Good morning or good afternoon. Welcome to Swiss Re's first quarter 2020 key financial data conference call. Please note that today's conference call is being recorded. At this time, I would like to turn the conference over to John Dacey, CFO. Please go ahead, sir.
Thank you, good morning or good afternoon to everyone. I'm here today with Eddie Schmid, our Chief Underwriting Officer, and Guido Fürer, our Chief Investment Officer, who will provide some insights on the impact of COVID-19 on our underwriting and asset management operations. Also in the room is Philippe Brahin, our Head of Investor Relations. I'd like to start with a brief overview of the key figures we published this morning. Swiss Re entered the pandemic crisis in a very strong capital position. We also took proactive measures to protect our investment portfolio in the balance sheet in particular. Guido will tell you more about it. On the operational side, we were able to support our clients and partners without disruptions. Our activities remain resilient in the current environment as the quality of our April renewals testifies. Nonetheless, COVID-19 related claims weighed on our results.
We reported net losses of $225 million for the first quarter of 2020. P&C Reinsurance reported a net income of $61 million despite the losses related to COVID-19. The business segment was also affected by large natural catastrophes slightly above our expected losses, mainly related to the weather events in Australia and winter storms in Europe. We also experienced some negative prior year development, which somewhat unusually, was driven more by premium true-ups than reserve additions. Excluding the burden from COVID-19, P&C Re's normalized combined ratio is in line with our 97% estimate for the year. Life & Health Reinsurance delivered above its target ROE, reflecting strong underwriting and investment results, with no material underwriting impact in the quarter from COVID-19. Corporate Solutions reported a net loss of $171 million impacted by losses related to COVID-19.
Excluding those losses, the combined ratio was 13 percentage points better than one year ago. The normalized combined ratio is broadly in line with our 105 estimate for the full year. Life Capital results was impacted by the mark to market on our implied holding in Phoenix, partly offset by a hedge on the U.K. equity markets. The underlying business performed broadly as expected. The agreed sale of ReAssure remains on track and is expected to close in the third quarter of 2020. The group reported a strong return on investment of 3.2% for the first three months of 2020 as an active portfolio management and hedging significantly offset the impact of financial market volatility on the asset portfolio. For the April reinsurance renewals, we are pleased with the outcome achieved.
We saw overall volume growth of 4%, while nominal prices increased by 8%, with a strong increase on Japan windstorm of more than 50%. Risk adjusted price quality year to date remained unchanged, reflecting the lower interest rate environment we're in and material adjustments to loss assumptions, particularly with respect to certain cat exposures. Moving on to the balance sheet, Swiss Re maintains its industry leading capital position with the group Swiss Solvency Test ratio comfortably above 200% as of the 31st of March. As confirmed following our AGM on the 17th of April, and in light of the current volatility in financial markets and global economic situations, the board of directors has concluded that the share buyback program will not be launched.
We will continue to manage our assets and our capital with our utmost foresight, allowing us to continue to support the clients and preserve value for shareholders in these difficult times. With this, I turn it over to Eddie.
Thank you, John, and good morning and good afternoon from my side. As John already mentioned, our Q1 results were impacted by $476 million of COVID-19 claims. Of these, $253 million were in P&C Reinsurance and $223 million in Corporate Solutions. These reflect claims notifications as well as evidence of expected claims materialized as of end of March. Close to 75% of the reinsurance loss and over 80% of the Corporate Solutions loss relates to event cancellation, with the remainder mostly coming from business interruption and smaller amounts from other lines, including credit and surety. As previously communicated, our total maximum exposure to event cancellation across 2020 is a mid to high triple digit million amount.
This is skewed towards the first half of the year in terms of events covered, which means you would expect to book most of the losses in the first two quarters. On credit and surety, you would expect further losses as the recession impact of the crisis becomes more visible in various economies. Economic development remains highly uncertain, depending, for example, on the effectiveness of substantial government interventions. P&C Re has a 10% market share in credit and surety, and Corporate Solutions less than 3% of the overall primary market, both with a high global diversification across a range of industries. Business interruption remains the most debated area of impact in the context of the COVID-19 crisis.
