Allianz SE (ALV) Earnings Call Transcript & Summary

Good morning from Winter in Munich. We have fresh snowfall. I'd like to welcome you to our 2021 Capital Markets Day. We are delighted to be with you today, and I hope we have an exciting program to lead you through today. The agenda for the day is called simplicity at scale. And we are trying to explain to you how Allianz is going to grow value faster than most companies over the next few years, build on a very strong foundation. Let me give you a little bit of an overview of the agenda for today. I'm delighted to have a number of my colleagues lead you through the day and we'll have some time for Q&A. I'm going to kick it off with an overview of what we're going to do. After that, Giulio will lead you through the confidence that we have in delivering our value. Barbara will talk to you about the transformation we're doing on the technology and business side. Chris Townsend will talk to you about the opportunity in commercial lines. And Andreas Wimmer is going to explain to you what enormous value creation potential we have in Allianz Lebensversicherungen. And then Emmanuel will talk about performance at PIMCO. So you get the best of Allianz today. Now before we go into the agenda, let me make a couple of comments. We're going to have a break in between for you to get -- grab some lunch before we go into Q&A, and then we'd like to wrap it up around 3 p.m. this afternoon. So I hope you have the stamina, the excitement that we have. We are very proud of what we have prepared. And let me use the opportunity to thank all of my colleagues preparing for the day to day has been an amazing journey to see what Allianz is capable to do and is going to do as we move forward. Also, we had a couple of announcements yesterday and early this morning, and we'll try to help you today to digest the news as we're putting Allianz on yet another trajectory of faster and stronger value creation. So let's move. The theme of my speech is delivery, and that's important. We're going to quickly look at what is actually Allianz's value proposition to investors and actually beyond investors to the community of stakeholders around that. It's pretty clear that serving investors is our priority, but it only happens if we really outperform the customer interface, if we have highly motivated associates and Allianz and if we play a role in society, and we're going to talk about that. In particular, in the second chapter around how we are going to drive value going forward. And I will summarize at the end, what is our ambition for the next 3 years? What are we trying to achieve by 2024? Now what is actually the value proposition of Allianz in a nutshell? It's very important for all of us to remind ourselves that we're here because we have a purpose. We spend a lot of time in the last few years to delineate it, and we call it we secure your future. And it's not just a slogan. It is really driving the essence of what we do every day. It actually is followed by an aspiration. We really want to be the trusted partner for protecting growing your most valuable assets. And assets, we don't think about the car or the house. We're thinking about our health, protecting our family and thinking to help society to develop. Imagine what we are doing on the net asset on our lines in terms of financing the green transition. Now the aspiration and the purpose can only be to come alive if we have 3 promises that we deliver on. The first one is a very careful balance across stakeholders. We've talked for many years about stakeholder capitalism. And in Germany, we have been a front runner for these things for a long, long time, but we're going to look at that how balance across stakeholders is driving more value also for shareholders. Now the second thing is we are here because we need to deliver benchmark results across the enterprise. And because we are so large, we need to prove to you and the world that we're delivering benchmark results at scale that we do not cross-subsidize inside of the enterprise, that we do not have a corporate discount but actually use our strength, our scope and scale to deliver more value than otherwise possible. And last but certainly not least, we're living in a world that is truly transforming and is becoming a lot more volatile. So strong resilience in such a world is super important, and that's the base promise that Allianz always had, and we're going to stick to it. Now you may find that a bit aspirational. But in reality, Allianz already today is the #1 global franchise in our industry. We have more than 120 million customers. We are #1 if you take life and health and asset management as a retirement provider together, we are larger than anybody else that claims to be a leader in wealth management or anything else. We're the #1 global P&C franchise. We're the #1 in assistance. We have the #1 global footprint. We have the #1 brand. We're the #1 on sustainability, the #1 in financial strengths and the #1 in diversity and inclusions. And by the way, if you look at total payouts over the last few years, whether it's dividend, share buybacks and value created, we are the #1. So you're at home with the #1 franchise and we'd like to keep it that way. Now the way we think about that is creating careful balances across our stakeholders, starting with you, our shareholders and those that represent them in generating strong cash, delivering a decade-long track record on dividends. And we've never missed one and we've never missed a beat, but reinvesting that in the future for even stronger value creation and growth. Now that only happens if we're outperforming at the customer interface. We've said that at the beginning of the renewal agenda, this is an industry that has not been in favor with customers. We have companies that are really great, and we've gone a long Germany to now be the #1 insurance brand in the world and having 58% of our business is in life, in P&C and in health that are loyalty leaders, i.e., the company that gets most recommended to family and friends than anybody else. So our ambition is, in difference to the last 3 years where we try to be better than market to now really drive loyalty leadership everywhere. I'm going to talk about that some more. In addition, we need to make sure we serve our other constituents very well. And employees are not just an asset. They are the most important asset in terms of driving customer satisfaction and the success that we've had. And this is not about working harder. It's being more diverse and more inclusive. And think about an industry like financials, we have been the leader on diversity inclusion and almost any dimension, we will talk about that too. And we really want to contribute to society not just through providing great products and services, but really being recognized for social engagement and strong governance. And we're winning on price after the other. Now I could spend probably half an hour on delivery on targets, whether that was the first 3-year plan or the second 3-year plan. What I'd like to talk about the fact that we have created and maintained a very careful balance between the stakeholder groups. And this is what this slide is supposed to say whether that is on EPS growth, DPS growth, ROE but also Net Promoter Score above market or the motivation of our people. And we are particularly proud of the last one. In 2021, really achieved again record earnings, record results on customer satisfaction and record support from our people, while actually in the world, things become more difficult. Now the way I would like to summarize what we've been doing and are going to do has something to do with a very simple value creation formula that is based on earnings per share growth. Whether it's growing the nominator or the denominator are shrinking, i.e. having less capital, all of that translates eventually into the growth of the earnings per share. And we have 3 sources. First is growing the business. Second is improving our margins. And the third one is managing capital efficiency. And we have done very well across all 3 levers, which we are pulling at different points in time depending on where the opportunity set is. Now it's important to notice that our industry has been overall pretty dynamic in terms of growth, particularly the first 3 years and we're doubling growth to 3% and 4.5% operating profit growth the last 3 years. And we would really like to accelerate that into the future as we are gaining benefits from scale, and this is the story for today. Now we've not just had very good operating profit delivery despite COVID, despite all the shocks. Now we need to move forward and understand that we have not just grown earnings, but we have improved the quality of the earnings. And I would like to focus for the next minute or so on this one. It's very important that we are coming out of the world for the last 125 years, and to about 5, 6 years ago, 70% of our earnings came from investment income, particularly in property casualty, having high coupons, equity gains that we'd reinvest but not really making money through underwriting if you think about it hard. We have been growing operating profit out of the core underwriting result by 14%, and we've been driving the expense ratio down 1.5 points just the last few years. And again, we continue to drive that as investment income is going to decrease further in the future, and we have to rely on really our own power to drive earnings growth. The second thing is driving the transformation on the life and health side. Interest rates are now on a real basis, strongly negative in Germany in many places. So it's very important to drive the business mix changes. And we're now almost at 90% of our new business being in preferred. What is not preferred is still recurring premium from the old book. Basically, new business is close to anything other than what we want to do in the future. And our very strong asset management business has had outstanding investment performance plus driving productivity, something we need to see, by the way, across the enterprise, great underwriting and productivity gains, great transformation in Life and Health, plus driving productivity as we've seen that in asset management. So the power of Allianz across the 3 segments is about to be leveraged not just in the segment by actually getting synergies between the segments, which we're going to talk about. Now one of the tenets of our renewal agenda has been and continues to be extremely strong discipline in capital management. And we don't want to drive quarterly earnings or our quarterly share buy or quarterly dividend announcement. We have a very fundamental strategy that wants to make sure that one thing happens, none of the capital that you own in Allianz sits idle, whether that's through dividends, organic growth, disciplined inorganic growth, and share buybacks. We are going to the use arsenal to maximize value creation in a flexible way as the market shows, and we are working on long-term improvements, which I'm going to talk about in terms of the partnership that we have announced this morning, this is not again about short-term movements. This is about rethinking our business model for the long run. Now a couple of points. First, this is what we've done the last few years on M&A. What you see is the commitment that we've made, we have kept. We focus on both on transactions. We've cleaned the portfolio. And we're trying to do 3 things: first, strengthening the position in the markets that we are in. We have scale, but the industry is still vastly fragmented. So whether that's LV and LNG in the U.K., Westpac in Australia, or SulAmerica in Brazil, we are building out strong local franchises, and this was about 50% of what we did. The second thing, we're building out our Life and Health and Asset Management franchise is that's probably a little bit underrated. And as you see with Aviva, which is a protection business in Poland, with Taikang in China or the bond management stuff from Gurtin, we are building out our Life & Health asset management franchise, exactly where and how we want to build them. And last but not least, and that's going to grow in importance going forward, we are accelerating the investment and the scalability of our global digital platforms, and I'm going to talk about that. Most importantly, on the claims management side, we believe in a world where frequency is going down and severity is still going massively up, controlling the claims journey in terms of quality for our clients, in terms of payout and in terms of also quality of repair is essential for future success. By the way, the same will happen on the home side and other parts of our value chain. And we are building the platforms that are going to improve our economics and create own platforms. That all on the back of the promise we made a few years ago, the business model transformation and Allianz is ongoing, and I'm going to give you a couple of examples today and Barbara and others will add to it. First, remember, the future has to be about high tech and high touch. And the way there is around having fewer, more intuitive products for our clients and no negative surprises. Still the lowest Net Promoter Scores we get on claims that are not being paid. That one has to be better, and COVID was a nice wake-up call that we need to accelerate, and we're doubling down. The second one is digital by default, not digital on the margin, at the core of what we do. And this is what we are driving now in motor insurance. We're not trying to automate paper processes. We need to really use technology to redefine how services have to work. For that, we need better data and better data analytics. So for example, now 92% of our P&C retail business, we have verified e-mail address and digital information, and that's the essential prerequisite for really moving to a digital model that is totally paper-free. The other thing is really getting rid of legacy. A little of the lot is we need to systematically wind down and decommission our old processes, products and IT that's very painful, but we are probably the leader in our industry in driving this transformation. It is not ending yet anytime soon, but we are already seeing the benefits of doing that, and I'll give you some example. This is really what makes Allianz distinctive. We have been putting for over a decade now, product, process and IT into place that we can harmonize across the globe, and we can standardize our processes to get real scale benefits. Think about creating a product for life insurance that you're not reinventing in every market. Think about building a platform for sales support that you don't replicate across markets, but you build once and scale globally. Now you see that in many parts of the value chain, think about Adobe for marketing purposes, we're going to have the same platforms for the core of our business. And the way we prove it to you, as we've done in the last 4 years, we consistently increased productivity. So expense ratio is going to go down 30 to 40 basis points on average every year, obviously adjusted for purposes mix, if we grow in profitable lines that have a little bit more expense ratio, but overall productivity gains are starting, they're not ending. I can spend a lot of time on now how we do that, particularly through the Allianz customer model, we are massively driving the reduction of product variance in the next few years, process variance throughout the world. We're leveraging our IT platform systematically. It's a long journey but it builds exponentially in terms of impact. It's very important to do this in a very granular level and do it globally. When I was the CFO in this company, a long time ago, I didn't even know what the productivity numbers were the local business. Giulio now has that every day. And we're doing it across the enterprise. The second thing, this is not a back-office issue only. We are driving this now systematically into the distribution side by providing branding and marketing excellence, by driving millions and millions of leads into our sales engines, therefore, driving up sales productivity and technical excellence on over time funding financing in new technology. We are spending EUR 3.5 billion every year on technology. This is unmatched. The firepower that Allianz has in terms of tech in our industry is unmatched, and we are harnessing this power as we scale. Now let me point out to 3 examples that you know, but people don't really understand the leverage capability we have. With Allianz X, we have created not just an understanding investment return vehicle for investing in digital revolution in our industry, we also have been able to build a strategic portfolio of assets that will allow us to scale, whether it's ControlExpert, GT Motive, the partnership with CLARK and finanzen.de which is one of the best platforms to drive distribution, productivity or unicorn insights, we have created through partnerships with Lemonade, N26, Stripe and others. Now we need to increase the scale and the fire power of that even more, and we are planning to it open it for third-party capital because like from aim in the past through Allianz Real Estate, now everybody wants to co-invest. So this is not just a strategic opportunity for us. We can actually leverage it into the asset management space and create more growth and value and more earnings for us on the asset management side. And this is a great example of synergy across the enterprise. The second example is Allianz Partners, the world leading as a stance and partnership platform for B2B2C enterprises. Amazing to see the strong rebound from the COVID crash, Allianz Partners made a profit last year when almost nobody did despite the implosion on the travel side. And we are back 25% up when revenue this year with very strong profitability. In parallel, we have been digitalizing the platform, think about that under such a stress and really winning 1 transaction and partnership after the other. So Uber outside of France is a partner of Allianz of nobody else. And if you think about digital-first transformation, this is how we start and going forward, it is important to understand we are going to have access to many millions of clients that we are going to then bring back to our traditional distribution platforms that still generate enormous margin and value and not just the other way around. Last but not least, under Allianz Direct, there's always lots of talk but nobody really knows the facts. I know them because I spend a lot of time on them. We have created in 2 years, actually the first IT platform that is fully live across 4 markets. When I talk to you about one IT platform, it is one. It is not as similar. It's the same, and it runs seamlessly across 4 markets. We have been able to not just launch motor, but also home and travel across markets and successfully rebranded. Actually, the biggest beneficiary of the Usain Bolt campaigns have been our local companies because of its resounding success. Now there are challenges, of course, because when you have COVID and things related to it and there's no new business in motor, the direct platforms suffer the most. So post COVID, we need to start scaling it. But this year already, I can tell you after a massive cleanup in Germany, we're growing 30% in new business despite that with a very nice attachment rate between MOD and Casco, which is really important for profitability. So it will be the platform for the future as we think about what is the operating platform for motor insurance. So all of that, we will scale and Barbara will talk about it some more as we move forward. Now I would like to remind us that this is not about, again, another 3-year plan. This is a picture of the last 20 years, if you think about it, how did the last 10 years in detail, every time there is a major event, Allianz continues to power ahead. Even with COVID, you will see by the end of the year with massive flood, by the way, the biggest ever insured events in Germany, Allianz is coming back with strong performance. Because of the diversification we have and the decisive action we are taking in light of these unavoidable challenges, nobody could have foreseen really COVID as it happened or the last nat cat or the negative rates, but we're dealing with it very aggressively. And again, in parallel driving the support from other stakeholder groups, not just shareholders. Now let me tell you now about what we think is going to happen and how we will react it. The key thing is when you read everything out there, you need to really get depressed. Because the challenges for our industry are enormous in their building. I talked about investment income being 70% of the earnings not too long ago, it's disappearing, not just in life insurance, but also in P&C. Think about the digital attacks, all the funding you have for start-ups that buy at enormous prices leads and put pressure on distribution costs in our industry. Think about cyber security and cyber pressure. Think about the refinancing of our industry's transformation into the green world and so on and so forth, not to talk about the stress between China and the U.S. building. So where does that leave as all? Well, it leaves us with an industry under pressure, but with significant upside for those that know how to master this environment, have the scale, the strengths and the resilience that Allianz has. So let me contrast that a little bit. On the growth side, yes, there will be lower growth, particularly in the areas where you don't offer strong customer value. However, those companies, when we see them all, outside of Alliance that have loyalty leadership, that have technical excellence and that leverage global partnership that are growing 2 to 3x what the other guys can do. In margin, again, we have overcapacity. Inflation is really driving inflation on the claims side, and we have digital disruption. But you can constantly improve productivity through scaling products, through scaling processes and building our digital platforms. And Allianz is a very long-term plan. Again, we are not doing it overnight. There is no wonder happening, but we systematically rebuild the platform to be digital and scalable. On the capital efficiency side, you see that unless you are a retail P&C company that has very low cost of capital, the cost of capital in our industry has been growing enormously. People are afraid of large balance sheets. They are afraid of negative rates, they're afraid of ultra low spreads in the crazy valuations in some parts of the equity market. Think about the Tesla and then nat cat exposure growing massively. Well, we have fully understood how to transform into a more capital-light lower volatility model with much more tight control of the tails and systematically leveraging our capital synergies and scale and access to private capital markets as evidenced with the transaction that we've just announced. Last but not least, given the rising political instability, there is a risk of higher regulation and political risk for many. That's why we are investing in being the #1 brand on this planet into having the highest customer trust, the best people and being a leader on ESG around reinforcing our resilience. I don't want to talk about in detail how we have performed an underlying, but it's fair to notice. If you think about the underlying profitability, there are only 2 models. It's either very focused players in P&C and life or by country, or it is a truly global franchise that can leverage scale and skill. This is what we are, this