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Good afternoon, and welcome to SCOR Full Year 2020 Results Call. My name is Olivier Armengaud, Senior Manager of Investor Relations team, and I'm joined on the call today by Denis Kessler, Chairman and CEO of SCOR; and the entire Executive Committee.

May I please ask you to consider the disclaimer on Page 2 of the presentation, which indicates that the financial results for 2020 have been audited and that the final group solvency results are to be filed with the supervisory authorities by May 2021, and this may differ from the estimates expressed or implied within this report. I would also ask you to note the statement in respect of COVID-19, which indicates that the potential impacts of the COVID-19 crisis cannot be accurately assessed at this stage given the uncertainty related to the magnitude and duration of the pandemic and the possible effects of future governmental actions and/or legal developments.

Before starting our Q&A session, I would like to hand over to Ian Kelly, CFO of SCOR.

Thank you, Olivier, and welcome to the call, everybody. Let's go to Slide 4 of the presentation.

The reinsurance industry in general and SCOR, in particular, have not been spared by the dramatic consequences of COVID-19, which started to wreak havoc upon the world over a year ago. This pandemic has impacted societies and economies on a global basis as never before.

Pandemic risk is obviously well-known to reinsurers. Infectious diseases figured prominently in the risk maps SCOR draws up each year.

The study and modeling of risk was an integral part of our risk management when COVID-19 struck. With hindsight, we underestimated the truly global reach of such a phenomenon as well as the critical impact of the various unmodelable decisions taken by governments to contain the spread of the virus, which ultimately had a major impact on the reinsurance industry's exposure to this crisis.

The measures taken to contain COVID-19, particularly lockdowns, have affected all areas of economic and social life. This has become a multifaceted crisis; health related, social, economic, financial and even geopolitical.

It has therefore impacted reinsurers in terms of both assets and liabilities on both the life and the P&C sides. The group has successfully passed this real-life stress test by absorbing this major shock.

SCOR ended 2020 profitably with a net income of €234 million and solvently. SCOR's solvency ratio at the end of 2020, which takes into account the projected future COVID-19 claims, remains very strong, standing at 220%.

This is at the upper end of the group's optimal solvency range. Furthermore, the group maintains a very strong level of liquidity, standing at almost €2 billion.

And the four major rating agencies have affirmed the group's financial rating at a level of AA minus. If we look at the three business engines in more detail, on the P&C side, the growth was maintained despite contraction in some lines of business, such as Marine or Aviation due to the slowdown of the wider economy.

The technical profitability is strong with a normalized combined ratio in line with Quantum Leap assumptions. In addition, we had a strong start to this year with excellent renewals delivered in favorable market conditions.

On the Life side, the growth was driven by continuous strategic expansion in Asian markets, and we delivered robust technical results to absorb the ongoing impact of the active phase of COVID-19. Finally, on the investment side, we maintained our prudent portfolio positioning and delivered a strong return on invested assets despite the low yield environment.

The COVID-19 pandemic has been like an enormous tax on the industry and on the SCOR Group. Of course, this has impacted our financials, but the underlying business model remained sound.

The group's fundamentals are very strong, as demonstrated, firstly, by the excellent results we would have recorded in the absence of COVID-19, which cost the group €640 million before tax in 2020, and secondly, by the level of solvency achieved at the end of December. Let's move to Slide 5.

Throughout 2020, SCOR's teams were fully mobilized to continue to actively implement our strategic plan, Quantum Leap, focused on the twofold targets of profitability and solvency and accelerating our use of new technologies while continuing our actions in terms of sustainable development and social responsibility. SCOR accelerates its technological transformation to improve its performance and create long-term value.

SCOR delivered several ambitious digital projects in 2020, notably with the integration of CyberCube's risk model on the P&C side to boost our cyber exposure management capabilities. The development of hELIOS on the Life side providing an accurate knowledge of risks stemming from our in-force portfolio, and the deployment of more than 60 automated robotic processes into the organization.

The deployment of the IFRS 17 and IFRS 9 programs is also on track. SCOR is actively preparing for the implementation of these new accounting frameworks, with go live on 1st of January 2022 for IFRS 9 and 1st of January 2023 for IFRS 17.

Let's move on to Slide 6. SCOR continues its progress towards sustainability and strictly adheres to the best practice corporate governance rules.

In 2020, SCOR actively integrated ESG considerations across all its operations. On the environmental side, SCOR published its inaugural climate report based on the TCFD recommendations and joined the Net Zero Asset Owner Alliance.

On the social side, upon the proposal from management, the Board of Directors has decided to set a target of 20% of women at the Executive Committee in 2021 and 30% by the end of 2025. That's from 10% today.

The Board has also decided to set an additional target of 27% of women amongst our most senior partners by the end of 2025 from 19% today. Finally, on the governance side, as part of the succession plan announced in December 2020 and upon the Nomination Committee's recommendation, the Board of Directors has decided to separate the roles of Chairman and CEO.

