Good afternoon, ladies and gentlemen, and welcome to the SCOR Group Q1 2022 results conference call. Today's conference 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 to limit the number of your questions to two. At this time, I would like to hand the call over to Mr. Yves Cormier. Please go ahead, sir.
Good afternoon and welcome to SCOR Q1 2022 results call. My name is Yves Cormier, Head of Investor Relations, and I'm joined today on the call by Laurent Rousseau, CEO of SCOR, as well as the entire executive committee. Can I please ask you to consider the disclaimer on page two of the presentation? I would like to hand over to Laurent Rousseau. Laurent, over to you.
Thank you, Yves, and welcome everybody. Before giving the floor to Ian on the Q1 financials, I would like to step back and give you my perspective on the results and the environment. Q1 2022 was marked by a combination of exceptional events. The sustained level of natural catastrophes for the past five years has compounded with the ongoing pandemic first, and more recently with geopolitical and macroeconomic tensions on a scale not seen for many years. This translates into another difficult quarter and impacts the way we run our business and our transformation. You will remember when I took over as CEO, I committed to two things, engagement and transparency. I said I would share my views on where the group stands, as well as the opportunities and the challenges we face. This approach drove our profit warning on the 15th of April, showing both transparency and engagement.
Having acknowledged a difficult quarter for the Group, the question now becomes, what do we do about it? How do we address performance and challenges head on? First of all, we do so by stepping up our actions to reduce volatility and improve our profitability. This is why before communicating on our upcoming strategic plan, we will accelerate the refocus and action plan to deliver on Quantum Leap. Point one, we have communicated on some actions in January, but we have decided to be even more ambitious and set the bar higher. Namely, we'll proactively target to 15% reduction of our CAT PML by year-end, which is a further reduction compared to our initial target of -11% announced for the first of January renewals. Second, we aim at reaching a better balance, taking a more conservative view on CAT.
We should not assume that the past five years are exceptional. They're probably the new normal. Instead, we should run our business, assuming these past five years are indicative of the new normal, and manage our portfolio to deliver on our 8% CAT ratio. The volatility of the CAT business we are looking to address here is not so much in the tail, but more in the belly of the redistribution. We're more talking here earnings at risk than capital at risk. Third point, reducing volatility also applies to our life mortality book, but we are still in the middle of the pandemic event. We are looking at all options and continue to engage with our clients to improve the profitability of the profitability and the performing treaties and pushing for management actions.
After the volatility management, we also proactively review our presence and performance market by market, line of business by line of business, and we will raise the profitability requirements where it needs to be. The current positive market environment allows us to do so, and we take advantage of it proactively. This is true both on the P&C side, as shown by pretty strong first-of-April renewals, as well as on the life side. Our view is that we are at a point in a cycle where margins on new business are very attractive and where back books require proactive management. Last but not least, we will increase cost discipline. We need to remain nimble and agile and be the most adaptable in a fast-changing environment. I want to ensure that we remain so as we grow selectively the franchise.
This is a fundamental competitive advantage, but one that perhaps we can still fully leverage on. Beyond the volatility reduction performance, profitability improvement, I also want to talk about the balance sheet. We need to continuously optimize our capital structure and proactively manage the balance sheet. Interest rates rising will be a bumpy journey, bringing volatility, but ultimately, it is leading to a better investment income. It implies some positive, what I call wealth effect, on our internal model solvency ratio. We take further actions to make this capital more fungible, better allocated, and less costly. Reducing our cost of capital remains a priority. This is how you should interpret the two achievements this quarter. First one, we restructure our Swiss and Irish entities. We used to have one P&C balance sheet in Switzerland and one life and health balance sheet in Ireland.
We now have one composite and diversified balance sheet in Ireland, which is much more efficient from a capital and a cash point of view. The second measure is a significant reduction of letters of credit in the U.S. As a conclusion, we have been stepping up in 2022 the refocus and action plan required to pave the way to the upcoming strategic plan. Before talking more about the strategic plan, I will let Ian comment on the Q1 results.
Thank you, Laurent, and good afternoon, everybody. Let's go to slide nine for the key financial highlights of the Q1 2022 results.
