Allianz SE (ALV) Earnings Call Transcript & Summary

Good afternoon, everybody, and welcome to the Allianz conference call on the financial results of the year 2022. Before we start the call, let me do the usual housekeeping and remind you that this conference call is being streamed live on allianz.com and YouTube, and that a recording will be made available shortly after the call. [Operator Instructions] All right. That was all from my side for now. And with that, I turn the call over to our CEO, Oliver Bate.

Hello, everybody. Thank you for joining Friday afternoon. For some people its already weekend, so we are happy to have you with us. I'm just going to report in about 10 slides for the summary of the year and then Giulio will lend his usual quality address all your questions and give you some more insights. So we had a very strong year given the environment and revenues and profit at all-time high, EUR 14.2 billion. And that's already conservative as we'll discuss a little later. So much more than I would have anticipated in the middle of the year, and it shows really the resilience of the franchise. What's more important is the underlying drivers of resilience is competitiveness. And one of the things that we have been talking about for a long time is can we consider -- create consistent improvements across the portfolio, particularly around productivity. So that's why we've added a point here. If you think about it, a further reduction of the adjusted expense ratio, which is sort of looking outside of the portfolio of partners, we have had more than 240 bps reduction in the expense ratio since 2016, and that keeps on coming and will target it for the next few years as well. What's very good has been pricing power. You see that in the P&C revenues up and the margin up and its keeps on being consistently tested. What is also important, which you don't see on the slide, is that retention has been very high. Sometimes when we have been raising prices to balance inflation, then you see elapses increase, and we haven't really seen that, which is very important and testimony to the strength of the brand. Solvency II at 201%, that's actually not the most important number. It has to be seen in combination with what Giulio is going to describe in terms of resilience and stress test. We have been working in 2022 to decrease the volatility. And when you look at the shock scenarios, they are much more resilient than they were before, and we are going to continue to take risk out of our balance sheet over time because that's really important to assess the 201%. Payouts have been attractive again. We are relentless in giving capital back that we don't need, EUR 6.5 billion that lifts total payouts since 2016 to EUR 38 billion. And that despite significant investments in the growth of the franchise that you see, for example, this year with the consolidation of former Aviva Poland portfolio, which has a very nice effect. And our new business margin. And you will see also a profit uplift in the coming years for the moment, seeing more the down side in the restructuring, which by the way, explains also a little bit -- somewhat lower-than-expected ROE in Life. Again, the first 2 or 3 years, you have accounting mismatch. Now this is despite all of the issues that we have seen last year. I don't want to go through them in detail, you have all experienced -- citizens and employees. Now the portfolio level with the record operating profit and dividend increase of 6% to EUR 11.4, which we are going to propose to our AGM are all fine. The share buyback program that continues at a steady pace. So we're not panicking about it and we are going to continue execute the program that's underway until April. But let me repeat, we have no incentive to sit on money and capital that we don't need. And we are going to continue to return it to our shareholders over time as we say fit. But we are also in no rush to just try to do something every quarter. Now what is very important is this slide because what this basically shows that all segments have been very resilient. Even Asset Management that had a [indiscernible] carefully, we haven't had I think in the last 40 years plus or so, equity and bond markets down. We have very resilient revenues. We have very resilient margins and EUR 3.2 billion operating profit. I don't know too many asset managers of our size with that level of profitability in that level of margins. Life and Health profits have been extremely strong. And what the message here is -- and again, 5 years ago, I was doubtful whether we could get there. We have a run rate of EUR 5 billion OP in Life, it should be the standard without much of volatility. For sure, whether that number is always at that level, we have had some normalization effects to be taken care of. We'll explain that to you in the outlook. But it's a really strong, really, really, really strong performance. And P&C has been particularly strong, EUR 6.2 billion revenue growth of 12%. Now people were worried about the fourth quarter. I can only tell you we are using every leeway to strengthen our balance sheet for what's coming. And with all due respect, we didn't need any more profit extra. What we really need is the resilience for what's coming. And we are making sure we are building that resilience everywhere where that is needed, and that will be very important going forward. And the best way to see that is looking at the Commercial Lines segment, Giulio will give you the number, we are actually at a 90 combined or better. The issues that we have been seeing in Motor and others, we have been addressing by really buffering the reserves as much as possible in order to be prepared. So both pricing will be earned in through the year of '23, you'll see that and the reserves are prepared. So in a good outlook scenario, we'll have significant upside. In a medium scenario, it will be just fine. Even in the higher inflation scenario, we have created significant buffers. Today is the last time I'm hopefully going to talk about Structured Alpha. That's the next page, just to be very clear. We are taking this damn series. This is sort of not just a bump in the road, but we want to make sure that this thing doesn't repeat itself. What are the lessons learned they are threefold. The first one is to make sure we deliver on our purpose for our clients. When something like this happen and our clients get hurt, we take that very seriously and we want to make sure we compensate our clients fairly. We have been very clear that we will do that. So 90% of our expenditures, you can read the page for yourself, have been going to clients and the DOJ explicitly said that particularly the SE has been extremely, extremely productive in addressing clients' needs. And we stick to that. The second one to make sure we resolve these things fast. Our financial institutions where these things linger around for years, we took basically less than 12 months to resolve the investigation and 15 months to get to the settlements. And financially, I want to reiterate we are done with this thing, done and dusted. And what is it for our organization? We have to really make sure that tail risks are being reinforced. At a statistician, I always get nervous when people talk about 50 basis points standard deviation and confidence intervals. We need to really go to Six Sigma risk management to really make sure that the things that we think are very, very, very remote but can still happen. We take out. And I can give you an example, 4 years ago, we started to introduce an in-force aggregates on the P&C side, whether that's nat cat or large loss exposure because a lot of the negative surprises in AGC&S was actually an accumulation of medium-sized losses. And we don't want to have these things in our balance sheet anymore. And you see that again later, Giulio, give you the number in terms of we need to drive that even the combined stress testers that are supposedly to be very rare events, should be not a problem for us. Now the next page that's very important I would like to talk about is we have really worked to increase the growth of operating profit and eventually net income over the last 2 years. So this page basically shows an uptick in operating profit growth since 2019. But it also shows that whenever something happens, and again, COVID is the exception, that the portfolio over time supports each other