Good morning or good afternoon. Welcome to Swiss Re's annual results 2022 conference call. Please note that today's conference call is being recorded. At this time, I would like to turn the conference over to Christian Mumenthaler, Group CEO. Please go ahead, sir.
Thank you very much, and good morning, good afternoon everyone here from me as well. I'm here with John Dacey, our Group CFO, Moses Ojeisekhoba, our reinsurance CEO, and Thomas Bohun, our head of investor relations, to talk you through the annual results 2022. Let me maybe start with just a few points. 2022 was obviously a tough year with a lot of factors that affected our results, like the war in Ukraine, inflation, the financial markets, net cat losses, COVID, et cetera, et cetera. I think it's important to stress, of course, that Q4 was a good quarter. A clean quarter for all the businesses with a very good combined ratio in P&C Re. That's while taking some actions on the economic inflation front.
We had good results in life and health Re, $200 million approximately, of the three quarters to see the pandemic go behind us. We had Corso good performance, 93.1% combined ratio, which is the same for the full year, they continued to perform well. We saw increase, you know, improvements on the investment front with higher reinvestment yields. All of that leads us to believe that next year overall, the recurring investment yields should lead to about $400+ million compared to this year, to 2022. We have the strong capitalization, which supports a dividend of $6.4.
As you know, we switched to US dollars because it's our currency in which we report, and it's also underlying, from an economic perspective, a currency that is very important for Swiss Re in contrast to Swiss francs. All that a successful start into the new year. You have seen the renewals, the renewals data. We're personally, you know, very excited about that. We think we had a very good renewal. We're happy about the results. I also need to stress that it was needed. It was needed for the reinsurance industry. The industry, the price increase in the industry had historically lagged behind what we could see in the primary insurance space and the corporate solution space.
It was really needed, and you could also see last year, 2022, the underlying combined ratio actually deteriorated because of the high inflationary pressure. It was needed, appropriate, but we feel very happy of how we could navigate the situation, get through some volume growth, a very high price increases of 18%. Of course, eaten up partially by inflation and model updates of 13%. A net 5% improvement, which should translate into an improvement of the combined ratio of the underwriting year of about three points. We were also proud that we had actually investors coming in and towards the end of the year, they saw the underwriting performance as good and wanted to participate.
We were also able to increase our sidecar funds to almost $3 billion. The reason I mention that is because of the trust. It's an important sign to us and our underwriting that we got these investors coming in. In terms of all of that makes us, you know, optimistic in terms of the targets and where we want to go. We didn't change the multi-year targets. With this 14% group ROE, which is on a normalized equity basis. Of course, we will have to translate that into an IFRS ROE, and we intend to do that at the Investor Day at the end of December of this year.
And there's no change to the message that the IFRS equivalent should benefit from higher earnings on the life and health Re, while shareholder equity also expected to be significantly higher than where it is now in US GAAP. When it comes to 23, P&C Re moved to a reported combined ratio target. We feel with the quality of the portfolio we have now and everything else, we feel comfortable to do that. The target is less than 95%. The starting point, of course, is impacted by the inflation. We think something like 96% is probably the starting point.
You take into account the renewal we had so far, the three-point improvement on the underwriting basis, which gets earned through, of course, through two years, and that gets a sense of how we got to the 95, less than 95. On the life and health Re side, we increased the target from $300 billion to $900 billion. There's still a bit of COVID in that, assuming as we could see the last three quarters, but much more subdued. Also we, as we have communicated previously, see less of a drag or expect less of a drag from the pre-2004 business in the U.S. This explains this number. In Corporate Solutions, we improve 1 point of the target ratio compared to last year to less than 94.
I think it's important not to forget that there's also inflationary pressures around us, including in the U.S., as evidenced in the, in the results, the Q4 results of other primary companies. Also reinsurance got more expensive, fortunately. Of course, this has an impact on the expectations for the combined ratio of Corso. All of that of course leads to this target of more than $3 billion of net income. We used to have a ROE target, but we felt that, and there were concerns in this community, what an ROE target means in this GAAP and this rate environment with rapidly increasing rates. We, for this year, switched to a net income guidance, so to say.
Next year, we intend to go back to ROE since the IFRS equity is much more stable than the GAAP one. Clearly, I think a very different and more optimistic place we start from this year compared to 2022, but we also stay vigilant and focused on all the risks we see around us. I think with that, I hand over to Thomas for Q&A.
