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Good afternoon, ladies and gentlemen, and welcome to the SCOR Group Q1 2022 Results Conference Call. Today's conference is being recorded. [Operator Instructions] At this time, I would like to hand the call over to Mr. Yves Cormier. Please go ahead, sir.
Good afternoon, and welcome to SCOR Q1 2022 results call. My name is Yves Cormier, Head of Investor Relations, and I'm joined today on the call by Laurent Rousseau, CEO of SCOR, as well as the entire Executive Committee. Can I please ask you to consider the disclaimer on Page 2 of the presentation. I would like to hand over to Laurent Rousseau. Laurent, over to you.
Thank you, Yves, and welcome, everybody. Before giving the floor to Ian on the Q1 financials, I would like to step back and give you my perspective on the results and the environment. Q1 2022 was marked by a combination of exceptional events. The sustained level of natural catastrophes for the past 5 years has compounded with the ongoing pandemic first, and more recently, with geopolitical and macroeconomic tensions on a scale not seen for many years. This translates into another difficult quarter and impacts the way we run our business and our transformation.
You will remember, when I took over as CEO, I committed to 2 things: engagement and transparency. I said I will share my views on where the group stands as well as the opportunities and the challenges we face. This approach drove our profit warning on the 15th of April, showing both transparency and engagement.
Having acknowledged a difficult quarter for the group, the question now becomes, what do we do about it? How do we address performance and challenges head on? First of all, we do so by stepping up our actions to reduce volatility and improve profitability. This is why before communicating on our upcoming strategic plan, we will accelerate the refocus and action plan to deliver on Quantum Leap.
Point one, we have communicated on some actions in January, but we have decided to be even more ambitious and set the bar higher, namely, we will proactively target a 15% reduction of our cat PML by year-end, which is a further reduction compared to our initial target of minus 11% announced for the 1st of January renewals.
Second, we aim at reaching a better balance, taking a more conservative view on cat. We should not assume that the past 5 years are exceptional. They're probably the new normal. So instead, we should run our business, assuming these past 5 years are indicative of the new normal and manage our portfolio to deliver on our 8% cat ratio. The volatility of the cat business we are looking to address here is not so much in the tail, but more in the belly of the redistribution. We're more talking here earnings at risk and capital at risk.
And third point, reducing volatility also applies to our life mortality book, but we are still in the middle of the pandemic event. We are looking at all options and continue to engage with our clients to improve the profitability and the performing treaties and pushing from management actions.
After the volatility management, we also proactively review our presence and performance market-by-market, line of business by line of business. And we will raise the profitability requirements where it needs to be. The current positive market environment allows us to do so, and we take advantage of it proactively. This is true both on the P&C side, as shown by a pretty strong 1st of April renewals as well as on the life side. Our view is that we're at a point in the cycle where margins on new business are very attractive and where back books require proactive management.
Last but not least, we will increase cost discipline. We need to remain nimble and agile and be the most adaptable in a fast-changing environment. I want to ensure that we remain so as we grow selectively the franchise. This is a fundamental competitive advantage, but one that perhaps we can still fully leverage on.
Beyond the volatility reduction, performance, profitability improvement, I also want to talk about the balance sheet. We need to continuously optimize our capital structure and proactively manage the balance sheet. Interest rates rising will be a bumpy journey, bringing volatility. But ultimately, it is leading to a better investment income. It implies some positive, what I call, wealth effect on our internal model solvency ratio. And we take further actions to make this capital more fungible, better allocated and less costly.
Reducing our cost of capital remains a priority. This is how you should interpret the 2 achievements this quarter. First one, we restructured our Swiss and Irish entities. We used to have on P&C balance sheet in Switzerland and 1 life and health balance sheet in Ireland. We now have one composite and diversified balance sheet in Ireland, which is much more efficient from a capital and a cash point of view. And the second measure is a significant reduction of letters of credit in the U.S.
As a conclusion, we have been stepping up in 2022, the refocus and action plan required to pave the way to the upcoming strategic plan. But before talking more about the strategic plan, I will let Ian comment on the Q1 results.