in the segments. And therefore, we are not just waiting for luck and diversification. That's, by the way, the thing that never happens when you need it the most, but to systematically strengthen the segments, and I love the next page. If I can get there, Page 8, maybe somebody can push the button. Very good. Very good. My clicker has a hiccup. What you see here is the development from 2019 in all 3 segments. And that shows a large double-digit increase in underlying operating profitability improvements, whether that's in P&C out of the turnaround for commercial lines is actually not just AGC&S and the continuous productivity enhancement, again, that we have delivered. And it's not funny accounting like you find that occasionally in other places where from 1 year to the other 40, 50 basis points disappear. This is a continuous work on the underlying cost and revenue base. You see that in Life and Health with the releases from the back book. And again, people ask today, whether we continue absolutely. We need to turn this base business from a spread business into a fee business over time, not overnight, not hectic because we don't have a problem as other people have, but we see that as a huge opportunity as a collaboration with our Life companies and Asset Management, as we started to describe in '21. And again, the Asset Management segment, despite the enormous sort of volatility last year, we are still on a like-for-like basis, even with a reduced result, 18% up over 2019. So that helps us to push group results almost 20% over the 2019 level. The next page gives you, again, the track over time, and the Life is not a straight line, so there's some volatility around the numbers. But what is very important, we keep these things in line and they are not accidents, the outcome of deliberate strategy and continuous management action, whether that's on productivity, whether that is on Life new business margin or whether that's the cost income ratio in the Asset Management segment. Now numbers are outcomes, and I know you care mostly for the outcomes as you see them in the numbers. I allow myself to have a slightly different view because I really believe that companies in a world that is getting much more complicated and much more volatile, you need to have the trust of your customers and of your people in addition to the trust from the shareholders. And this is what Page 10 is supposed to say. We have been consistently working on making our -- bringing our customer satisfaction up through product simplification, making service processes better. And the results you can see on the left-hand side. We measure that now with digital, what we call digital NPS, a real time before it was out-bound calls where we ask people are you recommending us to your friends and family. And we originally said we want to have, the vast majority of our business above market. Now the aspiration is clearly we want to be loyalty leaders, i.e., the best in customer satisfaction in almost everything we do. And you see that everywhere, and it drives that. And by the way, it is not just on core services to be a loyalty leader, you need to really have the trust of your clientele. The right-hand side of the chart is as important because it shows what is the motivation of our people and how much do they feel taken care of, which we express what is called the Work Well Index. And last year was again another record year. And more importantly, for employee motivation, we have now cracked best-in-class on a global benchmark. And you see that in many, many, many other KPIs, whether that's in Refinitiv on Diversity EDGE Certifications, we really believe we need to be the most attractive employer to have the most satisfied customer base. And that gets reflected in the brand. You know that we have the strongest brand and have been #1 -- a number of indices, not just Interbrand for a number of years, and the latest is the Edelman Trust Barometer, and that's important. Now why do I say that? Because we were really wondering how Structured Alpha would impact that. In fact, we don't see that at all in the underlying customer satisfaction, and we thank our clients for that trust, and we hope to get that trust back from everybody who was disappointed. Now the next page talks about our environmental footprint. You know that Allianz has picked 2 of the sustainable development goals as the core and the most important is climate change. And that just gives you a confirmation that we are ahead of plan in terms of delivering on our commitments which are, by the way, quite, quite aspirational. Now the thing that many continuously ask and think about, and it's a bit sad that it's only sort of share buybacks and dividends because the underlying cash flow generation of the group should be what matters and how intelligently we deploy capital internally and externally. It just shows you again the record on dividends and the potential upside we are having over the next few years. If we go beyond the minimum 5% increase, and therefore, we are proposing EUR 11.4 for this year, it should go at least to EUR 12 and EUR 12.6 in the subsequent years. And obviously, capital that we don't need, we are going to use for other forms of return. And again, at this share price, investing in our own stock is a super attractive investment, which we will do as soon as it is how do I call that professional and again, doing something while we have our current buyback program running would look a bit like panic, so we're going to do it on a consistent basis. Now disciplined capital management to be continued is probably the most important page, when you think about it, that's Page #13. Because it shows you that we have a very clear strategy and have had it now over the last 6 years, in terms of what we do on dividend and what we do in terms of returns. And you can see the nice curve. And what we are trying to say is there is an unabated commitment to keep that up, whether that sometimes the payout ratio goes higher and sometimes it's lower, but we have every incentive as management to improve the return on invested capital and return it where it is belongs, that is to our shareholders if we don't need it ourself. That leads us to the outlook for next year. Now people said, this is super, super cautious. In fact, it is -- particularly if you compare it with this year, the one thing that I'd like to point out, the outlook for P&C is already at EUR 7 billion. So when people were worried and wrote some comments about Q4 last year, let's just be very clear, even though we are conservative, it's already going to jump to EUR 7 billion, which is EUR 400 million ahead of the 2024 target we have given ourselves at the end of '21 where people said, "Wow, that's ambitious." Just to be clear. Now the components are somewhat changing because we have interest rates up, that has a significantly positive effect that Giulio will show you, and we need to again create more reserves in order to buffer inflation effects, but the quality of the earnings is probably stronger than it was before because we're earning higher rates per risk much higher than we thought, and we again are continuously making productivity gains that reinforces the earnings resilience. Again, we are cautious on Life & Health because we had some positive effects as we are managing through rapidly rising rates this year that may not repeat themselves. Asset Management, we're also very cautious because the AUM levels at the beginning of this year are significantly lower than they were at the beginning of last year. And we don't want to be too optimistic on flows and returns, on the other hand, we have already had a double-digit billion inflows this year. But again, in this environment, we want to be very cautious. And corporate, again, is very conservative. We haven't put the number in that we had for this year. So what you can basically say, well, then what does that mean? Well, look to the '24 outlook, as I said earlier, that we consider to be very ambitious in '21, we're almost there today. So thank you very much for listening. And Giulio will give you the details, just by the way, to reiterate the outlook and the comparison is based on IFRS new, right? So it's not the IFRS old. And for us, there are small movements, they are basically the identical numbers. And I'm happy to get some of your questions later. I assume most of them will go to Giulio.

