Q3 2024 Allianz SE Earnings Call

<unk> Allianz group financial results for the third quarter of 2024.

For your information, this conference call is being streamed live on Allianz.com and YouTube. A recording will be made available shortly after the call. At this time, I would like to turn the call over to your host today, Clare-Marie Coste-Lepout, Chief Financial Officer of Allianz SE. Please go ahead, Clare-Marie. Thank you very much, Andrew. And good afternoon, everybody. I'm happy to share with you today our third quarter results. If you look at our 9M numbers on page 3, which clearly are a very nice set of numbers, you can see our strong momentum in terms of both growth and profitability. This momentum is well spread across our segments. What the numbers show as well is our resilience.

As we have seen both in the second quarter and the third quarter, an elevated level of natural catastrophes but as well of large losses and weather-related events. So let me now go into more details into the numbers. You can see our overall growth which is strong at 11% and that's ahead of the first half of the year which was at 7.5%. All segments are contributing with PNC steaming both from volume and price, life and health with double-digit growth and asset management with net flows of almost 70 billion, now more than three times the entire level of net flows we have seen in 2023 and our asset and our management are up 7%.

year to date. On profitability as well, we are doing very well. Our core ROE is at 17.5%, which is up 15% versus last year. This is supported by our improved operating profit and net income, clearly. PNC has a combined ratio of 93, which is at the low end of our outlook range. Our value of new business is at 3.5 billion, which is reaching record level in the first nine months of the year. And our cost-income ratio in asset management remains at industry-leading level. With this sustained momentum and our operating profit being now at 11.8 billion and 9M, we are happy to mention that we now expect our year-end operating profit to be at 3.5 billion.

operating profit to be in the upper half of the outlook range. Let me now go to the third quarter on a standalone basis on page 5. So clearly we had a very good quarter, both in terms of growth and profitability. If you look at our main KPIs, so total business volume, operating profit and shareholder core net income, they are all up double-digit level versus last year, and our ROE is at 18% for the third quarter. PNC has seen nice growth, 9.5% internal growth, out of which we have both pricing and volume. Volume is actually 3% into that number. Operating profit is at $2 billion for the quarter.

That's supported both by the growth but as well by the improved combined ratio at 93.5 which is well within the range of our outlook and clearly much better compared to last year which was impacted by an exceptional high level of natural catastrophes. Life and Health had an outstanding quarter from my perspective in terms of new business. You can see new business up 31% versus last year. Clearly all regions are contributing. You will see that when we go into more details. We are growing at an attractive new business margin of 6.1% which basically allows us to deliver a value of new business of 1.2 billion which is up 33% versus last year. On the Asset Management,

side, we have seen third-party net flows of $20 billion for the quarter, out of which PIMCO is contributing $25 billion. Our operating profit is marginally down. This is due to the lower level of performance fees in the quarter. And adjusted for that effect, our underlying operating profit is up 11% year-on-year, which I think is a very good level. So overall, a strong momentum across the board, building on the one we have already observed in the first two quarters of the year. Let's go to solvency on page 7, where you can see that our solvency ratio is up 3 percentage points compared to the second quarter, and we emerge at a strong level of 2.9%.

The sensitivities as well are unchanged compared to the second quarter, and as you may remember, they are at a lower level compared to year-end 2023, and this is including from the cross-effects, which is a very nice outcome from my perspective. Moving to page 9 and having a look at our organic capital generation, which is strong for the quarter at 7 percentage point, that's fully in line with our expected range of 6 to 8 percentage point per year, net of tax and dividends, and this, despite the high level of growth we have seen in the business in the quarter, so that's a strong outcome in terms of organic capital generation. For the rest of the work, you can see that we have a limited negative growth.

negative market impact of minus 1 percentage point, which is mainly linked to the lower level of interest rate. On the capital management side, we have minus 2 percentage point, which is linked to the dividend accrual, the extension of the share buyback in the second quarter, which is partially offset by the AGCS transaction in the US that is mainly contributing to the offset of the first two effects I was mentioning. So, overall, a strong development of our solvency ratio and we expect our net operating capital generation to be fully in line with our 6 to 8 percentage point range for the full year 2024. Let's move to page 11, looking at PNC.

I think this page clearly highlights the strength of the growth momentum we see across our portfolio in PNC. Growth is higher in retail at 11 percent, with motor at 13 percent. Commercial see a growth level of 6 percent. Rates continues as well to be at very good level across the board. As you can see, the growth is well spread across entities and geographies. You can observe that on Germany, on France, on Italy, on Australia, on Spain. Fed credit is seeing a bit of reduction of total business volume, which is linked to the weaker economic environment. And on AGCS side, we see the effect of the divestment of the mid-core book in the U.S.

compared to last year, this is linked to both a better combined ratio which is at 93.5 as I was mentioning really middle of our outlook range and the growth of our insurance revenue which is up 8% versus last year as we are earning the growth we were basically communicating quarter after quarter into that number. So before I go into a bit more detail into the combined ratio, I would like to highlight the fact that the AGCS sale of the U.S. mid-corp business is impacting our number as we have a fronting for ARCH of the new business that is now in place and is going to stay for up to 3 to 4 years.

years and this fronting activity is basically mechanically impacting our ratios, this is improving our expense ratio and this is deteriorating our loss ratio via the range chance ratio. So now going into more details into the combined ratio, you can see that our NATCAT impact is lower this quarter at 3.4% compared to last year that was at 7.3%. So last year was very exceptional, it was one of the worst, I mean it was the worst quarter in 10 years in terms of NATCAT experience, but still at 3.4% this is above our expectation of 3% CAT load and the quarter in general has not been particularly quiet in terms of events. So we have seen the floods.

in Eastern Europe, we had several storms in Europe as well and we had some hurricanes in the U.S. and also beyond NatCat, we also have seen quite some smaller weather-related events and large losses during the quarter. Our expense ratio is very good, is benefiting I think from fundamentally from some mixed effect from the productivity actions we are continuously pushing through and as well from the AGCS effect I was mentioning before, which is contributing positively to the expense ratio. Also, I think on a year-on-year comparison, our expense ratio is a bit, the comparison is flattened due to the fact that last year we had some negative effect into our expense ratio.

If we move to the customer segment, you can see that retail is at 94.9% combined ratio and within that number, our undiscounted attritional is improving by 1.4% point versus last year and 1% point versus the second quarter. And here we are clearly earning the benefits of the pricing actions as we expect. Commercial remains at a strong level of performance with a combined ratio of 90.5% despite some of the elements I was mentioning, so the AGCS effect, but also some of the large losses I was mentioning as well. Let's move to page 15, which overall continues to highlight the quality of our franchise.

across our PNC business and geographies, I would say. If you look in a bit more detail into the operating entities, you can see that Germany and Central Europe, as an example, have been also impacted by natural catastrophes but are emerging with a good level of combined ratio despite that effect. We see clearly for the UK and Australia the continued improvement in terms of combined ratio and operating profits showing up into basically as a consequence of the actions which have been taken by the teams to really improve the quality of the business. So that's nicely showing up. France, as an example.

also see the strong actions the teams are pushing in terms of addressing the inflationary effect that we see on that market. On AGCS, you see several elements. I would say clearly the fact that the quarter has not been quiet in terms of natural catastrophes for AGCS. You have a bit of a negative effect coming from the ARCH transaction. And then we have seen quite some large losses in the quarter that basically are not for us any trend related, but they came as an increased load into the quarter. On trade, we see a normalization in terms of loss experience, but we also had some large losses into the quarter.

which are explaining the reduction of operating profit, still I think combined ratio being at a very good level for that business, partners is clearly earning the growth into the operating profit at a good level of margin, so really good trajectory on that side as well. Moving to page 17, where you can see on the investment result side that we continue to earn the benefit of the higher rate environment into the interest and similar income. This is partially offset by the interest accretion, which is in line with our expectations but clearly is reflecting the fact that we are.

paying for the higher discounting that we have seen last year. And in the valuation results and other, we have a bit of noise this quarter, which is mainly linked to the euro to US dollar rate being like more negative effect this quarter versus more positive effect last quarter, which is emphasizing the effect on that line item. So overall on PNC, let me recap. We see a strong growth continuing, very good level of profitability in line with our outlook, with the actions on inflations being earned through in the combined ratio. So overall, we are well positioned towards the future on PNC. Let's move to life and health on page 19, where

New business has clearly been exceptional this quarter and this is particularly strong from my perspective for a third quarter, which traditionally is always a little bit lower. So PVNBP is up 35% at an attractive new business margin of 6.1%, which is leading to a value of new business of 1.2 billion, which is up 33% versus last year. And clearly all our entities are contributing to that growth, as you can see on this page. So it's a bit difficult to pick, but maybe let's first pick the US, where we have a nice growth of 60% in terms of PVNBP, which is linked to the momentum in the US.

US, clearly, and also some promotions we have run on our fixed index annuity business for six weeks in the quarter. Italy, also a very nice growth of 22%, where the colleagues in Italy are basically market leading in terms of Unitlink business, and this trend is continuing this quarter. Asia-Pacific, also in particular, had a very strong growth during this quarter, at an excellent new business margin of above 10%, which basically is leading Asia-Pacific to have the second largest contribution in terms of value of new business after announced last year.

life in the quarter. This growth is as well of a good quality as we are growing at 95% from our preferred line of business this quarter. If we go to page 21 and we look at the CSM development, here as well really good development overall. The CSM is growing at 1.5% for the quarter, which is bringing us at 4.6% growth year to date against our guidance of approximately 5% for the full year. This is significantly in excess of the release, approximately 60% higher, which is clearly good for the future.

And our CSM release is at $1.3 billion, which is fully in line with our expectations. To provide you with maybe more details on the CSM development through the work, you can see in terms of development for the economic variances, we have positive economic variances of $300 million, which is mainly linked to the lower level of interest rate. And our non-economic variances are negative, $600 million. This is linked to the annual assumption updates that we are performing in the third quarter. And in particular, this is coming from the lapse experience we have seen over the last few quarters. And this effect is actually halved on a net basis.

has a significant part of this non-economic variance is linked to the old book of fixed index annuity on easy life side, which is reinsured. So from gross to net, it's disappearing. And as you know, the net CSM is what matters for future profitability. Our CSM sensitivities are broadly unchanged, and they are at a very good, very low level, which is also quite good. And if we move to page 23, our operating profit is at $1.4 billion, which is fully in line with the second quarter of 2024, including the translation from CSM release to operating profit.

flows on HDI side which is twice the level of the inflows we have seen in the second quarter. HDI has seen outflows of 5 billion which is linked to two large mandates we have in the low margin fixed income business. And we have seen as well on HDI side in the third quarter some inflows in the higher margin business like multi-assets or alternatives as an example. Year to date for both PIMCO and HDI our net flows are at almost 70 billion against 22 billion for the full year 2023 and an outflow of 80 billion for 2020.

October as well has seen further positive inflows coming from both AGI and PIMCO. So overall, at the end of the third quarter, we have $1.8 trillion of asset under management, which is up 7% versus the beginning of the year, and this is also our highest level of asset under management since the beginning of 2022, and this is clearly good for our future level of profitability. Let's move to page 27, where you can see that our revenues driven by the asset under management are up 7% versus last year, with a resilient level of fee margin, slightly impacted by business mix.

level of performance fees is quarter and PIN co-signed. This is only a matter of seasonality and we expect those to materialize at a later point of time. HGI is nicely growing revenues and if we move to the year-to-date view, revenues are up 4%, I think suggested. Moving to page 29, as logical, our operating profit is impacted by the lower level of performance fees. Excluding this, OP is up 11% year-on-year and that's driven by both the higher average asset under management and the strong cost control at both asset manager. As you can see, despite the lower level of performance fees, our cost income ratio is at 61% which

is in line with our expectations. So overall, on asset management, we see strong inflows, now already at three times the level of 2023. Asset under management are up 7% year to date with strong profitability level. This is also positioning as well for the future. Corporate segment, I am going to skip. This is in line with our expectations and there is nothing specific to highlight. Let's move to page 33, where you can see that from an operating profit to net income, there is a bit of movement on the various line items. But overall, we have a fairly clean effect with 400 million of non-operating profit, much lower compared to the third quarter 2023. We also have a very strong growth. So overall, we have a fairly clean effect with 400 million of non-operating profit, much lower compared to the third quarter 2023.

have like the effect of the ARSH transaction that is showing up in particular online item other. Our tax rate is in line with expectations. So overall, our shareholder core net income emerged at 2.5 billion, which is up 23% versus last year. Our core EPS is as well up 25% versus last year. We are fully on track for the 25 euro EPS target for the full year. Let me recap on page 35. Clearly, we are happy with the strong momentum we see in the business both in terms of growth and profitability across all our segments. This is as well underlined by a strong level of solvency ratio at 209%.

This is positioning us well for the future and given where we are now at 9M, we can refine our guidance for the full year to an operating profit expected in the upper half of the outlook range. I'm very much looking forward together with the entire team here to welcoming you at our capital market day on December 10 to exchange on perspective for the next three years. I'm now happy to take your questions but suggest to keep the questions related to the outlook for that event. Thank you very much.

Speaker Change: clicking talk request and we will release your line if you've dialed in it is a star five some house rules as ever

Speaker Change: I'd ask you to keep your questions to two questions focused in particular on the Q3. If you have any follow-up questions, then rejoin the queue at the end. Great. With that, our first question is from Andrew Baker from Goldman Sachs. Go ahead, Andrew.

Thanks for watching!

