Good afternoon, ladies and gentlemen, and welcome to the SCOR Group Q1 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 that you limit the number of your questions to two. At this time, I would now like to hand the call over to Mr. Yves Cormier. Please go ahead, sir.
Good afternoon, welcome to the SCOR Q1 2023 results. My name is Yves Cormier, 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. May I please ask you to consider the disclaimer on page two of the presentation? I would now like to hand over to Thierry Léger. Thierry, over to you.
Thank you, Yves. Good afternoon and, welcome everyone also from my end. I'm very pleased to be here for my first analyst call as CEO of SCOR. Special thanks go to François de Varenne for the leadership, for his leadership during the transition period, and of course to the entire team helping him to succeed. Today we focus on the first quarter of 2023. François and team, or François was the interim CEO until or during that period until May, and, it therefore sounds only very natural to me to leave the floor to François to present Q1 today. I will share a few words to conclude before the Q&A. With this, François, over to you.
Thank you. Thank you very much, Thierry, and thank you for your very elegant gesture. I think this is a testimony of the very good transition we prepared over the last three months. The executive committee and I look forward to benefiting from your outside-in perspective on the company and working under your leadership. I'm delighted to present our first result under IFRS 17. As I shared with you a month ago, I strongly believe this is a historical milestone for the industry and that IFRS 17 provides a new benchmark for the valuation of the group. Let's now move on to the key messages of our Q1 results. Today I want to share with you two key messages. First, we keep a clear focus on our 2023 priorities, and second, the reinsurance market benefits from tailwinds positively impacting the three business lines of SCOR.
After a strong Q1, we are even more comfortable that we can achieve our targets for the year. Let's go to my first message. The group focuses on the execution of its 2023 priorities. First, we increase profitability. SCOR generates a group net income of EUR 311 million in Q1, which translates into an annualized return on equity of 29.7%. This very strong performance is driven by the three business lines delivering results in line with or better than our 2023 financial assumption. For P&C, the combined ratio stands at 85.2%. It includes a Nat Cat ratio of 9.9 points, in line with the 10% budget announced on 12th April . For life and health, insurance service results amount to EUR 272 million. For investments, we have delivered a regular income yield of 2.9%, bearing a one-off negative item of 13 basis points.
We improved the risk return of the P&C portfolio. SCOR is taking full advantage of the positive phase of the P&C rinsed cycle. The group achieved risk-adjusted rates increases of 9% during the January renewal and 7% during the April renewals. The P&C portfolio was rebalanced from casualty and motor lines towards global lines. Actions were also taken to increase the cedents' retention on Nat Cat treaties and to reduce the PML of SCOR agriculture portfolio by 50%. The steering of our portfolio will translate into an improvement of the expected technical profitability. We maintained the solvency ratio in the upper part of the optimal range. The group solvency ratio is estimated at 219% at the end of March. We focus on a disciplined approach to management expenses. The group pursues its transformation and simplification.
The management expense ratio stands at 6.7% of insurance revenues in Q1, and as I told you, one month ago, we are on track to deliver EUR 125 million recurrent efficiency gains on management expenses by the end of 2025. Overall, this leads to a significant increase of our economic value since the beginning of the year. My second message today: during this first quarter, the reinsurance industry benefits from several tailwinds that should continue during the rest of the year. First, the positive phase of the P&C reinsurance cycle, marked by a strong improvement in pricing and terms and conditions, is ongoing. These favorable market conditions are expected to remain in place at the June and July renewals. Second, in life and health reinsurance, the excess mortality linked to the COVID-19 pandemic has been reduced, and this trend is likely to persist.
Finally, on the asset side, invested assets' financial contribution will continue to increase thanks to high reinvestment rates. In this context, after a sound economic value growth at constant economics during the quarter, we are confident that we can achieve our financial target for the year. At the end of Q1, the group economic value per share stands at EUR 54 compared to EUR 50 three months ago. I will leave the floor to Ian, who will make you through our Q1 results in more details.
Thank you very much, François. Good afternoon, everyone. Let's look at the Q1 2023 results, which are published for the first time under the new standard of IFRS 17. As presented on April the 12th, we moved away from IFRS 4 and introduced new metrics for measuring the performance of the group at that point, and showed our assumptions for the full year of 2023. Today, we present our Q1 result in that context. On this first slide, you have an overview of SCOR's Q1 performance and KPIs that we use to measure our activity. Overall, the performance of the group has been strong over the quarter, with a net income of EUR 311 million.