Thank you, Oliver, and good afternoon or good morning to everybody. And now we can go into my part of the presentation. As Oliver said, we had a record profit in 2022. That's record profit after we posted a record profit also in 2021. And that's also significantly ahead of our outlook of EUR 13.2 billion, this is an environment which was particularly challenging because of what happened in February of last year. When we look at the revenue, the revenue are flat, but we see growth is actually in the area where we wanted to see growth. So in Property & Casualty is not surprising that in the current environment, in the Life segment and also in Asset Management, revenue are going to go down. But overall, on an adjusted basis for FX and also for consolidation, we have a flat revenue development. On the operating profit, in Property-Casualty, we achieved profit of EUR 6.2 billion, which is 8% higher compared to the prior period, and this is due to the fact that we have been able to keep the combined ratio stable and we have benefited them from the growth of the business and also from higher investment income. So again, a EUR 6.2 billion of operating profit, which is ahead of the outlook. And also, as Oliver was pointing out, we have put a significant amount of inflation reserves. So from that point of view, the quality of the numbers are -- the correlate number is very good. On the Life side, we have a EUR 5.3 billion of operating profit. That's a record operating profit and also you see that the new business margin is very strong at 3.8%. So we are very happy about the development in the Life business, where -- at the end of the day, what is happening. We put a lot of effort over the last years on the in-force and also new business. And now we're also getting the benefit from higher rates. In Asset Management, clearly, the environment has been challenging. We ended up with a profit of EUR 3.2 billion, which is lower compared to the outlook and also prior period. But I would say, considering the environment, the performance has been actually pretty resilient. So bottom line is strong performance in 2022. And what is even more important, we are well positioned for 2023. Coming to Slide 5 on the operating profit development for Q4 and also other relevant KPIs. We see a strong picture with an operating profit of EUR 4 billion. Here, clearly, we had a large contribution coming from the Life segment, and that's a consequence of favorable market condition in Q4, but also we had catch-up effect coming from changes in assumption interest rates. We could have done this in the course of the year. But usually, we do this kind of change in assumption towards the end of the year, and that was also the reason why we flagged a couple of quarters ago that we expect to see positive unlocking coming in 2022 from -- especially from interest rates. On the Property & Casualty side, we have EUR 1.5 billion of operating profit for the quarter. This is actually in line with our outlook divided by 4. And also in the last quarter, just to give you an idea, we put about 3 percentage point of loss ratio into this inflation reserve. So again, the quality of the underwriting result is pretty good. And then on Asset Management, EUR 800 million of operating profit is broadly in line with the development that we saw also in the preceding quarter. When you put all together, EUR 4 billion operating profit is a very strong level of performance. So we had very good 2022 with a very strong finish in the last months of the year. Now on Page 7. On the solvency ratio, you can see the solvency ratio has improved by a couple of percentage points compared to the level of September. What is even more important is the development of the sensitivities. We told you that we wanted to reduce the equity sensitivity to below 15 percentage point by the end of the year. Right now, we are at minus 13 percentage points. When you look at the other sensitivities and you compare to the sensitivities that we had a year ago, you can see there is a strong reduction. So overall, you look at our solvency ratio, you also look at the combined stress test, you can see that we are very, very well position from that side. So we are very happy with the level and also with the level of sensitivity that we are getting to. Page 9 on the development of the solvency ratio by driver. You can see that we had a contribution coming from the organic generation. There was 27 percentage points pretax and dividend. If you do after tax and dividend, that's about 8 percentage point. It's a little bit less than the 10 percentage point we were expecting that because we are growing more in P&C compared to the expectation that we had a year ago, but we are still speaking of a strong organic generation. As you know, also from the prior quarters, we had clearly a negative impact due to the market movement. And on capital management and management action, you see minus 2 percentage points. If you remove the dividend from that line item, there is an improvement of 9 percentage points, which is coming from the management action that we took during 2022. So we had also a significant derisking happening. So as you can see, we can take action in order to stabilize and improve the solvency ratio and also to make sure that from a risk appetite, the sensitivities are within what we think it's appropriate. So when you put altogether, 201% of solvency ratio. So it's a comfortable and good level. And clearly, we expect as we get additional generation of organic development in 2023, we expect this solvency ratio to further improve. Now we come to the P&C segment, where we show traditionally first the growth and also the growth by companies. As I said before, very nice growth of 9.5%. This is mostly driven by price, and that's also a clear indication that we have been reacting to the inflation environment that we saw coming in the course of 2022. You can also see that basically all companies had a positive growth rate. And if you look at the growth rate of 2022 compared to the growth rate of 2021, you can see that basically almost all companies have better numbers. On the change in renewal, the number is 4.9% for the year. If you look at the 9 months, the number was 4.3%, which means there was also an acceleration as expected, coming in Q4. So from a management of inflation point of view, I feel very confident that we did a very good job in 2022, and we are very well positioned as we look at 2023. Page 13. It's about the development of the operating profit where you can see EUR 500 million improvement. This is mostly coming from the investment results, but also on the underwriting result, there was a little bit of better development. The combined ratio is actually relatively stable. And here, we can see that there was a slight improvement coming from nat cat load, partially compensated by the increase in expense ratio because of the business mix Allianz Partners, which means then that was, as you see, an improvement at runoff, which was clearly largely compensated by the improved -- by the deterioration of the attritional loss ratio. Here, I can tell you that there is a substantial amount of recycling going on. Just to give you an idea, Allianz Trade has released a significant amount of runoff is basically producing a positive runoff of 1 percentage point. All this runoff has been recycled into the accident year. So you need almost to reduce the runoff by 1 percentage point, and you can also correspondingly reduce the attritional loss ratio by 1 percentage point. And that's just one example. I could also make -- that's also the most eye-catching sample, but you need to consider that there was this kind of recycling happening. And also, when you look at the year, we put aside the EUR 1 billion of inflation reserve. When you add also the number that we had put aside already last year, we had EUR 1.8 billion of inflation reserve, which is definitely a number where I think we are very well protected as we look into 2023. On the segment development, you can see clearly some pressure coming in retail, but we are still having a 96% combined ratio, which is clearly know what we like for, but it's looking for, but that's still a solid one. And we expect this combined ratio to get better in the course of 2023. And in commercial lines, you can see really strong results combination with 90% combined ratio. And this is clearly due to the improvement that we saw in AGC&S, also the great results of Allianz Trade. But as Oliver was pointing out before, also make up our combined ratio is basically at a 90% level. So very strong performance in commercial lines. As we go to Page 15 on the operating profit by combined ratio by entities. You can see a lot of good numbers like in Germany, Italy, Australia, Eastern Europe, Switzerland, AGC&S, Allianz Trade. There are a couple of exceptions, most notably Spain and England. These are not specific to Allianz. As you know, the market has been pretty tough, both in Spain and especially in England, which also means we are definitely expecting that we're going to see an improvement in 2023. So from this point of view, we have a lot of company operating nicely, and we expect this performance to be sustainable in 2023. And then we expect clearly a few of the levers to improve also significantly as we go into 2023. And now coming to Page 17 on the investment results. Clearly, there's been a positive driver of our performance in 2022, with an improvement of EUR 400 million, which is coming from the higher rate environment. If you look at the reinvestment yield, this is basically double compared to the level that we had last year or in 2021. And if you look at that number just for the quarter, that was 4%. So it means also that -- and as you know, rates are still pretty high in Q1. So as you can imagine, there is a lot of investment income, which is building in the pipeline, so they should also sustain our performance in 2023. So bottom line for P&C, EUR 6.2 billion of operating profit, which is higher than our outlook in an environment which was challenging, but we have been able to keep a combined ratio at the