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Allianz SE (ALIZF) Q4 2022 Earnings Call Transcript

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Allianz SE (OTCPK:ALIZF) Q4 2022 Results Earnings Conference Call February 17, 2023 8:30 AM ET

Company Participants

Oliver Schmidt - Head of Investor Relations

Oliver Bäte - Chief Executive Officer

Giulio Terzariol - Chief Financial Officer

Conference Call Participants

Peter Eliot - Kepler Cheuvreux

Michael Huttner - Berenberg

Andrew Ritchie - Autonomous

William Hawkins - Keefe, Bruyette & Woods

Vinit Malhotra - Mediobanca

Will Hardcastle - UBS

Thomas Fossard - HSBC

Dominic O'Mahony - BNP Paribas Exane

Oliver Schmidt

Good afternoon, everybody, and invited to nan Allianz Conference Call connected nan Financial Results of nan Year 2022. Before we commencement nan call, fto maine do nan accustomed housekeeping and punctual you that this convention telephone is being streamed unrecorded connected allianz.com and YouTube, and that a signaling will beryllium made disposable soon aft nan call. [Operator Instructions].

Alright, that was each from my broadside for now. And pinch that, I move nan telephone complete to our CEO, Oliver Bäte.

Oliver Bäte

Hello, everybody. Thank you for joining Friday day for immoderate people's already weekend. So we are happy to person you pinch us. I'm conscionable going to study successful astir 10 slides for nan summary of nan twelvemonth and Giulio will, successful his accustomed quality, reside each your questions and springiness you immoderate much insights.

So we had a very beardown twelvemonth fixed 3the situation and revenues and profit astatine all-time high, €14.2 billion. And that's already blimpish arsenic we will talk a small later. So, overmuch much than I would person anticipated successful nan mediate of nan year. And it shows really nan resilience of nan franchise.

What's much important is nan underlying drivers of resilience is competitiveness. And 1 of nan things that we've been talking astir for a agelong clip is tin we tin create accordant improvements across nan portfolio, peculiarly astir productivity. So that's why we've added a constituent here. If you deliberation astir it, further simplification of nan adjusted disbursal ratio, which is benignant of looking extracurricular of nan portfolio of partners, we person had much than 240 bps simplification successful nan disbursal ratio since 2016, and that keeps connected coming and will – targeted for nan adjacent fewer years arsenic well.

What's very bully has been pricing power? You spot that successful nan P&C revenues up and nan separator up, and it keeps connected being consistently tested. What is besides important, which you don't spot connected nan slide, is that retention has been very high? Sometimes erstwhile we person been raising prices to equilibrium inflation, past you spot lapses increasing. We haven't really seen that, which is very important and a grounds to nan spot of nan brand.

Solvency II astatine 201%. That's really not nan astir important number. It has to beryllium seen successful operation pinch what Giulio is going to picture successful position of resilience and accent test. We person been moving successful 2022 to alteration nan volatility. And erstwhile you look astatine nan daze scenarios, they're overmuch much resilient than they were before. And we are going to proceed to return risks retired of our equilibrium expanse complete time. Because that's really important to measure nan 201%.

Payouts person been charismatic again. We are relentless successful giving superior backmost that we don't need, €6.5 billion. That lifts full payouts since 2016 to €38 billion, and that contempt important investments successful nan maturation of nan franchise that you see, for example, this twelvemonth pinch nan consolidation of nan erstwhile Aviva Poland portfolio, which has a very bully effect successful our caller business separator and you will spot besides profit uplift successful nan coming years. We're, for nan moment, seeing much nan downside and nan regularisation which, by nan way, explains besides a small spot somewhat little than expected ROE successful life. Again, you cognize nan first 2 aliases 3 years you person accounting mismatch. Now, this is contempt each of nan issues that we person seen past year. I don't want to spell done them successful detail. You person each knowledgeable arsenic citizens and employees.

Now, nan portfolio level pinch nan grounds operating profit and dividend summation of 6% to €11.4, which we're going to propose to our AGM, are each fine. The stock buyback programme that continues astatine a dependable pace, truthful we're not panicking astir it. And we are going to proceed to execute nan programme that's underway until April. But fto maine repeat, we person nary inducement to beryllium connected money and superior that we don't need. And we are going to proceed to return it to our shareholders complete clip arsenic we spot fit. But we are besides successful nary unreserved to conscionable effort to do thing each quarter.

Now, what is very important is this descent because what this fundamentally shows that each segments person been very resilient. Even Asset Management that had an annus horribilis [indiscernible] we haven't had, I deliberation successful nan past 40 years positive aliases so, equity and enslaved markets down. We person very resilient revenues. We person very resilient margins and €3.2 cardinal operating profit. I don't cognize excessively galore plus managers of our size pinch that level of profitability successful that level of margins.

Life/Health profits person been highly strong. And what nan connection present is, and again, 5 years ago, I was doubtful whether we could get there. We person a tally complaint of € 5 cardinal OP successful life. It should beryllium nan modular without overmuch of volatility. For sure, whether that number is ever astatine that level, we person had immoderate normalization effects that will beryllium taken attraction of. We'll explicate that to you successful nan outlook. But it's a really strong, really, really, really beardown performance.

And P&C has been peculiarly strong, €6.2 billion, gross maturation of 12$. Now, group were worried astir nan 4th quarter. I tin only show you, we're utilizing each leeway to fortify our equilibrium expanse for what's coming. And pinch each owed respect, we didn't request immoderate much profit extra. What we really request is nan resilient for what's coming. And we're making judge we're building that resilience everyplace wherever that is needed. And that will beryllium very important going forward.

And nan champion measurement to spot that is looking astatine nan commercialized statement segment. Giulio will springiness you nan number. We're really astatine a 90 mixed aliases better. The issues that we person been seeing successful centrifugal and others, we've been addressing by really buffering nan reserves arsenic overmuch arsenic imaginable successful bid to beryllium prepared. So some pricing will beryllium earned successful done nan twelvemonth of 2023. You will spot that. And nan reserves are prepared. So successful a bully outlook scenario, we'll person important upside. In a mean scenario, we'll beryllium conscionable fine. Even successful a higher ostentation scenario, we person created important buffers.

Today is nan past clip I'm hopefully going to talk astir Structured Alpha. That's nan adjacent page. Just to beryllium very clear, we are taking this damn serious. This is benignant of not conscionable a bump successful nan road, but we want to make judge that this point doesn't repetition itself.

What are nan lessons learned? They are threefold. The first 1 is to make judge we present connected our intent for our clients. When thing for illustration this – and our clients get hurt, we return that very seriously. And we want to make judge we compensate our clients fairly. We person been very clear that we will do that. So, 90% of our expenditures, you tin publication nan page for yourself, person been going to clients. And nan DOJ explicitly said that, peculiarly nan SEC has been extremely, highly productive successful addressing client's needs. And we instrumentality to that.

The 2nd 1 is to make judge we resoluteness these things accelerated successful our financial institutions wherever these things linger connected for years. We took fundamentally little than 12 months to resoluteness nan investigation and 15 months to get to nan settlements. And financially, I want to reiterate, we are done pinch this thing, done and dusted.

And what is it for our organization? We person to really make judge that tail risks are being reinforced. Now, arsenic a statistician, I ever get tense erstwhile group talk astir 50 ground points modular deviation and assurance intervals. We request to really spell done Six Sigma consequence guidance to really make judge that nan things that we deliberation are very, very, very remote, but tin still happen, we return out.

And I tin springiness you an example, 4 years ago, we started to present and enforce aggregates connected nan P&C side, whether that's nat feline aliases ample nonaccomplishment exposure, because a batch of nan antagonistic surprises successful AGC&S was really an accumulation of mean sized losses. And we don't want to person these things successful our equilibrium expanse anymore. And you spot that again. Later, Giulio will springiness you nan number successful position of we request to thrust that moreover nan mixed accent testers that person supposedly to beryllium very uncommon events should beryllium not a problem for us.

Now nan adjacent page that's very important I would for illustration to talk astir is we person really worked to summation nan maturation of operating profit and yet nett income complete nan past 2 years. So this page fundamentally shows an uptick successful operating profit maturation since 2019. And it besides shows that whenever thing happens, and again, COVID is nan exception, that nan portfolio complete clip support each different successful nan segments. And, therefore, we are not conscionable waiting for fortunate and diversification – that's, by nan way, nan point that ne'er happens erstwhile you request it nan astir – but to systematically fortify nan segments.

And I emotion nan adjacent page, if I tin get there, page 8. Maybe personification tin push nan button. Very good. Very good. My clicker has a hiccup. What you spot present is nan improvement from 2019 successful each 3 segments and that shows ample double-digit summation successful underlying operating profitability improvements, whether that's successful P&C, retired of nan turnaround for commercialized lines is really not conscionable AGC&S and nan continuous productivity enhancement, again, that we person delivered – and it's not funny accounting for illustration you find that occasionally successful different places wherever from 1 twelvemonth to nan other, 40 ground points, 50 ground points disappear. This is simply a continuous activity connected nan underlying costs and gross base. You'll spot that successful Life/Health pinch nan releases from nan backmost book. And again, group asked today, will we continue? Absolutely, we request to move this guidelines business from a dispersed business into a interest business complete time. Not overnight, not hectic, because we don't person a problem arsenic different group have, but we spot that arsenic a immense opportunity arsenic a collaboration pinch our life companies and Asset Management arsenic we started to scribe successful 2021.

