Talanx AG (TLX) Earnings Call Transcript & Summary

Good morning. Good morning to Talanx's Capital Markets Day 2022. We released last night our dividend proposal for the coming years. And today, we wanted to give you an overview of our updated strategy for the next strategy cycle for the years '23 to '25. We have a day of full of information for you, and we will start with our CEO, Torsten Leue, who gives a summary of the strategy for the next cycle, followed by Jan Wicke. Jan Wicke will not only focus on what IFRS 17 and 9 mean to the Talanx accounts, but also introduce you on how we deliver on our dividend strategy. After Q&A and a coffee break, we will follow with our business divisions. So each of the divisional heads will explain to you how to unchain our primary divisions. We will start with Edgar Puls for our industrial divisions followed by Ralph Beutter for HDI Specialty. Initially, we wanted to have Ulrich Wallin here, unfortunately, Ulrich got a flu. I'm sure he's watching solely, get well soon. But Ralph is also well equipped to explain to you Specialty business. He is the COO of our HDI Global Specialty business. Thereafter, we will turn to our retail operations, and that will be done by Jens Warkentin, our recently appointed CEO for Retail Germany, and then we'll have Wilm Langenbach for Retail International. So each session will be followed by a short Q&A. We also have a few participants on the screens. We will make sure that those will have the opportunity to ask questions again. And so I wish you a pleasant day, enjoy the flight through our strategy, and I hand over to Torsten Leue.