level of the preceding year and that we are benefiting from growth and from investment income. And as I said, before with a reserve that we put aside, we are very well positioned for 2023. Now coming to the Life segment, the new business margin, it's really good. It's almost 4%. And also, you see all segments are contributing. On the growth side, clearly, there are -- first of all, when you see the minus 17% of growth, you need to adjust for some of the one-offs that we had in 2021 and that we discussed a year ago. So if you adjust for those one-offs, the growth is negative, minus 8%, which is kind of normal in an environment where clearly, the appetite for unit-linked or single premium business is going to be reduced compared to a more stable environment. But overall, strong performance, especially from a margin point of view. Page 21 on the operating profit development for the Life business. We achieved record profit in Life with EUR 5.3 billion of profit. This is mostly driven by the development in Protection and Health and also unit-linked with our guarantees. Here, we have also the benefit coming from the acquisition of Aviva, but also in Protection Health there was some organic development. And when you look at the other segments like capital-efficient products and guaranteed savings and annuities, you can see stability in this number in an environment which has not been easy at the beginning of the year from an impairment point of view. But eventually, we benefited from higher rates. Page 23. On the exhibit by OEs, you can see on the operating profit that Allianz Leben has produced, again, a very stable profit. In the case of Allianz Life, you see a reduction compared to 2021, but that's more because 2021 was exceptionally good. The level of 2022 is more in line with our expectation. And then as I was saying before, under CE, you see the doubling of the profit because of the acquisition of Aviva, which is going according to our expectation. And on the new business margin, you can see basically across the board an improvement of the new business margin. So from that point of view, I would say the profitability of the business, which is relevant as you think about Solvency II capital generation is really good. One remark I didn't say before, when you look at our solvency generation, we have, on the one side, very strong new business margin coming in their own fund. And when you look at the capital requirement, we are right now releasing about EUR 600 million of capital on the Life side because of the different intensity of the business. So there is a strong contribution on the organic line item coming from the Life business. Page 25. That's about the investment margin, which is more or less stable compared to 2021 level. I think what is important here is to highlight that the current yield is going up significantly by almost 20 basis points and the guarantee level is reducing by about 10 basis points. So the spread has widened by 30 basis points. That's extremely good for the profitability or resilience, I would say, of the business. And we expect this trend to continue clearly in 2023 because the guarantee levels are still going down and the yield is going to be higher in 2023 versus 2022. So overall, strong results in Life, both on the operating performance and also on the investment margin, on the quality of the profit and overall -- I will say we are also here well positioned for 2023. Now coming to Asset Management. Clearly, in Asset Management, asset basis went down. When you look at the third-party assets under management, you can see a reduction of about 17%. This is not surprising. This happened basically to all asset managers because both equity or fixed income assets went down in the course of 2022. You can see, however, that on the alternative, we have been able to grow in the space on the things that we can control better. There was indeed some growth, which is a good thing to see. And going to Page 29 on the inflows. We discussed that many times. So I will say we're not spending too much time on the inflow situation for 2022, but I can tell you that in January of this year inflows have been positive, both for AGI with EUR 1 billion, but especially with PIMCO, but PIMCO with EUR 10 billion. We saw also positive inflows in February. So from that point of view, we always discuss what does it mean for PIMCO when we have this kind of rate environment? We know it's positive fundamentally just a matter of when this positive is going to come through our numbers. It might be now as we see in this month, it might be the markets are going to be choppy again. But there is no doubt that it's just a matter of time that we're going to see strong inflows coming back in PIMCO. When I say matter of times, I'm not meaning ages, it's just a matter what it's going to be next quarter, the other quarter, it might be already now as we speak based on what we are seeing at the moment. That's on the inflows situation. On the revenue, they have been relatively resilient, and that's also due to the fact that on the previous slides, we are looking more at a point-to-point comparison. Here, we are looking at revenue, which are more based on the average assets under management during the period. So when you look at the average assets under management in 2022 versus 2021, in reality, you see less of a drop and this explains why the revenue are pretty resilient. And also on top, which is very important, the fee margin is very stable. In the case of PIMCO, we even see an improvement in the fee margin. In the case of AGI, there is a bit of a reduction due to the Voya transaction, but overall stable no margin -- fee margin. Page 33, on the operating profit development. Clearly, in an environment where the asset base is going down, you get -- considering also that there is some operational leverage in Asset Management, you get a reduction in the profit. If you look at the number, excluding performance fees, that's a reduction of about 5%. If you also look at the number, including performance fees, that's about minus 8%. Again, nothing really different from what you see in the market. We even believe that our numbers are a little bit better compared to what other companies might have disclosed. And here, I'd like to highlight, especially the performance AGI because the profit of AGI is well north of EUR 700 million. And as you remember, just in 2019 or 2020, the company was performing more at level of EUR 600 million operating profit. So despite all the challenges that we had with AGI, the underlying business is performing nicely, and we are now at a level of performance, which is significantly higher compared to what we had just a couple of years ago. And with that, we come to the corporate segment, where we had a nice improvement, mostly driven by the increase in investment income because of the different rate level. And also we are getting some more dividend from some of the participation that we are holding. So overall, this improvement is driven by the capital market development and especially the rate development. And then we come at Page 37 to our net income, which was EUR 6.7 billion. Clearly, here, we have the impact of Structured Alpha and also, we have the impact of the transaction of disposing Russia, which is basically just an accounting pay. There is a reality no real cash impact coming or solvency impact coming from the transaction. And then as you can imagine, in this kind of environment, we're picking up a little bit more impairment compared to a normal situation. If you adjust the numbers just for Structured Alpha, which is clearly a nonoperating item and also for the Russian disposal, the net income will be EUR 8.8 billion, which is a better reflection, clearly, of what our normalized net income might be. So this tests at least this gives you a good idea about what kind of bottom line expectations you should have for 2022 on a normalized level. And now we come to the outlook for 2023. Overall, EUR 14.2 billion of operating profit. As you know, we have a tradition to set the outlook for the year equal to the operating profit or the proceeding year. So that's something that we do basically most of the time. So we keep faithful to this tradition, which is saving us well. When you look at the single segments, we have an operating profit of EUR 7 billion for Property-Casualty. I'm very confident that we are going to at least achieve this number. And the reason is we're going to see growth, continued growth. The investment income is going to be higher. We have proven that we can manage inflation very well, and we put also reserve aside to protect us in the case, there are surprises. And in the case, inflation's going to be less than what is currently is, then we're going to see a benefit coming from that reserving. So we feel very well positioned on the P&C side. On the Life side, EUR 5 billion, it's expectation for 2023. That's also a number where we feel very good, considering that in the last 2 years, we have overachieved the EUR 5 billion threshold. Here, there is a little bit of certainty because of the IFRS 17 implementation. But fundamentally, we know that this business is operating at least at a EUR 5 billion of profitability level. In Asset Management, we are kind of cautious because of clearly the starting point, considering that the asset bases, as Oliver was saying, went down in the course of 2022. Here, we can say what we see right now in January is pretty encouraging. But clearly, we are just at the beginning of the year, we are going to see what the remainder of the year will bring. And then in Corporate, we are definitely on the conservative side with EUR 800 million. So from this point of view, when you look at the outlook and the different components, we have -- we feel very, very good about a very solid outlook. And as you know, we have a track record to beat the outlook. It happened all the time, except in 2020 when we had COVID. So I believe history has a tendency to repeat itself. So I would say that most likely we're going to be better than this number. And with that, I would like to open up to questions.

