Good morning or good afternoon. Welcome to Swiss Re's half year results publication conference call and live webcast. Please note that today's conference call is being recorded. At this time, I would like to turn the conference over to Andreas Berger, Group CEO. Please go ahead.
Thank you very much. Good morning, and also good afternoon for everybody who's dialing in. I appreciate you taking the time to join us today. Before Anders Malmström, our Group CFO, walks you through the details of our H1 results, I'd like to start with some brief remarks. Today, we're pleased to report a strong net income of $2.8 billion for the first half of 2026. This represents more than 60% of our full year net income target of $4.5 billion, which positions us well for the remainder of the year. We're proud to operate three core businesses. They're our passion. Each one is a leading value creator in its respective market. Together, Life & Health Re, P&C Re and Corporate Solutions provide significant diversification, both from a capital efficiency and an earnings perspective.
The strength of this diversified business model is reflected in our first half year results, with excellent underwriting results driving the group's 23% return on equity. Life & Health Re delivered a strong result in the first half of the year, marking two consecutive quarters of clean earnings. The result was driven by strong in-force margins and favorable experience, particularly in U.S. mortality. This reinforces our confidence in the actions taken last year and in achieving our $1.7 billion net income target for 2026. Our P&C businesses continued to deliver strong underwriting results, supported by a low level of large natural catastrophe losses and the high quality of the portfolios we have built over the years. This allowed us to post strong results while also strengthening the balance sheet. You hear us talking about cycle management. Let me expand on that and what this really means for us.
Namely, preserving the quality of our underwriting portfolio, maintaining prudence on loss picks, expanding cycle de-correlated business lines, improving cost efficiency, and elevating capital management. All of these we are delivering. The mid-year renewals were broadly consistent with what we had already seen at the January and April renewals. Competition remains most pronounced in non-proportional property, where nominal pricing is down by high single digits year-to-date, with similar trends observed at the mid-year renewals. Casualty & Specialty continue to present a more balanced pricing environment. Within Casualty, Liability experienced notable rate increases, while Motor also saw positive rate developments. Overall, we achieved a mid-single digit nominal price increase across our Casualty portfolio year-to-date.
In Specialty, competition has picked up. However, nominal rates rose across the majority of sub-lines in Specialty. Our approach in this environment remains unchanged, maintaining underwriting discipline while defending our portfolio quality and margins. Being in a constant active dialogue with our clients and brokers is absolute key in this market. This proximity and relevance to clients means that even if we reduce exposures in some cases where expected returns no longer meet our requirements, we can often expand our role in other areas. This has helped us not only defend our market position and share of wallet, but also to selectively grow through tailored solutions based on our leading risk knowledge while remaining disciplined where returns are inadequate.
Overall to date, we have maintained our market position. We achieved volume growth of 11% at the mid-year renewals compared to our business up for renewal, driven by new business wins in proportional property and selected specialty lines while maintaining broadly stable terms and conditions. Combined with the January and April renewals, year-to-date premium volume increased by 0.5% compared with the business up for renewal. Overall, the nominal pricing across our diversified portfolio remained broadly flat year-to-date. We consider all of this a good outcome, reflective of successful cycle management so far. The second important element of cycle management is to maintain prudence on loss picks. year-to-date, we increased our loss assumptions by 4.4%, almost entirely explaining the risk-adjusted price decline of 4.6%.
In addition, new business continues to include our uncertainty load. If experience develops more favorably than assumed at inception, both the prudent loss assumptions and the uncertainty load would emerge as positive experience variance. This is exactly the resilience we aim to build into the portfolio and what we are now seeing come through. Corporate Solutions is navigating a similar market environment. Risk-adjusted commercial rates were down by around 6% across the portfolio during the first half of the year. Despite this, the business unit continues to grow in its strategic focus areas, namely in cycle-decorrelated lines and differentiated propositions such as international programs.
