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Earnings call: Allianz Group reports a total business volume growth of 7%

Published 05/16/2024, 07:52 AM
© Reuters.

Allianz (ETR:ALVG) Group (ALV.DE) has delivered a robust financial performance in the first quarter of 2024, with significant growth in business volume and profits. The company's total business volume grew by 7.5% to €48 billion, while operating profit reached €4 billion.

Shareholder core net income saw a 16% increase compared to the previous year. These figures are indicative of Allianz's successful start to the year, with key metrics surpassing full-year assumptions and a strong solvency ratio of 203%.

Key Takeaways

  • Total business volume increased by 7.5% to €48 billion.
  • Operating profit reached €4 billion, with shareholder core net income up by 16%.
  • Property & Casualty (P&C) segment saw a 7.5% internal growth and a combined ratio of 91.9%.
  • Life and Health segment achieved its highest quarterly new business value at €1.3 billion.
  • Asset Management reported €34 billion in third-party net flows and an operating profit of €800 million.
  • Solvency ratio remained strong at 203%, with capital strength stable.
  • Operating profit to net income conversion was straightforward, with lower impairments and a 25% tax rate.

Company Outlook

  • Allianz confirmed its outlook for the year, expressing confidence in its prospects.
  • The company expects similar seasonality and discounting patterns as the previous year.
  • Growth opportunities in the German P&C market, particularly in motor and non-motor lines.

Bearish Highlights

  • Higher than anticipated discounting effects in Q1 due to higher volume and inflation in certain countries.
  • The real estate valuation is expected to plateau after increases in 2024.

Bullish Highlights

  • Strong growth in the P&C segment and improvement in the combined ratio.
  • Life and Health segment showed strong new business momentum with a record level of value.
  • Asset Management achieved a 4% increase in third-party assets under management and high performance fees.


  • Negative internal growth rate of -1.9% in Q1, though catch-up is expected in Q2.
  • Some financial lines business, including cyber and aviation, not priced as desired.

Q&A Highlights

  • The company is managing inflationary trends effectively.
  • Pricing increases implemented in Q2-Q3 are expected to boost earnings in the second half of the year.
  • Reserve strength for AGCS and Allianz Group is satisfactory, with no need for strengthening.
  • The impact of the Brazil floods event is still being assessed but is expected to be a low to mid-digit event.

Allianz Group's financial results for the first quarter of 2024 demonstrate the company's strong position in the market, with growth across its segments and a solid solvency ratio. The company anticipates continued success throughout the year, despite facing some challenges with discounting effects and pricing in certain lines of business. Allianz's proactive management of inflationary pressures and strategic pricing adjustments are expected to contribute to a stronger performance in the latter half of the year.

Full transcript - None (ALIZF) Q1 2024:

Andrew Ritchie: 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 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 Coste-Lepoutre, Chief Financial Officer of Allianz SE. Please go ahead, Claire-Marie.

Claire-Marie Coste-Lepoutre: 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 3, and we start with the 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 have contributed 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 details into P&C. Here you see as well a good growth level at 7.5% internal growth with a very good pricing momentum. And 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 nat cat 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 the 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 at €800 million 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 have 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 1 percentage point down on the solvency ratio. And in terms of operating Solvency II earnings, we are emerging at 6 percentage point, which is within the range of our expectation between 6 percentage point and 8 percentage point. We have a bit lower operating Solvency II earnings this quarter, mainly linked to the fact that we had a higher level of growth in the quarter, and especially coming from the life business. And so as such, we have some timing effect at the beginning of the year with a 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 1 percentage point, and that's related to positive effects that came from the equity side with an offset coming from the update of the EIOPA 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 two acquisitions in Italy, or some renewal of our distribution agreement as well. That also came with an effect into that capital management action. Facts, 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 the top down estimate, that would certainly have been to maintain a flat level of Solvency II ratio at 206%, we have the three main drivers I was mentioning for 1 percentage point each. So these higher growth, the EIOPA 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 1 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 U.K. 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 MidCorp, which is up 6%, and LargeCorp 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 walk, 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 details on the -- 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 nat cat events from 2023 that contributed to negative runoff into this quarter. That was mainly for the events in Italy and Australia last year. Our nat cat impact is lower. And within the attritional, we are performing -- we are developing ourself 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 am reemphasizing the effect of the attritional that we are indeed tracking in that -- 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 U.K., 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. And 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 P&C 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 one-off effect in this quarter associated with a large structured or insurance contract and -- yes -- 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 year-end and they are obviously, very stable overall. So the 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 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 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. Both 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 AGI, and that went mainly towards the fixed income asset categories but also in alternatives. On average, our net flows and the market movement takes 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 under 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, where 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 AGI. 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 prospect 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 work. And let's go to Page 35 where we can have a look from the -- translation from operating profit to net income. And 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 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, 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.

