Good afternoon, and welcome everyone. The first nine months have been marked by many climate events across the world, including heat waves, wildfires, floodings, as well as rising interest rates and geopolitical tensions with the continuation of the war in Ukraine and the Israel-Hamas war. In this context, SCOR has been performing well with a net profit of EUR 602 million for the first nine months of 2023. A return on equity of 18.8% and a strong growth in economic value. Also, the Solvency II ratio of 206% remains within the optimal solvency range. These results confirms SCOR's focus on delivering its targets.
On the P&C side, we are below our cat budget over the first nine months of 2023, which is a testimony of the effectiveness of the actions taken on our P&C business to right size our exposures over the past year. Also, the attritional losses have improved, and we are on track regarding the strategic plan Forward 2026 assumptions. Let me focus quickly on Q3. Our results translate into EUR 135 million net income for the quarter, supported by positive results across all three activities, despite some challenges on the P&C side. The P&C performance was impacted by quarterly net cat claims, and, also some man-made activity. Again, over nine months, we have been within, or even below the net cat budget, and on the attritional loss side, we see clear improvements.
For Life and Health, the business continues to grow profitably and generates a strong insurance service result. In investments, the group continues to benefit from high reinvestment rates and reports a noticeable increase in the regular income yields. A high increase in the regular income yields, sorry. Regarding the January renewals, our objective is to take advantage of the hard market by generating new business at very attractive margins. In this context, and with EUR 602 million nine months results, we are confident that we can grow our economic value further and deliver on our Forward 2026 objectives. With that, I would like to hand over to François.
Thank you very much, Thierry, and good afternoon, everyone. I'm pleased to present these Q3 results. Let's mention, I will focus on quarterly results and not year-to-date figures. As Yves stated at the beginning of the call, I will present all figures without the impact of the fair value of the option on our own shares. Indeed, we not, we do not take any credit for this. Before diving into the details of Q3, I want to emphasize one key message. We are on track to achieve our overall profitability objective for the full year. To understand this strong statement, let me describe the way our Q2 and Q3 accounts have been built, especially regarding the added buffers. The published return on equity is 13.7% in Q3 and 20.2% year to date basis.
If you exclude the fair value of the option on own shares, the return on equity stand at 12.5% on a quarterly basis and 18.8% since the beginning of the year. These are strong results. And now, if you exclude from this from this return on equity, the added buffers of Q2 and Q3, and also the Q1 one-off, we deliver a return on equity of 16.1% on a quarterly basis and 21.2% on a year-to-date basis. This underlying performance is clearly very strong. Since Q2, Thierry and I have deliberately added buffers in our quarterly accounts, especially when the results are as strong, and in Q2, as in Q2, and in this quarter. The added buffer in Q2 and Q3 represents 2.4 points of return on equity.
It reduces the economic value growth at constant economics by 1 point and the solvency ratio close to 2 points. We have maintained a strong reserving discipline over the first nine months of 2023, while delivering very solid results. After this preamble, which is important to understand our financial strategy, let's focus on the key highlights of the quarter. The group delivers a satisfying net income of EUR 135 million, contributing to a strong, EUR 602 million net income for the first nine months of the year. We are on track to reach the assumption of the year for 2023, which is close to 12%. The group insurance revenues reaches EUR 4.2 billion.
On the P&C side, the insurance revenue growth is 6.4% over the quarter due to the weight of the 2022 premium in 2023 earned premium, and to underwrite more business than anticipated in April 2023, given very attractive market conditions. On the life and health side, the insurance revenue growth is 13.5%, but it includes a one-off reclassification. Otherwise, it would have been similar to the premium growth of 2%. The P&C new business CSM is lower than in Q2, given that the bulk of the P&C reinsurance renewals took place in H1.
It is also slightly lower for life and health, but we are well on track to meet our EUR 450 million assumptions for the year. The performance of the third quarter is driven by positive results coming from our operating expenses and our investments, and continue to demonstrate the efficiency of our business model. I would like now to comment on the evolution of our solvency ratio, which stands at 206% at the end of Q3, in the upper part of the optimal range. We see, however, a 7 point reduction compared to a ratio of 213% in Q2. This reduction is mainly driven by two decisions from the management. One is to grow higher than planned in P&C during the 1.1 2024 renewals, to benefit from the favorable market condition.
