Allianz Se Unsp/Adr

Ladies and gentlemen, welcome to the Allianz conference call on the Allianz Group financial results for the first quarter of 2024. For your information, this conference call is being streamed live on Allianz.com and YouTube. A recording will be made available shortly after the call. At this time, I would like to turn the call over to your host today, Claire-Marie Cost-Lapute, Chief Financial Officer of Allianz SE. Please go ahead, Claire-Marie.

Thank you very much, Andrew. Good afternoon, everyone. I'm very happy to report our very good results for the first quarter of 2024. If we look at page three and we start with a group overall, we see here a good growth this quarter with our total business volume up. 7.5% at 48 billion. Our operating profit is at 4 billion, which is 27% of our midpoint outlook. And our shareholder core net income is up 16% compared to last year, also supported by improvements on the non-operating profit side. All segments are contributing to these results, which is really providing a good balance, and in particular the P&C segment. So let me go in a bit more detail into P&C. Here you see as well a good growth level at 7.5% internal growth with a very good pricing momentum. Our combined ratio is at 91.9. Here you can see, which is in line with last year, you can see here that we have benefited from a lower level of NADCAT with less reserve release as an offset. And what is really super important in the combined ratio is that in the underlying, our attritional loss ratio is developing in line with expectations as we earn the price increase. We emerged with an excellent operating profit at 2.1 billion, which is up by more than 10% compared to last year. On the life and health side as well, really good level of growth, growth at an excellent new business margin, which basically means we are emerging at a value of new business of 1.3 billion, which actually is the highest level of value of new business we have registered in a single quarter. And when it comes to our CSM release and our operating profit, we are exactly in line with our expectations and we have 1.3 billion of operating profit for the quarter. On the asset management side as well, a really good quarter. You can see a very, very high level of third-party net flows of 34 billion for the quarter with an excellent level of performance fees as well that came into the quarter. So together with an improved cost-income ratio, this is leading to an operating profit of at 800 million euros, which is also nicely up compared to last year. So overall on this page, we see a very good start into the year, and all key metrics in terms of growth and profitability are better than our full year assumption as communicated in the year-end call. Let's move to page 5 and let's have a look at our capital status. So when it comes to the Solvency II capitalization, you can see that we are strong at 203, which is slightly down compared to year-end 2023. And if you look on the right-hand side at the key sensitivities, our sensitivities are slightly reduced compared to year-end 2023. So as a consequence, we have a stable level of solvency post-stress compared to year-end 2023 at the end of the first quarter. Let's move to page 7 and let's look in more details at the development of the solvency ratio. So basically going down from the 206 to the 203, you can see the model change effect, which is basically the regulatory update of the ultimate forward rate, which is bringing one percentage point down on the solvency ratio. In terms of operating solvency to earnings, we are emerging at 6 percentage point, which is within the range of our expectation, between 6 and 8. We have a bit lower operating solvency to earnings this quarter, mainly linked to the fact that we had a higher level of growth in the quarter last year. and especially coming from the life business and so as such we have some timing effect at the beginning of the year with higher level of premium that we anticipate is going to work itself out over the year. On the market impact we are also slightly down minus one percentage point And that's related to positive effects that came from the equity side, with an offset coming from the update of the EOPA equity side, with an offset coming from the update of the EOPA VA, together with a slight widening of the sovereign spread, together with our ongoing mark-to-market adjustment of real estate. On the capital management side, we have minus 6 percentage points, out of which we have the expected effects that came from the share buyback of 1 billion that was announced during the year-end call. We have the dividend accrual effect, and then we have a small effect coming from capital redeployment into smaller M&As that took place in the fourth quarter, like the TUA acquisition in Italy, or some renewal of our distribution agreement as well, that also came with an effect into that capital management action. Tax, I don't think I need to comment. So, overall, I think if you step back and you look at the development of the solvency ratio compared to a top-down estimate that would certainly have been to maintain a flat level of solvency to ratio at 206, We have the three main drivers I was mentioning for one percentage point each. So this higher growth, the EOPA-VA and the mark-to-market effect of real estate, and then the smaller M&As and renewal of distribution agreements that all came for one percentage point. So overall, we have a strong and unchanged capital strength at the end of the first quarter versus year-end. And let's now move to P&C and have a look at page 9. So on page 9, our P&C growth is strong at 7.5%, and this is well shared across the portfolio. This is mainly driven by rate, but with nuances clearly depending on the dynamic of the markets. As an example, here you can see that we have highest rate change in the UK and in Australia, I would say as expected, given the inflationary effect that we expect to be the highest in 2024 there. We continue to have a buildup of rate on renewals. As you can see, at the end of the first quarter, we are above both full year 2023 and the first quarter last year, which was at 5.6% against the 7.4% we see now. And in the underlying, on the retail side, we have a higher rate change on renewal, which is at 11% in the quarter. For motor, it's even higher. Commercial is still solid at this point in time, with mid-corp, which is up 6%, and large corp, which is at 3.5%, as you can see on this page as well. Let's move to operating profit on page 11. You can see our very good operating profit at 2.1 billion. On the work, you can see that we are benefiting here from both the technical side and the investment side into the positive development of the operating profit. And in general, we are running ahead of our midpoint guidance for the year. Our combined ratio is at 91.9, which is better than the 93 to 94 range we based our guidance on for the full year. Now if I go in a bit more detail in the combined ratio on the right hand side, you can see that our expense ratio is steadily improving by 30 bps compared to last year. The runoff level is lower compared to last year. Here we have seen as well some negative developments from some NatCat events from 2023 that contributed to negative runoff into this quarter. That was mainly for the events in Italy and Australia last year. Our NADCAT impact is lower. And within the attritional, we are developing ourselves with