Swiss Re AG

Christian Mumenthaler - Group Chief Executive Officer Philippe Brahin - Head of Investor Relations David Cole - Group Chief Financial Officer Matt Weber - Group Chief Underwriting Officer Guido Fürer - Group Chief Investment Officer

Thomas Seidl - Bernstein Daniel Bischof - Baader Helvea Andrew Ritchie - Autonomous Vikram Gandhi - Societe Generale Kamran Hossain - RBC In-Yong Hwang - Goldman Sachs Vinit Malhotra - Mediobanca Sami Taipalus - Berenberg Bank Thomas Fossard - HSBC Frank Kopfinger - Deutsche Bank Jonny Urwin - UBS

Thank you very much. Good morning or good afternoon everybody and welcome to our 2016 annual results conference call.

I am here today with David Cole our Group CFO, Matt Weber, our Group Chief Underwriting Officer and Guido Fuerer, our Chief Investment Officer and Philippe Brahin, our Head of Investor Relations. Let me start with a couple of brief remarks and the results we published this morning.

Our Group net income achieved $3.6 billion with all business units contributing positively to the results. We also benefited from the strong contribution from investments with an ROI of 3.4%.

The Group ROE is above are over the cycle target of 2016 and many other targets were met in 2016. We also reported the estimated outcome of the January renewals.

As you’ve seen we actively steered our portfolio reducing capacity where rates were non-economic. The premium volume is down by 18% compared to what was up for renewal, demonstrating our underwriting discipline.

Our risk adjusted price quality is maintained and stands at 101%. Given our strong capital position and business performance we also announced this morning that the board will propose to the AGM 2017 an increased dividend of CHF 4.85 as well as new share buyback program of up to CHF 1 billion.

Finally we announced this morning that Matt Weber has decided to step down from his current role to start a new chapter in his life. Of course we will miss Matt his experience and guidance of 25 years at Swiss Re and we wish him all the best for the future.

Eddie Schmid, as Group Chief Underwriting Officer on July 1. Some of you already know Eddie, who has been at Swiss Re for 26 years and bringing a broad underwriting and business experience across many lines and markets.

And with that, I’ll hand over to Philippe to introduce to Q&A session.

Thank you, Christian and good day to all of you also from my side. As usual just before we start our Q&A session I’d like to remind you to please restrict yourselves to two questions each and register again to follow-up questions.

So with that operator, could we please take the first question.

Yes, thank you. Good afternoon, first question is on obviously Corporate Solutions one of the businesses, which didn’t meet the even cross-cycle ROE target you also guide now for 2 percentage point higher combined ratio has 3% for the year.

My question is, what makes you confident that this comes back in reasonable time to normal ROE level, how much patience do you have in this business, is my first question? The second one, I know it’s probably difficult to comment for you, but I guess some comment would be helpful - how would be let’s say issues, one of your clients AIG had in the casualty business given that you have a very strong relationship, a very large treaty relationships there and of course AIG now transferring a lot of long-tail liabilities to production.

Otherwise, I wondered if you could comment how this reserve issue AIG has been experiencing impacts your casualty relationship with this client.

Thomas thank you. This is David Cole, the CFO.

I act little bit as an air traffic control here I think, the first question talking about confidence in the future of Corporate Solutions I’ll ask Christian to address that and then for the second question regarding AIG and potential impact will ask Matt to follow-up on that one.

Obviously I was expecting the question on CorSo. I think it’s maybe worthwhile to summarize my thoughts on that and the EC’s thoughts on that.

So clearly the year 2016 was disappointing, we didn’t meet the ROE targets so is a good time to step back and look at the business and rethink - everything we’ve thought, why we’ve entered and whether everything is still valid. So let me just share a little bit of our thinking process.

So the first question is and we always thought on a long-term future, 10 years whatever this is going to be an attractive business or is this, are we sure it’s going to be an attractive business and I think the answer is still, yes. All right and as we shift and also in the primary business side, some risks will shift from retail to Corporate Solutions type business like on the motor side, which self-driving cars.

