Swiss Re AG

Thank you very much. Good morning and afternoon everybody and welcome to our half-year 2019 results Q&A call.

I'm here with John Dacey our Group CFO, Eddie Schmid, our Group Chief Underwriting Officer, Andreas Berge, the CEO of Corporate Solutions and Philippe Brahin, our Head of Investor Relations. Before we go to Q&A, I will make a few comments to put today's reported information into context.

Andreas will compliment this by adding some additional color on Corporate Solutions. The Group reported a net income of US$953 million for the first half of 2019 supported by the strong results of our Reinsurance business units and reflecting an excellent investment results.

I want to emphasize the very strong performance of P&C Re despite significant adverse claims development of Typhoon Jebi in Q1. The enhance earnings power of P&C Re in an improved pricing environment is supported about our core strength.

The scale of the business coupled with flat expense base, the diversification by Life & Health Re, our unparalleled client access and the expertise and risk knowledge built over many decays. In the year to-date renewals, we found attractive opportunities to deploy capital and expect our pretax earnings to increase by more than US$350 million as premiums are earned.

Life & Health Reinsurance continues to deliver very good results supported by improved mortality experience in the Americas and portfolio management actions. Incorporate Solutions, we have now completed the previously announced business and reserve review implementing decisive management actions to put the business unit back on track to profitability.

The Group has contributed US$600 million of capital into Corporate Solutions restoring its SST capital position to level which we consider adequate. Andreas will tell you more about Corporate Solutions in a few moments.

On to Life Capital, we already spend a lot of time and effort in H1 preparing for the ReAssure IPO. Unfortunately market conditions were not favorable and we decided to suspend the process.

We still aim to consolidate this business -- to deconsolidate this business and will continue to act in shareholder's best interest. And with that, I'll hand over to Andreas.

Thanks Christian, and good afternoon to everyone also from my side. I'd like to make a few remarks on the work undertaking at Corporate Solutions as I took over on 1st of March this year.

We conducted a comprehensive review of our portfolio and left no stone unturned. Specifically, we look at historic profitability and volatility both for Corporate Solutions and for the market, potential market size, legal trends, as well as the ability to efficiently service customers and provide a product that is differentiated from competitors.

Through this thorough review, we identified the business lines where we wanted to focus our productivity growth and those which needed to be addressed. The pruning actions focused on 35% of the book and are expected to decrease our premiums by approximately 20% of our book.

Remaining portfolio is in better shape. And we also benefit from the positive right momentum observed in commercial insurance.

In the first half of 2019, the risk adjusted price quantity of Corporate Solutions portfolio improved by 9%. We expect pricing momentum to continue in the second half, but also beyond that.

As part of our detailed reserve review, we analyze case reserves mostly related to prior accident year large losses and strengthened reserves where appropriate. Majority of the development was in recent accident years 2017 and 2018.

From a line of business perspective, liability predominantly North American liability and property were the most impacted. In order to protect Corporate Solutions back book and adverse development cover was put in place with P&C Reinsurance business unit and we have set up our tactical and strategic reinsurance protection to reduce volatility going forward.

As another outcome of our strategic review I've installed a new management team, our Executive Committee for CorSo, ensuring all parts of our business are represented at our leadership table. This ensures that our decisions taken are based on input from all relevant areas and that we deliver to our customers quickly and consistently across geographies.

We're confident that these decisive actions would drive a turnaround in the performance of Corporate Solutions and expect to achieve 98% combined ratio in 2021. With that, I'll hand over to Philip to introduce the Q&A session.

Thank you, Andreas, and good day to all of you also from my side. So as usually before we start the Q&A, I'd like to remind you to please restrict yourself to two questions each and then register again if you have follow-up questions.

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

Hi there. I think the first question is for Eddie.

Could you give us a sense of to what nominal rate increase was year to-date and in July if you didn't for higher loss cost? So I think your plus one and plus two has some reflection of higher loss cost in it.

And on renewal, are you playing in the very high layers, your Nat Cat PML went up considerably again from the year-end, but obviously does not matched by those sort of volume is Nat Cat premiums. So where is at least is the best price Nat Cat business in the U.S.

now. What layer is it then?

Is it being found out? And secondly on CorSo, I still not sure on to longer term ambition.

Is it still to generate a 10% to 15% ROE. It doesn't look like the 98 combined into that interest rate environment with a book that's becoming shorter tail is enough to get you there?

And also on the strategy, is it still the aim to expand into global monster and generally just further down the layers from access? Is that still the long-term ambition?

Thanks.

Thanks, Andrew. I think it's more like four questions, but that's okay.

Just go ahead Eddie.

Okay. On the first one, Andrew, regarding the price increase and how does this relate to let's say, adjustment to models, that basically what you're asking about.

So, yes, we have adjusted our loss models in some part of the business where we had new learnings. In Japan out of Jebi we've adjusted the models to some extend and obviously that was the experience with the wildfires in California.

There we also took action and made the loss models bit more conservative. So the 1% that's actually reflected.

So without these adjustments the price increase would be better, but it's fair to say this would not make a huge difference. Obviously, we need to see this 1% is across very broad-based portfolio in which has a lot of Cat business but also big quota share business.

So the 1% really needs to be seen in that context. So it would be a bit better.

But even I think 1% across these weighted average portfolio has a significant improvement, which was explained by our combined ratio estimates move from 100 two years ago, 99 last year and now we're comfortable to get to the 98. And the second part of your question is regarding the Nat Cat growth.

