Q1 2025 Hannover Rueck SE Earnings Call
Yousef: Good morning ladies and gentlemen, and welcome to the Hanover Rueck conference call on Q1 2025's results. I am Yousef, the course call operator. I would like to remind you that all participants will be in listen-only mode and that this conference is being recorded.
Good morning, ladies and gentlemen, and welcome to the handle Fleury conference call on Q1 2025 results.
Speaker Change: The chorus call operator.
Speaker Change: I would like to remind you that all participants will be in listen only mode than that this conference is being recorded the presentation will be followed by a Q&A session can register for questions at any time the press the star followed by one on your telephone.
Yousef: The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star followed by one on your telephone. For operator assistance, please press star and zero.
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Karl Steinle: At this time, it's my pleasure to hand over to Karl Steinle.
Karl Steinle: Please go ahead.
Clemens Jungström: Well, good morning everyone and welcome to our earnings call on the first quarter results of 2025.
Speaker Change: Good morning, everyone and welcome to our earnings call.
Speaker Change: On the first quarter results for 2025.
Clemens Jungström: Today's speakers are Clemens Jungström, our new CEO, and for the first time, Christian Hermann Ingmeier, our CFO. For the Q&A, we are joined by Sven Althoff and Claude Chèvre as in the past.
June: Today's speakers are claim at June <unk>, our new CEO.
Speaker Change: For the first time Christian heavily Meyer our CFO.
Speaker Change: For the Q&A, we are joined by Svein <unk> and coach evident.
Speaker Change: The past and with that I'll hand over to you.
Clemens Jungström: And with that, I hand over to you.
Clemens Jungström: Thank you, Karl. And good morning from Hanover. I'm pleased to report that we got off to a very solid start in 2025 despite a significant impact from large losses in P&C re-insurance against the backdrop of absorbing the losses from the L.A. wildfires with an impact of $631 million. This is very satisfying and highlights the resilience of our diversified earnings generation. With group net income of $480 million, we also remain in a position to confirm our full year target of around $2.4 billion. The strong underlying profitability and the further strengthened balance sheet gives me considerable confidence to be even better positioned in potentially volatile times.
Speaker Change: Thank you Scott and good morning from Hanover.
Speaker Change: I'm pleased to report that we got off to a very solid start in 2025, despite a significant impact from large losses in P&C reinsurance against the backdrop of absorbing the losses from the L. A Wi Fi us with a net impact of 631 million. This is very satisfying and highlights.
Speaker Change: The resilience of our diversified earnings generation with.
Speaker Change: Group net income of $480 million. We also remain in a position to confirm our full year target of around $2 4 billion.
Speaker Change: This strong underlying profitability and to further strengthen our balance sheet gives me continued confidence to be even better positioned in potentially volatile times.
Clemens Jungström: In P&C, RE revenue increased by 5.1 percent adjusted for FX. The reported growth number is affected by a refinement in the calculation for the non-distinct investment component. Excluding this effect, the underlying growth would be in the double digits, a level that provides good support for our target of more than 7 percent. A couple of additions and details on the non-distinct investment components will be explained by Christian later on. Our successful January renewals are reflected in a strong new business CSM, including loss component of 1.5 billion euros. The combined ratio of 93.9 reflects the fact that our large loss budget was exceeded by $330 million, mainly driven by the mentioned L.A.
Speaker Change: In P&C re revenue increased by 5.1% adjusted for FX. The recorded growth number is affected by a refinement in the calculation for the non distinct investment component. Excluding this effect the underlying growth would be in the double digits.
Speaker Change: That provides good support for our target of more than 7% couple of addition to deep days on the non distinct investment components will be explained by Christian later on.
Speaker Change: Successful January renewals are reflected in our strong new business CSM, including loss component.
Speaker Change: The 1.5 billion euros.
Speaker Change: Combined ratio of $93 nine reflects the fact that our large loss budget was exceeded by 330 million, mainly driven by the mentioned law wildfire losses.
Clemens Jungström: wildfire losses. Furthermore, the ratio reflects our prudency in our reserving approach also in the first quarter. Hence, and I would really like to emphasize this, the underlying profitability of our P&C portfolio was very strong again and clearly supports our four-year target below 88 percent.
Speaker Change: Furthermore, the ratio reflects our prudency in our reserving approach also in the first quarter.
Speaker Change: And now I'd like to emphasize is the underlying profitability.
Speaker Change: Our P&C portfolio was very strong again, and clearly supports our full year target below 88%.
Clemens Jungström: In life and health reinsurance, revenue decreased by 4.1%, adjusted for currency effects. The main reason is the reducing volume in our U.S. mortality book. Generally, the more important number to measure growth in life and health is really the new business generation. And at 232 million euros in the first quarter, this has been quite a successful quarter in this regard. The reinsurance service result of $243 million is in line with the overall stable positive trend observed in previous quarters and clearly supports our target for 2024. The investment performance was very satisfactory, the return on investment of 3.5% is comfortably above the target and is based on strong ordinary income.
In life and health reinsurance revenue decreased by 4.1% adjusted for currency effects. The main reason is the.
Speaker Change: Reducing volume in our U S mortality book generally.
Speaker Change: Important number to measure growth in life and has is the really the new business generation and at 232 million euros in the first quarter. This has been quite a successful quarter in this regard.
Speaker Change: The reinsurance service result of $243 million.
Speaker Change: In line with the overall stable positive trends observed in previous quarters, and clearly supports our target for 2025.
Speaker Change: The investment performance was very satisfactory the.
Speaker Change: The return on investment of three 5% is comfortably above the target.
Speaker Change: <unk> is based on strong ordinary income.
Clemens Jungström: Finally, the capitalization remains strong with a solvency ratio of 273 percent. This figure includes foreseeable dividends based on a quarterly accrual of the ordinary dividend paid for the year 2024.
Speaker Change: Finally, the capitalization remained strong with a solvency ratio of 273%. This figure includes foreseeable dividends based on a quarterly accrual of the ordinary dividend.
Speaker Change: For the year 2024, as you probably saw on the news ticker last week, given our strong capitalization according to all rather than capital models.
Clemens Jungström: As you probably saw on the news ticker last week, given our strong capitalization, according to all relevant capital models, we intend to redeem a 500 million euro hybrid bond on the first call date, which is in June. Refinancing of this bond is currently not envisaged. On the shareholder's equity, increased by 2.4%. The positive contribution from Q1 earnings was partly diminished by currency translation. The CSM increased by 8.4%, mainly reflecting, of course, the new business generated by both business groups. As you know, the new business contribution from PNC is seasonally high due to the recognition of the January renewal.
Speaker Change: We intend to redeem a 500 million euro hybrid bond on the first call date, which is in June refinancing of the bond is currently not envisaged.
Speaker Change: On the shareholders equity.
Speaker Change: Increased by 2.4% the positive contribution from Q1 earnings to us partly.
Speaker Change: Diminish by currency translation.
Speaker Change: <unk> increased by 8.4%, mainly reflecting of course, the new business generated by both business groups. As you know the new business contribution from P&C is seasonally high due to the recognition of the January renewals.
Clemens Jungström: The risk adjustment increased by further 3.3% driven by new business in P&C and assumption changes in life and health. On a more general note, we are now in the third year of IFRS 17 reporting and observing the progressive growth in the CSM and the risk adjustment gives us a lot of comfort as regards future earnings growth.
Speaker Change: The risk adjustment increase by further 3.3% driven by new business in P&C and assumption changes in life and health.
Speaker Change: On a more general note. We are now in the third year of 2017 reporting and observing the progressive growth indices.
Speaker Change: The risk adjustment gives us a lot of comfort as regards future earnings growth.
Christian Hermann Ingmeier: On that note, Christian, over to you. Yeah. Thank you, Clemens, and good morning, everyone.
On that note Christiane over to you.
Christiane: Yes. Thank you Klemens and good morning, everyone also from my side pleasure to guide you for the first time through our fingers.
Christian Hermann Ingmeier: Also from my side, pleasure to guide you for the first time through our figures. Our P&C business is growing nicely on a diversified basis, including a strong contribution from structured reinsurance. The top line growth is slightly below our 7% target for the full year. As Clemens already mentioned, the reported number is impacted by a refinement in our accounting. We have adjusted the approach to calculate the NDIC non-distinct investment components from a written to an earned basis. This is more in line with the earning pattern of the other components of the reinsurance revenue. However, this modification was not reflected in Q1 2024, and this results in a one-off effect when comparing the revenue numbers for the individual quarters.
Christiane: Our P&C business is growing nicely on a diversified basis, including a strong contribution from structured reinsurance.
Topline growth.
Christiane: Slightly below our 7% target for the full year.
Christiane: Came in as already mentioned the reported number is impacted by a refinement in our accounting we have adjusted the approach to calculate.
Christiane: Non distinct investment components from a britain to earn basis.
Christiane: This is more in line with the earning pattern of the other components of the reinsurance with venue.
Christiane: However, this modification was not reflected in Q1 2024.
Christiane: And this results in a one off effect when comparing the revenue numbers for the individual quarters.
Christiane: Excluding this base effect from Q1 2020 for the reinsurance revenue would have increased by more than 10%.
Christian Hermann Ingmeier: The healthy growth trends are additionally confirmed by the underlying premium growth also being in the double digits. Last but not least, the seeded business is not impacted by the refined ENDIG calculation, hence the impact on reported growth in the net revenue is a bit more pronounced.
Christiane: To help the growth trends are additionally confirmed by the underlying premium growth also being in the double digits.
Christiane: Last but not least the ceded business is not impacted by the refined and the calculation.
Christiane: Hence the impact on reported growth in the net revenue is a bit more pronounced.
Christian Hermann Ingmeier: In summary, I would like to emphasize that, firstly, there is no impact on earnings because there are corresponding effects in the service expenses offsetting the impact on reinsurance revenue, and secondly, on an underlying basis, the growth trends are very healthy and well in line with our plan. The accounting impact on reported growth will decline over the course of the year. The combined ratio of 93.9% reflects the impact from large losses that ended up 330 million euro above our quarterly budget. Apart from the LA wildfires, the overall large loss experience was benign. Excluding the impact of large losses exceeding the budget, our combined ratio is well our target of below 88%.
Christiane: In summary, I would like to emphasize that firstly, there is no impact on earnings because they're a corresponding effects and the service expenses offsetting the impact on reinsurance revenue.
Christiane: And secondly on an underlying basis the growth trends are very healthy and in line with our plan the accounting impact on reported growth will decline over the course of the year.
Christiane: The combined ratio of 93, 9% reflects the impact from large losses that ended up $330 million above our quarterly budget.
Christiane: Apart from BLA wildfires. The overall large loss experience was benign excluding the impact of large losses exceeding the budget or a combined ratio is well in line with our target of below 88%.
Christian Hermann Ingmeier: This means that the underlying profitability was again very healthy.
