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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good morning or good afternoon. Welcome to Swiss Re's First Quarter 2023 Results Conference Call.
At this time, I would like to turn the conference over to John Dacey, Group CFO. Please go ahead.
Thank you very much, and good morning or good afternoon to everyone on the call for me. I'm here with Thomas Bohun, our Head of Investor Relations, to talk you through the first quarter 2023 results. Before we go to Q&A, allow me to make a few quick remarks on the release we put out this morning.
The first quarter represents a solid start into the year for Swiss Re with a net income of $643 million. Our objective is to make more than $3 billion this year. We believe we are on track, and there are a few key drivers for this. First, in P&C Re, we earn the majority of our nat cat premiums in the second half of the year when the Atlantic and Pacific storm seasons occur. Assuming normal experience, this is expected to benefit the combined ratio.
We are also benefiting from strong renewals. The 19% price increase achieved in April represents a continued strong momentum in the spirit of what we saw in the January renewals. The 97.2% combined ratio we achieved in the first quarter despite higher nat cat activity is therefore in line with our full year ambition.
Secondly, our Life & Health business is typically impacted by elevated mortality in the first quarter due to the circulation of respiratory viruses, especially the flu in winter months. We expect this impact to reduce in the next quarters on our path to our $900 million net income for Life & Health Re.
Thirdly, Corporate Solutions had an excellent quarter as evidenced by the 90.3% combined ratio. Corporate Solutions price increases accelerated in Q1 compared to the end of last year, and this will benefit margins going forward. Finally, the recurring investment yield continues to increase as expected, reaching 3.1% yield in the first quarter. Interest rates have declined in the last days but we expect continued upward trajectory as we invest incoming cash at higher rates.
On reserves, the overall net reserve development was modestly positive in the first quarter in both P&C units. We saw releases in property lines, while we added the casualty lines, mainly in P&C Re as well as Specialty and Corporate Solutions. In addition to [indiscernible] and very importantly, almost all of the $1 billion inflation IBNRs we set up in [2022] across liability, motor, property and specialty lines remain in IBNR form. We intend to continue to balance any reserve redundancies with increased caution where required. The main goal is to deliver on a reported combined ratio targets.
Capital remains very strong. We've not published an official first quarter SST figure. We estimate the SST ratio as of mid-April to be close to where it was when we started the year. That is around [290%]. While we have not renewed some of our investment hedges and saw a negative impact from slightly lower yields, our SST ratios benefited from strong renewals with higher economic income expected a key factor.
And with that, I'll hand over to Thomas to introduce the Q&A session.
Thank you, John, and Hello to all of you from my side as well. [Operator Instructions] So with that, operator, could we have the first question, please?
The first question comes from the line of Kamran Hossain with JPMorgan.
Two questions for me. The first one is just thinking about the combined ratio guidance for the year. I think it's pleasing to say that you'll do everything you can to hit the kind of guidance of 95% and below. When I look at kind of what happened in the quarter, you clearly had property, and I think there were a lot of headlines around Turkey and clearly, there was a big loss, but it looks more to me like the casualty [indiscernible] the source of the issue rather than property, if you ex out Turkey from property, your combined ratio is something like 55%. Can you maybe talk a little bit -- in a little detail around what's going on in casualty? How one-off the kind of additions in -- I think you talked about motor and liability are and to what extent that's behind you? The second question is on CorSo. As you said, you had an excellent quarter. The problem seemed well kind of so far in the rearview mirror now. How long do you think margins can keep going? Do you think actually the [indiscernible] reinsurance cycle will help CorSo a little bit?
Kamran, thanks for the questions. On the combined ratio, and I assume that you're making reference to what we show on Page 20 of the slide deck, where we've put the Q1 2023 combined for property, casualty, specialty and P&C reinsurance. I guess what I would say is we're thinking slightly different about the current year and prior years. And in the current year, yes, the nat cat experience we had was above our expectation, the loss in Turkey was a large loss. Actually, the -- our team went back.
This is by far the single largest insured loss for an earthquake across Europe ever. It's twice the insured loss of the previous largest earthquake for insurers, at least, which was in Turkey in 1999. It's 5x larger than the -- or more than 5x larger actually than the L'Aquila loss in Italy in 2009. It's the seventh largest earthquake loss around the world ever. And so to give you a magnitude, the $5.3 billion that we estimate for the industry is a big deal.
