Münchener Rückversicherungs-Gesellschaft AG in München

Thank you, Moritz, and good morning and welcome to everyone to Munich Re's Q3 earnings call. Today I have the pleasure to introduce two speakers to you. As always, Christoph Jureka, our CFO, for his last quarterly earnings call as the Group CFO before taking over the Group CEO role next year. And a warm welcome also to Andrew Buchanan. CFO of Reinsurance. Most of you know him anyway. He will be the group CFO as of next year. Andrew will support us during the Q&A session. Now I hand it over to Christoph for his opening remarks.

Thank you, Christian, and good morning also from my side. It's always a pleasure being here, and I'm pretty sure I'll miss all of you, but I'll still be around. As always, I start with my introductory remarks. Munich posted another particularly pleasing net result this quarter. As you all have seen, €2 billion in Q3 and the drivers are similar to those of the previous quarter. We have a good underlying performance across all lines of business and coupled with an exceptionally strong technical result contribution in P&C, reinsurance and GSI. We have very high net earnings at Ergo, including net positive one-offs, as well as also a very high investment return. Overall, with a net result of 5.2 billion euros after nine months, we are running clearly ahead of our pro-rata full-year guidance. In all segments, we are comfortably on track to meet or even exceed our full-year targets. Let's look at the Q3 earnings drivers in more detail, starting with the investment result. The return on investment of 4.1% continued to benefit from benign global equity markets and overall positive fair value changes in reinsurance, while the investment result of Ergo was boosted by the first-time consolidation of Next Insurance. The reinvestment yield of 4% remains above the group's running yield, providing further support for its upward trajectory going forward. Turning to the business fields, let's start with reinsurance. The life and health reinsurance, total technical result of 314 million euros, came below the pro rata annual ambition, driven by negative biometric experience across major markets. This offsets the positive experience we posted in the first quarter and is not an indication of a negative trend in our portfolio or generally deteriorating mortality. This aside, the total technical result developed as expected in terms of the release of CSM and risk adjustment and benefited from strong new business and the impact for management actions. The result from insurance-related financial instruments, which includes our Finn Marie business, grew nicely over the quarters and performs according to our expectations. Overall, after nine months, the total technical result is within the range of the Pro Rata full-year guidance. The stock of CSM increased despite strong currency headwind due to favorable new business development providing a sound basis for continued high total technical result going forward. In P&C reinsurance we posted an outstanding Q3 result with a combined ratio of 62.7% which benefited once more from very low major losses. The release of the loss component of almost 2 percentage points is in line with the neutral overall change we anticipate for the full year. Reserve releases amounted to the expected six percentage points in the combined ratio. And I'm particularly pleased that the underlying performance remains strong with a normalized combined ratio of just below 79%. After nine months, the normalized combined ratio is very much in line with our guidance for the full year, while the actual combined ratio of less than 70% is even well ahead of plan. Please allow for an additional remark on insurance revenue. The decline we have been observing during the course of the first nine months is on the one hand driven by currency effects, mainly due to the US dollar. On the other hand, it is the consequence of deliberate business decisions we took in the latest renewals to safeguard a high profitability of our portfolio. we remain prepared to reduce business which does not meet our requirements with respect to prices and even more so as regards terms and conditions. Beyond that, the further downward revision of our full year top line guidance in Q3 is also related to premium adjustments including changes in the NDIC calculation. The negative currency impact on the top line applies in particular to global specialty insurance. Hence, rather technical headwinds obscure the fact that the business continues to grow nicely at the mid single digit rate on an underlying basis. As regards profitability, GSI posted a strong performance in Q3. The first nine months combined ratio of around 86% is better than the full year guidance, thanks not least to a pleasingly low combined ratio of 82.8% in Q3, which benefited from a low level of major losses. In primary insurance, Ergo came in with an extraordinary strong net result of €304 million in Q3. This result includes a few positive and negative one-off effects, such as the first-time consolidation of Next Insurance and the impact of the German tax reform, all in all leading to a net positive effect of around €50 million. Adjusted for this effect, The net result is slightly ahead of the quarterly run rate, underscoring the strong underlying performance. Overall, Ergo is well on track to achieve its full year guidance. Ergo Germany posted a net loss of 21 million euros in the third quarter, driven by high tax expenses because of the corporate income tax reform. From 2028 onwards, we will benefit from gradually decreasing tax rates. The technical performance in life and health remained strong, mainly driven by lower claims in the PAA business. The CSM release was fully in line with expectation, while the stock of CSM decreased, mainly due to model and assumption changes in long-term health. The P&C business achieved a good technical result with a combined ratio of 88.7% at the level of our full-year guidance. Ergo International reported an extraordinary strong net result of €324 million. The first-time consolidation of Next Insurance provided a gain in the investment result. Underlying, the segment continues to deliver a strong performance. The technical profitability in life and health was pleasing. And the P&C business delivered a strong total technical result overall. and a combined ratio of 88.7%, better than the full year guidance. Turning to capital management. The group's economic position remains very strong. The Solvency II ratio increased to 293% in Q3. Strong operating performance and the issuance of subordinate debt overcompensated the consolidation effect of Next Insurance, accounting for around 10 percentage points as expected. I would like to conclude with the outlook for the full year 2025. Based on the drivers I described before, we expect €1 billion lower insurance revenue in reinsurance compared to our last guidance we gave in August. Obviously, this reduction mainly affects P&C and GSI. In contrast, the profitability KPIs of both segments are much better than anticipated. Therefore, the outlook for the combined ratios improves to 74% for PNC and 87% for GSI. After standing clearly ahead of our pro rata full year guidance after nine months, we are of course very optimistic to achieve 6 billion euros net income in 2025. In the last quarter of this year, we will reassess reserve uncertainties as part of the annual reserve review as usual. Our actual versus expected analysis shows a pleasing continuation of an overall very favorable reserving trend. However, we might opportunistically use the so far better than expected financial development and any benefit in case of lower large losses also in Q4 to even further strengthen our reserve potency, potentially also at the cost of a higher normalized combined ratio. We anyway plan to realize disposal losses in our fixed income portfolio to support the running yield going forward. These measures are all fully in line with our long-term oriented financial steering approach, targeting a steadily increasing and smooth earnings trajectory. We will present our new midterm ambition on December 11th. With this, I am at the end of my opening remarks, and I'm looking forward to answering your questions. But first, I hand back to Christian.

