Allianz Se Unsp/Adr

Ladies and gentlemen, welcome to the Allianz conference call on the Allianz Group financial results for the first quarter of 2025. 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 Kost-Lepout, Chief Financial Officer of Allianz SE. Please go ahead, Claire-Marie.

Thank you very much, Andrew. Good afternoon, everyone. I'm very happy to welcome you all to our first quarter call. As you will see as well, we have decided to change a bit the format of the call, adding to our usual set of slides some pages which are providing some highlights, and hopefully also leave more time for Q&A. We hope together with the team that you are going to like it, and as always, we welcome your feedback so that we keep on improving. Let me start on page A4, which provides an overview of our first quarter results for the Alliance Group. Overall, you can see that that we had a very good start into the year and that Allianz is very well positioned to achieve its 2025 and its mid-term financial targets as we focus on executing our capital market delivers, driving smart growth, reinforcing productivity and strengthening resilience. If you look at our top line, which is up by almost 12%, and as you can see, supported by all segments, which is positive, very positive, we emerged with a total business volume of 54 billion euros, which is a record level in a quarter for the Allianz Group. Also at a record level is our operating profit at 4.2 billion euros and again here all segments are contributing. Our performance is supported by our focus on customers, technical excellence and productivity as you will see as we go through the segments. Our shareholder coordinate income emerged at 2.6 billion, which is a strong level. And we have, as you have seen, a lower translation of the growth of our operating profit into our shareholder coordinate income, which is due to two items. First of all, a higher level of restructuring this quarter compared to last quarter and last year. And second, an exceptional tax item related to the decision to sell our stakes in the Bajaj joint ventures. And this will, over time, obviously, once we get the proceed, create more shareholder value once we receive and we deploy them, right? So adjusted for this tax effect, our core EPS is up 7%, which is in line with our capital market decommunication. Our solvency continues to be strong. It's supported by a very good level of operating capital generation, which has offset the impact of our dividend accrual and our previously announced new share-by-back program, which costs 4.4 percentage points of solvency ratio. Let me move to page A5, and let's have a look at our P&C business. So we had a very strong quarter for the P&C business, which is leading to a record level of operating profit. This performance is due to both the earning of the growth and a very good level of combined ratio. With 7% internal growth, we see good top line development, further growing from the strong 2024 base. Out of the 7%, approximately 5% is price and 2% is volume in the quarter. The pricing and the volume effect is higher in retail, while on commercial line, pricing momentum is slowing, as we expected and as we have already communicated in the capital market day. Maybe let me illustrate that a little bit more. On motor, we are seeing the highest level of rate in our portfolio, as we continue to see discipline in most markets. Large corporate is moving towards flat rate. And the details of our portfolio illustrate well our underwriting approach against this background, with double-digit percentage growth in new business volumes in Germany, as an example, as we went through our most successful 1-1 renewal in motor. And by contrast, we were disciplined in markets like the UK or some line of business on the AGCS side. The overall level of combined ratio was very good at 91.8%, even slightly ahead of the first quarter last year, which had a very low level of natural catastrophes of 0.4%, while for this quarter the cat load was 2.1%. What is striking in my view is that when you look at our portfolio, it's clearly the breadth of strong performance with a large number of operating entities, which are delivering a combined ratio in the 80s or low 90s, even though, again, we had a certain level of natural catastrophe this quarter. Both retail and commercial are contributing very nicely to this 91.8 combined ratio. Retail has been improving strongly as we are clearly earning in the numbers the benefits of our pricing and underwriting actions. Commercial profitability remains at a very attractive level. It's lower compared to last year, but it's mainly due to the larger level of natural catastrophes we have seen in commercial and also the lower level of discounting in that subsegment. PNC overall. continues to be well supported by our productivity focus, as this is evidenced by the further improvement of our expense ratio. So overall on PNC, we see strong growth. We see the earning of our actions that we have undertaken in terms of profitability, which is basically leading to a level of operating profit, which is at record level for a quarter at 2.2 billion euros. Moving to life and health on page A6, here you can see that our customer centricity and the discipline underwriting we have put in place is clearly leading to an excellent performance across the board. To start with, what is particularly striking in our numbers is the continued strength of our new business production. We sell volumes up 17% at a very healthy new business margin of 5.5%, which is driving to an excellent new business profit growth of 14%. We are delivering this growth after what was already a great new business level in 2024. So for me, clearly, it reflects the continued strength of our product propositions and our distribution initiatives. What is very strong as well is that our growth continues to be globally diversified. As I already mentioned last year, so this is really building on the continuous trend. And you will see as well that within our portfolio, almost all our entities have a value of new business growth, which is above 20%. The strong new business and also the healthy dynamic we see in our infance have driven a good level of growth in our CSM this quarter. Clearly, this growth of the CSM will support our profitability going forward as we are going to earn this CSM in the future. And as a consequence as well of those good developments, we have a normalized CSM growth, which is ahead of our yearly guidance at 1.9% and better than last year as well. This is leading to a strong development of our operating profit, which is supported by the earning of our CSM, and as well the impact of a small portfolio transfer we have done between