These positive results also support the group solvency ratio, which is estimated at 219% as of March the 31st, and remains in the upper part of the optimal range of 185%-220% defined by the group. The group insurance revenues stand at EUR 3.9 billion, the new business CSM is high for both P&C and life and health, and we will see more in detail later on how that drives the performance of the group. Overall, these results lead to a significant increase in the economic value of the group to EUR 9.8 billion, which corresponds to a growth of 9.4% in the quarter and implies an annualized return on equity of 29.7% at this early stage of the year.
On the other metrics, the management expense ratio of the group, which stands at 6.7% of the insurance revenue, is better than our assumption for the full year 2023. This excellent performance is driven by the activity of our three business engines, which is in line or better than the financial assumptions announced on the 12th of April. Let's look at those details. Starting with SCOR P&C, which actively continues to deploy its capital in a favorable market environment and reports a high level of new business CSM at EUR 588 million in Q1 2023, benefiting from the high level of technical profitability expected on the treaties renewed in January of this year. As a reminder, the contractual service margin is a fundamental concept introduced by IFRS 17.
It represents the unowned profits which are amortized over time, which applies to P&C business even though the business is shorter in duration. In Q1 2023, the P&C gross written premiums stand at EUR 2.4 billion, down 3.1% at constant exchange rates compared to Q1 2022, reflecting the repositioning of the portfolio with selective growth in the favorable market conditions. Looking at the P&C insurance revenue, it reached EUR 1.8 billion in Q1, which represents an increase of 5.4% compared to Q1 2022 at constant exchange rates. The target for the year 2023 is between 0% and 2%. The increase in Q1 comes from the strong growth in specialty insurance, primarily reflecting prior year volumes as insurance revenue is on an earned premium basis. It increased by 21.5% at constant exchange rates. Now specialty insurance represents 34% of SCOR's P&C insurance revenue.
In addition to the increase in new business CSM and insurance revenue, SCOR P&C also demonstrates a strong technical performance in Q1, with a combined ratio on the left-hand side of the slide standing at 85.2% for Q1 2023, lower by two points compared to the assumption set at 87% for the year overall. There are two key components within this. Firstly, a natural catastrophe ratio, accounting for 9.9% of insurance revenue in line with the 10% cost budgeted and announced on April 12th, mostly driven by the Turkey earthquakes and U.S. tornadoes. Secondly, an attritional loss ratio, including commissions, that stands at 70%. On the right-hand side, we present the Q1 P&C insurance service result, which is driven by two effects. On the one side, the CSM amortization of EUR 293 million and positive claims experience variance.
On the other side, an offsetting effect coming from retrocession and premiums. This is arising from the treatment in IFRS 17 of the limited level of recovery on proportional and on proportional retrocession impacts. We noted also, as part of SCOR's P&C performance, the attributable expense ratio stands at 6% of insurance revenue in the first quarter of this year. Overall, a strong performance for P&C in Q1. Let's move on to life and health, which also reports a strong new business CSM generation and technical results. The new business CSM amounts to EUR 192 million in the first quarter of the year and reflects the quality of the treaties underwritten during the period. SCOR's life and health insurance service result amounts to EUR 272 million in the first quarter of 2023. The assumption for the full year is at EUR 450 million.
The strong insurance service result in the first quarter is driven mostly by two factors. The first, a positive experience variance in the U.S., including favorable COVID-19 claims development. Secondly, the impact of a one-off item following the revision of an accounting estimate representing about half of the variance. Overall, a strong performance also from the life business. Moving on to the investment side of the business, as of 31st of March 2023, the total invested assets amount to EUR 22.4 billion. The asset mix is optimized with 81% of the portfolio invested in fixed income, with a high-quality average rating of A-plus and a duration at 3.2 years. SCOR continues to benefit from a favorable interest rate environment when reinvesting at a higher rate, generally generating regular income yield. In Q1 2023, the total investment income on invested assets stands at EUR 157 million.