So fundamentally we think this business will be attractive, will exist although in 10 years and it’s just highly cyclical as we know and it’s an attractive field to be in. The second question has been, does Swiss Re have any particular strategic capabilities that shouldn’t make Swiss Re in that business.

And I think, over there the answer is yes in our mind because in that type of business you need to have good brand name, you need capacity and you need underwriting discipline and underwriting knowledge and I think we have all of that. We’ve been in this business for 20 years or so I think it’s clear that, it will take a longer term view, this is a good business also for Swiss Re.

Then you go to the next level and you might say, okay. So what about execution, so do we have an execution problem and there I think it’s useful to refer to, what you can see out in the markets.

Our main course of competitors have released figures at this stage and from those I’ve looked at, they look very similar. So you have combined ratio published runs around 100% right now, which indicates that the market is just incredibly tough and at the level which is basically not sustainable, if you want to make the right profit.

So it’s a really tough market, when you compare to competitors I think you need also to take into account two other things. The first one is, we see this as a growth area so we invest significant cost into it also to enter primary lead and that adds 3% to 4% combined ratio points that are clearly visible in the cost ratio and combined ratio and the other one is, that course is basically a 2012 start up, so when we created the Group structure in 2012 it was separated out and the old reserves of course they were left behind in Reinsurance.

These reserves have produced the equivalent of 4.3% combined ratio points, so had we shifted them together of course, so i.e. we’re another start up like the other competitors they would be 4 points better in the combined ratio.

So these are not excuses, this is just trying to analyze the factual situation of where to correlate and whether we have an execution problem. So my answer will be, this is a growing business, we invest in it as we should and it’s mostly a market issue that we’re accounting which is not sustainable and at some stage we will turn it as always turn.

So my confidence in the turn is high but it’s very hard to foresee at which point that will happen.

But does that known then that you also applied like you’ve done in the Reinsurance base strong cycle management now scaling back, also given the fact that with rising US interest rate I guess the softening on the underwriting side probably gets a new fuel if you want.

No absolutely. But [indiscernible] if you look at the last two years CorSo didn’t grow, it shrunk.

The only reason it grew is because we acquired IHC Risk Solutions, we’re tipping into some transactions both on acquisitions, but otherwise it was actually one of the few CorSo carrier that started to shrink earlier then some others and show some disciplined underwriting. So clearly we need to do that, doing this and we need to continue to do that.

So absolutely that’s a core success criteria in Corporate Solutions. In bad times you need to be underweight, in good times, overweight.

So I mean from an easy perspective, of course we have two choices. We can say we stop all investments in the future to try to make the combined ratio look good in the next quarters but that’s not the way we would like to proceed.

If you take a step back you’ll realize that 6% of our capital is in this business, so not 25% it’s just 6% and is a clear growth area and we don’t see any reason to slower down our investments in that area. And that means the actual investment in IT infrastructure and all of that, not necessarily on just write business that is not profitable.

So fundamentally we’ve seen no reason at this stage to change our view on the long-term, short-term and what we’re going to do with Corporate Solutions and I hope that this lengthy answer - give you just sense because otherwise I’m going to get 10 questions. So I hope this gives you the holistic picture of our thinking currently.

Thank you, Christian. Let me go to Matt for the question regarding AIG.

Thomas if it’s okay, I will not give you a super long answer, but probably some more than two or three words because we do understand that this is almost of public interest, this topic. Normally of course we could and would never comment on the performance of an individual client transaction.

Here, we believe we can say a few words given that for instance in 2016 a transaction we concluded together was in the public domain and there I would like to make one or two comments. So that’s because so far most questions we have received related to that one, that transaction incepting 1/1/2016 covers new and renewal business.

Now one year later we’re still in the very early portion of the tail, in underwriting we call this a very green contract. Green contract as you know has an ultimate loss which mostly consists of IBNRs which stands for incurred, but not reported losses.

Quite frankly some of the losses have not even happened which are going to happen for underwriting year 2016. So it boils down to how do we set IBNRs, we do not set IBNRs on an individual client or an individual contract-by-contract level.

