Good morning, ladies and gentlemen, and welcome to Swiss Re's Media Conference. My name is Elena Lobothenko. I am Head of Media Relations and Corporate Reporting at Swiss Re. We are joined today by Swiss Re Group CEO, Christian Mumenthaler and our Group CFO, John Dacey. We will start with a presentation of our 2020 Swissree.com, where you will also see the slides that we will be presenting or by dialing into a conference call, which is audio only.
Please note that for the Q and A session, if you would like to ask a question, you will need to dial into the conference call. The numbers you can find at the bottom of today's news release. And now it is my pleasure to hand over to Christian Momentaler, our Group CEO.
Thank you, Elena. And hello, good morning, good afternoon or good evening to all of you out there. I hope you're safe and well through these crazy times. I definitely hope that by the half year result, we'll be able to meet Physically, but obviously at this stage, this is how we have to live. And so I hope you're all well wherever you are.
So before John brings us through the numbers, I'd like to give you a higher level overview of how I see the numbers, the renewals, Our situation on the sustainability front, so it's structured in 4 parts. The earnings in context comes first, then P and C pricing update, the capital actions and sustainability. So let me start with earnings in context. If you could go to the next page. So, So I think the easiest way to explain the result of last year of minus €900,000,000 is to talk about 2 separate Alright.
So one is the COVID-nineteen impact, which was a SEK3.9 billion pretax impact. So I'll talk about that in the next three slides to give you a bit of sense where it's Coming from and how we see things going forward. And then the underlying SEK 2,200,000,000 net income, which excludes COVID-nineteen, which was actually a very good Number, we're very happy with that one. And so I'm also going to explore a little bit of how the underlying result was composed of and what were the drivers. Let me first drive into COVID.
Slide 4 shows the drivers behind that. So the drivers, The 2 of the most important drivers which we have shown in the last two quarters, I think, the first one, business closings in Europe It's the driver for the majority of our business interruption losses. Business interruption loss is not A big topic in Asia. It's much less in the U. S.
It's more a European theme for language reasons. And so here is the key driver. This is sort of an index That shows how many businesses were closed, non essential or essential businesses through the quarters. So you can see that we had a very big Q2 event from that perspective, a much lower, let's say, summer months, Q3 event. And in Q4, it was probably worse than most of us anticipated as we were in Q3, partially due to a new virus mutant, but Probably also 2 late reactions overall to a rise of numbers after a few months that were frankly very good.
And then on the bottom, you see the excess mortality. U. S, this is still the other slides. Slide number 4, please. So, on the bottom, you see excess mortality in the U.
S, England and Wales. That's the areas where we're most exposed to In terms of mortality, you can see that in Q2, there was a big excess mortality in inland whales, but all in the U. S, so this was a bad quarter. Q3 was calmer, and then again Q4, particularly towards the end also in the U. S, had a heavy death toll.
So these are the underlying drivers which lead to the claims on Page number 5. So this chart was also shown to you twice already. So this is an update. You can see on the right, very right, the number US3.9 billion dollars And how it split amongst quarters? So, quarter 1, we had the beginning of it 12%, Q2 had the majority 53% of it, And Q3 was relatively mild, 11%, and Q4 was 24%.
And then the one left to that, You can see how much is paid and case reserves and how much is IBNR. Difference is paid and case reserves is if you have Some concrete notifications from clients that that becomes a case reserve. IBNR means incurred but not reported. So we have to book Claims which we think, based on our analysis, have happened but haven't been reported to us, and this is the so called IBNR. And then you can see the split in different buckets as we did in the last few quarters.
I'll just Highlight 2 of these buckets. Business interruptions, you can see this is where we have the biggest uncertainty because the paid and case reserves are still very small and probably much More than we thought half a year ago. So, there is a big uncertainty here. We know the exposure. We hear from our clients.
So, we can try to get to a number, But this is certainly a number that has a much higher uncertainty around it. And then mortality, the 912, This is important just in comparison to other companies. There's 2 ways you can define this number, this claims number. The first one will be to say it's all the claims where it is clear that the person has died from COVID-nineteen. So when you have a Notification on the death certificate, which will be a much smaller number or what we picked here is basically Excess mortality over the last 3, 4 years.
So our number is higher, but it also means that we know there's lots Cases where people die of COVID-nineteen where it's not official and therefore, we think that this definition probably makes a bit more sense. But you can take both, and it's just important to note the difference. The total will be the same. So, it's just a classification question. At all through the year, we've tried our best estimate approach.
I'm really happy Our claims teams who have thought very diligently about this and by half year were courageous to step forward and had a pretty good sense of how big this will become, and this assessment hasn't fundamentally changed since then. So So, we can go to the next page in terms of outlook. Obviously, always difficult to give an outlook when we don't know how it will end, But I guess most of us have a scenario in our head that vaccinations campaign will work. We all look at Israel where you have a very high Vaccination rates, they started towards the end of last year. They are rapidly vaccinated, in particular, people over 60.
Now most people, like 80% have received the 2nd dose, and we see a sharp drop in terms of new cases in that age band and also a sharp drop of Hospitalization in that manner, that gives us the hope that indeed things will get better in many parts of the world. So, based on that background scenario, we have the event cancellation business where we think Something lower than €200,000,000 is still up for 2020. This is based on the fact that Corporate Solutions has exited this business in 2019, But the policy still have to run off. So we know the exposure is shrinking. And obviously, also our clients where we reinsured things Have latest last year stop to write this kind of business.
So there's a runoff inside. And the business interruption side, There's new language introduced all through the year, but the biggest one is obviously the oneone renewal we just finished. So, the exposure is drastically Reduced, which is why a bit independent of how the pandemic goes, we see another exposure of about €100,000,000 or less than €100,000,000 And then you have a bucket credit surety, other lines like visibility. This will be based on secondary effect and more the economic effect Often pandemic, so they haven't materialized yet. We don't know yet how big they will be, but the estimate in our scenario are less than SEK 200,000,000.