And again, nan Asset Management segment, contempt nan tremendous benignant of volatility past year, we are still, connected a like-for-like basis, moreover pinch a reduced consequence 18% up complete 2019. So that helps america to push group results almost 20% complete nan 2019 level.

The adjacent page gives you, again, nan way complete time. Life is not a consecutive line. So there's immoderate volatility astir nan numbers. But what is very important, we support these things successful line, and they are not accidents. They're result of deliberate strategy and continuous guidance action, whether that's connected productivity, whether that is connected life caller business margin, aliases whether that's nan costs income ratio successful nan Asset Management segment.

Now numbers aliases outcomes, and I cognize you attraction mostly for nan outcomes arsenic you spot them successful nan numbers. I let myself to person a somewhat different position because I really judge that companies successful a world that is getting overmuch much analyzable and overmuch much volatile, you request to person nan spot of your customers and of your group successful summation to nan spot from nan shareholders. And this is what page A10 is expected to say. We've been consistently moving connected making our – bringing our customer restitution up done merchandise simplification, making work processes better. And nan results you tin spot connected nan near manus side, we measurement that now pinch digital, what we telephone integer NPS, i.e. existent time. Before it was outbound calls wherever we inquire people, are you recommending america to your friends and family.

And we primitively said we want to person nan immense mostly of our business supra market. Now nan aspiration is intelligibly we want to beryllium loyalty leaders, i.e. nan champion successful customer restitution successful almost everything we do. And you spot that everyplace and it drives that. And by nan way, it is not conscionable connected halfway services. To beryllium a loyalty leader, you request to really person nan spot of your clientele.

The correct manus broadside of nan floor plan is arsenic important because it shows what is nan information of our group and really overmuch do they consciousness taken attraction of this, which we definitive what is called nan Work Well Index. And past year, it was again different grounds twelvemonth and, much importantly, for worker motivation, we person now cracked best-in-class connected a world benchmark. And you spot that successful many, many, galore different KPIs, whether that's successful Refinitiv connected diversity, Edge certifications, we really judge we request to beryllium nan astir charismatic employer to person nan astir satisfied customer base.

And that gets reflected successful nan brand. You cognize that we person nan strongest marque and person been number 1 connected a number of indices, not conscionable Interbrand for a number of years. The latest is nan Edelman Trust Barometer. And that's important.

Now why do I opportunity that because we were really wondering really Structured Alpha would effect that. In fact, we don't spot that astatine each successful nan underlying customer satisfaction. And we convey our clients for that trust. And we dream to get that spot backmost from everybody who was disappointed.

Now nan adjacent page talks astir our biology footprint. You cognize that Allianz has picked 2 of nan sustainable improvement goals arsenic nan halfway and nan astir important is ambiance change. And that conscionable gives you a confirmation that we're up of scheme successful position of delivering connected our commitments, which are, by nan way, quite, rather aspirational.

Now, nan point that galore continuously inquire and deliberation about, and it's a spot sad that it's only benignant of stock buybacks and dividends because nan underlying rate travel procreation of nan group should beryllium what matters and really intelligently we deploy superior internally and externally.

It conscionable shows you again nan grounds connected dividends and nan imaginable upside we are having complete nan adjacent fewer years. If we spell beyond nan minimum 5% increase, and therefore, we are proposing 11.4% for this year. It should spell astatine slightest to 12% and 12.6% successful nan consequent years. And obviously, superior that we don't need, we're going to usage for different forms of return. And again, astatine this stock price, investing successful our ain banal is simply a ace charismatic investment, which we will do arsenic soon arsenic it is, really do I telephone that, professional. And again, doing thing while we person our existent buyback programme moving would look a spot for illustration panic. So we're going to do it successful a accordant basis.

Now, disciplined superior guidance to beryllium continued is astir apt nan astir important page erstwhile you deliberation astir it. That's page number 13. Because it shows you that we person a very clear strategy and person had it now complete nan past six years successful position of what we do connected dividend and what we do successful position of returns. And you tin spot nan bully curve. And what we're trying to opportunity is location is an unabated committedness to support that up, whether that sometimes nan payout ratio goes higher and sometimes it's lower, but we person each inducement arsenic guidance to amended nan return connected invested superior and return it wherever it is belongs, that is to our shareholders if we don't request it ourself.

That leads america to nan outlook for adjacent year. Now, group said this is super, ace cautious. In fact, it is. Particularly if you comparison it pinch this year. The 1 point that I'd for illustration to constituent retired nan outlook for P&C is already astatine €7 billion. So erstwhile group were worried and wrote immoderate comments astir Q4 past year, let's conscionable beryllium very clear. Even though we are conservative, it's already going to jump to €7 billion, which is €400 cardinal up of nan 2024 target we had fixed ourselves astatine nan extremity of 2021 wherever group said, well, that's ambitious.

Just to beryllium clear, now nan components are somewhat changing because we person liking rates up. That has a importantly affirmative effect that Giulio will show you. And we request to again create much reserves successful bid to buffer ostentation effects. But nan value of nan net is astir apt stronger than it was earlier because we're earning higher rates per risk, and overmuch higher than we thought. And we, again, are continuously making productivity gains that reinforces nan net resilience.

Again, we are cautious connected Life/Health because we had immoderate affirmative effects arsenic we're managing done quickly rising rates this twelvemonth that whitethorn not repetition themselves. Asset Management, we're besides very cautious because nan AUM levels astatine nan opening of this twelvemonth are importantly little than they were astatine nan opening of past year. And we don't want to beryllium excessively optimistic connected flows and returns. On nan different hand, we person already had a double-digit cardinal inflows this year. But, again, successful this environment, we want to beryllium very cautious. And corporate, again, is very conservative. We haven't put nan number successful that we had for this year.

So what you tin fundamentally say, well, past what does that mean? Well, look to nan 2024 outlook, arsenic I said earlier, that we see to beryllium very eager successful 2021. We are almost location today.

So convey you very overmuch for listening. And Giulio will springiness you nan details. Just by nan way, to reiterate nan outlook, and nan comparison is based connected IFRS new, right? So, it's not nan IFRS old. And for us, location are mini movements. They're fundamentally nan identical numbers. And I'm happy to get immoderate of your questions later. I presume astir of them will spell to Giulio.

Giulio Terzariol

Thank you, Oliver. And bully day aliases bully greeting to everybody. And now we tin spell into my portion of nan presentation. As Oliver said, we had grounds profit successful 2022. And that's grounds profit aft we posted nan grounds profit besides successful 2021. And that's besides importantly up of our outlook of €13.2 billion. This successful an situation which was peculiarly challenging because of what happened successful February of past year.

When we look astatine nan revenue, nan gross flat, but we spot maturation precisely nan area wherever we wanted to spot growth. So successful spot and casualty. It's not astonishing that successful nan existent environments, successful nan life conception and besides successful Asset Management, gross are going to spell down. But, overall, connected an adjusted ground for FX and besides for consolidation, we person a level gross development.

On nan operating profit, successful Property-Casualty, we achieved a profit of €6.2 billion, which is 8% higher compared to nan anterior period. And this is owed to nan truth that we person been capable to support nan mixed ratio unchangeable and we person benefited past from nan maturation of nan business and besides from higher finance income. So, a summation of €6.2 cardinal of operating profit which is up of nan outlook and also, arsenic Oliver was pointing out, we person put a important magnitude of ostentation reserves. So, from that constituent of view, nan value of nan numbers is very good.

On nan life side, we person a €5.3 cardinal of operating profit. That's a grounds operating profit. And also, you spot that nan caller business separator is very beardown astatine 3.8%. So we are very happy astir nan improvement successful nan life business where, astatine nan extremity of nan day, what is happening, we put a batch of effort complete nan past 2 years connected nan in-force and besides caller business, and now we are besides getting nan use from higher rates.

In Asset Management, clearly, nan situation has been challenging. We ended up pinch a profit of €3.2 billion, which is little compared to nan outlook and besides anterior period. But I will opportunity considering nan biology capacity has been really beautiful resilient. So bottommost statement is beardown capacity successful 2022. And what is moreover much important, we are good positioned for 2023.

Come into descent 5, connected nan operating profit improvement for Q4 and besides different applicable KPIs, we spot immoderate image pinch an operating profit of €4 billion. Here, clearly, we had a ample publication coming from nan life segment. And that's a consequence of a favorable marketplace information successful Q4. But besides we had a drawback up effect coming from changes connected presumption liking rates. We could person done these successful nan people of nan year. But, usually, we do this benignant of changing presumption towards nan extremity of the. And that was besides nan logic why we flagged a mates of quarters agone that we expect to spot affirmative unlocking coming successful 2022, particularly from liking rates.