This means that the underlying profitability was again very healthy.
Christian Hermann Ingmeier: Furthermore, I would like to emphasize that despite the impact of large losses on the results in the first quarter, we have not changed our prudent reserving approach for the current and prior underwriting years. Finally, the combined ratio includes a discount effect of around 8%. This is still higher than the interest decrease in the reinsurance finance result, but our prudent initial reserving should reflect the difference. The strong investment result primarily stems from the increased ordinary income from fixed income securities and very solid returns from alternative assets. For the sake of completeness, the amortization of our inflation-linked bonds added 42 million euros.
Christiane: Furthermore, I would like to emphasize that despite the impact of large losses on the results in the first quarter, we have not changed our prudent reserving approach for the current and prior underwriting years.
Christiane: Finally, the combined ratio includes the discount effect of around 8%. This is still higher than the interest accretion in the reinsurance finance results, but our prudent initial reserving should reflect the difference.
Christiane: The strong investment resides primarily stems from the increased ordinary income from fixed income securities.
Christiane: Very solid returns from alternative assets.
Christiane: For the sake of completeness.
Christiane: Amortization of our inflation linked bonds added 42 million euro.
Christian Hermann Ingmeier: The other result includes positive currency effects of 66 million. The main contributor to the PNC service result is the CSM release, reflecting the recent renewals in a very attractive market environment. As in 2024, the CSM release includes some catch-up effects due to a prudent release in previous periods, but the impact in the first quarter was minor and will remain so throughout 2025. The experience variants mainly reflect the AA wildfires, pushing total large losses clearly above our quarterly budget. The runoff result was an overall minus 167 million euro and continued prudency is the reason why this number is negative.
Christiane: The other reside includes a positive currency effect of $66 million.
Christiane: The main contributor to the P&C service reside as did see us ever release, reflecting the recent renewals and a very attractive market environment.
Christiane: In 2024.
Christiane: CSM release include some catch up effects due to our prudent release and previous periods, but the impact in the first quarter was minor and we remain so throughout 2025.
Christiane: The experience variance mainly reflect the wildfires pushing total loss losses, clearly above our quarterly budget.
Christiane: Run off result was an overall a minus 160.
Christiane: 67 million Euro.
Christiane: And continued prudency is the reason why this number is negative the underlying reserve runoff was positive as expected.
Christian Hermann Ingmeier: The underlying reserve runoff was positive as expected. The loss component from new business is quite low, confirming the attractive rate environment in P&C reinsurance. The CSM growth is mainly determined by our successful January renewals resulting in a strong new business CSM of 1.5 billion Euro as already mentioned. Compared to the previous year, the number increased moderately. This development mirrors our renewal reporting growth at slightly lower risk-adjusted prices and the reduced session rate to our retro program. Changes in interest and if X rates had a smaller effect overall.
Christiane: The last component from new business is quite low confirming the attractive rate environment in P&C reinsurance.
Christiane: The CSM growth is mainly determined by our successful January renewals, resulting in a strong new business <unk>, one 5 billion euro as already mentioned compared to the previous year the number increased moderately.
Christiane: This development May Ross, our renewal reporting growth at slightly lower risk adjusted prices and to reduce attachment rates to our <unk> program.
Christiane: Changes in interest and X rates had a smaller effect overall.
Christian Hermann Ingmeier: Let's move now on to life and health. Here, reinsurance revenue decreased by 4.1%, largely driven by US mortality. Growth was mainly recorded in UK longevity. The reinsurance service result lines up well with the rather stable and good profitability in previous quarters. The mortality experience has been favorable, including a positive one-off of around 20 million euro from a client recapture, offsetting a negative effect from increasing the risk adjustment for our morbidity book in Asia. And this again highlights the benefits of our diversified portfolio. The contribution from financial solutions and longevity continued to be strong. Overall, the reinsurance service result of 243 million Euro provides good support for a full-year target of more than 875 million Euro.
Christiane: Let's move now onto life and health.
Christiane: Reinsurance revenue decreased by four 1% largely driven by U S. Mortality growth was mainly recorded in U K longevity.
Christiane: The reinsurance service reside lines up well with the rather stable and good profitability in previous quarters.
Christiane: Mortality experience has been favorable including a positive one off of around 20 million euro from client recapture offsetting a negative effect from increasing the risk adjustment for our our morbidity book in Asia.
Christiane: This again highlights the benefits of our diversified portfolio.
Christiane: The contribution from financial solutions, and longevity continues to be strong.
Christiane: Overall, the reinsurance service reside of 243 million Euro provides good support for our full year target of more than 875 million Euro.
Christian Hermann Ingmeier: The investment result mainly reflects good ordinary income from fixed income. Altogether, the EBIT contribution from our Life and Health Business Group was €253 million in the first quarter. Looking briefly at the IFRS 17 components of the service result, the CSM release is the main profit driver and the release in Q1 is within the expected range. The risk adjustment release was extraordinarily low in the first quarter. We expect a normalization over the course of the year. The experience variance is clearly positive, mainly driven by our mortality book, based on a diversified contribution from different geographies. This mitigates the negative impact from the loss component of 77 million euro.
Christiane: The investment reside mainly.
Christiane: Flex good ordinary income from fixed income.
Christiane: Altogether, the EBIT contribution from our life and health business Group was 253 million Euro.
Christiane: The first quarter.
Christiane: Looking briefly at the <unk> 17 components of the service resulted the CSM release is the main profit driver and the release in Q1 is within the expected range. The risk adjustment release was extraordinarily low in the first quarter, we expect a normalization over the course of the year.
Christiane: The experience variance is clearly positive mainly driven by our mortality book based on the diversified contributions from different geographies.
Christiane: Mitigates the negative impact from the loss component of 77 million Euro the new business loss component was a miner.
Christian Hermann Ingmeier: The new business loss component was a minor 8 million euro, the main driver being an increase in risk adjustment for morbidity business in China. This is not based on new trends resulting in assumption changes, but the overall level of profitability in life and health allowed us for more cautious positioning with regards to our critical illness book in Asia. Altogether, the reinsurance service result is slightly ahead of our expectations. The CSM development on the right side is negatively impacted by currency effects. The CSM generation which includes the new business CSM and also extensions on existing contracts amounted to 232 million euro based on a diversified contribution from financial solutions, morbidity and mortality.
Christiane: 8 million Euro the main driver being an increase in risk adjustment for morbidity business in China.
Christiane: This is <unk>.
Christiane: Not based on new trends, resulting in an assumption changes, but the overall level of profitability in life and health allowed us.
Christiane: For a more cautious positioning with regards to our critical illness book in Asia.
Christiane: Altogether, the reinsurance service resided slightly ahead of our expectations.
Christiane: The <unk> development on the right side is negatively impacted by currency effects, we see as <unk> generation, which includes the new business CSM and also extensions on existing contracts.
Christiane: Amounted to 232 million Euro based on a diversified contribution from financial solutions morbidity and mortality.
Christian Hermann Ingmeier: Changes in estimates did not have a material impact in this first quarter. Altogether, the total CSM remained almost stable. The development of our investments was, again, very satisfactory. The ordinary investment income reflects the continued rollover in a higher-yield environment and a strong operating cash flow. Inflation-linked bonds contributed, as mentioned, €42 million in line with our expectation. And additionally, the contribution from also alternatives was very solid in the first quarter. As you can see on this slide, all other line items in the investment income had no real meaningful influence on the result, particularly with regard to impairments and the change in expected credit loss.
Christiane: Changes in estimates did not have a material impact in this first quarter altogether. The total CSM remained almost stable.
Christiane: The development of our investments was again very satisfactory the ordinary investment income reflect the continued rollover into higher yields.
Christiane: Ireland and has strong operating cash flow.
Christiane: Inflation linked bonds contributed.
Christiane: Mentioned 42 million Euro in line with our expectation and Additionally, the contribution from.
Also alternatives was very solid in the first quarter.
Christiane: As you can see on this slide all other line items in the investment income had no real meaningful influence on the results, particularly with regard to impairment and a change in expected credit losses.
Christian Hermann Ingmeier: This highlights the strong resilience of our portfolio. All in all, the return on investment of 3.5% marks a good start to the year and is above our 3.2% target. At the bottom of this slide, you can see that the unrealized gains within the OCI have changed materially in the category others.
Highlights the strong resilience of our portfolio.
Christiane: All in all the return on investment of three 5% marks a.
Christiane: Good start to the year ended above our three 2% target.
At the bottom of this slide you can see that the unrealized gains within the OCI has changed materially in the category others.
Christian Hermann Ingmeier: Let me explain this. This reflects our participation in Viridium that has now to be accounted as an asset held for sale and so just is reclassified in the reporting.
Christiane: Let me explain this.
Christiane: This reflects our participation in the lithium that has now to be accounted as an asset held for sale and so just reclassified in the reporting.
Christian Hermann Ingmeier: As the annual reserve review by Willis Towers Watson has been concluded, I'm happy to share and provide you with their final view on our reserve adequacy at year-end 2024. And the final number is 2.523 billion Euro. This means that the reserve resiliency has increased more than initially indicated in March. We are always cautious, of course, in predicting the outcome of an independent third-party review. So this does maybe not come as a real surprise. Still, it provides additional comfort for our reserving approach and future assumptions, and particularly for the long tail lines. in light of a generally uncertain claims environment, we even more prefer to be here on the cautious side.
Christiane: S.
Christiane: Annual reserve revenue by Willis Towers Watson has been concluded.
Christiane: Happy to.
Christiane: Sure and provide you with their final view on our reserve adequacy at year end 2024, and define our number is two five to 3 billion euro.
Christiane: This means that the reserve resiliency has increased more than initially indicated in March we are always cautious of course in predicting the outcome of an independent third party revenue. So this does maybe not come as it relates to price.
Christiane: Still it provides additional comfort for our reserving approach and future assumptions.
Christiane: And particularly.
Christiane: For the long tail lines.
Christiane: In light of generally uncertain claims environment, we even more preferred to be here on the cautious side.
Christian Hermann Ingmeier: This is also visible in the Lost Triangles for 2024, which we have published today on our website. The increase in prudency is clearly visible, particularly there in the long tail line. The underlying trends in the development of all loss ratios are largely positive, but specific underwriting years in the liability segment also include a limited increase in our best estimate reserve. Generally, we feel very comfortable with the current reserving position. At the end of 2024, the overall prudency level of resiliency reserves plus risk adjustment stood at 7.7% of nominal net reserves. Going forward, our unchanged reserving approach for new business and the in-force book should view further growth in our resiliency reserves in absolute terms, reflecting the increase in business volume.
Christiane: <unk> is also visible in the loss triangles for 2020 for which we have published today.
Christiane: On our website.
Christiane: The increase in prudency is clearly visible, particularly there in the long tail lines.