We set the IBNRs portfolio segment by portfolio segment and to give you an order to magnitude, we have Swiss Re use approximately 100 portfolios on the P&C side when we set reserves and we determine the IBNR provision on the basis of the underlying paid and reported triangles. Which means completely independent from the IBNR set by our clients and that’s just important for you to consider, of course we’ve received the Q1, [indiscernible] we looked at them, we analyzed them and on the basis of the Q1 [indiscernible], we see now meet at the this point in time to change our reserves.

Thank you, Matt. Next question please.

Thanks, good afternoon. Two questions, the first one on the January renewals for the price decks declined by one point, what is your outlook for the remainder of the year in terms of rate changes and relates to that, I mean the 18% volume decline, how does it impact your planning in particular on the cost side?

Then the second one, we are probably [indiscernible] claims inflation, you have touched upon this briefly at the Investor Day, but it was still early days. I mean, given the new administration in the US, could you talk about your mid-term claims inflation expectation and do you see potential risks on the reserve side?

Thanks, Daniel. I think actually both of those questions probably best directed to Matt.

Okay, good so the first question. How do we see rate changes to continue look it’s always a little bit guess work, it’s very hard to forecast the future.

Our current thinking is that the trends we’re seeing i.e. a decrease of the rate decreases in property and the decrease of the rate decreases in specialty and casualty plus, minus, flat however with distinct differences by segment and market that this trends in the short-term will continue.

In the medium to long-term nobody does, we don’t know it depends how quickly excess research in the industry not at Swiss Re, but in the industry are depleted and of course it also depends on the occurrence or lack of occurrence of individual large losses. Your question what 1B [ph] related to 18% volume decrease really have an impact on the cost ratio, of course yes, it will have an impact.

And on the cost ratio, however please take also into account that large transactions that a lumpy business sometimes you write them and sometimes you don’t write them. It’s hard to really plan for them and sometimes you write the big deal in the middle of March, they do not necessarily come all at January 1.

So by the nature, if you’re strong in the area of large transactions this is risk you incur, especially if you have a good and strong look at the bottom line, that’s also important. We always said our large transactions and our tailored solutions, we regard them as more attractive than the regular core business or the open market reinsurance business.

However that’s not necessarily true for, well it’s definitely not true for each and every individual deal. So also they’re prudent underwriting discriminating risk selection and really good structuring really does matter and is important.

Your question two related to inflation in the US. Of course this is something we pay a lot of attention to and we monitor it continuously, we see at this point in time a little bit higher risk for increasing loss relevant inflation for some lines of business and in the UK and especially also in the US and we are taking this into account when we’re writing new business.

Thank you, Matt. Move over to the next question please.

Hi, there. Just on the life and health business, you delivered on ROE for the full year above the targets [indiscernible] and yet when I go to the disclosure on the kind of I guess the biometric elements of the result, it looks like there were net negatives in terms of mortality, morbidity, worsen [ph], expected and valuation assumptions.

So that gives me the impression or maybe you could tell me what you think the underlying ROE was, which you’ve told us in the past for life and health. It must have been aided by sort of higher than expected realized gains.

And linked to that, is there a specific action that you need to take in the UK, as the UK that you mentioned in your commentary as the source of weakness? And I guess the second question just on Life Capital.

You’ve talked some transfers occurred, are you still transitioning Admin Re UK or Swiss Re, the ReAssure UK to an internal model in Solvency II. Has that happened yet or should that happened in 2017 and would there be an additional benefit in terms of cash flow if that was to happen?

Thanks.

Yes, thanks Andrew. May I’ll take both of those.

So first on Life and Health, we’re very happy with the result. We’re able to present for 2016 and you’re right Q4, 2016 was a little bit lower just shy of the 10%, but we remained firmly committed and convinced of the sustainability, the underlying profit of this business.

You see that also in the reported operating margin, you’re right to point the UK where we had some issues on the mortality, morbidity side. Quickly showing up in Q4, we certainly will address those as we do always when we identify areas where parts of our business are performing lower than our expectations.

We also just add some to be expected volatility at the end of each year. We show, the volatility coming from model adjustments, from valuation adjustments and whatnot.

