Allianz SE ($ALV)

Ladies and gentlemen, welcome to the Allianz conference call on the Allianz Group financial results for the first quarter 2026. For your information, this conference call is being streamed live on allianz.com and YouTube. A recording will be made available shortly after the call. At this time, I would like to turn the call over to your host today, Claire-Marie Coste-Lepoutre, Chief Financial Officer of Allianz SE. Please go ahead, Claire-Marie.

Thank you very much, Andrew, and good afternoon, everyone. So let me start with an overview of our group results for the first quarter of 2026, and clearly, for me, the picture -- from my perspective, is one of strong start to the year. This allows us to reaffirm really confidently our full year outlook we can do so despite an elevated market volatility and more uncertain macro environment. Across our 3 strategic levers, growth, productivity and resilience, we continue to execute with discipline and to deliver towards our ambition. If we look in more details at Page 4, then you can see that overall, our business volume continues to show steady internal growth. It's driven in particular this quarter by our P&C and our asset management segments. The Life business was resilient against the first quarter 2025, where business volume was particularly high. Our operating profit momentum is excellent. We are nearly at 7% year-on-year in terms of growth, where we do benefit from the diversification of our business model. Here we see double-digit growth in P&C, where we reached a new record level of operating profit. We see an excellent performance in Asset Management, which is up 6% or even 15% FX-adjusted and Life delivered a resilient performance, even if it is impacted by FX and also by the disposal of our JVs with UniCredit and with Bajaj. On the net income side, we do see the impact of the completion of the Bajaj disposal for EUR 1.1 billion net. And as a reminder, and as we have indicated previously, we will neutralize this accounting gain over the course of 2026 through strategic and productivity actions and as well reinvestment into higher-yielding instruments. Only a modest share of that overall amount was used in the first quarter for EUR 1.5 million net and more will clearly follow during the year. Adjusted for the Bajaj effects, our underlying core net income achieved a strong increase of 7% year-on-year. We also achieved an ROE of 18% and as well an excellent EPS growth of 9%. So clearly, and I think it's very important. Beyond this exceptional effect, the fundamental performance is very strong and fully on track towards our Capital Market Day ambition. At the bottom right of this page, you can also see that our Solvency II ratio ended the quarter at 221%. This is a very resilient level with well-contained market volatility and consistently delivered strong operating capital generation. Let's move to P&C on Page 5. And there, you can see that our top line momentum continued at a pace that is very much in line with 2025. Our internal growth is at 7% with a split broadly 50-50 between price and volume. The price effect in the underlying has slightly moderated, but overall, the renewal rates remained resilient across the book. As an example, we see retail motor that is running at plus 8%. And within commercial, as an example, MidCorp is at plus 4%. As you can see as well in the further detailed pages, the growth across the P&C portfolio remains well diversified. You have plenty of example of that growth momentum in the document, but some standout contributors would include our platform businesses like Allianz Partners or Direct that are both growing double digit. We also -- we see also a strong new business in Germany and also selective growth in commercial, where pricing meets our hurdle rates. Across the organization, very clearly, we continue to be focused on our growth trial, achieving new customer growth, increased cross-sell and churn reduction. Our underwriting profitability is excellent with a combined ratio at 91%, that is supported by both retail and commercial. This outcome reflects broadly benign nat cat environment. But more importantly, if you go into the details, actually a robust underlying underwriting performance and an ongoing improvement in the expense ratio. The details, as always, are provided in the back of our presentation. You should as well remember when you look at those numbers that basically the year-on-year changes on that -- in attritional loss ratio, prior year developments are affected by an offsetting accounting impact that has been introduced in the second half of 2025. Allowing for that effect, the underlying attritional loss ratio improved by 30 bps, and the runoff impact was flat year-on-year. As always, in the first quarter, and in general, we remain cautious in our booking approach, including when it comes to our initial loss ratio peak with uncertainty on the inflationary outlook at this point in time. The sustained top line momentum and the further improved combined ratio drives our 11% operating profit growth, reaching an excellent EUR 2.4 billion of operating profit. The investment result is broadly flat including the impact of lower equity realization contributions there. The realized losses below the operating line in the first quarter in Non-Life will benefit the operating investment income later in 2026 and into 2027 as we reinvest into higher-yielding instruments. We also continued to leverage AI across the P&C value chain for marketing and distribution of new business through to claims management. The main focus is on customer experience and the uniqueness of our value proposition towards our customers to fuel our growth trajectory. As an example, at Allianz Partners, we have introduced several new large OEMs relationship in the first quarter, that are supported by Agentic AI tools in roadside assistance, significantly scaling our straight-through processing of claims. In Italy, France, Spain, our AI tools are supporting our agents to provide training or real-time support in assessing the risk via AI experts and also boost customer service and productivity at the point of sales. Similarly, in commercial, our submission allows for a much faster and higher quality answers to submission via preparation, enrichment of data and best allocation to underwriters. This is generating significant impact, both in the response time and in conversion rates of our submissions. Overall, I'm very, very pleased with the performance of our P&C segment. We see good growth. We see excellent and robust underwriting profitability across both retail and commercial. Let me move to Page 6, giving a look at our Life Finance business, where the underlying performance of the segment is considerably stronger than the headline momentum might suggest. So the new business first. So on the new business comparison versus previous year is impacted by a very high base in the first quarter 2025, which included large tickets in Germany, strong Thailand sales ahead of the regulatory change on the medical riders and the UniCredit JV business, which has been disposed, as you may remember, in the second half of 2025. Adjusted for those impacts and also the FX effects, the underlying new business volumes are slightly up and the new business value is broadly stable with an attractive mix with Protection Health and unit-linked contributing 60% to this one. To illustrate a bit some of the strong development versus last year, I want to mention first Italy, where really the Italian team has been doing a tremendous job in the first quarter, building on the momentum of what they have already achieved in '25. Where you see that the new business value is up net of minorities and including associated fees with strong unit-linked growth through their financial adviser network. The new business in Asia, if you exclude Thailand is up 12%, and we see as well a continued strong momentum in Health Germany with a continuing double-digit new business value growth. On the Life CSM development, we can see that despite the lower new business value, the expected in-force return still exceeded the release, generating a healthy 1.7% normalized growth. The overall CSM growth was impacted this quarter by the capital market volatility flowing through both the economic and the noneconomic variances, in a broadly consistent manner with our disclosed