A - Andrew Ritchie: Thank you, Claire-Marie. Okay, we're now ready to go to questions. [Operator Instructions] So with that, I think our first question is from Andrew Sinclair of Bank of America. Go ahead, Andrew.

Andrew Sinclair: Thanks, Andrew. So first it was just on -- can you tell us Claire-Marie, just a little bit about prudence in booking of your attritional undiscounted loss ratio in Q1? It strikes me that probably with low nat cats and the higher discounting benefits you probably book that fairly prudently, but it's always tough for us to measure that from the outside. Just can you give us some color in terms of the prudence of that attritional undiscounted loss ratio in Q1? That's my first question. And the second one was just looking at the CSM role forward, and the non-economic variances and assumption changes line has been negative pretty much every quarter under IFRS 17. I think you talked about French lapse assumptions in Q1 this year, but it's been a pretty constant negative I'd really hope that that number be a positive over time if you're prudent. Just if you can give us some color on what we should expect for that lane going forward. Thank you very much.

Claire-Marie Coste-Lepoutre: Okay. Thank you very much. So the first question on the -- a bit giving some color, right, on the attritional in Q1. And I think like indeed -- so in the attrition, you have multiple dimensions, you have the large loss load and you have what we call weather, which has a smaller level of nat cat we see, which are not making it to a nat cat, actually, but are still weather related. Those two components in the first quarter was basically in line with our expectations. So there was not particularly any supportive dimension into this -- into our attritional loss ratio associated with that effect. Where we are particularly monitoring and where I'm particularly happy is when it comes to the pure attritional development associated to the earning of the rate so linked to the frequency and severity of the business we are seeing. And here, I think, you know, this is the first quarter only as well, and we have a lot on the -- I was also reserving actuary in the past. You have some elements that you need to take into careful consideration in the first quarter. So even if you have priced up and you see a nice rate increase that you expect to come through towards -- fully towards the end of the year, I think a reserving actually will not reflect that at the beginning of the year because you have a bit -- to be a bit cautious and really make sure that your assumptions on the pricing side are reflecting themselves into the reserving side. So I think the level of improvement we see at this point in time is a good level of improvements given the fact that we have this naturally cautious approach in the first quarter into our attritional loss ratio. So now on the CSM side, where you were mentioning a need -- the development of the non-economic part of the CSM. So I think from my perspective, the way I look at it and I'm actually observing it on my own, since the third quarter close, I think we have had a lot of movements that were associated more from -- to us getting to know or adjusting to the IFRS 17 world. And so we had quite some adjustments that were related to this transition. And the fact that as we were going through the books, we realized that we were in the need to adjust some dimensions. So that was one. And remember, we had some gross CSM adjustments that basically on a net basis are not relevant because we had some movements between growth and net. So that will be one big bucket, which I think are important into qualifying this components of the CSM development. And then I think on the non-economic side, at this point in time, given the dynamic of the market from my perspective, it's quite logical that we see razor-negative adjustments given the lapse experience we are having in some of our books. And remember, we also sometimes have a positive recycling, if I may put it this way, between these non-economic adjustments because we see lapses, but in the case of AZ Life, as an example, that will recreate, because we get more new business, that will recreate new CSM at a higher expected level of profit also. So I think that's also dynamics we need to have in mind. But I think given where we are in the economic environment for the life business, I'm not so surprised that we see that effect into that component of our CSM work.

Andrew Sinclair: Super helpful. Thank you very much.

Andrew Ritchie: Thanks, Andy. The next question is from Peter Eliot of Kepler Cheuvreux.

Peter Eliot: Thank you very much, Andrew. And I guess the first one was -- and I was a little positively surprised on the discounting benefit that it benefited the combined ratio by more points than it did a year ago. I was wondering, could you just sort of help us understand the moving parts there, whether it's just the interest rates that you expose -- that you're exposed to are higher, or whether there are some other moving parts that we can't see like duration or what have you. And I'm just wondering if you can help at all in terms of updating us on your expectations for the full year based on where interest rates are currently. And the second theme also interest rate related actually. But just looking at the sharp acceleration you've seen in interest and similar income, I think I looked at in Q4, the year-on-year delta was plus 120. In Q1, it's almost doubled, plus 216. And I think the growth in the asset base has helped, which is probably a mixture of volume growth and investment returns. But just wondering if you could help us sort of -- is there anything to sort of stop us projecting that further? Because if I look at the asset allocation as well, it's your cash has grown quite a lot, which presumably will be in reinvested. So I'm just wondering if the yield of the portfolio is even slightly understated, but just wondering if you can rein in my optimism on that line. Thank you very much.