is what we have been, and this is what we are going to build out. So let me go through the facts in more detail. For the next few years, we really would like to grow earnings per share is 5% to 7%. And we're giving us a range because there's lots of interesting things happening outside the space. But we'd like to combine the 3 sources of value creation in an intelligent way: growing our business, further expanding our margin and driving capital efficiency, like with a partnership that we've announced today around telco in the U.S. with Allianz Life of America. And it's very important to understand, regardless of what the shocks maybe that come from the outside. We are about to generate EUR 23 billion in cumulative cash remittances to the holding and despite that, keeping our ROE at least 30%, if not high. So let me go into the details. First, one of the most important lever is actually transforming our life and asset management franchise, which we look at together even though we are separately reporting them because they're feeding each other. All our life and health clients benefit from our asset management expertise because we are delivering outperformance on the investment side, not in the life and health carriers only. And for shareholders, we are creating value twice in the life and health company and in the asset management franchise and the transaction I'm going to describe is a testament to that. Now what we have to do is really lift capital out of the Life and Health in-force balance sheets in a systematic way and take advantage of the very competitively priced private capital that is available for people like us and not for others. The second one, we need to expand our P&C leadership systematically. We've done it this year, for example, in Italy, and we're systematically doing it across markets. We need to boost growth through scalable platform. By the way, growth doesn't mean just revenues. It also means margin. When we build the claims platform out as we do today, and we went live in Italy, I think last week, we will capture much better margins because we can steer the cars, not just in our network, but we can leverage the claims platform that we are building to get to much better outcomes in terms of average claims payout, while not lowering service standards to our clients. Now we need to really drive verticalization and execution agility. Now what does this mean? Sounds very theoretical. It's very practical. Like we've done with AIM, Allianz Investment Management over the last decade, we really need to bring the benefits of our scale to the table, not by replicating locally but by driving things consistently. By the way, it's not centralization. It doesn't mean we're going to settle a claim in Spain out of Munich. It means we're going to have an identical business model, a product and process model globally and drive productivity gains and higher customer satisfaction through that. Last but certainly not least, we can reinforce capital productivity. It has been pretty good already. But as we see with this transaction, there are ways to leverage private capital much more successfully than in the past, and we're not going to leave any stone unturned in order to find out whether it's better to leverage other capital sources than your shareholder capital in order to produce higher value. Now I can go through the components in detail. In the interest of time, I'm just going to go through 1 or 2 of the 4 -- 5 themes of value creation. So in Life and Health, I'm going to give you some detail around the transaction we've announced, so let me skip that for the second. It's very important on the P&C side that we do 2 things. First, in retail motor, in particular, on non-motor, productivity progress is at the essence. We're still inefficient. We have very good in technical excellence. We are building out claims. We have great in customer satisfaction. Productivity is something that we still need to drive at there's too much paper floating around sounds obvious, it's not so obvious. So we now have given ourselves the target to really be beating the best in every market that we're in. The second, and Chris Townsend is going to talk about is grow value in commercial lines, something that is overdue. Now in terms of platforms, I think I gave you most of that. I'm going to talk about claims in a few minutes. And this is where most of our focus is building first in Europe and then globally a leading claim platform for motor and home. Execution agility is something that's very important. Allianz is a great machine to deliver outcomes. Agility is not yet our strength, and that's something. What do we mean with that? It's not just about speed, but about discipline. And that is what we can do, still a little bit better, and we're working on it every day. And the thing I would like to add to what I said before on capital productivity is the point around resilience. Chris Townsend will talk to you about is not just the fact that we need to improve profitability in commercial lines, we need to bring the volatility of the earnings lower because it's not just about the earnings or the ROE, but how often do we get negative surprises in the business is something that we need to pay more attention to. So let me give you a couple of details. And let me focus on the transaction that we announced earlier this morning. And we've been working on, by the way, for 2 years. So this is not a one-off. This is a signal of a fundamental transformation of the business model, not just for is it Allianz Life of America and our asset management business, but what we are trying to achieve globally. We have a leading life insurance franchise as Allianz. We have a leading global asset management franchise, and we have a leading investment capability with AIM that is often underestimated. And we would like to transform it into something that is more capital efficient, has more innovative capital-light products. It leverages our active superior asset management capabilities and drives growth through the network. And you're going to see that across retirement, across savings and across wealth management because many of the things that we do are already wealth management, even though we don't cut. Andreas is going to talk about Allianz' AIMS position today, and I'm going to introduce the transaction on the U.S. in just a moment. Now the first thing I wanted to show you, and this is the numbers that we had a couple of years ago in terms of new business profitability relative to the size of the new business. And we've always aimed to have new business margins north of 3% that translates into north of 15% ROE on an ongoing basis. So this is what happened in the last 2 years until 2020, we have quite had quite a few improvements. So for example, Germany grew not only but massively improved margins already. The U.S. stayed with the course in terms of volume, but margins actually with declining rates went down, and we have done a fabulous job to transform our Asian business already from capital-intensive to capital light and light protection. I'd like to point out because I don't have more slides on Asia, is probably one of the most underestimated success stories over the last 5 years how we've been able to transform the quality of that franchise and the resilience of the franchise of our Asian life colleagues. Now in Europe, you see that margins have only slightly improved and volume has slightly been going down. So let's look at what's the plan for the next few years. Very importantly, we are going to drive the new business margins across the universe up. In Asia, we need to drive the growth up. And in Germany, as you will see, we are going to increase both margin and volume. Even for core Europe, where margin pressure has been extremely strong because of the shift in business that we've been doing -- been able to do, now also in France, which is probably the toughest market in Europe. We are moving margins to the target level almost everywhere. Now how can that be if investment income goes down? You see on this slide very nicely that indeed investment income is projected to develop negatively over the next few years just with risk-adjusted returns coming down. So we are not betting the house. We are not going out on the risk curve. In fact, we're driving up technical margin and loading in fees to drive operating profit up. So the quality of the earnings, ladies and gentleman, is going to massively improve over the next few years why we drive more value. And we are one of the few people that can actually do that. Now let me show you how it works in practice, not just through new business, but taking a very close strategic look at our in-force. Allianz Life of North America is already one of the best life insurance companies in the industry. Everybody said that everybody always wanted to buy it. Well, you don't sell something that is good as it is. But it has been very capital intensive. So we thought long and hard how can we leverage the power of Allianz Life of America and our asset management franchise to create even more value. So we have the leading U.S. index annuity provider with strong earnings. By the way, on average, EUR 1 billion operating profit, which is 23% of the Life segment and 9% of the group, so it's a big business for us. with very good ROEs. It was already 12% over the last few years, but it consumed about EUR 8 billion in IFRS capital. By the way, this is the business in Allianz that consumes most of the absolute amounts of capital more than any other. So we knew we had to do something. In addition, we have the leading global active asset management franchise. A lot of people don't know that with EUR 2.5 trillion, EUR 3 billion operating profit, 24% by the way, of the group. So it's a core part of what Allianz is not a side hobby as some people believe. And it has been growing earnings 8% per year. Now a cost/income ratio of 60%, which is the envy of the industry, not only at PIMCO, but also now at AGI and improving the cost/income ratio 80 basis points every year from '18 to '21 on average. Now what we are doing now is we are creating a partnership together with Talcott and Resolution. And by the way, Resolution is already our partner on the transaction we've done in Switzerland a couple of weeks ago, the first ever large scale back book transaction that Switzerland has ever seen, and we are going to reinsure about EUR 30 billion of our FIA reserves. And PIMCO and AGI will become a partner of Six Street and Talcott. And that's very important. So we're not selling a part of the book. We indeed are creating a win-win for both parties by leveraging the capability and freeing up EUR 3.6 billion of capital of Allianz Life, that's 9% ladies and gentleman of our group Solvency II ratio. We're going to receive EUR 1.8 billion in ceding commissions post tax, plus we will have a day 1 effect of EUR 450 million on day 1. Now it took us a long time to come to this partnership because for Allianz, it's very important to have a very strong risk management framework in place. The world is becoming more volatile, and we need to make sure that this partnership also holds if there's a shock. Now as we execute this and are building it out and our partnering not just on the reinsurance, but also on the asset management side, let me explain to you what the facts are going to be. So we are going to have much more efficient capital deployment and the ROE in life is going to move from 12% to 18% in the U.S. The segment will improve at least by 1 percentage points in terms of ROE, while the profit level remains almost unchanged. Can I repeat that? The profit level stays almost the same. Why is that? Because while we lose operating profit in AZ Life, we're making this up through reinforced asset management fee income, particularly for private credit and other olds, which are much more attractive for us and recurring asset management fee income of about GBP 60 million in which much higher multiples and much more stability. So it's a real win-win, and it's the beginning of a journey. It's not a transaction. It's actually a partnership that we'd like to extend both on the existing portfolio of AZ Life, think about variable annuities, think about creating new products, distribute, leveraging private capital and its capital efficiency in a systematic way, and it will not stop at the U.S. board. Now as we move through this transformation, what are you going to expect? This slide shows you capital intensity on the one axis and increasing profitability. So what we are actually seeing on this page is the current target. We would love to have 13% ROE and we don't have it. And that's why investors have been very cautious in terms of 2020 numbers that says, is this ever going to move with interest rates keep on going down, spreads go and keep on going down, equity market volatility. Well, that is the future of what you're seeing on this page. The U.S., I just explained to you in terms of capital intensity declining. You see that with a shrinking bubble and ROE jumping to 18%. But also Germany, Andreas will talk about that, will significantly improve ROE and reduce capital intensity through very intelligent measures, for example, on longevity risk, Switzerland, we've already done. We've worked on Benelux, that's underway. And then we have Italy that has massively moved not through back book sales, but renegotiating in-force contracts and moving massively to unit-linked and much more capital-light products. What we now have to work on is the remaining like France and others. And again, we are confident that we can move that over time as well. So a real transformation not a tweaking of the edges. Now one of the reasons why we can do that because we have a superior ALM function in Munich. And I would like to go out to you and say, reiterate the point how important Allianz Investment Management is for the value creation. If you benchmark us to our core peers, we have had a 40 basis point outperformance ratio on current yields and 90 basis points total performance over the last few years. We had much more resilience, and we have a much stronger generation of alternatives. And I'd like to reiterate the incubation of Allianz Real estate has been super important for PIMCO, think about Allianz Capital Partners in PIMCO. So it's an essential part of what we do plus the driver on ESG is super strong. And you have the facts to match it up. Again, Allianz Leben is a super strong asset. In the interest of time, I'd like to jump over this slide and just point out that Andreas is going to talk about that in detail. It's the strongest company with double the margin that anybody else has in this country. What is not well understood, it is also highly capital efficient and highly resilient, and we're going to prove that to you. Now asset management leadership is a story that has been told through the numbers, not just through double-digit asset growth and attractive margins, but all the other items that you should know, again, if you think about that, many think about as traditional trading-oriented asset management is just not true. We have now more than EUR 210 billion AUM in Q3 is the number on odds and it's growing 12% a year and is going to grow more with outstanding investment performance and strong improvement in productivity. That is almost unmatched. And Manny Roman will have the pleasure to explain to you the outlook this afternoon. Now 2 or 3 minutes on beating the best in retail P&C because you know we have an outstanding retail franchise, but everybody is always coming back and saying, "Yes, but you know the mutuals are so much better." Yes, indeed, there are models that are better than the ones we have, if you think about motor only. If you think about the universe of other products, home, home content liability, we are the leader. Now we need to fix some issues in P&C, and we have very granular benchmark in terms of how to do that. The German colleagues have been leading the way. We have a new comprehensive model to get to best-in-class performance quickly because the competition is not sleeping, and we have extremely precise targets bringing up new business by 25%, bringing unit costs down by 25% and most importantly, bringing down the loss cost by more than 10%, leveraging our new claims facility. Chris will talk about commercial lines across AGC&S, mid corp and oiler. He's going to go through, it's very important that we lift operating profit. The ambition is more than EUR 0.5 billion in OP uplift, while reducing earnings volatility through intelligent reinsurance, and he's going to talk about that, how we can get this done. Now one of the things, again, we believe, are totally under assessed and undervalued is the platforms that we have been building around travel, mobility, health, finance and home over the last few years. And that's not just about claims that I've just mentioned or health, where we are extremely strong with NEXtCARE, Allianz Care, Vivy and others, but also around finance. I think, for example, all western Germany is totally underestimated in terms of its capability because it starts first with usage, then driving customer satisfaction and eventually boosting sales per client. So don't underestimate what's coming, and we're building them out systematically, as we are doing it on the home platforms that we have that are now extremely strong, so asset stones through all the platforms we have. But last but not least, transforming the way we're doing travel insurance globally, where we are the market leader, and we are going to strengthen our capabilities even further. Now let me move on to claims. I think it's super important for you to understand that a lot of people are worried about, well, Google will offer other insurance and take all the margins or Amazon. Yes, customer access and customer access as reasonable cost is super important. Underwriting engines and algorithms, custom download data is super important. Let's not kid ourselves, but we are the #1 brand, people come to us. What is more important and where you can build a competitive advantage is to have claims platforms that the big tech guys cannot replicate. It's very, very hard to organize physical networks the way we are able to do that. And with control export, GT Motive, and more assets to come, which we'll announce in a couple of weeks, systematically going through telematics, world-class digital notification of loss, AI-based damage assessment, segmentation and steering in real-time, fraud analytics and automated payouts, the journey is just beginning. And we're offering the platforms to our competitors why because the scale benefits of driving down cost and increasing revenue for the platform really, really makes this available for other insurers as well, maybe not the biggest of our competitors, but many others out there. Verticalization. When you think about Allianz, people say, you are a multi-local company. The reality is when you think about our brand, it's all totally global. The way we do websites, it's totally global. The way we do partnerships already totally global. The next step, first on the digital and then in the physical world, of course, adapted to local customs and customer requirements has to have one Allianz experience. And the one Allianz experience has to be the loyalty leader experience, and we're driving that. In terms of customer access, we have relied -- by the way, think about the pharma industry being the same because of regulation mostly on local networks and distribution. We have to add global partnerships and platforms that feed each other successfully, and we're going to talk a lot over the next few years of how that's going to happen. We have been offering and harmonizing global motor products with minimal local tailoring. It's time we scale that and get the in-force business there as we have been able to do that on the investment side for a long time. And we've had local or regional operations teams that we are now adding global utilities with our [indiscernible] program, Barbara is going to talk about it. IT and infrastructure is global and will be even more global. Last but not least, the balance sheet has always been global, but we have more efficiency to drive. And when you look at the verticalization, the largest amount of work that's still to be done is actually in P&C because this is where all the people on the local processes are in the legacy, and it's also true for old Life systems. So this is where I have to move on platform, asset management, reinsurance, AIM, treasury, we're already where we need to be. This is not the last slide, but it's probably for me still, as I started 6 years ago, the most important. I'm not worried about Amazon only because of its scale and power and financial power because it has the highest Net Promoter Score, the highest customer satisfaction. So we have been moving aggressively on the brand. We have been growing massively on voice of customer, on getting marketing excellence to the digital world, but the future is really one thing that we need to do. We have to be the loyalty leader in everything we do because it comes with 3x the growth and 3x less churn. And we need to put the numbers and the performance behind that. With the way we're now doing it digitally, it is going to come. Talent and development. Very few companies talk about the most important asset to get this all done, that is actually our people. So everybody in Allianz has very strong targets on leadership, and we have consistently been achieving or outperforming them. And there are other things that people consider to be, yes, a site concession like having equal pay for everybody across genders, well, by the end of this year, we have done it. We have 30% of our businesses run now by women. Okay. Let me repeat that when I started as a CEO, there was none. There was no female CEO. We had 1 female board number. Now we have 3 and everybody is following. So as we move forward, it is very important. We understand the power of diversity rather than it being a side constraint. And we're getting recognized every day across many of these things that go beyond gender and other items, and it is training. So let me go quickly to the summary of how we are trying to lift our ambitions even higher. This is what we are trying to achieve over the next few years: drive value creation to 5% to 7%, 3% to 4% through growing the business, 1% to 2% on margin expansion and 1% to 2% on capital efficiency. And we're trying to drive the top line of the company probably north of EUR 160 billion if the world doesn't fall on our heads. And there's further optionality built into this case, building global platforms at scale. Think about the transaction we announced this morning, imagine that we scale this across our portfolio. Think about capital productivity and even better and more successful M&A and making sure that our global digital platforms are not just driving productivity, but also customer growth. This is the Allianz that we have in mind that we have dreamed about that we have built and that we are now driving to get there, while being the loyalty leader and what we really know to do. We have a new baseline that we're putting in, so we want to bring loyalty leadership to more than 50% on a rebase level that's driving it up very strongly, keeping the IMIX also 75% and being their clear leader in sustainability and diversity in our industry and beyond. And with that, I thank you for your attention. I'm very much looking forward to your questions in a little while now, and I'm going to very soon hand over to Giulio.

