Allianz Se Unsp/Adr

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

Thank you very much Andrew and good afternoon everybody. I'm happy to share with you today our third quarter results. If you look at our 9M numbers on page 3, which clearly are a very nice set of numbers, you can see our strong momentum in terms of both growth and profitability. This momentum is well spread across our segments. What the numbers show as well is our resilience as we have seen both in the second quarter and the third quarter an elevated level of natural catastrophes but as well of large losses and weather related events. So let me now go into more details into the numbers. You can see our overall growth, which is strong at 11%. And that's ahead of the first half of the year, which was at 7.5%. All segments are contributing, with PNC steaming both from volume and price. Life and health with double digit growth. And asset management with net flows of almost 70 billion, now more than three times the entire level of net flows we have seen in 2023. And our asset and our management are up 7% year-to-date. On profitability as well, we are doing very well. Our core ROE is at 17.5%, which is up 15% versus last year. This is supported by our improved operating profit and net income, clearly. P&C has a combined ratio of 93, which is at the low end of our outlook range. Our value of new business is at 3.5 billion, which is reaching a record level in the first nine months of a year. And our cost-income ratio in asset management remains at industry-leading level. With this sustained momentum and our operating profit being now at 11.8 billion and 9 M, we are happy to mention that we now expect our year-end operating profit to be in the upper half of the outlook range. Let me now go to the third quarter on a standalone basis on page 5. So clearly we had a very good quarter, both in terms of growth and profitability. If you look at our main KPI, so total business volume, operating profit and shareholder cornet income, they are all up double-digit level versus last year. And our ROE is at 18% for the third quarter. PNC has seen nice growth, 9.5% internal growth, out of which we have both pricing and volume. Volume effect is 3% into that number. Our operating profit is at 2 billion for the quarter. That's supported both by the growth, but as well by the improved combined ratio at 93.5, which is well within the range of our outlook. and clearly much better compared to last year which was impacted by an exceptional high level of natural catastrophes. Life Annals had an outstanding quarter from my perspective in terms of new business. You can see new business up 31% versus last year. Clearly, all regions are contributing. You will see that when we go into more details. We are growing at an attractive new business margin of 6.1%, which basically allows us to deliver a value of new business of 1.2 billion, which is up 33% versus last year. On the asset management side, we have seen third-party net flows of 20 billion for the quarter, out of which PIMCO is contributing 25 billion. Our operating profit is marginally down. This is due to the lower level of performance fees in the quarter. And adjusted for that effect, our underlying operating profit is up 11% year on year, which I think is a very good level. So overall, a strong momentum across the board, building on the one we have already observed in the first two quarters of the year. Let's go to solvency on page 7, where you can see that our solvency ratio is up 3 percentage points compared to the second quarter, and we emerge at a strong level of 209%. The sensitivities as well are unchanged compared to the second quarter and as you may remember they are at a lower level compared to year end 2023 and this is including from the cross effects which is a very nice outcome from my perspective. Moving to page 9 and having a look at our organic capital generation, which is strong for the quarter at 7 percentage point. That's fully in line with our expected range of 6 to 8 percentage point per year net of tax and dividends. And this, despite the high level of growth, we have seen in the business in the quarter. So that's a strong outcome in terms of organic capital generation. For the rest of the work, you can see that we have a limited negative market impact of minus one percentage point, which is mainly linked to the lower level of interest rate. On the capital management side, we have a minus 2 percentage point which is linked to the dividend accrual, the extension of the share buyback in the second quarter, which is partially offset by the AGCS transaction in the US that is mainly contributing to the offset of the first two effects I was mentioning. So overall a strong development of our solvency ratio and we expect our net operating capital generation to be fully in line with our six to eight percentage point range for the full year 2024. Let's move to page 11 looking at PNC. And I think this page clearly highlights the strength of the growth momentum we see across our portfolio in P&C. Growth is higher in retail at 11%, with motor at 13%. Commercial see a growth level of 6%. Rates continues as well to be at very good level across the board. As you can see, the growth is well spread across entities and geographies. You can observe that on Germany, on France, on Italy, on Australia, on Spain. Trade credit is seeing a bit of reduction of total business volume, which is linked to the weaker economic environment. And on AGCS side, we see the effect of the divestment of the mid-core book in the U.S. in the total growth column, and the internal growth is impacted by some seasonality effects coming from our ART business. So corrected for this effect, the internal growth at AGCS is at 4%. Also, and that you cannot see directly, but we have a mid-corp business which is outside of the US, which is spreading across the geographies. And here we are also seeing nice internal growth level of 13%, with pricing up 5%. So overall, a very satisfactory picture in terms of growth development. Moving to page 13, where you can see that our operating profit is very good at 2 billion, which is growing by 36% compared to last year. This is linked to both a better combined ratio, which is at 93.5, as I was mentioning, really middle of our outlook range. and the growth of our insurance revenue, which is up 8% versus last year, as we are earning the growth we were basically communicating quarter