So that's the P and C lines, both CorSo and P and C. In mortality, we like in the past, we give you we think it's easier to just give you a Sensitivity, so the sensitivity is for every $100,000 excess death, there will be an extra claim of about $200,000,000 So this very much depends on the vaccination campaign, how things go. January was a heavy month in the U. S, But you can see now cases dropping quite sharply in the U. S, new hospitalizations also.
So we are hopeful that we're going to see also the death rates Drop in the U. S. So hopefully, this gives you a sense of how we see COVID-nineteen in 2021. And I would like now turn to the underlying business, the $2,200,000,000 of earnings we had underlying Because I think there's a lot of good news in my view in how things have developed. So first, P and C Re on the left side, We had announced in January 2020 that we expected 97% normalized combined ratio.
The actual number is extremely close to that. So, Indeed, we're able to continue to improve the quality of the portfolio. You see very nicely the whole pricing cycle on this Chart, this is the normalized combined ratio, which was very high, close to 100 for 4 years in a row, start decline in 2019 and now again 2020. And with the renewal we have done, which consists of also a lot of pruning, We actually announced a combined ratio of 95% or below for P&C Re. So we see good momentum here, and we're basically going back towards the underwriting year 2014 after a difficult period.
On the right side, you can see Corporate Solutions. We don't try to confuse you. There's two lines here. The blue one is the same normalization method as in reinsurance, which Only takes into account Nat Cat and previous year developments. In CorSo, manmade losses also play a big role.
So the gray dotted line is actually the one that also normalizes for large manmade losses. So you can see that last year, we were below 100
Christian, we've lost
John, perhaps we should go over to you while we reestablish the connection.
That'd be fine. I'm sure we'll get Christian back online in just a moment. Why don't I jump to the Let's see if we've got another ability to bring them back in the next minute or 2. If it doesn't come back online, then I'll Deliver the financial figures. Thank you, everyone, for your patience here.
Can you hear me?
Yes, we can hear you.
I'm sorry. This is, I guess, Murphy's Law. By computer, something happened, I don't know. But so I'm really sorry for everyone. Can I continue from here, Elena?
Everything else is fine?
Yes, please.
Okay. Sorry, everyone. Where did I break off? Did I talk about the left and the right chart?
The difference between the blue line on Corporate Solutions and the gray one.
Okay. Excellent. So as you can see here, the normalized For manmade in CorSo was 101 last year. And so we have said, based on everything we're seeing right now, That next year, we should be below 97, but this year, we should be below 97 in terms of combined ratio. This contrasts to the 98% we had originally thought when we started this whole restructuring in Corporate Solutions.
So overall, very happy with what's happening In CorSo. Let me go over to the next slide, which is around asset management. So I have to say that we're extremely pleased with how Asset Management has worked for this year. The return on investment was 3.5%, Running yields 2.4%. But this doesn't show the full quality of what has been achieved.
Very early on in February already, Asset Management and all of us Risk Management Finance, we realized that this could become a very big pandemic. And therefore, we started to hedge The portfolio, but also to work on the different segments, segment by segments, In terms of how exposed we think they would be to the pandemic. And as a result of that, we had a much Lower exposure to foreign agents versus the markets of 50% and extremely low impairments of €27,000,000 only in this whole book. And as Guido has shown to you in the last Investor Day, the portion of unrealized gains with a maturity of over 10 years, so the substance That protects the yield is very high for the Swiss Re Group. If you go to the next page maybe.
So as usual, I tried to give a bit of a summary of the different business units and how I see the outlook. So here you can see the different as reported numbers in terms of ROE, but you can also see the reported number Excluding COVID-nineteen, which for P&C we were 13%, liveness above 10% and Corporate Solutions above 16%, which was Aided and helped by very low man made claims activities. In terms of outlook, based on what we have done on the renewal, You can see I put a green outlook for 2021. The whole portfolio quality has improved very significantly. On Life and Health, we put a yellow dot.
There's not the same price momentum in Life and Health. And on top of that, reaching the ROE is Challenging with these very low interest rates, which blokes the equity. And then on Corporate Solutions, also the momentum, very strong, So very positive outlook. And finally, ITQ, our white labeling digital business grew 76% in terms of core Business premiums last year and added a lot of partners went out to 40 partners. So very bullish about this too.
So this is a bit of assessment of the businesses for 2020. And I'd like to go further now, look at the renewal And looking ahead. So we as I said in the Investor Day in towards the end of last year, The focus of this renewal was very much margins. So improving the margins was at the heart of it. We wanted to tighten terms and conditions.
This was vital for to exclude or clarify the language around business interruptions. We wanted to significantly cut casualty, in particular in the large corporate risks, which is the most dangerous part in the U. S. And then on the Nat Cat side, we wanted to lower the exposure to frequency events. These are the so called aggregates, Which means this covers that company rights that add up all the losses you have during the year, also the small losses And the total sum of that then determines whether you have to pay out a cover.
And with climate change, we've seen some of the secondary perils, the smaller ones, which are Less modeled and less understood, increased a lot. We have reacted with increased increasing our pricing models on all of that, But we still don't feel comfortable to have a true strong position in that. So there was a clear target to also reduce on these property aggregates. And on the bottom here, you can see the results. So more than 98% of the renewed treaties have exclusions In terms of pandemics, there's still a bit of multiyear treaties that we haven't renewed yet.
So it's not we're not that 100%, but there's a massive Decline. Then on the casualty side, we cut 55%, this large corporate risk segment. And we have 500,000,000 more than 500,000,000 less aggregate limits in these property aggregates. And all of that helped us to get to an even more improved portfolio of combined ratio, which should be below 95 in 2021. So on the next slide, you can see the result of the renewal.
