Münchener Rückversicherungs-Gesellschaft Aktiengesellschaft in München (ETR:MUV2)

Earnings Call: Q1 2019

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May 8, 2019

Good morning, everyone. Thanks for joining us for our call on the Q1 earnings. I have the pleasure to be here with our CFO, Christoph Jureka. And in just a few seconds after my short introduction, I will hand it over to him. And he will give you just a short overview and a few messages on our Q1 result before we will then go right into Q and A. Christoph, please go ahead. Well, thank you, Christian. It's a pleasure for me to present our Q1 results today. And as Christian just said, I'll start with some introductory remarks. With €633,000,000 in net earnings in Q1, Munich Re had a good start to the year. This good result is based on a solid underlying business performance and an investment result, which is largely in line with our expectations, also helped by some positive FX effects of €58,000,000 and a low tax ratio of 16.2%. We had a ROARG of 9.9 percent and the ROE totaled 9.1%. In Green Insurance, we are well underway executing our growth strategy, and the outcome of the April renewals showed some positive momentum there. In Primary, we continue to be on track with respect to Agro's strategy program. So overall, we are fully in line with our financial targets 2019. As there were some debates this morning about the operating income versus the net income, please allow me some comments on the difference between the two because net income wise, we are above the consensus versus operating there were some differences. If you look at the drivers, we see that many of the drivers have been capital market driven. So if you look in the operating, while we are somewhat below, then the investment results or capital market driven result, this is one of the drivers here. The second one is in life reinsurance that we had a technical effect based on interest rates in Australia to increase our liabilities there. On the other hand, in the non operating result, we had market driven effects like FX, which were also capital market driven, which then increased the non operating and overall led to the achievement of the net income consensus result again. And then on top, we had, as I said, positive FX developments, but they are also not independent from Capital Market Developments because the mix of our earnings, depending on how we are performing on Capital Markets, also is influencing the tax ratio quite heavily. Having said that, my message would be please don't overemphasize the differentiation between net income and operating income as many of the differences are often capital market driven and not all of them are consistently being accounted for in operating or non operating. And therefore, I'd like to somewhat maybe highlight the point that in our view, we are fully in line with our target and also fully in line with the guidance. Having said that, I'd like to give some more flavor on some of the details of our result. I quickly mentioned the investment result already. We had the decline in interest rates in Q1. Stock markets increased and the spreads tightened. So overall, from an asset valuation perspective, a very positive quarter. At the same time, U. S. Dollar and some emerging market currencies appreciated, which was beneficial for us. Thereby, we were able to deliver ROI of 2.9% with a slightly reduced running yield compared to 2018 as a whole. These total gains, mainly on the fixed income side, more than offset the write downs and losses on derivatives, with both have been largely related to equities. Our drop in the drop in interest rates is reflected in the reinvestment yield of 2.1%. And this makes our outlook for the return on investment clearly more ambitious going forward. Coming to Life and Health Reinsurance. Our Biometric experience is overall in line with our expectations. We had some offsetting effect, favorable development in Continental Europe, offsetting adverse development in Australia. So this is compensating each other. All other regions have been performing very close to our expectations. Then in the technical result, Life and Health, we see that the technical result, including fee income, is somewhat light compared to 25% of the plan. This was driven by 2 other technical effects, and I've been mentioning one of them already. The first one is the shortening of the duration for our Canadian asset portfolio, which was more than compensated for by positive impact on the investment result, which due to our simplistic allocation method is mostly being seen in the P and C Reinsurance segment. So this is a kind of technical effect you have to keep in mind. We'll continue with the shortening of the duration in the Q2, so we'll probably talk about it again next time. The second effect on the technical income is the drop in yield curve in Australia, as mentioned before, which led to some strengthening of the claims reserve, but only interest related here. Then coming to P and C. Q1 combined ratio P and C was 97.9%, so fully in line with our year end outlook of 98 this time, including negative run off for large losses in the of 5.1 percentage points in total. This was the major loss effect. There's, of course, a basic loss effect as well. Basic losses were higher than anticipated