This separation will come into effect following the general meeting in the spring of 2022. I'm now moving to Slide 7.

The COVID-19 pandemic is still ongoing and continues to present significant uncertainties for 2021. On the Life side, there are uncertainties around mortality development with the appearance of virus variants, the level of respective containment measures and the rollout of vaccinations, particularly in the U.S.

There are also uncertainties around the impacts of prolonged lockdown measures on P&C claims. Finally, there are some macro uncertainties around the continued Central Bank's emergency measures to support economies and the timing to end whatever it takes policies.

Inflationary pressures, even transitory, may create a new dynamic for the reflation trade in the market. Even though uncertainty remains, SCOR estimates COVID-19 claims to be manageable.

As I said at the outset, SCOR has passed this stress test and absorbed the impact of the pandemic. Let's go to Slide 8.

With the group's very strong capital position and in line with our capital management process and dividend policy, an attractive cash dividend of €1.8 per share for the fiscal year 2020 will be proposed at the Annual General Meeting. Moving on to Slide 9.

We have many reasons to be optimistic about the industry's prospects. We believe that COVID-19 is helping to create the conditions for stronger reinsurance growth, along with a positive pricing dynamic.

COVID-19 is driving a general increase in risk aversion, which in turn is driving higher demand for risk coverage throughout the world. On the P&C side, COVID-19 reinforces the general market hardening observed across all lines and all regions with the low-yield environment, an additional catalyst.

SCOR took full advantage of these favorable conditions and full advantage of the depth of its franchise to produce an excellent outcome in the January 2021 renewals. COVID-19 is also creating the conditions for a transformation of life reinsurance based not only on higher awareness of the importance of life and health coverage but also upon the acceleration of its use of new technologies from underwriting to claims management.

Let's go to Slide 10. SCOR is well placed in this beneficial reinsurance industry environment and will continue to scale its global platform and expertise to seize profitable market opportunities, leveraging its strong Tier 1 credentials.

We expect that these positive trends will translate into a P&C combined ratio trending towards 95% and below, a Life technical margin anticipated to return to the Quantum Leap assumption range of 7.2% to 7.4% by Q4 2021 and a return on invested assets of 2.4% to 2.9% on average across Quantum Leap. Let's now just take one minute to go through the detailed financials for the year.

I'm on Slide 12 of the presentation. The group delivers solid financial results with a net income for the year of €234 million, despite the impacts of COVID-19 pandemic, which before tax amounted to €284 million on the P&C side and €314 million on the Life side.

In addition, we also had to face a series of natural catastrophes and the continued pressure of the very low yield environment. In this context, SCOR wrote close to €16.4 billion of gross written premiums during the year.

That's a 1.8% increase at constant exchange rates over 2019. SCOR Global P&C grew at 2.4% at constant FX.

Excluding the negative impact of COVID-19 on gross written premiums, growth would stand at 5.6% at constant FX, in line with Quantum Leap assumptions. At SCOR Global Life, the growth stood at 1.4% at constant FX.

The volume increase was driven by continued strategic franchise developments in the Asian markets and achieved despite COVID-related delays in completing some large transactions. Excluding market exits targeted under Quantum Leap, the growth would have stood at 3.9% at constant FX.

In spite of the COVID-19 pandemic, SCOR delivered robust underlying technical profitability in 2020. SCOR Global P&C had a net combined ratio just above 100%.

That includes an impact of 4.7 percentage points related to COVID-19 and a natural catastrophe ratio of 6.8%, slightly below the budget of 7%. Overall, the normalized net combined ratio for natural catastrophe and COVID-19-related claims stood at 95.7%, absolutely in line with the Quantum Leap assumptions.

SCOR Global Life maintains a robust performance in 2020, while absorbing the shock of COVID-19, demonstrating the resilience of its business model. The Life technical margin stands at 5.8% in 2020.

The COVID-19 impact of 3.7 percentage points of technical margin is largely limited to the U.S. market and was offset by an active portfolio management and a strong reserving position and with a positive impact from reduced flu claims in the U.S.

Overall, COVID-19 claims for 2020 have been in line with expectations. Going forward, the COVID-19 claims are projected to remain at elevated levels in the first half of 2021 reducing by the end of the third quarter.

Including COVID-19 projected claims, the technical margin for 2021 is projected at around 5% and the technical margin is anticipated, as I said, to return to the Quantum Leap assumptions range by Q4 of this year. In spite of the very low-yield environment, SCOR Global Investments delivered a strong return on invested assets of 2.8%, thanks to its prudent portfolio positioning.

Realized gains stood at €197 million over the year, mainly coming from the fixed income and real estate portfolios. Impairments remain limited, demonstrating the portfolio's resilience.

Based on the current portfolio positioning and under the current market environment, SCOR Global Investments is expected to deliver a return on invested assets in the range of 1.8% to 2.3% for 2021. Overall, the group net income for 2020 at €234 million translates into a return on equity of 3.8%.

