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Q2 2025 Earnings Call
Aug 14, 2025 12:00 AMOperator: Good morning or good afternoon. Welcome to Swiss Re's Half Year 2025 Results Conference Call. Please note that today's conference call is being recorded. At this time, I would like to turn the conference over to Andreas Berger, Group's CEO. Please go ahead.
Alexander Andreas M. Berger: Thank you very much, and good morning or good afternoon to all of you. I appreciate you taking the time to join us today. So thank you for that. Before our group CFO, Anders Malmstrom, walks you through the details of our half year results, I'd like to start with some scene setting and brief remarks. Today, we're pleased to report a strong net income of USD 2.6 billion for the first half of 2025, resulting in an annualized ROE of 23%. All of our 3 business units delivered their fair share, and we also benefited from a solid investment result. The main driver of the fact that we were able to achieve around 60% of our full year net income target of more than USD 4.4 billion has been the strong underwriting contribution of our P&C businesses. Here, we benefited from relatively quiet second quarter with respect to large losses, after a tough start to the year, as we all know. Large losses in the second quarter were modest plus P&C Re and corporate solutions coming in below USD 150 million, entirely from man-made events. This means that we did not consume our nat cat budget in the second quarter. While this explains the strong combined ratio results, we did allocate a reserve for current year losses that may not have -- the losses that may not have been reported to us yet by the time we closed the quarter, thereby adding an increased level of resilience to our P&C units for the second half of the year. Our P&C reserves remained resilient. The positive nominal reserving for the first half amounted to around USD 300 million with the majority in P&C Re. I'm happy with the outcome of the renewal of this year in P&C Re. Market participants largely maintained the discipline on terms and conditions. Overall pricing is still attractive with a picture across lines of businesses being more nuanced given the different stages in the cycle that each of the lines of businesses is in. This is very important to us. As not all lines are correlated, meaning there's not just one single cycle. In property, despite a decline in risk-adjusted pricing, we achieved attractive margins, particularly in the nat cat space. It's important to note that current reductions are occurring from very healthy levels, which puts the observed pricing pressure into perspective. In casualty, we saw nominal price increases in the mid-single to double-digit range, which were largely offset by our prudent loss assumptions. And in specialty, we successfully defended our attractive margins. The outcome of midyear renewals was consistent with those of January and April, reflecting a continued focus on underwriting discipline and prioritization of margins over top line. We increased volumes in our property and specialty lines by 5%, while further significantly reducing our casualty volumes by 27%. We achieved nominal price increases of 2.3% on our overall portfolio in the midyear renewals or negative 2.4% on a net basis, meaning post the impact of higher costing loss specs we have taken. Year-to-date, we have achieved 3% volume growth, while the net price change of a modest negative 1.8% is supportive of our 2025 targets and again, reflects the overall discipline that we continued to maintain. When you combine volume and price developments, P&C Re's new business CSM of USD 2.2 billion in the first 6 months of the year is unchanged from the same period a year ago. That's a very solid outcome. And to stress again, we have no top line targets. The focus is entirely on maintaining healthy risk-adjusted margins and a high-quality portfolio. Life & Health. Life & Health Re produced a solid first half result. The USD 839 million net income is just above the pro rata target requirement of USD 800 million. So overall, we're on track. We continue to have some noise from smaller portfolios where experience lags expectations, but this is within manageable levels, and we expect this to fade a few quarters into the future. Importantly, our largest portfolio's most notably U.S. mortality are performing in line with expectations. We continue to make progress on our costs. Our admin costs for the quarter are in line with the cost ambitions outlined during our investor event in December last year. Accordingly, we are on track to reduce our cost run rate by around USD 100 million this year at constant FX , contributing to the overall target of USD 300 million by 2027. We will break out details on this for you in the future. Now, we're confident, but we remain vigilant as we look ahead. Priority #1 is to deliver on our targets, and we remain in a good place to do that with all three business units on track. And I also told you that we have a second priority, which is to increase the overall resilience of the firm. Also here, I feel we have made very, very good progress. The actions we have taken on in-force reserves in P&C Re and Life & Health Re, the underwriting and reserving of new business and to focus on operational excellence and efficiency across the firm are all part of it. We will now see what the second half of the year brings, also as we enter the peak of the wind season. The macro environment remains uncertain with abundant risks around us. So all of this, our focus on underwriting excellence is unchanged. And with that, I'd like to hand over to Anders to you, our group CFO. Over to you.
Anders Malmstrom: Thank you, Andreas. And again, good afternoon or good morning to everyone on the call. I will make a few remarks on the results we released this morning before we go to the Q&A session. Andreas has taken you through the highlights of our overall strong first half results. Let me add a few further details. On revenues, the group's insurance revenue amounted to USD 20.9 billion in the first half, down from $22.2 billion last year. Please note that we have adjusted last year's first half revenues down by just below $300 million to reflect the updated methodology on netting profit commissions. Last year's first half service expense has changed by the same amount with no net impact on the P&L. This provides for a better like-for-like comparison. The $1.3 billion decline has a few major drivers, most of which were already highlighted in the first quarter. The termination of an external retrocession transaction in Life & Health Re, with no bottom line impact, which inflated last year's first half revenues by about USD 0.4 billion. In Corporate Solutions, the nonrenewal of the Irish MedEx business accounts for a 0.2 billion reduction in revenues versus last year. And the decrease of USD 0.7 billion in P&C Re is driven by the pruning of the casualty book and increased revenue seasonality between first and second half of the year in property and general multiline. For the second half of the year, we currently expect subject to FX movements, revenues to be higher than in the first half by around USD 1.5 billion. The main driver here is the seasonality of expected nat cat claims in P&C Re and Corporate Solutions. You will hear us continuing to stress earnings are what matters, and we continue to see good resilience here. Despite some pressure on rates across our P&C business, the new business CSM production of the group remain healthy at USD 3.1 billion in the first half of the year, up marginally from last year's $3 billion. Let me move on to the insurance service result of our businesses. In P&C Re, you will continue to notice a decline in the CSM release versus last year's period. The $1.4 billion release is down from last year's $1.8 billion. The decrease is driven by the earn-through of prudent initial loss fixed, including the impact of new business uncertainty allowance, Experience variance and other, as we call it, and which includes all variances relative to initial reserve assumptions, amounted to a positive $102 million in the first half. This figure was negative after Q1, largely as a result of the high large nat cat and man-made losses. The low large loss burden in Q2 drove a positive $242 million overall experience in Q2 and this has resulted in an overall positive first half. Total first half large nat cat losses of EUR 556 million, almost entirely from the L.A. wildfires were below the first half budget of USD 778 million. Large man-made claims amounted to USD 230 million, which is still slightly higher than what we would normally expect to see in an average first half. The overall positive experience on large claims was partially offset by current year reserves we set up for attritional losses of more than $200 million that may not yet have been reported to us, which reflects a cautious stance we are taking as we entered the second half of the year. Importantly, we benefited from a positive prior year result. Nominal reserve releases in P&C Re amounted to around $250 million in the first half. In terms of the combined ratio, P&C Re's the first half results of 81.1% is well below the 85% target we have for the year, strongly hedged by the 76.3% of the second quarter. Moving on to Corporate Solutions. The first half CSM release of $451 million is above last year's $440 million, driven by higher in-force margins. Experience variance and other was positive at $65 million. This reflects favorable underlying performance and a positive prior year reserving result, partially offset by an allowance for expected claims seasonality due to late reporting. Large nat cat claims of $60 million were driven by the L.A. wildfire loss of $50 million, below what we would have expected for the first half. Large man-made claims in the first half amounted to almost $200 million, which is slightly above average offsetting the good luck on large nat cat. Corporate Solutions, 88.2% combined ratio for the first half compares to our target of less than 91% for the full year. So clearly, a good base to take into the second half of the year. Finally, Life & Health Re, the first half CSM release of USD 846 million is below last year's USD 918 million, mainly because of the assumption reviews carried out and booked in 2024. Experience variance and other amounted to a negative USD 197 million in the first half, which primarily reflects impact of selective assumption updates in onerous business and volume updates. Overall, actual claims experience was slightly positive. We are focused on reducing the noise from some of our smaller portfolios where actual results have lagged expectations. Our goal is to achieve a neutral experience variance in the near future. Life & Health Re's net income of USD 839 million, as Andreas already mentioned, is just above the pro rata USD 800 million share of our USD 1.6 billion full year target. We benefited from solid investment results with the ROI of 4.1%, slightly ahead of last year's 4%, a large part of the increase is due to the realized gain we achieved on the sale of our definitive stake in Q1, which was partly offset by targeted sales on fixed income securities. Recurring income remains healthy, standing at USD 2 billion in the first half. Lastly, a few words on capital. We estimated the group SST ratio at 264% as of 1st of July 2025. This is 7 points higher from where we started the year. That's where I will leave it for now, and I'm happy to hand over to Thomas to kick off the Q&A.
Thomas Bohun: Thank you, Andreas. Thank you, Anders, and hello to all of you from my side as well. [Operator Instructions] With that, operator, could you please start the question?