It's fair to say that this is geared more towards the peak tariffs, Hurricane, U.S., earthquake. So the increase in exposure measured in value at risk which disclosed externally is more pronounced than increase in premium and expected loss.

So that explains why it's not moving in sink. I don't think we can put out any, let's say, layers which we prefer.

It's really across the board. We look at it on a clients and deal by deal basis.

Although quite a few of these Cat deals are structured in the form of transactions, so its not really possible to point to anyone else. There's a lot factors that really comes together and poll down to what we think is now a very adequately prices Cat portfolio, that's why we felt comfortable to deploy more capital.

It will turn into an attractive return on capital because we have folded diversification and it will boil down to significant contribution to earnings at the end of the day.

Okay. I'll take the CorSo question, Andrew.

First of all, on your ROE target. We have no reason to change the ROE target for CorSo, which stands at 10% to 15%., and with our ambition and target for 2020/2021 with 98%, we think we should end up at the lower end of our target corridor.

So we're pretty comfortable on that one. On the long-term ambition, first of all, the focus this time here for half your results is profitability, restore profitability to set the foundation for future growth.

And we'll come back in November obviously at the Investor Day to be a bit more specific on our strategy going forward with a Strategic Vision, we call it Strategic Vision 23 Plus. Now, on your Primary Lead, all I can say is, yes, this is the right move.

It's quite logical that for a company like Swiss Re and Swiss Re Corporate Solutions with expertise, the risk knowledge and everything on technical capabilities that we have, we should drop-down from excess positions. We should go down from wholesale markets more to where the risk is to primarily layers, because that's where we can differentiate and where you also get the premium levels that you require in order to sustainably meet also your target on the ROE side.

I think we can declare victory in penetrating the Primary Lead markets. We've invested a lot of money into people, into capabilities and I think this is a tick in the box for us.

On the global master program business this is my home curve, I truly believe that there are few players who really could play in this segment. We are probably one of the few ones that have identified a key differentiator which is the delivery of the program.

A lot of competitors in this segment struggled due to IT legacy. This developed the state-of-the-art technology platform to deliver global master programs.

I think this is something we're going to capitalize on and you will hear much more on our November Investor Day. But I'm very comfortable and very confident that we would have success with this one.

That's the feedback that we get from clients and from brokers.

Great. Thanks Andrew for your questions.

Can we have next question please.

Hi. Afternoon everyone.

Three questions, first one coming back to CorSo, I mean, as [Indiscernible] addressing it. But when you think about CorSo, might be one question, but could you maybe talk about similarities between the Life & Health changes a few years ago and the Corporate Solutions, restructuring changes that you've announced today.

What should be a degree of confident in – we make changes here and then we can move on and this is that much results. So that first question.

The second question, we saw the comments about ReAssure committed to reducing to the stack. You didn't make any comment about the second tranche of the buyback.

How should we think about that for now? Thank you.

Thanks, Kamran. So, on the comparative Life & Health its actually an interesting question.

So, to me there's some parallels and some differences. I think the parallel that would drive is that when the business starts to get into trouble its not a good idea to bleed it out over many years, even though that might be the first instinct because its too hard to face reality.

So I think clearly my aim was to take on the learnings from Life & Health and apply them to Corporate Solutions which is why so much work has come into these two quarters, so I've seen on all different aspects and the choice we made are painful. I think the difference is that obviously Life & Health is a much less volatile business, right.

In CorSo, whatever we do is because its big net cat, its going to hit CorSo and there's not much I can do whereas in Life & Health I think some of these results are much smoother and easier to predict. It was also difficult to predict this, ultimately where will the trends go in U.S.

Casualty in particular where we saw some underlying trends increase. We had to make some assumptions.

But obviously nothing is every certain. So I'd say, we tried our best, so we also threw the ADC cover protect some of the old reserves.

I wanted to sure that team has a real chance to start from here, but I'm also aware that there are some and you aware that there are some risk factors which could affect them. But I would hope that the underlying program that Andreas has come up with to me is very plausible and executable because of price increase in the market.

I mean, we can prove, pruning is part of it, but I think frankly its the price increases which are really, really needed a necessary and coming through at this stage which make this plan in my view executable.

John, do you want take on?

With respect to the share buyback, first of all, just reiterate the first tranche of 1 billion is a well on track. As of yesterday we've completed about 45% of it and look to continue to execute that over the coming months.

As we said before the second tranche is not dependent necessarily on the ReAssure IPO but rather more broadly on Access capital position during the course of the year and the second half of the year in particular. Unambitiously, I think it's safe to say that not doing the ReAssure IPO will make it a little less likely that we find ourselves with excess capital after we finished the first tranche of the buyback, but let's see how the next three months go then we will give you a update I think on October 31st when we release our Q3 results.

Obviously, there's a lot of moving parts here. The good news is we're finding the ability to deploy real capital in the P&C Re business as well as in Life & Health, but with a fairly strong first half and expectations of a strong second half of the year we'll build back up the earnings and therefore the overall capital of the Group.

Thanks Kamran for your questions. Next question please.

Hi. It's Vikram from Soc Gen.

Thank your for taking my questions. Firstly, on CorSo referring to slide 17 and 19, I'm a bit confused as to how should we interpret the 9% rate increase in the first half alone against the six percentage points combined ratio improvement from rate increases by 2021.

Is just because on the expected losses has change? Or is there something else?

