Allianz SE (ALV) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Allianz conference call on the Allianz Group Financial Results 2025. For your information, this conference call is being streamed live on allianz.com and YouTube. A recording will be made available shortly after the call. At this time, I would like to turn the call over to your host today, Mr. Oliver Bate, Chief Executive Officer of Allianz SE. Please go ahead, Oliver.

Thank you, Andrew, but I thought you were the host. But anyway, happy to be -- delighted to speak to you today. Thank you for your attention. I know it's a bit of a crammed reporting season and a few of our friends have changed their reporting. So apologies if we are having a lot of information at the same time for you. Let me go through the slides, and I will refer to the respective page as I go through them. We would like to just put a frame on what are we discussing today because a lot of things always around reporting season are very short-term numbers comparison. The key thing I would like to highlight today is less than 15 months ago, we saw each other at the Capital Markets Day here, where we looked at the 3-year plan and put out at the time what many of you called a very ambitious plan for the next 3 years. 2025 is actually the first year of delivery on the 3-year plan. So let's bear in mind what we were looking at in December of '24 and how are we performing relative to the targets that we've given ourselves. And I find that very important in times of short-term anxieties and how we do. If we turn our attention, please, then to Page A4 in the deck, the highlights. We are on almost every measure above what we could imagine in December of '24, whether there's revenue base, up 8% for last year, operating profit, up 8%. And again, we had some questions, what about Q4? Claire-Marie will talk about it. We are above what we thought in Q3 we could do at the upper end, and that's why we raised the outlook. Shareholder core net income, double-digit up, dividend per share, double-digit, by the way, 9 out of 10 years now increasing dividend again, this time double digit. And we are very happy because we leave many of our shareholders want and need dividend for the retirement, and that share is only going to increase. Our solvency ratio, we've worked tremendously, and a big thank you to Claire-Marie and her team, together with particularly our colleagues in Stuttgart and having worked on strengthening that at 218 5.more importantly, please look at the stress tests and the solvency post-stress test that we saw. We wanted to be very resilient after a financial crisis. If you run even the combined stress tests, you will see now that scenario looks pretty good. And we have more to come. Remember from the sale of our Indian participation, a few points, the Solvency II revision. So we should be in very safe territory versus potential shocks from the financial side. And core equity return is 18.1%, another point up and 2 after last year. We said in the Capital Markets Day for further reference, above 17%. So we're comfortably there. And also, as you will see later, have very strong capital generation. So not just the solvency is very good, but the key thing is OCG have been exceptionally strong. Liquidity is very strong. And that's why, because there was one of the questions, we have decided to do EUR 2.5 billion share buyback because our cash generation power is very, very strong. And we still believe that our share price is a very attractive investment for our money particularly relative, and we'll talk about it, to other investment opportunities. This is, by the way, true for a number of our peers in the industry because the insurance sector has been derisking and improving earnings quality over the last few years. When you turn please to Page A5, we do a little bit of a deep dive in some of the numbers, a bit more top down, though, relative to what Claire-Marie is going to tell you. And for the two businesses that I believe we run, retirement and protection, every single KPI that we really care for has seen an improvement. That's rather unusual for many places because if you think about the size of Allianz, we really are now very happy about all segments delivering, whether that's the Life insurance side, Asset Management, cost-income ratio improving to 60.7. Record net flows, EUR 139 billion, a lot of that in PIMCO but also AGI, which I think is quite remarkable, 7% organic growth. 93% of our investments are outperforming 3-year benchmarks. So there is a correlation between flows and performance. So that's really strong. The core of what people typically look at, the P&C retail side, 92 combined, while reserves continuously being strengthened. Commercial lines, the same, even below 92%. And what we look at, as you know, have been for a few years growing, the Protection and Health side, the operating profit is up 10%. So put it any way you want, you will find a hard time really poking into the delivery, which is what matters in Allianz. Now it's not just '25. Let me go back to -- it sounds a little bit self-serving, if I may say, because I've been CEO for 10 years. But what we really put out with the renewal agenda and its chapters is we want to build a company that resoundingly delivers even under adverse scenarios. Remember, we have had COVID, we are having the war in Ukraine, we're having enormous problems with trade. We have the U.S. dollar trending down, so affecting massively our earnings from the United States. Maybe as a reminder for everybody, 50% even our P&C premium is denominated in non-euro currency, so exposed to foreign exchange. Despite all of these things, the dynamics have been very positive and accelerating, whether that's on revenues, operating profit, earnings per share and dividend per share. And we are all very proud of that. Now the question is always, you say, well, this is the pricing for the future. But as a small reminder, we are running here a business that is trying to do well over long periods of time, not just for the next quarter. Now why are we doing really well? So I talked about the sector environment having been positive. We also had some positive effect last year when people want to point out, okay, were we lucky, not just good. Yes, we had a little bit less nat cat than was in the budget. But remember, that can change very fast. Just the EUR 300 million we had in the fourth quarter from Australia just from a 3-day hailstorm can very quickly change the equation. But we also had massive again headwinds with the U.S. dollar. And these things, we really need to be prepared for. The way we think about it is not just resilience of the financials but actually having an organization, and we're going to be talking about it, that we are trying to make bulletproof relative to the challenges we have there, whether that's political tensions, i.e., having a fully diversified portfolio in terms of channels, customer segments, product and geography, but also being able to help society with increasing issues around affordability of products, alternative investment challenges, climate change and then, of course, the AI revolution that is going to come towards us. And we'll probably talk about it. Against that, we keep on investing in a number of things. Customer loyalty is super important. NPS, I'll give you some more numbers. And again, these are numbers that we have audited. They are not self-acclaimed. The brand strength is super important. We are growing brand value and it's not just inter-brand. It's brand finance, It's trust parameter. So the trust in the brand has never been higher and we have the highest ever level of engagement of our employee base, and let me share some details. That the ratings are very strong is a matter of itself. So let's look at Page A8 again. It's becoming a bit boring to see upward sloping curves like that. And are we manipulating them? Let me repeat, NPS and these numbers, brand value, were not done by us. They're are externally audited because we run them, and they are numbers benchmarked against competition. So we had 70% of our businesses now being loyalty leader. And they're moving up. We still have some that we're not happy with, but we are not allowing anyone anymore to not be above market. Employee satisfaction on the right-hand side or motivation. We have typically two numbers we look at, the motivation plus what we call a work well index, i.e., how safe people feel at the workplace. By now, we are best-in-class for both of these numbers. When we started, by the way, a few years ago, in earnest, we started managing the details at around 2018. We could have not imagined to go where we have been. Now that's based again on deliberate strategy and is not an accident. I will not go through Page A9. But as a reminder, we have three main levers determined and described in the Capital Markets Day December '24. It's around driving smarter growth. Remember, the historical issue for Allianz particularly in Europe was insufficient customer growth, organic customer growth. The second one is further reinforcing productivity that was already in light of the ensuing AI revolution. So that, for us, AI is nothing new, right? We've been working on that for quite a long time on pricing and other items. And further strengthening resilience because as we move into very, very uncertain times, we