Claire-Marie Coste-Lepoutre: Thanks, Peter. Indeed on the discounting effect. So certainly, what's -- we have a slightly higher than anticipated discounting effect from your perspective, that I could understand. First of all, we have a normal pattern in terms of discounting. In terms of -- on a quarterly basis, we get a higher discounting effect in the first quarter, and that's basically going to reduce itself over the quarter. So we can happily also provide to you the discounting patterns the way we see them on a quarterly basis. So you have this seasonality effect that clearly explain part of the positive effect you may have computed in terms of discounting element. And then the main driver for the higher level of discounting is driven by both a bit of higher volume in some of our operating entities, mainly linked to higher reserves. So that's the case for AGCS as an example, and we also have certain operating entities with a higher level of inflations that will be Argentina or Turkey as an example, that also contributing to this higher level of discounting into the first quarter. So those are the main effects we see. But obviously, overall, the discounting also depends on the yield environment, which is also slightly better compared to what we identified anticipated. So if this rate environment will maintain itself during the entire period of the year, that should also help indeed to bring our discounting effect a bit to the higher side, which would contribute positively to the outlook clearly. But I think that's too early to assess that point at this point in time. And then on the interest - yes. Thanks, Peter.

Peter Eliot: Sorry. Could I very quick --

Claire-Marie Coste-Lepoutre: Yes, sure.

Peter Eliot: Could I very quickly -- sorry. And that's great. I mean, I guess we're probably looking at sort of Q1 this year versus Q1 last year. It sounds like we can assume that the seasonality this year should be similar to the seasonality that we saw last year, or that you've guided to and -- when doing all sort of full-year forecast from here.

Claire-Marie Coste-Lepoutre: Yes, indeed. So that's actually indeed the case. You have the similar level of seasonality. I think what we expect in terms of discounting is that you have approximately 35% of your discounting effects that is coming in the first quarter.

Peter Eliot: Right. Thank you.

Claire-Marie Coste-Lepoutre: Then I think on the interest and similar income, the way I look at it, Peter, is that for me, interest in similar income moves in tango together with interest accretion. So that's -- so what you see that indeed we are earning the higher rates into the interest and similar income, but we are paying a higher level of interest accretion. So that's the way to look at it. And indeed here in that case, net-net, we have a bit more of a positive effect. But I would not extrapolate too much further up these effects. Yes.

Andrew Ritchie: Okay, Peter, thanks. And the next question is from Will Hardcastle, UBS.

Will Hardcastle: Hi, thank you, everyone. And first of all, can you help to outline the current opportunity set in German P&C, please? Last year, there was lots of discussions about the likely double-digit price increases in German motor. The opportunity for Allianz is to grow volume as you push price increases further. There's a comment about the increased volumes 100,000 year-on-year, but can you help us under us to understand how many of those came in Q1 standalone and perhaps a quarter-on-quarter progression, and what percentage volume uplift 100,000 is? That would be helpful. And second, I'm sorry this is going over old ground a little bit, but I remember a sustained period just over a year or so ago when there was the consistent inflation loading placed. I guess I'm just really wondering what's happened to this IBNR. Is this still assumed as reserve prudence or loading? Or is this being classed as case reserves now? Thank you.

Claire-Marie Coste-Lepoutre: Okay. So I think on the inflation loading, so what's -- so it's broadly unchanged our inflation, inflation loading at the end of the first quarter. The main point is that it has transformed itself, if you want, in terms of nature of a reserve. So it's still a reserve. It's still a dedicated reserve. But when it was first build up, it was built up for the short tail type of line of business because we were expecting at this point in time with the inflation -- inflationary environment coming through, that we will see an effect into our claims reserves at -- I mean, in the subsequent year. By now, this effect of the inflationary effect into our reserves did come through -- so did come through. So that's why it has already been reflected in our results and in our reserves, in particular, at year-end 2023. So now what we have done, and we have done a lot of technical -- actually analytic reserve-related type of analysis. We have projected what may be the long-term nature of inflation to come into our long-tail reserves. And as such, we have adjusted our inflationary reserve for that effect. And that will emerge in terms of development, if you want, in terms of true up over time because those reserves are much more longer tail compared to the other reserves. Yes. Okay. When it comes to German P&C -- so I think your question was related to basically, what was the opportunity associated with the growth on the German side, right? So I think what we have seen is a very strong level of -- I mean, we see a good level of growth in our P&C business indeed, and we have -- and we see that level of growth emerging both on the motor and non-motor side. I don't really want to enter into the granular information here because it's quite confidential information as well, and we usually do not comment granularly on a lob-by-lob basis. But basically, if you do, we have approximately 10 million customers in Germany. So 100,000 more customers in Germany is 1 percentage point more clients in Germany, and then you can take the expected profit here. What I think maybe if we step back a little bit more on the German portfolio, there is definitely, a big opportunity associated to growth. And we see we are well positioned given the dynamic in the German market. And the first quarter is confirming that dynamic, I would say overall.