Andrew Baker: Thanks, guys. So, the first one is just on the PNC expense ratio development. So, I appreciate that some of the improvement was from the Arch transaction.

Speaker Change: Also, you highlight the favorable mix changes and the contribution from productivity gains. Are you able to just give us a sense of what is, what specifically is driving those favorable mix changes? And then if there is anything you can say to break out the contribution from the productivity gains, that would be really appreciated. And then secondly, is there anything you can say on, hopefully this doesn't fit into the outlook comments, but maybe it does, but anything you can say on the Q4 NACA experience today, particularly on Spain, and then maybe if you can comment on the interplay between what you expect the private insurers to pick up versus the CCS to pick up, that would be extremely helpful. Thank you.

Speaker Change: Thank you. So let me start with the Q4 NAPCAT. So I mean, at this point in time, we expect for both, I would say, so the hurricanes we have seen in the U.S. mainly for the Spanish floods to be well within the type of budget we would expect for the quarter. So nothing in particular, particularly higher, I think for the Spanish one, I would expect to be in the, I mean, maybe a low double digit or double digit type of loss. We are still obviously looking at it.

Speaker Change: And then for also the Hurricane in the U.S., we expect to be either, I mean, high double digit, low triple digit number, but again, really well within our 3% catalog for the quarter.

Speaker Change: So, on the PMC expense ratio, I understand you would like to understand a bit more what's happening. I mean, it's always a bit difficult to unpack because we have so many specific elements which are contributing to the mixed effect, so it's really related to the various type of businesses and how they come through in a single quarter. I don't think you should use that really as a reference overall. I would rather use basically the status we see at 9M as a reference for the expense ratio and you can expect a little bit of a positive effect to come through from the ARCH transaction as we were mentioning before. But I think that's the best way to unpack that.

Speaker Change: numbers because it's always a bit too granular without adding value from my perspective. Thank you. Great. Thanks, Andrew. Our next question is from James Shuck from Citigroup. Go ahead, James.

Yeah, hi, and good afternoon, everyone.

My first question is around the AZ Life TSM.

Speaker Change: just the development in the nine-month stage, so you added a lot of new business, very strong in the period, but the CSM actually fell sequentially nine months versus H1, so just keen to see if there are any operating variances or lapse experience happening in that.

in the U.S. crease. And then, secondly...

Speaker Change: Just picking apart the combined ratio a little bit, so the underscanted attritional loss ratio in Q3 adjusting for AGCS rose by 40 basis points.

Speaker Change: But the retail number got 1.4 out of 140 basis points better year on year. That implies quite a severe deterioration on the commercial side. So can you just tell me what's happened there in the outlook for commercial, please? Thank you.

Speaker Change: Thanks a lot, James. So let me start with the easy life CSMA effect. So indeed, you know, for the third quarter, so we have done our assumption updates. And as I was mentioning, you know, so we have adjusted for the lapse assumption in particular. In the U.S., given, you know, the dynamic of that market where you see all businesses basically lapsing, being like recycled into a new business, this is a particularly strong effect. So you have that effect that is showing up in the growth CSMA of easy life. And then you have the second effect I was mentioning, you know, moving from growth to net because, I mean, in particular, that those lapses are happening on.

Speaker Change: the business that is reinsured today, the fixed index annuity business that is reinsured on the easy lifestyle, which is basically then being neutralized when you move from gross to net. So those are the effects you see on the easy lifestyle, mainly on the CSM. And then I think on the combined ratio overall.

Speaker Change: So, on the attritional loss ratio for commercial, indeed, we have seen an increase of the attritional loss ratio for commercial altogether. There is clearly the effect of the ARCH transaction, which is higher when you move from just looking at global to only commercial on a standalone basis. And then we have, I think, two main effects in that number.

Speaker Change: We have seen a higher level of large losses for the quarter, clearly both on AGCI side and on trade side which are impacting the number and there we don't see any particular concern. So, it's just like volatility that happened to be in this quarter which is impacting that attritional combined ratio. And the second effect is this normalization of the attritional level of trade which is also coming into that effect. And that's fully in line with what we expect to see given the overall market dynamic for trade. So, and you know as well the team is pretty conservative in the way they are also booking the current accident year.

Speaker Change: loss ratio, so that's also what you see here, but it's really fully in line with our expectations. Very helpful, thank you. Thanks, James. The next question is from William, William Hawkins from KBW. Go ahead, William.

William Hawkins: Hello, both. Thank you very much. Clary, just tell me a bit on the life CSM, please. First of all, I probably should know this by now, but can you remind me why you have a positive impact on the CSM from a decline in yields? Normally, I think lower yields are bad for life companies and so I just can't remember why your CSM benefits from that. And then secondly, can you just help me understand the outlook for the expected in-force return? Do I just drag across 5.8% as a constant return or could that number be bouncing around a

Thank you.

William Hawkins: Sorry, could you repeat the second question, I mean the sound was not very good so I could not hear you very well. I'm sorry, on my side, yeah, I just wondered about the outlook for the expected enforced return in the CSM walk, it's 5.8% in the nine months and I'm just thinking do I just drag that into the future, it's a very stable figure or is that a number that could be moving as yields move over time?

Speaker Change: Yeah. So on the life, sorry, on the CSMA effect. So basically, this is really, I mean, first of all, this reaction depends a lot from one type of life business we have to the next one. So that's also, again, a bit complicated to unpack. So you can also ask the IR team to maybe comment it more to you in the details, depending on our various businesses. But the main reason is that there is an appreciation which is linked to our protection business, and then the effect of the profit sharing into the surplus that is basically explaining those effects into the economic variances. And then on the expected.

Speaker Change: expected in-force return, they are also moving depending also on the underlying model we are using for our live business, so it's different between the VSA and the BBA business, where we will have for VSA basically a market rate to which we are adding an expected over-return, and so the market rate is risk-free basically, and then the over-return depends on the underlying assets which are backing our live business, so that will clearly depend on the environment I would say. And for BBA...

Speaker Change: We are using basically our locked-in rate at inception. So those are fixed. So they were just for indication. They were 4.4% for the full year 2023. And they are currently at 4.5%. So basically, you can estimate also unchanged towards your end. And for our VSA side...

Speaker Change: So, you can use an assumption that basically the risk-free rate we use is currently 3.5 and then you add a bit of extra boost linked to the expected overall return which you can estimate around 0.5, that's basically what you can have in mind for the full year.

William Hawkins: Thanks, William. Next question is from Vineet from Mediabanker. Vineet, go ahead, your line is open.

Vineet: Yes, good afternoon. Thank you very much. I hope you can hear me. So my two questions. First is on the attritional loss ratio where I remember last year we were thinking about 24 being a 71 kind of level and now when we clean up the nine months for all the for Caledonia for

Vineet: the AGCS transactions, you're getting somewhere near 71.3. And I'm just wondering if you're still happy with that kind of.

Vineet: looking at it on a clean basis or would you still think that you know we should be looking for that 71 level because on a reported basis now I would rather imagine that we are looking about a flat number for the Solia 24. I'm sorry this is outlook but this is just for the near-term for you really trying to pack that out. Second question is on the

Vineet: life side, where obviously such strong new business growth, but I'm just curious, the nine-month operating investment result remains.

Vineet: lower this year than nine months last year. Whereas obviously in PNC we're seeing the opposite end. Is there something in the life investment result which is notable or a one-office effect?

So that's my two questions, please. Thank you.

Speaker Change: Thank you. So I think indeed on the attritional loss ratio, first of all, I think the better reference given the ARCH transaction overall for our combined ratio from my perspective is really to use as a guidance overall these, I mean the 93 to 94, I think clearly towards the low end of the 93 to 94 for the full year, given the swing we are seeing from an attritional loss, I mean from an attritional loss ratio to expense ratio perspective, that's a better view. I think in the current number of, on the loss ratio side, towards the 71%, I think we have seen several effects, right?

Speaker Change: We have had the New Caledonia large loss in the second quarter that has impacted negatively the attritional loss ratio. We have the ARJ effects I have already mentioned. And we have as well an elevated, a bit elevated level of weather-related events into that number. That is basically explaining the full breach against the 71 I was mentioning before. So what is even more important for me is that in the underlying, we really see the improvements we were expecting beyond the bit of the volatility effect I was mentioning overall. On the OP investment result effect, which is indeed a bit…

Speaker Change: a bit lower compared to last year. So it's more that last year was really, really high, so it was unusually high last year. And if you look at the third quarter development, it's more in line, basically the third quarter is fully in line with the first and the second quarter on a standalone basis, so that's the right reference because we had some specific effects last year. Okay. Thank you, Gérald. Thanks, Vinit. The next question is from Wilhard Castle from UBS. Go ahead, Wil.

For more information visit www.FEMA.gov

Speaker Change: Thanks, everyone. First of all, with retail running at around the 95 and commercial between 90 to 91, I guess is the return on capital better here for retail or commercial at that level given your relative diversification implications? And secondly, can you give us a bit of an update on how the relative competitiveness is shifting now quarter on quarter in UK retail? It looks like barring any material makeshift in a way that you're putting through price increases but a bit of a slowing rate quarter on quarter. And how should we expect volumes – I guess when should we expect volumes to stabilise in the UK?

Thank you.

Speaker Change: Let me start maybe with UK retail where indeed I mean like I think we are now starting to see a price decrease in particular on the motor market in the UK still I mean we are currently pricing above the inflation level and we are also pricing at a level of margin we are happy with so we are still basically seeking growth in the UK retail market but I think the peak of the UK retail market is behind us in terms of dynamic from what we see.

Speaker Change: We have our total ROE for PNC is approximately 15% for PNC overall and we have good developments I think across the portfolio. At this point in time, I don't really want to share a split between retail and commercial because it's too high level from my perspective and you really need to go into a bit more details looking at each and every line of business, each and every geographies because you have like very specific dynamics in each and every of our markets also related to the specific capital consumption of each and every of our markets.

Speaker Change: of those markets. So I think the important number from my perspective is really this 15% which is a good level of ROE that we are also seeking at structurally improving going forward.

Speaker Change: Thank you. Thanks, Will. The next question is from Andrew Sinclair from Bank of America. Go ahead, Andy.

Andrew Sinclair: Thanks everyone, a couple for me and I'm in Singapore today so let's start asking about Asian life.

Andrew Sinclair: Just really good figures there, and I thought it was quite impressive, particularly quarter on quarter, never mind year on year, so just anything to particularly call out within that that has been particularly accelerating, and on the subject of Asian life, anything that you can say about income insurance in Singapore next steps. And then my other question was just about AGC&S, it looked like the rate trend slowed quite a lot in Q3 versus H1, was that rate trend slowing to do with the ARCS transaction as well, or is that just underlying trend slowing in the retained business, just anything you can say there. Thank you very much.

Speaker Change: Thanks a lot. So on Asia Life, so we have seen indeed particularly strong growth in terms of PV and BP on our life business. But I think if you look at the portfolio and the trajectory of that portfolio over the last few quarters, we have seen really a steady growth, which is more linked to the fact that we have been strengthening our sales team and we have been doing also dedicated sales campaign during the year. But if you look quarter after quarter, as an example, we are at 1.7 billion of PV and BP in Q1, also 1.7 in the second quarter. So there is no...

Speaker Change: I mean, no really big developments on the Asian life except the fact that there is strong focus on growth in the market which is good. Then I think on income insurance, at this point in time, there is nothing I can share with you. I think when we know more, I will share more information with you. Clearly, I think we have taken good notes of the comments which have been made by the Singapore government and we are working with involved parties to assess the concerns so that we can come back basically as soon as possible. More fundamentally, we like the Singaporean business and we are really convinced we can

Speaker Change: can contribute to the Singaporean economy going forward, either via the footprint we have today or basically like further developing our various setups there. I think then you had a second question, which was related to AGCS and the rate dynamic on AGCS side. So clearly, I think on the large commercial and specialty business, the rate for momentum is decreasing very quickly and we have some part of the business that are clearly softening. We have seen that trend already for some of the line of business, that was the case for cyber, for financial lines as an example, where we see a strong trend.

Speaker Change: rate decrease which does not always mean we are not price adequate but a strong rate decrease and we see as well in some part of the world for other parts of the business also those softening trends across the board. So I would expect also to continue to see reduction of rate level steadily on the large commercial and specialty business where we are also paying a lot of attention in terms of underwriting quality on our side.

Great. Thanks, Andy. Thank you.

Speaker Change: The next question is from Hadley Cohen from Morgan Stanley. Go ahead, Hadley.

Hadley Cohen: Hi, thanks very much. A couple of quick questions please and the first one is, I guess, an extension of questions that have already been asked around the commercial lines margin. I mean, you talk about plenary, you talk about rates softening from here and I think you mentioned a normalization of loss activity on the trade side.

Hadley Cohen: Is there still more to go on the normalization of trade and how is rate trending relative to lost cost trends? I guess the question is to what extent should we expect further margin deterioration on the commercial lines?

Hadley Cohen: And then second question is on non-economic variances in light of CSM. I think in six of the last seven quarters they've been at least triple digit million negative.

Hadley Cohen: I'm just wondering how we should think about the outlook on that line from here. I think one of your peers has guided to further potential pressure from assumption changes on the growth CSM.

Hadley Cohen: for them going forward, so I'm just wondering how you think about that. Thank you.

Speaker Change: Yeah, thank you very much. Let me start with the live CSM development. So indeed, what we have done in the third quarter is that we have done this annual update of our assumption change. So that was very important that we do that in the third quarter. So we are reflecting what is the effect of our lapsing, in particular, the update of the lapse effect into our non-economic variances into the live CSM. So that has come through. And as I was mentioning, so this is 600 million negative, out of which half of that you can consider is moving away when you go from growth to net.