want to make sure not just the balance sheet and the ratings are strong, but also the organization is really reinforced whether we have the threat of cyber attacks or other stress that can be put on to the balance sheet, which may be coming from regulation. Let me give you a couple of examples. Let me start by Page A10. The growth in our underlying customer base is increasing. If you say, are we where we need to be? The answer is absolutely not yet. We're starting the flywheel in Allianz. And as you know, large organizations always need time to really work on it. We needed to put the prerequisites into place. I talked about brand, product quality, service quality being on the rise. And particularly in light of rising prices, the price-to-value perception is always super important. It comes through very strongly in NPS. The challenge is basically in two areas. The first one is churn. We talked about it. We still have too much churn in the system. We're working on it and systematic bringing that down. That would require 2, 3 more years until it is where it needs to be. But where we are doing better, in my mind, than I thought possible is in terms of winning new customers. So we've had enormous successes. And I can tell you just one example. And we started with the turnaround of our business in Germany around retail customers. We could have not imagined, going back over 10 million cars that we have now, at some point, we had lost 4 million cars in a row over about 10 years. We've been coming back from the low point at around 8.2 million cars, and we're going up. Now motor insurance is something that's highly competitive. So we're not doing it for the volume. We want to create value. So that's happening at the moment at very attractive rates and good levels of profitability. Churn, I've mentioned. Cross-selling is a very important point. There are countries where we have never had success in cross-selling. Italy is one of them. We are improving our ability to increase that and there will, again, be more work to be done. Last but not least, we have consequently invested in the so-called platform business, Allianz Direct and Allianz Partners. And you see improving levels of growth and of profitability at the same time as we are starting to see returns on building scalable business models. Obviously, you, as investors, want to see that across the group. And this is one of the comments I'm going to make on AI. The way the technology develop will make it easier for Allianz to now harness, we'll talk about that, productivity gains and best practices across border because we will not be needing to go through very onerous IT processes to do so. Let me move further on the Health and Protection side. There's a couple of things that I would like to highlight. First, we have been a winner in a number of emerging markets on Health for a long time, Turkey, we are by far the market leader, and we're accelerating our advantage. But even in Germany, where 10 years ago, many of us were asked, why do you actually have that business? Can it actually do well relative to the universal cover in the system? We are growing leaps and bounds, and that's because we have been reinventing the business model, completely new products both in comprehensive cover and supplemental cover, true market extension through our digital health product, true market extension through innovation on group health products, particularly with the innovations post-COVID. Now companies are finding it very attractive to increase employee retention and engagement to having supplemental health cover. So a true success story. 364,000 new customers just in German health with very attractive margins, something, again, a lot of people would not think possible. And let me pick up another example. People, for a long time, there is no way to cross-sell in the agency force. Really we are product sellers. We're not really client advisory. In France, our agency channel has seen a significant uptick in cross-selling, into protection with very attractive margins, and the numbers you see here versus prior year and versus 2020. So we are on the move on health and protection, and we are working hard to continue that because it's a product that's both attractive for society and customers and attractive for shareholders. Now let me move on to productivity. And at the risk of getting on your nose, this has been a multiyear journey. What you don't see on this page is what the peak was. We started with a PC expense ratio of 28.6% in 2018. That was the peak. And we've come to 23.9, yes, so almost 5 points reduction. And we continuously will try to meet and work very hard to take out 30 bps a year. On a like-for-like basis, ladies and gentlemen, that means we have been taking out 20% of the relative cost base. That's not true because we obviously had pricing effects on the portfolio. But on a relative basis, this number means like-for-like today, we operate 20% less cost. And we haven't really fully embraced all of the opportunities that we have across the entire value chain. Claire-Marie can also talk, by the way, about our finance transformation program. We're working on the service unit. So we are looking at it at the entirety of the value chain. And let me point also out to the fact that most people are telling you, you can only do it on everything that's not related to distribution. It's not true. It's not even true for Allianz. You see what we've been able to do on acquisition costs. And again, we haven't really reinvented the model. We have been working on pretty layman and laywomen levers in order to drive productivity up. So there's a lot more to come. It's coming from a few levers. One, we have decided some of the extraordinary gains that we're expecting this year. We're going to reinvest. We are already spending EUR 6.5 billion in tech, and we're getting more and more focused on new innovation and new functionality versus running the machine. So there's enormous pressure on the running cost of the machine to free up investment into new things. We are going to broaden our focus on unit cost and factor productivity across the entire organization. I mentioned that. So Andreas Wimmer is leading a program on Life. And you see it, by the way, already in the numbers for AGI. A lot of people have questions on whether they can do this. They are making great progress. PIMCO has always been very good at it. And now, again, doing step changes on redesign of process. Yes, I'd like to say it is, first, to focus on better client experience. We really believe that artificial intelligence in any type of automation has the primary objective to make our product offerings more distinctive. So we're less worried about cheaper and cheaper and commoditizing what we do. We want to build a differentiated product and service offer. That is the key priority also for the deployment of Gen AI. And we are trying these things out in what we call our platform businesses because this is where we see these things fastest. And it's digital first. So this way, we also have to be the most competitive on customer service. And when you look at the growth patterns in both businesses and the margins, you see scale at work. So that's really important. The next step for us, and we can talk about it if we have the time, is to help our customers to address the issue of ever rising prices for insurance product, i.e., addressing product affordability by offering distinctive services that effectively reduce the cost of risk. Now let me continue on resilience before, very soon, I'm going to hand over to Claire-Marie. So all the finance numbers you're going to get from Claire-Marie, the only thing I wanted to say is we are increasing operating capital generation. You'll see that. So Solvency II improvement is not risk reduction really only, but it's really generating more capital and more cash in light of what we have promised to you. 25% OCG this year, and we're working on having 23% to 24%. Remember, that was the number. Cash remittance, 89% across the business. And having lower leverage than we used to have. This is what we want to do. Again, these are just the financials. We are also working on making sure the organization is more resilient, i.e., we can react to shocks, wherever they may come from, whether that is cyber attacks or other kinds of shock that happen in our environment. Now last but not least is always a major form for short-term discussion on should we not have a different methodology for outlook. The answer is no, not for now. We are increasing that by 9% from 16% to 17.4%. We obviously have the ambition to beat that. So we will work day and night to make sure that we do more than the midpoint, and we have been when you look at the numbers very carefully over the last 10 years, for most of the time been able to do that. And we will strive to continue to build that track record. So this is the confidence. But we also will remain conservative. Let me end that as people saying that is, are you confident? Look, guys, if we have a further massive devaluation on the U.S. dollar, it can easily take EUR 1 billion out of the OP in terms of conversion, just to give you a number, right? And that cannot be excluded. We don't expect that. But we want to be erring on the conservative side. Overdeliver rather than overpromise is the mantra that we're working on. Thank you.

