SCRYY - SCOR SE (SZCRF) Q1 2023 Earnings Call Transcript
2023-05-12 16:43:12 ET
Start Time: 09:30
End Time: 10:30
SCOR SE (SZCRF)
Q1 2023 Earnings Conference Call
May 12, 2023, 09:30 AM ET
Company Participants
Thierry Léger - CEO
François de Varenne - Interim CEO
Ian Kelly - Group CFO
Jean-Paul Conoscente - CEO of SCOR Property & Casualty
Frieder Knupling - CEO, SCOR Life & Health
Romain Launay - Deputy CEO, SCOR Property & Casualty
Yves Cormier - Head, IR
Conference Call Participants
Freya Kong - Bank of America
William Hardcastle - UBS
Kamran Hossain - JPMorgan
Andrew Ritchie - Autonomous
Vinit Malhotra - Mediobanca
Tryfonas Spyrou - Berenberg
Darius Satkauskas - KBW
James Shuck - Citi
Thomas Fossard - HSBC
Phil Ross - Exane BNP
Presentation
Operator
Good afternoon, ladies and gentlemen, and welcome to the SCOR Group Q1 2023 Results Conference Call. Today's call is being recorded. There will be an opportunity to ask questions after the presentation. In order to give all participants a chance to ask questions, we kindly ask that you limit the number of your questions to two.
At this time, I would now like to hand the call over to Mr. Yves Cormier. Please go ahead, sir.
Yves Cormier
Good afternoon, and welcome to the SCOR Q1 2023 results. My name is Yves Cormier, Head of Investor Relations, and I'm joined on the call today by Thierry Léger, CEO of SCOR; as well as the entire Executive Committee. And I please ask you to consider the disclaimer on Page 2 of the presentation.
I would now like to hand over to Thierry Léger. Thierry, over to you.
Thierry Léger
Thank you, Yves. Good afternoon, and welcome everyone also from my end. I'm very pleased to be here for my first analyst call as CEO of SCOR. Special thanks go to François de Varenne for his leadership during the transition period and of course to the entire team helping him to succeed.
Today, we focus on the first quarter of 2023. François and team or François was interim CEO during that period until May, and therefore it sounds only very natural to leave the floor to François to present Q1 today. I will share a few words to conclude before the Q&A.
With this, François, over to you.
François de Varenne
Thank you very much, Thierry, and thank you for your very elegant gesture. I think this is a testimony of the very good transition we prepared over the last three months. The executive committee and I look forward to benefitting from your outside objective [ph] in the company and working under your leadership.
I'm delighted to present our first results and IFRS 17. As I shared with you a month ago, I strongly believe this is a historical milestone for the industry and that IFRS 17 provides a new benchmark for the variation of the Group.
Let's now move on to the key messages of our Q1 results. Today, I want to share with you two key messages. First, we keep a clear focus on our 2023 priorities. And second, the reinsurance market benefits from tailwinds positively impacting the three business lines of SCOR. After a strong Q1, we're even more comfortable that we can achieve our targets for the year.
Let's go to my first message. The Group focuses on the execution of its 2023 priorities. First, we increased profitability. SCOR generated a group net income of 311 million in Q1, which translates into an annualized return on equity of 29.7%. This very strong performance is driven by the three business lines delivering results in line with or better than of our 2023 financial assumption.
For P&C, the combined ratio stands at 85.2%. It included non-GAAP ratio of 9.9 points, in line with the 10% budget announced on April 12. For Life and Health, insurance service result amounts to €272 million. And for Investments, we have delivered a regular income yield of 2.9%, bearing a one-off negative item of 13 basis points.
Second, we improved the risk return of the P&C portfolio. SCOR is taking full advantage of the positive phase of the P&C reinsurance cycle. The Group achieved the risk adjusted rate increases of 9% during the January renewals and 7% during the April renewals. Besides the P&C portfolio was rebalanced from casualty and motor lines to our global lines. Action were also taken to increase the cedants' retention on net capital and to reduce the PML of SCOR agriculture portfolio by 50%. The steering of our portfolio will translate into an improvement of the expected technical profitability.
Third, we maintain the solvency ratio in the upper part of the optimal range. Indeed, the Group's solvency ratio is estimated at 219% at the end of March. Fourth, we focus on a disciplined approach to management expenses. The Group pursues its transformation and simplification. The management expense ratio stands at 6.7% of insurance revenues in Q1. And as I told you one month ago, we are on track to deliver €125 million efficiency gains on management expenses by the end of 2025.