Christiane: The underlying trends in the development of our loss ratios are largely positive, but specific underwriting years and the liability segment. Also include a limited increase in our best estimate reserves.
Christiane: Generally generally.
Christiane: You're very comfortable with the current reserving position at the end of 2020 for the overall prudency level of resiliency reserves plus risk adjustment stood at seven 7% of nominal net reserves.
Going forward, our unchanged reserving approach for new business and be enforced book should fuel further growth in our resiliency reserves in absolute terms, reflecting the increase in business volume.
Christian Hermann Ingmeier: To conclude now my remarks, while the L.A. wildfires had an impact on our quarterly results, there is still a substantial large loss budget available for the rest of the year. Our business model is designed to absorb volatility from large cap events, moreover, with our strong P&L and balance sheet. And the fact that we have confirmed our profit guidance for the year underlines our ability to do so.
Christiane: To conclude my remarks.
Christiane: The wildfire has had an impact on our quarterly results. There is still substantial loss loss loss budget available for the rest of the year. Our business model is designed to absorb the volatility from large cup events. Moreover, with our strong P&L and balance sheet and the fact that we have confirmed our profit guidance.
Christiane: For the year underlines our ability to do so.
Clemens Jungström: And on that note, I'll hand back to you, Clemens, for some comments on the outlook. Yes, thank you, Christian. So a quick glance on the renewals. It's fair to say that the April renewals were characterized by a market environment quite similar to the January renewals. We have not observed any meaningful inflow of new capital, but reinsurance capacity was generally available. In this market environment, we observed some pricing pressure, most pronounced in property business. Casualty pricing, on the other side, remained more stable. As reinsurance rates continued to provide us with attractive returns above the cost of capital, we made the most of the healthy demand for our security and grew our premium volume by 10.4 percent.
Christiane: And on that note I'll hand back to you Clemons for some comments on the outlook. Yes. Thank you Christiana So quick clients on our renewals. It's fair to say that the April renewals were characterized by a market environment quite similarly to quite similar to the January renewals.
Clemons: We have not observed any meaningful inflow of new capital, but reinsurance capacity was generally available.
Clemons: In this market environment, we observed some pricing pressure most pronounced in property business casualty pricing on the other side remained more stable.
Clemons: As reinsurance rates continued to provide us with attractive returns above the cost of capital. We made the most of the healthy demand for our security and grew our premium volume by 10, 4%.
Clemens Jungström: The growth is diversified by region and line of business with a particularly strong contribution from the U.S. With an overall risk-adjusted price decrease of 2.4%, the quality of our portfolio remained strong. As the business development in the first quarter supports our expectations for 2025, we've kept our guidance unchanged. We continue to expect growth in revenue and P&C of at least 7%. The combined ratio is expected to come in below 88%. Also, accounting for the LA wildfires, the remaining large loss budget provides significant room to absorb losses in the remainder of 2025. And if needed, the underlying profitability and our balance sheet strengths will further support the target achievement.
Clemons: The growth is diversified by region and line of business with particularly strong contribution from the U S.
Clemons: With an overall risk adjusted price decrease of two 4% the quality of our portfolio remains strong.
Clemons: As the business development in the first quarter supports our expectations for 2025, we have kept our guidance unchanged. We continue to expect growth in revenue and P&C of at least 7% the.
Clemons: The combined ratio is expected to come in below 88% also accounting for the La Wi Fi as the remaining large loss budget provides significant room to absorb losses in the remainder of 2025.
Clemons: And if needed the underlying profitability and our balance sheet strength will further support the target achievement.
Clemens Jungström: The Life and Health Service result is expected to come in above 875 million and we are targeting a return on investment of at least 3.2%. Altogether, we are quite confident that we will achieve our net income guidance of at least 2.4 billion euros.
Clemons: The life and Health service result is expected to come in above $875 million and we are targeting a return on investment of at least the 0.2% altogether. We are quite confident that we will achieve our net income guidance of at least $2 4 billion euros.
Clemens Jungström: This concludes my remarks and we would be happy to answer your questions.
Clemons: This concludes my remarks, and we would be happy to answer your questions.
Yousef: Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from said question queue, you press star and two. Participants are requested to only use handsets while asking a question. Anyone who has a question may press star one at this time.
Clemons: And ladies and gentlemen, we will now begin the question and answer session anyone who wishes to ask a question press star and.
Speaker Change: One on the telephone here at Cowen to confirm that you have entered the queue.
Clemons: You wish to remove yourself from <unk> question.
Clemons: Crestar into participants are requested to only use handsets when asking a question and you want to ask a question May Press star one at this time.
Michael Huttner: The first question comes from Michael Hüttner, Berenberg. Please go ahead. It's my lucky day. Good morning. Thank you very much and congratulations on, as you said, solid results. I really only had one question and it was on the solvency, the 273, which is well ahead of consensus, I think, 262. I just wondered if you could walk us through the moving parts, particularly the earnings contribution. My feeling is it's a little bit ahead of what you might have expected, but it's hard for me to kind of split it out because there are lots of moving parts.
First question comes from Richard with Baird.
Speaker Change: Please go ahead alright.
Speaker Change: Alright. Good morning, Thank you very much and congratulations on as you said solid results.
Speaker Change: I really only had one question there was on the phone and say the 273 wishes.
Speaker Change: Got ahead of consensus.
Speaker Change: Uh huh.
Speaker Change: I was just wondering if you could walk us through the moving parts, particularly the <unk>.
Speaker Change: The earnings contribution.
Speaker Change: My feeling is it's a little bit ahead of what you might have expected.
Speaker Change: It's hard for me to kind of.
Speaker Change: The split it out because I mean lots of moving parts I mentioned currency also played a role.
Michael Huttner: I imagine currency also played a role.
Christian Hermann Ingmeier: And then the only other question, which is a very lightweight one, is given your 3.5% investment return in Q1, investment is a fairly stable thing, why didn't you change the guidance? Anyway, that's it. Thanks. Yeah, thanks, Michael, for your questions.
Speaker Change: And then the.
Speaker Change: Any other question, which is a very lightweight one is given you had three 5% investment return in Q1 investments fairly stable thing.
Speaker Change: You changed your guidance anyway, that's it thanks.
Speaker Change: Yes.
Speaker Change: Yes, Thanks, Michael for your question, let me start to elaborate on the solvency ratio.
Christian Hermann Ingmeier: Let me start to elaborate on the solvency ratio. As you will have seen in the footnotes on the slide, we start to present from now on the solvency ratio with a quarterly accrued ordinary dividend. As Clemens also mentioned, so the regulatory solvency 2 figure would be 265%. But this, nevertheless, is more or less around 4% increased compared to end of last year. And the main drivers here are in the own funds, the very positive new business that was written, actually a bit better than expected. And we have to have in mind here that in contrast to IFRS, this is fully reflected in the own funds.
Speaker Change: You will have seen in the footnotes on the slide we start to present from now on the solvency ratio with the quarterly.
Speaker Change: Accrued ordinary dividend.
Speaker Change: As <unk> also mentioned towards the regulatory.
Solvency II figure would be $2, 65%, but this.
Speaker Change: Nevertheless, it's.
Speaker Change: More or less around 4% increased compared to end of last year and the main drivers here are.
Speaker Change: In the owned funds the very positive new business desk that was that was written.
Speaker Change: Actually a bit better than expected.
Speaker Change: And we have to have in mind here that in contrast to <unk>. This is fully reflected in the owned funds. So there is no CSM.
Christian Hermann Ingmeier: So there is no CSM or the like deferring this. Second, the actual versus expected experience in life and health, so coming from mortality, as we also already saw some minutes ago, was positive for the own funds. And the economic impact was with some minor ups and downs in total more or less balanced. The SCR also decreased a bit despite the growth. And here the main impact comes from the FX exposure as the euro appreciated more or less in comparison with all major currencies. And this was the driver for the SCR. So both numbers are going down, but the SCR a bit more than the own funds.
Speaker Change: Or the like deferring this.
Speaker Change: Second.
Speaker Change: Excellent growth as expected.
Speaker Change: I expect it to experience in life and health so coming from mortality as we also already.
Speaker Change: So.
Speaker Change: Some minutes ago.
Speaker Change: Positive 40 owned funds and the economic impact was with some minor ups and downs in total more or less balanced.
Speaker Change: The SCR also.
Speaker Change: Decreased a bit despite the growth in here the main impact comes from.
Speaker Change: <unk> exposure is the euro appreciates its more or less in comparison with all major currencies and this was the driver for the SCR. So both numbers are going down, but the SCR a bit more than the owned funds and this makes up the increase.
Christian Hermann Ingmeier: And this makes up the increase.
Speaker Change: Thank you.
Christian Hermann Ingmeier: Michael, on the ROI, just, well, short answer, it's really too early in the year, to be honest, to change our guidance on that. Happy to take the 3.5 ROI when we come to it in Q4. But keep in mind that we have a couple of elements in the P&L, in the investments that can provide volatility, of course, you know, particularly the private equity and real estate portfolios valued through the P&L, and that can come with some volatility as we go through the year. But it's fair to say that we went off for a good start on our investment result.
Michael: Michael on the ROI just short answer.
Michael: It's really too early in the year to be honest to change our guidance on that happy to take the $3 five ROI when we come to a hit in Q4, but keep in mind that we have a couple of elements in the P&L in the investments.
Michael: Debt.
Michael: Debt.
Michael: That can provide volatility of course, you know that.
Michael: Particularly the private equity and real estate portfolios value through the P&L and that can come with some volatility as we go through the year, but.
Michael: It's fair to say that we went after a good start on our investment for that.
Christian Hermann Ingmeier: Thank you.
Michael: Okay.
Andrew Baker: The next question comes from Andrew Baker, Goldman Sachs. Please go ahead. Great. Thank you for taking my questions. The first one, just on the PNC reinsurance revenue target of 7%, I appreciate this is still in place on the new definition, but I believe it's prior to FX. Given where we've seen sort of the US dollar weakening, do you still think this sort of greater than 7% is achievable after FX, based on what's happened here today?
Speaker Change: The next question comes from Andrew Baker from Goldman Sachs. Please go ahead.
Andrew Baker: Great. Thanks for taking my questions first one just on the P&C reinsurance revenue target of 7%.
Speaker Change: Appreciate it this is still in place on the new definition.
Speaker Change: I believe its prior to FX, given where we've seen some of the U S. Dollar weakening do you still think with sort of greater than 7% is achievable. After FX based on what's happening here today.
Andrew Baker: And then secondly, just on the PNC reserve runoff, are you able to split the underlying reserve runoff that you saw in the first quarter with the reserve strengthening? And then as we think about this sort of reserve runoff as we go through the year, how should we expect this to develop, just given, as you've said, your prudent reserving on this side?
And then secondly, just on the P&C reserve runoff are you able to split the underlying reserve runoff that you saw in the first quarter with the reserve strengthening and then as we think about this sort of reserve run off as we go through the year, how should we expect this to develop just given as you said your prudent reserving on this side.