We reiterate that most property policies require a physical trigger, and among those that offer coverage for non-damaged business interruption, not all would cover pandemic. In a number of markets, insurers have provided non-damage business interruption extensions that cover pandemic, however, which despite generally tight sub-limits, could add up to a material loss burden. We are monitoring the regulatory and legislative initiatives very closely. We echo the deep concerns voiced by a number of our clients, peers, and insurance regulators on the danger of potential retrospective changes to insurance contract wording. Moving on to Life & Health Re, we have so far not seen any impact on our business from increased mortality. For instance, mortality experience in the U.S. is in line with our expectations in the first quarter. We continue to monitor the trends here very closely, including any changes in lapse behavior and possible increases in disability claims.
I would mention that a 5% mortality increase in insured mortality over a one-year period would imply additional claims of approximately $400 million for reinsurance and $15 million for Life Capital. The current scale of the impact of COVID-19 on our book is still far from such a scenario. A word on our one in 200-year pandemic stress. We previously disclosed excess mortality numbers this scenario assumes in key countries, for instance, 200,000 in the U.S. Globally, our scenario assumes 14.5 million excess deaths. It should be noted, however, that this scenario is based on an influenza pandemic, which assumes a very different age fatality profile to COVID-19. The current virus disproportionately affects all the demographics with an average age of above 80 for fatalities, while 90% of our Life & Health Re portfolio covers individuals aged 60 or below.
Overall, there are still a number of key unknowns when it comes to assessing the ultimate potential impact of COVID-19 on our underwriting portfolio in 2020. The main ones being the severity and duration of the economic downturn, as well as the outcome of litigation and legislative initiatives around coverage for business interruption. We believe that the impact will be manageable and will represent an earnings event rather than a capital event for Swiss Re. With that, let me hand over to Guido.
Thank you, Eddie, good morning or good afternoon also from my side. Q1 saw significant COVID-19 related market turbulences across basically all asset classes. We experienced falling equity markets. We saw basically two out of the five biggest daily falls in Q1, but also were confronted with widening credit spreads and bond yields, which were falling. All of which are damaging for insurers and reinsurers. However, as John mentioned, we put in place significant hedges in the early part of the quarter in anticipation of elevated volatility. These hedges helped us to mitigate negative impacts and led to gains of roughly $650 million in the first quarter, split evenly across equity and credit. Ultimately, we experienced a net valuation loss of approximately $300 million in the first quarter.
Overall, we report an analyzed return on investment for the quarter of 3.2%, which would have been only 0.5% if we would exclude the benefit of the hedges. In addition, we had $80 million benefit on hedges for the U.K. equity market, which partly offset the negative impact of the Phoenix share price movement in our Life Capital result. As ReAssure is classified as held for sale, its investment portfolio is excluded from the return on investment calculation. These hedges remain in place for the time being, and we continue to manage them dynamically as the situation evolves while retaining our cautious outlook. During the last few quarters, we carefully reviewed our investment portfolio for issuers and sectors particularly sensitive to the ongoing crisis, resulting in a targeted reduction of credit exposures. This led to small realized losses on energy, special finance, travel, and leisure bonds as examples.
Our ESG investment approach also contributed to the protective and high quality of our credit positioning. The group's impairment result was a modest $16.16 million in the quarter, reflecting the high quality of our credit portfolio. Given the downward trend in interest rates, our group running yield declined to 2.5% from 2.8% at the end of 2019. With that, I hand over to Philippe, who will take us through the Q&A.
Thank you, Guido, and good day to all of you also from my side. As usual, before we start our Q&A, I would like to remind you to please restrict yourselves to two questions and register again if you have follow-up questions. With that, operator, could we please take the first question?
The first question comes from the line from Ivan Bokhmat from Barclays. Please go ahead.
Hi. Good morning. Thank you for letting me ask the questions. I've got two. The first one is on your top line. Could you give us some big picture thoughts on how dependent it is on the economic activity? Where do you see the biggest risks stemming from this downturn? The second question, it's just relating to your SST ratio and capital sensitivities. Given the hedges that have been put in place, could you give us an update of how the sensitivities may have changed, and where should we expect the biggest reduction? Thank you.
Maybe Eddie, you take the first one and John the second one.
Yeah, happy to comment a bit on the top line. Again, as so many other questions, it's still early days to come up with firm views. What is clear, as with economic downturn, the lockdown in a number of lines of business, you would expect premium volumes to go down. If you think about motor lines, if you think about workers' comp lines or related to the payroll, if you think about some of the sales in the life business. Clearly there is expected to be an impact on the top line. We would still expect the insurance industry to not be as impacted as, let's say, GDP overall. Quite an impact, but not as material for economies overall and quite dependent on the respective lines of business and segments.