Thank you, Bernd. So welcome as well from my side, and welcome the name of my team here. You see 2 people not here, this is JJ on show yesterday evening. You know him as CEO of Hannover RE, it makes no sense having him here on stage, he has his own Capital Market Day. And Caroline Schlienkamp is the new HR Board member who really focus on the talent management and other things in HR, you have seen yesterday as well evening. And the team, you know them, Jens Warkentin, you don't know yet. He's a marathon man. He knows operations financials, really very good, was the CFO in Germany. So as we need in Retail Germany marathons, he's the right man to do so. Actually, we're the winner of the marathon of the category over 50-or-something, right? So welcome, Jens on board, and he will present Germany. Good. So thank you all as well in front of the screen that you have interest in our stock and the Capital Market Day, and we would like to show you 2 things basically. Promise is a promise. So what we have delivered, what we promised. And second, what we will promise until 2025. So we call it stabilization what was in the past and now acceleration of what will be in the future. This industry and then talked you about the past, the 3 indicators we have given, our KPIs, the last 3, 4 years. So the 800 basis points was the 8% return on equity. Basically, it was 8% because there was no interest above risk-free that was not existing, was even negative. Earnings per share growth was at least 5% and dividend payout ratio, 35% to 45%. What have we delivered? Return on equity is always the most important things are in the footnotes. That is thing I've learned in my life. So you see that the -- roughly 9% we will do and I think it will be above 9% because at the end of this year, we expect significantly higher than 10% return on equity. So the 800 basis points is the average over the year in spite of corona, we achieved a return on equity. And we -- again, we don't adjust our return equity like in the market, sometimes it is really the pure IFRS accounting, not adjusted return on equity. If you would adjust it, we would be far above even taking the OCI out because mainly it was driven by the high OCI jumping into the equity. We account for that, others don't and therefore, will be for sure, high double-digit return on equity, if we would adjust it as well. Net income, it was driven by net income and not by the equity, as I said, because the OCI was significantly increasing the equity. So it was driven by the strong EPS growth. We are here on the baseline of EUR 850 million coming up to the range of 105 (sic) [ EUR 1,050 million ] and EUR 1,150 million. And here's the first message. In the range, we believe we will come out in the upper range of this range we've given. So basically, more closer to 115 (sic) [ EUR 1,150 million ] than to 105 (sic) [ EUR 1,050 million ]. This is the first message. And taking this into account, if we go to the upper range, we will not have -- and you see again the footnote around 7%, 8% EPS growth, it will be rather than 9%, 10%, let's say, depends what we come up with the upper range. And here taking just to account that the EUR 850 million was then the basis of this. When you just say at 850 was we had a profit warning in that year, industrial portfolio we had to clean up, and it was the EUR 703 million was the real figures, which we have said. And the real figures of EUR 703 million, but was really the value of the portfolio at that time. If you take then the EPS growth, we talk about 10% to 13% EPS growth. So it was a real one around 13% coming from 703 and not for EUR 850 million. So whatever, I crunched the numbers. We have achieved 5% at least EPS growth. And the dividends as well, we had a payout ratio of 35% to 45%. And some of you said it's low, but we were 47%. So at least above what we have promised. And we promised as well to increase our cash pool where we can pay dividends out from, I think, EUR 0.8, let's say, below EUR 1, up to EUR 1.5, and we have achieved it. Jen will tell you more about it. We are above EUR 1.5. So in that moment, we always said we will revise our dividend strategy what we have published yesterday evening. I will tell you more about it in a second. So dividend was a big issue that we are catching up here with the market. And I think this is what we published yesterday evening, we are there. When you just summarize in the figures, I always find astonishing to say that, yes, we are not considered as a growth stock or let's say, the market, which is growth stock is more dividends, but you see here that we grew from EUR 34.9 billion to over EUR 50 billion, and we will say significantly over EUR 50 billion on the figure we will publish till at the end of the year. That means at least 43%, I would say, closer to 50% growth. So top line was 50% -- roughly 50% growth, which will come out probably the end of the year. We are by far, roughly -- not close to 3x faster growing than the peers on the top line. You see it again, the numbers in the footnotes. We only can compare until '21 because '22 we don't have yet for sure. But fast, fast-growing and much faster than the peers. And net income, which is more important, is growing by 50% at least. If you take the upper range, when it comes out there, it will be close to above even 60%. So since 2018, half of top line, 50% and even 60% bottom line more or less could be the message next year. So this is, I would say, a growth stock, if you really add half of your company in just this couple of years. And this is driven by the primary insurance. So reinsurance was performing always as a machine. And you know all the figures of Hannover Re. But as we head into 2018, we had this prime insurance, especially industrial portfolio of Edgar, [indiscernible] was not good, not a good shape and we really turned it around. And now the share of the prime insurance is not 31%, but 40%, and we're aiming for more here. So basically, primary is 40% of everything in the profit is primary insurance. And you see it quarter by quarter, we are around, even above this year, 40% in the quarters. And this in spite of and the whole market has it, for sure, the corona issue and as well Ukraine. It's about EUR 2 billion we have to absorb in our figures. And it shows as well that Ukraine, we always -- as we always did in the past, we learned it from Hannover Re, I want to be very conservative when it comes to the reserving. And when we have close to EUR 400 million, I think EUR 361 million or whatever was a figure, and Ukraine reserve, 70% is still IBNR. So there's nothing happened yet. It shows you just a figure how we try really to keep this culture of conservative reserving. So EUR 2 billion headwinds we had. Just to show you the quality of the results, especially in the primary insurance, we published always Towers Watson results once a year. We learned a well for him in Hannover Re. They have EUR 1.7 billion, basically stable reserving, but they're growing. So basically, there's a percentage-wise is decreasing still. And the primary is the contrary. So significantly increase of the resiliency reserve published or accounted by Towers Watson of EUR 800 million more resiliency within the best estimate reserves. So this shows you -- we showed not these results in the profits. We showed it in the resiliency reserves. It's now published. So basically on the way since 2018, EUR 800 million additional reservation, which significantly gives us resiliency for whatever comes in the future. And proportionately, we even higher reserved in the resiliency than Hannover Re, if you compare to the total reserves. So that shows, again, quality of the prime insurance. It was not really hard calculating, but we're very conservative seeing our reserve situation. Overall, it brought you 69% total share of return, which is an upper range of the peers we compare with each other. So basically 69% is what, at the end, accounts for you as shareholders. That was the past. So we stabilized, I think, the company, prime insurance, and we call it even unchained prime insurance, it's basically moving ahead to 40% of the company. So it's visible. It's not something we have just by the way. It's a major part of our company. The 40%, nearly half of it comes from primary. Going forward, we say acceleration and acceleration means for sure, everybody wants to have more and higher and faster, we as well. And therefore, we have the strategic house, 25%. And this house has 4 ingredients: capital management, A; people management, B; focused divisional strategies, C; and sustainability, D. Probably the main part is the capital management, and I start now running you through about these 4 letters. A, capital management. We will increase our remittance ratio from average 44% in the time, 2019-'22 until 60%. Jan will tell you more about it, what we will do with the measurements we do in the capital management. One thing we did as well, we changed completely our incentive systems. So basically, the focus on return on equity and the remittance ratio is for each CEO in the company there as the main focus. So incentivized and measurements you can do, I think we can do here more as we basically saved a lot of money already. We can be very -- I mean, safe in a sense of cash pool. Now we know that we can do more here, and we will do, and Jan will tell you. So 60% is now the message. And always having in mind, 60%, while having in mind that we are fast growing, a very fast-growing company. I mean 3x faster than the peers. And this was the message we gave yesterday. So we play a bit with number 25. So -- but just maybe to explain you, since 2013, when we went to IPO, we started with 120%. We brought the dividends every year, EUR 0.05 more or less up or stable 1 year with corona, but we catch them up in '21 from 150% to 160%. So you can say over the period, always EUR 0.05 basically up. So the difference was in 2013 to 2021, EUR 0.40 per share. And we will now increase 1 step proposed already next year for this year dividend, 2022, 25% up. So the dividend we will propose is EUR 2. So basically, we did in 1 year now, what we have done in the last 8 years. So we are there starting with the EUR 2. And then we say we don't want to have anymore stable message. We only go upwards. We go upwards with 25% until '25. So the figure will be EUR 250 million in '25. The steps are upwards. We don't concrete the steps we will decide year-by-year, but it's sure at the end of the year, EUR 250 million will be there and will be only going upwards. So this is a dividend message due to more accelerating capital management, I would say, in our company. And having in mind, again, we are a fast-growing company. Good. First, capital management. Second, B, is the people management. Here, we basically have a new board member yesterday, you have seen her, Caroline. And I think it's very important and major parts are about culture and the company, how we can achieve this fast growth. It's about structure, but mainly it's about people and about the business model we have, and this is driven by many ingredients, but by people and as well by cost efficiency, how we approach the markets. So it's really a different approach. Hannover Re is always somewhat different. And I would say the prime insurance gets as well somewhat different and many things, what they are doing, and we see it in the numbers. So this is basically what [indiscernible] is working around and the first results are there. So I always say a healthy company, healthy people run faster. And you see that the organizational health check we have, again, in the footnote, you see the 800 companies we compare to each other. It's an external survey. Interesting is the number is 86% of our people answered it worldwide. So it's a huge participation ratio. Normally in service, you know from your own company, if you achieve 86% of all employees answering a survey it's, I think, a good figure. So you see engagement here worldwide. So over [ 20 ], whatever, 2,000 people answered. And the number is here, we started with the third quartile. So basically, really at the bottom, nearly, yes. And we are now in the top quarter at 77%. Just to give you a figure because it doesn't mean much to you, but top quartile means something and 80%, if you achieve 80%, you're really top in class. So we're really not that far of a culture which at the end, and there are questions like motivation, leadership, innovation, all this typical question you can have, the people feel as well give us a rather positive signal that we're on the right way. We're not there where we want to be because on top, we are just top quartile, but the way is a target. And for me, it's always important that people work with a culture and that we see leaders in the company who really believe this is important, especially in these times today. Let us see focused division strategies here. We want to have, let's say, a more prime insurance share, which is strategic ambitions of 50%. We don't say yet the date here, it's not '25 because Hannover Re has a good run now. As you know, the whole reinsurance market is really in a very hard cycle. So we allow us to help for sure Hannover Re to be outperforming. But still, as prime insurance is catching up, this is our ambition to come close to 50% as a strategy. Timing, again, especially it's not here there, but we will be there. So this is basically the 50-50. And my colleagues will tell you much more. So I just make very small summary, what they will tell you. Edgar will tell you he wants to have at least above 10%, which industrial really has never seen without playing those reserves. So this is really a clear commitment. And what he says as well to you is 2018, we started with 4.7%, so roughly 5%. He will be above 10%, I would say, significantly above EUR 10 billion in '25 with a CAGR of 12%. And be sure when you have seen the resiliency, the EUR 800 million we built up in the primary insurance, main part comes from industrial. We don't publish the segments, but it just tells the main part comes from the industry portfolio, you see that it's not growth, it should be profitable growth, and you see it at least a 10% return on equity reflecting this one. This Edgar will tell you in a second. Retail Germany or marathon man, Jens Warkentin will tell you as well, I would like to have at least 10%, above 10% again, which Germany never have seen. And he will tell us well that yes, cash is important, profit transfer is important, and we need it and they give us 44%, which means EUR 650 million more cash contribution to the group. And overall, you see that with EUR 300 million above EBIT is again Retail Germany never have seen. Retail International, Wilm Langenbach will tell you, again, I want to have at least 10%. Again, international was very fast growing in the past years. You have seen it, and he will as well now, as always when you acquire, when you grow organically, you get a steady state, not steady state, but a state where you really can work with the [indiscernible] you have acquired, and it will be above 10% here as well. This message will be EUR 721 million, we are #5 in the 5 markets in the motor business. We carved out, and we want to be in 25% not just in the motor, but in the whole non-life business, #5, which is a huge step because the whole non-life market is much bigger than just the motor market. Motor is the core of each market in emerging markets, but he want to be top 5 in all nonlife market. And JJ will tell you nothing because he told you already that at least we want to have 10%. And you know that Hannover Re always is far above 10% return on equity and the market is below 10% of equity, far below. So I always say internally, just go on. Don't talk about it, just go on. And with a lean operating model, which again, we have the [ most ] segment as well in the prime insurance, it's just a winning model and the valuation is justifying it, I would say, or approving it. So these are the segments, my colleague will tell you in a second. The last one was the sustainability, the D. Here, we have the targets published. No change here. We always each year, revise our targets. It will be again in the first quarter next year. But the main targets are the same like the market. We are basically on track compared to the market and the rating is improving it. And again, in these times, it's always moving targets. We don't make, let's say, much marketing around it, we just work on what is necessary here. So this basically was just in a nutshell. I think you're probably much more interested in the numbers and our colleagues about the details. We want to accelerate, we feel comfortable with that one. The team can run faster, I believe. And these are the 3 commitments. The return on equity, at least the 10%. And I would rather say significantly above 10%. Jan will give you a nutshell what it means significantly above 10%. But we want to stick to the 10% first because Hannover Re did it always in the past and they were much higher. And the volatility of you'll feel probably in the IFRS 17, let's see we always say significant above 10% return on equity. Net income. And here, we will show you that there will be improvement of 25% and the real result if you compare apple-with-apple. So Jan will tell you that this space is EUR 1,250 billion -- EUR 1.250 billion. And on that basis, we grow 25% to EUR 1.6 until '25, 2025. How we come to the 125 -- 1.250 -- EUR 1.250 billion is that we take the upper range, the EUR 1.150 billion I told you in our guidance as an example. And then we take EUR 100 million on top of this. And EUR 100 million is only the accounting effect due to IFRS 17. So it's 1% ROE effect. It's only accounting effect, roughly EUR 100 million is net income effect, half from Hannover Re, half from primary insurance, so we cannot take it into account. So therefore, EUR 1,150 billion upper range or let's say, the high point of our range, plus EUR 100 million only accounting effect, EUR 1,250 billion and then the 25% to the EUR 1.6. So the message to you is only whatever happens with accounting, and we need probably some time that we all get more comfortable with that, we want to improve our business really operational by 25%. And the shareholders should participate in that one. So first, now the 25% immediately up and then the 25% until '25 as well up and only upwards. So these are the next year's promises to you. We basically can count what it means for EPS growth and so on. So I think here, we are quite at least within the market or even above. So these are my promises, and Jan will tell you more about the details.