Speaker Change: But at this point in time, I think our CSM is very well reflecting the embedded value we have into our life business. So I do not expect any further negative development because we have fairly reflected what we expected at this point in time into our life CSM development. On the commercial side, I think you were mostly interested in trade. But I think if you look at the current situation, clearly trade has been seeing a bit of rate decrease in the recent quarter. This is a trend we have been observing already last year.

Speaker Change: where actually the rate change on renewables was even lower at year-end 2023 compared to what it is now. So, it was lower last year. So, this normalization is really related to the post-COVID environment and to the economic environment. What is specific to this quarter is this large loss volatility we have seen in the quarter. That being said, I mean, like if you look at the combined ratio of trade, it's still at a very good level from my perspective. We are at 92 or 93. I don't know. I don't have the exact number in front of me now, but it's a really good level of combined ratio. So, it's clearly, I mean, producing good level of margin.

Speaker Change: and we expect that to continue at – so, 83. So, we expect that to continue basically going forward at similar level. So, there is really nothing worrying in the development as we see it from trade at this point in time. Thanks very much. Just to quickly follow up on, I guess my question was, I mean, did it involve trade but more around the commercial lines margin outlook more broadly because I think you were talking about rate softening on large commercial and specialty.

Speaker Change: and given the direction of trade, maybe that stabilizes from here how we should think about the outlook for the commercial margin more broadly.

Speaker Change: Yeah, the way I would look at it is that I would consider like flat margin across the commercial business. Okay. Perfect.

Hadley Cohen: Thanks Hadley. The next question is from Andrew Crean from Autonomous. Go ahead Andrew.

Andrew Crean: Hello, Dan. Really just a numbers question. I wanted to dig into the retail result. Could you actually give us what the attritional undiscounted combined ratio was this year and last year? I'm just giving us the 1.4 points improvement, please. And similarly, did you do the same on commercial?

Thank you.

Speaker Change: This is not a level of detail we want to display, so I would not provide that. I think you have enough information with what was provided to basically understand the overall type of margin we are delivering at this point in time. The reason for doing it is because if we want to try and assess the level of underlying improvement which can come through in retail, that's ready to come through, we kind of need

Speaker Change: Well, Andrew, we give you the mix of the business. We've said that we think broadly we can hold the commercial lines margins flat. There's some noise this quarter with the ARC transaction, some large losses in weather, so you can follow up with us, but I think there's enough information to assess the outlook. Okay, I'll follow up. Thanks.

Speaker Change: The next question is from Craig Sinclair, doesn't say your institution, Craig.

Speaker Change: Hi, yes, Greg from Berenberg. Sorry, I was having technical difficulties with my phone. I was just wondering if I could ask two quick questions, one being on the October monthly net inflows from PIMCO. Can you give us a figure for that, please? And then on the second question, can you give more colour around the cost of risk for the German motor business, please? Thank you.

Speaker Change: Sorry, Craig, just to clarify on the second question, do you mean the claims cost trend? Yes. Yes, please. Okay.

Speaker Change: Good, so on October, I mean, normally we don't mention that explicitly, but basically we are around 10 billion for PIMCO and we are 1 billion positive for HDI in terms of October flow. So approximately 11 billion of net inflows for October month. Then on the claims cost trend for Germany, I don't have the exact number with me, so I think you can go back to the IR team. What I can tell you is that in general, we have been pricing, I think, ahead of inflation on our side.

Speaker Change: And we are taking a market share in the German retail market, in particular motor. And basically, what we see is that globally, right, the inflation, the claims cost inflation is always higher compared to the inflationary headline numbers given in particular the dynamic we see currently around trade, sorry, basically replacement parts of vehicles. So you have an economic tendency around that. So if you want my guess, but you can follow up with the team, I would say like between five and 10 percent inflation level would be what I would say.

would use in terms of trend.

Thank you. Thank you.

Speaker Change: Yeah, absolutely. Thanks for the opportunity. I just wanted to ask two questions, please. One is a broad question about the life and health, the value and the volumes. We've seen some quite big swings, whether it's US life or whether it's Germany, and there's interest rates to take into account, and also kind of sales campaigns. I just kind of want to get a feel for how confident you are that the base we're at now is not an artificially high one, and that going forward, we're going to have a lot of volatility similar to what we've seen on the way up. So are you confident you can steadily grow the new business outlook? Obviously, it's somewhat interest rate dependent.

Speaker Change: and I'm just keen to understand the level of volatility in that coming through. And then secondly, it's a question I've asked before, I appreciate, and maybe you're going to address it at the end of the day, but I do note there's only 300 million increase in the SCR for the business evolution, which given the amount of growth that you put on in the third quarter, whether that's on the life side or on the P&T side, I've seen a very low number, so I'm just keen to get some insights into that, to be able to split it out into P&T and life and health for me, that would be very helpful. Thank you.

Speaker Change: Yeah, so I think, I mean, obviously, I think you will always have some volatility in the PV and BP, right? We always, like, you know, do certain promotions, one quarter, the next quarter, so you never know when they are happening, so the teams are deciding when to do that. We also sometimes have, you know, large, big tickets which can come, so that was the case, as an example, this quarter on Lebanon, so that you never know when they are coming. What I still believe is that, fundamentally, there are good trends currently in our businesses, really also linked to the sales focus, also some of our increase of our tail agents, workforce, and so on and so forth. So that's really, basically, the trend.

Speaker Change: coming through, in addition to the fact that the rate environment is a good one for our business currently, which is supportive in putting our businesses in competition to the banking products in particular. So I think we are confident with the development, but you will always see volatility. Then on the STR effect, basically one of the reasons, I think if you look at it, the capital we have been using for growth is fairly similar from one quarter to the next. What has been varying from one quarter to the next is some of the benefits we are getting from the release of the in-force on the life side, which has been varying a bit from one quarter to the next.

Speaker Change: So in particular, you have a big effect between Q1 and Q3, because on Q1, we had the annual assumption update that it came there and basically reduced the level of release of SCR that did come into that number.

Thank you very much.

Speaker Change: Thanks James. And the next question is from Ian Pearce from BNP Exxon Paribas. Thanks. Go ahead Ian.

Speaker Change: Thanks, Andrew. It's nice to take my questions. The first one was just on some comments that were made earlier today, Claire-Marie, I think, about the valuation of AGI that you're seeing in the market. I was wondering if you could just provide a bit of context on how you're thinking about AGI valuation and what you are seeing in the market. I think that'd be very useful. And then the second one was just on a couple of the acquisitions that you announced in Q3. So, Fridays, a B2C business, and then the IpsiQ B2B2C business. Obviously, both in the sort of direct-to-consumer or digital distribution markets. So, just a little bit about what you're seeing there and if you're seeing increasing penetration, increasing shift towards that, and if that's sort of what's underlying the acquisition.

insurance to you now.

Speaker Change: Yeah. So if you allow me, I will not provide you with any valuation elements related to AGI. I think I was more referring to some of the press elements I have seen, which I think you don't need to have studied a lot to basically come up with a different valuation. So that's what I was making, but I will not go beyond that number. Maybe on direct, so what we are doing, indeed, we have been doing a couple of smaller acquisitions for direct, and that's really related to the fact that we have built a good platform on the direct side that is operating at a low level of admin expense ratio, if you want.

Speaker Change: which basically allows us to easily plug a new business and as such we can do that in a much better way compared to some of those smaller entities which basically are operating at very high level of expense ratio. So that's a really nice way to increase the scale effect on our direct platform which we like very much. So with those two acquisitions we have injected almost 4,000, 4,100 more customers into the platform of direct so that's clearly part of our strategic outlook for that business.

Thank you.

Speaker Change: Thanks Ian. The next question is a follow-up from Vineet. Go ahead Vineet.

Speaker Change: Yes, thank you for the opportunity. Just one question on Germany combined ratio, please, where even when we take out the GATT, the 3Q is about 50 or 60 bits better than 2Q standalone, and obviously very low, very good level of around 85%. Now, is this to be interpreted as?

Speaker Change: A, either the known motor is very strong or getting stronger or is it that...

Speaker Change: So sort of let's say the war on motor is being won now and we are seeing improvements between 2Q and 3Q.

Speaker Change: So just curious on what's happening in Germany combined ratio Q2 versus Q3. Thank you. Yeah. So basically, if you look at the, I mean, I think if you look fundamentally on the German business, what we see on the year on year and then in the fact that we see steadily the improvement in the attritional loss ratio as we were expecting. Also, this quarter, we have a lower level of runoff. Sorry, I mean, we have a slightly lower level of runoff this quarter compared to a slightly higher level of runoff this quarter compared to last year. We also have lower level of large losses this quarter compared to last year. But if you look fundamentally, this is a good level.

Speaker Change: I think, of combined ratio for the business and the main effect that is explaining the decrease is really the reduction of the NATCAT load compared to last year. And I think in the quarter to quarter, there is nothing really specific to be mentioned. Q2 to Q3, it's really much more of continued earning of the benefits as we expect.

Speaker Change: Great, okay, as we have no more questions, that will conclude the call today. Just to remind you, again, we have our Capital Markets Day coming up in a couple of weeks' time. It would be great to see as many of you as possible in person here in Munich or virtually. And with that, many thanks for dialing in and we'll speak to you again soon.

Speaker Change: Good morning, everyone, and welcome to Allianz's second quarter 2024 media conference call. Thank you for joining us today. My name is Frank Stoffel, Head of Financial Communications and Valuation Relations, and I am here at our headquarters in Munich with our Chief Executive Officer, Oliver Baette, and our Chief Financial Officer, Claire-Marie Coste-Leputre. Today's conference call is scheduled for 90 minutes, and as usual, we will answer your questions following the presentation. With this, I hand over to our CEO, Mr. Oliver Baette.

Oliver Baette: Guten Morgen, everybody. Thank you for dialing in this morning. In a quite crowded day of results from a lot of peers and a lot of companies, I would like to thank you for being with us today because there are many, many other things you could do this morning. So we appreciate your attention. I want to just comment on a few things up front in terms of developments for the next few minutes. And then Claire-Marie Kost-Lepoutre will lead you through the highlights of our financial results for the second quarter or more, probably also highlight the six-month development, obviously, because we have a long way to go.

Oliver Baette: term business model that doesn't live quarter to quarter, but that lives over next year, 135 years. So, let me just talk to you about what happened in the first six months. That's the page number three in the documents that we have distributed to all of you. I hope you have had access to and some time to digest the usual information.

Oliver Baette: than 5% up to 7.9%. Shareholders net income even higher. We measure it at the moment with core net income.

Oliver Baette: undiluted net income number is even stronger and our solvency is up at a very strong 2 or 6 from our perspective. The OP outlook therefore is fully confirmed. We feel at this point at least comfortable that we will make

Oliver Baette: Because of the strong results that we've had over the first six months, we have extended our share buyback by another $500 million to $1.5 billion, and then total payout stands as a strong $6.9 billion, which equates, depending on how you run the numbers, to a total payout ratio of 75%. This is, by the way, what Allianz has been doing on average over many years now, and we have a very strong commitment to keep distributions to our shareholders strong. In the first quarter, we focused on the results of increasing the dependable payout on dividends from 50% to 60%, so this is the balance in order to get to, depending on how you run

Oliver Baette: numbers to 75. So it's very important. This is fully in line with what we've been doing over the years. It's nothing out of the ordinary.

Oliver Baette: That's just the numbers, let me talk about the business, because Allianz is not in there for producing financial numbers, at least not only. But what we're really here for is to help people face really, really difficult future. And you remember a lot of debates we've had over the years about the value of our purpose, which we call We Secure Your Future. And the second quarter of this year had another test. This was the third large weather event in Germany in the last four years. We had serious floodings in southern Germany, just to give you a few facts.

This is from band.

Oliver Baette: and before to other, which we had in May of 2024. Remember, we already had a big flood. And it's totally clear that because of the way we are doing Netcat modeling now, how do we risk evaluation? And in particular, how we are dispatching our excellent claims to justice in time and helping our clients that we help loss to actually turn from a small

Oliver Baette: damage to a big damage and we can spend a lot of time on it. I would like to take the opportunity to thank our claims assessors and our employees in the claims departments because they have agreed together with our workers council to open weekend work and to work off hours and a big thank you goes to them and our agents in the areas that have been available for customers 24-7. And you see that one of the key success factors in terms of providing customer satisfaction and at the same time limiting damages was actually Allianz Handwerker Service. Something that we've been working on for a long time was not always perfect. Now the colleagues there have done an amazing job dispatching 6,700

air dryers very very quickly we had

Oliver Baette: very fast loss assessments, we actually had maximum 14 days to inspect all urgent claims and got outstanding customer feedback. I was very proud also to read that it was even acknowledged by politicians and the press. So thanks to the colleagues for doing that because it's good for customers and it's good for our shareholders because fast response also means lower claims. And there's a lot to be learned. Most importantly, also in Bavaria, if I'm allowed to make this comment, that we need to do better in terms of loss prevention, not just as insurance, but also from the political leadership because you may ask yourself why in Germany we continue to have these huge losses, why in neighboring countries?