sensitivities, if you do the underlying math. And as we speak, and some of those market impacts have already improved, we would expect our CSM to recover accordingly. Our Life operating profit was impacted by FX and also the UniCredit, Vita and the Bajaj disposals. Adjusting for this, the underlying life profit was slightly up. There was also a modest market volatility impact in our investment results. We would expect a portion of those effects to be temporary. Overall, the life performance has been resilient in the context of a demanding comparison with last year, perimeter changes and as the market volatility we have seen in the quarter. Going forward, the perimeter impact will ease, and we expect an improved life investment results. We remain focused on achieving attractive risk-adjusted returns on new business, and we are confident we will deliver in line with our capital market targets. Let's move to Page 7 and have a look at our Asset Management business. There, we had an outstanding start to the year against volatile capital markets. Our net inflows in the first quarter reached a record level for the first quarter, with strong growth at both PIMCO and AGI. Overall, the net inflows of EUR 45 billion correspond to an annualized organic growth rate of 9% diversified across regions and asset classes. And as we speak, this good momentum continues. Some administration of this at PIMCO, we see continued strong traction beyond the more traditional fixed income strategies for its expanding active ETF suite and broad-based demand also across Asia and Europe. And at AGI, we see inflows across multi-asset, fixed income, equities and alternatives with new mandate wins in Asia, in particular. The product proposition of our asset managers continue to be strongly supported by our value creation for our customers via our investment performance with at least 90% of outperformance on a 1- and 3-year basis across our full third-party asset under management base. We generated EUR 2.2 billion of revenues, up 12% FX adjusted, driven by the growth of our assets under management. The fee margins are broadly resilient with some temporary impact in the quarter from upfront distribution commissions associated with the strong flows. I am also very pleased with the productivity focus at both asset managers that is evident in an excellent cost-to-income ratio, delivering more than EUR 850 million of operating profit, up 15% on an FX-adjusted basis. It was a volatile period for capital markets in the first quarter, and there was a lot of debate around topics such as private credit. Overall, our asset management businesses have been selective and very mindful of liquidity considerations, even when growing their private and alternative offerings, their focus in the alternative and private credit space is differentiated and focused around areas such as infrastructure or asset-backed finance. Overall, the current focus on credit and liquidity risk is a tailwind for our asset managers to continue to demonstrate the strength of their offering. Moving to 8 and our Solvency II ratio development. So Allianz, further emerged with a strong solvency ratio at 221% with a 2 percentage point increase versus year-end in a volatile market environment. Beyond the traditional effects like share buyback and the usual dividend accrual, we also have the positive effect that we have announced coming from the divestment of the Bajaj JVs that is coming through. To be highlighted from my perspective are maybe 3 key points. The first one is that we have a very contained market impact. The second one is that we have a very consistent operating capital generation. And in addition, we had various model updates, which directionally can be hard to predict that came out at a small positive in this instance, you should not assume this to always be the case going forward. So clearly, the underlying drivers of the solvency development are very strong in the quarter with volatility. Let me move to Page 9. And here, I'm very pleased to announce that from this quarter onwards, we will be including in the backup slides, additional disclosure, providing insights into the performance of our Health and Protection business. As a reminder, we set out a target at our Capital Market Day to grow the operating profit of Protection and Health by a CAGR of 7% through to 2027 to reach EUR 2.2 billion of operating profit by then. Our Protection & Health business is currently split across P&C and the Life segment with different product features, which is leading to different technical accounting treatments. Our disclosure will develop over time, but they are designed to give more insight into the components of profit and the nature of the products we are selling. On the left-hand side of this slide, you can see that we can segment the business into short term. Typically, that will be annual policies, including medical reimbursement health business, mostly accounted for in the P&C segment with combined ratio as being the most relevant steering KPI for that business. Great example of that will be the International & Travel Health business within Allianz Partners. On the long-term side, this will include typically our term or all life that is sold as riders to saving products or the German Health business, which has unique long-term features such as the aging provision. This business is accounted for in our Life & Health segment with the CSM and its growth has been one of the most meaningful steering KPI for the business. The overall Protection & Health operating profit is split roughly 60% long term and 40% short term. Across Protection & Health, we combine a strong global oversight on underwriting standards, product and pricing with customization to local market needs. In particular, we have a global coordination for our health business through enhanced digital health. This was showcased at our finance insight session of June 2025. And for my projective, it's definitely a good reference material if you want to get more insights into the health business. All our businesses have initiatives in place to further grow and to strengthen technical excellence. Some example of such initiatives are illustrated here in the middle of the page. They cover a broad range of elements such as increased use of digital channels for sling and customer servicing, the use of AI to increase the ability of our agents to underwrite health business or more systematically leveraging cross-sell opportunities to sell health alongside P&C products. If you move to Page 10, where we are showing some financial highlights for the business, and we are illustrating the new format we will use going forward. You can see the very good momentum in the operating profit, growing 10% year-on-year adjusted for the disposal of the UniCredit JV. On profitability, you can see a healthy combined ratio of around 93% for the short-term business, both within the P&C business, driven in particular by attractive margins in health. For the business book in Life & Health, our new business and new business margin at a good level but impacted by sub scoping effects, in particular, the disposal of the UniCredit JV, the lower level of sales of medical riders in Asia and some additional tax on health and gross premium in France. So the normalized CSM growth of around 1.5% for the long-term business is healthy, and we would expect the business to deliver full year normalized growth, at least in line with the whole life segment. Overall, the health and protection market is a huge market with significant growth potential also as we see selective disengagement of some states from that part. We see a strong appetite for our products also supported by our ecosystems. We are very well positioned and very confident in our ability to meet our capital market targets day there. Let me recap on Page 11. So overall, we had a strong start into the year. If you normalize for the positive effect of the sale of our stake in our JVs with Bajaj, we delivered an excellent 9% core EPS growth, which is at the high end of our Capital Market Day commitments, Similarly, our productivity and our resilience focus is as well very visible in our numbers. I can just very confidently confirm our outlook for the full year of EUR 17.4 billion plus/minus EUR 1 billion. And with that, I thank you all for your attention, and I hand over back to you Andrew for questions.