Thank you, Christoph. We can go right into Q&A. Please limit the number of your questions to a maximum of two per person, and if you have follow-up questions, please rejoin the queue. Thank you.

Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Questioners on the phone are requested to disable loudspeaker mode and eventually turn off the volume from the webcast while asking a question. In the interest of time, please limit yourself to two questions. Anyone who has a question may press star and one at this time. One moment for the first question, please. And the first question comes from Shanti Kang from Bank of America, Maryland. Please go ahead.

Hi, good morning. Thank you for taking my question. So on the revenue guide, which is now 61 billion, you mentioned that was attributed to three components. That was the premium adjustments, the renewals and FX impacts. And I was just curious, could you help us gauge how much of that guide reduction today was linked to each component that you've mentioned? I was mainly surprised just to see the FX as a contributing factor in this second round revision. That's my first question. And then the second one is, just given the buoyancy of the 9M result today at 5.2 billion versus that 6 billion mark, what really held you back from raising guidance for the full year today? Should we take that as some cautious positioning into Q4, for example? Thank you.

Shanti, thank you very much. Sorry for the slight delay. We're two here together today, so we always have to discuss who's taking which question. I kick it off here now. I am Christoph speaking still here. I start with the second question. So the nine-month result indeed with €5.2 billion is very close already to the €6 billion. So as I said also in my introductory remarks, we are very optimistic not only to achieve the €6 billion but potentially also exceed it. But I think what I also mentioned is that we will opportunistically just use the opportunity to strengthen our balance sheet and also strengthen earnings for the future. And I think that the two main levers which seem to be quite attractive for us from today's perspective are realization of losses on fixed income instruments, which I think we already very completely plan to do. And then depending on how the reserve review goes, but also depending on how many large losses are we going to see in the fourth quarter, also potentially act a bit on the reserve side to position ourselves even more on a cautious level than where we are already. Now, is this all needed? No, obviously not. I mean, our reserve position is very sound, completely unchanged compared to prior years. So I'm just highlighting that just to make sure that there are no concerns. But, of course, opportunistically you can always do a bit more. And, I mean, anyway, there's always room to, you know, additionally buffer some or additionally increase the prudence in the reserves. So that's something we would consider doing. And, basically, this is the reason why we didn't increase the guidance to higher than six billion immediately. Your first question on revenue and the split between the various sources, and you were talking about three potential sources. I would even cluster it into two groups of different origins for the premium decline. The first group is what I would call technical adjustments. Technical adjustment would, for example, include FX, would also include premium adjustments. And in the premium adjustment, I think in my presentation at the beginning of the meeting, I also mentioned the NDIC changes we saw. So that's the first part. And premium adjustment, for example, could also be that some treaties we have, the premium volume is attached to external parameters. If they change, the premium volume changes also. So I would call them technical corrections. Technical also because, I mean, currency is a different item, but for the other things, the profitability is very much unaffected by those changes. And then there is a second category and this second category is very much related to business decisions. Business decisions where we decided not to continue with businesses where prices or even more importantly terms and conditions would not be in the right order, right order of magnitude, right size when it comes to price or terms and conditions would just not be good enough for us to continue to underwrite the business. Now coming to you asking for concrete numbers. I think you can see it in our presentation If you look on slide 18, you see already the split between currency and organic change for the nine months and and So today you can see that the what is it the point exchange is roughly 300 million while the organic change is around 600 650 and in that organic change there is also these premium adjustment topics. And my high-level estimate would be maybe 250 of premium adjustment in that number and the remainder being then related to these business decisions.