P&C and Life & Health this quarter. So clearly, we have a very healthy dynamic in the life and health segment. And from my perspective, this is fueled by many elements we have elaborated on during the capital market day, including the need for trusted solutions, both on retirement and health in a volatile environment. Let me move to asset management on slide A7. And here you can see that our asset management business continues to see a good level of profitability. In the first quarter, we had strong net inflows of 29 billion euros that has been emerging from both AGI and PIMCO. As you know, the asset and our management are also impacted by the market and the FX movements. And this quarter, the FX effects were negative by almost 56 billion euros, which is basically leading then to an overall stable picture on the asset and our management side. Our net flows continued to be supported by the strong relative investment performance of our franchise, which has supported a high market share of industry net inflows into active strategies into the quarter. Our overall revenues grew by 5%. As you know, performance fees can always be volatile. They are low at PIMCO for the quarter, against a backdrop of high performance fees for first quarter last year. Our asset under management driven revenues, which exclude these volatile items, grew strongly by around 10% in the quarter, as you can see supported as well by a very stable third-party asset under management margin. Our operating profit increased by 5%, and this is exactly 25% of our full-year outlook midpoint. As you can see as well, we continue our focus on productivity in the asset management segment, as the lower performance fees are barely impacting the cost-income ratio. This journey will continue for the segment, and as an example, HGI has announced a strategic reshaping of its business recently, and we have posted in our non-operating results an associated provision to support this in the first quarter. Let me move to Solvency on page A8. You can see as well here our strong capitalization at 2.08, which is almost unchanged versus last quarter, with the operating capital generation offset by the normalized dividend accrual and the 2 billion previously announced share buyback. The market effects have been neutral in the first quarter, with FXFX increased interest rate volatility and movements in spread, offsetting the positive effects from the interest rate and the equities up in Europe. Our operating capital generation is very good at 6 percentage point post-tax. This is driven by high operating earnings, especially in the P&C segment, and also some non-economic variances of our life and health segments, which accounts for almost 1 percentage point. On an annualized basis, this brings us well on track for our ambition of above 20 percentage point operating capital generation by year-end. This concept transaction contributed positively as expected in the management actions. Part of the effect should actually be operating capital generation as a new business underwritten out of the new structure already in the first quarter benefited from a lower cost of capital. On the right side, you can see how stable our solvency to ratio is under various stresses. Our sensitivities are mainly unchanged versus year-end 2024. So this is clearly overall emphasizing the structural resilience of our group. Let me move to page A9, where I'd like to spend a bit of time to highlight some of the key elements on how we are managing our performance during uncertain times. As I mentioned to you during the Capital Market Day, we have a very clear focus as an organization on structural resilience, and we do so comprehensively when it comes to financial volatility, risk management, balance sheet and liquidity strengths, or governance. Of course, the capital markets context in the recent days has been more positive, but we are mindful of the volatility which has been observed in the recent months and the debate which clearly persists on the macro outlook. So this page provides a summary of the key features to remember for the alliance group when it comes to the market, to ethics and to macro sensitivities in the current volatile environment. I will clearly not go through those items in details, but this provides some elements highlighting our confidence in underlying assets and liability positioning and the option we have for risk mitigation. Clearly, we are very proactive as an organization. We constantly monitor, we stress test, we take actions as required. Also, our diversified business model, the strength of our franchises and the management toolbox provide strong downside protection to our organization. While clearly this is super important for us to manage risk in volatile times, our strengths can as well allow us to take advantage of dislocations or capture opportunities as well. This can be to fuel growth or also to promote life and asset management product propositions as an example. Let me move to page A10 and conclude here. What I want to stress out is our strong performance in the first quarter. The first quarter has seen positive contribution from all segments, delivering again a record level of operating profit, fueled by good growth and underlying productivity. This very good start into the year allows us to reaffirm with confidence our outlook for year end at 16 billion euros plus minus 1 billion euros, with also good resilience in the context of any potential volatility. Those results are as well in line with our capital market day targets. If I adjust for the effect associated with the posting of the tax effect associated to the Bajaj transaction, this transaction will, over time, create value for our shareholders with the expected proceeds creating more opportunity for accretive deployments and financial flexibility. We are focused on executing our capital market day targets, with the first quarter already reflecting positively on the journey to deliver higher organic growth, improve capital generation, and ongoing productivity improvements. With that, I'm happy to take your question, and I hand over back to you, Andrew.

Great, thank you, Claire-Marie. Okay, we're ready for questions. Just a couple of housekeeping points. First of all, if you are using the web call function, there is a talk request button on the top right-hand corner. Alternatively, if you've dialed in, which I think some of you have, it is star five, and we will unmute you. And again, on housekeeping, if we could stick to two questions, and then hopefully if we have time, you can rejoin the queue. Okay, with that, I think we're ready for the first question, which looks to be from Andrew, Andrew Sinclair from Bank of America. Go ahead.