So we start on the left side with €8,000,000,000 of total renewable business. So this is basically business that comes into the market this year. So last year, Re. Some of the multiyear treaties, for example, don't come on the market, so they would be excluded here. You start with 8.8, then you have business you cancel in Some of the categories I just mentioned, which leads to 7.9%.
And then within the business you renew, there's Sure. Of price increases and cutting some of the shares in the same areas like casualty, aggregates and property, Which is a reduction of €500,000,000 Then there's some new business, all of that leading to an estimated outcome of 7 point €8,000,000,000 which is a premium change of minus 11% from the renewable year to date. In terms of price changes, we write here nominal price change 6.5%. This includes high loss assumptions of 1.5%. So it means that across different lines of business, we have adapted our models to be more conservative by 1.5%.
So If you took that on a like for like basis, the improvement is actually 8% nominal. On the next slide, I can show you a little bit the composition and what happened where. So I will focus mostly on the left side. You see the different lines of business. Nat Cat had good price changes, very good price changes, but book stays The same, and that's because of the reduction of aggregates in particular.
So there's actually growth on the rest. On the property side, there's a reduction of 15 which is despite some price changes, but this is business that's quota share with low margin, which are borderline. We didn't write them, Especially we grew a little bit and in casualty we saw the decrease that we had talked about. In casualty actually the price increase was not that high. We're a bit Surprised how bullish the market was.
Some clients retained it actually and some competitors went into it. I think this is the probably the effect of the price increases we could see. But as a result of that, it didn't actually increase as much as we thought it should. So This also helped the pruning that we have done. So overall, we're very satisfied with that.
It fits what we had expected in terms of economic return. It's a significantly improved quality portfolio. And on the next page, Page 13, I thought it's interesting maybe to dig a little bit into the volume loss. You might ask why did you lose so much business? What is happening?
So what you can see here is basically the delta between 2 distributions. The first one is the outcome of last year. So we segmented last year's outcome as As priced last year in a segment below 90% combined ratio, nominal combined ratio, a segment of 90% to 100% and a segment over 100%. And we compared it to the outcome of this year. How much premium volume do you have in these different segments?
And you can see that in the below 90 90 to 100, we actually grew premiums, but the big, big reduction is all above 100 combined ratio. I might ask why did we write above 100% combined ratio last year? Why do we have so much here? Well, there's always this very large Pool of premium of businesses with less volatility that have relatively thin margin, this is an efficient market. And if you have interest rates of 2% like the U.
S. Had last year and you have a duration of 5 years, you can Right. Business is above 100%. And if the capital charge is not too big, if it's low volatility, it can make economic sense. But it's always a much more Tight margin business that you have in this segment.
And now, obviously, with increasing the loss stakes, but also the new discount rates reflecting the new Interest rate environment, it becomes much tougher to write much in this segment. So this is yet to the conclusion to Shrink the portfolio to something of higher quality. So hopefully, this gives you a sense of the renewal. One word around CorSo on Page 14 now. So you can see CorSo.
CorSo, the renewal is much smaller in CorSo. We don't talk about renewal. This is more a constant writing Business during the whole year, there's a little bit more in January, but it's very different to P and C where the January renewal is 46% of our portfolio. So on the left side, you can see the over a longer period of time, all of these pricing charts, price quality change. The strong line is overall CorSo and the dotted line is property, which had a much bigger Decline over time and then came up much stronger.
So you can nicely see how on this compound price quality change, we're back to Underwriting years 13, which were clearly positive underwriting years still as seen from today. The price risk adjusted price quality improvements Last year, 15%, it's very strong, followed by following 12% in 2019. And on the right side, You can see where we shrunk, where we grew over this period of time. So the left side very much reflects what we had said, where we would shrink Like U. S.
Casualty or Aerospace, so there's very strong declines in the pruning, but we also saw opportunity in property, Re. And that probably reflects what you can see on the left side where you had very strong price increases in property, For example. So this is where Corporate Solutions is. This leads me to Page number 15. So we propose a stable dividend, even though we had obviously some unprecedented times, a tough year, But this is also based on a very positive outlook.
So unchanged CHF5.90. On the right side, I repeat, the Capital management priorities, we have now since many, many years, the first parties to ensure superior capitalization at all times And maximize financial flexibility. This is clearly given. We have now we went from a target to a range like all competitors have. The range our range is 200% to 250% SST ratio, and obviously, we are in this range.
And then the second party is to grow the regular dividend or at minimum, Keep it where it is, which is what we decided to do. Priority number 3, deploy capital to new business growth. And we certainly hope That as things have improved now quite a bit in P&C Re and CorSo, there will be opportunities to deploy capital. And party number 4, if we can't deploy capital, is to repatriate to shareholders. So this is around capital.
And then let me end on Page 16 around ESG. ESG is obviously a very broad topic with many Other aspects, including the social and governance aspect, but I thought maybe what I should do here is focus a little bit on the E, on the environment, because that It's a topic that's very close to our business model and who we are. And there's a lot of things happening right now, which I'm not sure everybody is aware of. You can see a lot on this chartered word net 0. So there is rising consensus around the world That we must they take a target like 2,050 and basically have The net CO2 emissions by then to 0, which means efficiencies, changing technologies, trying to get out as much as you can Of that of these different emissions and the rest that remains has to be extracted from the atmosphere through either new technologies that do it directly Or through forestations, for example, other means.
So 2,050 becomes this net zero becomes a very strong Guiding live, the EU certainly is behind that. I think the new U. S. Administration too, we're going to see a very big change here. China has committed to net 0 by 2,060, but we committed to that and so far everything they have executed on it.
