Welcome, everyone. It's great to see so many familiar faces. Investors, analysts, thank you very much for taking the time to come here. We very much appreciate. I know it's a busy time of the year for all of you, so we really appreciate you took the time Monday morning to come here to The Gherkin. My 20 minutes are around the high level view of Swiss Re. I'd like to start with this slide, where on the bottom, and you have seen that before, because I'm quite passionate about this, are what I would call the three biggest strategic assets at the core of Swiss Re. All the businesses are built on those, but these are three differentiating strategic assets.
The first one, client access, you could also say brand, basically means that we have access to all the insurance clients in the world, to the C-suite of these clients, that we know thousands of corporates in the world through Corporate Solutions, and that we basically have the right to play. The second one, risk knowledge, is the accumulated knowledge around risk that we have accumulated over decades, which allows to have, hopefully, deeper insights into some of the risks and to price the risk more adequately. Then capital strength, which used to be probably the most important one 20 years ago, is now a bit less important in this low interest rate environment where there's plenty of capital. It's still a very important differentiator for our clients. Clients appreciate the capital strength that we deliver.
These are the three strengths, and I will go through each of them in a bit more detail. Based on those, we have three businesses, which are all in different states right now. Reinsurance is clearly the foundation of our strengths. It's regaining and increasing the earnings power in this environment that's slightly improving. It's the core of what we do. We then have Corporate Solutions, which is clearly in a transitional phase, trying to get back to profitability and doing a strategic refocus. Life Capital is also transitioning from a unit dominated by ReAssure to a digital B2B2C player. As Thierry this afternoon will tell more about that. I'll also go quickly through the three businesses and how I see them and where they are. First, let me go through the strategic assets. First one around client access.
You know that's some of my favorite charts. What do they show? On the left side is a visualization of a relationship with a big insurance client. Every time anybody at Swiss Re has a meeting anywhere in the world with a particular client, like Allianz, they write a discussion note with who was there, what was discussed, et cetera, and the client executive will get these notes. They see everything that's going on between the two entities. This is the visualization of all this data. You have all the names of people on top, names from the clients on the bottom, this shows who has met with whom over time. With these big clients, typically 10 interactions a day is the norm.
There's a massive interaction between Swiss Re and the client organizations at many different levels, which yields some clear benefits in my view. What I haven't shown yet is the slide on the right. There's an expansion a bit, to the broader industry, to other industry players. This one shows the different units within Swiss Re and how they interact with other parts of the industry. Not insurers, but technology company, real estate, OEMs, i.e. car manufacturers, and finance. What you can see here is obviously you would expect Corporate Solutions here to have contact with all of those and maybe Group IT with the technology part.
What is probably a bit more surprising is that reinsurance has quite a lot of interactions with those, because in the solutions team, we have a lot of things we're doing with some of those, including, for example, the collaboration we have with BMW on ADAS, which is public, but also many things that are not public. On top, you can see Life Capital, which is basically IptiQ, has a massive amount of interaction with a lot of these players. Very little is visible yet in terms of outside announcements. There's clearly a huge interest by those company and by us to work together. There's also global diversification of the Swiss Re group, which is quite unique in my view. You all know the US GAAP figures, in the regions, $16 billion in Americas, $11 billion in EMEA and $7 billion in Asia.
If you look at the EVM premiums, which is basically the discounted future cash flows of the premiums, in particular in Life & Health, you take the discount of all the future premiums that a current contract will yield. The picture already looks quite different. It's $15 billion in the Americas, $13 billion in EMEA and $16 billion in Asia. Asia is now the biggest one, particularly because of the Life & Health business. That's also because of this global reach that we say our purpose is to make the world more resilient, and we measure all kinds of KPIs around that. We're active in more than 150 countries. There's more than 100,000 P&C clients supported, most of them Corporate Solutions, obviously. In Life & Health, we measure how many family members we support, which is more than 175 million.
This is basically the client access, the reach the firm has. In terms of risk knowledge, two years ago, we founded the Swiss Re Institute, which was created to have an overview of all research activities at Swiss Re. We have about 450 people working on R&D, 13 R&D teams, 80 R&D programs. We can now structure those in terms of what value they bring to Swiss Re and what the intent is of those. We have the segmentation of five different categories here. First one is market intelligence, which helps business steering. Second one we call insurance beta, which helps capital allocation here. These are related. There's insurance alpha, which is basically risk selection and pricing tools, which we have for all kinds of lines of business.
There's this commercialization, which is around data solutions, publications, and this includes tools like Magnum and Life Guides. By the way, outside is a booth for Magnum in case you're interested to once see it live. There's efficiencies, process re-engineering. We also lose all of our R&D to make ourselves more effective. This is the framework and how we steer now the different pockets. We have made adaptations since we have the Swiss Re Institute to focus to the areas we think are most important. In that context, we have a tech strategy, which I showed to you, I think, April last year. It's completely embedded into this SRI framework. Our tech strategy has four priorities. The first one is increase our clients' competitiveness. This is through tools like Magnum. This is the whole commercialization aspect of what we try to achieve.
We apply the tech to improve our own value chain. This is the efficiency bucket. Third one, get closer to risk through digital platforms. That's the big bet we make on the iptiQ platform. Finally, there's one around data. Harvest the full potential of our proprietary data, which supports all of those. There's approximately $300 million we spend per annum on the whole technology side. Half of that goes into iptiQ, which is really from all the ideas we had, the one we believe in most. There is a second biggest project, we call it Atlas. That's basically creating a new general ledger for this whole Swiss Re group based on the SAP HANA technology. That allows for a five-day close because it's in memory.
We also have done a co-innovation project with SAP, and the reason they chose us is because we have this EVM knowledge for more than 20 years, and this was now crucial to create a product which can do IFRS 17. This is a very interesting co-innovation project. The product is actually out. This FPSL is already out. It's marketed to companies who will use it for IFRS 17. One other area we are quite active in is this whole automotive and mobility solutions. These technology initiatives have an impact on Swiss Re, and you will see it over time. This is a graph that tries to show how much of the EVM premium is coming from or is related to some of these technology initiatives. You can see over time, the biggest one, obviously, is Magnum in Swiss Re in the Life & Health solutions.
We talked many times about Magnum. This is the business that is linked to Magnum. Magnum is a tool that is used for underwriting at the front end by our clients. Then in the back end, we link to that. We have a share of the business, and this is the business we get through this Magnum platform. You see P&C Re solutions, which is relatively new, where we have different solutions. We have Corporate Solutions, very small. That's the new platform they have, so there's a few clients on it, but this should grow quite a bit. Then iptiQ on top. This is EVM premium, so this is basically the discounted future premium of everything we have written at this stage. That's why life is dominating because you see all the future premiums whereas P&C is a bit smaller.
It's becoming significant and there's some real impact for us. On the capital strength, I probably don't need to spend much time on here. The figures are all known to you. The last SST ratio we published is 241%. We try to calculate the Solvency II figure. I think this is a cautious approximation, which is why we say it's higher than 260. We have some data from competitors and peers which are lower. This leads us to believe that on a comparable basis, Swiss Re is one of the stronger balance sheets out there in the market. That's important, again, for our clients. Let me now go through the three different businesses. Reinsurance clearly, in my view, is in a very good state and has significant competitive advantages. Several ones, actually. The first one is global scale.
You see the market shares here, 17% for Life & Health, 11% for P&C. Scale just generally means you have some efficiencies of scale. This is direct client access. Most people go all through brokers. We have 90% in Life & Health without brokers, and in P&C is about half. There's a very high diversification, in particular with Life & Health. Many of our competitors don't have a Life & Health business. We get significant benefits from having a Life & Health business. Superior risk knowledge. It's not the focus of this presentation, but last April, there was a presentation where we showed you in more detail how we measure the delta in value get from our risk knowledge and from the different things we do. More than 50% of profit is differentiated profit.
Profit we get on top of what we would expect the market to be able to get. Reinsurance also has a positioning, obviously, as a net risk taker. We're a shock absorber for society. We have net positions in Nat Cat that are bigger than most. That's basically based on the hypothesis that in good years, you outperform the rest. In bad Nat Cat years, you underperform, but on average, you save the retro premium. If you look at the last five years, I think it's quite a remarkable result, 11.5% ROE. That includes 2017, which was the most costly year in Nat Cat ever recorded in terms of market loss. It includes 2018, which is the fourth biggest Nat Cat loss year. That includes the first nine months of this year, which clearly have been heavily impacted by Nat Cat.
Reinsurance overall, including life and health, obviously, is able to absorb this volatility from the Nat Cat side and produce good returns. If you look one level deeper, we also see this reinsurance as the source of the more immediate term earnings growth. Life and Health Re, this is the costed view in EVM. This is basically when we write the business, how do we see it coming, including expected loss? How do we see the profit growing? Life and Health Re, you can see that in our cost reducer ex ante, we grew it about 50% since 2015. We went to $1.2 billion EVM profit.
You can see on the P&C Re side, we had a drop with the soft market to 2016 and then a bit of a bottom out, and then now we start to see more EVM profit being created through growth and slightly better margins. I guess that picture makes us optimistic because we don't really see a particular end to the Life and health growth. Asia is still growing and on P&C, we clearly hope for the conditions which seem to happen right now to improve. CorSo. We talked a lot about CorSo this year for obvious reasons. Got stuck in a really bad market. We talked a lot about the left part here at the half year results. The, I'll call it the fix it part, which has four components here.
It says about pruning, it's about price increases, improving productivity and optimizing reinsurance structure with the target to get to 98% combined ratio, by 2021. Yes, we're going to get the question. We're still confident to achieve that. That's just the fix it part, cannot be the only thing. Andreas today will also talk a bit about the more strategic side of the whole thing. For now, it's the strategic priorities, the strategic directions we want to take on top of that, because just fixing it is, in my view, not good enough. We also need to fix a direction which will make CorSo something more unique than it used to be. Here are the components of that. The first one, in my view, extremely important because it touches a lot, is what I call de-commoditize our core business.
Not just look at what is profitable or not, but also look at where do we think we have competitive advantage, where can we claim that, and to focus basically on those pockets. The second one is grow with differentiating assets. CorSo has a few unique assets. For example, we have a JV with Bradesco in Brazil. This is quite unique. We have a good name, so we can do other JVs in other high growth markets. We have the platform, PULSE, which we also showed in April of last year, which is probably one of the best, if not the best, in the market. The question is can we leverage that? We also have a structured team that does parametric transactions, which is quite unique. It's well hidden within CorSo. It's only a sub-part, but it's quite unique and producing good profit.
It's really the question, do we see differentiating assets and can we leverage those going forward? The third one is maybe a bit esoteric, but we still put it on here because there's real demand by these ecosystems to talk to us. We call it here expand through tech driven solutions. There are these ecosystems and they ask themselves how can they include insurance into the ecosystems? Are there different ways to distribute corporate insurance, which overall is extremely ineffective in terms of a value chain currently, and we are on all these discussions. I put it out there so that you're not surprised if something comes out, but it's not a proven point at this stage. I think it's an interesting strategic idea. I come to Life Capital. Based on popular demand, I guess, I reiterate the question I get at every investor meeting.
What's next for ReAssure? I'm still going to get the question later, I'm sure, but here the first version of it is, clearly what I say is the North Star is unchanged. The direction is unchanged, right? Strategically, I think it's a great business, but it doesn't fit with our balance sheet and therefore the priority must be to deconsolidate it over time. We're not a forced seller, so I want to do it in a way that makes sense for shareholders. Therefore, we continue to explore all kinds of routes to achieve that goal. Under no circumstances do we want to become a forced seller. Which means that in the meantime, the team has our full support. They can do acquisitions, and we'll support everything that increases the value of this asset.
Two slides on iptiQ because I talked about it for the first time in April of last year, and I think it's quite exciting and we put a lot of effort into it and attention. Why would we do that? IptiQ is our state-of-the-art digital white labeling B2B2C platform. We work with big brands, corporate brands who can sell to their clients. We have by now 28 partners, insurers, intermediary banks and ecosystems, but many more are thinkable because it's basically the whole value chain you need to distribute life insurance and now also P&C insurance. The geographic reach is now the EU basically and the U.S., so quite a lot of consumers in focus. The capabilities, you have 60 days to partner onboarding.
It means that if you want to sell life insurance under your name, we have all the capabilities and within two months you're up and running with one of the best platforms. It's multi-channel, it's end to end. We have customer insights, et cetera. We try to learn from everything that is around the best possible value chain step, and we're also rearranging it. We work also with some startups, if they're better than established players. We're more an arranger of the value chain than trying to program everything ourselves. We started all in Life. Term, Whole Life, Accident, Critical Illness, Health Add-ons. These are all biometric products, which are in our view, or which are the piece of the Life & Health market, which we understand the best. I'll call it the filet of the beef, of the animal.
It's really the most attractive part of the Life and Health market. In P&C, we now have the capabilities since a few months, travel, cyber, mobility and home. The platform can do a lot, it's scalable and we have some beginning results that we can show here. The gross written premium this year, that estimate, since we're not at full year end, about $225 million, and the analyzed new business premium of $155 million. You might say, "Why bother since this is Swiss Re? It's so big," right? The reason to bother is that first of all, it can grow much more, obviously. Second, this is biometric risk where we know a lot, and it's the best piece of the Life and Health market. You have to put it into context.
155 million APE is getting close to what leaders write in big markets like the U.K. It's typically $200 million-$300 million in the biometric risk spectrum. Most of what people write is savings products. In that space, it's already like a big local player. If you stopped growing at this stage here, at $155, you just continue to write $155 every year, you get to about $1 billion of gross written premium in 10 years because it's multi-year premium and you have some lapse rates, et cetera. I think it's easy to see from that while it's still small now, if it continues to grow, it could become something much more substantial for the Swiss Re Group, and that is obviously our bet and our way to access some of that primary risk we don't get so much through reinsurance.
Finally, a word on sustainability. We're very proud about what we've done at the time where this was not so fashionable as it is now. We have, on the investing side, obviously two, three years ago, switched to ESG benchmarks. Guido will show it. I think the interesting thing for everybody here is that now we can see how it worked in practice. In practice it worked better than what we thought and what the benchmark would be without that. It's interesting difference between practice and what you expected. Underwriting, we are one of the leaders in wind farms, do many other things. Our own footprint since 2003, we're 100% greenhouse gas neutral because we buy certificates. Even within that, we have halved our footprint. We made efforts within our footprints to make buildings like this one, which are quite effective.
We have invested a lot in making ourselves as neutral as possible, which has been recognized also externally through different indices in the world. With that, thanks a lot for listening. That hopefully gives you an overview of the group. I'd like to hand over to our CFO, John Dacey.
Thanks, Christian. Thanks, everyone. Again, we'll have questions for the three of us when Guido finishes his session. I wanted to spend a little bit of time just reminding you of where we stand in terms of our capital position, how that's developed over the period, our ability to repatriate profits, not only up inside the organization, but to our shareholders along the way, and then a couple slides on the ACP team that we've organized in September. The starting point is the macroeconomic conditions for the insurance industry remain challenging. I don't have to tell you that. You follow this industry very well. I'd argue that our team on the investment side has done a great job of positioning itself to deal with lower interest rates. The running yield continues to be at 2.9% through the first nine months of this year.
There will be pressure on reinvestment rates, and that's likely to come down slightly. I think overall, we can be very confident of the ability for us to continue to earn large profits in the investment functions. Slowing global growth is an issue for not just investments, but also for the demand for insurance. At the same time, we think that the protection gap that we see, especially in high growth markets, is huge, unaddressed, and Swiss Re is uniquely positioned to support both the primary companies that want to get after this, but also with our iptiQ business model to do some of it ourselves. I would say that we're now in the third year of an industry with large P&C losses.
To date, the Nat Cat losses have been less than in 2017 and 2018, you see some of the pressure coming up on the casualty side. Obviously, everyone in the room wants to talk about that. We've got Edi here to do that after lunch. I will say that the hardening of rates across geographies and across business lines makes us fairly optimistic, both for our reinsurance business, but also the CorSo business for 2020. The group capital position we announced with the Q3 results that at July 1st , 2019 we've moved down a little bit to 241% SST ratio. That compares to our target of 220. Maybe the one novelty on this slide that I'm not sure that we've disclosed explicitly, to reinforce that 220 is a target, not a limit.
We have included the number 200, which is where we've got management authority within the executive team to bounce to if we see good reasons to be below the 220. Over time, that's our target. We expect to be around that number. I think what you see in the first six months of 2019, that both the required capital and the available capital have increased. It's just that the required on a proportional basis has increased a little more, which brings us down to the 241. We showed a slide similar to this earlier, just to reiterate, there's a series of places where the economic earnings of the groups come from. On the left side of the slide, you see the new business, what we're actually underwriting in the current year, has a strong positive performance over this period. In 2017 and 2018, you see some negative movements down.
This is the Nat Cat losses that we had to book. 2019 is just the first half of the year, the second half Nat Cat numbers are not in there. You can expect for the P&C businesses then, you'll see something that will be negative, decreasing the total number. I would say that one important thing, and Christian mentioned this earlier, the stability of the life and health economic earnings contributing $1 billion a year to new business economic profits. We've got the release of the current year capital cost from the underwriting side. Again, a strong and improving performance over the periods. Similarly, a release of the current capital cost for the investment side. There, the lower interest rates probably have muted a little bit that contribution. On balance, a very strong performance.
