Good afternoon, ladies and gentlemen, and welcome to the SCOR Q4 2023 results conference call. Today's call is being recorded. There will be an opportunity to ask questions after the presentation. In order to give all participants a chance to ask questions, we kindly ask you limit the number of your questions to 2. At this time, I'd like to hand the call over to Mr. Thomas Fossard. Please go ahead, sir.
Good afternoon and welcome to SCOR Q4 2023 results conference call. My name is Thomas Fossard, head of investor relations, and I'm joined on the call today by Thierry Léger, CEO of SCOR, as well as the entire executive committee. Can I please ask you to consider the disclaimer on page 2 of the presentation? And now I would like to hand over to Thierry Léger. Thierry, over to you.
Thanks, Thomas, and good afternoon, everyone. I would like to start with four key messages. 2023 was a strong year for SCOR with EUR 780 million in net income supported by all business activities. I will come back on this in more detail later. We delivered on the decision to reduce our exposures to climate-sensitive risks. We raised retentions, clarified wordings, and increased prices. I'm very satisfied with our Nat Cat claims coming in below budget and with our current positioning in Nat Cat. Our reserves are in a good position. At Q4, all lines have been checked at the very granular level and are at best estimates. This was confirmed by an in-depth, independent third-party review conducted by Willis Towers Watson.
Last but not least, given our strong capital position with a solvency ratio of 209% and the growth in economic value, we are proposing a regular dividend of EUR 1.8 per share in line with market expectations. Before I go on, I would like to highlight that in this call we will be presenting all figures without the impact of the fair value of the option on our own shares. Let me first focus on the full-year group results. Overall, we are satisfied with the strong performance in 2023. The group solvency ratio stands at 209%, down 4 points compared to full-year 2022. We maintain a solvency ratio at the upper end of our target range of 185%-220%. This is despite the volatile financial market environment, at least for interest rates, and our decision to lean into the hard market.
We grew our economic value by 8.6% in 2023, slightly above our target of 8.1%. As you would remember, we aim at delivering at least 9% economic value growth during the forward 2026 strategic plan. The strong operating performance of all activities generated a net income of EUR 780 million, translating into an excellent 17.5% ROE. Turning to our businesses, as mentioned previously, all our activities delivered in 2023 exceeded the full-year assumptions. P&C with a combined ratio of 85% versus our assumption of 87%. Life and Health with an insurance service result of EUR 589 million, above our assumption of EUR 450 million. Investments with a regular income yield of 3.2%, above our 2.9%-3.1% guidance. Let's now turn to our dividend announcement. During our investor day last September, we presented our new capital framework. Yesterday, the board has approved a regular dividend of EUR 1.8 per share.
As per the new capital framework, this now sets the floor for the upcoming years. This decision has been taken on the basis of, first, a strong solvency ratio of 209% at the upper end of our optimal range, and second, on an above-target economic value growth of 8.6% at constant exchange rates. These will be the two factors determining our dividend going forward. We believe that the dividend of EUR 1.8 is the appropriate level at the start of our three-year strategic plan while the environment remains supportive for our businesses. In 2023, SCOR's core operating model based on three businesses with complementary contributions has proven its strength. The model generates diverse cash flows, leading to more stable and more profitable earnings, turning into hard capital over time and strengthening our balance sheet.
Leading into the first year of our forward 2026 plan and after almost one year in the CEO role, I continue to be excited by the prospects of our company. The environment is volatile, sometimes unpredictable, but it offers attractive opportunities for SCOR. Over the last 10 months, I have been able to engage with clients and our teams around the world. It confirmed my initial conviction about one of SCOR's core strengths. We have a leading global franchise built on long-term relationships and the technical expertise of our employees. We position ourselves as a reinsurer providing solutions to our clients. At the same time, we strategically allocate capital in a very disciplined way to the most profitable and diversifying lines of business in a dynamic way. As you know, underwriting is very close to my heart, and I'm pleased with the successful January renewals.
We had a clear roadmap in mind, and the teams fully executed on it. I keep telling our underwriters that our attention has to be entirely with our clients and business. As a result, we see an increasing pipeline of new business opportunities coming our way. Of course, this is not limited to P&C. We see similarly positive trends on the life and health side. As every year, we have conducted our internal Q4 review of the reserves. In addition, this year, following a concern from our shareholders, we decided to commission an in-depth, independent external review of all our P&C reserves. The result confirms the solidity of our reserves above the best estimates. Let me turn to 2024 and beyond. Myself, the executive committee, and all employees are focused on delivering on our three-year plan forward 2026. It consists of growing our business while modernizing SCOR.