And secondly on P&C Re, on the one hand its -- the slide 30 and 31 say, the price increases for the Nat Cat business were mostly flat apart from the loss affected treaties. While on the other hand we see that the Nat Cat exposure does increased significantly.

So just wondered why the sudden increase in appetite despite the rating momentum clearly not that strong? Thank you very much.

So on CorSo, the 9% rate increase, let's say, just increase to 9% [ph] in half of 2019 reflects the year-on-year increase and risk adjusted price quality of Corporate Solutions on the total portfolio. That also includes 2% pruning and business mix changes and 7% pure rate change.

The 7% rate changes are only for the first half of the year. So what you find in this book [ph] and the combined ratio book this is obviously then projected also to the three years until 2021, that's the difference.

Eddie, do you want take the P&C Re question.

Yes. So the question is that the Nat Cat price increases.

This year seem rather moderate while with global. That said which is off the question.

If you look at it bit over two years, I think out of record loss year 2017 we pushed a lot of price increases into 2018 as we could achieve as a mitigant. Quarter improvement of the book probably also let go quite bit of shares.

Into this year now in a further improvement pricing environment even though not massively, it made a lot of sense for us to recapture shares but also grow the Nat Cat business., because the quality we have in our book and we can see it in the market clearly is attractive even our global diversification and the Life & Health diversification this Nat Cat business achieves a very attractive return on capital. What you've seen in this year that business that has been significantly loss affected like wind business in Japan, or Florida business we saw significant rate increases, 15%, but its fair to say, in other place this pricing kind of more flattish.

But the quality of the business with "is very adequate" and that's why it made a lot of sense to deploy more capital into that space. What we've also done we see it bit more to third party capital investors so that the business that goes beyond our appetite cannot be readily diversified and we see it more to some long-term third party capital providers to make sure overall to keep a balance book within our risk capita, but it’s a very attractive space in the Nat Cat area where we have demonstrated over many years that we understand this risk very well, so we feel very comfortable to employ more capital and to be confident it will turn into good contribution to earnings.

Thanks Vikram for your questions. Can we have the next question please?

Hi, everyone. Thanks for taking my questions.

The first is just on the 350 million that you talk about the increase in net earnings from renewals achieved so far year to-date. I wonder if you could just help us in thinking about how quickly that is likely to influence the results.

And also if we take into account how interest rates have evolved over the course of the year? What does that put you relative to your 10% to 15% ROE ambition in P&C?

And then, secondly, Eddie just picking from that point about the increased use of third party capital in for Nat Cat business, something that history hasn't in the past on a huge amount. I wonder if you could just elaborate on why now you've decided to do more of that.

Is it because you're getting closer to your thresholds of what you would like in Nat Cat or if you could talk a bit more about that strategic change? Thanks.

John, do you to take the first one.

Sure. So, on the 350 million you should expect that gets on I think largely over the next two years.

There's might be a little bit of tail into a third year. But the business that's come on starting with January 1, April, June, July renewals is all, we expect to help out here.

Also don't forget that part of the strength of this portfolio was some relatively short tail SME focused, Casualty underwriting that we put in place would be a probably identified transaction with AmTrust at the beginning of the year. So – and that we're comfortable with these new earnings.

The point you mentioned about decrease in interest rate is a challenge for us. It's a challenge for the industry.

We're pretty proud of being able to maintain the running yield of 2.9% in the first half of this year. It will be challenged to keep that up going into 2020 if rates continue their recent past here, but in the meantime I think we're comfortably in place with our target return on equity of P&C Re when we get our combined ratio delivering at a 98%.

If the price rises that we've seen coming through during the course of this year continue, I think we should be comfortable also in 2020, the underwriting of the book. With respect to the retro sessions, I'd argue that this is not necessarily change your strategy just an expansion and some capabilities that we've always had, but Eddie why don't you explain where we are?

Yes. Thanks, John for leading.

I mean, its fair to say, P&C Re was at the forefront to establish third party capital made 20 years ago by introducing ILS and so on and so forth, and its fair that we always being using third party capital, but we didn't make a thoughts about it that maybe other players have done. But its clearly we believe Nat Cat is very attractive business for the Swiss Re balance sheet given the diversification, our client franchise, the proprietary risk modeling we have.

We are a natural home. So its clearly our ambition to remain a leader in the Nat Cat business.

And given the growth by just all the risk factors, the concentration of values in exposed areas, all these together just means this is a growth risk pool where we want to play substantially. And we obviously had a certain maximum appetite for Huricane U.S.

and some other belt. So we get for some of this various.

So, it already make sense then to get as much of these attractive piece in our balance sheet and diversify, but where it becomes too big there it make sense to share it with some long-term third party to investors, some but in the past and even the growth outlook which just be paid and we can also use more of that as we see fit.

And just for the absence of doubt. The vast majority of the business we write gross remains our balance sheet net.

Thanks for your questions. Can we have the next question please.

Hi, there. Thanks for taking my questions.

Just focusing reserves. So did you spot any thing in P&C Re reserving that were in attention or discussion during the CorSo reserve review.

And what drove the P&C Re reserve additions and casualty in the period? And what's your expectations for casualty reserve development from here in the context to some peers flagging higher social inflation?

Thank you.

Eddie, do you want to take it there?

Yes. I can take the P&C Re reserving question.

