Swiss Re AG

Thank you, and good morning or good afternoon to everyone. I am here today with Edi Schmid, our Chief Underwriting Officer; and Guido Fürer, our Chief Investment Officer, who will provide some insights on the impact of COVID-19 on our underwriting and asset management operations.

Also in the room is Philippe Brahin, our Head of Investor Relations. I’d like to start with the brief overview of the key figures we published this morning.

Swiss Re entered the pandemic crisis in a very strong capital position. We also took proactive measures to protect our investment portfolio and the balance sheet in particular and Guido will tell you more about it.

On the operational side, we were able to support our clients and partners without disrupt -- disruptions and our activities remain resilient in the current environment as the quality of our April renewals testifies. Nonetheless, COVID-19-related claims weighed on our results.

We reported net losses of $225 million for the first quarter of 2020. P&C Reinsurance reported a net income of $61 million despite the losses related to COVID-19.

The business segment was also affected by large natural catastrophes slightly above our expected losses, mainly related to weather events in Australia and winter storms in Europe. We also experienced some negative prior-year development, which somewhat unusually was driven more by premium true-ups than reserve additions.

Excluding the burden from COVID-19, P&C Re’s normalized combined ratio is in line with our 97% estimate for the year. Life & Health Reinsurance delivered above it its target ROE, reflecting the strong underwriting and investment results, with no material underwriting impact in the quarter from COVID-19.

Corporate Solutions reported a net loss of $171 million, impacted by losses related to COVID-19. Excluding those losses, the combined ratio was 13 percentage points better than one year ago and the normalized combined ratio is broadly in line with our $105 million estimate for the full year.

Life Capital results was impacted by the mark-to-market on our implied holding in Phoenix, partly offset by a hedge on the U.K. equity markets.

The underlying business performed broadly as expected. The agreed sale of ReAssure remains on track and is expected to close in the third quarter of 2020.

The Group reported a strong return on investment of 3.2% for the first three months of 2020, as an active portfolio management and hedging significantly offset the impact of financial market volatility on the asset portfolio. As for the April reinsurance renewals, we are pleased with the outcome achieved.

We saw overall volume growth of 4%, while nominal prices increased by 8%, with a strong increase on Japan windstorm of more than 50%. Risk-adjusted price quality year-to-date remained unchanged, reflecting the lower interest rate environment we are in and material adjustments to loss assumptions, particularly with respect to certain nat cat exposures.

Moving on to the balance sheet, Swiss Re maintains its industry-leading capital position, with the Group’s Swiss Solvency Test ratio comfortably above 200% as of the 31st of March. As confirmed, following our AGM on 17th of April and in light of the current volatility in financial markets and global economic situations, the Board of Directors has concluded that the share buyback program will not be launched.

We will continue to manage our assets and our capital with our utmost foresight, allowing us to continue to support the clients and preserve value for shareholders in these difficult times. And with this, I turn it over to Edi.

Thank you, John, and good morning and good afternoon from my side. As John already mentioned, our Q1 results were impacted by US$476 million of COVID-19 claims.

Of these, US$253 million were in P&C Reinsurance and US$223 million in Corporate Solutions. These reflect claims notifications as well as evidence of expected claims materialized as of end of March.

Close to 75% of the Reinsurance loss and over 80% of the Corporate Solutions loss relates to event cancellation, with the remainder mostly coming from business interruption and smaller amounts from other lines including credit and surety. As previously communicated, our total maximum exposure to event cancellation across 2020 is a mid-to-high triple-digit million amount.

This is due towards the first half of the year in terms of events covered, which means you would expect to book most of the losses in the first two quarters. On credit and surety, we would expect further losses as the recession impact of the crisis becomes more visible in various economies.

Economic development remains highly uncertain depending for example on the effectiveness of substantial government intervention. P&C Re has a 10% market share in credit and surety, and Corporate Solutions less than 3% of the overall primary markets.

Both with high global leverage occasion across the range of industries. Business interruption remains the most debated area of impact in the context of the COVID-19 crisis.

We reiterate that most property policies require a physical rigor and among those that offer coverage for non-damage business interruption, not all would cover pandemic. In a number of markets, insurers have provided non-damage business interruption extensions that cover pandemic.

However, which despite generally tight sublimates, could add up to a material loss burn. We are monitoring the regulatory and legislative initiatives very closely.