Also a warm welcome from my side. And I'm happy to share a few things from the CFO desk with you. And to start with this, as Torsten just has mentioned, with regard to the past strategic cycle, we have set out 3 targets: return on equity, EPS, gross dividend payout and we are to outperforming in all 3 categories. And we are doing this while in parallel, consistently managing our resilience. What see reflected in the chart in both the solvency ratio, which stands above 200% as well in our external ratings. And if we are to announce a new strategy, obviously, 1 question arises, which is what remain unchanged. And I want to focus you on 3 topics here. First of all, Talanx will continue to focus on insurance risk. So there will be a limit that from the risk capacity usage, the market risk, which always goes along with insurance risks, will be below 50%. So this rule will remain in place. And this translates into a quite conservative low better investment strategy, which we will continue to have. Second, we will actively manage our resiliency also going forward. And what does that mean in the light of inflation? I will explain later in a little bit more detail. And third, seems to be like a no-brainer, but the Talanx focus is really on profitable growth. And if you see the growth number, which Torsten just has shown, and you see also that we always align this growth ambition with cost efficiency ambition. So we are market in terms of cost efficiency, we are a cost leader in the most markets we are operating in, then this is a pure focus on profitable growth in insurance. And this is more or less the headline of our business model. What will change now? First of all, we will have to change the language, how we communicate with each other. The underlying cash flows of our business will remain the same, but the language, how we translate that into P&L, into equity and so on. So this is what's changing. And second, if we look into the market, I think the most obvious challenge currently is the inflation environment. And I just want to focus on the 2 things, first on the accounting language and then on inflation. So to start with the accounting language. For those of you who were attending our educational session to IFRS 17, 9. You already are aware that we are fans of the new accounting standard because it provides a more consistent treatment of asset and liabilities. The life insurance business is reflected much more in an economic sense. So that's really useful for all of the external audience and our shareholders that they can better distinguish between good and bad business. And this should result in equity, which is much more stable and for you, much more meaningful as an indicator for the economic development. We will have somewhat stricter fair value approach for investments. So a larger proportion of our investment portfolio will be related fair value through P&L. This will cause some volatility, yes. But all in all, I think it's a real positive that this new accounting standard is not only more economic, but it's also much more linked to Solvency II, which will facilitate always also the communication to the market. So all in all, we are very, very positive with regard to the new standards, provide some uncertainty, and this is why we focus on this Capital Markets Day on the dividend announcement a little bit because cash is easy to understand. And -- but nevertheless, we are positive for that money. I know that you have to do your calculations going forward. And we thought about giving you some numbers also in order that you can do your calculations, but please notice that the numbers I will show to you are unaudited. They are preliminary, yes, but they should be served as a good proxy also, yes? So to start with the top line. As Torsten has said, we are expecting above EUR 50 billion gross written premiums for the current year. If you are to translate that into insurance revenues, then we have to deduct the investment component in the life insurance, saving parts of it as well as the investment component in reinsurance, which is the commissions, the cost commissions, the reinsurer pays to the insurer. They have, for instance. And this makes the vast majority of this change because the figure is EUR 38 billion or above EUR 38 billion if we translate at 1:1. Second, the equity. We will have a start with the equity of roughly EUR 8.5 billion, which is lower than the equity under IFRS 4. But then the equity development is growing and not shrinking what you see currently under IFRS 4, IAS 39 due to the accounting mismatch. And I want to keep you in mind that at the end of the year, we will expect shareholders' equity of clearly above EUR 9 billion, so growing from the starting point despite dividend payment to be in our accounts. If we go and have a deeper look into the balance sheet, then obviously, the question arises what is the financing headroom we have. And the new accounting standard does provide more insights to the risk-bearing capacity of a company. And it's not only the equity. You find here now EUR 15 billion. This is due to the fact that this is total equity, including the minorities also from Hannover Re. And then you can add the CSM, with the contractual service margin, which you can look at as being a present value of future gross profits. You can add the risk margin with the risk adjustment, which is also risk bearing, then obviously, you have to deduct, those are both pretax numbers, the tax effect on it. And then you will end up this being roughly EUR 24 billion risk-bearing capacity. And if you then add also the subordinated debt, which we have on the balance sheet, then you are EUR 29 billion as a whole risk-bearing capacity. And then out of that, you can also figure out the debt leverage to EUR 24 billion compared to the EUR 6.6 billion, which we had a leverage at the beginning of the year. This is 22%. And the clear message here is we have plenty of room for financing activities. What I want to do next is I want to give you some important insights for both P&C and for the life insurance to start with P&C. In P&C, the real news is that we have to discount the claims reserves. If you see here in the waterfall chart first, you have to adjust the current EUR 47 billion P&C reserves by certain things because the netting is slightly different under IFRS 17, then you have EUR 43 billion if you compare apples and apples. And then you have a discounting effect, which is partly offset by the risk adjustment. And the discounting effect, if you look at it, it's rather small. Why is that so? Because at the beginning of the year, the interest rates were very low. So please expect for the end of the year, this will be a higher discounting number, not just this EUR 2 billion going forward. So there will be some change in that, but this is what you can see here. Coming to life where we see the most significant changes. And we have taken here the example of Retail Germany. So it's just Retail Germany. It's not Hannover Re or Retail International. And to start with once again with the insurance revenue. So in Jen's business unit, they are expecting clearly above EUR 4 billion revenues in our gross written premiums in life for the end of this year. And if we then deduct the investment component and also the unit-linked business, it's just EUR 1.5 billion insurance revenue left, yes? And if you take this as a proxy also for our peers, 1/3 that would be maybe not the right proxy because we have much more biometric business than our peers. So I think this relation is even a good one in terms of in between gross written premium insurance revenues for life. Second, with regard to the balance sheet, there will be a stochastic valuation, which really makes sense, in particular, for the profit participation business where we have given out guarantees in the past also. Because chose the asymmetric profit sharing, which is if a guarantee is deep in the money, obviously, the shareholder has to pay whereas you have to do profit sharing when you're in the positive. And this will be reflected in the initial balance sheet of the life entities, yes? And the third thing to keep in mind is that the profit distribution over lifetime, if contract in a life insurance developed according to plan, will be different from IFRS 4 because you have a later profit recognition if you compare that to IFRS 4 where we had more upfront profit recognition. And to go even deeper, what you can see here on the chart is that, first of all, the equity where we start with for the life entities is much lower than the equity, which we had under IFRS 4. But if you then add the contractual service margin, which is the present value of future profits, and deduct the taxes because it's a pretax number, then you end up at EUR 1.8 billion here for the German life entities, which translates nearly 1:1 to the Solvency II owned funds, so which is very much linked to the Solvency II owned funds. And just keep in mind, solvency ratios in Jen's units on average above -- clearly above 300%. So it's an asset risk capacity for the business we are doing there. And this also provides it and in addition, it provides some headroom for dividend payments, upwards this niching. And what you can see here also is that this business model in life is very little shareholders' equity, a lot of risk capacity provided by the money from the shareholders -- from the policyholder. This is what also is reflected here in the chart. With regard to the new accounting standard, there's just 1 thing I do want to draw your attention to, which comes a little bit as a negative. We will have slightly more volatility. And this is due to the investment accounting, IFRS 9. So the vast majority of our balance sheet of our assets will be accounted for fair value through OCI, the bonds and so on. They are fine and a very, very thin proportion amortized cost. And then we have this EUR 12.9 billion so-called SPPI fail assets like private equity funds like mutual funds, which are not consolidated in it, which will fluctuate through the P&L. So it's fair value through P&L. Out of that, due to the accounting in Life, EUR 5.4 billion doesn't matter for the volatility in the end. So we have EUR 7.5 billion EBIT, which is exposed to this volatility. And if we then were to deduct taxes and also the minorities from Hannover Re. Then we have EUR 3.9 billion exposed to the volatility of market change. And what does that mean? Let's assume we have a 10% increase in the portfolio, then we will have EUR 390 million more profit net income. And if it's the other way around, it's the other way around. And obviously, we had some internal discussions whether we should get rid of these assets. But then we had looked in our portfolio. And if you look at it in the past and also what we expect for the future, we have always achieved a very, very nice yield pickup on this part of the portfolio, yes? And