So as we have said prior viewed development overall was negative 5.1% in terms of combined ratio points, the majorities that comes from the Jebi strengthening which we did in the Q1. Otherwise if you break it down to lives of the business there were some positive on special lines and property obviously was quite negative.

But even by Jebi competitive by some favorable from the Hurricanes in 17th and then as the casualty reserve which developed slightly negatively during the first half of the year. That was stemming from U.S.

but only from two isolated client cases. Overall, we feel very comfortable with the reserve level also the U.S.

one as we have explained in the past, we reflected old play strengths and everything in U.S. so what we have put up now as the reserves there is our view adequate, yes, I think that's on the reserves.

I think part of the question was also the look through from CorSo, the learning from CorSo both underwriting and claim side, maybe you can say a few words.

Yes. Obviously, both the words compares the two parts.

I think one clear element of the CorSo learning is that we got all exposed to the U.S. liability particularly the large corporate risk.

I think we have flagged that already in the past that we have clearly spotted that as a channel industry trends, that large corporate risk, the development of these court decisions, the settlement just have exploded over the last few years. That's clearly an area we have addressed on both sides.

On CorSo we have taken significant actions to reduce that part, but also in Reinsurance we moderate bit. What we can say that Reinsurance casualty portfolio is a much more diversified business.

So it's much more global, much less the U.S. focused and it has a much broader underlying risk basis, so it's much less focused on these large corporate risks.

It has a lot of mid-market and also SME business. That's why the reserve base, also in reinsurance is much more diversified, they're exposed to these let's say very large individual large limits and they can also see it in the loss triangles we republished that that the Reinsurance reserves are much more predictable and robust in nature.

Okay, good. Thank you, Jonnie for your questions.

Can we have the next question please?

Yes. Hi, everyone.

The first one it's just on the SST ratio. I know you haven't disclosed a number for HI, but is it possible to give -- there's a lot of moving parts.

Is it possible to give some sort of stare on where you are there? And can you just remind us the second buyback.

Would not be to avoid building the ratio versus where it was at year end or should we think about it relative to your target levels of capital? That's number one.

Number two, it seems like your business is getting a bit more capital intensive as you move into more Nat Cap business. Obviously the duration of the casualty book has shrunk as well.

So, should we expect that there's a mix shift and impact on the combined ratio going into 2020 as well as a sort of tailwind on pricing? Thank you.

Sure. I mean.

So let me start with the SST. As you say there are a lot of moving parts here and we will give you the July 1st estimate of the SST when we report our Q3 results on October 30st.

To help you a little bit with direction obviously the capital deployed in P&C Re has been or will have ceteris paribus reduced the SST ratio, the first billion of growth was already in on the January 1 renewals and so that would have been in the 251 number that we published as of January 1. The second billion would be worked through.

And you should think of that to be a reduction of available capital for us or utilization of capital. I think on market movements, we've got countervailing forces, credit spreads have tightened in the U.S.

and UK and that's probably positive for us somewhere between 30 and 40 basis points depending on the market. On the other hand interest rates moving down by 60 to 70 basis points will reduce the SST numbers for us.

And that second one is probably going to be a larger impact at least in the first six months than the credit spreads. So financial market's net-net will be negative.

The deployment in P&C Re will also be a reduction. We've had the earnings which are a reasonable I think for the first half of the year.

But as we continue to deploy capital you should not necessarily expect a lot of other positive moves, absent something in the markets. So I think we'll see where we are and we'll also see what happens during the next three months of the hurricanes.

Out of the question was around the business makes an impact on duration. I think that's the question I think it's fair to say looking at the growth we've achieved this year in P&C Re.

So far net cash was a driver and the loss casualty transaction of the underlying business is mainly short duration SME type which is also short duration. So that is a bit a shift to the shorter tail.

And it's also fair to say in our portfolio outlook even we see the attractiveness of Nat Cat and some of the shorter tail lines that will be better to shift. But given the broad devastation of the book I think the mix and also duration is quite robust, so it doesn't change rapidly over time.

But what a slight shift to a two bit shorter tail that is a fair assumption into next year.

All right. Thanks.

Thanks Sami for your questions. Can we have the next question please?

Good afternoon. Its Simon.

First question is for John I guess. Can you elaborate what do you think as the return on investment on the capital injectment to ReAssure, and also the 600 million that you're investing to CorSo.

And the second question I guess goes to Andreas, on reserve editions that you're taking in court. Is this a -- shall we say academically actual aerial reserve edition or did you did you put in a little bit of a safety cushion there?

Thanks, Simon. Look I think our belief is the 600 million that we injected into the Corporate Solutions business positions that business to be successful in the future.

As Andrea as I mentioned earlier, we expect in 2021 to return not only to an underwriting profit but to a return on equity that's within the range probably at the lower end of that range of profitability. So I – when we think about the IRR of this capital it's linked to the long term earnings capability of CorSo and I think we're pretty comfortable that that's a reasonably robust return.

On the capital put into ReAssure, I think there's a little different story. Again in preparation for the IPO we move the solvency to capital level from where it had been at around 120% up to something close to 145%.

That required total injection of £480 million of which we put in 75%, about £360 million. Again, in the long term value creation of ReAssure we're confident that this will have a fine return.

To give you a sense of what that could look like, the dividend yield that we had calculated for ReAssure had priced at the lower end of the IPO range would have been a 9.5% dividend yield. And to give you a one parameter of the kinds of returns that this business is capable of, we obviously didn't do the IPO but we're confident about the business's ability to deliver.

