Münchener Rückversicherungs-Gesellschaft Aktiengesellschaft in München (MUV2) Earnings Call Transcript & Summary

Good morning to everyone. Welcome to Munich Re's Q2 2026 Earnings Call to all analysts and investors joining us today. And we indeed appreciate you attending our presentation as we are aware that some other insurance companies released results today. I have the pleasure to be joined by our CEO, Christoph Jurecka; and our CFO, Andrew Buchanan today. Both gentlemen will kick it off with some upfront remarks. Afterwards, there will be plenty of time for Q&A. So Christoph, the floor is yours.

Thank you very much, Christian. A big pleasure to see you all today virtually and to present excellent results today. Let's start immediately on my Page 4. And as you can see, we deliver on our promises. Munich Re is firmly on track to achieve its full year targets as it has consistently done in recent years. And with a net result of EUR 3.9 billion in the first half of the year, we have already achieved more than 60% of our full year net income guidance. To be fair, we benefited from low major losses and the strong equity market performance. However, these results are at the same time, reflecting the continued strength of the underlying performance across our business segments, which I will discuss in more detail later. This performance translates into a return on equity of 23%, comfortably above our Ambition 2030 target of more than 18%. After only 6 months into the new financial ambition, I'm fully confident that we will deliver on our medium-term targets despite the current headwinds in P&C reinsurance. My confidence is underpinned by the strength of our businesses, which are largely insulated from the P&C reinsurance side. Slide 5 of our deck illustrates that the growth in GSI, in Life Re, and in ERGO more than offsets the revenue decline in P&C Re on a currency-adjusted basis. We will continue to expand their earnings contribution, enhancing the diversification of our earnings profile and further strengthening the resilience of our financial performance over time. GSI is actively shaping its portfolio to capture opportunities in attractive specialty insurance markets, while Life Re and ERGO are delivering consistent earnings growth for quite some time now. While P&C reinsurance contributed around 50% of our half year earnings, the strong performance of these other businesses gives us greater flexibility to manage the reinsurance cycle more strictly. We can afford to walk away from business where pricing does not meet our profitability requirements. Disciplined underwriting remains essential to maintaining the quality of our portfolio and navigating a temporarily more challenging market environment. Across the group, management incentives are not driven by top line targets. In many cases, foregoing business is preferable to writing business at inadequate terms, while we, of course, value long-term client relationships. Accordingly, our insurance revenue guidance should be understood as a directional ambition rather than a hard target. And this brings me to the July renewals on Slide 6. Our discipline was again evident in the July renewals, where we managed the portfolio consistently to optimize risk-adjusted returns. We withdrew from business with inadequate profitability, particularly in the XL segment, partly offset by new business opportunities in proportional and non-proportional business. Overall, volume declined by around 9%, however, largely driven by the overall price decrease of 5.5% and a further material reduction in U.S. casualty. The reported price change includes a negative business mix effect of around 1 percentage point due to an increased share of proportional business. In essence, in July, we saw no acceleration in rate softening compared to the April renewals. Pricing in XL business moderated by the same amount, while slightly higher declines in proportional business reflected the higher starting profitability in those markets renewing in July. In casualty business, specifically, we have not accepted a meaningful increase in ceding commissions, but are still concerned about loss cost trends being greater than rate increases in the primary insurance market. Importantly, market discipline was largely maintained with structures and wordings holding firm. Overall, the market environment remains still quite attractive and continues to offer healthy margins for the risks we assume. And maintaining this discipline requires the flexibility to redeploy capacity swiftly across geographies and perils. Munich Re has a clear competitive advantage in this respect, underpinned by strong capitalization, the global footprint and deep client relationships. The bubble chart on Slide 7 illustrates how consistently we manage the portfolio. We are prepared to reduce or exit business where pricing does not adequately reflect the underlying risks, but also maintain business that comes from a very good level and is still attractive. At the same time, we continue to identify attractive opportunities to deploy capacity and growth, including in Latin America and the U.S. Less exposed to the cycle is our global specialty insurance business, which is shown on Slide 8. We established GSI to bring Munich Re's growing specialty primary insurance businesses under a single integrated management structure, while leveraging the group's risk expertise, capital strength and brand. The business grew by around EUR 800 million annually through 2024 and adjusted for currency effects would have continued to grow in 2025. By combining a broad range of specialty insurance businesses, geographies, distribution channels, and underwriting cycles, GSI can flexibly allocate capital to the most attractive profit pools. Recent product extensions are U.S. real estate, professional liability, as well as surety in Europe. In terms of profitability, GSI has consistently delivered very strong combined ratios, fluctuating moderately around 90%. Looking