and resulted in a normalized combined ratio of around 100%, according again to our very schematic calculation, which comes with and we discussed it the last time already, which comes with a very simplistic view on things. Driver here is again large claims in our North American Risk Solutions business, which fell short the €10,000,000 major loss threshold and therefore have not been normalized for. And then on top of that, commissions in Q1 have been higher than what we would expect for the full year. And then going forward, of course, we also expect some tailwind from the renewals in April and then also July, which will then be earned in the following quarters. Therefore, for the time being, an underlying combined ratio of much closer than 90% to 98% is remaining to be our aspiration for 2019 as a whole. Then I mentioned renewals already. April renewals have been pleasing. So the trends we saw in January continued. Prices were up for especially the markets where we saw risks affected by the natural catastrophes. But also in the DPL markets, we saw some positive trend towards stabilization. Our price increases for the overall portfolio amounted to 1.4%, and the premium volume rose by more than 10%. So we were able to see opportunities in digital markets, especially in India and also in Japan, of course. WIMO Insurance, we have strong earnings in Life and Health, which offset the large losses on the P and C Germany side. Overall, Ergo is contributing €85,000,000 to our result, and this is in line with our ambition of €400,000,000 for the full year, if you take into account that Q1 includes disposal losses of €22,000,000 as a consequence of our portfolio optimization in the international business. In Germany, the net result of Life and Health Germany of €63,000,000 reflects a very good performance ongoing good performance in health and a high level of disposal gains to finance the sets that are so that since Tuzot Zukchnerlung funding, which we did to a large extent already in the Q1. On the P and C side in Germany, we saw a combined ratio of 98.1%. If you adjusted for above budget, not cut and man made claims, it would be around 95%. And then looking at the seasonal fluctuations, we generally always have in Q1. So there are there's both seasonality on claims as well as on premiums. Then we see that the underlying combined ratio still supports the 2019 full year guidance of 93%. Overall, you could say for Aker Germany that the positive impact on Life and Health Germany is offsetting the negative one in German P and C. So overall, it's nothing really did not really happen a lot. In international business, comment ratios continue to be 95.4% in a very attractive level, which is in line with our ambition of 95% for the whole year. We communicated last week that we're going to sell our Turkish entity, which will lead to a mid double digit €1,000,000 burden in Q2. This is, of course, not included yet in the Q1 account, just to be clear. However, this effect will neither affect our earnings outlook for 2019 nor the ARGO targets for the strategy program 2020, 2021. So this will be compensated. Capitalization remains to be sound. In addition to the solid Q1 net earnings, the capital market developments led to a significant increase in IFRS equity of more than €2,000,000,000 and the ongoing share buybacks had, of course, an offsetting impact, but very slightly offsetting impact only. So IFRS capital increased substantially. 72 ratio is around 2 50 percentage points now and also, therefore, higher than where we were at year end. So also from that side, capitalization improved. And in local GAAP, we continue to have substantial headroom for further distributions. So this is unchanged. You know that already. We're going to start with the next share buyback in a couple of weeks. And as you know, this should be completed then by the AGM 2020. Finally, outlook. The outlook is unchanged for the year. So we are still aiming for the net profit of €2,500,000,000 and we are very confident of achieving that after the first quarter fully supporting the outlook. Of course, as always provided that there are no material adverse developments on the large losses or capital markets front. With that, I'd like to conclude my opening remarks, and of course, we'll be very happy to take your questions now. Yes. Thank you, Christoph, for your opening remarks. We will now then start with the Q and A. And as usual, I would like to ask you to restrict yourself to a maximum of 2 questions per person. And please go ahead. Thank you. We can now take our first question. It comes from Edward Morris of JPMorgan. Your line is open, sir. Please go ahead. Good morning, everyone. Thank you for taking my questions. First, just a point of clarification. I wonder if you could just help a little bit on the Nat Cat disclosure that you've given. So I think you've mentioned that there's a negative impact on prior year of around 5.1%. And yet the overall contribution from nat cat appears to be 4%. So I'm just trying to understand it would appear that there's a small positive contribution current year contribution from Nat Cat. So can you just explain that? And the second question, just coming to renewals. I mean, thinking about the experience with Jebi and the quite good price increases that you've seen