it's onerous, it has impact on the CSM. if the portfolio is not on risk. And I think you saw that also when you actually look at the walk in the CSM, you see exactly the same. But it's much smaller. You know, we had a very big adjustment that we did at the end of last year, and now we see smaller adjustments, and this will go away over time.

On the P&C side, command ratio side, you asked the question whether we see portfolios where we actually see rate increases. Yes, we do. It's a line of business dimension, but it's also a geographic dimension. Take casualty, for instance. You see rate increases coming through in the U.S., for instance, also in Europe. But you see rate decreases in Asia, for instance. So that's a very good example to see. It's very specific, and that's how you have to manage on a pretty granular basis. There are other lines of businesses on the specialty side where you also can see a rate increases. And if you take property, it depends on the constellation of the portfolio. If you are exposed in certain territories, loss-prone territories, but also in loss-prone occupancies, high-risk occupancies, and this is then reflected in your treaty business, that obviously will have an impact, and that's the area where rates are not reducing. But if you have a pretty plain vanilla portfolio where the exposures are not as pronounced, that's where we found rate decreases, but also at constant terms and conditions and attachment points, so that's important.

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

We now have a follow-up question from James Schack from CT. Please go ahead.

Oh, hi. Thanks for the opportunity. On the Life and Health 3 CSM release, I just kind of noticed that's tracking more like 10%, and I think your previous guidance had been for 8%. Could you just confirm that the kind of new run rate is now closer to 10%? And then secondly, on the SST walk, it's I just kind of just had a question about the debt issuance, really, because I thought you'd issued 2 billion of debt in the first half of the year, which would be about 11 points on the SST, but you didn't include that in the walk. If you just clarify that for me, because I know that's only temporary. Thank you.

Yeah, so on the life and health question about the CSM release, I think you're right. I think we saw a higher number relief, but I think we're still sticking to the guidance going forward. So the CSM really should then again come down to around 8% based on the opening balance. I think that's what we would expect and go on for. Obviously, that's something we work through. And then I think the second question on the debt, you know, this is the issue debt, but this debt basically replaces existing debt. And so it has no impact because the net debt The debt that is reflected in the S&T ratio will stay the same.

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

The next question comes from Michal Hutner from Berenberg. Please go ahead.

Apologies if these have been asked before. I got mixed up. One is on U.S. mortality and the other one is on aggregate commerce. So on aggregates, I just would like kind of confirmational reassurance that you don't do this stuff because it's the accounting. I was thinking about the accounting for this. It's awful, isn't it? Effectively, the year-end is like a cliffhanger. Will they, will they? reach the, you know, go over the top, as it were. And we've seen an increasing number of companies everywhere saying they do have aggregate coverage. So I just wanted confirmation that's not business line. You do all the risk as well. And the other one is my favorite question is on U.S. mortality. I'm sure it's been asked, and I'm really sorry I kind of messed up here. What was the experience in Q2, and can you separate the kind of what I would call ordering lives for people like me and the high-risk lives, you know, the things that, for example, Hannover and Munich highlighted? Thank you.

I just wanted to give you assurance on the aggregate cover. I'll take that part, and Anders can take the gas mentality one. So, yes, when we say we apply discipline underwriting and technical excellence, then I can give the assurance and confirm your views here.

On the U.S. mortality, I think I said it before, but I'm happy to repeat that. I think we had positive experience on U.S. mortality for the second quarter. We already had it in the first quarter, but we have it in the second quarter as well. I don't think we split. the mortality experience to the way you described it, but I think throughout we have positive experience now what we see on the USM mortality.

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

The next question comes from Roland Pender from AutoVHS. Please go ahead.

Yes, good afternoon. Two questions from my side, please. First of all, new business CSM in life and health. This is rather flittish since a while. What would it take to have a more structured growth going forward? Maybe you could provide you an outlook, what you expect in terms of growth rate for the next quarter of years. Depends what you want to provide. Secondly, P&C, in terms of conditions, where are terms of conditions actually softening in the market and how do you react to this? Thank you.

Maybe I'll start with the new business year on life and health. I think it's important here. I mean, you generate, you have to, what we call, I call it the ongoing new business CSM from almost a bit, call it the BAU normal, and then you have transactions. Transactions are, by definition, lumpy, and in transactions, you want to be sure that you actually generate real value. This CSM is just from the ongoing new business that we actually generate, and from that perspective, I'm actually very happy with with the CSM that we generated here because we basically maintain the CSM through our new business without going into large, lumpy, but maybe also more riskier transaction. Now we look at transactions when they come, when we're comfortable, but we don't just write transactions to write transactions. Only do that if we're really comfortable with the assumptions. So actually in that context, the new business CSM that we have here, that is very stable, but it replaces the outgoing CSM more or less, which I think is a very good outcome. And the key point is it remains, we keep the profitability and the in-force that we have.