Particularly in Q4 of 2016 a couple of those things went against us a little bit, there is nothing specific that would suggest that ongoing profits and our ongoing commitment to the 10% to 12% would need to be changed. In terms of your comments about the situation in the UK, yes we were successful.

Very happy to announce that we’ve concluded now the Part VII transfers in the UK. The Guardian business actually they’re too specific Part VII that really facilitates a couple of things for us.

Number one, it means we can’t go onto the next phase at the synergies, one of the synergies that we certainly would like captured in the course of 2017, is moving indeed to an internal model. Of course that’s ultimately substitute to the approval of the regulatory body in the UK, the PRA those discussions of course were already low advanced prior to the acquisition of Guardian, we decided to put them somewhat on hold because we recognized we need to clear that portfolio and [technical difficulty] it’s was too significant to simply ignore and have two different types of treatments during the course of 2016 and certainly one of our priorities for 2017.

And yes as when we would succeed in moving over the internal model, I would anticipate that to have a positive impact on cash generation.

David, can I just follow-up? What went better in life because you’re above your target return on equity, but it looks like the biometric experience versus expected was below normal for the year.

Maybe I can take that Andrew. We disclosed a little bit different lines, right on how the result is decomposed that happened, as you know from an economic perspective life and health is actually more volatile than P&C, but obviously the way it’s accounted it’s much less so, so there were years the experience was much better than expected and we had negative adjustments on the models and this year I think was basically the contrary, with some negative especially in the UK, some negative deviations in actual claims but where some positive model developments.

But towards that’s one of the same so, so it’s not like the ROE is all dependent on realized gains, it’s actually the online technical one which contains both components in our view as strong, so we feel comfortable about that. On the realized gains, one word I think, the realized gains are bit one side of the medal of low interest rate environment.

So in life and health either you have a low interest rate environment which means that your GAAP equity is blown out of proportion which makes it harder to have an ROE, but vice versa each time you touch any asset you realize gains basically. So to be that belongs a bit together in a different environment with higher interest rates the GAAP equity would shrink and yes you wouldn’t have to realize gains anymore, but you still would be able to achieve the ROE.

So in that sense, this realized gains are not completely meaningless. I think they’re an expression of a certain environment we’re in, which is just about positive side the negative is that the GAAP equity is very large.

I think Guido has expressed it well in our Investor Day, where we have realized gains in the course of 2016 and before that as well, by the way. These were not financial accounting reporting driven, the vast, vast majority are just based on economic decision making.

And it sounds like for the UK very specific Re required, you think this will normalize in fairly short time?

I mean obviously each time we have something like that, the reviews of Q1 we’re going to have reviews through all the levels of the organization on that. So I can’t predict any in the future movements of that, but from what we’ve seen at this stage we think that’s, that we develop the appropriate bookings.

So in other words I don’t see anything further coming through at this stage.

Okay, all right. Thanks.

In the media line, capital internal model application that was the second question.

Yes, I’ll respond to that. So we hope to have that achieve during the course of 2017 obviously it’s subject to regulatory approval, but I think we’re in a good position to achieve that during the course of the year.

Okay, thanks.

I have got only one question, which is on the Ogden discount rate that the Group is using as of the end of last year. I think it stands at 2.5%, this is based on my discussion with IR.

Can you just provide us with some sort of sensitivities as to what the hit on the results would be if it was lowered to let’s say 1% or 1.5%? Thank you.

Yes, thanks Vikram I’ll take this one. So yes we of course are watching the Ogden situation and understand that there could be an announcement in the UK at any time, we haven’t specifically reflected anything in our 2016 accounts or we’d done that, in prior years where adjustments to the Ogden rate would be considered.

We remain overall strong position as you know upper half of the best estimate range, I won’t give a specific number for Ogden, a lot depends on where they ultimately end up, which then drives the present value of the potential lump sum payments, but also has an influence on the propensity of claimants to expect either the annuity type of structure or the upfront payment. Our business is relative to perhaps other players significantly smaller component of our overall portfolio.

As and when they announce something, we will reflect it in our then current period results.

Can I ask about the renewals that you’ve taken so, you’ve reduced premiums there quite substantially in January, is there much capital benefit to that? So, do you have kind of more capital as a result of that?