this translates on average, and this is maybe important also for your calculation, to 1 percentage point return on equity, which is just derived from this part of the assets in particular, in the area of private equity, we are very well-experienced investor, and we have seen nice profit. So we decided to keep it and to accept the volatility, which goes along with these assets because it will provide additional return for the shareholders and for us. So let me now come to how we translate that in our future plan. Torsten already has mentioned that we expect under the old accounting standard results for 2022 to be in the upper half of the range of EUR 1.050 billion to EUR 1.150 billion, upper half in the range. And then we have this accounting effect, which is the release of the CSM in both life and health reinsurance and life in the primary insurance. And we have adjusted our targets. So we have increased the baseline by this 100%. We are providing here you with a figure EUR 1.250 billion as a baseline. This is not our expected result for 2022. And I want -- for a second, I want to draw your attention to that fact. We are currently steering our results after IFRS 4, IAS 39. So in next year, if you -- and this doesn't fit 100% to steering under IFRS 17 and 9. So in next year, if you have a prior year comparison, I believe this comparison won't be very meaningful because the results are steered from a different angle. And this will not only be true for us, it will be also true for others. So this is why we decided to provide you here with a normalized figure on which you can base your calculation is plus or above 25%. For those of you who have done the math, it's 28%, if we increase it to EUR 1.6 billion. And so it's above 25%, how we want to increase our operational profit base. So having said that, let's go to the most important KPI for the future, which is the return on equity, which remains a return on equity. And as Torsten told you, it's clearly above 10%. And if you now do the math yourself, I've given you the number, equity clearly above EUR 9 billion, let's take EUR 9.5 billion. And then EUR 1.250 billion net income. And then you can do the math yourself. So this ambition is above 10%, and it's clearly above 10% going forward. We have consistently reflected the new accounting standard in all compensation schemes of the group. So we have increased the hurdle rates from 800 basis points to 900 basis points going forward. And given that risk-free rate, which is calculated as a 5-year rolling average of 10-year German bonds will increase, that will be in a very soon future, above 10%. Also the threshold what we have to achieve. So it's very consistent. And next to the return on equity, which is the most prominent factor in the compensation schemes, not only of the Executive Board, but also of the managing directors, we have the dividend payment. So these are the 2 factors which really matters in order to get the remittance ratio up out of the group. And in order to give incentives to do capital-efficient business within the group because we want to have the buffers in the holding. So going forward, we will not only provide you with a return on equity figure like this with all the volatility, which is embedded due to this IFRS 9 accounting, the fair value through P&L accounting. We will also provide you with an adjusted return on equity. And I know adjusted and so on, it doesn't sound so good. But we will adjust this return on equity for the development, and it will be just an additional information for the SPPI fail assets movement, yes? This should provide you with a better feeling on the underlying performance without this volatile movement of the investments. And if you then keep in mind that, on average, we had 1 percentage point increase of the return on equity by the SPPI fail assets. So on average, this gives you a feeling of the development of the operational performance overtime. So at least our thought it could be helpful for you to provide you with these 2 boxes here. Let's now come from the language to the real business to the underlying cash flows. And a lot of investors are concerned about inflation. If we see here the IMF outlook, they expect inflation to peak this year and then to drop sharply over the next years. And obviously, questions arise. The business model of insurance, collecting premium first, paying out claims later is exposed to inflation because you have to put in inflation assumptions first when you calculate your premium and then you will have to pay out later than, obviously, it's expected inflation versus real inflation which matters. And therefore, this peak in inflation obviously has caused a lot of management action also in our company. The countermeasures, which were taken in all business units will be explained by my colleagues in more details in their presentation. And I would like to give you more analytical framework. So first of all, we have the pricing for the new business, which will be explained by my colleagues in more detail. Second, we have the effect on the claims reserves, which we manage with our active resiliency management. And finally, we have an outlook which does not only reflect the happened inflation, but the future inflation to take place and how this will impact the profitability. I will focus on the active resiliency management and the real interest rates, which really matter for the last point now in a second. Let's start with this chart, which is a conceptual chart. So as you are aware of, we are booking best estimates. And these are the best estimate provided by our actuaries, which you find in our balance sheet. And then given that we are a decentralized group, we have a second opinion by an external actuary by Willis Towers Watson, and if their best estimate is below our best estimate, we call the difference being the resiliency embedded in our business. This is what we published. And now let's assume we were to do nothing about inflation. What would happen if inflation exceeds the initial expectation? Then obviously, the external actuary will adapt this claims calculation, and so resiliency will shrink, yes, if we were to do nothing, but we are not doing nothing. So first of all, we immediately have installed a very conservative reserving for every new claim. Second, you will see, by nature, lower runoff profits if we have to pay out higher claims. And those is already reflected in the combined ratio of the current year. So if you take a duration of 5 years as a good proxy, for our liabilities, 1/5 more or less is already reflected. It differs a little bit from business to business. And I tell you, we have maybe done a little bit even more than this 1/5, yes? And on top of that, we have -- as we are always aware in our risk management as inflation matters and that you can miss with your inflation expectation, real expectation, we have in our asset portfolio inflation linkers. And this is the only thing I have to correct. I hope it's right in the print out. Later, there is something about the investment portfolio. The right number is we have EUR 6.7 billion also close to EUR 7 billion inflation linkers in our portfolio. And just to give you a number, we are expecting an additional return during the course of this year in between EUR 400 million and EUR 500 million related to this inflation linker, which also helps us to manage resiliency. So -- but now I told you at the beginning, we are positive about this inflation environment and we see opportunities. And why is that so? First of all, my colleagues will explain to you that we are very confident that we can increase the prices according to inflation or even of us. And second, if we go look for the future inflation, I want to have your attention for this chart. What you can see here is the inflation expectation, which is derived out of the inflation linkers we are buying. A 5-year inflation expectation in the United States from the beginning of the year to the end of third quarter, dropped, it didn't increase, it dropped by 80 basis points. So the implicit inflation, which is in the inflation linker. For Europe, it's the other way around. So we have a drop of 80 basis points for the U.S., and we have an increase of 40 basis points for the average 5-year inflation, which is embedded in the inflation linker or where we have inflation swaps. If you go then in parallel to the interest rate development, there we see an increase of 280 basis points for the dollar environment and 300 basis points for the euro environment, always measured with treasury and the equivalent in the eurozone. So -- and this really matters because we are investors in parallel. I'm talking about your risk-free rates. And if you combine the 2, then you see that the real yield development, nominal interest minus inflation has increased by more than 300 basis points for the dollar, for the United States and 260 basis points for the eurozone. And also to give you a rough feeling, I told that in the third quarter, we had 32% of our premiums related to the dollar, 29% to the eurozone. This is why we focus on these numbers here. And this positive real yield development provides a nice upside to our future profit expectations. And therefore, we are very confident that we can deliver this 25% increase in profitability from 2023 to 2025. And this confidence is also underlined by our dividend policy, 25% up for the current year, another 25% up to '25. So just remember, 25-25-25. This is our new dividend strategy on which we will deliver. And we will do that by consistently managing our resilience. So the Solvency II target will be in the upper range or even above of the target range of the solvency numbers, we will remain our strong financial ratings. We have a very well-diversified earnings mix with the majority of our business being in the wholesale markets, which are quite hard currently. And also, as Torsten has mentioned, we are -- without changing our dividend policy, the dividend reserve factor, I changed the wording from cash flow factor to the dividend reserve factor, which is the statutory profit distribution pool given for [indiscernible] Germany divided by the dividend would have been at EUR 1.6 billion. Due to the increase in the dividend, it's now will drop to EUR 1.2 billion, but it will then develop an increase over time again, so that we are confident that at the end of the new strategic cycle, we will then have a reassessment of the dividend strategy again. So to sum it up, we expect our profits to go to more than EUR 1.6 billion by 2025. I'm so used to the word more than that sits to EUR 1.6 billion by 2025. We will continue to manage our resiliency actively. And last but not least, given that we are growing much faster than our peers, we will monetize these profits and deliver steadily rising dividends to our shareholders. Thank you for attention, and now we are ready to take your questions.