Thanks a lot, Oliver. So good afternoon from my side as well to all of you. Really happy to be here today. Maybe like starting on Page B3. Before we dive into the numbers, I want to give you maybe a short overview. So you have heard it already from Oliver. We had very strong overall picture in terms of performance. What we see in our numbers is growth, is profitability and its resilience. And this is clearly demonstrating that we are on an excellent path when it comes to the delivery of our midterm targets to our Capital Market Day delivery. So this performance is fueled clearly by the focus we have as an organization in terms of execution of our three strategic levers, growth, productivity and resilience, also as already mentioned by Oliver, And what you can see as we go through the material, I will say, in my section but also detailed part of the numbers, you will see how both our sustained financial momentum and our disciplined attention to resilience is actually supporting our confidence when it comes to 2026 and, I will say, even beyond 2026 very clearly. So if we go into the numbers and if we start with the top line, Our top line reached a record level of EUR 187 billion with an internal volume growth of 8%. And here, all segments are contributing to this positive development. For all segments, this growth is either in line or above our Capital Markets Day ambitions. And on a nominal basis, we have seen a strong FX effect in particular in the second half of the year, which is impacting all segments. And Oliver has already highlighted some of the effects, as an example, on the P&C side. Our operating profit grew by more than 8% emerging at EUR 17.4 billion, which is our highest level ever. And this is as well above the high end of our original outlook and as well above the Capital Markets Day expected growth rate we had communicated in December 2024. P&C clearly had an excellent year, but both Life and Asset Management delivered strong performance as well. We have an FX impact, just below EUR 400 million, in our operating profit. So excluding the FX effect, to get a sense of the true underlying picture of the performance, our operating profit growth would have been around 11% with P&C at 17% and Asset Management. This year, we have a better nonoperating profit, which, together with our operating profit, results in a very strong core net income growth and core EPS growth of 13%, which is also clearly above our 7% to 9% Capital Markets Day target range. This 13% is building on a 12% growth that we have already achieved last year, which is making our EPS journey very attractive. In addition, our RoE is also nicely above or strictly above 17% target, emerging at 18%. Finally, our Solvency II ratio is at a strong 218%. This is the highest level it has been for over 5 years. This is demonstrating our resilience and our focus on this as an organization. Moving to P&C. And if we look at Page B4. Here, you can see that for the year, our top line achieved its highest level ever at EUR 87 billion with 8% growth, and we have both price and volume which are contributing roughly equally to this development. Retail P&C growth, in particular, is at 9%. And as Oliver has already mentioned, our initiatives to increase our underlying volume growth are making good progress, achieving 3.5% in the second half of the year. As you can see further in our material, so in Section C, this growth is broad-based across our portfolio. On the right side, we are overall at a healthy level of 4.6% for the year with retail, where we are at 7%, where we expect the price discipline to continue and to keep pace with claims inflation in 2026. And in commercial lines, we are close to 1% rate increase. Our book is very diversified, as you know, meaning that there are parts where rates are harder in some segments. Overall, across our portfolio, we see many opportunities to continue our growth path at profitable levels. Talking about profitability. As you can see, our combined ratio emerged close to 92% for the year. This is clearly an excellent level. And both our retail and our commercial lines of business are contributing to this development. Once again, you can see further in the material how diversified this performance is as well across the portfolio. The main driver for the positive development of our margin compared to 2024 is a further improvement of our fundamentals in the attritional loss ratio, which I'm very happy with, although we do have some accounting effects between attritional and runoff I already announced in the third quarter, which are reducing a bit the readability of these aspects. Overall, the low level of nat cat we have seen in 2025 is offsetting the decreased level of runoff and discounting. Even though we have seen quite some cat activities in Australia in the last quarter, our nat cat experience was better this year compared to 2024. Finally, as communicated in the third quarter, we have been very conservative in our year-end booking both in terms of runoff and in terms of current accidental peak. And we have further increased the level of prudency in our balance sheet. We also did continue, as mentioned by Oliver, our focus on productivity with our expense ratio further reducing by 30 bps versus last year as expected to in this number. So while the investment result was slightly lower compared to 2024, in 2025, this is mainly due to FX. Our excellent technical performance and the growth we have seen allow our operating profit to emerge at EUR 9 billion. This is 14% higher compared to last year, well ahead of our Capital Markets Day assumptions of 6%. So overall, we are very pleased with the performance of our P&C business in 2025. We see excellent performance in both retail and commercial. This performance is not due to a better nat cat environment but rather is a reflection of excellent volume growth, positive underlying margin development and prudent current and prior year reserving. This positions us very well for the year ahead. Let's move to Page B5, and let's have a look at our Life and Health business there, starting with growth. You can see on this page that our PVNBP emerged at almost EUR 85 billion, its highest level ever, with a growth of more than 5% FX adjusted, This growth comes after an exceptional new business development in 2024, where you may remember that we had seen, at that point in time, 22% growth in PVNBP back then. So I'm very happy with the new business we have captured in 2025. And we also see a good increase in net flows across our portfolio on the Life and Health side. We continue to operate at an excellent level of new business margin, continuing to benefit from a focus on our preferred lines of business with the contribution of Protection and Health and unit-linked up to 51% of the value of new business. Adjusted for the disposal of the JV with UniCredit, the new business profit of Protection and Health and unit-linked grew by 11%, slightly ahead of our Capital Market Day assumptions. Like in P&C, our performance across the portfolio is quite diversified. So Oliver has already outlined some of our success stories in Health. So I can add some positive highlights on the rest of our Life business with, as an example, the Italian team, which has grown by 20% its value of new business adjusted for UniCredit, or the Asian team, which did grow its sales outside of Taiwan by more than 14% last year. The Life CSM development over the year is better represented on a net basis, which allow for reinsurance and tax effect. And you can see, so in the middle part, that the net CSM adjusted for FX grew by 7.5%. Net of reinsurance, the noneconomic variances in the development of the gross CSM are modest, mostly reflecting the U.S. lapse experience. The earning of the CSM in the operating profit is in the upper end of expectations. So looking at operating profit. We emerged at EUR 5.6 billion, which is ahead of our outlook. This operating profit growth is around 4% FX adjusted and close to our medium-term expected growth rate with this adjustment. In the fourth quarter operating profit on a stand-alone basis, our level of operating profit is a bit lower than our recent quarterly run rate of approximately EUR 1.4 billion as a result of some of the charges that we have taken for some legacy medical business in Asia. So overall, for the Life and Health business, we are pleased with the level of growth and profitability of the new business in absolute, but as well considering the demanding comparison to 2024. We see very healthy inflows and a steady development of both in-force and profit, which gives confidence for 2026 as well. Moving to Asset Management on Page B6. Here, you can see, first of all, that the level of organic growth of our Asset Management business reflected in the flows developed strongly over the course of the year. We have seen a total net flows of almost EUR 140 billion and an organic growth rate of 7% for the full year. In the fourth quarter, the trajectory continued with EUR 45 billion of net flows, a record for a fourth quarter with strong organic growth at both PIMCO and AGI. The trajectory at AGI in the second half of the year is very pleasing to see from my perspective. So it's true from a flow perspective but also true from a productivity perspective. Our net flows continue to be supported by our excellent investment performance. We have a share of 93% outperforming asset under management against benchmark on a 3-year basis, so clearly adding value to our customers. Net flows are diversified across geographies and with strong developments as well in terms of new products and distribution initiatives like the PIMCO active ETF suite with nearly 50% growth in 2025. This excellent flow momentum is continuing into 2026 at both asset managers. Revenues, in the middle part of the chart, emerged at EUR 8.5 billion with margins broadly stable and lower performance fees compared to last year. Both asset managers have done an excellent job when it comes to productivity, and we emerge with a segment cost-income ratio below 61%, which we lend at an operating profit of EUR 3.3 billion, a 7% growth FX adjusted. So overall, the performance of the Asset Management segment also given the FX impact has been excellent, in my view. We see a record level of third-party assets under management, very strong flow momentum, stable fee margins and an excellent focus on productivity. So I'm very pleased here as well. Moving to. As you may remember, resilience was an important aspect of our Capital Markets Day at the end of 2024 as we continuously strive to secure reliable delivery of profit, capital generation and cash. So here, I'm coming back to the framework and my dashboard that I had laid out at the Capital Markets Day. As you know, we look at resi holistically. And here, we have seen clear positive developments over the year, also as we work structurally on the various dimensions of the framework. So as an example, we have seen a strong operating profit evolution despite the FX headwinds and we continuously enhance our technical excellence in our P&C business to ensure a good preparation to the cycle. We have generated 7 percentage point increase of our Solvency II ratio from a refined work at modeling implied volatility. Our Solvency II capital generation is at an excellent level, also supported by the early benefits of the focus we have of the enhanced focus we have given to that metric. We have further improved our downside management. And this downside management goes even beyond the significant improvement in post-Solvency II of plus 11 percentage points. For example, to include further diversification of our reinsurance structure, during the year, we did broaden the scope and the nature of our scenario testing to further reflect the geopolitical environment. So overall, a lot of work with positive concrete outcome as well in the numbers. Let me zoom into the solvency ratio development on Page B8. So here, our solvency ratio emerged strongly at 218% at year-end, which is 10 percentage point increase versus year-end 2024. So you have the rounding effect. It's not that I cannot do the math between the two on the slide. As you know, we set a target to improve our operating capital generation at the Capital Markets Day. We have decided to improve this from an historic level of around 20 percentage points to 24, 25 percentage points in 2027. We anticipated this will be a journey, as you may remember, as the natural operating capital generation from our business growth in the plan was more naturally around 22 percentage points. So now with all the early work we have done on the operating capital generation and a very strong performance we have seen in P&C in particular in 2025, we emerged at an excellent level of 25 percentage points this year. And there are a few one-offs in that number. So while I'm very proud of the achievement and of the outcome of 25 percentage point, we would estimate that the underlying level of sustainable capital generation is more around 22 percentage points in 2025 and we expect that we'll start with towards 2026 is a base from which we hope to generate at least this level in 2026. Our sensitivities have slightly reduced over the year and, combined with the overall increase in solvency, means that our Solvency II position post the combined stress is now around 197%, which is almost 200%. This is a very strong position to operate from for the future. Moving to remittance on Page B9. Here, you can see that our net cash remittance for 2025 is at EUR 8.6 billion, which is slightly ahead of our Capital Markets Day commitment, as is our remittance ratio of 89% against our 85% target as previously remittances continue to emerge from a very diversified base. FX is as well playing a role in the year-on-year comparison of the cash development. So on a normalized basis, our remittances grew at least in line with the operating profit growth. And on top of our normal cash remittance, we did receive the proceeds from the first tranche of the sale of the Bajaj joint venture a few weeks ago. So from a cash perspective as well, we are in a very healthy situation, which gives us also flexibility for the future. Moving to the outlook on Page B10. And here, indeed, as already mentioned by Oliver, we are keeping our traditional approach to base our outlook on the delivered operating profit of the previous year, thus, EUR 17.4 billion plus/minus EUR 1 billion. And this is a 9% growth compared to the outlook midpoint for full year 2025, which itself was 8% above the one of 2024. So even if you take just the trajectory of the midpoint, we clearly see our earnings progress that continues to grow strongly and ahead of our Capital Markets Day commitment there. Our range is unchanged versus last year and allows for certain uncertainties, typically around capital market volatility, FX and P&C nat cat. The details on the main assumptions which are supporting the various components of our outlook are in the back of our presentation to really explain what's happening to each and every component. I also would like to mention that, as announced, we plan to neutralize the IFRS accounting gain related to the disposal of the Bajaj joint ventures. This gain will be reinvested partly in productivity initiatives and also in accelerating reinvestment of bonds into higher-yielding instruments. Importantly, both of those actions will have a positive and lasting impact on our future earning power. Finally, the share buyback we have announced yesterday, we'll continue to support our EPS growth journey, standing at 14.4% at this point against our Capital Markets Day target, a very attractive level. Let me recap on Page B11. Clearly, I'm very pleased with our performance this year. With our operating profit above the highest point of our original outlook range of EUR 16 billion plus/minus EUR 1 billion, we are in excellent territory for the delivery of our targets for the 3-year Capital Market Day cycle. Importantly also, we have not only delivered a very strong financial performance but we have as well increased our resilience across all metrics. This is an excellent achievement, too. Both the financial performance momentum and the resilience of our organization provide a very supportive environment to our dividend proposal and our share buyback program. It as well gives full confidence towards 2026 and our ability to sustain value creation for all stakeholders. With that, I thank you all for your attention, and I hand over back for questions to you, Andy.