as a response to that, do you feel now that the market overall is compensating you for risks taken and the losses that you've incurred? And is there a way to think about the sort of return period for Jebi in particular? Do you feel that the market is responding as it should? Thank you. Well, thank you. On nat cat or general, let's just talk generally about large losses. When we disclose one off, clearly, this is always a mix of positive and negative effects. So there's offsetting effects there. And therefore, the JV is a large contributor, but that's, of course, not all. And there are, as you have been imagining in any way, there are offsetting effects. So you're right. So the explanation is the right one here. On the renewals, price increases are pleasing indeed. So I can confirm that. With return periods, I would be cautious because as diversification is really part of our core business, also the way we calculate is not we don't look at single event and then wait for a couple of years to earn it back. But it's more and that's how we do our underwriting as well. It's look at the overall portfolio and their offsetting effects, of course, between different geographies. Otherwise, the business would be more 1 dimensional as it actually is. So therefore, it's I think it's not the right way to look on one single claim and then wait for couple of years to earn it back. On the other hand, we have to say that in the past, Japan has not been performing so bad. So that's also part of the story here. Thank you. Next question please. Thank you. We can now move along to our next question. It comes from Andrew Ritchie of Autonomous. Your line is open. Please go ahead. Hi, there. I wonder, Christophe, could you just clarify how come the reinvestment rate stayed stable Q1 versus Q4? Is that a reflection of I think you've slightly started to change the reinvestment policy slightly, more infrastructure and more long dated. Just clarify kind of how that was achieved given the decline in benchmark yields and spreads. And secondly, on Life and Health Re, sorry, I'm a bit confused as to why what's the reasoning behind the asset duration shortening for Canada? And I think the implication is that this is an ongoing thing. Does that mean there's another earnings effect in Q2 or over the rest of the year? Thanks. Andrew, yes. First of all, reinvestment rate, you're right, the interest rate environment has become more difficult in Q1 than it was in Q4. So clearly, if you look only at the external environment, the expectation, I agree to that, should have been that it should have been smaller than what we saw actually saw because the actual development was stable. If you then compare in detail what the investment activities have been, then you will see that, of course, the specific assets we are investing into, they differ a lot between Q4 and Q1. And this has to do with the books we are investing into. So it depends on where do you have reinvestment needs in a specific point in time. Then of course also the cash positions we are holding are different. The Q4 was very much driven by derisking activities. In Q1, we still had a considerable cash position for preparing to pay the dividend, but so that this also plays a role here. And then, of course, as I said, the investment universe depends a little bit on in which book and on for which liabilities you invest. And in Q1, we did invest in longer duration bonds compared to what we did in Q4. So that's part of the different asset selection, if you want, in Q1. Is the expectation still that you can keep the running yield flattish for the year as a whole? I think that's what the kind of expectation was at least to the reinsurance business? Well, I think that's too early to say, Emma. I mean, we have 3 quarters of capital markets development ahead of us. So I'd say too early to say. What I mentioned before is that we, at this stage, stick to our guidance of 3% ROI overall. But this has become more ambitious than it initially was given the low interest rate or the lower interest rate environment we are currently in. Coming to Life and Health, we in Canada. So what we are doing here is basically improving our ALM mismatch position, which has been substantial in the past. And the driver that we are able to do that is a changed regulation, which the regulation changed a year ago or so. And now we are in a position that we can reduce the asset duration to bring it closer to what we think the rent liability duration is to reduce the mismatch here. And yes, we started that in Q1, but it will continue in Q2. What is important to notice is, and I think you saw that in the documents anyway, is that the overall earnings impact of that exercise is positive. So we have a negative impact on the technical result and a positive impact on the investment result, which is a couple of times higher than negative impact on the technical side. But just to be clear though, the impact on the investment result is because you're realizing positions. The actual ongoing earnings are lower though, aren't they? Yes. Yes, you're right. And at the same time, as they are lower, we increase on the liability side our liability. So that's all related to each other, yes. Okay. So it shouldn't affect the run rate technical and fee income in time, albeit it may well do again