This quarter, SCOR demonstrates its resilience in a challenging context and its capacity to absorb shocks while seizing growth opportunities for its franchise. At constant FX, gross written premiums increased 9.7% compared to Q1 2021, amounting to EUR 4.7 billion. At the same time, the group recorded a net loss of EUR 80 million, which illustrates the volatile environment in which we operate. P&C reports a strong growth of 20.2%, benefiting from both the solid growth of specialty insurance by 28.7% and the successful treaty reinsurance renewals of January and April 2022. On profitability, the net combined ratio stands at 103.7%. It is heavily impacted by the combination of the exceptional events.
Among these, the nat cat activity was high in Q1, with a nat cat ratio standing at 10.1%, impacted by Australian floods and European wind. Our combined ratio was also impacted by the other exceptional events, including the EUR 85 million prudent provision related to our exposure to the war in Ukraine and its consequences, as well as drought in Brazil and an unfavorable arbitration decision on a U.K. liability segment. The combined impact of these three events is a 9 percentage point increase in combined ratio. In P&C, I would, however, also like to focus upon the results of our April reinsurance renewals, which were strong. The total reinsurance portfolio records a 19.6% growth, mainly driven by treaty global lines, with new business gained notably in marine and energy in Europe and also in IDI and credit and surety.
At the same time, we continue to work on the repositioning of our P&C portfolio, reducing the nat cat exposure and focusing upon profitability. As Laurent Rousseau said, the group now projects a reduction of 15% of the nat cat PML at the end of 2022, and at the same time, we've recorded a 4.5% price increase on treaty reinsurance renewed to date, resulting in a priced net combined ratio improvement of 0.5 percentage points on the portfolio renewed. Now moving on to life. Life growth written premiums increased 1.1% at constant exchange rates, and the growth is mainly driven by the continued franchise expansion in Asia. The net technical margin stands at 1.4%, highly impacted by COVID-19 claims.
The EUR 195 million COVID-19 claims charge reflects both the high number of COVID-19 deaths in Q1 2022, as well as EUR 62 million related to deaths in prior quarters, mainly from Q3 2021, where there were differences in the age and regional distribution of the population impacted. The underlying life technical margin remains solid. On the investment side, we have successfully implemented IFRS 9, which importantly does not change valuation in the balance sheet, which is at market value, but it does change how movements in value are reflected in the P&L. As a result, SCOR generates a return on invested assets of 1.8%. Under the IAS 39 standard, the return on invested assets would have reached 2.1%, a level broadly comparable with the 2.2% recorded in Q4 2021.
Underlying regular income is increasing, and the reinvestment rate now reaches 3.1%. If we look briefly at other key financials, group shareholders equity remains strong at EUR 6 billion, resulting in a book value of almost 34 EUR per share. The net operating cash flows were negative in Q1. This is mostly related to the payment of COVID-19 claims, which had been provisioned in 2021. Nevertheless, liquidity remains very strong at EUR 1.7 billion. Most importantly, the solvency of the group remains very robust, with an estimated Q1 Solvency II ratio of 240%. With that, I hand back to Laurent Rousseau.
Thank you, Ian. Let me come back on the articulation of our action and refocus plan for 2022 and our upcoming 2023/2025 strategic plan. With hindsight, I do believe it was the right decision to postpone our Investor Day, initially planned end of March. Since then, some of the structural uncertainties have not clarified or got any simpler. Our planning was prepared before the outbreak of the war in Ukraine, which has amplified uncertainty, making all the references used for inflation, interest rates, economic growth, and market cycle susceptible to higher volatility. It was necessary to be flexible and adapt our strategic plan. The short-term headwinds need addressing, and we are playing defense before playing offense.
The third reason is we continue to make good progress on IFRS 17, and we firmly believe it will crystallize value, in particular of our life business that is not today on our balance sheet. We foresee an economic value comprised of equity and CSM above EUR 9 billion. Our engagement with the market will be framed by IFRS 17. We will keep our two-step approach with a strategic update end of July with our Q2 results, and then the full Investor Day with our Q3 results.
You can count on us to continue engaging proactively and transparently. On this, we can move to the Q&A. On page 24, you will find the forthcoming scheduled events. With that, we can move to the Q&A session. Can I please remind you to limit yourself to two questions each? Thank you.
Thank you, sir. Ladies and gentlemen, to ask a question, please press star one on your telephone keypad. We do have our first question from Andrew Ritchie from Autonomous.