Great. Thank you, Claire-Marie. Okay. So we're now ready for questions. [Operator Instructions] Okay. So with that, it looks like our first question is from Andrew Baker from Goldman Sachs.

The first one, I guess, just on the reinvestment of the EUR 1.3 billion Bajaj stake sales. Should we assume that the remaining reinvestment will be predominantly from realization of investment losses? And I guess if not, are you able to give a bit more detail on the types of strategic initiatives that you are really playing into outside of this? And then can you also just help me with the timing a little bit, so for the rest of the year, how would we expect that redeployment to come through? And I guess, would you benefit which business line should we expect the benefits to flow through as well? And then secondly, just on the Life & Health operating investment result, comment in the presentation talking about the unfavorable impact of market movements on Allianz Life and how some of that should come back in future quarters? Can you just give a little bit more detail on the mechanics behind that and how much we should expect to come back?

So thank you very much, Andrew, for your questions. So on your first one, so basically, you are right. So we have now used the first quarter to do a tranche of realized losses on the bond side. We expect to use the rest of the proceeds actually to balance to support our strategic initiatives and also our productivity initiatives, in particular associated to the AI transformation and the opportunity we see associated there. And depending on the exact timing of those effects, we will also be rebalancing some of those with also bond realization. So we will -- we are still flexible. It will depend a bit on the exact timing and emergence of the initiative. But -- so the exact allocation is not yet decided as we speak. When it comes to the exact timing effect, it's also a bit difficult to assess exactly. But what I will do that you can take the remainder and then basically go into 3 tranches until the end of the year. I think it gives you a good view on what may happen on the nonoperating profit side until the end of the year by quarter. And then when it comes to the line of business, it will be mostly coming into the P&C business as we will -- as we see also some acceleration of those transformation opportunities, I would say, in particular related to AI. And then you were asking the question on the volatility associated to the -- so -- so I think what is important to have in mind is that indeed, the investment component within the operating profit on the Life and Health side is unusually low for this quarter because we have quite some noise in this line item for the quarter. We have actually almost EUR 60 million negative effects, which are coming from FX and from market and we also have a negative effect, if you want, coming from the comparison, is a positive effect of Bajaj previous year, right, for approximately EUR 15 million. So those 2 FX combined are basically mostly explaining the deviation. And then if you zoom into a EUR 60 million deviation we have seen from -- coming from FX and for market. Actually, we anticipate EUR 30 million of that to come back over time. And maybe just to give you the big picture on that maybe 2 big pictures on that item, I would say -- going forward, I will say, the investment, the investment line item in the Life Finance business truly in line with our outlook guidance, which is below EUR 500 million. That's basically what you should keep in mind. So there is no -- we don't anticipate that to change. And on the AZ Life side, what is creating this effect is that because the markets were negative, we have seen volatility as well the hedging costs went up. And basically, those costs actually will also will be deferred over time. So that's why we are going to see this recapture over time.