Christian Hermann Ingmeier: Thank you. Let me take the revenue question. I mean, we were able to report double-digit growth if you include our structured reinsurance at both the 1st of January and now at the 1st of April renewals. So this, to give you a simple answer to your question, gives us confidence that we will achieve our 7% guidance, including FX, the effect. And, Andrew, on the runoff result, first of all, Q1. So I think it's fair to say that In a normal quarter, we would expect a triple digit positive runoff result, and we have seen not really anything that would be detrimental to this also in Q1.
Speaker Change: Thank you.
Speaker Change: Yes.
Speaker Change: So let me take the revenue question.
Speaker Change: We were able to report double digit to improve if you include all of structured reinsurance.
Speaker Change: The first of January and now at the first of April renewals.
Speaker Change: This.
Speaker Change: To give you a simple answer to your question gives us confidence.
Speaker Change: We will achieve over 7% guidance.
Speaker Change: <unk> FX effects.
Speaker Change: And Andrew on the runoff result, first of all Q1, So I think it's fair to say that in.
Speaker Change: In a normal quarter.
Speaker Change: We would expect triple digit positive run off result, and we have seen not really anything.
Speaker Change: That would be detrimental to this in and also in Q1. So this is <unk>.
Christian Hermann Ingmeier: So this is, to a large extent, really attributable to resiliency build, which we did in the first quarter, which is also to be read in connection with the strong underlying profitability of the P&C book and the tailwind that we had from currency results. So this is really resiliency build to a large effect. And this is how we would expect this to develop over the course of the year. So usually for a full year, we expect clearly a mid-triple digit to a high-triple digit number in terms of runoff losses on a discounted basis. And this is still in line with expectations subject to any reserve resiliency buildup that we will see in 2025.
Speaker Change: To a large extent really attributable to.
Speaker Change: Two resiliency build which we did in the first quarter, which is also to be read in connection with the strong underlying profitability of the P&C book and the tailwind that we had from currency results. So so this is really resiliency built.
Speaker Change: Larger effect and this is how we would.
Speaker Change: Expect this to develop over the course of the year.
Speaker Change: So so usually for a full year, we expect clearly.
Speaker Change: Amidst triple digit to high triple digit number in terms of run off losses on a on a discounted basis. So and this is still in line with expectations subject to any reserves resiliency buildup that we that we will see in 2025.
Christian Hermann Ingmeier: Great.
Christian Hermann Ingmeier: Thank you.
Speaker Change: Great. Thank you.
Cameron Hosein: The next question comes from Cameron Hosein, J.P.
Speaker Change: The next question comes from Kamran Hossain J P. Morgan. Please go ahead.
Cameron Hosein: Morgan, please go ahead. Hi, good morning. Two questions for me. The first one is coming back to the previous... So, I'm just trying to think this through. So, 93.9 for the quarter, drag of 167, and you say you should normally have a triple digit million positive, so kind of, you know, delta is probably like 267. Should we take that off plus the excess cat and that's kind of what you're kind of printing at the moment on an underlying basis and combined ratio? Just a little bit confused on kind of how these things add up, and also kind of why in a, you know, large loss quarter, you added to kind of prudence and kind of thinking behind that.
Speaker Change: Hi.
Speaker Change: Two questions from me the first one is.
Speaker Change: Colon cancer the prudence.
Speaker Change: I'm just trying to think the circuit so much.
Speaker Change: $3 nine for the quarter.
Drank of 167, and you said you should normally have a triple digit million positive same site kind of dosage form to safran should we take that plus excess Scott.
Speaker Change: Kind of printing at the moment on an underlying basis on combined ratio.
Speaker Change: Confused on kind of how do you think you're set up and also kind of Hawaii.
Speaker Change: And then very heavy cat loss quarter.
Speaker Change: Our soft quarter.
Speaker Change: On the <unk> kind of the thinking behind that the.
Cameron Hosein: The second question is just on the views on pricing at the mid-year. Obviously, it sounds like, you know, kind of April went down a little bit, but still reasonable levels. What's the view on kind of how things will shape up heading into the mid-year renewals? Thank you.
Speaker Change: The second question is just on the.
Speaker Change: The views on pricing at the mid tier with me it sounds like kind of April went down a little bit.
Speaker Change: Still reasonable levels, what's the view on kind of how things will shape up heading into the midyear renewals. Thank you.
Clemens Jungström: Yeah, Cameron, let me start with your second question. I mean, the pricing we saw at first of April was very much in line with the development at 1.1. So this would imply that also for the mid-year renewals, we will see a relatively similar picture through retained earnings. There is a particularly strong supply of property capacity. So we have to expect that property pricing will continue to soften at the mid-year renewals. When it comes to the US, I'm certain that the white fires will be taken into account and will have a little bit of a dampening effect for the mid-year renewals, but it will not change the overall trend.
Speaker Change: Yes, Kevin.
Kevin: Let me start with your second question.
Kevin: I mean, the pricing we saw first of April was very much in line with the development at one one so.
Kevin: It would imply that also for the midyear renewals, we will see a relatively similar picture through retained earnings.
Kevin: Particularly strong supply of property capacity. So we have to expect that the property pricing will continue to source the material renewals.
Kevin: When it comes to the U S I'm certain that the wildfires, we'll be taking into account and we will have a little bit of a dampening effect.
Kevin: For the midyear renewals, but it will not change the overall trend when it comes to the other.
Clemens Jungström: When it comes to the other classes of business, we expect that renewals are going to be more stable than on the property cap side. Again, that's what we saw at 1.1 and at 1.4. So no reason for us to assume that the mid-year renewals will behave any different.
Kevin: Classes of business.
Kevin: We expect that renewals are going to be more stable than on the property cat side again, that's what we saw at one one and at one four so no reason for us to assume that we'll grow the midyear renewals will behave any differently.
Clemens Jungström: Kamran, on the prudency in the first quarter and the read sort of of the combined ratio, I think it's a fair calculation that you've come up with. So again, we would expect a positive runoff result, which we would have seen also in the first quarter. So no major distortions to that. So if you do the math, then I think you land where you were, Kamran, with your underlying profitability of the P&C book. The question, why in a loss-heavy quarter, why have we built resiliency in the first quarter? Well, first of all, We have seen quite some tailwind on the other income in the PNC reinsurance results, so mainly the currency result.
Kevin: Cameron on the prudency in the first quarter and to read sort of the combined ratio I think.
Kevin: It's a fair calculation that you've come up with so again, we would expect a positive runoff result, which we would have seen also in the first quarter. So no major distortions to that.
Kevin: So if you do the math then I think you land, where you where you were coming in with your underlying profitability of the P&C book the question why.
Kevin: Loss heavy quarter.
Kevin: We build resiliency in the first quarter were first of all.
Kevin: We have seen quite some tailwind on the other income in the P&C reinsurance results. So mainly the currency result.
Kevin: Secondly.
Clemens Jungström: Secondly, the strong underlying profitability of the book allowed for it. We will, as always, share this with you, how much resiliency was built. It's always good to have some buffers in these days, particularly looking at the cycle overall. So being prepared for resilience as we go through the cycle is part of the consideration. Thank you very much.
Kevin: This strong underlying profitability of the book allowed for it.
Kevin: As always share this with you how much resiliency with bid it's always good to have some buffers.
Kevin: In these days.
Kevin: Particularly looking at the cycle overall, so so being prepared for for resilience as we go through the cycle is.
Kevin: As part of the consideration.
Alright, Thank you Bryce.
Ian Pearce: The next question comes from Ian Pearce, BNB Paribas, please go ahead. Hi, morning everyone. Thanks for taking my questions. The first one is just on the California loss where the level of retro protection you're getting on that loss seems pretty high compared to previous loss episodes. So just a couple of questions on that. So firstly, if there's creep on California, do you expect that you will continue to see losses there? And then is there any impact on retro for the remainder of the year, given the size of the loss that your retro partners have taken already?
Speaker Change: The next question comes from Ian Pearce Bnb Paribas. Please go ahead.
Ian Pearce: Alright, good morning, everyone. Thanks for taking my questions. The first one just on the California loss.
Ian Pearce: The level of retro protection, you are getting on that loss seems pretty high compared to previous.
Ian Pearce: So just a couple of questions on that.
Ian Pearce: Creep on California, do you expect that you'll continue to see losses. There and then is there any impact on the remainder of the year given.
Ian Pearce: The slight loss that Youre retro partners it taken already.
Ian Pearce: And then the second one was just on the currency result. I was pretty surprised to see that being positive, given the US dollar movement. If you could just talk about expectations for that number for the remainder of the year, given what we've seen in currency markets, that'd be very useful.
Ian Pearce: And then the second one was just on the currency.
Ian Pearce: Probably can see that being positive.
Ian Pearce: Given given the U S. Dollar movement. If you could just talk about expectations for that number for the remainder of the year given what we've seen in currency market that'd be very useful. Thank you.
Christian Hermann Ingmeier: Thank you. Yeah, on the wildfires, I mean, out of the 1.3 billion of gross loss, 438 million is coming from our fronting activities on the ILS side. So the gross loss we have written for our own account without the fronting activities is 868 million. Out of the 868 million we have calculated that we will recover roughly 230 million on the retrocessional side. As the US is covered peril under our proportional K session, most of the recoveries will come from the K facility with only a minor collection calculated from our whole account event tower. So this also gives you an idea of how this is impacting our retrocessional program for the rest of the year.
Ian Pearce: Okay.
Ian Pearce: Yeah on the wildfires.
Ian Pearce: I mean out of the one 3 billion.
Ian Pearce: Gross loss.
Ian Pearce: 438 million this coming from our planting activities on the ILS side.
Ian Pearce: So the gross loss.
Ian Pearce: We have written for our own account without the fronting activities is $868 million out of the 868 million. We have calculated that we will recover roughly $230 million on the retro sessional side.
Ian Pearce: As the U S.
Ian Pearce: Apparel on the oil proportionate okay.
Ian Pearce: The recession most of the recoveries.
Ian Pearce: Come from the K facility.
Ian Pearce: With the <unk> mine.
Ian Pearce: <unk>.
Ian Pearce: Collection calculated from who.
Ian Pearce: The current events.
Ian Pearce: Our so this also gives you an idea of how this is impacting our retrocession, though.
Ian Pearce: Graham for the rest of the year there is hardly any impact on the non proportional cover.
Christian Hermann Ingmeier: There's hardly any impact on the non-proportional covers. So there's still considerably limit left. It also means that if the gross loss should deteriorate, we will be able to collect from both our K facility and from the whole account protection, which would mean that the increase of our net loss would happen on a slower basis compared to the increase on the gross side. So we feel well positioned with the reserve position. A, because we started with a robust assumption for the Q1 exercise, and B, even if we should have some deterioration, we have good retro protection in place.