forward, the segment is well on track to generate robust and gradually increasing earnings over time and to achieve both this year's targets and the medium-term objectives of Ambition 2030. Moving to Life reinsurance on Page 9, which has performed strongly in recent years, and this positive momentum continues. We remain highly successful in generating new business that will translate into earnings over time. In the first half of the year, we concluded a longevity transaction covering EUR 4 billion of pension liabilities. More recently, we completed 2 large structured transactions in the United States, which will only be reflected in our numbers later this year. Our substantial CSM stock provides a strong foundation for reliable earnings delivery. Supported by a well-diversified portfolio, we continue to capture attractive opportunities in transactional business and longevity. At the same time, we remain disciplined. Our clearly defined risk appetite helps mitigate the risk of adverse surprises, as evidenced by aggregate experience that is tracking slightly better than expected. The very strong performance of our FIN RE business once more made a significant contribution to earnings. Together, these factors drove a total technical result of more than EUR 1 billion in the first half of the year, somewhat ahead of the pro rata full year guidance and underpinning the targets of Ambition 2030. Turning now to ERGO on Page 10, which continues to deliver reliably against its ambitions and is well on track to achieve its targets once again. ERGO's digital-first approach and the systematic deployment of AI across the group are key drivers of further efficiency gains and scalability. At the same time, ERGO is deepening customer engagement through its customer portal, a 4-time German Brand Award Winner, and the ERGO app, which ranks first among insurance apps and customer surveys. In addition, ERGO continues to invest in its global brand to strengthen international visibility. In Germany, the focus remains on profitable growth, balancing top line expansion with underwriting discipline. We see attractive growth opportunities in P&C, including fire, property, and motor, as well as in supplementary health and new life business. This is supported by top-rated products and a high-performing sales organization. Together with disciplined underwriting and effective claims management, this underpins a strong technical profitability. While Germany remains an important market for ERGO, the strategic focus is gradually shifting towards a higher international earnings contribution, where ERGO continues to deliver dynamic growth. Strong market positions in Polish motor and Greek property, as well as Belgian corporate health business, are driving profitable top line expansion. The integration of ERGO NEXT is on track, and we are convinced that its AI capabilities platform, combined with ERGO's underwriting excellence will be a key catalyst for profitable business development. Let's turn to our investment portfolio on Page 11, which continues to benefit from supportive capital market conditions. We are reinvesting new money at 4.3%, providing further upside to the running yield. However, we are not relying on higher interest alone. We have identified additional levers to enhance returns, including the gradual expansion of alternative investments and the active pursuit of opportunities across markets and currencies. This quarter, we also benefited from a strong performance of our private equity investments. This brings me towards the end of my presentation with the outlook 2026 on Page 12. Based on strong half year results, we are heading with tailwind into the hurricane season, being well on track to deliver another record result this year. I'm even more so pleased that all businesses are contributing to this success. At our Q1 call in May, we announced that the revenue forecast is more challenging than what we thought when we originally said it. With the information of the latest renewals, we decided to lower our revenue guidance in reinsurance by EUR 2 billion to now EUR 38 billion. I said in the beginning, for us, this is a directional goal rather than a hard target. Related to that, let me conclude with a few remarks on our Ambition 2030 on Page 13. No doubt, we are seeing the effects of the reinsurance cycle on growth and margins in our P&C reinsurance business. This is, to some extent, amplified by the benign major loss experienced, a double-edged sword that supports current earnings but doesn't help in price negotiations. But such cyclical pressure is not new to us, and we have navigated similar phases successfully before. And this is precisely why we have already considered a certain slowdown of the technical performance in P&C reinsurance in the earlier years of our financial planning period until 2030. However, this time around, we are even better placed than in previous cycles. Our strong balance sheet, higher investment income, and the steadily growing earnings contribution from businesses that are largely insulated from the P&C cycle enable us to navigate the softer market environment from a position of strength. This gives us the flexibility to walk away from business where pricing does not meet our profitability requirements while valuing long-term client relationships. Anyway, over the medium term, we see a compelling case for P&C reinsurance supply and demand becoming more evenly balanced again. Finally, our strong solvency position of more than 300% provides substantial flexibility in managing capital. We remain committed to returning excess capital to shareholders through growing dividends and share buybacks. Together, these strengths underpin our ambition to deliver a return on equity of more than 18% and average annual earnings per share growth of more than 8%. In summary, the targets of our Ambition 2030, of course, remain fully intact. With that, I hand it over to Andrew now, who will guide you through the Q2 figures in more detail.