Economic earnings for the last eight years, averaging $4.2 billion. The reason this matters is these economic earnings are the basis for our SST calculations, which then drive our ability to talk about capital management. In particular, when we look at what we've been able to achieve, both through the regular ordinary dividend, which has increased systematically over the period, up to $560 this year, and the special dividends and share buybacks of recent years. What you see is the total yield on our share price far in excess of our major peers. Even the ordinary dividend by itself, at 5.3%, is peer leading. There's one other firm which matches us. The flows coming up through the businesses continue to be strong.
Reinsurance is down a little bit in 2018 and 2019 because of the losses in the Nat Cat side, but the underlying balance sheets of these business units is robust. You see in Life Capital, the cash that we've been getting in part or largely, frankly, from the ReAssure business delivery, and that continues in 2019. We've been able to do this in the context of a capital structure which has de-levered over the period. When you go back from 2013 to 2019, what you see is the top components of these pillars of our capital or what we've been able to adjust. The letters of credit dramatically down, senior debt down, subordinated debt remains an important part of the capital structure. The core capital, very stable over the period. Our leverage ratios for both subordinate and senior are down to 14%.
We think that this is a smart way to be managing our capital base. Enormous flexibility going forward. We've got the $2.7 billion pre-funded subordinated debt. That's not included in the SST ratios. That's available at our discretion should we see the need for it. We've also included here the allusion to the alternative capital partners. Alternative capital partners is a team that we've assembled from the ILS team based between New York and London, our retro and syndication teams. This is existing capabilities that we've had in Swiss Re. Between 1997 and today, we're the largest sponsor of Nat Cat bonds in the world. The people behind us are typically the large brokers, which are coming on strong in this space, but we continue to have unusual expertise that our clients rely on. We've got our own portfolio of cat bonds where we actively trade.
We find opportunities where there are discontinuities in the market over some period of time. This has been significantly profitable and sustainably profitable. It's not a big source of earnings for us, but it allows us to get a pulse of the market on a daily basis. Our sidecar, Sector Re, everyone in the room I'm guessing is familiar with it, allowing us to be able to flex the amount of retrocessions that we go into the market with. In 2019, as we've increased our Nat Cat gross exposures, we've also put another $900 million of those exposures into alternative capital in what is increasingly a challenging market spot. We maintain the majority of the underwriting risk on our own balance sheet. We will continue to do that. We're not looking to lever out the way some of the competitors have.
We think that's the best way of making sure that we maintain an alignment of interest with the investors that come into these vehicles. The other thing on the right side of this page, dealing with our peak risks in this way, allows us a more efficient management of our capital position over time. We expect our reinsurance team and over time CorSo to be able to find opportunities where these peak risks that we write could become challenging for us to fund with a normal capital structure. Using ACP selectively on those risks gives us a chance to be able to manage those tails with another set of tools. I've mentioned the partnership approach over the last 20 years. We've been able to establish strong partnerships along the way.
We're looking to expand that with opportunities for people that might not have been receiving great experiences in the last 2.5 years on the ILS market, to spend more time with Swiss Re and potentially bring us into their portfolios. The differentiated approach I mentioned, we think there's real ability for us to manage this team together with the underwriting team of the Nat Cat side, but also with the treasury team and the finance side. It's one of the reasons why we've decided to take this out of the reinsurance business unit and into the group for the management of those two dimensions. Lastly, I can finish here, I'd just like to reiterate what our capital management priorities are. In the first case, our goal continues to have superior capital. Christian talked about this.
Our clients respect this, but also count on it, and their willingness to give us unusual market shares and long-term contracts in some cases is a function of that capital strength. We expect to grow the regular dividend. We've demonstrated in the last five years our ability to do that, even through difficult market conditions on the P&C side specifically. We deploy capital for business growth. Again, here, we've been able, in 2019, to demonstrate a strong growth capacity, leveraging our existing underwriting strengths, but also bringing down the cost ratios as the volumes are increasing with a similar cost base. Priority 4, which we have not forgotten, is the repatriate for the excess capital. We're more than 50% through, almost 70%, I believe, at this point in time, of our share buyback for the year.
When we finish the year with the fourth quarter, we'll have the discussions of future capital actions with our board and announce them in February, in case anyone wanted to ask the question already today. With that, I've been able to give Guido a little extra time for his session.
Thank you very much, John. It's a big pleasure to talk about the asset management side of the house and show you a bit where we are relative on the value contribution. You see here on this slide, it's not only about producing investment result, but the team and technology is also leveraged for many other things. Now, starting with one figure, again, putting this bit into an historical context. The last five year, the asset management side could produce $4 billion of net earnings, more or less consistently with very small volatility. We not only produce investment return, we could also establish a very flexible investment platform, which would help in more stormy times, because we can easily manage assets externally. We can also easily manage assets internally with the full flexibility and also capability.
We do a lot in the ALM context, again, together with my colleagues on the business unit, but also with Edi on the group underwriting. That's a truly iterative process which we apply on both sides of the balance sheet, which again helps to extract extra value. We are a big user of technology. Nowadays, financial market is not only about fundamentals. We know there's many more things which needs to be incorporated into investment strategy. That's why pattern recognition, particularly if we talk about credit migration risk, it's a great tool which we fully apply and invest into it. Big data. Analyzing unstructured data is not only a topic in many consumer goods, it's also a very big topic on the investment side. Again, we invest resources, time, and capability to basically make something with data which impacts the sentiment in financial market.
Ultimately, it's about scenario modeling, something which we have done for many years, but we try to make it more sophisticated. Also making sure that we understand the full world. This is not only financial market world, it's basically also the environment, but ultimately also the underwriting side. Christian has mentioned, we continue to work on this ESG approach. I give you an update afterwards where we are on the investment side. Finally, our team and capability is not only used on the asset side. We are an integral part of the product offering to our clients.
On most of the tailor-made transaction, and Moses will cover this in the afternoon, you have colleagues from asset management joining, be it on the modeling of implied financial market risk, but also try to find out how regulation drives the preference or the dislike of certain implied financial market risk, and basically how we handle them. That's a few example that you see the team is not only used to produce investment return, but ultimately to the benefit of our clients, that we have a full understanding of the value chain. Now, let me talk about the investment result for a second. This is a historical overview. What you can say, it's 3.6% return on investment the last five years, which is 30 basis point better than our peers. Again, this should give a bit of consistency that this is a strong performance over multiple year.
That's mainly fixed income. That's why you are in financial market, 30 basis points. Outperformance is a considerable piece. I will explain afterwards how we did it. Important is basically the running yield, which is an important phenomenon, particularly for forecasting the sustainability of investment result. John has mentioned, we are a bit impacted, hopefully less than the market. The main impact comes through the denominator. To give you one figure, and that you can also easily calculate yourself, if interest rate moving by 100 basis points, basically parallel shift, this has an impact about 20 basis points on the running yield. That means rates have come down, on the 10-year. If we go back January 1st, 2019 we were around 270. Now we at 170, gives 1% has an impact on 20 basis points. That's why probably we will show 2.8 for Q4.
Could be there's another 10 basis points next year, 2.7, but it's mainly the denominator. That's why it is a kind of one-time effect. Denominator is relatively stable, also coming back to that, why we could keep that up. Now if you look at the composition, it's basically, it's 1/4 , which comes from gain realization over the last five years. There's one special, this is 2018. There you see the unrealized gain or the realized gain is negative. This was the introduction of the new GAAP rule, as you all know, on the equity side, which goes now fully through the P&L. This was the exception, but again, if you look through that figure, it's very consistent respect of production.
How we can held up this relative high confidence on the bottom line contribution, one of the main reason is that the unrealized gain. There we are a true differentiator. Most of our unrealized gain is at the very, very long-term bucket of the term structure. That means 2/3 is in the 10-year+ maturities. That's very sticky. That means, if we don't touch it, and we haven't touched it in the past, and there's no intention to touch it, that remains. Again, that's a true differentiator. I think there's not many who have so much unrealized gain in that part of the bucket. That means even if rates are coming down, we should be less exposed. The things which mature before the 10-year bucket has a lower book yield than what we basically hold in the 10-plus piece.
If you look at Swiss Re's fixed income portfolio, we tend to have a lower, sorry, a longer maturity. Has to do with the business which we are writing. We are fully matched on an EVM basis. That means we have also the luxury to hold very long-term assets, which of course, if you had locked them in earlier days, their yields were still decent. That's a big plus, and this exactly happened in our shop. That's why having longer kind of maturity based on the ALM, not because we go long duration, makes you much less exposed to a lower yield environment, which we forecast. Again, we don't hope that yield will go back overnight. I think we will face lower for longer. This gives you an idea how we can cope in this environment.
I'm pretty sure some of the features they will stay, and that's why I'm very happy to say, I feel we can cope with lower for longer, even if it stays. What have we done on the asset allocation? That's a main driver, I guess, of the sustainability of the return. You see on the left-hand side, the classical asset allocation. It's about 41% credit instruments and equity and alternative. That piece increased by about 10% the last three years. You see the government bond actually is slightly negative, while the total balance sheet, which we manage, went up by 4%. We know lower yield, of course, has an impact particular also on the government bond portfolio. Nevertheless, the major add-on happened on the higher yielding piece. Now, the main question which you should have, did we basically make compromise on the credit quality?
With other words, is yield hunting a topic? I can assure you it is not. If you look at the credit bond slide, it's pretty much unchanged with respect of composition. Average rating is A-minus in the credit side. Now, if I take the full fixed income portfolio, very happy to report we have AA-, which is better than the market. Our peers, they have an A-plus. That means we have a higher quality type of fixed income portfolio and probably our true differentiator in the amount of unrealized gain, in particular where those unrealized gains are in the term structure. We massively increased in private debt. You see the last three year, we increased by 65%. Now, how we have done this? It's through different channel. We have also direct sourcing of private transaction.
You see, we captured, we call it a so-called compensation for liquidity risk. We captured 75 basis points on top of a kind of a comparable credit portfolio. That's considerably higher than any type of benchmark which you trust. Benchmark in this area is around 20- 35 basis points. We have more than double captured, and that's lock in. Most of them are long-term loans, be it infrastructure or CML. Again, that's something which we will continue. These are not funds. These are directly sourced or together with our partner. Each transaction is an own one. This is a very successful activity, which we have built up over the last year, which we will continue. That means the underwriting pen or the investment decision is with us, that's why we could capture such a nice premium without compromising on the credit quality.
Real estate, I think it's good to show you what we have done. This is also message we will continue. We don't invest into real estate fund. These are direct investment, which we do again, has increased by almost 1/4 the last few years. These are core plus type of real estate, unleveraged. We show a net yield of 7.7%. Again, a very strong return and much better diversified than five years ago. Again, these are directly on our balance sheet. We decide which building we buy. It's not the fund investment. This is something which we have started a few years ago. Now we established a very nice network. That's why you can expect this should help to sustain nice returns, even if yields stay low. Let me come to the last slide. Also Christian and John has mentioned it.
We have done probably the most important decision, changing benchmark. This has been done in end of 2017, beginning of 2018. I think we are still the only insurance company which fully applies ESG benchmark across all liquid markets. The good thing is, we haven't suffered on the return. It's the opposite. Equity, for example, we outperformed. If you have taken an ESG benchmark, the last few years, we had a better performance, and without doubt, it's a much safer portfolio. If you can express it in information ratio as one example, we took different time selection. It's true. It doesn't matter if you look the last 12 months or last three, four year. It's a considerably better portfolio. Clearly, on a risk-adjusted basis, but in our case, even on the yield side, we didn't suffer any forgone return.
I show you one effect, which is really impressive, at least for me, hopefully for you as well. I show you on the bottom, basically our so-called carbon intensity of the portfolio. Before we switched, I took 2015. That means how many millions of CO2 you have per million revenue of our underlying securities. You see what happened since we introduced this benchmark. On the corporate credit side, the drop was at 42%, and on the equities side, it was 52%, that's almost half, which is an incredible achievement just we've seen three years. Now it's not only good for ESG and maybe some inclusion in certain benchmark. This is a portfolio which is far less exposed to any stranded asset discussion. If a regulator kicks in with this extra penalty, we are prepared, and I think better prepared than many others.
That's why we continue on this thought leadership on the ESG side. Another example of that, we were one of the co-initiator of this United Nations Asset Owner Alliance. We committed, together with a few colleagues, to have a net zero emission portfolio by 2050. It's long way, we will define milestones between today and then. I feel confident because what I have seen the last three year, basically reducing by 50%, I think we can go further than that. That's why we did, after we really looked at our own portfolio, after we looked what it means, that we can commit to such things. PI, again, asked us to join the so-called leaders group, also in recognition of the work which we have done, we had the best rating ever in 2019 based on portfolio action, also engagement.
These are a few examples which matter particularly aspect of the sustainability of our investment return. With that, I would like to ask Christian and John to join me for the Q&A. Thank you.
Thank you, Guido. All right, we'll start the Q&A session. Maybe I'll ask you to introduce yourself and restrict yourself to two questions each, please. Maybe Kamran first. There is a microphone to help you.
Hi. It's Kamran Hossain from RBC. Two questions. The first one's just coming back to the, I guess, the three strengths of Swiss Re. It sounds like to me that you're getting paid or you've got differentiated terms from, I guess, the access you've got to people and the knowledge. The balance sheet's less important. If you're to roll this forward into the future, especially with something like Alternative Capital Partners, is it unthinkable that Swiss Re moves away from having a double A rating in the future? Would you ever reach a point? That's the first question. The second question, one for Guido. There's been some discussion around where there might be some investments in other parts of the world. Could you maybe run us through what the strategy for principal investments is? Particularly around trigger points. I know you sold to South America.
FWD sounds like there's going to be a transaction, in the press, in the coming years. Maybe some more color around what you're thinking there. Thank you.
Okay. Happy to take the first one. I think you're right, and I alluded to that, right? Capital strengths has become less relevant. I think in the past 20 years, 30 years ago, people came to us just for capital strengths, right? A little bit for the rest. Whether that remains true for the next 50 years, I'm not so sure, right? There are scenarios where capital comes back into fashion.
I think in terms of relative strengths, in the past everybody was AAA, I mean, the big ones. Now that's gone. I don't think we'll ever get back to a AAA, even we technically are a AAA. I don't think our clients expect that or would want to pay for that. I think the clients expect a strong balance sheet. If you want to do long-term business, then even stronger. AA, I think is useful at this stage. In the end, it's all a relative game, right? I wouldn't want to go lower if my main competitors stay at AA. If everybody is A+, and that's the new standard, we will have to adapt to that. At this stage, I don't think the next two-three years, that's a big discussion point. Yeah.
On the global investment side, as we continue to be a global investor, one piece is driven by our insurance activity. If we sell more insurance or reinsurance in China, our portfolio will grow. We try to be matching with respect of currency as far as this is suggested by the liability. Outside of that, we are opportunistic. PRI is an investment activity. It's different than if you look at our liquid equity portfolio, you see most of our investments are in high growth market. That means it's another way to improve or increase our footprint. We had a very successful story, as you mentioned, with New China Life, also ReAssure. We continue to do that. That means it's a bespoke transaction in the market which we believe in, where we can add value, not only providing funding, but also knowledge transfer.
A good example is in Africa, we have six different holdings. These are long-term shots. I think the two examples would show you it can be applied very successfully. Again, not only helping an investee, but also basically add bottom line value for our own shareholder. That's why FW is another example, where we're fully engaged as a shareholder and help the company to increase the footprint in Asia. I'm pretty sure there will be other example coming. Thank you.
All right. Thank you. Vinit, you're next.
Thanks very much. Vinit from Mediobanca. My two questions. First is on the Nat Cat strategy, Christian. I'm a bit surprised that given where we are coming from in the marketplace, you've chosen to bring in more and more of alternative third-party capital, when in theory, you could have said, "Hey, this is really the opportunity we've been waiting for. We want to grow." When we see the growth numbers, they are so strong, and then we have to remind ourselves not to get too excited about them because some of that is just fees. That is for a fronting kind of thing. Just why bring in these people now into this party? That's the first question. Second question is just on the Solvency II equivalence.
Apologies, I might have missed some earlier comments, but the last time I remember this number was well north of 300%- 310% relative to SST being, say, 270 range. There seems to be quite a difference in this 260% versus the 240% now. Maybe it's just not that important, as you just said, capital is not really the main ingredient. If there's anything to point out, I'd be very happy to take that. Thank you.
Happy to do Nat Cat. Overall, even though we're going to have Edi, the expert, obviously, tell us a bit more. I think Nat Cat is obviously a growing risk pool and one we can very successfully compete. We have our own R&D tools. We have very good results over time. We have fundamental high confidence. It fits very much our strategy. We have some peak exposures, but some others where we have much less. The most efficient portfolio would be to grow most of the non-peak exposures, but to keep the peak, the very big peak capped. That you cannot do by choosing clients, because a lot of clients want to have an unbalanced portfolio. The only way to do that is to grow the overall and then hedge more some of the peak exposure.