Thank you, Oliver. Good morning to everybody. You heard from Oliver about our strategy for the next 3 years. And now I'm going to talk about how this strategy is reflected into our numbers. But now you know our targets, you also know that targets and plans are as good as the assumption that you point into it and also as good as the confidence that management has to deliver on those targets. And I can tell you that I have a healthy degree of confidence that we can deliver on this target. Being finance guy, I also have always the needed amount of paranoia. And I think as you go into future having the right balance between confidence and paranoia is the best way clearly to be successful. As we talk about confidence, I'd like to share with you our new dividend policy. We made basically 3 changes. The first change is we reduced the level at which we might revisit our dividend policy from 160% to 150%. The second change is why we are maintaining our payout ratio of 50% on the net income, we are introduced the possibility to change that net income for volatile items. That's in response also to the change coming from IFRS 9 and 17. The change of IFRS 9 and 17 is going to introduce a little bit of volatility, not a big amount of volatility, but there will be a little bit more volatility in our numbers. So we want to adjust for the volatility and also we take the opportunity to adjust the net income for extraordinary effects. The last change is the most important one. As you know, as of now, our dividend policy as a ratchet. So the dividend of a given year cannot be lower than the dividend for the preceding period. Now we want to have basically a policy where we say the dividend of a given year has to be at least 5% higher than the dividend or the proceeding year. So I think this is a strong sign of confidence from our side. That's basically the bottom line, 5% to 7% EPS growth, 13% plus ROE and increasing dividend by at least 5%. That will be it. But clearly, there is a narrative around this bottom line and now going to go through the narrative. But before I go into the future, I would like to take a step back and reflect about our journey over the last 3 and 6 years. Usually, I don't like to do that. I believe finance is about looking forward. But I believe that looking back in this case, is going to give you a sense of the quality of our delivery, and I think you can extrapolate this quality also into the future. Second, I always talk to you on quarterly results when we compare quarter-over-quarter, but you don't measure strategy in quarters, you make your strategy on a longer time horizon. So that's the opportunity for me also to put numbers really together. Let's start from property casualty. The property case what you can see a journey of improvement. You can see growth in premium over the last 6 years. And if you focus on the last 3 years, you can see even an acceleration of growth, and this is despite the COVID impact in our Travel business or also in our credit insurance business. When you look at the combined ratio, you can see a clear trajectory of a reduction in the combined ratio. And if you adjust for the nat cat load, which in 2021 is clearly higher compared to what we had in 2010 or '15, you see, respectively, an improvement of 2.5% versus the 2015 level and 1.5% versus the 2018 level. So definitely an improvement in combined ratio. The operating profit is flat. But if you adjust for the net cash impact, you can see an increase in reality of 4% per annum and think that we have today, as Oliver was referencing before, EUR 500 million less investment income compared to 6 years ago. So definitely, a story of improvement of underwriting performance, also a story of accelerating growth on the revenue line and adjusted for the nat cat in 2021, you can definitely see growth in our profit. What is also very good, in my opinion, this improvement has been widespread, that's basically showing the improvement in combined ratio adjusted for nat cat and runoff in our operation. You basically see almost entities had an improvement over the last 6 years. So this is the reflection really of this attempt to get better across the Board and try to beat the market. So that's the story on the P&C side, in my opinion, a very strong story. And now we can go into what I think is even a better story. And I'm very proud of our life franchise. As you know, I have a background more on the life side, I spend a lot of time in Minneapolis. I always believe when I was a Mini and I was not thinking just about Allianz Life, I was thinking about our life operation, there we have a very good skill set on the life side. And I believe this trajectory is definitely showing that. Look at the evolution of the value of the business over time and also look at our ability to keep in the last 3 years, the new business margin at about he 3% level despite interest rates, which are negative in Europe. Also, and there was very important in 2021. We have been successful with our transformation. So we see that we can achieve a nice new business managing and on the same time, we get the production that we need to get. Look at the ROE trajectory. The ROE is going up. I believe a few years ago, there was more the notion of the ROE might implode. Now the ROE is going up. And now in 2021, we are basically at 12%. And I would like to highlight that's an ROE without leverage. So that's very also important. So when you put the leverage, we can say this segment is contributing to the 13% ROE that we have as a target at group level. And now also look at the trajectory of the operating profit, which is going up over time. So also here, maybe a few years ago, the notion was our operating profit might go down. Now you can see there is an increase in operating profit. The 4.9%, it's just to talk now about the forecast is a little bit elevated compared to a normalized level, and that's because Allianz Life due to the low volatility is very, very good 2021. But even if I adjust the number for that, my normalized number will be more about 4.7%. That's still a number which is better compared to the target we gave ourselves in the Capital Market Day of 2018, and that's also better compared to the outlook of EUR 4.4 billion that we had for 2021. So a very nice progress on the Life side. And here again, we can see how this progress has been widespread. And this is the picture of the ROE by entity and the blue dots are the companies with a ROE about 10%, and the red dots are the companies with an ROE below 10%. You can see that basically, as of now, we have only 5 entities with an ROE below 5%. I tell you 3 entities are going to be above 10% next year. And the 2 companies, which are now going to be about the 10% next year are very low. Just to give you an idea, the capital allocation to these 2 companies each is EUR 50 million each. So basically, we are speaking around this. So we can say all our entities are now delivering ROE, which are going to be in excess of 10%. And I think that's a really powerful picture. Now we come to Asset Management. In Asset Management, we have also a nice trajectory. and you can also see how this trajectory has been accelerating over the last 3 years. You can see this in the development of the assets under management. you can see that in the development of the cost/income ratio. And you can see that also in the development of the operating profit. We are clearly well aware that the markets have been benign. So from that point of view, there was definitely a lift coming also from the market conditions but we also strongly believe that our entities have been performing very nicely in this environment. We are very proud of the franchise that we have, both at PIMCO and at the GI. For PIMCO, you're going to listen to Manny in a few moments. For AGI, I can tell you they are going to have an profit operating well in excess of EUR 800 million. And I did a benchmark in just a few weeks ago, and I can tell you that in 2021, we are beating the competition basically on all dimensions. So it's not just markets. It's also a lot hard work going into delivering these numbers. And I don't know if you remember, but in 2018 we had a capital cost income target that we gave to ourselves, both for PIMCO and for AGI. In the case of PIMCO, the idea was to keep the cost income ratio below the 60% level. You don't see the numbers in the slides, but you can see that we've been keeping the income ratio very stable. And if I were to put the numbers in the slide, the cost/income ratio for PIMCO, it's about 50 -- 59%. In the case of AGI, we gave us a target of below 67%. And if I were to put a number on the blue dots on the right-hand side, the number will be 63%. So from that point of view, really no achievement due also to the intense restructuring that AGI has done in 2020. Even more important, despite this restructuring, which was also restructured on the investment platform, AGI is producing record flows this year. So that's the important part of the story because sometimes when you're restructuring, you lose on some other value drivers. In this case, it is basically something very positive that we see record inflows at AGI also in 2021. So a very good story also on the asset management side. And now clearly, when you had this kind of operating performance, this finds its way also in the Solvency II calculation. And here, you can see that over the last 3 years, our organic capital generation, on average, has been about percentage point. And this despite clearly the challenging conditions that we had in 2020 because of COVID. So if we were just to normalize for that and consider a normal year, the capital generation would have been 10 percentage point for sure. But the real part of the story in this slide is the business evolution and especially the contribution of life to the business evolution. You can see basically that the Life business is not really adding to our ACR on an organic basis. Clearly, since rates went down, we've had to put more Solvency II capital because of the market movement, but the ongoing generation on the life side is basically 0, which means the capital efficiency of the new product is such that basically the capital that we need to put for them is compensated by the release of capital that we get from the in-force. And then don't forget that we have a value new business, which is helping the on funds. So I think that's a very powerful story, especially as we project our thinking into the future. And now this is about remittances. One thing is capital. One thing is the cash that you get into the holding company, the two things are related, but they are not equal. You can see that we had about EUR 20 billion of cash remittance, net of holding costs and interest payments in the period 2019 to 2021. That's a little bit lower compared to the level that we had in the last -- in the previous 3 years period. That was because in 2016, we had about EUR 10 billion remittances coming from entities that was really a very high number. I think there was welcoming gifts for Oliver who was the new CEO. So -- but overall, you can see that we have a very high remittance on average about 95% and the 91% level is a very good level also for a company which is growing, we are not shrinking. And now when you look at the payout to shareholders, you can see about EUR 30 billion plus over the last 6 years. Clearly, you see a little bit more buyback in the period '16, '18, a little bit less in '19, '21 because we had more M&A activity. We always said that we're going to pay M&A in a tactical and strategic way over time. On average, you can expect the average of those numbers. What is nice is the outcome is the same because, as Oliver showed before, we had a growth in the period of '18, and we expect to have adjusted for extraordinary effect, also an EPS growth to 6% in the period 2019, '21. So we had this kind of flexibility. And clearly, you can we are going always to keep in mind what our targets are and do our best to achieve our targets. So that's the story. I think it's a very compelling story from a delivery. And I will say the quality and consistency of the delivery that you saw in the last 3 or 6 years is the same quality and consistency that we want to bring also into the future. So now let's talk about the next 3 years. You heard from Oliver before, you saw in my slides before that our target for EPS growth is 5% to 7%. So I choose basically the midpoint of this 5% to7%. I'm using as a reference point. And we assume -- we are assuming that 2/3 of the 6% growth is going to come from operating profit development and 1/3 is coming from capital management. Just to give you a sense about the baseline for the operating profit, I'm assuming a EUR 13 billion starting point. Don't be surprised for our operating profit might be a little bit higher at the end of 2021, but I think sake of this argument is going to start with the EUR 13 billion rounding number for operating profit. And for the EPS, I'm assuming a normalized EPS of 2021 for 2021. So that's the reference point that as we go into this conversation. Now starting from the operating profit, we are targeting 4%, which means basically at least EUR 14.5 billion of operating profit by 2024. I know you are very good we met. So if you add that numbers or the segments in 2024, you're going to see indeed an operating profit more of 14.8%. So I would say, clearly our expectation is that we're going to exceed 14.5% in order to get to a very solid 4% growth in operating profit. Now I'd like to go with you through the segment development, the staff from property casualty where we expect our operating profit to go up by about EUR 1 billion. And when you do the composition between underwriting results and investment income we are expecting basically EUR 1.2 billion, a very solid EUR 1.2 billion of additional underwriting results, which means a growth of 7%. On the other side, we still are going to have some drag coming from the operating investment result, that's about minus 1%. So when you put all together, anyway plus 6% growth in our operating profit for property casualty. On the operating investment results, we also expect that this drag is going to reduce over time. So as we are going to have the next Capital Market Day in 2024, I expect that the number is not going to be negative anymore. Now talking about the underwriting results, we are assuming 3% to 4% of growth. And we are assuming a reduction of the combined ratio to 92%. I think that's a very realistic expectation. Part of the improvement is going to come from retail. I can tell you right away that in retail, if we are adjusting for the nat cat load, we are basically right now at 92%. So it doesn't take us a lot to get into the range of 91% to 92%. So from that point of view, we feel very confident about our ability to get into that range. And when we look at commercial lines, we are a little bit closer to the 95%. If adjusted for nat cat, we get closer to the 90%, 94% plus. So also, in that case, we have a little bit of an improvement, but that's definitely an improvement that we feel we can achieve and Chris is going to talk later about this. Also the expense ratio, we want to bring down the expense ratio. As of now, we are close to the 27% level. The idea is to try to push it down towards the 26%. I don't know whether we're going to get precisely to 26%, but the idea is definitely that in 3 years down the road when we talk about our expense ratio, we are going to talk of something that resemble 26% and not 27%. So if you ask me, this is not an aspiration. That's not an ambition. It's a very realistic plan and I think it's good to have a plan as opposed to have aspirations or ambitions. Next one is about the possibility check on the life side. Let's start first from the EUR 4.9 billion of operating profit in 2021. That's indeed a good normalized level because, as I was saying before, yes, we need to normalize down for Allianz life, which is having a very good year. But on the other side, we know that we had the Aviva acquisition. So from that point of view, that's a good baseline. And then we expect to achieve a growth of 3% over the next 3 years. What we see here is a strong contribution coming from our preferred lines. And we have a double-digit growth expectation for OP in protection unit-linked, and we have a high single-digit growth expectation on our capital-efficient products. And when you look at the contribution of the operating profit coming from the capital-efficient lines, we are basically more than 70% of operating profit coming from those lines. If you look at the contribution on a value of new business higher, obviously. On the other side, clearly, we are going to run off basically the guaranteed savings and annuity business. so that's where you see the minus 3% coming through. Now 3% might not look like glamorous growth, but think also that part of the back book transaction there that we are doing also like the back book transaction that we did in Switzerland, detracked a little bit from an operating profit point of view, but the point is you get the capital efficiency. So that's more also of an ROE play. It's not just an operating profit play. You saw that reflected also in slides of Oliver with a 13% ROE target for 2020. So when you consider the package of growth in operating profit and improvement in ROE, I think that's a solid package, again that's not an ambition, that's not an aspiration, that's a plan. And now coming to asset management, we have an expectation of 5% growth over the years. 3% is coming -- 3% growth is coming from growth in the assets under management and 2% is coming from margin and efficiency. Now starting from the assets under management growth. The 3% growth in assets under management is, I would say, pretty solid to achieve in the sense, just the net flows. If you look at our net flows history, you need to average because net flows can be higher or lower depending on the market condition, you get easily to 2% to 3% of net flows contribution to our assets under management. So we are not relying on market performance basically to these kind of numbers. Clearly, market performance or dislocation of very favorable markets that can create a sensitivity around these numbers, but you can get pretty comfortable with the idea that the 3% growth in assets under management is a very moderate growth for the business. And then on the fee margin, we are assuming stable fee margin. That's also the experience that we are currently doing that we have been doing in the last quarter. Also from performance fees, we are assuming stable performance fees, and we still want to achieve some improvement in the cost/income ratio. So again, here, you can see we don't need to make heroic assumptions to get to a 5% growth in our profitability in asset management. So that's the story on our operating performance. And clearly, all these numbers somehow find a way into Solvency II. Solvency II is a little bit of a different accounting metric, but there is a link clearly between the two. So overall, we are expecting an organic on fund generation after tax of EUR 30 billion. Then we are going to invest about EUR 4 billion to growth, which is basically the capital consumption coming from the growth in P&C. Then we have an assumption of above EUR 14 billion of dividend over the next 3 years, which means we have an excess capital generation of EUR 12 billion cumulative over the next 3 years. And in the language that we use during our regular calls, this means basically 10 percentage point capital generation per annum. And then the translation from capital to cash, we need always to account for some noncash item that is even more with some leakage. If you want to do a system, this leads us to a EUR 9 billion of excess cash generation, cumulative, which is about EUR 3 billion per annum. If you remember the Capital Market Day of 2018, we had EUR 2.5 billion per annum. So overall, it's way more than 10% increase in our assets cash generation. And then the [indiscernible] is also relevant. So if we keep the leverage cost, then we would have additional EUR 2 billion of hybrid capacity to support both cash and capital generation. But setting this aside just organically without even accepting a reduction of the leverage ratio, we would have EUR 9 billion of assets cash generation and EUR 12 billion of excess capital generation. Now if you look at the evolution in the next 3 years compared to the last 3 years, you can see that our organic fund generation is significantly higher compared to what we had in 2018, 2021. Here, we should adjust the 2018, 2021 period for the COVID situation. But even adjusting for that, the number is higher. And then on the remittances, you can see definitely a push with a EUR 23 billion of remittances, again net of holding costs and net of interest payment compared to EUR 20 billion for the period 2019 and 2021. So the remittance ratio, I think you are familiar with this number, it's higher than 80%. That's the number that we to present when we set our targets in front of you. And clearly, we're going to try to come out with other ideas in the next 2 or 3 years how to lift this number to well above 80%. And as we speak about ideas and capital optimization, these are a few of the things that we did over last 2, 3 years, we did a Belgium transaction. We did a Spanish transaction. France, the classification is basically, we put pension business from Solvency II into Solvency I. And also, as you know, we are making transfer products from the legacy business, if you want to do new business. On Italy, we are doing the negotiation of big contracts. Just a few weeks ago, we had the announcement of the transaction in Switzerland. So you can see there is a lot of activity going on, and the sum of all these activities have produced about EUR 1 billion of capital release. And then clearly, we are always looking at new ideas and one is basically the transaction that we have announced just today. This is where our comfort level comes that we're going to -- we are in a very good trajectory to achieve a 13% ROE in the Life segment by 2024. And again, this is an ROE without leverage. Now let's talk about the transaction in the U.S. Oliver has already talked about the strategic rationale of the transaction. So I'm not going to go into that. I can just speak about a few numbers, EUR 3.6 billion of capital upstreaming. And if you split this EUR 3.6 billion, you have EUR 1.8 billion coming from capital release and EUR 1.8 billion is basically the ceding commission after tax, which means it's a 2x book value. Now in the fixed in this annuity space public market, I believe the valuation of more onetime book value. So onetime versus 2 is a bit different. Now it's true that our counterparties have value drivers that we can now deploy maybe our traditional competitors, I can now deploy, but still between 1 and 2 price to book value, there is a big gap. And this is a clear indication that there is a fundamental underestimation of the quality of the earnings that we have in the fixed in his annuity space. So that's something that I want you to reflect upon because the difference is very staggering. You can see that we are going to lose EUR 150 million dividend in the next per annum. What is important, that's not a perpetuity. It's EUR 150 million for a few years. And then clearly, since this is a book, this EUR 150 million is going to drop off. So this gives you a little bit idea of the attractiveness of the transaction then as Oliver was saying before, there is basically no impact on the net income. And that's also because of the different treatment of the insurance commission between local accounting and IFRS accounting. And there, you can see a very nice lift of the solvency ratio by 9 percentage points. So that's a very strong transaction. Clearly, very valuable for us. But I think also the hidden message about the quality of awareness is something that I don't want you to miss. And so this is a proof of our strict capital management, I would say, it's not just strict, it's also active. I think we are very active. You saw we did a lot of transaction and can tell you that the headline is maybe the most important thing to take away. We don't expect major changes. Now on this one, I would always put some paranoia because as long as it is not there, you never know. But I can tell you, we did a lot of [indiscernible] runs. We did a few ones. We even tested the plan based on IFRS 9 and 17, and we don't see a major change in profitability. We also don't see a direction. sometimes, the profit might be a little bit higher, sometimes a little bit lower. Fundamentally, we don't see any major change. So based on the best knowledge that we have today, we can tell you we should not expect this to change. Basically, the conversation that we are having today, but I always reserve the right to say you never know in life. The only thing I can tell you, volatility is going to be a little bit higher, and that's not because of IFRS 17, it is more because of IFRS 9. There are some assets that have to be booked at fair value through the P&L. And so we are going to have to live a little bit with this volatility, which is going to be very transparent and very easy to explain. And as said before, we're going to adjust for this volatility as we set our dividend. So no major issues so far coming from IFRS 9 and 17, that's our expectation. So bottom up was to sum it up. I'm confident about the fact that we can deliver on this plan. The confidence is coming our bottom-up planning. We went through a lot of planning dialogues in the last 2, 3 weeks. We know we are an international company, but we are based in Germany, and we like planning. So we did a lot of thorough planning. I think the track record is something that you saw reflect in the last 3 or 6 years. So we're going to carry the same attitude in order to deliver also into the future. We have a great team. As we go through the planning dialogues, we look at the numbers. We look at the initiative. We also look at our people. And I can tell you, we have really great people in our subsidiaries. And then I believe we have a strong culture. And culture is important because let's be serious, we are embarking on a journey for 3 years and who knows what could come in our way. But if you have a great team and if you have a strong culture, I think you can cope with the challenges that we face that we don't even know what they could be as we speak today. So all these kind of things give me confidence about our ability to deliver as we had been doing in the past. And now as we move forward, this was more of a high-level description of what we want to do from a numbers point of view. Barbara is going to talk about SCM and our transformation. Chris is going to talk about commercial and the opportunity that we had there. Andreas is going to talk about reliability of Alliance Leben with a 5% per annum dividend growth is a dynamic reliability, something that as a CFO, I like a lot. And then Emannuel is going to speak about PIMCO, and when you speak about PIMCO, you always speak about performance. So now we're going to have a break, and we're going to reconvene in about 15 minutes, and I want to thank you for your attention. So see you in 15 minutes. [Break]