Ian Pearce: So this is still considerably limit left.
Ian Pearce: It also means that if the gross loss should deteriorate.
Ian Pearce: We will be able to collect from both our K facility and from the whole account.
Ian Pearce: Protection.
Ian Pearce: Which would mean that the increase of our net loss would have on it.
Ian Pearce: A slower basis compared to the increase on the gross side, so we feel well positioned with the reserve position.
Ian Pearce: Because we started with a robust robust assumption for the Q1 exercise and B, even if we should have some deterioration we have good retro protection in place.
Ian Pearce: Okay.
Christian Hermann Ingmeier: To your question regarding the currency result, generally speaking, we see here general mismatch in accounting. So, as you will know, there are non-monetary items and the revaluation with FX go through the OCI and not through the P&L. And second, when looking at the Hanover Rueck figures, you have to see that we steer with a quite disciplined asset liability matching and hedge the currency risks. But we do this with regard to the economic value of Solvency II and not with IFRS. There are slight differences. So, we might see here also some up and down going forward, but we have to see how the rates develop.
Ian Pearce: Yes to your question regarding the currency result, generally speaking we see here.
Ian Pearce: Generally a mismatch in the accounting so as you as you will know.
Ian Pearce: Our non monetary items.
Ian Pearce: TD revaluation with FX go through the OCI and not through the P&L.
Ian Pearce: And second when looking at the <unk> figures.
Ian Pearce: Youll have to see that we steer with quite disciplined asset liability matching and hedge it.
Ian Pearce: Currency risks.
Ian Pearce: But we do this with regards to the economic value of solvency II and not with <unk>. There are slight differences. So we might see here also some some.
Ian Pearce: Up and down going forward, but we have to see how the rates develop.
Ian Pearce: Alright, thank you.
Shanti Kang: The next question comes from Shanti Kang, Bank of America. Please go ahead. Hi, good morning. Thank you. So just two questions for me. So the first one is, last week we heard from a company that was able to secure aggregate cover, which expected to buy in a one in four or one in five type scenario.
Shanghai Tang: The next question comes from Shanghai Tang of Bank of America. Please go ahead.
Speaker Change: Hi, good morning, Thank you.
Speaker Change: So, let's just take ourselves from a southern Fasano, our last week, we had from a company that was able to secure.
Speaker Change: I'll go get copper, which expected to buy in a one in four one in five type scenario I was just curious if you could tell us more about your participation in aggregate cover market today.
Shanti Kang: So I was just curious if you could tell us more about your participation in aggregate cover markets today. And then the second question was on pricing. So obviously with the 2.4% decline in April, it seems that pricing is coming off peaks. But I'm just curious how far they can continue to decline before you'd stop pushing for growth. Thank you. Here on the property CAT side, we certainly have a preference to write event hours, but on the other hand, we are also prepared to write some aggregate covers. It's a smaller part of our portfolio. We would have the preference to write at higher return periods from a retention level point of view.
Speaker Change: And then the final <unk>.
Speaker Change: Question on.
Speaker Change: On pricing.
Speaker Change: Obviously with the two 4% decline.
Speaker Change: Decline in April it seems that pricing has come off peaks Columbus curious how far.
Speaker Change: Continuing to decline before you'd stop pushing for Craig.
Speaker Change: Thank you.
Speaker Change: Yeah on the property Cat side, we certainly have a preference to ride events hours, but on the other hand, we also prepared to write some aggregate covers the smaller part of our portfolio.
We would have the preference to write at higher return periods from a retention level point of view.
Speaker Change: No.
Speaker Change: <unk>.
Christian Hermann Ingmeier: We also observe that there is more capacity available in the market to write those covers, but as I said, we are not a major player in aggregate covers, but do entertain them from time to time in the context of an overall client relationship. When it comes to your second question, I mean, I would remind you that the loss component we have shown is still at a rather marginal level, which gives you an idea that we feel that despite softening, most of the business we are riding is still over and above our capital hurdle rates. So, from that point of view, we continue to be comfortable growing in this pricing environment.
Speaker Change: We also observe that there is more capacity available in the markets to write those covers.
Speaker Change: As I said, we are not a major player in aggregate cover us but to entertain them from time to time in the context of an overall client relationship.
Speaker Change: When it comes to your second question.
Speaker Change: <unk> reminds you that the last component, we have sure Stu a raw the marginal level, which gives you an idea that we feel that despite softening.
Speaker Change: Most of the business, we're writing is still over and above our capital hurdle rates.
Speaker Change: So from that point of view, we continue to be comfortable growing in this pricing environment of course much too early to think about how the pricing environment may look like.
Christian Hermann Ingmeier: It is, of course, much too early to think about how the pricing environment may look like at the 1st of January renewal, because particularly the volatility in the capital market and, of course, the major loss burden from a natural catastrophe and man-made side will play a role here. So, assuming that things are similar to where we are today, it would not necessarily immediately make us stop riding the business, and we may continue to grow. But if reductions start to become more meaningful, then this dynamic may change. But that's too early to really tell. Right now, most of the business we are riding is at a good level of profitability.
Speaker Change: The first of January renewal cost, particularly.
Speaker Change: Volatility in the capital market and of course, the major loss from net.
Speaker Change: Natural catastrophe manmade side will play a role here so assuming that things are similar to where we are today it would not necessarily immediately make us.
Speaker Change: Stop writing the business and we May continue to grow.
Speaker Change: If reduction start to become more meaningful than this dynamic may change.
Speaker Change: That's too early to really tail right now most of the business. We are writing is at a good level of profitability.
Christian Hermann Ingmeier: again. Thank you.
Speaker Change: Thank you Franco.
Wilhart Cacto: The next question comes from Wilhart Cacto, UBS. Thank you and morning everyone.
Speaker Change: The next question comes from warehouse capital UBS.
Speaker Change: Okay. Thank you and more liberal.
Wilhart Cacto: Can you remind us again please on where the reserve resilience rests relative to history in percentage terms when also you consider risk adjustment and in what circumstances would you look to build that beyond even this level and beyond reserve growth I guess.
Speaker Change: Can you remind us again, please on where the reserve Brazilians rep relative to history in percentage terms.
Speaker Change: When all things considered risk adjustment and in what circumstances.
Speaker Change: Would you look to build that beyond even this level and can be honored the growth I guess.
Wilhart Cacto: And what's the minimum level you'd be willing to have it at and that's not for now obviously but I'm just thinking for the future. particularly given CFO change as well.
Speaker Change: Most of the minimum level you'd be willing to have it and thats not analyses, but I'm just thinking for the future.
Speaker Change: Particularly given CFO change as well.
Christian Hermann Ingmeier: And the second one, it's another reserved question, but it's just, you mentioned there we'll see clear evidence on the reserving triangles of this. I guess, can you point us in the right direction before we all drill down into these of what we should be looking for? Thank you. Yeah, maybe on the first, the resiliency reserves, if I understood this correctly, you ask on the relative reserve resiliency level, including the risk adjustment. So for the end 2024, this would be the 2.5 billion, as Watson is showing, and then we have 1 billion, so 3.5 billion, and this would be 7.7% of the net reserves, that's the status.
Speaker Change: And the second one it's another reserve question, but it is just you mentioned, we will see clear evidence on the reserving triangles of this I guess can you pointed in the right direction before we drill.
Speaker Change: Drilling down into the <unk> of what we should be looking for thank you.
Speaker Change: Yeah.
Speaker Change: Yeah, maybe maybe on the first the resiliency reserves.
Speaker Change: Stood this.
Speaker Change: This correctly.
Speaker Change: You ask.
Speaker Change: On a relative relative reserve redundancy level, including the risk adjustment so far for 202024. This would be the two 5 billion Willis towers Watson, it's showing and then we at the $1 billion. So $3 5 billion and this would be seven.
7%.
Speaker Change: Of the net.
Speaker Change: <unk> that's the status so the overall and we mentioned that philosophy here is to grow the resiliency in line with business growth.
Christian Hermann Ingmeier: So the overall, and we mentioned that philosophy here is to grow the resiliency in line with business growth, but we will, of course, have a look at the overall result in the remainder of the year, and we are preparing for a cycle, have to see what exact reserves we will do then later, and this, be assured, there is a change in CFO, but not a change in reserving philosophy and approach here, this will be continuously done also in the future, like in the past. Thank you.
Speaker Change: But we will of course have a look at the overall results in the remainder of the year end.
Speaker Change: We are preparing for a cycle.
Speaker Change: Have to see what exact reserve up we will we will do them.
Speaker Change: Later and this.
Speaker Change: Be assured there is.
Speaker Change: Change in CFO, but not a change in reserving.
Speaker Change: Philosophy and approach here.
Speaker Change: We will be continuously.
Speaker Change: And then also in the future like in the past.
Christian Hermann Ingmeier: Just a quick follow-up on that if that's okay. I guess semi sort of wondering is, is it possible to go higher from this level as a percentage before you start getting knocks on the door? Is that plausible? Yeah, that is possible. There is no clear limit or a special figure where it ends. We feel comfortable with the level we are. There would be room to maneuver also above that, but it's too early to say if we will steer in that direction.
Speaker Change: Thank you.
Speaker Change: Follow up on that if that's okay I guess.
Speaker Change: Semi sort of wondering is.
Speaker Change: Is it possible to die, Ohio from this level as a percentage before you start getting knocks on the door is that is affordable.
Speaker Change: Yes, yes that is it is it is.
Speaker Change: That is possible.
Speaker Change: There is no.
Speaker Change: Clear limited our special figure.
Speaker Change: And we feel comfortable with the level, we are there would be room.
Speaker Change: To maneuver.
Also above that but it's too early to say.
Speaker Change: We will steer in that direction.
Christian Hermann Ingmeier: Yeah, and then on the reserve study and our triangle, I mean, it's of course the long-tail classes we were talking about earlier. So where you will not see a lot of movement is on UK motor. We have not taken the more positive octane rate development into account when setting our IVNR levels. So this translates mostly into additional prudency. On the other hand, we've taken a slightly more prudent approach when it comes to US casualty. I mean, where we had data points that were indicating that it would support slightly more prudent best estimate approach, we've done so.
Speaker Change: Yeah, and then on the reserve study and our triangle will.
Speaker Change: Of course, the long tail classes, we were talking about earlier.
Speaker Change: So where you will not see a lot of movement is on UK motor.
Speaker Change: We have not taken the more positive rate development into account when setting our EBITDAR levels. So this translates mostly into additional prudency on the other hand, we've taken a slightly more prudent approach.
Speaker Change: The comps to U S casualty.
Speaker Change: Where we have data points that we're indicating that would support.
Speaker Change: Slightly more prudent best estimate approach we've done so you will not be surprised.
