Allianz Se Unsp/Adr

Ladies and gentlemen, welcome to the Allianz conference call on the Allianz Group financial results for the second 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. We appreciate your time. We know it's a very busy day today with lots of results. Today on the call, we will be joined by Oliver Bader, Chief Executive Officer of Allianz SE, and Clem-Ri Kost-Laput, CFO of Allianz SE.

the presentation will be followed by lots of time for q a with that i'd like to turn over to oliver for some opening remarks oliver yeah thank you andrew good afternoon busy thursday we thought we'd be good to pick a thursday not a friday like others but unfortunately many others are there so again also from my side a big thank you for being here with us today we had a very strong quarter actually The best quarter, if I remember correctly, we ever had in terms of financials, but also on other dimensions. And I'm going to go a little bit into the difference. Because of the strong delivery, we have upped the share buyback program. When in the beginning of the year we talked, there was a lot of question, does Allianz stick to its payout strategy very much? We do. The long-term average, let me remind you, is around 75%. That's where we're about at, depending on how you run the numbers. It's more accurate to use absolute numbers. I was advised by Andrew, as I'm very happy he's here with us now, 6.9 billion, which is a very strong contribution. Plus, and that's very important, we have built a track record over the last few years of being very disciplined. So we are recycling data. The gains out of the U.S. from selling a subscale position in the mid-corp space into investing into scale in Southeast Asia or better to speak of ASEAN. We look at it a little bit in this way by assuming from zero to a. if not the leadership position in Singapore, with taking majority of NTUC income, and there will probably be questions around that. Now, those results are quite remarkable in light of, and you've heard it from various competitors today, of continuing challenges overall. By the way, in all segments, let me go through all three. We had elevated net cap activity again in Germany. This is the third out of the last five years where we had significant losses out of weather events that the portfolio balanced very nice, still below 100. And the overall portfolio still goes strong. The second one, we still are coming back from very fast rising rates and competing with very high crediting rates on the banking side. So the present value of new business in life and the margins are now very strong. That's coming back. And the third one, very much a difference to other active asset managers. We're having extremely strong inflows also at PIMCO. And that continues into July. I've mentioned that earlier in some comments in the press, 11 billion. So it shows that you can win. in the businesses if you're really strong, one. Second, the diversification that people always think it's a cause for discount, we believe it's a strength and it shows, particularly, again, in times of massive stress in the world economy, in world politics that we have been very based. We are also very pleased with the performance improvement continuations that we have seen in Latin America, in the UK, in Australia, which are helping our results and help balance out some of the other activities that are still very, very tough. Claire Marie will talk about it a little bit more. Claims inflation continues to trend above CPI inflation as car manufacturers are making not enough money from selling cars. So after sales and service of a source of profit, they're raising prices continuously for spare parts and for repair our prices. So we need to really bring our scale to the benefit of consumers. I'm bringing that out just to give you a number. If you go through our German steering tariff, We save on average on a Costco claim 1,000 euros, which we then can pass on in terms of lower prices to our consumers. So the scale in claims where we've been building out solved and continues to do that continues to pay back. as it does pay back what we're doing on netcat prevention and portfolio underwriting. I'll share that with you. So overall, we are on track to meet our outlook for 2024 on the back of 6.5% higher volume, 5% more operating profit, almost 8% more core net income, and the solvency moving up to 206. So that's it. Let me go a little bit more into two details. The first one is talking about, and I think it's very important, not just for the public, but also for you as shareholders, how we put our purpose into practice. And again, looking at the floods in southern Germany, Just to give you some numbers, in 11,500 claims, an average claim size of 25,000, workloads increased by more than 45%, and the current loss estimate to be around 