Which is some of the capabilities we had, but we're now putting more to the front. All of that is in the context of increasing cat rates, obviously, right now. This is attractive. The capabilities we have with this ACP, I think are very useful because there's a potential world out there. There's different worlds out there. I think one potential world is capital is plentiful. People will find ways to play as much as they want. That's a world where our clients will demand, instead of them doing a lot of this alternative capital thing, I can see more and more of them saying, "Why don't you do it? I give you a bigger share, but then you share some of it in the back end, so I don't have to care about all of that." That's the strategy.
I think it's really good to have all these elements for the full machinery in place, which we have. In terms of tactics, if rates were to fall down or if retro rates were to go much higher up, then on a tactical basis for next year, we would steer the portfolio differently. We can choose not to grow too much. A lot of the retro we have is actually not in the retro market. You'll see from a chart in Edi's team, it's swaps with Japanese, it's sidecar where people get the same price we have and things like that. We're less dependent on the retro market. Still, you could have situations where the prices there are too high, which is a pricing signal to the front, and then we don't write as much.
I think it's more about the strategic establishment of the full machine. Nobody has the impression that we cannot provide what other reinsurance players are providing to the market. We can actually do the same if necessary.
I'd reinforce that last point of Christian's. We are not dependent on this market to be able to continue to grow our business. We see the ability to grow faster, facilitated by a bigger capability out there. What you see in 2019 is obviously the gross premiums growing very strong. The net premiums also growing strong. Just a little bit of a differentiation between the two of them. I apologize, the second-
The difference on the Solvency II equivalent figure.
Yeah. Here, I'd say two things. One is on the July 1st, 2019 number. It's both an estimate under the SST regime, a very good estimate, but it's not a full year audited set of numbers. We've probably included a little more leeway in the transitional calculation of our Solvency II. The point is, 241 doesn't equal to 260. 241 is above 260. I'd say you should not read anything particular into a closing of the gap from the Solvency II Ratio to the SST ratio. Both numbers are lower than they were when we did this the first time. We're comfortable that we remain on a Solvency II basis, above the high end of the range of most of our competitors.
Thank you. Maybe here, Farooq.
Thank you very much. Farooq Hanif from Credit Suisse. On ReAssure, are you waiting for a particular set of conditions or proof of concept? Further deals, because obviously there was a hiatus and there'll be more deals before you come back. That's question one, I guess. Question two, can you characterize what you mean in asset management by a moderate decline? Obviously there's a decline that we can mathematically try and estimate from the current yield environment and your reinvestment yield. Then there's what you do to offset that. Are you going to, for example, halve the decline or can you give us some idea? Thank you.
Maybe I take the ReAssure question, right? I can assure you we're not waiting. Once the North Star is set, obviously you look at all your options you have. These options change over time, right? Every quarter. There's different options we have to achieve our goal. There's no particular need to wait. It could be that the market condition improve and certain avenues become more attractive. Could also be that we get approached by somebody who's willing to pay the right price. In which case, it's faster. There's really no need to wait in our mindset. This is a goal we have set ourselves, and we'll execute when it makes sense for shareholders.
I would say our ability to transact on the Quilter deal in the autumn this year, I think explained to the market a capability that we have to continue to find attractively priced opportunities to bring onto this book of business. It was one of the questions around the IPO. Is there a pipeline and can we execute across that pipeline? That transaction itself, I think, reinforced the view that the answer to both those is yes. The other thing we did say publicly is we weren't going to start the IPO process until 2020. I think we can safely confirm that.
Okay. Maybe addressing the yield question which you raised. We have official forecast again down by the colleagues, Nasseri, Chief Economist. He believes that rates will stay low for longer. He assumes 1.4 until year-end, and not much higher for the next few years. It's also linked to global growth outlook. I only see downward revision wherever you look. Be it OECD, IMF, whatever. That means we can expect lower growth. We have uncertainty, which we all know, which I don't need to mention. That's why the environment is different, and you still see very accommodative central bank policy. The good thing is, there's some recognition. It can't be the only game in town. It has some side benefit, which can be costly. That's why I think there's some reluctance to take rates much lower.
I think we have to get used that the levels which we see here will not disappear soon. That means from a long-term perspective, I have to be even more careful in portfolio turnover. That's why what I referred before, which is a true differentiator in our balance sheet, is even more valuable. We try to compensate it a bit through growing in private market. The reason why I showed you the slides is to also give you comfort that we not just grow for the sake of growth. We do it very bespoke, very careful. For us, if you deploy capital in those market, we know it's illiquid. Secondly, most of the things are long-term. That's why we want to lock in yields which are attractive, always on a relative base. Of course, five years ago it was more attractive.
If you look where government bond is, and most likely will stay, the private market capability is a key piece. What I showed you shows we can really differentiate and can capture some of the yield which is otherwise not possible. It's done by Swiss Re. This is not that we invest into existing fund. It's done by your own team. This should mitigate the low yield environment. Again, the main impact comes through the denominator effect, which we described before. Thank you.
All right, next question. Maybe Ivan
Hi. It's Ivan Bokhmat from Barclays. I've got two questions. The first one would be on the interplay between your investment yield and the pricing you're getting on the P&C Re side. Just wondering, with the lower level of yields, do you feel that the rate you're getting offsets that pressure? If not, how much more rate do you need? Maybe putting this in context, you have been able to produce $1.2 billion of EVM profit in 2015. How much further do we need to get back there? The second question is on the buyback. From the discussions with investors we've been having over the past few months, it's become clear that the $1 billion buyback is being viewed more and more as an ordinary buyback as opposed to the $1 billion that was canceled, that's special.
I know that you may not agree with this assessment, but I'm just wondering if you would put some more of your framework around it, and how much you could possibly tolerate having the payout externally higher than what you generate internally from dividends from business units. Thank you.
I think I take the first question since I'm probably closest to the business. The way it works in the P&C underwriting universe is that everybody who writes a piece of business does so in these EVM terms, so discounted cash flow terms. The discount is the so-called TPF rate, the transfer price of fund, and that's a risk-free rate, and it's set before the renewal. It's actually reset several times a year, and if it changes a lot, even more frequently. It means the practical challenge is somebody who's writing longer tail lines of business, when they look at the same piece of business with the new TPF curve, if that person gets the same price, it's going to be a significant hit on the EVM compared to what they had last year, right? That's mostly for the longer tail of lines.
That's not for Nat Cat or so, but for casualty, that will be, for example, a big issue. Starting in Monte Carlo, we have started to communicate with our clients that lower rates means higher nominal prices just to compensate. Just to get the same expected EVM profit. Some fully understand, some maybe don't, some pretend not to understand. It's the usual, I guess, negotiation because the nominal rates still play a role, right? Psychologically for people. The decisive thing is that nobody will be motivated in our troops to write something at negative EVM. The pressure will be entirely there, and if clients don't come in with the right increases, we're going to write less of the business. That's going to be the consequence of this framework. At least I think we always have a rational view around that.
You're absolutely right that psychologically, people struggle much more with this direction than the other one. I think in the other one, we got some tailwinds because people felt that paying the same price is good, whereas economic profit had increased. Yeah.
Maybe with respect to the question on the buyback. You're right to identify that we did think about the second tranche of the 2019 buyback different than the first tranche. We were explicit in saying it would depend on the excess capital in the second half of this year. Two of the important dimensions of that excess capital were going to be, in the first case, the success or non-success of reducing our stake in the ReAssure business. Secondly, the benignness or non-benignness of the Nat Cat season. In both of those cases, we found we didn't get what we thought was adequate pricing for the ReAssure transaction in the summer. The cash did not come in the door.
Secondly, I think it's fair to say that this year's Nat Cat season, while not terrible, has been robust and it's delivering losses also through the fourth quarter. We've separated the capital returns to shareholders into the ordinary dividend and the share buyback. That share buyback, or previously the special dividends, have been an important part of moving us down towards our target capitalization on an SST basis. As I said, when we close the year and have our final accounts both under EVM and US GAAP, we'll evaluate our ability to deliver capital to shareholders in multiple forms. I don't think you should read across that by not doing the second tranche, that it has necessarily implications for future capital actions other than we've got $1 billion more than we otherwise would have had.
Thank you. Heather?
Hi. Just following up on the ReAssure question. You've been clear that you won't be a core seller of it, do you think about potential use of proceeds of any transaction? For example, what's your strategic thinking on, for example, growing in the U.S. specialty lines, property casualty market, or doing other transactions with the proceeds? What's the big picture view that you take on what you could do with those proceeds?
M&A, right? You talk about M&A.
Yes. Yeah, M&A. Exactly.
Yeah, because investing in the business we have done these years. About 2 billion we invest in the business, that's not a M&A. I think it would be highly unlikely to link it one-on-one to a transaction, right? How do you get the timing right and everything at the same stage? I think we focus on ReAssure on its own. Once we have the proceeds, we can think what's the most appropriate way to use them. M&A generally, I think. Within reinsurance, it's hard to see anything strategic. You could only do something if the price are extremely low, and it would typically, you have some significant dis-synergies. On the business side, you would have huge synergies on the capital side and on the cost side. Certainly in the current environment with the prices where they are, it doesn't seem like an attractive proposition.
Corporate Solutions, we have done bolt-on acquisitions all the way through. It's hard to see something big and exciting that will completely fit and add something strategic to Corporate Solutions. There's just a limited number of available targets at this stage. If there's ever something that completely makes sense, we would consider that. In Life Capital, I think if we find something that makes sense that adds to the digital businesses, would absolutely consider that. Again, I don't think you need to think in terms of automatic redeployment into something.
Maybe you pass the microphone to Sami behind you. Thank you.
Yeah. Hi. Sami Taipalus from Goldman Sachs. My first question is on capital management. All your communication around capital management is based effectively on the economic view of capital. If you look at that, you're still in a very strong position, both on stock, with significant excess capital and flow. About $4 billion of annual capital generation on average. It's very difficult to reconcile that with the fact that you couldn't execute on the second buyback this year. I appreciate there was obviously some specific things you'd link to that, but it's still hard to see why not. I'm interested to know, what is actually the constraining factor on your capital management? Is it rating agent capital? Is it debt leverage? I guess it must be something else. Then the second question is on R&D and underwriting culture.
I read a very interesting paper recently from your APAC colleagues about typhoon risk and the fact that the market models on the typhoon risk significantly underestimate the risk versus historical averages. Which surprised me a little bit, given that you're the largest writer of cat reinsurance in Japan, and that you've grown this pearl quite a lot in the last couple of years. I'm wondering, are you fully integrating what you're generating in terms of your research into the business? Are you giving your local underwriters enough, sort of, I guess, authority to take their own decisions? Thank you.
Can you pass?
Let me answer the first one, and then we'll figure out the response for the second. I'd actually probably change your question. It wasn't that we couldn't do the second tranche. We chose not to.
I think that's an important difference. What we saw was an environment where, in the first slide that I presented, the macroeconomic conditions remain uncertain. I think there's an election coming up in this country. There's an election coming up in the United States. There's a trade war, which is either going to go ballistic or moderate, but I don't think anybody has a good view of which of those two is more likely. In that context, moving into the second half of this year and early next year with a very powerful capital position seemed to be in our relative interest. That's where we are. There are multiple dimensions which we look at. Regulatory capital is one of them. The rating agencies is a second. Overall liquidity, a third.
I've mentioned how far we've de-leveraged the balance sheet, the access that we have for contingent capital at our call. I'd say our goal is over time to maintain this very robust balance sheet and evaluate at any point of time how much true excess we have that we're prepared to redeliver to the shareholders. I don't think you should view that there's some secret hidden, we don't tell you constraint on us. I think we've been reasonably transparent. You say our target's 220. We've got a glide path in that direction. We remain at July 1st, 2019 well above it. The economic earnings are massively important to us. We think they will derive GAAP earnings over time, especially out of the life and health portfolio. Not only. The value we're building up there will earn out in our GAAP results.
I think we've been extremely clear and consistent on this second buyback. We were last year looking towards end year of 280 in the SST ratio, that was Q3, I think. It is definitely too high, and when we project it going forward, it could have gone above 300. That's where I asked the board, we need a second buyback just in case some of these conditions are fulfilled. I think they clearly were not fulfilled. They released that we're going down towards this gliding path that John said. To me, the second buyback was very clear what kind of conditionality we had around that. As John said, it's not that we can't do it's just we chose not to. I think on the typhoon question, it makes much more sense to have Edi.
If you can pass the mic, maybe, our Chief Underwriting Officer, Edi Schmid.
Oops. Hard to get out of these seats. On Typhoon Jebi risk. The first one, you kind of hinted that the local team may not have done a proper job. To say the Nat Cat business is written in a very, let's say, robust framework. The models have to be used on the ground there that are calibrated on the group level. Also when it comes to the authority levels, all the bigger transactions, they would be referred up to a very senior level. There's a lot of controls around how we write that business. Obviously, it's important to point out that Nat Cat models, we have significant expertise over many decades, but these models are not perfect. Whenever we have significant events, we obviously take all the learnings and adjust the models, and that's what we're doing right now.
Reviewing all the evidence from a scientific perspective, including things like climate change, but also the claim trends . We then recalibrate these models. Not just for the last few years, but we also go back many decades. Clearly we think at this point, it's fair to say that the Japanese typhoon risk has been rather underestimated. I would not say that we see something like a significant climate change impact. If you look at typhoon frequency over maybe 100 years, you don't see a trend. You see certain cycles of increased activity, and we may be now again in a phase where you see a bit more typhoons going to Japan.
It's important to point out, every year there's 10 to 15 typhoons reaching the Japanese mainland, and some of them obviously hit densely populated areas like last year, Jebi in Osaka and now this year in Tokyo. Clearly the markets also with the competitive pressure, and how some of the players use the models, they obviously tend to present a bit of optimistic view of risk, and really try to step back and look at all the scientific evidence, all the loss experience, and at any point in time, come up with the best view of this risk. All we can see at this point, clearly there's an underestimation, and we'll push a lot obviously then to make sure that we get compensated for the appropriate level of risk also in Japan.
Thanks, Adrian. James in the back.
Thanks. It's James Shuck from Citi. Both my questions really are around the capital generation. The EVM, you give us the slides that show that on average across the period of $4 billion or so. Obviously, that's been impacted by a high level of Nat Cats in that period and various other things. You have an expected generation that you would think one year in advance will come through. It's really that number I wanted to get at. Are you saying $4 billion is the expected EVM generation under normal environment scenarios? Secondly, kind of linked to that, what's the cash conversion on the EVM that you expect? Life & Health Re in particular, it looks like only a dividend of about $500 million is paid up, but the EVM is obviously much stronger than that. Thank you.
I think if you reach back into the 2018 full year annual report documentation, we gave a fairly explicit discussion about EVM generation, and the number that was there, I believe is $3.4 billion of something that looks to be, with the current book of business, a sustainable number for this business. While we didn't make a prediction or a forecast, I think that's the number that we've explicitly said is a relevant starting point when you think about capital generation for us. The economic earnings we've got in today's includes a number of very good years for us. We've got no reason to think that we don't rebound to that. There will be some variations because of our Nat Cat portfolio over what in any one year we actually deliver.
One of the things I tried to explain in the chart I showed was the unlocking of the capital in the existing book of business will continue apace. It's the new business component which will show some variations. The other thing that was not on that slide was over that period we're talking about from 2013 to the first half of 2019, Guido and his team actually delivered another $400 million per annum outperformance on the investment side. That's what gets you if you went through and added the numbers, you get 3.8 across the top, and the 4.2 is the number that we've shown for the average for the period. I think net, we're comfortable with a very strong economic performance of the business that we have. Again, we won't make a forecast, but that I think triangulates in.
Your second question is, well, when does that show up in US GAAP earnings and cash? It depends dramatically by line of business and by the activities where we are growing. I think you do see, because of the nature of the risks in the Life & Health business we write on morbidity and mortality, some of the contracts are long-dated contracts. The savings risks are not there, and you would expect profit recognition on the US GAAP basis with some certainty and timeliness. I think the Life & Health business has needed new capital for its expansion. That's affected the dividend capacity. I'm confident of the earnings that we've got embedded in this business and will continue to deliver a strong performance over the next years. Thank you.
We have mics coming up.
If you don't mind me just following up on that. If $3.4 billion is the expected EVM in one period, leaving aside investment outperformance or underperformance. The special dividend costs $1 billion, the ordinary dividend of $1.7 billion, so that's $2.7 billion. Of that $3.4 billion, not all of that can be cash upstream. Life Capital looks like it's about 50% of the EVM. On free cash flow, it looks like you're distributing nearly everything. Would you disagree with that?
I think in the context of 2017, which was, as Christian mentioned, the largest Nat Cat year ever, and 2018 to a lesser degree, we've been distributing a considerable amount of it. I think in a normal year, we believe we've got a very comfortable cover.
Okay. Thank you. Jonny?
Hi, Jonny Urwin, UBS. Just one question around volatility. Obviously, we've had three choppy years driven by losses. Question, has there been any change in your appetite for the net risk that you take relative to peers? It doesn't sound like it. It sounds like you're more interested in rebalancing away from peak to non-peak. Any comments there would be great. Thank you.