We echoed a deep concerns voiced by a number of our clients, peers and insurance regulators on the danger of potential retrospective changes to insurance contract awarding. Moving on to Life & Health Re, we had so far not seen a net impact on our business from increased mortality.

For instance, mortality experience in the U.S. is in line with our expectations in the first quarter.

We continue to monitor the trends here very closely, including any changes in less behavior and possible increases in disability claims. I would mention that a 5% mortality increase in insured mortality over a one-year period would imply additional claims of approximately US$400 million for reinsurance and $15 million for Life Capital.

The current scale of the impact of COVID on our book is still far from such a scenario. A word on our one-in-200-year pandemic stress, we previously disclosed excess mortality numbers this scenario assumes in key countries.

For instance, 200,000 in the U.S. Globally, our scenario assumes 14.5 million excess deaths.

It should be noted, however, that this scenario is based on an influenza pandemic, which assumes a very different age fatality profile to COVID-19. The current virus disproportionately affects older demographics with an average age of above 80 for fatalities, while 90% of our Life & Health Re portfolio covers individuals aged 60 or below.

Overall, there are still a number of key unknowns when it comes to assessing the ultimate potential impact of COVID-19 on our underwriting portfolio in 2020. The main ones being the severity and duration of the economic downturn, as well as the outcome of litigation and legislative initiatives around coverage for business interruption.

However, we believe that the impact will be manageable and will represent the earnings event rather than a capital event for Swiss Re. With that, let me hand over to Guido.

Thank you, Edi, and good morning or good afternoon also from my side. Q1 saw significant COVID-related market turbulences across basically all asset classes.

The experience falling equity markets, we saw basically two out of the five biggest daily falls in Q1. But those were confronted this widening credit spreads and bond yields, which were falling, all of which are damaging for insurance and reinsurers.

However, as John mentioned, we put in place in significant hedges in the early part of the quarter in anticipation of elevated volatility. These hedges helped us to mitigate negative impacts and led to gains of roughly US$650 million in the first quarter, split evenly across equity and credit.

Ultimately, we experienced a net valuation loss of approximately US$300 million in the first quarter. Overall, we report and annualized return on investment for the quarter of 3.2%, which would have been only 0.5% if you would exclude the benefit of the hedges.

In addition, we had the $80 million benefit on hedges for the U.K. equity market, which partly offset the negative impact of the Phoenix share price movement in our Life Capital result.

As ReAssure was classified as held-for-sale, its investment portfolio is excluded from the return on investment calculation. These hedges remain in place for the time being and we continue to manage them dynamically as the situation evolves, while retaining our cautious outlook.

During the last few quarters we carefully reviewed our investment portfolio for issuers and sectors particularly sensitive to the ongoing crisis, resulting in a targeted reduction of credit exposures. These led to small realized losses on energy, special finance, travel, and leisure bonds, as examples.

Our ESG investment approach also contributed to the protective and high quality of our credit positioning. The Group’s impairment result was a modest US$16 million -- 1-6 million in a quarter, reflecting the high quality of our credit portfolio.

Given the downward trend in interest rates, our Group running yield declined to 2.5% from 2.8% at the end of 2019. With that, I hand over to Philippe, who will take us through the Q&A.

Thank you, Guido, and good day to all of you also from my side. So as usual, before we start our Q&A, I would like to remind you to please restrict yourselves to two questions and register again if you have follow-up questions.

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

Hi. Good morning.

Thank you for letting me ask questions. I have got two.

The first one is on your topline. Could you give us some big picture thoughts on how dependent it is on the economic activity and where do you see the biggest risks stemming from this downturn?

And the second question, it’s just relating to your SST ratio and capital sensitivities, given the hedges that’s been put in place, could you give us an update of how the sensitivities may have changed and where should we expect the biggest reduction? Thank you.

So, maybe, Edi, you take first one and, John, the second one.

Yeah. Happy to comment a bit on the topline, and, again, as for many other questions, it’s still early days to come up with views.

What is clear as with economic downturn, the lockdown in a number of lines of business, you would expect premium volumes to go down, if you think about motor lines, if you think about workers’ comp lines or related to the payroll, if you think about some of the sales in the Life business. So, clearly, there’s expected to be an impact on the topline.

But we would still expect the insurance industry to not be as impacted as, let’s say, GDP overall, so quite an impact, but not as material for economies overall. And quite that dependent on the respective lines of business and segments.