As a reminder, this is not included into the insurance service result and comes on top of that. The return on invested assets stands at 2.9% in the first quarter. The regular income yield is at 2.8%, 90 basis points higher than in Q1 2022, and in line with the 2023 assumption range of between 2.8% and 3.2%. The reinvestment rate is high and stands at 4.6% as of the end of March, down from 4.9% as of the end of 2022. The invested assets portfolio is highly liquid, and financial cash flows of EUR 9 billion are expected over the next 24 months, enabling SCOR to benefit faster from these high reinvestment rates. Let's now move to the economic value growth, which is now one of our key indicators to measure the development of the intrinsic value of the group.
In the first quarter, the group economic value is up by EUR 0.9 billion, reaching EUR 9.8 billion. As mentioned earlier, it's supported by strong business performance and favorable economics. In this context, SCOR's performance is very solid, and the value creation exceeds the group's target for the period. The economic value growth is driven by the development of its two components. The group shareholders' equity reached EUR 5 billion at the end of Q1 and represents an increase of 22.4% compared to the year-end. The group CSM net of tax increased to EUR 4.8 billion, which is up 4.8% compared to the year-end.
This results in an economic value of EUR 54 per share compared to EUR 50 per share as of 31st of December, an increase of 9.4% or 6.3% on constant exchange rates and interest rates. This is in one quarter. Obviously, the annualized figure is higher. It reflects both the quality of the new business generated and the materialization of the CSM into earnings and equity. It leads to a reduction in SCOR's financial leverage, which stands at 20.1% at the end of March, adjusted for CSM, and is two points below the figure at the end of December.
I will finish with SCOR's liquidity position, which is strong at EUR 2.2 billion of cash and short-term investments. Further, the group generates strong operating cash flows of EUR 281 million in the first quarter. As usual, we have more details in the appendices, and we'll have the Q&A sessions to address your questions. To conclude, I'm happy that we're able to present good results for the first time under the new accounting framework today and to illustrate the true economic value of the group as of the first quarter. I'll now hand back to Thierry.
Thank you, Ian. Let me summarize. I'm very satisfied with the Q1 results. We are executing on our 2023 priorities. The teams are mobilized and fully focused on the business opportunities that are ahead of us. I think we are living the best market in two decades, providing several tailwinds to the reinsurance industry as a whole. I see SCOR very well placed. After the first quarter, we are confident in our ability to achieve our targets for the year. It is with great confidence in SCOR's abilities that I, therefore, look ahead. We have an excellent opportunity to take full advantage of our global franchise and technical expertise. Thank you for your attention. Let's move to the Q&A. Yves, over to you.
Thank you very much, Thierry. On page 17, you will find the forthcoming scheduled events. That, we can now move to the Q&A session. Can I please remind you to limit yourselves to two questions each? Thank you.
Thank you, sir. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure that your mute function is turned off to allow your signal to reach our equipment. Again, you may press star 1 to ask a question. We'll take our first question from Freya Kong with Bank of America. Please go ahead.
Hi. Thanks for taking my questions. Firstly, would you be able to quantify the discounting impact within your combined ratio for both Q1 this year and Q1 last year, or at least the year-on-year benefit that you saw from higher rates? Secondly, you seem to be tracking well ahead of your full-year run rate, for new business CSM. Are you comfortable with these targets remaining unchanged because they're seasonal effects we need to consider, or are there any positive surprises that you've seen year to date? Thanks.
Thank you, Freya. Yes, on the firstly, on the discount rate, we communicated in April our assumption for 2023, a discount rate in the combined ratio of 4%. What we see in the 1st quarter is higher than that. Does form part of the variation of the combined ratio from the 87%-85%. There are other moving factors in there too. For example, the impact of retro. To be very clear, irrespective of the accounting change, we would have seen a good quarter for P&C in Q1.
The underlying business performance is positive on the P&C side. It's a strong quarter for the business unit. We see that in the insurance service result. In respect of the question on the overall new business CSM generation and the assumptions for 2023 that we've laid out, we're very happy with the result that we have for the quarter. We've seen strong economic value growth. We've seen strong performance from the various business units. It's one quarter. Though we're very happy, we maintain our assumptions that we described in April at this stage.
Okay. Thank you.
Thank you. Thank you. Can we move to the next question, please?