And I guess, thinking for late in the year, do you have plans to redeploy that as this is kind of waiting for more large transactions materialize? That’s my question.

Thank you.

Matt, do you want to take that one?

Sure. So, I make the assumption that you relate to EVM capital when you asked the question.

So, for EVM capital, correlating exposures do matter, especially everything else is almost diversified out. Nat cat, to give you an example, we reduce our capacity for the top key scenarios, including the US, US hurricane and California earthquake, but also European windstorm by between 3% and 11%, depending on the scenarios.

And these percent numbers will influence our total required EVM capital. We have enough capital to deploy, but we do not necessarily have to deploy it.

So, we just patiently wait for good opportunities and should good opportunities arise, we redeploy it and if not, we will give it back to share shareholders.

Next question, please.

So, I’ve got two. First in the Life Capital, I think there was a capital contribution of $150 million in the fourth quarter.

I think it was opened up, opened but constrained [ph] in the US. Can you just give us a bit more detail on that and whether we should be expecting further capital contributions into the life capital business and second question is around, whether there was any specific was strengthening in the fourth quarter I think Matt you mentioned you taken some of the claims inflation trends in accounts from new business and you made some comments about the [indiscernible] as a whole, but I was just wondering if there is any reserve strengthening specifically in the fourth quarter.

Thank you.

Let me take the first and then I’ll come back to Matt on the second. So yes you’re correct we’ve made investment in one of open life businesses in Life Capital during 2016.

It’s basically extending our iptiQ model which we’ve been active now in Europe for sometime into the US, where we actually set up shop in fact rolled our first policy before the end of the year so about eight month from start to finish that included purchasing an entity that provided us with licenses that accelerated our ability to go ahead and start that business up, that’s where your question about likely to continue that. We have indicated in the past that over the course of the next couple of years we would envision making investments into the open book business not necessarily always in the form of acquisitions relatively modest acquisition, I might add as indicated in the US right now but really just investing the startup cost and building up the portfolio of business there.

That’s all been incorporated in our overall communication regarding cash generation. You may recall that after Guardian we increased our expectation from the three-year period 16, 17, 18 up to $1.7 billion but they indicated that over the course those three years we would also see a possibility to invest part of that cash back into the business particularly in the open book business.

So I think what you saw back end of 2016 which is fully in line with what we had previously communicated, just to reiterate I don’t anticipate any significant acquisitions in that space.

Okay, I take your second question related to the research strengthening specifically in Q4. Overall of course under insurance site and on the Group wide level we have favorable development.

However of course if you drill down, we found some areas that we have to strengthen our research and the most prominent one which I would like to highlight to motor business there we strengthened our research in Q4 into market, one is turkey and one is again in the United States. And in the United States it continues to be the trucking business which is producing bigger losses than the expected to happen.

So we made an adjustment to our research also in Q4.

Sorry, the size of the reserve strengthening.

Yes, I can give you the amount of total we strengthened in Q4 by 30 million.

Okay, thank you very much.

Yes, good afternoon. Thank you.

Just can I try to understand better this whole renewals data that has been presented today because the headline 18%. If we go back to last year’s data, there was a restatement in the first quarter numbers because of the large transaction.

So is it not fair to say that actually the underlying or the normal renewals is not actually down 18%, but probably flat. So how should we really interpret this number, please?

So that’s the first question. And second question is on the pricing commentary, there is obviously you have stated that large transactions are flat in the pricing so that one can understand, but there is also a comment about high growth markets being flat in pricing.

And if you could just help us understand where that is coming because I would have thought there is a lot of pressure in high growth markets, but that’s just from the outside. Thank you.

Chris, you want to take the first one?

Yes. While Matt finds the data for the second one.

So on the first I think you’re right I think it’s important to state that if you go back to last year, I don’t the slide in front of me but I think we said we ended up with $8.8 billion, the second column right, $8.8 billion and then when you look at this year slide we say up for renewal 10 point something ending with $8.5 billion. So if you make ending point versus ending point, $8.8 billion towards $8.5 million that’s quite relevant, but so far what we always showed is upper renewal and upper renewal is really now since the portfolio one is up for renewal exactly on that date because that shows the kind of selection and underwriting discipline we have and the difference is basically there are three, four elements to it as we complicate it.