Will Hardcastle: Great. Thank you.

Claire-Marie Coste-Lepoutre: Thank you.

Andrew Ritchie: Thanks, Will. Next question is from Michael Huttner of Berenberg. Go ahead, Michael.

Michael Huttner: Good afternoon. Thank you. And I have two questions. One is on the life, and the other one is on real estate. On the life, you mentioned that part of the reason that the 6% or the 6% growth in organic capital generation versus the 6% to 8% range, and that was partly because life was -- growth was strong. But I thought and I may be mistaken. I thought that somewhere it was said that the life growth is now self-funding, but in other words, low strain. So I just thought if you could give me a little bit more color here and I'd be really interested, and also maybe you talk about that life reinsurance deal that sounds very attractive. And then on the real estate, so we're seeing more negative coming through. And can you say how much you've now reduced the valuation of your portfolio in the past 18 months maybe, and how much more than is to come? Thank you.

Andrew Ritchie: Michael, sorry, your line wasn't great. Just to clarify. I think your question -- the first question, just to help us out here, was --

Michael Huttner: Yes.

Andrew Ritchie: -- you want to understand, as we've said in the past, that the life business is self-funding from a solvency perspective.

Michael Huttner: Yes.

Andrew Ritchie: You want to understand why we're flagging it as a sort of more strain in Q1. Is that broadly the question?

Michael Huttner: Exactly. Exactly right. Yes.

Andrew Ritchie: Okay. Thanks.

Michael Huttner: Yes. Thank you. Sorry about that.

Claire-Marie Coste-Lepoutre: Yes. So with pleasure. So I can explain indeed I think like -- so the life business is -- has been -- during 2023, fully self-funding in the sense that we had some of the higher capital consumption associated to our back books. That basically was -- I mean, was free up during the year. And the new business under Solvency II model actually was also self-bringing its own owned fund to basically 200% of owned fund against the capital consumption. And basically, we use the growth on the -- the good growth we have seen on the Allianz Life portfolio, which is not under Solvency II, as you know, but which is under RBC and is treated with an equivalent formula was benefiting in terms of growth into the solvency ratio from the release from the older books. So what we see now in Q1 is that we have the new Solvency II business that is basically growing with exactly the same logic. We have slightly less runoff, but we're still there from the older book under Solvency II. But we had quite some sharp growth on the Alliance life book. And as such, we need to finance a little bit this growth. And it also comes with some patterns effect which we think is going to offset itself during the year. So that's more of a momentarily effect and that's still very much linked to, I mean. But still, I think the overall trajectory from my perspective is a very good one. So that's on the first point. And then on the real estate book overall. So we had 8% of reevaluation last year. And for the first quarter, we had a bit less of 2% of reevaluation in the quarter. And I think those are really average numbers. So I want to emphasize that thing that first of all, you know, and I'm -- I had a deep dive on that one. Our book is super high quality, very diversified across the countries. So what we see is that this reevaluation is done asset by assets, and some assets where we have reevaluated much more or much less, and also in some of that reevaluation effect, you also have some ethics effects that we need to have in mind. As an example, we have a nice real estate book in Switzerland, which is super book and also appreciating very well. But it's in Swiss franc so you have some FX effect also associated with this one. So that's for what we have done until now. For the rest of the year, as you know, we basically go through the portfolio during the year. So what the real estate team told me that you can expect a similar level of revaluation as we have seen in the first quarter until year end, with the view that there will be as well after that a plateauing of the valuation because we really went through our book, and we have done a very good job, I think, at diligently reflecting the market development. So I think that's what you can plan with.

Michael Huttner: Thank you very much.

Andrew Ritchie: Great. Thanks, Michael. Our next question is from Will Hawkins (NASDAQ:HWKN) of KBW.

Will Hawkins: Thanks, Andrew. Hi, Claire-Marie. And first question, please. On Slide 9, you're highlighting the acceleration of nominal rate increases. So you went from 5.6% to 7.1% to 7.4%. Could you give us the progression if you were thinking about real rate increases, please? I'm imagining the absolute numbers very different. I'm not really sure about the progression, whether we're seeing acceleration or what. And if you can split between retail and commercial in that answer, that would be helpful, please. And then secondly, you've made reference to BaFin discussing changes in transitional measures in Germany. And I'm really sorry if I'm totally behind the curve on this, but I'm not really sure what you're referring to and whether it has any relevance at all to the business that Allianz is conducting or not. I know your solvency ratio excludes transitional, so I'm not worried about that. I'm just not really sure of the context of what's going on. Thank you.