Over the years, we've built a market-leading AI-enabled technology platform that allows us to seamlessly manage the insurance needs of our multinational clients across more than 150 jurisdictions. This makes us a trusted global partner with a truly differentiated value proposition. The exclusive strategic partnerships announced today in Mexico and India are a good example of how we continue to strengthen this proposition while selectively expanding our presence in attractive growth markets by leveraging our underwriting expertise and global capabilities. This, too, is an important element of how we manage the cycle. Alongside our underwriting actions, improving efficiency remains a key priority.
Today, we announced an increase in our operating cost reduction target to $500 million by 2028. The increase reflects strong progress towards our initial reduction target of $300 million by 2027, as well as further opportunities to simplify how the group operates, focusing on non-client-facing teams. We continue to measure this cost reduction on a run rate basis. That means the lower cost run rate of $500 million by year-end 2028 will be fully reflected in the full year 2029. I also mentioned capital management as a key component of our cycle management strategy. Anders will update you where we stand on this. Looking ahead, our priorities remain unchanged.
We remain focused on delivering our financial targets and the group's overall resilience. Although the market environment remains competitive and we are entering the peak of the hurricane season, we are- s orry, just got them mixed up here. We are confident in the quality of our portfolios, our disciplined underwriting approach, and our diversified earnings profile. With that, I can hand over to Anders, and not before, and he will provide you a bit more details on the first half year results.
Thank you, Andreas, and good morning or good afternoon to everyone on the call. Andreas has taken you through the highlights of our strong first half year performance. Let me add a few further details before we move to the Q&A. P&C Reinsurance reported an insurance service result of $1.8 billion in the first half of 2026, well above the prior year level. The increase was mainly attributable to favorable experience variance related to both current and past services. The positive experience related to current services of around $350 million primarily reflects large Nat Cat losses coming in $676 million below expectations, of which $391 million in Q2. Positive experience related to past services of around $350 million in the first half of 2026 reflects reserve releases across short tail lines of more than $1 billion.
Given the benign large Nat Cat experience in the first half, we retained a significant portion of these releases by adding around $500 million to IBNR reserves for long tail lines in the second quarter. This is in addition to the IBNR reserves established earlier in the year for potential inflationary impact of the ongoing Middle East conflict. Together, these actions further strengthen the resilience of our balance sheet. On the back of these elements, P&C Re reported an excellent combined ratio of 76.7% for the first half, comfortably within its full year target of below 85%. Let me also briefly touch on new business CSM before moving to Corporate Solutions. P&C Re generated new business CSM of $1.6 billion, compared with $2.2 billion in the prior year period.
The year-on-year reduction in new business CSM and increase in new business loss component is consistent with the approximately 4 percentage point increase in the nominal combined ratio on the between $16 billion and $17 billion of treaty business renewed through the end of June. In addition, there's also a modest impact from our facultative book. It's also important to point out that the new business CSM reduction is driven by our higher loss picks, not by an overall decline in nominal pricing. That is a good sign. Turning to Corporate Solutions, the business continued its strong performance, delivering a combined ratio of 86.1%. The insurance service result amounted to $578 million, supported by a CSM release of around $400 million. Experience earned and other was positive at $193 million, primarily driven by a favorable experience related to past service across lines of business.
In addition, Corporate Solutions benefited from lower than expected large Nat Cat losses, more than offset by the usual allowance for potential claim seasonality due to late reporting. New business CSM amounted to $201 million, compared with $262 million in the prior year period, reflecting the more challenging market environment in some lines, partially offset by the inclusion of P&C Re's credit and surety business. Turning to Life & Health Re, where we continue to see the benefit of the actions taken in 2025 coming through. Net income for the first half amounted to just over $1 billion. The insurance service result increased to $1.2 billion and includes a CSM release of $758 million, corresponding to an annualized release rate of around 9%, in line with our full year guidance. The result was again supported by positive experience variance, particularly from U.S. mortality.