On nan Property-Casualty side, we person €1.5 cardinal operating profit for nan quarter. This is really successful statement pinch our outlook, divided by four. And also, successful nan past quarter, conscionable to springiness you an idea, we put astir 3 percent constituent nonaccomplishment ratio into this ostentation reserves. So again, nan value of nan underwriting consequence is beautiful good. And then, connected Asset Management, €800 cardinal of operating profit is broadly successful statement pinch nan improvement that we saw besides successful nan preceding quarter.

When you put each together, €4 cardinal of operating profit is simply a very beardown level of performance. So we had a very bully 2022 pinch a very beardown decorativeness successful nan past months of nan year.

Now connected page 7. On nan solvency ratio, you tin spot nan solvency ratio has improved by a mates of percent points compared to nan level of September. What is moreover much important is nan improvement of nan sensitivities. We told you that we wanted to trim nan equity sensitivity to beneath 15 percent constituent by nan extremity of nan year. Right now, it's minus 13 percent point. When you look astatine nan different sensitivities and you comparison to nan sensitivities that we had a twelvemonth ago, you tin spot location is simply a beardown reduction. So, overall, erstwhile you look astatine our solvency ratio, you besides look astatine nan mixed accent test, you tin spot that we're very good positioned from that side. So we are very happy pinch nan level and besides pinch nan level of sensitivity that we are getting too.

Page 9 connected nan improvement of nan solvency ratio by driver. You tin spot that we had nan publication coming from nan integrated generation. There was 27 percent points pretax and dividend. If you do aft taxation and dividend, that's astir 8 percent point. It's a small spot little than nan 10 percent constituent we were expecting. That's because we were increasing much successful P&C compared to nan anticipation that we had a twelvemonth agone erstwhile we were still speaking of a beardown integrated generation. As you cognize besides from nan anterior quarters, we had intelligibly a antagonistic effect owed to nan marketplace movement.

And connected superior guidance action, you spot minus 2 percent points. If you region nan dividend from that statement item, location is an betterment of 9 percent constituent which is coming from nan guidance action that we took during 2022. So, we had besides a important derisking happening. So, arsenic you tin see, we tin return action successful bid to stabilize and amended nan solvency ratio and besides to make judge that, from a consequence appetite, sensitivities are wrong what we deliberation it's appropriate.

So erstwhile you put each together, 201% of solvency ratio, truthful it's a comfortable and bully level. And clearly, we expect arsenic we get further procreation of integrated improvement successful 2023, we expect this solvency ratio to further improve.

Now, we travel to nan P&C conception wherever we show traditionally first nan maturation and besides nan maturation by companies. As I said before, very bully maturation of 9.5%. This is mostly driven by price. And that's besides a clear denotation that we person been reacting to nan ostentation situation that we saw coming successful nan people of 2022.

You tin besides spot that fundamentally each companies had a affirmative maturation rate. And if you look astatine nan maturation complaint of 2022 compared to nan maturation complaint of 2021, you tin spot that fundamentally almost each companies person amended numbers.

On nan alteration successful renewal, nan number is 4.9% for nan year. If you look astatine nan 9 months, nan number was 4.3%, which intends location was besides an acceleration arsenic expected travel successful Q4. So from a guidance of ostentation constituent of view, I consciousness very assured that we did a very bully occupation successful 2022, and we are very good positioned arsenic we look astatine 2023.

Page 13, it's astir nan improvement of nan operating profit wherever you tin spot €500 cardinal improvement. This is mostly coming from nan finance results, but besides successful nan underwriting result, location was a small spot of a amended development. The mixed ratio is really comparatively stable. And present we tin spot that location was a flimsy betterment coming from nan nat feline load, partially compensated by nan summation successful disbursal ratio because of nan business operation astatine Allianz Partners, which intends past that location was, arsenic you'll see, an betterment successful nan runoff, which was intelligibly mostly compensated by nan improved – by nan deterioration of nan attritional nonaccomplishment ratio.

Here I tin show you that location is simply a important magnitude of recycling going on. Just to springiness you an idea, Allianz Trade has released a important magnitude of runoff, which is fundamentally producing a affirmative runoff of 1 percent point. All these runoff has been recycled into nan mishap here. So you request almost to trim nan runoff by 1 percent point. And you tin besides correspondingly trim nan attritional nonaccomplishment ratio by 1 percent point. And that's conscionable 1 example. I could besides make – that's besides nan astir oculus catching sample, but you request to see that location was this benignant of cycling happening.

And also, erstwhile you look astatine nan year, we put speech €1 cardinal of ostentation reserve. When you adhd besides nan number that we had put speech already past year, we had €1.8 cardinal of ostentation reserve which is decidedly a number wherever I opportunity we are very good protected arsenic we look into 2023.

On nan conception development, you tin spot intelligibly immoderate unit coming successful retail, but we are still having 93 mixed ratio, which is intelligibly not what we for illustration for, but it's – looking for, but it's still a coagulated 1 and we expect this mixed ratio to get amended successful nan people of 2023. And successful commercialized lines, you tin spot really beardown results, 90 mixed ratio. And this is intelligibly owed to nan betterment that we saw successful AGC&S. Also nan awesome results of Allianz Trade. But arsenic Oliver was pointing retired before, besides successful mid corp, our mixed ratio is fundamentally astatine nan 90% level, truthful very beardown capacity successful commercialized lines.

As we spell to page 15 connected nan operating profit by mixed ratio, by entities, you tin spot a batch of bully numbers for illustration successful Germany, Italy, Australia, Eastern Europe, Switzerland, AGC&S, Allianz Trade. There are a mates of exception. Most notably, Spain and England. These are not circumstantial to Allianz. As you know, nan marketplace has been beautiful tough, some successful Spain and particularly successful England, which besides intends we are decidedly expecting that we are going to spot an betterment successful 2023. So from this constituent of view, we person a batch of institution operating nicely and we expect this capacity to beryllium sustainable successful 2023. And then, we expect intelligibly fewer [indiscernible] to amended besides importantly arsenic we spell into 2023.

And now coming to page 17, connected nan finance results, clearly, there's been a affirmative driver of our capacity successful 2022, pinch an betterment of €400 million, which is coming from nan higher complaint environment. If you look astatine nan reinvestment yield, this is fundamentally double compared to nan level that we had past twelvemonth during 2021. And if you look astatine nan numbers conscionable for nan quarter, location was 4%. So, it intends besides that – and arsenic you know, rates are still beautiful precocious successful Q1. So, arsenic you tin imagine, location is simply a batch of finance income, which is building successful nan pipeline. So this should besides prolong our capacity successful 2023.

So bottommost statement for P&C, €6.2 cardinal of operating profit, which is higher than our outlook successful an situation which was challenging, but we person been capable to support mixed ratio astatine a level of nan preceding twelvemonth that we person benefited from maturation and from finance income. And arsenic I said before, pinch nan reserve that we put aside, we are very good positioned for 2023.

Now coming to nan life segment. And caller business margin, it's really good. It's almost 4%. And also, you spot each segments are contributing. On nan maturation side, clearly, first of all, erstwhile you spot nan minus 17% of growth, you request to set for immoderate of nan one-offs that we had successful 2021 and that we discussed a twelvemonth ago. So if you set for those one-offs, nan maturation is antagonistic minus 8%, which is benignant of normal successful an situation wherever intelligibly nan appetite for unit-linked aliases azygous premium business is going to beryllium reduced compared to a much unchangeable environment. But, overall, beardown performance, particularly from a separator constituent of view.

Page 21 connected nan operating profit improvement for nan life business, we achieved grounds profit successful life pinch €5.3 cardinal of profit. This is mostly driven by nan improvement successful protection and wellness and besides unit-linked without guarantees. Here, we person besides nan use coming from nan acquisition of Aviva, but besides successful protection and health, it was integrated development.

And erstwhile you look astatine nan different segments, for illustration superior businesslike products and guaranteed savings and annuities, you tin spot stableness successful in this environment, which has not been easy to opening nan twelvemonth from an impairment constituent of view. But, eventually, we benefited from higher rates.

Page 23, connected nan grounds by OEs, you tin see, connected nan operating profit that Allianz Leben has produced, again a very unchangeable profit. In nan lawsuit of Allianz Life, you spot a simplification compared to 2021, but that's much because 2021 was exceptionally good. The level of 2022 is much successful statement pinch our expectation. And then, arsenic I was saying before, nether CEE, you spot nan doubling of nan profit because of nan acquisition of Aviva, which is going according to our expectation.

And connected nan caller business margin, you tin spot basically, crossed nan board, an betterment of nan caller business margin. So from that constituent of view, I will opportunity nan profitability of nan business, which is applicable arsenic you deliberation astir solvency to superior generation, is really good.

And 1 remark I didn't opportunity before, erstwhile you look astatine our solvency innovation, you person connected nan 1 side, very beardown caller business separator travel successful nan ain fund. And erstwhile you look astatine nan superior requirement, we are correct now releasing astir €600 cardinal of superior connected nan life broadside because of nan different strength of nan business. So location is simply a beardown publication connected nan integrated statement point coming from nan life business.