Oh, hi there. Could you just give us a sense as to whether you were surprised by the level of nat cat loss in the quarter? I guess I'm trying to frame it in the context of the fact you did quite a lot of remedial work last year in reducing cat exposure, and yet, you know, you've ended up quite significantly above budget. I appreciate there were some large events. They weren't super large events, so maybe just frame the nat cat experience versus kind of work you've done already. Secondly, I'm still struggling to understand how you would like us to think about the underlying or normalized combined ratio profitability in Q1, given that you haven't specified some of the sort of noise factors that you highlighted.
Can you give us a sense as to where that's running at? And also, if I could sneak in on that point, why did you call out an arbitration claim? I presume that is effectively an adverse PYD. I'm not sure why you're suggesting it's some kind of one-off. Thanks.
Thank you, Andrew. Jean-Paul takes all three.
All right. Thank you. Thank you, Laurent. On the nat cat question, yes, we were surprised. The events, you know, as mentioned, that the events driving this are the Australian floods, which represent a EUR 77 million net impact to us this quarter. It was, you know, several events. It was driven by particularly one contract we had in Australia, which is heavily exposed to this type of peril, which was a multi-year transaction. The sort of curtailing of PMLs that we had done did not, you know, concern this contract. The other big impact was the European windstorms, which represent a EUR 43 million net impact to us this quarter. Again, several events.
Here, this means that, you know, we took advantage of some of the payback we received from the flood events last year. Then what it means is that we need further price increases and probably curtailing further some of the treaties there. That was what we saw from the Q1. On the rest, you know, it was sort of minor impact as well about 1 point of deterioration from the 2021 events. On your second question on the normalization. We have a deterioration of about 9 points on the commission plus attritional loss ratio compared to last year. Eight of those 9 points are explained by three, let's say, exceptional events.
One is the war in Ukraine, for which we provisioned EUR 85 million, which represents roughly 4.7 points of attritional loss ratio. Then we have the drought in Brazil, which is not considered cat, but you know, is very similar to a cat. Then we have this arbitration. It doesn't relate to COVID or any recent events. It is an arbitration dating back to, you know, several years ago. I think it's about seven or eight years ago, for which a negative judgment was just rendered this quarter. When we combine all of these, you know, it adds up to about 8 points.
If we normalize for 8% cat ratio and remove those three elements, we would be back towards a 94-ish combined ratio.
Okay, thanks.
Our next question comes from Kamran Hossain from J.P. Morgan.
Hi, afternoon. First question is just on the life business. Just interested in the, I guess, the charge relating to the third quarter last year. Just to help us get comfortable, could you maybe talk through what assumptions kind of came true for the third quarter of 2021, and why we should feel kind of okay with the assumption made for kind of Q4 and Q1 2022? It seems like in Q4 particularly, there's been quite a large element of late reporting. The second question is just on, I guess, on the PMLs. What return periods are you reducing exposure? I guess, you know, there have been, you know, recent nat cats, it's more kind of been an issue of frequency rather than severity.
Just interested in kind of, you know, what return periods you're targeting in order to reduce the P&L volatility. Thank you.
Thank you. Frieder will take the first one and, Jean-Paul, the second one.
Q3 2021 was a quite unusual quarter in the pandemic in that in the U.S., we had a very different age distribution of COVID deaths, and we also saw a very different regional distribution of deaths. Age-wise, the average age of COVID deaths fell quite a bit compared to previous quarters and also later quarters, and we've included a chart in the presentation showing this. The regional distribution moved much more towards the South and the Midwest compared to earlier and later quarters. Both of these are factors which increase our exposure. We saw some of this, of course, in Q3, but also in Q4 when we increased our COVID provision somewhat to take those very specific factors into account.
Claims which were reported, and they often come with a time lag of up to six months, and they come in batches. The claims which came through in Q1 exceeded what we had expected. You know, we think this can really be largely attributed to the very specific features of the COVID experience in that particular quarter. Since then, the average age of COVID deaths has returned back to previous levels, and also the regional distribution is much more comparable to previous quarters.
In addition, as we show on the slide, and as I'm sure you're aware, the number of COVID deaths has fallen quite steeply towards the end of Q1 and is now at a much lower level. We expect Q2 to be a more benign quarter in terms of COVID experience.
Okay, thanks.