Oliver Baette: that have been better prepared. Think about the Netherlands. They have been living under the water surface for a few hundred years. They are better protecting losses. So there is a lot to be done in order to make sure we reduce the impact of changing weather patterns forward. So we need to work between the industry, our clients, and particularly the political leadership to improve the protection against these weather events which are here to stay. So this is one highlight that I wanted to share out of the second quarter. And again, you see from the results of Allianz, despite these things happening in our core market where we are very large, the overall profitability is still very strong, even though various elements keep on being stressful. And we'll probably get questions around that. The second thing

Oliver Baette: One thing I wanted to share is we have had a very consistent story and execution around how we think about capital management beyond just simple dividend policy and share buybacks. And the key example here is for our quarter, we have sold our U.S. midcorp on entertainment businesses because we have been over the years thinking through could we ever get to a top 1, 2, 3 position in the segment in the United States without massive capital deployment and the answer has been no. And therefore at some point we decided we are not the best owner for this segment of the business and found a proper partner to grow this business.

Oliver Baette: than we can, and have redeployed the capital into the acquisition of income insurance, a leading insurance franchise in Singapore. Remember, Singapore is our home for the region in ASEAN, but we don't really run a big operating business there. We have a start-up, P&C Company, that's doing fine, but it's far from being a leader. With this investment, we are putting us to be the number one in P&C, the number three in health, and have a very promising starting position, number six in life, where we believe we can do much, much better. We really target a double-digit ROE over the midterm, and the consideration for acquiring 51% is the best.

Oliver Baette: 1.5 billion euros and we want to build that out and to have by the way it's very significant the OP in the region is going to grow by about 30% plus so it is making a meaningful difference to building out our present and Southeast Asia. We actually believe Singapore has the potential to become the Switzerland

Oliver Baette: Southeast Asia. So it's also an investment into the city-state and its its community and again I expect some questions around this. I don't want to take them on. So these are the highlights of

Oliver Baette: first six months and the second quarter. Needless to say, as you compare and read across the line with our competitors, it's very hard to do so well when the world is such a dangerous place. And I'm happy to say, not just our employees, our customers, but our shareholders are safe with us. With that, I hand over to Claire-Marie.

Claire-Marie: Thank you very much, Oliver. Let us move to page 7, and let me as well maybe start by thanking our employees, because I think our results are very strong for the first half of the year. And as you mentioned, Oliver, it doesn't come by chance, and they have been working really hard to deliver those numbers. So from my perspective, as I mentioned, I'm very pleased with those results, and they demonstrate our sustained strong momentum in terms of performance, together with the resilience of our operating model, as we have navigated through an environment which has seen inflation remaining sticky in some markets, some volatility in the capital markets, and while the first quarter has been benign in terms of loss experience.

Claire-Marie: The second quarter has been quite active from a weather perspective and in that context we deliver a record operating profit at 7.9 billion euros.

Claire-Marie: And similarly, actually, a record shareholder net income at 5 billion euros, which is almost up 8% compared to last year. And what I think is particularly nice to see in those results is that all our segments have seen business volume growth over the first half and have contributed as well to profit growth into our operating profit and net income. Those results and our sustained momentum basically give us confidence towards the second half of the year and our 2024 OP guidance. Let me now move in more detail into the second quarter results before we enter into our Q&A session. Let's move to page 9.

Claire-Marie: here we are looking at our results for the quarter. I think overall the strength of those results is demonstrating very well our sustained momentum that we have really been seeing building up over the last quarter. Overall, we see almost 9% growth and our operating profit is very close to the first quarter one despite the elevated level of natural catastrophes we have seen this quarter which just in terms of comparison compared to last year is 500 million more that got lost into the quarter.

Claire-Marie: So, let me start with the PNC segment. Here you can see our double-digit growth that is coming both from pricing and volume. Our combined ratio emerged at 93.5 for the second quarter which is in line with our expectation which are basically between 93 and 94 for the quarter and that's leading to an operating profit of 1.9 billion that is slightly above our quarterly expectations.

Claire-Marie: As mentioned, given the elevated level of natural catastrophes we have seen this quarter, this delivery is supported by a very strong underlying performance of our business which is particularly nice to see as we are clearly earning the benefit of all the actions we have taken to address the inflationary trends in our portfolio.

Claire-Marie: If we look now at Life & Health, we continue here with an excellent trajectory compared to the previous quarters with 1.1 billion of value of new business and a double digit operating profit growth.

Claire-Marie: On the asset and management side, I think looking at the first half of the year, we have been clearly in an uncertain context when it comes to the central bank intentions and we have seen again another quarter of double-digit net inflows in that environment. So, with slightly improving cost-income ratio and our third-party asset and management growth, our operating profit grew as well by close to 6% into the quarter. So, overall, a very strong picture as already mentioned. Let's move to page 11 and let's look at our balance sheet overall. We maintain a very strong level of strength with our solvency ratio that is up 3 percentage points compared to previous quarter.

Claire-Marie: And our sensitivities, which is a very important aspect to look at, I think, given the uncertainties currently, are broadly unchanged and are pointing out to a good level of resilience of our capitalization.

Claire-Marie: Page 13, if we go in a bit more detail in terms of development of our solvency-to-ratio, we are moving up by three points and basically two points are coming from our capital generation net of tax and dividend which is exactly in line with our expectations for the year which are 6 to 8 percentage point. The market effect that is made of plenty of effects is actually close to zero and on the management action side that also capture multiple dimensions, we also see a positive one point that is emerging from our actions here. So, overall a very strong solvency position that makes us confident and this confidence as mentioned.

Claire-Marie: by Oliver is reflected as well in our extended share buyback program of 500 million euros that we have announced yesterday night. Let's move to PNC and let's start by looking at our growth on page 15.

Claire-Marie: And here you can see the continuation of our excellent level of growth, quarter after quarter I would say we are at 10% overall out of which 3% are coming from volume. We see more growth in the retail segment which is quite logical also given the inflation pattern which is at 12% with motor particularly high at 15% and commercial is at 9% growth overall. And when you look at this page overall what you can see as well is that our growth is very well spread across our entities. So everybody is doing a very strong job here. You can see in particular Italy, Spain, Australia or Germany with a particular level of growth.

Claire-Marie: particularly high level of growth, but on the commercial side as well, we continue to see growth and maybe just to highlight on the AGCS side, while we have seen a little bit of softening of the rate, as you can see on the rate change and renewals, we continue to have clearly line of business or geographies where we have good areas for growth.

Claire-Marie: Let's move to page 17 and let's look at our operating profit for PNC. We are at 1.9 billion as I was mentioning already and that's ahead of our outlook midpoint for the year and I really think this is a very strong result given the elevated level of NATCAT we have seen this quarter. This is clearly demonstrating the strength of our diversified portfolio. We are going to look at that in a minute when we look entities by entities but that's very strong. Our overall combined ratio is at 93.5 and basically you can see that this is supported by also our good actions on the expense side as we are continuing our productivity journey.

Claire-Marie: And if you look in a bit more details at retail overall, so retail quarter to quarter is improving by 0.5 percentage point, but in that number, you have a higher effect of natural catastrophes of 4 percentage point. So just like this delta gives you a sense of the underlying strength and improvement we have seen in the underlying of the portfolio. On the commercial side as well, we have seen a higher level of natural catastrophes in the quarter, and even with that effect, we are emerging at a very strong level of combined ratio at 91.3. So overall, also very strong, let's look at our portfolio on page 19, which I think continues to be a super, super strong page.

Claire-Marie: showing the quality of the diversified portfolio we have. It's really nice. Overall, clearly, you can see the impact of the large floods in South Germany that are really visible there on the German side with close to 10 percentage point higher NATCAT effect compared to last year into the combined ratio. And despite this, Germany is emerging at 99.8 combined ratio, which is a very strong performance,

Claire-Marie: is a very strong improvement as an example on Australia, Latin America compared to previous years. UK is also doing a really good job at addressing the issues and emerging at a much better level of profitability. We also continue to see very strong performance from many of our entities, Italy, Central Europe, Switzerland will be also examples. And on the commercial side, AGCS is also seeing a good level of performance despite as well 5 percentage point more NATCAT load into their results for this quarter and trade which is a bit negatively impacted by a technical effect into the combined market.

Claire-Marie: ratio also continues to operate at an excellent combined ratio. So really overall, a very, very strong page from my perspective. Page 21, you can see that our operating profit investment result is slightly up. As we are actually, you know, we move now to the IFRS 17.9 world. So we are earning the benefits of the higher yield levels into the operating investment results. But they are more or less neutralized by the higher interest appraisal we have to pay as an offset unwinding of the previous year discounting benefits. So over time, if rates keep stable, you would expect this effect to continue growing.

going forward.

Claire-Marie: So, let me recap on PNC. For the quarter, we deliver an operating profit at 26% of our outlook midpoint guidance despite an elevated level of natural catastrophes. For both commercial and retail, our growth momentum continues. For retail, in terms of profitability, we see clearly the earnings of our pricing actions which are coming through as we expected. And on commercial, we continue to operate at a very good underlying level of profitability. All of that clearly put us on a good trajectory for the future. And let me move now to Life & Health on page 23. Here you can see as well the continuation of the new.

Claire-Marie: new business momentum we have seen in the first quarter, our PV and BP is up 6.5%, but in reality, actually, if you adjust for a large Allianz 3 contract we had in 2023, we are up 15%, which is even stronger. And you can see that very clearly on the page when you look at our values portfolios and what is the level of growth they are showing up, which is really demonstrating how the growth is widespread into our life and health book.

Claire-Marie: Even the U.S. had actually a very strong quarter as last year we had a promotion that was not repeated in Q2 2024 which is basically explaining the Delta UC. This growth has been done at an excellent level of new business margin at 5.8% and that's leading us to a value of new business of 1.1 billion which is basically in line with last year. So overall, clearly an excellent development on the new business side, on the life and health side. Now let's move to our CSM which basically you know is our forward looking stock of margin to come and here also we see developments which are very well in line with our expectations.

Claire-Marie: First of all, the level of profit we are releasing to come into our operating profit is in line with our expectations. So, we expect 8 to 9 percent per year. So, here we are emerging with 1.2 billion for...

Claire-Marie: for the quarter and as well our future build-up of the CSM, which is a normalized CSM growth, is as well close to our expectations. We always have a bit of seasonality in the second quarter and third quarter. If you look at the first half of the year overall, we have built a normalized CSM growth of 3% against the 5% we expect for the full year. So again, strong development, also forward-looking. In the movement of the CSM, we almost had no economic movement for the quarter, and on the non-economic side, you see a down of 300 million, which is basically mainly related to the lapse activity we have seen. On the sensitivity...

Claire-Marie: side, which I think again are very relevant given the environment we are living into. They are broadly unchanged compared to previous quarter and they are clearly confirming the robustness of our CSM against market movement.

Claire-Marie: Let's move to page 27 and here you can see as well very clean translation from our CSM release to the operating profit. We see less movements in the negative variances and we see as well, which I'd like to also highlight, higher results from our pure Unit Link business, which is coming into that line item other operating, where both actually Italy and Mexico have been performing very well and contributing nicely as well to our operating profit. What you can also see on this page, I think nicely on the right hand side, is a nice build up of the diversification in terms of contribution of operating profit from our various business units.

Claire-Marie: and geographies, which is very visible on that page. So overall on life, we continue to see a strong growth at a very good margin level together with growing CSM, which is positioning as well for the second half of the year too. Let's move to asset management on page 19. And as mentioned here, I think we have clearly seen a bit of uncertainty given the inflation landscape and the debate on the timing of the central bank rate cuts, which is impacting the development of our asset management business. But in that context, we have seen 14 billion of net inflows, which together with 30 billion of

Claire-Marie: net inflows we have seen in the first quarter means a 5% growth of our third-party asset under management here to date, which is a very good level of growth and also which is basically leading to the revenue growth we are seeing on page 31, which is clearly driven by our asset under management while our margin basically are slightly down but very stable if you look at it also quarter after quarter so a lot of work as well going into that and our performance is which have normalized compared to last year and are fully in line with our expectations.

Claire-Marie: In terms of operating profit on page 33, we see a growth here of 6% that is supported by our stable cost income ratio without the performance effect which is always a bit volatile clearly from one quarter to another one, our operating profit growth is at 10% which again is clearly very strong. If we look a little bit more into the details of our two asset managers, PIMCO clearly emerged with a growth of above 6% for the quarter with a cost income ratio that is improving and AGI is as well contributing very nicely to the operating profit growth, also close to 6%.

Claire-Marie: 6% growth with a cost income ratio that is slightly higher compared to last year, but that's a seasonality effect and we expect also the cost income ratio to improve and normalize down a little bit towards the end of the year. So overall on asset management, our operating profit is in line with our full year guidance and we are very well positioned to capture the market momentum if the direction of rates clarify, which clearly makes us confident as well for the second half of the year.

Claire-Marie: Corporate segment, I will simply skip because it's much better than expected. On page 37, also I think a very clean page, you can see the translation from our operating profit to net income. I think maybe the only elements I would like to highlight is that our tax rate is higher compared to last year, but it's clearly at our normalized level, it's more that last year we had some positive one-off contributions. So overall, this leads us to a shareholder net income of 2.5 billion, which clearly positions us very well towards our yearly trajectory. Let's move to page 39 and let me wrap up here. So overall, I think a very pleasing first half of the year.

Claire-Marie: both from a performance and a resilience perspective given the strength of the contribution of both all our segments and our various business units.

Claire-Marie: Our capital position is strong and while you can always see volatility in our numbers, the overall situation mid-year makes us confident to fully meet our financial trajectory for the year.

Speaker Change: This confidence is clearly reflected in the extension of our share buyback program by 500 million. And as things stand now for 2024, we have a total payout of 6.9 billion euros with our new 60% dividend payout policy and 1.5 billion share buyback, which I think is a very strong level in terms of payout. I think this is clearly demonstrating our commitment to attractive shareholder return while in parallel we continue to optimize our capital deployment as shared already by Oliver when it comes to our M&A optimization approach. With that, I hand over back to you, Frank, for Q&A.