I think, well, we get a section with Edi Schmid, but our belief is that this is a field that makes sense, that is understood by our shareholder, that's delivered good returns overall over time. We're not afraid of the volatility. The returns can only come if you're able and willing to take some of that volatility. Clearly, volatility is increasing with the amount of Nat Cat we're taking. If you look at our share price reaction or the reaction by investors with large Nat Cat losses, I think that would strengthen my view that this is a good line of business. Generally, people understand that every event is NPV positive, more or less for Swiss Re, if you stay in and you get compensated over time. I think clearly, compared to all other line of business, this is one of the most compelling ones.
Ed, next.
Thanks. Two questions. Firstly, just interested in your view on where you think we are in the point in the cycle. Your two central group targets are on an over the cycle basis. Obviously, we've had quite a difficult few years. I remember the Swiss Re Institute, just over a year ago, I think it was, saying that you didn't think the industry was meeting its cost of capital. Clearly, pricing has been improving in some business lines. Do you think based on where we are today, at the current point in the cycle, you can hit these two group targets? The second question relates to some press articles a few weeks ago regarding a potential anchor shareholder taking a stake in Swiss Re. Just wondering how you think about things like that. Do you see it as being something that potentially could be positive for Swiss Re?
How do you make sure existing shareholders are not disadvantaged by anything like that? Thank you.
I'll take the second one.
Yep.
Look, I think the Bloomberg article you referred to talked specifically about a potential investment in and around the Chinese company CPIC. We put out our own press release saying, yes, there have been some preliminary discussions about us potentially making an investment into this company. Preliminary and not in any way confirmed. There was a second part of the Bloomberg article, which we didn't comment on because frankly, it's not our business to comment on, that suggested that CPIC might be interested in investing in Swiss Re shares as well. I think for anybody that wants to invest in Swiss Re shares, in general, we welcome. We think it's good value for at current price levels. What I would say is we haven't been in any specific strategic discussions as a core shareholder in our stock that would require any special treatment or behavior.
I don't think we're disadvantaging in any way the existing shareholders, and we would be very cautious before engaging in any sorts of agreements with outside investors to do that. You'd be keenly aware that a 1.5 year ago, we were in certain discussions with SoftBank, where the nature of the shareholding might have looked a little different. There, the leadership of the company decided it was not in our interest to have SoftBank as a major shareholder at whatever conditions that they might have been looking for.
On the targets, it's a question of probability. Can you reach a certain probability? Because there's so much volatility, you can, all in bad year, reach it, but just with a lower probability. I think we can currently, if we look at 2020. The tightest one is clearly the ROE one, which is more challenging. Reinsurance has no problem at all to achieve that. It's more a question of all the other things, which I guess you see us very proactive on other fronts. One front is the excess capital, which I think we have been successful in deploying. That makes it harder. The other one is ReAssure, a big block with low ROE, more or less locked in a low interest rate environment. That's two very big blocks.
I think CorSo is a small block of equity, and it can be fixed within this two-year framework. Less than two years now.
I think the overall makes it harder, and you need to work on these two pieces.
Next question. Sure, Michael.
Two questions on ACP. First question, you sourced $900 million alternative capital, you mentioned in the presentation. Can you give us an overall comprehensive overview of your alternative capital? How much you have in cat bonds, how much capital you have in sidecars? Maybe it's part of Edi's presentation, forget about the question. Also the structure of your retro protection. Second question on your motivation to buy retro protection. Apparently, your P&L seems to be more volatile than the P&L of peers. Maybe this goes along with your philosophy of being the ultimate residual risk taker. Do you buy retro for limiting your overall risk exposure or just for steering? Do you also see a component of arbitrage in buying retro protection?
To your last question, I think we can safely say that over the years, the purchasing of retro protection has systematically been a positive event for us, that our ability to generate adequate pricing on the front end has been able to allow us to make these placements at reasonable covers. I can take you on the slide deck on page 89, in the appendix. We've got a little bit of additional information with respect to the sidecar platform. There you can see the relative growth of the sidecar between 2018 and 2019, which explains the majority of that $900 million increase, but not all of it. When Edi comes back, he'll be able to talk a little bit more about it, if that's okay.
Okay. Maybe we take the last question.
Sure, Andrew.
Hi, there. It's Andrew Ritchie from Autonomous. Firstly, for John, in your leverage calculations, you always include the subordinated debt that has been funded but not drawn down, but that's not included in your SST ratio, which I guess is a bit harsh. That's how you include it as leverage, even though it's not actually being used. Under what circumstances would you use it or draw it down in SST? I guess I'm asking, would it be used for sort of funding general growth, or is this a really sort of last- resort kind of facility? Obviously, you could actually issue new debt cheaper than that facility, because I think it was issued when spreads were a lot higher. I'm just curious as to how you would like us to think about that facility, and why you treat it in leverage, but you don't actually use it.
The second question for Christian, when do you think about reviewing the risk-free, the ROE target? I think one could argue, you have met it. Over 20 years, I think Swiss Re's done about 700, 670 basis points over 10-year risk-free ROE. It's been challenging recently, the business is becoming a bit less capital intensive by your own admission. You're saying capital is less relevant. ReAssure you don't want to own all of. You're happy to use more third-party capital. You're also flagging more volatility. 700 basis points, frankly enough, as a compensation for that. When would you review that target?
I'll answer the first one. The $2.7 billion is not last resort funding. It's there precisely to make it relatively simple for us to achieve it. I do think you're aware there's some other contingent capital positions with other triggers which are not included in that number. I'd also say that we do have ability, as we've shown this year, to access the market in ways that is well received by the debt investors. The fact that we don't include this in the SST calculation probably has some historical roots to it. It doesn't mean that it's not secure. It just means that it's in addition to the in-place accessed funding. Whether we should rethink that or not, fair comment. I don't see any necessary trigger to change the categorization.
One of the reasons we put it out there explicitly is to let everyone know that we do have that access. What it would take to utilize it, I think, in the context of either something specific within business units in terms of important new opportunities for organic growth in the first case, where the pricing environment makes us believe that upping the leverage modestly could be justified in supporting that growth. Then, frankly, if the one in 200 year storm really does hit, and we see an environment where pricing would become massively different than it is today. We're prepared to move into it, I think, with a certain level of controlled aggression, if that's the right word, and take advantage of those situations. Here's $2.7 billion sitting on the sideline that we can deploy.
On the ROE target, I guess this is the first time I hear that question in the last few years. It's refreshing, because most of the time people ask me how we're going to reach the current targets. Thank you for looking past the last three years over a longer period, because I think your question makes a lot of sense if you think about the longer term. Clearly, the current target is challenging. We also have the U.S. risk-free rate, right? Not the average or something. We have half of our business, not U.S., and we have some significantly lower interest rates in some other parts. I think the question will come up on our table once we achieve it, right? I think you should set targets where you have a plan. I don't want to set a target where we don't have visibility through that.
I guess the first goal will be to achieve comfortably, hopefully, the 700+ , and then we can discuss about that. I hope you're right that we will start to discuss that at some stage, but it's not imminent.
We've come to the end of our first Q&A session. Thank you very much. I know we had some questions online. I think the IR team will follow up if we have not actually answered these questions right now. We will be back at 1:30 P.M. for lunch. Lunch is right behind us in the room when you arrived earlier today. Thank you. Thank you, John. Christian. Good day. Welcome back, everybody. I hope you had a good, nice, enjoyable lunch. I hope you had time to visit some of the booths we organized for you today. It's my pleasure to introduce Moses for the reinsurance session. Thank you. Thank you, Moses.
Thanks, Philippe. Good afternoon. Together with Edi, we'll cover reinsurance for this next segment. I'll take a little time to cover the context in which the business operates and some of the things we're trying to do in reinsurance to ensure that we're the winners in this space. While Edi covers in greater detail portfolio steering with a focus on Nat Cats, as well as the casualty business. Similar slide to what Christian showed all of you, the three key assets in terms of how we look at it. For us in reinsurance, we look at them as what drives the differentiation that we're able to generate as a business. If I take client access, our footprint is extensive. Beyond just the issue of the footprint is the access that I think we have to C-suites of most companies.
I take myself, on average, there's somewhere between 150 to 200 discussion notes, documented discussion notes that I have to produce every year. Most of those meetings are with C-suites of most of the companies that we deal with, which gives you significant amounts of information about their needs, and you're then able to try and find a way to match those needs. It's a critical part of what we do. On the risk knowledge side, focus clearly on what we apply, making sure that the knowledge that we have, we convert that into what we do in the underlying portfolio, but also apply that in terms of trying to serve the needs of our clients. I think enough has been said about capital.
I just want to underline from our standpoint, capital still remains relevant because in a number of the transactions that we have to deal with, while others may have capital, the scale of the capital, the size of your balance sheets still matters and gives you access to certain exclusive transactions. The capital strength is still a real factor. I think applying those things over the last five years within the reinsurance franchise, we sort of look at our return for the reinsurance business alone, measuring it in terms of the ROE as well as the capital that's repatriated. When you look at capital repatriation in John's slide, you could see reinsurance has repatriated over $11 billion to Group, and ROE is also market leading from a reinsurance standpoint in the midst of two of the worst Nat Cat years that the P&C market has experienced.
On the life and health side, most of the outperformance comes from the underwriting side and not from the investment side, driven again by knowledge and the discipline that we exercise when we prosecute business on the life and health side of our business. The industry is clearly changing. In sidebars during lunch, one of you also raised this point up around active cycle management and the ability to deploy capital. Advantages came from those two things, primarily if you take the last 10 years. The reality of the matter is we're in an environment that's changing, and I think the chart, the left-hand side simply shows that to you.
You look at the amount of capital that's come in over the last 25 years, especially the alternative capital path becoming much more prominent with interest rates dropping and clearly an impact also on the pricing index from a Nat Cat standpoint, and you see that there's a material change. Now, two things to say about that. One, I don't think the capital has come in only because it's seeking returns. I think part of the capital has come in also because exposure continues to grow. I think that's something that we should keep in mind when we look at the reinsurance business. In that environment, buyers are much more cost-conscious in terms of what they're willing to pay for reinsurance, and also an environment where you see technology beginning to have a more prominent role in the entire value chain and how you deploy that.
Our view is that for the future, the winners will be who are able to actually deploy technology much better and in a very innovative way, and come up with alternate sources of income, rather than just providing capacity alone. In the core of the business, which is much more competitive, clearly efficiency becomes much more important as well. There, scale clearly gives you also an element of advantage. Taking the prevailing business environment into consideration, we've sort of developed, we showed this to you last year, a strategic framework which has three main pillars around it. The core of the business, which is the most competitive part, and you would say even certain parts of it are commoditized, where in our view, the main thing that matters in this space is your ability to actually have presence and have the right scale.
Selecting the right risk and pricing is important, scale and presence is important, as well as the brand that you develop. Also in the transaction space, we spent some time talking about transactions where you structure the risk, or tailor them in multiple ways. The number of competitors you face in this space is different, a different set of competitors altogether. What makes you win is your ability to actually execute, in this particular space, as well as the size of your balance sheet. The execution piece, I'll come back to a little bit later, because that's an important point to point out on transactions. Solutions, which is where we try to come alongside our clients and help them in their actual business, their original business, as we will refer to it. You face competition that are traditional and also non-traditional competitors as well.
The professional services firms, some of the technology firms, some of the consulting firms, you compete against them. In our view, your ability to actually take part of the risk, so joint risk sharing, stands us apart, as well as the significant amount of work we do on the knowledge side, in applying technological advancements. When we take all of that and we have a view of where we want to take the portfolio for reinsurance over the midterm, our clear expectation and clear view is that we can grow the portfolio. Growing the portfolio also includes growing the profits in the business in a way that rebalances the entire portfolio.
If you look at it across those three strategic pillars, the clear goal is we want to grow all three of them, but more growth will come from solutions and from transactions, but also growing the core part of the portfolio. You'll also see over the last few years, we've gotten to a point where we have greater balance, when we look at it from a new business profit standpoint. Greater balance geographically in terms of how the portfolio is composed, and we want to maintain that balance moving forward. From a line of business standpoint, the capital that we deploy for the different lines of business, we also seek to have balance in that portfolio over the midterm. This is the roadmap that we are working towards as a business unit.
The growth that we're trying to grow is not just grow for the sake of growing only. We have a fairly tight framework that we work within. I present a simplistic version here. Edi will go into far greater detail on two components of it. We look at the portfolio and look at which part of the portfolio do we want to grow, which part we're trying to seek far greater profitability in, and where do we want to also reduce potentially exposure. Here we map the main eight sub lines that we have. In reality and in practice, there's far greater granularity to what we handle. If you take, for example, the specialty line. Within specialty, you'll have aviation, you have marine, you have engineering, you have agriculture, you have credit and surety.
If you take motor, you have commercial motor, you have personal auto. You take liability, there's general liability, there's products liability. Whether it's primary or whether it's excess, and across all lines of business, whether you're writing on a proportional basis or non-proportional. Then you also overlay on top of that the geographical components. It's not exactly the same thing for each geography. Within geographies itself, you have countries that have significant weightage. Agriculture in France versus agriculture in Brazil. While the main line may be grow or profits, sub lines may have completely different indications in terms of where we want to take the portfolio. That's the level of granularity that we apply to try and determine exactly where we should be deploying capital within the reinsurance business.
When we look at the short to midterm, the table to the left-hand side just gives you a sense of where we expect our portfolio to move towards. The eight main lines, looking at pricing and our view of what we're trying to achieve from a pricing standpoint. Exposure, in certain areas, we're looking to reduce exposure, which then gives you an overall sense of what will happen with the premiums by the period of time that we're talking about, and implied also what happens to profitability. You can look at a line like motor, where we expect pricing to go up, but we are looking to reduce exposure, but premium increases. The reason premium increases is the underlying pricing that we expect to generate is far higher than what you expect to shrink in terms of the exposure.
That's why you still see a situation where premium rises in a line of business where you're reducing exposure. Now coming to the three pillars and looking at the core of our business. Generally, I think as Christian mentioned, we tend to look at this from a EVM standpoint, but we also look at it from a US GAAP standpoint, and a measure of profitability for us is a combined ratio. When we look at the P&C portfolio over a certain period of time. We've spent most of our time focusing on the risk selection side, as well as making sure that we have the right pricing relative to the risk that we actually take. That's been where we focused on for the most part.
More recently, we begin to also look at the other component of your combined ratio, which is the expense ratio, and focusing on how we reduce the expense ratio. 2 levels primarily. One, simply reducing the expenses that we allocate to business, looking at resources and figuring out whether the resources are generating the right returns or not. The other is growing the portfolio as well. We give two examples by growing the P&C portfolio by 10 percentage points, we reduce the combined ratio by half a percentage point. If we grow the Nat Cat portfolio by 10 percentage points, we reduce the combined ratio by 30 basis points. Most of that's driven by the lower loss ratio that you see in Nat Cat. You see clearly an improved combined ratio trend over the last three years, for the P&C portfolio.
Our plans moving forward is clearly to also continue to see that combined ratio decrease. We'll give you the numbers for 2018, I think usually in February, when we've gone to our January 1st renewals. Going to Life & Health, where we've continued to grow, and we've continued to diversify that portfolio nicely. The chart shows mostly the value of new business that we've generated in the Life & Health business. You can see across all geographies, okay, Asia shows clearly a more prominent growth over the last five years. You also see that we continue to generate new business, EVM profit from new business in EMEA as well as in the Americas as well, which leads to a situation where you see the value of new business almost double over the last five years in terms of what we've been able to generate.
With still the majority of that coming from Life and not Health. Health clearly beginning to grow as we grow the portfolio in Asia far more, but mostly still on the Life side. In John's slide, he showed you something similar where we sort of look at the release of capital costs from the in-force portfolio, which helps grow the balance sheet of the Life & Health business. The combination of that, as well as what we do on the new business, ultimately creates a far greater economic net worth in the Life & Health portfolio. Our expectation is we'll continue to grow that moving forward as well. On the transaction side, demand drivers for us, from everything that we can see into the midterm, continue to be in place. We don't see any reason for demand to abate.
Some of those main drivers are what's happening on the accounting standard side, as well as from the regulatory standpoint, what statutorily most regulators are expecting life companies to do, and also what other stakeholders, primarily shareholders, are expecting in terms of the efficiency of utilization of capital, as well as trying to find ways to reduce volatility, ultimately in earnings. Beyond that, we also have management teams, generally, who are trying to change the profile of earnings that they have in their portfolio, and that's another major reason why we see transactions coming through. Our experience in this space puts us in a really good position. I think the access we have, again, to the C-suite, because most of the decisions around transactions for most companies comes from the C-suite. The access we have gives us access to the C-suite.
They give us a good sense of what they want to be able to do, and we find a way to partner with them, utilizing, again, the strength of the balance sheet that we have, as well as the knowledge. Execution certainty is very important when you deal with large transactions, because most of your counterparties want to know whether you've done it before. They want to know whether you've gone to the regulator, and the regulator knows the structure that you're trying to put in place and will approve it or not approve it. All these things matter when you're trying to do a large transaction. I think the last five years, the track record also shows it's a bit lumpy.