So there's this huge political momentum we will talk more about, I think, as the pandemic recedes because the whole issue of climate change comes back to the fore. What also is happening is that investors are increasingly looking at that. There's a huge momentum. We are Ard and actually founding member of the Net 0 Asset Owner Alliance, which at this stage has asset owners of $5,000,000,000,000 come together, We have all pledged to have that portfolio at net 0 by 2,050, which means that the companies within these portfolios Have to reduce the CO2 emissions and the portfolio overall has to be 0 by 2,050. And if companies are not making enough progress, They will need to divest these companies, which is obviously not what the companies want because these are very high quality investors, long term investors In the pension fund area and the insurance area.
So this is creating pressure on CEOs All around the world, certainly the Western world. And as a consequence, you also see more and more companies going in that direction And falling in line, basically pledging to be net 0 by 2,050, which is something we have done several years ago. And the important thing to understand by doing that, in particular, the consumer oriented companies obviously have a high interest of Making that pledge net 0 by 2,050 is that you can only achieve this if your own operation is net 0, which is usually the simplest part. Secondly, that all power, all energy you're using is net 0. And then the so called scope free Is that every company that delivers anything to you needs to be net 0 and your product as you could deliver them to the world need to be net 0.
So the effect of this increasing pool of very large companies having pledged net 0, and we're one of them, means that they will put a lot of Pressure on the whole value chain, on the whole delivery chain, on every company that delivers to them, Which typically in many industries are 100 or even 1000 of companies that are delivering to them. So I think this is going to be a big topic of 2021. I see a huge momentum more than ever before because of all of these factors, the political factor, The factor of the investors putting pressure on and now actually company CEOs, a lot of them taking this very seriously, making pledges And then also making plans to implement that. So within all of that, Swiss Re is extremely well positioned. We have also made a pledge to be a mid tier of our own operation by 2030, as you know, and we're following all of this to make sure that we are net 0 by 2,050, Which also gives us a very privileged position in many of the rankings and the assessments of the rating agencies overall.
So I hope this is useful to give you that overview. And now we're going to I'm going to hand over to John For the financial highlights and again sorry for our technical glitches, but it worked well. So thank you very much.
So So if we can do a sound check, everything is okay?
Yes, it is.
Very good. Thank you, Elena and Christian for your agility here. Let's see
if we can move on and
Look at some of the key figures. Here, the summary page on 'eighteen has, as Christian said, both the actual reported U. S. GAAP results In 2020, by comparison to 2019, and at the bottom, the adjusted figures for the COVID losses. And again, We're not trying to confuse you, but we do show both the figures ex COVID distinct from what we call normalized losses for And nat cats and other large events as well as for the development of Reserves positive or negative during the course of the year.
Maybe if we start then in a little bit of a deeper dive into P and SUEZY. SUEZY on Page 20. Here again, and apologize if I repeat some of the Positions of Christian, but I think it's important to say that we grew this book of business. Importantly, Premiums earned up 8% year on year. The underwriting was undoubtedly massively impacted by the COVID.
The loss of NOK247 1,000,000 is what we've reported. That's Compared to a profit ex COVID of we've estimated to be $1,300,000,000 So the current Activities of P&C Re are profitable unambiguously once we align for the COVID losses. That's clear also in the combined ratio chart that you see in the right side of this page, where a reduction material reduction over not only Last year 2019, but the last 3 years. If we go to the next page, Slide 21, A couple of important things here. One is, in spite of the challenges, operational challenges that the pandemic has Given our business, we manage through them.
And as we manage through them, we also were conscious of the costs We're spending to support these operations. Our cost ratio continued in 2020, a decline And the U. S. GAAP basis from 31.1 to 30.3, efficiency gains across the value chain And a continued reallocation of resources to those areas where we think our future is more interesting. In those areas of solutions and transactions, we continue to see an increased economic contribution on the right side of this page Of the solutions space in P&C Re and importantly, the transactions.
So more than 200 transactions closed. These are Oftentimes, bespoke deals with individual clients. And what's remarkable is that in spite of Working distance and not necessarily being able to meet in person the way that we have been for the last 150 years, we were able to get these deals done with great Client relationships that have been built up over those years. We go on to Life and Health Re on Slide 23. Again, strong premium growth of almost 7%, Supported by what we saw some larger transactions, the margin Down material, because of the COVID losses on the right side of the page, down on the lower right, you see the net income With and without COVID, so Life and Health Re still made a profit in the year in spite of a pretax Loss from COVID of US1 $1,000,000,000 after we remove those on a tax affected basis out, we would have shown a profit of 855,000,000.
The running year, which is an important component for all our businesses, but especially on life and health, Has decreased, but it's remained robust at 3%. The ROI for the year down at 3.7%. On the next page, again, we see a similar message to P&C Re on the efficiency side, Our ability to continue to write business without increasing expenses materially with the active cost management, the discipline that we maintained during the Of course, the COVID crisis on solutions, again, an increase as well as transactions. Here, transactions, even more important is a total 39% of the economic profit for 2020. If I move on from Life and Health 3 to Corporate Solutions, Christian, I think I gave you a clear sense of the turnaround in action.
The one thing I would say is on The volumes of Corporate Solutions, we fully expected that we would not show €4,000,000,000 of premiums earned in 2020 when we began the year. And what we found, as Christian I identified was there are important pockets of business we were able to expand. So even though we pruned more than 800,000,000 Premium in those lines, which we wanted to exit or reduce materially, the actual reduction in volume It's only down 3% as a result of finding opportunities to redeploy capital and write attractive new business. Again, on the right side, the combined ratio with and without COVID is dramatically different. Here, the ex COVID number is even better than what we would consider a normalized number.