We talk and the documents sent out this morning about the £2.1 billion that we expect ReAssure to generating gross cash generation over the next five years and 2019 included. And with that kind of cash generation we think the 265 million of dividend that they committed to is entirely feasible, if we own 75% of that that would be a nice return.

Okay. I'll take the case reserve question whether there's some cushion or buffer built in.

again, I can only repeat as we did the strategic review we looked at the portfolio and at all cases. And here I must say we looked at all the rules that we had in place, the timeliness the accuracy of the kinds of claims reserves and then the roundtables.

We looked at the low, the high point, the midpoint and all available information that was at hand that has been to the best estimates and this is exactly what we have seen here in the numbers in Q2. In general, we can say that we already saw a trend that started a couple of month -- quarters before that was a trend that we acknowledged and we still had increased the number of claims not only at the large end now, but also at the medium sized, meaning, the claims between the 5 million and 10 million range, so before we have only looked at -- predominant who looked at the large ones and then we saw that below the 10 million range we saw an increased number of claims closer to the 8 million to 10 million and I think that's a reflection of we have done here, so best estimate is exactly the right term here.

Thanks Simon for your questions. Can we have the next question please.

Hi there. Good afternoon everybody.

Just going to the adverse development cover to give us a sense or some confidence on whether that will feed through into P&C Re. Can you give us an idea maybe of the confidence level that you priced that at or perhaps the size of reserves that the 100 million pertains to, just we get an idea maybe of that if you're charging an arm's length price, what is that risk as a percentage of the book that you are pricing in?

And maybe secondly going back to the 2.1 billion capital generation in sterling in ReAssure, if I remember correctly that included re-risking benefits which under SST were difficult to put into place. Are you going to be willing to let that business unit now run and price on a Solvency II basis and maybe take some short term pain on an SST basis to allow them to continue with the path that they had before anyway including re-risking?

Thank you.

I can give a bit of color around to ADC. I mean, the starting was really what Andreas has been explaining that that we did a lot of diligence to review the case reserves in a Corporate Solutions and the ADC now attaches at this what we think is really a prudent level of reserves in the CorSo back-book.

And that was also again as we always do with reviews and an independent method by Group actual have control and also confirming that the new reserve base is really at a prudent level. And then on that level reinsurance P&C was comfortable to provide that ADC cover.

And then also restructured it in a way that only 80% of the risk goes to P&C Re. So Andreas and teams still on the hook was 20% to have some alignment of interest.

And what is important that as for any other transaction between two business unit, this has to be obviously done at Arm's Length. So on the P&C Re side goes through the normal underwriting and transactional review process as any other that offers their own view.

And in the end they feel comfortable at this price that these make sense to be put on their balance sheet. And also offer these reserves strengthening CorSo putting it at a prudent level, If they did make actually sense to then keep the residual reserve risk within the Group.

Otherwise again we would just see some marching out of out of the firm, but we have to the capital to hold that residual risk. But at the end of the day it is a transaction that is at arm's length and P&C Reinsurance felt comfortable at that price to take the risk with the structuring and everything we have put in place.

And just for the absence of doubt there is a certain asymmetry to this cover where P&C Re is responsible for 80% of any deterioration, should there be deterioration. But of course we'll actually get 80% of the upside if we find that our reserves are in some cases redundant.

So I think the -- there's a balance here, but the underlying point is we believe the reserves are well set as the starting point. With respect to the ReAssure gross cash, the 2.1 billion, you're exactly right, there is a belief that there would be a re-risking component to that.

I did make a couple observations. One, I mentioned before the capital that we've injected into ReAssure, most of that actually came over from Life capital which had the capital already in the business unit, a relatively small amount came from the Group.

But that provides them with a stronger capital base to be able to manage a couple of things including the potential adjustment of asset risks for the company. Your larger point I think is as we consolidated that up to the Group SST we prepared for that hit and I think within reasonable bounds probably yes, but again this is a five-year plan.

And as we've said our mid-term objective is to find the means to reduce our stake from the current 75% to 49%. I hope that doesn't take five years.

We don't see any good answer and we're getting our dividends. Well, we may hold on to it but my expectation is that in this time horizon we will become a minority owner and the freedom on the risks asset reside will be unmitigated.

Okay. Thanks Farooq for your questions.

Can we take the next question please?

Yes. Good afternoon.

Thank you for the opportunity. Just two questions please.

The one is a follow-up if you like on buyback. And the second one is on CorSo please.

So, on the buyback just we -- I mean it's obvious that SST is bit lower than the 250 you'd last reported. If we think of a scenario where interest rates are where -- remain where they are next three months and if the hurricanes are within the budget.

Does not make this buyback bit more likely or there's no such probability equations? So I just want to understand how you think of?

Because basically the interest rates in the hurricanes are unknown. Secondly just on the Corporate Solutions this concept of pruning is obviously delayed, but in the past you've also heard from Christian that we're not trying to slow this business too much or not shrink it to greatness I think.

And also seeing a 7%, 8% growth rate now. So, Andreas, are we looking at actually lower volume base in CorSo going forward?

Or are you saying that that is the shrinkage in this 20% of the 900 million, but you will be very open to finding the growth. Are you open to making it up somewhere else?

Thank you very much.

Jon, you take the first question.

Yes. I'll try.

So with respect to the buyback, Vinit, I'd say, we'll look at the comprehensive capital position of the Group towards the end of the third quarter. Those two items that you mentioned, interest rates and large losses are Nat Cat losses will be part of the factors.