Unmistakably, you see that the revenues that we generate in terms of the costed value of new business that we see is actually increasing in the large transaction space, with a large proportion of that coming from Life & Health because they are much larger in terms of the size of the transactions that we see on the Life & Health side. While not on the slide, I think another point I should make is if we just look at the last 10 years, since 2010, the number of large transactions that we've written, we look at what we expected, so what we costed, versus what actually happened. The gap between those two is negligible from our standpoint in terms of the portfolio separately for Life & Health as well as for P&C.
Even though each particular transaction may not be exactly as you expected, but across the portfolio, they are incredibly close in terms of what happened versus what we actually expected. We look at 2018, and we deconstruct that, as I mentioned, Life & Health sort of dominates about 60% of the value of our new business profits that we see and about 40% from P&C. Within P&C, the majority of the transactions that we do, both in terms of volume as well as in terms of value, comes from property and actually not from casualty. The number of transactions we did in 2018, roughly 200, is probably typical for any single year that we effect transactions. That's around what we would expect yearly. I think the main point is we see demand. The drivers are still there.
They are not changing. We will continue to see opportunities for transactions moving forward. I come to Corporate Solutions, which is the newest of the pillars in terms of how we organize them. With us, again, coming back to our clients and trying to help them in their original business, and trying to find ways to create long-term partnerships, the nature of the solutions that we put in place, most of them are tech-enabled, by nature, platforms you embed in the processes of the primary company's business, which means they're extremely sticky because you embed them in the process. Not so easy to take out. The nature of payment that we take being reinsurance, which means we're willing to eat our own cooking. It's not just that we give you the advice and we walk away.
What we say, and we actually take the risk alongside you, makes us a really strong partner because that alignment of interest is extremely strong. Most of our clients see value in the solutions that we've put in place, and we now see at least 1/4 clients using at least one of the solutions that we have put in place, and we expect that proportion will continue to grow. The main reasons for coming to us to try and put in place solutions are driven by basic things. Trying to improve growth, trying to improve profitability of existing portfolios, and I will go through the two real live examples on the profitability piece. On the growth piece, it's simply new products, new distribution.
We look at parametrics, for instance, whether it's flood in the U.S. in terms of the products we've developed, the rating engines, which we embed in our client system. We look at earthquake in China, we continue to develop solutions that helps our clients. Telematics, trying to access group of drivers who are uninsurable today, but they want to be able to insure them in a way that does not destroy the loss ratio. We partner with them to bring telematics solutions in place. iptiQ, working with our sister company. Thierry will spend a lot of time talking about iptiQ.
The end-to-end platform that they've developed, digital platform, lots of our customers, clients, see this of tremendous value because they have either legacy systems or they don't quite have the knowledge, or they don't have the investments to be able to put in place to create that sort of product for themselves. They partner with us, to be able to gain the capabilities and in return, we generate new business profits as well as premiums from our clients. The efficiency piece, Magnum, you're familiar with, as well as Swiss Re is probably the equivalent of Magnum on the single risk P&C side, where we help our clients in terms of underwriting risk on an automated basis. You can almost say, even though I put it on the efficiency, it's much broader than that.
It's sort of like modernizing some of their business and in a lot of cases, also helping them grow as well as helping them improve profitability as well. Behavioral economics, we probably have one of the largest teams in the insurance industry of behavioral economists. Over, at last count that I looked at, about 160 use cases, where we try to change the experience of the end consumer using the resources that we have in-house. Whether that's in trying to improve lapse rates or trying to improve take-up rates or trying to improve cross-sell capabilities within an organization, behavioral economists come alongside primary clients.
The first example, real life example I give you, which is related to Life & Health customer retention, is a real life example of a client, where it's a post level term, so that gives the geography away to the U.S., where post level term, the premium increases significantly. Because the premium increases significantly, most clients lapse the policy. In the case of this particular client, the lapse rate was 86%. Within two years, the entire cohort of clients lapsed. We came alongside them to look at, one, the risk premiums, define the risk premium, and then we define the curve of premiums in post level term. On the basis of that redefinition, we're able to improve the lapse rate from 81% down to 26%. 55 percentage points improvement, which generates $36 million for the client.
In this case, because we reinsure a large proportion of that treaty, the value to Swiss Re is $29 million. On the P&C data analytics side, as a client with a non-performing portfolio, loss ratio way too high, using their data, using our own proprietary data, using models that exist with the data and smart analytics team within Swiss Re, coming up with a combination of risk selection, new risk selection rules, plus changes in the pricing, we're able to improve the loss ratio by 6 percentage points, saves the client $9 million. In this particular case, we were not the reinsurer on that portfolio, for the work that we did, they ceded a portion of that portfolio to us, it generates $2 million in EVM value to Swiss Re. Those are examples, we'll continue to do much more of that.
It becomes a more important part of the revenues that we generate at Swiss Re. I think in conclusion, I think the franchise from a reinsurance standpoint, has a strong track record of delivering results. To Andrew's point a little bit earlier, while we haven't changed the 700 basis points, we still commit to the targets that we have for both life and health and P&C. Even though risk-free is clearly less and will not necessarily arrive at those numbers, we still arrive at the 10-15 for P&C and 10-12 for life and health. We recognize clearly that the environment is changing. We've retooled our strategy to ensure that we succeed in this particular environment with the respective pillars that then allows us to grow. In growing P&C, we get a scaling effect, which improves our combined ratio.
For life and health, we expect it to continue to deliver the exact way that it's delivered until now. I'll invite Edi to come up and spend a little bit more time talking about steering the portfolio itself, and also greater detail in Nat Cat and casualty. Edi?
Thank you, Moses. Good afternoon, welcome also from my side. As Moses already explained, we run a quite decisive portfolio management approach actually across the group, also within reinsurance. I will dig deeper into two key portfolios. On the one hand side, natural catastrophe, a business where we have demonstrated a strong track record and where we believe we can actually continue to grow the contribution to sustainable earnings. On the other hand side, I will dig into U.S. casualty. Clearly a business that has been more challenged over the last couple of years, which we have put on what we call an exposure management priority already two years ago. I will show a bit more what we're doing there.
This kind of triangle, where we actually put every portfolio on a clear priority, whether it's sustainable growth, enhancing profitability margin, or addressing risk concerns we use a lot these days throughout the company, not just in reinsurance, also actually in Corporate Solutions. Andreas will later show a bit more what we're doing in this regards in the Corporate Solutions segment. Now let's dig into the Nat Cat business. First, it's important to describe the Nat Cat risk pool. The Swiss Re Institute estimates we have about $30 billion of reinsurance premium in that space. Obviously, a significant part is North America, but it's spread quite well around the world. If you look back, this has actually been a big growth business. Nat Cat business has been growing above GDP, 6%-6.5% over the last 20 years.
We also think it will continue to grow at significant rates going forward, still above GDP. I think there's quite some obvious underlying trends that explain this growth. You have continuous urbanization, you have more dense assets and people in Nat Cat exposed areas along the coastlines. In emerging markets, you have more prosperity, so insurance penetration will go up. I think there's all the reasons why this risk pool is going to grow in the future. On the right-hand side, as we have pointed out many times, there's still a huge protection gap out there. Again, in 2018, 3/4 of the losses were not insured, and the Swiss Re Institute estimates that in total per year, on an expected basis, more than $200 billion of Nat Cat losses are actually not insured.
That is why we think this is a growing pool, where we want to play a leading role in. This slide show that we have been and are a leading player in this business, which shows our market share on the reinsurance side. We had some 12% on the global business back in 2012, 2013, a little bit less for hurricane North Atlantic, because this is a clear peak risk. Obviously in a very softening market, we reduced our market share to some extent. Again, more recently, 2018, 2019, we are back at similar levels, close to 12% on the global average and about 11% in hurricane North Atlantic. On the right-hand side, you also see our portfolio is quite diversified. Obviously, 40% in North America, but then we have significant businesses also in the other continents.
I would point out in hurricane North Atlantic, still in Florida, we are a bit underweight compared to the rest of the U.S. Where we are more overweight is in Japan and in Australia. These are very concentrated markets, with both markets dominated by three strong seeding companies. We are very well positioned, so that's why we have quite a significant market share there. Obviously, there have been some losses over the last years. Over time, we are also confident in these markets we can make a decent margin. Now, I think that's a very important slide. It really compares to the Nat Cat loss burden we anticipate with cost before we put the business on our balance sheet, and then compare to what actually has happened in terms of loss activities.
On the left-hand side, so the loss levels per year and the premium and our expected losses, and obviously, there's significant year-on-year volatility. 2005, Katrina, Rita, Wilma. 2011 was the earthquakes in Tohoku, Japan, and Christchurch. 2017 was the big hurricanes. A lot of volatility. What is important if we look over a period of time, whether we go 20 years back or 10 years back, the losses we actually anticipate in our cat portfolio match very closely what we actually see. We think we have a very strong skill to anticipate the loss burden in this business, and that's what we call costing accuracy, and it's very important to give us the confidence to grow further in this business. Now, why do we have this strong track record?
I think it's mainly based on a substantial R&D effort we have been putting in for more than 30 years to have the best possible views on the Nat Cat risk. We have 190+ models in place. Different perils, which also shows the broad diversification of this portfolio. We have more than 40 scientists in-house that work on these perils, but we also work with leading scientific institutions outside to make sure we always have the latest scientific evidence. Of course, we always need to look into what new insights we get from the latest claim events. We think it's an important competitive advantage to always update these models as quickly as possible. For example, after the hurricanes in 2017, we quickly had some learnings around vulnerability for some occupancies. Already for next renewals, we are ready then with an updated model.
Already as we speak, with all the typhoon activity in Japan, we're reviewing also all the evidence, the scientific state-of-the-art, plus what we now learn from the claims to again update these models so we have the best possible view of risk. These rapid feedback loops are very important to make sure we really reflect the latest state of the art. Maybe to a question asked earlier, what we have implemented is a very robust framework based on technology across the whole company. Any policy and Corporate Solutions, any reinsurance treaty somewhere, is run through the same platform. Nat Cat models are on the cloud these days, and then it will be quite online aggregating up, so we can also manage the capacity and ultimately put it into our group risk model so we can again determine the capital allocation to these different risks.
This gives us a lot of control and also transparency on the book of business we have in place. Also linking a bit to the solutions piece, Moses explained more we also use Nat Cat proprietary expertise to help our clients. Out of the cloud, via an API service, clients can access our Cat modeling and write the original policies on that basis, and then obviously cede a quote to share back to us. That's really what we think is our competitive advantage in terms of the proprietary knowledge on Nat Cat. This slide explains a bit Nat Cat is such an attractive business for us, for the shareholder. It has a lot to do with diversification. On the left-hand side, we show the return on economic capital of Nat Cat business over the last couple of years.
The first thing to point out, even at, let's say, a low point in the pricing cycle, 2016, 2017, this business was still at an attractive level. It has improved again a little bit, 2018, 2019, with increasing prices. What we also show here, to compare the attractiveness of this business on our balance sheet versus an undiversified player. Let's take a collateralized reinsurer right in the same business as we have. The return on capital would be much lower. Obviously, that has to do with the diversification our balance sheet brings to bear. The explanation is really given on the right-hand side. We show the individual perils, as we call them, hurricane North Atlantic, California quakes, so on and so forth, and their tail risk. Now, if you put these tail risks together and diversify, the contribution of each factor gets much lower.
That's what you see with the blue charts. Obviously you can add the diversification with other underwriting risks, particularly the life and health side, which further reduces the contribution of a Nat Cat. In, let's say, a Swiss Re Solvency test view, you can even then bring in the diversification with financial market risks, and that's what's shown at the bottom there. There, Nat Cat risk actually becomes quite a small contribution to the total risk. To give an example, if you look at our peak exposure hurricane North Atlantic, if we deploy $1 billion of tail risk capacity, we would only have to back this up with some $100 million. It shows we have a multiple of 10, in terms of capital efficiency versus an undiversified player. I think that's really our efficiency to bring Cat business on our book.
Additionally, I would also point out the strong franchise vis-à-vis the ceding companies that actually like to have their risk with a reliable partner. From a regulatory perspective, I think it's an advantage to have a very solid balance sheet to take on these risks. Obviously, with the growth Nat Cat, also our, what we call the budget, is increasing, so we expect more losses to happen. That's only natural. Last year, we had a budget disclosed about $1.15 billion. For this year, we cede more than $1.3 billion. Actually, the budget has grown a bit less than what we call the tail risk or the capital allocation. We have grown quite a bit in what we call the peak perils, particularly hurricane North Atlantic. These allocate more capital, so the growth there was even above that level.
I think what's important to point out that obviously with the growth in exposure, we grow the premium. We have grown and will grow the business at least the same, even better margins. The absolute level of earnings will continue to grow with this exposure growth. The question is asked, what does this do to our earnings volatility? It depends a bit on how you measure volatility. If you look at the absolute earnings, which will grow, versus the volatility of these earnings, the ratio should be about the same. What I will explain later again is the use of alternative capital partners.
It will actually lead to somewhat more diversified portfolio as we grow the whole book, but we cede a bit more to our third-party capital providers for the peak risk, so the overall portfolio will become a bit more diversified. For this year, we actually think the growth Nat Cat business will add some $150 million of pre-tax earnings to our GAAP bottom line. Alternative capital partners, as John already alluded to. We have always been a leading player. We have traded insurance-linked securities more than 20 years ago. May have not been as outspoken as others, but we have used it in the past. Clearly, with the growth, we think it's better to be ready and also have third-party capital to share with them some of our particularly peak risks.
If you look at a cession ratio in terms of tail risk cession on the chart on the left-hand upper side. Last year we ceded about 13% of this tail risk. This year it has increased to about 20%. What is very important, and John also mentioned it, we still write most of the business on our own balance sheet, and we want to have close alignment of interest. We write this business using our client franchise, using our proprietary knowledge, and make sure this business is attractive for our own shareholders, but it also is an attractive long-term business for our third-party capital providers. As mentioned before, we cede a bit more of the tail risk. There it makes more sense. We have obviously set some risk tolerance limits.
We don't want too much concentration just in one risk factor, so it makes sense for these really outstanding peaks like Hurricane North Atlantic to share a bit more with alternative capital partners. Maybe also some comments on what does our hedging portfolio look like. At this point, a significant part is via sidecars. Over many years we have established relationships with long-term investors, pension funds who have been with us for a long period of time and also continue to be with us after some losses because they also had very good years, obviously, before that. The whole hedging portfolio is really designed for quality and sustainability. We make sure it comes with little basis risk, so it matches closely our incoming business, which is the case with sidecar because it's basically a quota share.
Also the other instruments are with little basis risk, and also most of the coverage is collateralized, so we don't want to really replace the underwriting risk with credit risk. We make sure this is, to a large extent, collateralized. We'll continue to grow this platform with quality and long-term third-party capital. Obviously, in addition to the risk taking, there will be then some commission. Our partners will pay us a commission to use our franchise and our risk knowledge to bring this business in. That's really Nat Cat story, and I'll switch now to a more challenged business, to be frank, on the U.S. casualty market. What I would say, at the highest level, the challenges really come from two factors.
The first one, a very soft market the last few years, and the other one is a much more aggressive tort environment in the U.S. On the left-hand side is the commercial rate development in the U.S. The blue line at the bottom is the large commercial risks. What you can actually see the price level, the rate level, 2018, 2019, is actually close to 1999, which was the worst soft market ever, which just shows that we are at a very low rate level in the large commercial business. On the right-hand side, really what happened in terms of a more aggressive tort system. What we show here is the average median verdict value of the 50 largest tort verdicts, and there was a significant increase in these settlements over the last few years.
If you really try to understand the underlying factors, it has a lot to do with much more litigation funding, so more aggressive plaintiff lawyers funded with money going after these cases. On the other hand side, you have a much more, let's say, negative perception of the corporates in the U.S. in the general public, which also influences then the jurors who are very much inclined to decide in favor of the plaintiff and against the corporate. These are really the underlying factors that explain this increase, and that's really what we call then together social inflation, and clearly something the industry has underestimated over the last couple of years. As I said, Swiss Re has put U.S. casualty already on what we call an exposure management priority and improving profitability priority since two years, and we took several actions across the various casualty portfolios.
We started to reduce appetite for U.S. liability and commercial motor. We also pushed a lot for commission increases. You can actually see that the economic combined ratio improved over the last two years. We also introduced a load in the costing to reflect the increased social inflation when we write the business. We started also to monitor the large corporate risk much more closely because that's really the segment most affected by the social inflation. We request detailed policy level board roll from clients, and we get that in most cases. We also have developed analytics tools where we can identify large corporate risks so we understand really what are the most effective pockets of business in our ceding company's portfolios, and then we can work actively with them to address these problematic areas.
Last but not least, also over the last couple of years, we have reflected these trends in our reserves. We added close to $1 billion into our U.S. cash reserves over the last couple of years. If you look at our total casualty reinsurance portfolio, it's important to point out that this is quite a diverse pool of businesses, both in terms of geography but also in terms of lines of business. We write more than $9 billion of casualty business, and about $4 billion of that is really U.S. casualty. These are businesses that actually are performing quite well, in line with our expectations.