Eddie, I might add that in the context of what will be some clear losses coming on both sides of the balance sheet for many of our reinsurance clients. One could imagine in the second half of the year and into 2019, an actual increased demand for reinsurance by those primary companies as they look to manage their own balance sheets and reduce potentially the volatility of some of those earnings. I think for well-capitalized groups like Swiss Re, you could imagine a situation where the volatility in the marketplace actually creates increased demand for some of our capabilities and products in reinsurance. With respect to the hedges and sensitivities, we've distributed also recently the sort of baseline that, as you correctly point out, does not include the hedges. What I would say is that we don't expect these hedges to stay on forever.
In fact, as Guido said, we'll look dynamically to understand when we can withdraw them when we feel that the economic conditions in the various markets have stabilized and/or are likely to move forward in a sustainable positive direction. As such, we've not provided additional sensitivities just because they would be temporal in nature, and it would be potentially misleading to put them out there. What I can say is, at the moment, we have protected the downside for equity values substantially. The credit hedges are more partial in their coverage, and there is undoubtedly some basis risks between the portfolio we have and the liquid hedges that we were able to find reasonable volumes and prices for. On interest rates, generally, I think we remain somewhat exposed with some modest adjustments to those sensitivities.
I think overall, we can say those sensitivities, as we've published, are the outer bound of what you should expect over the next quarters. Depending on Guido's actions, we'll either come closer to them or stay much more conservative based on our view of the financial market volatilities.
All right. Thanks, Ivan, for your questions. Can we take the next question, please?
The next question comes from Andrew Ritchie from Autonomous. Please go ahead.
Oh, hi there. Could I just ask to get a bit more color on the prior year effect in P&C Re? I'm a bit confused. Just go through again the premium adjustments, and exactly what that is adjusting. It's clearly not adjusting exposure. Are you saying all of the prior year was related to that, or what else was a factor? I guess the other question, John, you mentioned we could see increased demand, and there's evidence of that already. I guess a question for Eddie. Do you expect mid-year renewals to already be affected by what's occurring in terms of slightly less capacity in the market and also increased demand? Thanks.
On the first one regarding the PYD. For this quarter, indeed, there was a bit more development on the premium line. I will also comment on the claims line later. What happened a bit more than in other quarters, that the premium that are coming through are not in line with our earlier assumptions. It's coming actually not from one specific part of the business. It's across markets, across lines of business. Mainly from proportional contracts where we, in the end, rely on our cedents and their forecasts. At this time, these forecasts tended to be on the optimistic side. That explains why a bit more than normal, we had a more significant movement on the premium line. There was also some slight negative development on the claims line, but very moderate. There were some pluses and minuses.
We had some negative on UK Motor, and there was also some negative from U.S. liability. We had a couple of cedents that were catching up with their reporting on claims. Overall, it was quite a moderate quarter in terms of PYD. I would also point out that on the Corporate Solutions side. In Q1, the prior development was actually slightly positive, which is good news that the decisive reserving actions we took end of last year seem to be holding up. The second one, Andrew, was around impacts on pricing already for the mid-year renewals. I'm also a bit cautious on speculating on prices. Clearly, if you look at the industry overall already, we have started to see significant price momentum, as you know, in the commercial markets and more now also on the reinsurance side, in areas where it was loss affected.
We had very successful renewals in Japan, as John pointed out, where we could achieve substantial premium increases. I think with the impact likely on the capital position of some primary companies with a bit more avoidance of risk in general, clearly the demand is expected to go up, while the fear factor in the market would impact supply on the other hand. I would say it's quite a likely outlook that we see further price strengthening. We can also look just at the recent development in the ILS markets, the alternative capital markets, where also spreads were widening a bit. Everything points in this direction. It's too early to tell to what extent. Clearly, supply, demand equilibrium is shifting.
Maybe just one clarification on the first part. As Eddie mentioned on premiums, there's no direct link to COVID-19 to this premium adjustment. I think most quarters we've got some movements. It just so happened in this first quarter of 2020 that there was an unusually mix of relatively large premium adjustments compared to the size of the claims adjustment that netted through.
