Allianz Se Unsp/Adr

Ladies and gentlemen, welcome to the Allianz conference call on the Allianz Group financial results for the second quarter and first half of 2026. 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 over the call to your host today, Oliver Bate, Chief Executive Officer of Allianz SE. Please go ahead, Oliver.

Thank you, Andrew, and thank you, investors, for taking interest. I know you had a couple of calls already, so we are trying to keep it mercifully short and focused in order to make sure we make the best out of your time. So page A2 is where I would like to start. Just as context, and that you're all aware of, we are in a very volatile environment, not just geopolitical tensions, but also enormous nervousness, investor nervousness around who's going to win and lose from AI, including the people that are actually spending hundreds of billions on building AI infrastructure. And therefore, just as a reminder, we are very, very focused on our three strategic priorities, which we've outlined the last Capital Markets Day, driving smart growth, reinforcing productivity now with the help of AI getting implemented into the core of the company and further strengthening our resilience, which has now reached a new height. Just as another reminder, Allianz has made it a deliberate choice to try to lead on a number of factors that we believe are important in such a really volatile environment. The first is the trust of our stakeholders, not just shareholders, but particularly society and customers at the core of it and our own people. So we are the number one in the Edelman Trust parameter. We've also captured the number one position on the Evident AI Index for insurance as a leader in not just understanding but implementing AI in our business. and what we believe is super important in a GenTech world is to have the strongest brand that emanates the trust of consumers. And again, we are by far the most valuable brand in the inter-brand ranking and also true for a number of other brand rankings. So we believe we are well positioned to deal with this global challenge, but we are humble enough to understand that the world can be a very difficult place and we cannot do well all the time and always. Now, let's move forward. Page number A3, please. What's really interesting to see in the first six months, and I'm going to talk about six months, not the quarter. It's obviously important for you to re-address your questions on the Q2. I'd like to talk about what we've done on the two businesses that we outlined. We report on three reporting segments, but the two businesses that we strategically differentiate, protection and retirement, We are on track on all of the key parameters across the portfolio. Productivity further 30 bps down and that is also what we should be seeing by the end of the year. Since 2018, we have been continuously delivering and I'm very confident we keep on delivering. Why is this important? It gives us the flexibility on pricing and on reinvestments into the brand and distribution and in growing the business. Apropos, our platform business continues with very strong growth momentum, as promised and as indicated before. A reminder, mid-corp combined ratio at 88%, super strong, despite the pressure we're seeing on reinsurance markets in large corp. We are expanding our footprint in some of the important segments. The partnership with Coalition is One, accessing alternative reinsurance capacity via Lloyd's, coming at very attractive rates, even relative to other items is important. And Health and Protection stands at 1.2 billion, which is also a nice level. On the protection side, we're happy. The other side of the coin, retirement, we have a couple of things that are important. Record net inflows. Inflows continue throughout the years, and by the way, continue as in the first half also in July. We are further supported by excellent investment performance, as you can see over that, and we are supporting further growth with investments into building our ownership In asset management, both in PIMCO with the purchase of the M units and our investment in UOB asset management in Singapore. That combined with the acquisition of HSBC in Singapore helps us to establish a decent presence in one of the most important wealth markets In Asia, we believe Singapore has a strong future ahead in an environment where people will be nervous where to put your money. Very strongly regulated, very well regulated, very good rule of law. So we are big fans and we have finally had the opportunity to invest in both areas. By the way, a coincidence that it's happening in Chile. within a few days of each other but there's no coincidence is that we want to strengthen both the life side and the asset management side and Singapore has a lot of innovation opportunities The experience that we've had in the US with AZ-Live in the wealth market will be a big asset to bring to Singapore, just as an example. A little more detail to that on page A4, where we are showing some details. I don't want to go through this slide. Actually, you could probably read faster than I can speak to it, even though I speak very fast. Just as a reminder, PIMCO buyout of minorities has been a long term plan. It's happening now because we have reached a point where we can do it five years after we stop issuing the options. We have the right to call them and we have agreed with the PIMCO leadership that this is a good time and to do this very, very quickly. A good investment for many reasons, including a very decent return on a business we know very well and that's doing exceptionally well. And we are very happy to and very proud to partner with EOB on asset management, a very strong bank, by the way, not just domiciled in Singapore, but in some important Southeast Asian markets. So that's Quite important, on the left-hand side again, some information on HSBC. Important is to point out, if I may say so, under the ownership of HSBC, this franchise has massively transformed in a very short period of time. It's not a bank assurance agreement alone. That is important because HSBC has doubled down on building out Wealth Management in partnering with Allianz in Singapore, they just added another 100 relationship managers to build out wealth. But it has other distribution structures that are important as well, agents and more importantly, independent financial advisors. So it's multi-channel and we want to build that out further. And it's not just life, it's also a health insurance platform from which we would like to build. So we're very happy as we see, we think we're going to have very good returns. And by the way, a very good mix, low risk, a bit higher risk so that we make sure you can as investors rely on us getting a decent return on investment on these growth investments. So let me then go to page A5. As a summary, then I'm already done. I love this slide. It's my favorite in the deck because it nicely shows that we are not relying on a single cylinder. We've been saying it over all of the years that not every machine can really work all of the time. We're in the fortunate position at the moment that all our engines are powering the group results to have a nice diversified portfolio. And we believe we will be in a good position to hit our outlooks and the midpoint, not just for the earnings outlook, but the midpoint for our strategic cycle. We are exactly 18 months, i.e. 50% into the three-year cycle. So as we can say nicely, so far, so good.