Normalized for the impact of COVID-19 and natural catastrophes, the return on equity would have stood at around 10.6% above our Quantum Leap profitability target of 800 bps above the five-year risk-free rates. If we briefly move to Slide 14, we can see the solvency position of the group is very strong, as we noted earlier, at 220% at the year-end.

This is at the upper end of the optimal range of our solvency scale and already takes into account the proposed dividend and the projected future COVID-19 claims. Finally, on Slide 16, we can see that the group has generated strong operating cash flows of just under €1 billion during the year.

And the liquidity of the group is very strong, standing at €2 billion. So overall, we are very happy with the results.

The group is in a strong position. And with that, I will hand back to Olivier for the Q&A session.

Thank you.

Thank you very much, Ian. On Page 22, you will find the forthcoming schedule event.

With that, we can now move to the Q&A session. [Operator Instructions] Thank you.

Good afternoon. Couple of questions on Life.

First of all, on the Life technical margin guidance for 2021. Just looking at the number, I'm just trying to square the 5% guidance that you've given for the year, which is lower than Q4 stand-alone, which was a bad quarter.

How should we think about that? Or is it – are you implying that both Q1, which we know looks bad, but also Q2 will be very severe in the coming months?

I mean it suggests that it would be as severe as Q2 2020, which was clearly another very bad quarter. So just getting a little bit more color and understanding around that.

And then the second question on Life is, to what extent have Life claims still being coming in below your expectations? You talked about this at Q3 then coming in about a third lower than you'd expected.

And if this is the case, when will this be recognized or seen in the IFRS numbers? Thank you.

Paolo?

Yes. This is Paolo.

Kamran, thank you for the questions. Let me just quickly go through the second question quickly as this is just more straightforward.

Just to give you a quick breakdown of the COVID bookings at Q4, I think that would answer the question. At Q4, for the U.S., we booked €283 million for the U.S.

portfolio. That was a €50 million increase to where we were at Q3 year-to-date at €233 million.

And if you look through the breakdown of that, we had about €105 million booked in relation to COVID deaths in Q4, less some adjustments for the flu that was reduced over the winter. But then we had a €42 million release of the COVID-19 provision booked earlier in the year to reflect a relatively lighter claim experience than we've seen at the beginning of the pandemic.

So that amount is already been released into Q4. Going back to your first question, I think, first of all, as we look at 2021, we see a strong underlying performance of the business.

And ex-COVID, we see the business performing at or slightly above our Quantum Leap assumption of 7.2%, 7.4%. And as you – as we communicated throughout the last few years, we're constantly working globally with our clients and retro partners on treaties that are not performing as expected to optimize structures.

And as part of our global in-force management, we're regularly reviewing the portfolio and take actions where appropriate. Now during 2020, some of these actions have resulted in kind of like a larger-than-average P&L impact, which contributed to the higher technical margin ex COVID.

In 2021, we will continue our strategy of optimizing globally our in-force portfolio. But we – at this point, we feel we're going to be back more at normal levels in a sense.

And you'd also have to mention that going into 2021, we have a lot of moving parts. So the assumptions of around 5% is what we feel comfortable at this point, but this can evolve as we move through the year.

Does that address your question, Kamran?

Yes. I feel like it is one to probably ask when we see what experience is like in the coming quarters, but you know that answer.

Yes, thank you.

Next question, please.

It's Vik from SocGen. Just a couple of questions from my side.

Firstly, going back to Life and Health. I see the group is assuming about 280,000 excess deaths in the U.S.

However, the corresponding claims figure projected in the Solvency II ratio is missing. So can you please help us with that number?

And related to that, the reduction in guidance for Life technical margin to 5%, I wonder how should we think about the underlying reserve margin of that that can absorb the COVID-19 shock? So any comments there would be really helpful.

The second question was really simple one on the tax rate. I see it's coming in still quite a bit higher.

So when is it that we should expect a run rate close to the 23% or thereabouts, that the group has guided to in the past? Thank you.

Paolo, on Life.

Yes. On the Solvency II numbers that you see on the projections on the presentation, that includes the full load of the 280,000 impact.

So our Solvency II numbers now reflect full ultimate expectations of COVID. In terms of the 5% in the margin, I think we – as you well know, our overall reserves continue to have a very significant margin of prudence, particularly at the time of our U.S.

acquisition in 2011 and 2013, we did the resetting of the actuarial assumption. So building an adequate level of prudence in our reserves across our U.S.

book. And this allows us to withstand a certain amount of deviation.

So that's something that we continue to evaluate, and we will continue to evaluate as we go through 2021.

Thank you, Paolo. Ian, on the tax rate?

Yes. Just to – before I go on to the tax, Vik, just to add to Paolo's response, the COVID-19 solvency ratio, what the solvency ratio includes, Vik, the COVID-19 impact going forward and the 280,000 deaths.

Just to help think about how this has moved, just so that it's a bit clearer, in the Solvency II walk on Slide 14, you can see that the eligible own fund impact of COVID-19 is around €615 million. So that includes – that's a pretax figure.