New business CSM amounted to $338 million, compared with $569 million in the prior year period, primarily reflecting lower transaction activity. On our investment portfolio, again, it delivered a robust contribution in the first six months with an ROI of 4.0% and a recurring income of $2 billion. Let me also add a few words on group items. The result includes a reserve increase taken in the second quarter related to business in run-off that was formerly part of our dissolved Life Capital unit, which included ReAssure, iptiQ, and elipsLife activities. Over the past years, we have successfully exited almost all of the former Life Capital businesses. In this particular case, to facilitate the exit, we provided a supporting reinsurance arrangement as part of the transaction.
Following the decision to place this reinsurance contract into run-off and manage it separately from our core reinsurance business, we reallocated it from Life & Health Re to group items where we manage our other run-off activities. The comparative information has been updated accordingly. Finally, on capital, Swiss Re continues to maintain a very strong capital position with an estimated group SST ratio of 264%, comfortably above our target range.
The increase of 14 percentage points since 1st of January 2026 primarily reflects underwriting and investment contributions, as well as a temporary benefit of around 5 percentage points from the issuance of subordinated debt to partially refinance debt maturing in 2027. We're also making good progress on the $1.5 billion share buyback we commenced in March, having executed approximately 60% by the end of July. With that, I will leave it here and hand over to Thomas to open the Q&A.
Thank you, Andreas. Thank you, Anders. Hello to you from my side as well. As usual, before we start, I just like to remind you to please limit yourself to two questions. Should you have any follow-up question, please rejoin the queue. Operator, with that, can we please have the first question?
Sure. The first question comes from Andrew Baker from Goldman Sachs. Please go ahead.
Great. Thank you for taking my questions. First one, can you just help me on the reserving side, please? I think you said that you released $1 billion in short tail reserves in the first half. I appreciate that you recycled a lot of that into long tails, but $1 billion, sort of over 20% of your earnings target for this year, at least. How structural should we see these short tail reserve releases as we think about sort of earnings 2027 and beyond? I guess on the long tail additions, is this just prudence, or have you seen any deterioration in underlying trends in any of these lines?
Secondly, I appreciate these are relatively small numbers, but if I look at your mid-year renewals, your higher loss assumptions is +4.2% within your pricing. This is down from +4.4% in April year-to-date and +4.6% in January. Just curious, what has led to this sequential decline? Has anything changed in your view here? Is it mix, or am I just sort of missing something? Thank you.
Maybe just on the reserve releases, what you have seen now, I think I highlighted it now also in the prepared remarks, is obviously in the current period you see it's mostly coming from the Nat Cat side, the low Nat Cat clearly. In the previous period, it's really coming from the prudent reserving and the prudent loss picks in a way that we've done mostly on the short-term lines. That's in a way now a testament to that the reserving philosophy that we changed is really coming through now, and we see positive reserve developments. This all together, I think, allowed us then to strengthen resilience and also put some of that into IBNRs, into long-tail lines, which is not a trend. This basically answers your second question here. This is not about seeing a trend.
This is, in a way, just having the opportunity to do that in a very strong environment and to strengthen the resilience of these lines, not because we see any worsening here at all. Your question about the mid-year renewals, and here about the loss picks. This is not a change in loss picks. This is the business mix that we have now seen in basically the January and April, and now also into June, July renewals. Overall very consistent. I always say this is a continuation. This is not a change here. It's all the differences you see is because of the different business mixes we have. Individually by business line, it's pretty much the same now since the beginning of the year.
Thank you. Andrew, could we have the next question, please?
The next question comes from Shanti Kang, Bank of America. Please go ahead.
Hey, thanks for taking my questions. I just had two. The first one is on P&C, and thinking about the direction of the earnings into 2027. Could you just help us think about that? Given the decline in new business CSM today, how should we think about the direction of the P&C earnings into 2027? Sort of at what point does lower new business profitability start to sort of outweigh any benefits from a very profitable in-force? Trying to gauge that balance. The second thing is, just on Casualty.