So thank you very much, Oliver, and maybe moving into section B. So good afternoon, everyone. As mentioned by Oliver already, we had an excellent set of results for the first half, where all segments are contributing, again demonstrating the rigor we put in the execution of our capital market delivers, including from leveraging AI. Building on Q1, we reached 54% of full-year operating profit midpoint and we have an excellent level of solvency to ratio. We are very confident clearly against our yearly and our capital market day targets. So on this page you can see starting by the Right left corner, that our total business volume is at 99 billion euro at the end of the first half, with an internal growth of 4.3%. In Q1, we were at four. In Q2, we are at 6% internal growth. So clearly, there is an accelerated momentum in terms of internal growth in our numbers. You can see as well in the underlying that we have very strong performance. As an example, asset management is at 19% growth in the second quarter. This level of growth in the first half of 2026 is building on a 10% internal growth that we have achieved in the first half in 2025. So if you bring the two together, we achieve a high single-digit level of growth over the last two years. The development of our operating profit demonstrates from our perspective both our technical excellence and as well our ability to grow profitably. We emerge at a 9.4 billion level of operating profit, which is our highest level ever for a first half, and we have been growing that operating profit by 9% compared to last year, which is an excellent level to which all segments are contributing, including our health and protection business, So the health and protection business, you get more details as we are building on the first transparency we have been providing in the first quarter this year. So it's basically displayed transparently in the backup of this document. And you will see there that we have a 9% of underlying growth, which is also an excellent level. Our shareholder core net income emerged at 6.4 billion euros and you have seen that already that in the year-on-year comparison of the net income we have many effects this year at the first half. We have effects coming first from the disposals that we have seen both last year and this year. and we have also the effect from the restructuring. As mentioned in the first quarter, we are leveraging the gains we are generating on the sale of Bajaj, of the GV with Bajaj, to advance our AI-driven transformation. So if you adjust for both effects, meaning the disposals and the restructuring or the excess restructuring, our shareholder core net income grew by 9%, which is an excellent level. Now, if you also further look into the analysis presentation, you will get more details on our estimate for non-operating profit for your end. As you know, there is quite some natural volatility in that number that is linked in particular to the hyperinflation effects. But it's important to note that in addition to the approximately 600 million of further offset of the badge-age gain, Further restructuring could be expected in the second half, in line with past experience. As an example, the minus 200 million that we have seen as per the first half of 2026. Now coming back to the development of our core EPS, you can also see that our adjusted core EPS is up 10%, which is better than our target range of 7 to 9%, so also at an excellent level. Resilience continue to be very strong with our solvency ratio at 225%, as well our operating capital generation is very good at 11 percentage point, fully in line with our expectations for the year. So we have a very healthy level of coverage and also very high financial flexibility into our numbers. This supports very well the transaction that we have announced recently. So moving to PNC on page B4, here you can see our excellent level of profitability. You can see as well the very good level of internal growth we have with high quality performance across the portfolio when you go into the further details. So our total business volume is close to 50 billion for the first half. Our level of internal growth is 6%. And as part of that internal growth, commercial is at 4% and retail is at 7%. That 7% is very good from my perspective. And what you see as well in the underlying is that volume growth is building up from Q1 to Q2. Q2 is at 3% volume growth in retail. Our internal growth is as well spread. You can see in the further details as an example, the very strong performance of Germany that is at 6%, also even Q2 is at 7%, Eastern Europe is at 7%, LATAM is at 13, and we see as well the continuous very strong dynamic in our platform business where Direct is at 11% and Partners is at 10%. Also in terms of pricing dynamic, we see a resilient environment overall. In retail, we are at 5%. In motor, we are at 7%. And commercial continues to present quite a diverse picture and where we are clearly focused on cycle management with good opportunities we continue to see across the portfolio. Our combined ratio is at 91.4% for the first half, and our operating profit is at 4.9 billion, which is up 9%. This is a record level of profitability for a first half. and this record level of profitability is delivered both via the technical result and as well as the investment results. Both commercial and retail have a very strong level of combined ratio as you can see as well. And if you look further into the details of our insurance technical