On your second question, let me try to answer, but if I haven't correctly answered your question, please come back. I think the PML for the different events, as such, is relatively low. The return periods are relatively low. What's unusual, for example, in Australia, is the severity of the single event in a given area, for example, in Brisbane or in Sydney, is quite extreme. You know, when you look at it from an Australian point of view, it's not so. You know, the Australian floods were actually, you know, potentially five events that accumulated over a significant period of time with locally some rainfall that was, you know, with a return period of over 100 years, you know, never seen before.
Similarly in Germany, where we, you know, the European windstorms were not severe as such, but it was a combination of several days of a windstorm which accumulated into these claims. What we're seeing is you know, the frequency of small to medium-sized losses, which is something that, you know, why we believe the pricing that we're seeing on the property side is not sufficient. That was an illustration of this quarter. I don't know if I answered your question correctly or not.
Yeah, I think it was Kamran Hossain. I think it was kind of more getting at whether you're reducing kind of extreme kind of tail risk, whether you're looking at kind of PMLs at kind of one in 200 + level and reducing that 15% or something a little bit closer. It sounds like it's quite a bit closer than that.
Yeah, yeah. No, with the 15% reduction, we gave the PML number, but it's across the board that we're reducing.
Okay, thanks.
It's not just tail events. What we're worried about is, you know, not the tail events as such. It is more the frequency of small to medium-sized losses, which has been what's been affecting our results for the past five years.
Okay, thanks.
Our next question comes from Will Hardcastle from UBS.
Good afternoon, everyone. The first one is on the cat budget. I guess if net cat exposure is reducing 15%, top line at the group level or the P&C levels increasing by 20%, is it, sounds like it's a fair statement, so the cat budget's increased by over 30% in absolute terms, and that's on lower exposure. I guess squaring that, apart from perhaps the acceptance that the budget was deficient before, is there anything else that would narrow that gap between the two to suggest it's not simply added conservatism into themselves? Secondly, I guess, simply, very high level, what's the binding constraint on capital at present? You know, you're well in excess on solvency. Is it rating agency or is cash more of a constraint at present? Thanks.
Okay, I'll take the first one. I think that what really is the key driver is whether the baseline that we've been using, we and the rest of the industry have been using, which is using CAT models that, you know, provide a view of CAT over a 30, 50 year or a 100 year time horizon are really good predictors of what that risk will look like in the future. That's the basis we, you know, we had, let's say for the past five years. You know, we did a study to evaluate scientifically what the impact of climate change would likely be over the next 10 years instead of the next 30 years.
in that, we saw the results being predicted as relatively low. This is not, you know, not aligned with the historical experience. You know, what we're doing now is we're taking a much more pessimistic view of the risk going forward and a forward-looking view of CAT. You know, using the last five years as an illustration of what the climate change effects for the next five years can be expected. That leads us to have a much more pessimistic view of CAT going forward. Your calculations are correct, but I think in the meantime, our view of CAT is become much more pessimistic.
The Q1 just reinforces that pessimism, and I think that will drive some of the actions we will take over the next coming renewals and continue to reduce our CAT volatility.
Maybe, Will, let me add something on that. You know, we spend still an awful amount of time to model, to estimate the CAT budget and taking different time horizons and so on. I think there is a very pragmatic view of running a business, which is to say, can we sustain more what we saw in the past five years? What do we need to do for the, you know, 8% CAT ratio to be relevant if the CAT activity is similar to the one we've been seeing recently. You know, some of our competitors dismiss the past five years and looking at longer-term periods.
I think in running the predictability of our earnings, and not having to normalize constantly, we need to be able to run the business with the volatility we saw in the past five years. It's, I would say, an additional analysis alongside the more normalized view, longer term analysis we do on CAT budget, and that leads to this conclusion. I'll hand over to Ian, even though, Will, would be good if you could specify your second question. We're not entirely sure we got everything of it.
Yeah, sure. I was just thinking about the binding constraints on capital at present. You know, your solvency is at 240%. It doesn't feel like it's that. I guess, is rating agency or cash more of a constraint than the solvency at present?
Yeah. Thanks, Will. Yeah. I mean, the solvency ratio is strong and we're of course happy with that. In terms of that capital position, we're comfortable with it. I mean, we apply our capital to accretive growth, and we see good opportunities in the market. We also see a volatile environment, as we've described. There's a significant portion of the increase in the solvency ratio has come from the macro environment. We see a volatile claims environment, so holding a strong solvency ratio as such is not a bad thing. You're right. There are other capital measures, and these are more of a constraint and tend to bite first, in fact, at present.