Edi, I might add that in the context of what will be some clear losses coming on both sides of the balance sheet for many of our reinsurance clients. One could imagine in the second half of the year and into 2019 and actual increased demand for reinsurance by those primary companies as they look to manage their own balance sheets and reduce potentially volatility of some of those earnings.

So, I think, for well-capitalized groups like Swiss Re, you could imagine a situation where the volatility in the marketplace actually creates increased demand for some of our capabilities and products in reinsurance. With respect to the hedges and sensitivities, we have distributed also recently the sort of baseline that as you correctly point out does not include the hedges.

What I would say is, that we don’t expect these hedges to stay on forever. In fact, as Guido said, we will look dynamically to understand when we can withdraw them, when we feel that the economic conditions in the various markets have stabilized and/or are likely to move forward in a sustainable positive direction.

As such, we have not provided additional sensitivities just because they would be temporal and it would be potentially misleading to put them out there. What I can say is, the moment we have protected the downside for equity values substantially, the credit hedges are more partial in the coverage and there is undoubtedly some basis risks between the portfolio we have and the liquid hedges that we were able to find reasonable volumes and prices for.

On interest rates, generally, I think, we remain somewhat exposed with some modest adjustments to those sensitivities. But I think overall we can say those sensitivities as we have published are the outer bound of what you should expect over the next quarters and depending on Guido’s actions what will either come closer to them or stay much more or conservative based on our view of the financial market volatilities.

All right. Thanks, Ivan, for your questions.

Can we take the next question please?

Hi, there. Could I just ask to get a bit more color on the prior year effect in P&C Re?

I am a bit confused why -- just to go through again the premium adjustments and exactly what that is adjusting. It’s clearly not adjusting exposure and you are saying all of the prior year was related to that or what else was a factor?

And then, I guess, the other question, do you expect, I mean, John you mentioned, we could see increased demand and there’s evidence of that already. I guess a question for Edi, do you expect mid-year renewals to already be affected by what’s occurring in terms of slightly less capacity in the market and also increased demand?

Thanks.

So, on the first one regarding the PYD, so for this quarter indeed there was a bit more development on the premium line, I would also comment on the claims line later. But what happened a bit more than in other quarters that the premium that are coming through are not in line with our assumptions.

It’s coming actually not from one specific part of the business. It’s across markets, across lines of business, mainly from proportional contracts, where we in the end rely on our cedents and therefore costs, and at this time, this forecast tended to be on the optimistic side.

So that explains why a bit more than normal we had a more significant movement on the premium line. There was also some slight negative development on the claims line, but really moderate and there were some pluses and minuses.

We had some negative on U.K. motor and there was also some negative from U.S.

liability. We had a couple of cedents that we are catching up with their reporting on claims.

But, overall, it was quite moderate quarter in terms of PYD. And I would also point out that on the Corporate Solutions side in Q1, the prior development was actually slightly positive, which is good news that the decisive reserving actions we took end of last year seem to be holding up.

And the second one, Andrew, was around impacts on pricing already for the mid-year renewals. I am also bit cautious on speculating on prices.

But, clearly if we look at the industry overall already, we have started to see significant price momentum, as you know, in the commercial markets and more now also on the reinsurance side in areas where it was less affected. We had very successful renewals in Japan, as John pointed out, where we could achieve substantial premium increases.

So, I think, with the impacts likely on the capital position on some primary companies with a bit more avoidance of risk in general, clearly the demand is expected to go up, while the fee effect in the market would impact supply on the other hand. So, I would say, it’s quite a likely outlook that we see further price strengthening.

We can also look just at the recent development in the ILS markets, the alternate capital markets, where also spreads were widening a bit. So everything points in this direction, yeah.

But it’s too early to tell to what extent. But, clearly, supply/demand equilibrium is shifting.

Maybe just one clarification on the first part as Edi mentioned on premiums. There’s no direct link to COVID-19 to this premium adjustment.

I think most quarters we have got some movements. It just so happens in this first quarter of 2020 that there was an unusually mix of relatively large premium adjustments compared to the size of the claims adjustment that netted through.

All right. Thanks, Andrew.

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

Yes. Hi, everyone.

I hope you are doing well. Two questions from my side.