Operator: The first question comes from Kamran Hossain from JPMorgan, London.
Kamran Mark Hossain: Two questions for me. The first one is just I guess looking at the profitability in P&C, I think it's pretty clear that there's a healthy difference between what you're targeting, the better than 85% and where you're running underlying. Just noting like Andreas' comments around resilience increasing the business. What's the potential for maybe the gap between the underlying and what you're targeting to get a little bit smaller just interested in kind of your attitude towards that? Or are you happy with 85% to the right number, keep delivering that and see upside wherever you can? The second question is on the Life & Health book. Just intrigued about the comments about you wanting to become experience variance neutral. What's the journey towards doing that? Is that some negative hits on the way in terms of timing, kind of what that look just interested in kind of how you get to that position.
Alexander Andreas M. Berger: Thank you, Kamran. Let me start with P&C and Anders, maybe you want to take the Life & Health one. So first of all, we're not managing the reserves towards the profitability. It needs to be defendable and we explained previously already how we changed our reserving philosophy. So that's the one aspect. And the second one, the question is really whether an 85% format ratio is a good one. Of course, 85% combined ratio is a very good one, in particular, in comparison to the history and in particular, the soft market cycles that we came out from. So where is the right level of combined ratio? That obviously depends on the shape of your portfolio. We see that we have reduced significantly our casualty book. We are very well diversified in our portfolio. We see that the lines of businesses that we're in, not all of them are correlated. So we then also see that the trends that you can see maybe on the pricing on the rate developments are not valid for all individual parts of the portfolio. So an overall 85% or we said better than 85% is very good. We also said at the end of the year, last year, when we talked about the visibility suddenly of the earnings power of our portfolio and the underlying quality of our book that we shouldn't look at it as a run rate. So we are in a volatile market and we need to manage volatility. And if you now are in a cycle where you show below 85% or actually they are in Q2, 76% combined ratio, that is very good, but that quarter, as we said, didn't show any nat cat. It's only large man-made losses. And even there, it was all within our expectations. So that's all I can say. If we are better than the 85% towards the year-end, that's exactly what we targeted. And we always said, first priority is hit our target. Second priority is increased resilience of the group, and we're happy with the position we have at the moment.
Anders Malmstrom: Okay. And maybe just a few words on Life & Health and overall, then I can go into your detailed question. I mean, overall, we feel comfortable with the reserving. We had positive claims experience over the quarter and actually the half year. And we also had them the large portfolios, we actually have positive experience. So U.S. mortality was positive, so that's good. But we have some smaller portfolios that we're going through right now that are not meeting expectations, means that the experience is not as we expected and we had to change the assumptions and we're still going through further smaller portfolios. And so that's why, we kind of foreshadowing that there will still be a few quarters where we will have some volatility. It doesn't mean we expect them anything right now because we don't know, but just experience told us that the smaller ones can also have some experience variances. That's exactly what we do now. But the key point is, the large ones are performing as expected, and the overall reserving is fine, we're comfortable with.
Operator: The next question comes from Andrew Baker from Goldman Sachs.
Andrew Baker: First one, just on the revenue outlook for the second half. Can I just confirm what I think you're saying? So I think you're saying, Life & Health Re broadly in line with the first half. And then you get the $1.5 billion second half benefit from P&C Re in course and the majority of that is P&C Re. And I guess, is that based on where sort of FX levels are today? So just confirmation there would be great. And then secondly, just staying on the insurance revenue on the P&C Re side. What's driving the increased seasonality between the first and second half in property and the general multiline that you called out in the slide?
Alexander Andreas M. Berger: Okay. Maybe I'll start with the second question first. I mean, what really drives the seasonality is the nat cat experience because nat cat seasonality. Usually in a normal year, I think you see much more nat cat coming in the second half of the year, which then gives you a higher revenue that comes out of the reserves for the second half of the year. That's really the seasonality that drives. The first -- on the first question, yes, this is at constant FX. So we obviously assume that FX will not move. And then the -- on Life & Health, you're completely right. I think you can expect that to continue. P&C Re, exactly the 1.5 billion that we mentioned. And, of course, I think is also -- you have some seasonality there, but I think this is partly offset by the increased impact from the medex nonrenewal that we have.
Operator: The next question comes from Will Hardcastle from UBS.
William Fraser Hardcastle: The first one, just verifying actually, just what you just said there, is that premium move is at constant FX. It won't move. Do you mean year-over-year, it would be the same as last year or it would stay as that spot is broadly today? The second one, probably the more important one. Just really thinking about moving parts in that potential combined ratio number. You said a lot about where net pricing is, et cetera. And I'm just trying to think about that business mix shift and implication onto it. What would be the spread broadly between the casualty and the rest of the book? And then, I guess, with the renewal impacts and when that revenue change, what mix reduction do you anticipate to be for casualty relative to the rest of the portfolio?
Anders Malmstrom: So maybe the first one, yes, is spot FX. Basically, FX stays where it is today. And that's what we meant. On the second one, the -- your question is if casualty reduces in the mix, how does this impact the overall combined ratio? I think that's the question. And obviously, I think this will improve the combined ratio going forward. I think that's what we would expect. The exact number, I think, we will see over time. But I think, clearly, improvement in profitability for the full book to that mix.
Alexander Andreas M. Berger: It's important to note here also that we try to manage the tail. So we have a duration of our book that is significantly reduced now. So we can be much more reactive and quicker in addressing unprofitable pools also unfavorable developments A versus E. That is much quicker now to be addressed in a book that has a tail that is much shorter.
Operator: The next question comes from Shanti Kang from Bank of America.
Shanti Kang: So I just was thinking about the forward growth path from here now that you've done all the pruning work on the casualty book. How should we think about your appetite going forward and what your growth strategy is given that prices have started to come down a bit. Maybe you could talk a little bit about the underlying dynamics which would make certain lines more attractive than others? And then I don't think I heard this or you mentioned it. But on the Life & Health side, it looks like there was some assumption updates on the onerous contracts for this quarter, could you just help us understand those tweaks and the underlying drivers for those?
Alexander Andreas M. Berger: Yes. Maybe again, let's split it up. I'll take the first question and Anders can take the second one. So we believe that we are operating in a very attractive market environment. We see increased demand for reinsurance, not only in cat, but also in cat. And I think that's good news. What we do is we manage the cycle and we manage the exposures. And that's something that we are very happy with and proud of that we increased the discipline in managing these cycles, in addressing the right KPIs and translating them into our costing and then bringing it into a price in the market. So we believe that if the market stays disciplined, there is great opportunity for us. There's plenty of opportunities, we call it the target liability portfolio, where we have a 5-year forward-looking view on how markets are developing, particular rates are developing per line of business. And then we look at focused growth areas that do not correlate with those lines of businesses where the rates are actually going down. And that's exactly where we're focusing on. So that's a product lens. But then we also overlaid with a territorial lens, geography. And you can see it also in our numbers. We have seen a decline or a stable U.S. American portfolio. And why? Because of U.S. casualty, you see that property, specialty in particular, are very, very attractive areas where we see growth opportunities. And this is almost across the board in specialties. And this is true for basically all P&C businesses. You might see it also in the market. Yes, there are others who also see this as an opportunity and attractive growth area. So expect more there. So I think it's good. So we deploy capacity where it's attractive, and we look at the mix of our portfolio that we are consistently delivering on what we target.
Anders Malmstrom: On the Life & Health side, the assumption updates, and I mentioned that before, when we talked about the potential volatility in the result, it's really small portfolios that we have that we updated in EMEA. It's mostly on the health and disability side where we had them updated, but it's really the small portfolios that I mentioned before, that's where we updated assumption.
Alexander Andreas M. Berger: Can I maybe just add one thing on the growth areas? And because you can see that as the rates were hardening, the professional buyers and sophisticated buyers of reinsurance have obviously looked at their own resilience and risk financing structures. And you see some of them actually taking premium out of the market and managing these. They have very solid balance sheets. But that, again, creates an opportunity for us to provide solutions, structured solutions. And the same happens, by the way, also in the primary commercial space, where the large captive owners take premium out of the market because they feel it's too high. But then again, with our leading position in the alternative risk transfer space, we can provide a full one-stop shop service for captives, fronting for the captives, structuring within the captive and sitting behind the captive as a reinsurance proposition. So that's a pretty attractive proposition that not everybody can provide.
Operator: The next question comes from James Shuck from Citi.
James Austin Shuck: I have one observation and then 2 questions. The observation is just on the insurance revenue in P&C Re. I think there's a little bit of confusion for us here because we're trying to track how you're growing over time, particularly through a soft cycle. But I think the accounting, particularly. Because you're not under PAA approach makes it pretty difficult to do so. So the observation would be, it might be helpful to disclose the gross written premium and the net written premium, so we can actually track that more meaningfully. On my two questions. Firstly, I just wanted to return to the Life & Health Re. You'll just be crystal clear about what you're saying on the experience and other variance because that was obviously a very negative figure in 2024. It's still negative. When you're saying that you're expecting that to go to neutral, a little bit of volatility in the coming quarters perhaps. Is there anything else inherent structurally in that number? Or should essentially that USD 832 million that we saw in '24, should that just go to zero? So that's the first question. And then secondly, just a very simple one, really. On P&C Re, the new business CSM, which, as you say, is kind of flat at 1H. Can you just comment on your ability to grow that in absolute terms through the current cycle, please?