For Corporate Solutions, natural catastrophes were similar to what we expected. But in reality, we had a strong positive momentum from prior year reserve adjustments, where we were actually able to release some reserves, which ended up Being redundant during the course of the year and that helped improve that reported or the ex COVID combined ratio. When we take that impact out, we go back up from 93.2% to 96.8%, still a very healthy Rate, that itself was positively influenced by a relatively low level of manmade losses in the For the all of 2020, and if you added that back in, you'd probably be something closer to 105. Again, still well below our guidance, and we've given the guidance for 2021 of better than 97 here. So we're optimistic about the opportunities for Corporate Solutions to continue to write profitable business And be supported, frankly, by a strong industry move on the price continued price increases Into 2021.
Could we go to the next page? The reserve adequacy restored, I think, is the summary line we should think about. This 4% increase was actually Demonstrated over the course of the year, there was actually very little real volatility in those reserves. And As I said, positive releases for the full year compared to the last 3 years where we felt the need to reinforce reserves based on new information that came to us In those years, there was more than $120,000,000 of gross expense reduction And CorSo, with the pruning of the portfolio and the elimination of certain lines of business, we've redeployed a little bit of that And some important new investments. But overall, the expense ratio Moved down by actually 2 full percentage points in spite of the fact that our premiums decreased year on year.
And lastly, not quite as dramatic as some of the things we're doing in the reinsurance side on differentiated assets, but the International B program Up by 50% year on year in terms of the volumes that we're able to book with clients that are benefiting from Our global capabilities, which continue to be enhanced with the expansion of the technology that we're deploying there. So that's Corporate Solutions. If I can go to Life Capital. Here, this will be the last time that we report Life Capital as a business unit. We'll continue to provide information on IptiQ Business.
The Significant remaining business was part of Life Capital. But with the sale of ReAssure, the relative Scale and scope of the activities here did not warrant that it was put at the same level of Corporate Solutions and P and Or the reinsurance businesses. And so here what you see on net income, a loss, Part of this is the new business strain of IptiQ, which will continue. We flagged this in the Investor Day that we would expect IftyQ, new business strain as it continues its very strong growth to be about 50,000,000 Dollars a quarter. We also took the opportunity as we Finalized Ellipse Life inside Ellipse Capital before moving it over in 2021 to Our Corporate Solutions business to do a very strong analysis of The group's activities and reserving positions, we've done some important restructuring, including a withdrawal from the U.
S. An initiative that had been started, which we deemed to be probably not part of the future For it looks like a refocus on the European franchise and a strengthening of the Overall reserve positions to be sure that we're in good shape as we move forward with that. I think the most important figure on this page is the €1,500,000,000 dividend. We were successful not only in closing the ReAssure sale, but of moving the capital up to the group in 2020. You undoubtedly remember that we continue to own a significant share position in Phoenix Life.
The buyer of ReAssure and that itself has turned out to be a fine investment for us. On the open books here, overall, the growth 25%. But if I move to the next page For IP2 specifically, you see gross premiums written in 2020 grew by 70 6% up to $370,000,000 The in force policy count increasing by a similar amount. So the Average policy size continues to be pretty stable in that period. We've added another metric, which we Started disclosing at Investor Day gross income.
This is a number which is utilized by some of the newer Players in the insurance space, technology driven plays like ITTICU that have demonstrated The same level of or a similar level at least of strong growth based on platform technologies. And here, we'll continue to show this number as we continue to grow the book. One of the reasons we've been successful in increasing the premiums written has been the expansion of distribution partners, a continued diversification across Geographies, but also partners, saw up by more than a third from 29 to 40 during the course of the year. If we move on, we've got next our group investments. Christian mentioned the quality of the result, The relative defensive positioning that we had during most of the year and frankly even in Q4 where we maintained some hedges on the Observation that political situations in a couple of major countries continued to be Volatile in the Q4.
So while some people might have been expecting a little bit stronger 4th quarter investment return that was dampened somewhat by these hedges. I think in hindsight, we were very comfortable with the caution that we In place, and we enter the year with a very, very strong portfolio, 3.5% return on investment. The positioning that you see here with ReAssure excluded Showing a little bit of an increase on some of the credit investments from 35.6 to 39, A modest reduction in government bond portfolio, but still I think anyone looking at this in the industry would view this as A fairly conservative positioning on risk coming investment side. The one piece, which is unambiguous with the Current interest rates, even if we've seen some positive movement in the Q1 towards the end of last year and in the Q1 of this year, The running yield is down and down significantly from where it had been over the previous 4 years. That means as we reinvest the portfolio, We're not getting quite the same returns and just reiterates the need for continued price improvements And our P&C Businesses and continued innovation in the structuring of some of our life and health Contracts.
Christian did mention the losses from impairments of €27,000,000 Again, just A stellar performance as the team moved early and aggressively out of sectors which were Under threat during the course of the year and remain arguably under some threat as we go into 2021. On the next page, a slide which we showed, I think Guido had Also at the Investor Day, but just to reiterate, the largest single bucket For our bond portfolio, has these long durations of more than 10 years. Overall, dollars 82,000,000,000 A fixed income with €7,000,000,000 of unrealized gains, that number actually increased during the course of the year. And 70% of that fixed income has more than 10 years of maturity. So we're comfortable That we've well positioned with a conservative risk profile on this.
We are taking some advantage of improving financial markets. And some of the hedges that had been in place certainly in the middle of the year were Reduced towards the end of the year and we continue to manage dynamically that risk position. But as we go into 2021, we don't Re. Any bad surprises out of the asset side and we think there's opportunities as interest rates start to slowly Come off their lows of potentially finding opportunities for a little more risk taking As needed. And I think, and that's The last slide that I have, we've got more slides in the appendix, but we weren't intending to go through them.
So we'll go straight to the Q and A. And I turn it back to Elena to help manage that.
Thank you very much, John and Christian. We will now start the Q and A session. A reminder to everyone that if you would like to ask Question you will need to dial into the conference call. If you're following our media conference on our website, You should be able to see the dial in numbers now on the screen. Operator, could we take the first question please?