On the rating capital side, yes, that's true. That is more of a constraint at present. We have to be under those measures. It's not economic and we need to manage within the rating capital position. That said, we still maintain a buffer over the AAA level on an S&P basis to secure the AA level of rating that we provide to our clients.
Our next question comes from Thomas Fossard from HSBC.
Thomas, do you have a question or should we move to the next question?
Yeah, sorry. Sorry, I'm there. I was on mute. Yes, good afternoon, everyone. The first question was related to your life re business, just to better understand the underlying performance of the book at the present time. Frieder, if you could comment on what would be the underlying net technical margins, or maybe tell us how much you benefited in Q1 from management actions or reserve releases in order to offset the COVID-19 mortality additional claims, in order to work out where you stand currently on the net technical margin. The second question would be related to your approach of reducing property cat and reduce the volatility of the book.
I fully understand what you're doing in terms of re-underwriting the business. Now, I've always been told that actually a property cat was the, you know, kind of, somewhat the plain vanilla business that you needed to offer to clients in order to access other business, maybe less volatile or maybe also more profitable on your metrics. So the question behind is how much you can retrench from property cat in different geographies before this is starting to make your top line growth or, you know, like, staying with clients or gaining new clients a bit more tricky going forward. Thank you.
Thanks. Thanks, Thomas. Our expected technical margin or assumption excluding COVID is in the range of 8.2%-8.4%, and that's something which we maintain for the time being. In Q1, the actual performance of the book has been better than this, somewhat close to 12%. It has benefited from a good performance of the book ex COVID, really in pretty much all areas. We have, as you have rightly indicated, taken some management actions on underperforming treaties, and we continue to work closely with clients to improve the performance of business where it's not in line with our expectations and our profitability targets.
We continue to benefit from our ability to accelerate earnings as a consequence of, you know, being generally in a strong reserving position. Specifically, now we have been able to increase some reserving pads as part of the life in force transaction we did last year. This is all contributing to the strong performance of the book excluding COVID in Q1.
Thomas, regarding your second question, I think what we're trying to do is, I think there's two answers to your question. First, on the cat side, we're trying to be more selective as to who we give our cat capacity. The reduction that we're applying is not necessarily applying to all clients. We're being more selective, and we're providing the cat capacity as a priority to clients that actually offer us other attractive business. The second point is, on the other lines of business that we're trying to grow, starting with global lines, you know, we have a very small current position in most of those lines of business. We talk about marine energy engineering. You know, we're a relatively small player.
You know, to move the needle, it doesn't take us a very, you know, big growth in terms of of shares to gain significant volumes. You know, we're focusing more on excess of loss than previously. We're looking more at some of the quota shares in those lines of business, as the business has been remediated. That's how we're achieving the volume growth.
Maybe let me.
It's through client management, client selection, and I'd say, you know, growth in some lines of business where we're underway currently.
Sorry, Jean-Paul, for interrupting you. Let me add a couple of points on your question, Thomas. For sure, taking on volatility is our business. The day a reinsurer, you know, walks away from volatility, whether it is elemental volatility or other types of volatility, I think, we lose our value add. The question for me is twofold. One is how do you price it adequately? I think we're getting to this point where today, you know, the walk away is indeed a way to make yourself a price maker. We have to walk away. We have to be able to. This is how the cycle works. Until someone walks away, the cycle doesn't play.
Here we can do that in a selective manner, as Jean-Paul responded, so I'm not going to get into that any further. The second point is how do we build what I call a ballast? How do we build a broader base of business which is not cat sensitive and which absorbs the volatility? For me, the question of cat is how to measure, how to minimize the peaks in certain areas, in certain clients, in certain cases, and how to build a broader base. This is how you should look at some of the strong renewals we have been going through. They are non-cat driven.
They are pretty healthy growth, and they, I think they're gonna help us to have this better balance altogether.
Okay, thank you. I will queue for additional questions.
Thank you. We can move to the next question.
Thank you. Our next question comes from Vinit Malhotra from Mediobanca.