I would like to encourage our participants on the screens. Dario, James and Zurab if you would like to raise questions to just activate your camera, and we put you on the screen for you to be able to post some questions too. So Michael first, we probably have a mic that everyone can understand you well.

In primary, so you said 60% is -- sorry, 50% is a target profit. You're currently at 40% to target in midterm. And you said not 2025, but because reinsurance is also growing. I just wondered if you can give us an indication of how much the profit growth is in primary stand-alone? The second is on the -- you're talking about the benefit of higher interest rates in your profit outlook. I just wondered if maybe you could give us a figure of how much of the EUR 1.6 billion comes to interest rates? I know we could work it out, but anyway. And the last question is, previously, you had an EPS target and now you have a net income target. And my question here is how much of that EUR 1.6 billion could be, and I'm being a little bit difficult here, could be from M&A?

Okay. I will start, and Jan will continue. So we will not give more indications than 40% to 50% primary insurance until 2025 because again, as I told you, the market is so hard in Industrial and as well in Hannover Re, just look. So what the message is 40% to 50%. No more indication under 25%. The last question is the EPS target, we don't plan with M&A in our planning. So this is the question that's generally, we don't plan with some M&A. And regarding the second question, interest rates, Jan, maybe you can provide something how much is in the EUR 1.6 billion from interest rates increase?

Well, I think that's a very good question. But the new accounting language, we are currently learning to use splits, the investment income between the risk-free income, which is embedded in the insurance service result and the investment income from own risk. So it's a little bit difficult to answer because the interest rate effect I have mentioned, you will see in the insurance service result because I focus here on the risk-free one. And so well, I will come with that. I have to give a more detailed look in the numbers. But what you can take as an assumption if you do the math yourself, maybe this is helpful. Do the math yourself. We used to take the capital market assumptions by forward rates at the beginning of June as a basis of our planning. So this is normal -- we don't take own assumptions, we take the capital markets ones, yes? So...

[indiscernible] from HSBC. A question on your dividend policy, which is 25% growth. But what about the dividend, if you were to miss or to significantly overachieve your net income target? Because, I mean, working at the numbers, it looks like as if you were still shooting implicitly for a 40% ratio implicitly also you dropped the guidance or the reference to any payout ratio. So could you clarify exactly what will be the outcome regarding the dividend? And the second question would be around reinsurance and how you are willing to structure your insurance in the context of hard market cycles, anything to have in mind regarding change in structure or the level of your attachment points?

So first of all, we haven't linked our dividend policy to payout ratio or the like, given that we expect higher volatility of the net income due to the SPPI failures that this is, first of all. So we have given you, I think, the most clear guidance you can give, which are real numbers, EUR 2 at the beginning, EUR 2.50 at the end of the strategic cycle. So -- and in between, yes, it depends on the development, what we would see. And we will link that a little bit to that one in between. So we haven't thought so deeply about payout ratios that we thought a lot about how to provide for the stability for you as shareholders, that we can provide this dividend and therefore, we had a lot of contingency plans also in terms of that we can, even in every market condition deliver on that one. So this is -- so this is why we still continue to have a focus on the dividend reserve factor within the holding and have additional buffers to play the game here.

And regarding the second question is we changed reinsurance structure. I would say that we postponed the question a bit to Edgar because it's mainly about industrial portfolio. And sure there is changes were regarding attachment points and others, and I would just postpone to Edgar the question. Is it okay for you because Retail is really a small part in the whole reinsurance game, it's about industrial portfolio.

Yes, [indiscernible]. Two questions from my side. Looking at your redundancies, which increased nicely to EUR 1.3 billion end of '21, do you have a rough estimate where this might land in the current year? Secondly, the opening balance sheet, German Life, this is also pinned down at the time where interest rates were very low. So what would have been the moves looking maybe also at year-end? And also looking at the loss component, for example?