So that's about €800 million on a pretax basis. Sorry, that's – it's – now that's split between Life and P&C.

If we take out the known impacts as at the end of 2020, so the €314 million on Life and the €284 million on P&C, you're left with around €200 million impact in 2021. So that's where the figure comes from.

And it's largely on the Life side. There are some impacts on P&C.

But just to help you think about it, the 280,000 deaths, we did disclose the sensitivities there. For each 10,000 deaths, it's about €7.5 million impact.

So that sort of broadly gets you thinking around the €200 million number. And if you take the 5% technical margin guidance for 2021, that brings you back to around about €200 million impact, if you work through the numbers.

So that's how to think about and reconcile the 2021 impact on the Life side. As I said, there are a few ups and downs.

There is something in the Solvency II side on the P&C side as well, but it's largely that Life number.

That's really helpful.

Okay. Then onto the tax figure.

Yes, it is slightly elevated for the year. Really, this is a bit of a mechanical impact that stems from the fact that the net income is lower, yet we do have some frictional beat that is a cost in the year and relatively with lower income, that has a larger impact.

The underlying geographic rate mix is in our Quantum Leap range within the assumption. And we continue to look at ways to optimize that beat frictional cost, and we have some work ongoing upon that.

Okay. Thank you very much.

Thank you, Vikram. Next question, please.

Hi, there. A quick one, first of all, on the Solvency II walk, capital generation.

I think the assumptions are zero assumptions/experience variant, ex COVID is zero; full year, they were positive at the half year. So this implied second half negative assumption change in Solvency II ex COVID.

What was that? Second question.

I'm sorry to go back on this. I'm just concerned on detecting change of confidence/tone in the underlying Life business because essentially the guidance now is just a straight pass-through of the COVID losses as per the sensitivities you've told us before.

So nothing at all from in-force management with the implication being you exhausted that – those options in 2020 to defend the profitability. I'm just puzzled as to why there is a sudden change on that?

Or is it just excessive conservatism? Thanks.

Frieder, on the first question.

Yes. Hello, everyone.

So at the half year, we had overall variances of €73 million. Now we have €10 million for the full year.

So a slight negative variance in the second half of the year. That's the result of regular assumption reviews, which we do on an annual basis, which lead to strengthening in some areas and then release of prudence in other areas plus claims and persistency variances.

So there's not a single driver for this. But overall, the impact is small.

And with an overall variance close to zero, we feel that our models are well calibrated.

Thank you, Frieder. Paolo, on the second question.

Yes. Andrew, the updated assumption that we have on the technical margin for 2021 is driven entirely by the worsen of the pandemic versus the projections we had in September last year.

So back at the IR Day, we gave you an assumption for 2021 for Life technical margin of between 6.5% and 7%. This was based on the epidemiological view at that point, where we were projecting around 70,000 U.S.

COVID-19 reported deaths for the U.S. for 2021.

Now the pandemic has developed worse than anyone projected at that point. And we're currently projecting 280,000 deaths.

That's 210,000 deaths higher than we were projecting in September. So as Ian said before, in terms of how to look through the impact, we are reiterating the much reduced impact of the pandemic is having on our insured population compared to the general population, with an indication of €7 million to €8 million in additional claim costs for an additional 10,000 deaths in the general population.

So using the mid-range of – the mid of this range and using our 2020 earned premiums as a reference, we have an impact of around 90 basis points of the technical margin for each 100,000 additional deaths. So the updated assumption is driven by the worsening of the pandemic and nothing else.

The underlying are less pretty much in outer compared to the guidance that we had back in September. And as I said, some of the actions we took in 2020 had a larger-than-average P&L impact.

We cannot only always forecast precisely the impact of our in-force management programs. And the 5% is what we feel comfortable right now with what we have in the pipeline that might change and improve over 2021.

Okay, thanks.

Thank you, Andrew. Next question, please.

Hello. Hi.

Thanks for taking the question. So I have a first question on the dividend.

You announced the proposed dividend of €1.0 per share today. So if you could please give us an update on where the regulator is on this matter?

And then another one, again, on the Life business. In the Life business, the technical margin, excluding COVID-19, will be 9.5%.

So is this purely driven by a number of one-offs such as lower flu impact due to more people staying at home and so on? Or perhaps there is more – there is some positive component that should be considered as a recurring element?

I'm just trying to understand whether there might be some tailwind or change helping you to deliver top end of the target range, for example, if you can please give a little bit more color on this.

Ian, maybe on dividend.

Yes. Sure.

So thanks, Emanuele. And as I said earlier, we're very happy with the position the group is in.

We're in good shape. And we're happy with the dividend.

We have the capital for this. We have the liquidity for this.

And that's been the basis of the discussions with the regulator also. And beyond that, in fact, as with all companies, they requested information in respect of certain stress scenarios were they to occur.

And even under the most extreme stresses that they were asking about, we stand within the optimal solvency range. So we're in a very, very strong place there, and we're perfectly comfortable and happy.