Yes, good afternoon. Thank you. First question is, Laurent, you mentioned in quite clarity the balance sheet optimization and fungibility of capital. I'm just putting into context, which on the slide 21 today, and the legal entity optimizations. Are you expecting any capital savings from these? Should shareholders expect something, like the previous French entity, optimization in 2019? Could a capital return happen if possibly you find capital savings? That's the first question. Second question is, just on Ukraine, where it's good to see that you have put out a number here. Could you just comment on what could be the risks from previous conversations around the mid-April time? I remember there was some more scenarios about credit or maybe some more color if you could provide that.
What we're really trying to understand is what could make this worse from your current understanding that this is probably, you know, most of the ultimate, if I understand correctly. What could make this situation worse for you from the loss perspective? Thank you.
Thanks, Vinit. On the first question, maybe I'll take that. The project that we show on the deck that you referred to, this has been a project that's been long in the making. This isn't a sudden or recent event, and has really been driven by the output of our internal model. We're doing two key things here, and it brings two key benefits. What we're doing is, we're transferring the two Irish subsidiaries into composites. Then secondly, we're merging the Swiss entity into SCOR SE. That's what we're doing. On the benefits side.
Firstly, on the capital side, we get group solvency ratio benefits from higher diversification, and then we get local capital benefits as well, as we're able to, for example, cede business from the U.S. to Ireland on the P&C side. That's the first benefit on the capital side. The second benefit is really on liquidity improvement at the holding and at the Irish subsidiary level. If I give an example of that, what it means. At the holding, instead of holding an illiquid investment in subsidiary in Switzerland, the holding is gaining hard assets from the merger. This brings working capital comfort and flexibility into the holding perimeter. I mean, these are things that we're able to do as a reinsurer to optimize the position.
It doesn't mean an immediate additional dividend or capital return at all. Really it does provide us with more degrees of freedom at local entity levels and at the group level. We'll continue to do that. We will continue to seek such opportunities as we go forward.
Okay. Thank you.
On your second question, Jean-Paul. So the EUR 85 million that we posted is a precautionary bulk reserve, which corresponds to what we believe is our ultimate risk based on the information to date. You know, we've received only precautionary loss notifications. So these are clients that have policies that are potentially exposed to the conflict that put on notice their insurance company or their reinsurer. But there's actually no loss information to date that we received that explains what is the loss driving the claim. You know, the main lines of business that we see potentially being impacted are credit and surety, political risk, political violence, marine and aviation.
Those are the main lines of business. Political violence, you know, and then the first three political violence is the one that's most likely to have some trigger in the short term. Many of these policies have a waiting period, so it would take some time to, you know, to develop better clarity. Aviation, the claim is mainly driven by these aircraft. The issues there are whether the reregistration of the aircraft by Russia are considered set to confiscation and which policies are affected. Is it one event? Is it several events? So, you know, we run different scenarios, from low range to kind of a high range. We believe the EUR 85 million constitutes the best estimate view at this stage.
We think it's gonna take a lot of time to have better visibility, you know, unless there's a resolution of the conflict that's very short, which doesn't seem likely right now, that we'll have, you know, clarity before the end of the year. Even once we have clarity, I think there's also going to be a significant amount of litigation, for example, on aviation around the issue of whether it's a tempest confiscation, and which policies can be triggered and which ones can't. It's a very complex situation, very complex claims that will take a lot, you know, a lot more time to develop better information.
Thank you very much.
Thank you. Can we move to the next question, please? Yes.
Please.
Our next question comes from Vikram Gandhi from Société Générale.
Oh, hello, it's Vikram Gandhi from Soc Gen. I hope you can hear me. I've got a couple of questions. First one is on the P&C business. I appreciate the portfolio repositioning and the reduction in nat cat exposure. However, when I see the growth in global treaty lines and specialty lines, it appears that the group might be picking up a lot more man-made loss exposure, potentially. Since you don't spell that number out each quarter or each year, I'm just concerned it might make your attritional or normalized combined ratio more volatile. Is that a fair description or, you know, should I be thinking it differently? That's one. The second one is on nat cats.
I know there are two specific events that you mentioned, the storms in Europe and Australian floods. I think they total up to about EUR 120 million of the more than EUR 180 million impact for the quarter. There's another third at least that's missing. If you provide that would be much appreciated. Also if there's any retro benefit in the first quarter already. Thank you.
Vikram, can you please repeat the second question? We didn't get it very well. You got cut off.