Thank you, Christian. Before we start, if I could just remind you to limit yourself to two questions. Should you have follow-up questions, please re-join the queue. Operator, could we have the first question, please?
The first question comes from the line of Kamran Hossain with JP Morgan. Please go ahead.
Hi, afternoon. Two questions from me. The one is on the combined ratio target in P&C Re, where you've moved to this reported basis rather than the normalized basis. Just in that change, is this a sign you've got more confidence overall in delivery or a change in the way that you're doing things? I just think about kind of course, when you move from having a normalized ratio to a reported ratio, suddenly it felt a little bit more robust. Dare I say it, there's probably fewer opportunities to give excuses for not hitting the target. Just interested in the thinking, around the way you've moved from, you know, normalized to reported in P&C Re.
The second question is on the economic uplift to profitability from the 1st of January renewals, which I think you said was $0.8 billion. You know, it's around half the book. What do you expect for the remainder of the year to bring in terms of market conditions? Should we expect something similar or is it just a little bit too early to tell? Thank you.
Yeah, I'll maybe take the first one, Kamran. I think you're right. Part of it is a cultural thing. We want to just make sure externally and internally that we have the confidence and that we want to see the reported figure as we did in Corporate Solutions. I think that's healthy. It also means people have to really think through the volatility around this number. What helps it, of course, Corporate Solutions we can buy a lot of reinsurance, which they did, and they can protect some of that this way. It's a bit harder for reinsurance.
The fact that we increased the attachment points in a lot of programs, I think on average about 50%, means that we move a little bit away from this frequency losses that have hit us again and again the last three years. Of course, we're still exposed to, you know, significant losses, but this combined with the price increases just gives you more room to maneuver. In that spirit, we felt this is a transition we should do now. It's indeed the combination of all of these factors, but it's definitely a signaling element to that. It's also more market practice. I think that's probably the answer. Moses, maybe on the rest of the year.
Yeah, I mean, for the rest of the year, the factors driving what shaped January 1st renewals remain for the rest of the year, which is the need for attachment points to move up and the need for rates to move to match up with the risk that's been taken. Clearly, this looks different depending on which part of the region you happen to be in, keeping in mind that January 1st was dominated by Europe. As you get into April 1st, it's Japan, you get into latter parts of the year, it's the U.S. You know, the underlying thesis is similar. The rate changes will be slightly different depending on the market and the move towards attachment points.
They have different starting points. The underlying message across the rest of the year is simply the same thing. Attachment points need to move up. Rates also need to move up to match up with the risk we are taking.
Thank you, Kamran. Could we have the next question, please?
The next question comes from the line of Andrew Ritchie with Autonomous. Please go ahead.
Hi there. Could you just walk through why the NatC at budget or assumption for P&C really has been kept the same? I think the moving parts are underlying exposure in terms of limit deployed actually went down slightly, although it may change the rest of the year. There is some underlying inflation, attachment points have shifted it as well. I don't know if you could give us some sense as to the robustness of why the 1.9 doesn't change year-over-year, even allowing for the better underwriting such as attachment points. The second question, just to clarify, some of the true ups or adjustments in liability lines, you talk about reflecting higher wages and medical expense inflation.
Do I assume that's a true up to the state we're in at this point? Or should there be further wage and Medex inflation? Is there a further adjustment? Would there be a further adjustment required, particularly in the current year possibility? Maybe just clarify that. Thank you.
Okay, Andrew, I'll take the first point around the NatC at budget and why it hasn't shifted. You know, our starting point always is the portfolio that's up for renewal. We make adjustments driven by combination of the retro placements that we have together with the view of the losses that are under the threshold of $20 million, and a couple of other adjustments. Here, I think we've been prudent by saying the up for renewal portfolio, we expect some growth in exposure in that up for renewal portfolio, which we factor into the NatC cat budget, that's why we feel comfortable that it's better we stick with the $1.9 billion same as we had last year.
With respect to the liability true ups, Andrew, I think there was a chart that Christian spoke to in the deck, which showed over the previous years how much we've actually added to reserves.