Warm welcome also from my side to our digital Capital Markets Day. I'm very happy to talk to you about our digital transformation a little bit more in detail. And what we saw throughout the pandemic that all our customers in all age groups dramatically increased their digital capabilities. Luckily, we at Allianz started already our digital transformation some time ago, and we didn't even stop throughout the pandemic, because we want to meet our customers anywhere, anytime with a simple intuitive offering, and that I will explain you more the entire concept on the next page. So Oliver already talked about it, we want to create one Allianz global customer model. That means we start with the products to be global, to be harmonized, then also go into the processes that actually come together with the product. And if we have the global product and the global processes harmonized, we can also massively simplify the underlying technology. We call that, in all itself, the Business Master Platform that contains not only the processes and the product, but also the IT. We will also show you that this is scalable throughout the group and also has baked in the sustainability components. Why are we already enable to do so? Because if you go to the next page, you can see that we have one big advantage, because we have one of the biggest captives within the financial service industry. We have a technology captive that consists, as of today, out of 12,000 IT experts. These 12,000 IT experts around the globe are not only responsible to build the new, but also taking care to run the old. And at the same time, we do the transformation. And of course, you can imagine as a constant target, we need to, of course, have our systems available secure and resilient 24/7. We combine that also with another capability that is very important, it is the business process analytics, although that we have already also in a global team. And it helps us also when we have a crisis, because then we can make sure that we can use the entire community around the globe that makes us much more resilient. All over, this team is actually working with an IT budget of EUR 4.2 billion, which is roughly 40% change, 60% run. You need to imagine that at the moment, of course, we have a double run because we are in the process of transforming. Also important to mention that we do the entire transformation out of this budget, so we did not increase. This is the budget we have at hand to do the new, get rid of the old. Another very important enabler is that we understood quite early that if you are a data-driven company, if you are technology at your heart, you have to have an absolute stable infrastructure. So we invested very, very early in simplifying our infrastructure. This is what you already see in the infrastructure total costs going down. And also as a side effect, we could substantially reduce the amount of incidents. Also on the data center, we went down from 144 data centers into 6 strategics data centers around the globe, and we have already moved 66% of our infrastructure into the cloud. What was very, very useful throughout the pandemic was that we already started early to virtualize our workplaces. So we had already, in 2018, 80,000 employees on a virtual workplace, and we brought it up to 121,000 in the year 2021. That, of course, made it possible that we had, throughout the pandemic, 90% of the workforce working from home. And that was also the reason why we did not stop our transformation even through the pandemic. So these are the capabilities that you need. But what is most decisive in our transformation journey is, of course, the product. The product and the process. So what we need to do is to make sure we have a global, a harmonized product. And that was done because we understood that, especially in P&C, end of the product functionalities are very similar across markets. So what we did, we actually designed a product laboratory where everybody can, fairly easy, do a rapid product design. And then, this is based on a common framework. So before I explain to you, I think it makes much more sense, we look into this little movie can explain it much better. [Presentation]