We are very strategic about how we grow our business. Profitability is a must, and we constantly seek to improve our diversification, solutions capabilities, and new sources of growth. We are a risk management company and put underwriting at the heart of what we do. Taking risk is our business. Nevertheless, as we grow and try to offer solutions to our clients, we have limited appetite for risks exposed to climate change. We are conscious of the geopolitical environment, increasing exposures to war, terrorism, and civil unrest, and we remain very cautious regarding US casualty. To enhance our commercial drive, we take actions to improve client orientation, fast decision-making, and how we bring the full potential and expertise of SCOR to our clients. Let me focus on US casualty for a moment.
You remember me saying that we would remain very cautious towards U.S. casualty, and I believe that the 1.1 renewals prove this. Going a step further, we have decided to stop underwriting U.S. general liability and professional indemnity, single-risk business, from Europe. Going forward, we will only write this business locally from the U.S. It will be effective for renewals and new policies incepting from the 1st of May 2024. London and Paris-based underwriters will focus on developing the non-U.S. book of general liability and professional indemnity business, one of our strategic growth areas. With this, I hand over to François for his presentation of our Q4 performance more in detail. François, please.
Thank you very much, Thierry, and good afternoon, everyone. I'm very pleased to present this Q4 result. In my section, I must mention, I will focus on quarterly figures and not year-to-date figures. Also, I will focus on figures excluding the mark-to-market impact of the option on SCOR's own shares. I have one key message today. We have delivered a very strong fourth quarter, and we have achieved our overall profitability and solvency objective for the full year 2023. The group delivers a very strong net income of EUR 179 million in Q4, contributing to a EUR 780 million net income for the full year. The return on equity stands at a high 16.6% for the quarter and 17.5% for the full year, above our assumption of risk-free rate plus 1,100 basis points for 2023, which is close to 12%. The performance is clearly very strong.
Our management expenses ratio has increased to 7.9%, driven by seasonality of expenses pattern in H2. However, on a full-year basis, this ratio stands at 6.9% and is better than our expectation for 2023. The performance of the fourth quarter is driven by positive results coming from our businesses and our investments. We have maintained a strong reserving discipline over 2023 while delivering very solid results. Let's now focus on the P&C results. P&C delivers strong results over the quarter. The new business CSM stands at EUR 77 million, excluding IFRS stabilization measures. We have performed a reclassification from the first quarter, which impacts the new business by a negative EUR 153 million. Through this exercise, we have refined the level of the P&C new business CSM for 2023, and we believe that this is a more reasonable baseline for the future years.
Over the full year, the new business CSM in P&C stands at EUR 952 million and is now in line with our assumption of EUR 1 billion new business CSM. Looking at the P&C insurance revenue, it reaches EUR 2 billion, up 0.7% at constant effects. We see the effect of the portfolio rightsizing we performed during the January 2023 renewals as the weight of the 2023 underwriting year increases every quarter in the business mix. Looking into 2024, the January 2023 portfolio rightsizing impact will continue to weigh on the 2024 insurance revenue mechanically. However, we expect the ramp-up of the insurance revenue to be visible in 2025. Specialty insurance represents around one-third of total insurance revenue for P&C, which we consider as a satisfying balance within P&C reinsurance overall.
If we now look at our P&C combined ratio, it is very strong over this quarter at 75.6%, supported by a very low Nat Cat ratio of 1.5%. P&C has benefited from favorable developments from prior year's Nat Cats, notably from Hurricane Ian, Typhoon Nanmadol, and Winter Storm Elliott. This benefit is mainly due to our conservative reserving. In Q3 2022, we had booked EUR 279 million for Hurricane Ian. This figure was based on an industry loss of $17 billion at the top end of the estimated industry loss range at that time. Our cautious approach has borne fruits. Based on the data submitted by CDANS, we observed positive experience variances associated with all these CAT events. Excluding these positive developments that we partially released in Q4, the Nat Cat ratios stand at 8.7% in Q4 and 9% for the full year 2023, well below our annual Nat Cat budget.
We are highly satisfied with what we have achieved on the Nat Cat front, which proves the effectiveness of our portfolio rightsizing. We remain disciplined and continue to minimize the impact of climate-sensitive business, as previously mentioned by Thierry. The undiscounted attritional loss and commission ratios stand at 79.3% in Q4. This may be higher than what you had anticipated. Let me decompose this figure. It includes another IFRS 17 stabilization measure related to the retrocession booking. We adjusted the retro amortization pattern, which led to a +3.8 points combined ratio impact in Q4. It also incorporates a positive one-off technical income of -1.4 points on the combined ratio due to a commutation of a large multi-year contract at the end of 2023. The underlying attritional losses are now in line with our expectation.