So that's the position with the regulator.

Thank you, Ian. Paolo, on the Life technical margin.

Yes. I think we're back to the similar point that I just made answering Andrew's question.

If you take our performance, we had the overall underlying performance. We're very comfortable with where that is.

We feel the underlying fundamentals of the business are very strong and are leading us to comfortably achieve the Quantum Leap assumptions that we laid out. And on the other side, we're constantly working with our clients and retro partners on treaties that are not performing as expected to optimize structures.

And as part of our global work on in-force management, we're regularly reviewing the portfolio and take actions where appropriate. So during 2020, consistent with prior quarters, we took steps to increase premium rates on certain underperforming U.S.

contracts. And these actions are similar to what we have done in the past.

The P&L impact and solvency ratio impact for each action depend on the contract terms, the mixture of business covered in each contract, the claim experience in the contracts and other factors. Some of the actions taken in 2020 had larger-than-average P&L impacts, which contributed to the higher technical margin ex COVID.

In 2020, we will continue our strategy on optimizing our in-force portfolio globally. And at this point, again, we will be having the pipeline.

That's where the – we get to the that 5% technical margin assumption that can evolve over time and as we go through the quarters in 2021, we will keep you updated.

Thank you.

Thank you, Emanuele. Next question, please.

Yes. Hi, everyone, from my side as well.

Hope you’re doing well. First question on the diversification benefit for Solvency II.

This has gone up both year-on-year and since the half year stage. So I was wondering if you can explain basically the main drivers of why the diversification benefit is up to about 53% now.

The second question is on the management expense ratio. It is down meaningfully year-on-year.

And I assume this is partly down to COVID. Now going forward, should we expect this to go back up to about 7%?

Or are some of those expense savings going to be permanent? Thank you.

Frieder, on the diversification benefit.

Yes. The diversification benefit tends to be higher.

The higher, the better balance the underlying main risks and in particular the more or less independent risk categories. So our capital requirements are mainly driven by Life and P&C underwriting risk and then to a lesser extent by market and credit risk.

What happened in the second half of 2020 was that first of all, we've grown our P&C business more quickly in particularly to get the 1:1 renewals, and the SCR reflects the upcoming 12 months, including the 1:1 renewals and expected renewals later in 2021. So the P&C risk contribution has gone up a little bit, and the balance between Life and P&C is now almost perfect.

And then secondly, market risks have increased a little bit in line with the re-risking of our investment portfolio and also financial market movements. So the balance of our underlying risk profile has further improved, and this has led to a further improvement in the diversification benefit, as you already mentioned.

Thank you, Frieder. Jean-Paul on the expense ratio or not?

Yes, Olivier. Regarding management expenses, as you've seen, they ended up being lower than our Quantum Leap assumption.

That's the result of several factors. One of them, obviously, a lower travel expenses in the COVID context.

Also, another one is lower variable compensation. As you know, we have a compensation policy that is designed to ensure alignment with shareholders and so the lower ROE has resulted in lower variable compensation.

So going forward, we believe that the assumption that we have set as part of Quantum Leap still corresponds to the right level. We want to continue to invest in the business.

Ian mentioned some of the developments that we've made in technology. So we think that's the right ballpark.

However, of course, there are certain items that will continue to benefit. We are going to draw the lessons of what we've experienced in terms of operations.

And for instance, we don't anticipate to revert to travel levels as we saw before COVID-19. So here, there will be an element of permanent savings going forward.

Thank you. Next question, please.

Hi, thank you. Good afternoon and good morning, everybody.

So my first question, I just want to clarify what you said about investment return. I think you said 1.8% to 2.3% in 2021.

I presume the comparison is the 2.8% in 2020. And I just want to square that with the Quantum Leap guidance, which is 2.4% to 2.9%.

And I think you fielded plenty of questions on the investment yield recently. And to lower that number by so much just for one year ahead seems somewhat strange, but perhaps I might misunderstood something on that.

Secondly, just in terms of the SCR, I think you partly answered the question with the diversification benefit, but there's no increase in SCR despite the very strong growth that you're showing at the renewals. And I look at your solvency position and you're at the top end of that range.

So it still seems a very odd decision to me not to revisit the 2019 dividend. I appreciate this as game over, if you like, but perhaps you could just flesh out a little bit the decision not to revisit that dividend.

Thank you.

François on investment returns.

So on the investment returns, so you're right. So the assumption of Quantum Leap is return on invested assets between 2.4% and 2.9% over the strategic plan, and we maintain this assumption today.

For 2021, my expectation is a return on invested assets between 1.8% and 2.3%. And as you said, this has been to be compared to the 2.8% delivered in 2020.

Having said this, I must recognize that this range has been computed with – in a prudent way with forward rates at the end of December 2020. And what we are seeing today and what we are playing through the fixed income portfolio, and that's why you saw a significant capital gain that we took at the end of December last year.