Thanks. That was really fair. Thank you.

Then the next question comes from Andrew Baker from Goldman Sachs. Please go ahead. Great.

Thank you for taking my questions. First one, just in terms of the sort of prudent actions that you're talking about in Q4, how much of that is you're conscious that the full year 25 net income number will be the base for your next plan? Or should we, when we think about your new targets and the base, should we expect that to be on the sort of normalized 6 billion sort of target number? And then secondly, just on the GSI insurance revenue growth, I think you said in your comments that the sort of underlying growth is mid-single digit. Can you just help me bridge sort of how I get to that number? Because, again, if I just look at your slides and back out FX, it looks like it's a bit below this. So what am I missing in terms of that bridge to get back to the mid-single digit underlying growth rate? Thank you.

Okay. And I'll take the first question, and then Antjun next to me will take the second one. Okay. The starting point for the next strategy phase, and I have to apologize in advance, I will not comment a lot on that today because, I mean, we have our investor day coming up soon now at the 11th of December anyway. We will go into all levels of detail. But obviously the starting point should be what we think is the underlying earnings power we have currently. And there we still think six billion is maybe not a bad starting point to start with in any case. I mean, there's always moving parts and we shouldn't be overly scientific about all these ups and downs we are seeing here and there. But we think six billion is probably the right starting point to think about what we are able to deliver also going forward.

And let me take the second question. You were asking about the growth rate in GSI. It's Andrew Buchanan speaking here. And I think the important thing to understand is it's right indeed to adjust for the FX. But then if you look at our slide and you look at how the insurance revenue has changed for the nine months of this year compared to the first nine months of last year, you may be looking at our number of 183. And indeed, if you calculate that as a percentage of the starting point, it's a relatively lower single-digit number. It's more around the 3% level. The important thing to bear in mind is that the premium adjustment topic that Christoph was also talking about shows up in this number two. He mentioned the so-called NDIC effect. That is not confined to P&C reinsurance. So that is also a phenomenon that we see in GSI. It's a pure accounting effect, so it doesn't affect the underlying performance of the business. But if that accounting effect or premium adjustment had not come through, then that 183 organic gross would have been significantly higher. In fact, possibly more than double the number you see there.

That's really clear and really helpful. Thank you.

And the next question comes from Michael Hutner from Wernberg. Please go ahead.

Hi there. I've got one question which my colleague and I debated, and he thought you wouldn't be able to answer, and I'm hoping you might. And then the second one is much simpler. So the first question, you kind of said it pretty much throughout your presentation. You're incredibly profitable. If I take the 62.7 or whatever combined ratio in Q1 in reinsurance, add back the discounting, So we're at 71. I think the sum of your peers would be around 90. And I know you can't comment around your peers, but if your peers represent the markets, and you must be thinking about the market as well when you do your numbers, you're almost 20 points better. And this is almost a question to – it's nice to have both the CFO and the CEO in almost the same role at the moment. How do you think about that? Where do you see this excess – well, I would term it as excess – all this better than market profitability coming from. It's very nice. The second question is really, really simple. Can you say anything about the credit losses in the U.S.?

Thank you. Okay. The second is I can be very brief. Credit losses in the U.S., I don't think we are affected by that at all, if I understand correctly what you mean by that. But whatever I understand under the term credit losses does not affect us. The difference to peers, maybe I should give back the question to you, because in a way I was always hoping to get better comparable numbers with IFRS 17, but now some of our peers have GMM numbers, we do have PAA numbers. There are some logical differences, but then also in the business, the business mix is different. So there are quite a few differences. But we are all also in a bit sometimes asking ourselves, where does this difference come from? And frankly, I do not have a conclusive answer either. So I'm not sure if it was you or your colleague who said I was not able to answer it, but one of the two of you was right. I'm also a bit puzzled by the difference. But let's rephrase it in a positive way. Let's just say we are all impressed by the level of profitability our underwriters are able to achieve.

Then the next question comes from Kamran Hossein from JPMorgan. Please go ahead.

Hi, good morning. Two questions for me. The first one is just coming back to the kind of six billion guidance. It sounds to me that you're more likely than not to take action than key for. Just really intrigued kind of, you know, you're one and a half billion for a normal course, you've got a large loss budget within that. Is there anything going on in large losses as well that we should consider? One of your peers commented particularly on Melissa yesterday. So could there be an even greater than 700 million post-tax kind of buffering via, you know, realised losses and prudence and reserves? The second question is on GSI. Really great to see another excellent course in terms of, like, headline performance. I just wanted to get your insight into whether you think this is just NatCat good luck for two quarters, I think you were 7-8 in Q2, you were 8-2 in a bit for Q3, or whether there's anything else going on underlying that's coming in a little bit better than you'd assumed. Thank you.