The first one will be on nat cat. So, basically, if I look at you are nat cat premiums, these are up about 6%.

This year obviously driven by pricing and your budget is also slightly up, but less on the 6%. So I am just wondering, are you actually increasing your net exposures or are you passing most of the additional catastrophe risk that you are underwriting over to ACP or external retro?

Then on COVID-19, I mean, we know that giving precise estimates at this point in time is probably too difficult. But I was wondering if there are any developments or maybe exposures that caused concern to Swiss Re from a risk management perspective?

Thank you.

So, Edi, back to you again too.

Yeah. Thanks, Paris, for all the questions.

On the first one, regarding our nat cat account, it is correct. If you just measure the nat cat related premium in P&C Re.

That’s up about 6% last year versus this year. That’s in line with the strategy.

We also explained last year at the Investors Day that we look at nat cat as an attractive pool, where we have a good client franchise and also the risk knowledge to underwrite this business in a good way. But also back then we said that our goal is to use our franchise and our risk knowledge to underwrite.

But also we want our nat cat portfolio rather to be more diversified. So when it comes to do the concentration peaks like hurricane, we started to actually share more of the business with alternative capital partners.

And that in the end you already gave a bit of the answer -- explains why the budget is only going up by some 3%, which actually means that we see it a bit more out to our alternative capital partners than we increase on the gross side. As you may have also observed, alternative capital market was a bit more stretched in recent times.

But, actually, Swiss Re could maintain the support from its third-party capital providers and we could even get some more support. We just issued also few more cat bonds so that will actually go into the upcoming hurricane season with a good hedged portfolio and a portfolio that in the end is more diversified.

And the second one was quite broad, about areas of concern around COVID. I mean, we have already indicated in earlier calls the areas where there is likely going to be increased clams on the event cancelation.

I think we covered that quite a bit. Obviously, credit and surety is something to watch quite closely.

Obviously, that’s a line that’s closely linked to the economic development with the recessionary outlook and the likelihood of increased defaults. But also, and maybe there’s a good example to just point out the uncertainties.

So you can expect recessionary impacts and more defaults. On the other hand, the government interventions are really also quite unprecedented.

And if you think about specifically for credit and surety, in many markets, there’s government support for the SME sector. There’s discussions even in some markets that the government actually is backing up the trade credit business, because trade credit is important to keep the economies going.

So there’s just a number of unprecedented factors at play that make it very difficult to forecast what’s really going to happen. But our credit and surety book, to maybe explain it better, we have 10% market share in reinsurance.

We are not a leader as bigger ones and, also, I think, I mentioned, it’s less than 3% and it’s a very diversified book of business. And we already -- actually because of the end of cycle situation, already reduced our exposure there.

So credit and surety is an area and then, I think, there’s obviously many other areas where there are pluses, but obviously more minuses. Yeah.

So I will leave it at that for the time being.

All right. Thanks, Paris, for your questions.

Can we take the next question, please?

Hi. Yes.

Good afternoon. Two questions from me.

The first question will be, could you tell us if you have taken additional measures since COVID-19 crisis started, if you have taken any additional measures to protect your balance sheet? Actually, you indicated significant derisking of your investment portfolio.

I think that that was clear. That was explained by Guido.

Now I was thinking on everything apart from investments, have you taken additional measures in order to protect your book I know with additional protection or things like that in order to limit the effect? The second question will be on CorSo.

The first question would be the 13% price increase, but the momentum is still keeping up well. But in light of the recessionary environment and in light of walking and talking to your clients, how do you believe that 13% is still achievable in the new environment.

And also due to this new environment are you taking a pause to the cost reduction program at CorSo? Thank you.

Okay. So, maybe John for the first question and Edi on the CorSo.

Sure. I might come back on the last.

So in terms of predicting the balance sheet, I think, first and foremost, these actions on the asset side have been significant, and if I can say so, obviously, effective and reducing the negative impact that otherwise would have come through. On this side, obviously, you have whether P&L relevant and then those items, which are just relevant on the balance sheet.

But one thing I would point out is that the book value of the company has held up extraordinarily well through the first quarter if you compare book value per share on March 31st, where we were on December 31st, the reduction is less than 4%. That I think is indicative of how we have been able to manage the extraordinary actions that otherwise might have hit us for a potentially double-digit decline.