We announced this higher growth during our Investor Day in September. Do not forget as well, that this growth is expected to be higher in the first years of the plan. This impact the solvency ratio by -5 points. This is obviously a controlled deployment, and we should see the benefit of this deployment on the P&C VNB increase in Q4 and in Q1, 2024. This effect should be visible on the capital generation in Q4 and Q1, 2024. The other decision is to put aside some reserves, in P&C in Q3, like we did in Q2, some buffers. This represent an impact of around 1 point of the solvency ratio. Then we have the quarterly accrual of the dividend rate for 2 points.
There are finally some other minor effects, such as seasonality, as we see higher cat activity and the lower contribution from renewals in Q3, or market variances, which is very small this quarter. Let's now move on to the details of the performance of the three activity over the quarters. Let's start with the P&C results. P&C new business continue to create value. The new business CSM stands at EUR 169 million. For the first nine months, it is already above our 2023 assumption of EUR 1 billion overall for the year. This reflects the strong pricing condition at the July renewals, and for specialty in insurance, the high margins we expect on the new business. Without any renewal round in Q4, we expect the new business CSM to be more limited in Q4.
Looking at the P&C insurance revenue, it stands at EUR 1.9 billion, up 6.4% at constant FX. This growth rate is lower than in Q2, which was at 7.9%. We see here the effect of the portfolio right sizing we performed during the January renewals, as the insurance revenue broadly followed the pattern of gross earned premiums. But as I said, insurance revenue also continues to increase because we have written more business than expected in April, June, and July renewals. As you know, we have increased the capital allocated to specialty insurance based on attractive returns observed in this business. We are now satisfied with the current balance between insurance and specialty insurance, with the latter representing 1/3 of total insurance revenue for P&C. Let's now look at the P&C combined ratio.
It stands at 90.2% over the quarter. We are very satisfied with the level of net cat claims over the first nine months period. For the first time since 2016, with the exception of 2020, due to the COVID economic slowdown, the ratio is below the annual cat budget of 10%, at 9%, in line with our peers. We are above the net cat budget for Q3, with a cat ratio of 13.3%. As you know, the third quarter is marked by seasonality. Our largest event this quarter is due to one claim from a factory destroyed by the Hawaiian fires. This is not a surprise for us. It can happen.
Also, we have a European bias on our net cat book, and we have been hit by the mid-size cat event in Europe this quarter, such as the Italian storm or the Slovenian flood. It is worth mentioning that to date, we have not performed any reserve release in our accounts. The mechanical impact of the P&C discount is 9% over the quarter, above our assumption of 6%-7% communicated for the year, so let's say on average, 6.5%. We are carefully following the discount effect, and as a measure of prudence, we have booked 2.5 point of excess discount benefit into a buffer this quarter.
Overall, if you normalize the Combined Ratio for the excess cat and for the excess discounting effect and the reserve buffer, which offsets each other, you will find a Combined Ratio of about 87%. On this normalized level, I would like to say two things. First one, the first one is that while the overall attritional level is satisfactory, the level of man-made claim is not, and we are working on it to improve it. I will get back on this. The second one is that with the current level of attritional, everything else being at budget, it is not possible to add buffer without exceeding the 87% ratio. Over the plan period, as we explained in September, we expect to be in a position to add buffer while remaining below 87%.
The man-made claims are not concentrated on one segment, but are coming from various lines and underwriting year. We will reduce our attritional ratio over time, as we have launched a number of initiatives to strengthen our man-made book, such as increasing rates and deductibles, decreasing our maximum growth capacity, and adapting our insurance protection for single risk business. On the discount effect, we provide you with the reason for the high impact in Q3. We have identified three main drivers. One is linked to the increased share of business incepted in the 2023 underwriting year in the claims, with a higher locked-in rate. Mechanically, this will weigh on the discount. The second driver is linked to a higher claims level in Q3, meaning the discount effect is higher.
And finally, you need to consider the fact that the proportion of claims impacting longer, longer tail lines is higher this quarter, and that the reserving buffer booked also relate to long tail lines. This buffer is added to the segment where we feel it is most relevant. This has been done consistently with the reserving approach outlined at the Investor Day. We have rolled forward our reserve and have added some buffer in Q2 and Q3. To conclude, I'm perfectly aware that of the fact that discount impact is higher than you anticipated, but again, we do not take credit for this, and we have fully recycled this benefit into added buffer. Let's move on to life and health.