Page 25. That's astir nan finance separator which is much aliases little unchangeable compared to 2021 level. I deliberation what is important present is to item that nan existent output is going up importantly by almost 20 ground points and nan guarantee level is reducing by astir 10 ground points. So, nan dispersed has widened by 30 ground point. That's highly bully for nan profitability aliases resilience, I will say, of nan business. And we expect this inclination to proceed intelligibly successful 2023 because nan guarantee levels are still going down and nan output is going to beryllium precocious successful 2023 versus 2022. So, wide beardown results successful life, some connected nan operating capacity and besides connected nan finance margin, connected nan value of nan profit and overall. And I will opportunity we are besides present good positioned for 2023.

Now coming to Asset Management. Clearly, successful Asset Management, plus bases went down. When you look astatine nan 3rd statement assets nether management, you tin spot a simplification of astir 17%. This is not surprising. This happened fundamentally to each plus managers because some equity aliases fixed income assets went down successful nan people of 2022.

You tin see, however, that connected nan alternative, we person been capable to turn successful that abstraction connected nan thesis that we tin power better. There was so immoderate growth, which is simply a bully point to see.

And going to page 29 connected nan inflows, we discussed that galore times. So, I will opportunity – I will not walk excessively overmuch clip connected nan inflow business for 2022. But I tin show you that successful January of this year, inflows person been affirmative some for AGI pinch €1 billion, but particularly pinch PIMCO – astatine PIMCO pinch €10 billion. We saw besides affirmative inflows successful February. So from that constituent of view, we ever discuss, what does it mean for PIMCO erstwhile we person this benignant of complaint environment. We cognize it's affirmative fundamentally. Just a matter of erstwhile this affirmative is going to travel done our numbers. It mightiness beryllium now arsenic we've seen this month. It mightiness beryllium nan markets are going to beryllium choppy again. But location is nary uncertainty that it's conscionable a matter of clip that we're going to spot beardown inflows coming backmost astatine PIMCO. When I opportunity matter of times, I'm not meaning ages. It's conscionable a matter whether it's going to beryllium adjacent quarter, nan different quarter. It mightiness beryllium already now arsenic we speak based connected what we are seeing astatine nan moment. So that's connected nan inflows situation.

On nan revenue, they person been comparatively resilient. And that's besides owed to nan truth that, connected nan erstwhile slides, we are looking much astatine nan constituent to constituent comparison. Here, we're looking astatine revenue, which are much based connected nan mean assets nether guidance during nan period. So erstwhile you look astatine nan mean assets nether guidance successful 2022 versus 2021, successful reality, you'll spot little of a drop. And this explains why nan gross are beautiful resilient.

And besides connected top, which is very important, nan interest separator is very stable. In nan lawsuit of PIMCO, we moreover spot an betterment successful nan interest margin. In nan lawsuit of AGI, location is simply a spot of a simplification owed to nan Voya transaction, but wide unchangeable caller separator – interest margin.

Page 33, connected nan operating profit development, clearly, successful an situation wherever nan plus guidelines is going down, you get – considering besides that location is immoderate operational leverage successful Asset Management, you get a simplification successful nan profit. If you look astatine nan number excluding capacity fees, that's a simplification of astir 5%. If you besides look astatine nan number including capacity fees, that's astir minus 8%. Again, thing really different from what you spot successful nan market. We moreover judge that our numbers are a small spot amended compared to what different companies mightiness person disclosed.

And here, I'd for illustration to item particularly nan capacity of AGI because nan profit of AGI is good northbound of €700 million. And arsenic you remember, conscionable successful 2019 aliases 2020, nan institution was performing much astatine a level of €600 cardinal operating profit. So, contempt each nan challenges that we had pinch AGI, nan underlying business is performing nicely and we are now astatine a level of capacity which is importantly higher compared to what we had conscionable a mates of years ago.

And past we travel to nan firm colony wherever we had a bully improvement, mostly driven by nan summation successful finance income because of nan different complaint level and besides we are getting immoderate much dividend from immoderate of nan information that we are holding. So, overall, this betterment is driven by nan superior marketplace improvement and particularly nan complaint development. And past we travel astatine page 37 to our nett income which was €6.7 billion. Clearly, present we person nan effect of nan Structured Alpha and besides we had nan effect of nan transaction of disposing Russia, which is fundamentally conscionable an accounting play. That is nan reality, nary existent rate effect aliases solvency effect coming from nan transaction. And then, arsenic you tin imagine, successful this benignant of environment, we are picking up a small spot much impairment compared to a normal situation. If you set nan numbers conscionable for Structured Alpha, which is intelligibly a non-repeating point and besides for nan Russian disposal, nan nett income will beryllium €8.8 billion, which is simply a amended reflection, clearly, of immoderate normalized nett income mightiness be. So, this gives you a bully thought astir what benignant of bottommost statement anticipation you should person for 2022 connected a normalized level.

And now, we travel to nan outlook for 2023. Overall, €14.2 cardinal of operating profit. As you know, we person a contented to group nan outlook for nan twelvemonth adjacent to nan operating profit of nan preceding year. So that's thing that we do fundamentally astir of nan time. So we support religious to this tradition, which is serving america well.

When you look astatine nan azygous segments, we person an operating profit of €7 cardinal for Property-Casualty. I'm very assured that we are going to astatine slightest execute this number. And nan logic is we're going to spot maturation – continued growth. The finance income is going to beryllium higher. We person proven that we tin negociate ostentation very well. And we'll put besides reserve speech to protect america successful nan lawsuit that location are surprises and successful nan lawsuit ostentation is going to beryllium little than what it presently is. Then we are going to spot moreover a use coming from that reserve. And so, we consciousness very good positioned connected nan P&C side.

On nan life side, €5 cardinal is nan anticipation for 2023. That's besides a number wherever we consciousness very bully considering that, successful nan past 2 years, we person overachieved nan €5 cardinal threshold. Here location is simply a small spot of certainty because of nan IFRS 17 implementation. But fundamentally, we cognize that this business is operating astatine slightest astatine a €5 cardinal of profitability level.

In Asset Management, we are benignant of cautious because of intelligibly nan starting point, considering that nan plus bases, arsenic Oliver was saying, went down successful nan people of 2022. Here we tin opportunity what we spot correct now successful January is beautiful encouraging, but intelligibly we adjusted nan opening of nan year. We are going to spot what nan remainder of nan twelvemonth will bring and past incorporate. We are decidedly connected nan blimpish broadside pinch €800 million. So from this constituent of view, erstwhile you look astatine nan outlook and nan different components, we person a – we consciousness very, very bully astir very coagulated outlook.

And arsenic you know, we person a way grounds to hit nan outlook. It happened each nan time, isolated from successful 2020 erstwhile we had COVID. So I judge history has a inclination to repetition itself. So I will opportunity that astir apt we're going to beryllium amended than this number.

And pinch that, I would for illustration to unfastened up to questions.

Question-and-Answer Session

Operator

A - Oliver Schmidt

All right, yeah. Thank you, Oliver and Giulio, for your presentations. And, yes, now we would beryllium happy to return your questions. And we will return nan first mobility from Peter Eliot.

Peter Eliot

I conjecture a spot of a bias towards nan outlook successful my questions. But nan first one, erstwhile you gave your IFRS 17 presentation, it sounded for illustration non-life would look astir €250 cardinal amended nether IFRS 17. So I conjecture I'm conscionable benignant of trying to quadrate that pinch nan remark that nan outlook would person looked nan aforesaid connected some accounting standards. And, yeah, I conscionable wonder, is it conscionable a lawsuit of nan magnitude of conservatism progressive aliases is that – you mentioned life, possibly Giulio, is that an offset?

And possibly then, conscionable specifically connected nan outlook for Asset Management and non-life, I was wondering if you could conscionable explain what you're assuming successful position of flows connected Asset Management. And successful non-life, are you capable to springiness america immoderate benignant of position of nan benignant of nan mixed ratio connected nan aged accounting ground that you're reasoning of there?

And past possibly finally, I conjecture we've seen this benignant of nan use from nan ostentation linked bond, connected nan finance income autumn away. Is that fair? We've benignant of seen that travel was done and shouldn't get overmuch much of that?

Giulio Terzariol

Maybe I'll commencement from nan P&C outlook. I tin springiness you fundamentally each assumptions that we person made, truthful past you tin dress up your mind whether this is fierce aliases conservative. So, maturation complaint to get to nan €7 billion, I commencement first successful nan aged logic and past I show you what is nan quality betwixt aged logic and caller logic. That's nan champion measurement to attack nan question.

So if you presume 6% of maturation complaint successful premium, which is thing that I judge we should beryllium capable to execute considering that, connected an earned basis, we're already connected a higher trajectory. If you presume a mixed ratio 94, which is what we did successful 2022, truthful I consciousness beautiful bully that we should beryllium astatine slightest astatine 94. If you put an presumption for finance income of €3.3 billion, which will beryllium €250 cardinal much compared to what we had this year, which is wholly achievable, we will beryllium fundamentally astatine €6.7 cardinal to €6.8 cardinal of operating profit. So that will beryllium fundamentally nan operating profit successful nan aged logic. And therefore, nan nett effect of discounting and unwinding, we person astir €200 cardinal to €300 million, which is simply a very debased number. So, arsenic of now, we're going to spot measurement much than that, to beryllium frank, betwixt us. But conscionable deliberation astir aged logic, 6% maturation successful NPE, 94 mixed ratio, astir €3.3 cardinal of finance income, decidedly achievable. And this will put america already astatine €6.7 cardinal to €6.8 cardinal of operating profit.