Next question is from Iain. Iain Pierce from Exane BNP.

My questions were just on the Health & Protection, the new disclosure. Thank you for providing that. Very helpful. Just on the sort of outlook, so is the best way to understand this that you're expecting sort of 4% to 5% growth in operating profit in the long-term business? And does that imply double-digit growth in the short-term businesses? And then also on the disclosure for Q1, so the 550, obviously, that's on run rate for your CMD 2027 target already. So just sort of if you could talk about the performance relative to target and if you sort of expect to how comfortable do you expect to exceed the 2027 target in the health and protection operating profit?

No. So basically, what I expect when you look in terms of relative growth, I expect the short-term business to grow faster compared to the long-term business, which is quite logical as well because the short-term business entails partners, entails Turkey and Italy, which have faster growth and also then the earning of this growth into the operating profit is actually faster on the short-term side versus the long-term side. So that's for the sort of overall view. But basically then in terms of -- and the fundamental growth, I expect growth around 8% for the short-term side and basically 6% around the long-term side. And then when it comes to the underlying features of profitability to those business, on the short-term side, I expect the mid- to low 90s type of combined ratio. And for the long-term part of the business, I expect the CSM indeed to grow around 5%, the release is around 8% to 9%, so not so differentiated compared to our fundamental business and the new business margin is obviously well above 5% for that business. So we are on track. That's what I would use. Maybe it's a bit conservative actually at this point in time, but this is still what I will use as overall reference point towards 2027.

Okay. Next question is from Fahad Changazi from Kepler Cheuvreux.

Could you comment on the retail P&C volume growth outlook for the remainder of the year and compare to plan target as well in terms of how should we see that shape? And could you just comment a bit more on what is happening with AGCS, where we had strong internal growth with rates negative, just to see the dynamics and outlook for that business and which lines you're playing in?

Yes. Thanks a lot for your question. Maybe let me start with AGCS, right? So we have a couple of items which are coming through in the growth of AGCS. So we have some booking time effect, so which have accelerated a bit some of the booking in the first quarter, which is showing up with increased growth. And then we have -- we are clearly working on developing our franchise. We have invested into teams. We have strengthened our offerings as well. And we also have new good tools in place, as I was highlighting related as an example to our ability to treat the submission that is really making also a difference in the way we are interacting with the market. So we have the combination of both sides. Clearly, we are extremely mindful of the environment, and we are growing where we can achieve a good level of what we call APTP, which is actual price against technical price because we see that this is a very nuanced environment, and so you have to be careful in the way you are proceeding. So I think there are really support and fundamental driver for that growth, but I will also not multiply by 4 the growth we have seen in the fourth quarter towards year-end. Then you were asking the question on the retail volume growth and where this is that we stand? So our volume growth for the first quarter was -- on the retail side was at 2.4%, which is below our ambition of 3% to 4% volume growth for the -- as commented or communicated as part of the Capital Market Day. What we see, first of all, overall in terms of a positive driver is that we see growth in number of policies and customers across all our major retail entities. Nonetheless, what we have seen is that we we have some operating entities where we had -- despite the fact we had the good momentum, we are slightly below target linked to some seasonality effects. So that's typically the case for Germany and France. In some of our operating entities, we see clearly very good traction like the U.K., Italy or typically our platform business. We are double-digit growth, although in retail there, in direct partners of retail as an example. So we are on it. I think clearly, we are working on our Capital Market delivers still lot of work to be done. I think as we mentioned before, there is a very strong focus from the organization. We are very confident we are going to get there, and we see in the underlying really good momentum.

Next question is from William. William Hawkins from KBW.