in Q2? Well, in Q2, there might be another effect, which will then again be overcompensated by the investment result. But on the long run, it shouldn't influence it. We can now move along to our next question. It comes from Kamin Hassan of RBC. Your line is open. Please go ahead. It's Kamin Hassan from RBC. Two questions. First one just on the North America Risk Solutions. I think when we heard about the kind of smaller large losses below the threshold last year, they were kind of accepted as being noise to some extent. Could you maybe talk about whether we're still thinking about these as being noise or whether there's something else going on and the actions you're taking on those? And then in your statement, I think it was in the press release, you talk about growing for the last 6 renewals in some areas. When do you think the kind of expansion and I guess improving operational leverage story comes to an end for Munich Re. Any thoughts around that would be really helpful. Thank you. I did not really understand the second question. There was some noise. Could you maybe please repeat that? Yes, sure. In your media statement, you talked about areas that you've grown in the last 6 renewals. And it feels like there's been a little bit of a change in, I guess, management's stance on growth since the beginning of last year. Could you maybe talk about when you think that appetite comes to an end, the appetite to grow premiums and find new areas comes to an end? Okay. No, I got it. Thank you. I start with the first question on the risk solution business. And maybe I start with giving you some more flavor on what's really going on there, because maybe that will also help in your assessment if this is really noise or anything else. We again and that's what I mentioned before, saw some higher claims still below our outlier threshold. What we did see, we did accumulated midsized man made losses there. We did see weather related losses from the record cold winter, especially in the U. S. Midwest. So in the European measure of minus 40 degree centigrade, I cannot spontaneously translate it now in the U. S. Measure, but it was really cold, which led to the fact that the homeowners had losses from frozen pipes and so on, but this was really extreme. And then we had some tornadoes in March that also remained below the outlier threshold and so impacted the large loss performance, but was not normalized. So those are the claims effects we're talking about here. And where adequate underwriting and pricing actions are already underway to address the performance in certain sub segments where they're necessary. But taking those measures, it takes some time until they fully earn into the portfolio. So things are being addressed or have been addressed already. But some of and then you can understand that it's very, very cold winter or some of the annatto that is clearly something which has to do with noise, with volatility. So that's not really a structural topic. Where are in cases where we have some structural issues, they have been addressed. And over time, we expect the improvement to eat into the portfolio. That's on the risk solution. The growth appetite, I mean, as long as we can write profitable business, our appetite continues to be high. So I don't see why we should stop that given that we still find pieces of really attractive and profitable business out there. And as you can see, also with the price development we have been showing now for the 1st April renewal. I think this is a good signal and a good proof of that there is profitable business out there. So at this stage, and this is part of the strategy also for our 2020 results, the growth strategy is continuing and will continue. Finally, coming maybe back once to the risk solution, what I would like to add outside of the specific issue, I'd like to maybe draw your attention a little bit of the order of magnitude we are talking here. This is a very small sub segment in our overall book. And any large loss we could have from cut or also from manmade would quickly be bigger than the issue we are talking about here. So I understand that it's something where there has been a lot of debate around. But the issue itself, is important as it is, so I don't say it's not important, but the size is still limited. That's something I wanted to add. Thank you. Cameron, next question please. Thank you. We can now move along to our next question. It comes from Vinit Malhotra of Mediobanca. Your line is open. Please go ahead. Yes. Good morning, everybody. Thank you very much. Just quickly, so Christophe, I know you said risk solution is small, but seems to be the biggest explanation between the 98 and the 100 of the sort of I know you don't like normalized calculation being too simple, but just the way it is, it seems to be important up to 2 points. Could you just, in that background, comment on the new initiative, which was announced recently of the Munich Re Specialty Insurance Company. So I remember in the full year results, there was this push to get a bit more growth there or a bit more emphasis was placed? And are these losses that we are talking about today, are these in similar areas or in completely different, as you said, homeowners? So if you could just comment in that context, it would be very helpful for me. Thank