Thank you, Claire-Marie. Great. We're ready for your questions. And just to remind you how to do that. So we're very omnichannel at Allianz. So there's lots of options. You can use the talk request button if you're accessing as far as via the web. [Operator Instructions] In case of any other technical difficulties, you can, of course, also e-mail any of the Investor Relations team or even Bloomberg. You can find most of us on Bloomberg as well. You can message us there if there's any technical problems.

So with that, it looks like our first question is from Andrew Baker of Goldman Sachs. Andrew, go ahead.

So the first one is just on the fourth quarter attritional loss ratio. Just hopefully you can help me with the moving pieces here because it's 130 bps higher year-on-year. I can see 140 bps of that is from the accounting change. But how do I think about picking apart the underlying year-on-year improvement, which presumably has come through and then your more conservative loss picks? So any help there would be helpful. And then secondly, I guess, a broader question. Just on the German pension reform, are you expecting any positive or negative impacts on your business or opportunities and threats from that pension reform?

My personal opinion is that most of the reform initiatives do not have to come from the government employers and not just talk about biller they will not change... [Technical Difficulty] It will take 20 years -- sorry, my phone was off. I hope you got some of the answers. So let me repeat. Pension reform Germany, the issue is that the public discusses certain things for the public system. I will not comment on that. But what we see is increasing demand for Pillar 2 reforms. Just as a background, the group pension system in Germany are a huge success both in terms of historical penetration but value for money for the savers. Why? Distribution costs are typically 2/3 lower. Admin costs are also significantly lower because of the way it's organized. The union is coming back and saying, we need to strengthen that. We have had already supplemental group health coming, which is a huge business for us. We are #1 in that business. It's growing leaps and bounds. I also expect further strengthening of the employee benefits businesses coming as a core strength to come through because Pillar 3 reforms, as we've seen them, will take 20, 30 years to have a material impact on reducing reliance on the public system. That's my personal opinion. So the answer is yes, I expect further benefits. As a personal comment, we need a reform also on Pillar 2 because a lot of the requirements that we have in terms of guarantees of capital and returns are reducing the benefits to consumers. So we need to make sure that tax incentives are basically available for decumulation products beyond fully guaranteed. That's the real obstacle for additional products. But on the fund decumulation side, we expect a lot of boost. And we are happy about both. As you know, we are a leader in both segments. So the answer is yes. I also expect, you didn't ask the question, a lot of reform on the health care side. Germany has the highest per capita spending in the EU on health care and not with good outcomes because average life expectancy is not increasing but decreasing. So we need as much reform on health care and sickness days than we have on pensions. Now, Claire-Marie, on the Q4...

Yes, I can do that. So indeed, Andrew, I think when you do on the quarterly slide on a stand-alone basis like the undiscounted attritional loss ratio is at 72.8%, which basically you need indeed to correct for the NDIC effect. So if you do the direction for the NDIC effect, your undiscounted attritional loss ratio is at 71.4%, which is basically exactly at par with last year for the fourth quarter. And the explanation to this one is that simply we've been very conservative. We have been very conservative in the current accidental peak. And we also have been very conservative the PRI reserving, as I was mentioning. So I think that's what you will see that's coming through across our portfolio. And that's an illustration of that point very clearly.

Okay. Thanks, Andrew. The next question is from Fahad Changazi of Kepler Cheuvreux. Go ahead, Fahad.

Could I ask about how our PIMCO flow is doing in Q1 2026? You mentioned the momentum is strong and there have been very strong flows in the last 2 quarters above the planned run rate. And also in regards to the Solvency II revision that's coming up, I understand you're not give you an update and it's 5% to 10%. But where are we in terms of getting other things that perhaps don't give you as much an uplift by taking Benelux to the internal model?

Sorry, just to -- because your line wasn't clear.