Over Q4, we observe a large discount impact of 11% with similar drivers to what we presented in Q3. These drivers are an increasing share of business with a higher locked-in rate, a higher level of claims, and higher claims payment duration. Over these 11 points, close to two points are driven by a reallocation of reserves performed during our reserve review into the longer tail line, such as our D&F casualty book written out of London and Paris. This does not impact the level of claims but extends the duration of claims payments. I will come back to provide more color on this reserve review with the following slides. If we look at the P&C insurance service result, it is supported by a strong CSM amortization, reflecting the very strong combined ratio over the quarter. It also reflects the positive experience variance linked to mature Nat Cat developments.
Some of you may wonder about the impact of lower interest rates and what it implies on the discount benefit and the combined ratio. As far as the discount rate, looking to 2024, we expect a similar level of average locked-in rates as in 2023. Actually, interest rate in Q4 2023 fell to a similar level as in late 2022, and a large part of business is locked on 31st December 2023. As such, we maintain the -6 to -7 points discount assumption in line with forward 26. We also confirm the below 87% combined ratio assumption for 2024, and we maintain a flat CAT ratio at 10% and flat attributable expenses. Depending on the group profitability in 2024, we might decide to build further buffers in 2024, noting that the 87% combined ratio already includes prudence. Let's now move on to the P&C reserves.
Thierry and I met many of our shareholders at the end of last year. We have carefully listened to them, and we have understood some concern about SCOR's reserve adequacy. It was also a listed concern in my presentation at the IRD last September, and we have addressed it. I believe that what we are announcing today will fully alleviate your concern on this topic. I have presented our new reserving strategy during the last IRD, and I will not go through it again today. But this new and prudent strategy has seen already results. Following a thorough annual review at Q4, which covered 75% of our P&C IBNR reserves, our group chief actuary concluded that all lines were at best estimate, including our long tail lines.
In Q4 2023, the P&C gross booked reserves lie well within the range of reasonable best estimate, within the confidence level moved up by a couple of percentage points within the reserve risk distribution. In addition, to completely address any concern, we asked for a third-party review of SCOR's P&C reserve this year. This review has been performed by Willis Towers Watson, which concluded that SCOR Global P&C Claim Reserves are greater than Willis Towers Watson's corresponding best estimate as of 30th December 2023. This obviously confirms all our internal work and our own confidence into our reserves. We are determined to continue with this new reserving strategy. We want to move our confidence level to the higher part of the best estimate range over the next three years. Let's now focus, after P&C, on life and health.
The life and health business continues to generate profitable growth, with a new business CSM reaching EUR 90 million in Q4. This contributes to a new business margin of EUR 466 million over the full year, above our assumption of EUR 450 million. Life and health generates an insurance service result of EUR 64 million in Q4. This is impacted by volatility in risk adjustment, but we are pleased with the underlying performance of the life business. The CSM amortization reaches EUR 81 million, despite an adjustment in the amortization pattern. Similarly to P&C, in Q4, we continue to experience some variation brought by the first year of the IFRS 17 transition. However, on a full year basis, we have amortized EUR 412 million of CSM, which represents 7.6% of the opening CSM stock, and this is broadly in line with the 8% guidance we have provided in the past.
Experience variance is limited in Q4, reflecting an underlying performance in line with expectation. Let's now focus on onerous contract. The life and health insurance service result is negatively impacted this quarter by EUR 50 million from onerous contract. Please bear in mind that this did not come from new business. The main driver for a negative impact of loss component in Q4 is a change in the risk adjustment. For profitable contract, the change would flow through CSM, while for onerous contract, the change directly flows through the P&L. This is essentially related to a change in allocation in risk adjustment, and this is not new business related. We remain confident on achieving our life and health insurance result of assumption of EUR 500 million-EUR 600 million over the duration of the plan, and we will gradually move from EUR 500 million to EUR 600 million over the next three years.
To put things into perspective, as illustrated on slide 18, we have a total of EUR 0.2 billion onerous contracts for life and health versus a stock of CSM of EUR 5.4 billion. Our onerous contracts predominantly reflect historical treaties, which had negative experience in the past. In 2023, the biggest contributor is a portfolio which has been in runoff since 2019. This portfolio, which accounts for 80% of the loss component, is well identified and under scrutiny, and its size remains very limited compared to the profitable contracts. After P&C and life, let's now move on to investment. We are particularly satisfied with the regular income yield, reaching 3.7% this quarter and 3.2% on a year-to-date basis, supported by increasing reinvestment rates and the relatively short positioning of our fixed income portfolio. We maintain a high quality of rating, A+, and a duration of three years.