I'm checking in with all the companies on expense leverage after some work that KBW has done. And I mean, one observation is that you seem to have remarkably low expense ratios in Germany and America, which is good, but I'm still trying to sort of figure out. Leads to 2 questions. Where in general, do you think your expenses are best of breed and where do you see the need or opportunity for meaningful improvement in expense efficiency across the business units? And then secondly, please, when you're thinking about the impact of expense management on your EPS growth targets, do you ever envisage admin expenses actually falling as a profit driver? Or is this always going to be a relative game of making good investments so that your expense ratios may be improving, but the absolute number isn't coming down?

So I think, first of all, I mean, we are -- there are clearly like 2 components in our expense ratio, where -- admin and the acquisition part. And we are focused overall as an organization on the delivery of the 30 bps improvement year-on-year, which we think is very distinctive and is also a very strong driver also of our ability to work and to sustain some of the growth trajectory we want to achieve because part of that, and that's also associated with some of the AI actions we are doing today is that there will be benefits as we are working in terms of customer experience, optimizing the processes. As part of that, basically, productivity becomes a sort of a byproduct of the optimized processes that then we can reinject into making our product in terms of pricing points as attractive to fuel the growth, which is a very important item. Then I mean I'm not so sure which expense ratio you did look at for the U.S. because we don't have a U.S.-based really business. They are part of our global lines. So I will not really look at that. So I'm not so sure. But basically, what we do in general is that we are -- we benchmark our businesses quite fundamentally within their own markets, also against best-in-class peers and then against internal benchmarks and what we -- and that's a part of a challenge we are operating because we believe it's also key to the strategy I was highlighting, in particular, on the retail side. Now how this is going to evolve going forward? I think it's too early to say. But at this point in time, I would just take our 30 bps improvement as being the base until year-end 2027. And then we will further communicate on that aspect as we also see how AI overall is also providing support to our processes.

That's really helpful. If you allow me just to come back, so my observation about America was about life, not about Non-Life. And I did just wonder, beyond the 30 basis points you're talking about in non-life, which is clear and great. Do you have any similar observations about on the life side of the business, please?

Life is always a bit more tricky, but we also actually do have -- we also look at different productivity KPIs for our Life business. So we have have multiple KPIs we are looking at against reserves, in terms of unit costs and so on and so forth. So we look at different elements. And we do have targets that we are also balancing also in terms of impact overall. So I mean if you take -- and some of our business are definitely best-in-class by far and obviously we'll have an unbeatable unit cost that is also very supportive for some of the future strategy development. AZ Life is also doing really well. And we continue to look at it because we believe it will be a differentiator going forward and so on and so forth. So we also challenge our businesses because, again, the fundamental logic of having better competitiveness in terms of productivity is also a fuel for customer satisfaction and for growth.

And William, I think we've discussed the mix effects in your comparison on life expense ratios are massive between savings and protection as well, which I think might impact some of your regional comparisons.

Okay.

Our next question is from Ben. Ben Cohen from RBC.

I wanted to ask on 2 things. Firstly, on the P&C side, on the commercial rate, it looked like the sort of -- the improvement there was slightly stronger, plus 2% in the quarter versus plus 1% for the full year. I know that's a small change. But could you say anything about whether you are seeing better momentum in terms of commercial pricing across the book. And specifically, in terms of geography on the P&C side, could you talk about the very strong improvements that they've been in the combined ratio, both in the U.K. and in Italy, in particular. And I suppose in the U.K. was a bit surprised because others have talked about how competitive the market is, in general, both on the personal and the commercial side?

Sure. So on commercial rates, overall, so indeed, for the quarter, we are at plus 2% for the commercial scope. The main driver of that is actually the MidCorp business, where we have seen a bit of strengthening of rate across some of our portfolios now leading to MidCorp a plus 4% rate increase overall. I think it was driven by specific markets on top of my mind, I would have Germany in mind as an example, but we have a few others where -- where there was a need to inject some further price increase also from a market perspective. I want to highlight that on maybe businesses like more the AGCS business for us is approximately 15% of a -- bit less than 15% of our global top line, right? There the cycle is definitely not over. We clearly see that there is some of the line of business or regions that where competition is fierce. I will put it that way and where our rates are softening that good example of that will be property large businesses. As an example, financial lines also continue a bit on that path, and we see some improvement in some other line of business. But clearly, that's a very nuanced landscape on the large corporate side, large corporate and specialty side. And then -- and then you were asking some questions on basically the combined ratio improvement, right? First of all, I think you were asking for the U.K., I think. So in the U.K., what we see that there has been a lot of work associated to expenses management overall, so productivity focus from the U.K. team. Also a lot of rationalization that is coming through. Also, as you can see on the page I think [ B14 ] the nat cat impact is contributing positively to this development of the combined ratio is actually the main driver of that. And in the underlying, Allianz U.K. has been cautious when it comes to runoff in general. So I think that's the main driver. So I would say in a nutshell, I will say, good focus on transformation on the U.K. team showing up in the sequence ratio and also mainly benefits from the nat cat side, while still being from a technical perspective, quite conservative. And then on Italy, so what we see there contributing to the development. First of all, I think very good development when it comes to the expense ratio, which are flowing through, also some of the mix effects related to some of the acquisition from that perspective. And also the fact that they had simply a very good also experience during the first quarter that came through into the attritional loss ratio. So overall, I think the Italian team is doing an outstanding work when it comes to technical excellence and balancing basically selection and growth at the same time.