I think on the liability side, the smartest way to protect our balance sheet is do smart underwriting, and once again, we are in a quarter where the COVID numbers are distracting us from speaking about the underlying. But let’s remember that we made $300 million in our Life & Health Re business in the quarter.

We have really are on track for the two estimated loss ratios 97% in P&C Re and 105% in CorSo for the year. So I think the best thing we can do is make sure that, in spite of 14,000 people working from home, continue to deliver the kind of results that we had in the April 1 renewals to make sure that that business is going very well, while simultaneously managing the crisis of the pandemic and the associated fallout on economic activity from that.

So that’s where management is. There’s a series of weekly and even in some cases biweekly meeting that have been instituted to separate the active management of COVID-19 related issues from our day-to-day operations and those day-to-day operations proceed apace with almost no interruptions.

Yeah. Maybe I could just add a bit of color on the liability side.

I mean, early on, as the COVID crisis unfolding, we took a number of actions in terms of our shafting our underwriting appetite. In the end this is a crisis still unfolding.

So the picture you can have in your mind is instead of a burning house and normally as an insurer, you need to be very careful not to provide coverage for things that are already foreseeable. So across many lines of business, in P&C and Life & Health, we have tightened our own appetite to not put undue risk on our balance sheet.

So, for example, we have reduced capacity for large lives we would put out there, because there’s really a risk of increased, get worse selection or when it comes to a line like disability income that is linked to some extent to economic development recession. We also reduce the appetite and there’s many examples in other areas and so that’s obviously one important dimension to protect our balance sheet.

But as John said, it’s equally important for those lines, those exposures that are not materially impacted by COVID that our business, our underwriting and everything continues as normal as possible. And then, on your second question was around the pricing dynamics in the Commercial business.

I would clearly see this to continue. I mean, we have already started to see the movement.

It was still quite slow. We know a year ago in the beginning it was only 5%, then over 2019 averaged CorSo could achieve 12%.

The first quarter it’s up to 13%. I think also related to the comments earlier just dynamics in the risk taking markets overall it’s what’s happening.

I think the only direction I can see that this momentum is going to. And I think, the last one was on the cost side, John, you want to take that?

Yeah. So the restructuring at CorSo was laid out.

We are removing about one-third of the business that was on the books at mid-year 2019. You start to see that show up in the premium earned in spite of the rate increases that we are getting.

We have actually I think for the first quarter shown a reduction in earned premium, because of the portfolios which have not renewed. In many cases there were whole teams, which were relieved of their responsibilities, because we are not in the business.

The good news is some of that -- a fair amount of that was done in 2019 before the crisis and so many of those people were able to migrate to other carriers that were more convinced of future success in those lines. I think we will continue to reshape CorSo into a strong performing company.

That means following through on already committed actions. I don’t think we necessarily need to do more than that at this time

All right. Thank you, Thomas, for your questions.

Can we take the next question please?

Hi, everyone. Thanks for taking my questions.

Just two please. So, firstly, on business interruption, I mean, please could comment on whether you are seeing reinsurance policy wordings broadly follow the primary policy wordings and become so as kind of here what you think are the main risks on BI.

So is there explicit or unintended exposures in policy wording or is it the risk of retrospective legal challenge to coverage -- those comments around on your books specifically? Then I guess on just thinking about the balance sheet and scope to grow gross loss.

I mean, do you think you have the balance sheet strength and the appetite to go after the capital intensive lines that could see more rates, given the likely the reduction we are seeing in industry capital? So just the -- I suspect you will say you got the balance sheet, but I am more interested in the appetite?

Thank you.

Thanks, Jonny. Maybe we start with Edi.

Yeah. No.

Thanks, Jonny. The first one on business interruption, as mentioned in the introductory comments, that that’s clearly the most debated area, and obviously, the main discussion first is happening on the primary side, to what extent pandemic triggered business interruption is covered or not.

We still remain of the view that most property policies, they actually require a physical damage figure for BIs to be claimable, particularly that the large limits on BI or these policies. And then, obviously, there’s a range of, what you call, non-damaged BI extensions in several markets and these you have to then put into different buckets.

So there is those that clearly pandemic is excluded on the one extreme. But on the other extreme, there are a number of policies out there that clearly cover pandemic and then there’s a whole range in between whether it’s, for example, additional figures that need to be met.