Anders Malmstrom: Okay. Maybe I start again just on the Life & Health Re. I mean it's the way you should really think about is that we have multiple larger and smaller portfolios. The large one, they're all performing really well. I think the mortality business, what we see right now is positive, and that is by far the biggest one. And that was the problem child over the last few years. I think that's fine. And now we're going to the smaller ones. And we just want to make -- and you update the assumption constantly. And I think we're now going through the smaller ones. And ultimately, we want to be in a position where we're on the prudent side, similar to what we discussed on the P&C side, you want to have a best estimate that is slightly above the midrange so that you have a positive experience or a neutral experience over time. I think that takes usually a bit longer on the Life & Health side than it takes on the P&C side. That's exactly where we're going to go. And now we just have to go through the small portfolios, which also take time just because there's many different smaller portfolios. But they want to be exactly the same situation where you have kind of north of the midpoint of the best estimate range to have a positive or neutral experience. And then on the P&C Re about the new business CSM, I think, first of all, I mean, this is maybe also a comment to your comment because I think what we try to tell you, revenue is probably not the right measure to think about the bottom -- the real impact of new business growth. It's really the CSM. And the new business CSM, I think, really gives you what ultimately -- what value is generated to new business. And what you see here is that even though people talk about a weaker environment, I think what we're actually showing you is the CSM is exactly the same as the year before, which means, I think we are able to generate growth in that environment because we kept the value of the business the same despite having a more conservative approach about loss picks, we have the uncertainty load that all goes into the new business CSM. And then we'll, over time, return as a profit back to the bottom line. I think that's really how we think about -- that's when we -- when we say we don't manage top line, we manage bottom line. We actually manage new business CSM. That's what we really manage.
Alexander Andreas M. Berger: And I can repeat the comments that I did, I think, many times before, to grow in our industry is not a problem, but to create value and to grow in the right areas, that is the challenge, and that is a challenge that we're taking on. So that's why we're focusing on the new business CSM rather than pure top line number.
Thomas Bohun: Just been asked to clarify some of the introductory comments on the revenues. So for H2, we are basically saying that revenues we expect currently to be about EUR 1.5 billion higher than H1 this year, roughly at the current FX, where FX is today. So subject, of course, to any future changes.
Operator: The next question comes from Vinit Malhotra from Mediobanca.
Vinit Malhotra: So my 2 questions, one on P&C Re reserving, please and one on Corporate Solutions profitability. So on the P&C Re reserving, I appreciate the resilience from last year is higher, of course. But when we see the casualty 27% cut, I'm just curious what's driving that? And whatever has driven that, does that mean that the reserves are still fine for casualty? Because obviously, you must have seen something worsening, which has prompted such an aggressive pruning. And then I presume the reserves are still fine for casualty. So just a little bit more assurance on that or positive messaging on that would help. Second question is on Corporate Solutions. So I noticed the risk-adjusted rates is quite a bit worsening in 2Q. I think it was minus 1% in 1Q and it's about minus 7% in Q2 or something like that. And there's also a mention of stringent portfolio steering. So obviously, we'll see Corporate Solutions running below the 91% already. But with this kind of a price cut, any comments on that? And then how are you sure of -- how are you confident about the targets when you see a 7% price cut as well?
Alexander Andreas M. Berger: Just first question, were you seeking assurance? Yes, I can give you the assurance. We said last year that the decisive actions on the reserve increase should give us comfort. And I mentioned that I -- now I can sleep easily. And that's something I would like to confirm again here. The reduction of our casualty book is just a consequence of understanding where we stand around rate adequacy and the A versus C analysis. We have done plenty of analysis, detailed analysis on where are the healthy portfolios and where not, the risk pools. And we have seen that in certain areas, so we would like to really reduce our exposure because we do not have very good comfort levels around the A versus C analysis. So assurance, yes. And the fact that we're forward-looking, moving into prudent territory and not stopping underwriting. So we believe that after the pruning situation in the casualties, we are actually where we wanted to be from a peak 17% market share now to around 5%. I think that's a good area to be in. And going forward, we have addressed the costing, and we'll see whether the rate adequacy can be achieved in the market. If not, we stay away from it. So that's the situation on the P&C Re resilience of the casualty side. Do you want to take the CorSo one on the profitability? Because I think the CorSo profitability is actually very good. And you can look at it from all angles. Rate reductions, again, as I said before, for the overall P&C businesses, we are in a very healthy environment. And you just have to then distinguish between the individual lines of businesses. There are some lines of businesses that have more rate reductions than others. And it also depends on the area where you're playing and where you underwrite. We do a very granular, almost alpha play on where to deploy capacity and where the attractive markets are. In property, you will have some loss prone portfolios. There, definitely, the rates are going up. But you have portfolios where the risk is actually quite limited. And that's typically the area where the rates are reducing. So I wouldn't draw the conclusion that this is an overall statement on the profitability of CorSo. The cycle management works at the moment really impeccably well. The shape of the portfolio is very healthy, and CorSo has all reason to be confident to achieve the year-end target. Going forward then beyond that, we will address all levers. So there is obviously the loss pick that we have to consider, but there are also expenses that we have to consider. And we have streamlined -- further streamlined the organization to increase the speed of decision-making, but also reduce -- further reduce the complexity and to increase proximity to clients, and that all should play positively for the future.
Operator: The next question comes from Chris Hartwell from Autonomous.
Chris Hartwell: Just a couple of quick questions from me. First of all, on the cat side, I was just wondering how your appetite is potentially changing in terms -- in the sense of the type of cat business you might be writing if there's particular risks that you're, I guess, shying away from within the sort of the broader cat book at the moment? And then secondly, I was just a very sort of simple math. I just wonder if you can help me bridge the SST movement since January 1.
Alexander Andreas M. Berger: On the cat side, I can say, I mean, we're a leading cat player. We have a very well-diversified cat book. So all types of cat perils that you can imagine. We have a strong team that continuously takes in all the information, new events, new information and enhances the models. We deploy capacity and where we can also achieve the rate adequacy, that's a very nice situation to be in. It's not just the U.S., it's a global cat book and it's global diversification. And that's why prime insurers actually seek reinsurance from us because they can see really that they benefit from our diversification benefit. So that's on the cat side. So we see increased demand. But I think one word maybe also on the structures. We're not a frequency reinsurer. We are shock absorber. We take the peaks, but we help prime insurance companies to handle and to manage also the frequency levels. We provide data, we provide models. And we can see now an increased effort also on the primary insurance side to address their net position. And here, that's an area where I said there are structured solutions that can be provided, but also the dialogue to the ultimate end consumer, end customer, the ultimate insured, that is the area where the primary insurance companies are focusing on to increase the resilience of their customer base. So appetite is there.
Anders Malmstrom: So maybe just quickly on the -- and I can give you a high-level summary of the movement of the SST. I mean SST was at USD 257 million at the end of the year. Now it's at USD 264 million. Obviously, what you have to take into account is the earnings that we generated, and we have now 6 months in and then also the accrual of the potential dividend. That's how we usually do. And actually, if you do a rough calculation and say, okay, the IFRS $4.4 billion earnings target, and we have now a bit more than 50% if that would translate directly into SST capital, which is not exactly the case, but as a good proxy, that would actually generate 28 points. And if we then assume you take half of it off as a dividend accrual, you get to 14 for the full year. And if we then prorate that for half year, it's actually exactly the same. It's exactly what we see. Now this is a simplified view. There's a number of other small points. But I think this gives you directionally what you can expect as SST capital generation in a, what I call a normal year where you don't have too many mark-to-market movements and not too many FX movements.
Operator: The next question comes from Darius Satkauskas from KBW.
Darius Satkauskas: Just two, please. One on the Life & Health Re. So I assume you'll be looking at smaller portfolios because the experience has not been fully satisfactory even if these portfolios are on the smaller side. So I assume the way you increase the odds of positive variance is by adjusting the assumptions to be more conservative. Are the CSM levels in those portfolios somewhat below the rest of the group? And if so, do you see a risk of a bit of P&L volatility on the back of this exercise? So that's the first question. The second question is just on the P&C Re combined ratio. So how much benefit do you expect the business mix changes to have? And do you think it's enough to offset the rate change you saw year-to-date? And just on that, are there any lines that you write that are both price adequate and actually seeing positive premium rate increases? Or is the stuff that's seeing positive momentum not price- adequate?
Anders Malmstrom: Yes. So let me start with the Life & Health Re. I mean what I said before, we're going now through the smaller ones because with the change to IFRS, I think we have to go through all the portfolios because it's important that we understand also under IFRS, you obviously start with the big ones. We did all of that. We're now going to the smaller ones. And exactly as you say, we see that some of them are not performing. And so we adjust that. It has impact on the P&L. If it's onerous, it has impact on the CSM if the portfolio is not onerous. And I think you saw that also in the -- when you actually look at the walk in the CSM, we see exactly the same. But it's much smaller. We had a very big adjustment that we did end of last year. And now we see smaller adjustments and this will go away over time.