Overall, this leads to a significant increase of our economic value since the beginning of the year. I certainly [indiscernible] today, during the first quarter, the reinsurance industry benefits from several tailwinds that should continue during the rest of the year. First, the positive phase of the P&C reinsurance cycle marked by a strong improvement in pricing and terms and conditions is ongoing. These favorable market conditions are expected to remain in place at the June and July renewals. Second, in Life and Health reinsurance, the excess mortality linked to the COVID-19 pandemic has been reduced, and this trend is likely to persist.
Finally, on the asset side, invested assets financial contribution will continue to increase thanks to high investment rate. In this context and after a sound economic value growth at constant economics during the quarter, we are confident that we can achieve our financial targets for the year. At the end of Q1, the Group economic value per share stand at €54 compared to €50 three months ago.
Now I will leave the floor to Ian, who will take you through our Q1 results in more details.
Ian Kelly
Thank you very much, François, and good afternoon, everyone. Let's look at the Q1 2023 results which are published for the first time under the new standard of IFRS 17. And as presented on April 12, we moved away from IFRS 4 and introduced new metrics for measuring the performance of the Group at that point and showed our assumptions for the full year of 2023. And today, we present our Q1 results in that context.
On this first slide, you have an overview of SCOR's Q1 performance and KPIs that we use to measure our activity. Overall, the performance of the Group has been strong over the quarter with a net income of €311 million. These positive results also support the Group's solvency ratio, which is estimated at 219% as of March 31, and remains in the upper part of the optimal range of 185% to 220% defined by the Group.
The Group insurance revenue stands at €3.9 billion and the new business CSM is high for both P&C and Life and Health, and we will see more in detail later on how that drives the performance of the Group. Overall, these results lead to a significant increase in the economic value of the Group to €9.8 billion which corresponds to a growth of 9.4% in the quarter, and implies an annualized return on equity of 29.7% at this early stage of the year.
On the other metrics, the management expense ratio of the Group which stands at 6.7% of the insurance revenue is better than our assumption for the full year 2023. This excellent performance is driven by the activity of our three business engines, which is in line or better than the financial assumptions announced on the April 12. So let's look at those details.
Starting with SCOR P&C, which actively continues to deploy its capital in a favorable market environment and reports a high level of new business CSM at €588 million in Q1 2023, benefiting from the high level of technical profitability expected on the treaties renewed in January of this year.
As a reminder, the contractual service margin is a fundamental concept introduced by IFRS 17. It represents the unknown profits which are amortized over time, which applies to P&C business even though the business is shorter in duration. In Q1 2023, the P&C gross written premiums stand at €2.4 billion, down 3.1% at constant exchange rates compared to Q1 2022, reflecting the repositioning of the portfolio with selective growth in the favorable market conditions.
Looking at the P&C insurance revenue, it reached €1.8 billion in Q1, which represents an increase of 5.4% compared to Q1 2022 at constant exchange rates. The target for the year 2023 is between 0% and 2%. The increase in Q1 comes from the strong growth in specialty insurance, primarily reflecting prior year volumes as insurance revenue is on an earned premium basis. It increased by 21.5% at constant exchange rates, and our specialty insurance represents 34% of SCOR's P&C insurance revenue.
In addition to the increase in new business CSM and insurance revenue, SCOR P&C also demonstrates a strong technical performance in Q1. With a combined ratio on the left hand side of the slide standing at 85.2% for Q1 2023, lower by 2 points compared to the assumption set at 87% for the year overall.
There are two key components within this. Firstly, a natural catastrophe ratio accounting for 9.9% of insurance revenue, in line with the 10% cost budgeted and announced on April 12, mostly driven by the Turkey earthquakes and U.S. tornadoes. And secondly, an attritional loss ratio including commissions that stands at 70%.
On the right hand side, we present the Q1 P&C insurance service result which is driven by two effects. On the one side, the CSM amortization of €293 million and positive claims experience variance. And on the other side, an offsetting effect coming from retrocession and premiums.
This is arising from the treatment in IFRS 17 of the limited level of recovery and on proportional retrocession impacts. We noted also as part of SCOR's P&C performance, the attributable expense ratio stands at 6% of insurance revenue in the first quarter of this year. So, overall, a strong performance for P&C in Q1.
Let's move on to Life and Health, which also reports a strong new business CSM generation and technical results. The new business CSM amounts to €192 million in the first quarter of the year and reflects the quality of the treaties underwritten during the period. SCOR Life and Health insurance service result amounts to €272 million in the first quarter of 2023. The assumption for the full year is at €450 million.