All right. Thanks, Andrew. Thanks for your questions. Can we have the next question, please?
As a reminder, if you wish to register a question, please press star and one on your telephone. The next question comes from Paris Hadjiantonis from Exane BNP Paribas. Please go ahead.
Yes. Hi, everyone. I hope you are doing well. Two questions from my side. The first one will be on Nat Cat. Basically, if I look at your Nat Cat premiums, these are up about 6% this year, obviously, driven by pricing, and your budget is also slightly up, but less than the 6%. I'm just wondering, are you actually increasing your net exposures, or are you passing most of the additional catastrophe risk that you are underwriting over to ACP or external retro? On COVID-19, we know that giving precise estimates at this point in time is probably too difficult, but I was wondering if there are any developments or maybe exposures that cause concern to Swiss Re from a risk management perspective. Thank you.
Eddie, back to you again too.
Yeah. Thanks, Paris, for the questions. On the first one regarding our Nat Cat account, this is correct. If you just measure the Nat Cat related premium in P&C Re, that's up about 6% last year versus this year. That's in line with the strategy we also explained last year at the investor day that we look at Nat Cat as an attractive pool where we have good client franchise and also the risk knowledge to underwrite this business in a good way. Also back then, we said that our goal is to use our franchise and our risk knowledge to underwrite. Also we want our Nat Cat portfolio rather to be more diversified. When it comes to the concentration peaks like hurricane, we started to actually share more of the business with Alternative Capital Partners.
That in the end, you already gave a bit of the answer, explains why the budget is only going up by some 3%, which actually means that we cede a bit more out to our Alternative Capital Partners than we increase on the gross side. As you may have also observed, alternative capital market was a bit more stretched in recent times. Actually Swiss Re could maintain the support from its third-party capital provider, and we could even get some more support. We just issued also a few more cat bonds so that we actually go into the upcoming hurricane season with a good hedged portfolio and a portfolio that in the end is more diversified. The second one was quite broad about areas of concern around COVID.
We've already indicated in earlier calls the areas where there's likely going to be increased claims on the event cancellation. I think we covered that quite a bit. Obviously, credit and surety is something to watch quite closely. Obviously, that's a line that's closely linked to the economic development with the recessionary outlook and the likelihood of increased defaults. Also, and maybe it is a good example to just point out the uncertainty. You can expect recessionary impacts and more defaults. On the other hand, the government interventions are really also quite unprecedented. If you think about specifically for credit and surety, in many markets, there's government support for the SME sector. There's discussions even in some markets that the government actually is backing up the trade credit business because trade credit is important to keep the economies going.
There's just a number of unprecedented factors at play that make it very difficult to forecast what's really going to happen. Our credit and surety book, to maybe explain better, we have 10% market share in reinsurance. We are not a leader. There's bigger ones. In CorSo, I think I mentioned it's less than 3%, and it's a very diversified book of business. We already, actually because of the end of cycle situation, reduced our exposure there. Credit and surety is an area, and then I think there's obviously many other areas where there are pluses, but obviously more minuses. Yeah. I'll leave it at that for the time.
All right. Thanks, Paris, for your questions. Can we take the next question, please?
The next question comes from Thomas Fossard from HSBC. Please go ahead.
Yes, good afternoon. Two questions for me. The first question will be, could you tell us if you have taken additional measures since COVID-19 crisis started, if you've taken any additional measures to protect your balance sheet? Actually, you indicated significant, the risking of your investment portfolio. I think that was clear as it was explained by Guido. I was thinking on everything apart from investments. Have you taken additional measures in order to protect your book? I know with additional protection or things like that, in order to limit the effect. The second question will be on CorSo. First question would be, the 13% price increase. The momentum is still keeping up well, but in light of the recessionary environment and in light of supporting and talking to your clients, how do you believe that 13% is still achievable in the new environment?
Also, due to this new environment, are you taking a pause to the cost reduction program at CorSo? Thank you.
Okay. Maybe John for the first question and Eddie on CorSo.
I might come back on the last. In terms of protecting the balance sheet, I think first and foremost, these actions on the asset side have been significant and, if I can say so, obviously effective in reducing the negative impact that otherwise would have come through. On this side, obviously you have, whether P&L relevant and then those items which are just relevant on the balance sheet. The one thing I would point out is that the book value of the company has held up extraordinarily well through the first quarter. If you compare book value per share on March 31st to where we were on December 31st, the reduction is less than 4%. That I think is indicative of how we've been able to manage the extraordinary actions that otherwise might have hit us for a potentially double digit decline.