Alexander Andreas M. Berger: On the P&C side, combined ratio side, you asked the question whether we see portfolios where we actually see rate increases. Yes, we do. It's a line of business dimension, but it's also a geographic dimension. Take casualty, for instance, you see rate increases coming through in U.S., for instance, also in Europe. But you see rate decreases in Asia, for instance. So that's a very good example to see that's very specific, and that's how you have to manage on a pretty granular basis. There are other lines of businesses on the specialty side where you also can see rate increases. And if you take property, it depends on the constellation of the portfolio. If you are exposed in certain territories, loss-prone territories, but also in loss-prone occupancies, high- risk occupancies. And this is then reflected in your treaty business. That obviously will have an impact, and that's the area where rates are not reducing. But if you have a pretty plain vanilla portfolio where the exposures are not as pronounced. That's where we found rate decreases, but also at constant terms and conditions and attachment points. So that's important.
Operator: We now have a follow-up question from James Shuck from Citi.
James Austin Shuck: On the Life & Health Re CSM release, I just kind of noticed that's tracking more like 10%. And I think your previous guidance had been for 8%. Could you just confirm that the kind of new run rate is now closer to 10%? And then secondly, on the SST walk, I just kind of -- just had a question about the debt issuance really because I thought you'd issued $2 billion of debt in the first half of the year, which will be about 11 points on the SST, but you didn't include that in the walk. Could you just clarify that for me because I know that's only temporary.
Anders Malmstrom: Yes. So on the Life & Health question about the CSM release, I think you're right. I think we saw a higher number release. But I think we're still sticking to the guidance going forward. So the CSM release should then again come down to around 8% based on the opening balance, I think that's what we would expect going forward. But we will -- obviously, that's something we work through. And then I think the second question on the debt. This is -- we issued debt, yes, but this debt basically replaces existing debt. And so it has no impact because the net debt will remain -- the debt that is reflective in the SST ratio will stay the same.
Operator: The next question comes from Michael Huttner from Berenberg.
Michael Igor Huttner: Apologies if these have been asked before. I got mixed up. The one is on U.S. mortality and the other one is on aggregate cover. So on aggregates, I just would like kind of confirmation or reassurance that you don't do this stuff because it's the accounting -- I was thinking about the accounting for this. It's also effectively, at the year-end, it's like a cliff edge, will they reach the -- go over the top as it were. And we've seen an increasing number of companies everywhere saying they do have aggregate cover. So I just wanted confirmation that's not business line you do or the risk is low. And the other one is my favorite question is on U.S. mortality. I'm sure it's been asked, and I'm really sorry, I kind of messed up here. What was the experience in Q2 and can you separate the kind of what I would call ordering lives for people like me and the high-risk lives, the things that, for example, Hanover and Munich Re highlighted?
Alexander Andreas M. Berger: Just wanted to give you assurance on the aggregate cover. I'll take that part, and Anders can take the U.S. mortality one. So yes, when we say we apply a disciplined underwriting and technical excellence, then I can give you assurance and confirm your views here.
Anders Malmstrom: On the U.S. mortality, I think I said it before, but I'm happy to repeat that. I think we had positive experience on U.S. mortality for the second quarter. Even though we already had it in the first quarter, but we have it in the second quarter as well. I don't think we split the mortality experience to the way you described it. But I think throughout, we had positive experience now what we see on the U.S. mortality side.
Operator: The next question comes from Roland Pfänder from ODDO BHF. Roland Pfänder: Two questions from my side, please. First of all, new business CSM in Life & Health. This is rather flattish since a while. What would it take to have a more structured growth going forward? Maybe you could provide you an outlook what you expect in terms of growth rate for the next quarters or years? Depends what you want to provide. Secondly, in P&C terms and conditions, where are terms and conditions actually softening in the market? And how do you react to this?
Anders Malmstrom: Yes. Maybe I'll start with the new business CSM on Life & Health. I think it's important here. I mean you generate -- you have the -- what we call -- I call it the ongoing new business CSM from almost a bit, call it the BAU normal and then you have transactions. Transactions are, by definition, lumpy. And in transactions, you want to be sure that you actually generate real value. This CSM is just from the ongoing new business that we actually generate. And from that perspective, I'm actually very happy with the CSM that we generated here because we basically maintain the CSM through our new business without going into large lumpy, but maybe also more riskier transaction. Now, we look at transactions when they come, when we're comfortable, but we don't just write transactions to write transactions. only do that if we're really comfortable with the assumptions. So actually, in that context, the new business CSM that we have here that is very stable, but it replaces the outgoing CSM more or less, which I think is a very good outcome. And the key point is it remains -- we keep the profitability in the in-force that we have.
Alexander Andreas M. Berger: On the second one, terms and conditions, we do see discipline and consistency in the market. And I can repeat again, this is the most important aspect that we're watching. There's clear attention on this one because we need to play the role that reinsurers should play. We take the peaks. We are the severity protection provider, the shock absorber. The prime insurance companies are best positioned to address the frequency. And hence, if this continues, that's a positive, and that should be seen as the norm. And that's what I said this morning as well. This should be the new norm. We're not in an exceptional market situation. This should be the norm. And should we leave as an industry, the discipline, I don't want to be part of that group that leaves the discipline.
Operator: The next question comes from Iain Pearce from BNP Paribas.
Iain Pearce: The first one was just on the sort of second priority that you mentioned in terms of increasing the resiliency of the group. If you could just give some comments on how you think the resiliency has trended in the first half. Clearly, you made some comments around the Life & Health already, but more thinking about the P&C side, particularly in light of the strong reserve release that you took in H1? And also why you decided to take that reserve. Release through the P&L rather than invest that into additional resiliency. That's my first question. And then the second question was just coming back to the seasonality point. Obviously, I understand that the nat cat risk creates the seasonality, but I don't really understand why there's a big difference year-on-year unless that's just the mix changes so significantly, it creates this difference. I wouldn't have expected it to be this big based on the mix changes that you're seeing. If you could just comment on that as well, that would be great.
Alexander Andreas M. Berger: Let me start with the resilience topic. When we changed the reserving philosophy, we clearly said that we want to position ourselves at the upper end of the best estimate range, and that was clearly our ambition. We have started to do that. And in 2024, you've seen this one big decision to increase the U.S. liability reserves. So we found ourselves suddenly in that position. We increased also the -- certainty load on new business to make that more sustainable also for the future. And if you look at our position also in the IBNR positions that we have in the current year IBNR, I think we sit in a very comfortable position. And that's a desired position to be in when you deal in such a volatile market. So that's managing and steering the business and managing volatility. So if we continue with this discipline, you should see that we will be consistent in delivering earnings in the future. And that's what, in my opinion, a reinsurance company should do.
Anders Malmstrom: And then I think to your question about the impact of seasonality relative year-over-year, and that's really driven here by the introduction of the uncertainty load because in 2024, the new business that we had was new business written in 2023, which did not have the uncertainty load. I think that's released. Now with the new uncertainty load, you really see a change in pattern. And then you compare 2025 versus 2024 and you see a seasonality impact year-over-year. So call it transitional, but I think that's really the technical answer why we now see a seasonality that we didn't see the year before.
Operator: We now have a follow-up question from Will Hardcastle from UBS.
William Fraser Hardcastle: It's a quick one, hopefully. I'm trying to understand the amount of rigor/completeness perhaps in the assessment of the $300 million cost save that you struck at December CMD last year. I guess you spent longer and you see the businesses. I guess you spent longer in your seats, the business is looking like it's in better shape, perhaps more time to focus on these things. Has the potential of this changed in that time period?
Anders Malmstrom: Yes. I mean quickly, we're very comfortable to achieve the -- we said greater than USD 300 million by 2027. We -- this year, we'll achieve another USD 100 million. So I think I don't -- I'm not worried about this one. What we will then do is we will switch towards a business as usual, continuous improvement approach. Expense management is becoming a more important strategic lever, also in reinsurance, and that's what we're going to do. We'll look at this, but we don't cut costs just for the sake of cutting costs. We are improving the structures in the group. We're getting quicker. We're reducing complexity. And this -- all of this is translating then obviously into in those numbers. We have clear playbooks, clear plans by group executive committee members responsibility, and we are in full implementation now. So consider this as almost being done because we'll see it earning through then going forward, but we're very comfortable here.
Operator: There is actually a follow-up from Michael Huttner, Berenberg.
Michael Igor Huttner: And it's really shortish, given the U.S. mortality is performing a little bit better, when would you start thinking maybe about reviewing the assumptions you have there?
Anders Malmstrom: Yes. Look, I think -- first of all, I think the good thing is that it is performing as expected, and we are positive. I think it's exactly where we want to be. But we do every year, we go over our portfolios and we assess if the assumptions are adequate or need to change them one way or the other. So this is -- but I think we're in a good position now on the U.S. mortality.
Thomas Bohun: Thank you, Michael. Thank you to all of you for your interest and attendance at this call. Should you have any further questions, please do not hesitate to contact any member of the IR team. With that, thank you again, and have a nice rest of the day. Thank you.