Next question is from Michael. Michael Huttner from Berenberg.

One is the capital generation, the 6%. I know every time I ask you, we say, no, no, it's the numbers are too high, you should normalize it, but you keep beating it. And from speaking to [ excellent IRR terms ], it sounds if it's more structural now. Can you say a little bit what's changed here? And the other one is kind of a big broad question. You're going to be very disappointed. But Bank said that this morning, AI is incredibly cheap at the moment because basically, the AI providers are providing it at below cost, but it might go up in cost once it's embedded. And -- but you sound as if it's very expensive, but putting the question really simply, what's the payback assuming on these investments? Just again, a feel for it? And then just another question, I know it's tricky. What's the number for PIMCO or inflows in April? .

Okay. On the flow question. So -- so I said -- I did mention, right, that the momentum is continuing. We are in the low double-digit net inflows as we speak at both AGI and PIMCO. Yes.

Quarter-to-date or monthly?

Quarter-to-date, but we are still like it's...

Yes, that's collectively the aggregate of the total.

Okay. .

And there is a delay as well in the report, but basically, that's quarter-to-date. And then I think you were asking the questions on the cost of AI, right? So -- so I think the way we look at it is that I mean from my perspective, it depends. You have to nuance a lot the cost of AI from one type of tool to another type of tool depending on what you are using it for. So I think it's a very generic sentence, well, because the reason why I'm coming from that angle is that if you think about it, the way we are using AI, we are using it along the value chain to optimize in most cases, our customer experience. And what is happening is that sometimes you need a voice, sometimes you need something that is more image related, so you have very different type of AI agents you are using, and they come with different price points. Where I agree is that we are building our processes and the optimization of our processes in a flexible manner. So we usually put in competition 2 different providers we select one. But we don't want to be constrained because that technology is evolving very fast. So we want to be in a very -- in an easy way, capable of replacing that technology with another technology, if you want. And then the way we are looking at it is that we are looking at the value delivered against our overall target, all along of those processes, if you want. So I cannot really say it's cheaper, it's not cheap because some of that is cheap. Some of that is not cheap depending on what you are looking at. What matters from my perspective is what is it that we are really delivering in terms of impact fundamentally into the various business cases. And that's the way we look at it. So I think on the OCG side. So first of all, thank you very much. As you know, have been working a lot as an organization on making progress on driving operating capital generation. And we see indeed that there is good value creation across our businesses. The reason why I will not say you can always take that number and then multiply it by 4 and have it available, is that there are always various components that are coming into the OCG. So you may have a bit higher growth, as an example, in some markets, which is consuming bit more capital, while value creation is going to come later on. You can have different mix effects. So just maybe if you compare this quarter compared to same quarter last year, as an example, this quarter, we had less capital consumption in the finance while we had more capital consumption in P&C as we had some mix effects that did come up into that number. So where I'm with you is that there is clearly focused, there is clearly steady and good value creation into the OCG as well just by nature and given the KPI like some volatility associated to the underlying of what's happening with our business, and we will always have that. So that's why I'm very confident with a strictly above 22 percentage points we have communicated and we continue to strive for a good development in that KPI.

The next question is from William. William Hardcastle from UBS.

You mentioned that you remain cautious on the initial loss picks for the uncertainty on inflationary risk at this time. I guess with that line, are you suggesting it was perhaps more caution than normal in light of the near-term inflationary risk when you booked this quarter or just a similar level of caution and you're just flagging it at this stage? The second one is, first of all, thanks for mentioning some AR use cases we've been a risk of not actually discussing AI or much through the results season this time around. I wanted to get an understanding how you're ensuring you're staying ahead of competition in the use of AI beyond just that heavy technology spend? And do you have a strong view at whether the scope of aiming edge over competition here is greater in retail or commercial. It sounds like mostly you're pointing to retail.