Those are policy would only pay if there’s an outbreak of the infectious disease on the premise and then you need the closure by public authority. So it’s in this gray area where currently all our cedents are going through their portfolios to identify what is really in their portfolio.

So that’s really what’s happening on this original side, and clearly, there will be some areas where there will be legal disputes. And on the retrospective inclusion by legislation, I think, we commented in introduction that’s just deeply concerning idea, insurance really relies on the rule of law, and if we move down that track, clearly, it would go beyond what the insurance industry is able to bear and that there I believe that reason will prevail there.

So that’s more the situation on the original side. And then on the reinsurance side, it really depends on the kind of contracts, proportional or non-proportional.

And then there’s some contracts, for example, catastrophe contracts. Clearly, it’s named perils that, there would be no exposure, but there’s also contracts where it really follows the original policy wording and then a question is then about aggregation of losses.

For there we have also quite some elements in terms of event definitions, hours closes. So there’s a lot of things that need to be sorted out.

But that’s just to give you a bit of color, why that it takes a bit of time to have a clear assessment of the whole landscape around business interruption. Maybe the second one, John, you take about our ability to…

Yeah.

Asset legislature.

Sure. And just I understand that it’s frustrating not to have clear estimates of what this looks like.

But to just remind people that there’s enormous uncertainty on the underlying health issues and nature of the pandemic and our worldwide offices, we see some place is well-organized as Singapore is now looking at its third wave. And so to think that we are out of this first storm of the pandemic, I think, is absolutely premature.

The subsequent economic cost to it and what is, in fact, clearly, the responsibilities of insurance -- primary insurance, and ultimately, reinsurance remains highly speculative, and so I just caution everybody from trying to get ahead of the facts on this one. With respect, Jonny, to your second question.

Yeah, I think, you asked about capital intensive covers. We do think we have got the balance sheet to be able to manage this.

But I think the hurdles as you implied are probably higher, right? The -- we are paying a lot of attention to where our long-term interest rates are, compared to some of our European competitors.

We probably have more interest in U.S. dollar rates and are paying a lot of attention to how far down long-term rates have moved, that’s affected our pricing.

When we talk about the required price increases in the April 1st renewals. Some of that came from more conservative modeling of the nat cat risk, but some of that has in the January 1 renewals came from a different view of long-term rates.

And so anything that we do in terms of increasing business going forward is going to require to be value creative in this new rate environment and to the degree that it involves a longer tail business, those hurdles just become more and more impactful in what the required pricing would be.

Jonny, thanks for your questions. Can we take the next question, please?

Yes. Good afternoon.

I hope you can hear me.

Yeah.

So I have -- thanks very much. So one topic left, which I don’t know if it was addressed in the first few minutes, I missed it, sorry.

This is about U.S. workers compensation.

It seems some very wide ranging numbers from various bodies like the NCCI or even in California. I mean, could you help us understand where you are sitting on that, what are the risks for you if any or if material, and any color would be very helpful?

Thank you very much.

Yeah. Thanks, Vinit, for question on workers’ comp.

We touched it briefly as one line of business that is likely impacted definitely on the premium line. So U.S.

workers’ comp, I mean, what you would expect that, obviously, with the lockdown that that premium is going down. But you could also see that many people working from home, some of the more exposed jobs not being conducted for the time being.

It could also be, let’s say, a reduction in frequency. But on the other hand, there will likely be claims on certain types of jobs in terms of the healthcare workers, other care workers.

Just what we can say, our workers’ comp folks does not have a significant part of these more exposed types of jobs. Also our workers’ comp business is mainly proportional contracts in the U.S.

and those would have occurrence cap, so that the maximum exposure from this development should actually be quite limited. So for our specific situation, we do not expect a material impact from the workers’ comp business.

But on a more broader basis, again, just reiterating what John was saying, we are still early in the crisis and how this is going to unfold still has more open questions than things we can really answer.

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

Hi. Good afternoon, everybody.

It’s Vik from Soc Gen. Apologies if you have already answered this question, since I dropped out of the line.

Now, firstly, can you give us some color on the underlying…

Yeah.

…exposures in the U.S. casualty, i.e., D&O, E&O, MedMal, general advocate, et cetera and what kind of really flows through the underlying excess books, which are the lines that are particularly susceptible to adverse developments in the prevailing circumstances?

That’s question one. Secondly, given the firstly weak results at CorSo and the 141% SST, how should we think about the prospects of potential capital injection in the unit?