Our assurance astir achieving 94 mixed ratio is very high, considering that we did that successful 2022. I spot 2022 being much challenging compared to 2023 because, successful 2022, we had intelligibly each nan nett premiums earned coming from 2021. And nan nett premium earned for 2021, didn't cognize that Putin is going to beryllium astatine warfare successful Ukraine. Now arsenic we spell into 2023, we person each nan NPE coming from 2022, particularly much towards nan 2nd portion of 2022 and nan NPE of 2023. And these premium, they really – they've been priced intelligibly to relationship for inflation. And then, arsenic I was saying before, we besides put speech a sizable reserve for ostentation 2022.

So these are nan things you request to judge to, and truthful I judge you tin dress up your mind really blimpish this number is. And don't hide that besides we presented successful November that we person inaugural connected nan declare side. They should besides bring further profit. So from that constituent of view, I person a precocious grade of confidence. Clearly, cipher knows what tin hap pinch nat cat, each these benignant of things. But from a underlying constituent of view, we are really good positioned compared to this outlook.

On inflation-linked bonds, which mightiness beryllium linked to besides this question, look, if ostentation stays astatine this level, you're going to see, again, a beardown publication from inflation-linked bonds. In that case, I will opportunity nan €3.3 cardinal of finance income whitethorn beryllium blimpish because we took down a small spot nan presumption connected what we mightiness get retired of inflation-linked bonds. So we're going to spot what happens connected nan different broadside if inflation-linked bonds are going to nutrient little income, past you should expect also, location is little inflation. And then, our €1.8 cardinal of ostentation reserve is going to astir apt spell into nan bottommost statement and not into claims. So you request ever to see that, yeah, location are galore pieces successful nan equation. So, I deliberation we're going to beryllium good 1 measurement aliases nan other.

Then your different mobility astir nan inflows. Okay, inflows are benignant of moderate, but successful reality, you cognize astatine nan extremity of nan day, because you tin estimate astir nan inflows, whether they're going to beryllium much aliases little each day, truthful we look much astatine what we deliberation nan assets nether guidance are going to beryllium astatine nan extremity of nan year, and we are wide readying betwixt inflows and accretion, comparatively mean summation successful assets nether management. That's nan measurement we group nan plan.

One main point to watch successful reality successful Asset Management is nan FX improvement arsenic we are benignant of limited to a definite grade connected nan FX. So, you request to watch not only what is going to hap from a superior marketplace constituent of view, but besides from an FX constituent of view. Overall, nan €3 cardinal is – I deliberation it's a – I wouldn't telephone it blimpish because we request to admit that intelligibly 2022 has been tough. prevention it because we request to admit that intelligibly 2022 has been tough. But I deliberation it's a coagulated ground wherever nan downside mightiness beryllium constricted compared to nan upside, but we're going to spot what happens successful 2023.

Oliver Schmidt

And we will return nan adjacent mobility from Michael Huttner from Berenberg.

Michael Huttner

Well done connected really bully results. I person 3 questions. One is connected rate flow, nan different 1 is connected Poland and nan different 1 is possibly you tin talk a small spot much astir pricing. Maybe you tin make it – I don't know, it's a wish, circumstantial to each market, really quickly you tin spot immoderate of these much challenging markets for illustration Spain and nan UK move around.

On rate flow, €7.2 billion, I think, is nan number excluding nan one-off of Structured Alpha and nan Lucy deal. And it's up from 6.7%. So, it's [indiscernible] I conscionable wondered, is this nan benignant of tally rate? Or tin we spot immoderate acceleration acknowledgment to amended pricing?

On Poland, I heard from nan media call, but I astir apt misunderstood that this should beryllium nan 1 of nan main drivers for moving nan life ROE from 12% adjusted 2022 to 13%. I would make that Poland is worthy location astir €500 cardinal aliases €600 million. I don't know. But I conscionable wondered if you tin explicate a small spot nan moving parts connected this? And then, yes, connected nan spot much granularity connected non-life.

Giulio Terzariol

I deliberation 1 mobility was connected nan rate flow. Basically, if you set for Structured Alpha and Lucy, nan rate travel successful 2022 was northbound of €7 billion. As you remember, successful nan Capital Market Day, we said we want to person €23 cardinal of cumulative rate flow, 2022, 2023 and 2024. And that's nan idea. So, fundamentally, yes, we expect, basically, to astatine this level rate travel accelerating intelligibly arsenic location is much maturation successful nan profit – successful nan business. But, yeah, deliberation astir that we put guardant a €23 cardinal cumulative rate flow. That was not included successful Structured Alpha and Lucy astatine that time. But if you normalize for these 2 things, yeah, we are connected a bully way to get to nan €23 cardinal of remittances. And if you comparison to nan play earlier 2022, we are €20 cardinal remittances. So location is decidedly an acceleration that we want to spot successful these 3 years compared to nan 3 years before.

On Poland, my remark was erstwhile you do an acquisition, clearly, you get fundamentally firstly ROE including nan goodwill. And past what happens, truthful my meaning is going to beryllium a small spot dilutive. At nan beginning, you person besides restructuring expenses, and you're going to get nan synergies later. And also, you had nan alleged PGAPs accommodation and nan amortization of this PGAP accommodation is beautiful pro rata alternatively of pursuing if you want a much system view.

So, basically, erstwhile you do an acquisition, you're going to get a dilution successful nan ROE and past this dilution is going to trim complete time, and that's nan logic why location is first an effect successful nan ROE of nan segment, but past complete clip this effect is going to spell away. So that's connected Poland.

And then, connected pricing, I will say, look, fundamentally, you spot much pricing successful general. Maybe I tin besides springiness you an accusation because I was looking astatine nan alteration connected renewal successful unit for nan 9 months versus nan 12 months and past I was doing nan implied calculation for what is happening successful nan quarter. If you do a calculation for illustration what is happening correct now aliases what was happening successful Q4, you get to a high-single digit number. So fundamentally we are seeing numbers which are very adjacent to 8% to 9% of complaint increases arsenic we speak.

It's different clearly, surface science by geography. I tin show you, successful nan UK, we person monolithic complaint increases because, arsenic you know, nan marketplace has been suffering a lot. So successful that case, you spot complaint increases which are northbound of 20%. We spot very bully complaint increases besides successful Germany. In this case, we are speaking of a precocious azygous digit. And then, we spot besides now amended complaint increases coming successful Italy aliases successful Spain. I saw immoderate numbers yesterday aliases heard that now nan mean premium successful Italy mightiness beryllium coming backmost up. The mean premium successful Italy was ever going down for many, galore years. So, from that constituent of view, location is simply a move correct now successful nan markets, which is decidedly affirmative and it should thief to make judge that nan mixed ratio is going to beryllium astatine nan capable level.

Oliver Bäte

And if I whitethorn add, conscionable – normally, I ne'er interfere erstwhile Giulio says thing 2 aliases 3 accusation because I conscionable look astatine nan UK. It's very important. Unlike different companies connected nan LV side, nan important effect was nan flood, not motor. Actually, centrifugal is astir 95, 95.5, which is very different from title penning astatine 100. So nan flood point and that is getting repriced. In nan Allianz marque of business, there's commercialized and others, there's much activity to beryllium done. But conscionable to comparison them, it's not centrifugal inflation, which group benignant of thin to confuse.

The 2nd point I want to reiterate is nan very beardown capacity connected commercialized is, barroom thing that I tin imagine, going to proceed because nan AGC&S turnaround is benignant of completed. We person 80% jump successful operating profit and still improving reserves and we're going to gain nan premium through, arsenic Giulio said. The aforesaid is existent for nan remainder of nan commercialized portfolio. So you're going to spot a important boost coming from elements.

And connected a individual expectation, we must spot – and I'll framework it this measurement – a numerical turnaround successful Brazil. We will not prolong different twelvemonth of underperformance. So that's conscionable unsocial astir €150 cardinal to €200 cardinal much OP that needs to travel done nan system. And nan remainder is performing really well.

The 2nd remark – again, I want to add, location was a batch and we possibly could person done a amended occupation – misinterpretation connected Q4. It's very important what Giulio said astir Allianz trade. You person astir a 1% mixed ratio effect of recycling of, truthful to speak, reserves successful waste and acquisition that group don't understand. Remember that also, compared to 2021, wherever we had nan authorities schemes and we person a batch much profit coming and we person an unwinding of nan COVID reserves, which we did then, truthful this is existent money. This is not funny money to amended reserves, to put it mildly. So it's very important for nan mentation of nan results.

If you conscionable return this one, nan existent underlying nonaccomplishment ratio is astatine slightest 1% lower. And I deliberation that is very important that group do not get nan incorrect position connected nan Q4 numbers.

Oliver Schmidt

And we will return nan adjacent mobility from Andrew Ritchie, Autonomous.

Andrew Ritchie

The first question, could you conscionable update america connected what your cardinal reinsurance aliases your cardinal arena retentions aliases location retentions person done, station nan caller reinsurance renewal. I presume they've gone up, but possibly conscionable explain to what nan rates person gone up connected your highest perils.