Thanks very much, Christoph, and good morning to all of you from me as well. A quick logistical comment upfront. For my remarks, I will not refer to any further specific slides in the pack, which you all have, of course. I'm just going to verbally expand on the financial performance of the quarter and the half year. So I start by repeating something that Christoph said earlier, our diversified business model underpins sustainable earnings over time. And in the short term, P&C reinsurance once again benefited from a benign major loss environment, putting us on a strong course towards our earnings target for this year. But in an environment where the reinsurance cycle is showing signs of softening, and underlying earnings in P&C Re are beginning to reflect the terms achieved in recent renewals, the profitability of this segment remains at an adequate level. And the benefits of diversification are becoming increasingly evident as strong contributions from our other segments enhance the resilience of the group's operating performance. In addition, as you know, a strong investment result in this quarter complemented the sustained strength of our technical results. And all-in-all, this resulted in a strong second quarter net profit of EUR 2.2 billion, which you will have seen a couple of weeks ago in our pre-announcement. And together with the very pleasing Q1 result, Munich Re remains firmly on track to achieve its full year target. Now against that backdrop, let's take a closer look at the key Q2 earnings drivers, starting with the investment result. The return on investments of 5.5% benefited from favorable capital market conditions with strong contributions from both public and private equity investments. The running yield of 4% was supported by higher interest rates, but I should also mention dividend seasonality and also the catch-up effect from our inflation-linked bonds, which I also talked about in this call back in Q1. The reinvestment yield remained or, in fact, increased to a very good level of 4.3%, which will provide continued support for the running yield through the rest of the year. So with a return on investment of 4.2% for the first 6 months of the year, we are comfortably within our full year guidance of greater than 3.5% ROI. Now I turn to the business fields, starting with reinsurance. And the Life and Health reinsurance total technical result was EUR 528 million in the quarter, so above the pro rata ambition that we would need to hit our annual target. The release of the CSM and the risk adjustment was in line with expectations, while mortality experience was slightly positive. The result from insurance-related financial instruments developed very favorably, supported by the large transactions that our colleagues completed in the second half of last year. And it's very pleasing also that the stock of Life CSM continues to grow, having now reached EUR 16 billion, driven by solid new business generation and with some help from positive currency effects, providing a strong foundation for sustainably high technical results in the coming quarters and even years. So being ahead of the pro rata total technical result guidance after the first half year means we are well on track to achieve our Life and Health targets as well. In P&C reinsurance, we posted a strong Q2 results as well. You will have seen the combined ratio of 68.9%, once again benefiting from very low major losses. Reserve releases amounted to the usual and expected 6 percentage points in the combined ratio. Now in our Q1 earnings call, we had already mentioned the upwards pressure on the normalized combined ratio. And you can see that in Q2, the ratio increased to around 82%. This firstly reflects the gradual earn-in of recent renewals, which also led to business mix effects from a higher share of casualty proportional business and a lower share of property non-proportional business. However, what we did not know at Q1 was that the increase would be accelerated also by the writing of a large structured transaction, which has led the basic loss ratio to shift upwards somewhat structurally as well. You will have heard me say in the past that if we find business that has a good balance of risk and return, we will not