So Cameron, it's Andrew speaking again. On the Q4 question, you asked if there's anything special out there and you mentioned Melissa in particular. I have to add a pretty hefty caveat up front. It's early days. The loss estimation process on Melissa is in full swing, as you would expect. It's a Caribbean event. I think probably the numbers will take a bit longer to stabilize. But at this stage, we are counting on a mid-triple-digit loss number. That's our current view. And I would say, just for the record, that fits comfortably inside our loss budget for Q4. So if that's the only thing we see, then we'll certainly have some room left over. But other than that, I don't think there's anything noteworthy that needs to be mentioned. Then the question on GSI. So thank you for mentioning that the numbers we're now seeing, Q2 and Q3, are certainly looking better. Overall, I would say to me this is a fairer reflection of the underlying earnings power of the business. So I'm really pleased to see GSI at this level. It feels about right. I can tell you that we are not supporting that result or dressing that result up. by doing any kind of extraordinary reserve releases behind the scenes or anything else. So that really is a true number. What you see is what you get. But, of course, acknowledging the simple mathematical facts that Q3 was a benign outlier quarter for GSI as it was for P&C reinsurance. So both segments have benefited from that. Let's call it a one-time tailwind. But other than that, I would say with GSI, this is a fairly fair reflection of how the business is running.

Thanks, Andrew. Then the next question comes from Ivan Bockmart from Barclays. Please go ahead.

Hi, good morning. Thank you very much. I've got two, please. The first one is on the PNC. I'm just wondering, looking back to nine months of the year, I think perhaps to draw some parallels to Michael's questions, one of the things your large peers were doing was adding to reserve buffers. Is there any indication that in your combined ratio there's any increased level of prudence or it's all reserved for the Q4 actuarial review? And then maybe my second question, shifting topics on life and health three. There was a bit more negative experience this quarter. Perhaps you could give a little more color on the geographies and lines of business. One thing I'm particularly interested about is, whether some of this experience may be related to the large transactions that you've been writing recently, and perhaps you can elaborate on how your experience with those large transactions have been unfolding. Thank you.

Ivan, thank you for the question. I start with PNC, and Endel will then take a live question. On the PNC side, so reserves... I mean, our reserve review always goes into the fourth quarter, so it's still ongoing. But what we see so far is a very strong reserve performance across all our books, more or less. So having said that, I think the way we book has been as conservative as ever, and we have a very positive response. reserve performance also on that basis. Did we deliberately decide already to have additional reserve strengthening so far until the first nine months or in the first three quarters? No, that was not the case. But in the first nine months we more or less booked as we always would book in our regular business activity. While in the fourth quarter, and this is what I said in my introductory remarks, opportunistically, we might even add additional prudence to that if the result allows, and just to be even more on the safe side going forward. Do we have any indication that that would be needed? No, we don't. But then on the other hand, we really understand from many of our investors how much they appreciate a smooth earnings trajectory, smooth and slowly increasing earnings trajectory going forward, Obviously, in very good times, you need to somehow also prepare, to be prepared once there is potentially a quarter or maybe also a couple of quarters where volatility is striking. And therefore, as I said, opportunistically, we just might use the fourth quarter to build up even more prudence despite the positive developments we saw so far this year.

And Ivan, I'll take the life health question. It's Andrew again. So you asked about the experience and the geographical spread of that. So quite a few different markets, and I would say what we saw in Q3 was a number of relatively unspectacular items that each on their own were in the double-digit millions. which in this quarter happens to all have a negative sign attached to them, and so they tend to add up. Typically, we benefit from a bit of diversification in our global portfolio between countries and lines of business. This quarter didn't work out so well, although if you look at what we've seen so far this year, we actually had a good quarter in Q1 where a lot of the items just had positive signs attached to them. So it can go both ways. I wouldn't say that there was any one big driver. that we would say is a systematic warning light that gives us particular cause for concern. You do just see these ups and downs, in this case spread between quite a number of the Anglo-Saxon markets, a little bit in the US, Canada, Australia, but nothing particularly large in any one of them. I did also ask the team also to satisfy my own curiosity to look back and see You know, these kinds of fluctuations, how do they look in historical context? And actually, if you look back in most past years, we have at least one quarter where there's been an up or a down like this. So we'll keep it under close watch, but I wouldn't say that there's anything in here that is a particular cause for concern. I think you did also ask about how the large deals are running. And I would just say for the record, the large deals so far, absolutely satisfactory. I think both financially and operationally running in a very orderly fashion.