Thank you, Laurent, and good afternoon, everybody. Let's go to Slide 9 for the key financial highlights of the Q1 2022 results. This quarter, SCOR demonstrates its resilience in a challenging context and its capacity to absorb shocks while seizing growth opportunities for its franchise. At constant FX, gross written premiums increased 9.7% compared to Q1 2021, amounting to EUR 4.7 billion. At the same time, the group recorded a net loss of EUR 80 million, which illustrates the volatile environment in which we operate. P&C reports a strong growth of 20.2%, benefiting from both the solid growth of specialty insurance by 28.7% and the successful treaty reinsurance renewals of January and April 2022.
On profitability, the net combined ratio stands at 103.7%. It is heavily impacted by the combination of the exceptional events. Amongst these, the nat cat activity was high in Q1 with a nat cat ratio standing at 10.1%, impacted by Australian floods and European wind. Our combined ratio was also impacted by the other exceptional events, including the EUR 85 million prudent provision related to our exposure to the war in Ukraine and its consequences as well as drought in Brazil and an unfavorable arbitration decision on U.K. liability segment. The combined impact of these 3 events is a 9 percentage point increase in combined ratio.
In P&C, I would, however, also like to focus upon the results of our April reinsurance renewals, which was strong. The total reinsurance portfolio recorded a 19.6% growth mainly driven by treaty global lines with new business gained notably in marine and energy in Europe and also in IDI and Credit and Surety.
At the same time, we continue to work on the repositioning of our P&C portfolio, reducing the nat cat exposure and focusing upon profitability. As Laurent said, the group now projects a reduction of 15% of the nat cat PML at the end of 2022. And at the same time, we've recorded a 4.5% price increase on treaty reinsurance renewed to date, resulting in a priced net combined ratio improvement of 0.5 percentage points on the portfolio renewed.
Now moving on to life. Life gross written premiums increased 1.1% at constant exchange rates, and the growth is mainly driven by the continued franchise expansion in Asia. The net technical margin stands at 1.4%, highly impacted by COVID-19 claims. The EUR 195 million COVID-19 claims charge reflects both the high number of COVID-19 deaths in Q1 2022 as well as EUR 62 million related to death in prior quarters, mainly from Q3 2021, where there were differences in the age and regional distribution of the population impacted. The underlying life technical margin remains solid.
On the investment side, we have successfully implemented IFRS 9, which importantly does not change valuation in the balance sheet, which is at market value, but it does change how movements in value are reflected in the P&L. As a result, SCOR generates a return on invested assets of 1.8%.
Under the IAS 39 standard, the return on invested assets would have reached 2.1%, a level broadly comparable with the 2.2% recorded in Q4 2021.
Underlying regular income is increasing and the reinvestment rate now reaches 3.1%. If we look briefly at other key financials, group shareholders' equity remains strong at EUR 6 billion, resulting in a book value of almost EUR 34 per share. The net operating cash flows were negative in Q1. This is mostly related to the payment of COVID-19 claims, which have been provisioned in 2021. Nevertheless, liquidity remains very strong at EUR 1.7 billion. Most importantly, the solvency of the group remains very robust with an estimated Q1 Solvency II ratio of 240%.
With that, I hand back to Laurent.
Thank you, Ian. Let me come back on the articulation of our action and refocus plan for 2022 and our upcoming 2023, 2025 strategic plan. With hindsight, I do believe it was the right decision to postpone our Investor Day initially planned end of March. Since then, some of the structural uncertainties have not clarified or got any simpler. Our planning was prepared before the outbreak of the war in Ukraine, which has amplified uncertainty, making all the references used for inflation, interest rates, economic growth and market cycle susceptible to higher volatility. It was necessary to be flexible and adapt our strategic plan.
The short-term headwinds need addressing, and we are playing defense before playing offense. And the third reason is we continue to make good progress on IFRS 17, and we firmly believe it will crystallize value, in particular of our Life business that is not today on our balance sheet. We foresee an economic value comprised of equity and CSM above EUR 9 billion.
Our engagement with the market will be framed by FY '17. We will keep our 2-step approach with a strategic update end of July with our Q2 results and then the full Investor Day with our Q3 results. You can count on us to continue engaging proactively and transparently.
On this, we can move to the Q&A.