The business continue here to generate profitable growth with a new business CSM of EUR 89 million in Q3 and EUR 366 million in the first nine months. We are on track to deliver a EUR 450 million new business CSM for the year as per our 2023 assumption. We continue to build our life and CSM generation, mostly from protection across all markets. The life and health insurance service results amounts to EUR 113 million, supported by a strong amortization of EUR 114 million, and a risk adjustment release of EUR 29 million. Experience variance stands at -EUR 9 million. The negative expense variance in Q3 is primarily driven by a negative one-off accounting change on accruals of -EUR 32 million.
We could have disclosed a normalized EUR 145 million insurance revenue, but we did not to be transparent. The point on the onerous contract is a technical reclassification that has no impact on the insurance service result. Overall, the performance of the life and health business is strong and stable and in line with our expectations. After the two business units, let's move on to investment. We continue to be happy with the regular income yields improvement, supported by the high investment rate and the relatively short positioning of our high-quality fixed income portfolio, which has an average rating of A+ and a duration of three years. Total investment income on invested assets stand at EUR 185 million, and the regular income yield reaches 3.4%, progressing well compared to 3.1% in Q2.
As we said in previous quarters, total investment income is not including into the insurance service results income on top. The reinvestment, the reinvestment rate stand at 5.4% at the end of Q3, compared to 5.1% at the end of Q2. On liquidity, on our liquidity position is strong and improving on the business side, with EUR 2 billion of cash and short-term investment at the end of September, and positive cash flow of EUR 655 million generated by our two business units, Life and Health and P&C. Let me make two comments on the net cash flow from operation for the quarter. On P&C, positive cash flow are driven by a strong inflow of premium in Q3 as per historical seasonality.
On Life and Health, cash flow are positive at EUR 54 million this quarter versus -EUR 165 million in Q3. We are less impacted by COVID. We will see some outflow from some legacy book blocks in the U.S., but overall, the balance is positive in Life, Life and Health, which is good news. The positive cash flow from the new business are now outweighing the impact from the legacy book. Overall, we are confident that we can reach the -EUR 100 million cash flow expected for the full year in Life and Health, as published in September at the Investor Day. Over the first nine months of 2023, the economic value is up 7.1% at constant economics, reaching EUR 9.2 billion. I remind you that the added buffer in Q2 and Q3 represent a drag of one point.
The economic value increase is notably driven by the strong shareholder equity growth of 15.2%. This is in line with our ambition to grow our hard capital faster. The economic value progresses thanks to the strong underlying performance of our businesses and our significant investment reserve. The economic value per share, which is 51 EUR, at the end of Q3. The financial leverage has slightly decreased to 21.2% compared to the end of 2022, as we are benefiting from the shareholders' equity growth, driven by a strong net income of EUR 602 million over the first nine months. As a conclusion, on my side, I want to convey a simple message. The underlying performance of strong- of SCOR is very strong. We continue to deliver, and we are well on track to achieve our targets for 2020.
As usual, there are more details in the appendix, and we'll have a Q&A session to address your question. Before closing this presentation on my side, and as communicated during the Forward 2026 plan presentation, I'd like to update you on a few organizational initiatives. I'm pleased to announce that we have launched the new data and data office platform of [Thias]. All the central initiatives focused on cash flow generation and ALM will be led by Matthew Giovacchini, who is joining us from Société Générale as former Group Head of ALM. Thomas Fossard is going to join us in 10 days as Head of Investor Relations and Rating Agencies. We will benefit from his significant experience as a sell-side senior analyst. As you see, we continue to transform and adapt the organization to make it more efficient to achieve our financial strategy.
Finally, I would like to warmly thank Yves Cormier for the excellent work he has done on the financial communication of the group, especially with the IFRS event in first publication and the communication on Forward 2026 strategic plan. Thank you, Yves. With that, I will hand it over to Thierry.
Thank you, François. Let me summarize in five points. First, we are very satisfied with the EUR 602 million net profit over the first nine months.... Second, we are also very satisfied with our net cat ratio over the nine months being below budget, despite it being a very heavy year for net cats. Third, we are very confident regarding our attritional loss that has improved, and we expect this to continue to improve. Fourth, our life and health and investment businesses contribute positively and in a very significant way to our overall result.