In liability, year-on-year. That's been a decreasing positioning, but we did the inflation in the 2022 in particular, although we started in 2021, with IBNRs. Our view is that we've closed this year, with a very strong reserve positions for inflation broadly, including for wage, medical and other dimensions which might affect some of the longer tail lines. With a expectation of continued elevated inflation in 2023, returning down to some more normal levels in 2024. We don't necessarily expect to start to have to do a lot more here. Obviously the reality of what we face in future years' inflation will have some influence over where we are, potentially positively or negatively, but our view is we're well-positioned.
It actually goes back to, you know, part of the answer to Kamran's question. By using a reported combined ratio, not a normalized, you know, this is going to include any prior year development that might be necessary. The fact that we're comfortable saying less than 95%, I think correctly reflects that we believe that we've got the right starting point, not just for year-end 2022, but for the expected inflation that's coming at us.
If I could add maybe on the NatC at, I remember you asked a similar question, I think, last year, Andrew. This is very much a bottom-up number, it's hard to decompose it into some of the easy factors. This is basically the whole portfolio once at the end of the year with all the expected losses and everything adding up to which is $1.9 billion in terms of overall loss. It will be, of course, a combination of the shifting layers up, writing some more business, including the inflation, the changing models, all of that. We don't have a decomposition side of that. Also the frequency profile changes also a bit.
You would have, you know, less exposure in higher frequency and more in the rest. But I think it's an interesting idea. We can maybe look at that internally, but we don't have that decomposition. On, on the, on the inflation side, I mean, hope it was very clear. Of course, we, so our actuaries and our economists make a prediction of where the inflation will be in all these different inflation indicators and lines over the next few years, and then you bring that back into the reserves. If, of course, next year there was a totally different assessment, both ways, and certainly if it was much higher, you would of course have to add reserves.
It's just, I think we just feel comfortable with the parameters we have taken and what we have chosen. This is an analysis that is done, you know, once or twice a year by the actuaries based on the forward-looking curves of all of these inflations.
Thank you. Andrew, could we have the next question, please?
The next question comes from the line of Freya Kong with Bank of America. Please go ahead.
Hi thanks, Just following up on Kam's question on moving to the reported target, this seems to now give you more credit for reserve releases, which have been historically marked as a benefit. Can we interpret this as you are now building in more confidence and prudence into reserving, hopefully to generate some positive FYD in outer years? And just following upon the cap budget question as well. I'm still not clear on the moving parts. I know it's a bottom-up view, but if you're growing, you've got inflation, you're growing exposure. Why hasn't that increased as well? Thanks.
Freya, maybe I'll come back. I think it's premature to expect that we would be planning material reserve releases into the P&C Re numbers in the coming quarters. I do think it does reflect the confidence we have that the reserves we start the year with are in very good shape. We'll release our triangles in March with our ABM numbers, but you'll be able to come to your own judgments. We're, you know, obviously $1.1 billion stronger than we had been before these inflation IBNRs were put into place. The other thing I would say is on the Corporate Solutions side, not the point of your question, we've had some positive reserve redu- sees come through the P&L for the last two years.
A lot of that in 2021 in particular was related to a lower frequency, driven by some of the lockdowns around COVID. We're back to a more normal position in 2022. Again, with Corporate Solutions, we're very confident about the overall positions of the reserves, but we're not counting on releases to get us to the better than 94.
On that, can I mean, we estimate we didn't grow exposure. Our estimate is that exposure is flat to actually slightly down. The 20+% growth is pure price.
It's pure rate. I mean, and maybe just on the moving parts, as you mentioned, I mean, even though we moved exposure away from the frequency layers, I think you have to look at the countering factors there around a prudent view on inflation, as well as the view we now have on loss model as well. If you take those two things, they actually end up countering for the growth we're showing in one-one. Clearly, as we move throughout the course of the year, if the growth trajectory is any different, it may also have a bit of an impact on the budget itself. For the growth we have right now, we feel the prudent number to put out is the $1.9 billion.
Thank you, Freya. Could we have the next question, please?
Next question comes from the line of Will Hardcastle with UBS. Please go ahead.
Oh, hi. Thanks for taking the question. I'm afraid part of my question is quite numbers-based now. We're not getting that financial review pack. On the reserve development, can you separate the Q4 reserve development by line of business? Just the Q4 part between motor, property and liability, that would be great. Just on the flat premium in Americas, it's really helpful colour, thanks, on the exposure discussion you've just done there overall. Could we maybe get some colour specifically on the Americas? Cause we've got flat premium here. I'm wondering if there's exposure reduction or it's just where you're operating has resulted in, you know, same exposure, better price, but flat premium. That'd be helpful. Thanks.