Our next question comes from William Hardcastle with UBS. Please go ahead.
Hi. Thanks, everyone, and welcome, Thierry. First question is, there's no real reduction in the Cat PML appetite, it seems, like in April. I'm just wondering if this is April-specific or there's maybe a step change in thinking for upcoming renewals and any expectations ahead of June, July. You sounded a bit more upbeat and potential exposure growth could come through versus more recent periods. And the second one is, can you walk me through the quarter-on-quarter solvency strength? It is materially better than consensus. I know there's an earnings strength there. Just trying to understand if anything materially changed on the SCR or not. Thanks.
Jean-Paul, we take the first one. Ian, the second.
All right. Thank you. Regarding the April renewals, as you see, we grew our gross revenue premium by 17%, actually. It's our expected EGPI by 17% at the April renewal. We did that at basically at constant shares. We maintained our shares, so we didn't reduce, as you said, necessarily the PMLs in April. The main reason is, you know, we started doing remediation on our portfolio starting at the April renewals last year, throughout June, July, which meant that when we came up for renewal
The 1st January renewals had to be further remediated. That's why we took a significant portfolio actions, reducing the premium and repositioning the portfolio. At April, there was not so much repositioning of the portfolio, but more, extracting better terms and conditions. The most of the growth we experienced that April has been rate-related. We expect the June, July renewals to be very much in line with that.
Thanks, Jean-Paul. Will, on the second question in respect of the solvency, this is really being driven by the strong capital generation, net of deployment, that we've had across the quarter. You see that also in the IFRS 17 results, of course, and driven by the new business value creation and the experience variance. So that's really the key driver. There are some other impacts within the walk itself. The dividend accrual is in there, at a quarter's worth of EUR 1.8, just being the dividend assumption from last year and also market variances. These are largely offsetting, so it's really driven by, as I said, the value creation and experience variance. It's not being driven by any particular SCR movement.
Thank you. Let's move to the next question, please.
Our next question comes from Kamran Hussain with JP Morgan. Please go ahead.
Hi. Afternoon, everyone. two questions. The first one is on the life result, clearly, like, an excellent result for the quarter. When we're trying to think about experience variance going forward, given this is the first quarter of IFRS 17, what's the right starting place for that number? Is it the other half of the EUR 137 that's not a one-off, or should we assume that's zero? Just some kind of thoughts around that. The second question is on the combined ratio. The discounting effect would be useful for kind of further quarters. In terms of manmade experience this quarter versus what you'd expect, could you give some commentary on what that looked like? Thank you.
Hi. we'll start with the second question, and Jean-Paul will answer that one.
Thank you, Thierry. As Ian said, the first quarter of P&C was a very good quarter regardless of the accounting framework that we use. In terms of manmade, the number of manmade and the size has been less than the historical average. This is due to, on one hand, all the on-running actions taking last year and at the beginning of 2022 to reduce the volatility of the portfolio, as well as just Q1 being a less active quarter than some of the past quarters in terms of manmade losses.
Thanks, Jean-Paul. Yeah. Do you have a question? Jean-Paul? Nope. On the first question, Ian is now ready to answer it.
Thank you. Thank you, Will. In respect of Kamran, sorry. In respect of the life result, yep, it's very strong. We're very pleased with the result in the quarter. As noted, it is being driven in particular by the additional experience variance that we see. The experience variance here relates to, firstly, on the one hand, the better experience in particular on the U.S. mortality portfolio on both COVID and non-COVID claims experience that we've observed.
The second piece is in respect of a one-off technical item where we've updated an estimate, and this is not expected to reoccur. As noted, it's about 50/50 between these two effects. There's the non-recurring element. On the experience variance, I don't think you can take a base for a recurring element here. What we've seen on the US side, for example, that can move it could be better to assume zero. Really, we couldn't give a basis for a particular set of guidance around this. It's going to vary in respect of what we actually see happening on the portfolios.
Yeah. Ian, that's really fair. Well done on that. Good quarter. Thank you.
Thank you. Let's move to the next question.
Our next question comes from Andrew Ritchie with Autonomous. Please go ahead.