Appreciate the call.

And the next question comes from Chris Hartwell from Autonomous. Please go ahead.

Good morning, and thank you for taking my questions. Just two, if I may. I just wanted to come back to the revenue trend. I think that would be really the answer to the first question. I'm trying to think about the message or what we've seen in the Q3 versus the experience from the July renewals. I mean, I think back with the Q2 results, you were talking about a more sort of conservative view on the cat book. So I was wondering how much of this that we're seeing in Q3 is relating specifically to cat, and therefore, are we seeing a bigger Q3 impact on growth than ordinarily we would see in future quarters just on that point? Hopefully, you're getting together and trying to get out on that question. And secondly, just on Next, the acquisition is a quarter in now, so I was wondering if you could maybe share your thoughts on it. It was a business you knew quite well, but now you've got 100% ownership of it. I was wondering if maybe you can update on your enthusiasm for the growth profile that you have there. Thank you.

Sure. The first question, I think I outlined already the underlying reasons for the revenue decline. The cut business is obviously also part of that. So what we said in the 1.7 renewal somehow had a limited impact also on the numbers as we present them today. But you also have to think about that after that renewal not so much time elapsed yet. So therefore, I mean, it's also other renewals which play the role there, but also business which is written outside of the renewal. So premium adjustments which are independent of the renewal dates also play the role. So it's a bit of a mixed bag, I would say. It's not cat only or not even pronounced towards the cat direction. On next. Indeed, so the closing was in the first of July, so we have now a bit more than one quarter where NEXT now belongs to us as a group. The integration work is going as expected, so a lot of the internal operational stuff has been set up. We are also able, as you can see, to include NEXT already fully in our IFRS numbers for the Q3 on a preliminary basis. We are working hard to get the first real then more precise consolidation done and also for the year-end closing and then we are well on track to do that. Also, a lot of the other, let's say, non-financial operating integration work is going well. And so far... Maybe so far is maybe even the wrong word. So we are not aware of any changes to the trajectory as we assumed it before the transaction, looking at the prospects of the company from today's angle. It's more or less the same, I would say. And anyway, it's only one quarter, so we have to take it from there.

Then the next question comes from Vinit Malhotra from Mediobanka. Please go ahead.

Yes, good morning. So my two questions, one is just on the, again, sorry to bring it up, but, you know, when we look at the revenue progression, so I'm not talking about the guidance as such, but the nine months, and thanks for taking it out at $650 million. I mean, it's still, even excluding the $250 million you mentioned, it's still about 2.5%, maybe 3%. organic weakness. And when I look at the renewals, I mean, a rough check is suggesting this year's YTD is down about 1.5%, and last year was about plus 1% or 2%. So maybe just rounding numbers, but I'm just trying to understand if there is something more than the renewals And now we are excluding end date, excluding, you know, adjustments. Is there something more that you would like to flag? And maybe the answer is simple no, but just wanted to be very sure. Second thing is on the balance sheet strengthening in full queue. And you said it's opportunistic. But I'm just wondering, I mean, 2Q and 3Q were 60s combined with NATCAT reserve releases fees. So, I mean, what better opportunity would have been to actually add to reserve? I mean, maybe the answer is the reserve review is needed for that decision. But I'm just curious about, you know, releasing reserves from NatCats for two quarters and then in fourth quarter we are adding banks. I'm just curious about that reserving action.

Leonard, it's Andrew here. Thanks so much for the question. I mean, let me take the follow-up on the revenue item first because you said, look, even if we strip out $250 million for Endic, you're asking, you know, what else can be going on there? And it's a fair question. So not all the business we write... is dictated by our big renewal dates in the treaty reinsurance on 1st of January, April and July. I think Christoph's comments earlier about how we've been really strict and disciplined about reducing business that doesn't meet our requirements. That's for sure the most important part of the story. We do also have some other business that's perhaps a bit more flow in its nature, where we have to continually update the estimates as we go through the year, as new information comes to light. So one example I could give you there, just to help you really concretely feel what we're talking about, is I might have a proportional treaty that I may have renewed all the way back on the 1st of January. but where neither we nor the client know exactly how many underlying policies are going to be sold. And so as you go through the year, the primary volumes get updated, and then those volumes get further updated when statements of account reach us. So, of course, there's a constant refining of estimates that happens during the year. many times you probably have ups and downs in those estimates which even out to a large extent i would say this time those estimation updates tended more towards the negative we tended to see more reductions in volume perhaps it's a bit anecdotal but another example i would offer you so that you can feel what kinds of things are going on is agricultural business agro business where some of it, the insured amount, and therefore the premium volume, actually responds to agriculture prices. And so when commodity prices drop in a particular period, you actually have less risk and less premium. And that indeed is something else that has happened. But you wouldn't necessarily know that on the renewal date, so you wouldn't pick that up in the renewal reporting. So when we talk about premium updates, updates of estimates, there are also these other factors blending in, not only the sort of big decisions on the renewal date to renew or not renew a program.