Strong insurance service result in the first quarter is driven mostly by two factors. The first positive experience variance in the U.S., including favorable COVID-19 claims development. And secondly, the impact of a one-off item following the revision of an accounting estimate representing about half of the variance. Overall, a strong performance also from the Life business.
Moving on to the Investments side of the business. As of March 31, 2023, the total invested assets amount to €22.4 billion. The asset mix is optimized with 81% of the portfolio invested in fixed income, with a high quality average rating of a plus and a duration of 3.2 years. SCOR continues to benefit from a favorable interest rate environment when reinvesting at a higher rate generating regular income yield.
In Q1 2023, the total investment income on invested assets stands at €157 million. And as a reminder, this is not included into the insurance service result but comes on top of that. The return on invested assets stands at 2.9% in the first quarter. The regular income yield is at 2.8%, 90 points higher than in Q1 2022, and in line with the 2023 assumption range of between 2.8% and 3.2%.
The reinvestment rate is high and stands at 4.6% as at the end of March, down from 4.9% as at the end of 2022. The invested assets portfolio is highly liquid and financial cash flows of €9 billion are expected over the next 24 months, enabling SCOR to benefit faster from these high reinvestment rates.
Let's now move to the economic value growth, which is now one of our key indicators to measure the development of the intrinsic value of the Group. In the first quarter, the Group economic value is up by €0.9 billion, reaching €9.8 billion. And as mentioned earlier, it's supported by strong business performance and favorable economics. In this context, SCOR's performance is very solid and the value creation exceeds the Group's target for the period.
The economic value growth is driven by the development of its two components. The Group shareholders' equity reached €5 billion at the end of Q1 and represents an increase of 22.4% compared to the year end. The Group CSM net of tax increased to €4.8 billion, which is up 4.8% compared to year end. This result in an economic value of €54 per share compared to €50 per share as of December 31, an increase of 9.4% or 6.3% on constant exchange rates and interest rates.
And this has been one quarter. Obviously, the annualized figure is higher. It reflects both the quality of the new business generated and the materialization of the CSM into earnings and equity. It leads to a reduction in SCOR's financial leverage with stands at 20.1% at the end of March, adjusted for CSM, and is 2 points below the figure at the end of December.
I will finish with SCOR's liquidity position which is strong at €2.2 billion of cash and short-term investments. Further, the Group generated strong operating cash flows of €281 million in the first quarter. As usual, we have details in the appendices. And we'll have the Q&A session to address your questions. To conclude, I'm happy that we're able to present good results for the first time under the new accounting framework today, and to illustrate the true economic value of the Group as of first quarter.
I'll now hand back to Thierry.
Thierry Léger
Thank you, Ian. Let me summarize. I'm very satisfied with the Q1 results. We are executing on our 2023 priorities. The teams are mobilized and fully focused on the business opportunities that are ahead of us. I think we are living the best market in two decades, providing several tailwinds to the reinsurance industry as a whole. And I see SCOR very well placed.
After the first quarter, we are confident in our ability to achieve our targets for the year. It is with great confidence in SCOR's ability that I therefore look ahead. We have an excellent opportunity to take full advantage of our global franchise and technical expertise. Thank you for your attention.
Let's move to the Q&A. Yves, over to you.
Yves Cormier
Thank you very much, Thierry. On Page 17, you will find the forthcoming scheduled events. With that, we can now move to the Q&A session. Can I please remind you to limit yourself to two questions each? Thank you.
Question-and-Answer Session
Operator
Thank you, sir. [Operator Instructions]. We'll take our first question from Freya Kong with Bank of America. Please go ahead.
Freya Kong
Hi. Thanks for taking my questions. Firstly, would you be able to quantify the discounting impact within your combined ratio for both Q1 this year and Q1 last year, or at least the year-on-year benefit that you saw from higher rates? And secondly, you seem to be tracking well ahead of your full year run rate for new business CSM. Are you comfortable with these targets remaining unchanged? Because there are seasonal effects we need to consider, or are there any positive surprises that you've seen year-to-date? Thanks.
Ian Kelly
Thank you, Freya. Yes, first thing on the discount rates, we communicated in April our assumption for 2023 a discount rate in the combined ratio of 4%. And what we see in the first quarter is higher than that. It does form part of the variation of the combined ratio from the 87% to 85%. There are other moving factors in there too, for example, the impact of retro. But to be very clear, irrespective of the accounting change, we would have seen a good quarter for P&C in Q1 and the underlying business performance is positive on the P&C side. It's a strong quarter for the business unit. And we see that in the insurance service result. In respect to the question on the overall new business CSM generation and the assumptions for 2023 that we've laid out, we're very happy with the result that we have for the quarter. We've seen strong economic value growth. We've seen strong performance from the various business units. But it's one quarter. Though we're very happy, we maintain our assumptions that we described in April at this stage.