And last, I see us very well-placed to take full advantage of the market conditions that we see today, in particular, the hard market on the P&C side, with attractive opportunities, in particular, of course, in P&C, but also on the investment side and in life and health. The teams, the executive committee, and I will continue to fully focus on delivering on our 2023 financial objectives and on our Forward 2026 strategic plan. The achievements so far are a testimony to SCOR's repositioning in the last year and to our well-diversified business model across life and health, P&C, and investments. Based on this, I see us very well placed to deliver on our strategic plan. With this in mind, we have also reinforced the executive committee in strategic areas of SCOR's Forward 2026 plan.
Claudia Dill, who just joined as Group Chief Operating Officer, will focus on the group's strategy in terms of operational efficiencies. Redmond Murphy, our new Deputy Life CEO, will notably oversee the life and health business in North America, a strategic market for the group. Their undeniable qualities and extensive experience will help us to achieve the targets set out in our new strategic plan. Thanks for your attention. Let's now move to Q&A. Yves, over to you.
Thank you very much, Thierry. On page 20, you will find the forthcoming scheduled events. With 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're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star one to ask a question. We'll pause for just a moment to allow everyone an opportunity to signal. We do have our first question from Will Hardcastle of UBS. Your line is open. Please go ahead.
Hey, thanks for taking the questions. First one is just linking to the solvency and the growth. You mentioned that it's 5 percentage points, quarter-on-quarter. Just trying to make sure, is this on top or what you already assumed when providing the capital markets day targets? The second one is just linking to the man-made. How are these trending year to date? I think you said Q3 was above discrete, but just wondering year to date, and was this just quarterly volatility as you see it? I think you suggested there was actions being taken. I didn't quite catch all the detail. Can you just talk me through those actions that are being taken on those man-mades? Thank you.
All right, thank you very much. I suggest probably Fabian takes the first question on solvency and how it varies compared to what we said at the CMD. And Jean-Paul can probably take the updates on man-mades.
As you know, we have in the calculation of the solvency capital requirement, which is here, the relevant part, a 12-month forward-looking view. Every quarter, we add an additional quarter, but we also update our assumption. In Q3, we have integrated now the operating plan, and this drives the reduction of the solvency ratio by 5 points, with the inclusion of the market view you have now on the growth that we want to achieve at the 1.1 renewals and in the next year.
With regard to the man-made losses. So, this is reflected in the attritional loss ratio. As François has pointed out, we're satisfied with our attritional loss ratio overall. So this quarter is a bit heavy, just due to a frequency of a number of small to medium-sized losses. But over the year, this has been okay. We still have a lag effect due to older underwriting years that are, you know, that are earning through, and having claims in the financial year, this year. As we, you know, in terms of actions taken, that's what we discussed previously, the raise of retentions, the improvement on rates, the sort of right sizing of the exposures. This all actions taken on the underwriting year 2023 and 2022.
As those years earn, you know, over the upcoming quarters, we should see those ratios improving over time.
... I will add on my side a comment on the growth for next year and the entire plan for 2020. The assumption in the plan, we provide an assumption of 4%-6% for the growth of insurance revenues for P&C. Do not forget that during the Investor Day, we explained that the growth would be mostly front-loaded. So, the 2024 growth should be higher than this. And as explained, and as I mentioned at the beginning, we expect to generate more new business, which will generate capital and offset capital deployment that we see in 2,3.
Okay, thank you. Can we move to the next question, please?
Our next question comes from Andrew Ritchie of Autonomous. Your line is open. Please go ahead.
Oh, hi there. Could you just remind me when is the normal cycle reserve cycle review? I mean, I know it was accelerated last year to be in Q3, but I think it's normally Q4, or maybe you've already done it. So just some sense as to how you think prior year is developing. I guess I'm curious because I don't know how confident you can be you've built buffers without an update on the actual you know, the health of reserves as it is right now. And that would apply both to life and non-life. I think there's an annual life review as well. The only other question is tax rate was very high in the discrete quarter. You did advertise at the Investor Day, the tax rate would be high.
Just to remind me, is it high for the rest of this year and next year, or how should I think about the trajectory? Thanks.