All right. Yes. Thank you, Oliver and Giulio, for your presentations. And yes, now we would be happy to take your questions. And we will take the first question from Peter Eliot.

I guess a bit of a bias towards the outlook on my questions. But the first one, I mean, when you gave your IFRS 17 presentation, it sounded like non-Life would look about EUR 250 million better under IFRS 17. So I guess I'm just sort of trying to square that with the comment that the outlook would have looked the same on both accounting standards. And yes, I just wonder, is it just a case of the amount of conservatism involved? Or is that you mentioned Life perhaps, Giulio, is an offset? And maybe then just specifically on the outlook for Asset Management and non-Life. I was wondering if you could just clarify what you're assuming in terms of flows on Asset Management? And in non-Life, are you able to give us any sort of view of the sort of the combined ratio on the old accounting basis that you are thinking of there? And then maybe finally, I guess we've seen the sort of the benefit from the inflation-linked bonds on the investment income fall away. Is that a fair -- we've sort of seen that come through and shouldn't get much more of that?

Thank you, Peter. So maybe I start from -- maybe from the P&C outlook. I can give you basically all assumptions that we have made. So then you can make up your mind whether it's aggressive or conservative. So growth rate to get to the EUR 7 billion. I'll start first in the old logic and then tell you what is the difference between old logic and new logic that's the best way to approach the question. So if you assume 6% growth rate in premium, which is something that I believe we should be able to achieve considering that on the earned basis, we already on a higher trajectory. If you assume a combined ratio 94%, which is what we did in 2022. So I feel pretty good that we should be at least 94%. If you put an assumption for investment income of 3.3%, which will be EUR 250 million more compared to what we had this year, which is totally achievable. We will be basically at EUR 6.7 billion to EUR 6.8 billion of operating profit. So there will be basically the operating profit in the old project. And then for the net effect of discounting and unwinding, we have about EUR 200 million to EUR 300 million, which is a very low number. So as of now, we're going to see way more than that to be framed between us. But just think about all old logic, 6% growth in NPE, 94% combined ratio, about EUR 3.3 billion of investment income, definitely achievable, and this will put us already at EUR 6.7 billion to EUR 6.8 billion of operating profit. Confidence about achieving a 94% combined ratio is very high, considering that we did that in 2022. I see '22 be more challenging compared to 2023 because in 2022, we had clearly all the net premiums earned coming from 2021. And the net premium earned for 2021 didn't know that Putin is going to be at war Ukraine. Now as we go into 2023, we have all the NPE coming from 2022, especially the -- more towards the second part of 2022 and the NPE of 2023. And this premium they really -- they're being priced clearly to account for inflation. Then as I was saying before, we also put aside a sizable reserve for inflation in 2022. So these are the things you need to believe to. And so I believe you can make up your mind how conservative this number is. And don't forget that also we presented in November that we have initiatives on the claims side, they should also bring additional profit. So from that point of view, I have a high degree of confidence. Clearly, nobody knows what can happen with nat cat, all these kind of things. But from a underlying point of view, we are really positioned compared to this outlook. Then on the inflation linked bonds, which might be linked to also this question. Look, if inflation stays at this level, we are going to see again a strong contribution from inflation linked bonds. In that case, I will say the EUR 3.3 billion of investment income might be conservative. So because we took down a little bit the assumption on what we might out of inflation linked bonds. So we're going to see what happens. On the other side, if the inflation linked bonds are going to produce less income, then you should expect also there is less inflation. And then our EUR 1.8 billion of inflation reserve is going to -- most likely go into the bottom line and not into claims. So you need always to consider that's -- yes, there are many pieces in the equation. So I think we're going to be fine one way or the other. On the Life -- and then you had a question about the inflows. Okay. We -- inflows a kind of modeling. But in reality, at the end of the day, because you can speculate about the inflows whether they are going to be more or less every day. So we look more at what we think the assets under management are going to be at the end of the year. And we are overall planning between inflows and accretion, a relatively moderate increase in assets under management. That's the way we set the plan. One main thing to watch in reality in Asset Management is the fixed development as we are kind of dependent to a certain degree on the FX. So you need to watch not only what is going to happen from a capital market point of view, but also from an FX point of view. Overall, the EUR 3 billion is I think -- yes, I wouldn't call it conservative because we need to recognize that clearly, 2022 has been tough. I'm thinking it's a solid basis where the downside might be limited compared to the upside, but we are going to see what happens in 2023, and there were the questions.

That was okay? All right. Thanks, Peter. And we will take the next question from Michael Huttner from Berenberg.

And -- yes, well done on really good results. I had 3 questions. One is on cash flow. The other one is on Poland. And other one is maybe you can talk a little bit more about pricing. Maybe you can make a -- I don't know, it with specific to each market, how quickly you can see some of these more challenging markets like Spain and the U.K. turnaround. On cash flow, EUR 7.2 billion, I think, is the number excluding the one-offs, the Structured Alpha and the Lucid deal. And it's up from EUR 6.7 billion. So it's a growth of EUR 500 million, which is very nice. And I just wondered, is this a kind of run rate? Or can we see some acceleration? Thanks to better pricing or. On Poland, I heard from the media call, but I probably misunderstood that this would be one of the main drivers for moving the Life ROE from 12% adjusted 2022 to 13%. I would make that Poland is worth somewhere around EUR 500 million or EUR 600 million, I don't know. But I just wondered if you can explain a little bit the moving parts on this. And then, yes, on the -- a bit more granularity on that.

So I think one question was on the cash flow. Basically, if you adjust for such a low cash flow in 2022 was north of EUR 7 billion. As you remember in the Capital Market Day, we said we want to have EUR 23 billion of cumulative cash flow, 2022, '23 and '24, and that's the idea. So fundamentally, yes, we expect basically to add this level of cash flow accelerating clearly as there is more growth in the profit in the business. But yes, I think about we put forward a EUR 23 billion cumulative cash flow. That was not including Structured Alpha and Lucid that time. So -- but if you normalize for these 2 things yes, we are on a good track to get to the EUR 23 billion of remittances. And if you compare to the period -- before 2022, we had EUR 20 billion remittances. So there is definitely an acceleration that we want to see in these 3 years compared to the 3 years before. On Poland, my comment was, when you do an acquisition, clearly, you get basically, first, the ROE, including the goodwill. And so then, what happens, so -- but finish is going to be a little bit dilutive. At the beginning, you have also restructuring expenses, and you're going to get the synergies later. And also, you had so-called pay gap adjustment and the amortization of this pay gap adjustment is pretty much pro rata instead of following, if you want a more economic view. So basically, when you do an acquisition, you are going to get the dilution in the ROE and then this dilution is going to reduce over time. And that's the reason why there is first an impact in the ROE of the same member then over time, this impact is going to go away. So that's on Poland. And then on pricing, I would say, look, fundamentally, you see more pricing in general. Maybe I can also give you an information because I was looking at the change of renewal in retail for the 9 months versus the 12 months. And then I was doing the implied calculation of what is happening in the quarter, if you do a calculation like what is happening right now or what was happening in Q4, you get to a high single-digit number. So basically, we are seeing numbers which are very close to 8% to 9% of rate increases as we speak. It's differ and clearly, geography by geography. I can tell you in the U.K., we have a massive rate increases because, as you know, the market has been suffering a lot. So in that case, you see rate increases, which are north of 20%. We see very good rate increases also in Germany. In this case, we are speaking of high single digits. And then we see also now better rate increases coming in Italy or in Spain. I saw some numbers -- or heard that now the average premium Italy might be coming back up. The average premium Italy was always going down for many, many years. So from that point of view, there is a dynamic in -- right now in the markets, which is definitely positive, and this should help to make sure the combined ratio is going to be at the adequate level.

Yes. And if I may add, just normally, I never interfere when Giulio says something 2 or 3 information because I just looked at the U.K. What is very important, unlike other companies in the LV side, the significant impact was the flood, not Motor. Actually, Motor is about 95%, 95.5%, which is very different from competition writing at 100%. So the flood thing, and that is getting repriced. In the Allianz brand, the business, there is commercial and others, there's more work to be done. But just to compare the -- it's not Motor inflation, which people sort of tend to confuse. The second thing I want to reiterate is the very strong performance on commercial is a bar anything that I can imagine going to continue because the AGC&S turnaround is sort of completed. We have 80% jump in operating profit and still improving reserves, and we are going to earn the premium through as Giulio said. The same is true for the rest of the commercial portfolio. So you're going to see a significant boost coming from elements. And on the personal expectation, we must see and I'll frame it this way, a numerical turnaround in Brazil, we will not sustain another year of underperformance. So that's just alone about EUR 150 million to EUR 200 million more OP that needs to come through the system. And the rest is performing really well. The second comment, again, I want to add, there is -- was a lot, and we maybe could have done a better job, misinterpretation on Q4. It's very important what Giulio said about Allianz Trade. You have about a 1% combined ratio effect of recycling of, so to speak, reserves in trade that people don't understand. Remember that also compared to '21, where we had state schemes in, we have a lot more coming, and we have an unwinding of the COVID reserves, which we did then. So this is real money. This is not funny money to improve reserves to put it mildly. So it's very important for the interpretation of the results we have. If you just take this one, the real underlying loss ratio is at least 1% lower. And I think that is very important that people do not get the wrong view on the Q4 numbers.

All right. Thanks, Michael, for your questions. And we will take the next question from Andrew Ritchie, Autonomous.