hesitate to write it even if it drives the combined ratio higher. I should also mention that the normalized combined ratio in Q2 has been adjusted for some one-off effects that are either temporary or relating to past periods and which I do not believe represents the underlying business performance. And that, in total, accounted for approximately 1 percentage point in Q2. Looking ahead, we would expect the 82% to continue trending upwards over the remainder of the year, albeit at a more gradual pace as the renewal impact now also for July continues to earn in and also as the large transaction I referred to a moment ago grows in volume. At this point, I would also like to comment on top line. Christoph already mentioned in his remarks that we now expect insurance revenue in the reinsurance business field to be EUR 2 billion lower than the original guidance of EUR 40 billion. I mentioned it at this point in my remarks because this reduction is largely attributable to P&C reinsurance, where in the first half of the year, revenue declined by EUR 1.4 billion versus the prior year period. Roughly 1/3 of the decrease was driven by currency movements and NDIC-related accounting effects. Above all, however, it is the result of disciplined underwriting decisions, which were taken to protect the profitability and quality of the portfolio. The new revenue forecast does still imply a stronger second half year compared to the first half, including the continued earn-in of the new structured transaction in P&C Re that I mentioned a few minutes ago. But importantly, this adjustment to the top line guidance does not affect our earnings outlook for the year. So all-in-all, with a combined ratio for P&C Re of 67.9% after 6 months, we are heading with tailwind into the hurricane season. I now conclude the reinsurance part of my remarks with Global Specialty Insurance, which delivered a pleasing result in Q2. On a reported basis, GSI revenue declined by around 3% compared with the first half of 2025. However, adjusted for currency and NDIC effects, organic growth was positive and was closer to the lower end of the range of 5% to 9% that we had talked about for the Ambition 2030 program. The combined ratio of 88.9% was largely in line with expectations. And with the first half year combined ratio of 86.3%, we are well on track to meet our full year guidance in this segment as well. Coming now to the primary insurance business field of the group, ERGO delivered a strong net result of EUR 321 million in the quarter, so far above the pro rata run rate and with a significant contribution this time from the strong investment result. ERGO Germany contributed EUR 235 million out of the EUR 321 million that I just mentioned. In German P&C, we achieved good technical profitability and took a more prudent approach to reserving in order to continue building balance sheet strength. And I would say also that it was the P&C segment, in particular, that benefited from the strong performance of private equity investment. Life and Health in Germany developed in line with expectations as did the CSM release rate of about 2% and the result from PAA business. The CSM stock remained at the year-end 2025 level, reflecting positive operating changes and growth in the Life new book. The ERGO International business achieved a strong net result of EUR 86 million. International Life and Health was in line with expectations, showing a stable high CSM release and new contracts added driven by Spain and by Belgium Health. In the International P&C business, the technical profitability and combined ratio were overall within the range of expectations with especially pleasing performance in major markets like Poland and Spain. Also, ERGO NEXT is progressing well in business development and integration. Finally, a remark on the group's economic solvency position. It remains very strong. The ratio under Solvency II increased to 304% in Q2, driven by the very pleasing operating performance I have just described, and our economic earnings were even significantly higher than the IFRS earnings in the quarter. With this, I'm at the end of my opening remarks. Christoph and I look forward to answering your questions. But first, I hand back to Christian.