Second question. I'm sorry to spell backmost to nan ostentation issue. I conjecture I'm struggling to – really to deliberation astir this ostentation reserve that you support referencing aliases nan ostentation buffer. Because surely it's not really a buffer. It's conscionable reality. You've put speech much for inflation. It doesn't look for illustration that large a number successful nan discourse of nan book. And each that will hap is that will conscionable get utilized up successful 2023 arsenic nan attritional continues to suffer immoderate ostentation effects conscionable earning done and you're conscionable going to usage that buffer to offset. So, there's not really a buffer. It's conscionable guardant booking, isn't it? I don't cognize why I wouldn't deliberation of it for illustration that. Maybe show maine why I'm wrong.

And nan only different questions I had were, tin you talk america done – are location immoderate surrender – changes to surrender acquisition occurring successful life successful ray of nan higher liking rates by country?

And finally, for life, you've benefited successful IFRS 4 from immoderate affirmative presumption updates, immoderate of nan true-ups astatine nan extremity of nan year. Would we spot akin affirmative emergence of assumptions successful IFRS 17.

Giulio Terzariol

So, possibly starting from nan cats program. So, fundamentally, we could spot nan programme pinch a building that we had. Clearly, from a capacity constituent of view, we had to make immoderate concession and besides pricing went up. But location were nary awesome surprises compared to what we were expecting.

Maybe nan champion measurement I tin springiness you besides nan limits by peril, but possibly nan champion measurement to reply your mobility is to springiness you a small spot of bottommost line. And nan constituent is we did an as-if calculation of 2022 and 2021 I person successful nan caller program. And successful 2021, nan nett rate travel would person been 60 ground points higher and 2022 would person been 30 ground points higher. So that's possibly nan champion measurement to look astatine nan numbers. So from that constituent of view, 1 mightiness expect a small spot much volatility wherever we are speaking – honestly speaking of a very constricted amount. So, we are very happy that, fundamentally, we could spot nan aforesaid building intelligibly pinch immoderate concession, but we don't person a important change, I will say, successful nan profile. Just a small spot much volatility.

And Oliver wants to opportunity something.

Oliver Bäte

One of nan astir important things that Giulio and I spent together pinch Kristen [ph] connected nan past 2 years, to make judge that we support nan aggregates. And because we person been very, very prudent, besides pinch our reinsurance partners, we were capable to spot our aggregate target – aggregate programme to nan immense mostly that, depending connected really you tally nan numbers, 85%, 90%, which is ace important because that is nan existent protection that we request successful our portfolio. And that was not clear astatine nan beginning. And arsenic I understand from nan reinsurance market, a batch of competitors that had ceded a batch of losses nan past 2 years into nan reinsurance marketplace person not moreover astatine immoderate costs been capable to spot this. So that's very important for you to understand because that is nan protection we didn't person 3 aliases 4 years ago.

Giulio Terzariol

On your ostentation reserve, okay, a buffer cannot beryllium interpreted for illustration we person €1.8 cardinal of buffer that is going to beryllium released into profit. So, decidedly is simply a reserve that is location to protect america against surprises connected nan ostentation side.

But I show you why I judge this reserve is, let's say, sufficient. And I springiness you an example. So if we had, let's say, 5% aliases much ostentation successful spare parts compared to what nan anticipation was, and by nan way, spare parts is very short tail, truthful from their constituent of view, location is not overmuch of a correction we tin do. But 5 percent points, it's astir €200 cardinal much claims. If we had €1.8 cardinal of reserve, you tin understand already that spare parts is not going to beryllium a problem. On nan bodily injury, okay, we mightiness spot immoderate development. For nan clip being, location is not overmuch happening. Clearly, location are different lines of business for illustration liability and truthful on. But we request to admit that – I was referring intelligibly to motors spare parts. But you tin understand what is nan magnitude of this reserve, considering what could beryllium nan effect of being disconnected by 5 percent constituent connected spare parts successful motor, which has been mostly nan rumor successful reality successful nan people of 2022. So it's intelligibly a reserve, which cannot beryllium identified arsenic a buffer successful nan consciousness of it's an add-on connected apical of our champion estimate, but I will opportunity it's a very prudent reserve. So from that constituent of view, we are not concerned astir ostentation becoming a problem for america from nan backmost book, and we are pricing 2020 – we've been pricing successful nan people of 2022 and besides – and now successful 2023 intelligibly considering for nan ostentation that we spot coming through.

On nan surrender acquisition successful life, no, we don't spot surrender. We person been looking into that beside successful a very mini book. So I don't deliberation we request to speak astir details. But erstwhile we look astatine nan awesome portfolio, erstwhile we look astatine Germany, aliases erstwhile we look astatine nan United States, we don't spot immoderate acceleration successful surrender. We did a batch of analysis. So we are very comfortable that this is not an rumor for us.

And past your different mobility astir nan unlock, successful nan caller IFRS 17 unlocking, they are now going to play nan aforesaid domiciled for illustration successful nan aged accounting modular connected nan different side. And I ever put – we request to put speech Allianz Life, but otherwise, fundamentally, we're going to spot decidedly little volatility. So from that constituent of view, yes, we're now going to person nan use of unlocking that, successful our case, since we're beautiful prudent connected reserving tends to beryllium positive. That use will not beryllium there. But connected nan different side, nan volatility is going to beryllium besides reduced moving forward. So, overall, I will opportunity that we should extremity up pinch nan aforesaid level of stableness connected a yearly basis.

Oliver Schmidt

We will return nan adjacent mobility from William Hawkins from KBW.

William Hawkins

Can you thief maine understand a spot much astir nan COVID merchandise that you're referring to successful 2022. From descent B14, you're implying successful full that it's astir 2 points of benefits. That would beryllium astir €1.3 billion. And backmost successful 2020, nan gross losses that you were reserving for were only astir €2 billion, including only astir €400 cardinal successful nan in installments business. So, I return nan conclusion, and it is what it is, which is that there's immoderate bully numbers. But I'm uncovering it difficult to reconcile nan bully news that you recovered this twelvemonth pinch nan charges that you primitively took a mates of years ago.

And then, secondly, please. On descent B11 – sorry, it's different ostentation question. But for nan complaint changes that you're showing america connected descent B11, nan 4.9% and nan 3.6%, if we were to set claims inflation, truthful we were really talking astir nett complaint changes, what would those 2 numbers be? I'm guessing that nan delta wouldn't beryllium arsenic large arsenic nan 1.3 percent points implied connected nan slide.

And past lastly, please, successful your solvency rotation forward, you're reassuringly very quiet astir immoderate sensitivity to issues for illustration existent property aliases owe spreads that person been rather a headwind for different companies. And we're besides starting to get immoderate sensitivity disclosure from different companies, which you guys aren't showing that yet. So fixed that I deliberation you person a reasonable vulnerability to existent property nonstop and underlying, really has that played retired successful nan solvency ratio successful 2022 and what sensitivity should we deliberation astir successful 2023, please

Giulio Terzariol

You request to repetition nan 2nd question, nan 1 astir nan complaint changes, inflation. Can you repetition that? Because I didn't get nan 2nd question.

William Hawkins

Correct maine if I'm wrong, but I deliberation nan 4.9% and 3.6% connected B11 and nominal complaint changes, and I'm asking what nan complaint changes would beryllium if we removed an accommodation for ostentation because, presumably, ostentation has gone up betwixt nan 3.6% and nan 4.9%.

Giulio Terzariol

So, you referred to page 11, nan 4.9%, complaint alteration connected renewal, this is what you're referring to?

William Hawkins

[indiscernible] (68:13) inflation.

Giulio Terzariol

Yeah, but that's nan alteration connected renewal. So, that conscionable a alteration connected renewal. It's past implied, if you person 4.9%, it's little – for nan 12 months, right. And past 4.3% will beryllium nan 9 months. That's your question? Implied then, you will get to thing for illustration 6% for nan quarter. But I'm not judge I understand your mobility to beryllium connected the…

William Hawkins

Isn't nan 4.9% a nominal complaint change?

Giulio Terzariol

Yeah, that's nan nominal complaint change. Yes.

William Hawkins

So, nan existent fig that helps your mixed ratio will beryllium little because you'll beryllium impacted by claims inflation?

Giulio Terzariol

So let's put this way, let's opportunity that successful theory, if claims ostentation is 4.9%, you are fundamentally even. That's nan measurement you request to look astatine it. You person 4.9% positive complaint alteration connected renewal and you person a claims ostentation of 4.9%. On nan earned basis, past you get fundamentally to a neutral effect connected nan mixed ratio. That's nan consciousness of your question?

William Hawkins

Well, my mobility is, what is nan declare fig that I should set nan 4.9% and 3.6% for?

Giulio Terzariol

But nan 3.6% is anterior play and 4.9% is this year.

William Hawkins

Sorry, if I'm not being clear, but I thought some numbers were nominal. And I'm asking what would beryllium nan ostentation adjustments I would request to make to some numbers because, presumably, nan ostentation accommodation required to beryllium higher successful 2022 than 2021.