We do believe today that there is higher probability for U.S. interest rate to rise a little bit with the next few months, given inflationary pressure.

And even transitory, that could create a new dynamic for reflation trade in the market. So we believe that there could be upside in our range as given today given what we see in the market today and again, compared to today and the beginning of the year, the 10-year U.S.

rate has increased by almost 35, 40 basis points already. So we have positioned significant liquidity in the portfolio to capture this upside.

So is the Quantum Leap target, which you're saying you're sticking to that 2.4% to 2.9%, is that basically...

Over the strategic plan. Over the strategic plan.

Yes.

Yes. But you're essentially assuming that the forward rates will improve.

Yes, which is not embedded in the guidance I gave you, the 1.8%, 2.3%.

Yes. Yes.

Okay. Thank you.

Thank you, François. On the second question, first, Frieder?

Yes. Thank you.

Maybe on the SCR development during the year, the one point, which is noteworthy is the slight reduction in the SCR in the operating impact by €36 million. That is driven by the fact that despite the strong growth in the portfolio, as you rightly pointed out, the SCR benefits from the improved profitability, in particular, the hardening market on the P&C side.

This is both reflected in the Asia movement in this step. So the fact that we have now renewed business in a much harder market and improve – expect these conditions to remain in place for the remainder of 2021 is keeping the SCR growth quite muted despite the strong growth of the underlying volume.

So this is a specific effect, which we are witnessing as we are moving from softer into a much harder market. That's a particular movement.

I think the other movements are probably more in line with what you would have expected. On the dividend question, I maybe hand over to Ian.

Yes. Sure.

Thanks, Frieder. Look, on the dividend, the 2019 dividend, we talked about that before.

That's gone. That was the strong recommendation of the regulator.

So we've moved on from there. I think what's key is our capital management policy remains consistent, and that's important with capital management.

And the policy is unchanged. We look at our solvency.

That's very strong. We look at capital for accretive growth.

We know that there's a – we're in a very, very positive environment with the P&C hardening market. And then we look at our regular dividend.

So that's how we've approached the dividend this year. The underlying earnings are good.

We've got strong fundamentals. And as a result, that's how we approached things.

And the Board have decided, obviously, last year, that was gone. And we've decided this year on this basis.

So that's where we stand.

Okay. Thank you very much.

Next question, please.

Yes, good afternoon. Thank you very much.

So many of my questions have been addressed. Thank you for that.

Just if I can ask still one just the solvency situation and capital management, which Ian you just alluded to. So if you could just guide a bit what should be kind of the organic operating capital generation because, obviously, it's been 18% to 20%, even 30% in 2019.

But just a guide on what is that number likely to be, if you think of future solvency projection? And then in the same way and if I can ask what – I mean if we also consider that you're at the top end of your solvency now of your optimum range and then this would only add as another year or two to progress and then you'll have the solvency to review as well, so there's going to be a fair bit of capital excess maybe over the optimal range.

If you could just comment on your thoughts around how you intend to use that, if you like. And you mentioned P&C growth, but just any more color would be very helpful.

And second question was more on P&C growth, which I understand the targets for 2021 are being reiterated. But just the fourth quarter was a bit less encouraging on that because you saw 1% odd growth versus 6%, 6.5% ex FX in 3Q.

So just – is it from one-off? Is it just something to note there would be very helpful.

And if I could just clarify a little bit with investments, the reinvestment yield, 1.2% despite already in fourth quarter pickup in U.S. It's because – probably because of the corporate spread.

But is this likely to improve already by now? Or will that also help beating the 2.3% you just mentioned?

Thank you.

Thank you, Vinit. The first question for Frieder, the operating capital generation.

So Vinit, we generated about €800 million to €1 billion of operating capital over the past three years per year. The SCR growth was relatively low.

And what I just mentioned helped to keep the SCR growth relatively minor, and we had similar effects in previous years, also the improvement in diversification. So I'd say the SCR growth on a recurring basis would be expected to be a positive as we are growing the business, maybe not growing as fast as the business volume itself, as long as we manage to capture good profitable growth opportunities and manage diversification, but it should at least grow somewhat.

Operating capital, I think, is in a generation – is in a good spot. We've been able to generate a bit more in previous years.

That's going to be a function in the future primarily of our new business generation capabilities. So far, our VNB growth is in line with Quantum Leap.

And now we are seeing good growth prospects, in particular, on the P&C side, then claims variances, of course, will also play a role. So yes.

I hope that gives you a bit of an idea of where this may be trending. And maybe, Ian, if you want to pick up on the link to capital management?

Yes. Sure.

Thanks, Frieder. I'll just go back to what I said before in respect of the unchanged policy.

We start with the solvency of the group. And we run – that's how we run the group.

It's run on the group internal model. And we consider out of that where we stand, how much capital we have for accretive growth and how we balance that with the expectations of shareholders in terms of return with the regular dividend.

So yes, I don't think we're in a position in terms of excess capital return. I wouldn't expect share buybacks at this stage because we see very positive opportunities in the market, in particular, on the P&C side, as we discussed and you've seen the strength of the 1:1 renewals.