Yeah. Thanks, Vik.

On the first one regarding mode of casualty, lots of business in the U.S., workers’ compensation just covered. Rest just the D&O space, you hint it, there is if, you look into past recessions are linked to financial market turbulence.

So that there could be a pickup in losses on the D&O side, again in the Swiss Re accounts, that’s not a material segment we support. And then there’s a more broader liability space that will obviously you could picture more lawsuits against employers and other areas.

I mean if we just add a little to this picture we are pointing -- being pointing out for a long time that the U.S. liability space in a quite aggressive tort environments with social inflation.

All the reasons why -- I think so while we have taken a very cautious stance on U.S. liability business on the CorSo side as we mentioned in early calls, we have taken a very decisive pruning, exiting the most exposed lines in U.S.

liability and also on reinsurance. We continue to be quite defensive on the risk liability lines particularly those exposed to severity.

So I mean, the 1-1 renewals, but again, now in 1-1-4 [ph], we have actually reduced our exposures to U.S. liability.

We measure now within the client portfolios the limits underlying exposed to severity and for the larger corporate segment, we actually have on a year-on-year basis taken out some 20% of exposure. So, clearly, there is a room for further litigation also out of this COVID.

But, again, as for other lines, a lot at this point would be speculation. I have to come up more to a firmly with how this is going to unfold.

And, Vik, your question, on CorSos capital. Yeah.

I mean, obviously, we would be better, if CorSo, was making money than losing money. I reiterate that the prior year development was a modest positive, for CorSo, for the quarter.

So we believe that we will have to weather the COVID-19 claims in Q1 and in further quarters. We will evaluate the capital levels at the business unit accordingly and make some decisions.

But I’d say here at the end of the first quarter, we don’t see the need to do anything in particular.

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

I just wanted to come back on the April 1 renewals, the plus 4% premium gross. Could you shed a bit of some light on split maybe on geographical basis, Asia versus U.S.

maybe? And also if you could split it differently by lines of business, property versus specialty versus liability just to better understand, I mean, how you shifted your book in April 1?

And the second question would be related again to social trends in inflation, U.S. social trends in inflation, because it’s been a big topic in Q3 and Q4 last year for the market, but then it’s completely disappearing from any press releases or call transcripts?

So -- and I guess that underlying just cleanse a trend I have call not stopped from one day to the other. So just if you could tell us a bit how things -- what you saw in terms of trends in terms of cleanse so far this year in terms of maybe secondly that is acceleration of the situation?

Thank you.

Back to you, Edi.

Back to me. The first one is a bit more color on our renewal account, so 4% growth across the Board.

Obviously that has an element of the price increases. That is the most significant contributor at this time.

We could achieve nominal price increases year-to-date on what we renewed of 6%, which is significant across our book. As we also said actually on a risk adjusted basis, this would be about flat, but still this is actually positive because it means that we could not only compensate for the more conservative loss picks in, for example, U.S.

casualty, which is related to your second question where we still see that this is a heightened stability environment. So we needed to cost this more conservative, so that loss assumption increases plus a significant adjustments we made to our typhoon flood modeling in Japan.

So these factors we could fully compensate by the nominal increases we achieved. In terms of the growth, it’s also a bit linked to the fact that, I just mentioned.

So, clearly, in Japan, we could grow the total premium by about 20% in the nat cat space with the price increases. But also we deployed more capacity given the beneficial outcomes we could achieve.

But then linked to our increased capacity on the nat cat side, we could also access some additional business from clients in other lines of business. But a bit more broadly, I would still say, that our trajectory, as already explained in 1-1 is to shift the portfolio up a bit more to shorter duration so we keep growing more on the property nat cat side and have a more cautious stance on the longer tail lines exposed to things like social inflation.

And then, obviously, there’s also the important point John made that in a much lower interest rate environment, obviously, these longer tail liability lines need to get even better in terms of underwriting profit to make sense given that you cannot discount as much anymore. So that’s just a bit of color around where the growth is coming from.

And on the social inflation topic, clearly, that’s not going away in the U.S. As we have commented earlier, we really think for the U.S.

liability market to become sustainable, that there needs to be more than just premium increases and limit reductions. That’s clearly what’s happening in the underlying business now.