you. That's my only question. Thank you. Yes. Yes, I'm very happy to do so. So the area of losses is a different one here. So as I said, the very cold winter affected our homeowners business, for example, which you're right with American Modern. So that would some of the areas we are looking here in this solution part now. The idea with our new entity in New York was to generate more growth out of the commercial in the commercial area, but that's a really different story. Coming back to your question 98 versus 100. And sorry, I have to say again that I don't like this very simple normalization. I think part of the story also is that, I mean, we normalize against the 12% average nat cut charge, which is a full year average figure. So there's, on top of that, also seasonality in that normalization approach and that also might play a role. So you will probably remember that generally Q1 is a quarter where we, at least in recent years, did have less cut activity than in other quarters. And maybe that's the missing link you are looking for in your equation. So generally, I just can only reemphasize that this very simplistic calculation is just giving hints on where to look into in the portfolio. That's how we use that, but it shouldn't be over interpreted. Sure. And if you have sense that the risk solutions problem or losses, are they different from the ones that were seen in 3Q 'eighteen? Or is it similar again? Would you be able to contextualize that for us? Well, tornadoes are kind of similar. It's both storm. We have the very cold winter is something we, of course, did not see in last year. Wildfire is also different. So in a sense, there's some similarity that's all kind of cut related, but below the threshold. So that's the similarity here. But the driver behind is it has been different every quarter. Great. Thank you very much. Thank you. We can now move along to our next question. It comes from Sami Tapoulis of Goldman Sachs. Your line is open. Please go ahead. Hi, everyone. Can you hear me? Yes. Yes. Yes. Perfect, perfect. So I just had some issues with my phone today. So first question is actually coming back to your growth ambitions. Could you just give us an I guess one part of them at least has been to expand the business in the U. S. And I suppose property and nat cat exposure, for example. So it'd be great to just give an update on your expectations ahead of June and July renewals. How confident are you on the market environment? And what sort of thing could we expect from you here on the growth front? So that's number 1. Number 2 is coming back to risk solutions. Obviously, there is quite a lot of loss experience there. Could you comment on the pricing side, what you're seeing in terms of pricing momentum in that business? It's quite a heterogeneous exposure. So if you could maybe break it down a little bit by the segments, that would be great. Thank you. Well, thank you. On the July renewal, I mean, generally, of course, it's extremely early now to talk about that. You know that U. S. Business has been loss affected last 2 years. So there should be some momentum. And generally, I'm an optimist. So from that perspective, I'm looking with kind of an optimism towards July. But having said that, it's really too early to really tell. Have you sorry, just can I just follow-up very briefly on that? Have you so I think you were somewhat confident on the rate momentum earlier in the year. Do you have you changed your mind at all recently? Or does your view remain sort of unchanged versus earlier in the year? No, we can remain to be confident that that's also what I meant when I said, I mean, optimists here. Maybe also looking at that, I mean, we, of course, if you're talking about cut growth, of course, we are also balancing that in the course of our overall risk strategy and the overall risk capital we are deploying. So that was something Joachim talked about in our analyst conference, that the overall risk did not over proportionally increase, but increased in line with premiums. And so we are really carefully looking also into diversification and the mix overall. But other than that, from an environment perspective, I just can confirm that we are confident. Coming back to your question on the risk solutions. Yes, measures have been initiated also on the pricing side, also on the portfolio level where when necessary, we have increased we have filed voice increases in various states, some of them high double digit amounts on for specific or some specific risks. Therefore, those measures have been, as I said, implemented. It always takes some time if they until they fully eat into the portfolio and come to the full effect. But yes, that's something we have been doing already. Okay, great. Thank you. Thank you. We can now move along to our next question. It comes from Andreas Schafer of Bancus Lampe. Your line is open sir. Please go ahead. Thank you. Just one question regarding the German P and C business. I mean you've again grown quite strongly in Q1, mainly in Industrial Lines. So overall, what does it mean for your midterm combined ratio target? And more importantly, do you expect also higher volatility in future? Yes. I mean, our to start with the end of your question, so the midterm target is completely unchanged. So we said 92% for 2020, 