But obvious one is, transactions that are written after we reported to you but still incepting 01/01 or incepting later but with renewal date 01/01. So we have some of those and also sometimes multi-year transactions that end up exactly on 01/17 and things like that and therefore before entering into the renewal, when you added everything up it was not the $8.8 billion, we had sort of 01/01 and it was 10 point something and so I think indeed you need to take both into consideration.

I think the - the minus 18 show, I would say the underwriting discipline versus what the decision we had to take and the $8.5 billion shows more year-on-year basis you have and as I said, it could be write more transactions. We had written some transaction in between, so hard to make a prediction to that.

And if this discipline is coming because there is a bit of a change in management here or is it just the normal Swiss Re profit which I assume?

No its only mean change, so I’m not that influential. I think it’s much more the discipline you have in the system right it’s quite brutal, we have this long-term private equity, you could see last year it was 102 and it’s a distribution around 102 and obviously it’s quite a normal distribution or something like that.

There’s a lot of these around that, which means that if prices go down overall in the whole market which they nearly did it becomes quite tough right to keep it above 100% so you starting have to shed a lot of business. So I think it’s more mechanical approach we have with every underwriting having to do, every deal price in the EVM basis and nobody wanting to have negative EVM clients for example.

So I think it’s more natural consequence of the, that we’re so close to 100% longer private equity. You see more shedding and clearly some of these large Chinese quota shares they were always not integrated place, but it was just too much.

Thanks Christian. Matt?

Okay, so we think the spectrum of high growth market segments and I do have here the numbers in front of me of course. We have individual segments that deteriorated in price adequacy and we have individual segments that improved.

Overall we stayed extremely close to flat specialty improved tiny little bit, casualty deteriorated tiny little bit within the area of high growth markets and property stayed more or less flat, so these are the observations we made within high growth markets.

Thank you Matt.

Hi, good afternoon everyone and thanks for taking my question. First one is on casualty rates, you mentioned in your disclosures that pricing was about stable year-on-year on renewals.

I just wanted to drill into this a little bit more, are you referring to I guess lot of your business is quota share business are you referring to ceding commissions and how do you feel in the pricing of this underlying primary business, do you feel that is also flat year-on-year? And maybe if you could comment on that separately from motor and non-motor, that would be great.

So I think that some loss driven rate increases in some of the motor segments? Then the second question I have is on the Life and Health Reinsurance business.

Now the health premiums grew for quite a few years in a row, but have been quite stable actually the last couple years so I’m wondering what the reason for that stabilization is and whether you still see that as a growth area into the medium term? Thank you.

Thank you, Sami. So I’ll let Matt take the first one.

Okay, so your question related to the price stability in casualty. We distinguish between proportional and non-proportional.

On the proportional site we take into account the movement of the price adequacy of down the line policies, of down the line portfolio and we also take into account changes in the commission or expected commissions to the extent variable commission features are involved. The more important one is the former, so the profitability of proportional reinsurance contract is determined by the profitability of the underlying business.

On the non-proportional side of course we have insurance rates that apply and our statements flat renewals applies to the combination of both for prop business and non-proportional business on a combined basis. Of course I try to point out earlier in the call, we observe differences by market and some of the markets have seen some difficulties in the past for instance US motor is one of these market and as a result of this, US motor has reacted already on the underlying portfolios and translates to price increases there and that is taken into account.

Just follow-up very briefly on that, did you see a significant difference in the rate dynamics between the non-proportional business and the proportional business?

Yes the non-proportional business is always more volatile to under proportional business.

Great. Thank you.

And as to your second question, there are three things. I’ll say the first is just indeed looking at individual quarter I think is always quite challenging because of the fact that we do have from time to time also large transactions in this space in the health space.

I think if you look at the overall compounded growth in the last couple of years and health is also been quite healthy and we would be based on our view of the continuing protection gap and our position in the marketplace see that we still have very nice attractive growth opportunities going forward, so little bit of quarterly noise. It was perhaps also a little bit exacerbated just by reclassification within our business unit, within Life and Health and Re also within the health area.