Claire-Marie Coste-Lepoutre: Sure. So I think on the real rate increase, the answer is that it varies a lot from -- I think, from one market, from one line of business to another line of business. And -- so I think what I could tell you as an example is that the real rate increase in the German motor book, as an example, is above 10% would be one example. In the U.K., also for our motor book, it's also clearly a very significant rate increase, which are fully in line with what I think you may have read in the press. So I think it's very much nuanced. I don't have an integrated number that I could give you easily for that one, but I'm not so sure. It's extremely relevant ultimately because what matters is more what we see translating itself into our numbers, as I was highlighting previously. Yes. But if you have a specific question on a given market, I think we can -- we could do a follow-up. Let us know. Yes. Then on these points on the transition also, indeed, I think you are, first of all, exactly right that for us, it's not relevant because we don't steer our business with the transitional. So we have always carefully managed our business excluding transitional. But I can explain to you technically what it is. So basically, in 2016, the transitional benefits were identified when you were computing the difference between the Solvency I reserves and the Solvency II reserves. So at that point in time, the Solvency II reserves, when you were to consider the market consistency with interest rate level that were close to zero, basically a much higher compared to the Solvency I reserves. And so, as such, the delta between the market consistent Solvency II reserves and Solvency I reserves, both consider being a transitional amount that was allowed to be amortized to zero over a period of 15 years so until 2032. Yes. And now, basically, BaFin did launch a requirement to recompute what would be the delta today, which is normal. Actually, it's really in the prerogative of the regulator to ask for that. And obviously, if you do that, based on that older book of 2016, which has developed, first of all, linked to runoff, also, because we have built some additional reserves, and also linked to the fact that the interest rates are now higher compared to 2016, this delta between the recalculated Solvency I reserves and now Solvency II reserve has actually reduced to zero. So that's the point. And then possibly there will be guidance that because this delta is now at zero, this should no longer be recognized in terms of transitional, and that may be enforced during the rest of the year. That's to be seen. So there I cannot really comment because this is a consultation that is ongoing. Vice versa I think what you need to have in mind is that this computation could be asked in a couple of years from now or in six months from now if the interest rate development would be changing, and then the transitional could be reintegrated, if I may put it this way, into the solvency ratio as a transition. Go ahead. Yes.

Will Hawkins: Got it. Thank you. So that means, mathematically, your 20 points of uplifted transitions will be going down because the main adjustment is to adjust from interest rates where they are today.

Claire-Marie Coste-Lepoutre: Yes, that's a much shorter way to put it together indeed.

Will Hawkins: Okay, perfect. Thank you. Thank you.

Andrew Ritchie: Thanks, Will. And our next question is from James Shuck from Citi. Go ahead, James.

James Shuck: Yes. Hi, and thanks for taking my questions very cleverly. So my first question, really I just wanted to dig into the increase in the SCR for the new business again. I appreciate it's elevated in Q1. You're pointing out it will normalize across the year. It still looks like you're using about 6 points -- maybe 7 points of your growth generation and reinvesting that into growth. That's a high number relative to peers, and I'm just keen to understand whether you get the same benefit that others do from the release of capital on the back book, particularly on the life side. When we look at other companies, maybe it's possible to see that there's this release and then that finances the strain on the new business. But you switched your product mix perhaps earlier than others and therefore maybe you don't get that same benefit. But just keen to understand that level of strain going forward, please. And then my second question on the undiscounted. It's quite a long phrase to say. Undiscounted attritional loss ratio ex UIB which I think was 10 basis points better year-on-year. You make the point it's 40 basis points better versus full year '23, and that you're kind of on track for the 1 point improvement across the year. Now obviously, given the starting point in Q1, that implies that as we move through on a quarterly basis through the year, you get the entry of rate and therefore the exit rate at the end of the year is actually a much better number. And my question is really how to think about any seasonality on that exit rate point because if we look into Q4 to get used to that one point, then you're automatically at a much lower base level moving into 2025, perhaps with more rates run through as well. So just keen to get some insight into kind of Q4 as we move through into the year and then into next year, please. Thanks very much.

Claire-Marie Coste-Lepoutre: Yes. So I think on this point on the operating Solvency II earnings and the capital generation. So I think the main point is that on the P&C side, our capital consumption I think is unchanged associated to the level of growth we are seeing from a quarter-to-quarter basis. And the main new element is this higher growth from easy life side which is coming with slightly less of an offset on the historical in-force book. Personally, I mean, my view is that definitely, we are going to generate on -- I mean, for the upcoming next quarter releases 6 percentage point to 8 percentage point operating capital generation, which is a strong capital generation, I would say. So I'm not particularly concerned on that effect. This is really these technical elements associated to also the higher level of premium in the first quarter. And when you have -- and that's really going to be earned over the upcoming quarters. So I don't know Andrew if you want to add a dimension to that one.

Andrew Ritchie: I think the only difference, James, if you're comparing us with peers is probably things like the AZ Life growth there would be quite different from some of the peers and the degree of seasonality.