The reinvestment rate stands at 4.5% at the end of the year, and we maintain a highly liquid invested asset portfolio with significant financial cash flows of EUR 10.2 billion expected over the next 24 months. SCOR will continue to benefit from the still elevated reinvestment rate with a 3.2%-3.6% regular income yield expected in 2024. In forward 2026, we announce our ambition to protect and activate our French DTAs in the future. We have published an expected 30% tax rate over 2024-2026. In 2023, we are in line with this guidance. During the transition period, we expect the corporate tax rate to remain around 30%, but it should gradually decrease. Over the last quarter, taking into account the strong growth profitability and the favorable P&C reserve review result, we have decided to build prudence into the execution of the recovery plan of the French DTA.
This explains the high effective tax rate in Q4 of 49% and the full year tax rate of 35%. Adjusted for this one-off prudence, the full year tax rate would be close to 30%, and we therefore maintain the assumption over the forward 2026 period. Our liquidity position is strong and continues to improve with EUR 2.2 billion of cash and short-term investment at the end of 2023 and positive cash flows of EUR 588 million in Q4 generated by our two business units. In P&C, positive cash flows are driven by a strong inflow of premium in Q4. In life and health, cash flows are positive by EUR 23 million this quarter, bringing the full year life and health cash flow to a break-even level. This is actually better than our guidance of minus EUR 100 million cash flow for 2023.
We are well on track to deliver the target of above EUR 1.5 billion of operating cash flows by the end of the plan. Over 2023, the economic value is up 8.6% at constant economics, reaching EUR 9.2 billion. As mentioned during the IRD, the economic value increase is driven by the strong shareholder equity growth. We therefore confirm our ambition to grow our Tier 1 capital. I would like now to comment on the evolution of our solvency ratio, which stands at 209% at the end of Q4, at the upper part of our optimal range. This represents three points of increase versus the 206% solvency ratio at the end of Q3. In Q4, we had a positive capital generation combined with less capital deployment.
During the January 2024 renewals, we achieved the growth rates we wanted and grew in the lines that we targeted with higher margin than we expected, which is really good news. As a result, our year-end solvency ratio reflects a lower capital consumption than we expected. The capital generation linked to the capital deployment in 2023 is not yet fully reflected into our 2023 solvency ratio. This will be reflected in 2024 capital generation. Over forward 2026, our ambition is to decrease our financial leverage to below 20%. We are on track to achieve this objective. Our financial leverage is reducing thanks to the strong net income generation in 2023. As a conclusion, I want to convey a simple message. The underlying performance of SCOR is very strong.
We deliver and we achieve our assumption and targets for 2023, and we stay focused on the delivery of the forward 2026 plan. We believe that we are in a strong position to deliver our forward 2026 target and assumption. All targets and assumptions remain unchanged. As usual, there are more details in the appendices, and we will have a Q&A session to address your questions. With that, I will hand over to Thierry. Thank you, François. As a conclusion, I'm very satisfied with what we have achieved so far, and I feel we are hitting the ground running for executing on our forward 2026 plan. Now, let's move on to the Q&A. Thomas, over to you. Thank you very much, Thierry. On page 31, you will find the forthcoming scheduled event. With that, we can now move to the Q&A session.
Can I remind you to please limit yourself to two questions each? Thank you. Thank you. If you would like to ask a question, you may signal by pressing star one on your telephone keypad. Please make sure you're. And we have the first question? Yes. We'll take our first question from Will Hardcastle with UBS. Hi. Thanks, everyone. Quick questions on reserving first up. I guess this reallocation, the bulk provisioned casualty, presumably that discount benefit is going to unwind going forward. We are experiencing the technical difficulties. Thank you. Pardon the interruption. Are you able to hear us? Can you hear me? Mr. Hardcastle, please hold just a moment. Are the speakers able to hear us at this time? Please stand by for just a moment. Okay, Arteo. Can you hear us? We can hear you. Are you able to hear us? Yes, we can now.
Can we move to the first question, please? Yes. Give me just a moment. We'll take our first question from Will Hardcastle with UBS. Thanks, everyone. That was quite a suspense. I guess with respect to the IFRS 17 stabilization measure, first of all, on reserves, I think if I understand this, it relates to an underestimation of direct and facultative premium and effectively a true-up for the year. And therefore, if I sort of split that uplift across the year, it's sort of an added point or so for the full year. Would this have been in that initial 87% guide? And that's another one-point uplift, but you've found another point somewhere to maintain the guidance, if that makes sense. And then on the, I guess, the second question is related to the life re. Can you just talk me through? You mentioned the 7.6% on the CSM amortization.