Yes, I think I will take both questions. First, with regard to the resiliency embedded in our best estimate, I would to set out the expectation that they will be lower for -- at the end of 2022 compared to the EUR 3 billion, which you've seen before, and this is due to the inflation effect. So we are balancing here. Yes, we are. But you shouldn't have any worries because it will be just a bounce and then it will be rebound due to the setup measures I already mentioned. So no worries about it. So second, with regard to the development of the CSM, it's more or less a question with higher interest rates. Yes, and the overall picture will show a nice impact on the CSM at the year-end, yes. So I expect the CSM to be higher than this EUR 2.5 billion in Retail Germany at the year-end, yes.

And regarding the first one, redundancy, let's see it over the cycle. It's good to have this kind of resilience reserve in any case. But we make sure that actually going forward, balance out again back.

Any other questions? Michael?

And so on the resiliency and to link it to your -- I think you said you adjusted to inflation over 5 years. I just wondered if it's the same thing, you talked that you are mentioning? I think you were saying that you adjust for the inflation, you did a bit more than 1/5 this year. So I just wondered if -- how that links to these redundancies? And then just on the redundancies, how can you have redundancies on the system, which is supposed to be even -- which is to be all best estimates? It's a puzzle. And then the -- just going back to the dividend payout. So you're saying people will be incentivized to pay out more. Can you give us a better feel for what the numbers are? What the benefits are? Do I get EUR 1 million, if I pay you 41% instead of 40% or do I get EUR 10,000? I mean how big a driver is this?

So I will start with the first one. So with regard to Brazilian, how resiliency? And I really -- I try to -- I avoid the word redundancy because these are resiliencies, which are embedded in our best estimate and the wording is quite important also for our auditors. And what is the reality? Let's face it. You have a theoretical standard like IFRS, where we have to book best estimate but if you ask 2 actuaries, you will receive 2 different numbers on what the best estimate is. It has to do with culture. It has to do with a future assumption setting, yes? If you compare the figures over various geographies, for instance, I have my prejudice with regard to some Anglo-American actuaries, which are a little bit sharper than the typical German one. And so -- but it's just a prejudice, so don't take it too serious. What I want to bring across is you will always have more than 1 view on the best estimate. And this is why we have implemented this additional guidance -- this additional governance with an external view on our actuarial reserves. And it's about -- for about 95% of our claims reserves. We have the second view. And this provides us also an internal management with much more comfort, yes? So we see what's going on in the various business units. It's more a concept of managing our accounts than of steering balance sheet. And we have this positive resiliency, which really helps to manage inflation shocks like we had in this current year. So it's helpful, yes. And we believe in that. And we are -- yes, we are conservative. And this gives me also and yes, we are quite cost efficient. And so the bonus numbers, but this is up to Torsten, if you deliver more dividend payment.

Again, I would regard the dividend, no, we will not get millions here a lot. It's about culture. So let's give you an exact example on the board. We have always the same targets. So there's no separate target for industrial or same for Retail International. We all remunerated the same way. So -- and therefore, the culture-wise, nobody is playing in the others, and there's no egoism in that because we all play the same game. So group return equity, it's a group cash coming up and so on. So if you -- form that kind of things, then it is automatically centralized push to the others. And the culture should be -- the [ money has to be with mummy ]. And if you implement that culture, there's -- it's not -- for sure, it's worth remuneration behind this and target setting. But this is just the secondary, the culture is important. When people don't feel that [ money belongs to mummy ]. These are not the right managers for us, very simple. And then they should expect if some investments are coming, yes, we are ready to help. But this is really -- you always have this issue of getting the money to the holding, yes. And I'd rather prefer not by paying more money. I mean we pay something, but it's not a money question. It's a culture question. We need the characters of people who understand how we want to play together. And that we implemented, I think, at least in the Board, and I can say more and more on the company. It's much easier and much less stress. And maybe another example to give you, we don't talk too much about plan versus actual. We just say the more the better because I don't like having a culture of discussing [indiscernible] lower plan to outperform your plan and make the 1% more to your plan and so on. So much stress, so much number crunching for nothing. We learned this as well from Hannover Re because they always say more, the better. And then people have total different behavior, and we lose do not so much energy of just talking about the planned figures. We have a plan, has a figure, but the foundation is more the better and affected as well and relative performance counts. For me, it's much more interesting. If you have a local entity in Poland, that they perform better than the market. And you can be an excellent manager having low results as the market is disaster. So always make sure relative performance counts. And sometimes you do mistakes overshooting a plan and it seems you're a great manager, but sometimes because you have a conservative plan or you're just lucky and the whole -- is even more lucky than you. And this is all not really how you measure performance in my way. Relative performance counts and the more, the better. Different culture.

Okay. Thanks, Dustin. Any other questions? Okay. If there are no questions, I mean we are still around anyhow for a bit. Then I suggest that we break for a quick coffee. And given that we are ahead of time, we would reconvene at 10:30. So 30 minutes coffee break. And then we continue with EDCA pulled for industrial lines and thereafter, a [ live vote ] on for specialty lines. Thank you. [Break]

Okay. So we are back. Given that Nicholas is in attendance, too, and you find a little present. The story is we actually cooled down our office bearing these days. And a bit of difficulty to calibrate it correctly. Assuming that some of you experienced the same, you thought a bit of stocks would help you survive these days. So now over to Edgar and Reif, who will tell you how the unchanged primary insurance in industrial and specialty lines. Edgar, the floor is yours.