Freya Kong
Great. Thank you.
Ian Kelly
Thank you.
Thierry Léger
Thank you. Can we move to the next question please?
Operator
Our next question comes from Will Hardcastle with UBS. Please go ahead.
William Hardcastle
Hi. Thanks, everyone, and welcome, Thierry. First question is there's no real reduction in the cap PML appetite it seems like in April. I'm just wondering if this is April specific or as maybe a step change in thinking for upcoming renewals and any expectations ahead of June, July. You sounded a bit more upbeat on potential exposure growth could come through versus more recent periods. And the second one is can you walk me through the quarter-on-quarter solvency strength? It is materially better than consensus. I know there's an earnings strength there. Just trying to understand if anything materially changed on the SCR or not. Thanks.
Thierry Léger
So, Jean-Paul will take the first one; Ian the second.
Jean-Paul Conoscente
All right. Thank you. Regarding the April renewals, as you see we grew our gross written premium by 17% actually or expected EGPI by 17% at April renewal. But we did that at basically constant shares -- we maintained our shares. So we didn't reduce, as you said, necessarily the PMLs in April. The main reason is, we started doing remediation on our portfolio starting in the April we know of last year throughout June, July, which meant that when we came up for renewal, the January 1 renewals had to be further remediated. And that's why we took significant portfolio actions reducing the premium and repositioning the portfolio. At April, there was not so much repositioning of the portfolio but more extracting terms and conditions. So most of the growth we experienced at April has been rate related. We expect the June, July renewals to be very much in line with that.
Ian Kelly
Thanks, Jean-Paul. Will, on the second question in respect of the solvency, this is really being driven by the strong capital generation net of deployment that we had across the quarter. And you see that also in the IFRS 17 results of course and driven by the new business value creation, and the experience variance. So that's really the key driver. There are some other impacts within the walk itself and the dividend accrual is in there at a quarters worth of 1.8, just being the dividend assumption from last year, and also market variances. But these are largely offsetting. So it's really driven by, as I said, the value creation and experience variance, and it's not being driven by any particular SCR movement.
Thierry Léger
Thank you. Let's move to the next question, please.
Operator
Our next question comes from Kamran Hossain with JPMorgan. Please go ahead.
Kamran Hossain
Hi. Good afternoon, everyone. I have two questions. The first one is on the Life result where it's [ph] clearly like an excellent result for the quarter. When we try to think about experience variance going forward, given this is the first quarter of IFRS 17, what's the right starting place for that number? Is it the other half of the 137 that's not a one-off? Or should we assume that zero, just some kind of thoughts around that. The second question is on the combined ratio. The discounting effect would be useful for kind of further quarters. But in terms of manmade experience this quarter versus what you'd expect, can you give some commentary on what that looked like? Thank you.
Thierry Léger
Hi. So we'll start with the second question, and Jean-Paul will answer that one.
Jean-Paul Conoscente
Thank you. So, as Ian said, the first quarter of P&C was a very good quarter, regardless of the accounting framework that we used. In terms of manmade, the number of manmade and the size has been less than historical average. This is due to, on one hand, all the underwriting actions taken last year and at the beginning of 2022 to reduce the volatility of the portfolio, as well as just Q1 being a less active quarter than some of the past quarters in terms of manmade losses.
Thierry Léger
Thanks, Jean-Paul. Then on the first question, Ian is now ready to answer it.
Ian Kelly
Thank you, Kamran. In respect to the Life result, yes, it's very strong. We're very pleased with the result in the quarter. And as noted, it is being driven in particular by the additional experience variance that we see. The experience variance here relates to, firstly on the one hand, the better experience in particular on the U.S. mortality portfolio on both COVID and non-COVID claims experience that we've observed. And the second piece is in respect to a one-off technical item where we've updated an estimate, and this is not expected to reoccur. And as noted, it's about 50-50 between these two effects. So there's the non-recurring element. On the experience variance, I don't think you can take a base for a recurring element here. And so what we've seen on the U.S. side, for example, that can move -- it could be better to assume zero. But really, we couldn't give a basis for a particular set of guidance around this. It's going to vary in respect to what we actually see happening on the portfolios.
Kamran Hossain
And that's really fair. And well done on a good quarter. Thank you.
Thierry Léger
Thank you. Let's move to the next question.