93% for this year. We had a Q1, which was affected by large losses, but mostly on the cut side. So this was mostly the storm Eberhard in Germany, which led to the large outlier behavior we saw here for Ergo. We also were a little bit above budget for the man made on the man made side, but to a much lower extent than on the cut side. So therefore, the Q1 shouldn't be interpreted in a way that some changed business mix did somehow change also that the comment ratio we are seeing right now. Also the growth, it needs some time into the portfolio. And therefore, I mean, we saw that now in Q1 that profitability of the P and Germany segment was positively influenced by the growth. And the lines we are writing and the business we are writing, we are very confident that this is profitable business, so it will further support achieving our combined ratio target. But as I said at the beginning, we confirm the 93% for this year and the 92% for next year. Okay. Thank you. Thank you. We can now move along to our next question. It comes from Jonny Urwin at UBS. Your line is open. Please go ahead. Hi, good morning. Thanks for taking my question. Just one for me today, please. So just going back to the normalized combined ratio in the context of recent growth initiatives. And I appreciate your comments that we shouldn't over interpret the normalized combined ratio, and I appreciate the flaws in doing that. But just stepping back from the detail, since you started to focus more on growth, the normalized combined ratio has consistently missed guidance. And I know you most likely say this is an overly I personally wouldn't see a relationship in timing between 1 and the other. So this is obviously something which happened, but there's no connection between the 2. Okay. And so I guess it's difficult, isn't it? Because that's the way the market typically assesses your underlying levels of profitability. We don't really have a better way of doing that. But I guess how else can you give us confidence that the underlying profitability of that growth is developing in line with your estimates, which I guess is implicitly what you're saying? I mean, that's always difficult to differentiate. I mean, what we then would need to give you is really on a portfolio level, kind of a normalized combined ratio differentiating in the growth initiatives versus the in force. I mean, that starts to be then really messy, if you could go into more detail there. Therefore, generally, we continue to have this concept of a normalized combined ratio because I think everybody is used to it. And so it's at least one way to address topics and have the right topics also now for the call, for example, to talk about. So from that perspective, I think the concept is not that bad, but it can be misleading sometimes. And maybe one thing is the underlying view, but the other is, of course, you should also look at our large loss developments. And that also I mean, the level we are affected is varying from 1 quarter on quarter. There's some volatility in it clearly. But overall, our budgets generally are high enough. Also this quarter, again, we are below what we would say is our large loss budgets. So therefore, I think looking performance of P and C Re only on a normalized basis is clearly cutting out the underwriting efforts, which were especially relevant in the area of large losses. And so that's also part of the equation. On top of that, also business mix questions play a role and growth in areas where we still make some money, but the combined ratio is comparatively high. We would continue to do that even if our 98% or 97% for next year would be at risk then because we will still make money with it. Therefore, we always said that the combined ratio per se is an aspiration we would like to achieve. But the target is the net income target, and that's continuing to be the main target for us. So therefore, I think there's not one single answer to your question, but I'd like to invite you to not only look at the normalized view, but in a broader context on our P and C business because there's much more to recognize and much more also to evaluate when assessing the quality of our business. Fair enough. That's helpful. Thank you very much. Thank you. We can now move along to our next question. It comes from Thomas Fossard of HSBC. Your line is open. Please go ahead. Yes, good morning. I've got 2 remaining questions. One will be on the Ergo International Optimization Portfolio Process. So following Turkey, could you remind us what remains to be optimized at this point in time? And the second question will be related to Life and Health Re in Australia. You're talking to reserve strengthening linked to low interest rates, but it seems to be that trends in the DI market remains pretty adverse and you had some negative development in the past. So could you update us on what the situation as far as your business is concerned in Australia at this point in time? Yes, very happy to do so. I'll start with Airgo International. Yes, we communicated Turkey last week. And basically, from a signing perspective, that's very much marks the end of our portfolio optimization activities. Closing of the transactions, of some of the transaction is still to be expected in the remainder of the year. And therefore, also P and L