Thank you very much, Laurent. On Page 24, you will find the forthcoming scheduled events. With that, we can move to the Q&A session. [Operator Instructions] Thank you.
[Operator Instructions] And we do have our first question from Andrew Ritchie from Autonomous.
Could you just give us a sense as to whether you were surprised by the level of nat cat loss in the quarter? I guess I'm trying to frame it in the context of the fact you did quite a lot of remedial work last year in reducing cat exposure and yet you've ended up quite significantly above budget. I appreciate there were some large events. They weren't super large events. So maybe just frame the nat cat experience versus kind of the work you've done already?
And secondly, I'm still struggling to understand what the sort of -- how you would like us to think about the underlying or normalized combined ratio profitability in Q1, given you haven't specified some of the sort of noise factors that you highlighted, can you give us a sense as to where that's running at? And also, if I could sneak in on that point, why did you call out an arbitration claim. I've assumed that is effectively an adverse PYD. I'm not sure why you're suggesting it's some kind of one-off.
Thank you, Andrew. Jean-Paul will take all 3.
Thank you, Laurent. On the nat cat question, yes, we were surprised, the events -- as mentioned, the events driving this are the Australian floods, which represent EUR 77 million net impact to us in this quarter. It was several events. And it was driven by particularly one contract we had in Australia, which is heavily exposed to this type of payroll, which was a multiyear transaction. So the sort of curtailing of P&L that we had done did not concern this contract.
The other big impact was the European wind storms, which represent EUR 43 million net impact to us this quarter. Again, several events. And here, this means that we took advantage of some of the payback we received from the flood events last year. And what it means is that we need further price increases and probably curtailing further some of the [ trees ] there. So that was what we saw from the Q1.
On the rest, it was sort of a minor impact with as well, about 1 point of deterioration from the 2021 events.
On your second question on the normalization, so we have a deterioration of about 9 points on the commission plus attritional loss ratio compared to last year. 8 of those 9 points are explained by 3, let's say, exceptional events. One is the war in Ukraine, for which we provisioned EUR 85 million, which represents roughly 4.7 points of attritional loss ratio. And then we have the drought in Brazil, which is not necessarily cat, but is very similar to a cat.
And then we have this arbitration. It doesn't relate to COVID or any recent events. It is an arbitration dating back to several years ago, I think it's about 7 or 8 years ago, for which a negative judgment was just rendered this quarter. So when we combine all of these, it adds up to about 8 points. And so if we normalize for a 8% cat ratio and remove those 3 elements, we would be back towards a 94-ish combined ratio.
And our next question comes from Kamran Hossain from JPMorgan.
First question is just on the Life business. I'm just interested in the -- I guess, the charge relating to the third quarter last year. Just to help us [ come through ], could you maybe talk through what assumptions kind of came through for the third quarter 2021 and why we should feel kind of okay with the assumption made for kind of Q4 and Q1 2022, it seems like in Q4 particularly, there's been quite a large element of late reporting.
The second question is just on, I guess, on the PMLs. What return period are you reducing exposure? I guess there have been -- recent nat cats has more kind of been an issue of frequency rather than severity. So it's interesting kind of what return period needs holding in order to reduce P&L volatility.
Thank you. Frieder will take the first one and Jean-Paul, the second one.
So Q3 2021 was a quite unusual quarter in the pandemic in that in the U.S., we had a very different age distribution of COVID deaths. And we also saw a very different regional distribution of deaths. Age-wise, the average age of COVID deaths fell quite a bit compared to previous quarters and also later quarters, and we've included a chart in the presentation showing this.
And the regional distribution moved much more towards the South and the Midwest compared to earlier and later quarters. And both of these are factors, which increase our exposure. We saw some of this, of course, in Q3, also in Q4 when we increased our COVID provision somewhat to take those very specific factors into account. But then claims which were reported and they often come with a time lag of up to 6 months, and they come in batches.
So the claims which came through in Q1 exceeded what we had expected. And we think this can really be largely attributed to the very specific features of the COVID experience in that particular quarter. Since then, the average age of COVID tests has returned back to previous levels and also the retail distribution is much more comparable to previous quarters. And in addition, as we show on the slide, and as I'm sure you're aware, the number of COVID deaths has fallen quite steeply at the -- towards the end of Q1 and is now at a much, much lower level. So we expect Q2 to be a more benign quarter in terms of COVID experience.
