Hello, and welcome to the 31st Deutsche Bank Depositary Receipts Virtual Investor Conference, dbVIC. My name is Zafar Aziz from the DR Investor Relations Advisory Team at Deutsche Bank. I am pleased to announce that our next presentation will be from Swiss Re. Please note, all of today's presentations were recorded and can be accessed via the Deutsche Bank website, adr.db.com. At this point, I am very pleased to welcome our speaker from Swiss Re.
Welcome everyone. Thanks for having me. My name is Franz -Joseph. I am an Investor Relations Manager here at Swiss Re, and I will take part of the meeting to present you our company and our main elements of business units and operations and our financials. At the end, there will still be time for some Q&A. I hope you have some interactive questions that we can engage in. Looking at what is Swiss Re all about. Swiss Re, its motto is to make the world more resilient. We have a brand reputation of more than 160 years of expertise, and we represent Swiss values of reliability, precision, and collaboration. We have a global client franchise. Network and proximity provide unparalleled access to clients and brokers, having a top-tier position across our core businesses.
We have a strong capital position supported by diversification across business units, lines of business, and regions. For us, risk knowledge is central. We have proprietary models, research, and technical capabilities. That is all underpinned also by data, technology, and AI, which is the foundation and the true differentiator for us. Looking at our business, we have a winning platform. We are globally diversified, and we have about $42 billion in annual insurance revenue supported by three business units. These are absolutely core to Swiss Re's business. Significant diversification benefits across these business units. Combining P&C Re, Life & Health Re, and Corporate Solutions within one group significantly reduces the capital required compared with operating the businesses independently, allowing us to hold around 25%-30% less capital than individual components would require.
At the same time, a strong capital position, our group SST ratio of 259% as of 1st of October 2026, which is above our target range of 200%-250%. This is also supported by a strong client franchise, which remains a core differentiator. The Net Promoter Score confirms that the clients have a strong perception of Swiss Re, and it increased across all business units at the last survey. Looking at our priorities for 2026, delivering on our group net income target and resilience. Focusing on that, we already have, after nine months, achieved more than 90% of our full-year ambition. What does the journey to increase our resilience mean? It is a turnaround of Corporate Solutions in 2019, introducing new reserving philosophy across the group in 2023, strengthening the P&C Re in-force U.S. liability reserves in 2024, and completing an in-depth Life & Health Re assumption review in 2025.
This puts the whole group on a very strong foundation. What does resilience mean in 2026? Prudent initial loss picks when we write new business, well in excess of inflation, having a new business uncertainty load, and we build allowance also during the year for potential late claims reporting in P&C units. We also repurposed favorable reserve developments that we had into IBNRs for long tail lines and potential inflationary impacts from the Middle East. At the same time, we have a cost savings target that we raised this year from $300 million by 2027 to $500 million by 2028. This is net of inflation and investments, and we are well on track to achieve that. The strong group results are really driven by a contribution from all business units.
Not only the group is well on track, but also all individual business units, looking at the combined ratios in P&C Re and Corporate Solutions, or Life & Health Re earnings. So, we remain vigilant and disciplined as we look ahead going forward. At the same time, we also refreshed our group strategy, Built to lead. Our ambition is to make the world more resilient, to be ready not only to advance our industry, but to shape its future and create lasting value. Three guiding principles underline that. Firstly, amplifying our core, expanding the leading market positions of our three core businesses, the full strength of the group, including also ACP, our Alternative Capital Partners, and PSS, and to create leverage across the portfolio and deepen our relevance with clients and brokers. Secondly, advanced reinsurance. What does that mean?
We also need to reimagine the value chain, use AI to speed up decisions, simplify processes, and scale expertise, turn proprietary data and research into insights and solutions for clients, brokers, and for ourselves. Thirdly, achieving more together. The right people and the right culture. Attract and develop future talent with intellect, execution, and vision, and drive commercial results. Ultimately, all of this serves our purpose to make the world more resilient. Swiss Re is well-positioned to generate value in its core markets. The three core businesses expand leading market positions across its target market of around $800 billion, and disciplined growth in healthy margin areas where we have clear strength is what we focus on. Consistent delivery of our investment strategy will support each business unit's ambition.