after quarter into that number. So before I go into a bit more details into the combined ratio, I would like to highlight the fact that the AGCS sale of the US mid-corp business is impacting our number, As we have a fronting for ARCH of the new business that is now in place and is going to stay for up to three to four years. And this fronting activity is basically mechanically impacting our ratios. This is improving our expense ratio and this is deteriorating our loss ratio via the range chance ratio. So now going into more details into the combined ratio, you can see that our NatCat impact is lower this quarter at 3.4% compared to last year that was at 7.3%. So last year was very exceptional, it was one of the worst, I mean it was the worst quarter in 10 years in terms of NatCat experience. But still at 3.4%, this is above our expectation of 3% cat load. And the quarter in general has not been particularly quiet in terms of events. So we have seen the floods in Eastern Europe. We had several storms in Europe as well. And we had some hurricanes in the U.S. And also beyond that, Kat, we also have seen quite some smaller weather-related events and large losses during the quarter. Our expense ratio is very good. It's benefiting, I think, fundamentally from some mixed effect, from the productivity actions we are continuously pushing through, and as well from the AGCS effect I was mentioning before, which is contributing positively to the expense ratio. Also, I think on a year-on-year comparison, our expense ratio is a bit, the comparison is flattered due to the fact that last year we had some negative effect into our expense ratio. If we move to the customer segments, you can see that retail is at 94.9 combined ratio. And within that number, our undiscounted attritional is improving by 1.4 percentage point versus last year and 1 percentage point versus the second quarter. And here we are clearly earning the benefits of the pricing actions as we expect. Commercial remains at a strong level of performance with a combined ratio of 90.5, despite some of the elements I was mentioning, so the AGCS effect, but also some of the large losses I was mentioning as well. Let's move to page 15, which overall continues to highlight the quality of our franchise across our P&C business and geographies, I would say. If you look in a bit more details into the operating entities, you can see that Germany and Central Europe, as an example, have been also impacted by natural catastrophes, but are emerging with a good level of combined ratio despite that effect. We see clearly for the UK and Australia the continued improvement in terms of combined ratio and operating profit showing up into Europe. basically as a consequence of the actions which have been taken by those by the teams to really improve the quality of the business so that's nicely showing up. France as an example you also see the strong actions the teams are pushing in terms of addressing the inflationary effects that we see on that market. On AGCS, you see several elements. I would say clearly the fact that the quarter has not been quiet in terms of natural catastrophes for AGCS. You have a bit of a negative effect coming from the ARCH transaction. And then we have seen quite some large losses in the quarter that basically are not for us any trend related, but they came as an increased load into the quarter. On trade, we see a normalization in terms of loss experience, but we also had some large losses into the quarter, which are explaining the reduction of operating profit. Still, I think, combined ratio being at a very good level for that business. Partners is clearly earning the growth into the operating profit at a good level of margin, so really good trajectory on that side as well. Moving to page 17, where you can see on the investment results side that we continue to earn the benefit of the higher rate environment into the interest and similar income. This is partially offset by the interest accretion, which is in line with our expectations, but clearly is reflecting the fact that we are paying for the higher discounting that we have seen last year. And in the valuation results and other, we have a bit of noise this quarter, which is mainly linked to the Euro to US dollar rate being like more negative effect this quarter versus more positive effect last quarter, which is emphasizing the effect on that line item. So overall on PNC, let me recap, we see a strong growth continuing, very good level of profitability in line with our outlook, with the actions on inflation being earned through in the combined ratio. So overall, we are well positioned towards the future on PNC. Let's move to life and health on page 19 where new business has clearly been exceptional this quarter and this is in particular particularly strong from my perspective for a third quarter which traditionally is always a little bit lower. So PVNBP is up 35% at an attractive new business margin of 6.1%, which is leading to a value of new business of 1.2 billion, which is up 33% versus last year. And clearly, all our entities are contributing to that growth, as you can see on this page. So it's a bit difficult to pick, but maybe let's first pick the U.S., where we have a nice growth of 60% in terms of PV and BP, which is linked to the momentum in the U.S. clearly, and also some promotions we have run on our fixed index annuity business for six weeks in the quarter. Italy also very nice growth of 22% where you know the colleagues in Italy are basically market leading in terms of unit link business and this trend is continuing this quarter. Asia Pacific also in particular had a very strong growth during this quarter at an excellent new business margin of above 10%. which basically is leading Asia Pacific to have the second largest contribution in terms of value of new business after Allianz Life in the quarter. This growth is as well of good quality as we are growing at 95% from our preferred line of business this quarter. If we go to page 21 and we look at the CSM development here as well, really good developments overall. The CSM is growing at 1.5% for the quarter, which is bringing us at 4.6% growth year-to-date against our guidance of approximately 5% for the full year. This is significantly in excess of the release, approximately 60% higher, which is clearly good for the future. And our CSM release is at 1.3 billion, which is fully in line with our expectations. To provide you