Operator: . Thank you all for your participation. You may now disconnect.
Alexander Andreas M. Berger: Thank you very much, and good morning or good afternoon to all of you. I appreciate you taking the time to join us today. So thank you for that. Before our group CFO, Anders Malmstrom, walks you through the details of our half year results, I'd like to start with some scene setting and brief remarks. Today, we're pleased to report a strong net income of USD 2.6 billion for the first half of 2025, resulting in an annualized ROE of 23%. All of our 3 business units delivered their fair share, and we also benefited from a solid investment result. The main driver of the fact that we were able to achieve around 60% of our full year net income target of more than USD 4.4 billion has been the strong underwriting contribution of our P&C businesses. Here, we benefited from relatively quiet second quarter with respect to large losses, after a tough start to the year, as we all know. Large losses in the second quarter were modest plus P&C Re and corporate solutions coming in below USD 150 million, entirely from man-made events. This means that we did not consume our nat cat budget in the second quarter. While this explains the strong combined ratio results, we did allocate a reserve for current year losses that may not have -- the losses that may not have been reported to us yet by the time we closed the quarter, thereby adding an increased level of resilience to our P&C units for the second half of the year. Our P&C reserves remained resilient. The positive nominal reserving for the first half amounted to around USD 300 million with the majority in P&C Re. I'm happy with the outcome of the renewal of this year in P&C Re. Market participants largely maintained the discipline on terms and conditions. Overall pricing is still attractive with a picture across lines of businesses being more nuanced given the different stages in the cycle that each of the lines of businesses is in. This is very important to us. As not all lines are correlated, meaning there's not just one single cycle. In property, despite a decline in risk-adjusted pricing, we achieved attractive margins, particularly in the nat cat space. It's important to note that current reductions are occurring from very healthy levels, which puts the observed pricing pressure into perspective. In casualty, we saw nominal price increases in the mid-single to double-digit range, which were largely offset by our prudent loss assumptions. And in specialty, we successfully defended our attractive margins. The outcome of midyear renewals was consistent with those of January and April, reflecting a continued focus on underwriting discipline and prioritization of margins over top line. We increased volumes in our property and specialty lines by 5%, while further significantly reducing our casualty volumes by 27%. We achieved nominal price increases of 2.3% on our overall portfolio in the midyear renewals or negative 2.4% on a net basis, meaning post the impact of higher costing loss specs we have taken. Year-to-date, we have achieved 3% volume growth, while the net price change of a modest negative 1.8% is supportive of our 2025 targets and again, reflects the overall discipline that we continued to maintain. When you combine volume and price developments, P&C Re's new business CSM of USD 2.2 billion in the first 6 months of the year is unchanged from the same period a year ago. That's a very solid outcome. And to stress again, we have no top line targets. The focus is entirely on maintaining healthy risk-adjusted margins and a high-quality portfolio. Life & Health. Life & Health Re produced a solid first half result. The USD 839 million net income is just above the pro rata target requirement of USD 800 million. So overall, we're on track. We continue to have some noise from smaller portfolios where experience lags expectations, but this is within manageable levels, and we expect this to fade a few quarters into the future. Importantly, our largest portfolio's most notably U.S. mortality are performing in line with expectations. We continue to make progress on our costs. Our admin costs for the quarter are in line with the cost ambitions outlined during our investor event in December last year. Accordingly, we are on track to reduce our cost run rate by around USD 100 million this year at constant FX , contributing to the overall target of USD 300 million by 2027. We will break out details on this for you in the future. Now, we're confident, but we remain vigilant as we look ahead. Priority #1 is to deliver on our targets, and we remain in a good place to do that with all three business units on track. And I also told you that we have a second priority, which is to increase the overall resilience of the firm. Also here, I feel we have made very, very good progress. The actions we have taken on in-force reserves in P&C Re and Life & Health Re, the underwriting and reserving of new business and to focus on operational excellence and efficiency across the firm are all part of it. We will now see what the second half of the year brings, also as we enter the peak of the wind season. The macro environment remains uncertain with abundant risks around us. So all of this, our focus on underwriting excellence is unchanged. And with that, I'd like to hand over to Anders to you, our group CFO. Over to you.
Anders Malmstrom: Thank you, Andreas. And again, good afternoon or good morning to everyone on the call. I will make a few remarks on the results we released this morning before we go to the Q&A session. Andreas has taken you through the highlights of our overall strong first half results. Let me add a few further details. On revenues, the group's insurance revenue amounted to USD 20.9 billion in the first half, down from $22.2 billion last year. Please note that we have adjusted last year's first half revenues down by just below $300 million to reflect the updated methodology on netting profit commissions. Last year's first half service expense has changed by the same amount with no net impact on the P&L. This provides for a better like-for-like comparison. The $1.3 billion decline has a few major drivers, most of which were already highlighted in the first quarter. The termination of an external retrocession transaction in Life & Health Re, with no bottom line impact, which inflated last year's first half revenues by about USD 0.4 billion. In Corporate Solutions, the nonrenewal of the Irish MedEx business accounts for a 0.2 billion reduction in revenues versus last year. And the decrease of USD 0.7 billion in P&C Re is driven by the pruning of the casualty book and increased revenue seasonality between first and second half of the year in property and general multiline. For the second half of the year, we currently expect subject to FX movements, revenues to be higher than in the first half by around USD 1.5 billion. The main driver here is the seasonality of expected nat cat claims in P&C Re and Corporate Solutions. You will hear us continuing to stress earnings are what matters, and we continue to see good resilience here. Despite some pressure on rates across our P&C business, the new business CSM production of the group remain healthy at USD 3.1 billion in the first half of the year, up marginally from last year's $3 billion. Let me move on to the insurance service result of our businesses. In P&C Re, you will continue to notice a decline in the CSM release versus last year's period. The $1.4 billion release is down from last year's $1.8 billion. The decrease is driven by the earn-through of prudent initial loss fixed, including the impact of new business uncertainty allowance, Experience variance and other, as we call it, and which includes all variances relative to initial reserve assumptions, amounted to a positive $102 million in the first half. This figure was negative after Q1, largely as a result of the high large nat cat and man-made losses. The low large loss burden in Q2 drove a positive $242 million overall experience in Q2 and this has resulted in an overall positive first half. Total first half large nat cat losses of EUR 556 million, almost entirely from the L.A. wildfires were below the first half budget of USD 778 million. Large man-made claims amounted to USD 230 million, which is still slightly higher than what we would normally expect to see in an average first half. The overall positive experience on large claims was partially offset by current year reserves we set up for attritional losses of more than $200 million that may not yet have been reported to us, which reflects a cautious stance we are taking as we entered the second half of the year. Importantly, we benefited from a positive prior year result. Nominal reserve releases in P&C Re amounted to around $250 million in the first half. In terms of the combined ratio, P&C Re's the first half results of 81.1% is well below the 85% target we have for the year, strongly hedged by the 76.3% of the second quarter. Moving on to Corporate Solutions. The first half CSM release of $451 million is above last year's $440 million, driven by higher in-force margins. Experience variance and other was positive at $65 million. This reflects favorable underlying performance and a positive prior year reserving result, partially offset by an allowance for expected claims seasonality due to late reporting. Large nat cat claims of $60 million were driven by the L.A. wildfire loss of $50 million, below what we would have expected for the first half. Large man-made claims in the first half amounted to almost $200 million, which is slightly above average offsetting the good luck on large nat cat. Corporate Solutions, 88.2% combined ratio for the first half compares to our target of less than 91% for the full year. So clearly, a good base to take into the second half of the year. Finally, Life & Health Re, the first half CSM release of USD 846 million is below last year's USD 918 million, mainly because of the assumption reviews carried out and booked in 2024. Experience variance and other amounted to a negative USD 197 million in the first half, which primarily reflects impact of selective assumption updates in onerous business and volume updates. Overall, actual claims experience was slightly positive. We are focused on reducing the noise from some of our smaller portfolios where actual results have lagged expectations. Our goal is to achieve a neutral experience variance in the near future. Life & Health Re's net income of USD 839 million, as Andreas already mentioned, is just above the pro rata USD 800 million share of our USD 1.6 billion full year target. We benefited from solid investment results with the ROI of 4.1%, slightly ahead of last year's 4%, a large part of the increase is due to the realized gain we achieved on the sale of our definitive stake in Q1, which was partly offset by targeted sales on fixed income securities. Recurring income remains healthy, standing at USD 2 billion in the first half. Lastly, a few words on capital. We estimated the group SST ratio at 264% as of 1st of July 2025. This is 7 points higher from where we started the year. That's where I will leave it for now, and I'm happy to hand over to Thomas to kick off the Q&A.
Thomas Bohun: Thank you, Andreas. Thank you, Anders, and hello to all of you from my side as well. [Operator Instructions] With that, operator, could you please start the question?
Operator: The first question comes from Kamran Hossain from JPMorgan, London.