290 million. A big thank you we already handed to our employees earlier today. It's real work for everybody involved, and we had to be there. We were there before anybody else showed up, by the way. Big kudos not just in terms of dedication but speed. We deployed 600 claims assessors, moved them down to Bavaria from all sides of Germany. Particular kudos to Allianz Handwerker Service. I'm going to talk about that in a little while again. It's now more important to talk a little bit about insurance and services, because without Allianz Handwerker Services, we would have not been able to deploy 6,700 air dryers urgently needed. One day only until the first loss assessment. Typically, it normally took in the past three to four days. And within two weeks, we basically had everybody inspected that needed to be inspected with getting exceptionally strong feedback, not just from clients, by the way, also for the first time from the media and political leadership. That makes us very proud. For you, more relevant is that despite that our loss share relative to market share is lower and it's trending lower, we provided you on the right-hand side of page four with some data on flood band. That was the July 21 versus the last one here in May of 24. And we keep on investing in NETCAT modeling, real-time risk assessment, and proactive loss prevention. Now, The key thing is particularly sending SMS warnings to clients and bringing things down. I don't know whether you know, but in a very short period of time, we found out that the Wi-Fi systems were down due to power outages, and we got Starling into the system very quickly. I'd like to thank them for making that technology available at very short notice and allowing us to really do the work. in a way that was useful. It's probably one of the most important inventions in the last few years. So we're investing in technology to speed things up and make them more precise. Also needed, and that's a small interesting technical vignette, as we move into more sustainable housing and installing, for example, more wooden houses than others, fast inspection to prevent total losses is super important as mold builds within a couple of days. So there is a true economic cause behind being not just very good but also very fast. So this shows that you can be good and do well at the same time, and we are continuing to build on this advantage. By the way, behind that is a really important question that is, do you have scale? We could not do that if we didn't have 14% market share in this area, actually 20%, because you have to have certain minimum size to move. So that's the first example. of what we do, bringing more value to the community and more value to shareholders at the same time and how it works. And we expect over the next few years even more benefit as we bring technology into the homes and into the assessments. The second thing that I would like to talk about is there's a never-ending debate about M&A versus returning capital. It's quite sad to see that growing the company is seen to be more critical than returning capital, but we've been extremely disciplined over the last few years. Here again, as I mentioned earlier, the U.S. mid-corp we've looked at, we tried to build it out into a market-leading position. The capital requirements and the return on that would have been too large relative to what we believe we can do. So we exited the position, and we have been working for a long time on building the partnership with the Singaporean community to acquire Income, the number one P&C company in Singapore, a leading health provider. and a strong life company that has lots of upside, to put it mildly. And this acquisition is aimed to really give us double-digit ROIs over time, but more importantly, creates a very strong home base for us. We've been domiciled in Singapore since 1991, but we have never had an operating business in the city-state. Now we do have it, and it's the leading franchise, and we're very proud of it. having won the trust of the community to do so. So these are the two points that I really wanted to highlight in terms of strategic developments. The last one, maybe that's not on the slide. We continue to enjoy not just flows but strong performance. In the asset management segment, they are fully in line, if not ahead of plan. There is more to come, particularly in terms of productivity over time. It's a very important subject for the segment and for the industry at large, I think, because of pressure. on active management coming both on margin and volume. And we're fully aware of it, and we are fully working on it. And you can see it's quite rare to see numbers like the ones we've seen. By the way, flows for AGI in July have also been positive in case that somebody wants to ask that. And with that, I hand over to Claire Murray.