We absorbed that as well as the floods and Typhoon and cyclone in's New Zealand and still we're able to come through with a solid combined ratio of 97.2%. To your point, there were some positives in property as well, and this relates to prior year development that partially offset the losses we had in the current year. And maybe I can specifically call out a significant release that we had with Hurricane Ian from last year. If you remember, in the third quarter of the year, we had to book based on sort of early information and the number we had included a substantial potential loss with respect to flooding and the national flood insurance program.
The reality is as we found out during the first quarter of this year after the period for making claims to that program expired that the losses for flood were substantially lower than we originally expected. And we decided to go ahead and release that component on Hurricane Ian and that had a very positive impact for the combined ratio that we report for property, which is the mix of the current and previous years.
On casualty, we took a look at the some new information that came in from our clients with respect to specific liability claims. We also noted that the overall reserve positions while we think there's strong have an uncertainty around them, and we decided to go ahead and repurpose some of the reserves that were being released out of the property side and strengthened our casualty reserves from prior years. Some of that, as I said, was related directly to information that came from clients. We might have thought about doing something different vis-a-vis existing IBNRs, but we saw the opportunity to go ahead and take some of the prior year gains that were in place on the property side and increase the reserves for casualty, U.S. casualty in particular.
I think it's important to observe that overall the prior year development was positive across these lines, approximately $40 million, both in P&C Re and as well as in CorSo, and we're comfortable as we were, frankly, at year-end with the overall reserving levels that we've got in place. So I think to your point, we are -- in any one quarter, you might see certain lines look relatively strong or relatively weak based on some of the reserving options and decisions that are taken. But overall, this target of 95%, we take very seriously, and we'll continue to work to delivering that for the P&C Re business.
On CorSo, what I'd suggest is the activities that you saw in the primary space in the fourth quarter of the last year where a number of players who had not made specific allocations related to inflation during most of the year decided to call out inflationary impacts on some of their businesses has fallen forward into the 2023 on the pricing side where pricing has improved as a result of this recognition. And so our risk-adjusted prices in Q1 were up 5%. Your question is how long can this last? My response is, I don't know exactly, but I think directionally, it's the right thing we see. In fact, that while some lines are well priced, there's others that need to catch up still, and we would encourage the market to be sure that line by line, we're getting adequate pricing for what, in some cases, are substantially higher loss cost estimates related to inflation but not necessarily [on the] inflation.
Hope that helps.
The next question comes from the line of Andrew Ritchie with Autonomous.
Just a technical question. Why is it the expense ratio deteriorate in P&C Re year-on-year, both acquisition and operating expense, given what's been happening ceding commissions and the volume growth I'm surprised that was the case. The second question, could you just give us a sense as to what you're thinking around mid-year renewals, I guess, both in terms of sort of your appetite, I mean, because I don't think you've grown exposure that much year-to-date. You obviously harvested prices on a cat, but I guess your appetite and just what you're sort of expecting around the trajectory of rate increases. Clearly, there was very good momentum in April, but what are you thinking midyear.
Yes. Sure, Andrew. I'll try to take both. On the expenses, with P&C Re, it actually looks a little worse than it probably should related to understatement in Q1 of 2022 of the total expense base. We had a small glitch, which we fixed in the half year results, but there is approximately $40 million of OpEx, $38 million, I think, was a precise number that should have been in the '22 numbers that wasn't.
So I wouldn't -- too much over the difference year-on-year, we're largely flat, which is the way we think about that, even though we're growing expenses -- or growing premiums 8% for the position.
On the midyear renewals, a couple of thoughts. One is we weren't necessarily surprised but we were pleased that the April renewals showed this 19% price increase. This includes, as you know, the Japanese market, which had not had a lot of loss activities in the last 24 months on the nat cat side at least. And so we were comfortable or pleased actually to see that our clients there as well as other parts of the world were part of that renewal recognize that the new supply demand reality and that we were able to get these price improvements as strong as we were. With respect to what's coming in June and July, which is another 25% of our book between the two, we've got some significantly loss-impacted portfolios, which are renewing in that period.