On your second question, let me try to answer, but I haven't correctly answered your question, please come back. I think the PML for the different events as such, is relatively -- the return periods are relatively low. What's unusual, for example, in Australia is the severity of the single event in a given area, for example, in Brisbane or in Sydney is quite extreme. When you look at it from an Australian point of view, it's not so, but the Australian floods were actually potentially 5 events accumulated over a significant period of time with locally some rainfall that was with a return period of over 100 years, never seen before.
Similarly, in Germany, what we -- all the European windstorms were not severe as such, but it was a combination of several days of a windstorm, which accumulated into these claims. And so what we're seeing is the frequency of small- to medium-sized losses, which is something that -- why we believe the pricing that we're seeing on the property side is not sufficient, but there was an illustration this quarter. So I don't know if I answered your question correctly or not.
Yes, I think it -- broadly, I think it's kind of more getting at whether you're reducing kind of extreme kind of [indiscernible] whether you're looking at kind of PMLs at the kind of 100 and 200 plus level and reducing that 15% or something a little bit closer and it sounds like it's quite a bit closer than that.
Yes. No, with the 15% reduction, we gave the PML number, but it's across the board that we're reducing. It's not just [indiscernible]. What we're worried about is not the [indiscernible] as such, is more the frequency of small- to medium-sized losses, which has been what's been affecting our results for the past 5 years.
And our next question comes from Will Hardcastle from UBS.
The first one is on the cat budget. I guess nat cat exposure is reducing 15% top line, at the group level is -- P&C level is increasing by 20%, is it -- [ is that really ] a fair statement, so the cat budget increased by over 30% in absolute terms, and that's on the exposure. So I guess squaring that, apart from perhaps the acceptance of the budget was deficient before, is there anything else that would narrow that gap between the 2 to suggest it's not simply out of conservative within themselves? And then secondly, I guess, what -- simply very high level, what's the binding constraint on capital at present? You're willing to [ accept more solvency ]. Is it rating agency or is cash more of a constraint at present?
Okay. I'll take the first one. I think that what really -- the key driver is whether the baseline that we've been using, we and the rest of the industry have been using, which is using cat models that provide a view of cat over a 30-, 50-year, 100-year time horizon are really good predictors of what that risk will look like in the future.
And that's the basis we had, I'd say, for the past 5 years, and we did a study to evaluate the -- scientifically what the impact of climate change would likely be over the next 10 years instead of the next 30 years, even that we saw the results being predicted as relatively low. And this is not aligned with the historical experience. So what we're doing now is we're taking a much more pessimistic view of the risk going forward and a forward-looking view of cat using the last 5 years as an illustration of what the climate change effects for the next 5 years can be expected. And that leads us to have a much more pessimistic view of cat going forward.
So your calculations are correct. But I think in the meantime, our view of cat has become much more pessimistic. Q1 just reinforces that pessimism. And I think that, that will drive some of the actions we will take over the next coming renewals and continue to reduce our cat volatility.
Maybe, Will, let me add something on that. We spent still an awful amount of time to model, to estimate the cat budget and taking different time horizons and so on. I think there is a very pragmatic view of running a business, which is to say, can we sustain more what we saw in the past 5 years. And what do we need to do for the 8% cat ratio to be relevant if the cat activity is similar to the one we've been seeing recently. Some of our competitors dismissed the past 5 years and looking at longer-term periods, I think in running the predictability of our earnings and not having to normalize constantly, we need to be able that we can run the business with the volatility we saw in the past 5 years.
So it's, I would say, an additional analysis alongside the more normalized view longer-term, analysis we do on cat budget, and that leads to this conclusion. I'll hand over to Ian even though we -- would be good if you could specify your second question. We're not entirely sure we got everything of it.
Yes, sure. I was just thinking about the binding constraints on capital at present, your solvency is at 240%. It doesn't feel like it's that. I guess is rating agency or cash more of a constraint than the solvency at present?