I was listening to the U.S. earnings calls over the last few weeks, and one of the larger peers is super cautious on general liability in the U.S. I know you guys have cut back your book in the last year or so, but it would just be good to get your thoughts on conditions there, given you're saying rates are increasing, but it seems like loss cost trends are still pretty buoyant there. Just getting your thoughts on that would be helpful. Thank you.
Yeah. Okay. Excellent. Look, I think, I'm not giving I'm on the position to give the guidance now going forward for 2027. What you clearly see, I think the reduction in new business CSM gives you some idea here. At the same time, also what we now see coming through is really the reserving benefit from being at the upper end of the best estimate range. Just to give you a bit kind of details for what we see now, just for 2026, because you see in the slides that the renewals impact is roughly 4 percentage points in nominal and combined ratio, which is for the renewed business.
This has not fully come through in 2026. We are very comfortable to stay below the 85% combined ratio points. That kind of gives you the indication that we can expect a mid-triple digit and reserve release that's baked into these expectations. Look, we're not really guiding here to anything in 2027, but I think if you just take that trend going forward, I think it gives you an estimate. In the fall, we give you the full outlook for next year.
Maybe on Casualty, very briefly. We are very happy with the position we're in, with the market share we're in, and also the sub-segment, sub-lines that we're operating in. The nominal price changes that came through, are actually reflected also in the growth that you can see in the Casualty line, particularly in the U.S. You have to see that the loss assumptions that we have put up is actually bigger than the nominal price changes that we see. We still have a prudent approach to Casualty. We're consistent with what we have seen before and done before. That's sort of the way you should interpret our statements. I don't know what markets then say, but that's definitely our approach here.
Thank you, Shanti. Could we have the next question, please?
The next question comes from Kamran Hossain from JP Morgan. Please go ahead.
Hi. Two questions from me. The first one is, just intrigued about the motivation behind the increased cost cut. Definitely kind of a welcome thing, increased efficiency. Clearly, you're well on the way to kind of hitting your number that you set out previously. Is it market conditions? Revenue may be a little bit softer. Just understanding kind of why today it feels like it's a kind of full year issue to kind of talk about. The second question is just back on the long tail reserving additions. As I think your explanation around kind of the amount you've, where it's come from, where you've recycled it, makes sense, kind of adding more into prudence, etc. , the kind of lemon tree.
I think when you took the actions in Q3 2024, you talked about being at 90th percentile, kind of reserving competence across the entire book. I think talking to a predecessor, he suggested that in the kind of Casualty book, it would be higher than that. Could you maybe give some qualitative comments around whether those numbers are a little bit higher these days, or whether actually just everything's running to plan? Thank you.
Very good. Okay. Maybe just starting with costs. Look, I think cost is something that every company has to maintain and manage constantly, and that's not different to us. We announced this program now two years ago to $300 million. We're very well on track with it. Remember, I always said it's important that it's not just a hockey stick, it's a constant every year. Basically, we make progress towards that. That's going according to plan. With that in mind, we basically say, "Look, now let's extend that," because it is going to plan, extend it by a year, but also to increase it. The benefit should then really come through that there's a better support ultimately for the clients and for the businesses.
That's why we focus on the non-client areas within the group, focusing on processes, focusing on simplifying the group, which then frees up resources that will help to grow the business. Timing, just because we're well on the way here, kind of mid, we're in the middle of it now, two years after it, so we thought it's a good time now to update that and give you that guidance here.
On the long-term reserve additions percentile, when we announced it, we said clearly we are at the 90%. Going forward, we will not give an exact number, but we are at the upper end of the best estimate range, and we continue to be at this upper end of the best estimate range. You also see that now coming through the positive reserve development that we now see now basically quarter- after quarter,- which shows you that we're above the midpoint. Without giving you a number, I think it's really going according to plan.