It's what we are doing in addition to -- so let me start with -- so indeed, you are right. I think when you look at what we are working on in terms of basically developments as part of the resilience action as we had communicated in the Capital Markets Day, there were two type of actions, right, more like sort of a short-term focus, which we see also emerging into our OCG this year and also in some of the positive developments we have seen from the model change. But there are things which are more complex, will take more time for all the reasons I have been mentioning repeatedly that are going to come later on, either 2027 or beyond 2027, so that typically the work we are doing as an example on bringing Benelux to the internal model, but also other actions we are doing for the U.K., also the things we are doing for Asia. So the work is ongoing. It's working well and it's following its path, I would say. And again, so now we'll be preparing and, at certain point, we are also going to start the engagement further with the regulator. So that will take some time. But basically, that's really on the right path. Now when it comes to the Solvency II revision. So I did further run our models, and we expect an positive outcome, which is on the high end of the range we had communicated. So we'll see that coming through after, I mean, from the 1st of January 2027 onwards. So that's basically for the Solvency II ratio. And then you were asking questions, I believe, around PIMCO, PIMCO flows and what we see. So basically, so the trends we have seen in the fourth quarter is continuing at this point in time. So we have already a double-digit positive net inflows at this point in time coming from the Asset Management side. And that's clearly related to multiple dimensions. That's related to the fact that we have this excellent performance, I have been mentioning already. That's related to the shape of the yield curve. It's also related to the fact that we see a certain type of rebalancing. Like as an example, equities have been very well. So there is also a certain type of rebalancing in the portfolios. Also some people are very attracted by credit strategies but rebalancing towards more liquid strategies, which is also supportive of some of the PIMCO strategy. And finally, we have a very nice level of success in some of our new strategies, new wrappers, like the ETF suite I have been mentioning. So all of that is really putting PIMCO on a very nice growth trajectory.

Great. Thank you, Fahad. The next question is from Kamran, Kamran Hossain of JPMorgan. Go ahead, Kamran.

So two questions for me. The first one is just thinking about expenses within the business. You've had clearly have like a lot of success over the years in bringing down your expense ratio, kind of economies of scale, just excellent efficiency throughout. I guess as you look at the AI trend and where things are going, I know it's not a new thing for Allianz overall, but do you think there is a potential for maybe the historic run rate to accelerate over time? The second question is on P&C. Would you be able to talk about kind of what's happened to the reserve buffer in 2025 or discretely in Q4? Just interested to give or not giving the message on the additional prelims or the conservative loss picks in the fourth quarter.

So on the reserve development, so indeed, so we have been very cautious, right? I think also just to get a good assessment of that, if you do all the analysis, right, related to where we were for the overall runoff and then you correct the runoff of the NDIC effect, which is 0.5 percentage points, and then you remove what is the natural effect of 0.6%, basically our resulting to level of runoff is extremely small in the portfolio. So that's a very good illustration of what has happened in terms of fundamentals. So our reserve levels at this point in time are extremely strong, are certainly like in the highest it has been against our historical reference, to put it this way. And then I think your other question was...

Yes. I can talk about, Kamran, about the productivity journey that we've been on since basically 2018. So we are planning to continue that there is no letting go, again, now increasingly across the entire value chain in terms of the upside that you're talking about, where we're thinking about is, and it has also relates to AI, has something to do with the fact that we increasingly will be debottlenecking the interface between business requirements and then IT delivery. When you come from a very fragmented historical architecture of your IT, the issue was always you need to change the back-end system, the middle layers and many of the feeder systems in order to get benefits. And the decomplexitizing is at a minimum slow and typically not just slow but also expensive. Now why is that changing? Because a lot of the extra cost that we have in the run side of IT, and that's very important for productivity, is the parallel run between old systems and the new systems that we're bringing in because you're typically changing one product, let's say, motor, then you go into a non-motor retail, then SMC and then commercial. And it takes many years until you have every element of the value chain renewed. With a lot of things that we're seeing on new technology, it's not just we can as business people directly influence and create the code that will deliver better customer service to our clients, but we can also overcome the issues on the back-end system because the software now improves the software. So we are expecting massive productivity gains in the way we are producing code and replacing historical systems, and it's a lot about the speed by which we can do that. We can talk about that. The second thing is we are trying to improve value proposition of our products and services for consumers. A lot of the issues we typically have in P&C is when we have massive claims events because you can often not reach our call centers, you can never staff them to peak demand. And a lot of the things that we are deploying AI for is improving customer services so you don't have service bottlenecks anymore, whether that's reachability of ours, whether there is mass claims when you have a hailstorm, whether that is getting instant support and tracking on if you have a roadside assistance availability, whether that is finding additional doctors. And therefore, we are not just looking at automation and replacing labor, but also expanding what we believe is our distinctive service suite. Let me again give you an example. In the core of what we do in motor claims, particularly in casco in the core of Europe with our subsidiary [ SOLV ], which we are in the process of integrating and partners as a whole suite, is we are trying to reduce the cost of claims to consumers that trust us with managing their claims, including the journey through the repair jobs, the rental car and all other experiences driving the average claims cost down by 20% and 30% and then giving that as a rebase to consumers in order to dampen the quite considerable claims inflation that we've seen. I'm personally very worried about the affordability of our products, and I think that our sector will soon wake up to say we need to help consumers to really reduce the cost of risk. So it's really important that AI will help us to deliver these services and benefits even faster. In my mind, it will also strengthen our brand and our differentiated products away from just being cheaper, which basically just drives commoditization, right? So when you ask the question, are we building a moat around our business model? In fact, we are really working on distinctive client services rather than pure automation of core processes. They will also happen, just to be very clear, I'm not kidding about that. But we are focusing a lot on innovation. And the last one is actually innovating around distribution. A lot of clients are coming to us today already digitally even if they buy off-line with the LLM and the advice you can get from AI. There is an increasing flow to strong brands that have super high NPS, great product value and service. And we are not just hoping, but we're working to benefit from the strengths that we've built into the system. Sorry for a little, but the 30 bps is like the baseline, and we're going to show you the same numbers in Asset Management. You see that in AGI, by the way, cost-income-ratio coming down and further coming down. And we have the same initiative now, by the way, running on the life insurance side, Andreas Wimmer runs that. So we're going to see consistent productivity gains. So hopefully, that gives you a little bit of a picture of what we have been working on and are continuously working on.

Okay. Great. Thanks, Kamran. Our next question is from James, James Shuck from Citi. Go ahead, James.

I wanted to stay on the AI topic, if possible. And I was going to just understand how you see the hyperpersonalization journey in insurance in general, particularly as we move through the various configurations of AI as we go from traditional to fully agentic and ultimately to artificial general intelligence. And then specifically, how do you see the role of insurance company evolving within the LLMs? I know you spoke a second ago, Oliver, about brand and NPS scores mattering. But how confident can you be that brand will actually matter at all within an LLM? Will it not just be completely disintermediated?