Swiss Re. The first question comes from the line of Philippe Re with La Jaffee. Please go ahead, sir.
Hello. Good morning. Can you hear me?
Yes, we can. Hello.
Okay. So I have a question about P&C Business. You are continuing to increase the pricing, to improve the pricing. But are you determined to focus on margins and so to win on some volume growth Throughout all the business cycles, it is a key point in my opinion.
Elza, I can take that.
Yes, please.
I think, obviously, what we do is we have this economic framework where we try to value the business At the front line as it comes in. And there's usually general directions we give from the top on where to go and the Chief Underwriting Office is involved in that. But then the decisions day in and day out must be taken at the front because everything happens at the same time. So we don't Here, the volume, we don't say you have to grow or shrink. We just give general directions, as I showed on the slide, around Price quality, the kind of combined ratio we'd like to achieve, the economic profit we need to have.
And then there's an outcome Out of all of that, which will vary from year to year, sometimes people will find opportunities and there's volume attached to that, sometimes not. So I think the hardest bit to understand is probably that there's a large distribution in every line of business in terms of profitability. It's not just one value. When you see things moving up 5 points, distribution is much wider than that. So every year, we need to take a decision Of how much we write and also whether some of these marginal businesses in or out.
And the result this year clearly The push for profitability was to and lower interest rates also, which made some of this above 100% combined ratio business Not bearable anymore led to this shrinkage, but we're not making any particular predictions for the next 2 years.
Thank you.
Can we take the next question, please?
The next question comes from the line of Paul Walsh with Insurance ERS. Please go ahead.
Good morning. Can you hear me?
Yes, we can.
Lovely. Thank you. A couple of questions for me, please. Based upon our experiences in 2020, have you had to So change your approach to risk modeling and correlations in light of your experiences in the past year? And last secondly on the subject of negative rates, Are you prepared for negative rates?
And what do you think the impact of those might be?
Yes. So in terms of Experience the risk modeling, every I think every pandemic, every nat cat, every event, since we Our own proprietary model, we will look into what does it mean because you usually learn more. I mean, the uncertainty of all these models is probably higher than people generally think. So this is not different. I think we had pandemic in our models for 15, 20 years, so we knew they happen.
The reality has turned out a little bit different. It was less bad on the mortality side. Why? Because in contrast to historical events, There was a much, much stronger reaction. Obviously, as an historical event, sometimes people would isolate and we know that from the Middle Ages, but this was an Extreme reaction, certainly compared to 'nineteen, 'eighteen of locking down everything.
And that means the loss has shifted more to the P and T side To areas that were maybe not expected. So everything on the left side was expected. If anything, it was on the low end. But on the PT side, I think There's clear learnings for event cancellation business, which in my view will be very expensive in the future because people realize it's all correlated to this Pandemic events, so either it will exclude pandemic in the future or it will be very extensive. And then I think this on the whole business The interruption side, I think there's going to be or there is happening a big cleanup of language to clarify what is covered, what is not covered, because a lot of What has been covered now is was unintended.
It was language that was meant to cover small local Breaks of some things, so you have the full diversification across the world, but not a global pandemic. So it will be a combination of reaction On the language side, exposure side, which is probably going to be much bigger, and then modeling changes will probably follow that. So in the end, model changes might not be as important because the realities have simply changed significantly. To your second question, negative rate. So the we price every business based on whatever yield curve we have.
So it's a discounted view of premiums, discounted view of claims coming in. And so whatever rates you have, you just have to adapt. And in clear terms, that means that if rates go down as they did now, you need a higher price to compensate for that. So if you can't achieve the higher price, we cannot write the business. So this has this is how we see the business for more than 15 years.
So If you want, the absolute rate level doesn't really matter. What matters is more is the market does the whole market recognize Do they all see it the same way? And therefore, do the prices react? And they do, to a certain extent, obviously, not always perfect, but they do.
Thank you. And just to follow-up quickly on your first point you mentioned. You talked about event cancellation insurance. Do you foresee that becoming sort of very expensive in the future Because of the experiences we've had in 2020, could you just clarify that, please?
Yes. So this is a question of correlation. If Event cancellation was only covering local problems. That means you can write a lot of those and the premiums will diversify across the world. So That's and that was probably the assumption of the whole market in the past, which is why it was not that expensive.
If in the future people say they want everything covered, all the pandemics, basically every person who writes that needs to This covers up in the pandemic scenario, so it becomes a very capital heavy product. So I would foresee 1 of 2 things. Either pandemic will not be covered, global pandemics will not be covered and then it can remain in the price range it was probably Or you include it and it will become much more expensive. I mean, at the moment, I cannot say. This will be a prediction because at the moment, obviously, nobody Organizing anything and nobody needs insurance for it.
But as we opened up, I think this is going to be an issue.
The next question comes from the line of Ben Dizon with S&P Global Market Intelligence. Please go ahead.
Hi, good morning. Yes, I just have a question, if I may. Just the On the 11% reduction in volume at the renewals, I was just interested in I'm probably if you already covered this, but I'm just interested in what that says about what could happen at future renewal dates in 20 21 and what that will mean for your top line in 2021 as well or whether that's all or whether the company actually made there have got rid of that That particular problem area of business and there's no residual in that residual business in there. Yes. And so the second one was I think Christian you mentioned that So you're hoping to be in a position to deploy capital given improvements in POCRE and CorSo.
I'll just be interested in Where you might deploy that capital, what opportunities you seem to do that?
Okay. So I think it's important to say that the numbers is here. So The business that was renewed now, the way it gets into the GAAP numbers is always a mixture of the part of the current renewal that we will earn this year And the second half of what we wrote last year that will be earned this year. So it comes in a time delayed way. And so you have a certain smoothing, I would say over the years.