I guess within that EUR 5 million-EUR 600 million range of insurance service result, is that sort of what you were touching on there? It's going to be working their way up, I think was the word, as the years go on. I guess the point here is we should be assuming midpoint lower level, not DAR-1 specifics, but towards the end, the exit rate might be closer to the 600. Is that correct? Thank you, Will, for your two questions. They are a little bit correlated. So I think it's interesting. I mean, of course, you focus on the P&C, but I think it's interesting to understand what we do on what I call stabilization measures for IFRS 17.
You understand that as new CFO of the group appointing the year of transition to a complex and new accounting norm, it is my duty to take a stabilization measure as soon as I think it is appropriate. I do this proactively and in a very transparent way. Each quarter, I'm giving the details of these measures. The aim is really to reduce what I call the accounting noise in 2024. We have done this in Q2 and Q3. You can see this in Q4 in P&C and life. That's clearly the case. We have a recalibration of the new business CSM. That's on one part. On the combined ratio, what we did this quarter, we have 3.8 points in the Q4 attritional loss and commission ratio associated with an adjustment of the CSM amortization pattern on non-proportional cat ratio.
So this includes some catch-up from prior quarters as well. And I mentioned it during the speech. You have also one-off technical item. It's a one-off technical income, positive impact from interest on cash deposit, and that's coming from a commutation on a large multi-year contract at the end of the year. So if you take this into account, now adjusted for this, again, we maintain our expectation for 2024, a combined ratio below 87, including our buffers. On the life and health side, so as you see, the amortization rate of the CSM stock in 2023 for the full year is at 7.6%. So we maintain that's close to the guidance of 8%. We don't change this guidance. As you will see, and I guess we'll have also questions during the Q&A on this, we observe some volatility due to the loss component effect this quarter.
We also adjusted a little bit. We took some stabilization measures on life this quarter. Everything included, if you take this into account, we maintain our assumption over the next three years of an insurance service result for life and health between EUR 500 million and EUR 600 million. And to your question, we are gradually moving from EUR 500 million in 2024 to EUR 600 million by the end of the plan. So I'm more precise in the answer. If you'd like to move to the next question. Thank you. We'll go next to James Shuck with Citi. Thanks for taking my questions. Hopefully, you can hear me. My first question is on the solvency roll forward. So I think you showed OFG, so own funds generation. Still have technical difficulties to listen to the questions. Okay. Pardon the interruption. Are you able to hear us now? Yeah, François. Can you hear us?
Can you hear the questions now? Please stand by just a moment. Pardon the interruption. I do have those speakers reconnected. Are you able to hear us at this time? We can. Yes, we can. Okay. We're going to James Shuck with Citi. Please go ahead. Excellent. Thanks so much. So my question was on the own funds generation and the increase in the SCR. So the own funds generation for the full year is EUR 627 million. Could you just help me understand how that compares with the net income of EUR 812 million? What are the kind of reconciling items between that? And then kind of related on the SCR, is this key because that's 14 points of capital generation. It's quite backward-looking, I think, based on the comments.
I don't fully understand why the capital allocation has gone up from the reserve buildup, but perhaps you could explain that a little bit to me. And then my second question was just around the margin bill, please. So could you just clarify that what actually was added to the reserve resiliency is the difference between the discount rate and 6.5%? So that was in Q4 and across the full year. Thank you. Okay. Maybe the first one I'll take is on the SCR. As you know, the capital deployment is really the change in capital requirements due to the business updates in the internal model. This includes, obviously, changes in the cash flow, but also the expected planned new business. And overall, the 14% is really a mixture of the things, but mainly coming from leaning in the hard P&C market.
That's why we are above the historic capital deployment average. If you look at the own funds generation, I think we had strong contribution from new businesses and in-force, while both were expected by the impact of the experience variance from life and P&C. When you compare the results to IFRS 17, you have the same variance. For example, on P&C, the man-made, in particular in Q2, and life and health was impacted by operating assumption changes. There's also some effects on the risk margin. Overall, if you adjust for this, you would expect roughly EUR 900 million of own funds in 2023 or going forward, accounting for 22 solvency ratio points. When you look at capital generation and deployment plus dividend, you expect to generate roughly a few points per year on a normalized basis. Thank you, Fabian.