Operator
Our next question comes from Andrew Ritchie with Autonomous. Please go ahead.
Andrew Ritchie
Hi there. The first question just on the P&C service results, I should understand this better; apologies. The column claims and premium experience variance, which is plus 35, is that akin to a positive prior year? Or is it just accounting noise on some kind of premium update? Maybe just clarify? Should that be, all else things being equal, zero or should I -- just clarify that? It looks like a positive prior year of some kind or another? Second question, when will Life cash flow, operating cash flow turn positive? It's been negative for I think its 18 months now. Some of that is -- a lot of that has been COVID-related, I get that. I kind of had hoped it would turn positive in '23. So maybe clarify what's going on there? The only other -- it's not a question, it's a clarification and answer to Kamran's question on the other column in the Life insurance service result. Surely there should always be something in that other reflecting IFRS 9 business, which is not captured within the CSM. Is that not the case? Thanks.
Thierry Léger
Hi. So, Ian, over to you.
Ian Kelly
Yes. Thank you, Andrew. In respect of the claims and premium experience variance on the or within the P&C insurance service result, this is really reflecting the strong performance of the portfolio during the quarter and a driver of the positive technical performance of the business unit. And this is not something that would necessarily be zero. And certainly in a positive quarter where we have strong experience, you're going to see these impacts. And in relation to the Life cash flows, we do have or historically the cash flows have been impacted by the COVID claims. Still potentially a little bit of that coming through. But also on top of that, we have some legacy portfolios, which are in a phase where the claims are now expected to exceed premiums. The cash flow from this block of claims over premium is expected to reduce as the business runs off. And also, as we start to or continue to write new business that's cash positive and as we continue to manage the portfolio through management actions which bring positive cash into the Group, over time, we would expect the positives to outweigh the legacy impacts. And then finally in the walk of the Life and Health insurance service result, the element you're referencing, it's within the walk, it's small, but we have revenues on financial contracts within the insurance service result here on the Life side.
Andrew Ritchie
Okay. Thanks.
Thierry Léger
All right. Thank you. Can we move to the next question, please?
Operator
Our next question comes from Vinit Malhotra with Mediobanca. Please go ahead.
Vinit Malhotra
Yes. Good afternoon. Thank you. Some of my questions have been addressed. I'll just try to clarify one or two points. The first one is, and apologies, back to this experience variance in Life, [indiscernible] today. So just so that it should be assumed to be kind of new-ish and not be such big numbers. But what's a -- how should we think about, in the sense if claims are now in another quarter like 2Q also low for COVID or even excluding COVID, then should we assume that you have reset your assumptions and experience assumptions beginning of 2Q? Or how should we think just from a real world perspective if claims in Life for non-COVID continue to be low, which they should be, then should this be producing these kinds of good numbers? That's really a clarification. And second topic is more on the -- from the P&C revenue growth, which is 5.4% but gross revenue is minus 3%. And I understand this could be more earning out pattern, but is there anything else going on there on the accounting side [indiscernible] because it's quite a difference between GDP and GDP for Life if this is the only thing here to explain that? Thank you very much.
Thierry Léger
Thanks for the question. So the first one goes to Frieder, and then the second back to Ian.
Frieder Knupling
Yes. Thanks, Vinit. So what's happened in Q1 is, as Ian said, actual claims experience has been more favorable than what we had in our assumptions in our reserving models as of Q4 2022. We would update those assumptions in the future if there was a necessity to do so. But we haven't done this in Q1. You will see this in the analysis of change of the CSM. So currently, we have essentially the same reserving assumptions for Q2 as what we had in the year end 2022 models, and this will then be the benchmark against which we measure experience. And if claims are better or worse than those assumptions that's going to find its way into the experience variances. But as I said, all these assumptions have to be updated and kept at the current best estimate on an ongoing basis and you would see in our disclosures if we make any significant changes to our assumptions in the future.
Ian Kelly
And Vinit on the P&C insurance revenue growth of 5.4%, we're very happy with the result obviously in the first quarter. And it's a strong growth. But you're absolutely right. It really does result from this being on an earned basis. And in particular, on the specialty side, you can see that the impact there, there's a bit of a lag effect where that's coming through from the previous underwriting year into 2023. So it's a result of the timing and the business mix as you would expect.
Vinit Malhotra
Okay. Thank you, Ian. Thank you, Frieder.
Thierry Léger
All right. Thanks a lot. Can we move to the next question, please?
Operator
We'll take our next question from Tryfonas Spyrou with Berenberg. Please go ahead.