Speaker Change: Thank you very much, Claire-Marie. Before we start the Q&A, please let me mention some housekeeping items. As usual, we will answer all questions in English, but if you are more comfortable to ask your question in German, please feel free to do so and we will repeat it back in English for everyone else on the call to understand.

Speaker Change: If you want to ask a question during the Q&A session, press the Talk Request button on the web audio call or star 5 if you have joined via telephone. If you have an IP-based telephone, this may cause technical problems for you. If this is the case, please do not call.

Speaker Change: Please email media.contactatalliance.com and we can assist you with your setup or we can take your question and ask it on your behalf.

Speaker Change: The first question on the call comes from Michael Flamig from Börsen Zeitung. Michael, your line is open.

Speaker Change: Michael, can you hear us? The operator just said that the sound of the line was activated. Can you hear me?

Michael Flamig: Yes, we can hear you well. Okay. Great. Hello, Mr. Kossliputl, Mr. Bette, Mr. Stoffel. I have three questions, please. The first one, do you think Allianz will reach the upper end of the forecast range this year? The second one, which are the biggest risks in the next five months until year end? And the last one, Mr. Bette, you told that the U.S. midcorp and entertainment business was sold. The financials are a bit difficult to understand, but in the interim report is written that there is no material net income impact from this transaction. Nevertheless, it's signaled as a lost portfolio transfer.

So.

Michael Flamig: This business has a very long history with Allianz. Have you got a number, what loss has Allianz suffered since the portfolio was taken over? Thank you very much.

Speaker Change: Thank you very much. Let me start with your question on the outlook. So at this point in time, clearly, we see good developments into our business as I was highlighting during the presentation given the strength in terms of growth and operating profit clearly. But you know, we are in the insurance business, right? And we can always see in the second quarter of the year some natural catastrophes in particular but as well as indicated as well by Oliver, I think the overall environment we are operating into is a very complex one. So at this point in time, it's too early for us to bring any further perspective into our outlook.

Speaker Change: So we confirm the 14.8, we feel good about it, and we also confirm the range around it.

Speaker Change: Maybe, coming on your last question related to the divestment of the US mid-core portfolio, you will see the effects in the third quarter result. You should not expect to see big swings coming from that divestment. So that will come with small effects, also possibly some small distortions into some of our KPIs, but nothing to worry about.

Speaker Change: And maybe in terms of biggest risk for the second half of the year, I would say as always, we can, I mean, we have seen weather activities is always there. So I think for us, while we are doing an extremely good job, I think at pricing and diversifying our portfolio, as you can see, also in the first half of the year, the strength of our diversified portfolio, that's always something we are managing carefully. And also there are announcements with further building up weather events for the second half of the year. So that's always something to keep in mind. And I think.

Speaker Change: The overall economic and geopolitical environment is something we are carefully navigating. We feel comfortable given the strength, again, of our diversified portfolio, but we are not immunized against all the type of events that may come through from that perspective.

Speaker Change: Okay. Great. Have you got an aggregated number what you have invested in the U.S. mid-corp business and which losses you suffered there?

No, I do not. Okay, thank you.

Speaker Change: Maybe one thing what we're not worried about because typically investors are worried about it is we have very little exposure to volatility in the equity markets. We have carefully decided quite a while ago to try to hedge at a very high level equity market volatility and you see that also in the solvency numbers. One of the reasons why it's so low. So we're not worried about the flash crash you've seen in Japan and others because we've deliberately taken to hedge that at a very very high level. So that's one thing we're less worried about. Thank you very much.

Speaker Change: Thank you very much, Mr. Fleming. Our next question comes from Tom Sims from Thomson Reuters. Tom, your line is open.

Thank you.

Tom Sims: Hi, I assume you can hear me. Sort of related to that last element that you mentioned, Mr. Bata, a question for Allianz as a major investor in light of the big swings in financial markets. So what is generally the outlook for markets now? Have you made any position changes or adjustments in your portfolio? And are there any pockets of the market that look too risky right now?

Speaker Change: Thank you for the question, I'll do it very quickly. Over the last few quarters, you have seen increasing volatility, so it's nothing really new. What's really new is how very small changes, you saw that in Japan, 15 basis points rise in rates, and a few other things can create a significant crash at very short period time and unwinding the biggest carry trade probably of my time. And that is what we have to be prepared for. And nobody saw that coming, so that's the second thing, it's very, very hard to predict. We don't know what people will do on rates, so volatility, so therefore, our position is defensive across all asset classes. People tend to forget because we have a lot of assets to invest.

Speaker Change: invest, that we focus on very high quality assets, we do not take highly leveraged positions in almost everything we do, at least as far as I know, I always as a CEO hope to know, but you never know everything. But from everything we see, this has paid out extremely well. The other thing we look through daily volatility, we have a very long-term business model. So some of that volatility is pricing noise. Why do I say that? We always get lots of questions on real estate. And this is a really funny way to look at it. We have an extremely high quality real estate portfolio. Anybody that has to sell at the moment has to sell at huge discounts. And then the question is, what is the portfolio worth? And my answer would be, it depends. It depends on whether you have a large portfolio.

Speaker Change: you have to sell if you have to sell then you're in trouble if you don't have to sell and we never have to sell you're not in trouble so we have really strong basis so

Speaker Change: We keep on managing not just the quality of the investment portfolio carefully, but what is often overlooked, the liquidity of the business very carefully. So, that is something that I think investors need to pay more attention to when they look at financial institutions. We have the benefits, and that's true for insurers overall, in difference to banks, that we have very little run risk. So, that is something that people overlook. But our exposure is conservative. The second one, as a comment, where people, I think, are not paying enough attention to is the issue, and this stems still from the time when central banks were anesthetizing investors in the bond market by, you know, what is called, I don't even want to use the name.

Speaker Change: But quantitative easing, which is sort of in and of itself a funny word. Why do I say that? The level of indebtedness of public households is really scary. And it's now getting to the United States. Now, to be fair, they have the reserve currency of the world. But even there, I would spend a lot more time looking at very fundamental debt dynamics. And then we are also very careful on not just corporate credit risk, but also sovereign risk. And remember, in financial institutions, investment in sovereign risk, particularly domestic, is seen to be risk-free. Nothing could be more wrong than that. It's not risk-free.

Speaker Change: The only G7 country in the world that has a triple A rating today is Germany and this is where we are at home Thank you

Yes, good morning Mr. Bates, bonjour Mme Cote-de-Poutre.

Speaker Change: I have a question on the Olympics. They were not mentioned among the highlights during your presentation. It's logical because they are ongoing, the games in this quarter. Nevertheless, the main insurer of the event and do you expect a very positive return at this stage given the absence of significant damage linked to all the exposures you have?

Speaker Change: And let's cross fingers that it stays that way, of course. And do you already have an idea of the return of your investment in this event, generally for the image, awareness of INF and the business?

Speaker Change: So, basically, first of all, there is a highlight which is on the cover page related to the Olympics where we have like the Olympics logo, so I think the finance team decided that it would be nice to do something given that we are into the Olympic environment and we try to stay committed working on the numbers while everybody's enjoying watching the Olympics. So I think overall, given the enthusiasm that is raising around the Olympics and the fact that so many communities actually are really engaging around the Olympics, we definitely consider that the Olympics are great and they are really contributing extremely well to what we are doing.

Speaker Change: what we wanted also to do via the Olympics, which is bringing people together.

Speaker Change: around watching as a community athletes who are basically engaging in terms of performance, but also fitting to the message that we are mentioning today. Also, some of them going through some strong resilience, right? So I think it's resonating very well with our core messages around performance and resilience and bringing community together. So we feel that this is contributing extremely well to our brand overall. Remember that the brand value of the Alliance Group is $20 billion, so definitely I think that's a worthwhile investment that is also contributing further to the buildup of our brand.

Speaker Change: And cheers to France. I have to say we were at the opening and I've seen some other things despite the rain initially. It's one of probably the one of the most successful Olympics and I want to shed some more color since I was the guy inventing the partnership with them. These are not just one of the most successful.

Speaker Change: games, in terms of creating enthusiasm, and to answer your question, the return is very positive without giving you the numbers, but it's also very positive for our people. The Olympic contribution that Allianz does is one of the top five contributors to employee motivation in the group at the moment, so it's super important for our people inside of Allianz. They're super proud, and that is not to be underestimated, so it's not just the customer side, just to add to what Clément said, it's internally a massive driver of pride and engagement, and we have made sure that part of the way we run this, many of our employees and many of our customer service staff get action.

Speaker Change: to see the Olympics, which is rather unusual. So, we don't run it as a celebrity shop, as it's sometimes being perceived. The second thing is, it's also one of the most sustainable Olympic Games ever, which is very important, as Alian stands for that. There's been a lot of criticism, how does that not create, it's just not true. It's another sort of fact that I have to just applaud the team in Paris for using existing facilities, and rather building out new things that end up being dead in the wood. It was a big bet, particularly by the mayor, who I was, she gets criticized for many things. I can only applaud the lady for this one, using the, so beautiful, and actually.

Speaker Change: as we found out practical capabilities to have them. So when it will be all over.

Speaker Change: you will find out that the footprint that the games have left are strongly emotional, but they're actually very little physically. And it's also something to say, it's the first Olympic Games, and you know that I personally in Allianz care for where you have 50% of the athletes being men and women. So this is the first time ever. So there has been enormous progress under Thomas Bach, who again is not always getting the credit for what he's doing, because it's very hard to organize Olympic Games. So I can only congratulate the IOC and particularly the French team for putting up an amazing event, and we are very proud to be part of the movement.

Speaker Change: Okay, thank you for the caller and too bad for the figures, the numbers, but maybe they come later.

Bye.

Speaker Change: Thank you, Jean-Philippe. Let's move to Alexander Hüttner from Reuters, please. Alexander, your line is open.

Alexander, can you hear us?

Thanks for watching!

Get out!

Speaker Change: We can't hear you, Alexander, so if you wouldn't mind redialing in, please, or asking your question again. Until then, we move to Stefan Kahl from Bloomberg, please.

Stefan Kahl: Yes, hello and thanks for giving me the chance to ask a question, actually it kind of refers to the portfolio we were talking about earlier on the call, I was wondering what role private credit actually does play in Allianz's portfolio and how you must be able to look at the asset class in general at the moment?

Speaker Change: I'll leave that to Claire for a second, but be careful, it's my top-down answer where Claire looks up the data. So I would like to say a couple of things while we give you then the facts a little bit. One, we have been a lender, by the way, very few people know this, for the history of Allianz, so 134 years. So for example, we are one of the significant mortgage issuers in this country through Allianz Leben, that's often forgotten. So that's a form of, if you want to say so, private credit that we've been always doing. We're not new in this. The second thing is we've also done private lending, in German called Schulzeindarling, for many, many decades. So it's not an area. Now there's a rush into it as the banks through Basel III are being...

Speaker Change: charge much higher capital and they'd like to have either securitized this business into people with lower cost of capital that they think may be us or even us. So we are investing there, but we are really cautious. We only go into high-quality private credit with very strict underwriting guidelines, and we don't believe that the rush that we see there and the hype is warranted. In fact, I am personally very nervous when all the private credit houses are now trying to think about an IPO. You typically want to know whether that's a great time to invest in the asset class. But maybe some numbers from Clare-Marie? No, definitely. So, basically, in terms of private debt, we have one on

Speaker Change: 135 billion at the end of the second quarter invested into alternative debts and that's basically steaming through as mentioned by Oliver, a very well diversified portfolio of non-commercial mortgages, some commercial mortgages, some infrastructure debt or some further private placement where we have been basically investing for many years with very high quality portfolios. So that's the nutshell view on our portfolio and we are always happy to follow up with more insights if you want.

Okay, thank you so much to you both.

Speaker Change: Thank you, Stefan. Let's move to Alexander Hübner again, please. Alexander, your line is open.

Alexander Hubner: Hello, I hope you can understand me now. I've dialed in via telephone now. Can you hear me?

Speaker Change: Yeah, we can hear you well. Okay, good. Some more detailed questions, sorry for that. One, you mentioned the acquisition of income insurance in Singapore. As to media reports, there seems to be some opposition to this acquisition in Singapore because of the nature of the business until now. Can you elaborate a bit on that? How do you see the chance to get this deal really done? Another question on Crouch.

Speaker Change: The three events with Taylor Swift in Vienna have been cancelled last night. I'm not sure whether you're involved in that. Can you help us a bit in explaining how these music events are insured and what could be...

payable in this event.

Let me start with income, if I may.

Speaker Change: decades, would keep its focus on providing affordable healthcare, P&C insurance and life insurance for the working class in Singapore. This is the key concern, and it was, again, quite a debate when the corporatization happened a few years ago. There's also a small aspect of it because a number of the so-called members of the cooperative became shareholders as part of the conversion, and it was a debate on how would they be treated relative to other members that are not part of it. Through a number of years, we were able to convince the Singaporean community enterprise at the lead of it, and it's an important part because more than one-third

Speaker Change: of the Singaporean citizens are directly or indirectly a client, but most of them directly of income. And this position of income was even stronger a number of years ago. I'll talk about that in a second. And the key part was helping that income would really

keep up

Speaker Change: and stay up to the challenges that are there in a world that is getting more and more difficult.