Thank you very much, Oliver. Let's move to page seven. And as you can see here, overall, I'm very pleased with our results in the first half of the year. From my perspective, they clearly demonstrate sustained strong momentum in terms of performance when you really look at quarter after quarter, together with the resilience of our operating model. As we navigated through an environment which has seen inflation remaining sticky in many markets, we have seen as well some volatility in the capital markets. And while the first quarter has been a bit benign in terms of loss experience, the second quarter has been quite active from a weather perspective, but as well from a large loss perspective for us. So in that context, we deliver record operating profit at 7.9 billion and as well a record shareholder core net income at 5 billion, which is up almost 8%. And exactly as mentioned by Oliver, what is really nice also in those numbers is that all our segments are seeing business volume growth and are as well contributing to the profit growth as well. So if you look in a bit more details in property and casualty segment overall, so clearly 8% growth mid-year, out of which the majority of that growth is coming from pricing, while we had 1% of volume growth in that number. We emerged with an operating profit that is at an excellent level of 4 billion, that is also up versus last year, while we had a much higher level of natural catastrophes at that point in time and also similarly on the large loss side. Life and health continues very good, very strong growth trajectory from my perspective as well. We achieve a record level of operating profit. And we continue that growth with an excellent level of margin, which is basically generating a value of new business that is up 12% compared to last year for the first half of the year. Exactly as mentioned by Oliver, clearly an environment that is not easy to navigate. Still, in the first half of the year, we have accumulated almost 50 billion of net inflows. which is a very strong performance. And our third-party asset management are basically at the highest level since beginning of 2022. So that's also a very strong performance for the asset management side. Overall, given also our slightly reduced cost-income ratio, we continue to see an improvement of our operating profit on the asset management side. So all of that give us clearly confidence and also like the underlying momentum we see in terms of performance into our business towards the second half of the year and also our 2024 operating profit guidance. I will now go in a bit more details into our second quarter results. And after that, we can enter into our Q&A session. So moving to page nine and looking at our results per quarter, here you can clearly see the strength that those results demonstrate in terms of momentum. Overall, we see almost 9% growth and an operating profit that is very close to the first quarter one, despite the elevated level of natural catastrophes and large loss we have seen this quarter. If I go into the property and casualty segment, first in terms of volume, we see double-digit growth that is coming both from pricing and volume. Secondly, our combined ratio emerged at 93.5 into the second quarter, which is within the range I guided towards of 93 to 94 for the year. and that's leading to an operating profit of 1.9 billion that is slightly above our quarterly expectations and as mentioned already given the elevated level of natural catastrophes and large loss we have seen this quarter which send overall at 700 million versus last year this delivery is supported by a very strong underlying performance of the business which is particularly nice to see as we are clearly earning the benefits of our pricing actions that we have started to take in 2023 to counteract against the inflationary environment we were seeing. On the life and health segment, we continue with an excellent trajectory. We have 1.1 billion of value of new business and a double-digit operating profit growth. And on asset management, again, and as mentioned already by Oliver, despite an uncertain context when it comes to the central bank intentions, we have seen another quarter of double-digit net inflows. And with our slightly improving cost-income ratio and our third-party asset and our management growth, our operating profit grew as well by close to 6%. Let's now move to page 11 and let's have a look at our balance sheet. Here you can see that we maintain a strong level of strength with our solvency to ratio that is up 3 percentage point compared to previous quarter. And our sensitivities, which I think in the current environment, right, is a very important element to look at, are broadly unchanged and pointing out to a good level of resilience of our capitalization. Let's move to page 13 and let's have a look in a bit more detail at our solvency to ratio development. I think for this quarter we have a very simple outcome in terms of those three percentage point improvement. We have two percentage points which are coming from our organic capital generation, net of tax and dividend. We have a lot of various effects which are coming on the market side, but ultimately they emerge close to zero. And on the management action side, We also have a lot of different elements, but overall it emerged by almost one percentage point positive. So overall, a strong solvency position we feel really confident about. And this confidence is as well further reflected in our extended share buyback program of 500 million euros that we have been announcing yesterday evening. Let's now move to P&C on page 15. And let's first look at growth. So I think this page is a very good page that is clearly highlighting the excellent level of growth we see across our portfolio. Our growth overall is at 10%, out of which 3% is volume. And we see more growth in retail, which