Yeah. Will, before John and Moses answer your question, we will obviously publish all these details on March 16. You will also get the reserve triangle, you will have all those details. We just decided not to publish the financial review as announced in Q3, in order not to have too many documents out there, and also as we're focused on the transition to IFRS to make sure that we are focusing on the right things this year. I hand over to John and Moses.
Maybe on the reserve movements on Q4 for P&C Re, again, for the quarter, we had a positive approximately $20 million related to the inflation numbers that we put up. The casualty was roughly -$300 million, property +$200 million, and yeah, +$200 million, and Specialty +$100 million. Gives you a sense of where that was. Within the casualty, some of it was motor, but a good chunk of it was some other casualty lines that were reflecting up with longer tails on the wage and medical inflation in particular.
With regard to the flat premiums in the Americas, I mean, two main factors. We moved fairly aggressively the retentions upwards, and clearly in the lower parts of our program, you have more premiums loaded into that space, you know? Once you move further up, clearly you lose some of that premium. The second factor is we also, in the casualty part of our portfolio, we continue to reduce our exposure to the large corporate risks as well. These are the two main reasons why the Americas premiums are flat.
Thank you, Will. Could we have the next question, please?
The next question comes from the line of Vikram Gandhi with Societe Generale. Please go ahead.
Oh, hi. Good morning, good afternoon. Just a couple of quick ones from my side. Can you remind us on the latest position on COVID reserves? Has the group released any of it? What's the latest IBNR? And the latest IBNR on Russia/Ukraine reserves as well. That's question one. Secondly, is there any change to Corso's reinsurance structure? I think the net retentions were down to $200 million and $35 million, respectively, for NatC at and Man-made losses the last time we saw that. Those are my questions. Thank you.
Vikram, on the COVID, we actually were able to settle some of the outstanding positions with some of our larger clients and bring down the IBNRs. There's still material, about 30% of the overall positions for P&C Re, but we expect most of this to be cleaned up during the course of 2023. There's some regulatory/legal positions in both Australia and the UK which are resolving themselves. Once those are clear, I think the primary companies and Swiss Re or the reinsurers more broadly will be able to land this one. Still material.
With respect to Russia, we did do, excuse me, some modest increase in positions in Q4, both for P&C Re and for Corso. There's about $330 million total set up. The vast majority of this is IBNRs. There are relatively few paid claims related to this. Again, as it was the case from the Q1 but continued through the year to date, most of those IBNR reserves are related to the aviation lines for Swiss Re. Or the maybe more precisely, the largest single position is related to aviation. The second question was-
Corso.
Corso's-
Reinsurance.
Re-reinsurance program. Corso's paying more for reinsurance, but the details I don't think we're planning to deliver. They've got the combined ratio that they've target that they need to hit. I would say, you know, what they're paying is market rate. Mostly to Swiss Re, but not exclusively.
Thank you, Vikram. Could we have the next question, please?
The next question comes from the line of Vinit Malhotra with Mediobanca. Please go ahead.
Yes, good afternoon. Thank you very much. Just my first question is on slide 16, the renewal slide. I'm just curious that, I mean, motor inflation, motor insurance is a topic. Sorry, it's not slide 16. I apologize. It's the renewals data, slide 13. The motor insurance inflation is a topic very much in focus these days. I'm a bit surprised that in casualty we see quite a chunky increase here, almost equal to the Nat Cat increase in dollars, in premiums in the renewals. You mentioned here increase in Asia motor. Can you just comment a little bit? I'm just curious. Maybe you see the trends are different there or better there than in Europe, presumably. Just a quick comment on that, please.
Second thing is, just on the slide 16, I mean, I am a bit surprised at the earn through of the business you have assumed. It seems at least optically not very high. I mean, is it because of, you expect a bit longer earn through of that 3%, or is it just the slide isn't labelled and that's why, we are seeing that kind of, effect? Thank you.
Okay. I'll take the first question around the growth in casualty. Motor forms a part of it, but the largest part of our growth in casualty comes from structured contracts and structured deals which have protections around them. The second piece that I think is important to keep in mind on the casualty would be longer duration for the reserves that you hold from an economic standpoint with interest rates rising. These deals that we're costing are actually very attractive for us. That's why we were willing to grow them.