Hi there. First question, just on the P&C service result, I should understand this better. Apologies. The column claims and premium experience variance, which is +35, I mean, is that akin to a positive prior year, or is it just accounting noise on some kind of premium update? Maybe just clarify. Should that be all those things being equal to zero, or should I mean, does clarify that? It looks like a positive prior year of some kind or another. Second question, when will life cash flow, operating cash flow, turn positive?
It's been negative for, I think it's 18 months now. Some of that is a lot of that has been COVID-related. I get that. I kind of had hoped it would turn positive in 2023. Maybe, clarify what's going on there. The only other, it's not a question, it's clarification and answer to Kamran's question on the other column in the life insurance service result. Surely there should always be something in that other reflecting IFRS 9 business, which is not captured within the CSM. Is that not the case? Thanks.
Hi. Ian.
Yep.
Thank you, Andrew. In respect of the claims and premium experience variance on the, or within the P&C insurance service result, this is really reflecting the strong performance of the portfolio during the quarter and a driver of the positive technical performance of the business unit. This is not something that would necessarily be zero. Certainly, in a positive quarter, where we have strong experience, you're going to see these impacts. Relation to the life cash flows, we do have, or historically, the cash flows have been impacted by the COVID claims. There's still potentially a little bit of that coming through. Also on top of that, we have some legacy portfolios which are in a phase where the claims are now expected to exceed premiums.
The cash flow from this block of claims over premium is expected to reduce as the business runs off. Also as we start to or continue to write new business that's cash positive, and as we continue to manage the portfolio through management actions which bring positive cash into the group, over time, we would expect the positives to outweigh the legacy impacts. Finally, in the walk of the Life & Health insurance service result, the element you're referencing, is within the walk. It's small, but we have revenues on financial contracts within the insurance service result here on the life side.
Okay. Thanks.
All right. Thank you. Can we move to the next question, please?
Our next question comes from Vinit Malhotra with Mediobanca. Please go ahead.
Good afternoon. Thank you. Some of my questions have been addressed, but I'll just try to clarify one or two points. The first one is an apology. Back to this experience variance in life. I mean, given life was a key driver of the B today. I mean, how so you did say that it should be assumed to be kind of zero-ish and not be such good numbers. What's the log I mean, how should we think about in the sense, if claims are now in another quarter, like 2Q, also low for COVID-19 or even excluding COVID-19, then should we assume that you have reset your assumptions and experience, assumptions beginning of 2Q?
How should we think just from a real-world perspective, Ian, that if claims in life or from COVID continue to be low, which they should be, then should this be reducing these kind of big, good numbers? That's really a clarification, maybe. Second, topic is more on the P&C revenue growth, which is 5.4% but gross revenue minus 3%. I understand this could be more the earning-out pattern, because is there anything else going on there on the accounting side, the IFRS 17 side, because it's quite a difference between GWP and GEP, if you like, if this is the only thing here to explain that. Thank you very much.
Thanks for the questions. The first one goes to Frieder, and then the second back to Ian.
Yeah. Thanks, Vinit. What's happened in Q1 is, as Ian said, the actual claims experience has been more favorable than what we had in our assumptions in our reserving models as of Q4, 2022. We would update those assumptions in the future if there was a necessity to do so, but we haven't done this in Q1. You would see this in the analysis of change of the CSM.
You know, currently, we have essentially the same reserving assumptions for Q2 as what we had in the year-end 2022 models. This will then be the benchmark against which we measure experience. If claims are better or worse than those assumptions, that's going to find its way into the experience variances as I said, it you know, all these assumptions have to be updated and kept at the current best estimate, on a, you know, ongoing basis. You would see, in our disclosures if we make any significant changes to our assumptions, in the future.
Vinit, on the P&C insurance revenue growth of 5.4%, we're very happy with the result, obviously, in the first quarter. It's a strong growth. You're absolutely right. It really does result from this being on an earned basis. In particular, on the specialty side, you can see that the impact there's a bit of a lag effect, where that's coming through from the previous underwriting year into 2023. It's a result of the timing and the business mix, as you would expect.
Okay. Thank you, Ian. Thank you, Thierry. Okay.
All right. Thanks a lot. Can we move to the next question, please?
We'll take our next question from Tryfonas Bidou with Berenberg. Please go ahead.