Yes. Thank you very much, gentlemen. We are now very much looking forward to your participation, the analysts, in this discussion. However, I would like to ask you not to ask more than two questions per person. If you have additional questions, then just please join the queue again. And with that, we can go ahead. Thank you.

[Operator Instructions] We have the first question coming from Shanti Kang from Bank of America.

So it was really on the reinsurance revenue guide. I've heard your comments now that this is more of a directional ambition. So for that EUR 38 billion for the full year, that sort of implies an acceleration in the second half for revenue. I'm just curious to understand what would drive that sequential improvement in the second half of the year. Would that be from the Life and Health transactions you mentioned, perhaps GSI or structured one-off? I guess I'm trying to work backwards from you actually setting the new guide at the EUR 62 billion or EUR 38 billion. You clearly set that with some purpose, and I'm curious what the execution risk is to that, I guess.

Shanti, it's Andrew here. I'll take your first question today. So I think you've gone quite some way towards answering your own question already. When looking at this guidance, we did carefully look at what was in the pipeline, as we always said we would do. And indeed, on the Life and Health side, I'm cautiously optimistic. Christoph mentioned that we'd written a couple of things already that are going to -- we are pretty sure will come into the books in the second half of the year, whether it's Q3 or Q4 might depend on regulatory approvals and things like that. But also the pipeline is relatively well stocked. And I'd say we have a few things with pretty decent probability of closure. So I think there is some upside potential there. And then on the P&C side, and I said clearly, this is where most of the, let's say, the sliding, the deterioration has come from in terms of revenue outlook. Things have been balanced out somewhat by the large structured deal that I mentioned that came in, in Q2 that wasn't known to us upfront and which has balanced things out. So we've looked at the upsides and the downsides. And I think my personal opinion is EUR 39 billion would have been aggressive. I think EUR 38 billion now looks like a very sensible, reasonable and achievable number where I would maybe even go so far as to say we have a good chance of meeting. So I feel -- trying to help you calibrate, you're trying to get a sense of confidence level, I would say I feel good about the EUR 38 billion. I think that's quite a solid number now.

The next question comes from Andrew Baker from Goldman Sachs.

First one, just on the P&C Re core. I guess on the normalized combined ratio deterioration in 2Q, are you able to provide a split between the impacts from the large structured transaction and the renewal impacts? And then I appreciate the guidance for the rest of the year, upward pressure around the 82. But as we think about the combined ratio into next year, are you able to give us a sense of how you're sort of expecting renewals to earn through there? And then is there anything we need to take into account in terms of a reduction in large loss budget given property XL volume reductions or any offsetting factors? And then secondly, in ERGO, there was no change to the EUR 24 billion insurance revenue guide for the year. This implies pretty sizable growth, I think sort of 15% plus growth in the second half year-on-year. What gives you confidence in achieving this one? Is there some sort of next reinsurance recapture? Or is there something else that gives you the confidence there?

Thanks, Andrew. I wasn't exactly counting. I think you may have snuck 3.5 questions in there, but they do fit together as a package. So I will tackle them first. I think on some of the more commercial aspects on renewals, it might be that Christoph will have more to say about those perhaps later. But let me just try and address the finance aspects of what you just asked. So on the normalized combined ratio, I'm going to have to disappoint you a bit here. I think I don't have an exact breakdown between the renewal earn-in and the new structured deal, how much each of those contributed. Put it this way, they're both significant enough that they were both worth mentioning. I wouldn't mention things if it was just moving by 0.1. So they're both meaningful, but I don't have an exact breakdown for you. The combined ratio into next year. And here, I perhaps can best give you only a partial answer. Because clearly, we need to go through our full planning process, which is -- has started, but it will only conclude much later towards Christmas. And then we'll see what business we have on the books and the mix. And we'll obviously have to position ourselves a little bit also with respect to how we see the market shaping up for next year as well. And we might have more insight after Monte Carlo and after renewal negotiations have started ahead of 1/1. So we'll know much more towards the end of next year. And I wouldn't really be able to commit to anything until then. What I would say is that the large structured transaction that I mentioned will continue to earn through most of next year, even in its current shape. So I would, therefore, suggest the structural uplift that started to flow into our Q2 numbers, I think, is going to accompany us through next year. And so whatever combined ratio we come with, I think, will probably, therefore, be -- well, by definition, will be a bit higher than what we would have done in the absence of that deal. Coming to your specific question about the large loss budget, I think you very astutely have identified that there is a certain business mix shift that has taken place. And what I would say to you is that the 18% large loss ratio that we're currently using in our normalization calculations is probably now with the benefit of hindsight, a bit on the strict side, because our mix is certainly more towards proportional and more towards less cat-heavy business than I think we envisaged. Now we try not to mess around with that during the course of the year. So we're not going to change the rules of the game on how we do the normalization intra-year. But I think we will need to look at that again, and I'm not sure yet where it lands. But as I said, I would say probably there's more downward pressure on our cat ratio as a proportion of premium or our outlier ratio as a proportion of premium. So the 18% sitting here today is probably a bit high and a bit harsh in ourselves. And then lastly, you're absolutely correct. At ERGO, the run rate is currently behind where it would need to be because you would need to do EUR 6 billion a quarter to get to the EUR 24 billion guidance for ERGO. And the first factor that you mentioned is absolutely correct. So ERGO NEXT, firstly, continues to grow. And secondly, is in the process of internalizing much of the reinsurance that was previously placed externally. So that's absolutely true. I would have a couple of other examples for you. The one is that our Chinese Life business within the ERGO Group is going to be brought into our consolidated results for the first time. And so there is premium there that would not really have been separately visible to you in the past that you will start to see in the second half of the year. And then the last example that I would have top of mind is our acquisition in the Baltics where we took over the Gjensidige business, where you will also start to see some premium coming through in the second half of the year. So I think we have a few reasons there to be optimistic that the EUR 24 billion is still a realistic number.