Maybe on page 16, Vinit, of course, this is not, this is not pure mathematics. You, you have a starting point which here it says 96.9, but that includes Ukraine. Is the question, is it in or out, or do you expect anything else? Then, this is earn through. The business written in 2023, I think we write in a different place. That we, the portfolio written now, we expect a three-point improvement in combined ratio, but only, let's say, half of that gets earned through in the first year. It's the shorter tail line, so it's not exactly half of that. The first year should be a 1.5 to two points improvement that this contributes to.
This earn through of what we wrote last year, which of course had to be reviewed, because of inflation. This was also subject to these APLRs plus cost discipline. Technically, I think it's correct. It's less than 95, but it's not, 95 is not a mathematical outcome.
Thank you, Vinit. Could we have the next question, please?
The next question comes from the line of Ashik Musaddi with Morgan Stanley. Please go ahead.
Yeah, thank you. Good afternoon, everyone. Just a couple of questions. First of all, with respect to your capital position, I mean, you printed even a higher SST ratio now to 80%, and that is certainly helping you to pay the dividend. How do you see the dividend outlook going forward, especially in light of, I mean, continuing improving economic earnings? Because I mean, even now you mentioned that the renewals that you are seeing is leading to $800 million of higher economic, sorry, higher economic earnings. How do we think about that? That's the first question.
Secondly, if I look at your guidance for full year, $3 billion net profit, I mean, with the improvement that you are suggesting with respect to combined ratio and the new business you have written this year, shouldn't this $3 billion be more? Is there something we are missing that this is just a conservative number or you're expecting some headwind somewhere? Yeah, these are kind of two questions, I would say.
Ashik, on the first one, yes, the January 1st SST number, we expect to be above 280. That's flattered a little bit by a very low risk position on assets that we had at the end of the year, purposely a series of hedges on higher risk assets, which, you know, we may determine during the course of this year to remove. I think the starting point should not be over interpreted. There's reasons that both the jump in interest rates during 2022 and the relatively low risk position on our asset side, which made this number big. We're comfortable operating at a relatively high level, given the macroeconomic uncertainties, the geopolitical risks that surround us.
On top of that, I think what we showed on January 1 is the ability to write profitable, very profitable, actually, new business. This capital will also be a source of supporting the growth, the opportunities for the rest of the year. That's where we are. On the dividends, I don't want to overstate, but, you know, the economic earnings, which we'll display in March also are going to be affected by a lot of the things that affected our GAAP earnings. So, you know, maintaining the dividend at around 590 Swiss francs for this year was important for us.
I think as we deliver against the targets we've put out for 2023, we can evaluate the dividend policy to be paid in 2024. For now, I think we're comfortable maintaining the stability of the dividend for this current year and let's have a different discussion 12 months from now when we've got these earnings actually delivered. The target, the $3 billion, we do think there are positives that should help us get there, and whether it's on the investment income or what we expect to be a much better performance in the P&C Re business in the course of this year. Again, we've taken out off the guardrails of normalization.
In that number, we need to absorb big shocks that might come from our net cat portfolio. We've got $1.9 billion to absorb it, but other places and I think we're more protected today than we were on the asset side, but there could also be, during the course of the year, some challenges there. I think we're comfortable saying, we believe we've got the levers to deliver $3 billion. If we deliver more than that, which is implied by the sign in front of it, that will be a good answer for all of us, and we'll give you an update quarter by quarter on how we're doing.
Thank you, Ashik. Could we have the next question, please?
The next question comes from the line of Thomas Fossard with HSBC. Please go ahead.
Good afternoon, everyone. The first question will be related to Corso. C ould you maybe elaborate a bit more about what kind of pricing environment you're seeing into 2023 ? How does it compare to last cost inflation? And in this context, what or how should we expect Corso to grow or not grow, in terms of premium income in 2023 ? T he second question will be maybe more for Christian. Christian, you just announced recently a significant restructuring or change in corporate structure of the group. M aybe you can drive us through the benefits you intend to extract of it. Maybe it was not the intention, initially of the legal restructuring, but maybe there are some cost savings associated to this one. Maybe if you could say a word or two about this. Thank you.