Well, the issue is I don't know the future. If I knew at the invention of the combustion engine that Porsche will do really well, that's 100 years ago, it had a different job. But to give you a more serious answer is what we're doing is we're working on it every day. So when you put into various markets what's the best car insurance, what has the best service, the LLMs, as they learn, they give you an answer. And we are working on it day and night. We're putting enormous resources behind it, trying to understand what the criteria are, what the source case is. And interesting is actually better than price comparison websites who continuously push, as in the U.K. only pricing. You actually see criteria, likability, empathy, customer service, claims service, recommendation, i.e. NPS by current customers. So it's quite a broad set of things. Second, there's a very interesting -- when I saw the sell-off, particularly in commercial lines of brokers, I thought, a lot of b***s***. If you are an incorporated company, you have as a client to get professional advice. Under German, U.S. law, French law, you need to get professional advice. So let's imagine for a second you have a small SME business. You're buying through your ChatGPT account your liability cover. You end up not getting paid when there is a claim and you have business difficulties. And you end up in court. What do you tell the people? And by the way, who has the liability for that advice to buy [indiscernible] rather than AXA or Allianz? So we have some, in my opinion, a little bit not yet mature assessments of the outcomes because the question of who is liable for advice, who is liable for hallucination is a very important question that not just regulators in the future were addressing, they have already assessed it and says, there is no advice in purchasing without liability. So it's a great question, James. Really great. I think we don't have the time today, but it will warrant a lot more conversation. In my opinion, there's also a lot of opportunities. Every innovation, there is a lot of downside but there's a lot of upside. I personally believe that consumers will be empowered to ask a lot more questions and get a lot more Important question answers then they can get answered today. It will put a lot of pressure on us to do one thing really well. That is, to offer differentiated value to consumers. So I personally believe it's a good thing for consumers. And I would love for you to go back to December of '24. We had quite an extensive session on what we believe AI is going to do in the business model. None of what we've seen over the last 15 months have been contradicting it. And there's a reason why companies like Anthropic and others believe Allianz is ahead of many, many other competitors. Thank you, James, for the very good question.

Okay. Thank you, James. And I said, we're omnichannel. We have a question from Kailesh, who's submitted by e-mail. So it's Kailesh Mistry from Deutsche Bank. He's actually managed getting three questions but they're short questions. So first of all, on Slide C10, I think he's referring to the Solvency II walk, how is the SCR consumption split roughly between P&C, Life and Health and Asset Management? That's question number one. Question number two, on the capital upstream, where did the EUR 0.6 billion excess come from? I guess, Kailesh, you're asking between Life and nonlife. Claire-Marie mentioned Bajaj, but I assume that is for '26, which is the case. And then the third question. Reinvestment of the IFRS gain, that's related to Bajaj, should we assume this all happens in 2026? So therefore, neutralized at net income level in '26? How should we think about these movements for S2 roll forward where the sale adds 6 points in 1H '26? I think that's a straightforward, Kailesh. That will be apparent in Q1, the 5 points. And then there's a small additional 1 point will be probably most likely 2Q.

Indeed, so that was. For this one, maybe as we are still on the reinvest of the IFRS gain for Bajaj. So indeed, there is a difference between the cash view and the IFRS view, so the cash which is above EUR 2 billion will give us flexibility, and we will be reinvesting the IFRS gain in 2026. So the idea is that it's entirely neutralized in 2026 via the two main means I have already highlighted before. Then when it comes to the EUR 0.6 billion of excess remittances, they are actually equally split between Life and Health and P&C this year. As you know, right, this excess cash is always lumpy by definition. We are constantly working on various -- I mean, we are constantly working across the various balance sheets in the organization to address the trapped cash. Directionally, we expect more cash trap in Life and Health, but that's always, always lumpy. So last year, our 2025 was 50-50 between Life and Health and P&C. And then you were asking what is the split in terms of capital consumption, so basically the EUR 1 billion of SCR. So last year was actually, out of the EUR 1 billion, it's EUR 0.7 billion is for Life and Health and EUR 0.2 billion is for P&C. So it's remarkably low for P&C if you look at the growth we have generated in P&C. The reason for that is that we have been focusing and working a lot on various required calibration of some of the capital consumption on the P&C side, which is also showing up in that number.

Okay. Thank you, Kailesh, for that e-mailed question. The next question is from Andrew, Andrew Crean of Autonomous. Go ahead, Andrew.

A couple of questions. Firstly, can you talk a little bit about how you see pricing in retail developing over the next 12 months? I think profitability is now at a good level. Do you think you can still get pricing above your estimates of claims growth? And then secondly, U.S. Life, where the competition is changing. You've got more private equity players in there operating at lower capital regimes and with a higher tolerance investment risk. Do you still believe that your model can compete with them? And do you wish to continue to compete with them given the relatively low multiples on public life companies out there compared with your own overall?

Okay. Thanks a lot for the questions. And also starting with the pricing on the retail side. So indeed, we continue to see good pricing momentum across our portfolio in retail. What is clear is that we continue also to see -- just as a reminder, right, so for our overall retail portfolio, we have seen in 2025 a 7% rate increase. Within that one, as an example, motor was higher, was at 9% rate increase. And what we see is that there is clearly a differentiation market by market as always. But across the board in multiple markets, there is still the need to continue to see a certain level of rates, in particular as the inflation continues to be quite high and actually above the headline inflation, in particular, coming from spare parts and so on and so forth. So there is still quite some need there. It's in particular, the case for France, but also Spain or Germany as an example. So long story short, we believe that we will continue to see a solid level of rates in our retail portfolio and also that the rates we are getting are basically above or in line with the inflation on the loss side we are experiencing. So our strategy, overall, maybe just to step back and to move away from all those numbers, is basically to say, as you mentioned, we have a good level of margin. And from that good level of margin, we are focusing on growth across our portfolio. And we feel quite comfortable with the initiatives we are pushing through that Oliver also as already highlighted. Plus what we see, we are capable of achieving, leveraging also some of our AI tools that are supporting us on that journey.

Yes, Andrew, thank you. You see, Life, a long conversation. I'll give you the short answer. There are a couple of structural differences between what we do in some of the private equity owned business. The most important one that we are focusing more, on decumulation and retirement with different risk return profiles than the pure accumulation products. Remember, we don't do fixed annuities. We have fixed indexed annuities. But there's still risk that we need to manage, particularly behavioral options in the products. If you remember all the noise 20 years ago and 15 years ago around the VA. So the key thing is typically not asset risk. It is liquidity risk. And if and when that materializes, we are taking a lot of time to look at that. Second, we would like to focus on retaining on balance sheet only where we believe we have, as a balance sheet owner, the appropriate returns on it. We have therefore regularly used markets to securitize parts of the portfolio. Remember, our project [ Lucy ] in '21. We've just [indiscernible] it. We will do a few more securitization exercises if there is like there has been a systematic differences in between how public markets and private markets actually price exactly the same economic risk return profile, but they come in different, if I may say, that accounting regimes. It's not just capital regimes, but they are also different accounting regimes. So we are acutely aware of that. Last comment, my personal opinion is, but it's very personal, we always go through cycles, sometimes very extreme cycles in terms of what investors find super attractive. You see that now with the share prices, some of the private credit and private instruments players from stellar to less stellar. And we believe to look through the cycle in terms of what we believe in terms of earning proper returns on the business that we do. But we're very astutely aware of what the risks are, and we're trying to continuously improve. I remember when we met many years ago, we were talking about German life insurance. Just to give you an example, we effectively have now for new business, and Solvency II is helping with that, 75% to 80% less capital consumption today with better customer value than we had when I joined Allianz 18 years ago. So that has been the journey in many markets, And I think the U.S. is going to see more and more rationalization in the use of capital. We will not go on the edge, if that's your question, in terms of taking investment risk. But again, my personal opinion is not default risk of the things that you see. It's actually liquidity risk under stress that is going to cause the cracks. We don't have much of that.

Okay. Thanks, Andrew. The next question is from William, William Hawkins from KBW. Go ahead, William.

The first one, just to hear a bit more about your thoughts about the extremely strong solvency ratio, north of 25% for you guys. And for many public players, it does seem excessive and it's about to step up further with the solvency reform. I fully recognize that's a very nice problem to have and it does allow you to point to the resilience of your business. But on the other hand, it may be pointing to the fact that capital is not being deployed efficiently and you're diluting returns. And it does sort of beg the question, is there ever a number where you have too much capital in the solvency ratio? Just help me understand how you're kind of framing that given the extremely strong number would be great. And then secondly, the remittance of EUR 8.6 billion, what would you argue is your freely distributable group cash position? And how much of that is in the parent company? It's great to see the flow, but I always find it hard to think about the flow if I don't know the stock that it's contributing to.