Yes. Thanks, Will. Yes, I mean, the solvency ratio is strong, and we're, of course, happy with that. But in terms of that capital position, we're comfortable with it. We need -- we apply capital to accretive growth, and we see good opportunities in the market. We also see a volatile environment as we've described, a significant portion of the increase in the solvency ratio has come from the macro environment and we see a volatile claims environment. So holding a strong solvency ratio as such is not a bad thing.
But you're right, there are other capital measures and these are more of a constraint and tend to bite first in fact, at present. So on the rating capital side, yes, that's true that, that is more of a constraint at present. We have -- under those measures, it's not economic. And we would -- we need to manage within the rating capital position. That said, we still maintain a buffer over the AAA level on an S&P basis to secure the AA level of rating that we provide to our clients.
And our next question comes from Thomas Fossard from HSBC.
Yes, sorry. Sorry, I'm there. Was on mute. The first question was related to your life re business, just to better understand the underlying performance of the book at the present time. So Frieder, if you could comment on what would be the underlying net technical margins. Or maybe tell us how much you benefited in Q1 from management actions or reserve releases in order to offset the COVID-19 mortality additional claims in order to work out where you stand currently on the net technical margin.
The second question would be related to your approach of reducing Property cat and reduce the volatility of the book. I fully understand what you're doing in terms of in terms of re-underwriting the business. Now I've always been told that actually a Property cat was the kind of somewhat the plain vanilla business that you needed to offer to clients in order to access other business, maybe less volatile or maybe also more profitable on your metrics. So the question behind is how much you can retrench from Property cat in different geographies before this is starting to make your top line growth or staying with clients or gaining new clients a bit more tricky going forward.
Thanks, Thomas. Our expected technical margin or our assumption, excluding COVID is in the range of 8.2% to 8.4%. And that's something which we maintain for the time being. In Q1, the actual performance of the book has been better than this, somewhat close to close to 12%. And it has benefited from a good performance of the [ ex ] COVID really in pretty much all areas.
We have -- as you have rightly indicated, we have taken some management actions on underperforming treaties and we continue to work closely with clients to improve the performance of business where it's not in line with our expectations and our profitability targets. And we continue to benefit from our ability to accelerate earnings as a consequence of now being generally in a strong reserving position and then specifically, we have been able to increase some reserving paths as part of the Life in-force transaction we did last year, and this is all contributing to the strong performance of the book excluding COVID in Q1.
Thomas, your second question I think what we're trying to do is -- I think there's 2 answers to your question. First on the cat side, we're trying to do is be more selective as to who we give our cat capacity. So the reduction that we're applying is not necessarily applying to all clients. We're being more selective, and we're providing the cat capacity as a priority to clients that actually offer us other attractive business.
The second point is on the other lines of business that we're trying to grow starting with global lines, we have a very small currently position in most of those lines of business. We talk about marine, energy, engineering, we're a relatively small player.
And so to move the needle, it doesn't take us very -- big growth in terms of shares to gain significant volumes. And we were focusing more on excessive loss previously. We're looking at more, some of the COVID shares in those lines of business as the business has been remediated. And so that's how we're achieving the volume growth. But it's client management, client selection and I'd say growth in some lines of business where we're underway currently.
Sorry, Jean-Paul, for interrupting you. Let me add a couple of points on your question, Thomas. For sure, taking on volatility is our business. The day a reinsurer walks away from volatility, whether it is elemental volatility or other types of volatility, I think we lose our value add. The question for me is twofold. One is how do you price it adequately? And I think we're getting to this point where today, the walkaway is indeed a way to make yourself a price maker. And so we have to work away. We have to be able to -- and this is how the cycle works. Until someone walks away, the cycle doesn't play. And here, we can do that in a selective manner, as Jean-Paul responded. So I'm not going to get into that any further.
And the second point is how do we build what I call a ballast how do we build a broader base of business, which is not business -- which is not cat sensitive and which absorbs the volatility. So for me, the question of cat is how to measure, how to minimize the peaks in certain areas and certain clients, certain cases and how to make -- how to build a broader base. And this is how you should look at some of the strong renewals we have been going through. They are non-cat driven. They have pretty healthy growth, and they -- I think they're going to help us to have this better balance altogether.
Our next question comes from Vinit Malhotra from Mediobanca.