Maybe on your second question, James, I just want to say that in Q4, as you saw it, there is no reserve strengthening coming from the P&L. So there is no reserve strengthening. All the positive developments on Nat Cats are flowing into the net income. And we added, but it's a marginal amount, we added a very small buffer into our P&C reserve this quarter. Then on your question, you can see 2.3 points of additional discount impact compared to Q3 2023. And that's really linked that's what I said. That's really linked to a reallocation of our reserves. I suggest we move to the next question. Thank you. We'll go next to Kamran Hossain with J.P. Morgan. Hi. Hope you can hear me. It's Kamran Hossain from J.P. Morgan. Two questions. The first one is just on the reserve review, which I think is very welcome.
I'm very pleased that you've kind of got a third party to take a look and kind of give the statements they've given. Could you maybe quantify on the reserve confidence level? You said it's gone up year on year. I'm just intrigued kind of how much it's gone up and kind of where it sits now. If you're not going to disclose it today, kind of at what point you might kind of get around to doing that because I think it's very useful for us. The second question is on kind of the areas that you're focusing on for 2024. 2023 has been a sensationally good year for the company, and things have gone very well. What are the areas of focus for you as a management team in 2024? Are there any areas you're looking to improve, build on, grow, shrink, etc.?
Just very interested in the kind of headlines on that. Thank you. So thank you. Thank you very much, Cameron, especially for the nice compliment. I mean, you guessed well. I will not answer to the exact positioning within the best estimate range. What we confirm is that we move up by a few points within the best estimate range compared to last year, 2022. So that's the case. And confirm also that the ambition by the end of the plan is to move to the higher part of the best estimate range. And we want to at least build EUR 300 million of buffers into our reserves. On the 2024 priorities, maybe I'll give the floor to Thierry. Thank you, François. So I think I answered it already in some part in my initial words. So a few points still. Again, partially repetitious.
But we have in our forward 2026 plan, we have defined our areas to modernize SCOR. And I would like to highlight three. One is ALM. So we said we need to evolve our ALM from a more static to a more dynamic ALM. We have hired already the first person in the area. And as we speak already, we have begun on that path. The second area of modernization was on risk partnerships. That's the way to have third-party capital participating in our distribution and underwriting capabilities. We have also continued to strengthen that area. And we'll soon announce the head of that business. The third area I would like to mention is capital allocation. I think you have heard us talk a lot about capital allocation already. We are, however, continuing to improve how we allocate our capital.
So we are refining our views on diversification and return on capital deployed. And we are looking across our book of business to constantly improve our business. So I mentioned this over and over again, but it's really a journey we're on. And I'm actually quite satisfied with where we are already. On an operational level, we have our EUR 150 million target of cost savings. So that will require quite a lot of transformation and simplification. We have a particular focus on decision-making. We have to make sure we are close to the clients, that decisions can be made close to the clients. We're also looking at the efficiency of our systems and, of course, the use of data. On the underwriting side, we remain actually committed to the areas we have defined so far. So the growth areas are very clear, structured solutions across life and health and P&C.
In P&C, we have growth areas defined in some specialty lines. We are also looking generally at innovative new types of products that can help us grow. I would like to mention those three that have a particular focus and where you will see actions in the months to come. Thanks, Sherry. Next question, please. We'll go next to Darragh Quinn with RBC Capital Markets. Hey. Afternoon, everyone. The first one is just on life and health. It's your comment that you expect the insurance service results to grow gradually from EUR 500 million to EUR 600 million. Because if I look at what you delivered in 2023, just from the amortization of CSM and risk adjusting alone, that's something like EUR 540 million already. Presumably, you're expecting positive experience variance on top of that as well.
So why do you think that the gradual increase of 500 is appropriate, or are you just being really prudent over there? And the second one, can you maybe explain what's driving the regulatory model change in that SCR increase? Because it feels as though you spoke about improving diversification benefit, but at the same time, you're already way above your peers. And I'm not sure whether there's any regulatory risk or not of that diversification benefit being brought down. So any details behind that, please. Thank you. Thanks. Thank you for the answer to all your questions. I will take the first one on our expectation for the contribution of life and health insurance service results next year. So as you saw in Q4, again, part of what I call the IFRS stabilization measures, we took some action on the life and health CSM amortization.
It relates to refinements in our methodology for CSM amortization. Before—Hello? Pardon the interruption. Just a moment. Are the speakers able to hear me at this time? Pardon the interruption. Are the speakers able to hear me? Please stand by as we reconnect our speaker line. Just a moment. Hello? Could you hear us again? Pardon the interruption. Yep. Your line is reconnected. Please continue. Okay. So Darragh, are you still on the line? Yes, I am. Yep. Yeah. So I don't know. I mean, since we have really technical issues here in Paris today, so I don't know what you have listened to in terms of answers. So if you listened to my answer or already it cut, the line was cut for Fabian's answer. So tell me, and we'll start from where we missed. We missed everything, I'm afraid. Sorry. Okay.