I think on the liability side, the smartest way to protect our balance sheet is do smart underwriting. Once again, we're in a quarter where the COVID numbers are distracting us from speaking about the underlying. Let's remember that we made $300 million in our Life & Health Re business in the quarter. We really are on track for the two estimated loss ratios, 97 in P&C Re and 105 in CorSo for the year. I think the best thing we can do is make sure that in spite of 14,000 people working from home, continue to deliver the kind of results that we had in the April 1 renewals to make sure that that business is going very well while simultaneously managing the crisis of the pandemic and the associated fallout on economic activity from that. That's where management is.
There's a series of weekly and even in some cases biweekly meetings that have been instituted to separate the active management of COVID-19 related issues from our day-to-day operations. Those day-to-day operations proceed apace with almost no interruptions.
Yeah. Maybe I can just add a bit of color on the liability side. Early on as the COVID crisis unfolded, we took a number of actions in terms of adjusting our underwriting appetite. In the end, this is a crisis still unfolding. The picture you can have in mind is that of a burning house. Obviously as an insurer, you need to be very careful not to provide coverage for things that are already foreseeable. Across many lines of business in P&C and life and health, we have tightened our underwriting appetite to not put undue risk on our balance sheet.
For example, we have reduced capacity for large lives we would put out there because there's clearly a risk of increased adverse selection or when it comes to a line like disability income that is linked to some extent to economic development recession, we also reduce the appetite, and there's many examples in other areas. That's obviously one important dimension to protect our balance sheet. As John said, it's equally important for those lines, those exposures that are not materially impacted by COVID, that our business, our underwriting, and everything continues as normal as possible. On your second question was around the pricing dynamics in the commercial business. I would clearly see this to continue. We have only really started to see the movement. It was still quite slow.
We know a year ago, in the beginning, it was only 5%, then over 2019 averaged, CorSo could achieve 12%. Now in the first quarter, it's up to 13%. I think also relating to the comments earlier, just dynamics in the risk-taking markets overall with what's happening. I think the last one was on the cost side, John, you want to take that?
Yeah. The restructuring at CorSo was laid out where we're removing about one-third of the business that was on the books at mid-year 2019. You start to see that show up in the premium earned. In spite of the rate increases that we're getting, we've actually, I think for the first quarter, shown a reduction in earned premium because of the portfolios which have not renewed. In many cases, there were whole teams which were relieved of their responsibilities because we're not in the business. The good news is a fair amount of that was done in 2019, before the crisis, many of those people were able to migrate to other carriers that were more convinced of future success in those lines. I think we'll continue to reshape CorSo into a strong performing company. That means following through on already committed actions.
I don't think we necessarily need to do more than that at this time.
All right. Thank you, Thomas, for your questions. Can we take the next question, please?
The next question comes from Jonny Urwin from UBS. Please go ahead.
Hi, everyone. Thanks for taking my questions. Just two, please. Firstly, on business interruption, please could you comment on whether you're seeing reinsurance policy wordings broadly follow primary policy wordings? I'd be keen to just kind of hear what you think are the main risks on BI. Is it explicit or unintended exposures in policy wordings, or is it the risk of retrospective legal challenge to coverage? Those comments are on your book specifically. I guess on just thinking about the balance sheet and scope to grow post-loss, do you think you have the balance sheet strength and the appetite to go after the capital-intensive lines that could see more rates, given the likely reduction we're seeing in industry capital? I suspect you'll say you've got the balance sheet, but I'm more interested in the appetite. Thank you.
Thanks, Jonny. Maybe we start with Eddie.
Yeah. No, thanks, Jonny. The first one, on business interruption, as mentioned in the introductory comments, that is clearly the most debated area. Obviously, the main discussion first is happening on the primary side, to what extent pandemic-triggered business interruption is covered or not. We still remain of the view that most property policies, they actually require a physical damage trigger for a BI to be claimable, particularly the large limits on BI or these policies. Obviously there's a range of what you call non-damage BI extensions in several markets. These you have to then put into different buckets, so there's those where clearly pandemic is excluded on the one extreme, but on the other extreme, there are a number of policies out there that clearly cover pandemic.