This was a common effort of many, many OEs. And already by today, many OEs are using that. And now, I would like to give you the practical example because always sounds nice to hear, we want to see that it really works. So what is the benefit here? What you see, is for once, we have identical product offers in various markets. So this is already proving that we can sell the same product in various markets. Customer feedback very high. Another thing that we did is also simplifying the underwriting process, so making it much easier for our customers to connect with us. So if you look into Privatschutz, for instance, we went from 40 to maximal 8 clicks to quote. But it is not everything. I think what is also extremely important that we clean the product portfolio, what do you see what was done in Turkey and also in Italy, really massively decreasing the product combinations and also the old product families and bringing them into one. So that is happening, and this is really important because it's the product that actually makes the difference, whether you can fully simplify according the -- along the entire value chain is also into the technology and that I will show you. But before we talk about the technology, we need to first look into processes, also mentioned by Oliver, because this is where the beauty is, and this is also where we will achieve what Giulio told you, the continuous improvement of the expense ratio. So how do we do that? We looked into the overall processes, and we did nothing really new because this is what you're doing, this business process reengineering and everybody who ever worked in operations and IT most it. The thing is what we are using is new tools in the market that allow us to do that much faster because in the past, we did that manually. Now, we can do that with the solutions that give you, within a very short period of time, an analysis of the processes and inefficiencies, and effectiveness in your processes. Then you need to decide how you would like you to be process to be, you bake that into the system. And then, I think this is also very important, you combine that also what is out there in the market with automation, with artificial intelligence and also with robotics. And then we also combine that with the strategic assets that we bought from the market. Oliver gave you the example of claims, which I just briefly now will reiterate to bore you, but exactly that is it. So we need to make sure that also from an architecture point of view, we need to have the architecture in a way that we can easily also connect to all the partners that is out there in the market to help us to increase the offering to our customers. So if you quickly go to the next page and we look into claims Oliver explained to you. And just to make sure it's on the mobile of the customer. So we want to make sure that from the very first moment, we have the first notification of loss, we use what is out there in terms of tools to do the upload with the photo on the smartphone to do the immediate artificial intelligence-based loss assessment, to work together with GT Automotive on the cost estimates. And more important also for our customers, we do have the claims tracker, where the customer can see 24/7, real-time, the status update on his claim. So this is on the product and on the process, continuous simplification. If you do that, of course, that needs to be reflected in the underlying technology. So let's look into the new, what do we want to do new. So on the new, of course, we want to massively reduce the platforms. If we go to the next page. And you see we want to confirm multiple OE platforms that we have around the globe into one look and feel globally. On the customer front ends, already we massively decrease the amount of customer front ends we have out there. And the advantage is not only cost and productivity, but advantages also that you can scale much faster innovation because you have the same underlying platform. In the global master platform, you need to imagine we have 80% core layer, which has the functionalities to serve all the business. It's now, let's talk P&C, but also their target for all the others. And then you have per country because of local regulations, roughly a 10% local customization. And on the country layer, which is then the same in the country for the operating entities of Allianz, an additional 10%. Why would that work? Because we understood when we analyze index, the product, that the products has like, 85%, 90% commonality. So this is absolutely achievable. And of course, you can imagine if you manage all of that one, the productivity enhancements are given. So the more tricky thing, and also that one was mentioned by Oliver, of course, how to get rid of the old. So what did we do? We also here, we started quite early, and we now gain some expertise and experience to do that because you can imagine, we are not a new company. So we have some systems that are around since some 30 years or so. So therefore, it's very important that you understand what you are doing. So up to now, we decommission already 600 applications, and we have 600 more to come until 2025, and then we will do the rest. This already gives us a EUR 250 million run rate saving until 2027. Now again -- what you're telling us, but do you have an example that all comes through? Is that really scalable. So we took an OE very far from Europe, and we go to the next page and we go to Australia. In Australia, we said, okay, let's see whether this is working. Whether it's working that we simplify the product through the customer eyes with an underlying processes harmonized and the IT platform. So we asked 1,500 clients. We generated the product with the product lab. As you saw, this one tariff generation, very important not to again build another legacy, and on the new website. The result quite not quite impressing for the first month. We see the call center conversion rate up by 50%. The new business gross written premium up by 40%. The new business contracts up by 30%, and the online conversion rate up by 20%. So looks promising. And I would say, now, we start harvesting what we started already a couple of years ago. Digitalization is not everything. What we absolutely also need to have a key focus on is, and then we come to the next slide, sustainability. Also mentioned already by Oliver is a very crucial topic for us. And especially being a data-driven company, we need to absolutely carefully understand how we use energy. So we do have a target of greenhouse gas emission reduction of 30% by 2025. So by using and increasing continuously our digital collaboration, and this is what you see with me here and with also from PIMCO joining from the U.S., we have a hybrid setting today. This is absolutely needed because by this, we can massively reduce business travel. In addition, of course, we use every lever that you can use as a -- in the area of technology, for instance, talking about the flexible capacity usage via the cloud. In the area of electricity, another thing that we do, we want to have 100% renewable electricity by the 2023. And already as of today, we have 4 out of 6 of our data centers run by renewable energy. And for the others, we are actually working together with the colleagues around the globe to increase the supply side to be able to also make a step forward here. Another very interesting thing I'm focusing not only on sustainability, but also on productivity is, of course, paper use. Paperless communication is, for us, absolutely must-do to make life easier for our customers to get productivity up, but also in terms of sustainability. And then last but not least, to mention here in the area of claims -- area of claims, we started already now to understand whether our customers would accept that we go into repair instead of replace. And I can tell you, this is very much accepted. So we want to have, by 2024, already 62% of the claims steered, really, repair car parts instead of replacement. So I think with that, I could give you an overview also how we massively work on sustainability. And before I'm giving the stage to my dear colleague, Chris Townsend, I would like to quickly summarize how we want to come to the P&C expense ratio that -- with the decrease of 30 basis points per year. And I think the answer is simple -- simple. The answer is simple, digital and scalable. And with that, I thank you very much, and I would give the stage to Chris.

Thank you, Barbara, and good afternoon. I want to take the opportunity now to talk you through our commercial P&C segment and through the -- how through the deployment of our global businesses and our global platforms, we're going to both expand our margin and drive profitable growth to support the strategy that both Oliver, Giulio and Barbara have spoken about. So if I can show you first of all, please, the global commercial business. Overall, I think this is probably the first time you've seen it in this sort of setup. And I'd say right from the outset, it's a portfolio construct, which is both balanced and one that we're very comfortable with. All of the component parts are complementary to each other and a number of the skills are fairly intertwined. So it consists of 4 businesses. First of all, our large commercial business, which we go-to-market there is AGC&S. Secondly, the mid-corporate business, then the credit insurance business. And finally, a modest-sized third-party reinsurance business. Collectively, it's about EUR 20 billion of premium, which makes us one of the largest global commercial insurers, and it's about 35% of our overall P&C premium. The rest of the P&C premium being made up of our traditional retail business, our SME, Allianz Partners and office. We believe that there are a number of factors which can help us to drive growth in this business. The more macro factors driven by, obviously, the economic recovery, digitalization, the infrastructure renewal and then, broadly, the green transition. And all of these help from a well-placed commercial insurer to drive growth through the portfolio. So what I'll do now is go through each of the 4 component parts to show you how we're going to do this. First off, for AGC&S. Now this business has gone through a ton of change in the last 2 years. We've got a whole new executive team in place, led very ably by Joe Muller, who's put in place a real clear strategy and clear direction for the business, and we've invested heavily in terms of technical excellence to improve the portfolio. Let me give you some examples. So we now have 80% of the premium underwritten and priced on contemporary, much more appropriate pricing tools. We have 1/4 of our business individually case underwritten by price actuary. We've also exited some unprofitable business. We've exited about EUR 700 million of unprofitable business. Now, that business was performing well north of 100% combined ratio. And just by taking that out, we can improve the loss ratio between 2019 and 2021 by about 3.5%. We've also been making a significant change on the expense side of the equation. We've reduced headcount over the period by 7%, but we've also been driving a much simpler, more sensible global structure and have been investing in the key areas we need to. So again, for instance, we've improved and increased the number of our professionals in the areas of pricing, portfolio management and actuarial by 50 people over the last 2 years. Whilst we've been doing all this, rate has clearly been our friend. We've generated effective rate changes on our renewal business by about 26% in 2020 and 15% year-to-date this year. And both of those are obviously well north of lost cost inflation. We think going forward that the rate increase will continue into 2022, albeit on a more muted level, but again in excess of loss cost inflation. So with that, we've also been taking the opportunity to build much greater resilience into the portfolio, as Oliver mentioned, to reduce the tail risk of the business. So to give you a couple of data points here. The overall aggregate exposure of our business in AGC&S over the last 2 years has reduced by 32% for a corresponding change in terms of premium by only 7% reduction. Another example will be on financial lines, where we've reduced the aggregate exposure by 33%, but actually increase the premium from that by 13%. So just think about what that can do to the overall shape of the portfolio. It's a significant improvement. We've also optimized the reinsurance. When I started on the first of January this year, our maximum per risk net exposure for the group for business written by AGC&S was EUR 150 million. In June, we took it down to EUR 75 million, and as of the first of January next year, it will be EUR 50 million. So that's 1/3 net per risk across the 12-month period. Again, a significant change in the shape of the portfolio. The business also benefits from a range of other -- range of other reinsurance protections and we've got quota shares on most of the lines of business, and we've really dampened down the volatility. So as Giulio mentioned in the third quarter earnings call, we're drawing a line under the remediation effort now, and the aim going forward is to drive profitable growth. Now, that will come in a number of different areas, but our focus for the moment will be on the captive and multinational business, which is clearly in demand given the market situation. It will be on property, soft occupancy where we will not significantly increase our cap exposure and it will be on some specific areas around the specialty business and around financial lines. And the last piece I'll give you on AGCS before I move on to the numbers is just from an NPS perspective, our customers really trust what we're doing, and the scores have been super positive for us in terms of both our claim skills and our risk engineering, which are clearly super valuable to our customers. So in terms of output on the next slide, please. You can see the journey we've been on from over the last couple of years. We believe the actions we've been taking will allow us to deliver a 98% combined ratio this year and move forward to 95% over the next 3 years. And that 3 points of difference will come from both loss ratio, 2% and 1% from the expense ratio. So we're driving both margin and positive impact in terms of the loss ratio. Now, the key thing here is really about volatility. So we think the actions we've taken around pricing, reinsurance terms and conditions and the like, will basically drive down that corridor volatility to plus or minus 3% through the cycle, which is a significant improvement on what it was before. Okay. Let's move on, please, now to the mid-core business. First of all, what is it? It's a business which sits between the SME sector and the large core business. And by its very nature, the SME is much more standardized and automated. And the large core business and the mid-core business is more individually underwritten, needs much more human intervention and much more bespoke in nature. So the mid-core business is about EUR 7 billion of premium spread across 40 different operating entities. 2/3 of that's on our European heartland. And then from a line of business perspective, the largest line is property, but we've also a really healthy spread of the other lines of business, which comes at a much higher margin for us. Those 40 OEs are not all made equal. The largest, as you'd expect, is right here in Germany, which is EUR 1.7 billion of premium, and the smallest is only EUR 4 million of premium. So you've got to have an operating model which supports both of those, but also brings the value of the global corporation to bear. So we've changed the operating model on the first of July this year, and we've created an organization called Global Commercial on the next slide, please. And what this does basically is allow us to have a consistent global strategy with a consistent risk appetite across the board and enables us then to basically drive, through the use of global tools, around pricing, portfolio management and risk assessment. So we've got the benefit of scale brought right to the local entity very, very quickly. We're also in the process of pooling all of our data globally. So by the end of next year, we'll have the majority of our core lines of business on one global data platform, which will enable us to make much better data-led insights into our portfolio and drive a better outcome for the shareholders longer term. And then also just in terms of that fact that not all OEs are made equal, we're driving a hub-and-spoke model for some of the more emerging and developing markets so that, again, we can bring those capabilities to bear super quickly. Now this business at the moment runs at a 97% combined ratio. And our aim going forward on the next slide, please, is to drive a full point improvement in this to bring that down to a 93% combined ratio. We'll do that in 3 areas. One is profitability, one is growth and one is productivity or margin expansion. The profitability will largely come from the deployment of these cloud-based pricing, portfolio management and risk assessment tools, but we'll also deprioritize property growth and emphasize more growth in the other higher margin lines of business, which are clearly in demand by our customers. The growth will come from our European heartland, but will also come through a lot of the hubs around the world. And then from a product capability or product perspective, we've been told by our customers that very much in demand are our industry packages, many multinationals, the financial lines of business and renewable energy, all of which we're eminently well placed to provide. And finally, to talk to the point that Barbara mentioned before about global platforms. We believe strongly that the lower part of the mid-core business, we should turn much more into a flow business where human intervention is only where required and where it can add value. So to that end, we're in the process of developing a harmonized front-end platform that will give us automated connectivity to our distribution partners, will pull together all of those tools I mentioned before, which will really increase the speed to market and the efficacy of our capability to our customers and to our distribution partners. So we think overall, that actually, we're really well placed to take advantage of this mid-market opportunity given a few factors. First of all, our global scale, I've mentioned EUR 7 billion already. Secondly, the brand that Oliver referenced earlier. Third our distribution reach. And then fourth, a lot of the global IT platform. So collectively, we believe this will drive that 4-point margin improvement. Moving on now to Euler Hermes, our third part of the segment. Now, this is a really cool global business, #1 in the highly profitable trade credit insurance market, 25% market share and the best NPS in the industry. It has super high barriers to entry for new entrants, and I think our own competitive moat is built around 3 core things. It's built around credit assessment, credit underwriting and then the real secret source actually is in the claims and collection capability. So in terms of credit assessment, over the years, we've built up a database now that exists for -- so we have credit data on 80 million companies globally. And through the deployment of a range of artificial intelligence tools, which we've developed over the last 5 or 6 years, we can make automated buyer decisions on 80,000 customers per day. 80,000 customers per day, no one touches that business at all, okay? It's a remarkable setup. This is underpinned by 600 credit analysts, which give a super strong service to our customers. Then as I say, that the real quality at the end of the process is our claims and collections capability. And over the 5 years pre-COVID, this team, and they're spread all around the world, were able to bring down the initial amount of a claim by 40% through their actions, which obviously gives us a great benefit to the client and also great for us in terms of loss ratio. So this is a data-driven, tech-enabled business led by market and credit experts, and one which we're rightfully very proud of. So in terms of output, this business has, over the last 20 years, run at an average combined ratio of 83%. And for the 4 years since we've owned the last part of the minority stake, it's generated a cumulative operating profit of EUR 1.4 billion. As you can see here, there's been numerous shocks and challenges economically. And what's great about this business is that they can really flex their underwriting approach, risk appetite and products super quickly to protect the business. The slightly elevated number there in 2020 is as a result of the state support schemes, which were only in Europe. All of those were off now as of the 30th of June, and the business has returned to a much more normalized run rate of profitability. Okay. So the fourth -- sorry, thank you, partner. Growth. We should grow this business as well, obviously. So the profitable growth, given that the track record of history we've got, the growth we want from this business is 6% going forward. So we want to grow this business at a CAGR of 6%. That's double what it's been historically. 2/3 of that growth will come from our traditional trade credit business, but with a particular emphasis on the U.S. where the market has been underpenetrated for a good period of time. The other 1/3 of the growth will come from some specialty trade credit business plus also a focus on surety given some of the unique credit skills we've got in the business already. In order to bring the business in line with the group across the board, we will be rebranding this under the Allianz brand going forward into the first quarter of 20'22. Thank you, partner. And the final piece on Euler Hermes is that, as I mentioned before, a lot of these businesses are fairly intertwined. So what we've done here is to use those credits and data capabilities to enhance our business elsewhere. For instance, we use the credit skills from Euler Hermes now to help us underwrite D&O in AGC&S. Okay. The final piece now we'll move to the reinsurance which is an internal reinsurance vehicle, helping us to manage both capital and risk across the organization. It's also the entity which purchases our NatCat retro program. But the core business, as I say, is about managing capital and risk across the group. It does this via writing quota share business of all of our operating entities. And over the period shown here, it's generated over EUR 7 billion in cash benefit for the organization. It does this by taking advantage of the diversification benefits of the group, and that also enables us to write third-party reinsurance, again, because of the diversification benefit. Now, we write a modest portfolio. It's about EUR 1 billion, give or take, but it runs at a 94% combined, a 15% ROE and is very low in terms of volatility. So never in this period, has it been above 100%, and most of the business is low volatile structured reinsurance. So you should not think we're going to grow this business significantly going forward. We literally will flex it up and down with the market, but we'll be very focused in terms of value around both that combined ratio and the ROE. So let me just briefly touch on the NatCat program. On the right-hand side of the slide here, you can see the performance of the program over the past decade. It's been super resilient through some very difficult CAT years. So overall, it runs at a cost to us of 1.9% of net premium earned. And on the left-hand side, you can see the actual setup for the current program. So this shows you the 2021 program. It's been, as I say, resilient in a pretty difficult CAT year, and you can expect us to continue with a similar program going forward. We've just actually tested in the market, but given the resilience and given the performance over a long period of time, we'll stick with this program, but you should expect us to increase the aggregate protection going forward. And we're in the market now to do that from 1/1. This NatCat structure, this retro structure, is very conservative compared to our peers on a number of levels, not least of which the percentage of operating profit exposed or the percentage of group equity at risk as a result of this. So it's a super strong program. So before I hand across to Andreas, let me try to pull this together in terms of the ambition for commercial going forward, I firmly believe that the actions were taken on AGC&S, the work we're doing on the mid-core business and the profitable growth from Euler Hermes will enable us to generate an additional EUR 500 million of operating profit by 2024. This will come by taking the combined ratio of AGC&S from 98% down to 95%, mid-core from 97% to 93%, and most of the profit growth will come from those areas, but also strong growth and profit from Euler Hermes as well. So that's really the story for the commercial business. And with that, I'll hand across to my good friend and colleague, Andreas Wimmer, for the Life sector. Thank you.