We haven't changed our long term target for the SST of 220. Our Starting Point at the beginning of the year was 251.

We built the optionality of the second buyback on the – to deal with the situation where we found ourselves with unambiguously excess capital. I think as I mentioned before the absence of the IPO reduces the probability.

But let's see where we are towards the end of the Q3 and as I said we'll give you clarity on our intentions on October 31st.

I think it may be worthwhile repeating what I said before and why do we have the second potential tranche. It came from last November where the SST ratio of 280 which is really very high, the highest we had in a long time.

And as we did the business plan we were worried that -- it was clear that this year that could be a series of factors including recovery in financial market, IPO, low Nat Cat et cetera. There could be a combination which would lead a year later to an even a higher one which is not really acceptable.

So we said, we would like to have this instrument at hand to avoid the situation for this particular case. And the time we want to take a decision is really in November because that's when we have all the facts together.

So I think it's very hard at this stage to say if this but that. There's no formula in our head.

We're not an autopilot. There's a real business decision to be taken in view of all the factors we'll have there.

So it's not like we tried to be difficult. There's really more I tried to make it clear what our intent was with this second buyback.

So the goal is certainly not to be above 280. The risks are much lower right now with the IPO and the business, the capital could deploy but who knows right and again we're not on autopilot.

Yes. I'll take the.

Pruning question on CorSo, and no we don't want to shrink to greatness. But what we did in our strategic review, we looked at the portfolio and created three different buckets.

And one bucket was portfolios where we'll not see sustainable improvement of risk exposure and price to risk. So those areas we have -- we said to ourselves we will not be able to influence this market.

We don't have the size and the leadership position to influence this market so we will have to take action here. So that's where we reduce significantly our engagement.

That's the bucket number one. And number two is the bucket where we said, we're so subscale in this market.

We will in the foreseeable future not reach a position of a leader, market leader to also bring in our strength to differentiate as well. So that's another area where we said, if you don't make money in those areas and can't fill up properly, so why being there because we can't bring in our strength.

And the third area are risk sub-portfolios where we believe it might be an attractive market. But the way we have trading and handling the risk is not efficient.

It could be a market inefficiency, it could be ourselves, so that's something we look in detail into it and marine for instance is such a market where we say we'd like to be in the marine market, but not in the way it is traded today. So you can't operate with a almost like 40% expense ratio in that market that's not sustainable.

Here we would like to redefine how a Marine can be done mostly digitally in future. And you've seen that we have created a Chief Innovation and Transformation Officer.

So that's a signal already for the future strategy. Now the change -- the risk landscape is changing dramatically and I think now is the time to address profitability to restore profitability in order to set the foundation for future growth.

And I think it requires really fresh thinking and fresh ideas and solutions to bring to the parties. The clients welcome.

We have the right positioning. We have the right ingredients and bring to the party to really address the risk management changes in the industry.

And we're very comfortable confident that we can do this. I already mentioned one area with the global program platform that we are providing.

But I'd like to give this detail more in our November Investor Day if you may.

Thanks Vinit for your questions. Can we take the next question please?

Hi. Good afternoon everybody.

My first question again on CorSo. So, you show the bridge on the combined ratio from a normalized level of 110 in 2018 down for the 98.

I think about the portfolio pruning the rate increases and the expense savings, most of those will be earning through in the sort of second half of 2019 into 2020 and into 2021. The slide on slide 15 showing that the combined ratio from CorSo excluding the kind of management actions and the impact from the ADC is actually running at 101 in H1, 2019, so can you just only square that as a starting point versus 110 as a starting point?

Second question, thinking about the Group ROE target, so CORSO when I'm looking at an ROE at the lower end of the 10% to 15% you'll be holding on holding onto ratio for the foreseeable future which obviously has a low single digit ROE. It looks like you've deployed 2 billion of capital in the period just gone for 350 million of earnings pre-tax over two years which looks like a massive tax return on solvency capital around 7%.

I guess when I put all that together and think about your target for 700 basis points over the U.S. risk free which is currently around 2%.

I'm sort of looking at that and thinking it looks little bit challenging in order to hit that at across the cycle target. So maybe you just give an update on how you see that Group ROE target please?

Thank you.

Okay. I'll start with the first part of the question.

On the combined ratio on Slide 15, it's fair to say that in Q1 and Q2 I think we had the underlying business that we brought on book is actually very good. We'd benign on that Cat situation.

So overall I think we were very happy, also in particular with the rate increases that we could generate. So we're very healthy as far as the new business and I think going forward they will look very good.

So the point I would try to make here on page 15 and the gap between the 132.8 and 101.2 is really the management actions. And here it's fair to say we had two buckets of management actions, it's in Q1 and Q2.

And as we said in Q2 we had and a reserve impact after the review of 328 million. This is subdivided into prior years reserving and in current year reserving.

So those are the two buckets. Now if you look at the first half year and only look at the prior development then you take the Q1 225 and now the Q2 264 which brings you then to the 489 a first half year prior year development.

So that's the situation. And then if you add again the adverse cover development of 100 million.

This will bring you then to a H1 290 management actions number of 653 million. So, that sort of gives you the overall picture of that slide 15.

And James, my quick answer to the question is yes, the first half was actually pretty benign and that's where Andre has started with for CorSo core business in Nat Cat especially, so the one-ten [ph] is the right place to start this walk. We expect the glide path through 2020 to get to the 21x target of a 98 combined ratio.