Excellent. Thank you, Andrew. That's very good, Carlos.

Thank you. And we had your other question on the reserve strengthening, and I understood it. Why didn't we do anything already in Q2 and Q3, given the results were so good? Maybe there are two reasons for that. The first is a process-related one. Indeed, our reserve review is only towards the year-end. But I think there's a second reason, and the second reason is also that we... I mean, we want to be very transparent also how the business is really going. And if every single quarter would somehow interfere with our reserve level, I think it would a bit overshadow also the view on the underlying profitability. And therefore, we just book the first three quarters as they come in, in a way. And then only in the course of the fourth quarter, we look deeper into the reserves. And opportunistically or even if required, which didn't happen so often in the past years, we would then take action on the reserves only. And then also be very explicit and tell you what we did, just to make sure you can differentiate between the underlying development and what we would potentially put as an additional prudence into the reserves. I think this transparency is very important. And therefore, again, the first three quarters, we didn't do a lot in that respect on the reserving side. Great. Thank you, Christopher. Thank you.

And the next question comes from James Shook from Citi. Please go ahead.

Hi there. Good morning. I had a question to begin with about Munich Reventures. I'm just keen to understand... why you've decided to close that unit. Obviously, it's given birth to Next for you, which one would think would be a great success. And it just seems as if, you know, Christophe, that's like one of your first moves moving into the new CEO role has been to shut that unit. So I'm just keen to see if there's any kind of messaging that we can read into that closure. And secondly, I believe that Joe Welling has said stated at one of the conferences that we can expect a kind of flashish outlook for insurance revenues in P&C re-excluding GSI. Could you just clarify... What is meant by that? Over what time frame? Is that nominal? Is that real? Is it in constant FX? It would be very helpful to get an idea of the outlook for P&C Revenues based on previous commentary. Thank you.

James, thank you. Excellent questions. I start with Minigree Ventures. So first of all, there's no CEO messaging at all in any of the items you might observe at Munich Re today or the last quarters or even in the weeks to come. We do have the CEO right now and there will be a new one next year. And currently I'm the CFO and that's all about it. We'll speak more about the future anyway on the 11th of December. So I refrain from commenting anymore on future CEO kind of questions. I don't think it's the right point in time to do that. On Munich Reventures, though, what I can say is that there has been a shift in our activities, not only related to Munich Reventures, but more broadly, that we wanted to concentrate more on our core activities, on our core insurance and reinsurance business. And in that course, we did take some action already also in other areas in recent years. And in line with that activity, we also decided that it would be a better way forward to have that activity now handled or to be managed by our asset manager, Mayak, instead of Munich Reventures. And this is all what I should say or have to say about that. I think it's a normal shift of focus which happens occasionally in companies. And we very much want to focus on our core business now. And I think it makes a lot of sense also looking at the profitability we are able to achieve and the margin we are able to achieve in the core business. So that's maybe about Munich Reventures. On the P&C revenue outlook, the very general statement I can make is, and this is very much in line with what you see in the Q3 numbers already, that for us always profitability matters more than the sheer volume of what we are doing. I think this is something you know us for very well and it's something we always have been highlighting very much. More details on how this very general view would translate into a revenue plan into the future, I have to apologize. This is something we are happy to comment on on 11th of December, but today it's just about a month too early for that discussion.

Okay, look forward to that. Thank you very much.

And the next question comes from Jochen Schmidt from Metzler. Please go ahead.

I have one question on insurance finance expenses in P&C RE, which even decreased in Q3 year over year. Obviously, FX effects have probably played some role and business volume has to be considered. But nevertheless, it seems that the negative contribution from the unwind of discount does currently not increase much further. Would that be a right conclusion for modeling purposes for 2026? That's my question. Thank you.

Also, this is a question which is so forward-looking that I think it makes sense to rather discuss it in December, but I think that the general assumption is not wrong, that for this year there is a bit of a gap. And I think also you gave a good explanation for that. It's interest rate-related. And therefore, also for the future, obviously a lot will depend also on the interest rate assumptions. And some of our business is not as long-term such that also short-term interest rate moves sometimes do matter in that regard. But again, the more long-term outlook and perspective is something we should take up maybe then in December.

Thank you. The next question comes from Emmanuel Museau from Intesa San Paolo. Please go ahead.

Hello. Hi. Thanks for taking my question. I can see there is quite a bit of focus on revenue growth and cycle management. While I also know that you have quite a sizable amount of surplus capital based on your solvency target range, and this continues to grow. It is about $16 billion, if I'm not wrong. So I was wondering how much of that you unencumbered and deployable to other uses other than organic growth? And if you can also remind us what is your rationale for further M&A and if there is any ROI or rate that perhaps you may want to share with us. And lastly, on GSI, what are the lines of business that you see most attractive at the moment? Thank you.