If you zoom in a bit more into the U.S. casualty business, there is about a third, is really U.S. liability, also you have workers' comp under accident health, you have motor business, the liability is about a third. With this analytics tool in the client portal, also looking at all the limits, we estimate that only about 3% of the business is really exposed to what we call large corporate risk. That's why we think the most affected business is quite a manageable portion of the total U.S. liability business. This is obviously the picture on the incoming new business side. I would also point out, maybe to complete that picture, you may have noted, we also disclosed earlier in the year, we grew the liability or the U.S. casualty business quite a bit into 2019.
It's important that this was very much targeted. It was regional business with no LCR exposure, and also it was some transactions mainly around small or medium-sized enterprises, very low limits, first dollar coverage, which is very much a short duration, and much more predictable. We clearly have kept a very careful stance on the large corporate liability risk. Now turning more to the reserve side. We have, again, also on reserve side, quite a diversified pool of reserves for casualty business in reinsurance in totality. Year-end 2018, it's $28 billion of reserves, and about $14 billion of that relates to U.S. casualty. Again, you can break this down to different lines of business. Accident health actually has performed rather favorably. More recently, motor, we had some issues a couple of years ago, which we took decisive actions on.
If you look more closely into U.S. liability, the $8 billion reserve base, within that, we estimate that about $1.5 billion is exposed to what we call the large corporate risk business. Also in that respect, the business most exposed to social inflation is quite a manageable part of our total reserve book. We explained our reserving approach in many occasions in the past. It's really a robust bottom-up around all the reserving portfolios. There's very close feedback loops with underwriting, with the claims teams. We really make sure we always reflect the latest trends we see in the various portfolios. What I show on the left-hand side here is a chart on our initial loss picks on the reserving side for U.S. liability business.
What we can see, that our loss picks, compared to what the industry reserved that, has always been a little bit higher, which shows that we have been proactive in reflecting some of these trends. In some of the liability portfolios in the U.S., the reserving actuaries actually put a loss pick some 10 points ahead of the initial costing pick, again, to reflect some of these developments. On the right-hand side, again, what we show is the total casualty reserves, where still from an actuarial control perspective, this is additional view on the reserves from a group basis. We are confident that the reserves are set at a prudent level. Obviously, if you look at U.S. liability more specifically, clearly there's uncertainty.
If you put that into the overall U.S. casualty reserves, also assessed by our independent actuarial control assessment, we're still confident that the reserves are set at an adequate level. I'm running out of time, so I will finish with just one or two more slides. Actually, more recently, there has been much more dramatic actions by many carriers in the U.S. On the right-hand side, you see the rate development charts. If you look at general liability umbrella, pricing has increased since 2018, but it's now going up quite significantly. Excess liability, you see many carriers taking down limits, increasing attachment points. The market is reacting now much more decisively. The good news of this is that our book in the U.S. is to a large extent proportional, so we'll benefit from all these improvements.
I would still point out that U.S. casualty, and particularly liability piece, will, in our portfolio management approach, stay on a strict exposure management and profitability improvement focus, as clearly in this environment of elevated social inflation, we need to take a cautious stance. To close off, again, our portfolio management triangle. Nat Cat, clearly a portfolio where we're confident we can grow earnings further, now enhanced with alternative capital partners to manage our peak exposures in a risk-controlled way. On the other hand, U.S. Casualty, where clearly we'll keep a focus on exposure management and push for further rate increases. When it comes to these most exposed large corporate risks, we'll clearly also not hesitate to reduce exposure further.
In addition, as was also mentioned earlier, we have lower interest rates, so is an additional reason to push even more for price increases as you need a better nominal margin, if you lose on the discounting factor. That's on these two key portfolios, and I think with this we'll switch now again to Q&A. I think Moses will join me on stage for that one. That's on these two key portfolios, and I think with this we'll switch now again to Q&A, and I think Moses will join me on stage for that one.
Thank you, Edi. We have, I believe 15- 20 minutes for the Q&A. I will also, again, this time ask you to restrict yourself to two questions each. Maybe Paris, you want to start?
Yes. Thank you. It's Paris Hadjiantonis from Exane. I have a question for each one of you. The first one will be on U.S. casualty. You seem to suggest that when it comes to social inflation, the trends you are seeing are mainly on large corporate risks. What we have been seeing from several other players in the past quarters is a trickle-down effect or a spillover effect into more SME business. Are these trends that you're also seeing or not really? If not, why? Is there a difference versus the others? The other question will be for Moses when it comes to the need to leverage technology to generate alternative sources of income, as you've said it. We are seeing basically your biggest competitor taking a different approach from you, which is cooperate with Insurtechs, try to find partners.
You seem to be taking a slightly different approach, which is developing a lot of the things in-house or trying to partner with industry players. Why do you think your approach is better than your competitors?
Okay. Edi?
I'll take the first one on social inflation, also, let's say, affecting SME type of business. We clearly don't see that trend going down into these smaller businesses. I think there was one carrier that announced some issues with some SME portfolios, but I think these are specific factors. Typical SME businesses, they are not part of this, let's say, social sentiment against large corporates. I'm not aware of, let's say, any big verdicts against these smaller types of companies. The SME businesses we have written this year, they perform actually quite well, in line with expectations. It may not be limited to the largest corporates. There may be other corporates that have deep pockets, but would really not see this go down to the SME level.
Still, I think the issue is big enough at the large corporate risk level for the industry now to take really serious actions, to improve the pricing situation, but also the terms and conditions massively on this segment. We actually have serious concerns that liability for large corporates will get to sustainable levels anytime soon. That's also why on the Corporate Solutions side, we take very dramatic reductions of this exposure, and we also keep it very controlled on the reinsurance side. SME, I cannot see a similar pattern.
The only other thing to maybe add to Edi's comment is, I think if you also look at the limits profile for the SME customers that we see, the typical limits that they purchase versus the limits that you see in the large corporate segment, that's the other reason why you'd be far more worried about the large corporate risk segment rather than the SME segment. Coming back to your question on tech investments versus building. I think Christian showed the chart, which talks about our approach to technology and the four main areas where we choose to focus. If I go back to 2012, 2013, we also started, we had a tech investment fund. We invested in a number of companies.
I think we quickly came to the view that in order to be able to cover the entire universe and pick the right risk, you needed a ton of money to say you were going to invest. It was far better, in our own view, to actually do two things. One is we partner with a number of VC firms globally. They have portfolio companies, and then we take use cases to those portfolio companies, and that way we get exposure to the best and emerging technology that comes through. The second is, we look at our own selves to say, "Okay, what are the things that we need to do?" Working on our own selves, we come up with technological advancements, which we then know our clients also need, and then we partner with them as a way to try and generate our income.
It's a different model, but we have greater conviction about what we're doing in this space in terms of the hit rates and the return versus just making investment and not really knowing which one's going to succeed or which one will not succeed.
All right. Thanks, Christian. Andrew, you.
A question for each. Actually, it's mostly for Edi. Sorry. Edi, just trying to relate, on the large corporate risks, the implied premium is about $120 million, based on slide 56. The implied reserves are, you say, are $1.5 billion. That's obviously quite a big difference. I obviously would expect the reserves to be higher than the premium. Is a lot of large corporate business excess business? I just try to understand, is that large corporate business, is the premium you show actually useful as a guide at all? It's all excess business. On the topic of excess, just tell us again, how do you get comfortable with the underlying trends before your attachment, if you understand what I mean?
On that cat, one risk modeler says that the worldwide one in 200 tail is about $300 billion, and the expected sort of annual cat loss, whatever the average is about $85 billion. You say you've got a 10% market share, your cat budget's obviously a lot less than that would imply. Is that purely the diversification effect?
Sure.
Would you recognize those numbers and say, well, it's just because we're so diversified, we'll end up with a fraction of that. What work have you done to further assess the Nat Cat budget sort of realism, given some of the underlying trends?
Yeah. Thanks, Andrew, for these two questions. On the first one, let's say the exposure in the reserves versus the exposure on the premium side. Actually, when we estimated this 3%, we not only looked at the premium, but we really looked at the limit profile. In the policy borders of the clients, we look at all the limits and which part is really exposed to LCR, and not. As explained, obviously the reserves are much bigger because it's the accumulated exposure over a number of years. I think the ratio sounds about right to me. How can we get comfortable with this risk? It's fair to say the court system is quite aggressive, and we don't know when this is going to end. It's just what we have done, we have really tried to reflect all the things we have seen.
All these larger verdicts are reflected in the cost. We added a loading to the costing for liability business. We reflected it on the reserves. It's clear there is more uncertainty at this point in time, and that's also, as I said, particularly for large corporate risk, where there's this strong sentiment against corporates, where there's these limits out there. It's really very hard to make this business sustainable. That's why we really take a very cautious stance, and we work with clients to reduce that exposure. On the Corporate Solutions side also, shy very much away from these very exposed limits. This is going to be a challenge for the industry over the next couple of years, yeah.
Edi, can I?
Sorry?
Is there an excess of loss bias to the LCR business?
There was in Corporate Solutions. There was a lot of excess business. In the reinsurance business, it's a broad mix. We have participations with different companies, some excess, some also primaries. There it's clearly much less exposed to the excess. It was the case on the Corporate Solutions side. That's the nature of LCR there.
Yeah. I think the only thing I just wanted to add, Andrew, real quick is, where we tend to write excess as in excess in the primary world, where you put a treaty on top of that, we also tend to have the proportional treaty in place as well.
As well.
Yes. It's rare that we'll just go and write excess on an excess policy, yeah.
Yeah. The second question was more around the Cat budget and how we get comfortable that this is the, let's say, good estimate for the mean losses we expect. As I said, we do this peg testing on a very regular basis. It shows a very good picture on a global basis. We obviously do this also on a regional, on a perils, and also on a different layer basis to make sure we always take appropriate actions if we see too much deviation. The $85 billion and your calculation with the 10% share, I think it's very important that it really depends on how these Cat markets are structured. The $85 billion referred to is the total insured loss. Reinsured, ceded, and what's kept with the insurance company.
You would really have to dig into each of the markets, how the losses are split between the primary market and the reinsurance market. This can go from 50/50 in some markets to some whatever. Chile, you would have 90% reinsured and 10% retained by the primary market. It's very hard to give one number. Obviously our market share, as I pointed out, can be quite different. It is an average 12%, 11%, but it can easily be below that, but it can also go up to 20% in some of the markets. It's not so easy to get from this $85 billion, which is not an unreasonable number, to what is our share. We feel confident with our budget, compared to all the experience and all the research we do.
We have also updated some of the models, which also goes into the budget. On wildfire, we made the models more conservative. As we speak, we are updating the typhoon Japanese models that we'll also add to that budget then in the next year.
Heather, are you next? Are you?
Hi, Heather Takahashi. Two questions. Do you have a view on opioids exposure? If you follow the people that cover the healthcare industry, there seems to be a range that people throw around for approximate industry economic exposure to the issue. Do you guys have your own view? Within that, how much is the industry insured exposure? Below that, do you have a view on what Swiss Re's exposure would be? Second question, you talked about litigation financing. One of these firms has recently had some issues, one of the publicly traded firms. I'm wondering if you have seen any impact from that or investor appetite for the asset class, or do you expect there to be any impact from that?
Maybe you want to take the first, I can take the second.
Yeah, let's split like this. I was kind of expecting questions on opioids since we talk about the U.S. liability market. First I would start, this opioid thing is a very sad story for U.S. society, 40,000 people killed every year. I think it's far too early to talk about numbers. We have all these lawsuits now in the courts. There's thousands of municipalities, of counties, of states that have filed lawsuits. There have been some verdicts that are under appeal now. It's really far from having a real view where this may end up. What is very important to point out at this point in time, that all these lawsuits, they are for what you call economic losses. It's these municipalities, these counties just having increased social costs due to policing costs to take care of this problem.
The other lawsuits are what you refer to as injunctive relief, or it is for actually known events. None of these things that are now in the courts, and where there may be actually quite significant settlements with the big manufacturers and the big distributors, none of these things that are being discussed is actually covered under a liability policy. There's no coverage for an economic loss. There needs to be a bodily injury. I don't say there's no exposure, but it's far too early to see the total impact this will have on the companies accused, and then what may come to the insurance industry. From what we see today, the big numbers talked about, that's for issues that are not covered under a liability policy.
Obviously, there will be attempts from those who have to then pay big fines to recover some of that from the insurance company. This will take quite some time to unfold. At this point, we don't see real coverage for what is discussed in the courts.
On the topic of litigation funding, I think you know it's been around forever. It's not new. It's just taking different forms. I think more recently it's become far more organized. From what we can track, we've seen increased investment in this space because it's been presented as a slightly different asset class. The U.K. company that you're speaking about and the issues, I think it's too early to tell whether that dents the amount of flow of money that goes into this space or not. We haven't seen any impact yet.
Okay. Next question. Farooq?
Hi there. Farooq Hanif from Credit Suisse. Just a quick question on slide 58, where you show that two percentage point gap in your initial loss picks. One way of looking at it is that 2% is not a lot. You could argue that maybe some other players in the industry are just catching up recently, that's why we've had a lot of headlines. How should we think about this? Should we think about the cumulative effect? Should we be thinking about pre-2014, where there's a bigger gap? How can you give us a bit more comfort around that for people who are really negative on this issue? The second question, more on the solutions business. To what extent is the solutions business going to depend on new digital players, primary insurers that you support?
Rather like one of your big peers that we talked about earlier. To what extent is your vision that that's really enabling competitive primary insurance is going to be your strategy? Thank you.
Actually part of the answer is that this is cumulative. In each of these years our reserving actuaries have set an initial loss pick 2% higher than the industry average. The reserves are built across all these years. Then in addition to these points, more recently, as also indicated on the slide, on some pockets in the U.S. liability portfolio, actuaries have actually set a loss pick, a loss ratio of 10% above the initial costing, just to reflect the more recent trends we have seen, as I explained on the increased verdicts and the social inflation topic. It's cumulative over these years, which means we have built in quite a bit of additional reserves to reflect the recent trends.
I think on one other chart I showed that if you add it up over the last few years, it's close to $1 billion that we put into U.S. liability reserves in addition. That just shows we have taken significant measures to bring the reserves to a level where we feel comfortable.
Okay. On solutions, I think if I take the midterm, at least, I think we still continue to see the traditional players as by far the largest source of revenues for us. Because that install base, the inforce base that they have, and your ability to do things like managing lapses within it and the value generated is so much more significant than anything that you start to do newly. On the new side is why I was talking about iptiQ. I think there we sort of use the iptiQ model to partner, both on the life as well as on the non-life side, to work with new players, pipelines, distribution pipelines, OEMs, different people who can give us different sorts of access to risk. We serve as the insurer or reinsurer behind them.
From Swiss Re's perspective, those are the two ways in which we look at it.
Maybe we take the last question. Jonny?
Thank you. Jonny Urwin, UBS. Just two on the U.S. casualty. I guess the essence of the question is, how much worse can the 2014 to 2017 underwriting years get? How should we think about the most recent underwriting years? On 2014 to 2017, you've obviously strengthened significantly already. Can you give us an indication of where that's taking you from and to in the range of the 60th to 80th? On the most recent underwriting years, can you give us an indication of where you are? It sounds like you're opening up very conservatively, so presumably at the top end or even above. Thank you.
In the end, just to reiterate some of the explanations I've already given. If you look at just the U.S. liability more narrowly, particularly the LCR business, clearly there is risk. If we look at U.S. casualty overall, there we are very comfortable that the reserves are still within the 60-80 range because this is assessed from an independent actuarial control level, at higher portfolio aggregation, looking at all the experience, the triangles over the last 30 years. The total reserves, we are very comfortable that they are prudently reserved at the 60-80. If you zoom in into U.S. casualty and then more narrowly into U.S. liability, clearly there's risk. We have taken these measures. We increased the loss peaks. We added close to $1 billion. We see these reserves at what we call a best estimate.
That means there is 50/50 chance it can go either way. I would not deny there is more risk around this. If you put it into the total pool of casualty reserves, which are $28 billion, we think within that there is room to absorb volatility, and that's why we feel comfortable that the total reserve base is reserved very prudently. On the U.S. liability specifically, there is clearly more uncertainty at this point in time.
Okay. Thank you, Moses. Thank you, Edi. We'll take a very short break. Let's try to be back in 10 minutes, and then we'll finish the day. Thank you.
Yeah. Thanks, Philippe. Good afternoon, everybody. The last time I was speaking, that was on the 31st of July, and I said the good news is more than 65% of the portfolio is healthy, very good. The bad news is we're going to address the other bit. We came up with our management actions. I'm glad to say today the good news is we're really addressing it, and I would like to give you an update today, the progress update, where we stand, because I think that's the most critical question that needs to be answered. Where do we stand? Are we really on track? Do we restore profitability? Are we achieving our target that we set out very clearly for 2021 on a 98% combined ratio? Coming back to Christian's slide, the three differentiating aspects of Swiss Re also apply to Swiss Re Corporate Solutions.