Oh, hi. Good afternoon and congratulations on a strong start of the year. I have one question on just coming back to the CSM, new business CSM in P&C. I guess this is running more than half of your run rate for the full year. The way I'm thinking about this is that January, when you're at close to 50% of total P&C renewals, and presumably a big factor here, is it therefore too unreasonable for us to think that this number can actually double the rest of the year given that the remaining 50% of the book renews? Just one more question. Sorry to come back to the experience variance in life. Are you seeing any benefit here from the management actions you took last year? Here, I'm thinking more about the recaptures in 2022. Is it still can this be a driver, of this variance? Thank you.
Okay. Thanks for that. The first, goes to Ian, and the second to Frieder again.
Yeah.
The P&C new business CSM generation, again, we're extremely happy with the development in the first quarter. It is subject to seasonality. There's, as noted, a large proportion of the reinsurance portfolio renewing in the first quarter. That came with for us, as you recall, a strong expected margin improvement. That is driving the generation. For the rest of the year, we'll need to see on a quarter-by-quarter basis. You know, it's been one quarter so far, so we're not changing our assumptions at this point.
Okay. Thank you. On the second question of whether the experience variances have been influenced by management actions which we took, last year and previous periods, I'd say the answer's in principle, yes. The business which has been subject to management actions and, you know, the business which has been recaptured, it only accounts for a relatively small proportion of our overall portfolio. You would see in principle, you would see some beneficial impact of recaptures of underperforming business, but it's not going to be a major part of the experience variance which, you know, as Jan said, was also partially driven by better COVID experience. The favorable experience has really been spread across large parts of the portfolio and not been isolated to individual treaties.
Just to add to that and just one point of clarification, it is positive in the first quarter in terms of COVID experience. The COVID tapering off is within the assumptions. Were that to follow the tapering that we had assumed, there would be no experience variance. We do assume that COVID is going to go. It's just happened quicker than we had expected in the first quarter.
Very helpful. Thank you.
Thank you. Can we move to the next question, please?
Our next question comes from Darius Satkauskas with KBW. Please go ahead.
Afternoon. Well done today on the results. Two questions, please. The first one, what are your thoughts on the combined ratio normalization? I mean, on top of normalizing for natural catastrophe losses, should we also normalize for loss component amortization and loss component change? If so, can you provide these details for the first quarter, or will you provide these details going forward? That's the first question. Second question is apologies, I'm gonna touch on the discounting again. Could you please consider that going forward, as discounting makes it difficult to see the underlying claims development? On that, P&C unwind of discount was EUR 83 million in the quarter, which is around 6% of net insurance revenue. I can't see how discounting would have been smaller as the unwind will include lower locked-in rates from last year. Is there anything I'm missing here? Thank you.
Okay. Ian, we'll take your questions.
Yeah. On the combined ratio normalization, I think again, I'll come back to the information we provided at the April disclosure. There, we gave some indication on what we would expect in terms of the discount rate, what we would expect in terms of the cap budget. This quarter, we also see an expense ratio of 6%. This, we, along with the other elements within the combined ratio, need to really see how things evolve quarter- on- quarter.
I think perhaps we'll be able to, as we evolve, you know, give some further color. At the time, for the time being, we stick with what we've disclosed and with our assumptions in respect of the discount rate, all I can say at this stage, again, is that it was positive in respect of the assumption to the assumption that we've given. That's clear. It's pleasing. It's part of the benefit that we see within the combined ratio this quarter. We will see again, how that evolves. Again, we're not changing the assumption on our discount rate at this point.
Okay. Thank you.
Thank you. Can we move to the next question?
Our next question comes from James Shuck with Citi. Please go ahead.
Hi. Good afternoon. Thanks for taking my questions. The first one I had was on the P&C new business CSM. EUR 588 million in the quarter, I think it'd be pretty clear that's a good number. I was just kind of intrigued why you didn't kind of disclose a prior year comparative on that. You do talk about +25%, but I think that's just for the discrete April renewals, and it excludes agriculture and is on a gross of retrocession basis. What I'm keen to understand is what that P&C new business CSM has done year on year, whether you wanna include agriculture or not in it, and preferably net of retrocession. 'Cause I wanna get an idea of, really, the movement in profitability, through the new business, please.