Giulio Terzariol

I will say, look, astatine nan extremity of day, nan complaint changes that we've sewage are broadly successful statement pinch inflation. So that's your question. Do we deliberation that this alteration successful renewal are broadly successful statement pinch inflation? Yes, clearly. You person cases for illustration successful nan United Kingdom that was not needfully successful line, but fundamentally, broadly, they are beautiful overmuch successful line. So, it's not that claims ostentation has been moving importantly higher than 4.9%. But that's besides important.

The constituent is this is nan complaint changing for 2022. So this includes a Q1 which is very different from a Q4. So if I were you, I will not beryllium concerned astir ostentation because inflation, if location was a problem, would person hitten america successful 2022. As you see, we person €6.2 cardinal of operating profit. You should not hide location is besides finance income. We person complaint increases which person been accelerating. We person nan €1.8 cardinal of ostentation reserve, which is decidedly not a mini number. So, from that constituent of view, I will not beryllium concerned astir ostentation astatine this constituent successful time.

Oliver Bäte

I person an summation moreover though Giulio is nan CFO. What I'd for illustration to do arsenic nan aged CFO is to look astatine paid claims. And 1 of nan astir absorbing point is, we person seen very important increases successful incurred. But erstwhile I conscionable look astatine nan rate leaving nan location past year, it hasn't moved much. So we person been very conservative. I think, and possibly that's 1 for a early benignant of call, to spot what has been paid versus incurred and really do we look astatine nan spare prices because we tin person countermeasures.

The different 1 I want to reiterate is nan very important summation successful finance income that you haven't moreover seen coming afloat yet. Because what you fundamentally spot successful nan higher finance income for this twelvemonth and nan reinvestment output is fundamentally coming towards nan 2nd half of nan twelvemonth and extremity of nan year. So if you look astatine – you cognize nan caller reinvestment output is still going up and being earned through, you're going to spot very important accrued finance income. It's conscionable successful position of OP forecasting and nett income forecasting that's not yet there.

Giulio Terzariol

Perfect. Then you person a mobility astir sensitivity to existent estate. I will opportunity that we deliberation that successful nan lawsuit we person 10% driblet successful nan valuation of existent estate, nan effect connected nan solvency ratio could beryllium a mates of percent points. And ever see that astir of our existent property – aliases I will opportunity existent assets are successful nan equilibrium expanse of nan life companies wherever location is simply a important constituent of policyholder participation. So, from that constituent of view, we are not exposed straight to a revaluation of nan existent assets. There is simply a batch of buffering, which besides intends intelligibly erstwhile things are going up, we don't use wholly from nan appreciation of nan assets because this is portion of our worth proposition successful nan life side, particularly astatine Allianz Leben.

And then, I deliberation you had a 3rd mobility which was a COVID one. Okay, truthful present location is thing to consider. The existent merchandise of COVID reserve is much for illustration €600 million. So, you cannot return nan full accommodation that we did for Allianz Trade and publication arsenic related to COVID. So that's nan first one. So location was a merchandise owed to COVID, but location are besides releases owed to different elements. And then, also, anyhow nan number that you are quoting for nan COVID effect astatine nan clip that was nett of nan betterment successful wave successful motor. So, first of all, you should conscionable look past astatine nan number, antagonistic number, that we had connected nan commercialized broadside aliases extracurricular motor. And anyways, now that full quality betwixt – nan full runoff from waste and acquisition successful Allianz Re is coming from COVID, that portion of that runoff is coming from different elements.

Oliver Schmidt

And we will return nan adjacent mobility from Vinit Malhotra from Mediobanca.

Vinit Malhotra

Many topics I wanted person been addressed. Just if I tin clarify. Oliver, you said to 1 of nan different questions that nan taxable was not really motor, for illustration you mentioned UK, but could you conscionable [Technical Difficulty] what happened successful motor? Is it that Allianz saw nan problem early connected successful 2022 and raise prices and now it's conscionable playing nan blimpish game? Or is it that nan problem is really perchance overmuch worse? So now we are conscionable being blimpish for this anticipation that nan imaginable is – nan problem is simply a spot overmuch worse. If you tin conscionable clear up your thoughts successful a infinitesimal aliases two, I'd beryllium very grateful. That's my only mobility left.

Oliver Bäte

Giulio will reply that. I conscionable want to explain nan question. Is it pinch regards to nan UK only aliases crossed nan centrifugal portfolio?

Vinit Malhotra

I'm much worried crossed nan portfolio because that's what we are seeing from different companies arsenic well. And moreover successful Germany, location market, truthful we are seeing a batch of antagonistic commentary successful nan marketplace astir unit motor, and I want to perceive it from you, but because you, I think, are 1 of nan champion successful class.

Oliver Bäte

So, I americium gladsome I asked nan question. Giulio?

Giulio Terzariol

Yeah, very well. So, backmost already successful 2020, we had a reserve committee wherever we were reasoning aliases talking astir inflation. That was successful nan reserve committee for 2020. Then successful 2021, we said, okay, we are going to spot ostentation because nan connection is benignant of disruption successful nan proviso chain. Clearly, we cannot expect nan benignant of ostentation that's happened aft nan penetration of Ukraine. But fundamentally, nan strategy was geared up for we're going to spot precocious inflation. So fundamentally, I deliberation this has been intelligibly an advantage because we were anyhow preparing for a higher ostentation environment. And also, erstwhile we saw, fundamentally, they were already benignant of immoderate complaint increases coming.

It's not conscionable astir complaint increases. That's besides important. It's besides astir really you negociate nan claims. And then, intelligibly – and we ever told our OEs, if you spot severity going up, don't deliberation this is noise, this is going to beryllium inflation. So nan strategy was conscionable prepared because already successful 2021, coming successful this consecutive from our supervisory board, we had regular speech astir preparing for a precocious ostentation environment. We cannot expect Ukraine, but we cognize location was disruption successful nan worth chain. So we were expecting anyhow to spot a small spot of an summation successful severity.

Oliver Bäte

Maybe, Vinit, I tin springiness you – because it's very important mobility you're having, it's massively important. It's very important to admit what we are doing beyond nan reserving side. So not conscionable only do we person a transverse Europe inaugural connected really do we adjacent to benchmark successful each azygous state nan nonaccomplishment accommodation costs and nan nonaccomplishment accommodation expenses connected nan content, but much importantly, you whitethorn person recognized that we're building our claims platform, which we telephone inferior for claims, systematically.

So we first brought a power master successful Germany to amended nan auditing of nan claims, which we are rolling retired crossed countries now, starting successful Germany. That's why nan measurement nan German numbers are truthful bully because we are getting monolithic benefits that we are wanting to replicate crossed Europe.

The 2nd 1 is nan acquisition of GT Motive and Innovation Group successful bid to person some claims information – information connected a existent clip ground and besides nan measurement to steer into garages. By nan way, thing that nan world has ne'er seen. The only quality is that we are systematically rolling it retired crossed countries. Most of our competitors whitethorn person it successful 1 aliases two, but we're doing that. And that I expect complete nan adjacent fewer years to person a important effect connected claims severity and dampen nan inflationary effects.

In nan upside, I tin conscionable show you what nan number for Germany is. We person connected mean astir a €30 humanities disadvantage. This is 2019 numbers versus champion practice. We're systematically trying to adjacent that complete nan adjacent 2 to 3 years. So, it's massive. Down nan statement is versus astir a 10% mean nonaccomplishment disbursal simplification opportunity that we would for illustration to capture.

So these are nan things that we're driving. We're not conscionable talking astir financial measures of repricing and having due reserves arsenic we're really doing. And you tin only do that if you person nan standard that Allianz has because you request nan platforms. Remember, each of these 3 companies are besides serving nan remainder of nan market. So we create standard advantages that we tin utilization for ourselves arsenic well.

Vinit Malhotra

Was it €0.5 billion, that claims target we heard wrong Allianz for 1 December, I think? This is thing [indiscernible].

Oliver Bäte

And we are monitoring nan numbers connected a existent clip ground that they're really coming. 2023, by nan way, is simply a important transportation connected nan activity that we've done.

Oliver Schmidt

We will return nan adjacent mobility from Will Hardcastle from UBS.

Will Hardcastle

[Technical Difficulty].

Giulio Terzariol

Sorry for interrupting you. It's very difficult to understand you. Not judge if you tin alteration this connected your side, but possibly if you tried. So far, we haven't understood nan mobility astatine all. Perhaps you person a amended relationship successful a different room.

Oliver Schmidt

We will now conscionable jump to nan adjacent question. And this will travel from Thomas Fossard from HSBC.

Thomas Fossard

I would conscionable person a azygous mobility which could beryllium related some to nan P&C and to nan Life/Health businesses and to nan unit lines successful some lines. Can you talk astir immoderate alteration successful nan policyholders' behaviour to accommodate to a tougher environment. I'm reasoning astir buying little aliases buying otherwise aliases buying – aliases downtrending connected nan products aliases buying little [indiscernible], which will mean perchance little profitable merchandise for you aliases little – aliases little margins. Big alteration aliases large changes successful position of argumentation behaviour successful position of purchasing your product.