Thank you, Andrew. So, two questions on the reserve review process and the tax rates. I think François can take both.
Yes. Thank you, Andrew, for your two questions. So maybe the first one, I just remind you what we explained during the Investor Day, and I think that's important to understand our disciplined approach to reserving. So in Q1, Q2, and Q3 each year, we do a roll forward process. So which means that reserves are rolled forward by the finance team to allow movement in line with experience and for changes to reserving approaches after, of course, validation of the Group Chief Actuary. On top of it, and that's new, and we did it in Q2 and Q3, we add buffers. We build conservatism into opening loss ratio and conservative reserving for large event upfront.
That's what we did for the, for the French riot, for instance, in Q2. And if possible, we add buffers to increase reserves on top of all of our roll forward process. These buffers, as you can imagine, are allocated to longer tail lines. In Q4, and 2022 was an exception, it was done in Q3, but the normal process at SCOR is Q4, we do the annual review. And here, we check how added buffer allow to move the booked reserve higher on the percentile within the best estimate range. Again, when we build a buffer each quarter, we do not look only at the P&C result and the combined ratio, but of course, we also look at the overall group result, and that's the benefit of the composite model.
I just also reiterate what I said during the introduction. Our reserve, there is no reserve released since the beginning of the year at all, and our reserve at Best Estimate, and our chief actuary is really comfortable with the position at Q3. The second question on tax, so that's something also I mentioned during the IR day. We have an assumption during the next three years that that is higher. We took an assumption on average tax rate of 30%. As explained during the IR day, we would like to secure and one day to utilize the French Deferred Tax Asset we've got at the level of SCOR SE.
During this transition period, it will slightly increase the tax rate before we can benefit from a highly reduced tax rate for the group in France. So this quarter you have the two effect. The tax rate reflects the various geographies where the profit has been generated in this period and where tax rates might be higher. The tax rate in Q3 is also driven by a prudent stance not to recognize new tax assets for losses occurring within SCOR SE. As you see in the URB last year, in the statutory account of SCOR SE, we are in losses. That's still the case today, given all the retrocession flowing to SCOR SE. And we don't recognize, we don't activate the DTA on this, and this is visible.
So that's the one-off effect that you see, that you see this effect. Keep in mind that all tax losses in France, to tax losses carry forward, are not lost. They are evergreen and can be reactivated when we can and when it will be appropriate.
Thank you. So let's move to the next question.
Our next question comes from Kamran Hossain with JPMorgan. Your line is open. Please go ahead.
Hi, everyone. Two questions from me. The first one is on the man-made issue that you've kind of talked about. Is there any reason why you wouldn't but kind of create a standalone man-made budget just to help you understand the volatility? Just wondering kind of why that wouldn't be your approach to this. Seems to be a bit of an issue over the last few years. The second question is on capital. Just looking at the split between hard and soft capital, you're still kind of less than 50% hard capital. How is this going to interplay, or how is this going to play out in capital management decisions over the next few years? Just thinking about S&P and kind of their views on hard versus soft capital and how that might impact kind of rating requirements.
Any thoughts on that would be really interesting. Thank you.
... All right. Thank you, Kamran. So the first question on man-made can probably be-
Yeah, we take it.
Well, François will take both questions.
Yeah. So on your question on the man-made budget, of course, internally, we have a budget and something we follow. And that's why we had the comments from Terry also at the beginning of the call. We don't publish the man-made because for us, within the attritional, and that's the beauty, and that's the way our business, our P&C business, is built. We could have, I would say, a relative allocation of capital between arrangements and specialty, and that's why we don't publish a budget, since this one could change for a given year. And then it will be difficult to explain and to track those changes.
So we have this diversification within the P&C business unit, within the P&C portfolio, of risks, and we prefer to maintain it and then to adjust our relative exposure to the two lines. On the art of capital, you see it, we have a strong increase of art capital, 15.2%, this quarter. This is in line with the strategic plan, the direction. We maintain the objective, so you will see the stock of CSM over the next three years is expected to be almost flat, and we expect a strong generation of art capital, which should reduce the mix between soft and hard capital during the next three years. On the S&P impact, we are all waiting.
That's expected for Q4, the new capital model. I have no other comments than the one I made during the IR Day, on this. I think it should be favorable to SCOR, at least the latest version. That was the case.