First question, could you just update us on what your key reinsurance -- what your key event retentions or regional retentions have done post to the recent reinsurance renewal, I assume they've gone up, but maybe just clarify that to what degree have gone up on your peak perils? Second question, I'm sorry to go back to the inflation issue. I guess I'm struggling to -- and how to think about this inflation reserve that you keep referencing of the inflation buffer. Because really, it's not actually a buffer. It's just reality. I mean you've put aside more for inflation. It doesn't look like that big a number in the context of the book. And all that will happen is that will just be used up in '23 as the attritional continues to suffer some inflation effects just earning through and you're just going to use buffer to offset. So it's not really a buffer. It's just forward booking, isn't it? I don't know why I wouldn't think of it like that. Maybe tell me why I'm wrong? And the only other questions I had were, can you talk us through, are there any surrender -- changes of surrender experience occurring in Life, in light of the higher interest rates by country? And finally, for Life, you benefited in IFRS 4 from some positive assumption update to some of the true-ups at the end of the year. Would we see similar positive emergence of assumptions in IFRS 17?

So we're starting from the cats program. So fundamentally, we could place the program with the structure that we had. Clearly, from a capacity point of view, we had to make some concession and also pricing went up, but there were no major surprises as compared to what we were expecting. Maybe the best way I can give you also the limits by payroll, but maybe the best way to answer your question is to give you a little bit the bottom line. And the point is we did an as if calculation of 2022 and '21 having the new program. And in 2021, the nat cat low would have been 60 basis points higher and 2022 would have been 30 basis points higher. So that's maybe the best way to look at the numbers. So from that point of view, one might expect a little bit more volatility where we are speaking on -- of a very limited amount. So we are very happy that fundamentally, we could place the same structure, clearly with some concession, but we don't have a significant change, I would say, in the profile of just a little bit more volatility and Oliver wants to say something.

Yes. One of the most important things that Giulio and I spent together with [ Christain ] on the last 3 years to make sure that we keep the aggregates. And because we have been very, very prudent also with our reinsurance partners, we were able to place our aggregate target, aggregate program to the vast majority depending on how you run the numbers, 85%, 90%, which is super important because that is the actual protection that we need in our portfolio. And that was not clear at the beginning. And as I understand from the reinsurance market, a lot of competitors that had seeded a lot of losses since the last few years into the reinsurance market have not even at any course been able to place this. So that's very important for you to understand because that is the protection we didn't have 3 or 4 years ago.

Perfect. Then on your inflation reserve, okay, buffer cannot be interpreted like we have EUR 1.8 billion of buffer that is going to be released into profit. So definitely it's a reserve that is there to protect us against surprises on the inflation side. But I tell you why abilities reserve is, let's say, sufficient, and I give you an example. So if we have, let's say, 5% or more inflation in spare parts compared to what the expectation was. And by the way, spare parts is very short tail. So from that point of view, there is not much of misstate can do about 5 percentage points. It's about EUR 200 million more claims. If we have EUR 1.8 billion of reserves, you can understand already the spare parts is not going to be a problem. On the bodily injury, okay, we might see some development. For the time being, there is not much happening. Clearly, there are other lines of business like liability and so on, but we need to recognize that. And I was referring clearly to Motor spare parts. But you can understand what is the magnitude of this reserve considering what could be the impact of being off by 5 percentage points on spare parts in Motor, which has been mostly the issue reality in the course of 2022. So it's clearly a reserve, which is -- cannot be identified as a buffer in the sense of -- add on top of a best estimate, but I will say it's a very prudent reserve. So from that point of view, we are not concerned about inflation becoming a problem for us from the back book. And we are pricing in 2020 -- we've been pricing in the course of 2022 and also -- and now in 2023, clearly considering for the inflation that we see coming through. On the surrender experience in Life, now we don't see surrender. We have been looking into today beside in a very small book. So I don't think we need to speak about details. But when we look at the major portfolio, when we look at Germany, when we look at the United States, we don't see any acceleration in surrender. We did a lot of analysis. So we are comfortable that this is not an issue for us. And then you had a question about the unlocking in the new IFRS 17, unlocking they are now going to play the same role like in the old accounting standard on the other side. And I always put -- we need to put aside Allianz Life. But otherwise, fundamentally, we're going to see definitely less volatility. So from that point of view, yes, we are not going to have the benefit of unlocking that in our case, since we are pretty prudent on reserving tends to be positive. That benefit will not be there. But on the other side, the volatility is going to be also reduced moving forward. So overall, I will say that we should end up with the same level of stability on a yearly basis.

Thanks, Andrew. All right. We will take the next question from William Hawkins from KBW.

Can you hear me?

Yes.

Can you help me understand a bit more about the COVID release that you're referring to in 2022. I mean from Slide B14, you're implying in total that there's about 2 points of benefits that would be about EUR 1.3 billion. And back in 2020, the gross losses that you were reserving for were only about EUR 2 billion including only about EUR 400 million in the credit business. So I take the conclusion and it is what it is, which is that there are some good numbers. But I'm finding it hard to reconcile the good news that you found this year with the charges that you originally took a couple of years ago. And then secondly, please, on Slide B11, sorry, it's another inflation question, but for the rate changes that you're showing us on Slide B11, the 4.9% and the 3.6%, if we wanted to adjust claims inflation. So we were actually talking about net rate changes. What would those 2 numbers be? I'm guessing that the delta wouldn't be as big as the 1.3 percentage points implied on the slide? And then lastly, please, in your solvency roll forward, you're reassuringly very quiet about any sensitivity to issues like real estate or mortgage spreads that have been quite a headwind for other companies. And we're also starting to get some sensitivity disclosure from other companies, which you guys aren't showing that yet. So given that I think you have a reasonable exposure to real estate direct and underlying, how has that played out in the solvency ratio in '22 and what sensitivity should we think about in 2023, please?

You need to repeat the second question, the one about the rate changes, inflation. Can you repeat that? Because I didn't get the second question.

Yes. You can correct me if I'm wrong, but I think the 4.9% and 3.6% on B11 are nominal rate changes. And I'm asking what the rate changes would be if we removed an adjustment for inflation because presumably, inflation has gone up between the 3.6% and 4.9%?

So you're referring Page 11, the 4.9% range change on renewal, that's what you're referring to?

[indiscernible] Inflation...

Yes, but that's a change in renewal, yes. So yes, that's just a change in renewal is -- and then implied if you have 4.9% for 12 months, right? And then 4.3% with the 9 months, that's your question, imply then you will get to something like 6% for the quarter. But I'm not sure I understand your question to be -- on the...

Is it in the 4.9% a nominal rate change?

Yes, that's a nominal change, yes.

So the actual figure that helps your combined ratio will be lower because you'll be impacted by claims inflation?

So let's put this way. I say that in theory, if claims inflation is 4.9%, you are basically even. That's the way you need to look at that. You have a 4.9% rate change on renewal, and you have a claims inflation 4.9% on a basis, then you get basically to a neutral impact on the combined ratio. That's the sense of the question?

Yes.

One of my question is what is the claim figure that I should adjust the 4.9% and 3.6% for?

Okay. But well, 3.6% is prior period and 4.9% is this year.

Yes. Sorry, if I'm not being clear, but I thought both numbers were nominal. And I'm asking what would be the inflation adjustment I would need to make to both numbers because presumably, the inflation adjustment required to be higher in '22 than '21?