So I don’t see anything there that looks like a read across into future, opportunities of future growth.

I wasn’t actually referring to the quarterly growth rates, so I mean just looking at your disclosure state, the premium was $4 billion in 2014, $3.8 billion in 2015 and $3.7 billion in 2016, more like a trend over the last few years. But perhaps it was this reclassification that you mentioned, maybe that?

Indeed some reclassification but also just some currency impact there because we - good for that business is written in Asia and other markets outside of the US, so that also having an impact.

Okay, but nothing changed in your outlook?

Nothing, in fact that continues to be an area we see good opportunities going forward.

Okay, thank you.

I had two questions, the first one will be on the group investments. So referring to Slide 10 of your slide pack, the running yields in 2016 was 2.9% only 10 basis points down compared to 2015.

So seems to show kind of flattening of the negative impact from the low interest rate environment. That said, it looks like you’re still investing your new money around 1.9 in Q4.

So could you help us to better workout what we should expect in terms of running yield assumptions for 2017? And the second question will be probably for Matt and relating again to inflation risks.

I think that there is a lot of attention around the evolution of CPI but based on the history of your books, can you tell us what has been positive correlation between your superimposed inflation and CPI? And here behind I’m referring one of your peers comment saying that - so in the past in their book negative correlation between CPI and superimposed inflation, thank you.

Thank you, Thomas. Also you’ve given me opportunity to direct the question to Guido.

Guido you’re to pick up first one.

On the running yield as you correctly mentioned it’s 2.9 for the year. Now we also make the statement we believe this is now probably a good level which we should be able to hold in going forward more or less of course all this depends what yield level is doing, but again if I look US rates have come up a bit as we clearly some expectations that we see slightly higher rate.

If you also look kind of overall reinvestment rate and if refer to Investor Day where we showed basically how the structure of our fixed income portfolio - but we have seen the bulk of securities are really in the longer term that means you still have very high level of coupon income. In respect of new investment, we saw various bonds which matured you can capture let’s say levels which are closer to the current running yields that why we believe 2.9 is a good guidance.

In contrast to former years, we have to counter kind of rundown of that piece we believe now we probably reached a good bottom, it doesn’t mean that it cannot drop considerably below, but if I stick to our forecast I assume we should be able to hold the running yield around this area. With the tendency maybe slightly to the upwards again depending what policy rates are doing.

We just think again we have at the moment 15% in cash in short-term. If we pick up slightly higher yield again if rates are going up, we have an immediate impact also on the component.

Plus of course if we invest in US corporate and here you have 3.6%, 3.7% which are good levels, that’s why overall I feel comfortable with 2.9 and again made the statement, this is probably good assumption as a floor.

Just kind of ask on this 15% cash, any willingness to redeploy that in the short term? Thank you.

I think cash is always, it’s an asset class first of all. One part of it is driven that the right short-term basis that means we don’t want to take unnecessary interest rate risk, on the other hand it offers a lot of optionality and opportunity and finally it’s a combination of both.

Again 15% cash is a continuable [ph] piece which gives you a lot of flexibility in allocation as well as capturing some of turning that opportunities and going forward.

Thank you. Matt you want to.

We did a while ago, at starting probably trying to figure out similar type of both correlation or anti-correlation and if my memory is correct and the study is little bit dated. I believe we found a weak positive correlation but a big one and if you now just lean back and forget about the study and look at it qualitatively inflation on the P&C side matters most for casualty in the United States, the US is 50% of the worldwide casualty market and the one with the longest tail, so that’s where inflation does matter.

There are three inflation types that are important medical inflation, wage inflation and social inflation. Social inflation is kind of the catch-all but it includes also pain and suffering and how pain and suffering reimbursements develop over time and if you now think of it medical inflation contributes to CPI, but it’s clearly not the majority of the CPI basket.

It’s a smaller piece. Social inflation doesn’t contribute at all to the CPI.

So if you just lean back and think it through qualitatively you would probably also expect a small positive correlation but it’s really not big one.