With respect to the Group ROE, the continued ownership of 75% now 100% of ReAssure it will be a drag on ROE. But as I suggested before the price firming that we see both in P&C Re as well as CorSo lead us to think that the opportunities to make money in these lines is significant on a going forward basis.

I'm not concerned about the Group's target of 700 basis points over the 10-year risk free. And as you say right now we're diving down to something very close to 2% for that U.S.

benchmark. We will work through the asset side of the balance sheet as best we can, but those financial targets I think are entirely achievable by the business mix we have.

If I may add, because I think it's an important question. I mean we're fully committed to these to this Group we target.

Everything is feasible. You can see the underlying with 98 is maybe 11.5 ROE and P&C Re, but that's hopefully that's not the end of it.

We still see some price increases. Overall the P&C Re market is still in the softer side of the cycle.

So I think you can expect a bit more there. Then CorSo, we had to get to certainly to the lower end of this range by 2021.

Clearly we need to do something about ReAssure, I mean that's the key focus and I think you would be wrong to assume just because we didn't do an IPO now that we're going to have it for five years as you said. I mean the goal is clear and it's mid-term and I think we talked about one year, two years but it's in my view if we can do it for the right price for the shareholders obviously but it's clear there's a focus on that.

And then the excess capital is being deployed as the as we talk. I mean the earnings are on top, the capital doesn't change.

So, I mean, I think we're very focused on that. It just takes time from where we are.

It's clearly two businesses that have now just crossed a bad self cycle.

Thank you, James for your questions. Can we take the next question please?

Thank you. Good afternoon everybody.

I have two questions. My first question is on ReAssure and coming to you back to a point question on the potential environment you're looking forward to restart this project again.

I mean, we are potentially at peak equity levels and bond yields are potentially further declining from here. So what could be the environment you're looking at?

And what will be the catalysts here? And then secondly on Corporate Solutions, in the past whenever you presented combined ratios you always pointed out to a track of three to four percentage points coming from your investment expenses.

How should we look? I think about those in the context of this new 98% target, are they also reflected in or do you don't have any more investment expenses any more, so you have a 3% to 4% release.

How are they reflected?

Good. So I'll take I guess the ReAssure question.

I think about 70% of the work that's been done now for the IPO preparation is something we're going to use anyway because it allows us to extract ReAssure from the Swiss Re Group with in a much bigger extent. So all the functions were folded in we have a new CEO and board.

We have basically a new management team. We recapitalize it at a standalone level and all of that.

So that's precious work and we want to bring that back. So, I think what needs to happen now is that the new management team needs to execute on the plan.

They have a prospectus to this plan dividend is a lot of things. Self investor feedback was that it's not – the management team is new and they're not proven, right.

So I think they have now a good opportunity to prove themselves. We decided clearly not to go for an IPO at the second half of the year, because there's a new time window in the second half.

But I think in view of the political situation right now that will be unwise to kill everybody in the work to do that. So I think the next day to look at it is probably early 2020 to see where the markets are, what is here.

I think an asset yielding 9.5% in a market like the U.K. with pension funds and local investors who are not caring about the pound for example is not completely unreasonable.

I think it's an attractive opportunity honestly for four for local investors. So I'm not particularly worried about this -- the value of this asset over medium term or so.

i think its only a question of time. And obviously if there -- should there be any other opportunities we will also look at other opportunities.

But I think we have several potential ways to continue the consolidation of this asset and we're going to pursue them.

And frankly maybe – the one thing I would say, what we found in the marketplace, well, equity markets broadly in the U.K. specifically seem to be functioning fine and in the end of June early July the primary market was a different story and the combination of a couple other IPOs which had gone out the door and performed badly and an emerging concern by institutional investors about putting new money into the U.K.

just created an environment where this appeared very very difficult. You can claim that our aspirations on price might have been too high.

We'll evaluate that over time. But I do think that the weakness in the pound that we've seen in the subsequent weeks is indicative of concerns that were emerging as we were trying to build the book for the IPO.

That's the first case. With the second case on CorSo, maybe I'll jump in first and Andreas can talk about a bit, but a lot of this comes from before Andreas's time.

You're exactly right. We have been making these investments both in the Primary Lead capabilities as well as some other technologies.

Most of that will in fact finish by 2021. But I don't expect CorSo to not invest.

There will be important technology related moves that we will expect to continue. Having said that, the 98 is a firm number and doesn't have caveats around it, it's not 98 plus two points.

It's 98.

Yes. I mean, just to maybe elaborate on that.

When we did the review we obviously looked also into the expenses and investments will always singled out as three to four percentage points and we saw that the investments went mainly into the Primary Lead initiative and the Primary Lead initiative had three -- again three buckets. One was domestic Primary Lead.

So we hired people we developed the skills and capabilities and I think this went actually quite well. So we see a much stronger engagement in this Primary Lead.

So, not everything is bad. So those lines of businesses where we have very strong that's primarily due to the Primary Lead investment.

And the second bucket was additional lines of businesses, for instance, exit in the healthcare at a company and portfolios in this area. So those are all initiatives that were under the flag or under the heading of Primary Lead.

And the third bucket was the international program platform, the international business program platform. Now the first two that I mentioned I would say, let's declare victory.

Those are basically running out those investments and their business as usual. The third one, that's an area where we are going to drill deeper.