Also, the group's transversal capabilities, as I mentioned before, with Alternative Capital Partners, Public Sector Solutions, and the Risk Data Solutions, enhance the value we provide to clients and brokers, and reinforce our market position. So, this will amplify the core and deepen the strength that is truly setting Swiss Re apart. We are operating in a more competitive pricing environment in selected P&C lines. But there are strong underlying fundamentals. The global market premiums are expected to grow steadily at around 4%-5% annually, and the demand for risk transfer remains strong. The midterm pricing outlook is becoming more competitive. Some P&C lines see more pressure as the cycle evolves, following several years of strong price increases. With that, the focus becomes more and more on cycle management.
Having still a high level of underwriting discipline, focusing on the bottom line, not on the top line, continuing to expand our cycle-decorrelated businesses, having cost discipline while also having an efficient capital management. The role of a lead reinsurer is critical. It is about providing stability to the market, and our scale and access give us a clear advantage in shaping the business that we want to write. As the market develops, our priority is clear: build on our strength and deepen the core areas where we create most value. Looking at P&C Re, P&C Re is a leading franchise with global setup, highly appreciated by our clients. We have a fantastic franchise on all dimensions. We hold around 10% market share in a market that is forecasted to grow around 4% nominally per year.
Our clients consistently rank us at the top, which is evident of our successful dual model of direct and broker access. The portfolio is the strongest it has ever been in the sense of its distribution. We shifted portfolio toward property, including NatCat and specialty, and reduced exposure to casualty, especially U.S. liability. NatCat is the number one risk pool for us, with an average combined ratio of 67% over the last 10 years. Now, looking at Corporate Solutions. Corporate Solutions is a global specialized risk partner for medium to large corporates across 150 jurisdictions. The target market is around $350 billion, forecast to grow around 5% per annum over the next five years. Corporate Solutions provides valuable diversification to the Swiss Re Group, and our ambition to sustainably increase its earnings contribution.
We will continue our path of disciplined and profitable growth, both in attractive segments, strengthening cycle resilience and diversification. Moving to Life and Health Re, we are a leading player in Life and Health Reinsurance, with 14% market share of an around $130 billion market. We are ranked number one by target clients in Life and Health Re, and number two in the total Life and Health Re market. Deep client relationships we have, 90% of which is written directly with clients, supported by 30 Life and Health offices worldwide. The high-quality portfolio that is well-balanced across life and health ensures attractive opportunities from increased risk awareness and primary insurer capacity. Constraints also supports new business growth, stable earnings contributor in terms of supporting our diversification and dividend capacity across the group. Also, our investment portfolio is well-positioned to consistently contribute to group net income.
It is conservatively positioned, managing over $100 billion of assets with a focus on investment-grade, developed markets for stable fixed income generation. We have a strong credit track record, high-quality credit allocation with minimal credit impairments over the past decade. We have a consistently strong recurring income and recurring income yield, which supports group earnings stability. The recurring income of more than $4 billion for 2026, based on the nine-month performance, and its ongoing supported from a reinvestment yield of 5.1% as of nine months 2026. Also, as mentioned before, as one part of cycle management, capital management is very important. We have a clear capital management priority set, maintaining superior capitalization and deploy capital into the business, grow the dividend in line with long-term earnings power.
Our ambition is to grow the dividend with more than 7% per year over 2025 to 2027, and we delivered 8% in 2025 and 9% in 2026. The last priority is to deliver a sustainable annual share buyback linked to the achievement of our annual group net income target, complementing our ordinary dividend, leading to a regular payout ratio of around 65%. In addition to that, extraordinary share buybacks are an important lever of cycle management. That is what we started in February this year when we announced a $1 billion extraordinary share buyback on top of the $500 million sustainable. Swiss Re also maintains strong capital position and financial flexibility. One of the foundations of the Swiss Re Group is looking at very strong capital position. Superior capitalization provides flexibility to capture attractive opportunities and manage risk through the cycle.