I have two questions, my first question, I would like to come back to the net cut budget and the exposure. As you said you are cutting it down, you try to answer as far the EVM impact, could you also go over little bit on the SST impact at the end of the day, that this lower exposure will have?

And the second question is on the derivatives movement in the Life Capital segment, which affected Q4 again. Should we expect this P&L volatility to continue going forward along the interest rate movements or the other question would be, when will it fade out?

Your last part of the second question was?

When should we expect to fade out, if at all.

Yes, thank you. Matt you want to pick up the first one.

Yes on SST basis, net cut given the fact that it diversifies heavily away from the big risks including market risks. I would expect the decrease we have done and decreases we plan to do, going forward will have a very, very minimal impact.

So let me come back to the derivatives impact on Life Capital. So just to put into context we started showing the derivatives with Q1, 2016 in both Q1 and Q2 as well as somewhat less but still important Q3 showed positive impact as rates were declining.

In the UK but we also announced right away with acquisition of Guardian that we went over the course of basically the first part of the year convert that portfolio into more Swiss Re ownership optimizing a far approach to Solvency II. Now we buy in large achieved that reduction and the size if you will, the derivatives position during the course of the first nine months or so first part of 2016 anyway, so that leaves us now with a position has as DBO wanted at the end of Q4 of 2.4 and that’s a position that we probably are going to be more less comfortable in holding, now it does have impact on our reported financial results, but we hedged the business on the base of economic view as opposed to [indiscernible] substantial [ph] view.

There may well be some noise of volatility going forward, we’ll show it you each time, so you’d be able to see it. Given our current intent to maintain the position more or less the way it is, I think you can probably calculate the potential impacts on a going forward basis.

Guido you want to add anything to that?

No, it’s perfect.

Just quick question from me on the normalized combined ratio, can you help us bridge the 2016 guidance to the actual and then also the 2016 actual to the 2017 guidance that will be helpful, thanks

Thank you Matt.

Okay, so let me do it for 2016 first Reinsurance and first if it’s okay, we don’t give guidance. We share with you our expectations because we feel it’s not really our task to guide you.

It’s just our task to share with you, what we think. But that’s just terminology.

On the Reinsurance side, our adjusted combined ratio was 99.8% for Reinsurance. Our expectation which we stated at the beginning of the year was 99%, so this is less than 100 basis points difference, we view this as the normal range of uncertainty.

We have for instance with respect to agricultural losses a little bit higher losses driven by France for instance than the expected and this alone explains already 0.7% or the 0.8% point difference. On top of this we have additional things where we were a little bit too optimistic and other things where we are little bit too pessimistic, but overall we felt we actually did a pretty good job formulating a realistic expectation for Reinsurance and that is through for the full year.

I wouldn’t pay too much attention on a quarter-by-quarter basis because the quarterly volatility is just too big. On the Corporate Solutions side we were a little bit too high with respect to what happened compared to what we expected to happen.

Our adjusted combined ratio was 104%, we said we would come in at 101%, this 3% point difference is due to the fact that we shrank our premium a bit more than the anticipated it would which increase our cost ratio, our expense ratio. We incurred more market softening than the anticipated at the time and last, we had more losses between $2 million and $10 million than we expected to have.

With respect to our expectations for 2017, going back to the Reinsurance side starting at 99% which we felt was a good expectation and we realized it, if we mentally adjust for the higher losses that happened on the Agro side. At 01/01 we lost 1% point in the price quality assuming that might continue brings us to the 100% expected combined ratio for Reinsurance.

On the Corporate Solutions thinking goes as follow; we start with the 104% on a normalized adjusted basis, we take into account smaller but still further rate decreases which we expect to incur also on the Corporate Solutions side and we subtract from this the positive impact, we expect to see from portfolio pruning actions and portfolio steering actions most of which we done already or most of which we have started already, but it takes a few quarters until disclosed through into US GAAP numbers.

Thank you Matt. Any other questions?

Thank you very much. Thank you.

We’ve come to the end of our Q&A, so thank you very much for joining and don’t hesitate to reach out to any member of the Investor Relations team if you have follow-up questions. Back to you operator, thank you.