I will go through my little presentations along those three elements. Christian already mentioned those. I'd like to really highlight that the implementing management actions piece is the key focus. That's a key priority. You shouldn't see it as sequential. You should see it really working in parallel on all the other aspects of those changes. We work in a very large premium pool, risk pool. The commercial insurance market is estimated at $800 billion, and the Swiss Re Institute still estimates it to grow at six percentage points. I think that's quite interesting. It is a very large and growing premium or risk pool, as you can say. You see here the segmentation. We looked at the excess layers, the international programs and the primary lead. That's exactly the segmentation that we mentioned because this is relevant for our business.
We broke it down to the addressable target market. We took out everything that we don't look at, the motor, for instance, and other parts of the business. We come to a $300 billion roughly, that is really the addressable target market for Corporate Solutions. If you go further to the right, you see that the excess layer, the international program business, and the primary lead were the key terminologies, the keywords that you were listening in the past. This is still valid. This is still where we're playing. The SME and the workers' comp commercial auto, this is not an area where we're playing. I think that's very important for you to know that workers' comp for us is not a market, that we don't feel that we have a differentiating aspect to offer here.
On the motor market, even commercial auto is not the market that we're in. SME, it requires specific DNA. It's a scale game, a process-driven game, automation game, for very small businesses. It's a distribution game, that's not our DNA. We come actually from a very large corporate end, dropping down to the mid-market. We introduce the new terminology here, large corporates as the top end of the market, then the mid corporates. We're much more aligning to the market terminology. Brokers are using this terminology. Other insurance companies are using the terminology. The cutoff, the segmentation criteria, $500 million upwards, that is sort of a market definition. You will see that with other peers as well. That makes us a bit more comparable. When we talk about market segmentation, we're focusing. Internally, we're focusing.
We're all using the same language. When it comes to SMEs, we only do it where we have access to markets via, for instance, bank insurance channels, bank distribution channels like Bradesco. In high growth markets, like Bradesco in Brazil, our joint venture partner, they offer us their whole distribution chain, their whole banking branch network. Through that network, we have access to those customer segments. Here, purely by default, we go on automated platforms. No bespoke or manual underwriting, and that's the game that we are on in these markets. I'd like to talk today about those elements here. Four strategic priorities or pillars. Number one is the key focus is implementation of the management actions. It's about pruning, it's about expense savings, it's about creating a more effective organization, and obviously, it's about protecting our downside risk, our balance sheet.
Secondly, I would like to look at after pruning at the decommoditized core of our business. After we have sort of exited or re-underwritten the types of business that we were not happy with, the remaining bit, that's the healthy part. We actually did a backward simulation. We said if we had applied those management actions before, how would that healthier core look like in hindsight? I think we would have outperformed the market. Obviously, in hindsight, everybody's smarter, but I think it gives us so much credibility and confidence internally also to go down that route going forward. We look at the decommoditized core, where we look at differentiating assets. That differentiation, I think we will continue with differentiating assets that support the core. Here I'll give you a few examples.
Christian already mentioned the international business platform as one example, and I'm sure during the lunch break, you could have a chance to look at the booth to see it real-life and also maybe have some questions answered by our experts. The last element is expanding through tech-driven solutions. Obviously, this is sort of the wider shot, but we have some very promising proof points already, and we can talk about this along this presentation. Coming to the first bit, it is about rebalancing our portfolio. If you look at the left-hand side, we were very heavily North American driven, basically U.S.-driven. EMEA, in comparison, was completely underweight. If you then go to the lower part, you will see that casualty was also an element that was, in my view, overweight, and we're going to reduce it.
This is only showing you the 9-month figures. If you go through then the walk, the pruning activities, and we'll discuss that a bit later, you will see that this element will reduce significantly, as well as the North American bit. Yeah, if you look at the pruning activities overall, they're obviously pretty much spread around the globe. The hotspot, the focus is North America, and within North America, very clearly U.S. If you take out Canada, U.S. is really the hotspot. Canada is one of our most profitable markets. It's actually the number 5 country premium size wise, and I think we're quite happy with the development in Canada. On the right-hand side, you see the walk, the development of the premium, the pruning, and the price increases, and then obviously also some exposure growth, which bring us to the 3.6 at 9-month 2019 numbers.
It's fair to say that the pruning does only reflect those businesses that we exited this year in May or prior May. The rest will obviously be earned later, and you will see it on the next slide. The price increases, we're going to have a separate slide on this one. I think we're quite happy with the price increases so far. We still think there's more to come, and I think we're going to push even now for the year end for additional price increase because I think now is the moment to do it. Now is the opportunity in the market that brokers and customers will look for capacity and will accept certain price increases, and I think we're going to push towards that. The exposure growth, this is desired growth.
The market is turning at the moment. You will see definitely much more submission flow coming through. We see that customers and brokers, they look for new opportunities. They look for new offerings. They look for new capacity. Capacity is scarce. It has its price. We see more and more differential pricing. For the same risk. We can push through higher rates for the same price in comparison to some of our peers. Apparently, customers value the brand, but also the expertise, the claims handling, et cetera, that comes with it. Now, this is the critical slide. You might remember on the 31st of July, we showed this slide. We walked you through all aspects until the 2021 target combined ratio of 98%. Today, I think we can give you an update on the portfolio pruning.
All the activities that we laid out in playbooks, very detailed activities on the what, meaning what portfolios are we going to address? How does it play out over the quarters? That's all done in playbooks for each executive committee member with a personal signature and a personal commitment. That gives us the confidence that everybody stands behind those activities and behind those measures and implements. So far this year, 25% of all actions will be seen in US GAAP. Very clearly, this is what has been done before. In particular on the U.S. casualty side, we were early in addressing those elements. E&S casualty exit, Excess U.S. Liability Umbrella. Those were the ones that we communicated in May this year. This has been shown partially already this year.
If you go into next year, you will see that all the other activities that we introduce now will be shown by 2020. 90% of all actions should be seen by 2020. The rest are long-term agreements, multi-year contracts, and those will be seen then by 2021. Very clearly there's a walk. There's not any surprise or so. There's no miracle. There's hard work, very quick and very painful initial activities. That goes obviously also for the expense ratio. The expense savings are going to be addressed along the portfolio pruning. You've probably heard and seen the news in the newspapers or also in the publications. Consecutively, we were addressing those portfolios and every time then the news came up and then teams were affected by this. We were lucky that the reinsurance BU, business unit, could also absorb some of those individuals that were impacted.
Other than that, the market was absorbing it. We also have seen some portfolios that we could sell. We could sell portfolios to some of our competitors, in particular on the general aviation side, but also on the FinPro healthcare side. The 1% on the adjusted reinsurance structure, this is the ADC that we concluded. In addition, we have had a tactical reinsurance solution for the remainder of 2019, for the second half. We entering into a more systematic, also strategic reinsurance approach going forward. We significantly reduced our net exposure, our net on property, for instance, but also most lines of businesses, we dropped down to $35 million net versus $75 million before. On Nat Cat side, we dropped from $300 million to $200 million.
We're quite confident that with all these actions and with the work that we can see will happen, we'll come to the 98% combined ratio. That's the good news on our side. As far as the rate increases are concerned, you will see on the left-hand side the market figures. The right bar, this is 8%, represents 8% of rate increases. In comparison to the market, we look very, very good. Nine months figures showed a 10% rate increase. Partially it's because the market 8% is basically across all market segments. As we had the discussion around large corporates before, we are very much at the top end of the market, and this is obviously a market that reacts more heavily as far as rate increases are concerned.
On the casualty side, as you can read here, this is a bit more modest because actually we're exiting this element in North America. Property is a driver, and in particular, loss-prone accounts are the driver, and naturally Nat Cat. in comparison to peers, we still believe that we're pushing through more rate increases. We see now as we get more inquiries around quoting businesses and brokers and clients insist that our quote shows up on their list. In at least Nat Cat, we can see that our quote is used as a reference point to Eddie's point. The very technical approach, very data-driven approach, and the robustness over consecutive years of underwriting, technical underwriting Nat Cat and property also gives the market the confidence that this is a reference. We might not get the business because we're still too high in rate increases, but we're not compromising here.
Either there's a differential pricing, so we get it, or not. We think the markets will come back if others are writing it at a lower rate increase. I think that's their decision. We believe that still today you see rate increases that are not sufficient. After our pruning activities and addressing the underperforming portfolios. We have a remaining core of the portfolio that is healthy. That's the business that I was talking about, and we try to decommoditize it. We, in certain areas, were following a me too strategy, so we were following big risk pools with basically everybody in the market being present in that pool. Competitiveness was fierce, and we couldn't add any additional value to that market. We were basically just a pure commodity provider, capacity provider. We said to our markets, we don't want to be just a pure capacity provider.
If you look for capacity purely, there are enough markets for that. If you want to play and work with Swiss Re and Swiss Re CorSo, then there's more to offer here. If we can't offer anything in addition, we stay out of it. That's the kind of discipline that we really will apply these days. Here you will see some examples where we could demonstrate over the years that we had differentiating assets to offer. Property energy in particular. Engineering is a very nice line of business where we still have room for growth. FinPro, interestingly enough, we were making money all those years. In comparison to our peers, that's an area where we stayed away from very difficult areas in FinPro or financial lines.
Aviation, after we have now pruned the general aviation bit, that's a line of business in the remaining part where we feel comfortable. We have had individual hits, yes. That's what we're there for. Overall, I think we have had a very good risk selection, and we could outperform the market over the years. Now, the differentiating assets that we want to focus on are here the following. International program leads, innovative risk solutions, joint venture place in high growth markets, rather than individual organic growth, planting the flags and organically learning. Last but not least, we have the weather derivative business as well. On the international program business, we decided not to purely compete on the underwriting side because we felt there's not enough differentiation that you can show on the underwriting side. We're not better than a Zurich, an XL, an Allianz on the underwriting side.
To deliver the product, that was the problem, and that's what we're going to address, and that's why we developed a state-of-the-art platform. Through that platform, by simplifying the process, we influence the underwriting. That's the new product that we came up with, and I'll talk about that in a second. The ONE Form, we call it. It's a simplified product for property with master cover international business, plus the local policies that mirror the international business. What is different? We take away all the complications, all the differentiation that underwriters add to a product just to show differentiation. Those differentiations that they add to the product cause a lot of complication and workarounds in the process, in the delivery. Through the platform, we try to address the simplification and underwriting.
Innovative risk solution, those are the typical parametric solutions that Moses also was mentioning in his reinsurance part. That's something we're really proud of. We are market leaders in the primary insurance space, and we'd like to grow this business. Currently, we sit at $325 million-$350 million, and we'd like to grow it with additional business cases that we're going to sign off very soon. In particular, in structured solutions for fronting for captives. We think that as the market is hardening, in particular the complex underwriting purchase community, they will go slightly away from risk transfer and will focus more on structured solutions and on captive solutions. I think that's something that we're going to see going forward, and that's an area where we're going to be more than happy to explore. This slide here is the future. The future happens already today.
We'd like to use technology and data, and we'd like to address the inefficiencies in the industry. We have to address it with the international business platform, but we'd like to go a step further and to offer it as an open platform to white label it. We've got the first example with Brokerslink. Brokerslink is the fifth largest broker network in the world. They were struggling because they tried to build the platform themselves twice. They failed. Then they tried to team up with a Silicon Valley startup company to build that platform. It didn't work. They saw the platform, and now as we speak, we're customizing it. This is purely a fee-based business where Brokerslink put all the cross-border business on that platform and use our fee. It's a white labeled platform.
On top of it, they offer us a share of the business that is sitting on that platform. I think it can be a solution going forward towards a more standardized approach in that industry because the problem is really the fragmentation and everybody tries to work with different systems and platforms and portals. I think we have to address it. We get a lot of requests from other broker networks, even the larger ones, but also from insurance carriers. Here we can work together with the solutions entity from the business unit reinsurance to see whether or not that could be another offering like iptiQ that is quite interesting for Swiss Re. That's something we're working on. The second one is marine. Marine, as you have read, marine cargo insurance.
Marine, we exited because we believe we can't influence that market to bring the expense ratio down to a meaningful level. We say the problem is still there, and here we're trying to team up with ecosystems, with corporate partners, to offer digital propositions on the marine side. Again, it's a bet. Let's see if that works. We have reduced the number of staff in the marine team because we're not actively writing anymore, and the small core of the staff, composed of traditional, very experienced underwriters plus data scientists, data experts, they're working now in an agile form, agile way to come up with a digital solution. We've got already some use cases in place. Let's see what that brings. All in all, with the focus on the improvement actions, we feel very comfortable that we get to a 98% combined ratio.
This will translate into about 10% ROE. That's the lower end of our range. Obviously, going forward, I personally expect the combined ratio to improve to be comfortably within the range of 10%-15% ROE. Thank you very much.
Thanks, Andreas. Thank you. Let's start the Q&A and take the time for at least a good 10 minutes of Q&A. Who wants to start? Maybe James in the back.
Thanks. James Shuck from Citi. On Corporate Solutions, you talk about the solutions side of things and the technology and the platforms that you're developing. There's obviously quite a lot of overlap with the P&C Re side. We heard earlier about the solutions side, and that's going to grow quite significantly. Is it fully loaded within Corporate Solutions, or what's the degree of sharing of information and digital costs within those, please?
Yeah. It's fair to say the reinsurance business unit, they're further advanced, obviously, because they're working on solutions for quite some time. We have focused on areas where we already have assets that we could use. The international platform is there. We don't want to wait until we develop something new. It's there. We have underutilized it. That's why we said the strategic focus should be to look at our assets that are there already and see, is there a market, is there a pain point to be addressed, and can that be monetized? I think consistently, we should really see whether we could use that. In addition, we're working together with Anette Bronder, our Group Chief Operating Officer in the group, and we would like to leverage the group much more on the data side and on the technology side.
You shouldn't see it as a standalone Corporate Solutions unit or effort. You should really see it as a group effort and Corporate Solutions has the access to their corporate customer base, and then can offer those solutions leveraging the group. On the reinsurance side, wherever there is an overlap on customers, and we have some very clear examples, that's where we then work together. Those are common customers, and those are customers where a Chinese wall is not required because it's not a treaty business, et cetera. Those are services. They will then sort of coordinate much better those customer accesses.
You have a follow-up question?
My second question, was I allowed two questions?
Sure. Go ahead, James.
Oh, thanks. The reserve addition that was taken in CorSo at H1, that seemed to be mostly due to man-made losses. I wasn't entirely clear what the extent to which that includes some of the casualty reserving trends that we've seen. Kind of linked to that, obviously things have moved on since July. To what extent are your loss picks and your reserving situation within CorSo reflecting the new norm on casualty in particular? Thank you.
As you can imagine, we went through a comprehensive review. We looked at all portfolios, but with a specific focus, obviously, on the most distressed portfolios. We were using also group support from the Group Chief Underwriting Officer unit. We have done what we saw. Obviously, we stay very closely to the markets and monitor. You've seen, obviously, in the course of the year then also news coming up, and then trends being identified. We were not immune to that. We looked at it, and together with the group colleagues, and then with the actuaries, we're looking at it on a consistent basis and continuous basis every quarter. We look into it, and if there's need, we'll act. That's the situation. We were pretty comprehensive at the second quarter. I think we are observing the markets continuously.
That's probably one of the reasons why we said, as Edi correctly said before, we exited this business because we felt we were not big enough to be any time influential in this business to make it work. We believe this is a bigger problem of the U.S. market, we believe that the incumbents, the market leaders, should actually take the lead. We were too small in that market. We could not influence it, why deploy capacity into a market that is not healthy and where you can't influence it as a Corporate Solutions entity?
All right, next question. I saw Andrew on the front.
Hi. It's Andrew Ritchie from Autonomous. Andreas, since you came up with the half year, the famous walk and the combined ratio, I guess the pricing environment's got even better. I'm wondering, has your view of the normalized starting point changed as well? I think you were handed the 110 by kind of your predecessor, I suppose. What's your view of what the actual starting point is for the normalized combined ratio as of today based on. You've still got some current loss trends on the casualty book. I know the reserves belong to the reinsurance business, but you've still got some current. What's the normalized starting point?
I guess the other thing just to address, when you talk to your competitors who are international program large corporate insurers, they all sort of dismiss CorSo as ever likely to make an impact in the international program business, partly because you've been concentrated at excess layers. Less familiarity with the nitty-gritty of boring stuff like claims, payments, regulation, all that kind of stuff, and you don't have the infrastructure to do the captive solutions business that they've been doing for years. What do you say when you hear that criticism as an observer? Also, having worked for one of those large competitors.
Yeah. Coming to your first question, normalized to 110. Look, that's the number we worked off. We looked at the 2018 numbers. You can now argue changing the numbers all the time. That was the base where we started from. Then we did the work, and we looked at all the aspects that I went through. We looked at reserving, obviously. This is continuous work. What we did is we intensified the loops between claims, actuarial, finance, and underwriting. In particular in underwriting. We were much closer in addressing the costing, the calibration of the costing tools, because you could argue, are the costing tools fit for purpose in that environment? What we did was be much faster and much more accurate in bringing the rating levels up and that being reflected in the costing tools.
As we speak, Ashley, he's sitting in the back, he's actually found a writing officer for Standard & Digital, and he's overlooking that aspect of pricing actuaries and then also costing tool calibration. This is a very important message. It's not that we haven't done it before, but we saw that we were too slow in reacting. When we reacted, it was not decisive enough. People, like the whole market, were still hoping that maybe that market is turning and then we get that rate increase, but it didn't happen. I think that's something that we're quite proud of, to make that much more robust and much more decisive and quicker going forward.