Christian Hermann Ingmeier: You will not be surprised that this, of course, mainly happened in the soft underwriting years 2014 to 2019. But overall, in most classes of business, in most territories, the underlying reserve development was trending positive. But where we had the data points, we were also willing to take a slightly more prudent approach.
Of course, mainly in the softer underwriting years, 14% to 19.
Speaker Change: But overall in most classes of business most territories. The underlying reserve development was trending positive, but where we were we had the data points. We were also willing to take a slightly more prudent approach.
Vinit Malhotra: The next question comes from Vinit Malhotra, Mediobanca. Please go ahead. Yes, good morning. So, frankly, most of my questions have been asked, but I have one. I mean, I'm still a little curious that how do you perceive the relation between building. even more reserve redundancies and the cycle softening. is your expectation that When the cycle softens further, you will be leaning on these reserves to meet. profitability objectives. And do you think that, you know, that's what the rough plan is? I'm just curious. mainly on that. Thank you very much.
Vineet Malhotra: The next question comes from Vineet Malhotra Mediobanca. Please go ahead.
Vineet Malhotra: Good morning. Thank you most of my questions have been asked.
Vineet Malhotra: I have one.
Vineet Malhotra: I'm still a little curious that.
Vineet Malhotra: How do you perceive.
Vineet Malhotra: The relation between building.
Vineet Malhotra: Even more reserve redundancy.
Vineet Malhotra: And the cycle bottoming.
Vineet Malhotra: Is your expectation that.
Vineet Malhotra: When the <unk> software.
Vineet Malhotra: We'll be leaning on this with us to meet.
Vineet Malhotra: Profitability objectives.
Vineet Malhotra: And do you think that.
Vineet Malhotra: Thanks.
Vineet Malhotra: What better planning so I'm just curious.
Vineet Malhotra: Mainly on that thank you very much.
Vineet Malhotra: Yes.
Christian Hermann Ingmeier: I'm happy to answer this. And as Christian has luckily clarified, there is no change in reserving policies. So prudency and resiliency build is clearly part of our model, as you know, providing stability over the cycle. So we always look at our earnings mid-long term, and we want to really provide stable, increasing stable results over the cycle. And that's why we stick to the reserving philosophy. And briefly coming back to Will's question, and is there a ceiling? And I would say, I would confirm what Christian said, not yet. So if you purely look what the $2.5 billion is an equivalent of $5.5 of nominal reserves, and then you add the risk adjustment, as Christian mentioned, which is also very strong and very high, I'd say, conceptually.
Vineet Malhotra: Happy to.
Vineet Malhotra: To this end as Christiane.
Vineet Malhotra: Luckily clarified that there's no change in reserving policy cell prudency and resiliency build is clearly part of our model as you know.
Vineet Malhotra: Providing stability.
Vineet Malhotra: Over the cycle. So we always look at our earnings made long term and we want to really provide stable.
Vineet Malhotra: Creating stable results over the cycle and that's why we why we stick to the reserving philosophy and briefly coming back to with question and is there a ceiling and I would say I would confirm what <unk> not yet so if you purely.
Vineet Malhotra: But the 2.5 billion is an equivalent of five five of nominal reserves and then you add the.
Christian Meyer: The risk adjustment as Christian mentioned, which is also very strong and very high.
Christian Meyer: I would say conceptually so so if you look at the $5 5 billion just sitting in the in the <unk>.
Christian Hermann Ingmeier: So if you look at the $5.5 billion just sitting in the liability for incurred claims, there is more room for resiliency build. And we are able to, and we are willing to, utilize this resiliency in case of the financial year where we see large loss burden in excess of our budget, or as we go through the cycle, to really keep our guidance stable. And just to clarify, the trigger for this quarter build, was it the 2.5% price cut in? It doesn't sound like it was a surprise or a shocking number, I'm just curious as to was there a trigger or you just said let's do this for the medium term and see?
Christian Meyer: Liability for incurred claims there is more room for resiliency built.
Christian Meyer: And we are able to and we are willing to utilize these this resiliency infinite in case of.
Christian Meyer: The financial year, where we see large loss burden in excess of our budget.
Christian Meyer: Sure as we go through the cycle to really keep our guidance statement.
Christian Meyer: And just to clarify.
Christian Meyer: The trigger for this quarter.
Christian Meyer: Was it the two 5% price cutting.
Christian Meyer: It doesn't sound like it was a surprise of a shocking number in there.
Christian Meyer: Curious as to what you do.
Christian Meyer: To do this for the medium term and fee.
Christian Hermann Ingmeier: Yes, we were happy with the outcome of the Willis-Towers-Watson report, as Christian mentioned, so this was fully in line with what we expected. And the Q1 was really about, as mentioned earlier, strong underlying results. and some currency tailwinds in the quarter. So we've taken that opportunity to actively, proactively build a bit of resiliency also in Q1. Thank you. Thank you very much.
Christian Meyer: Yes, we were happy with the outcome of the Willis Towers Watson report as Christian mentioned, so this was fully in line with what we expected.
Christian Meyer: Q1 was really about.
Speaker Change: Mentioned earlier strong underlying results.
Speaker Change: And and some currency tailwind in the quarter so.
Speaker Change: We've we've taken that opportunity to.
Speaker Change: To actively proactively build a bit of resiliency also in Q1.
Speaker Change: Thank you. Thank you very much.
James Shock: The next question comes from Ivan Bokmat, Barclays, please go ahead. Hi, good morning. Thank you very much. I have a couple questions. The first one is about the new business CSM and PNC. So if I look at this number that you report on slide eight, the $1.5 billion, compare it to last year, first quarter, we're talking about approximately 4% growth year on year. So I'm just wondering if you could perhaps talk about the large books behind it of where do you think, what do you think was the bigger contributor to that growth? What changed year on year?
Speaker Change: The next question comes from Ethan Bochum at Barclays. Please go ahead hi.
Ethan Bochum: Good morning, Thank you very much.
Speaker Change: Couple of questions.
Ethan Bochum: One is about the new business <unk> P&C. So if I if I look at this number that shortfall to slide eight.
Speaker Change: $1 5 billion compare it to last year first quarter.
Speaker Change: Talking about approximately 4% growth year on year.
Speaker Change: Just wondering if you could perhaps talk about the the large books behind it where do you think what do you think was the bigger contributor to that growth what changed year on year.
James Shock: Is it property? Is it structure? Reinsurance? Maybe you could help put it into context. And also when I think about, let's say you have an 88% combined ratio guidance, so you have like 12 points of margin. Now prices are down two to three percentage points. So in As we think about this new business CSM, should we think about, you know, that price headwind as like a 10% weighing down on the CSM offset by the exposure growth? Is that the right way to think about it? Or maybe I'm completely off.
Speaker Change: <unk> is it structured reinsurance maybe you could help put it into context.
Speaker Change: And also when I think about.
Speaker Change: Let's say you have an 88% combined ratio guidance. So you have like 12 points of margin now prices are down.
Speaker Change: Two to three percentage points.
Speaker Change: As we think about this new business CSM.
Speaker Change: Should we think about that.
Speaker Change: That price headwind.
Speaker Change: 10%.
Speaker Change: Weighing down on the on the CSM offset by the exposure growth is that the right way to think about it maybe I'm completely off.
Christian Hermann Ingmeier: And secondly, I have a question on Life and Health 3, also about the new business, perhaps. I'm just wondering whether the, you know, in the past 12 months, let's say there's been several large transactions brought to the market, whether you've considered them attractive, to what extent you've participated? And also, what are the changes in interest rates that we are seeing, the volatility, whether that makes the finsol business more or less attractive to seedings as we go forward? Thank you.
Speaker Change: And secondly, I have a question on life and health re also.
Speaker Change: Also about the new business, perhaps just wondering whether.
Speaker Change: In the past 12 months, let's say, there's been several large transactions brought to the market, whether you've considered them attractive to what extent you've participated and also.
Speaker Change: What are the changes in interest rates that we are seeing the volatility what does that makes the fence whole business more or less attractive to see as we go forward. Thank you.
Christian Hermann Ingmeier: Let me start with your CSM question and the growth compared to Q1 in the previous years to our calculation more like six percent than the four percent you have mentioned. The two positives which are helping in that increase is the general growth in the business and the fact that we did buy less retro compared to the previous year. On the other hand, this is somewhat counterbalanced by the decline in reinsurance pricing where, as you will remember from the one renewals was close to 3%, now 2.5% and this of course also has a bearing on the quality of the profitability in the business.
Speaker Change: Yeah, let me start with Youll see a dumb question.
Speaker Change: The growth compared to Q1, the previous years to our calculation more like 6% than the 4% you have mentioned.
Speaker Change: The two positives.
Speaker Change: Which are helping in that increase.
Speaker Change: <unk> general growth in the business.
Speaker Change: The fact that we did.
Speaker Change: Less retro compared to the previous year.
Speaker Change: On the other hand is.
Speaker Change: Somewhat counter balanced by the decline in reinsurance pricing.
Speaker Change: As you will remember from the one one renewals was close to 3% now two 5%.
Speaker Change: This of course also has a bearing on the quality of the profitability in the business. So two positives one slightly negative.
Christian Hermann Ingmeier: So, two positives, one slightly negative. The component parts are as diversified as the premium growth. So, most of our regions, most of our product lines are growing and are positively contributing to the CSMM development. So, no difference compared to the revenue growth here. When it comes to the 88% combined ratio, which is percentage point lower compared to the previous year, the main the fact that we have bought less retro-sessional coverage in a general relatively stable incoming price environment that made us feel comfortable to use our combined ratio target from 89 to 88, despite the fact that we were expecting a slightly softening market environment.
Speaker Change: Grow the component parts.
Speaker Change: As diversified as the premium growth.
Speaker Change: So most of our regions most of our product lines are growing and positively contributing to the field development.
Speaker Change: Development, So no difference compared to total revenue growth.
Speaker Change: It comes to the 88.
Speaker Change: And so the combined ratio, which is a percentage point lower compared to the previous year.
Speaker Change: Main driver behind this.
Speaker Change: As we explained on previous occasions really the effect.
Speaker Change: We have bought less retro sessional.
Speaker Change: Copper rich.
Speaker Change: General relatively stable incoming price environment.
Speaker Change: It made us feel comfortable to reduce our combined ratio target of 89% to 88. Despite the fact that we were expecting a slightly softening market environment.
Christian Hermann Ingmeier: Yeah, maybe to your two questions on life and health, many thanks. I start with the change in interest rates. What you have to understand is the change in interest rates has an impact on our seedings, on the direct business, mainly on savings business, and we're not in that type of business. So for us, the change in interest rates is not that relevant as for the direct insurance company. So no change from our side.
Speaker Change: Yes, maybe to your two questions on LIFO has many things I start with with the change in interest rates. What do you have to understand that the change in interest rates has an impact on our <unk> on the direct business mainly on savings business.