Hello, everybody, and good afternoon. Oliver Bate has already outlined in his presentation, our strong position in Life, the strategic transformation and the convergence to asset management. I want to show how Allianz Leben is implementing this strategy, building a very strong value proposition for policyholders and shareholders. A value proposition that is based on capital-light products and reliable, steady growing dividends. Now, let's start with some key things. You can see that Allianz Leben is a core part of the Life & Health segment with an operating profit of EUR 1.2 billion, around 12%, so of the operating profit of the segment and the value of the new business. In the German market, we are the clear market leader by size and number of customers. But very important, we are highly profitable with a return on equity of 13% and EUR 700 million of dividends and a healthy Solvency II ratio of 270%. Now, Allianz Leben is focusing on 3 strategic pillars. The first one, continuous adaptation of the business model to the low interest environment. So Allianz Leben is focusing strongly on capital-efficient products, which are really balancing the returns and the potential for the customer and stability and security. And we will grow our share of protection and health products. Second, shareholder value. We want to ensure shareholder value by, again, steady growing dividends. Risk management and capital management is a key to that, and again, stabilizing the Solvency II ratio. And the third one is we are part of the Allianz ecosystem. And we are helping to have a steady inflow, net inflow for asset management for our asset managers. Allianz, as a long-term strategic investor can really help to unlock the opportunity of alternative assets to the group. And thereby, at the same time, embracing our targets for sustainability in investments. And we will further continue to build up digital platforms which can be used as shared assets in the group. Very important part of all that is looking at our in-force portfolio. Let's see that on the next chart, where you can really see how we match the in-force business, the guarantees, how we manage that. Now, let's have a closer look. What you can see here is over a period of 30 years in every sec and every year, the net income, the current income of fixed income assets and real assets are higher than the cash flows from guarantees. What you can also see, if you do this over even longer time period till 2018, there is a huge buffer left of EUR 100 billion, a buffer that is available, on the one hand, for policyholder participation but also for shareholder return. And the very nature of this buffer is that it absorbs volatility. So this market volatility does not meet anything harm or harm the company. Also very important, all guarantees are matched and fully funded, comfortably funded. We match duration of assets and liabilities and, also very important, our average guarantees are about to decline strongly in the next years. For instance, to 2040 -- 2025 to 0.9%, and 2030 to 0.5%. But most important, this in-force book is as Oliver mentioned, highly profitable. The return on reserves is 44 basis points. To compare it with the German industry without Allianz, it's about 20 to 25 basis points, so you see the superior profitability. Now this strength -- this financial strength enables us to invest in a very attractive asset allocation. That's what you can see here. We have invested over EUR 100 billion in alternative assets, infrastructure, real estate, private equity and private debt. Now, here also we come to very close with our asset managers, Allianz and PIMCO. And you can see that we generate a lot of asset management fees, but most important, we create an uplift in our current yield of 40 basis points, a really impressive number. And this helps us to drive product innovation to shape the market but also to drive conversions of asset management and life. So let's have a closer look at our products and market approach. Product innovation is a key for Allianz Leben. And we have really introduced several new product categories with reduced guarantees who have a higher expected return, while at the same time, offering stability and security to customers. And our ambition is, till 2022, to have a protection level of 80% in the new business. So 80% of premiums paid in. Now, when it comes to the business mix, we also try to increase the share of protection and health products. If you look only at Life, the average is about 15% in our new business, but we work very closely with our colleagues also from the Allianz [Privatschutz] to generate integrated solutions for private customers and corporate customers. If you would include also the Health business in this portfolio view, we would be close to 30%, so I think this is also a very interesting and reliable number. And again, investment strategy, this is really adapted to the very low interest rate environment. We constantly improve and increase the share of alternative assets, giving us this uplift when it comes to our investment returns. So our ambition is, for 2024, to have a new business margin above 3.5%. Now, let's look a little bit closer to this evolution of our product innovations. What you see here in this chart is this, how we have managed this transformation in the last years. We come from a world with traditional products, with guarantees and only investing in our general account. Now, we have switched to modern innovative products. Products with reduced or no guarantees, really balancing returns for our customers and security and stability. What are the advantages for the customers? This more flexible asset allocation is tend to generate higher returns. While we still can offer downside protection and very important as a USP for our industry, life long income, and we can combine that with attractive riders. For the shareholder, very important, these products are self-financing. That means from the moment they are sold, they are contributing strongly and very positively to our Solvency II ratio. So what we can do is we drive self-financing growth. And we are generating higher new business margins with this innovative hybrid products. These products are also the basis for international factory, the product factory from Stuttgart to other countries. We have been already delivered products to Italy and Spain, and we will go to other EU European countries. Now, also very important is how we bring that to our customers. And in the next chart, you can see like a little screen from our digital advisory tool. And I really like it, because what you can see here is that customers can learn and understand how they can balance returns and guarantees. In this example, it's InvestFlex, one of our hybrid solutions. The customer, for instance, can enter the guarantee level here at 90%, and then he sees what the part of the portfolio, which really goes into equity investments, for instance is, in this case, 30%. Now, if he is changing the guarantee level, for instance, now to 60%, you can see how increasing to 55%, giving him much better opportunities for higher returns. It has been really a journey to bring that to the market, but we have been very successful with that approach. So let's have a look to the next part to our dividend, and this is in the core of this presentation. What I want to show is that given all the strengths you have looked at, our in-force management, the average guarantees going down, stable investment returns on the other hand, and this is very important, growing expense and risk results, which really balances and stabilizes our gross surplus, which we then can transform into dividends. And this is all highly resilient. Why? I have shown these enormous buffers that keeps away market volatility from the shareholder returns. These buffers has to stabilize that even in an extreme stress scenario as seen in 2008. So reliable, steady growing dividends are in the center of this value proposition. Now, let's summarize that a little bit. I have already mentioned that we really focus on sustainable value creation for policyholders and shareholders. And we are doing this, on the 1 hand, by building on the core strengths of the company. Financial strength, investment strengths, technical excellence. But we are also doing that by making usage of a unique, collective business model. A business model where buffers from -- and funds from policyholders help us to grow the business. They enable us, these buffers, to invest in attractive asset allocation, closing the loop of convergence of asset management and life. And this investment approach is also a core of our value proposition for our customers. In this way, we can increase our dividend base, while at the same time, limiting or reducing our risk exposure. Therefore, I think Allianz Leben has a strong value proposition for the group for growing Life business, for growing Protection and Health business, and for growing our asset management business. In this way, I want to hand over to Emmanuel Roman and the high-performance team of PIMCO. But before I'm doing this, I really want to thank the team of Allianz Leben for their technical excellence, for their know-how, for them, driving innovation that really makes the difference. Thank you very much, and Manny, it's your time.

Good afternoon. My name is Manny Roman, and I am the CEO of PIMCO. We are celebrating our 50th anniversary in 2021. We started in Newport Beach, somehow by luck, and we are still there. We manage more than $2.1 trillion in assets, and we have clients all over the world. Someone told me it's more than 50 different countries, and regardless of where our clients are, we have provided our clients with best-in-class investment solution and services. And I think part of our success is our client-centric culture and the fact that we have an investment process, which really hasn't changed over the past 50 years. We have an investment committee where we meet 3 times a week. We discuss macro trend, we discuss the Fed, we discuss emerging market, we discuss real estate. We discuss many different things which are relevant to making the right investment decision. And it's one firm, it's one view, and it's one drive to deliver alpha to our clients. If you look at the next slide, you could see that our investment returns from our clients has been the foundation of our growth engine. And we think constantly about risk management. 2020 had its many challenges in terms of what to do in the COVID pandemic. We try to find customer solution for our clients and we want to deliver long-term outperformance to our clients. You can see that 91% of our assets are above the benchmark over the past 5 years, which is a sign of alpha, and 96% of fund are above our peers. If you look at the next slide, the industry has benefited from market better. And if you look at any equity manager, you can see that the rise of the equity market has drove the inflows that they could get. We have grown organically, and we have grown seeing strong client demand via net inflows. And if you look at the last 3 years, the market returns have driven 75% of the industry growth in terms of assets under management, while for PIMCO, we have experienced a 40% higher growth rate from client inflows relative to the industry. If you look at the next slide, you could see the resiliency to our business. And the fact that we have a long history of serving clients in both retail and institutional markets across the globe. We have tried to build an offering where we think of the various need of our clients, but also the various source of alpha in every region of the world. And as emerging market grows and as the world become bigger and bigger where you find new source of alpha. And I think it's important, as someone who's been in this business for 35 years, to think that we constantly need to strive for new source of alpha because at the end of the day, the ability to outperform is what make an asset manager special. it also enables PIMCO to quickly adapt to growth area and opportunity, but also to continue to provide solution and deliver on client needs. We have clients all over the world. They have complicated issue in terms of delivering solutions to their own retiree and benefit of the plans, we're here to help them. If you look at the next slide, you could see that we have had a pretty good 5 years. Scale and diversification, and of course, our performance of returns, have translated into strong business results. And you can look at our asset under management and revenue, and they have grown 1.4x since 2016. While our profit, or operating profit, have grown 1.5x. And I think it's a testimony to the fact we're on a tight ship and the fact that we have a declining cost income ratio. It's been, in 2021, another positive year for PIMCO. Our projection for the full year remain in the range, and of course, we are subject to a number of variables, including performance fee that won't crystallize until the end of the year, and of course, currency and market value until the 31st of December. When you look at the next slide, you could see that our strategy starts with our clients. Our clients have problems, they have needs. And our initiative, what we decide to invest in, are shaped by what our clients want. We focus on building our next-generation solution with alternative and private credit, ESG and of course, retirement across the globe. And to do this, we need to keep on hiring people. We need to invest in technology and analytics, and we need to invest in digitization. So we're transforming and adopting our organization into the future. And what's really important is, because human capital matters so much, we have to instill a culture of inclusion and diversity as well as innovation. We need to be able to hire the best people, make them feel welcome and feel that PIMCO is the place where they want to be. I always think that the strength of an organization our 25 to 35-year-old people that will be here 20 years from now. I will also say that what makes us special is a strong partnership with Allianz. Let me talk about alternative for one second. The PIMCO alternative asset under management are 4x larger than it was 5 years ago. And I think it's been trying to expand from an existing core competency in public fixed income into private credit, real estate, hedge fund, but also solution for the retail market, which are interval fund and closed-end fund. And we've seen a lot of opportunities in 2020. The market got dislocated and we've been able to put to work a lot of assets in the private side. You can see also on the slide, that it's been really important to invest significantly in building a technology and being able to invest into the transformation of our core business. Enhancing our investment process with analytics providing best-in-class client experience with our digital client perform, but also sometimes going on the outside and doing partnership and taking stake in companies such as Beacon and Hub. And I think we need to be open to sometimes look at the evolution on the outside with blockchain and what else we can do in terms of finding where to optimize the efficiency of PIMCO. Let me say a few words about our strong relationship with Alliance, which is the next page in the presentation, as a parent, as a client and as a partner, and it's been a key element of our successful growth, but also the execution of business opportunity. And for a long time, of course, PIMCO has united with Allianz Life partners to product development and distribution across various regions and life products. But it's more than this. It's also about us being able to have learned from a parent. We run a really good financial institution group. We manage money for a lot of other insurance companies than Allianz, and being able to learn from Allianz has better -- has made us better manager for other people, and that has been a really good and productive relationship, which start with the friendship between Oliver Bate and myself. If you look at the next slide, you're going to see that the industry has experienced a big difference between leaders and laggers, and that the capital markets are pricing a premium to leading asset manager that showcase breadth, scale, the ability to change and a diversified strategy mix. So that is really important to keep in mind. We are looking all the time at the public market. We know what the public market rewards, and we also try to focus on places where we can add value. And we can add value to clients, knowing what we know how to do and what we don't know how to do. So as we look forward, expanding our ESG and retirement platform are 2 important topics for PIMCO and for Allianz. We look to invent the next wave of solutions for our clients in this space. But of course, one crucial ingredient is to keep on hiring the best people and a total commitment to a culture of inclusion and diversity. And we strongly believe that the best talent leads to the best thinking and the best outcome from our clients and our business. And I think our inclusion and diversity strategy is to attract, develop, retain and get top talent in a diversified and global manner. So PIMCO continues to actively pursue investment excellence while seeking to evolve and to meet different needs from our clients in the context of very dynamic markets and policy environment where, to be honest, nothing is cheap, and we will need to navigate this for the years to come. This is a special year for PIMCO as we celebrate a notable milestone in history, and we look forward for the many opportunities to serve our clients for the next 50 years.

All right. That was the last formal presentation of today's Capital Markets Day. We will now take a break until a quarter past 2 and then continue with the Q&A session. Thank you. [Break]

Welcome back to the Allianz Capital Markets Day 2021. We will now have our Q&A session. [Operator Instructions] Finally, please keep in mind that this conference, including your contribution, is being streamed live on allianz.com and YouTube, and the recording will be made available shortly after the event. All right, that's all from my side for now, and we will now take your questions. And we will take the first question from Peter Eliot, Kepler Cheuvreux.