Okay, Thomas, I'll take both of them. Corporate Solutions obviously being part of the corporate insurance part of the value chain has experienced huge price increases since the low point, as you know. They're very large cumulative. Last year, we saw, you know, a decline in the increases. Still increases, but much lower ones. We had several years of double digits. Last year was more like 3% or so on our portfolio. In view of the results also that were published by a lot of Corporate Solutions players, you can definitely assume that pressure is on.
I think what helps the corporate insurance market is the inflation indeed, that is coming through, and you see it in the numbers of the corporate insurance players. This is a negative, but it keeps rates up. The other one is reinsurance prices now, you know, becoming bigger. To a certain extent, you could say this is good because it keeps the discipline. While we don't see big increases, we're also not seeing decreases. I have to qualify that there are some line of business where unfortunately there is some decreases, and Corporate Solutions has full licenses to cut wherever we can. We were not dependent on premium volumes.
Overall, I would say the environment is still a very constructive environment for Corso and conducive to growth, but at a flattish level. That's just for Corso. Remember that we're not in U.S. Casualty or the lines which maybe show bigger growth, so don't compare it to others. In terms of our portfolio, we see a flattish, slightly positive pricing environment, net pricing environment. On the reorganization, I mean, you have covered this for a long time.
You probably remember when in 2012 we created the current structure, which is a bit unusual, that there was Corporate Solutions, there was Admin Re, there were several businesses, and the idea was to have a flexible structure where we could have potentially investors in some of them, grow some of them, et cetera. But of course, Admin Re has been sold, and so the structure as it is now is heavy for what it has to cover. It's probably we felt one layer too much for what is needed. We, of course, there was a strong sense internally that we want to, you know, simplify that and fit into a structure that would lead us for the next five to 10 years.
I mean, I'm a strong believer that every, at least every 10 years, you need to change some of these structures just for to keep the company, you know, fit. In this case, we came to a conclusion, we can take out about a layer. We can or should empower some of these market units that we have. We're not changing them that much, but they basically are one level closer to me. It's three layers to two layers. This is only possible by splitting reinsurance into two entities. This is more towards the top. It becomes leaner and some decision power for some of the decisions, the easier ones, going to the front.
That's all based on also analysis. I mean, we obviously have looked at all the successes and mistakes of the last 10 years and what works, what not, which type of controls are necessary for good underwriting and what is not necessary. This sort of embodies that. The complex transactions will still be priced by, you know, the central function in these two units, while a lot of the smaller business, which is much less dangerous, will be more delegated down to these market units, and that should make them, you know, quicker and more client-centric. We expect some cost savings, obviously, from that, but it's not a cost-saving program. If a cost-saving program, you start with a number, and then you allocate it everywhere.
Here, we start with making the organization more nimble, and then we will, as we go through that, you know, add up all the, the consequences we see on the cost side and communicate that, I guess, by Q1 or so, give you an update on where we are. We see this as basically contributing to our ambition to keep the costs flat and grow the top line. I think I showed a slide in the investor day last year that over 10 years, Swiss Re had grown the top line by 6% and the cost line by 1%. This basically improves the competitive position. Of course, the competition is also improving that.
This is something we have to do and need to do to become more nimble and more efficient, have a higher productivity as we go forward. This, this exercise will contribute to this ambition, which is a high ambition in this high inflationary environment, obviously. I hope this gives you a bit of a sense. Yes, definitely there's gonna be some contribution from that to this, to this ambition.
Thank you, Thomas. Could we have the next question, please?
The next question comes from the line of Derek Au with RBC. Please go ahead.
Hi there. Afternoon, everyone. Two questions, please. The first one is on the loss model updates. Can you say what kinds of risks were the updates for? If it's possible to split the 13% between inflation and the model updates? My second question, just going back to the SST, did the loss assumption changes impact the SST at all? Can you say what amount of premium growth or capital usage for 2023 you've assumed within uthis 280%, please? Thank you.
I'll take the first one on the loss model updates. In terms of the split between inflation and loss model updates, it's roughly 2/3, 1/3 is the split. Inflation about 2/3 of the 13% and 1/3 on the loss model update. The loss model updates really is driven across most lines of business. Not just property, we also have model updates in casualty and also in specialty. They reflect just our view of risk, you know, in terms of from the standpoint of both severity as well as frequency. If you take an event like the hailstorms in France, which sort of like you ended up with losses that have a return period that were much longer than we expected.