We still continue to invest. So what you see in the walk up that combined ratio slide you'll see 2% expense savings.

And this is on the gross bases, actually two and a half and then you deduct the investments in particular on the side of the technology platform that brings you down to the 2%. So we continue to invest and again in our Investor Day in November we're going to be bit more specific about what that means for their strategy going forward.

Thank you, Frank for your questions. Can we take the next question please?

Hi. Thank you very much.

Just one small one. Can you update us on where the absolute level is of risk adjusted price quality for P&C Re and CorSo after these rate increases?

From memory, the last time you gave us P&C Re figure it was 103% at the beginning of last year. So given that you've had one or two points of rate increase, I'm guessing that figures quite easily 104%, 105%.

But I've no idea where CorSo is? It's good you've had a 9% rate increase.

But I don't know where that actually takes you absolutely? Thank you.

Eddie, you want to take it.

I think we stopped disclosing. On price adequately used in the past, because the main point to make is what is really the price change comparing the renewal basis and the basis we put on our books and then I think we changed to new measure which we explain, the more simple measure which should be more comparable to also what peers disclosed and then on that measure we now say for the first half of the year the business we renewed is one point better than the then expiring.

That's what it's fair to say that this -- an improvement in price quality, it does not reflect some capital allocation or things, but I would also then say this internal measure is long term price legacy is up a bit, but it's not a number that we disclose going forward.

Okay. Thank you William for your questions.

Can we take the next question please?

Hi. Thank you.

Very quickly on CorSo. How do you define the normalized combined ratio?

So how should we think about the average Nat Cat loss is when we think about the 98% combined target? And then secondly with respect to the aggressive pruning in some lines and growing in others, I'm assuming there must be a natural limit to doing this as that would reduce de diversification.

So, any thoughts that would be welcome? Thank you.

Yes. The CorSo normalized loss ratio has a large Nat Cat budget of 190 million for the full year 2019 and we expect something north of 45% or something 46% expected than the first half of this year.

That's the main part of the combined ratio normalized.

Vikram, what is the second part of your question. Can you remind us?

The couple of actions which is -- one is the aggressive pruning in sub businesses while growing in others whether it is good pricing. I'm assuming there must be a natural limit to doing this as continuing this would reduce diversification in the portfolio at some point.

So any thoughts on that would be helpful?

Maybe I'll jump in. I think those both are in terms of geographies but also in the lines of business.

There remains a robust diversification even within CorSo. And then when we think about within the Group, the concentration on some of the more profitable lines is not going to be a problem for us.

So, I don't expect any particular issues with respect to either capital charges and/or earnings concentration to be the issue here as the CorSo portfolio gets rebalanced. So I think the important thing you see on one of the pages when we talk about and there's a number of lines where we're going to significantly reduce but not exit.

And part of that is due to be able to serve clients, let's say that might be great clients for our property book and still asked for some covers which we're prepared to do for those better clients.

Well, we actually came to a conclusion that the CorSo portfolio was too concentrated for example in West liability that it was not enough protected by reinsurance, so going forward with the reinsurance protection and to be less let's U.S. liability focus actually becomes better leverage of that portfolio, but diversification maybe extend as a group and we can use reinsurance closer to get it all in balance.

Thanks Vikram for your questions. Can we take the next question please?

Hi. Thanks for taking my follow-up.

Just a question on the new money rate really. So can you just give us an idea of as of today what the new money rate is?

And what you're actually investing in. Obviously, U.S.

rates are higher but in Europe the situation is very different. And if you think like yields around 50 basis points, so how you're thinking about risk-adjusted returns on investments and what this means your strategic asset allocation please?

So, I mean, you've correctly identify the challenge for us. The majority of our assets are probably related reflecting the majority of our liabilities and so the matching the estimate new money rate that we've got for the reinvestment is something close to 2%.

That's below the running yield of 2.9 and obviously something we're going to have to manage. I would say that the asset management team has been able in a challenging environment to maintain that 2.9% in part by going into some alternative investments infrastructure, other plays increasing and some cases parts of the real estate portfolio, which are fighting solid yields, nothing exceptional but adequate.

The quality of the portfolio has not changed. We maintain a fairly conservative position on the credit book in particular.

And I think that's also reflected in de minimis level of impairments that we've had in the last quarters. So this will be a challenge to us going forward as will be a challenge to everyone in the industry.

Let's see, how we work through it.

Thank you, James for your follow-up question. Next question please?

Thank you. Just a quick follow-up please.

The reinsurance purchasing strategy going forward for CorSo, could you just confirm whether you intent to consider buying reinsurance externally or you likely to continue just buying it from P&C Re? Thank you.

So, in principle we prefer to buy internally by P&C Reinsurance business unit. But we're not excluding, actual market is going forward we are strategically positioning ourselves in buying reinsurance and we will use external markets as well.

But obviously we're prefer to use internal markets.

Yes. Has all already been in the past combination that the business we like and it was within our overall risk tolerance as the first priority stay on either the CorSo order reinsurance balance sheet and only if they get above four we can digest within our own balance sheet we do externally, but if you go for CorSo to be bit direct in the market, it also feedback signals so its both, the first priority is to keep the risk we can diversify in our balance sheet internally.

Thank you, Ed for you follow-up questions. This is actually the end of the Q&A session.

There are no more questions. So if you have any follow-up you don't hesitate, you reach out to any member of IR team.

Thank you again everyone for joining today.