Tryfonas Spyrou
Hi. Good afternoon and congratulations on a strong start to the year. I have one question on, just coming back to the CSM new businesses and in P&C again this is running more than half of your run rate for the full year. The way I'm thinking about this is that January renewals are close to 50% of total P&C renewals and presumably a big factor here. Is it therefore too unreasonable for us to think that this number can actually double the rest of the year, given that the remaining 50% of the Group use? And just one more question, sorry to come back to the experience variance in Life. Are you seeing any benefit here from the management actions you took last year? I'm thinking more about the recaptures in 2022. Can this be a driver of these variances? Thank you.
Thierry Léger
Okay, thanks for that. The first goes to Ian, and the second to Frieder again.
Ian Kelly
Yes. On the P&C new business CSM generation, again, we're extremely happy with the development in the first quarter. And it is subject to seasonality. And there's, as noted, a large proportion of the reinsurance portfolio renewing in the first quarter. And that came for us, as you recall, a strong expected margin improvement and that is driving the generation. For the rest of the year, we'll need to see on a quarter-by-quarter basis. It's been one quarter so far. So we're not changing our assumptions at this point.
Frieder Knupling
Okay. On the second question of whether the experience variances have been influenced by management actions which we took last year and in previous periods. I'll say the answer is in principle, yes. However, the business [indiscernible] has been subject to management actions in the business which has been recaptured. It only accounts for a relatively small proportion of our overall portfolio. So you will see -- in principle you would see some beneficial impact of recaptures of underperforming business, but it's not going to be a major part of the experience variance, which as Ian said was also partially driven by better COVID experience. And then the favorable experience has really been spread across large parts of the portfolio, not been isolated to individual treaties.
Ian Kelly
But just to add to that and just one point of clarification, it is positive in the first quarter in terms of COVID experience. The COVID tapering off is within the assumptions. And were that to follow the tapering that we had assumed, there would be no experience variance. But we do assume that COVID is going to go. It's just happened quicker than we had expected in the first quarter.
Tryfonas Spyrou
Very helpful. Thank you.
Thierry Léger
Thank you. Can we move to the next question, please?
Operator
Our next question comes from Darius Satkauskas with KBW. Please go ahead.
Darius Satkauskas
Good afternoon. Well done today on the results. Two questions, please. The first one, what are your thoughts on a combined ratio normalization? On top of normalizing for natural catastrophe losses, should we also normalize for loss component amortization and loss component change? If so, can you provide these details for the first quarter, or will you provide these details going forward? So that's the first question. Second question is, apologies but I'm going to touch on the discounting again. So your competitors disclosed this impact on the conference calls. So could you please consider that going forward, as discounting makes it difficult to see the underlying claims development? And on that, P&C unwind of discount was 83 million in the quarter, which is around 6% of net insurance revenue. I can't see how discounting would have been smaller as the unwind will include lower locked in rates from last year. Is there anything I'm missing here? Thank you.
Thierry Léger
Okay. So Ian will take your questions.
Ian Kelly
Yes. On the combined ratio normalization, I think, again, I come back to the information we provided at the April disclosure. And there we gave some indication on what we would expect in terms of the discount rate, what we would expect in terms of the cat budget. This quarter, we also see an expense ratio of 6%. This we, along with the other elements within the combined ratio, need to really see how things evolve quarter-on-quarter. And then I think perhaps we'll be able to, as we evolve, give some further color. But for the time being, we stick with what we've disclosed and with our assumptions. In respect of the discount rate, all I can say at this stage, again, is that it was positive in respect of the assumption -- to the assumption that we've given. That's clear, it's pleasing. It's part of the benefit that we see within the combined ratio this quarter. And we will see, again, how that evolves. But again, we're not changing the assumption on our discount rate at this point.
Darius Satkauskas
Okay. Thank you.
Thierry Léger
Thank you. Can we move to the next question?
Operator
Our next question comes from James Shuck with Citi. Please go ahead.
James Shuck
Hi. Good afternoon. Thanks for taking my questions. The first one I had was on the P&C new business CSM. So 588 million in the quarter I think it's pretty clear that that's a good number. I was just kind of intrigued why you didn't kind of disclose a prior year comparative on that. You do talk about plus 25%, but I think that's just for the discrete April renewals and excludes agriculture and is on a gross of retrocession basis. So what I'm looking to understand is what that P&C new business CSM has done year-on-year, whether you want to include agriculture or not in it and preferably net of retrocession because I want to get an idea of really the movement and profitability through the new business, please? The second question relates to the AGM. So you've taken a rather unusual step of committing to giving a strategic update at the AGM. I say unusual because I know we have a Capital Markets Day planned later in year in September. So just in terms of managing our expectations, could you just kind of outline a little bit about what we should expect at that AGM, please? Thank you very much.