Yes. Yes, sure. I think the numbers that you, that Jean-Paul mentioned were Aussie floods about EUR 75 million and another EUR 45 million from the European storms. They total up to about EUR 120 million. Whereas I think the total nat cat impact has been more than EUR 180 million for the quarter. There's another almost more than a third of the total nat cat loss that you know that I'd like to have some color on. If there is any retro recovery already in there.
Okay, thank you.
On your first point.
All right. Thank you, Laurent. On your first point, on the man-made. First of all, these are lines of business where it's easier to purchase reinsurance and retro, and we're active buyers of reinsurance and retro on those lines of business. We're better able to manage our net exposures in those lines of business. We, you know, we're very much aware that as we try to reduce volatility on the cat side, we don't want to create new increased volatility in other lines of business. It's something we have very much in mind as we develop these lines of business. That's how we plan to manage that.
I don't think you should see our net attritional loss ratio, necessarily, you know, becoming more volatile in the future. On your second question, the other significant event of the first quarter was the Japanese earthquake. You know, this is an event for us that we estimate at EUR 13 million net. As I said, there's been some adjustment on the 2021 and prior cat events, which represent another point of cat ratio. We've had just some small losses of floods, you know, a small tornado in the U.S., some small typhoons in Asia.
that, you know, each of them relatively small, but again, an accumulation of these events that basically create the balance of them.
Okay. Understood. Are you seeing any retro or are you booking any retro recovery already in Q1 or it's too early in the year to be doing that?
Yeah, we have some recovery on the proportional side. On the non-proportional, we don't have any recovery to date. You know, there are two types of non-proportional. There's the aggregate and the per event. On a per event basis, we don't have any event that actually reaches our program on a per occurrence basis. On the aggregate, these are programs that are designed.
For a level of aggregate losses over the year. It would be surprising if we would trigger those aggregates already in the first quarter, and that's not the case.
Okay. Thank you. Very helpful. Thank you.
Thank you. Can we move to the next question, please?
Our next question comes from Ashik Musaddi from Morgan Stanley.
Thank you, and good afternoon, everyone. Just a couple of questions I have is, first of all, on investment income now. As you have moved to IFRS 9, thanks for all the disclosure you have given. I mean, pretty helpful. I mean, still a lot of moving parts, but still pretty helpful to understand what's going on. Would it be possible for you to give some color as to how we should think about the return on invested assets going forward, just because it's a different basis and different accounting. That would be helpful. What would be your new money yield? I think it was mentioned about 3.1% at the moment, as in how fast would you transition into that yield? Would be very helpful to understand.
That's the first one. Secondly, I mean, you mentioned that you have used up some buffers or some reserves in life to basically adjust for some of the extra losses on COVID. I remember you did that last year as well. How do we think about any additional buffers that are still left in the life business? Any thoughts on that would be very helpful. Thank you.
We take the one on IFRS 9. On slide 48, you've got the main principle of IFRS 9. The main point is that there is no change, as mentioned by Ian at the beginning of the call, in the valuation of the securities within the balance sheet. What is changing is the way some securities are going to affect the P&L or not. Here, you've got the detail on slide 49. We have EUR 1.2 billion of assets that are fair value through P&L under IFRS 9, compared to EUR 200 million under IAS 39 before.
Of course, this change add volatility that will be positive or negative each quarter, and that's an indication of what we should discover under IFRS 17 as well next year. This additional volatility, we see it this quarter in negative contribution from the fair value to income, given again the interest rate increase on the market. The second item that is impacted under IFRS 9, under the previous accounting standard, we used to impair a bond when we had an evidence of loss or a credit default. It was an ex-post impairment policy. Under IFRS 9, like, for all the banks, we do now an ex-ante provision to a potential impairment in the future that's called the Expected Credit Losses.
Here as well, each quarter, we use the Moody's tool to compute the Expected Credit Losses. Each quarter, it will depend on evolution of interest rate, but also evolution of macroeconomic indicators. That's true that also in Q1, we had an adverse development on the macroeconomy due to the Russia-Ukraine crisis. If you see the impact of the provision to ECL this quarter and the fair value through P&L of those securities, it adds 26 basis points of volatility. That was the point mentioned by Ian. Under the previous accounting standard, our return on the asset would have been 2.1%.