No, I would say, look, at the end of the day, the rate changes that we got are brought in line with inflation. So that's your question. Do we think that this change in new broadly in line with inflation? Yes, clearly, you have cases like in the United Kingdom was not necessarily in line. But fundamentally, broadly, they are pretty much in line. So it's not that claims inflation has been running significantly higher than 4.9%, but that's also important. The point is this is the rate changing for 2022. So this includes Q1, which is very different from Q4. So if I were you will not be concerned about inflation because inflation if there was a problem, would have hit us in 2022. As you see, we have EUR 6.2 billion of operating profit. If you not forgot there is also the investment income. We have rate increases, which have been accelerating. We had a EUR 1.8 billion of inflation reserve, which is definitely not a small number. So from that point of view, I will not be concerned about inflation at this point in time. It's...

Yes. I have an addition, even though Giulio is the CFO. What I'd like to do as the old CFO is to look at paid claims. And one of the most interesting thing is we have seen very significant increases in incurred. But when I just look at the cash leaving the house last year, it hasn't moved much. So we have been very conservative, I think, and maybe that's one for a future sort of call to see what has been paid versus incurred and how do we look at the spare prices because I have countermeasures. The other one I want to reiterate is the very significant increase in investment income that you haven't even seen coming fully yet. Because what you basically see in the higher investment income for this year and the reinvestment yield is basically coming towards the second half of the year and end of the year. So if you look at the new reinvestment yield is still going up and being earned through, you're going to see very significant increase in investment income. It's just in terms of OP forecasting and net income forecasting, that's not yet there.

Perfect. Then you have a question about sensitivity to real estate. I will say that we think that in the case we have a 10% drop in the valuation of real estate, the impact on the solvency ratio could be a couple of percentage points. And we always consider that most of our real estate or, I would say, real assets are in the balance sheet of the life companies where there is a significant element of policy order participation. So from that point of view, we are not exposed directly to a revaluation of the real assets. There is a lot of buffering, which also means clearly when things are going up, we don't benefit completely from the appreciation of the assets because this is part of our value proposition in the Life side, especially at Allianz Leben. And then I think you had a third question, which was the COVID one. Okay. So here, there is something to consider the real release of COVID. Reserve is more like EUR 600 million. So you cannot take the entire adjustment that we did for Allianz Trade as related to COVID. So that's the first one. So there was a release due to COVID, but there are also releases due to other elements. And then also anyway, the number that you are quoting for the COVID impacted the time there was net of the improvement in frequency in Motor. So first of all, you should just look then at the number -- negative number that we had on the commercial side or outside Motor. And anyway, it's not that the entire difference between the entire runoff on our trade and Allianz Re is coming from COVID, that part of that runoff is coming from other elements.

That's Okay?

Okay. Well, we assume that was okay. If not, please come back to us after the call, okay? So thanks for your questions, and we will take the next question from Vinit Malhotra from Mediobanca.

Yes. And many topics I wanted have been addressed. Just if I can clarify, Oliver, you said to one of the other questions, the topic was not really Motor, like you mentioned U.K., but could you just lay out position once again for [indiscernible], what happened in Motor? Is it that Allianz saw the problems early on in '22 and raise prices and now just play the conservative game? Or is it that the problem is actually potentially much worse? So now we are just being conservative. All this possibility that the potential is a problem is a much worse. If you can just lay out your thoughts in a minute or 2 I'd be very grateful. That's my only question left.

Yes. Giulio will answer that. I just want to clarify the question with it. Is it with regards to the U.K. only or across the Motor portfolio?

No, I'm more worried across the portfolio because that's where we are seeing from other companies as well and even in Germany, home market for you. So we are seeing a lot of negative commentary in the market about retail motor, and I want to hear it from you because you, I think are one of the best in class.

Yes. So I'm glad I asked the question. Giulio?

Yes, So back already in 2020, we were -- we are the reserve committee we were thinking or talking about inflation. That was in the reserve committee for 2020. Then in 2021, we said, okay, we are going to see inflation because the world is kind of disruption in the supply chain. Clearly, could not spread the kind of inflation that's happened after the invasion of Ukraine. But fundamentally, the system was geared up for we're going to see higher inflation. So fundamentally, I think this has been clearly an advantage because we were anyway preparing for a higher inflation environment. And also when we -- so fundamentally, they were already kind of some rate increases coming. It's not just about rate increases. That's also important. It's also about how you manage the claims. And then clearly, when -- and we always told our -- if you see severity going up, don't think this is noise. This is going to be Inflation. So the system was just prepared because already in 2021, coming in this straight from our Supervisory Board, we had a regular conversation about preparing for a high inflation environment. We could not anticipate Ukraine, but we knew there was disruption in the value chain. So we were expecting anywhere to see a little bit of an increase in severity.

Maybe, Vinit, I can give you because it's a very important question you're having is massively important. It's very important to recognize what we are doing beyond the reserving side. So not just only do we have a cross Europe initiative on how do we close to benchmark in every single country, the loss adjustment cost and the loss adjustment expenses on the content, but more importantly, you may have recognized that we're building our claims platform, which we call utility for claims systematically. So we're a first Board control expert in Germany to improve the auditing of the claims, which we are rolling out across countries now starting in Germany, that's why the way the German numbers are so good because we're getting massive benefits that we are wanting to replicate across Europe. The second one is the acquisition of GT Motive and Innovation Group in order to have both claims data, spare part data on a real-time basis and also the way to steer into garages. By the way, nothing that the world has never seen. The only difference is that we are systematically rolling it out across countries. Most of our competitors may have it 1 or 2, but we're doing that. And that I expect over the next few years to have a significant impact on claims severity and dampen the inflationary effects. And the upside, I can just tell you what the number for Germany is, we have, on average, about a EUR 30 historical disadvantage. This is 2019 numbers versus best practice, we dramatically trying to close that over the next 2 to 3 years. So it's massive. The underlying is -- versus about a 10% average loss expense reduction opportunity that we would like to capture. So these are the things that we are driving. We're not just talking about financial measures of repricing and having proper reserves, we're really doing. And you can only do that if you have the scale that Allianz has, right? Because you need the platform. Remember, all of these 3 companies are also serving the rest of the market, so we create scale advantages that we can exploit for ourselves as well.

Sorry, was this EUR 0.5 billion the claims target we heard inside Allianz on 1st December, I think. This is something brings...

And we are monitoring the numbers on a real-time basis that they're actually coming. '23, by the way, is a significant delivery year on the work that we have done.

Thank you, Vinit. All right. We will take the next question from Will Hardcastle from UBS.

First one is given the -- fixed income -- is increasingly attract to ROI bank -- and should we expect to further asset -- helps Allianz -- portfolio [indiscernible].

Sorry Will. Will, sorry for interrupting you, it's very difficult to understand you. Not sure if you can change this on your side, but perhaps if you try it. So far we have understood the question at all.

I'll try again and see.

Perhaps you have a better connection, a different room. Okay. I guess we have hopefully not accidentally disconnected Will, but he can, of course, dial in again later. So we will now just jump to the next question, and this will come from Thomas Fossard from HSBC.

I would just have a single question, which will be related both to the P&C and through the Life and Health businesses. And to the retail lines in both lines. Can you talk about any change in the policyholders behavior to adapt to a tougher environment? I'm thinking about buying less or buying differently or buying or down trending on the products or buying less [indiscernible] cover, which would mean potentially less profitable product for you or less or lower margins big change or big changes in terms of policy behavior in terms of purchasing the product?