Thank you, Ian and Frieder. Jean-Paul, maybe on the P&C growth question.

Yes. Thank you, Olivier.

On the premium side, in Q4, as you said, the growth was more muted than prior quarters. It's been mainly a driver of the underwriting year 2020 where in Q4, the contribution from prior underwriting years was smaller than in prior quarters.

And we've had growth, strong growth in specialty insurance but the P&C reinsurance was really the one that was more muted this quarter. We expect in Q1, the contribution of underwriting year 2020 to start shortly and to be back on the growth path in 2021.

Thank you, Jean-Paul. François, on the reinvestment.

So on the reinvestment rate, so that's true that the reinvestment rate, and I remind the definition of the reinvestment rate. That's the market yield of the portfolio, the last day of the quarter, given our asset allocation.

So the 1.2% reflects market condition the last day of December, given our asset allocation. So in practice, it means that it doesn't take into account the increase of interest rate that we saw since the beginning of the year.

And I'm convinced that it will continue a little bit. Just to give you a sense of the sensitivity of this reinvestment rate, it was 1.4% at the end of Q3, 1.2% at the end of Q4.

And that's mostly explained by the credit spread tightening during the last quarter and not by interest rate. So you see that we have room of maneuver to improve this, thanks to the increase of interest rate.

And keep in mind that 49% of our portfolio is denominated in U.S. dollar.

So that's where we have the bulk of our investment portfolio.

Thank you.

Thank you, François. Next question, please.

Hey, good afternoon, guys. Just on that investment return discussion, I'm not sure if I may have missed it.

Did you provide what the reinvestment rate would be as of now in light of the pickup or loss? And I guess in that respect, would you be willing to be picking up some more longer-dated bonds, given what we're seeing on the pickup being most significant as you extend the duration.

And think about the solvency perspective, would that narrow any mismatch that you have so actually helping? Or any color thinking on thinking on that would help.

And then on P&C, I think this is one of the first P&C questions, but the wording is pretty – it's trending towards 95% and below. I guess, just trying to get a bit more clarification, thinking about – if we're thinking about 2021 in totality.

Or is that really thinking about by Q4, you'll be expecting to be below leaving the full year a bit more opaque? And thinking what is the COVID assumption implied in there?

It sounds like there is a COVID assumption from the solvency discussion.

Thank you, Will. François, reinvestment.

On the investment strategy, so as I mentioned, we are playing a little bit the inflation trade on the market. So we are still maintaining relatively short duration of the fixed income portfolio.

And as you see, significant amount of liquidity, nine points of liquidity in the portfolio at the end of the year, and that's where we are today. The day we will start to redeploy this cash within the fixed income portfolio, again, that's mostly in dollar, and we will target 10-year maturities on corporate bonds, mostly investment-grade and excluding sectors affected by the COVID-19 pandemic, so remaining prudent.

Our entry point on the market could be U.S. treasury rate between 1.5% and 1.7%.

And we are 1.35% today.

And maybe just to add to this, on the ALM question you asked, our mismatch currently is quite – our duration mismatch is quite small. And it's mainly driven by the outsized risk margin on a Solvency II basis, and we've got a clear position that this is exaggerated and should be reduced.

And fortunately, EIOPA is now also recommending the same that the risk margin should be reduced. So we are not worried about the remaining mismatch we have.

The sensitivity of our solvency position to interest rate movements is mainly driven by the interest rate sensitivity of our capital requirements, the SCR denominator of the solvency ratio. That is something which is a nature of our business and mainly driven by the long-term lines of business, in particular, the long-term mortality business and then to a lesser extent, P&C long tail lines.

Thank you, Frieder. Jean-Paul, on the P&C combined ratio.

Yes. Olivier, thank you.

So first on the COVID question, the – let me clarify that the increase in the IFRS accounts for COVID are mainly due to the earning patterns of the premium of the underlying lines of business. So the increase does not reflect necessarily the same increase in ultimate.

Today, at the end of Q4, the difference between our ultimate view that's included in the Solvency II calculation and the IFRS number is roughly €20 million. So we would expect those €20 million to continue to earn through 2021.

And those figures are our ultimate view of COVID. So there is no assumption of further claims based on the information we have today.

In terms of the combined ratio overall, we see an improvement of technical profitability of the business in 2020 and 2021, and these will earn over the coming quarters. Our approach is always to have a prudent reserving policy.

We tend to recognize bad news right away and wait for good news to be confirmed. So regarding your question as to when we start seeing the normalized combined ratio being below 95%, it's difficult to say, but I'd say over the second half of 2021 and 2022 is the expectation.

Thank you, Jean-Paul. Next question, please.

Yes. Good afternoon.

Just one question left on my side, and it would be for Paolo. Paolo, if you could comment on the what kind of top line growth you're expecting for 2021.

Thank you.

Yes. We're expecting overall premiums to be just slightly up but not much.