Thank you. Let's move to the next question.
Our next question comes from Tryfonas Spyrou with Berenberg. Your line is open. Please go ahead.
Oh, oh, hi. I had two questions. So first of all, is on the P&C combined ratio. I guess, how comfortable are you getting to the 87 target? I guess you probably need around 84 in the fourth quarter to bring you back down from 88 year to date. Is it mainly due to sort of not cat seasonality? So any comments on those moving parts on that. And the second one is on casualty. I was wondering how you feel about your book. Clearly, there's been a lot of discussions in the industry on casualty prior years lost trends. Any comments as to how the actual is expected from your side, is evolving on those 2014 to 2019 underwriting years? Thank you.
On your first question, so on our 87% assumption and below 87% assumption for the next three years. In Q3, as we said, if you normalize for CAT and higher discount benefit, an additional reserving buffer, which offset the higher discount benefit, we are broadly... I mean, we are just below 87%. The point is that we would like to be a little bit more below, because what we said during the IR Day is that the target being below 87%, should be done and should allow us to add buffer each quarter. So we maintain the assumption for the rest of the plan. As mentioned by Terry, that's a point of attention.
We are working on it, an attractive market condition, and on your role next year should help to go in this direction. On casualty, maybe a point that, I mean, you should have in mind, it's our net exposure to U.S. Casualty. In 2016, our net exposure in terms of PNC premium was 5%. In 2023, today, it's 7%. So we are not the exposure of, I would say, the other, and we should be less concerned by this.
Thank you. Let's move to the next question.
Our next question comes from Vinit Malhotra at Mediobanca . Your line is open. Please go ahead.
Yeah, thank you very much. So, for me, one question is just on the solvency to walk that, François, you clearly laid out, but just on the markets, I mean, generally, the interest rates were, were higher, quite a bit, and from your sensitivities, there's usually not much more meaningful things. So I'm just curious, is there any commentary you can provide on why markets were that ineffective for your solvency to progression in Q3? So that's the first question. Second question is, just relating to the slide 12, and if I can read a man-made question there. I mean, the last bullet point of higher duration, and, and also man-made losses tend to have higher payment duration.
I'm just curious to hear more thoughts on that, because I thought, for example, a factory fire might not be that long duration, but I might be wrong. So I'm just curious why you say that. And also, just on this man-made, is it safe to assume there is no number that you have provided, and is it coming from the business solutions, SCOR Business Solutions , or, or is it mainly traditional reinsurance as well? Thank you.
... So I think the first question on the impact of interest rates and solvency will be handled by Fabian. The second question on the handling of man-made and also reinsurance will be handled by Jean-Paul.
Yeah. I mean, as you know, the sensitivities are based on a kind of a linear view of the yield curve movements, and driven by the way we constructed by the U.S. dollar and euro only. The current economic environment is quite nonlinear in how the curves move. Additionally, it's also not all yields have increased. So for example, in China, yields have dropped or stayed at the same level, roughly. And when you then run the internal model, but also when you do the full valuation of our liabilities, then you get nonlinear effects. So maybe with external sensitivities, you would have estimated the effect of 3%-4%, running the whole machine, we get +1% market movement. So the difference is not as big.
On the second question, so, for this quarter, the man-made is about 2/3 from specialty insurance, 1/3 from reinsurance. This quarter in particular, we had a number of longer tail man-made losses coming from prior underwriting years. We had a surety loss, a number of general liability losses. So that's why the comment that this also affected the discounting.
On the link with the discounting, again, I come back on this. On the discounting impact, you have four drivers: one linked to underwriting years, one linked to yield curves, one linked to the duration, and one linked to the level of claims. So on the underwriting years, in H1, there was still a significant portion of incurred claims from earlier underwriting years with lower locked-in rates. Now, you look at the yield curve effect, of course, yields have increased during the year and also in Q3, amplifying this effect. That's more on your point, duration, so the claim this quarter and the buffer added correspond to line of business, which have a longer tail, resulting in higher discounts. And then we have the level of claims I mentioned.
The claims level is higher in Q3, meaning the discount effect will be higher.
Thank you. If we can move to the next question, please.
Certainly. And as a reminder, it was star one, if you had a question. We'll go next to Ashik Musaddi with Morgan Stanley. Your line is open. Please go ahead.