There's a whole range in between, where there's, for example, additional triggers that need to be met. The policy would only pay if there's an outbreak of the infectious disease on the premises, and then you need the closure by public authorities. It's in this gray area where currently all our cedents are going through their portfolios to identify what is really in their portfolio. Clearly there will be some areas where there will be legal disputes. On the retrospective inclusion by legislation, I think commented in introduction, that's just a deeply concerning idea. Insurance really relies on the rule of law, and if we move down that track, clearly it would go beyond what the insurance industry is able to bear, and there I believe that reason will prevail.
That's more the situation on the original side. Then on the reinsurance side, it really depends on the kind of contracts, proportional or non-proportional. Then there's some contracts, for example, catastrophe contracts. Clearly, it's named perils, where there would be no exposure, but there's also contracts where it really follows the original policy wording. Then a question is about aggregation of losses. There we have also quite some elements in terms of event definitions, hours clauses. There's a lot of things that need to be sorted out. That's just to give you a bit of color why that it takes a bit of time to have a clear assessment of the whole landscape around business interruption. Maybe the second one, John, your take about our ability to shed light later.
Sure. I understand it is frustrating not to have clear estimates of what this looks like. I just remind people that there's enormous uncertainty on the underlying health issues and nature of the pandemic. In our worldwide offices, we see someplace as well organized as Singapore is now looking at its third wave. To think that we're out of this first storm of the pandemic, I think is absolutely premature, given the subsequent economic cost to it and what is, in fact, clearly the responsibilities of primary insurance and ultimately reinsurance remains highly speculative. I just caution everybody from trying to get ahead of the facts on this one. With respect, Jonny, to your second question, you asked about capital-intensive covers. We do think we have got the balance sheet to be able to manage this.
I think the hurdles, as you imply, are probably higher, right? We're paying a lot of attention to where long-term interest rates are compared to some of our European competitors. We probably have more interest in U.S. dollar rates and are paying a lot of attention to how far down long-term rates have moved. That's affected our pricing. When we talk about the required price increases in the April 1st renewals, some of that came from more conservative modeling of the Nat Cat risks. Some of that, as in the January 1 renewals, came from a different view of long-term rates. Anything that we do in terms of increasing business going forward is going to require to be value creative in this new rate environment.
To the degree that it involves longer tail business, those hurdles just become more and more impactful in what the required pricing would be.
All right, Jonny, thanks for your questions. Can we take the next question, please?
Yes, the next question comes from Vinit Malhotra from Mediobanca . Please go ahead.
Yes, good afternoon. I hope you can hear me.
Yeah.
Thanks very much. One topic left, which I don't know if it was addressed in the first few minutes, I missed it, sorry. This is about U.S. workers' compensation. Seeing some very wide-ranging numbers from various bodies like the NCCI or even in California. Could you help us understand where you're sitting on that? What are the risks for you, if any, or if material, any color would be very helpful. Thank you very much.
Thanks, Vinit, for the question on workers' compensation. We only touched it briefly as one line of business that is likely impacted definitely on the premium line. U.S. workers' compensation, what you would expect that obviously with the lockdowns, that the premium is going down. You could also see that many people working from home, some of the more exposed jobs not being conducted for the time being. It could also be, let's say, a reduction in frequency. On the other hand, there will likely be claims on certain types of jobs in terms of healthcare workers, other care workers. Just what we can say, our workers' compensation book does not have a significant part of these more exposed types of jobs.
Our workers' compensation business is mainly proportional contracts in the U.S., and those would have occurrence cap so that the maximum exposure from this development should actually be quite limited. For our specific situation, we do not expect a material impact from the workers' compensation business. On a more broader basis, again, just reiterating what John was saying, it's still early in the crisis and how this is going to unfold still has more open questions than things we can really answer.
Thanks, Vinit, for your question. Can we take the next question, please?
The next question comes from Vikram Gandhi from Société Générale. Please go ahead.
Hi, good afternoon, everybody. It's Vik from Société Générale. Apologies if you've already answered this question since I dropped out of the line. Firstly, can you give us some color on the underlying exposures in the U.S. liability, i.e., D&O, E&O, medical malpractice, general liability, et cetera, and what kind of really flows through the umbrella and excess books, which are the lines that are particularly susceptible to adverse developments in the prevailing circumstances? That's question one. Secondly, given the relatively weak results at CorSo and the 141% SST, how should we think about the prospects of a potential capital injection in the unit?