Thierry Léger
Hi, James. Thanks. Ian will take the first. I will take the second one.
Ian Kelly
Yes. We didn't disclose a quarterly new business CSM for 2022, James. We gave the overall figure for 2022, but not a quarterly assumption. So you can go back to the disclosures there. I would say that in terms of evolution, you can consider that it's impacted by different factors, economic factors, business mix and volume, differences in expenses and the treatment of retrocession. I would say that also -- and the difference between 2022 on the P&C side, we are taking into account the inflationary environment as well as the calibration around the retrocession. So that has an impact also. So we have a conservative 2023 expected loss ratio.
Thierry Léger
And on the AGM or your question around the strategic plan overall, so what you can expect at AGM is a clear idea of the vision, the strategy, the priorities, so it's an outline, and therefore what you will get in September are the details, more clarity, the numbers, KPIs, and so on.
James Shuck
Okay. Thank you very much.
Thierry Léger
Thank you. Can we move to the next question, please?
Operator
Our next question comes from Thomas Fossard with HSBC. Please go ahead.
Thomas Fossard
Yes. Good afternoon, everyone. One question will be related to the investment income and most specifically to the regular investment income, which is not moving significantly up in Q1 compared to Q4 last year, despite a pretty significant or higher level number [ph] rate compared to the back book yield [ph]. So was wondering why this was the case and how should we expect it to trend going forward in the upcoming quarter? The second question will be related to the U.S. upcoming renewals. And here, just to understand, given the experience in Q1 where actually you've still been exposed to U.S. tornadoes. And it seems to be that you're the only one so far to report these type of losses in Q1. So I was wondering if potentially this was implying that you needed to tweak further some exposure during the upcoming U.S. renewal for specific type of business or if you've been eaten [ph] by a specific loss in Q1 that you want to highlight? Thank you.
Thierry Léger
Hi, Thomas. Thanks. So the first goes to François, and then Jean-Paul will take the one on the U.S. renewals.
François de Varenne
The regular income is in Q1 a standard 2.8, so that's in line with the guidance of 2.8, 3.24 for the year. As I indicated in the introduction, we have a negative one-off impact equivalent to certain bips in this particular [indiscernible] in Q1 it's mainly resulting from an accounting adjustment in the amortization of pattern of our leveraged loan books. That's a non-recurring item. So adjusted for this, the income yield is at 2.9%. If you remember well, we had also in Q4 this time a positive one-off. So I would say if you look at the normalized regular income yield in Q4 and Q1, that's relatively stable. Why it doesn't increase given the fact that we have a significant investment rate at 4.6% at the end of March, it just linked to the pattern of redemption in Q1 on our one portfolio that we're pretty limited.
Jean-Paul Conoscente
And regarding your second question on the renewals, just to go back on the U.S. tornadoes, U.S. tornadoes is exactly the type of loss that we want to avoid with the repositioning of the portfolio. So the impact for us is actually very small. And the Turkey earthquake is really the main driver behind our cat ratio budget. But for the June, July renewals, our expectation would be similar to April. A lot of the portfolio remediation has taken place last year. We plan to deploy similar capacity, perhaps slightly more capacity depending on terms and conditions to June, July renewals. But again focusing on the same risk appetite as we have currently avoiding Florida above a certain level of frequency and focusing on cat itself.
Thomas Fossard
Thank you.
Thierry Léger
Thank you. Let's move to the next question, please.
Operator
Our next question comes from Phil Ross with Exane BNP. Please go ahead.
Phil Ross
Hi there. It's another question on new business CSM and non-life, so sorry about that. But you had a very strong CSM last year it looks like for the full year. So can you just explain why the target is quite a bit lower this year, given what's happened to rates and reinsurance structures, and your own portfolio pruning? I think it may be due to inflation and retrocession impact that you mentioned in response to a similar question. But if you could just explain that that would be helpful? Second question, stepping back, you've had four quarters in a row now of portfolio pruning and repositioning on non-life that you've talked about. Are you happy now with the broad shape of the portfolio? Are there any areas you call out still that might require meaningful attention? Any color on that will be helpful. Thanks.
Thierry Léger
Hi. Thanks. So Jean-Paul will answer both of your questions.