But with this aggressive tort environment, with this nuclear verdicts, a lot of them are actually around commercial motor, if there is car accidents and then bodily injury, then the tort lawyers will go aggressively after some corporates and the jurors will then award these huge non-economic damages. And for that to become better, you will need to see some tort reform at the state or at the federal level to become again more reasonable.

And now you would add the developments around COVID-19 in the U.S. So it is clearly an area where we would continue to underwrite with the utmost caution.

Maybe just one observation on the penultimate point already to the degree that motor frequency has materially reduced in all markets with lockdowns, you probably see some modest benefit also on some of this commercial motor caseload and associated large jury awards related to it. But this is clearly a very temporal issue.

There’s no reason to think there’s been any structural change or improvement in that business.

Well, thanks, Thomas, for your questions. Can we take the next question please?

Paris, are you there?

Paris, are you on mute?

Yeah. Yes.

Hi. Sorry...

All right.

I was unmuting -- I was unmuting it. So a couple of very small follow-ups from my side, I guess, the first one will be on Life Re.

I understand there was a small clinical benefit for the quarter. I don’t know whether you can give us some color and quantify that.

I think it was something to do with the recapture. And the other one is on the investment side, obviously, quarter-to-date we have seen a pronounced bounce back on the equity front.

How should we be thinking about the benefit to Swiss Re from an accounting perspective, given that you have put quite a lot of in place?

Why don’t we go to the second question first. So, Guido can you help us out.

All right. A very happy to do so.

Thanks, Paris, for the question. You referred to the equity for tax inventory put in place.

And as John has mentioned, we will dynamically manage the not only for equity but also on credit. Now on equity, we have only option in place that means we kept the full upsides open, and as you know, under U.S.

GAAP, those flows through the P&L or the mark-to-market of the equity, as well as of the hedges. Now the fact that we have owned the downside protection doesn’t take away the full upside potential.

That’s why recovery which we have seen quarter-to-date should be very helpful. I think on the credit side, we have also a mix that of different measures, some are option related, some are index related, and that’s why also there we kept some of the optionality open.

A very important for us is the quality of the books and as it builds on the equity, as well as on the credit. And as John has mentioned, we actively do portfolio management.

That’s why we not only work with overlays and take out some of the bigger risk. But, clearly, also massively improve the quality of the portfolio over the last few quarters.

And to give you just one figure to give you a bit of a feeling. I think there’s a good questioning about the fall of angel potential in our industry, and as you know, under certain regulation you don’t get the capital benefit if it’s outside of investment-grade and talking about matching adjustment.

Swiss Re does not make use of that plus. Also, we just saw what happens in the midst of the crisis and relate to Q1, the Benchmark portfolios they had a fallen angel in Q1 of 1% basically credits being non-investment grade from former investment grade.

Swiss Re experienced through the same quarter just 0.2%. That means one-fifth of the market and those are thanks to the hedge.

I have to say many of that exposed to the COVID exposed to actually like leisure, kind of consumer cyclical, but also aviation. We are even net short.

And that’s why it’s a very dynamic program. And I think we look at both.

We look at the EBITDA risk which we clearly address to the overlay program. But in the long-term and I also believe as John has alluded to this crisis is not over in the short-term.

The economic damage is huge and some sectors will clearly be hammered not only over a few weeks but over a few quarters if not years. And we recognized that very early, that’s why we massively adjusted the portfolio position, started already last year.

To give you just one figure, in Q4 last year and in Q1 this year, we had $7 billion of changes in the cover bond portfolio that’s basically 25%. And of course, we went into the less exposed area and this gives you some idea how we protect the balance sheet.

And again, that we even if the crisis continues to do we expect that we will serve relatively decent in this environment. But it’s full of challenge.

Thank you.

Thank you, Guido. And the first question you asked, Paris, I think, was related to the Life & Health Re.

As we said, we had a strong technical result, as well as a good investment return. Specifically, I think, there was one not huge but what note of a size it’s probably worth noting.

We recaptured for some individual mortality business in Japan. Again, just serving our clients well and working with them on the way that they like us to help manage their own risks.

So, nothing special there, ordinary business and we do these kinds of transactions on a routine basis.

Okay. Paris, thank you for your follow-up question.

So we have actually come to the end of our Q&A. If you have any further questions, please contact members of the IR team.

Thank you again for joining today. We wish you all to remain safe and healthy.

Operator, back to you.