The next question comes from Kamran Hossain from JPMorgan.

Two questions from me. The first one is on -- I mean, last quarter, we got into really kind of deep discussion around what the earnings in Munich Re look like and what letter that implies. I don't really want to get into the conversation today. But just really interested in, given the very clear weakness in P&C Re versus where you thought you were going to be at the beginning of the year. And I appreciate that your net income target is a combination of volumes, which have been weaker, but also a combination of margin assumptions as well. But what do you think at this stage you can do to keep the earnings up? Do you think the share buyback that you've been ticking up each year needs to be bigger sooner on the 8% earnings growth? Or just maybe that's something we'll come back to. But do you think that's something you probably need to kind of pull the trigger on quite soon, kind of this year-end, et cetera, making it bigger to kind of keep the -- some earnings momentum in the business? The second question is on, I guess, where you are year-to-date. You've hit 60% of your earnings target. And I think as you both alluded to and as I think everyone can tell, there's been some good luck in the results. So kind of very light nat cat in Q1 and Q2 and some other kind of benefits coming your way. I would assume that EUR 6.3 billion, once you get there, you will probably try and put bits and pieces away in the balance sheet to use it at a later date. What will be the plan if you just hit a normal run rate of kind of losses, earnings in kind of Q3, Q4? Will this be put away for a later date? Or what will you do with that?

Kamran, thank you for your questions. I'll take these. Yes. I mean, you said that you didn't want to go into all these linear versus U-shaped kind of earnings development pattern discussions. And I think it's the right thing not to go into these discussions, if I'm honest, because for the midterm target 2030, we very deliberately have relative targets with return on equity and with earnings per share growth, as you, of course, know, which gives us an additional lever. And the additional lever is indeed capital management, as you also already outlined in your question. So we are more than conscious of that fact. I mean, we -- as a matter of fact, we set these targets knowing that we had that additional lever. And I said in my introductory remarks already, we knew that we were going into a softer phase of the market when we came out with our strategy already in December. So that's all not a surprise. So therefore, coming back to your questions, yes, of course, we have that lever, and we are 100% willing to use that lever. And we'll discuss that in the remainder of the year depending on the result development. I mean, the hurricane season just started, who knows where we're going to end. And also looking at the business development, looking at volumes, looking at potential growth of our risk capital towards the year-end and where do we stand with solvency, but also with other restrictions we have. So all this has to be considered. But having said that, of course, yes, we are aware of the additional lever, and we might use it 100%, which brings me back to the very nice question, what we would do with all the money we make if we would make it at year-end, which is a great question. Let's await the hurricane season first. And there is this German saying, I'm not sure if that exists in English as well, that you only distribute the bear which you -- after you hunted it. So we are still in a hunting phase here. I'm not sure if that same saying exists in English.

I think at least it's a new one for me. I will Google it straight after the call.

But more seriously, I mean -- I mean, of course, looking at the revenue development, we would -- I mean, as always, set the assumptions in our balance sheet in a conservative way. We always did that. You know the reserve review is coming up towards year-end. So we will look into all the levers we have and then take a diligent and as always cautious decision in that respect. And we might use potential, which we then might have or not depending on the season. So you know us well. But yes, it's too early to talk in more detail about stuff like that.

The next question comes from Ivan Bokhmat from Barclays.