Okay. I start with the capital management question. Emanuele, thank you for the question. Okay. So indeed, we are very strongly capitalized. And this is just a very good place to be in for various reasons. First of all, as you all know, capital repatriation is a significant part in our strategy and always has been and always will have. And again, for the future, we'll discuss it in December, but capital repatriation matters a lot to us. Having a strong capitalization is of course the ideal basis also for that going forward. On top of capital repatriation, obviously, deployment into growth. Organic growth but also inorganic growth is something which we are always looking at and trying to find the right areas to grow our business, having in mind our profitability targets, having in mind also our footprint, our concentration on the core business as we discussed earlier on. So this is something we are constantly looking into. And we identified various growth targets in recent times. As you know, for example, I mean, next was one example on the M&A side, but also organic growth, live freeze, I think a brilliant example where we are nicely growing. Ergo has been growing significantly over recent years. So there has been quite a high amount of growth. And this growth comes along with capital deployment on our side. And it's good to have it. a lot of capital to be able to continue a growth trajectory also going forward. Again, details to be discussed in December. Now M&A, M&A always has been on our list, so that's not new. We had this next transaction this year, but also in the future, why not looking into other targets as we always said. And clearly not in reinsurance because the synergies would just be massive. But on the ERGO or GSI side, completely unchanged view on that. M&A could be something we are looking into also in the future. My last and very general statement is that on December 11th, capital management will also be a very integral part of our strategy going forward. um so therefore um reserve some time and some questions please also for december to discuss capital management a bit more than um and not today then the next question comes from roland fender from auto bhf please go ahead yes good morning one question from my side on ago germany it seems like there has been some revenue softness in the last two quarters

So maybe you could shed a little bit of light in what's going on in P&C in the light of recent price increases in the market while revenues are actually falling on an organic level. Thank you.

I'll take the agro question, and I think there was one question from Emanuele still on GSI, which I think Andrew will then also cover. On the agro-Germany side, nothing very interesting. very specific as always in the various lines of business sometimes you focus a bit more on profitability and this is what we did and therefore the growth is a bit more muted currently in P&C Germany than what it used to be maybe a year or two ago but nothing really spectacular to comment on.

And it's Andrew here. Let me go back to the question posed by Emanuele about GSI. The first thing I would want to say there is just when we talk about GSI, it's important to remember that this is really a family of businesses that increasingly are working together, but which are active in quite different markets. So in particular, on the question of where do we see promise or which business do we feel positive about? I would say we continue to feel positive about the core equipment breakdown business that we write at HSB, which is one of the key business units within the GSI segment. I would say we continue to be positive about the business flow that we see in the Lloyds market, where we have the Munich Re-Syndicate. And then I would say, looking at other lines, in the US, we continue to believe that there is potential for growth in in the excess and surplus, the so-called ENS market in the US, which has been on a phenomenal run of growth in recent years. And my sense is that hasn't completely run its course. So we see some potential there. And then last but not least, We are modestly expanding our presence into continental Europe, also in our Munich Rees Specialty global markets business. And in terms of the lines of business that we see, I would say property rates are generally still adequate in most markets where we find them, which is good. And I think we have also made clear our intention to be active in insurity and in engineering lines. And last but not least, casualty is a very broad family of different products. We are indeed active in some of them with all due caution, making sure that we avoid any of the casualty issues that have caused trouble for U.S. carriers in recent years.

And the next question comes from Michael Hutner from Bernberg. Please go ahead.

Thank you for this opportunity. Two questions. One, the U.S. dollar rebalancing. I think you spoke about it, probably Q1. I just wondered, can you give us an idea of how far you've gone in that direction? And then the second is ergo growth in Scandinavia. My colleague, the famous colleague who was right on the first question, did ask me to ask about this, and I thought that's fair enough. Scandinavia has always been, I always thought it was a kind of almost a closed market, very difficult to break into, but it'd be interesting to hear what you have to say.

Sure Michael, thank you. So let's start with Ergo Scandinavia. Ergo always had a joint venture there 50-50 and took over the other 50% and now it's 100%. So in a way it's not a new market entry but just increasing the stake in an existing business. So therefore easier to break into that market and that health business we have there in Norway has always been running quite beautifully from a performance perspective. traditionally for many years. So we're happy to have it now in the group to 100%. So that's everything which is going on there. Remind me of the other question. The US dollar position in the meantime is very close to neutral. So the significant long position we had in the first quarter, we gradually reduced it and we are now more or less in a neutral position. Slightly long, but very close to neutral.