So I would say on the P&C, that's a little bit -- sometimes the idea that this is -- could happen. But for the time being, we don't see anything meaningful. So there is no indication that policyholders are buying considerably less property case with coverage. So that's not what we are experience, or at least now what we are experiencing as far as we are concerned. On the Life side, what we saw in the course of 2022, clearly, people stay more on the sideline, right? So people might by unit-linked product when there is a lot of volatility or invest less in single premiums. On the Life side, you see a little bit of change in behavior, which is a normal change in behavior when there is some market volatility, but fundamental change in behavior. Otherwise, any other policyholder buying less insurance because they have less savings, all these kind of things. We don't see any meaningful impact as of now. And honestly speaking, I don't think this is going to be meaningful, might be marginal. I cannot exclude that, but I don't see change in the way consumers are going to approach insurance moving forward.

Okay. So you meaning that actually both of products, you don't see people opting less for that proportion on the [indiscernible]?

No, nothing meaningful. No.

All right, Thomas. So Will, I hope we didn't accidentally kick you out of the call a couple of minutes ago, but let's try again now. I hope the connection will be better. So the line should be open for you, please go.

I hope these questions are worthwhile now, and I don't disappoint ain't. Given the increased yield in fixed income, they look increasingly attractive on an ROI basis on the Solvency II. Should we expect to see further asset derisking from Allianz that would help Solvency further? Or is the portfolio mix at something on a steady state? And the other one, just a very quick follow-up. Just on that EUR 1.8 billion inflation load that's been added over the past 2 years, has any of that been consumed already? Or is it still on top? And the second one is, are you able to give any data point at all on where attachment points in the main European or Asia Pac has gone from and to, in terms of the cat nat sales protection.

Sorry, the last question was attachment points. That's what you said or...

Yes. Any data points given where they've gone from and to, as an example from the cat nat sales protection.

Yes. Okay. So maybe starting from the first question. One question was, is the EUR 1.8 billion being used up a bit? No, the EUR 1.8 billion is what we have in the balance sheet. So that's there was no use of it. On the nat cat, I can tell you, so for example, we had for wins in Europe, the limit was about EUR 500 million to EUR 600 million, [ EUR 750 million ]. Now we have -- EUR 600 million, now we have a limit of EUR 800 million. So that gives you a little bit the idea of a touching point that we moved up. On the aggregate, maybe that's more interesting for you. The attachment point was 1.2% and now the attachment point is 1.5%. You need also to consider that we are larger companies. So we need also to, a certain degree, scale everything also to a different size. But as I was saying before, we -- the best way to look at this is as if calculation and basically, we might see some more volatility, but speaking of 30 to 50 basis points. Another way to speak about that is, I tell you, we have a nat cat load of about 2.5% in our planning. How that you can get? I would say we can get to the 4% level. At that point in time, the aggregate will come into play. So this gives you a little bit the idea of the situation on -- from a nat cat point of view. So not a big change, but there is a little bit more potential volatility that we are going we are going to see. And then you had a third question -- further derisking. So on the further derisk, I will say, clearly, as you said, rates are much more compelling compared to what we had 18 months ago. So from that point of view, gradually, Clearly, we're going to look at opportunity to shift more into fixed income. So from that point of view, you should expect that this is going to happen, but we are not like in a rush that we need to do in a month or 24 hours, but fundamentally, if raise at this level, clearly, we can change our asset allocation gradually because that's more efficient from a capital point of view and also we can offer a value proposition to our customers. So from that point of view, yes, the direction will be towards further gradual derisking over the next quarters when -- if they stay at this level.

All right. Thanks, Will. We will take the next question from Dom O'Mahony from BNP Paribas.

I've got 3. The first is I'm afraid I still don't really understand the assumption change within the Life segment. I wonder if you could maybe give me a little bit of -- a bit more detail on that. The second, Giulio, you mentioned that guarantees are still coming down in Life, which is great news. And I just wanted to ask if there's any sign that your competitors across your markets in the traditional saving markets are moving back into guaranteed products, whether there is any sign that guarantees on new business are coming up? And then my third question in a way is the opposite of Will's question. I'm just trying to understand the philosophy behind the equity derisking. Is it that you start with your solvency ratio and you're trying to reduce your sensitivity to the group solvency ratio? Or is it really a byproduct of decisions deeper down within the business? And I suppose if I can just explain why I'm asking that question. If I think about, say, German life, your solvency ratio in German life is extraordinarily high. It will never be a constraint on your ability to remit funds up to the group. As I might have thought that actually, given that headroom from a risk perspective, you might want to use that opportunity to say more investment risk and maybe generate more return. So if you could just help us understand a little bit about the philosophical approach to risk reward in investment portfolio, that would be very helpful.

So starting maybe from the guarantees. No, I mean some anecdotes here and there, but nothing really major in the sense of many competitors changing their guarantees and getting more aggressive. So they are here and there some noise, some anecdotes, but for the time being, we don't see a clear trend in this direction. We need to be ready. This might happen and we're going to stand our line. So I think we have a value proposition that we can offer with our necessarily increasing the guarantee element, and we can work with crediting rates, but not necessarily by the guarantees. I also believe in Europe, if you have Solvency II usually increasing guarantees is never a good idea. So from that point of view, the regime that we have now compared to the regime that's company said 10 years ago is such, that's there is not an incentive to increase guarantees too quickly or not to too high because the system can be pretty punitive from a capital point of view. And this maybe leads to the question by the way about derisking and whether we could get more risk instead of less risk. At the end of the day, there are many capital calculation that we need to run. So there is Solvency II, there are also rating agency calculation that we need to run and fundamentally, in any capital model anyway, if you have a well-matched portfolio by using fixed income instrument, the capital intensity is going to be pretty low. Once you start putting equity, you get to different capital intensity. So once you start getting 4% with 2.5% -- let's say, on a bond, you get 2.5% of yield, you can upbeat that kind of ROE is impossible. So by definition. Clearly, you cannot use bonds to provide value to your consumer. But you understand that at the end of the day, there are definitely capital-efficient asset allocation that can provide good value to the policyholder, and they might have a little bit less of allocation to equity or similar kind of estimate. So that's very important. It's a big change going from 0 [ risk free ] to 2.5%, and then you put a spread anecdotes this makes the economics completely different, both from a value proposition, also from profitability versus capital intensity point of view. Then on the IFRS accounting change, so I think you're referring to the fact that there is -- you are referring to the unlocking or what kind of activity?

Yes, the unlocking...

Yes. That's the way it works. So if you have a change in assumption in, let's say, of actuarial assumption like mortality, lapses, all these kind of things, these assumption changes, they go basically into the CSM. And so they get released over time. Eventually, you're going to get a profit, but you don't get the profit at once you're going to get -- or the profit and loss depending on the situation, you're going to get this impact spread out CSM gets release into profit.

Sorry, Giulio, what I meant was in Q4, what was the unlocking and how big was that?

Yes, I would say because the interest unlocking is something different. I will say there was, at Allianz Life there was a unlocking because of mortality or similar actuarial assumption of about EUR 150 million. That EUR 150 million will not be disclosed as profit. In IFRS 17 that EUR 150 million will be disclosed as in the CSM and the release over time. That's the difference that we would have in the new account regime.

All right. Thanks, Dom. We do not have any further questions. So this concludes our call. Thank you for having joined this call. We wish you a nice and pleasant afternoon and a good weekend. Goodbye.

Goodbye. To all you guys.

Thank you very much. Bye-bye.