results, there you will see first that our underlying loss ratio is essentially flat year on year against a very strong prior year base. From my perspective, this is a very good result that has been achieved while we have also added to our inflation buffers, in particular in commercial, out of caution. Our caution is similarly reflected in our lower level of runoff versus prior year. And in total, if you take those two elements together, the extra buildup of inflationary reserves we have performed in the first half represent approximately one percentage point of combined ratio. Our expense ratio as well, as mentioned by Oliver, continues moving toward our long-term target and we achieve 30 bps reduction year on year of the expense ratio. In terms of transformation, we continue to be very focused as an organization on revisiting our processes end-to-end, leveraging AI, starting and putting the customer at the center. We are rolling out numerous tools as an example to improve ultimately our growth via better services or also rate adjustment. As an example, what we see there is that we are embedding AI to help the productivity of our agents. We are growing the AI-assisted search and brand visibility. We are also achieving automated quote and bind capabilities where we see as well that the funnel of success is improving also quarter after quarter. And on commercial, we continue the focus that we had presented also already in the first quarter, mainly on helping growth as an example through faster response and booking times to support the development of the business. So if you look at P&C at the end of the first half, we continue to deliver growth at an excellent level of profitability. Clearly, we are confident in our ability to leverage our technical strengths and as well our diversified portfolio to navigate the current environment and to deliver strong performance. Moving into life and health on page B5, overall here we see good results for the segment at the end of the first half. We see good recovery in the second quarter of a number of negative effects that we had observed in the first quarter. So the momentum is good with growth of our key indicators in line with our expectations. The value of new business is at 2.4 billion euro, which is approximately stable if you adjust for the FX effect and as well for the impact of the disposal of the GV with Unicredit. Also adjusted, our VNB is up 4% and our PVNBP is up 9% in the second quarter standalone, so clearly good momentum there. The high quality and the diversified profile of the growth is also supported by a healthy share of protection, health and unit link in the underlying. We have some examples of that if you go into the details of the portfolio. We have a CE that is showing double digit growth on top of a very strong previous year. In the US, the sales are up in US dollar term despite promotion that was running last year in the second quarter. In particular, in the Ryla segments, we are doing very well with a 13% growth in the second quarter. and in Italy we continue to see a very impressive development if you adjust for the disposal of the GV with Unicredit. Our volume as an example with financial advisors is up 16% in the second quarter. We see as well a good level of development of our normalized CSM, which is at 2.7%. And this is fully in line with our full year outlook. And also the absolute level of CSM has recovered very well from the Q1 market effect, fully in line with our sensitivity. So you see very well the breathing of the CSM in the further detail. This improved momentum is as well clearly translating itself into the development of our operating profit, which is up 5%, FX adjusted and emerging at 2.9%. Just to illustrate this recapture of momentum as well into the operating profit, the operating profit was down 2% in Q1, so you really see well the positive development there. In Q2 as well, we see that the operating profit is developing positively across a widespread base of operating entities. We see as well that our investment results include the reversal of some of the market volatility we have seen in particular coming from the US in the first quarter. and we also see in the investment results in Q2 the first time dividend coming from Viridium and Sconset. So overall for the first half we have good results with strengths nicely diversified across the portfolio. We are pleased with the improved momentum which leaves us well on track for the full year guidance. Moving to B6, and that's also one of my favorite pages of the deck overall. We see the excellent first half results of the asset management business here. We see record net inflows of 84 billion euros. We see the double digit revenue and profit growth emerging from the asset management segment. And this is coming from both asset managers which are contributing there. Our annualised organic growth is at 8%, PIMCO is at 9%, HGI is at 7%, and this is clearly an impressive level, which is at the high end of the industry, in particular for active asset managers. Clearly what we see there as well is that we have a nice regional diversification of emergence of the net flows. We see as well the product innovation that is coming from both asset managers, which is clearly supporting as well the good development of the margin. And we see that quarter after quarter, we continue to add value to our customers. Our performance is very good. We have 93% of our asset and our management. that are outperforming their