We would expect this momentum to continue. We expect the demand to be sustained, and we don't see lots of new supply coming into the market. We didn't see it in April. We didn't -- we don't expect to see it here this summer. So you're right, we've not increased exposure materially year-to-date.
But we have an appetite in a number of the lines which are showing adequate pricing for us to go ahead and capture additional opportunities where we can. We also have in place a robust retro program, which we were able to expand year-on-year, and so the management of our peak risks continues to be in good shape. So I'm not predicting exactly where we're in vis-a-vis growth, but we're not constrained to grow. We've got the capital clearly as long as our clients are willing to meet us on what our price expectations are, we should be in good shape.
Andrew, you also had a question on acquisition costs. Is that correct?
I guess I would have expected that to have not gone up.
Thomas?
Yes. So we had a significant decrease already last year. So this year, we would expect the impact from pricing to really be seen more in the loss ratio. And hopefully, that's what you saw in Q1 in the attritional loss ratio and hopefully, that continues. The decrease we already saw last year on the commissions, and it could be that its overall more muted this year.
But you're right, currently, it's 0.3 points up. It could be anywhere near flat.
The question comes from the line Will Hardcastle with UBS. Please go ahead.
Can you hear me?
Yes, we can, Will.
Okay. Great. The first one is a quick one. Can you verify the change in the combined ratio calculation regarding the interest on funds withheld is already accounted for in your better than 95% combined ratio target? Or would that now mean 90% -- better than 94.4% for example, if that's the run rate?
And the second one is, is there any possibility you can break out that PYD between the classes even into very, very round double or triple-digit numbers? I'm wondering if there's any uptick in risk arising from social inflation that appears to be popping up as a key word again for many actuaries.
Sure. Will, the first one on funds was held, the -- yes, and I apologize if this had not been is clearly communicated to the analyst community in advance as somehow in the back of my mind thought it had been. We -- and the whole planning process with our Executive Committee and the Board of Directors that this was always part of an expected change to have us lined up better with our competitors. So this was in the calculation for the better than 95%. At the time the impact was a little smaller than the 0.6% that you see on Page 21 for the first quarter.
I don't expect this to become a bigger number during the course of this year. And overall, I think we're in belief that better than 95% doesn't mean 94.99%. So this gives us a room to be better and then we can see where we land at the end of the year of how much better.
With respect to your second question, on the quarter, we normally don't give the breakdown as we go. I think we'll provide a little more information in midyear. The one thing I would reiterate from what we spoke about before is the IBNRs that we did put up for inflation last year, which were largely related to the existing book of business and the impact of 2023 inflation on the book of business remain largely in place. And so I think overall, yes, we've got some bookings here in the first quarter. We'll have to work with our actuaries over the course of the next three months to be sure that we're appropriately allocating some of that inflationary reserving that was done last year to the appropriate books of business.
And some of that -- a lot of that was for shorter tail lines, which probably would not be social inflation, but you can imagine that at least some of what we booked, especially in Q4 was related to longer tail positions.
Overall, yes, the U.S. casualty in this book is something we watch closely. But again, we've made material reserve increases over the last three years is related specifically to social inflation issues.
The next question comes from the line of Freya Kong with Bank of America.
Maybe another way to ask about the casualty strengthening. Had you not seen those extra releases in property, would your inflation IBNRs have been a little depleted over the quarter? And sort of what can we track externally looking at inflation to measure whether or not you're going to be more comfortable with your reserves going forward? Or should we expect continued tweaks [indiscernible] at the margin of this?
And secondly, on large loss budgets, $1.9 billion for 2023, you've already consumed about 1/3 of this at the end of Q1. How do we as market get comfort that your flat budget year-on-year is appropriate given the track record that you've had?
So Freya, on the first question, it's a pretty hypothetical. What we would have done if we've not had the positions. We have the positions. And I think we're comfortable. We were comfortable on December 31 with the reserves.
We're comfortable on March 31 with the reserves. And I think your subsequent observation -- yes, I don't exclude that there will be continued tweaks or pluses and minuses where we find. We've got redundancies. We'll deal with them where we've got needs for reinforcing reserves we'll do that. They may not always match up quarter-by-quarter.
But obviously, in Q1, they roughly didn't. So I think we'll continue to evaluate this. If we thought we had a big hole that we needed to solve for, we would have solved for in the first quarter and taken the pain that was not the case. We've been able to work through it just fine. And with respect to your second question...