is at 12%, with motor particularly strong at 15%. Commercial is as well strong at 9%. And in those numbers, you have some benefits from the hyperinflation countries, but even adjusted for this, our growth level is strong at 7% for the quarter. On this page, in a bit more details, maybe you can see here the well-spread growth structure across our entities. But maybe in particular, you can see Italy, Spain, Australia, or Germany that are particularly strong for the quarter in terms of growth. And on the commercial side, Maybe looking at AGCS here, you can see that we have a bit of softening on the rate change on renewals when you compare year-end with 6M. But still, I think if you look at it at the lobe and geographies level, we continue to see good areas for growth, as you can see as well in our overall level of internal growth for AGCS. Let's move to page 17. And here you can see on the left-hand side that our operating profit is at 1.9 billion and is ahead of our outlook midpoint for the year. This is a very strong result given the elevated level of NATCAT, weather-related and large loss we have seen this quarter. And this is clearly demonstrating the strength of our diversified portfolio. If you look at our overall combined ratio, which is at 93.5%, as mentioned already, right, in the middle of our target range of 93% to 94% for the year. But if you go in a bit more detail into that one, two elements I'd like to mention. So first of all, our expense ratio that is improving quarter to quarter is Here you have a bit of positive seasonality effects that came into the 24.2%. But fundamentally, we continue to see a good trajectory in terms of productivity and enhancement. And you should expect to continue to see our expense ratio to move towards the 24.5% we have guided towards for the year. And then if you look in more details into the 93.5 on the attritional side, and you look at our attritional and discounted loss ratio, that is at 72.4. In this number, you have 1.4 percentage point of impact of the New Caledonia riot event. So I just sit for this. Our attritional is at 71%, which is better than both last year and Q1. And I expect this effect to continue to show up as we are clearly earning the benefit of the pricing actions into our attritional loss ratio. And I also expect that over the year, we are going to see the effect of the New Caledonia event to earn out so that we converge towards our 71% attritional loss ratio undiscanted. So if we look in a bit more detail into the combined ratio, on the retail side, we are at 94.7%, which is improved by 0.8% point compared to last year. And that's actually really good because we have in that number as well 4 percentage points of NatCat event. So that's clearly demonstrating again the fundamental improvement we see in the underlying. On the commercial side, despite the higher level of NatCat and New Caledonia, here we still are emerging at a strong level of combined ratio. Let's move to page 19. And this page, quarter after quarter, I would say continue to be a very strong page where you can see the quality of our diversified portfolio. The impact of the large floods in South Germany is clearly visible there. Germany emerged with a combined ratio of 99.8 for the quarter standalone. with a 14 percentage point impact of NatCat. So that's still, I think, a strong level to emerge at. But you can also clearly see on this page all the entities that have been also pushing quite actively for improvements, like the UK, Australia, that is doing an amazing job. And also Latin America would be another example of that one. And what you also continue to see on that page is a very strong performance of some of our entities like Italy, Central Europe, Switzerland, would be a few of them that are particularly strong also on that page. On the commercial side, AGCS as well sees a good level of performance despite COVID. Five percentage points more, not cut this year compared to last year. And trade is slightly negatively impacted in terms of combined ratio by a technical effect, but basically still operating at an excellent combined ratio of 81.4, and also with further strong growth of the operating profit, clearly. If we look on page 21 at our operating investment result, that is slightly up for the quarter compared to last year. Clearly, here we see the effect of IFRS 917 together. We are earning the higher yield levels, but they are more or less neutralized by the higher interest accretion as we are unwinding the previous year's discounting benefits. So if rates keep a bit stable, then you will continue to see that effect going forward. So let me recap on P&C. For the quarter, we deliver an operating profit at 26% of our outlook midpoint guidance, despite an elevated level of natural catastrophes and large losses during the quarter. For both retail and commercial, our growth momentum continues. For retail, in terms of profitability, we clearly see the earning of our pricing actions that were basically pushed through against the inflationary environment that are coming through as expected. And on the commercial side, we continue to operate at a very good underlying level of profitability. So clearly, all of that puts us on a good trajectory for the future. Let's move to life and health and let's have a look at page 23. And here you can see as well a continuation of the new business momentum we have seen in the previous quarters. Our PVNBP is up 6.5%, but it is in reality up 15% if you adjust for a large ION3 contract we had in 2023. And that is clearly visible on the page. I think when you look at the spread of the growth across entities and even the U.S. had a strong quarter considering the fact that we had a promotion last year in the second quarter. The growth is also of good quality because we are growing at 93% in our preferred lines of business. And we are growing at an excellent