effects, for example, from Turkey, we expect for Q2. So there will be some discussion around that also in the upcoming quarters. But from a signing perspective, so signing the SBAs, we are pretty well advanced and nothing really on top of that to be expected. Life and Health Re, indeed, there are risks in Australia, which we have to mention. So this time, the increase of the claims provision was interest rate driven. And of course, further decreasing interest rates would put again a pressure on these reserves. But this is not the only risk we are seeing in Australia. There are, of course, clearly also risks on the biometric side. The Protect Your Super regulation now has been finalized. We did write out write off a huge portion of debt in 2018 due to that regulation. But now it has to be seen if the assumptions we took end of 2018, if they will be realized now after this regulation has been finalized. There is clearly a risk that this is not sufficient, so we will have to carefully observe that. We do an assumption to review on the biometric side on a yearly basis. There are also potential experiences, variances, which we then would need to recognize. So I could continue. So they clearly are risks. And so going forward, what can we do? We work a lot on claims management and together with our clients there. This is actually difficult and really time consuming work, but we invest a lot there. We practically do not write any new business anymore. And at this stage, also, we do not see any additional regulatory issues or anything of that kind. So that's what we do right now. Finally, I cannot rule out that further risk will be realized at this stage. We try to be on top of things as much as we can, but Australia keeps continues to be an area of focus for us clearly. Okay. Thank you. Thank you, sir. We can now move along to our next question. It comes from Michael Haid of Commerzbank. Your line is open, sir. Please go ahead. Thank you very much. Good morning to everyone. Two questions. I have to come back on the to the basic losses, which you said were very high. It includes many small claims across many lines of business. I understand that. And aside of what you said about risk solutions, can you identify any other trend or anomalies, anything special which drives this high basic loss ratio? You mentioned that risk solutions overall plays only a minor role in terms of size. 2nd, April renewals. Can you talk a little bit more about the dynamics of the 1 April renewals? What lines of business you moved in? And what business you may have stopped writing or retreated from? Yes, basic losses, the major driver for the duration, although not huge, not big, that's what I said before, is still the Swiss solution business. So other than that, we do not see any deviation we would need to comment on today. The renewal, yes, 1st of all, of course, cut business in Japan was something which came with came in with higher prices, specifically on the wind side. So there, we see the reaction on the typhoons. Other than that, we see generally, we see growth in India. We see some growth also in Aviation. We see some growth also in the U. S. So that's where we see growth. And but then on top of that, we also reduced our stake wherever we thought conditions are not sufficient or prices are not sufficient. So there are selective contracts more or less everywhere where we discontinued our business because we were no longer happy with the price or the terms. I think that that's it what I'd like to comment here. Mainly casualty, which improved, but we also saw some tendency on the liability side for stabilization or a slight improvement. But that's the general picture. Okay. Thank you very much. Thank you. We can now move along to our next question. It comes from William Hawkins of KBW. Your line is open. Please go ahead. Hello. Thank you very much. Hi, Christoph. Back on Australian disability, thanks for the qualitative comments you just gave. Can you just be a bit clear about how we should scale this exposure? I mean, are you leaving us with the message that, yes, it's an issue, but there is no chance that it can affect your €500,000,000 technical result guidance? Or could it actually be more material than that? I'm not quite sure how to just think about the exposure you've got to that problem. I can only say we are very confident of achieving the €500,000,000 this year outside of any exceptional effects. And we do currently not foresee anything exceptional in Australia nor in other places. But if I remind you, and that's just a general remark, really nothing concrete in the pipeline, but the general remark would be, of course, recapture or something like that, clearly would have an impact on IFRS. And this would then potentially change the picture. But at this stage, nothing concrete in the pipeline and so nothing to announce, and we completely confirm our €500,000,000 target. That will conclude the Q and A session. I can now hand the call back to Mr. Becker Husson for any additional or concluding remarks. Thank you. Thanks a lot, Daniel. No additional remarks, of course, from my side. Thanks for participating in our call and looking very much forward to seeing you and hearing you next time. Have a nice day. Thank you. Bye bye.

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