The first question is, Laurent, you mentioned in quite clarity the balance sheet optimization and fungibility of capital. And I'm just putting into context, which is on the Slide 21 today and the legal entity optimizations, are you expecting any capital savings from these? And should shareholders expect something like the previous French entity optimization in 2019? So could the capital turn happen if possibly you find capital savings? That's the first question.
Second question is just on Ukraine, where it's good to see that you had put out a number out here. Could you just comment on what could be the risks, from previous conversations around mid-April time, I remember there were some more scenarios about credit or maybe some more color if you could provide that and what we are really trying to understand is what would make this worse from your current understanding that this is probably most of the ultimate, if I understand correctly. So what could make the situation worse for you on the last...
Fine. On the first question, maybe I'll take that. So the project that we show on the deck that you referred to, this has been a project that's been long in the making. This isn't a sudden or recent event and has really been driven by the output of our internal model. And we're doing 2 key things here, and it brings 2 key benefits. So what we're doing is we're transferring the 2 Irish subsidiaries into composites. And then secondly, we're merging the Swiss entity into SCOR SE. That's what we're doing.
On the benefits side, firstly, on the capital side, we get group solvency ratio benefits from higher diversification. And then we get local capital benefits as well as we're able to, for example, seat business from the U.S. to Ireland on the P&C side. That's the first benefit on the capital side.
The second benefit is really on liquidity improvement at the holding and at the Irish subsidiary level. And if I give an example of that, what it means, at the holding, instead of holding an illiquid investment in subsidiary in Switzerland, the holding is gaining hard assets from the merger. And this brings working capital comfort and flexibility into the holding perimeter. So I mean, these are things that we're able to do as a reinsurer to optimize the position. It doesn't mean an immediate additional dividend or capital return at all. But really, it does provide us with more degrees of freedom, local entity levels and at the group level. And we'll continue to do that. We will continue to seek such opportunities as we go forward.
On your second question, this is Jean-Paul. So the EUR 85 million that we posted is a precautionary bulk reserve, which corresponds to what we believe is our ultimate risk based on the information to date. We received only precautionary loss notifications. So these are clients that have policies that are potentially exposed to the conflict that would acknowledge their insurance company or the reinsurer. But there's actually no loss information to date that we received that explains what is the loss driving the claim.
The main lines of the business that we see potentially being impacted or Credit and Surety, political risk, political violence, marine and aviation, those are the main lines of business. Political violence, and in the first 3, political violence is the one that's most likely to have some trigger in the short term. Many of these policies have a waiting period. So it will take some time to develop better clarity.
Aviation, the claim is mainly driven by these aircraft. The issues there are whether the reregistration of the aircraft by Russia are considered set for confiscation and which policies are affected? Is it one event? Is it several events?
And so we run different scenarios from the low range to kind of a higher range. And we believe the EUR 85 million constitutes the best estimate view at this stage. We think it's going to take a lot of time to have better visibility. My -- unless there's a resolution of the conflict that's very short, which doesn't seem likely right now. And that will have clarity before the end of the year. Even once we have clarity, I think there's also going to be a [indiscernible] amount of litigation, for example, in aviation around the issue of whether it's set for confiscation and which policies can be triggered and which ones can't. So it's a very complex situation, very complex claims that will take a lot more time to develop better information.
Our next question comes from Vikram Gandhi from Societe Generale.
It's Vikram, SocGen. I hope you can hear me. I've got a couple of questions. First one is on the P&C business. I appreciate the portfolio repositioning and the reduction in nat cat exposure. However, when I see the growth in global treaty lines and specialty lines, it appears that the group might be picking up a lot more man-made loss exposure potentially. And since you don't spell that number out each quarter, each year, I'm just concerned, it might make your attritional and normalized combined ratio more volatile. Is that a fair description? Or am I -- should I be thinking it differently? That's one.
The second one is on nat cat. I know there are 2 specific events that you mentioned, the storms in Europe and Australian floods. And I think they total up to about EUR 120 million of [Technical Difficulty] more than EUR 180 million impact for the quarter. So there's another 1/3 at least that's missing. So if [Technical Difficulty] that would be much appreciated. And also if there is any retro benefit in the first quarter already?