Thank you, Kamran. Could we have the next question, please?
The next question comes from Iain Pearce from BNP Paribas. Please go ahead.
Hi. Afternoon. Thanks for taking my questions. Just to follow up on the mid-triple digit reserve release number that you're saying we should expect in a normal year. Does that include the uncertainty loading? I'm just back of the envelope here. If I say we could expect a $250 million normalized reserve release and adjust the experience variance for that would be a 6 points headwind on the combined ratio for H1, which gets you to the roughly 83 level, then I add 4 points for the renewals, and I'm at 87% for next year. Could you just, or 87% for the business you're writing. Could you just point where I'm going wrong there, or what's leading to that confidence on the 85% versus that math? The second one is just on the competitive positioning in the Life & Health business.
I understand that this business can be lumpy, even if we look over the last four quarters versus the previous four quarters, new business CSM is down in the mid-teens, FX adjusted. Just trying to see how you're viewing your competitive positioning, how you're viewing the competitive environment in Life & Health, and sort of what the pipeline looks like for new business in Life & Health from here. Thank you.
Yeah. Let me start on the first one. I think what I tried to basically explain to you here with the mid-triple digit, when we put the target together, that was exactly how we assessed and said, "Okay, we feel comfortable to go below the 85% target." Obviously now going forward, that will be adjusted. This is how you should think. We knew that we see the pricing pressures, and we saw that increase. At the same time, we're very comfortable that we will see these releases coming through. Part of it from the UCI, part of it from the prudent and loss picks. I would say that's that. Also it obviously depends. You always see then benefits or headwinds coming from the Nat Cat side. That was baked into this view. Life & Health.
On Life & Health, clearly, we have the long-term objective to be new business CSM 100% sustainable, which means we generate a new business CSM that is equal or higher than the CSM release that we see. That's the stated objective. Now, because it's also heavily dependent on transactions, it can be quite lumpy. Actually right now that we've seen a couple of quarters or maybe even a bit more where we were below that, but we've also seen quarters where we were above that. Last year we were CSM sustainable above 100%.
I think this year we will not be at 100%. We're very comfortable that for the second half of the year we will be back on, call it normal run rate, but I don't think we're going to get back to 100% on the CSM sustainability. This is a clear objective in the long run, which we've also had in the past. It just can be long periods.
Thank you, Iain. Could we have the next question, please?
The next question comes from Will Hardcastle from UBS. Please go ahead.
Hi there. Are you trying to tell us, essentially a 30% new business CSM reduction. I think if we annualize that, it would be c lose to $750 million or something is almost entirely extra prudency, and therefore, there's almost zero underlying earnings pressure from the renewals. That feels too generous to me. I guess, can you perhaps bridge that 30% reduction between prudency volume and margin? I seem to remember the new reserving philosophy that came in a couple of years ago was putting on around $600 million extra reserves pre-tax.
This would take time to ever get released to that extent in any given year. You've released $1 billion of short tail property year-to-date. I guess presumably, you're not encouraging us to extrapolate that $1 billion. Does this unwind sort of extra prudency as well that you've added in the last two years from benign CAT, which will ultimately be depleted? Thank you
Okay. Let me start. In a way, it goes a bit together, these questions. The reduction in CSM, we're not saying that this is all prudence, we're also saying this is not all just lower business. I think what we're saying is our reduction is pretty much in line with what we see on the renewals front with the different views that we have on the renewals. What we're saying is nominal premiums are pretty much flat, nominal pricing is pretty much flat, and then you obviously have the assumptions on loss increases. I think we're prudent there, you've seen that now over the last few years. We're not saying this is zero.
I'm not guiding you towards that this is zero, I think it's also you can make your judgment how much of that is, I would say, directly related to claims inflations and how much you would say there is some room there. We will give you the 2027 guidance later in the year based on that. I think that's an important point, we want to make sure that we are reserved at this upper end of the best estimate range, and then we see positive development, which now is clearly coming through.