Speaker Change: We're not in that type of business. So for us the change in interest rates is not that relevant to us for the direct insurance company. So no change from our side. The second question. You had was on the big deals. Yes, we have some big deals in 'twenty four.
Christian Hermann Ingmeier: The second question you had was on the big deals. Yes, we have seen big deals in 24. Most of these big deals, they came from the longevity business, and we looked at them, and we didn't believe that they were attractive enough, the profitability of these deals were attractive enough to participate. So we haven't participated in any of these big, big deals.
Speaker Change: Most of these big deals that came from the longevity business and we looked at them and we didn't.
Speaker Change: Our belief that they were attractive enough to profitably FTC's were attractive enough to participate so we havent participated in any of these big big deals.
Speaker Change: Okay. Thank you very much.
Jochen Schmidt: The next question comes from Jochen Schmidt, Metzler. Please go ahead. Thank you. Good morning. I have a follow-up question on reinsurance pricing on slide 17. You state abundance of capacity twice on this slide, but in your remarks you also mentioned no meaningful inflow of new capital into the industry. So would you consider the aforementioned abundance of capacity to be only particularly referring to individual regions or submarkets of the global reinsurance market? Maybe you could provide a bit more details here. That's my question. Thank you.
Speaker Change: The next question comes from Johan Schmidt Metzler. Please go ahead.
Speaker Change: Thank you good morning, I have a follow up question on reinsurance pricing on slide 17, you state abundance of capacity twice on this slide but in your remarks, you also mentioned no meaningfully inflow of new capital into the industry. So would you consider that the.
Speaker Change: <unk> mentioned abundance of capacity to be only particularly referring to individual regions or submarkets of the global reinsurance market, maybe you could provide a bit more detail. Yeah. That's my question. Thank you.
Christian Hermann Ingmeier: We see the high levels of supply really in all parts of the world, in all product lines. It's mostly coming from existing market participants, because that's why we say we are not seeing particularly new capital coming into the market, but obviously the profitability journey of the industry has been strong over the last nine quarters, so to the extent not fully dividended out, of course we retained earnings. and the fact that the market is more comfortable with today's pricing and retention level is leading to this supply situation. But it's really, in most territories, it's particularly strong on the short-sale classes, so property, some of the specialty classes, it's less evident in casualty and particularly U.S.
Speaker Change: We see the.
Speaker Change: High levels of supply really in all parts of the world in all product lines, mostly coming from existing market participants.
Speaker Change: Why we say we are not seeing.
Speaker Change: Particularly new capital coming into the market, but obviously the profit to profitability journey of the industry has been strong over the last nine quarters, so to the extent not fully dividend without of course.
Speaker Change: <unk>.
Speaker Change: Retained earnings.
Speaker Change: And the fact that the market is more comfortable with todays pricing and retention level is.
Speaker Change: Leading to this supply situation, but it's really in most territories is particularly strong on the shorter classes. So property some of the specialty classes.
Speaker Change: It's less evident in casualty.
Christian Hermann Ingmeier: casualty, which are the more stable parts of the market right now. Thank you.
Speaker Change: And particularly U S casualty, which are the more stable parts of the market right now.
Thank you.
Speaker Change: Okay.
Roland Fender: The next question comes from Roland Fender, Oddo BHS. Please go ahead. Yes, good morning. Thank you for taking my question. I would like to come back to the life and health business. Could you touch on the financial solutions business in China? I think you mentioned that there were some regulatory changes or challenges which might just fade out mid-year. For the first quarter, you reported quite a healthy new business. So what is still in place? Are things moving? So could you provide maybe an outlook on this? And secondly, on the longevity business, you did mention it in the first quarter reporting.
Speaker Change: The next question comes from rollout Thunder <unk> BHF. Please go ahead.
Speaker Change: Yes, good morning, and thank you for taking my question I would like to come back to the life business.
Speaker Change: Could you touch on the financial solutions business in China, I think you mentioned that there are some regulatory changes or challenges with smart.
Speaker Change: Trade out midyear.
Speaker Change: For the first quarter, you are correct that quiet healthy new business, so water still in place or are things moving so quickly.
Speaker Change: Could you provide maybe an outlook on this.
Speaker Change: Then secondly on the longevity business.
Speaker Change: You did mention it in the first quarter reporting.
Roland Fender: Could you indicate a view on your pipeline, what you see for longevity business you might be able to write in the near future, let's say?
Speaker Change: Could you indicate.
Speaker Change: On your pipeline, what you see for longevity business, you might be able to write.
Near future, let's say.
Christian Hermann Ingmeier: and maybe secondly just housekeeping questions. Could you mention the run yield and reinvestment yield of your fixed income portfolio and investments? Thank you.
Speaker Change: And maybe secondly, just.
Speaker Change: Housekeeping questions could you mentioned, the running yield and reinvestment yields.
Speaker Change: Fixed income portfolio. Thank.
Speaker Change: Thank you.
Christian Hermann Ingmeier: Let me start maybe with the Chinese financial solutions business. You're right, we said that there was a regular change going on in China on the EFS business, and I mentioned that already in the last call. We're still working on it to find some solutions for our clients and which are also feasible for ourselves. So we're still working on a solution there. On longevity, maybe just as the second question on the pipeline on longevity business, we do see still a good pipeline on longevity business, not only in the UK, by the way, but also a diversified pipeline geographically from other regions.
Speaker Change: Yeah, Let me, let me start maybe with the Chinese financial solutions business, you're right. We said that there was a regulatory change going on in China on the <unk> business and I mentioned that already in the last call we're still working on it.
Speaker Change: To find some solutions for our client incentives are also featured the proper self so where.
Speaker Change: Still working on a solution there.
Speaker Change: Yeah.
Speaker Change: And.
Speaker Change: Yes on longevity, maybe just the second question on the pipeline on our <unk> business, we do see still a good pipeline on longevity business not only in the U K by the way, but also a diversified pipeline geographically from other regions.
Christian Hermann Ingmeier: But as you know, these longevity deals, they're all transactional, they're quite big. So it's very difficult now to say what probability of success we're going to have there.
Speaker Change: But as you know does not have details around transaction, they're quite big.
Speaker Change: So it's very difficult now to say what probability of success, we're going to have there.
Christian Hermann Ingmeier: And briefly to your fixed income question, so the running yield was 3.5% and the reinvestment yield 4.3%. Okay, thank you.
Speaker Change: And briefly to your fixed income question, so the running yield.
Speaker Change: It was three 5% and the reinvestment yield four 3%.
Speaker Change: Okay. Thank you.
Michael Huttner: The next question is a follow-up question from Michael Hoettner, Berenberg, please go ahead. I have two. Thank you so much. The first one is on slide 11. You talk about 81 million experienced variants, mainly from mortality. I just wonder if you can give us some detail.
Speaker Change: The next question.
Speaker Change: And as a follow up question from Michael Huttner Bahrenburg. Please go ahead.
Speaker Change: Thank you so much.
Speaker Change: The first one is on slide 11, you talk about 81 million experience variance mainly for mortality I just wonder if you can give us some detail.
Christian Hermann Ingmeier: I have this crazy theory that the new obesity drugs are starting to make a difference and probably wrong. And then the other one, you talked about property pricing and aggregate covers and stuff. Should I take this to mean that the what I call attachment points are beginning to soften? Thank you. Yes, this is coming from mortality and it's coming mainly from our South American and South European business. And on the property retentions, they're mostly stable. I mean, there's less inflationary pressure and underlying values. So therefore, we are not seeing them go up. But we also are not seeing them go down for the most part.
Speaker Change: Tracy theory.
Speaker Change: The new obesity drugs are starting to make a difference probably wrong.
Speaker Change: Then the other one that you talked about.
Speaker Change: Property pricing in aggregate cover some stuff.
Speaker Change: Should I take this to mean that the.
Speaker Change: What I call the attachment points.
Speaker Change: Beginning to soften.
Speaker Change: The experience filings to summarize <unk> started adding 1 million. Yes. This is coming from mortality and it's coming mainly from our South American and South and European business.
Speaker Change: And on the property Retentions, the mostly stable.
Speaker Change: There's less inflationary pressure in underlying values. So therefore, we are not seeing them go up.
Speaker Change: But we're also not seeing them go down for the most part.
Christian Hermann Ingmeier: But of course, in a market where there is an oversupply of capacity, some clients are testing the market in the sense that they are looking to buy underlying coverage either on an event basis or on an aggregate basis, but the core programs are stable from a retention point of view. We don't see a trend in addition to the pricing trend of generally reduced retention levels.
Speaker Change: But of course in the markets, where there is an oversupply of capacity.
Some clients are testing the market in the sense that they're looking to buy underlying coverage.
Speaker Change: Either on an event basis.
Speaker Change: On an aggregate basis, but the core programs are stable from a retention point of view, we don't see a trend in addition to the pricing trends.
Speaker Change: Generally reduced.
Speaker Change: Retention levels.
Christian Hermann Ingmeier: Fantastic, thank you.
Speaker Change: Fantastic. Thank you.
Speaker Change: Okay.
Faizan Lakhani: The next question comes from Faizan Lakhani, HSBC, please go ahead.
Speaker Change: The next question comes from <unk> Zhang.
Speaker Change: HSBC. Please go ahead.
Faizan Lakhani: Your line is open, you may proceed with your quest. Hi there. Sorry, muted. Thanks for my questions. I had two questions on Life and Health 3. One was on the risk adjustment release and you mentioned you expect to normalise in future quarters. Will there be a catch-up from Q1 and to the rest of the three quarters or simply just normalisation? and secondly, on Greater China, you mentioned that there is no change in trend or worsening experience for you to get the opportunity to increase your risk adjustment. Should we assume that when you have qualitative positive experience variance that you will take actions like that to offset that, or is this just a one-off?
Your line is open you May proceed with your question.
Speaker Change: Hi, there sorry.
Speaker Change: Thats all my questions.
Speaker Change: Two questions on life and health re one was on the risk adjustment release, you mentioned, you expect to normalize in future quarters.
Speaker Change: There'll be a catch up from Q1 into the rest of the three quarters also impeached normalization.
Speaker Change: And secondly on <unk>.
Speaker Change: Greater China, you mentioned that there was no change in trend or western experienced going into the auction.
Increase the risk adjustment should we assume that when we have quarters of positive experience for you, we'll take actions like that to offset that or is this just a one off.
Christian Hermann Ingmeier: Thank you.
Speaker Change: Yes.
Christian Hermann Ingmeier: So, regarding the risk adjustment release that was prudent, this is indeed to be on the prudent side. There has been some observations of positive development that might be just temporary, so this adjustment neutralizes this, and we have to monitor this and look throughout the year if this effect becomes sustainable or not, and then we will accordingly use also this risk adjustment to steer that, so therefore we think it will normalize through the year. It's just prudency, it's not a trend underlying that. And maybe on your question on greater Chinese morbidity, I mean, as Christian already said, and I want Clemens also, we don't see any further negative trends on this business.