Yeah, thanks, Vik. The first one regarding more the casualty lines of business in the U.S. workers' comp, which just covered, that's just the D&O space you hinted. There is, if you look into past recessions, a link to financial market turbulence, there could be a pickup in losses on the D&O side again in the Swiss Re account. That's not a material segment we support. Then there's a more broader liability space where obviously you could picture more lawsuits against employers and other areas. It just adds a bit to this picture we have been pointing out for a long time that the U.S. liability space in a quite aggressive tort environment with social inflation. All the reasons why since a while, we have taken a very cautious stance on U.S. liability business.
On the CorSo side, as we mentioned in earlier calls, we have taken a very decisive pruning, exiting the most exposed lines in U.S. liability and also on reinsurance. We continue to be quite defensive on the U.S. liability lines, particularly those exposed to severity. In the 1/1 renewals, but again now in 1/1/4, we have actually reduced our exposures to U.S. liability. We measure now within the client portfolios the limits underlying exposed to severity. For the larger corporate segment, we actually have on a year-on-year basis, taken out some 20% of exposure. Clearly there is room for further litigation also out of this COVID. Again, as for other lines, a lot at this point would be speculation to come up more firm views of how this is going to unfold.
Vik, your question on CorSo's capital. Yeah, obviously it'd be better if CorSo was making money than losing money. I reiterate that the prior year development was a modest positive for CorSo for the quarter. We believe that we'll have to weather the COVID-19 claims in Q1 and for the quarters, we'll evaluate the capital levels at the business unit accordingly and make some decisions. I'd say here at the end of the first quarter, we don't see the need to do anything in particular.
Thanks, Vik, for your questions. Can we take the next question, please?
For any further questions, please press star and one. The next question is a follow-up question from Thomas Fossard from HSBC. Please go ahead.
I just wanted to come back on the April 1 renewals, the + 4% premium growth. Could you shed a bit of some light on split maybe on geographical basis, Asia versus U.S. maybe? Also if you could split it differently by lines of business, property versus specialty versus liability, just to better understand how you shifted your book at April 1. The second question would be related again to social claims inflation, U.S. social claims inflation, because it's been a big topic in Q3 and Q4 last year for the market. Suddenly it's completely disappearing from any price releases or of call transcript. I guess that underlying claims trend has probably not stopped from one day to the other.
Just if you could tell us a bit what you saw in terms of trends in terms of claims so far this year in terms of maybe second derivative acceleration or deceleration? Thank you.
Back to you, Eddie.
Back to me. The first one is a bit more color on our renewal account. 4% growth across the board. Obviously, that has an element of the price increases. That is the most significant contributor this time. We could achieve nominal price increases year to date on what we renewed of 6%, which is significant across our book. As we also said, actually, on a risk-adjusted basis, this would be about flat. Still, it is actually positive because it means that we could not only compensate for the more conservative loss picks in, for example, U.S. casualty, which is related to your second question, where we still see that this is a heightened severity environment, so we needed to cost this more conservatively, that loss assumption increases, plus the significant adjustments we made to our typhoon flood modeling in Japan.
These factors we could fully compensate by the normal increases we achieved. In terms of the growth, it's also a bit linked to the factors I just mentioned. Clearly, in Japan, we could grow the total premium by about 20%. In the Nat Cat space with the price increases, also we deployed more capacity given the beneficial outcomes we could achieve. Linked to our increased capacity on the Nat Cat side, we could also access some additional business from clients in other lines of business. For a bit more broadly, I would still say that our trajectory, as already explained in one one, is to shift the portfolio a bit more to shorter duration. We keep growing more on the property Nat Cat side and have a more cautious stance on the longer tail lines exposed to things like social inflation.
Obviously there's also the important point John made that in a much lower interest rate environment, obviously these longer tail liability lines need to get even better in terms of underwriting profit to make sense, given that it cannot discount as much anymore. That's just a bit of color around where the growth is coming from. On the social inflation topic, clearly that's not going away in the U.S., as you have commented earlier. We really think for the U.S. liability market to become sustainable, that there needs to be more than just premium increases and limit reductions. That's clearly what's happening in the underlying business now. With this aggressive tort environment, with this nuclear verdict, a lot of them are actually around commercial motor. If there's car accidents and then bodily injury, then the tort lawyers will go aggressively after some corporates.