Well, Bernd, hopefully, I hope the stocks are not the introduction to me with getting cold feet or something. I think it's just about Christmas and the room temperature. When I entered the stage 2 minutes ago, I had a kind of a deja vu, I have to say, because when I think back only 3 years, 2019, I remember that I was standing here on the stage and telling you something about the turnaround we are planning in Industrial Lines. I was telling you a story. And I remember that I was looking into quite some doubtful phases. Honestly, I won't ask who trusted the story and who did believe that we will make the turnaround. But I'm more than happy to stand here today as we and the core team has totally -- has been totally convinced 3 years ago that we will make the turnaround. And today, I can tell you that we did it. Torsten already showed you this slide. We changed our ROE, the entire profit from a negative profit in 2018 within 3 years, only '19, '20, '21 to now into a positive profit. And what I would tell you now that we made the turnaround that we will continue the path we have chosen and then we will continue to scaling our quality to the power of 3. That's how we name it. And the third thing is that we will, of course, in the future, also deliver stable results. So what does that mean in KPIs? Let's start with one of our most important KPIs besides ROE, of course, the EBIT. And you can see that in 2022, we expect something like more than EUR 200 million EBIT. This is a growth path since we started the turnaround. And when we have a look how we combine this EBIT coming from a financial result and coming, of course, from an underwriting result. I can tell you that this, what we expect until the end of the year is the best underwriting result ever in the history of industrial lines in Talanx. And this is what we already delivered in 2022. When we talked about the future in 2019 also at the coffee break and somewhere else, you always told me that you hate volatility, of course, who loves the volatility? We all hate volatility and we love stability. So one of our second task was to reduce the volatility we had in the past years prior to the turnaround in 2019 and change this into stability. Also here, we can tick the box, we delivered that. We intensively reduced our volatility by -- at the same time significantly decreasing our combined ratio. In the last years, we are very often asked, well, in a way, do you shrink -- by cleaning up the book. It's easy, do you shrink to beauty to a good combined ratio? And the answer is clearly, no, we didn't. Because the starting point, January 1, 2019, was starting at this time, the joint venture, HDI Global Specialty, with taking over the Hannover business from Hannover Re was EUR 5.6 billion gross written premium. And we expect at the end of the year something like EUR 8.7 billion. So actually, within 4 years, we grew organically by EUR 3 billion. And EUR 3 billion in 4 years means 3x the size of a midsized European insurance company and this pure organically. So how did we do that? The next question coming to growth was very often, well, is this sustainable, the growth? And do we make profit, the growth? Can tell you when we just compare that on the year change 21% to 22%, 40% of this growth is rate change and 60% is new business. And also here, believe me, you can feel the underwriting culture we have implemented in the entire company that the new business we write is profitable business. And you can feel that at the underwriting culture, but at the same time, we monitor this very closely and we dig into each and every portfolio, a new business we write to check if it's really profitable. Growing was one task, but the question was, where do we grow and how do we grow? And one of our main task was to grow also in specialty. When we look to the growth specialty, we started with something like 20% of our book of business. And by the end of this year, we expect roughly 1/3 of our business being specialty business. But the entire growth in those 4 years were more or less 50% from specialty and 50% from commercial. So it's more or less half-half from both segments. The second task, we set ourselves 2019 in respect of growth was to grow also outside Germany. It was not shrinking Germany, but we always said if we want to be HDI Global, what our name is, if you want to be a global company, we want to and we must become the more global player. And on the one hand side, we have proven that by growth. But at the same time, even though we grew in Germany, we grew much faster outside Germany. So actually, we expect by the end of this year, 25% of the business coming from Germany and 75% from other countries. In comparison to 2018, where roughly half of the business was still German business. One of the structural changes we made by the mid of this year also to become a more global player is that we changed our board structure. Now until the mid of this year, we had one Board member responsible for Germany only. But we said we will treat Germany more like one country in the world. So we have now a Managing Director for Germany. By the way, she's a great person. You should meet her 1 day, [ Baba Klimaszewski ]. She still has 2.2 billion premium and more than 1,000 people working in Germany. So she is pushing the transformation and really to become a more global and modern commercial insurer. But 25% is Germany only. At the same time, where did we grow? And I presented you in the last years that we have our core markets and develop to core markets, those 3 ports. And we also managed to grow exactly in the markets where we wanted to grow and those markets which we want to develop to core markets outside Germany. So can we measure that we are a more global player? That's hard to measure, honestly. You can see that on the gross written premium, but we perceive a lot of feedback from international globally acting clients and also from the global brokers who see us now as one of the real global players in the market. So what is the future? And in the future, what we plan is scaling quality to the power of 3. So we will continue working in a lean underwriting operation to become a lean underwriting champion. That means combining the underwriting culture, we have developed, we have proven in the past with a lean operating model we have. This makes us very fast and flexible on the markets. The second thing is leading -- becoming a leading IP and captive insurance provider. This is also one of our strengths already right now, and we will continue pushing that. And the third one is specialty powerhouse. Of course, we won't lose track on specialty. And specialty we really call it powerhouse because you can feel the power. Whenever you enter one of the locations, you will feel the willingness of each and every colleague to make the business and to make profitable business. And no one is keen on top line, but everyone is focusing on growth and profitable growth because we are fully focused on bottom line. So what does that mean? Let me start with the underwriting culture and giving you an example. And I don't want to bore you with the decreasing of attritional loss ratios or any technical things like that. I can tell you that we have implemented in the last 3 years a lot of additional tools. Tools to be -- to have a better underwriting, using the data we get from risk engineering from claims, using this for underwriting. But those are still tools. If you want to be an underwriting champion, you need the underwriting mindset. And a colleague of mine always says, a fool with the tool is still a fool. So actually, you can have some fools, but you won't change the mindset. So we invested a lot in the last 3 years to have the right mindset and the results, the combined ratio going down, attrition losses going down. All the things where we can really measure the success of the turnaround is an output of all the input starting with the culture and the underwriting culture. The eagerness to get the right business for an adequate price. How did we reduce volatility? There are a lot of things behind that, but just let me give you one example. We always said that we are too highly exposed to some NatCat risks. And you may remember this disastrous year 2017 with Holway, Irma and Maria, the 3 NatCat events in the U.S. Our market share of the market loss at this time was far more than 2 per mil on the market share. When I compare this now with Jan, we are below 1 per mil. So actually, also this proves not only the theoretical figures but also this proof that we manage the derisking, and we are still using the cut capacity we want to give for our core clients to be in the areas, but we stop underwriting any kind of not necessary, not profitable business in this region. The second advantage we have and this is still comparable to Hannover Re is our cost advantage. And I know that everyone usually hates to talk about costs. But in a way, we love it. I'm sorry to say so, but we love it. It's in our genes. We have been cost leader since years, and we will continue doing that because for us, it's a real game changer. That's a real differentiator to be best-in-class. And all those are competitive differentiators for us, which give us the advantage to be faster and more flexible on the market. And that we are fast can, for example, see on the inflation issue. We already had the discussion also in some areas in the last weeks and month. And everyone talks about inflation. I can tell you since half a year, we don't talk about it, we just manage it. And that's crucial. We have 4,500 people all across the world working with us in HDI Global. So we need to be fast in whatever we decide. And we cannot afford with usually 12 years contract period that it takes 6 or 9 months until everyone knows what to do in the organization. And that's why being fast and having a lean operating model is a differentiator. And how are we reacting to that? And Jan already promised that I will give you some more details. Of course, for the long-tail business, we have rate change. And we started to implement the rate changes to keep and to improve our results already mid of this year and the first renewals mid of 2022. And you can see that right now, our rate change were on average across the lines of business of about 11% pure rate change. And property is slightly different. In property, you have the sums insured. And if a client may have had last year, something short of, let's say, EUR 10 million and it may have had a loss of EUR 10 million. This EUR 10 million loss would have cost last year EUR 10 million, but this year, EUR 11 million. So actually, we consult and we discussed this with our clients that they have to adapt their total sums insured also not to run into an under insurance. So that's also part of our obligation to have a consultant function with our clients. And finally, of course, cost reduction is not only looking to the outside world, but even improving the cost ratio we have of being leaner and being faster in the market. And besides that, our claims maturity on the inflation side we are also quite relaxed there because roughly half of our claims are close after less than 2 years. In addition, in the underwriting part, we are digitalization. We improved digitalization and we transform our underwriting into a more digital world. I will give you just some examples. You can see here a map of the world. So one example is on the NatCat side. We improved our models. We have this NatCat modeling. And we have more than EUR 1.6 billion million locations of our clients in this NatCat model. So when Hurricane Ian had landfall this year, I was just in Israel and Friday night, we had the first -- we've made the first model runs with the team. And we call again in Saturday morning, Saturday night. So we were more or less on track how this impact could hit us and if it fits with the models. And what I told you, we are far below we more than halved our exposure in relation to the market share in comparison to previous events. So also there, it's pure data, data management, data quality utilization. But also in, let's say, our core business, risk engineering, we want to improve the risk with our clients. That's one of our obligations. We have really 200 risk engineers all across the world. We digitalize this, too, as giving our clients platforms and systems when you make recommendations for the clients with the loss experience we have, it's nice to have it in paper and put it into a draw or have it in a PDF and just store it in your file system. You need to monitor that those recommendations are permanently closed and that the risk of a client also improves. And our clients are interested in that. So that's something what we put as a service for our clients. The next generation of insurance. I think we've been talking about that also 3 years ago is the Internet of Things. Also here, we see a lot of people and companies talking about the Internet of Things. You can see it here, it's the II to the industrial Internet of Things. I would say we just do it, but we don't talk about that. We have 1 example what we can talk about because this was public. We have something like 20 MVPs, which we drive with our clients. We have a co-creation lap and HDI things in Berlin with roughly 10 people all across the world, a limited number of people, but economics, engineers, IT people sitting together with our clients and developing tangible cases where we can make money with. And I would like to give you just 1 example. We are all talking about batteries. Yesterday night, we also talked about some solar panels and how to store the energy because usually, you need the energy when the wind is not there, when the sun is not there. We talk about motor vehicles, electrical vehicles. And there are some risks, of course, with charging and recharging the batteries. And we are using data together with the battery intelligence company called Cure took us 1.5 years to check all the data we received during the charging process. What kind of data can prevent a loss? And we are now there that we brought it down to something like 10 KPIs. We are measuring. And with this, we can reduce losses. We made a kind of back testing last month with a couple of losses, which occurred on the market. And we would not have only prevented those losses and foreseen the losses. We would have foreseen them already 3 to 6 months before they occurred. So the spec test shows that meanwhile, we have an insurance product on that, and we can ensure and those battery charging together with some professionals. So you see this is what we are talking about the next level also of insurance also to prevent losses. Leveraging skills means also focusing on our strengthens. And we have HDI risk consulting, but also talking about IP fronting and captive services. Now this is for us and this is for everyone, for every global player, that's the ticket to play as a global player. You need to be in the top 25 percentile of IP fronting and captive services. And you read a lot that more and more companies in the world go to own risk carrying. They're shifting to captives, mainly due to lack of capacity in some areas, NatCat exposure and so on. So actually, we have those skills, and we will accelerate that. And when you see here the numbers that we expect something like EUR 20 million more EBIT, yes, that doesn't move the needle. I know that. But this is just, let's say, the service revenue we generate. But we expect in the next year is more than EUR 400 million more gross written premium. So we boost our premium income, and we want to focus to make money with our insurance business, and that's behind the EUR 400 million, we will boost with that. And you see that in the last 2 years, we intensively grew with captive business. And 2 things I would like to share with you. First of all, last month, we won one of the largest -- worldwide largest captive NRP fronting programs in the world. And we did not get the lead on this program because we were the cheapest on the insurance side. You have to be competitive, of course. We are competitive, but we are not cheap. It was because we are making a great job in captive services and IP fronting. And that's why also this client, you see the growth story trusted us and say, okay, you're one of the players I trust to do that. And the next thing, by the way, we have quite a young captive manager and also last month, the one at the Luxembourg captive Forum, the prize of -- in one category of being the captive manager of the year 2022. Congratulations to the colleague, again, that was a great move. So this is how we use our core business and our core strengths to accelerate also our growth. The third thing is transforming into -- transforming the specialty powerhouse. Till now we had 3 phases. 2019, I was standing here and I was talking about a kind of a start-up. So we had the founding phase. You see the EBIT was very low, gross written premium more or less stable, but we grew this very fast in this growing phase of the last 2 to 3 years to those EUR 2.8 billion on average, and we increased the EBIT. But now on the next 3 years, we were coming to the performing phase means slowing down the growth but fully focusing on performance. And this means we will have an EBIT of more than EUR 100 million in average in the last 3 years. Are we already there? No, we are not. You can see that we are better than average with specialty. But we always said that we want to be in the top quartile of our peers. And that's also the next level where we want to get into the next quarter -- into the top quarter. And usually, I would have stated now that Ulrich Wallin will make a deep dive on that in a couple of minutes. And I know that I introduced something like also 3 years ago when we started with specialty, Ulrich Wallin to you is the legend in insurance business, managing Hannover Re for 10 years with outstanding results, always outperforming business. And since yesterday, I thought that Ulrich is unstoppable. But yesterday, I learned that you need a very aggressive virus to stop him and quite some high fever. So Ulrich, when you're reaching us, all the best for you and hope you will recover fast. Ulrich is the Chairman of Specialty, and I'm more than happy to welcome, Ralph. Introduce Ralph, Ralph is the CEO. He is also on Global Board since January 1 of this year. 35 years in the industry, 35 years working with Ulrich. You started as a student from Ulrich. And then you became the, let's say, the secret joker of Ulrich. Whenever there was some Hannover Re trouble in the world, you will send out to fix this, fix it in Hannover a broad couple of years in London. And then you started some growth stories. And finally, the specialty story is the story with you and your team. But as said, Ralph will give you some insights on that later. So actually, what are my ambitions and what are the promises for the next years? Gross written premium will be above EUR 10 billion. As promised, we will continue the path we promised 2019 to be at 95% over the cycle. And if you may have read the documents from 2019, you will have seen that we are already 1 year ahead in our combined ratio path to what we have promised in 2019. And return on equity tossing some clear words from you. And of course, we will deliver more than 10% and we are already this year with more than 8% close to that. So all in all, I'm very proud with the entire team that I can say now that we delivered what we have promised 3 years ago. And once again, I won't ask you here who has trusted that but we delivered. And I was always convinced that we will deliver because we have the spirit in the company. And we will also deliver the next path, the scaling quality and for the future, for sure, we will have those strong and stable future results. And with this, Ralph, I will hand over to you, and you will make the deep dive into the specialty story. Floor is yours.