Plus, of course, we have some multiyear deals that deliver premium but are not in the renewals and then we have other renewals as we go through the year. So you shouldn't take any particular prediction on volumes for 2021 from this renewal. There's many factors that can influence that. This said, I think it very much depends on market development, interest rates development, how the rest of the market goes from here. So again, we're not steering the company based on volumes.
This is more an output parameter. We try to steer the company based on Economic profit you generate in the renewals. But I think on a high level, I can probably say that, yes, there were some specific areas we wanted to reduce, I don't foresee this to be the key focus in years from now because we did the work we wanted it to do at this stage. But again, I cannot particularly say anything about future renewals. On the capital deployment, that's our general policy, I think it makes sense.
So whenever we see opportunities, we can deploy that. It very much depends on where it materializes, where prices go up, Whether some clients need our help, whether there's M and A activity and they want some large transactions and capital relief from us, All I'm saying is we have the capital and we can grab opportunities if they arose during the year. So that is the 3rd party in our capital management framework. But again, here, I cannot predict if and when this would happen. Okay.
Thanks, everyone.
Thank you. Let's take the next question, please.
Your next question comes from the line of Karl Kaufman with AWP. Please go ahead.
Yes, hello. My question goes to Corporate Solutions. Could you give a bit more color of the plans with Corporate Solutions? Where do you stand in terms of the restructuring measures? And what are the next steps?
Are you planning to grow the business again?
Yes. Happy to do that. So obviously, the first party had to be the whole restructuring. So, as we had Andreas Berger come in at the beginning of 'nineteen, a lot of work has So, on the pruning side, we're nearly finished. It's maybe 5% less or so at this stage.
So, this is done on the cost side, everything is done, announced. It will come through the accounts with a bit of family, but that's all done. So the rest is really disciplined underwriting and trying, obviously, as we capture some of the Profitable growth we can see, but at this stage, this is just a balancing act with all the business we have cut. So to me, the first part is really to get this back on track until next year. Underneath that, there is a lot of We still invest in a few directions, which I talked about in the Investor Day, so at the end of the year.
So, I think we need to position Porzo into it shouldn't be a need to corporate insurance because it would suffer a lot in the next soft So, yes, we have time to either reposition it to make it more solutions oriented, to bring it closer to the clients With the primary layer business, there's some digital solutions that are being Developed within Corporate Solutions and then we want to make sure that Corporate Solutions is also the gauge for the whole Swiss Re Group towards the corporate clients, Which can also profit from solutions developed in reinsurance or from, for example, IPTQ. So but the vast Half majority of the troops must be focused on the quality and on improving the situations. And as I said, I'm very pleased about that. But you're right. This is not the end.
This is just Phase 1. Thank you.
Thank you. Let's take the next question please.
Swiss Re. And the next question comes from the line of David Owen with Insitu Games. Please go ahead.
Okay.
Yes, hello. We can hear you.
Hello. Can you hear me?
Yes, we can. Go ahead.
Okay. I just wanted to ask, you said last year that you had an exposure of $250,000,000 to Tokyo 2020. Has that claim now materialized? And have you paid it out
Re. John?
So we We don't speak to the specific covers or events. What I can say is the Current status is we expect the Olympics to occur in 2021. The maximum exposure that we would have remaining is the 250 that we referenced last year minus whatever we've set aside already this I think overall with event cancellation, what you've seen is a little bit of agility by The organizers, as we speak, the Australian Open is going on right now when by comparison, Last summer, Wimbledon was completely canceled and insurance loss for the industry. So overall, the We hope for the athletes first, for the city of Tokyo, for Japan that the Olympics do take place. If they don't take place, we will manage through whatever losses would come through.
But the maximum, as you correctly pointed out, that we flagged last year was US250 $1,000,000 for Swiss Re?
Yes.
Last year was €250,000,000 for Swiss Re.
Let's take the next question, please.
The next question comes from the line of Maximilian Folz with Societe Run Schwarzkapt. Please go ahead.
Hello, sir. I have a question about the climate risk. Your risk models improved, But at the same time, the climate effects the climate risks increase. What are the effects for your core business, The reinsurance.
Thank you. Yes. So happy to take that. So we have obviously a whole series of climate scientists natural category is scientists who follow the science that is developed everywhere around the world. So, the scientific consensus at this And increasing values in dangerous areas.
The climate effect is believed to be seen and visible in what they call the called secondary perils. So, the ones that are typically not huge for us, like wildfires, hail, floods, etcetera. And less so or there's just no consensus yet whether and how much climate change has changed hurricane frequency and severity. So, the effect at this stage are seen mostly in these smaller parallels, which have an impact on our business, and that's where we adapted Our models, but it has an impact in our business because traditionally these were not very big. So, the sophistication level of our modeling is not or was not high enough And they fall into the so called aggregate covers where clients just add up all losses they have throughout the year And then buyer protection on this.
So we have reduced that exposure a little bit. On the rest, like windstorms in Europe or Hurricane in U. S, we remain just very close to the science and see how it evolves and what things emerge. A lot of these phenomena, when you simulate them, are just Over a longer period of time. So, they are not there's not a massive increase from 1 year to the next.
It's just things that come in. And this Overlapping effect of bigger cyclical phenomena or climate phenomena that we can observe in the world. So It's not a straight thing. It's quite rather complicated. But yes, overall, we will be exposed, but The big mitigant here is that every year we choose to participate or not.
So this is not we don't write contracts That bind us on a 30 year period and if it deteriorates, if the trend is very negative, we pay out. That's not how it works. It's every year we can reassess the risk And we take it or not. So we can adapt pricing to that. So what it means in the end is the climate trend risk It's borne by society, not by the insurance industry.
Thank you.
Thank you. Let's take the next question, please.