Thank you.
Thank you, Will. Could we have the next question, please?
The next question comes from Vinit Malhotra from Mediobanca. Please go ahead.
Yes, good afternoon. Thank you very much. Many of my topics been addressed, but two topics if I can raise, please. One is just on the P&C Re revenue book, which FX shows quite a bit of improvement versus 1Q and 2Q. I mean, I remember the cedant updates to the topic, but probably it's been mentioned again. Is there anything that you would like us to think about the coming quarters or in terms of what could drive revenues?
I know it's not a guidance from your side. In other words, what could be one of which in these one, I mean, 1Q talk about 2Q. That's on P&C Re revenues. Second thing is just on the Life & Health Reinsurance. I mean, obviously, you're running above target. I'm just curious whether maintaining the target is driven by some expectations of some normalization, or it's just you wanted to be conservative of the target. Thank you.
Yeah, sure. Let me just start with the second one. I think we are running above target, but it's also driven by better than expected experience variances. If you normalize for that, and I think you should normalize for that, at least at that point in time, we will be exact on target here. Mortality can have some volatility over the year, and we've seen that before. Basically assuming that and having a normalized assumption here brings you exactly in line with our target. The other question was really on the revenue. I think you're absolutely right.
I mean, there's an FX component here. We don't really guide here, but what you know is that Q3 is usually higher given seasonality of the expected claim, just because of the Nat Cat. You have the Nat Cat seasonality that usually is much higher in Q3. That's why also you will see a higher revenue coming through there from the expected claims. Other than that, I think it's just very straightforward roll forward from what you see now with the first two quarters.
Thank you, Vinit. Could we have the next question, please?
The next question comes from Chris Hartwell from Autonomous Research. Please go ahead.
Good afternoon. First question, if I may, is just on the investment book. The reinvestment yield, I think, you pointed to a 90 basis point quarter-on-quarter improvement. That seemed a little high versus what we've seen sort of prevailing in, I guess, in rates markets. I wonder if you could give a little bit more color on that, maybe if there's any underlying asset allocation shift within that. Second question, just on the P&C Re side.
The expense ratio has been trending upwards a fair amount, actually, I guess, over the last couple of years, and quite a bit higher in H1 versus the prior year. I was wondering if you could also give a little bit of color on how we should view the expense ratio development through 2026, and I guess also whether there will be any benefit coming through to that on the cost saver, whether this is obviously pure underwriting expense. Thank you.
Okay. Let me start on the investment side, in particular the reinvestment and yield. Particularly in Q2, we saw, I would say entirely higher reinvestment yield. This is not the reason of any kind of changes in SAA. It's just that in this quarter, we had a higher allocation from the new investments than to spread product. This is a public and private credit, which now accounted for the majority of the purchases during the quarter. That's not because we wanted to change anything within the asset allocation. That was just because in Q2 particular, we had higher reinvestments into this particular asset class. I think that's important. Then on the expense ratio, for P&C Re, there's a net expense component in here.
I think you should see then some of the expense reduction coming through, but you know the expense reduction of throughout the firm, this is only part of that actually gets allocated then to P&C Re. I don't think this will have a material impact on expense ratio. Then the other one is just, we saw lower revenues coming through, which obviously naturally just increases the expense ratio here.
Thank you, Chris. Could we have the next question, if there is one?
We actually don't have any questions right now from the phone.
Maybe on the expense ratio, just to add, we are here very well in competitive benchmark level. It's not something to worry.
In the future, we will also provide a breakdown of the $500 million cost savings, exactly which line item it goes to and how we're doing against that.
Yeah.
With that, thank you all for your questions, for attending this call. Should we have any follow-up questions, please don't hesitate to contact any member of the investor relations team. Thanks again, have a good rest of the day.
Thank you all for your participation. You may now disconnect.