with maybe more details on the CSM development, so the work, You can see in terms of development for the economic variances, we have positive economic variances of 300 million, which is mainly linked to the lower level of interest rate. Our non-economic variances are negative, 600 million. This is linked to the annual assumption updates that we are performing in the third quarter. And in particular, this is coming from the labs experience we have seen over the last few quarters. And this effect is actually halved on a net basis as a significant part of this non-economic variance is linked to the old book of fixed index annuity on easy life side which is reinsured so from gross to net it is disappearing and as you know the net csm is what matters for future profitability Our CSM sensitivities are broadly unchanged, and they are at a very low level, which is also quite good. And if we move to page 23, our operating profit is at 1.4 billion, which is fully in line with the second quarter of 2024, including in the translation from CSM release to operating profit. There is still a bit of noise in the year-on-year comparison in the variances from claims and expenses in particular, so I will not pay too much attention to that one. And I clearly think that this 1.4 billion is as well strong against our yearly outlook. Overall our operating profit is growing by 5% year on year and this development is as well well spread across operating entities as you can see on the right hand side of that slide. We see Italy and the US which are leading the pack but as well Central Europe where in particular our Polish colleagues are doing very well with the comprehensive life offering with strong rider features. So let me summarize on life where we see an excellent 35% growth of PV and BP at attractive margin, our growth is very well spread across our entities, our CSM is growing too ahead of our yearly outlook which is good for the future and our operating profit is at 79% of our yearly expectations. Let's move to asset management on page 25. So I think on asset management, first of all, I think one should recognize that we continue to navigate in an environment with significant debates on rate cuts, volatility in markets, yield curves, and so on and so forth. So this is not a very straightforward environment for this industry. But in this context, I think our asset management business is performing well, and we have seen for the third quarter 25 billion of net flows on HGI side, which is twice the level of the inflows we have seen in the second quarter. HGI has seen outflows of 5 billion, which is linked to two large mandates we have in the low margin fixed income business. And we have seen as well on HGI side in the third quarter some inflows in the higher margin business like multi-assets or alternatives as an example. Year to date for both PIMCO and HGI, our net flows are at almost 70 billion against 22 billion for the full year 2023 and an outflow of 80 billion for 2022. October, as well as seen further positive inflows coming from both AGI and PIMCO. So overall, at the end of the third quarter, we have 1.8 trillion of asset and our management, which is up 7% versus the beginning of the year. And this is also our highest level of asset and our management since beginning of 2022. This is clearly good for our future level of profitability. Let's move to page 27 where you can see that our revenues driven by the asset and our management are up 7% versus last year with a resilient level of fee margin slightly impacted by business mix. We had a low level of performance fees this quarter on PIMCO side. This is only a matter of seasonality and we expect those to materialize at a later point of time. AGI is nicely growing revenues. If we move to the year-to-date view, our revenues are up 4%, FX adjusted. Moving to page 29, as logical, our operating profit is impacted by the lower level of performance fees. Excluding this, OP is up 11% year on year, and that's driven by both the higher average asset under management and the strong cost control at both asset managers. As you can see, despite the lower level of performance fees, our cost income ratio is at 61%, which is in line with our expectations. So overall, on asset management, we see strong inflows, now already at three times the level of 2023. Asset and our management are up 7% year-to-date with strong profitability level. This is also positioning as well for the future. Corporate segment I'm going to skip, this is in line with our expectations and there is nothing specific to highlight. Let's move to page 33, where you can see that from an operating profit to net income, there is a bit of movement on the various line items, but overall we have a fairly clean effect with 400 million of non-operating profit. much lower compared to the third quarter 2023. We also have like the effect of the ARCH transactions that is showing up in particular online item author. Our tax rate is in line with expectations. So overall our shareholder core net income emerged at 2.5 billion which is up 23% versus last year. Our core EPS is as well up 25% versus last year. We are fully on track for the 25 euro EPS target for the full year. Let me recap on page 35. Clearly, we are happy with the strong momentum we see in the business, both in terms of growth and profitability across all our segments. This is as well underlined by a strong level of solvency ratio at 209%. This is positioning us well for the future, and given where we are now at 9M, we can refine our guidance for the full year to an operating profit expected in the upper half of the outlook range. I'm very much looking forward, together with the entire team here, to welcoming you at our Capital Market Day on December 10 to exchange on perspective for the next three years. I'm now happy to take your questions, but suggest to keep the questions related to the outlook for that event. Thank you very much.

great um thanks claire marie um yes we're happy to take your questions maybe just some housekeeping first of all if you're on the web call you can ask a question by clicking talk request and we will release your line if you've dialed in it is star five some house rules as ever I'd ask you to keep your questions to two questions, focused in particular on the Q3. If you have any follow-up questions, then rejoin the queue at the end. Great. With that, our first question is from Andrew Baker from Goldman Sachs. Go ahead, Andrew.