Kamran Mark Hossain: Two questions for me. The first one is just I guess looking at the profitability in P&C, I think it's pretty clear that there's a healthy difference between what you're targeting, the better than 85% and where you're running underlying. Just noting like Andreas' comments around resilience increasing the business. What's the potential for maybe the gap between the underlying and what you're targeting to get a little bit smaller just interested in kind of your attitude towards that? Or are you happy with 85% to the right number, keep delivering that and see upside wherever you can? The second question is on the Life & Health book. Just intrigued about the comments about you wanting to become experience variance neutral. What's the journey towards doing that? Is that some negative hits on the way in terms of timing, kind of what that look just interested in kind of how you get to that position.
Alexander Andreas M. Berger: Thank you, Kamran. Let me start with P&C and Anders, maybe you want to take the Life & Health one. So first of all, we're not managing the reserves towards the profitability. It needs to be defendable and we explained previously already how we changed our reserving philosophy. So that's the one aspect. And the second one, the question is really whether an 85% format ratio is a good one. Of course, 85% combined ratio is a very good one, in particular, in comparison to the history and in particular, the soft market cycles that we came out from. So where is the right level of combined ratio? That obviously depends on the shape of your portfolio. We see that we have reduced significantly our casualty book. We are very well diversified in our portfolio. We see that the lines of businesses that we're in, not all of them are correlated. So we then also see that the trends that you can see maybe on the pricing on the rate developments are not valid for all individual parts of the portfolio. So an overall 85% or we said better than 85% is very good. We also said at the end of the year, last year, when we talked about the visibility suddenly of the earnings power of our portfolio and the underlying quality of our book that we shouldn't look at it as a run rate. So we are in a volatile market and we need to manage volatility. And if you now are in a cycle where you show below 85% or actually they are in Q2, 76% combined ratio, that is very good, but that quarter, as we said, didn't show any nat cat. It's only large man-made losses. And even there, it was all within our expectations. So that's all I can say. If we are better than the 85% towards the year-end, that's exactly what we targeted. And we always said, first priority is hit our target. Second priority is increased resilience of the group, and we're happy with the position we have at the moment.
Anders Malmstrom: Okay. And maybe just a few words on Life & Health and overall, then I can go into your detailed question. I mean, overall, we feel comfortable with the reserving. We had positive claims experience over the quarter and actually the half year. And we also had them the large portfolios, we actually have positive experience. So U.S. mortality was positive, so that's good. But we have some smaller portfolios that we're going through right now that are not meeting expectations, means that the experience is not as we expected and we had to change the assumptions and we're still going through further smaller portfolios. And so that's why, we kind of foreshadowing that there will still be a few quarters where we will have some volatility. It doesn't mean we expect them anything right now because we don't know, but just experience told us that the smaller ones can also have some experience variances. That's exactly what we do now. But the key point is, the large ones are performing as expected, and the overall reserving is fine, we're comfortable with.
Operator: The next question comes from Andrew Baker from Goldman Sachs.
Andrew Baker: First one, just on the revenue outlook for the second half. Can I just confirm what I think you're saying? So I think you're saying, Life & Health Re broadly in line with the first half. And then you get the $1.5 billion second half benefit from P&C Re in course and the majority of that is P&C Re. And I guess, is that based on where sort of FX levels are today? So just confirmation there would be great. And then secondly, just staying on the insurance revenue on the P&C Re side. What's driving the increased seasonality between the first and second half in property and the general multiline that you called out in the slide?
Alexander Andreas M. Berger: Okay. Maybe I'll start with the second question first. I mean, what really drives the seasonality is the nat cat experience because nat cat seasonality. Usually in a normal year, I think you see much more nat cat coming in the second half of the year, which then gives you a higher revenue that comes out of the reserves for the second half of the year. That's really the seasonality that drives. The first -- on the first question, yes, this is at constant FX. So we obviously assume that FX will not move. And then the -- on Life & Health, you're completely right. I think you can expect that to continue. P&C Re, exactly the 1.5 billion that we mentioned. And, of course, I think is also -- you have some seasonality there, but I think this is partly offset by the increased impact from the medex nonrenewal that we have.
Operator: The next question comes from Will Hardcastle from UBS.
William Fraser Hardcastle: The first one, just verifying actually, just what you just said there, is that premium move is at constant FX. It won't move. Do you mean year-over-year, it would be the same as last year or it would stay as that spot is broadly today? The second one, probably the more important one. Just really thinking about moving parts in that potential combined ratio number. You said a lot about where net pricing is, et cetera. And I'm just trying to think about that business mix shift and implication onto it. What would be the spread broadly between the casualty and the rest of the book? And then, I guess, with the renewal impacts and when that revenue change, what mix reduction do you anticipate to be for casualty relative to the rest of the portfolio?
Anders Malmstrom: So maybe the first one, yes, is spot FX. Basically, FX stays where it is today. And that's what we meant. On the second one, the -- your question is if casualty reduces in the mix, how does this impact the overall combined ratio? I think that's the question. And obviously, I think this will improve the combined ratio going forward. I think that's what we would expect. The exact number, I think, we will see over time. But I think, clearly, improvement in profitability for the full book to that mix.
Alexander Andreas M. Berger: It's important to note here also that we try to manage the tail. So we have a duration of our book that is significantly reduced now. So we can be much more reactive and quicker in addressing unprofitable pools also unfavorable developments A versus E. That is much quicker now to be addressed in a book that has a tail that is much shorter.
Operator: The next question comes from Shanti Kang from Bank of America.
Shanti Kang: So I just was thinking about the forward growth path from here now that you've done all the pruning work on the casualty book. How should we think about your appetite going forward and what your growth strategy is given that prices have started to come down a bit. Maybe you could talk a little bit about the underlying dynamics which would make certain lines more attractive than others? And then I don't think I heard this or you mentioned it. But on the Life & Health side, it looks like there was some assumption updates on the onerous contracts for this quarter, could you just help us understand those tweaks and the underlying drivers for those?
Alexander Andreas M. Berger: Yes. Maybe again, let's split it up. I'll take the first question and Anders can take the second one. So we believe that we are operating in a very attractive market environment. We see increased demand for reinsurance, not only in cat, but also in cat. And I think that's good news. What we do is we manage the cycle and we manage the exposures. And that's something that we are very happy with and proud of that we increased the discipline in managing these cycles, in addressing the right KPIs and translating them into our costing and then bringing it into a price in the market. So we believe that if the market stays disciplined, there is great opportunity for us. There's plenty of opportunities, we call it the target liability portfolio, where we have a 5-year forward-looking view on how markets are developing, particular rates are developing per line of business. And then we look at focused growth areas that do not correlate with those lines of businesses where the rates are actually going down. And that's exactly where we're focusing on. So that's a product lens. But then we also overlaid with a territorial lens, geography. And you can see it also in our numbers. We have seen a decline or a stable U.S. American portfolio. And why? Because of U.S. casualty, you see that property, specialty in particular, are very, very attractive areas where we see growth opportunities. And this is almost across the board in specialties. And this is true for basically all P&C businesses. You might see it also in the market. Yes, there are others who also see this as an opportunity and attractive growth area. So expect more there. So I think it's good. So we deploy capacity where it's attractive, and we look at the mix of our portfolio that we are consistently delivering on what we target.
Anders Malmstrom: On the Life & Health side, the assumption updates, and I mentioned that before, when we talked about the potential volatility in the result, it's really small portfolios that we have that we updated in EMEA. It's mostly on the health and disability side where we had them updated, but it's really the small portfolios that I mentioned before, that's where we updated assumption.
Alexander Andreas M. Berger: Can I maybe just add one thing on the growth areas? And because you can see that as the rates were hardening, the professional buyers and sophisticated buyers of reinsurance have obviously looked at their own resilience and risk financing structures. And you see some of them actually taking premium out of the market and managing these. They have very solid balance sheets. But that, again, creates an opportunity for us to provide solutions, structured solutions. And the same happens, by the way, also in the primary commercial space, where the large captive owners take premium out of the market because they feel it's too high. But then again, with our leading position in the alternative risk transfer space, we can provide a full one-stop shop service for captives, fronting for the captives, structuring within the captive and sitting behind the captive as a reinsurance proposition. So that's a pretty attractive proposition that not everybody can provide.
Operator: The next question comes from James Shuck from Citi.
James Austin Shuck: I have one observation and then 2 questions. The observation is just on the insurance revenue in P&C Re. I think there's a little bit of confusion for us here because we're trying to track how you're growing over time, particularly through a soft cycle. But I think the accounting, particularly. Because you're not under PAA approach makes it pretty difficult to do so. So the observation would be, it might be helpful to disclose the gross written premium and the net written premium, so we can actually track that more meaningfully. On my two questions. Firstly, I just wanted to return to the Life & Health Re. You'll just be crystal clear about what you're saying on the experience and other variance because that was obviously a very negative figure in 2024. It's still negative. When you're saying that you're expecting that to go to neutral, a little bit of volatility in the coming quarters perhaps. Is there anything else inherent structurally in that number? Or should essentially that USD 832 million that we saw in '24, should that just go to zero? So that's the first question. And then secondly, just a very simple one, really. On P&C Re, the new business CSM, which, as you say, is kind of flat at 1H. Can you just comment on your ability to grow that in absolute terms through the current cycle, please?