And just on this, can you explain why initially you were long US dollars? I think it had to do with capital allocation or something. But I struggle with this. Now you have so much capital, it's probably irrelevant.

No, no, Michael. For us, currency is like any other asset class where we would take positions in the technical asset allocation. And historically, currency, US dollar long, was always a natural hedge for other risky asset losing value. So therefore, in a way, it was a hedge position to offset the risk we would take, for example, in equities or commodities or other asset classes. All, as you know, to a limited extent anyway. We are an insurer, so we are not taking huge positions, but we do take positions here and there. And indeed, the tactical asset allocation in recent times achieved quite a beautiful outperformance for us with assets. with a nice amount of base points adding to our overall investment result. But as this year the currency position has been suffering so much, this year obviously the TAA was burdened by that. But I think year to date they were even able to overcompensate the currency loss on an economic basis including all the TAA positions. Having said that now, the hedge position obviously didn't work this year. So this year the correlation between currency and the risky asset classes was different than historically for the obvious reasons, political reasons. And therefore it was much harder this year to benefit from the hedge position. So this year we didn't benefit. But in the past we would have benefited from that hedge very often.

Super. Thank you so much. And the next question comes from Evan Bockmart from Barclays. Please go ahead.

Hi. Thank you very much. Just two small follow-ups. When thinking about the P&C revenues, one of the drivers you mentioned in the slides, but not so much in the commentary now, was the share reduction in the proportional business. I was just wondering if this is driven by your decision to write less of quality shares or just the competition resulting in an increased allocation to those quota shares being smaller. Maybe you could comment on that or maybe specific lines of business where that applies. And second question, I noticed that in Ergo, Germany, the CSM was seeing some sizable negative operating changes during the quarter. Was that related to tax or any other reason? Thank you.

I briefly take the Agro-Germany question. Indeed, the tax rate change due to the corporate tax rate did also affect the model for the CSM. I don't go into all the technicalities here, but indeed that's the driver behind that reduction. There will be an offsetting effect or a compensating effect in due course when the actual tax rate is lower starting 2028.

And Ivan, your question about the proportional business, you asked, are these reductions the result of our own, let's say, explicit decision, or is it a case of having our shares reduced? Well, the answer, honestly, is that it's a bit of both. And in some cases, it's almost a bit difficult to separate the two things because generally it starts with a discussion and finishes with a discussion and a mutual exploration of what we would be prepared to write on what terms. And sometimes that leads to the client actively reducing our share. Sometimes it's more initiated by us. But as you know, we don't comment on individual relationships or individual deals. So I ask you to accept the answer that it's a bit of both.

Maybe I could rephrase it a little bit. Do you see clients seeding less business in general or it's just the more commercial negotiations in this case?

I wouldn't say that there is a general trend for all clients to see less business. I do think that in certain markets, after a few years of decent profitability, some balance sheets have been rebuilt and strengthened. And it is the case that sometimes in reinsurance, you're not only competing against the other reinsurance companies, but you're competing against the client's retention. So there are definitely some clients out there that are now perhaps have the financial capability to accept more risks on their balance sheet than before. That is true. But also with a view ahead to the 1-1 earnings campaign, I mean, anecdotally in our risk committees, I think we are also seeing one or two requests for additional capacity that might be needed by certain clients. So I think there could be some increases as well as decreases, which is why I wouldn't want to be too pessimistic at this point.

Thank you. I appreciate that.

The next question comes from Ian Pierce from BNB Paribas. Please go ahead.

Hi, morning. Thanks for taking my questions. Just two very quick ones on ergo. If we take the normalization and sort of the 50 million of one-off net benefits you've had, do you see that 250 million as a good run rate going forward for ergo? And then second one, given you've not changed the net income guidance for ergo and they're already sat at sort of 800 million for the nine months, Should we be viewing this as the prudency to be added in ergo as well as in the reinsurance businesses in Q4 or investment losses in ergo in Q4 as well as in the reinsurance businesses? Thank you.

So I think the very brief, easy answer is ergo is acting similar like we do as a group overall. So I think it's the same financial steering DNA also in ergo. So indeed you could look at the run rate and interpret it as the target should be increased. But then also at ERGO side there are measures around how to maybe prepare a bit also for the future and ERGO will also be looking into those obviously. So therefore, the guidance of 0.9 billion, I think, is still the guidance, despite the fact that we saw three quarters now where the run rate was rather around the 250, which, by the way, is very good news because it shows that underlying Ergo is doing very well. And I think this is really reassuring and showing how much success and how much progress has been made again by Ergo.

Ladies and gentlemen, this was the last question. I would now like to turn the conference back over to Christian Becker-Hufong for any closing remarks.

Thanks very much to everyone for attending and for joining this call. Further questions, please don't hesitate to ask. Otherwise, we see each other again in December. Thank you.