Thank you for the presentation and the good news yesterday evening and this morning. If I could ask 3 questions, please. I guess, if I've understood correctly, you've still got nearly EUR 6 billion back in the U.S. business. I'm probably being greedy here after the update, but I'm just wondering, is there scope to do even more in the future? And secondly, I'm wondering if you could just talk a little bit more generally about the back book market. I appreciate it's a reinsurance deal but there also seems to be a lot more sellers. I mean you said private capital now is more available than before. And I'm just wondering if that's sort of being driven partly by the healthier market. Maybe if you could talk a bit about that, it'd be great. And finally, you mentioned the 40 basis points yield uplift at Allianz Leben. I guess most of that is coming from private equity. I'm just wondering if you could sort of mentioned to what extent you feel there's additional risk involved there and how manageable that is.

Yes, Peter. Oliver Bate here. Let me address your first 2 questions. And then I hand over to Andreas for the question on Allianz Leben because he's perfectly suited to address that. So indeed what we have announced this morning is not a deal, Peter. It is the beginning of a transformation of not just the AZ Life business model to an asset-light and asset gathering model, but we'll continue to look at opportunities. As I said earlier, we have a VA block that we're looking at. We're looking at other parts to enhance capital efficiency, even maybe with new products that we are currently not selling because they are so capital consumptive. So it's a shift in strategy, not a transaction, and that's very important. Second, yes, we are looking at it beyond the U.S. Please as a reminder, our partners, particularly a resolution we've already done the first Swiss transaction from Switzerland directly to Bermuda ever, EUR 5 billion. That is going to move Switzerland's ROE in Life. Think about that 13% and above. So it's a part of what we are trying to do. So yes, the answer is there is more room. And yes, now we look at it in terms of value. If there are offers like we have a frenzy at the moment, then we will crystallize it if the value creation opportunities are not better than what we can do ourselves. The second one, Peter, that is very important, why it's a partnership and not a deal. Because we want to work with partners that supplement their capabilities with ours, and particularly growing the asset management side. Manny Roman said that earlier, the idea is really, really to not just reduce capital consumption and bring up ROE in AZ Life, but also bring more business to our outstanding asset managers and bring and grow their private capital capabilities and the whole old space. So it has double synergies in that respect. So this is not about taking capital out and redistributing it. We want to use it to grow the business in particular in a capital-efficient way. And we're going to do that systematically. But again, the U.S., Peter, is -- has been very much pronounced because there have been many transactions. The market is very efficient, there is strong competition. So it's very clear where the value is and how do we partner to capture it. In other markets like in Europe, it's not yet that developed. There's more sell market rather than a reinsurance market for many, many reasons. Now another thing I wanted to say is we spend a lot of time preparing this, actually almost 2 years, because the risk management component of this interaction is super important. And difference to other shorter opportunistic deals, we've established a risk management framework that make sure even under severe shocks, both parties do understand what is going to happen, what is the collateral going to look like, how does capitalization looks like. So we want to build something that survive shocks and can survive shocks rather than that is opportunistic. Now with that, I hand over to Andreas.

Yes. Thank you for the question, Peter. I think if you look at the asset classes, really all of them mentioned are really contributing to this uplift. So besides, yes, private equity is important, but also private debt. And real estate is also a big part of this uplift. Now the volatility, and that's why we like alternative assets so much, is really limited here. I mean, that's the nice thing about the accounting principle here. And Allianz Leben is a really long-term investor, can have these asset classes very, very well. So I would even say that alternative is -- alternative assets have to reduce the volatility when it comes to our investment returns.

Yes. And maybe, Peter, just to add even though Andreas said it all, what is very important, the reason why we and others cannot do this is, is threefold. The first is access to investment opportunity. We've been growing the old space for more than a decade. The second one is we get a higher margin. Yes, you can call an investment bank and say, "I also want to have real estate assets." But you're paying a lot of the value now on the acquisition side. We do that together with our asset manager, so we don't have to overpay in generating the assets, and we get a higher quality. But the third one is super important. Allianz Leben has, depending on how you run the numbers, 2x or 3x the buffers in its balance sheet. So it's not just a matter of what the absolute resilience is, but also relative to others, we are much more resilient and much more efficient because we built the policyholder reserves to a level that we are a lot more shock resistance than we really show. So when Andreas showed the Solvency II numbers, these are before transitionals. If you look at the transitionals, which are hard capital in the stress scenario, we're north of 300%, I don't know what gazillion percent. So really comfortable to be able to withstand shocks that others cannot manage.

Maybe I should add just one point from the product view. You will know that we already have launched a product. It's called Private Finance Policy where you can directly invest in these alternative asset classes. And we have seen that since 2020, EUR 1 billion have been invested in this, with no guarantees, but also seeing that this is providing stability to this, let's say, wealthy investors.

I hope that answers your question, Peter. Thank you very much.

Thank you, Peter. We will take our next question from Andrew Ritchie.

A couple of questions. First of all, Oliver, in the last sort of planning cycle, you spent roughly the same amount on buybacks as on bolt-on M&A, roughly. Is that a good rule of thumb? I guess I'm surprised -- I'd be surprised if it was, given the risk is if you keep doing more buybacks, that adds complexity. And you've told us today at length impressively about the group's in-house capabilities. So I guess that's the first question. Second question, a short one. There's an uplift in Asset Management fees from the U.S. deal, which I think implies that the Asset Management business wasn't getting commercial terms pre- the deal. So is there some kind of uplift to a shift to commercial terms? Because what was an in-house client becomes an external client. The third question is for PIMCO. I'm just curious to understand. I think what you're telling us is you're very happy with your existing alternatives capability. There's been a lot of your competitors aggressively buying alternatives, particularly private equity capability. Is that something -- I think you're saying you don't -- you feel you got it in-house. Linked to the expected growth in alternatives in private, do you then expect the overall fee margin for PIMCO to be higher in 2024 than today?

Okay. As usual, Andrew, thank you for your smart questions. Let me start out with the first component. It's very hard to make a prediction on exactly the mix between acquisition, share buyback or other capital measures. I want to reiterate the foundation is the growing dividend because that is what investors can rely on. And in deference to the past, we want to make sure people understand, our confidence is so strong that we cannot just keep the last year, but we raised it every year 5% regardless. Whether that means in a flat year raising payouts; or in another year, that's the -- that's one. And that's much stronger than it was 3 years ago because we have now a lot more control, we believe, around our own ability to generate cash and value. The second one is to your point on M&A, it's very lumpy. Remember, initially we didn't do much. We sold Korea. We really helped to stabilize, with Manny's arrival, to stabilize PIMCO. When I became CEO, we had EUR 15 billion a week in terms of outflows. So it depends on where you are in the cycle. We will do whatever maximizes value for our shareholders. As you know, we have very, very hard criteria for M&A. Giulio is making sure that we don't really waste our money. Sometimes it's hard to explain something because people look at value price to NAV. We think that's wrong. We need to really look at price to earnings that we are paying in relative to the synergies. Think about Poland and we're building the scan. So the answer is, yes, we want to have a balanced approach but at any point in time, it can be lumpy. As long as our share price or share is the best investments, we obviously prefer that and to invest in our own share. And we're going to do that as long as that makes sense. Over the long run we want, as we said, to grow the company more. I think if you do excessive share buybacks, what we are basically doing is putting the company mentally and then capitalize into runoff. So we need to get the balance right between maximizing return on invested capital, and that we don't need to send that back. But if we can invest in profitable growth, we really believe we should do that. And we have been doing it. It will not be with transformational deals. That, I would like to reiterate. Same story, 2015 as '18, a lot of money is wasted in very large transactions. So we're focusing on systematically building the franchise. Whether that is in P&C, that's been in Life or in Asset Management. And I'll hand over to Manny now. But it's not like we are not looking at investments. In this current frenzy that people are seeing, we haven't found a transaction yet that would fulfill our return criteria. But I think Manny is the better person to talk to.

Thank you, Oliver. Andrew, thank you for your question. Let me just give you the framework. So rates in the U.S. at [ 1.42 ] when I left my desk this morning. And most of our clients whether the public fund or whether the insurance company, need to deliver returns above 7%. So the bottom line is they do need private solution to be able to deliver the returns that the stakeholders want. And so there is a big opportunity in private credit for both pension plan and for insurance company to actually purchase long lockup structure. And as you correctly pointed out, the margins on this product are higher. Obviously, performance is all what matter. And so if we perform, they will come. And if we don't perform, they won't come. Every time people come to kind of market, we have 2 options. Option 1, do it in-house and hire people. Option 2, buy from the outside and try to do an add-on transaction. What I can promise you is, every single transaction we have looked at from outside alternative manager makes no sense from a shareholder standpoint. And I think we've came pretty quickly to the conclusion that we're much better off hiring people and building in-house capabilities and growing our business accordingly.

Yes. Thank you, Manny. I missed the question, Andrew, on the question of fees at market or not. I think the -- this is a quick solution if you look at it superficially, sorry to say. But the point is we are also having different asset mandates. So consistent with what we just heard from Manny, the new asset allocation will be more focused on alternatives, on more sophisticated products. So we always use market benchmarks to say, if you are replicating an index, that's the fee that we would get from anybody. And PIMCO, like everybody else, is held to the same accountability as others. But as we all add more value, as we move into more of the alternative space, as we create higher risk-adjusted returns, also the fees paid out of our Life funds to PIMCO and others will go up for the right reason. Because they're adding more value and they're creating more risk-adjusted returns. So the good answer is over the long period, not just for in the term called resolution partnership, but across the universe, as we are scoping out and building out alternatives, the fee income for our asset managers because we can outperform for our policyholders as much as we can for our shareholders will go up. So the earnings power and asset management will be more stable and much higher.

All right. Thanks, Andrew. We will take the next question from Vinit Malhotra. Vinit, please go ahead.

Yes. Can you hear me, please?

Could you speak up a little bit, Vinit, please. Thank you.

Okay. Can you hear me now? Is that better?

Yes.

Yes, that's better.

Okay. So my first question is on -- I have 3 questions, please. Life PIMCO and P&C. On Life, really, the question is -- Two questions, if I can. One is that the bank assurance framework that I keep hearing about in the regulation of the banking world, seems to have made it more attractive for banks to get involved and compete with insurance companies. Oliver, what do you think, is it a real risk? Or is it that you expect the banks to think of the partnerships that you think they should think of? So I just want to understand a little bit of that topic. Then on the Life side, I would just wanted to ask Andreas, if just before COVID hit, there was some focus in the market. I'm now going back to '19 about new perspective of products which would be needed to push the company further on in this exceptional delivery mode. Is there some effect, is that just suspended conversations so that's the Life topic. PIMCO, just reminding the Slide 122, please. I think that there's a lot of Allianz Real Estate coming in here, which might have helped the slide to look like it is. I mean, could you help us understand that minus that effect -- any of that effect is there, and minus that effect, how much has been really the underlying sort of push in alternative assets? And last question, please, for this on commercial. The MidCorp, which is one of the important topics in your slide show, it's quite a popular area, isn't it? I mean, we've heard one of your competitors a few weeks ago, also talk about MidCorp and I've heard several other insurers talk about MidCorp. I mean, how are we going to differentiate? Or is it looking at different lines or some comment on competition in MidCorp, please?

Yes. Vinit, I'll start with the first question that you asked. I call it the French banking wet dream, which is that it's called the perpetuation of the Danish compromise, which has been proposed in the background to be perpetuated. By the way, it will be decided in 1.5 years, right? So I'm surprised, including from your bank to see that now everybody has a strategy to do that. Now let me explain for the broader audience what it means. It basically means double leverage in capital, which is defrauding policyholders, particularly in the French market by double leverage in capital from the bank and insurance. Now since the banks have 60%, 70% of the market, it actually pertains to only 2 big ones. And now the idea is to export that into other countries. We have a little bit in Italy with one large bank that does a 2, but by and large, is a phenomenon. Now our industry, by the way, also our policymaker will make sure that none of that happens because it basically means that the banks that are showing 14% or 12% core Tier 1 capital ratios actually have about EUR 10 billion or EUR 7 billion less capital when they claim they have. Can you really believe that the ECB, the strategic -- European Strategic Risk Board, our regulators will allow people to deprive policyholders of better protection. By the way, just after they moved the corporate pensions from Solvency II, back to Solvency I, which means half of the capital, I can't believe that. So good luck with that assumption and good luck for people that are building a strategy on double leverage and capital arbitrage. I have in my life, never seen that prevail, but it may happen and then we'll deal with that if needed in the courts, and I'm serious. The second one that your question is pertaining to is very important on the product side, and I hope I understood the question because it was not very, very clear. We have already moved almost all of our new business into the target product. What you see as recurring premium really from other products that is still in old products. So new business in anything that is not target is very quickly evaporating. And we are -- on the back book, as you saw, deploying a plethora of levers, whether that is selling books, reinsuring book, renegotiating or actually redeploying in-force business by talking to the distributors and clients and moving them from one product generation into another one. The reason why we do this strategically, the way we do that because we don't have a problem like others have that have to sell at a loss, by the way, we had one in Korea, but we fixed that 5 years ago, we have made promises to people, and we're not going to go and say, now we sell you to somebody else unless we absolutely have to. And the only place where we had to was in Korea. So it's very important to maintain the customer trust, to maintain the trust of the regulators, while we are moving into a capitalized product. And by the way, the way we measure our success is not just ROE, but net crediting rates and benefits to policyholders. It's very important, and we're going to talk about that some more in the future. The reason why we're going to be successful is not just we drive the NPS, but comparative crediting rates. So when you go to Germany or Italy, Allianz, not just offers the best returns for shareholders, but also the best value to policyholders. Only when that happens, then you can win and you can grow market share. Now with that, I hand over to Chris on the commercial lines.

Sure. So the question around MidCorp. I think I tried to touch on this on the slide earlier on. The competitive advantage we've got is around our brand, it's around our distribution reach, and it's obviously around our global platforms as well. So brand sort of speaks for itself. Distribution, the differentiator for us on distribution is our agency force. So our business is about 50-50 between broker and agency force. A number of our competitors don't have the quality of agency force. We've got in Europe, which really helps our business. Then the third piece in terms of the global IT platform, I don't think about that as purely IT, but think about it, please, in terms of the cloud-based pricing portfolio management and risk assessment tools, which we can bring to bear very quickly in every market. So that technical excellence will help us to drive down the loss ratio overall. And it's for that reason that we believe we'll be successful in that market.