The jurors will then award these huge non-economic damages. For that to become better, you will need to see some tort reform at the state or at the federal level to become, again, more reasonable. Now you would add the developments around COVID in the U.S. It is clearly an area where we would continue to underwrite with utmost caution.
Maybe just one observation on the penultimate point, Eddie. To the degree that motor frequency has materially reduced in all markets with lockdowns, you'll probably see some modest benefit also on some of this commercial motor caseload and associated jury awards related to it. There's clearly a very temporal issue. There's no reason to think there's been any structural change or improvement in that business.
Well, thanks, Thomas, for your questions. Can we take the next question, please?
The next question is a follow-up question from Paris Hadjiantonis at Exane BNP. Please go ahead.
Paris, are you there?
Paris, are you on mute?
Yes. Hi. Sorry, I was unmuting it. A couple of very small follow-ups from my side. I guess the first one would be on Life Re. I understand there was a small technical benefit for the quarter. I don't know whether you can give us some color and quantify that. I think it was something to do with a recovery factor. The other one is on the investment side. Obviously, quarter to date, we've seen a pronounced bounce back on the equity front. How should we be thinking about the benefit to Swiss Re from an accounting perspective, given that you have put quite a lot of hedges in place?
Why don't we go to the second question first so Guido can help us out?
Very happy to do so. Thanks, Paris, for the question. You refer to the equity protection which we put in place. As John has mentioned, we will dynamically manage the overlay, not only for equity but also on credit. On equity, we have only option in place. That means we kept the full upside open. As you know, on the U.S. GAAP, both flows through the P&L. Also the mark to market of the equity as well as of the hedges. The fact that we have only a downside protection doesn't take away the full upside potential. That's why recovery, which we have seen quarter to date, should be very helpful. I think on the credit side, we have also a mixed set of different measures. Some are option related, some are index related. That's why also there we kept some of the optionality open.
Very important for us is the quality of the books and the both on the equity as well as on the credit. As John has mentioned, we actively do portfolio management. That's why we not only work with overlays and take out some of the beta risk, but clearly massively improve the quality of the portfolio over the last few quarters. I give you just one figure to give you a bit of a feeling. I think there's a good questioning about the fallen angel potential in our industry. As we know under certain regulation, you don't get the capital benefit if it's outside of investment grade and talk about matching adjustment. Swiss Re does not make use of that. Plus, also we just saw what happens in the midst of the crisis and relate to Q1, the benchmark.
Portfolios, they had a fallen angel in Q1 of 1%, basically credits being non-investment grade from former investment grade. Swiss Re experienced through the same quarter, just a 0.2%. That means one fifth of the market. Also thanks to the hedge, I have to say, in many of the exposed to the COVID, exposed sector like leisure, kind of consumer cyclicals, but also aviation, we are even net short. That's why it's a very dynamic program. I think we look at both. We look at the beta risk, which we clearly address through the overlay program. In the long term, I also believe, as John has alerted to, this crisis is not over in the short term. The economic damage is huge, and some sectors will clearly be hammered, not only over a few weeks, but over a few quarters, if not years.
We recognized that very early. That's why we massively adjusted the portfolio position, started already last year. I give you just one figure. In Q4 last year and in Q1 this year, we had $7 billion of changes in the corporate bond portfolio. That's basically 25%. Of course, we went into the less exposed area, and this gives you some idea how we protect the balance sheet. Again, that even if the crisis continues to do, we expect that we will serve relatively decent in this environment. It's full of challenge. Thank you.
Thank you, Guido. The first question you had, Paris, I think was related to the Life & Health Re. As we said, we had a strong technical result as well as a good investment return. Specifically, I think, there was one, not huge, but of a size that's probably worth noting, recapture for some individual mortality business in Japan. Again, just serving our clients well and working with them on the way that they'd like us to help manage their own risks. Nothing special there, ordinary business, and we do these kinds of transactions on a routine basis.
Okay. Paris, thank you for your follow-up question. We have actually come to the end of our Q&A. If you have any further questions, please contact members of the IR team. Thank you again for joining today. We'll be sure to remain safe and healthy. Operator, back to you.
Thank you for your participation, ladies and gentlemen. You may now disconnect.