In the nat cat budget, $1.9 billion.
Thank you. We're -- I think it's very tough to extrapolate from any single quarter. If -- had there not been a Turkey earthquake, we would have been 200 -- below the budget for the first quarter.
So the timing of events is not a particularly useful way to think about this. Over the course of the year, we expect that we've got a well-diversified portfolio that will have losses in certain geographies with certain perils and others will [miss] us. And so that's the way we think. I think most importantly is the premiums that we're receiving for these losses are very far in excess of the expected loss, the $1.9 billion that we've got here. And so as we showed in 2022 with losses that for the full year were above expectations, we still write this to an underwriting profit as we've done in, I think, six of the last seven years.
And so we're not overly concerned when we happen to have one big event in one quarter. I think we'll continue to work through this. And as I mentioned before, we've got lots of the premiums earned in the second half of the year to be able to absorb what you would expect for our North American and Asian storms.
The next question comes from the line of Derald Goh with RBC.
Two questions, please. The first one, can I just quickly clarify that the strengthening in casualty that came from specific claims and was it mostly economic inflation rather than social inflation? And the question is, did you have to [tweak] your current year loss picks on the back of the reserve improvement that you saw this quarter? Because if I look at your renewal loss assumption, that's still plus [13%] as it was in Jan. I was thinking maybe it should be a bit higher instead.
Second one, just on CorSo. So you mentioned that rates reaccelerated, what would it drives that please?
Yes. So -- as I mentioned, we did have some claims notifications coming up from our primary carriers in the casualty side. In some cases, it was increase in the expected losses, in some cases, they were new positions. But we get these every quarter from clients. It's not particularly novel.
But I think we said is some of the reserving was in relation to those notifications. Some of it was a subsequent extrapolation and assumption adjustment on the claims reserve, which got us to the total number. I don't think it had any influence on the pricing for the current book for a couple of important reasons. One is, we've made material changes in pricing in these specific lines of U.S. liability of commercial motor of broader casualty and in the existing renewals, the price increases we put on that have been substantial.
And it's one of the reasons why you see on the renewal page, even though the economic earnings are positive. They're not as positive as you might have otherwise expected, given the duration and the potential upside from the investment income associated with that precisely because we needed to continue to push the expected loss component up as well. And so we're comfortable with where we are for the new business we're writing. We think we're being sufficiently conservative on that. And it's not just economic inflation in the U.S. liability space, I think there probably is some degree of large severity increases that we've [indiscernible] priced in the current book and which we've worked very hard to reserve well in recent years otherwise.
I think on CorSo what's driving these price increases is a couple of things. One, and maybe and alluding to your earlier question, the [private] companies are paying more for reinsurance, that includes for corporate risks and we need to adjust their frontline pricing for part of that [indiscernible] the other thing is the, what I mentioned before of the inflationary impact on ultimate loss costs and people see that they need to get more rate in the [door] at the beginning to be able to manage that position. We think our risk-adjusted prices were moved up nicely and maybe the market is playing a little bit of catch-up to where we already are in CorSo, and it could be the mix of our business is slightly advantageous to the current pricing marketplace. But again, we expect this to continue for some period of time, but how long I can't give you a good judgment on.
The next question comes from the line of James Shuck with Citi.
My two questions. Firstly, John, on the investment income, obviously, the funding yields are picking up quite nicely. The reinvestment yield is in excess of that. If I simplistically just look at kind of plus $200 million on the quarter on the running yield in absolute terms, and you did $2.9 billion last year. So if I kind of just plus $200 million x4 quarters, should I be expecting kind of [3.7] or so as a baseline for the running yields for the full year, perhaps even a little bit more than that because you have extra stuff to work through. Just help me understand the outlook for that core absolute number, that would be helpful, please.
And then secondly, on iptiQ, I think there's a comment that you've kind of shifted the focus away from growth a bit more towards profitability. I think your guidance before was $250 million loss this year, breakeven next year. Does that shift in focus change that the outlook for profitability there?
Sure, James. So look, it's a back-envelope calculation on investment income. I wouldn't disagree with where your numbers are. I don't think I'd put anything more on top of that. And again, our first quarter total result was received a benefit from some gains that were made in the private equity and listed equity space on a mark-to-market basis.