The second question relates to the AGM. You've taken a rather unusual step of committing to giving a strategic update at the AGM. I say unusual because I know we have a capital markets day planned later in the year, in September. Just in terms of managing our expectations, could you just kind of outline a little bit about what we should expect at that AGM, please? Thank you very much.
Hi, James. Thanks. Ian, we'll take the first. I will take the second one.
Yeah. We didn't disclose a quarterly new business CSM for 2022, James. We gave the overall figure for 2022, but not a quarterly assumption. You can go back to the disclosures there. I would say that in terms of evolution, you can consider that it's impacted by different factors, economic factors, business mix and volume, differences in expenses and the treatment of recession. I would say that also in the difference between 2022
On the P&C side, we are taking into account the inflation re-environment, as well as the calibration around the recession. That has an impact also. We have a conservative 2023 expected loss ratio. On the AGM or your question around the strategic plan overall, what you can expect at the AGM is a clear idea of the vision, the strategy, the priorities. It's an outline. Therefore, what you will get in September are the details, more clarity, the numbers, KPIs, and so on.
Yep. Okay. Thank you very much.
Thank you. Can we move to the next question, please?
Our next question comes from Thomas Buberl with HSBC. Please go ahead.
Oh, yes. Good afternoon, everyone. One question will be related to the investment income, and more specifically to the regular, investment income, which is not moving significantly up in Q1 compared to Q4 last year, despite a pretty significant, or higher level new money rates compared to the backbook yield. I was wondering why this was the case, and how would they expect, it to, trends going forward in the upcoming quarter.
The second question will be related to the, U.S., upcoming renewals. Here, just to understand, you know, given the experience in Q1, where actually, you're still being exposed to U.S. tornadoes, and it seems to be that you're the only one so far to report this type of losses, in Q1. I was wondering if, potentially, this was implying that you needed to, tweak, further some exposure, during the upcoming, US renewal for specific type of business, or if you've been eaten by a specific loss, in Q1 that you want to highlight. Thank you.
Hi, Tomás. Thanks. The first goes to François and then Jean-Paul will take the one on the U.S. renewals.
Tomás, the regular income yield in Q1 stands at 2.8. That's in line with the guidance of 2.8, 3.2 for the year. As, I indicated, in the introduction, we have a, a negative one off impact, equivalent to 13 Bps, in this regular income yield in, in Q1. It's mainly resulting from a from an accounting adjustment in the amortization of pattern of, our leveraged loan books. That's not, non-recurring item.
Adjusted for this, the income yield is at, 2.9%. If you remember well, we had also in Q4, this time, a positive one ooff. I would say, all in, if you if you look at the normalized regular income yield in Q4, in Q1, that's relatively stable. Why it doesn't increase given the fact that we have, a significant reinvestment rate at 4.6% at the end of March. It's just linked to the pattern of redemption in Q1 that on our bond portfolio that we are pretty limited.
Regarding your second question on the renewals, just to go back on the U.S. tornadoes, U.S. tornadoes is exactly the type of loss that we, you know, want to avoid with the repositioning of the portfolio. The impact for us is actually very small. and the Turkey earthquake is really the main driver behind our cap ratio at budget. For the June, July renewals, our expectation would be similar to April. A lot of the portfolio remediation has taken place last year. We plan to deploy similar capacity, perhaps slightly more capacity depending on terms and conditions, to June, July renewals. Again, focusing on the same risk appetite as we have currently, avoiding Florida, above a certain level of frequency, and focusing on Cat XL.
Great. Thank you.
Thank you. Let's move to the next question, please.
Our next question comes from Phil Ross with Exane BNP Paribas. Please go ahead.
Hi there. It's another question on new business CSM and non-life. Sorry about that. You had a very strong CSM last year, it looks like, for the full year. Could you just explain why the target is quite a bit lower this year, given what's happened to rates and reinsurance structures and your own portfolio pruning? I think it may be due to inflation and recession impact that you mentioned in response to a similar question. If you could just explain that would be helpful. Second question, stepping back, you've had four quarters in a row now of portfolio pruning and repositioning and non-life that you've talked about. Are you happy now with the broad shape of the portfolio, or are there any areas you call out still that might require meaningful attention? Any color on that would be helpful. Thanks.
Hi. Thanks. Jean-Paul will answer both of your questions.