Thank you, and good afternoon, team. Just a couple of questions I have is: see, first of all, I guess, there is a bit of difference in the attritional of nine months on your combined ratio versus the 87% guidance that we have. So I guess you are very clear that there is a bit of work that needs to be done on man-made losses. But is there any other things that you think needs to be fixed as well, or is it just, okay, let's-- if man-made losses get sorted out, then probably we are there or thereabout on, on, like, clean 87%. So that's the first question, I'm trying to understand. And second thing is, in life earnings, I mean, there were some negative one-offs with respect to experience variance and on this contract.
Can we get some color on what these are related to? Is this just a one-off, or should we be expecting these things in the future as well? Just trying to get a bit more sense of this, because this has been a bit volatile since first quarter. We appreciate that it's early days of IFRS 17, but some additional color on the volatility of these items would help us a bit. Thank you.
Right. Thank you, Ashik. So the first question on the attritional work left to be done will go to Jean-Paul, and the second question on the work on the life insurance service results will go to François.
Yeah, thank you. So on the attritional, we're actually quite happy with the underlying performance on the attritional book, except for the man-made losses. That's really the focus of our attention. As I said, a lot of work has been done already. It's more a question of earning through the more recent underwriting years. And we believe that, you know, the rest of the book is really as expected.
I may add on, on this one, because I think it's a very important point. In attritional, so there are two things that obviously need to be watched. One is the trend, that we are on a good trend, and we have highlighted it several times today. We are on a good trend, and we are confident with our attritional loss targets. And I think we have achieved a lot already, but as François pointed out, we want to get even a bit better. The other one is the volatility around that trend. That's also one that we are working on to improve, to be more stable around that. So really, three things that we're working on, and I'm comfortable on all three.
One, we work very hard on the portfolio, the mix of business that you're having, to have the best diversified book possible at any point in time. The second point is the line setting. We have reviewed the line setting again, this year, a lot, and we see already the positive impact from this, for example, with regard to improved diversification. And the third point is, we have again improved our buying of retro to have an even better control of our net lines. So three things that we are doing, that we are strengthening, and that all three together make us very comfortable. So again, I really want to emphasize this. We are not unhappy with where we are now. We are not yet satisfied.
We are at a good level, but we want to be better than that.
On life and health. So you mentioned a few one-off for technical points on excluding expense variance on contract. So I recognize that we have adjustment during this year that relates to transition of IFRS 17. Again, it's a complex norm, and we are learning every quarter. So on the few points that you mentioned on the negative expense variance in Q3, there will always be an element of expense variance, positive or negative each quarter. The negative expense variance that you see in Q3 was primarily driven by a negative one-off accounting update of -EUR 32 million.
So this is similar to the situation at Q1, where we had an update to an accounting balance that was positive. It was also positively impacted by the classification from expense variance to an onerous contract. So if you adjust for those two effects, the underlying expense variance this quarter is in fact positive at EUR 10 million. On onerous contract, impact of onerous contract in Q3 is driven by two technical factor. One, technical reclassification that is similar as in Q2, and the update of economic assumption. So I will not enter into the detail of each of them, but that's mostly what's really, then we have also this reclassification in transfer revenue. But we are transparent on everything.
And the difference also between the EUR 130 million and the EUR 145 million. On a looking forward basis, what we should look at is the Insurance Service Result. We are comfortable that we are going to be above the assumption for 2023, in 2023, and the direction that we set during the IR Day of Insurance Service Result between EUR 500 million and EUR 600 million is really reachable.
Thank you. Let's move to the next question.
Our next question comes from Darius Satkauskas at KBW. Your line is open. Please go ahead.
Hiya, thank you for taking my questions, two please. So the first one is on discounting benefit. So it was higher than what you assumed at the Investor Day. So you've added 2.5% to prudence. Now, you've been talking about your goal to rebuild prudence. So one, is this higher discount benefit allow you to do more than you expected at the time of the Investor Day? Also, you know, since the underlying discount rate should be higher, due to higher yields, does it mean that you should be able to rebuild your buffers faster than you previously expected? And then what sort of discount rate should we thinking about for 2024, if nothing else changes in terms of the macro? Now, the second question is, could you help us understand the potential upside from the favorable S&P model?