We go into the models, we make adjustments to reflect that. Same exact thing for a lot of the secondary perils, floods, and things of that sort. Also on the casualty side, you take the same exact view for frequency severity of events from a from a model standpoint. All of those we load into our loss models, and that's the driver of the loss model updates.
Maybe, Derek Au, on the SST, again, this is a preliminary indication that we are providing those sort of above 280. We'll actually give you the precise number on March 16th when we come out with the economic report, and there you'll see. Just to partially answer your question, the these estimates include what we believe based on our plans and trued up for January 1, the exposures, the risk exposures that we expect to have in the next 12 months from January 1st. In some ways, it's indicating if we go faster or take some additional liability risks, that would affect the measure.
As I mentioned before, if we reduce, some of the hedges and take additional, asset risk, that will also, affect the number.
Thank you, Derek. Could we have the next question, please?
The next question is a follow-up from Freya Kong with Bank of America. Please go ahead.
Thanks for taking my follow-up. On the positive development you saw in property and specialty lines, could we get more colour on this and how much of this was COVID provisions being released? Secondly, could we get an update on your exposure to the earthquakes in Turkey and Syria? Thanks.
Yeah. I can take both of them. On the releases, we don't think we're providing sort of the very specific details of where it comes from. As I said, the major reduction of IBNRs for the COVID was related to actual settlement with our major clients along the way. That's an important piece. On Turkey, unfortunately, you know, the reality is the economic losses and the human tragedy of this event is huge. At this point of time, the insured losses seem to be an unusually small fraction compared to other natural catastrophes.
For Swiss Re itself, we're in contact with both government agencies, including the people that organize a pool in Turkey for earthquake risks, but also our primary companies were not able to quantify our specific losses yet. We'll be coming out obviously in Q1. If we can provide more update in our March release, we will.
Thank you, Freya. Could we have the next question, please?
We have a follow-up coming from Will Hardcastle with UBS. Please go ahead, sir.
Thanks very much. Two quick ones. Can you give the Nat Cat price increase standalone January renewals, if possible? The second one, you mentioned a more cautious approach to cyber in January. I guess just a bit more colour on what's driving the more cautious approach. Thanks.
Okay. I'll take the price increase one. I mean, Will, I think you know we can't give you a, we cannot give you an exact number. I think suffice to say, for the non-proportional part of NatC at covers that renewed, the increases were quite substantial. Reference the broker reports. I think there's a bunch of reports out there that gives you a bit of a sense of how the overall market did.
I think on cyber, obviously, we had a portfolio, I think about $500 billion. The price increases were significant, about 50%, but we ended up at $600 million. Both is true. We had growth in premium, and we cut exposure, in cyber. It's really the environment, you see. Now, one thing is what you the kind of events you saw in the past, but this is an event of, I think a heightened risk, when you think about the geopolitical tensions that are existing. We have obviously the accumulation potential in cyber, which has been one of my worries and needs to be controlled. We cannot grow without limits on this.
We took a cautious stance at this point in time.
Thank you, Will. Could we have the next question, please?
The next question is a follow-up from Mr. Gandhi with Societe Generale. Please go ahead, sir.
Hello. Thank you for the opportunity. Just one, last from me. Can we get a sense of the expected level of Nat Cat premiums, given that the budget is, constant YOY?
Yeah. Thank you for that. We will provide that update sometime in mid-year because it's so dependent on the upcoming renewals. We started with a portfolio of about $4.2 billion yto $4.3 billion. If you take the volume growth of January, that gives you a good sense that we're now at $4.5 billion or above that. We'll provide an update after April and July, which will then be comparable to the $1.9 billion budget as well. Thank you for that. Could we have the next question, please?
The next question comes from Ivan Bokhmat with Barclays. Please go ahead.
Hi. Good afternoon. Thank you very much. My questions are related to alternative capital partners, but also your view on the cycle. Thank you for this helpful detail in the presentation. I was just wondering, how do you assess the pipeline, you know, the undeployed capital that you think may be waiting to come to the market? With that, perhaps you could, you know, express another view of how you think the cycle will play out, the current hard market in reinsurance. Thank you.
Sure. So the... We were successful in bringing additional capital into our sidecar as we've indicated. I think part of that is because a very strong alignment of interest that we've got between our own positions and the people that come and invest with us. The market conditions are supportive for that, but I also think in the last five years, enough people have been burned by losses coming, frankly, from some vectors which they didn't expect, whether it's P&C losses related to the pandemic, the secondary perils loading up a series of losses on people that were in retro programs. Clearly, the reaching back even to 2017 with, you know, three major hurricanes, named perils also affecting not just the catastrophe bond side, but almost everybody's retro programs.