The SST ratio consistently at or above the upper end of the target range, supported by strong earnings generation supports. Leverage ratio is at around 17%, and that also provides financial flexibility. Swiss Re overall, to conclude, is a truly global and diversified reinsurer with a strong capital position. We are well on track to deliver the group 2026 net income target of $4.5 billion, and our ambition is to grow Swiss Re's franchise over the long term, targeting multi-year ROE of more than 14%, supported by our leading positions across all three businesses. In the near term, we focus firmly on cycle management and margins. Delivering attractive capital returns to our shareholders is of utmost importance. We want to grow the ordinary dividend complemented by the sustainable annual share buyback.
Overall, our key message today are reflective of a Swiss Re Group that is resilient, disciplined, data-driven, and positioned to deliver consistently high-quality results. With that, we can open the Q&A session, and let me check what is coming in so far. First question, on AI, where are you seeing the clearest payoff, better risk selection or lower costs? I would say it is both, but it is also operational effectiveness and efficiency when it comes not only to lower costs, but also in terms of not only lower costs in terms of operational costs, but also, for example, when it comes to claims costs. One element that we have just set up last year was we have included also an AI process in our claims management.
You can imagine as a large reinsurer, we focus very much on the large claims, but we, of course, also get a broad base of smaller claims. It is not always possible to review all small claims, whether they are in line with the specific contract terms and conditions. This AI tool, for example, helps us to really go through all the small claims that we have that claims manager doesn't focus on manually to flag which ones are in line or not in line with contract terms and conditions. This, for example, also reduces our claims cost and helps be more effective and more efficient. At the same time, we, of course, also use AI when it comes to risk modeling. We have a very strong data foundation, and our scientists that also model NatCat and various types of perils also use AI to support their research.
I would say it's really on a broad base where we apply AI. Now we are really at the level where we say we want to reimagine our business. So, where it's not just about applying AI here or there in terms of small toolings, but really thinking of the entire value chain and the process that we have in the company for a specific topic, and then thinking, "How can AI help us reimagine that?" I hope that answers the question. Next question. Your solvency ratio is above target at 259%. Where can that capital create the most value? Well, it's a very good question. Of course, the first priority is, of course, to deploy in attractive business opportunities.
Even though the market is definitely, especially in certain P&C lines, more competitive, we still see very much in terms of new business opportunities, selective lines where clients also ask for our support. So, it's really about, first and foremost, deploying where you see attractive opportunities. We see that across P&C, whether it's in our core businesses in terms of property, whether it's in specialty lines, but it's also in core. As I mentioned, the cycle de-correlated businesses, whether that's, for example, our International Programs where we support clients worldwide to manage their global insurance portfolio, whether it is different opportunities in Life & Health. So, this is really the first and foremost priority.
But then at the same time, as mentioned before, also share buybacks can be a lever when it comes to cycle management and repatriating capital if we cannot deploy to the extent that we would like to in the market. Then also capital management in terms of capital repatriation and share buybacks is in the scope. What is the earnings outlook for the P&C segment as pricing becomes more competitive? Well, I mean, when it comes to the earnings outlook, generally, again, as I mentioned, our priority is really the quality of the book and margins and not growth for growth's sake or top-line guidance. We have our investors presentation in terms of our financial targets for 2027 soon on the 4th of December .
So, I think that is really where we then also will provide an outlook for P&C segment as well as our other segments and the overall Group. So there, I would ask for a bit of patience with regards to that. What concerns remain regarding the predictability of Life and Health Re earnings? I mean, when it comes to predictability, right, I mean, Life & Health, and especially when it comes to IFRS reporting, Life & Health currently has an in-force CSM, which reflects the incorporated profitability in our current book of around $16.7 billion, which is released over the time, over the service period of our book. So, that really means that, and the duration of our book is around 10-20 years, depending on the line of business.
So, that means, let's say, on average, 15 years predictability of earnings, at least based on what you have already within your in-force book. Therefore, the IFRS earnings predictability is actually quite good when it comes to the pure release of the CSM and the risk adjustment. Now, of course, our aim is to constantly replenish the CSM for Life & Health by, on the one hand, our normal flow business, but also with transactional activities. For 2026, we will not replenish it 100% because we just didn't enter in such large transactions as we did in the past. But at the same time, we also now shifted again our focus more on the new business generation. We had change in Life & Health Re leadership, and we have a new chief underwriting officer, a new CEO. We also have new head of transactions.