Your next question comes from the line of Andreas Kolle with SRS. Please go ahead, sir.
Andreas, hello?
Yes. Hello. This is Andreas speaking.
Yes, we're hearing you. So you can answer the question now.
Yes. Could you once again state what you expect this year regarding COVID claims and reserves?
Can you hear me?
Yes, we can.
Oh, sorry. Okay.
Yes. John, you want to do that? We have to get off mute.
Apologies. Happy to. On the slide deck on Page 6, we actually have the buckets listed out for you. So Across the P&C Businesses of P&C Re and Corporate Solutions, our best estimate is that we will be at less than €500,000,000 of losses In property casualty, split between the event cancellation, the business interruption, credit insurity and other lines. The more difficult calculation is Frankly, on mortality, where this unfortunately is going to be a function of actual deaths In 2021 that are driven by the pandemic.
And so here we put the calculation in place To say for every 100,000 U. S. Excess desks, we're likely to take a charge of about 200,000,000 In the Life and Health Re Business. You might ask why this is so focused on the U. S.
And the reality is with 1 or 2 Most of our portfolios don't cover the or most of life insurance Don't cover mortality risk for seniors past retirement age. And so that exposure just doesn't exist In countries like Italy or France, where there have been deaths, but the Mortality dimension of insurance is not relevant. The savings function is very relevant still and the industry has been behaving Appropriately as a result of that. So I think you can make your own judgments about How many excess deaths are likely to occur in 2021? Obviously, as Q1 started off very badly.
It seems to be improving. If you look at the daily counts, they are reducing in the U. S, but the Rollout of the vaccine simply needs to gain traction, and we need to see the reduction first in caseloads, then in hospitalizations And finally, in Invest.
Thank you very much. May I just ask again to Mr. Mumenthal, what makes you so optimistic This year, given the fact that COVID mutations might change the game again and again.
Yes. So I think there's different factors. One is we can all have different views of how the virus will Brad, overall, we watch Israel very closely. We're far ahead of most of us in vaccinations, and we can see that Hospitalizations of the elderly go down very drastically or the new cases go down very drastically. So there's definitely hope on that front.
But even if it was worse, then there is some backstops here, which I explained. So on the event cancellation, for example, the number of business Outstanding, it's just very limited. There have been no new policies since last year. And in Corozant, we stopped writing it a while ago. On the business interruption We are nearly through basically changing the wordings vis a vis our clients that this is not included.
So although there, there's a significant mitigant in place for one of the for actually the largest bucket of losses that came through last year. And then obviously mortality will do whatever mortality does, but I have a strong feeling that we with these two waves we have seen, we already had a lot of people Touched by the virus. And if you add the vaccine, I'm not saying it's going to go down to 0. I think the COVID-nineteen It will become endemic. It's going to become a virus that will be part of all of us and we might need new vaccines once a year, But it will be more it will adapt and it will be more like a flu type or influenza type virus for the human race.
Thanks.
Thank you. Let's take the next question please.
The last question comes from the line of Ian Smith with Financial
Tuptein. Please go ahead.
Hello, Ian. Can you hear
Mr. Smith, your line is open. You may ask your question.
Can you hear me?
Yes, we can. Hello, Ian.
Thank you very much. I think Murphy's law is applied to me now. I just wanted to follow-up on the Tokyo Olympics where you've said Whatever you'd be on the hook for will be €250,000,000 minus what you set aside this year. Can you give us any guidance as to how much you did set aside this year?
And I
suppose my other question is on the interest rate environment. We've seen a bit of a backup in yield since the start of the year as inflation expectations rise. If that continues through 2021, how will that kind of change the overall picture of group profitability?
Yes. So happy to respond. On the Tokyo Olympics, we've not revealed what we've Actually reserved in 2020. And so I'm afraid I can't help you with that specific exposure. We have More than $800,000,000 for event cancellation around the world.
And as I said, our expectations Right now, our best estimate of pre tax losses in 2021 are less than €200,000,000 But We also make clear that we do expect that some of the largest sporting events, especially those in the second half of the year, Should be able to take place even if without spectators. With respect to interest rates, you're right. We have seen some movements up. And you're also correct in suggesting that, that might be linked with Increasing expectations of inflation as we go forward. What I can say is we would welcome A reversion to more normal interest rates at the moment.
As Christian said, our business is priced with the existing rates. That was true on January 1 and will be true during the course of this year. So we don't anticipate in our own pricing A reversion to the mean. And if we find this improvement, that will assist us. I don't think it should reverse any of the price Improvements that we've seen, especially on the U.
S. Casualty book, we think those are needed and directionally correct, but not necessarily All what's required of the actual loss profile. And with respect to inflation, inflation, Long term increased inflation is not necessarily good for our business. It's one of the reasons why we've adjusted some of the parameters in our SST calculations When we release our January one number next month in March, it will demonstrate that we've taken a more A conservative view of what inflation might look like on going forward basis, and that will have increased capital requirement for those longer tail lines.
Maybe, John, I could add that the mechanics are such that if yields increase, if interest rates increase, You have several phenomena. One is that the SST goes up, so we have a high capitalization, which is essential for business taking. At the same time, in GAAP, the equity goes down because it's not mark to market views of the ROE goes up, but you have the same capability of writing business because what counts there It's the SST. And then the other effect, it's more psychological effect you have in the market is that people or a lot of Clients look at it nominally, not in insurance, but in CorSo. And so even if you get the same rate, the economic value of it is higher because of Higher interest rates.
So it's just psychologically usually more easy to go this way than when interest rates go down and people have to pay a higher price, Economically, you're on a standstill. So I would say rising interest rates generally are positive for these reasons for Swiss Re.
All right. Thank you very much. It seems So I would like to thank everyone for joining today's results media conference and wish you a great day.