Vikram, can you please repeat the second question? We didn't get it very well. You got cut off.
Yes, yes, sure. So I think the numbers that you -- that Jean-Paul mentioned where Aussie floods are EUR 75 million and another EUR 40 million, EUR 45 million from the European storms. So they total up to about EUR 120 million, whereas I think the total nat cat impact has been more than EUR 180 million for the quarter. So there's another almost more than 1/3 of the total nat cat loss that I'd like to have some color on. And if there is any retro recovery already in there?
On your first point -- right. On your first point on the man-made, first of all, it's -- these are lines of business where it's easier to purchase reinsurance and retro, and we're active buyers of reinsurance and retro on those lines of business. So we're better able to manage our nat exposures in those lines of business. So we are very much aware that as we try to reduce volatility on the cat side, we don't want to create new increased volatility in other lines of business. So it's something we have very much in mind as we develop these lines of business.
So that's how we plan to manage that. So I don't think you should see our net attritional loss ratio necessarily becoming more volatile in the future.
On your second question, the other significant event of the first quarter was a Japanese earthquake. But this is an event for us that we estimate that EUR 13 million net. As I said, there's been some adjustments on the 2021 and prior cat events, which represents another point of cat ratio. And then we've had just some small losses of floods, small tornado in the U.S., some small typhoons in Asia and that each of them relatively small, but again, an accumulation of these events that basically create the balance of that.
Okay. Okay. Understood. And are you seeing any retro? Or are you booking any retro recovery already in Q1? Or it's too early in the year to be doing that?
Yes. We have some recovery on the proportional side. On the nonproportional, we don't have any recovery to date. There's 2 types of nonproportional. There's the aggregate and the per event. On a per event basis, we don't have any events that actually reaches our program on a per occurrence basis. On the aggregate, these are programs that are designed for a level of aggregate losses over the year. So it would be surprising if we would trigger those aggregates already in the first quarter, and that's not the case.
Our next question comes from Ashik Musaddi from Morgan Stanley.
Just a couple of questions I have is, first of all, on investment income. Now as you have moved to IFRS 9, thanks for all the disclosures you have given. I mean pretty helpful. I mean, still a lot of moving parts, but still pretty helpful to understand what's going on. But would it be possible for you to give some color as to how we should think about the return on invested assets going forward just because it's a different basis and different accounting. So that would be helpful.
And what would be your new money yield? I think it was mentioned about 3.1% at the moment as in how would you -- how fast would you transition into that yield would be very helpful to understand, that's the first one.
And secondly, I mean, you mentioned that you have used up some buffers in -- or some reserves in life to basically adjust for some of the extra losses on COVID. I remember you did that last year as well. So how do we think about any additional buffers that are still left in the Life business? Any thoughts on that would be very helpful.
Will take the one on IFRS 9. So on Slide 48, you've got the main principle of IFRS 9. The main point is that there is no change, as mentioned by Ian at the beginning of the call, in the valuation of the securities within the balance sheet. What is changing is the way some securities are going to affect the P&L or not. And here, you've got the detail on Slide 49. We have EUR 1.2 billion of assets that are fair value through P&L under IFRS 9 compared to EUR 200 million under IAS 39 before. So of course, this change add volatility that will be positive or negative each quarter. And that's an indication of what we should discover under IFRS 17 as well next year. So this additional volatility, we see it this quarter in negative contribution from the fair value to income, given, again, the interest rate increase on the market.
The second item that is impacted under IFRS 9, under the previous accounting standard, we used to impair a bond when we add an evidence of loss or credit default. It was an exposed impairment policy. Under IFRS 9, like for all the banks, we do now an [ expense ] provision to a potential impairment in the future, that's called the expected credit losses.
And here as well, each quarter, we use the Moody's tool to compute the expected credit losses. Each quarter, it will depend on evolution of interest rates, but also evolution of macroeconomic indicators. And that's true that also in Q1, we had adverse development on the macro economy due to the Russian-Ukraine crisis.