James Shuck: Yes. Okay, wonderful. Thank you.

Andrew Sinclair: And the attritional loss ratio was your second -- sorry.

Claire-Marie Coste-Lepoutre: Yes, exactly. Yes. On the attritional loss ratio. So I think for me, what is -- so I think in the attritional loss ratio, as I was mentioning right before, we have different components, right? So you have components that will always be volatile, as I was mentioning. So the large loss load and the weather load as well, within these attritional 71, that was the guidance you will -- you can see volatility as well. So that's why I think this overall guidance around 71 is a good guidance for the entire year. And then you will also see some attritional -- you know, some mix effect into the attritional, I mean, constantly, obviously, because it's not as if we are a monoliner in one single country. So you will have the various weight of the various countries that are going to come through. So for me, it's really the earnings of the rate we expect to see from the book, as per plan, if you want. But now if we see good growth in some of the markets, which is going faster compared to some other books, that may nuance this attritional loss ratio -- this pure attritional loss ratio development. So I will not take it as completely static. I will reiterate that this 71 is the right guidance from my perspective for the entire year. And potentially you will see some slight movements also towards the end of the year. But then again, potentially we'd be also seeing some further developments from there onwards. So for me, we discussed it last time we met. I think this view that our range of combined ratio between 93%, 94% in the current environment is a good range. I would think we can make progress towards 94% as well in the upcoming years, and then we can create more value, from my perspective, from a strong level of growth from that level of margin for the future as well.

Andrew Ritchie: Sorry, James, you were cut off. So I'm afraid you want to follow up, you might need to get back in the queue. So with that, we can go to the next question, which is from Vinit from Mediobanca (OTC:MDIBY). Vinit, would you like to go ahead?

Vinit Malhotra: Okay. Thanks, Andrew. So my two questions. First is on the motor market leverage, okay. From seeing some of the commentary, it seems like we are seeing a turn here in the retail motor. So you mentioned Italy in your presentation, but also we keep talking about U.K. You mentioned something in Australia. I'm not sure there's motor. But just from where you're sitting, what do you think -- what do you see -- how far away from this turnaround? Has it happened, or is it starting to happen? Can you remain optimistic about motor market in the various regions you're in? Second thing is just a quick clarification. You mentioned 2% charge on real estate, which is about €25 billion assets, which is about half a billion when you look at just that 2%. Is that sort of the right number? And please, I just missed, why are we doing these revaluations? Is it because of office occupancies or something else that you could highlight just so we can understand the risk there more? Thank you.

Claire-Marie Coste-Lepoutre: So -- sorry, the line was not very good. So if I am not precisely answering your questions, please let me know, right. So I think your first question was on the development of the motor market in Italy, right?

Vinit Malhotra: Italy and automobile.

Claire-Marie Coste-Lepoutre: And?

Andrew Ritchie: Sorry. Was it -- Vinit, are you looking for an update on motor across the book essentially?

Vinit Malhotra: On retail motor essentially through Europe.

Andrew Ritchie: Retail motor across the book. Okay.

Claire-Marie Coste-Lepoutre: Okay.

Vinit Malhotra: Yes.

Claire-Marie Coste-Lepoutre: Yes. So basically, across the book, we see good improvement into our motor business. So our motor combined ratio improved by a bit more than 1 percentage point to 94.6% in the quarter, and that's supported in particular by a better profitability in the U.K., French, and Italian book, yes. And then for real estate, you were asking why we do the mark-to-market reevaluation. Actually, those assets are valued at fair value. And so as such, we have -- I mean, as part of our fair representation of our assets, we have to perform this mark-to-market valuation of our real estate book.

Vinit Malhotra: Okay. Thanks, gentlemen.

Andrew Ritchie: Thanks, Vinit. Next question is from Andrew Crean from Autonomous. Go ahead, Andrew.

Andrew Crean: And a couple of questions for me. Firstly, we've seen two life-back book deals fall away in Europe for other people. Could you just give us a comment on how you see the life-back book picture, firstly, in Europe, but also uniquely for you in the U.S. so whether anything is planned there? And then secondly, I was interested in your commercial versus retail splits and would like to be able to analyze you in the underwriting site along those lines. In order to do that, we need to see what the impact of discounting on the two areas was the BYD (SZ:002594) and the nat cat impact on each area. Is that something you might consider giving more disclosure on so that we can get in behind it?