Speaker Change: Because, for example, they used to be, once upon a time, the leader in life insurance. And they're now number five and six in their lost positions over the years. They were the leader in health insurance and now a very strong number three. And they still are the leader in PNC. So the idea of the community was we need to bring in a partner that helps us to make the leap forward. And it's very important that this is a partnership. We are not buying 100 percent now. We are buying 51 percent and taking entrepreneurial accountability for helping this very important community institutions to make the leap forward. And we are fully committed to the cause of income in supplying affordable access to insurance and health care covers.

Speaker Change: because that's what's really needed. And I could spend an hour on what the challenges are. For us.

Speaker Change: It is clearly an invitation to become part of the fabric of the Singaporean family and community, and we are very thankful for this opportunity because it's unique. It's never been done this way, and we are bringing the best of what Allianz can do. By the way, particularly from Germany there, our old age provision system, particularly pillar two, group life through employers is something Singapore doesn't have that comes with much lower acquisition costs, for example, than normally you get that through banks and agents, so that is something that we're really going to push. The strong success we had with Allianz Krankenversicherung in Germany.

Speaker Change: to really work with the supplier to contain healthcare cost inflation and therefore

Speaker Change: keeping and making health care, supplemental health care insurance affordable. These are just two examples of what we are planning to bring to the community. So I understand the concern, but to your concrete questions, we do not expect this thing to be derailed as we move forward.

Speaker Change: Let me answer your question on CrowdStrike. So first of all, I think like many companies, we have been impacted operationally by CrowdStrike. And we, I think also here, I can thank the team because they have done a very good job at putting us back on track swiftly. So here it has been a really nice experience. Now let me come back to the cyber question, so basically to the cyber insurance question. So first of all, I think cyber insurance is an area where we have always been quite cautious in terms of underwriting, but at the same time, being there in terms of underwriting because that's a very relevant risk also for the future for us to understand well. Our first actions related to cyber insurance.

Speaker Change: Secondly, we take a razor-cautious approach when it comes to the limits we are underwriting for cyber. We are looking for diversification, and we have, as well, a strong range transfer program in place. So this cyber event, per se, is a bit of a technical event as well because it's related to a technical failure, and typically, technical failure will not be covered by cyber policies unless this is explicitly, basically, underwritten. And so usually, it's more related to corporates, this type of coverage. And so overall, I would say at this point in time, it's still a bit early to really assess the event.

Speaker Change: would expect to emerge at a low to mid-double-digit million loss for us. So, nothing to be worried about from that perspective.

Speaker Change: And maybe the last question, sorry, on Taylor Swift. Please allow us to understand that we do not comment on a stand-alone event, so this one I cannot answer at this point in time.

Thank you.

Thank you.

Speaker Change: Thank you very much Claire-Marie. Let's move to Maximilian Voigt from Plato. Brief please. Maximilian, your line is open.

Speaker Change: Thank you very much for tagging my question. It's a small one. You and some direct competitors sold non-insurance parts of their business, you especially the movie business in the US and parts of Allianz Global Investors in the US. What is your approach? Do you want to grow in the non-insurance business or concentrate on the core business? And is there a swing from...

Speaker Change: Is there a swing from American continent to Asia? You spoke from Singapore as the twist of Asia. Thank you very much.

Speaker Change: So, I think first of all, if you look at our overall operation, our overall activities in the U.S., we are very strong in the U.S., right? You have PIMCO very strongly in the U.S., you also have Allianz Life that is operating on the life and health segment and growing extensively as well as we have been seeing. So, we are definitely there and in addition to that, we are also in the U.S. via our so-called global lines, right? We are the number one travel insurer as an example in the U.S. So, Allianz Partners is definitely strong there and Allianz Commercial is as well operating in the U.S. more on the large corporate side. So, the reason why we have decided to exit our mid-corp business is simply related to the fact that we are not a global company. So, we are not a global company. So, we are not a global company.

Speaker Change: to the logic of our operating model, we believe to be really able to perform from a strategic and financial perspective into our markets, we need to be in a leadership position in the top three. And that was not really possible to achieve as a position for our U.S. mid-corp business. So that's why we have decided to go along those lines. And definitely in terms of capital deployment, you have seen, we see a lot of opportunities in Asia, but we also see further consolidation opportunities, as an example, in Europe. So we are also looking as well at, in particular, maybe distribution opportunities.

Speaker Change: which are the convergence between our life and our asset management business also across the globe. So we are definitely not disengaging from the U.S. overall.

Speaker Change: Okay, thank you very much. Thank you, Claire-Marie. Can we get the next question from Ben Dyson from S&P Global Market Intelligence, please? Ben, your line is open.

Speaker Change: average for Allianz until a while ago was below 10. So we have very strong return on the invested capital and whatever we don't need we return. On M&A we are very selective as you see, very clear on what we want to achieve, very well prepared for a long time. We typically don't participate in auctions but we have a very clear strategy when and how we want to grow and at appropriate returns. It's nothing that has changed growing out where we believe the growth is and as Claire-Marie clearly has said where we can be a leader in the market. It's also important to come back to income. One of the reasons why we did it, it's the leader in P&C. It can be one of the, it's already top three, can be one of the top two in health.

Speaker Change: And there is a lot more to be done in life, so we don't want to buy something where we are an also-ran. That is not something we really like to do. We want to complement what we have to build our leadership position. This is in a nutshell. Nothing has changed.

Okay, thank you very much.

Speaker Change: Thank you, Ben. May I just remind everybody, if you would like to ask a question.

Speaker Change: Press the talk request button on the web audio call or star five if you have joined by a telephone Our next question comes from a week at our from Doe Jones news wires Rika your line is open You

Thank you.

Speaker Change: Rikke, you have disappeared from the queue. Can you please try to dial in again?

Thank you for watching!

Thank you for watching!

Speaker Change: This was the last question actually for today and this would conclude today's conference call. We thank you very much for your attention and for your interest in Allianz. We will report our financial results for the third quarter on November 13th and we are very much looking forward to continuing our exchange then. For those that did take their vacation already, we hope you still feel refreshed and your batteries are recharged. For those that still have their vacation ahead of them, like many of us, we wish you a relaxing time off. Goodbye.

Speaker Change: Good afternoon everybody and welcome to the Allianz Conference call on the financial results of fiscal 2023.

Speaker Change: As you know, this is my last call in the current role, therefore, for the very last time, let me read the usual and compulsory housekeeping remarks to you.

Speaker Change: First, let me remind you that this conference call is being streamed live on allianz.com and YouTube, and a recording will be made available shortly after the call.

Speaker Change: Second, if you want to ask a question after the presentation and join us via web call, please click on the talk request button at the upper right-hand side of your screen.

If you join us via telephone, please press star 5.

Speaker Change: That's all from my side for now and with that I turn the call over to our CEO, Oliver Bethel.

Oliver Bethel: Yeah, good morning, good day, good afternoon to everybody. Before I get to the content, let me use the opportunity since Olli already mentioned it that this is last time here. He was already the head of IR when I was CFO, which feels like a very long time ago.

Oliver Bethel: So a big big thank you to Oliver. He doesn't want to have a party, but he will have one. So this is how it happens in Allianz. Anyway, thank you very much, Oliver. An amazing job over many, many years for Allianz. Thank you, Oliver.

Oliver Bethel: Let me go into the presentation right away, because you have tons of questions, I saw tons of write-ups. We are always surprised how markets really function.

Oliver Bethel: But we'll explain to you what at least we can explain as much as possible today. So let me just go into a little bit into the strategy, but use the opportunities based on the questions and write-ups I've seen to address some of them.

Oliver Bethel: First one, it's still going on since COVID, people tend to forget what a crazy world we're living in.

Oliver Bethel: across our segments, whether that's P&C, life and asset management, all challenged by the same thing that's on page A2. I will not spend a lot of time on it.

The key thing is...

Oliver Bethel: Direct impact comes from inflation that is still high and looks like it's slowly abating, but the market have been too aggressive, I think, in pricing in.

Oliver Bethel: rate reductions yet, and the second one is climate change and the effect it has on claims is unabated.

Oliver Bethel: However, by the way, by and large, we haven't seen anything yet because a lot of the losses that are increasing are increasing to asset value, not to the increased frequency in these things. What is increasing is actually small local cyclones, as we call them. We had one last night in northern Germany. Not much happened.

Oliver Bethel: Thank God, but the key thing is that is harder to model and harder to price. So we need to stay on our toes with technical excellence.

Oliver Bethel: Page 83 just is a reminder that we run this company not from quarter to quarter even though we still do quarterly reporting. I wish we could move to six months reporting, save all others a lot of time, we'll probably do that next year.

without, by the way, compromising on quality of analysis

Oliver Bethel: 12 weeks to 12 weeks. We run Allianz for the very long one and that has three drivers of value on how do we grow the customer base, the profitable customer base of this client? How productive are we in doing that?

Oliver Bethel: in terms of cost of risk, cost of loss, and a cost to build and serve clients.

Oliver Bethel: And then how much, what is the cost of capital, and how efficient are we in deploying the capital? And the value capture program that we highlighted in 21, we are relentlessly executing against. I'll give you a little bit of a flavor in a while.

Oliver Bethel: We are truly convinced that returns to our investors are not possible if we don't have very strong corporate health. There's a lot of debate on that.

Oliver Bethel: We don't believe that discounted cash flows can be great if you don't have a company that is outstanding in the way it serves its clients and its people. I'll spend a little bit of time on it. And then what's important for you and everybody in financial services not to waste shareholder money.

Oliver Bethel: But we also believe, and that's a difference to what I think many of our peers do, we really believe there is no future without growing the franchise. There is a nice English saying that nobody ever shrank to greatness, and therefore while we want to be extremely disciplined on capital usage,

Oliver Bethel: That our purpose is to grow the franchise over the long run and ideally faster than than others and let's remind ourselves We are highly fragmented industry in difference to many others

Oliver Bethel: that doesn't really scale yet, we want to drive it to a growing and scalable business.

and that leads us forward.

Speaker Change: Page A4 reminds you that Allianz is not a property casualty company with some remote things attached. We are one of the largest life and health companies on the planet, on life actually number three.

Speaker Change: With very, very strong results. You see that on page A4.

Speaker Change: The new accounting regime is actually highly beneficial in the sense that it puts a real focal point on the very stable generation and distribution of cash from the live books.

Speaker Change: And you see there, very strong normalized CSM growth. Clemmarie is gonna talk about it.

Speaker Change: Continuously healthy new business margin and the growth is also coming back after a shock from the banks raising the crediting rates and people not knowing whether they should put money into the product. By the way, very similar to fixed income.

Speaker Change: That is slowly but surely changing now. You see that in Italy already, you see that in our U.S. life business is growing very strongly, and you see that everywhere else, I'm convinced, over the next few years.

Speaker Change: And with that, the profitability and the cash distribution that is highly reliable will continue to grow. And last comment, we have changed in 23 fundamental trajectories. Our new business doesn't require capital anymore. It actually is capital generative.

Speaker Change: From day one so over the next few years you can expect and I promise that five years ago

Speaker Change: Continuous improvements in solvency going forward. Asset management had a super tough year 22. Also, by the way, on investment performance, it was very hard to do extremely well with the rates up very fast and very significantly last year, significantly better.

Speaker Change: We had net inflows again last year, a very good cost income ratio and record performance. Let me talk about the cost income ratio.

Speaker Change: Indeed, in the asset management industry, there is pressure on margins and many, many companies have significantly deteriorating cost-income ratios.

Speaker Change: When you look at the gross margin and the cost income ratio at Pincor, which is the vast majority of what matters in terms of earnings, it is super resilient. It's actually best in class. It has remained below 60% and they are relentlessly working on using technology.

In order to offset the margin present is very successfully.

Working

and it's supporting the pivot towards.

Speaker Change: More margin rich and stickier assets in that journey will continue So you're finding in the enormously resilient franchise and also investment Performance is back to the top So congratulations to Dan and his team for doing that and the same is true for AGI Net flows are back again. We had more than 20 billion flows

Speaker Change: This year already, so that's very good. We had almost equivalent to all flows

Speaker Change: that we had last year. So asset management really coming back.

Speaker Change: And that's very important to understand. It's a significant driver. Together they have.

Speaker Change: earnings and if you look at the world of wealth management this makes Allianz if you look at it that way one of the leading wealth managers on the planet already today.

Speaker Change: And from a margin on asset basis, please run the numbers since the vast majority of our life assets are managed in-house. We for our shareholders are making money twice.

Speaker Change: So return on assets will focus on that and the capital markets day is very attractive. Now that leaves me with P&C. Operating profit is up. There were a lot of questions around Q4. I'll get to them later. Claire Marie has all the details.

First...

Speaker Change: We need to, with the new accounting regime, stop to look at months-by-months and quarter-to-quarter. You need to really, for now, look at the annual results because the discounting effect changes when interest rate changes are so confusing that you don't really get a handle.

Speaker Change: As you see, and we've said it in Q3 already, so this is not in hindsight change, we said there is still confusion of what goes to the.

Speaker Change: loss ratio versus expense ratio. We had told you that with Q4 and the year-end closing, we'll clean some of that up. Klemmer will explain that to you. That explains some of the movements that we had in the system, and that's very important.

Speaker Change: And we had a very good investment result overall also in PNC. I saw a question to overall non-operating investment that's not pertaining to PNC only. The real issue there is, and Clemmerie will explain, we have taken

Speaker Change: It's why we're also now reporting economic values going away from book values.

Speaker Change: There's a lot of concern from investors around the resilience of valuations in non-listed investments.

Speaker Change: So we really want to provide a maximum transparency and we've also taken the value of real estate where they had to be down. By the way, we'll talk about that eight percent, but we had three percent of three offset.