So if you see the impact of the provision to ECL this quarter and the fair value through P&L of those securities, it adds 26 basis points of volatility. So that was the point mentioned by Ian. So under the previous accounting standard, our return on invested assets would have been 2.1%. So in line, I would say, with the market consensus. And I think the main difference today between what we disclosed and the consensus was the miss on IFRS 9 volatility.
Now your point on what should we expect in terms of, I would say, objective or target or expectation of return on invested assets. You will see on Slide 51, the way we compute the yield under IAS 39 and under IFRS 9, I would say it's almost the same. So the only thing that would change, that's the volatility coming from a larger part of the portfolio that is fair value to P&L and also a change in ECL each quarter.
So I would say, we maintain the same objective as before under the new accounting standard. But with additional volatility, positive or negative each quarter. Your second question was on the reinvestment rate. So that's a good news. Let me remind that when there is an increase of interest rates, the day of the increase, it's a bad news because we have unrealized losses within the balance sheet and you see it in the appendix, but that's the case in Q1.
But the relatively short positioning of our portfolio with almost EUR 9 billion of financial cash flows to be reinvested in the next 24 months allow us to keep or to hold those bonds until maturity. So which means we won't see the losses into the P&L. And we can, if needed, absorb any claims, thanks to the liquidity of the portfolio. At the same time, given the short positioning of this portfolio, the reinvestment yield will flow quicker into the financial contribution, and you should expect to see it in the course of 2022 and 2023, with a progressive increase of what we call today now, the regular income, what was the income yield before.
It's very clear.
On your second question, Frieder speaking here, SCOR has a prudent reserving policy, and that applies very much to the Life business. We use large transactions to create reserve buffers. I mentioned the reinsurance transaction of last year. Another example would be the acquisitions of the large life portfolios a few years earlier when we used the opportunity to reassess assumptions and make sure we hold reserves with appropriate buffers. And the same applies to a new business, which we reserve with sufficient reserve margin. So I expect we will continue to -- maybe to benefit from the release of those margins as the business matures over the next quarters and years.
Our next question comes from Thomas Fossard from HSBC.
Yes. Just wanted to come back, Laurent, the -- what you said regarding the latest reactions on the back book and the difference you were making versus the play -- the pricing for the front book. I mean does it mean that actually you've got any IDs or anything that we should be aware in terms of further actions, I think that you indicated that all options were considered on the life side. maybe you're thinking of, I don't know, maybe ADC covers or something like that, maybe as well on the P&C side. So any clarification on what you meant will be interesting.
And Jean-Paul, regarding Ukraine-Russia, you mentioned credit exposure, but it looks to me that looking at [ coalface ] or the RMS, doesn't seem to be too much of a big deal for the time being. So I was wondering if we should think about SCOR credit exposure being slightly different? And maybe you can clarify if you had any exposure to credit enhancement on aviation fleet?
Thank you, Thomas. Look, on your first question -- I will let Jean-Paul comment on the second one. On your first question, it's -- the range of options that we look at is those that you've mentioned. I think on the life side, the management actions have been a value lever, which we have explored in quite an exhaustive manner. We continue to do so. It's not always possible to execute on them. But the combination of what I would call organic measures on the day-to-day relationship with other clients on the life side will continue. And we look as well at all other type of structures. The market is collective on the P&C side. It has to make sense economically. So we remain prudent and we will look at potential options. Jean-Paul, on the second question?
Thomas, on your question on Ukraine. You're right that right now, the credit insurance portfolio doesn't look like it's going to be heavily affected. I think the question was more what are the potential lines of business that could be affected. So that's why I included it in the mix. But right now, flows are continuing, the credit -- trade credit is the line of business that requires some default to be triggered. We're not seeing that happening. And SCOR, to your second question, is not overly exposed to credit enhancements for aviation or other lines of business. So our exposure is very much on the large trade credit insurers, coalface, RMS and...
And ladies and gentlemen, this concludes today's question-and-answer session. At this time, I would like to hand the call back to speakers for any additional or closing remarks. Thank you.
Thank you very much for attending this conference call. The Investor Relations team remains available to pick up on any questions you may have. So please don't hesitate to give us a call. As a reminder, SCOR will hold its Q2 results presentation on July 28, during which an update on SCOR's environment and strategic ambitions will be presented. I wish you a good afternoon.
This concludes today's call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.