Anders Malmstrom: Okay. Maybe I start again just on the Life & Health Re. I mean it's the way you should really think about is that we have multiple larger and smaller portfolios. The large one, they're all performing really well. I think the mortality business, what we see right now is positive, and that is by far the biggest one. And that was the problem child over the last few years. I think that's fine. And now we're going to the smaller ones. And we just want to make -- and you update the assumption constantly. And I think we're now going through the smaller ones. And ultimately, we want to be in a position where we're on the prudent side, similar to what we discussed on the P&C side, you want to have a best estimate that is slightly above the midrange so that you have a positive experience or a neutral experience over time. I think that takes usually a bit longer on the Life & Health side than it takes on the P&C side. That's exactly where we're going to go. And now we just have to go through the small portfolios, which also take time just because there's many different smaller portfolios. But they want to be exactly the same situation where you have kind of north of the midpoint of the best estimate range to have a positive or neutral experience. And then on the P&C Re about the new business CSM, I think, first of all, I mean, this is maybe also a comment to your comment because I think what we try to tell you, revenue is probably not the right measure to think about the bottom -- the real impact of new business growth. It's really the CSM. And the new business CSM, I think, really gives you what ultimately -- what value is generated to new business. And what you see here is that even though people talk about a weaker environment, I think what we're actually showing you is the CSM is exactly the same as the year before, which means, I think we are able to generate growth in that environment because we kept the value of the business the same despite having a more conservative approach about loss picks, we have the uncertainty load that all goes into the new business CSM. And then we'll, over time, return as a profit back to the bottom line. I think that's really how we think about -- that's when we -- when we say we don't manage top line, we manage bottom line. We actually manage new business CSM. That's what we really manage.
Alexander Andreas M. Berger: And I can repeat the comments that I did, I think, many times before, to grow in our industry is not a problem, but to create value and to grow in the right areas, that is the challenge, and that is a challenge that we're taking on. So that's why we're focusing on the new business CSM rather than pure top line number.
Thomas Bohun: Just been asked to clarify some of the introductory comments on the revenues. So for H2, we are basically saying that revenues we expect currently to be about EUR 1.5 billion higher than H1 this year, roughly at the current FX, where FX is today. So subject, of course, to any future changes.
Operator: The next question comes from Vinit Malhotra from Mediobanca.
Vinit Malhotra: So my 2 questions, one on P&C Re reserving, please and one on Corporate Solutions profitability. So on the P&C Re reserving, I appreciate the resilience from last year is higher, of course. But when we see the casualty 27% cut, I'm just curious what's driving that? And whatever has driven that, does that mean that the reserves are still fine for casualty? Because obviously, you must have seen something worsening, which has prompted such an aggressive pruning. And then I presume the reserves are still fine for casualty. So just a little bit more assurance on that or positive messaging on that would help. Second question is on Corporate Solutions. So I noticed the risk-adjusted rates is quite a bit worsening in 2Q. I think it was minus 1% in 1Q and it's about minus 7% in Q2 or something like that. And there's also a mention of stringent portfolio steering. So obviously, we'll see Corporate Solutions running below the 91% already. But with this kind of a price cut, any comments on that? And then how are you sure of -- how are you confident about the targets when you see a 7% price cut as well?
Alexander Andreas M. Berger: Just first question, were you seeking assurance? Yes, I can give you the assurance. We said last year that the decisive actions on the reserve increase should give us comfort. And I mentioned that I -- now I can sleep easily. And that's something I would like to confirm again here. The reduction of our casualty book is just a consequence of understanding where we stand around rate adequacy and the A versus C analysis. We have done plenty of analysis, detailed analysis on where are the healthy portfolios and where not, the risk pools. And we have seen that in certain areas, so we would like to really reduce our exposure because we do not have very good comfort levels around the A versus C analysis. So assurance, yes. And the fact that we're forward-looking, moving into prudent territory and not stopping underwriting. So we believe that after the pruning situation in the casualties, we are actually where we wanted to be from a peak 17% market share now to around 5%. I think that's a good area to be in. And going forward, we have addressed the costing, and we'll see whether the rate adequacy can be achieved in the market. If not, we stay away from it. So that's the situation on the P&C Re resilience of the casualty side. Do you want to take the CorSo one on the profitability? Because I think the CorSo profitability is actually very good. And you can look at it from all angles. Rate reductions, again, as I said before, for the overall P&C businesses, we are in a very healthy environment. And you just have to then distinguish between the individual lines of businesses. There are some lines of businesses that have more rate reductions than others. And it also depends on the area where you're playing and where you underwrite. We do a very granular, almost alpha play on where to deploy capacity and where the attractive markets are. In property, you will have some loss prone portfolios. There, definitely, the rates are going up. But you have portfolios where the risk is actually quite limited. And that's typically the area where the rates are reducing. So I wouldn't draw the conclusion that this is an overall statement on the profitability of CorSo. The cycle management works at the moment really impeccably well. The shape of the portfolio is very healthy, and CorSo has all reason to be confident to achieve the year-end target. Going forward then beyond that, we will address all levers. So there is obviously the loss pick that we have to consider, but there are also expenses that we have to consider. And we have streamlined -- further streamlined the organization to increase the speed of decision-making, but also reduce -- further reduce the complexity and to increase proximity to clients, and that all should play positively for the future.
Operator: The next question comes from Chris Hartwell from Autonomous.
Chris Hartwell: Just a couple of quick questions from me. First of all, on the cat side, I was just wondering how your appetite is potentially changing in terms -- in the sense of the type of cat business you might be writing if there's particular risks that you're, I guess, shying away from within the sort of the broader cat book at the moment? And then secondly, I was just a very sort of simple math. I just wonder if you can help me bridge the SST movement since January 1.
Alexander Andreas M. Berger: On the cat side, I can say, I mean, we're a leading cat player. We have a very well-diversified cat book. So all types of cat perils that you can imagine. We have a strong team that continuously takes in all the information, new events, new information and enhances the models. We deploy capacity and where we can also achieve the rate adequacy, that's a very nice situation to be in. It's not just the U.S., it's a global cat book and it's global diversification. And that's why prime insurers actually seek reinsurance from us because they can see really that they benefit from our diversification benefit. So that's on the cat side. So we see increased demand. But I think one word maybe also on the structures. We're not a frequency reinsurer. We are shock absorber. We take the peaks, but we help prime insurance companies to handle and to manage also the frequency levels. We provide data, we provide models. And we can see now an increased effort also on the primary insurance side to address their net position. And here, that's an area where I said there are structured solutions that can be provided, but also the dialogue to the ultimate end consumer, end customer, the ultimate insured, that is the area where the primary insurance companies are focusing on to increase the resilience of their customer base. So appetite is there.
Anders Malmstrom: So maybe just quickly on the -- and I can give you a high-level summary of the movement of the SST. I mean SST was at USD 257 million at the end of the year. Now it's at USD 264 million. Obviously, what you have to take into account is the earnings that we generated, and we have now 6 months in and then also the accrual of the potential dividend. That's how we usually do. And actually, if you do a rough calculation and say, okay, the IFRS $4.4 billion earnings target, and we have now a bit more than 50% if that would translate directly into SST capital, which is not exactly the case, but as a good proxy, that would actually generate 28 points. And if we then assume you take half of it off as a dividend accrual, you get to 14 for the full year. And if we then prorate that for half year, it's actually exactly the same. It's exactly what we see. Now this is a simplified view. There's a number of other small points. But I think this gives you directionally what you can expect as SST capital generation in a, what I call a normal year where you don't have too many mark-to-market movements and not too many FX movements.
Operator: The next question comes from Darius Satkauskas from KBW.
Darius Satkauskas: Just two, please. One on the Life & Health Re. So I assume you'll be looking at smaller portfolios because the experience has not been fully satisfactory even if these portfolios are on the smaller side. So I assume the way you increase the odds of positive variance is by adjusting the assumptions to be more conservative. Are the CSM levels in those portfolios somewhat below the rest of the group? And if so, do you see a risk of a bit of P&L volatility on the back of this exercise? So that's the first question. The second question is just on the P&C Re combined ratio. So how much benefit do you expect the business mix changes to have? And do you think it's enough to offset the rate change you saw year-to-date? And just on that, are there any lines that you write that are both price adequate and actually seeing positive premium rate increases? Or is the stuff that's seeing positive momentum not price- adequate?
Anders Malmstrom: Yes. So let me start with the Life & Health Re. I mean what I said before, we're going now through the smaller ones because with the change to IFRS, I think we have to go through all the portfolios because it's important that we understand also under IFRS, you obviously start with the big ones. We did all of that. We're now going to the smaller ones. And exactly as you say, we see that some of them are not performing. And so we adjust that. It has impact on the P&L. If it's onerous, it has impact on the CSM if the portfolio is not onerous. And I think you saw that also in the -- when you actually look at the walk in the CSM, we see exactly the same. But it's much smaller. We had a very big adjustment that we did end of last year. And now we see smaller adjustments and this will go away over time.