Speaker Change: through income, and that is something that is prudent, and that we have to do. It's not common practice yet everywhere in the industry, so we will always provide a fair view on what the values really are, and we are very comfortable.

Speaker Change: With the provisions that we've been taking and the value of our non listed so-called illiquid assets That's just what I wanted to say overall page a five

Speaker Change: Talk to you about what we're doing in the value capture program I'm not going to go into the details very much because today is for your questions Let me just hit a six just to reiterate a point

a very significant part.

564 billion of

The insurance assets are invested with our asset managers.

Speaker Change: and helping to drive scale there and very nice margin. By the way, not just margins for shareholder, but also our policyholders, because of course we can only have money managed by our asset managers if the return are top quartile.

Speaker Change: So, we are earning money twice on our customers' assets, and it's going to be even better going forward. Why? As we are tilting to more future and more sophisticated investments, then the margins and the stickiness will be better.

Speaker Change: And that adds in, just to put a simple number, almost a billion in fee income in asset management.

Speaker Change: Commercial lines has been not just turnaround, it's doing extremely well, not just AGCNS and Midcorp, that's on page A7.

Speaker Change: And we really believe we are just starting to harvest the benefits. The key thing is to start to go to market together. So we're starting with the customers and our brokers by introducing one interface, one brand to the market and then going back.

Speaker Change: into growing the business more. We had the gap in the market between AGCS and local companies that we were not capturing. And the third one is actually harmonizing the tools, the infrastructure, and then finally the cost base.

This is super important because we see early signs.

Speaker Change: In some markets, particularly the U.S., where we are not so big, where the cycle is turning.

Speaker Change: And we need to be aware that this super harvest is not.

Speaker Change: It's going to stay there forever. That's why it's so important that we capture all the synergies in the segment, that to be captures and we prepare for the softening of the cycle properly. And we can say the same about reinsurance, still very strong, but we see capacity flowing as always into the industry, as there is always a super cycle, which we are much better hedged again because the vast majority of what we do is retail. And we'll talk about that later.

Speaker Change: Platform Business A8, I don't want to talk about it. Allianz Partners is a resounding success in growth and the margin's coming up. We are leading in almost every segment that we're in, most importantly in customer satisfaction.

Speaker Change: A9 is important, you know that we are really driving customer satisfaction.

Speaker Change: Last year, again, was an all-time high in terms of outperforming customer satisfaction. We have now almost 60% of our businesses live health and P&C, where we are the loyalty leader. Even now in Germany, we're improving very fast, we're great on claims, we're the service leader now in P&C, which we haven't been for a long time.

Speaker Change: Brand is number one. By the way, our gap to the other peers is growing over time, not just for interbrand, it's brand finance.

Speaker Change: and we are now the number one trusted institution in our industry, and that comes on the back of a very strong employee trust base, which you, by the way, see also in productivity and sickness rates. We are now on employee motivation.

actually the benchmark in our industry.

Speaker Change: And beyond that, in terms of talent and diversity, you see that in our board, we're the only one where we're almost 50% in terms of female.

Speaker Change: representation, but it's more than gender. It's actually diversity in culture and many other things. And A10 is something that we're very proud of. We're leading in sustainability. This is not about being woke.

Speaker Change: or anything, we actually believe there is competitive advantage in leading in terms of sustainability that goes below and far beyond net zero. It has many aspects to it, and we have shown you a few KPIs.

Speaker Change: that we track very carefully. I think that's all I need to say. On page 11, I want to retage something because there's always the solvency question that's a bit of a bogus question. I'll tell you, we're the only ones in our industry that have a Moody's AA2 rating.

Speaker Change: We're one of very few that have a S&P Global AA rating.

Speaker Change: So it's just very important that resilience is for us many numbers and not just one and we feel very strong The other one is what is the solvency number after combined stresses and there we have been improving our position consistently

Speaker Change: So we feel very comfortable with the way we run this and how we distribute.

Speaker Change: Now, A12 is super important, colleagues, because I'm really sometimes surprised about the short-sightedness of the questions.

Speaker Change: We run Allianz and next year is going to be 135 years, and we've really learned from the past and thinking what are the continuous distributions of the cash generate for our shareholders.

Speaker Change: It's not just a level, but the reliability and the consistency of what we do. And everybody is inventing a new story every day. Page 812 tells you what the story is, accumulated 45 billion payout to shareholders.

Speaker Change: The vast majority dividend we want to grow the dividend piece because many of our investors

Speaker Change: that are long-term really look at dividend and dividend income, by the way, with an aging

Speaker Change: population that will become more and more important and that's why we've increased the payout of the capital deliberation how strong is our continuous cash flow generation after we change

Speaker Change: all the accounts and all of these things and it's super strong and buybacks are a.

Speaker Change: supplement if and when we find that we don't use capital. And it's a very important message I'm going to repeat a little later.

Speaker Change: We've just, after the 1.5, announced another $1 billion. If we have excess capital accumulating over the year, we will not retain it, but we do not want to go, because what we do, we want to see how a year develops, particularly given how dangerous the environment is.

Speaker Change: And if and then we'll feel we're accumulating more, we'll certainly give it back to you. Now, the turnaround in performance has been rewarded last year, and we'll continue to work on meeting our investors' expectations.

Au revoir.

Speaker Change: future and not from quarter to quarter. A14 is again another testimony that for long term investors is super important. I'm not going to talk about new dividend policy in detail.

Speaker Change: But we have increased dividends in seven out of eight years since 2015, in seven out of eight years.

Speaker Change: Now it's a 21% increase, by the way, with the old ratchet that would have taken three years to get there. So you know you're getting three years in one go now.

Speaker Change: And that's very important. And then the share buyback comes on top.

Speaker Change: This is, by the way, exactly in line with what we have communicated in 2021, what we wanted to have for EPS and cash flow in 2024. So we're exactly on track.

Speaker Change: if we are doing exactly what we think we'll do, we'll certainly exceed that.

Speaker Change: But discipline is what drives us, not a new story every day. Now, that leads me to page 15, where I think we had the biggest confusion, and I have to apologize a little bit today, because we had outlooks published by many of the cell site analysts.

Speaker Change: that were significantly ahead of the 14.8 midpoint that we have published today. Now, I would like you to have a little bit of a look at A15 and you may recognize a pattern that has been there since 2016.

Speaker Change: the achieved operating profit as the midpoint, and then we expanded. We used to have a 500 million up and down. We expanded that by a billion, taking care of the higher level of operating profit.

Speaker Change: So the market had sort of consensus was around 15.5 billion, which is sort of in the upper half between us and the outlook. Let's make a little assumption, ladies and gentlemen, that Allianz is as performance-aspiring as we've always been.

Speaker Change: then it's a good idea to have this consensus in mind. And let's assume that our management team is super ambitious. Now, you would say, yeah, but why didn't you raise the outlook further? Well, why would we in the middle of a three-year plan change the way we do outlooks?

Speaker Change: Then you would have asked us, okay, why it's not 15.9, why it's not 15.4, so let's just agree that we are planning for the year.

Speaker Change: conservatively confident that we'll do that and we'll do our very best to meet your expectations. Maybe that's the legally best way to phrase that but I'm bit I was a bit confused to see this number these numbers given that we exactly and a little bit above

Speaker Change: what we expected and said would we do. So in summary, we have.

Speaker Change: The strategy is functioning extremely well. You'll get an update at the end of the year, a little bit of a hint. We want to use the very strong level of profitability ability to grow this franchise more.

Speaker Change: mostly through organically growing that, but we are not excluding boson MNA. This industry is super fragmented. It is lots of room for.

Speaker Change: Consolidation and we want to be a winner of it. We're not putting the company in runoff by paying out 100% of the cash that we generate.

Speaker Change: We want to make sure that the cash that we don't need to grow the company goes back to you So the very high level of profitability are benefiting our shareholders

with a new dividend payout of 60%.

Speaker Change: Because we are very comfortable with capital generation we are adding 1 billion share buyback right at the beginning of the year.

Speaker Change: and the outlook is what it is. And with that, I hope that was helpful.

I'm passing it on to Claremont.

Claremont: Thank you very much, Oliver. So good afternoon, everybody. As you can see, there is high energy in the room, so definitely we are not going to sleep on our laurels. So if you look at page B3, in 2023, we actually deliver our strongest operating profit ever at €14.7 billion. And this is building on our very strong trajectory in terms of operating profit already in 2021 and 2022.

Claremont: And this number has been delivered while in 2023, we have seen an extremely high level of inflation, a very volatile financial market, and a high frequency of natural catastrophes.

Claremont: Our operating profit grew by 7% compared to last year and so did as well our shareholder core net income. If you adjust it for the negative runoffs we have seen in 2022 that have impacted down the shareholder core net income number.

Claremont: We emerged in 2023 with a very strong ROE at 16%.

Claremont: And what you can also not see on this page, but only towards the end, our core EPS is up 33% and that's the outcome of both very high shareholder coronet income and as well the fact that we have performed the share buyback, which also helps that number up.

Claremont: But beyond profitability, at group level, you can also see that our total business volume is up 8% in terms of internal growth, and that's steaming from all our segments. So that's also a very good indicator for forward-looking value delivery here.

If we move to P&T, our...

Claremont: Our operating profit clearly is slightly – is slightly – is almost at outlook level, sorry, and is slightly up compared to last year, while we are burying into the operating profit of the PNC segment 600 million higher cut load compared to normalized expectations. So that's a solid outcome, I would say, in the environment, given as well the underlying trends of very high inflation beyond the cut effect.

Claremont: What we see as well on the PNC side is a very good double-digit growth, which is made of 7% price increase, which is steaming from our actions to act on the inflation side, and also 4% volume growth, which is a very good level of growth we are also seeing in the underlying.

Claremont: On the life and health side, we see as well good growth at an excellent new business margin of 5.9 and with this we deliver a value of new business of 4 billion euros.

Claremont: Our operating profit is very good at $5.2 billion ahead of our outlook, and that's supported by a CSM release of $5 billion and strong operating investment returns.

Claremont: On the asset and management side, we are also ahead of our outlook in terms of operating profits and the asset management segment has been managing really steadily in the 2023 financial markets. That was really not easy to navigate.

Claremont: We have $22 billion of net inflows. We have really strong performances. And we have a cost-income ratio that is slightly better than expectations post the WEA transaction.

Claremont: If we move to page B5 and we have a look at our fourth quarter on a stand-alone basis.

Claremont: Here on the group side, overall, you see the very good double-digit growth that is basically reflecting already on the full-year numbers. Our operating profit is at $3.8 billion. That's in line with a strong second quarter and up 17 percent compared to last year. And our shareholder net income follows the operating profit growth if you adjust also 2022 actually for the disposal of our recent operation.

Claremont: On the PNC side, you can see that our OP is at 1.6 billion. That's better compared to the third quarter, but clearly not as good as the first half of the year. And here, the main driver is clearly the continuation of a higher frequency of NATCAT.

Claremont: many in Germany and the large flood we have seen in Australia. So overall for the fourth quarter, we have 300 million higher NET-CAT loads compared to normalized.

Claremont: We continue to see as well the very good level of internal growth into our PNC segment and this is close to 8% price increase that we are going to earn in 2024 into that internal growth of close to 10%.

Claremont: On the Life & Health side, we also see a strong new business that is mainly steaming in terms of growth, that is mainly steaming from our U.S. operation and Italy. Again, we see a very good new business margin for the Life & Health segment in the fourth quarter that is fully in line with the year.

Claremont: Our CSM release is at $1.3 billion, that is again in line with our expectations, and together with a good investment result that allows us to deliver a strong operating profit of $1.4 billion for the quarter.

Claremont: If we move into the asset management segment, here you can see our excellent operating profit that has been delivered. That's supported by our third-party asset under management which are up three percent. Excellent performance is coming from PIMCO and both asset managers are actually delivering better compared to last year's same quarter.

Claremont: You see as well the small outflows that we have experienced in the fourth quarter. They have stabilized after October entirely. And I can already tell you that after six weeks into 2024, as mentioned by Oliver as well, we are already at the same level of inflows compared to the entire year 2023, which is definitely good news as we are moving into 2024.

Claremont: So moving to B7, and here you can see that both our comprehensive shareholder capital and our solvency to ratio have developed positively in 2023.

Claremont: We have a strong solvency ratio at 206, and this solvency ratio has benefited from 9 percentage points of net operating earnings, which have been offset by the reflection of our new dividend policy mainly.

Claremont: For those of you that are looking at our solvency ratio on a quarter-to-quarter development, again I agree with Oliver, certainly the yearly view is way more relevant in terms of development of solvency-to-capital. But if you look at this one, you will see that we had a sharper drop into our solvency ratio compared to expected, and that's coming from the convexity linked to the interest rate of our solvency ratio, the real estate valuation, and obviously the reflection of our new dividend policy.

Claremont: On the sensitivity side, you can see as well if you compare year-on-year that we have a slight increase of our sensitivity on the equity market side and that's related both to the convexity and some model changes, but in the underlying there is no changes.

Claremont: What I find particularly interesting is the fact that if you look consistently at the combined shock year on year it has been decreasing steadily and so it's also the case between 2022 and 2023.

Claremont: If we move to B9, here you can see the very strong growth operating solvency-to-earnings of 27%, that's offset by 16% point of capital management actions, which are reflecting our new dividend policy and the 1.5 billion share buyback in 2023.

Claremont: the new 1 billion share buyback that we have announced yesterday.

Claremont: will actually be reflected in Q1 together with the new operating solvency-2 earnings which are going to come then.