All right. Thank you, Thierry. On your question on new business CSM, as Ian mentioned, we've strengthened our assumptions into our pricing. We took a forward-looking view of inflation, which is different from what we had, when we priced the business, for example, January 1st last year. We took, also a reinforced view of climate change, that we took in you know, that we take into our Cat modeling and pricing of Cat business. And recession as well, we take a forward-looking view of the price of recession, which is higher than what we had in 2022. I think it's a combination of all these effects that make our underlying assumptions more conservative than perhaps they were last year.
That's why we give a indication or a target for 2023 of EUR 750 million of new business CSM. In terms of your question of the portfolio repositioning, I have to say that we are currently very happy with our portfolio repositioning. I think we you know, as I mentioned before, at April, we consider that we are done with most of the repositioning. Are really looking to harvest the hard market conditions with capacities, you know, that are gonna be flat or slightly up depending on the conditions.
Thanks. That's helpful.
Thanks. Can we move to the next question, please?
Our next question comes from William Hardcastle with UBS. Please go ahead.
Thanks for letting me have a follow-up, guys. It's a quick one. Another reinsurer released a fairly meaningful amount of reserves related to Hurricane Ian, and it was NFIP-related specifically. Is there any benefit of this in your Q1 result?
Hi again, Will. This goes, of course, to Jean-Paul.
Thank you, Thierry. I confirm that we have not have any reserve movement, up or down on our results in Q1. For Hurricane Ian, we remain very prudent. You know, it's Florida. We still see losses coming from, events, of several years ago in Florida. So even though the initial, information from cedents, seemed to be on the low side, we remain very cautious, and we'll continue to do so.
I will just add, across the group, across all business units, there's no reserve releases, no reserve actions within the results. No additional reserves.
Brilliant. Thank you.
Thank you. Can we move to the next question, please?
Our next question comes from James Shuck with Citi. Please go ahead.
Thanks for the opportunity. Just two quick ones. The P&C Re CSM, I think you mentioned that that will amortize mostly over one year. Just intrigued why that is the case. We had one of your peers discussing yesterday how they would expect the CSM to emerge mostly over two years, but entirely over three. Just intrigued why that's one year. Secondly, on specialty lines. We've had another period of strong growth in specialty lines, +21.5%. Interested to know where that growth is, it's coming from 'cause, we've seen, again, some peers kind of pulling back a little bit, financial lines coming under pressure. Thierry, I'm not sure that you wanna offer any ideas about the shape of that book and just an update on kind of your views on specialty lines at this point in the cycle, please.
Okay. Thanks, James. The first one goes to Ian, then I'm happy to make a few introductory remarks on the second, Varenne will take the bigger part of the second question.
Yeah. Thanks, James. I think, the we need to recall that the CSM amortization is coming from both the stock at the start of the period and some of the amortization of the new business CSM that's generated within the period. it is the case that the opening stock is going to amortize over a year or so. the new that is generated, that's not the case. hence, the amount of CSM generated is not fully going that you see is not fully going to unwind in one year. I mean, it's also impacted by the business mix and other drivers. we would also expect it not to be equal in every quarter.
On, on your second, I'll just make an introductory remark. I see the specialty business as a very attractive way for us to this particular client base. I think it complements our business in a very nice way. It adds to the diversification. It has been profitable. It's of course a volatile business. It has to be written with a lot of care, which is the case, and also with the right level of protection. Varenne, with that over to you.
Thank you, Thierry Léger. As mentioned by Ian Kelly, what we're seeing in terms of insurance revenue for specialty insurance has to be seen as earned premium. This is the consequence of the growth in growth-return premium that we've seen last year. You remember we had a 17.5% growth of the GWP at constant FX and 28.8% at Current FX. This is what we're seeing today. It's earning through. We have it in the insurance revenue. This is mostly the single-risk business. Our portfolio business has grown at a speed that was lower than the single-risk business last year.
Yeah. Thank you, Varenne.
Okay. Thank you.
Thank you.
Ladies and gentlemen, this does conclude today's question-and-answer session. At this time, I would like to hand the call back to our 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 discuss any question you may have. Please don't hesitate to give us a call. As a reminder, SCOR will hold its Q2 results presentation on July 27th. I wish you a good afternoon.
This does conclude today's call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.