My first question would come on the Life and Health Re results. I mean, clearly comes ahead of the run rate, and we see strong growth in transactions. I was just wondering if I could ask you about those new transactions. How do you think about this new business in terms of margins? And also, I've noticed that you've been quite into LTC transactions, the ones that have been announced. How does that fit with your well-defined risk appetite, that you were talking about? Because I think this one, in particular, is a stand-alone LTC. And my second question is just on the investment income. I think, Andrew, you've mentioned that the reinvestment yield is nicely up to 4.3%. So that's 90 basis points above running yield. How do you think about the shape of this being reflected in the running yield in coming years?

Ivan, I'll take the first one. Large transactions and specifically LTC. We wouldn't write large transactions if we were not satisfied with the economy behind these large transactions, which is always a risk return perspective, we are taking in light of the book as we have it overall in our book also including densification and similar things. Maybe more specifically then to LTC and you're referring to one transaction which has become very public also. In the normal course of business, and many of you are aware of that, we have very little appetite for LTC as a stand-alone business, and that's unchanged. But then, however, we evaluate current and future client partnerships holistically, of course. And we are also willing to work always with our clients to explore and customize solutions on our business relationships while achieving, as I said, appropriate returns on the business and the inherent risk. I mean, this is a general strategy. Now more specifically -- let's be open, on Manulife, the one transaction which is public. When I look at that transaction, we considered the relationship over the course of the last 50 years with Manulife and our expanded partnership going forward. That's part of our view on the business. And we also looked, of course, at Manulife's track record in how they manage that business organically. And so this transaction is just another example of how we can partner with clients and then a number of multiple ways to address clients' needs and also meet our objectives. And so therefore, it's -- I mean, this is a very specific business with Life Re. It's not one size fits all. Each single transaction is different. But we do have the expertise, we have the teams. We have also the transaction certainty, which you need to have to make these things work. And so I think we can be very proud on what has been achieved and we say, very satisfied also with that.

Can I make a small follow-up on LTC, if possible? Maybe you could talk about the experience variances over the past, let's say, year. Mortality has been positive. Has there been any offset from other elements that are noteworthy? Sorry.

We don't break that out, but you can see overall the variances are positive this year.

And Ivan, it's Andrew speaking. I will come back to your other question, which is about investment income. So indeed, as you pointed out, the reinvestment yield in Q2 was very good, 4.3%. I probably would want to manage expectations a little bit, but I'm not sure we'll be able to show 4.3% every quarter. That is one of the more volatile numbers we have. Some quarters, we have lots of cash to reinvest. Other quarters, we have rather little. So 1 or 2 positions taken can sometimes swing the number a bit up or down more than you would expect. It probably also depends quite a bit on the particular mix of currencies that we need to reinvest in a particular quarter. I think at the moment, if we're doing a lot of U.S. dollar reinvestment, that probably helps because of where yield curves are. So I would want to perhaps just sensitize you a little bit to the fact that the reinvestment yield itself can certainly fluctuate a bit from quarter-to-quarter. But we have benefited from higher interest rates. And I think that does give me some optimism that we can continue to show at least a good reinvestment yield in the coming quarters, because as Christoph commented earlier, our colleagues have been finding, I think, decent opportunities offering reasonable yield. So then coming to the question of running yield and how that now translates. The running yield that we showed in Q2, which was the 4.0%, I think I won't say it's artificially high, but it clearly was helped by a couple of specific factors. The one was the catch-up effect on the inflation-linked bonds, which I talked about already in Q1 in sort of mitigating why the result wasn't very high in Q1. And I'm delighted to see that, that catch-up effect has come through exactly as planned. And then secondly, our dividend portfolio -- sorry, our equity portfolio does include a pretty reasonable portion of European equities paying dividends in Q2. So we do have the seasonality of the dividends coming through. So that's why I would want to say 4.0% on the running yield is probably higher than, let's say, a through the year underlying rate at the moment. But I also feel we should hopefully be generally achieving something a bit higher than the 3.5% that we had back in Q1. So the -- let's say, the completely normalized through the cycle underlying running yield is probably somewhere between those two numbers, if you want to pick 3.7% or something like that, that might be a more reasonable guess. And I think then given that differential between reinvestment yields and running yields, I'm cautiously optimistic that we will continue to show over time the uptick, perhaps 10 to 20 basis points, that kind of range as the reinvestment yield helps to pull the running yield upwards.