So there was a net probably $100 million or a little more than $100 million there. But, yes, I mean we do expect to be able to earn more on the assets. The 3.1% is on a trajectory, which we would expect to continue to increase at least for the couple of coming quarters, and then we'll see where long-term rates are at the end of the year. Our current Swiss Re Institute expectation, I think, is at 3.4%, so very close to where it is today.
On iptiQ, there are parts of this portfolio which are growing very nicely. There are other places where we were concerned that long-term profitability may not be achieved in specific product classes or geographies, and so we made some adjustments. That's why you see on, I think, FX constant basis effectively flat premium volumes. That doesn't mean that this is not capable of growing in the future. With respect to profitability, I think what we said is sort of the [250] or so loss in this year related to the new business [strain] and continued push out of the business.
The breakeven we've earmarked for 2025. So 2024 will be in between the two, but that's what we've -- I think we're on record for and committed to deliver.
The next question comes from the line of Vinit Malhotra with Mediobanca.
Yes I hope you can hear me.
Yes, we can.
My two questions. First on the Slide 21, the attritional loss ratio which is 57.9% is including [indiscernible] the full year and what we saw in '22. Could you just comment a bit about this? Is there some way to read this as to say that the inflation in used attritional pressures are easing a bit? Do you think that's [read] you would make from it?
So that's one question.
The second question is just on the P&C Re growth of 11.3% [NEP ex FX] and it's quite a pickup from earlier periods and it could be because of the renewable growth. And then you also noted that obviously, the nat cat premiums will come in to watch more and more and that's why you've been really growing. So should we expect a pickup in this 11% as the year progresses? So any comments on that, please?
Sure, Vinit. Thanks for the questions. On the first one, the attritional loss ratio improvements, I think there was a couple of things, but it's, largely, I'd argue related to the improved pricing we're achieving and the contained loss, right? I mean we've said it January 1 and reiterated year-to-date here with April 1 that we've got a margin of 5 percentage points between the price increases we're achieving and the loss costs which we're booking as we bring these premiums in. We've alluded to on the January 1, and it's still the case actually here after April approximately a 3 percentage point improvement in the combined ratio that should come from this.
In 2023, we should expect to see between 1.5 and 2 points come through. And I think this [1.4] you see in the first quarter is directionally linked to that. How this will develop quarter-by-quarter, I can't be precise on. But overall, this is where we should be going with it. And so that's the underlying reason why we're comfortable and confident that we'll achieve the better than 95% for the full year.
With respect to the premium growth, part of this is also going to be the question of what happens with pricing. Obviously, as we might expect, the price increases we've got year-to-date can hold up for the full year. Even if we've not grown exposure in any material way, we should see that premium volume continue to grow, if, in fact, some of the opportunities that are there at midyear or on specific transactions with clients during the course of the year, give us more opportunity than as I mentioned at the beginning with Andrew, we're prepared to write the business. We're not constrained either by capital or by sort of many peak risks as the retro programs are nicely in place.
So again, not predicting a massive increase of volume growth, but I don't exclude it either. Our goal is to continue to write economically profitable business, which is going to help us meet these targets we set out for ourselves. And if we got the chance to do more, then we'll do more. If we think the market is not responding to what we think are adequate price request, then we'll do a little less. But as you say, 60% of the book renewed at 11% growth is a nice place to be, I think.
The next question comes from the line of Ashik Musaddi with Morgan Stanley.
Just a couple of questions I have is, first of all, the life underwriting profits were impacted by mortality, but if I look at the underwriting profits within the life split, basically, I mean, it was more or less zero. So how do we think about that? I mean, ex mortality, how should we think about the underwriting profits in the Life business? Was there any negative variance deviation from your expectations? So that's the first one.
And secondly is -- sorry to go back on the casualty topic. I mean you've been booking a combined ratio of above 100% for, say, seven out of past nine quarters. I mean how do you get confidence that if it doesn't happen in the next few quarters? And if it does happen in the next few quarters, would you have -- could you just remind us where could be the pockets of additional reserve releases could be? I mean you mentioned that there are still quite a few IBNRs from other business lines, but any obvious ones which you would remind us that this is something which could be released to offset any casualty reserving?