So maybe let me start with your first question. So I was alluding to 2 points with my comment. There is one which is, obviously, at the beginning of the year, we are generally more cautious when it comes to the accidental loss ratio peak in particular because we have less evidence before being capable of reflecting how the year has unfolded. So actuaries tend to be more conservative. So that approach we have kept and that's definitely into our numbers. In addition to this one, given the overall environment in the Middle East, we have also done both bottom-up and top-down scenarios on what the implication of the situation in the Middle East could have on our reserve strength. And we have also further added, if you want, to our inflation buffer reserves that we had also already in place previously, where we have contributing -- we have contributed in addition in the first quarter to that one. Now to your question on AI development and how we benchmark ourselves against competition. I will say -- we -- I mean we are fundamental -- I will say, first of all, I think we are ahead of our competition from a different angle. I mean if you look at our Capital Markets Day presentation that was 1.5 years ago and what we were presenting already in terms of how an optimized customer experience is looking like when you use AI. It's actually already quite striking. That's a presentation from CM, and you also have quite some insights in terms of what we were already doing in the presentation from Klaus-Peter. And from there, I think, clearly, our further enhancement and developments have been accelerating themselves because the technology is faster and we see an acceleration of impact and also the new technology and the ability to replace the already use technology with new technology is actually quite tracking. Then I would not differentiate so much actually between retail and commercial, we see within commercial striking examples of what we can do within partners. As an example, I mentioned those OEMs relationship we have onboarded, all of the relationships have actually been onboarded with 0 added employees, we do that 100% AI, agentic AI-driven that's very impressive already today. I mentioned within Allianz Commercial, all the developments which are done along the value chain when it starts to submission, but also to booking or claims processing with AI also extremely impressive as we speak. And then on the retail space, we are working more around verticals associated with BNP approach. So basically, our platform where we are embedding actually AI within the common vertical so that the operating entities can tap into it. From what I see, I think it's pretty distinctive. It's also pretty distinctive in terms of product offering overall. And we see that in some of the pickup of those products, yes.

Next question is from Andrew Crean from Autonomous.

A couple of questions. Firstly, retail looking forward into the second half or to the back end of the year, what are you expecting in retail pricing relative to what you're expecting at the beginning of the year? My sense -- I suppose the background of the question is the Iran war and worries over inflation will have made you think that actually you need greater resilience and that the tough market or strong market in retail will continue longer? And then secondly, I just wanted to ask on the commercial lines combined ratio. I mean there's a good improvement about 1.4 points to 90.3%. Could you give us a sense as to what the commercial lines current year attritional core looks like first quarter to first quarter, making that allowance for the change in balance between BYD and attritional?

Yes. On your second question, you know that normally, I don't like so much to comment in the underlying. But basically, I can tell you that it's more or less flat year-on-year on the commercial side. Then when it comes to retail pricing. So -- so indeed, I think like -- so first of all, we are comfortable at this point in time where we are in terms of pricing against inflation trend, right? And you know it's different, and it has to be nuanced also by geographies and for different type of products. In particular, if you look at at markets like U.K. or Australia, different situations come to France, Italy or Germany and so on and so forth. You are right that, I mean, we are observing very carefully the inflationary trend in the current environment. So we have further reinforced what we call the triangle between pricing claims and reserving to be able to react very clearly. We are ready to price up as required. We also feel comfortable that the market is ready to do so in the current environment. At the same time, we are also exercising a lot of nuances, I would say, from triangle. We have even more precise technical liabilities, which allows us to have even more nuanced price increases. We also have an ability to reprice that is much faster, as an example, compared to the post-COVID environment. And we continue to push a lot on our distinctive assets, in particular, related to our ability to reduce cost of claims also tapping into our platforms, like so typically, what we can achieve there is a very good example of that, but also what we can achieve there basically optimization of our processes. Ultimately, what we really want to do is to balance the 2 and then to reinvest as required also into pricing power to fuel the growth, so basically to maximize value creation. That's the way we want to work with that.

Okay, we're around 2, which I'm allowing because it's -- it's a relatively light run to with the minute. So Michael, your first one round 2, for your second question is Michael Huttner from Berenberg.

The -- so low reinsurance costs, is that coming through? And amazing Germany -- maybe you can give us a feel for -- are we going today at 87.6%. This looks -- I've never seen this before. The -- that's it. .

Thank you very much. I think like -- so I think commenting on reinsurance ratio, I will not do right because from my perspective, reinsurance ratio have always difficult topic because you also have like topics associated with the recoveries. On balance, we expect given how the reinsurance round went at year-end to see supportive development from that angle into our performance for the year.

And just to give you a feel for the direction of my question, AXA said see 2 weeks ago, it was almost material, i.e., almost 5% on the earnings. Would it be the same for you? .

SP-8 I cannot comment on the views of AXA on the technical numbers. I think for me, reinsurance ratio, in our case, I find -- I mean I will see difficult to go along those lines, given the underlying elements that are going into the reinsurance ratio. But we are very confident given what we have achieved in terms of reinsurance and if it's at one that this is going to be supportive of our performance. And then Germany, indeed super. I'm glad also you highlighting it, I think we also need to place other operating entities, right? When we look at this Page 14, which is really, really nice to look at, right? I mean I will not -- I cannot predict where Allianz first is going to finish the year, but they are clearly on a very strong performance track both when it comes to underlying technical excellence, but as well when it comes to their growth trajectory. So we are very proud of the business as we are, I think, as well very proud of many of our businesses, I name a few already, but we have a lot of very strongly performing entities. I also want to highlight, as an example on this page, super nice performance of Allianz Trade as well, which we are not always naming, but it's also very impressive with an 80% combined ratio in the first quarter.