Jean-Paul Conoscente
All right. Thank you, Thierry. So on your question on new business CSM, as Ian mentioned, we've strengthened our assumptions into our pricing. So with a forward-looking view of inflation which is different than we had, we priced the business, for example, January 1 last year. We took also reinforced view of climate change that we take into our account modeling and pricing of cat business, and retrocession as well. We take a forward-looking view of the price of retrocession which is higher than what we had in 2022. But I think it's the combination of all these effects that make our underlying assumptions more conservative than perhaps they were last year. And that's why we give an indication or a target for 2023 of 750 million of new business CSM. In terms of your question of the portfolio repositioning, I have to say that we are currently very happy with our portfolio positioning. I think we -- as I mentioned before, at April we consider that we are done with most of the repositioning and are really looking to harvest the hard market conditions with capacities that are going to be flat or slightly up depending on the conditions.
Phil Ross
Thanks. That's helpful.
Thierry Léger
Thanks. Can we move to the next question, please?
Operator
Our next question comes from Will Hardcastle with UBS. Please go ahead.
William Hardcastle
Thanks for letting me have a follow up, guys. It's a quick one. Another reinsurer released a fairly meaningful amount of reserves related to Hurricane Ian. It was NFIP-related specifically. Is there any benefit of this in your Q1 result?
Thierry Léger
Hi, again, Will. So this goes, of course, to Jean-Paul.
Jean-Paul Conoscente
Thank you, Thierry. I'd confirm that we have not had any reserves moments up or down on our results for Q1. For Hurricane Ian, we remain very prudent. It's Florida. We still see losses coming from events several years ago in Florida. So even though the initial information from cedants seems to be on the low side, we remain very cautious and we'll continue to do so.
Ian Kelly
And I'd just add across the Group, across all business units, there's no reserve releases, no reserve actions within the results, no additional reserves.
William Hardcastle
Brilliant. Thank you.
Thierry Léger
Thank you. Can we move to the next question, please?
Operator
Our next question comes from James Shuck with Citi. Please go ahead.
James Shuck
Thanks for the opportunity. Just two quick ones. The [indiscernible] CSM, I think you mentioned that that will amortize mostly over one year. Just intrigued why that is the case? We had one of your peers discussing yesterday how they would expect CSM to emerge mostly over two years, but entirely over three. So just intrigued why that's the one year? And then secondly, on specialty lines. So we've had another period of strong growth in specialty lines plus 21.5%. Interested to know where that growth is coming from. Because we've seen again some kind of pulling back a little bit, financial lines coming under pressure. Thierry, I'm not sure if you want to offer any ideas about the shape of that book and just an update on kind of your views on specialty lines at this point in the cycle please?
Thierry Léger
Okay. Thanks, James. The first one goes to Ian, and then I'm happy to make a few introductory remarks on the second. But Romain will take the bigger part of the second question.
Ian Kelly
Yes. Thanks, James. I think we need to recall that the CSM amortization is coming from both the stock at the start of the period but the amortization of the new business CSM is generated within the period. So it is the case that the opening stock is going to amortize over a year or so. But the new that is generated, that's not the case and hence the amount of CSM generated is not fully -- that you see is not fully going to unwind in one year. It's also impacted by the business mix and other drivers. So we would also expect it not to be equal in every quarter.
Thierry Léger
One on your second, I'll just make an introductory remark. So I see the specialty business as a very effective way for us to do this particular client base. I think it complements our business in a very nice way. It adds to the diversification. It has been profitable. It's of course a volatile business. It has to be written with a lot of care, which is the case and also with the right level of protection. Romain, with that over to you.
Romain Launay
Thank you, Thierry. As mentioned by Ian, what we're seeing in terms of insurance revenue, specialty insurance has to be seen as earned premium. And so this is the consequence of the growth in gross written premium that we've seen last year. You remember we had 17.5% growth of the GDP at constant FX and 28.8% at current FX. And so this is what we're seeing today it's earning through, and so we have it in the insurance revenue. And this is mostly the single risk business. Our portfolio business has grown at a speed that was lower than the single risk business.
James Shuck
Okay. Thank you.
Thierry Léger
Thank you.
Operator
Ladies and gentlemen, this does conclude today's question-and-answer session. At this time, I would like to hand the call back to our speakers for any additional or closing remarks. Thank you.
Yves Cormier
Thank you very much for attending this conference call. The Investor Relations team remains available to discuss any question you may have, so please don't hesitate to give us a call. As a remainder, SCOR will hold its Q2 results presentation on July 27. I wish you good afternoon.
Operator
This does conclude today's call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.
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SCOR SE (SZCRF) Q1 2023 Earnings Call Transcript