Claremont: Again, on this one, you can see clearly, also associated with what we have been communicating in the previous quarter, that the live business growth is self-funded across the entire year 2023.

Claremont: And in terms of market impact, we have that's mainly related to the real estate revaluation that is partially offset by the strong equity market developments we have seen emerging almost flat for the entire year.

Claremont: So overall, a strong solvency level and improving further versus 2022.

Claremont: Let's move now into P&C on page B11. So this page B11 I find very good because here you can see that for our entire business, we see the growth patterns which are emerging from both pricing and volume.

Claremont: And something you cannot see on this page and you can only see if you look into the details is that if you look at the quarter to quarter developments of the growth patterns for retail associated to pricing, you see clearly a very steady upward momentum that we are going to earn into 2024 and is also going to continue to support the value creation even beyond 2024.

Claremont: Let's move to OP on page B13. You can see our strong operating profit at $6.9 billion for the year 2023. And if you look at the operating profit warp.

Claremont: There you see a slightly lower underwriting result between 2022 and 2023 that's mainly linked to the 500 million higher NATCAT load that we have experienced in 2023 compared to 2022.

Claremont: We have a very good operating investment result that is basically supported by the higher heat environment. And then you have a lot of noise in the other operating bucket.

Claremont: And here, and you have the details in the table below, but here clearly we had some positive one-offs in 2022, and we have some negative one-offs in 2023. But going forward, you should not expect, I would say, any of those to repeat themselves. The right order of magnitude for that one should be around zero.

Claremont: On the right-hand side, I have already commented, I would say, starting from the bottom maybe, I have already commented on the growth. On the expense ratio, you see clearly our 30 bids improvement year-on-year, which is basically in line with our expectations and reflect well on our fundamental actions there.

Claremont: And what you see as well in that expense ratio is the normalization versus the third quarter. In the third quarter call I mentioned to you, you should expect to see a normalization of the expense ratio, which has happened, and clearly this is creating a lot of noise between the loss ratio and the expense ratio in terms of quarter slides. And that's mainly coming into the commercial business.

Claremont: So, my view is that you should not read much into the quarter slides on a stand-alone basis in the fourth quarter, and the full year numbers are definitely much better reference towards 2024.

Claremont: So in terms of combined ratio, clearly you can see the very good combined ratio we are delivering on the commercial side, also a very similar level compared to last year. And on the retail side, we are at 95.8.

Claremont: This is clearly higher than we had expected at the beginning of the year, but I think given the cut and the inflationary environment in 2023, this is a solid technical result from my perspective and that's clearly demonstrating as well the strengths of our experts around the globe that have been capable of managing well in that environment.

Secondly, you see very clearly the effect of NatCat.

in particular on Germany, Switzerland, and Australia.

Claremont: And then if you look at the absolute level of combined ratio for many of our operating entities, and as I am listening as well to many of the release of some of the competitors in the local markets to our operating entities, I think they are performing really well in difficult environments. And we should recognize as well that from an absolute value perspective, if you look at Italy, if you look at C, if you look at Switzerland and Germany, this is really a good performance in their local market as well.

Claremont: For very challenging markets like UK and Spain, we see as well on this page that they are improving after 2022 clearly.

Claremont: Australia is clearly not where we want it to be. They have also suffered from a high level of negative runoff that also has impacted the market in general associated to a late NATCAT in 2022 that came with very high inflation into 2023.

Claremont: But what I think on Australia, more fundamentally, is that we have a really good team there. They are working super hard. And what we see as well associated with the actions they have undertaken is that we see the underlying improvements that are coming through in line with our expectation in the fundamentals.

Claremont: On the commercial side, clearly, we see the very strong market, but also the very strong performance of our operating entities with AGCS and Allianz Trade with an excellent combined ratio and double-digit operating profit growth.

Thank you.

Speaker Change: Let's move to page B17. Here you can see that like previous quarters, our investment results are excellent as we are earning the higher yields. Our reinvestment yields are also in line with previous quarters, 1 percentage point higher versus current yield.

Speaker Change: And you can see as well that our interest accretion for 2023 is at minus 7.1 million for the year, which is in line with our expectation.

Speaker Change: And in 2024, we expect that number to be close to 1.2 billion as we are going to pay for the higher discounting we have experienced in 2023. So overall, you should expect in 2024 a fairly stable operating investment result to emerge.

Speaker Change: So, let me recap on PNC. What do we see? We see an excellent performance in commercial with a really good outlook as well for 2024 and in retail, a strong price-driven growth with quarter-to-quarter momentum that we expect to earn into 2024 and forward.

Speaker Change: And despite an elevated level of NADCAT and inflationary trends, we have a solid technical result and a structured improvement into our underperforming entities in 2023 as well. So this makes us overall confident for 2024.

Speaker Change: Let's move to live and let's have a look at page B19.

Speaker Change: Here, I mentioned, you know, when we had the overview page, I mentioned our solid growth, which is around 5%, and that growth of 5% translates itself into a slightly lower level of growth in terms of PV and BP, given the discounting effect.

Speaker Change: You can see that actually our growth is mainly emerging from easy life.

Speaker Change: but still with very solid fundamentals in the other operating entities. Allianz-Lebanon had in 2023 slightly less single premium business given the competition with the banking products, but fundamentally we are seeing higher recurring business versus 2022, which is also really good because it's going to help us going forward, and the recurring business is a good business also.

to have on board.

Speaker Change: On the new business margin side, we see a stable new business margin. In the underlying of that new business margin, we have some positive effects coming from the economics, obviously, across all our operating entities. And we have a slightly negative effect coming from the spread decrease of easy life and some update of our non-economic assumptions.

Speaker Change: The value of new business is up 4 percentage points, actually FX adjusted.

Speaker Change: And, I'm sorry, it's up by 4% if it's adjusted. And this is coming both from volume and economics with contribution across the entire portfolio. So also a good, really diverse contribution from our operating entities.

Let's move into the CSM development on page B21.

Speaker Change: And here you can see that there's a solid picture on the value of new business that I just covered is confirmed by our normalized CSM growth, which emerged at 4.9% for the entire year, and this is in the higher range of our 4 to 5% expectation. So that's definitely a very good outcome.

Speaker Change: What we see as well is that we have a strong CSM release of $5 billion for the entire year, which is in line with our expectations.

Speaker Change: And you see as well a lot of noise on that walk that is coming from the non-economic variances.

Speaker Change: And here it's due from 2023 being a transitionary year into IFRS 17.

We have to process.

Speaker Change: a number of one-offs, a number of model changes which have basically no or super limited impact into our future profitability. So you should expect much less movement in the future into that bucket.

Speaker Change: And also, if you clean from the noise the CSM work in 2023, the minus 2.7 is actually a minus 800 million euros, which is much smaller and really, I think, the right type of reference you should have in mind.

Speaker Change: In terms of sensitivities, if you look at the right-hand side of that chart, you can really observe that, first of all, we have really small sensitivities into our CSM. And secondly, that those sensitivities are further reduced compared to last year. So that's really demonstrating that this CSM is actually quite a stable.

Speaker Change: stable beast and you should really expect a stable emergence in terms of operating profit going forward to come through from that CSM development.

Speaker Change: On page B23, you can as well see that the CSM release of $5 billion is emerging into an operating profit of $5.2 billion for 2023, and the main element, I would say, in between that has been supporting further the growth toward the operating profit is actually the good operating investment result we have seen in 2023.

Speaker Change: want to use this opportunity as we are giving a look at the operating investment result that to highlight that we have changed our backup. We have actually enhanced it, so I really hope you like it. And here in particular, we are no longer displaying our numbers on a book value, but we have moved to a fair value representation, so that's changing a little bit, obviously, so you should not, you should take that into account when you do your comparison.

Speaker Change: Also, maybe one last point, obviously between the two columns 2022 and 2023, you should not read too much into that comparison because they are of limited comparability due to the transitionary effect associated to IFRS 17.

Speaker Change: Let's move to page B25 and let's have a further look at our results across operating entities.

Speaker Change: And here you can see that all our operating entities are actually contributing well to our normalized CSM growth.

Speaker Change: except France, and that's mainly due to the lapses that are linked to our Luxembourg business that we have seen at the beginning of the year.

Speaker Change: And to a lower extent for CE, but that's broadly in line with our expectations in terms of normalized CSM growth.

Speaker Change: On the operating profit side, I just want to highlight easy life, where you see a very high level of growth in terms of year-on-year comparison. If you correct for the transitionary effect associated with IFRS 17, we are actually at a growth level that is in the mid-single-digit level.

Speaker Change: So let me recap on life and health. What do we see here? I am in a challenging environment, both when it comes to our investment product and the inflationary effect that we have seen also on the health and protection side. We have well mitigated those effects during the year. We have a solid growth that is around 5 percent, both in terms of top line and CSM, that is to be earned in the future. Our operating profit is well above our expectations, and again, this makes us confident on our ability to also deliver in 2024.

Thank you.

Speaker Change: On the asset management side, on page B27, you can see that our asset and our management reached 2.2 trillion and we are up 4 percentage points compared to last year.

Speaker Change: If we move to page B29 and we have a look at our third-party asset under management, we are up 5% compared to last year. This is clearly at a lower level compared to our expectations at the beginning of 2023 where we were expecting to see also a normalization of the shape of the yield curve that has not materialized in 2023. So I really think this development of the third-party asset under management is a really good job given the volatility of the markets we have experienced in 2023.

Speaker Change: And here we see positive net flows of approximately $22 billion that are steaming from PIMCO. And the markets have been supportive in terms of development, in particular towards the end of the year, while FX have negatively impacted the developments overall.

Speaker Change: Let's move to page B31 and let's have a look at our revenues. So if you FxAdjust our revenues in total, they are actually up 200 million euros versus last year.

Speaker Change: We have benefited from excellent performances on the PIMCO side that is entirely to the credit of the performance of the portfolio managers.

Speaker Change: And this is partially offset by the lower revenues, lower revenue driven by the level of the asset under management as basically the level of asset under management on average in 2023 has been lower compared to the level of asset under management in 2022. What you can see is that in terms of margin, PIMCO is likely up compared to last year. And here I also want to emphasize the point that Oliver was making because I was looking at the historical trajectory of the PIMCO.

Speaker Change: of the PIMCO margin, and if you look over the last seven years, it's actually very impressive how stable it has been. On the level of AGI, actually also the level of fee margin is in line with our expectations post the Voya transaction.

Speaker Change: Let's move to the Operating Profit development on page B33. Overall, our Operating Profit FX-adjusted AMATs are slightly up compared to last year.

Speaker Change: Our cost-income ratio is almost stable at 61.3 and supports really well the delivery. For 2024, clearly we aim our cost-income ratio to move closer to 61, with in particular AGI to continue to improve its own cost-income ratio towards 65 and beyond mid-term.

Speaker Change: So overall, our asset management business did deliver above our operating profit expectation in a volatile environment in 2023, and we expect steady improvement on the fundamentals for 2024.

Speaker Change: Page B35 I'm going to skip. It's actually better than expected and we got very nice support as well coming from the banking business.

Speaker Change: On page B37, we can have a look at the strengths of our cash remittances at group level.

Speaker Change: In 2023, our remittances reached 8 billion euros, and we have a ratio of remittances that is at 124%. It's quite high, and that's related to the fact that we had some dedicated capital actions, and as well linked to the fact that our net income structurally was lower in 2022. Still, if you look fundamentally at those developments, on average, we deliver above 80% of net remittances. For me, this is the right level of magnitude that you need to have in mind for the future.

Speaker Change: And secondly, what you can clearly see, when you look at the details on the segment by segment basis on how historically those remittances have developed, you clearly see the strength of our three pillar strategy that is allowing to have basically offsetting or compensating effect over time and to deliver very steadily on these above 80% net remittance that we see year on year.

Speaker Change: Let's move to page B39 and let's have a look at our net income. So basically, I don't want so much to comment on the super detail in between the operating profit and the net income because there is a lot of noise as well associated with Voya transaction, with the structured alpha, the recent disposal, the hyperinflation effects and so on and so forth. But more fundamentally, when you move from operating profit to net income, we have been in 2023 well supported by our tax rate.

Speaker Change: which has been benefiting from both a positive mix effect and also some positive one-offs.

Speaker Change: For 2024 and forward, you should expect a normalized tax rate level that is closer to 25%.

Speaker Change: And here you see again our earnings per share at 22.61 and as I was mentioning up 33%. And that makes us really proud on the Allianz Group to deliver such increased value to our shareholder.

Thank you.

Speaker Change: Let's move to our outlook on page B41, and you can see that we have set our outlook at $14.8 billion plus minus $1 billion, as mentioned by Oliver already. That's up 4% percentage point compared to last year's midpoint.

Speaker Change: And actually, the approach we have taken to fix our outlook is just leveraging our tradition, which is to fix our outlook at the actual level in terms of delivery. And we have simply slightly rounded it up this year because our operating profit today is at $14.746.

Speaker Change: So we felt a little bit adventurous and we have granted basically midpoint at $14.8 billion.

Speaker Change: So, joke apart, if you look at our PNC segment, the key drivers for the $7.3 billion outlook is first of all, which is increasing by $300 million compared to last year, what we have done in the underlying. We reflect on the growth of...

Speaker Change: of 6% for the total business volume and 5% for our insurance revenue. And we have set our combined ratio between 93 and 94 in the outlook. What we have changed in the underlying of the combined ratio is that we have increased our NAPCAC load to 3 percentage points.

Speaker Change: Yeah.

Speaker Change: And.