In line, I would say, with the market consensus, and I think, the main difference today between what we disclose and the consensus was the miss on IFRS 9 volatility. Now your point on what should we expect in terms of objective or target or expectation of return on invested assets, you will see on slide 50, 51, the way we compute the yield under IAS 39 and under IFRS 9, I would say it's almost the same. The only thing that would change, that's the volatility coming from a larger part of the portfolio that is fair value to P&L, and also a change in ECL each quarter.
I would say we maintain the same objective as before under the new accounting standard, but with additional volatility, positive or negative, each quarter. Your second question was on the reinvestment rate. That's true. That's a good news. Let me remind that when there is an increase of interest rate, the day of the increase, it's a bad news because we have unrealized losses within the balance sheet, and you see it in the appendix. That's the case in Q1. The relatively short positioning of our portfolio with almost EUR 9 billion of financial cash flows to be reinvested in the next 24 months allows us to keep or to hold those bonds until maturity.
Which means we won't see the losses into the P&L. We can, if needed, absorb any claims thanks to the liquidity of the portfolio. At the same time, given the short positioning of this portfolio, the reinvestment yield will flow quicker into the financial contribution. You should expect to see it in the course of 2022 and 2023. With a progressive increase of what we call today now the regular income, what was the income yield before.
It's very clear. Thank you. Thanks a lot.
On your second question, Frieder Knüpling speaking here. SCOR has a prudent reserving policy, and that applies very much to the life business. We use large transactions to create reserve buffers. I mentioned the retrocession transaction of last year. Another example would be the acquisitions of the large life portfolios a few years earlier, when we used the opportunity to reassess assumptions and make sure we hold reserves with such appropriate buffers. The same applies to new business which we reserve with sufficient reserve margins. You know, I expect we will continue to be able to benefit from the re-release of those margins as the business matures over the next quarters and years.
Okay, that's good. Thanks a lot.
Thank you. Next question, please.
Our next question comes from Thomas Fossard from HSBC.
Oh, yes. Just wanted to come back around what you said regarding the negative reactions on the back book and the difference you were making versus the quality of the pricing for the front book. I mean, does it mean that actually you've got any ideas or anything that we should be aware in terms of further actions? I think that you indicated that all options were considered on the life side. Maybe you're thinking of, I don't know, maybe ADC covers or something like that, maybe as well on the P&C side. Any clarification on what you meant would be interesting.
Jean-Paul, regarding Ukraine, Russia, you mentioned credit exposure, but it looks to me that looking at Coface or Euler Hermes doesn't seems to be too much of a big deal, for the time being. I was wondering if we should think about SCOR credit exposure, you know, being slightly different. Maybe you can clarify if you had any exposure to credit enhancement on aviation fleet. Thank you.
Thank you, Thomas. Look, on your first question, I will let Jean-Paul comment on the second one. On your first question, it's the range of options that we look at is those that you've mentioned. I think, you know, on the life side, the management actions have been a value lever, which we have explored in quite an exhaustive manner. We continue to do so. It's not always possible to execute on them. But the combination of what I would call organic measures on a day-to-day of the relationship with certain clients on the life side will continue. We look as well at all other type of structures.
The market is quite active on the P&C side. It has to make sense economically, so we remain prudent, and we look at potential options. Jean-Paul?
On your
On the question.
Yeah. Thank you, Thomas. On your question on Ukraine, you're right that right now the credit insurance portfolio doesn't look like it's gonna be heavily affected. I think the question was more, what are the potential lines of business that could be affected? That's why I included it in the mix. But right now, you know, flows are continuing. The credit trade credit is one of the business that requires, you know, some default to be triggered. We're not seeing that happening. SCOR, to your second question, is not overly exposed to credit enhancements for aviation or other lines of business.
You know, our exposure is very much on the large trade credit insurers, Coface, Euler Hermes, and Atradius.
Excellent. Thank you.
Okay. Thank you.
Ladies and gentlemen, this concludes today's question and answer session. At this time, I would like to hand the call back to speakers for any additional or closing remarks. Thank you.
Thank you very much for attending this conference call. The investor relations team remains available to pick up on any questions you may have, so please don't hesitate to give us a call. As a reminder, SCOR will hold its Q2 results presentation on July 28th, during which an update on SCOR's environment and strategic ambitions will be presented. I wish you a good afternoon.
This concludes today's call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.