So we've known each other for a long time, can I give you the 30 seconds? If you have 18% ROE, it's hard to see how we are not using shareholder capital efficiently. But you tell me what the proper ROE is. But on a more serious note, let Claire-Marie answer.

So I think like on our solvency ratio, I think there is a difference between solvency and cash, right? So I think it's an important aspect as well because it's not that you can entirely basically distribute your solvency ratio under the shape or form of cash. So there is a nuance between the two metrics. And while we are working a lot on the solvency ratio also to enhance our solvency ratio, over time, this is creating a lot of flexibility, from my perspective, on how we can deploy that solvency ratio associated with our strategy, so to support our strategy. And part of that also, over time, will also give more flexibility also from a cash perspective as we are able to crystallize that solvency ratio. Now given where we are right now, I think it's a good level to be at in the current environment we are into because basically, it's an optimized amount when you look across our portfolio, across all metrics. But it also gives us a lot of ability to absorb also a quite volatile environment, right? So that's also why we are always looking at what does that mean for us post combined shocks because that's a very good way to measure how resilient we will be in a much more challenged environment which also, again, gives us a lot of strategic opportunities when you are very strong in such an environment. So that's the way we are looking at it. And I agree with Oliver ultimately. If you look at all our metrics, we are clearly optimizing our metrics, and that's what you see in the very strong performance we have achieved. And then you were then you were asking where do we stand in terms of liquidity overall. So in terms of liquidity, I had communicated in the Capital Markets Day that we always retained security liquidity level of EUR 8 billion. That security level is obviously completely untouched and is at this point in time. So the level of liquidity we have overall is obviously above that one. So you can be very confident on the level of liquidity that is available overall.

Okay. Thank you, William. Our next question is from Ben Cohen from RBC. Go ahead, Ben.

There were two things I wanted to ask about. Firstly, could you talk about the impact of the steepening yield curve on demand and margins in the Continental European Life businesses? And the second question was just your views on M&A at the moment. I guess some of the comments around the Bajaj sale suggests that maybe there's a little bit of capital that's freed up there to spend. Could you just remind us your priorities with regards to M&A?

Let me take the first one because the good news, unchanged, absolutely unchanged. We are very conservative when it gets to deploying your capital for buying things. It has to be really a very clear business case. Some people call us too conservative, I don't think so, because we've been doing quite a few things like strengthening the Allianz Direct platform and a few others which we need to integrate. But what we do really want to invest, and I want to tie that to the next question, is to increase our organic growth and really grow market share. I remember some of you asked about 4 years ago, it was in the middle of COVID, and they went back to 2012 and said, at some point, you had 12 million cars in Germany and [indiscernible] had 8 million Now you have 8 million and they have 12 million. Is this going to continue? Just wanted to give you a KPI. We have been going back to having 10 million cars, I'm sure you can always debate the relevance of auto insurance, I'm using that as just one example. And we are focusing really on deploying capital to grow organic market share. Because the story has been that we have advantages out of better products, better services, better brand, better scale. You see that and we need to prove that to you. We need to prove that we are profitably growing market share, and this is everything we're focusing on and that we really would like to do. Because we believe at this level of return relative to cost of capital, the real value added is consistent growth and expansion of our customer franchise without jeopardizing margin. And I understand investor concerns because every time we talk about that, everyone then is trying to just grow market share and profitability goes down. So the thing to really watch is how do margins relative to growth behave. And I can assure you, we are spending all our time on how do we really make sure we get the benefits out of our investments. And whether that is in brand, customer service, product quality and other, it's the only way to answer, whether that's technical change in other. Second, what has changed, and Claire-Marie and kudos to our finance team here is we used to have a mentality for a long time in that the average temperature of the hospital is what matters, right? So you deliver on average a 92. You are great. And then when you looked under the hood, you would find 2 years ago, we had above 110 combined i property in Germany. We do not tolerate that anymore. We are even in the more difficult lines below 100% underwriting profits, and we will let volume go if that's not the case. That's why you will see differentiated growth patterns by market, by lob, by segment because -- and here's the benefit, and I really believe in that, and I've seen it over the years now, is we have such a diversified model that we do not run out of opportunities to grow. Now wherever you look, we are really diversified and that is helping us even if not also lenders are really humming all the time. And this is very different from when you are stuck in the reinsurance industry at this point in time, you had an enormous kind of last 6 years, lots of bottles of champagne popping. And now the world is changing. When you are only a large traded property markets, the world is changing. It's very different from us. We don't need to write the stuff. We do it if we make money. And that is really what has changed here. And we have now the numbers to prove it to you. So thanks for the question, and thank you for listening for me to reinforce that. The biggest opportunity, by the way, of all of them that we are working on is, again, let me reiterate capital markets, the retention side of retail and to a certain degree of mid-corp. We are still having retention numbers in some markets that could be significantly higher and that will give better value to shareholders because we spend enormous amounts of money on acquiring customers. And the key lever here is not NPS. It's actually how we incentivize our distributors and how do we incentivize our management because we have been incentivizing them for 130 years on gross growth, i.e., what you bring into the front door, not in terms of what was the net retention. That is the biggest change that we are driving now, and thank you for asking. I just wanted to highlight that, and we're going to show you the numbers.

So Ben, I think Oliver answered the second topic about growth. The first question, just to clear, Ben, was on the impact of the yield curve on flows in the Life business? Or...

The Life business growth, and that's going up. Okay. So the key point is, technically -- sorry, Claire-Marie can give you a much better technical explanation. When yield curves go up, the attractiveness of the product relative to what we used to have goes up. The issue, however, and I'll talk of it, the amount of flows that come in that you can then invest into the higher coupon. So it's not just yield curve going up, steepening. It depends on the duration of the site and the net cash flow that you're investing because we are duration matched. So you need to have fresh net cash flow investing into higher coupons for the earnings to go up over time. So economically, it's for customers much more attractive, particularly on a risk-adjusted basis. It takes time as it works itself into the new business into the in-force. Sorry for the more long-winded answer, but that's it. So typically, you have a 24 months lag of a steeper yield curve before you see a significant uptick. And then it obviously needs to work itself through the CSM, which takes, again, a little bit of time.

Okay. Cool. Thanks, Ben. Our next question is from Michael, Michael Huttner at Berenberg. Go ahead, Michael.

I had two questions. You've got these lovely slides, C51 to C55. And I wanted to ask if you could give us a little bit more comfort on the private placement debt. So that's, I think, about EUR 22 billion in total for the group as a whole and for AZ Life. And I know you spoke a little bit about that. It's about half the total half -- it's about EUR 11 billion. I just wondered just on that slide because that's the slide which mentioned last slide where the regulators are getting a little bit more focused, what the metrics are in terms of default rate, what you're seeing the buffers from the life insurance and then all this wonderful stuff. And then the other one is really simple. I think there were two numbers I caught. One is EUR 400 million for the headwind in FX. But I think, Oliver, you mentioned a figure of EUR 1 billion. And I just wondered whether sensitivity had gone up, maybe. That's it.

But Claire-Marie gives you the longer answer.