It was a good warm-up for me to answer to your question. So, on life and health, basically, what you see in Q4 on the life and health CSM amortization, it's also what I call an IFRS 17 stabilization measure. Here, what we did, it's related to refinements in our methodology for CSM amortization, again, for life and health. Before Q4, we used a simplified approach. It has been refined to be more accurate on a full-year basis, in particular, with more granularity. So, this has a true-up impact in Q4. There is no specific seasonality. So, for a quarterly run rate, you can consider one-fourth of the full-year amortization.
So if you take this effect into account, plus also, we prefer to remain prudent on the loss component effect that we see in Q4 and the potential volatility. We prefer to guide you at the low part of the range, EUR 500 million-EUR 600 million in terms of life and health insurance service results for 2024, instead of leaving a midpoint in the range. And now I will give the floor to Fabian for the second point. Thank you, François. So I think you have a misperception that the model changes had a big impact on the diversification benefit. What we have done this year is the usual set of model changes to improve our use cases. Thierry mentioned a few of them: capital allocation or ALM. Our model is on the constant inspection by our regulators, and we have their dialogue almost on a daily basis, I would say.
One model change I can mention for the ALM use case, for example, we model now a new currency, which helps us also to improve our ALM going forward. Next question, please. We'll go next to Ivan Bokhmat with Barclays. Hi. Good afternoon. Thank you very much. I wanted to ask the first question on the dividend. And I was wondering, given that you put together the solvency ratio, which is within the optimal range, and the economic value growth, thinking a bit more long-term, should the growth in dividend in the future be somehow linked to the 9% economic value growth ambition? I.e., would it be are you going to be surprised if we increase that dividend by 9% per annum? Or maybe you think that there is even more room for special distributions over that time?
Maybe the second question, just wanted to ask you about the CSM. I mean, the overall stock of CSM, I think, throughout this year had been largely flat in life and slightly down in P&C. I was just wondering if you have any thoughts on the trajectory of that beyond just talking about new business CSM. Thanks. Thank you, Ivan, for the two questions. On the first one, so I think Thierry was clear in his speech to guide you on the way we decided to determine the EUR 1.8 for 2023. Again, keep in mind that we introduced a new capital management framework last September. The beauty of this new capital management framework is now that forever, at least, we are going to pay a cash dividend of EUR 1.8 per share.
So you have to value this year, which is a significant change in terms of culture for us. In the future, if you link the decision of EUR 1.8 to the capital management framework, we said that it's linked, as you said, to the growth of DV, so reference could be 9% per year, as well as the solvency ratio. And of course, opportunities to redeploy capital given the attractiveness or not of the market. So there is not yet, I would say, a mechanical rule defined by the management and proposed to the board. So let's wait a little bit before we could move in a more guided approach of the growth of the dividend. Keep in mind that what we said in this capital management framework is that you have the regular dividend, so the one with the ratchet on the floor.
And on top of it, if needed, if we want to share also the good fortune of SCOR, we will add a special dividend or share buyback in the future. The second question, I agree with you, flat stock of CSM for life and health. We have some, I would say, recalibration of the new business P&C CSM in 2023. It was clear in the strategic plan, in the presentation of September 2026 or forward 2026, that the CSM stock over the next three years is going to remain relatively flat. And the growth of the EV is coming from the growth of shareholder equity, coming from two effects. The first one, that's the generation of strong net income, as we see in 2023. And also, if you remember, I mentioned also the effect of the reduction of the amount of annualized losses on the fixed income portfolio.
So combined with these two effects, we should generate a significant amount of hard capital over the next three years, which will reduce the leverage ratio, but again, with a flat assumption of CSM over the next three years. Next question, please. We'll go next to Ashik Musaddi with Morgan Stanley. Thank you, Ann. Good afternoon. Just a couple of questions I have is, first of all, Thierry, is it possible to get a very simple way of thinking about capital allocation? I mean, because there are quite a few measures, cash flow, solvency to capital generation, earnings, I mean, how are you thinking about capital allocation? So in terms of dollars or anything, if you can give, "Okay. We are generating $100. This much is going to dividend. This much is going towards growth, and this much is going to buffer," or any such thing.
That would help us get a bit of feel about how you're thinking about capital and capital allocation going forward. So that's the first one. Second is, thanks a lot on working on the solvency ratio to get it to 209 again. Is there any further levers that you can think that you can pull in the near future to get it more towards 220% or higher, which are pretty straightforward ones, etc.? So any color on that would be very helpful. Thank you. Thanks for the question, Ashik. So our intentions regarding capital allocation are quite clear, but we, of course, remain and must remain flexible, which is why I very often use the word dynamic in the way we look at it. But you're absolutely right.