In that context, with Hurricane Ian, I think there are people that were not really committed to this space that have decided to step out. We don't think they're necessarily flowing back in anytime soon, until the concerns around climate change impacts on Nat Cat are better addressed. I think Swiss Re is addressing them, and I think that's why we're able to get the funds coming in. My own sense is the supply of capacity will through 2023 continue to be limited. The market conditions that we saw on January 1 will be maintained for the April, June, July renewals. It's probably premature to try to project into 2024 already.
The, you know, what's clearly emerging is there's a series of professional investors that are willing to work with people that have a shared risk profile. There's a group of people that feel that they've been somehow taken advantage of, whether that's true or not, and are probably not going to return anytime soon.
Thank you, Ivan. Could we have the next question, please?
The next question is a follow-up from Thomas Fossard with HSBC. Please go ahead, sir.
Yes, thank you. Just wanted to check with you if you could provide an update on the loss or claims environment since the start of the year. How it went so far, if you want to flag anything that we should have in mind. Then the second question would be related to the target of 14% return on equity. I fully understand that actually, you don't need to change this target at the present time. I was trying to compare the implied net income of the 14% return on equity compared to your above $3 billion for 2023. It looks to me that the 14% has been set in very different environment, both for underwriting profitability and investment income.
Maybe you can help us to reconcile the two KPIs. Thank you.
Sure. If I understood your first question, you're asking about the current quarter?
Yes. Current quarter so far into the year, yeah.
I think it's premature as we're exactly halfway through to start talking about the current quarter, Vinit. In general, we'll, you know, we think the renewal has given us a good start to the year. We think the, you know, the investment side is also been supportive quarter to date. Maybe that's as far as I'll go. With respect to the 14%, you're exactly right. We came out with that midterm target a year ago when our shareholders' equity was in a very different place, when we gave a target for last year, which obviously we didn't achieve, of a 10% return on equity.
The, you know, nearly $10 billion swing in our fixed income portfolio due to the unrealized losses on the investment changes or interest rate changes have adapted that. What I think is we've left this on the page because it's directionally where we would want to be with a normal shareholders' equity, if you will. We will update this in December when we give you a clear indication of where we think we're landing on IFRS. What we said in the past is our IFRS starting point on shareholders' equity, we expect to be materially above where we currently are with US GAAP. That will be one big change between the two accounting standards.
The other big change is we expect the earnings coming from our life and health business to be materially above where they are on US GAAP because of a different profit recognition envelope. We'll give you details later in the year on both those. I think the way to think about the 14% is the sustainable return on equity on a more normal equity base rather than the shareholders' equity we're currently reporting, which, you know, inched up a bit at year-end to $12.7 billion. Yeah, you're right. If you take the $3 billion on the current shareholders' equity, you get to an ROE of above 20%.
Thank you so much. Could we have the next question, please?
We have a follow-up from Vinit Malhotra with Mediobanca. Please go ahead, sir.
Yes, good afternoon. Thank you. Just on the organizational chart, Christian. Also if I, if I can ask, you know, there was a high profile moving out of in the top management and the CEO. Should we expect some changes to how Swiss Re perceives NatC at or secondary perils? Would you rather say, no changes, business as usual, and this is just it? Just wanted to hear that.
Yeah, just to be clear, no changes. I mean, you know, we are very close to the risk. Underwriting is the core of who we are and of our future success. There's been some mistakes made in the past. There's also some successes, obviously. We all learned the lessons, we are totally focused to keep underwriting as strong as it is now. I mean, underwriting is not just one person, obviously. It's a whole huge organization. I'll be happy to introduce you to our new chief underwriting officers when the next opportunity shows. No, no change. Thank you, Vinit. Do we have any more questions?
There are no more questions at this time.
Thank you for all the questions asked, for your interest. I'd just like to remind you that we will release our annual report on March 16. We then have our management dialogues on March 17 at our offices at Swiss Re, London. We hope to see many of you there. With that, thanks again for attending the call, and we wish you a nice weekend. Thank you all.
Thank you for your participation, ladies and gentlemen. You may now disconnect.