an attritional which is better by 0.4 percentage point compared to year-end 2023. And that's fully in line with our expectation to achieve a 1 percentage point improvement by year-end as we are earning the rate momentum into the loss ratio. Then when you look at the resulting combined ratio for both commercial and retail, retail continues its excellent, sorry, commercial continues its excellent trajectory at 89.9 combined ratio, and retail is fully in line with our expectations at this point in time. Again, I'm re-emphasizing the effect of the attritional that we are indeed tracking on that side in particular. Let's move to page 13. And here you can see the translation of this very good performance across the entire portfolio. I think it's a very nice page across the board, clearly. And you can also see that some of our operating entities where we were paying more attention last year, given also the inflationary effects are developing nicely, like the UK or Australia in particular. Inflationary effects are developing nicely, like the UK or Australia in particular on that page. Let's move to page 15. And on the investment side, we are up 19% versus last year as we continue to earn the benefits of the higher rates. Our interest accretion is at minus 360 million. It's basically exactly in line with our expectations for the first quarter, given the seasonality effect as well. Our economic reinvestment yield is at 4.3%, which is ahead of last year, too, which is good. So overall, we have an excellent start into the year on the PNC side. In retail, we have a double-digit price momentum, which is earning into our combined ratio, while commercial continues to deliver steadily, both in terms of top line and technical performance. Let me now move to life and health on page 17. And here you see that we have a strong new business momentum in the first quarter with our PVNBP, which is double digit up, and that's particularly supported by Alliance Life, Italy, Asia, and the German health business. We also had a one-off effect in this quarter associated with a large structured or insurance contract. Our new business margin is very good at 5.7% which is above our target of 5% and all our entities are delivering here. So this is leading to a record level of value of new business as I was already mentioning at 1.3 billion. What is as well very nice is that 94% of this value of new business is from our preferred product areas. Let's move to page 19, and here we can have a look at the CSM work. So this work is very simple, this quarter. We have negligible economic variances, and we have some non-economic variances which are broadly in line with our expectations. The main effect here is actually the reflection of some of the lapse effect or update of our lapse assumption on the French book. So we have a very nice normalized CSM growth, which is at 1.7%, which is really good, and that's above our yearly expectation, given the higher level of value of new business we have seen in the quarter. Our CSM really is at 1.3 billion, which is exactly in line with our expectations and the yearly guidance we have for that item. And on the sensitivity side, they are basically unchanged compared to your hand, and they are obviously very stable overall. So this CSM beast is quite a stable animal, I will put it this way. Let's move to operating profit on page 21. And there as well, it's a very simple page from my perspective. The translation from CSM to OP is fully in line with our expectation in the in-between items. So we emerge with an operating profit at 1.3 billion euro, which is at 26% of our yearly expectations. Let's now move to page 23, where you can see that over our entire portfolio, the good developments I was mentioning are confirmed, basically. And both in terms of CSM and operating profit, we are in line with our expectations when it comes to an entity-by-entity view. So overall for life and health, we have a very strong quarter. We see growth, we see our new business value ahead of our expectations. Our CSM release and our operating profit are in line with our full year assumptions. Let's now move to asset management. I'm going to skip page 25 and go directly to page 27, where you can see that our third-party asset under management are up 4% versus the beginning of the year. We had a strong start with 34 billion of net flows that are steaming both from PIMCO and HGI, and that went mainly towards the fixed income asset categories, but also in alternatives. On average, our net flows and the market movement take the asset under management up 5% versus last year, which I think is a good basis for the rest of the year. Let's move to page 29. Here you can see that our revenues are up 5% due to the higher asset and our management and a very high level of performance fees, which are the highest in the first quarter since 2013. This is certainly not or probably not to be extrapolated for the rest of the year, I would think, but it is definitely nicely contributing to the performance of this first quarter. Let's now move to operating profit on page 31. Well, you can see that our operating profit grew by 7%, reflecting the higher average asset under management and the higher performance fees, while we had a good cost control with an improved cost-income ratio across both PIMCO and HCI. So overall I think we had a very good performance of the asset management segment in a volatile environment in the first quarter and we now have good prospects for the asset management business this year. Next page on the corporate segment I'm going to skip because it's better than expected and there is not much to highlight in the walk. And let's go to page 35 where we can have a look from the translation from operating profit to net income. You can see that this quarter the translation is actually quite simple. We have approximately 500 million of non-operating profit. where we had in particular lower impairments compared to last year. With a 25% tax rate, which is fully in line with our expectations, our core earnings per share is at €642, which is up 18% compared to last year, which I think is an excellent level. Let's move to page 37 and let me summarize. So we have a very good start into 2024. Our total business volume is at 48 billion. We see growth steaming from all segments, which is very good. Our operating profit is at 4 billion euro, which is 27% of the yearly midpoint. Our shareholder core net income is up 16% compared to last year, and we have a strong balance sheet with a solvency ratio which is above 200%. So that allows me to confirm that we are very well positioned to confirm our outlook at 14.8 billion plus minus 1 billion, as all our key metrics in the first quarter in each segment are better than our full year 2024 assumptions. With that, I'm happy to take your questions.

Thank you, Claire-Marie. Okay, we're now ready to go to questions. Just to remind you how to ask questions, if you're on the web call, you'll see a button called Talk Request in the top right-hand corner. Click that and you'll appear in my queue. If you've dialed in, press star five, and again, you'll appear in my queue. Just one housekeeping request, and maybe a slight change from history. I'd like you to restrict yourself, if possible, please, to two questions. If you have follow-up questions, by all means, rejoin the queue. So with that, I think our first question is from Andrew Sinclair of Bank of America. Go ahead, Andrew.