On the FX effect, like on the operating profit, so that's basically the level of total FX headwind we have seen in the operating profit last year. And that's basically a total FX effect, right? It's not only the U.S. dollar FX effect. And so like the numbers that Oliver was mentioning, the EUR 1 billion of possible FX effect, is related to total currencies. While the number that basically last year, you certainly may remember, which was again 10% U.S. dollar variation, we have a EUR 500 million operating profit effect. And that number slightly moved up. When you look at the sensitivity for 2026, it's around EUR 600 million. It's simply linked to the fact that there is also growth related to PIMCO, which is showing up in the numbers. So I think the one you need to compare to last year will be against 10% movement on the U.S. dollar, EUR 600 million, which was EUR 500 million last year. So I hope it clarifies. And then thanks for pointing out to all the work that basically the team did on the Pages C51 to C55, which is indeed providing a lot of transparency on non-traded assets, so both nontraded debt and nontraded equity, and then a new page we have introduced, which is providing full transparency as well on the investment portfolio of AZ Life. So I think what's new also on those pages is that we are providing by buckets what is the average expected return in each of the various categories and also a few elements which are explaining where we stand when it comes to those assets in terms of experience. Now related to nontraded debt overall, maybe just building on some elements I already shared previously. First of all, we have been investing in nontraded debt for a very long period of time. We have a lot of experience when it comes to private debt. And think about the fact that it's quite a natural place for us to be invested into because we are the owner of PIMCO. We also are the owner of Allianz Trade. So credit risk is something we know pretty well, we know very well, I will say. And also related to the point of Oliver, we have a lot of focus on liquidity as part of that risk assessment. Now if you look at this Page C51, clearly, we are very comfortable with the quality of our portfolio. And it's also not a very exotic portfolio when you really look at the details, when you look at what we are also expecting to generate in terms of return in that portfolio. Now half of that portfolio is a real estate related. We have 1/4 of that portfolio within that real estate part which is noncommercial mortgages. So that's retail mortgages essentially with Germany and within the Benelux. So that's an illustration. And then we have the infrastructure debt, which is also a very historical, longstanding, where we also have a lot of very positive experience. And then we have the private placement you have alluded to under middle-market lending, where we have very high-quality portfolio, which are also very diversified and with a very good track record. So if I understood well, I think you were asking in particular about what is the default level we have seen within the private placement portfolio, I think, for which, last year we had given the insights, which were around 18 bps default experience. Actually, we really continue to see similar level of trend. So there is nothing new, a new type of development which are emerging in that portfolio that are deviating compared to what we had experienced at the same point in time last year. We continue to have, when it comes to pricing of those type of placement, a very conservative approach. And our experience is actually in line with what we had communicated and way below the pricing we had taken initially. And then we have provided full transparency on the AZ Life investment portfolio which you will see there if you spend the time to go through. It's very high quality, and we are very comfortable to share that transparency to also provide more comfort.

With these things, from my perspective, I was already very impressed, it's Oliver speaking, with the Allianz Insight. Serious material, I would like to point you to that too because we knew that these concerns are coming. And the reason why I'm mentioning it, some of these things pop up when there's something like with first brands or now with some of the listed products of others. We also had said that we do not rely on the fake credit ratings that some people deploy. I just would like to reiterate, we'd like to be really Munich Bavarian boring when it gets to these things, and that is also true when we have subsidiaries on the other side of the ocean. So the label private investment or Level 3 doesn't mean anything. The issue, again, as we try to say, is liquidity stress. We look at that. We constantly compare our marks conservative assessment. Just as a proof point, you may have seen over the last 2 years how regularly we have been updating the valuation of our real estate portfolios. And when there were required, we brought the valuations down. So we have not held to artificially high relevance. And you saw that sometimes actually to my nonpleasure, but it's just what we do. We have no interest to keep fake marks. And I just want to make sure from the top of the house, we are trying to safeguard your money and be erring on the conservative side. It's a very important question you have, and it's a very important message for us to send. Does it mean you can never have anything? No, we don't know. But in the grounds of what do we control, we are really tight on risk.

Okay. Thank you, Michael. Our last question is from Iain, Iain Pearce of BNP. Go ahead, Iain.

The first one is just on the cash. Just looking at the cash, the capital return, obviously, the cash you're going to pay out in '26 isn't covered by the remittance that you've upstream this year. And if I just run forward the DPS sort of in line with the EPS growth target, that implies sort of EUR 350 million, EUR 400 million growth, which is roughly in line with the cash growth guidance across the plan. So just wondering when you expect the underlying cash return. I know you'll have a tailwind from Bajaj in '26 to cover the cash returns that we're expecting. And the second was just on the retail pricing outlook. If you could just talk a little bit around the claims inflation you're seeing in retail, particularly in motor, because it sounds like there seems to be some expectation of continued claims inflation. But if you look at the '25 experience, the '25 experience seems to be very low on the claims inflation side. So if you could just talk a little bit, particularly on motor, what you saw in '25 on claims inflation and what you expect in '26, that would be really useful.

So on the claims inflation, so indeed, what we continue to see is that is a slowdown on the overall inflation, but we are we -- I mean, despite this, I would say, the slowdown in headline inflation, the price inflation for spare part remains clearly well above headline CPI. So what we continue to see is clearly a level of inflation, in particular in motors, but I think in multiple parts of retail, that is in the mid- to single digits in many parts of our portfolio, but also in some of the portfolio like Australia or the U.K. will be mid- to high single-digit type of inflation. So we have to work against a nuanced inflation environment. That is basically that we have to address. And as always, right, we are not letting that level of inflation coming through. So we are working very actively to absorb some part of that inflation via a number of initiatives we are running for our clients in general. So we have a lot of focus, as an example, on leveraging spare parts, on settling claims very quickly, on basically guiding some of the cars, as an example, to preferred garages. So we have a lot of initiatives. And actually also even AI is also helping us from that angle also to address a lot of the fraud-related type of inflation, which is also supportive. And what we do is that we redistribute part of that benefit back to our customers to help as part of the overall affordability trajectory. So that's a very important aspect of it, and we are clearly working with that. Obviously, now, after quite some years of that repeated experience, we know how to address it. So I think that's the way we are working on that. So I would say, if you need to have something in mind, is that for Europe, it's actually more the mid- to single digit. And for Australia, U.K., it's on the higher end.

So you had a question on remittances versus cash out. I don't understand actually the numbers but I'm not the CFO anymore. If you run the numbers in the head, so core income, why do we say core net income, because it takes the noncash items out. So 11.1, you have a remittance ratio of 85% plus. That gives you 9.6% cash. We pay out 6.7 as dividends, 2 plus 5, that's 9.2. So I wouldn't understand why we were spending, paying, then we get in the holding. Then you have the cash buffer at the holding that we are also feeding through optimization of capital, i.e., we lift out excess capital out of the OEs that we do not count as remittances, so there may be a definition issue. So actually, I do not understand how you come to the numbers. But maybe Andrew can talk to that. We would never pay more money than we generate unless we want to consistently do that in a stressed environment. Remember, we had Structural Alpha, where it was very important for us to reassure investors that we deliver dividend, and that's why the payout ratio relative to accounting net income was higher. But usually, we have a significant buffer relative to the cash we generate for holding relative to what we pay out. Everything else would not be prudent and we wouldn't do that. But maybe I have missed the question and then Andrew can pick it up after the call.

I think as well, maybe, I mean, the way to look at it, and you can refer back to the slide we went through as part of the Capital Markets Day, right, is that we pay out approximately 90% of the cash we generate from the operating entities. And basically, the 10%, as mentioned by Oliver, we want to retain. We need that also to keep some flexibility to fuel some of the transformation and some of the deployments we want to do. I think that's the other way to look at it. And clearly, we have been optimizing from various angles. And I think this is really the level of cash we need to retain to be able to operate our business in an optimized manner.

Okay. Thanks, Iain. And that concludes our Q&A. Thank you, everyone, for your interest. Any questions, any follow-up, please feel free to reach out. And we'll see a number of you on the road in the next week. Thank you very much. Thanks.