We are really shifting also our focus more on new business generation, whereas in the last three years, we had more the focus of managing our in-force book and optimizing the in-force book in terms of management actions there. The next one. With the $1.5 billion buyback nearly completed, how are you thinking about the next round of shareholder returns? Well, I mean, as I mentioned, our overall capital management priorities are really well-balanced. We have the dividend policy of more than 7%. This is still for one more year, so for the full year 2026, paid out in 2027. At the same time, we have the $500 million of sustainable share buyback, which is linked to our target achievement, so therefore also very predictable and also a good tool to repatriate capital backed by earnings generation.
And then we had the $1 billion on top extra extraordinary buyback that we initiated with full year 2025 results. Now, how to think of the next round, right? I mean, overall, what we would say is the current one is completing probably with end of November. An extraordinary buyback is always decided, let's say, in the context of several elements, whether it is the capitalization that we have, whether it's earnings generation, whether it's what we see as opportunities for capital deployment. Overall, a share buyback needs BOD approval. It doesn't need shareholder approval. Therefore, it can be possible with our targets release in December. It could also be with full-year results when we also have a clearer view on what we were able to deploy at 1/1 renewals.
But generally, it's a flexible tool, and we will deploy it when we see it fit depending on the facts and circumstances at that point. Now, the next question. Corporate Solutions continues to deliver strong results. What have you learned about the customers and risks where Swiss Re has the greatest competitive advantage, and how are you directing growth towards those areas? As I mentioned, Corporate Solutions, there we really focus on, I mean, the split of the business has similarities to P&C Re, so we also have a strong share in property, and therefore also are, let's say, that is then also dependent on cyclical behaviors, and therefore, we are really trying to grow cycle de-correlated lines. Now, this is, for example, the Credit & Surety business or accident and health, where you also saw us recently writing new business in both areas.
Credit & Surety, we also had some transactions this year. This is really supposed to support the cycle de-correlated element to be not as dependent on the property cycle and being more flexible where to deploy capital. At the same time, as I mentioned, we also have things like International Programs, which is really a nice business because there you manage the insurance portfolio for large global corporates, which brings two elements in terms of income streams. On the one hand, you support them to manage that portfolio, so it is also fee-based, but at the same time, you also take a slice of that portfolio and therefore also have on the risk transfer side also a portion which earns through to Swiss Re.
That is really also a nice type of business we like, and it is also very sticky because you build long-term client relationships, which then also makes it anti-cyclical. Next question. How does management view the relationship between cost reduction, reinvestment, and margin expansion? Cost reduction and reinvestment, I guess reinvesting the, let us say, additional capacity that we have saved through cost reduction, I guess. As mentioned before, our cost reduction targets are net of inflation and net of reinvestment. That means within this $500 million saved by 2028, that is actually in net numbers. The gross number of savings is actually higher because it is net of reinvestment. Of course, we want to reinvest also into AI, into general technological advancement, but the cost savings target is really net of those investments.
Margin expansion, I do not know how to link cost reduction to margin expansion per se, because maybe it is in that sense we are not necessarily reducing capabilities by the cost reduction, especially when it comes to client-facing business. As we said, the cost reductions are really more on back office functions, operations, group functions, and not steered towards the client-facing roles. Therefore, margin expansion or reduction is not touched by cost reduction in that sense. Then, a 22.5% return on equity is impressive. How much of that reflects structural improvements in underwriting and capital allocation, and which levers could help you sustain attractive returns in a more competitive market? When we look at our nine months and also Q3 earnings and results, then of course, 2026 was also a year of benign natural catastrophe activity. Of course, this result is supported by that.
We also saw a strong emergence of positive reserve developments, so that supported it. Within the positive reserve developments, there is also a structural element that emerges from our prudent initial loss picks, from our uncertainty loads, or generally our prudent underwriting. So there is definitely a structural element which will continue also in the future. With that, unfortunately, I think we are at the end of the session already. I hope that was insightful. I see there were a lot more questions. We are happy to come back to them as well. With that, thank you for your attention.