new business margin of 5.8%. So overall, this is leading us to a value of new business of 1.1 billion, which is in line with last year. And so overall, I clearly think an excellent development on the new business side for our life and health business. CSM on page 25, I think also a really clean quarter from a CSM development perspective. So first of all, the CSM release is in line with the 8% to 9% range we expect for the year. Remember, for the year, we expect $5 billion total year. The normalized CSM growth is close to our run rate. We always see as well a bit of seasonality in the second quarter and third quarter, where the normalized CSM growth is expected a bit lower. But first half of the year, if you look at it, we are at 3% CSM growth against 5% expected for the full year. And then if you look at the work of the development of our CSM, Here we have negligible economic variances for the quarter, and we had slightly negative non-economic variances, which are mainly linked to the lapse activity. And by the way, this is negative on a gross basis, but this is positive on a net basis, because a lot of the lapses we have seen are actually part of the range and portfolio of easy life, so it's not impacting our net CSM ultimately. What is also important, I think, is that our CSM sensitivities are unchanged and they are as well confirming the robustness of our CSM against market movements. Let's move to page 27. And here you can as well see a clean translation from our CSM release to operating profit. We have lower negative variances this quarter, and we have higher results from our pure unit link business, in particular, steaming from Italy and from Mexico. And this is leading us to a strong operating profit against our outlook and a 15% growth year on year. On the right-hand side, you can as well see our very well diversified portfolio in terms of contribution to these outcomes. So I think it's visually very clear as well here. So overall on life, we continue to see a strong growth at a very good margin level, together with growing CSM, which is positioning us well for the second half of the year, too. On the asset management side, on page 29, as mentioned here, I really think that the bond markets have been a bit uncertain in the first half of the year, given the inflation landscape and the debate on the timing of central bank rate cuts. But we have seen 14 billion of net inflows in that context, which together with the 34 billion we saw in the first quarter means a 5% growth of our third-party asset under management year-to-date. Clearly, very strong growth from that side. On page 31, you see as well that basically this growth is translating into a revenue growth of 5% year-on-year. This growth is mainly driven by the asset and our management because our margins are slightly down, but still at a very strong level and very stable. I think when you look at it also quarter after quarter and our performance fees. have normalized compared to last year. Remember, last year in the second quarter was an exceptionally high level of performance fees. If we go to page 33, our operating profit growth is at 6%. That's also supported by a stable cost-income ratio. And without performance fees, which are always a bit volatile, right? So I think it's always a bit difficult to do those quarter-to-quarter comparisons. with performance fees, our operating profit growth is at 10%, which is clearly very strong. And as mentioned by Oliver, so we have seen slight improvement in our cost-income ratio, but we also expect towards your end further improvement of our cost-income ratio to come through on the asset management segment overall. So on asset management, our operating profit is in line with our full year guidance. We are very well positioned to capture the market momentum if the direction of rates clarify. And that makes us also confident for the second half of the year. Corporate segment, I'm going to skip. It's better than expected. There is nothing I'd like to mention in particular. And then if we go to page 37, which is also a very clean page in terms of translation from operating profit to net income. We had less noise compared to last year on the non-operating item side. What I'd like to mention is simply the normalization of our tax rate, which is fully in line with our expectation for the year. Last year, we had a pretty exceptionally low tax rate linked to some one-off events. So, overall, this leads us to a shareholder core net income of 2.5 billion, which positions us as well very well towards our yearly trajectory. Also, maybe worth to mention the fact that our ROE for the first half stands above 17%, which is also a very strong performance in terms of return on capital. Let me wrap up on page 39. Overall, I clearly think a very pleasing first half of the year, both from a performance and a resilience perspective, given the strength of the contribution of both all our segments and also many, many business units across the group when you look at it also in the further details we are providing. Our capital position is strong. And while I think you can always see volatility in our numbers, given the overall situation, mid-year, we are clearly confident to fully meet our financial trajectory for the year. This confidence is as well reflected in the extension of our share buyback program by 500 million euros. And as things stand now, for 2024, we have a total payout of 6.9 billion euros, which is made of our newly agreed 60% dividend payout policy with 1.5 billion share buyback. This level of 6.9 billion euros, I think, is a very strong level. And this is clearly demonstrating our commitment to attractive shareholder return, while in parallel, we continue to optimize the deployment of our capital, as well through M&A, as already mentioned by Oliver and presented in more details. With that, I hand over back to you, Andrew.