We expect a relatively flat 2021 to where we are in 2020. Given the disruptions of some of our clients had, yes, we believe that will be a good assumption right now.

Okay. And if I may, regarding offsetting parameters to higher mortality in the U.S., so the way we have to understand it is, I guess, that you're still relatively cautious on positive coming from the in-force management, as you said before.

Regarding the flu season being very, very small, I mean or unsignificant so far, in the past, I think that you said that it was taking almost two quarters to recognize the effect of benign flu season, so more likely to be positive on your H2 number than H1. So could you say if also the 5% technical margin is not expecting any positives from flu season this year again?

Yes. We did recognize some flu season upside in Q4 as a reduction of our – the reserves that we carry for that, and we have that included in the 5%.

It's not a large amount. It's roughly about €20 million into Q1 and Q2.

Thank you, Paolo. Next question, please.

Thank you very much. Good question.

Two questions on global P&C. On the combined ratio, you normalize the combined ratio for nat cat and you normalize it for COVID-19 but not for large manmade losses.

To my understanding, you had a number of elevated manmade losses in your book last year, one of which, for instance, was payroll. So I wonder how you look at these large manmade losses.

Would you say that the large manmade loss experience in 2020 was above expectations or above your budget? And by how much should we maybe adjust the normalized combined ratio you want to adjust that?

Second question, also on global P&C, the commission ratio. In Quantum Leap, you defined a target commission ratio of 24.5% to 25.5%.

Now both in 2020 and in 2019, you were at 24%, clearly better. Is this figure also a figure which we should expect going forward?

Thank you. Laurent, maybe?

Sure. So on the manmade, on the large manmade, so you're right, we do not have a normalization factor for manmade and refuse to do so.

Nonetheless, of course, we monitor it very precisely. We have a number of times communicated on an experience on our large manmade, which is actually pretty close to the nat cat load of 7%.

This is based on a pretty long time period. And in this respect, 2020 was actually not different from the average from the experience that we have.

It is actually slightly better than 2019, which was marginally higher than 2020 for the large manmade. Maybe one small difference for 2020.

You mentioned Beirut. There was another large claim in Japan.

Those manmades were actually more for our Treaty business than for our single-risk business. Single-risk business witnessed an increasing number of smaller claims.

But for the very large ones, like the one you mentioned, actually, they were more our Treaty side. But fundamentally, there is no change in pattern or surprise from our manmade loss in 2020.

Thank you. This is Jean-Paul.

Maybe I'll pick up the commission ratio question. The – you're right in that the assumption is 24.5% to 25.5%.

I think the better-than-expected results we have in 2020 is due to the management actions we've taken in over the year 2020, and we expect this to also be reflected in 2021 as we continue to put pressure on the reinsurance terms and conditions for proportional and try as well to grow a non-proportional part of the book. So we would expect the numbers we have in 2020 to be probably more reflective of what we expect in 2021.

So slightly below the original Quantum Leap target.

Thank you very much.

Thank you, Jean-Paul. Next question, please.

Hello. Hi.

Thank you. Just a couple of quick follow-ups.

One is for Jean-Paul. Just as a clarification, in answer to one of the questions, you mentioned about the ultimate claims cost on P&C business.

And am I right to understand that the difference is €20 million versus what is booked at year-end 2020? Is that what you said?

Or have I misunderstood it? And the second question is on the EIOPA review of Solvency II and the figure that was flagged that the Investor Day last year was about 20 percentage point uplift in Solvency II ratio.

So any updates around that considering what you're seeing at the moment?

Jean-Paul, on the first question?

Yes. Thank you.

So on COVID, you're right. So the ultimate for lines of business were the premium of the business has not earned through yet, that's mainly Credit and Surety, Casualty and longer tail business.

The ultimate – the difference between what's booked in Q4 and the ultimate is roughly €20 million. So that will continue to earn through throughout 2021.

On the Property BI side, what we've posted really is really what we expect. So that's fully earned through.

Thank you, Jean-Paul. Frieder, on the Solvency II ratio?

Yes. So what we published in September was an estimate of the impact of the proposed reform of the risk margin methodology on our solvency position.

What EIOPA has eventually proposed in December is completely in line with what we had expected at the time. The estimate, which we had made was as of Q2 2020.

So as of that date, that estimate is correct, and we wouldn't change that. As of year-end 2020, U.S.

interest rates have gone up a little bit in Q4. So the risk margin has mechanically reduced.

So the consequential impact of the proposed reform of the risk margin would be a little lower, 1 or 2 percentage points less, but the order of magnitude would be the same. And this would be by far the biggest impact of the EIOPA proposals.

There are some other suggestions which have a minor impact, but the risk margin proposals are by far the most important ones for us.

Okay. Very helpful.

Thank you.

Thank you, Frieder.

Thank you very much for attending this conference call. The Investor Relations team remains available to pick up any further questions you might have.

So please don't hesitate to give us a call. With this, I wish you a good afternoon.

Thank you.