benchmark on a three-year basis. I think it's fair to say as well that while the environment for asset management is not so straightforward right now, with many questions as an example on the direction of rates, on credit markets, on AI financing, et cetera, our asset management business continues to respond very well with differentiated offering. And that's also one clear element that is contributing to their success. And in July, actually, as we speak, we continue to see flows that are continued emerging following the same pace in comparison to what we have seen in the first half. Our revenues grew by 16%, FX adjusted. As mentioned, you can see as well a very resilient level of margin. Our operating profit is up by an impressive 19%, FX adjusted too. And good development as well of the cost income ratio is supportive of the overdevelopment of the operating profit against the revenue growth. So we are very happy with the performance in our asset management business and as well the fundamental strengths we see there provide confidence for the future. In addition, building on those strengths, we have pursued the two transactions already mentioned by Oliver on the asset management space and we are going to extract from that future value over time. Moving to page B7, where you can see the very clean development of our solvency ratio for the first half. We are emerging at 225% of solvency ratio, which is our highest level since 2018. And this is also, you can see as well, sorry, on this page, a very consistent delivery of operating capital generation, which is at 11%, and actually almost Exactly at the same level for Q1 and Q2, and this is fully in line with our target of at least 22 percentage points for the full year. As mentioned, for the future, the aggregated impact of both in terms of solvency and liquidity of the M&A, or the transaction we have announced, is highly manageable and we will as well generate over time attractive returns from those operations which are going to further support our positive development. So our resilience is very strong. We see high ability to manage the volatile environment in our resilience overall as already mentioned by Oliver. This is clearly a focus for us as an organization and this is a fundamental way We are operating our business in two. If we move to page B8 to wrap up, here you will see that first and just as a repetition of what I said on my first page, halfway through the year, we are very confident in our ability to deliver against our 2026 outlook. We are very, very well on track. But in addition, I want to spend a bit of time reviewing our status against our three-year strategic cycle as we are exactly midpoint through the capital market day journey. What you can see on the left-hand side is that in terms of financial KPIs, we are very well on track. Both our growth and our profitability across all segments are very supportive of the development of our core EPS growth and also the development of our core ROE. For both, we are trending ahead of our targets, as you can see. On the Solvency II operating capital generation, We are also performing well against our own expectations, right? Clearly there is still a way to go, and we knew that, and we are pushing on the levers we have identified. The work is ongoing and the work is going very well, so we are confident on our ability to deliver there. In terms of strategic delivery against our three main levers, on driving smart growth, I think you have seen in the document a lot of good illustration when it comes to, as an example, third-party net inflows, but also development of the operating profit of protection and health. On the PC retail volume growth, we see progress in our numbers. At the end of the second quarter, we were at 3% volume growth, which is at the low range of what is our target, which is 3% to 4% volume growth as part of driving smart growth. So there is still work needed together as part of our growth triathlon initiative. in order to be able to deliver, including leveraging AI to support our journey. When it comes to reinforcing productivity, here we are on track against our target very clearly. But even more importantly, I think what we see across the organization is a lot of fundamental work in terms of rethinking the processes from a customer-centric manner and also harnessing AI to advance the productivity across the organization. And this is very important, not only to deliver on the targets right now, but also for the next strategic cycle and for the fundamental transformation required on the way we are servicing our customers, also when it comes to make our product affordable for the future. Finally, on resilience, a lot of elements ongoing, as I was already mentioning, together with the fact, and I want to maybe re-emphasize the point I was making on the P&C business, that we are actively managing the cycle, which is clearly part of building resilience. and also on claims inflation given the uncertainty that is currently ongoing associated to the inflationary environment. We have built extra resilience as an example in the first half of the year. So overall this was an excellence for six months. We are very well on track to deliver our capital market ambitions. We want to continue building resilience while sustaining profitable growth and also while tapping into new technology across the value chain. So with that, I thank you all very much for your attention, and I hand over back for questions to you, Andrew.