I mean, could it be something that sort of allows you to do more when it comes to the capital repatriations with the, full-time results? Thank you.
All right. Thank you, Ivan. I think both the discount question and the upside from the S&P model are for François.
Yeah. So effectively, the discount impact is higher than expected, is higher than what we mentioned during the IR Day. The methodology that we described during the IR Day was to guide you a little bit on sensitivity of the computation of this. I mentioned, I mean, the fourth driver, the fourth driver of the evolution of the discount impact, underwriting year effect, income effect, duration effect, level of claims. What you should expect in Q4, it's probably still higher, a higher impact in Q4. For 2024, I prefer to wait the full year result and the annual review. Again, we see a sensitivity, of course, to long tail line of the discount factor.
I prefer to have the entire annual review of the reserves to give our assumption of the discount rate for 2024. On your second question on the S&P model, again, nothing we have no update on our side, except the fact compared to the IR Day, except the fact that there is a confirmation that we should have the release of the criteria and the new capital model in Q4. We will see, we will see. From what we saw and what I said during the IR Day, we see positively the new model, especially if they complete the entire CSM in the model.
Does that, how it will impact our capital management framework, as discussed in the IR Day, this is done independently from the S&P model. So you have the four, the four steps to take to take the decision, but that's not linked to the S&P model. Again, S&P, our strategy is we focus on the generation of economic value. As you saw in the IR Day, it's coming from a very strong generation of hard capital.
... So the outcome of this should be, of course, a correlation with the S&P capital. So it should be a strong generation of capital, and we should seek target to be at the level that S&P expects, I would say by the end of the plan.
Thank you very much.
Our next question comes from Ivan Bokhmat with Barclays. Your line is open. Please go ahead.
Hi, good afternoon. Thank you very much. Maybe I could ask the first question that's a little bit technical. On the Solvency II ratio, where we had, you know, quite a lot of movement, is there a chance you could just share the eligible own funds and the solvency capital ratio for, for this quarter, so that we can, you know, try to gauge the, the impact of the growth? And the second question, it follows up on that, but in a different direction. So, the appetite for, the growth plan for 2024, that has resulted in a higher charge, could you share a little bit more of, what classes of business have you, have you had in mind? Any geographies split between primary and, and reinsurance, you know, maybe in general sense.
Maybe the third one, just a small follow-up, if I may. So the... We were talking about the attritional ratio and the reserve addition. Should we think of the 87% target for combined ratio for this year as an underlying or rather still as a reported? Thank you.
All right. So I think Fabian can kick off on the solvency implications. And then, for the Combined Ratio, this is more probably for Jean-Paul.
Yeah, we don't publish on a quarterly basis the SCR and own funds split, and just give the solvency ratio with key movements.
With regards to your question on the classes of business, we intend to grow in 2024. This hasn't changed compared to what we presented at the Investor Day. On the reinsurance, you know, in terms of split between reinsurance and specialty insurance, we see opportunities for profitable growth on both units. On the reinsurance side, you know, as we said before, the areas of growth remain engineering, global lines, engineering IDI, marine, international casualty. We see conditions on property cat remaining attractive in 2024. And there, you know, in our expectations, we probably have a little bit more growth than originally planned if conditions materialize as we expect.
On the Specialty Insurance side, it's very much in line with what we explained at the IR Day.
On your last question for 2023 and the 87 combined ratio. So that's an assumption. That was the one of April for the entire year. So we maintain the assumption. I just remind you that it was before we introduced, Thierry and I, the buffer strategy in Q2. So the 87 was, I would say, without any buffer. For the next strategic plan, our assumption is to be below, during the next three years, below 87, but it should include buffer.
All right. Thank you.
We have time for one more question. If you did have a question, it is star one. Again, star one for any questions. With no other questions, ladies and gentlemen, this does conclude today's question and answer session. At this time, I would like to hand the call back to the 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 questions you may have, so please don't hesitate to give us a call. As a reminder, SCOR will release the results of its January renewals on February 6th, 2024, and its full year 2023 results on March 6th, 2024. On my end, these were my last earnings with SCOR. At the end of this call, I will have completed two full cycles of renewals, results, and investor days, and I truly enjoyed my interactions with all of you. Thank you for this, and I wish you a good afternoon.
This does conclude today's call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.