Let me answer the question on Real Estate. So there are 3 buckets. Bucket #1, opportunistic Real Estate where the target return is 15% to 20%. If you do a quick search on PIMCO, you'll see that we recently taken private REIT called Columbia. This segment of the market we've been doing for the past 15 years. We have private fund with long lockup where we try to deliver those returns. I think we're quite active and we had a pre-existing team. The second bucket is prime and core real estate. Oliver and I had talked quite a bit about where we should house the ARE business. We talked with Günther, and we decided because of the synergy that you can make a very strong case for a shareholder the Allianz Real Estate business should be housed in PIMCO where we could expand our capability and especially have synergy with the third bucket which is the real estate lending business. This is something we've done for quite a long time. We are a fixed income house. We think we understand the risk in real estate lending quite well. It's quite a big market in the U.S. We have dedicated private fund doing just that. We felt that having a better and bigger footprint in core real estate would enhance our capability to be able to expand this business and we have. And so when you look at our offering, it's, of course, work in progress, but it's incredibly strategic for us for the next 5 years and I think quite exciting.

Thank you, Vinit. Okay. We will take the next question from William Hawkins. Will go ahead, please.

You can hear me, can you?

Yes.

We can also see you.

Slide 73, when you talk about your IT budget -- sorry, I've got feedback. I'll try and get out of the way. Slide 73, you've got the EUR 4.2 billion IT budget, which is split 40-60. That's been quite constant for a while. And I'm thinking when you look out to the end of this business plan or the end of 2030, are there going to be any material changes? And I suppose the question, Oliver, really is, I appreciate the importance of the profit guidance that you're sticking with, but you could take a small hit to profits substantially to accelerate your investment in the change process. And I'm kind of wondering why you don't think more about investing more aggressively in the change parts of the IT budget. Secondly, could you just be clear again on your definition of excess capital? You're very clear that you will repatriate excess capital, but it's quite hard to think about how we quantify that statement. And as a small detail, why have you -- why have you decreased the floor for Solvency II to 150% from 160%. It feels to me like an unnecessary detail given how comfortably capitalized you are. And then lastly, please. With regards to this current planning cycle, have you examined whether the asset management business should run with more risk capital than the $1 billion that's currently allocated? And I apologize for the stented nature of those questions.

No, it's very good. We can hear you loud and clearly. Thank you very much. So Barbara can spend probably some time on it, but I'll do it quickly in the interest of time. This is a little bit like drinking good wine. If you drink too much of good wine, you get a headache. So we believe in technology, we are spending a lot of money, and it's exactly right what you have said. We need to spend more money on change and less on run. So what Barbara has described is we need to move the budget from maintaining legacy platforms into creating competitive advantage front to back, both in customer-facing technology in the intermediate layer and then in the back-end systems, if and when that is right. So you've outlined it. And the only way it works is we need to retire and decommission old business models, old products, processes and with them old applications. And we have a very ambitious decommissioning plan to shift the balance. Can we do better? Absolutely, we can still do a lot better on this one. With that, I hand over to Guilio for some of the questions on how the numbers work.

Thank you, William. So starting from the question regarding Asset Management and allocation of capital to Asset Management. No, we are not going to physically allocate more capital to Asset Management. And by the way, there are clear requirement of capital for Asset Measurement. So we're going to stick to the requirements. Now if you ask me to say more complicated, I tell you, at the end of the day, we are holding EUR 40 billion of SCR in total. So it's a big number. And I don't -- it doesn't look like we have a probably EUR 40 billion of SCR where we also keep ratio on top to have enough capital for sustaining all kinds of risks that we might have. So -- but the answer is clearly, we're not going to allocate physical capital to Asset Management because of what we're going through. On the excess capital definition, I will say that 180% is our solvency ratio, where we say that's the target level. So fundamentally, you could say, all the capital on top of that is excess capital. But then clearly, you have also -- the parameter that you need to consider. For the sake of what we presented today, we are just talking about the change in the excess capital. So when we speak about the EUR 12 billion, that's the change in the excess capital. So that's what you need to keep in mind. And then you had another question there on 160 versus 150. Look, that's a little bit body language. In the sense of -- we are really not concerned about the volatility of Solvency II, right? And the point is sometimes, and we saw that also during the COVID, people get very scared because the solvency ratio is moving up and down. And I would say we should not be scared about the volatility of Solvency II. I tell you something, as we start the meeting, and we go and we finish the meeting, solvency ratio might move by a couple of percentage points, because rates can move up and down sometimes by 10 basis points. And our message is, we shouldn't be scared by some volatility of Solvency II ratio. That's what we can tell you from our side. We are comfortable with the volatility, and we hope that you are going to get comfortable with some volatility, too. So that's more a body language you say, that's part of the equation, but we have enough capital, liquidity to sustain this volatility.

Thanks, Will.

Thank you, William.

Then we had a question on the IT budget.

I did that.

You did that. Okay.

Okay. Very good. Then we will take the next question from Dominic O'Mahony from Exane BNP Paribas. Dominic your line should be open.

Just 2 really from me, both in the context of the broader point that you're making about shifting the business towards capital-light, both organically and through the strategic partnerships. The first is really just on the ROE target. I put together the beginning of the strategic partnerships that you've laid out, the organic shift to capital-light as well as the margin expansion in your growth targets. I might have thought that actually that would be positive for ROE and that you might be able to afford to set an ROE target above that 13%. Is this just you being conservative? Am I going in the right direction? Or are there other factors in the equation that we need to think about that I might will be taking into account? And then the second question is, one point that's being put to me by investors is, while the board shift to capital light is to be welcomed, there is a risk that this also erodes margins. And actually, the big question is, do the insurers have powerful distribution capabilities to protect that. Chris, you mentioned the advantage in agency distribution commercially in Europe which is very clear and thank you for explaining that. I wonder if you could explain maybe for some of the other markets, other product lines where you see your distribution advantages and indeed how you're dealing with some of the disruptions that you see in the market, for instance, the increased share captured by aggregators.

Maybe I can start with the ROE question. So on the 13% plus. As I said before, the idea is to have a very robust 13% plus. Now clearly, the question you're posing is can we go to 14%. That's something that we are clearly going to have as a sort of ambition. But I want also to tell you something, let's say the Life business where we are 12% ROE, and we know that the transaction that we did, we announced today is going to give us about 1 percentage point of ROE. So you can see already 13%. But I can also tell you, we did the Aviva transaction, and the Aviva transaction, clearly, at the beginning is going to be a little bit dilutive on ROE. But that's what I'd like to say. We are building also for the Capital Market Day of 2024 to 2027. So you need to put together all the elements. And clearly, if you are just focused on lifting the ROE as much as you can in the next 3 years, you can get to 14%, very easily. But as you think also about really building up franchise and so on, there are clearly steps that you need to do in between to track a little bit from the ROE. And I like to think sometimes in EVA. When I joined Allianz, there was this concept of EVA. So at the end of the day, if you achieve 13 -- robust 13% ROE on a bigger basis, sometimes can be better than every 15 on a very, very light basis. But the answer to your question is, sure, we are positive. We're going to work on both. They're going to hedge, but the Aviva transaction, for example, is something that is impacting our ROE for the next 3 years by about 50 basis points. But then clearly, as we go down the road, you're going to see an ROE lift coming eventually also from that transaction. And the other question was on distribution, I understand. I was not sure about the question. So I think it was about distribution, where we have distribution advantage on the Life side? I'm not sure I got the question properly.

Sure. The question is -- so Chris talked about the advantage that you have in commercial distribution in P&C in Continental Europe. I was wondering if you could comment on some of the other products and markets where you see your advantage when it comes to distribution.

Yes, Dominic, I think you -- it's Chris Townsend here. So you touched on it in relation to the MidCorp business and then you referenced aggregates. Obviously, aggregators in the commercial business and not really a factor. The concept of a man and a van right at the bottom end of the SME market is starting to play out in some of the direct and aggregated business, but nothing more sophisticated than that. So from an aggregator market, we're well placed in the markets that matter. For instance, the U.K., we've got a very strong proposition in the LV business, which is a super strong business in the U.K. We've just launched a new capability actually on the aggregators in the U.K. Just to take account of the changes which you're coming with the FCA review on the first of January there to make sure. We can protect that business as well as our direct business, but we're not seeing it on a broader basis across the commercial business.

Okay, Dominic, is that all? Or did we miss something?

No, that's very helpful. I just wondered, whether in other product lines, for instance, in Life, for instance, where clearly, the agency force, as I understand, is very strong in your core markets. Any comments or color on those would be helpful.

Well, I think in general, the distribution power of Allianz Life is extremely strong. It's -- as you have seen in the U.S., it's really fantastic this year. I think in Germany, we have really made a huge swift from traditional products as mentioned, to capital light, which helps us to fuel the growth also for our asset managers, we can grow much more efficient. And also our agents in Germany are working extremely well in Life and Asset Management this year. And I see the same in other countries. So I would say we are very, very well positioned for instance, take Italy when it comes to Life distribution. Actually, I think that is one of our really strong assets as Allianz Group to having this distribution power.

Yes, very well balanced. We always tend to forget Asia because we sit here in the core of Germany. When you look at the new business value growth in Asia, it's been one of the strongest that you've seen even amongst peers. So while the in-force looks stronger, if you look at new business market shares, we're now the market leader in Indonesia, we are overtaking many competitors. So that is one thing in addition. And the vast majority of that is coming, again, like in Europe, through a diversified set of distribution channels, very, very strong agency distribution. We are working very much with focused regional banks where we have complementary skills and we're building out other capabilities as well. So we don't really rely on any of those. Even in Germany now, the brokers are the more relevant tail channels in terms of volume and our agents. And very few people do understand that. Next one. We have about 8 minutes to go.

Yes. We will take our next question from Michael Huttner from Berenberg.

Fantastic. I have 2 questions. One is the elephant in the room. I think you mentioned the word and I thought, well, that's a nice introduction. And I just wondered if you can actually speak a little bit. Because the impression I have is that the topic which occupies, I think a lot of investors' minds is so small for you that you kind of -- it's almost like it doesn't feature in the 3-year plan. So I just wonder if you can speak about that. The second question is on the -- It's for Giulio. Last time in Life, you promised 3% growth. You achieved 6%. This time you again was promising 3%. I just wonder why you love 3% rather than 6%. It seems to me that you can easily beat it to. You mentioned the Aviva plan and stuff. So I just wondered why is there this kind of reluctance maybe? And then the final question is a little bit, a tiny bit. You ask us to adjust for natural catastrophes, as a finishing point or starting point. I just wonder if you can say a little bit more about that because I always worry, if insurance has grown commercial lines, you obviously grow your exposure to more volatile business. And I just wondered if it's something that might put some investors off. I just wonder if you can give us a little bit more comfort on that.

Maybe I can take his question. So from the first question, I really tell you. I'm very forthcoming, but there is not much I can say on the first question. So we go straight to the second question, which I was expecting, why 3% on the Life side and not more? And that's the point, we are also doing back-book transactions. So from that point of view, this back-book transaction are taking away some profit. I can just tell you that back-book transaction that we did in Switzerland, EUR 20 million of operating profit, back-book transaction that is very small in France, it's only 5%. But when you add up, at the end of the day, it's going to detract a little bit from growth. But on the other side, you see the ROE going up. And maybe then we're going to surprise you on the upside, but think about is an ROE play, not just an operating profit play. And then on the last one, on the normalization nat cat. Your point is very valid. So we feel good about normalizing 2021 for the nat cat level because we think it's really excessive compared to what we should expect. This said, we are very careful about this point. And as we think about our planning for 2024, we have a little bit more of an allowance for nat cats. So from that point of view, we are not just saying everything is perfect and let's forget about nat cat. We think it's fair. At this point in time, as we present you the numbers for 2021 to make a normalization in order that you can see the progress over time. But clearly, as we think about the future, we are clearly going to monitor the situation very carefully. We have a little bit of a high allowance for nat cat. And as Chris said before, anyway, our program is pretty strong. So from that point of view, I think we are describing the situation in a fair way regarding the current performance, and we are very careful as we move forward into the next 3 years.

Can you give a figure on the budget for nat cat?

We are lifting it up by 20, 30 basis points, which doesn't look like a big number, but it's a move, and then we are going to monitor the situation as we -- where we get more experience in 2022 and beyond.

And also, I'll just add that the commercial growth we've spoken about is not intended to significantly increase the nat cat exposure. So it's in low nat cat areas of the business.

Michael, by the way, the issue has not been in the past nat cat, if I may just add finally because you addressed the question, has been large losses in property, which across Europe has been underperforming also in terms of rate relative to technical requirements, and we systematically continuously clean the portfolio, mostly by the way, broker distribution. So it's our own fault. So it's about discipline. And as Chris has said, we also reemphasize tail risk management, i.e., having proper limits, aggregates and reinsurance protection. So it's all about being disciplined, not about being lucky. All right. One more?

Yes. Thanks, Michael. As we have to finish this event at 3:00 p.m., we can take one more question. And give me a second. We will take this question from Thomas Fossard from HSBC.

First question will be on the group Solvency II sensitivity. I was wondering if you had already quantified the potential benefits of the U.S. back-book reinsurance deal. That was the first one. Maybe a second one, I can squeeze it, Oliver, I remind you commenting and maybe complaining a bit on the return on equity of the commercial lines versus retail. Could you potentially indicate how much the gap would have been closed by 2024?

So again, take the first question. There is no impact in reality on the Solvency II sensitivity coming from this transaction because, as you know, we are including Allianz Life with the equivalence. So they are coming to our numbers with the local RBC model and the local RBC model, the fix in this annuity is not really sensitive to interest rates or credit spread and there is no equity component, let's put this way, from a general account point of view. So basically, the sensitivity from a group point of view were not affected positively or negatively from this transaction. Just the level is affected by 9 percentage points.

Is that okay? Wasn't that the question, Thomas?

Yes, it is.

Very good. Then I would like to use the last 90 seconds, if I may, it's another one?

It was another one, ROE.

I'm sorry, I didn't get it was ROE. That's also my question. So there is a difference between the ROE and personalized and commercialize. I tell you, personalize ROE is north of 15% -- well, north of 15% in retail. And in commercial lines, we are -- we need to differentiate a little bit. We are about 12%. I think it's a little bit better, but we need to work on the ROE of AGCS a little bit. The reason anywhere for the different ROE between personal lines and commercial lines is one that combined ratio tends to be a little bit higher, but we see also different capital intensity, so between the 2 lines. So -- but fundamentally, I think about well north of 15% on retail. And I will say double digit, low double digit in commercial lines. But clearly, we will try to get to a little bit of a better outcome in the next 3 years.

Yes. So that's it. We are a little bit over time. I would like to use the opportunity to thank you very much for your interest and attendance. I hope it was worth your while because we spent some of a few hours of your time. We were very excited to present our new plan to you. We, as a team, feel that Allianz is exactly going in the right direction. I'd like to use the opportunity to thank my fellow colleagues here on the speech in Newport Beach and somewhere else in the off, and take the opportunity to thank our spectacular team who is prepared and run the show from behind the scenes, you are making Allianz successful. We are just the faces. You're at the engine room. Thank you very much, and enjoy the weekend.