Alexander Andreas M. Berger: On the P&C side, combined ratio side, you asked the question whether we see portfolios where we actually see rate increases. Yes, we do. It's a line of business dimension, but it's also a geographic dimension. Take casualty, for instance, you see rate increases coming through in U.S., for instance, also in Europe. But you see rate decreases in Asia, for instance. So that's a very good example to see that's very specific, and that's how you have to manage on a pretty granular basis. There are other lines of businesses on the specialty side where you also can see rate increases. And if you take property, it depends on the constellation of the portfolio. If you are exposed in certain territories, loss-prone territories, but also in loss-prone occupancies, high- risk occupancies. And this is then reflected in your treaty business. That obviously will have an impact, and that's the area where rates are not reducing. But if you have a pretty plain vanilla portfolio where the exposures are not as pronounced. That's where we found rate decreases, but also at constant terms and conditions and attachment points. So that's important.
Operator: We now have a follow-up question from James Shuck from Citi.
James Austin Shuck: On the Life & Health Re CSM release, I just kind of noticed that's tracking more like 10%. And I think your previous guidance had been for 8%. Could you just confirm that the kind of new run rate is now closer to 10%? And then secondly, on the SST walk, I just kind of -- just had a question about the debt issuance really because I thought you'd issued $2 billion of debt in the first half of the year, which will be about 11 points on the SST, but you didn't include that in the walk. Could you just clarify that for me because I know that's only temporary.
Anders Malmstrom: Yes. So on the Life & Health question about the CSM release, I think you're right. I think we saw a higher number release. But I think we're still sticking to the guidance going forward. So the CSM release should then again come down to around 8% based on the opening balance, I think that's what we would expect going forward. But we will -- obviously, that's something we work through. And then I think the second question on the debt. This is -- we issued debt, yes, but this debt basically replaces existing debt. And so it has no impact because the net debt will remain -- the debt that is reflective in the SST ratio will stay the same.
Operator: The next question comes from Michael Huttner from Berenberg.
Michael Igor Huttner: Apologies if these have been asked before. I got mixed up. The one is on U.S. mortality and the other one is on aggregate cover. So on aggregates, I just would like kind of confirmation or reassurance that you don't do this stuff because it's the accounting -- I was thinking about the accounting for this. It's also effectively, at the year-end, it's like a cliff edge, will they reach the -- go over the top as it were. And we've seen an increasing number of companies everywhere saying they do have aggregate cover. So I just wanted confirmation that's not business line you do or the risk is low. And the other one is my favorite question is on U.S. mortality. I'm sure it's been asked, and I'm really sorry, I kind of messed up here. What was the experience in Q2 and can you separate the kind of what I would call ordering lives for people like me and the high-risk lives, the things that, for example, Hanover and Munich Re highlighted?
Alexander Andreas M. Berger: Just wanted to give you assurance on the aggregate cover. I'll take that part, and Anders can take the U.S. mortality one. So yes, when we say we apply a disciplined underwriting and technical excellence, then I can give you assurance and confirm your views here.
Anders Malmstrom: On the U.S. mortality, I think I said it before, but I'm happy to repeat that. I think we had positive experience on U.S. mortality for the second quarter. Even though we already had it in the first quarter, but we have it in the second quarter as well. I don't think we split the mortality experience to the way you described it. But I think throughout, we had positive experience now what we see on the U.S. mortality side.
Operator: The next question comes from Roland Pfänder from ODDO BHF. Roland Pfänder: Two questions from my side, please. First of all, new business CSM in Life & Health. This is rather flattish since a while. What would it take to have a more structured growth going forward? Maybe you could provide you an outlook what you expect in terms of growth rate for the next quarters or years? Depends what you want to provide. Secondly, in P&C terms and conditions, where are terms and conditions actually softening in the market? And how do you react to this?
Anders Malmstrom: Yes. Maybe I'll start with the new business CSM on Life & Health. I think it's important here. I mean you generate -- you have the -- what we call -- I call it the ongoing new business CSM from almost a bit, call it the BAU normal and then you have transactions. Transactions are, by definition, lumpy. And in transactions, you want to be sure that you actually generate real value. This CSM is just from the ongoing new business that we actually generate. And from that perspective, I'm actually very happy with the CSM that we generated here because we basically maintain the CSM through our new business without going into large lumpy, but maybe also more riskier transaction. Now, we look at transactions when they come, when we're comfortable, but we don't just write transactions to write transactions. only do that if we're really comfortable with the assumptions. So actually, in that context, the new business CSM that we have here that is very stable, but it replaces the outgoing CSM more or less, which I think is a very good outcome. And the key point is it remains -- we keep the profitability in the in-force that we have.
Alexander Andreas M. Berger: On the second one, terms and conditions, we do see discipline and consistency in the market. And I can repeat again, this is the most important aspect that we're watching. There's clear attention on this one because we need to play the role that reinsurers should play. We take the peaks. We are the severity protection provider, the shock absorber. The prime insurance companies are best positioned to address the frequency. And hence, if this continues, that's a positive, and that should be seen as the norm. And that's what I said this morning as well. This should be the new norm. We're not in an exceptional market situation. This should be the norm. And should we leave as an industry, the discipline, I don't want to be part of that group that leaves the discipline.
Operator: The next question comes from Iain Pearce from BNP Paribas.
Iain Pearce: The first one was just on the sort of second priority that you mentioned in terms of increasing the resiliency of the group. If you could just give some comments on how you think the resiliency has trended in the first half. Clearly, you made some comments around the Life & Health already, but more thinking about the P&C side, particularly in light of the strong reserve release that you took in H1? And also why you decided to take that reserve. Release through the P&L rather than invest that into additional resiliency. That's my first question. And then the second question was just coming back to the seasonality point. Obviously, I understand that the nat cat risk creates the seasonality, but I don't really understand why there's a big difference year-on-year unless that's just the mix changes so significantly, it creates this difference. I wouldn't have expected it to be this big based on the mix changes that you're seeing. If you could just comment on that as well, that would be great.
Alexander Andreas M. Berger: Let me start with the resilience topic. When we changed the reserving philosophy, we clearly said that we want to position ourselves at the upper end of the best estimate range, and that was clearly our ambition. We have started to do that. And in 2024, you've seen this one big decision to increase the U.S. liability reserves. So we found ourselves suddenly in that position. We increased also the -- certainty load on new business to make that more sustainable also for the future. And if you look at our position also in the IBNR positions that we have in the current year IBNR, I think we sit in a very comfortable position. And that's a desired position to be in when you deal in such a volatile market. So that's managing and steering the business and managing volatility. So if we continue with this discipline, you should see that we will be consistent in delivering earnings in the future. And that's what, in my opinion, a reinsurance company should do.
Anders Malmstrom: And then I think to your question about the impact of seasonality relative year-over-year, and that's really driven here by the introduction of the uncertainty load because in 2024, the new business that we had was new business written in 2023, which did not have the uncertainty load. I think that's released. Now with the new uncertainty load, you really see a change in pattern. And then you compare 2025 versus 2024 and you see a seasonality impact year-over-year. So call it transitional, but I think that's really the technical answer why we now see a seasonality that we didn't see the year before.
Operator: We now have a follow-up question from Will Hardcastle from UBS.
William Fraser Hardcastle: It's a quick one, hopefully. I'm trying to understand the amount of rigor/completeness perhaps in the assessment of the $300 million cost save that you struck at December CMD last year. I guess you spent longer and you see the businesses. I guess you spent longer in your seats, the business is looking like it's in better shape, perhaps more time to focus on these things. Has the potential of this changed in that time period?
Anders Malmstrom: Yes. I mean quickly, we're very comfortable to achieve the -- we said greater than USD 300 million by 2027. We -- this year, we'll achieve another USD 100 million. So I think I don't -- I'm not worried about this one. What we will then do is we will switch towards a business as usual, continuous improvement approach. Expense management is becoming a more important strategic lever, also in reinsurance, and that's what we're going to do. We'll look at this, but we don't cut costs just for the sake of cutting costs. We are improving the structures in the group. We're getting quicker. We're reducing complexity. And this -- all of this is translating then obviously into in those numbers. We have clear playbooks, clear plans by group executive committee members responsibility, and we are in full implementation now. So consider this as almost being done because we'll see it earning through then going forward, but we're very comfortable here.
Operator: There is actually a follow-up from Michael Huttner, Berenberg.
Michael Igor Huttner: And it's really shortish, given the U.S. mortality is performing a little bit better, when would you start thinking maybe about reviewing the assumptions you have there?
Anders Malmstrom: Yes. Look, I think -- first of all, I think the good thing is that it is performing as expected, and we are positive. I think it's exactly where we want to be. But we do every year, we go over our portfolios and we assess if the assumptions are adequate or need to change them one way or the other. So this is -- but I think we're in a good position now on the U.S. mortality.
Thomas Bohun: Thank you, Michael. Thank you to all of you for your interest and attendance at this call. Should you have any further questions, please do not hesitate to contact any member of the IR team. With that, thank you again, and have a nice rest of the day. Thank you.
Operator: . Thank you all for your participation. You may now disconnect.