Sure, Ashik. Let me give you try. With respect to the Life and Health, I'm not quite sure I've got the source of your question. As [we've showed] I think in one of the early pages in the slide deck maybe five where we are demonstrating the U.S. excess mortality, which unfortunately is highly relevant for our quarterly P&L., what you see is the -- on the right here and scale still being above what would have been expected.
This excess mortality is -- it looks to be a little less than 5% on the graph, dramatically different than it was in the two COVID quarters of '21 and '22, but still not where it was in the prior years of '19 and '20.
And so I think in the -- we had a strong investment result in the first quarter, but this drag on mortality is kind of where the difference is between what we showed for the profit for the quarter and what you might have expected if you took 900 and divide it by four. And then there was a couple of other positives and negatives in the book, but there's nothing other dramatic item that we have any place in other lines or other geographies that were material for this result in Life & Health.
On the casualty combined ratio, look, if I had a very specific positions, which I thought were redundant, I would have drop them into the quarter and our external auditors would have been clear that they should be dropped into the quarter, I think there are the places which we'll evaluate during the course of the year that might be relevant as we see, I mean, a little bit like the flood component of Hurricane Ian. When we finished the full year, we had indications that this might be over reserve, but we weren't sure, and it wasn't clear by how much, and it was only after we got additional data during the course of the first quarter that we were comfortable saying that this is, in fact, a redundant piece.
It also didn't -- it wasn't lost on us that some of the investors in the -- our retrospection programs were looking at the same data we were looking at and wondering why these reserves were being held on to when it didn't look like we were going to have the claims cost. So I think there's a couple of different things going on here. The one observation you did make is we do have IBNRs. And again, I don't want to beat them to death, but the broad-based [1 billion] of inflation-related IBNRs that we put up in 2022, 95% of that remains as IBNR at the end of the first quarter. They will eventually be migrated down into specific sub-portfolios or even case reserves along the way.
But I think, again, we believe that we're well reserved, but part of this is working together with our clients and making sure that we've got the information that's relevant from them to be able to make our own judgments of how things might be developing.
The other thing which is important is our underwriting of this line of business has fundamentally shifted in the last two or three years, a major reduction in large corporate Re portfolios that have been reinsured by us, the complete exit of umbrella liability and excess and surplus casualty by core. So a number of very explicit actions to reduce further our exposure to the -- what we think is the worst part of the U.S. casualty market. Hope that helps.
The next question comes from the line of Tryfonas Spyrou with Berenberg.
I just have one question on Life Health and sorry to come back to this. I appreciate there could be some lingering COVID impact and how -- as you do demos on the slide, the excess mortality has come down a lot in Q1 almost back to pre-COVID levels. On the other hand, it looks like the flu season in the U.S. has ended unusually early in December last year. So I'm just trying to understand any other factors are keeping the results addressed in Q1.
And I guess how comfortable do you feel the $900 million run rate for the year?
Sure, Tryfonas. So yes, I saw the headline of the flu season ended in December. I'm not sure if that's coherent with what we've heard from other sources. And what I can say is when you look at the excess mortality, it was worse in January and February than it was in March. And there seems to be a trend being down.
Now whether that's point 1, point 2 is, I think and the data we received to date, it's -- we struggle to differentiate between COVID explicit claims, COVID-related claims and claims that are not COVID in the mortality. It's gotten more complicated because of the fundamental shift away from testing in the populations, but also there might or might not be other things going on. What we can say is, when we started the year, we expected COVID losses of more than USD 100 million to be absorbed during the year, and that was recognize when we set out the target of $900 million.
So some of what was a negative impact in Q1, which we believe we would have taken some of that up. But I think we still have a nontrivial amount left for the rest of the year. We don't expect COVID to be zero for the next three quarters, but we think we can absorb what's there in part with our expected loss profile. And the rest, yes, I think this is a strong Life and Health business where the negative impact for -- in the U.S., in particular, from the cohorts of pre-2004 why our two business should not have the same cost to us that they've had for the last three or four years, and that improvement plus improving investment result give us a high degree of comfort that we'll hit the $900 million.
[Operator Instructions] The next question comes from the line of Ivan Bokhmat with Barclays.