Claire-Marie Coste-Lepoutre: So a new question on the life-back books, and -- so I think in general, I think for the Allianz Group, we are constantly looking at ways to optimize our capital deployment. So clearly, life-back books are part of the considerations. They are part of the toolbox as are other tools. I mean, there are multiple other tools you can use, like reinsurance will also be another one. And indeed you are right, we did big -- yes, big actions in particular on our U.S. life-book with [Lucy] transaction, but we are constantly, as I mentioned, looking at other ways to further extend along the same logic. And as we speak, we also continue to look at that across our portfolio. And when it comes to, I think, life-back books operations right now, when you look at what's driving them from an economic perspective, the healed environment currently or the general environment is less favorable to make them fly, I think in general. So it's a bit less of a positive environment for life-back books on one end, and also I think the higher rate environment is making also life-back books the way we have them today, also much better to operate with as well in terms of risk-return profile I would say. Yes. Then on the commercial versus retail, I'm not keen yet to adjust our annual presentation. So we may consider to do more -- to provide more color on that going forward. But at this point in time, I don't really want to provide more detail. What I can tell you is that our loss ratio -- basically our global loss ratio for commercial in the fourth quarter was at €67.9 which basically was also an expense ratio that was better compared to the combined -- to the expense ratio we have on the retail side that basically led to this number. So for me, and also traditionally -- so I think what is important is that the current dynamic between commercial and retail is quite different at this point in time, and you can see that also when you look at the underlying developments for AGCS or for trade. And typically we see that the rate environment has started to soften in some dimension. We are still capable of capturing the volume we want to see in those businesses, but the dynamic has changed a little bit. While on the retail side, it's right as the opposite. We were more in a way softer environment, and now with the rate we are capable of injecting into the portfolio, the forward-looking dynamic is more positive on that side. Yes. I think you had the specific questions on the discounting effect as well. What I can tell you directionally is that the discounting effect on the commercial book is also higher compared to the discounting effect on the retail side. That's linked to the duration of the book. And also like the different type of currencies we see there, that is also contributing to the higher level of discounting on the commercial side, which is 1 percentage point higher actually compared to retail. If you want to do some math.

Andrew Crean: Yes. Thank you. Thanks.

Claire-Marie Coste-Lepoutre: You're welcome.

Andrew Ritchie: You're definitely, capable of the maths, Andrew. You're not getting any more disclosure. So thanks for the question.

Andrew Crean: Thank you.

Andrew Ritchie: And following by rules, we now move to follow-up questions. So, Peter, congratulations, you have the first follow-up question. Peter Eliot from Kepler. Go ahead.

Peter Eliot: Thank you very much. Feel very privileged. And the first one actually is predictable question that hasn't been asked yet, but wondering if you can just give us the latest on PIMCO flows quarter to date. And the second one, you've talked a lot about real estate and you've also commented on traded equity markets in the presentation elsewhere. Just wondering if you're able to add any thoughts or insights into the performance of your private debt and private equity. Thank you very much.

Claire-Marie Coste-Lepoutre: Yes. So on the PIMCO flows, so we have seen continuation of positive developments in the months of April, and also as we speak. So for the month of April, we are in the high single-digit number for the net flows on PIMCO side, which I think is really demonstrating that there is space for really good quality active asset management on the fixed income side, also in the overall context of the market. So that's good. And as I mentioned already to you as well, in general, the PIMCO management is quite bullish on the further development and also on the new strategies that they have been injecting. Yes. When it comes to the private equity book, actually, at this point in time, we are happy with the development of our private equity portfolio, both on the equity side and on the debt side. We have a very high-quality private equity portfolio that is super diversified. And, you know, we have a very long history of doing private equity, and we are benefiting from this longstanding experience that basically is dated back for more than 20 years. So we have teams that have built really nice portfolio over time with a very high level of diversification.

Peter Eliot: Great. Thanks very much.

Andrew Ritchie: Thanks, Peter. The next question is from Michael Huttner of Berenberg.

Michael Huttner: Thank you. And I feel privileged as well. I think you talked about the earn-through of the retail pricing. I just wondered if you could give a little bit more of your feeling of how this will develop for the year. And then the other question is really a stupid one. I'm really sorry. And why can't we -- could we just not multiply €4 billion by 4? And I know we've talked a lot about, this could be better, this could be worse, but it sounds like you're quite happy with the number overall. And those are my two questions.

Andrew Ritchie: Sorry, Michael. Just to be clear on the final question. Are you talking about the overall OP?

Michael Huttner: Yes, please.

Andrew Ritchie: So the first question was earned through of retail pricing. You just want a bit more color there. And the second question is whether we should multiply the Q1 OP by 4, essentially. Is that right?

Michael Huttner: Thank you.

Andrew Ritchie: Yes. Thanks. Sorry, your line is not great. Thanks.

Michael Huttner: Sorry.