We have defined a threshold at which we write new business, below which we estimate it's not worth to write it, and we would rather distribute this back to the shareholders. Now, this hurdle rate, obviously, is fluctuating, and that's obviously an exercise that we are doing on a regular basis. The whole model is quite complex, which is why I'm insisting that we need to get more refined in the way we look at it because the economic capital is actually the one we need for steering. The economic capital depends a lot on diversification, as an example. So that is a constantly changing pattern. And it also depends, as you know, on our retro program, the quality of our retro program. So we constantly adjust for all these parameters to actually find at each point in time the right hurdle rate to write new business.
And I would like to end on the last item that is actually not a detail, but it accounts for as much as 50% of the decision because you will appreciate that not every decision is done purely on an economic basis. A lot depends as well on underwriting judgment, what's our view on a particular risk. And that's where, for example, I mentioned geopolitical risk. Today, we would get very high prices on some of those risks. But our view is very clear, and we do abstain, even though purely economically, we could theoretically make a case. So that's important to keep in mind. I hope it answers your question, even if not totally precise. But for us, that's exactly how we apply our capital management model. On your second question, Ashik, on your second question, so on the solvency ratio, let me reassure you.
We deliver a 209% solvency ratio at the end of the year. It's in the upper part of the optimal solvency scale or range. So we are very satisfied with this solvency ratio, and there is absolutely no concern at SCOR with this level. Having said this, you can imagine all the solutions that we could implement if we would need to increase suddenly our solvency ratio. It could range from a change in the asset portfolio, in the business mix, or through optimized retrocession covers. Of course, all those solutions will have a cost, and there is no need today to pay this cost. That's very clear. Thank you. Thanks a lot. Next question, please. We'll go next to Vinit Malhotra with Mediobanca. Yes. Hi. Thank you. I hope you can hear me as well.
So just one question on slide 15, please, where the reserve buffer has been noted, and it seems that under some conditions, you will add the buffer. Could you just elaborate a little bit? Is it just that if profitability is better, then you will just make the buffer? Would you think because one of the, of course, recent topics has been that your new business is being written with more towards, let's say, upper end of the best estimate. So just curious on that slide 15 buffer comment. Second question is that there's a lot of emphasis on diversified growth, and that should also imply that as you grow in this stage of the cycle, there's not much SCR growth, and so solvency will gradually, naturally, by this means, increase. Is that how you see it as well? Thank you. Thank you. Thank you, Vinit.
Before giving the floor to Fabian, I will answer to your first question. So on slide 15, you see in the middle, there is a box that I like, CFO decision in accordance with the group profitability. So that's where we decide the buffer. So keep in mind what I said since Q2. So the amount of buffer, we act with determination with Thierry each quarter to add buffer. It's not automatically linked to the combined ratio and the performance of P&C. It's also linked of course, that's the primary link, but then that's linked also to the overall profitability of the group. So here, I confirm what I said. We have a marginal amount of buffer that has been added in Q4. We will continue, expect. Each quarter to see buffers again if we can finance them.
We act with determination with a target of at least EUR 300 million by the end of the plan. On your growth and diversification, I mean, it goes back to a bit what Thierry has said. We try to allocate the capital to less capital-intensive lines, but then there is the effect on the SCR coming from this, where we see the SCR more as a constraint to keep the solvency ratio in the optimal range. That's how we do the optimization. Okay. Thank you. Thank you, Ivan. Thank you. Thank you, Vinit. I think this is our last question. Before giving the floor back to Thomas for the conclusion, I know, Andrew, you are on the line, but very discreet during this call. You. So we delivered record results. It's almost for you, for your last call with SCOR.
I would like to tell you the immense respect I have for you for all your questions and analysis on SCOR and the industry as well over the last years. I think you helped us to move in the good direction. So I wish you all the best for the future. So before we conclude, I would like to thank everybody today on the call. As you saw it, results are good. Reserves are good. Solvency is good. I think we guided you confidently on our 2024 outlook. With this, Thomas, it's for you. So thank you very much all for attending this conference call. The Investor Relations team remains available for any upcoming questions. So please do not hesitate to give us a call. As a reminder, SCOR will hold its Q1 2024 results presentation on Friday, 17th of May, with a call at 9:00 A.M., 9:00 A.M. CET.
Our AGM will be held on the 17th of May starting at 10:30 A.M. With this, I apologize again for our technical difficulties today, and thanks for your patience. I wish you a good afternoon. Thank you. Thank you. This does conclude today's call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.