I got two questions, changing the topic a little bit, one on the investment portfolio. I was just wondering if the current share in the commercial real estate space over in the U.S., in particular, have made you were seeing some of your asset allocation. But I've noticed on Slide 23 is that the other investments number has come down a little bit. So I'm just wondering if you have done anything specific there, how do you assess the situation, whether on the investment or on the underwriting side?
And the second question, there's been some noise over the past six months about the changes to cyber [wording] taking out the state attributable [attacks]. So I was just wondering, in the past, there has been clearly from the management stated the caution to write that business because specifically of the accumulation due to state-sponsored [attacks]. Do you think that this new wordings would make you more optimistic on the class?
Sure, Ivan. Thanks very much for the questions and two questions that didn't include U.S. Casualty. So on the first one on the investments, yes, we're watching commercial real estate. Our real estate portfolio is not particularly large.
It's quite diverse. We actually sold a couple of properties in the last two years, not because we're growing insights but we thought they were relatively fully priced and provided the opportunity. I think this is one of the segments which we're unlikely to growing to at this point of time. We continue, I would argue to be cautious in the overall investment approach. We continue to have hedges in place, both on equities and to a lesser degree than we started the year on credit.
And we'll see how the rest of the year progresses. But we are very pleased that we had no impairments on neither real estate nor the credit portfolio in the first quarter of the year. And the gains were net positive from the positions. So I think at least for now, we'll stay relatively conservative in our deployment and don't see any big exposures or risks in the near-term.
On cyber, yes, so the market has seen major price improvements over the last two years. We believe they're absolutely necessary. There's a different question of whether they're sufficient. But directionally, this has gotten to be a better price market. Terms and conditions and specific [indiscernible] in place has improved as well.
And so that's a good thing. I don't think that combination makes us enthusiastic on the segment. We continue to believe that the accumulation risk is problematic, not just because of state-sponsored events but also, frankly, other potential actors working to simultaneously attack across geographies, across industries for reasons which might or might not be obvious.
And so we do continue to write this both in Corporate Solutions and in our reinsurance portfolio, but the premiums we have, I think, are underweight at $600 million, at least that was where we were at year-end, and we've got no real intention of growing this in any material way during the course of 2023. So I think it's increasingly significant line of business for the industry. I think it's better price than it was. But I think the challenges in this line remain and what we're doing right now is spending real time with partners to figure out how we are able to mitigate the risks and manage down the loss potential of the business we do right.
The next question comes from the line of Thomas Fossard with HSBC.
I had two remaining questions on my side. The first one will be related to potential issues regarding [surrender] rates on the Life side. Just was wondering if you may have on the return in the past, maybe in some financial solutions line, any -- or if you have any exposure to potential increase in lapse risk coming in the Life books?
And the second question would be regard -- maybe in the U.S. with more liquidity contingency plan being worked out by insurance company maybe as well as in Europe. I was thinking if you've been approached to provide liquidity and actually if you are willing to participate to this market?
Thanks for the question, Thomas. On the first one, I think the answer is we've got no particular exposure in our life book to positions, which are potentially exposed to lapse risk. In the first case, I'd observe that many of the primary companies after 2008 worked very hard on their products to make the likelihood of lapses and/or redemptions smaller based on a couple of bad experiences that you saw in the marketplace. Obviously, the famous class of YRT products that we've been talking about for too long, the pre-2004 had as one of its major design flaws, a lapse exposure, which we've learned some lessons from it.
And so we haven't put that up is a place where we want to go back into in terms of our exposure. So I think the industry is better protected and we don't have any specific risk exposure.
The second question, I've not aware that we've been approached, but I don't think we'd be particularly interested in finding ourselves the provider of liquidity to either our clients or other participants in financial services. We're comfortable writing the business the way we're writing it. The funds withheld component is an area where we're not trying to grow the business, but we do accommodate clients where there's a specific reason and a specific need, but it's a very small part of the portfolio, which I wouldn't necessarily drop in your class of liquidity-driven activity, but there's nothing new or novel going on there from our side.
There are no more questions at this time.
Then we'd like to thank you for all the questions asked and for your interest. Should you have any follow-up questions, please do not hesitate to contact the IR department. With that, we wish you a good rest of the week, and thanks again.
Thanks very much. All the best.
Thank you for your participation, ladies and gentlemen. You may now disconnect.