Claire-Marie Coste-Lepoutre: So the outlook -- so I think -- I mean, you have you have been doing insurance for a long time, right? I think this is the first quarter. Clearly, as I indicated, I think our key KPIs in terms of growth, in terms of profitability, are clearly ahead of our full-year expectations. But that's only the first quarter so that's why I think it's too early to revisit any outlook at that point in time. We don't know what may happen also associated to nat cat developments and so on and so forth. So that's definitely, too early to say. And you know, I think we are doing a really good job at addressing the inflationary trends, but inflation is not gone at all. I mean, that was also in the headlines recently. So we continue to see some inflationary trend and so we have to be very modest as well on our ability to manage the inflationary trend into our portfolio. Again, I think we are really doing a good job and I see that coming through, but it's too early to say at this point in time, I think. And then on the earnings through of the rates, and for me, I mean it's -- what we what we see and that's fairly technical, right, because you have to take really portfolio, but portfolio what you expect to come and how this is going to earn. So you really need also to take the earning patterns. So to give more color on that item is a bit difficult. I think this is what we see coming. And also you may remember that for some of our books, we started to increase the pricing more towards Q2-Q3. So you will also expect that the earning pattern of those is more going -- is going to come stronger in the second half of the year. That would be fully in line as well with our price increase trajectory.

Michael Huttner: That's super helpful. Thank you.

Andrew Ritchie: Okay. Thanks, Michael. And our last question of the minute is from Iain Pearce of BNP Exane. Iain, do you want to go ahead?

Iain Pearce: Hi. Thanks for taking my questions. And the first one was just on BYD. It sounds like BYD a bit lower this quarter due to some prudence given lower and half like discounting and some loss creep on some prior year events. But also you're sort of lagging higher inflation reserves on long-tail lines, which just leads the question around the development of the reserves that you're seeing in AGCS. So if you could give us any detail on how progression on the AGCS reserving position is going, that'd be really useful. And then just combining that with what we've seen on new business in AGCS, where you have been shrinking the portfolio, what are you seeing on go forward claims, and h ow are you seeing pricing in the commercial markets, and where has the exposure reduction come within AGCS? Thank you.

Claire-Marie Coste-Lepoutre: Yes. So on the -- maybe AGCS top line development. So we have indeed a slightly lower level of internal growth on the AGCS side, and that's linked to the fact that we have not taken up some of the business we thought was not priced accurately where we wanted them to be priced. And that's mainly the financial lines business, in particular, in the U.S., but some also business in the U.K. That will also be the case for some of our cyber business and as well for some of the aviation business, which is also not entirely priced where we want it to be. You also have in this internal growth, which is negative minus 1.9% an effect that is associated with some delayed booking in the first quarter, that basically we are going to catch up in the second quarter. So that was more technical effects that could not be reflected at that point in time. So that will come as a positive effect into the business. But other than that, I think on the AGCS side and on the commercial side, in general, we are developing in line with our expectations, and commercial dynamic is actually really good also on the MidCorp business associated to the Allianz commercial initiative, where we are seeing also good development and good growth momentum on that side as well. On your question on the BYD, also for AGCS. So we are obviously, looking at that extremely carefully. We don't -- do not see -- we do not see similar. I mean, we have not been in the need to strengthen our portfolio for the -- for some of the line of business that were in the press because we have been very diligently looking at the development of our -- or anticipated some of the developments into our book. So in general, I'm feeling really happy with the level of reserve strength on AGCS side. And also as part of our small M&A operation in the U.S. for AGCS, we have also sold €2 billion reserve that will also move away from the AGCS portfolio. But overall reserve strength, I feel good about, clearly for AGCS and more broadly for the entire balance sheet of the Allianz Group. I think in the first quarter, we have seen less reserve release, but that was simply related to the fact that -- I mean, our numbers were emerging quite nicely. There was no need to push fundamentally. So we did not stretch anything. So that was a very poised and natural runoff that came through in that circumstance. But in the first quarter, where you are again always a bit more conservative for the reason I was mentioning earlier on.

Iain Pearce: Okay. That's great. Thank you.

Andrew Ritchie: Now we have one question left in the queue. And then Michael, you're stretching the definition of follow-up, but I'm going to be nice to you. So do you have another follow-up question?

Michael Huttner: It's a really simple light one. It's Brazil floods. Can you give us a feel for the loss and how you see it?

Andrew Ritchie: Okay. Sorry. Again, I think you wanted Brazil floods if we have anything to say. Is that the question?

Michael Huttner: Yes.

Andrew Ritchie: Okay.

Michael Huttner: Yes, please.

Claire-Marie Coste-Lepoutre: Yes. So it's very early for that event, but that would be super well manageable and it will be to the low mid-digit type of event for us likely.

Michael Huttner: Perfect. Thank you.

Andrew Ritchie: Okay. Well, that concludes. I see no other questions in the queue. So thank you very much, everyone, for dialing in. If you do have any follow-ups, myself and my very capable team are here so please get in touch. And we look forward to speaking at the second quarter. Thanks very much.

Claire-Marie Coste-Lepoutre: Thank you very much. Bye-bye.

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