On the second one, terms and conditions, we do see discipline and consistency in the markets. And I can repeat again, this is the most important aspect that we're watching. There's clear tension on this one. because we need to play the role that reinsurance should play. We take the peaks. We're the severity protection provider, the shock absorber. The prime insurance companies are best positioned to address the frequency. And hence, you know, if this continues, that's a positive, and that should be seen as the norm. And that's what I said this morning as well. This should be the new norm. We're not in an exceptional market situation. This should be the norm. And should we leave, as an industry, the discipline, I don't want to be part of that group that leaves the discipline.

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

The next question comes from Jan Pierce from BNP Paribas. Please go ahead.

Hi, afternoon, everyone. Thanks for taking my questions. The first one was just on the sort of second priority that you mentioned in terms of increasing the resiliency of the group. If you could just give some comments on how you think the resiliency has trended in the first half. Clearly, you made some comments around the life and health of it already, but more thinking about the P&C side, particularly in light of the strong reserve relief that you took in H1 and also why you decided to take that reserve relief through the P&L rather than invest that into additional resiliency. That was my first question. And then the second question was just coming back to the seasonality point. Obviously, I understand that the NACAT risk creates the seasonality, but I don't really understand why there's a big difference year on year. unless that's just the mixed changes . It creates this difference. I wouldn't have expected it to be this big based on the mixed changes that you're seeing. If you could just comment on that as well, that'd be great.

Let me start with the resilience topic. When we changed the reserving philosophy, we clearly said that we want to position ourselves at the upper end of the best estimate range, and that was clearly our ambition. We have started to do that and in 2024 you've seen this one big decision to increase the US liability reserves. So we found ourselves suddenly in that position. We increased also the certainty load on your business to make that more sustainable also for the future. And if you look at our position also in the IV&R positions that we have in the current year, IV&R, I think we sit in a very comfortable position. And that's a desired position to be in when you deal in such a volatile market. So that's managing and steering the business and managing volatility. So if we continue with this discipline, you should see that we will be consistent in delivering earnings in future. And that's what, in my opinion, a reinsurance company should do.

And then I think to your question about the impact of seasonality and relative year-over-year, that's really driven here by the introduction of the uncertainty load because in 2024, The new business that we had was new business written in 2023, which did not have the uncertainty load. I think that's released. Now, with the new uncertainty load, you really see a change in pattern. And then you compare 2025 versus 2024, and you see a seasonality impact year over year. So, quality transition, but I think that's really the technical answer why we now see a seasonality that we didn't see the year before.

Thank you, Ian.

Could you have the next question, please? We now have a follow-up question from Will Hartcastle from UBS. Please go ahead.

Oh, thank you. It's a quick one, hopefully. I'm trying to understand the amount of rigor slash completeness, perhaps, in the assessment of the $300 million cost save that you struck at December CMD last year. I guess you spent longer in your seats. The business is looking like it's in better shape. Perhaps more time to focus on these things. Has the potential of this changed in that time period. Thank you.

Quickly, we're very comfortable to achieve, we said, greater than 300 million by 2027. This year we'll achieve another 100 million. So I think I'm not worried about this one. What we will then do is we will switch towards a business as usual continuous improvement approach. Expense management is becoming a more important strategic lever also in reinsurance and that's what we're going to do. We look at this but we don't cut costs just for the sake of cutting costs. We are improving the structures in the group. We're getting quicker. We're reducing complexity and this all of this is translating then obviously into those numbers with clear playbooks, clear plans by group executive committee members' responsibility, and we are in full implementation now. So consider this as almost being done because we'll see it running through then going forward, but we're very comfortable here.

Thank you, Will. We have time for one last question if there is one.

Please actually follow up from Mikkel Hutner, Berenberg. Please go ahead.

Thank you very much. And it's really short. Given the U.S. mortality is performing a little bit better, when would you start thinking maybe about reviewing the assumptions you have there?

Look, I think, first of all, I think the good thing is that it is performing as expected. We have positive. It is exactly where we want to be. But we do, every year, we go over our portfolios and we assess if these sanctions are adequate or need to change them one way or the other. But I think we're in a good position now on the U.S. mortality.

Thank you, Michael. Thank you to all of you for your interest and attendance. attendance at this call. Should you have any further questions, please do not hesitate to contact any member of the IR team. With that, thank you again and have a nice rest of the day. Thank you.

Thank you.

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