Speaker Change: So regarding the risk adjustment re lease that was prudent.
Speaker Change: Indeed to be to be on the prudent side. There has been some some observations of positive development that might be just temporary. So this this adjustment neutralizes. This and we we have to monitor this and look throughout the year. If this effect become.
Speaker Change: Sustainable or not and then we will accordingly.
Speaker Change: Yes.
Speaker Change: Use of use also.
Speaker Change: Risk a risk adjustment.
Speaker Change: Two to steer and.
Speaker Change: Yeah to steer that so therefore, we think it will normalize through the year, it's just prudent C. It's not the trend underlying that.
Speaker Change: And maybe on your question on greater Chinese mobility.
Speaker Change: Christiane already said number one payments also we don't see any further negative trend from this business. There was no negative claims experienced in Q1 that we have seen and it was really procure prudence and resiliency that we have gone there is not what you need to understand that this is long term business. So I don't expect us to release reserves based on.
Christian Hermann Ingmeier: There was no negative claims experience in Q1 that we have seen, and it was really for pure prudence and resiliency that we have done this.
Yousef: Now, what you need to understand is that this is long-term business, so I don't expect us to release any reserves based on quarterly movements that we observe that would be really a short-term view, and we really have a long-term view on this business. As a reminder, if you wish to ask a question, press star followed by 1.
Speaker Change: Quarterly movements that you observe that will be really a short term view and we really have a long term view on this business.
Speaker Change: Okay, that's very helpful.
Speaker Change: As a reminder, if you wish to ask a question. Please press star followed by one.
James Shock: The next question comes from James Shock, Citi. Please go ahead. Thank you, and good morning, everyone. I just had a few things left.
James Shuck: The next question comes from James Shuck Citi. Please go ahead.
James Shuck: Thank you and good morning, everyone.
James Shuck: Just had a few things left firstly I just wanted to ask about the outlook.
James Shock: So, firstly, I just wanted to ask about the debt outlook. You mentioned that you're going to redeem the 500 million of debt in Q1. How do you think about your debt leverage? It is a bit higher versus peers. So, just keen to understand if you intend to reduce the debt profile or keep it stable and grow the book value to reduce that debt leverage over time. That's my first question.
James Shuck: You mentioned that you're going to redeem the $500 million attached in Q1.
James Shuck: How do you think about it that leverage is a bit higher.
James Shuck: Just keen to understand if you intend to reduce the debt profile.
James Shuck: Right.
James Shuck: Greater book value to reduce that leverage over time.
James Shuck: That's my first question and then secondly.
James Shock: And then, secondly, I know you said in the comments that the SCR in Q1 decreased a bit from FX. I'm a bit surprised to hear that given the amount of growth that's coming on the book. So, even if we just for FX, let's call it stable. I'm particularly interested in the capital allocated to PNC RE for underwriting risk. If you could perhaps tell me how that developed in the quarter and just you think about it when it's forward looking on a 12-month basis, I think.
James Shuck: I know you said it.
James Shuck: And the comment that the SCR.
James Shuck: In Q1 decreased a bit from FX.
James Shuck: I am a bit surprised to hear that given the amount of growth that's coming.
James Shuck: But secondly, just FX, let's call it stable.
Speaker Change: It could be interested in capital allocated to P&C re underwriting risk if you could perhaps tell me how that developed in the quarter and just remind me how you think about it when it's forward looking on a 12 month basis I think.
James Shock: And then, finally, just quickly, I know you've had lots of questions on the resilience you've reserved. So, I'm not going to go back into that. But I would just like to know of that 5.5% excluding the risk adjustment, does that translate into some form of reserve percentile that you can tell us? Thank you.
James Shuck: And then finally just quickly on <unk>.
James Shuck: Lots of questions on the resiliency.
James Shuck: I'm not going to back into that but I would just like to know of.
James Shuck: Five 5%.
James Shuck: Excluding the risk adjustment does that translate into some form of central App.
James Shuck: Thank you.
James Shuck: Okay.
Clemens Jungström: James, good morning. This is Clemens. So just on the debt, so this is really just sort of, you know, and you know, we, we, we have quite quite stable capital now under all rating regimes etc. So this was really just taking advantage of the strong capitalization. On the resiliency, the 5.5, would you mind just repeating the question on that? I'm not sure if I fully captured the question, James. No, absolutely. So, I mean, certain other reinsurers, when they reserve, they're reserving to like the 80th or 90th percentile, or perhaps around about that. So what does the 5.5 translate to for you?
James Shuck: James.
Kevin: Good morning, Kevin So just on the debt. So this is really just sort of.
Kevin: And you know, we we have quite.
Kevin: It's quite stable.
Kevin: Capital now under all 18 regimes et cetera. So this was really just taking advantage of the strong capitalization.
Kevin: On the S&P <unk> and solvency II. So this is just for now clearly we will always look at capital efficiency and if the market allows.
Kevin: Need be we will look at our leverage ratio in light of clearly in light of any deaths in light of dividend policy et cetera.
Kevin: But that's just for now.
Kevin: On the.
Kevin: Resiliency.
Kevin: Five five would you mind just repeating.
James Shuck: Question on that I am not sure if I fully captured the question James.
Speaker Change: No that's absolutely say.
Speaker Change: Certain other reinsurance when they presented their reserving slightly ats low 90 percentile.
Speaker Change: Around about that so what is the $5 five kind of like two five.
Speaker Change: Okay.
Clemens Jungström: Yeah, we don't have it at hand. I don't have a number off the top of my head how that will translate into a confidence level. The confidence level that we provide will be a diminished number between PNC and life and health as part of the disclosures, but I don't have any at hand, James. for P&C and loan. However, I'd say with the 5.5, as we always said, you know, we are consistently at the upper range of potential best estimates. So we are really consistently prudent. Again, is there room for further increase in resiliency? Yes. So these are quite prudent and robust reserves that we're looking at and there's still some room to further increase.
Speaker Change: Yes, we don't have it at hand, and we we.
Speaker Change: <unk>.
Speaker Change: I don't have a number off top of my head, how that will translate into our confidence level to <unk>.
Speaker Change: <unk> service that we provide will be diminished number between P&C and life and health as part of the disclosures, but I don't have any at hand came.
Speaker Change: For our P&C Standalone however.
Speaker Change: I'd say with the five five as we always said we are.
Speaker Change: Consistently at the upper range of potential best estimates. So so we are really consistently prudent again is there room for further increase it resiliency yes.
Speaker Change: So these are.
Speaker Change: Quite prudent and robust with us that we're looking at and there's still some room to further increase those.
Clemens Jungström: But again, if we look at the overall PNC resiliency, you should always take into account also the risk adjustment that clearly goes on. Yeah. Okay.
Speaker Change: But again, if we look at the overall P&C resiliency you should always take into account also the risk adjustment.
Speaker Change: That clearly goes on top.
Speaker Change: Yes, okay. Thanks. Thank you for the question I'll make underwriting risk rate from PCB.
Clemens Jungström: Thank you.
Christian Hermann Ingmeier: And there's just a question on the underwriting risk rate from PCV. James, we don't have an answer for that yet, so we'll follow up on the SCR development in detail. and come back to you on that. Okay. Perfect. Thank you very much. Thank you.
Speaker Change: Okay.
Speaker Change: We don't have an answer for that yet so we'll follow up on the SCR development in detail.
Speaker Change: Okay.
Speaker Change: Come back to you on that.
Speaker Change: Okay perfect. Thank you very much.
Speaker Change: Thank you.
Michael Huttner: The next question is a follow-up question from Michael Huttner, Berenberg. Please go ahead. Sorry about that.
Speaker Change: The next question is a follow up question from Michael Huttner from Darrin Berg. Please go ahead.
Speaker Change: Sorry about that.
Christian Hermann Ingmeier: On the Ritium, can you say how big your stake is and what valuation is in your balance sheet now? Thank you. Yes, Michael. On Veridium, it's an equity participation, so it's just shy of 20% the participation. And so there are, you know, it's a mid-triple-digit number in terms of valuation. The deal has not been closed yet, so please bear with us. But it's a mid-triple-digit number for our part that we're looking at part of the OCI, and we will see how that number will develop when the deal is closed, which we expect to be later in the year.
Speaker Change: Kevin can you say, how big your stake.
Speaker Change: Valuations in the past thank you.
Michael Huttner: Yes, Michael.
Speaker Change: On the radio.
Speaker Change: It's an equity participation. So it's just shy of 20%.
Speaker Change: The participation.
Speaker Change: <unk>.
Speaker Change: So there are it's a mid triple digit number in terms of valuation to deal has not been closed yet. So so please bear with us.
Speaker Change: It's a mid triple digit number for our part that we're looking at part of the OCI and we will see how that number will develop.
Speaker Change: When the deal is closed which we expect to be later in the year.
Christian Hermann Ingmeier: We will see it in the Barenheit line item, as Christian alluded to, as assets held for sale or up for sale. So there's a line item in the financial statements, and that should provide the exact value that we are carrying at the moment. I don't have it offhand. Lovely, thank you.
Speaker Change: You will see it in the balance sheet line item as Christine alluded to.
Speaker Change: Assets held for sale are up for sale. So there is a line item in the financial statements and that should provide the exact value that we're carrying at the moment I don't have it off hand.
Speaker Change: Perfect. Thank you.
Yousef: Ladies and gentlemen, that was the last question.
Speaker Change: Ladies and gentlemen that was the last question I would now like to turn the conference back over to Clemens youngster, Phil for any closing remarks.
Clemens Jungström: I would now like to turn the conference back over to Clemens Jungstoeffel for any closing remarks. Yes, thanks very much. Thank you for your question, for your participation. I hope we have delivered the message that we have built resilience even not only in 2024 but also in the first quarter. In fact, both in P&C and in life and health as you've heard. So we feel very confident given the resilience in our balance sheet, given the underlying profitability to deliver on our targets and clearly to meet our guidance for 2025.
Speaker Change: Yes, thanks very much. Thank you for your question for your participation.
Speaker Change: I hope we have.
Speaker Change: Delivered the message that we have built resilience, even not only in 2024, but also in the first quarter in fact, both in P&C and in life and as you've heard.
Speaker Change: So we feel very confident given the resilience in our balance sheet, given the underlying profitability to deliver on our targets and clearly to meet our guidance for 2025. Thank you again and have a good day.
Yousef: Thank you again and have a good day.
Yousef: Ladies and gentlemen, the conference is now over. Thank you for choosing Corsco and thank you for participating in the conference. You may now disconnect your lines. Goodbye.
Speaker Change: Ladies and gentlemen, the conference is now over thank you for choosing chorus call and thank you for participating in the conference you May now disconnect your lines Goodbye.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: [music].
Speaker Change: Okay.