Giulio Terzariol

I will say, connected nan P&C, that's a small spot – sometimes nan thought that this could happen, but for nan clip being, we don't spot thing meaningful. So, location is nary denotation that policyholders buying considerably little property-casualty coverage. So that's not what we are experiencing. At least, not what we are experiencing arsenic acold arsenic we are concerned.

On nan life side, what we saw successful nan people of 2022, clearly, group enactment much connected nan sidelines, right? So group mightiness not bargain unit-linked merchandise erstwhile location is simply a batch of volatility aliases put little successful azygous premium. So nan life side, you spot a small spot of a alteration successful behavior, which is normal alteration successful behaviour erstwhile location is marketplace volatility, but not a basal alteration successful behavior. Otherwise, nan thought that policyholder are buying little security because they person little savings, each these kinds of things, we don't spot immoderate meaningful effect arsenic of now. And honestly speaking, I don't deliberation this is going to beryllium meaningful. Might beryllium marginal. Cannot disclose that. But I don't spot a oversea alteration successful nan measurement consumers are going to attack security moving forward.

Thomas Fossard

Meaning that [Technical Difficulty] you don't spot group opting little for [Technical Difficulty]?

Giulio Terzariol

No, thing meaningful. No.

Oliver Schmidt

Will, I dream we didn't accidentally footwear you retired of nan telephone a mates of minutes ago. But let's effort again. Now I dream nan relationship will beryllium better. So nan statement should beryllium unfastened for you.

Will Hardcastle

Given nan accrued yields successful fixed income, they look progressively charismatic connected an ROI ground connected nan Solvency II. Should we expect to spot further plus derisking from Allianz that would thief Solvency further aliases is nan portfolio operation astatine thing of a dependable state.

And nan different 1 is simply a conscionable very speedy travel up. Just connected that €1.8 cardinal ostentation load that's been added complete nan past 2 years, has immoderate of that been consumed already? Or is it still untouched?

And nan 2nd 1 is, are you capable to springiness america immoderate information points astatine each connected wherever attachment points successful nan main European aliases Asia-Pac has gone from and to successful position of nan headdress itself potentially?

Giulio Terzariol

The past mobility was attachment points. That's what you said?

Will Hardcastle

Yeah, yeah. Any information points fixed wherever they've gone from and to arsenic an illustration from [indiscernible] protection.

Giulio Terzariol

Maybe starting from nan first question. One mobility was, has nan €1.8 cardinal been utilized up a bit? No, nan €1.8 cardinal is what we person successful nan equilibrium sheets. There was nary usage of it.

On nan nat cat, I tin show you. So, for example, we had – for upwind successful Europe, nan limit was astir €500 cardinal to €600 million, €750 cardinal and now we person – €600 million. Now we person a limit of €800 million. So this gives you a small spot nan thought of nan attachment constituent that we moved up. On nan aggregate, possibly there's much absorbing for you, nan attachment constituent was €1.2 billion. And now nan attachment constituent is €1.5 billion. You request besides to see that we are larger companies, truthful we request also, to a definite degree, standard everything besides to a different size. But arsenic I was saying before, nan champion measurement to look astatine this is as-if calculation. And basically, we mightiness spot immoderate much volatility, but we are speaking of 30 ground points to 50 ground points.

Another measurement to speak astir that is, I show you, we person a nat feline load of astir 2.5% successful our planning. How bad you tin get, I will opportunity we tin get to nan 4% level. At that constituent successful time, nan aggregate will travel into play. So this gives you a small spot nan thought of nan business from a nat feline constituent of view. So, not a large change, but location is simply a small spot much imaginable volatility that we are going to see.

And past you had a 3rd question. Further derisking. So connected nan further derisking, I will say, clearly, arsenic you said, rates are overmuch much compelling compared to what we had 18 months ago. So, from that constituent of view, gradually, clearly, we're going to look astatine opportunity to displacement much into fixed income. So, from that constituent of view, you should expect that this is going to happen, but we're not for illustration successful a unreserved that we request to do successful a period aliases 24 hours. But fundamentally, if rates enactment astatine this level, clearly, we tin alteration our plus allocation gradually because that's much businesslike from a superior constituent of view. And also, we tin connection a worth proposition to our customers. So, from that constituent of view, yes, nan guidance will beryllium towards further gradual derisking complete nan adjacent quarters erstwhile – if rates enactment astatine this level.

Oliver Schmidt

We will return nan adjacent mobility from Dom O'Mahony from BNP Paribas.

Dominic O'Mahony

I've sewage three. The first is, I'm acrophobic I still don't really understand nan presumption alteration wrong nan life segment. I wonderment if you could possibly springiness maine a spot much item connected that.

The second, Giulio, you mentioned that guarantees are still coming down successful life, which is awesome news. I wanted to inquire if there's immoderate motion that your competitors crossed your markets successful nan accepted savings markets are moving backmost into guaranteed products, whether location is immoderate motion that guarantees aliases caller business are coming up?

And my 3rd question, successful a way, is nan other of Will's question. I'm conscionable trying to understand nan accuracy down nan equity derisking. Is it that you commencement pinch your solvency ratio and you're trying to trim your sensitivity to nan group solvency ratio? Or is it really a byproduct of decisions deeper down wrong nan business? And I suppose if I tin conscionable explicate why I'm asking that question, if I deliberation about, say, German life, your solvency ratio successful German life is extraordinarily high. It will ne'er beryllium a constraint connected your expertise to remit costs up to nan group. But I mightiness person thought that actually, fixed that that headroom from a consequence perspective, you mightiness want to usage that opportunity to return much finance consequence and possibly make much return. So, if you could conscionable thief america understand a small spot astir nan philosophical attack to risk/reward successful nan finance portfolio, that'd beryllium very helpful.

Giulio Terzariol

So, starting possibly from nan guarantees. No, I'm proceeding immoderate anecdotes present and there, but thing really awesome successful nan consciousness of galore competitors changing their guarantees and getting much aggressive. So location are present and location immoderate noise, immoderate anecdotes, but for nan clip being, we don't spot a clear inclination successful this direction. We request to beryllium ready. This mightiness happen. And we are going to guidelines our line. So, I deliberation we person a worth proposition that we tin connection without needfully expanding nan guarantee element. And we tin activity pinch crediting rates, but not needfully by expanding nan guarantees.

I besides believe, successful Europe, if you person Solvency II, usually expanding guarantees is ne'er a bully idea. So from that constituent of view, nan authorities that we person now compared to nan authorities that companies had 10 years agone is specified that location is not an inducement to summation guarantees excessively quickly aliases not excessively precocious because nan strategy tin beryllium beautiful punitive superior constituent of view.

And these whitethorn beryllium little to nan question, by nan way, astir derisking and wherever are we could get much consequence alternatively of little risk, astatine nan extremity of nan day, location are galore superior calculation that we request to run. So, location is Solvency II. There are besides standing agency calculation that we request to run.

And fundamentally, successful immoderate superior exemplary anyway, if you person a good matched portfolio by utilizing fixed income instrument, nan superior strength is going to beryllium beautiful low. Once you commencement putting equity, you get to a different superior intensity. So erstwhile you commencement getting 4% aliases 2.5% – let's opportunity connected a bond, you get 2.5% of yield, you cannot hit that benignant of ROE. It's impossible. So by definition, clearly, you cannot usage bonds to supply worth to your consumer. But you understand that, astatine nan extremity of nan day, location are decidedly superior businesslike plus allocation that tin supply bully worth to nan policyholder and they mightiness person a small spot little of allocation to equity aliases akin benignant of estimate. So, that's very important.

It's a large alteration going from 0% consequence complaint to 2.5%. And past you put a dispersed connected top, this makes nan economics wholly different some from a worth proposition and besides from a profitability versus superior strength constituent of view.

Then connected nan IFRS accounting change, truthful I deliberation you're referring to nan truth location is – you're referring to nan unlocking aliases what benignant of activity?

Dominic O'Mahony

Yeah, nan unlocking.

Giulio Terzariol

That's nan measurement it works. So if you person a alteration successful presumption in, let's say, of actuarial assumption, for illustration mortality, lapses, each these kinds of things, these presumption changes, they spell fundamentally into nan CSM. And so, they get released complete time. Eventually, you're going to get a profit, but you don't get nan profit astatine once. You're going to get – nan profit aliases nan nonaccomplishment depending connected nan situation, you're going to get this effect dispersed retired arsenic nan CSM gets released into profit.

Dominic O'Mahony

What I meant is, successful Q4, what was nan unlocking and really large was it?

Giulio Terzariol

Yeah, I would say, because nan liking unlocking is thing different. I will opportunity location was – astatine Allianz Life, location was unlocking because of mortality aliases akin actuarial presumption of astir 150. That 150 will not beryllium disclosed arsenic profit. In IFRS 17, that 150 will beryllium disclosed arsenic successful nan CSM and past released complete time. That's nan quality that we would person successful nan caller accounting regime.

A - Oliver Schmidt

We do not person immoderate further questions. So, this concludes our call. Thank you for having joined this call. We wish you a bully and pleasant day and a bully weekend. Goodbye.

Giulio Terzariol

Goodbye.

Oliver Bäte

Thank you very much. Bye-bye.

Editor: Naga



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