We have a quick follow-up from William from KBW. .

I'm so sorry. I know it's bad for them, but I kind of feel I've got lost in the detail on this discussion about underwriting. So just can I come back, the outlook for the combined ratio, you guided to 92% to 93% for the full year. and yet you've just printed 91%. And everything that I've heard you talking about is all about conservatism in loss picks and normality of reserve development and the rest of it. So I just wanted to kind of cut to the conclusion. Are we getting a message that you're comfortably running out of your guidance already? Or what are the obvious things that's going to drag you through to the end of the year? Maybe I'm just underappreciating nat cats, it's been a light quarter and the rest of the year is going to be tough. But can you tell me with the overall punchline here about why 91% is a good against your guidance?

So basically, indeed, in our guidance, we have communicated 92% to 93%, the 92% to 93% being the guidance for the combined ratio. If you look at our 91% for the quarter, if you neutralize all the other effects, right, and you look at it and you step back, it has benefited from a lower level of natural catastrophes. So if you normalize for nat cat, we are basically in this 92% to 93% range of combined ratio. So this is only Q1. So I will -- I feel very comfortable with our guidance, 92% to 93%. We are definitely on a very strong track. But I think it's too early for addressing -- adjusting that guidance thing stand.

Okay. And next question, apologies I didn't see you on the queue, though. -- your first round of questions, Vinit. Vinit Malhotra from Mediobanca.

So my 2 questions, please. One is on growth and one is on pricing. On growth, if I could just maybe follow up maybe just get a bit more because when we talk about Germany, for example, we've always talked about how retaining customers, how getting more customers, so more retail focus as well. And I think you mentioned earlier in the call that there was a bit of slowdown in the retail side in Germany. Could you help us understand that? And just staying on the growth topic, sorry, just a little more. The commercial growth, 6%, up from 3% in 4Q and pricing was only 2%. So you said you're comfortable with the business, but is that just to reiterate, could you just clarify that exposure kind of growth, if you like. And on pricing, when I look down the pricing data between 12 months and 1Q, all many OEMs are reducing pricing or seeing lower prices. Obviously, inflation is the risk you mentioned, you just highlighted, you added to the buffer. Is that -- isn't to be expecting -- are you expecting it to change this direction of travel of pricing? Or what do you think is happening there?

So let me start with growth. So what I wanted to say when I was answering -- starting with growth in retail. What I wanted to say is that we see that there is -- on the volume path clearly strong underlying dynamic within our operating entities. And there is a very strong focus on the execution of what we call the growth 3, right, this new business, retention and cross-sell, so that's what we see across the businesses, and we see a very good peak of that momentum in the underlying businesses. And that's what we have also seen in the second half of the year starting on. What we have seen as well in the first quarter sometimes is a bit more of some of -- some seasonality effect, if I may put it this way, related to mix when the business is coming up for renewal and what that means, and that also has contributed to some of those lower volume effect in our German business, in particular. So during the -- as the year is going to unfold, there will be a catch-up that is going to contribute to volume growth of our German business as the year unfolds to be precise. Then on the commercial side, we have indeed a good internal growth that is resilient. We are around 6% for the entire commercial business. And there, we have different businesses, right? So I think you need to to have that in mind. We have our partner business. We have Allianz Trade that has seen also growth development in short, as an example, we have AN3, which also has seen good growth, which is like you know this type of transactional business. And then within AGCS, we have the elements I was mentioning. So this catch-up effect, which is more technical effect, I would say. And then secondly, this appreciation of the franchise, the new tools being in place and a different way of engaging with [indiscernible] and all of that being done being extremely cautious in the overall pricing environment. So that's where we are. And sorry, I realize I did not answer your question on -- no, sorry, coming in to your question on pricing. When it comes to to retail, I think my answer will be nuanced, right? I think we are ready to increase prices. We are -- we feel confident we can do so for the various reasons I was mentioning in terms of technical ability to do and operational liability and feasibility into the system. And the same point, the fact that we want to maximize value creation. So we want to optimize the price against the volume, and that's basically what we are aiming at. So I cannot predict exactly how the markets are going to react and what would be the inflationary effect in each and every market. So that will depend on that. And then we will be doing that optimization. I think that's the way to look at it.

Thanks, Vinit. We have no more questions in the queue. We had one question by e-mail to the team. Just to clarify a comment made about our flows, net asset management flows since the quarter end. So to clarify, it's low double digit for the Asset Management segment. So the combination of AGI and PIMCO. So momentum continues for the segment at that level. With that, we have no more questions. So thank you very much. This concludes today's analyst call on our 1Q 2026 financial results. Thank you for your participation, and goodbye.

Bye-bye, everyone.