The next question comes from Will Hardcastle from UBS.

Is it possible to get any more color on this large structured transaction, whether it be sort of annual revenue impact, the type of risk level of capital intensity and whether it can go beyond 2027? I mean, my very quick calc would, it sounds like you're saying it's sort of at least 0.5 point maybe on that combined ratio impact, which maybe implies as much as 5% of your annual P&C revenue, but it could be way out. Any help, you don't need the exact numbers, would be useful. And then just thinking about how you manage those client relationships, bigger picture strategy-wise with this level of volume declines. You've clearly walked away from plenty of business correctly when it's not meeting return hurdles. But is there a limit to how much tactical business you're able to walk away from? And so anything sort of balance of how much of the book is structural versus tactical would be really helpful.

Okay. Well, I think on the first question, it's Andrew here. I'm sorry to disappoint you. We really can't give you much more on that. It is a special situation. We can't really go into individual transactions with clients that I think might be separately identifiable if they haven't already been released to the market. The only thing I can offer you is in terms of earning period, even as the transaction stands today, realistically, I am expecting earning through 2027. I don't think there's much of a tail into 2028. There might be possibilities to extend that also by mutual agreement. But I think we would make that decision when the time comes.

Yes. Will, I'll take the more general question, tactical versus client relationship, I would summarize it. And well, it really is case-by-case. Each individual client is different. And so we have client strategies. And with clients where we have long-term partnerships, of course, we stick with those clients. And it's a trusted collaboration also in softening market environments as it is also in hardening market environments. And we jointly with the clients work on the program, on the structures, on the terms and conditions, on the pricing, all in a very friendly long-term oriented way, I would say. And that wouldn't change also not in an environment like where we currently are, because this is really meant to be long term. And by the way, this is one of the really big competitive advantages we have with our strong capitalization, what we can offer our client is that even after the biggest possible cut events, we are still there and offering higher capacity if needed. We could double capacity in those situations where the need is highest for clients. I'm not sure if many other players in our market are able to do that. We can most certainly. So this is really one of our biggest strengths. Having said that, of course, there is also markets, clients who are looking at reinsurance in a much more tactical way, much more short-term oriented, much more opportunistic. And with these kind of relationships, of course, I mean, already to protect ourselves, we need to act similarly opportunistic or tactical sometimes. And we do. And we are fine with that as well, and we are serving these clients as well. But there, obviously, also our perspective cannot be as long-term oriented as it is with our long-standing partners. And so as I said, it's really client-by-client. It always depends very much on also what the client wants from us, how the client sees the relationship. And we are really able to mirror whatever the client wants to see in us to offer that. And yes, very happy to serve all clients really with a very long-term perspective. Can I give you numbers? Can I give you a split? I think that was the last part of your question. I'm sorry, I can't. And I'm sorry, I cannot go in, and I would not even have those aggregated numbers. But of course, I mean, a lot of our business is really based on these long-term relationships.

The next question comes from Iain Pearce from BNP Paribas.

The first one's just coming back to the LTC deal with Manulife. If you could just give us a bit more color on the sort of exact risks you're assuming? Are you just taking full ownership of all the reserves, assuming all the risk associated with the long-term care book? Or are you just taking portions of the risk on that LTC transaction? And just on GSI and the sort of slightly low run rate versus the midterm target on the top line growth FX adjusted, could you just give us a bit of a breakdown on the sort of subsegments within GSI and sort of which ones are running above or below plan? Because we're hearing quite mixed messages on some of the pricing data that we're getting on specialty lines at the moment. So just trying to get a feel for where might be above or behind expectations.

Iain, on the LTC deal, I can make it very brief, if you want. I mean, there is a press release out there on that deal where you find all the details which we can talk about publicly. And there's not really anything else we would like to comment publicly. If I summarize at very high level, it's a proportional treaty. And in that respect, the structure is not very, very unique. But yes, you can Google it, you'll see it. And I think all the details are in that structure. GSI, Andrew, are you?