As far as the second question is concerned on the international programs and the competitive landscape, this is a market where you probably have five to absolute maximum eight players who can provide lead solutions for international insurance programs, in particular for the large corporate space, but also for the mid corporate space. The argument was always that you have to have an international network to issue local policies. The reality was, and that's something that I already saw in my old job, but also in my new job, is the performance of a network. It doesn't matter if it's your own network or not. The proprietary network does not always perform better than a partner network. I think at Swiss Re, we have the beauty to use network partners that are also reinsurance clients.
We know them, we have a face to them, and we have very clear KPIs. The beauty is there's no workarounds, no Excel sheets that are sent around. They work on our platform. I think that's the beauty. It's painless. That's the difference. That's the network aspect. All the other aspects, I would argue, there's no reason why we shouldn't compete. We have capacity. We have limits that we can offer that others can't offer. We have underwriters who can handle the business. We've got claims management, and we've got a very nice operations team. Overall, I think the times are changing. We might actually be the forward-thinking carrier using modern tools, technology, plus simplified underwriting. I think that's the future. Okay, maybe one last question. Maybe Simon.
Thank you. Simon from Vontobel. I'm just wondering how much can you grow until the reinsurance clients will complain about you competing with them? Could you elaborate a little bit on the reinsurance policy that you will implement in 2021 and beyond?
Okay. On the first one, I think we've got very clear policies internally. The market needs capacity. At the moment, I think nobody should complain because it's a nice market for insurance companies if they do their homework. What we see now is we're actually being approached by markets through brokers or directly through customers to team up, combine capacity and expertise. I think that's a normal way of doing things at the moment. I haven't heard any complaints so far. If there are complaints, we try to avoid it. I can tell you there was one specific one in an area where we were even as Corporate Solutions subscale, and we were playing in a market, specific market, where we felt we can't differentiate, again, to that point. Our sister company, Reinsurance, had a very strong relationship with a player in that market.
We said, "Look, choose your battles. Discontinue that business. Hand it over to reinsurance. It's in a better place." I think that was a good solution.
All right. Thank you, Elias. Thank you very much for the Q&A session.
There was a second question.
You had a-
Program.
Insurance beyond 2020. Okay.
Just very briefly. I think what we set in place now, the parameters that I mentioned are in place now. What we do is we observe consistently now our net and what we're writing. I wouldn't rule out that there will be slight changes there, but I think we feel very comfortable with the solution we have in place now. We also look Nat Cat reinsurance, but again, technical underwriting. A risk doesn't get better if you net it out. Again, that should be our philosophy. All right. Thanks again.
Thank you.
Thank you, Philippe. Good afternoon, everyone. Last but not least, I hope, Life Capital. Life Capital was created in 2016, and basically it consisted of all the primary life and health businesses of Swiss Re. We have since sharpened the profile of those businesses and created three businesses with three brands. The first is ReAssure. ReAssure is a leading player in the consolidation market in the U.K. The second is elipsLife, a international player in the employee benefits business. The third is iptiQ, a global leader in the B2B2C space. Whilst these businesses all have their distinct leadership, their distinct cultures and targets, they actually all build on the three Swiss Re strengths. They all live from the client access of Swiss Re, its risk knowledge, and its capital strengths. Let me start with ReAssure, still with Life Capital and still its largest business.
Obviously, the ReAssure team has gone through a lot of work early in the year, in the months before the planned IPO. When the IPO actually was suspended, obviously the disappointment in the team was big. It was even more a pleasure that just a few weeks later, they were able to announce a new deal with the acquisition of the Quilter U.K. heritage business. For a consideration of GBP 425 million, we got 200,000 policies more and GBP 12 billion of assets under management. The surplus that we expect to be generated to emerge over the lifetime of this deal is more than GBP 500 million. This is based on synergies of more than GBP 200 million. GBP 200 million of synergies for a deal with a consideration of GBP 425 million is very considerable, and it actually is the metric behind this deal.
All of this leads to an IRR of above, well above 11%. It's actually even well above 15% for this deal. When you look at public figures and you look at the price to adjusted UT1, you will get a ratio of 120%. I'm sure you have made those calculations. If you adjust the UT1 for the new costs that we apply to this business, and if you adjust it for the transitionals on the technical provisions that we apply to this business, the ratio actually goes down to 80%, which actually brings the deal very much in line with other deals in the market. Last but not least, the payback period, the cash payback period with four years is extremely short on this deal. Overall, an excellent deal, excellent addition to ReAssure's book. Obviously, as I said, a motivational booster for the team.
As from 2020, we have decided on Life Capital level to not communicate or report on gross cash generation anymore. We will, however, instead focus on surplus generation at the ReAssure level. There, the target is a surplus generation of GBP 2.1 billion in the years 2019 to 2023. We will look at many other KPIs, but mainly at two other ones. One is customer satisfaction, currently very high at 88.6%. That's market leading. We will also measure the Solvency II ratio that is strong at 148% currently. The teams are very busy currently with the L&G integration that is going well under the circumstances. Also busy to adjust the asset portfolio to actually move it to a state where the risk return of that asset portfolio is better than what it is today. Let me move to elipsLife.
As I said, elipsLife is an international player in the employee benefit market that is around USD 160 billion premium on a global basis. elipsLife is active in a few countries in Europe and in the U.S. since this year. Their strategic pillars are built around three elements. The first, they're entirely and only biometric risk focused. They are broker distributed only, so there's no channel conflict for elipsLife. Thirdly, they are in the market leading with service and costs. This is actually enabled by their state-of-the-art platform. On this phase, elipsLife have been able to grow very successfully into this market and generate a premium today of almost half a billion dollars. This still at a loss ratio below 18%. Why do I say this?
18% is still a market-leading loss ratio, but it does actually include the costs of expansion into countries such as Italy, Germany, and the U.S. Obviously, without those countries, the loss ratio would be well below 15%. In terms of access to risk pools, which is so important when we talk about elipsLife, you can look at the two core markets of elipsLife, Switzerland and the Netherlands. You can see that the market share has grown by now to 5% and 6% for those two countries. This is considerable, considering that so far, Swiss Re's access to this risk pool in those two countries has been well below 1%. It is actually well below 1% for this risk pool as a whole. We think that with elipsLife, we have a very good business in place to access the employee benefit market.
Let me move to the third business, iptiQ. As I said, a leading global B2B2C player. Just to remind people, it's always the same speech. B2B is the access to our distribution partners, brands, and corporates. B2C means together with that brand, together with that distribution partner, sell policies, individual life and health or P&C policies to their customer base. That's what we mean with this model. iptiQ's success is based on three things. As you would expect, the most important one first is the B2B access to all these customers, distribution partners. The combination of Swiss Re and iptiQ together actually is a very powerful combination there. The second element is the leading-edge digital platform, operating platform of iptiQ, which is really market-leading and provides us with the flexibility and capability to connect to any partner and any consumer out there.
The third is really the combination of 150 years of Swiss Re's underwriting knowledge, together with the new data, new capabilities that we acquire in iptiQ around data that we get, data analytics, which allows us together to provide best-in-class customer journeys, better underwriting, faster underwriting as well, and also allows us to automate claims in a way that has not been possible before. It has allowed us today to be live with 28 partners. Each time I speak to this community, there are obviously many more partners. We are at 28. Through these 28 partners, we access almost 100 million consumers. We now have an in-force portfolio of 360,000 policies with an average policy premium of $700. iptiQ is still growing at a very rapid pace. As I speak, we sell about 5,000 policies per week. That corresponds to 250,000 policies run rate a year.
This explains as well why this unit is developing so fast, right? We have an in-force customer base of 360,000 and sell actually 250,000 of new policies a year. Obviously, that growth, again, is expected to accelerate next year. What we sell are individual, as I said, life and health and P&C policies. These are simple products and transparent products that are adding value to the consumers, and we sell them in a fair, transparent way as well. This explains why already today the NPS score is 10 points above the market average for similar companies. We continue to invest $40 million every year in innovation. I have given here a few examples of what we are adding just again to make the customer journey even more engaging, but also to learn more about our consumers and again improve our underwriting.
I get two questions constantly with iptiQ. The first I get is: Is it even possible to have such a tech startup growing so dynamically within Swiss Re? This is trying to answer this question. As you can see, we have obviously anonymized some famous insurtechs to the right. As you can see here, we have invested $475 million capital in iptiQ so far. With this, we have generated $225 million of premium. For $2 of capital, we have created $1 of premium. If you compare this with other so-called dynamic insurer startups, you can actually see that iptiQ compares really well and really shows that we do actually have this ability with iptiQ to grow very dynamically into this market. If you look at absolute size that we have achieved, and it's not on this slide.
In absolute terms, if we compare ourselves to major U.K. players or U.S. players, just for the biometric risk, they have an APE of $250 million- $350 million. We expect iptiQ at the end of this year to be at $150 million of APE for their business. That's just about half of some of the largest players in the U.S. and in the U.K. It shows not only is it growing dynamically, it also, in terms of APE, not in force yet, but in terms of APE, has reached a considerable size. Last but not least, the concern that this could be all bad business and that we get this growth only because we sell these products cheaply. Every policy we sell is, let's say, in the mixed price at an ROE of at least 12%.
The challenge for us is not to get higher margins. For us, it's actually to sell as many policies as we can at those margins. When somebody sells a policy, that person cannot deviate individually for an individual from the price. All these prices are set. The more we sell, the more we have profits. Here comes the second question. When will this be US GAAP profit-making? I hope that this is going to be helpful for all those who have this question. You see in the graph two lines, a green line and a red line. The green line shows emergence of EVM profit, and the red line shows the emergence of US GAAP profit. You can see on this chart that the expected EVM break even for the iptiQs we create is between three and five years.
You can also see that the estimated break even for US GAAP actually happens several years later, typically five to eight years after the creation of an iptiQ. If you go one level below, you can see different iptiQs that we have put there. You can see that iptiQ A and Z, for example, has been created obviously first and is already in the profitable zone. You can also see that the two life and health businesses, iptiQs in the U.S. and EMEA, are around EVM break even this year. Actually, we expect them next year to be well beyond break even in EVM terms. Really to march towards the US GAAP break even, but in the meantime, generating very nice EVM profits.
You can also see to the left, the new iptiQ joiner, iptiQ P&C, and any other iptiQ that we will create where we see opportunities for iptiQ will actually be a drag to the iptiQ overall. As we exactly monitor and know where the individual iptiQs are, and we hold management accountable for reaching break-even and all financial targets individually for the individual iptiQs, the overall picture will be always a mixture of all the different iptiQs. Every new iptiQ we create will hold back profits, but will be an investment into an even brighter future. In terms of valuation, we look at it in two different ways. I'm here just focused on iptiQ. We look at two ways. One is how Life & Health companies in high-growth markets are being valued, so typically as a multiple of the value of new business.
The second way is a multiple of premium. This is how many insurtech startups are being valued. If you apply average medium values to, or multiples to our numbers on the iptiQ side, you can see that today already we get to a valuation of iptiQ of between $1 billion and $1.5 billion. This is without adding elipsLife, obviously, that we value also at something between half a billion and $1 billion. We think that today we have already created north of $2 billion of value with these two businesses together. With this, in conclusion, Life Capital remains on the journey from a closed book provider to an open book provider. We remain fully committed to ReAssure, as we're actually looking for a different shareholding and looking to deconsolidate that business. The target for ReAssure is set that surplus generation of $2.1 billion from 2019 to 2023.
We remain fully focused on growing our elipsLife and iptiQ life businesses, and in the attempt to create billions of economic value for Swiss Re and for its shareholders. Thank you.
All right. Thank you, Thierry. Let's go through the last Q&A. The next 10 minutes or so. There we go. Please, Farooq.
Hi. Thank you. Farooq from Credit Suisse. Just two clarification questions on ReAssure, if I may. The 148% Solvency II ratio, that does not seemingly include the uplift from L&G, is that correct? Secondly, when you talk about a four-year payback on the Quilter deal, is that basically the GBP 425 million that you paid, essentially you get that back over four years? Thank you.
The 148% does actually include the L&G, plus some transitionals that you have to recalculate if you do such deals. I won't go into the details. It does actually include it. The Quilter payback, the four years, it's a very attractive deal because actually around 3/4 of the cash you're referring to, the $425, comes already back on the day of closing. The cash flows back extremely fast. The remainder of just a quarter of that cash is then flowing through a few years only. That's how this payback works. Quite an extreme payback that we see.
Another question? James in the back.
It's James Shuck from Citi again. Just on iptiQ, you show there's $400 million of capital that's been invested in that. The EVM is around $600 million. I think one of the previous slides showed that you had $300 million of kind of tech spend, of which half of that goes to iptiQ. If you launched iptiQ around 2015, you're spending that kind of run rate on the tech spend, and you've got that much of capital in that business, it doesn't seem like there's a lot of value creation, but maybe I'm missing something.
Maybe we have to go into your math more in detail. You refer particularly to the $600 billion economic networks that we've created?
I mean, just basically what you spent on iptiQ so far.
Yeah
versus how much new business value you're generating now relative to what the book value is. It doesn't seem like there's been a big uplift.
The chart, for example, to say $425 million or $475 million of capital for $225 of premium, is that not, I mean, it's one measure, right? There are many other measures to look at.
Presumably it's $425 million of capital, and there's $300 million of tech spend, of which about half has gone into iptiQ across multiple years. It's that bridge towards, or even towards the $1 billion or so that you're kind of highlighting.
Yeah
it should be only that.
Okay. Yeah. You can look at it. You look at the evolution of businesses, that's at least my view, particularly the first years require a particular push in terms of capital, right? The more mature your business gets, the less actually you need capital to provide that additional value generation. One iptiQ here is just about four or five years old. The other one is about three years old, the other one even younger. I think for businesses of that age, I view this as actually very attractive value generation. I would wonder which insurer startup out there really would have better numbers. If you could show me examples of others that are much better, I'd be interested, because we actually are always keen to learn to have benchmarks.
Any other question in the room? Vineet?
Thanks, Thierry. Vineet from Mediobanca. On the change of the target communication from Life Capital GCG to just ReAssure surplus generation. Given the chart you showed us, that iptiQ seems to have some break-even entities or very close. I am wondering the motivation to narrow down this target to just the ReAssure, because, on the one hand, you want the market to pay $1 billion, 2 billion and a half on that. Obviously, we can't see the full math, we can see today more clarity, but if the target has been narrowed down, that may or may not help this cause. I am just curious to know your thinking on that. Thank you.
Yeah. I understand your question and concern. Obviously, we feel that the whole business model, isn't it, of ReAssure is geared towards surplus generation or cash generation? It was always the starting point for Life Capital to measure this metric, right? We really feel that for iptiQ and elipsLife, where they are today, they're actually consuming, obviously, cash. They are consuming surplus. It actually makes little sense to communicate a number that is negative. One day, in many years, we think it's going to make sense. Right now, we would prefer to focus on other metrics that are more relevant to these open book businesses.
All right, next question. Andrew?
I think it was last year, Thierry, you talked about iptiQ, and you were asked about adverse selection, and you said there was an adverse selection problem on full underwriting. You were experiencing a bit of adverse selection. It sounds like you've changed your mind on that. Is that correct?
Yeah. We are acutely aware that the distribution channels that are more digital for iptiQ are very prone to anti-selection, much more so than obviously an agent that would or a doctor assessment, for example, of a person that would detect anti-selection. You can anti-select digital distribution in many different ways, obviously, and we are acutely aware. We are monitoring this very closely. We have detected, or we do detect it on a very regular basis and take immediate action. Given the monitoring system we have, you should not forget that we do have distribution data. We have all the data. We can look at distribution of age, we can look at regional distribution, male, female distribution, and all of that, and it tells you or us very fast whether there's something strange.
We can go down to agent level where when we see a sudden uptick with a particular agent on a particular product, it already signals us that there is maybe something wrong going on. I think we have, again, thanks to the platform and our analytics, created a very tight network around it. We are actually forced to overprice our businesses. Every insurance company in the world, when they go into these highly anti-selective products sold digitally, they have to ask for a higher price because they know they will be anti-selected against, and there will be higher lapses as well. We can go lower than those because we have tighter monitoring. As we learn and as we move and as we can actually detect fraud earlier, we can then again lower the price and become even more competitive in the market.
We are in no way comfortable around this. We are just comfortable with our monitoring, but we are very aware of the risk.
Okay. Thank you, Thierry. I think we can close the Q&A. Thank you very much. I give the floor to Christian for the closing remarks about that.
Thank you. I don't want to hold you up, and that was a long day for everybody. I'd like to thank you very much for coming here, taking the time in the busy schedule in December. I hope it was useful. We tried to give you an overview of the business and how we see it, and in particular, the three strategic assets we think Swiss Re is built on and the businesses we currently have, which all are in transition in different phases. We tried to adapt a little bit to the concerns we heard the last few weeks in the investor community, so we had a bit of a special round casualty and Nat Cat. I hope that was useful. In any case, again, thanks a lot for joining us, and see you next year at Investor Day. Thank you.