Thanks very much, Edgar. Yes, warm friendly welcome from my side as well. I'm more than happy to be here today even on short notice, I have to admit. But as you rightly said, Edgar, HDI Global specialty is also sort of my baby to a certain degree I remember 4 years ago, when I was called in the meeting and Torsten said, we have decided we want to set up a dedicated specialty lines carrier to with the global footprint. And we put together the -- yes, the specialty business written in the group under one roof. And I looked at it and I thought, am I really up for the challenge? And he said, yes, I mean, that's probably a once in a lifetime opportunity to have something which is rather small working reasonably okay-ish and try to make something special out of that. And I'm very grateful that also I have -- that we have had the support from the Talanx organization. They clearly said it's an investment initiative and together with HDI Global, I think we have come a long way. So the idea was built this U.S. or this global acting specialty line carrier with profitable growth. So let's look on how we have been doing in the last, last couple of years. So if you look at the numbers, you will clearly see there is a nice growth rate in the business when it was set up in 2019. But it's, I think, also fair to say that we had favorable market conditions from the very beginning. In hindsight, it was a perfect strategic move from the Talanx Board to say that is the right time to set up this dedicated specialty lines carrier. And I think over the last 3.5, 4 years, we have actually delivered. You also can see that the growth plans have been not that ambitious looking back. And we have clearly outperformed when it comes to growth. So we have grown from EUR 1.2 billion roughly to EUR 3.2 billion, hopefully by the end of this year. That's down to, of course, also the support we had from our 2 shareholders at the time, Hannover Re and Global. We had good market conditions, as I already said. The competition was struggling, but we also had a great team in place. We had people from -- in the Hannover Re, people from Global coming together. We put them into 1 company, and they have shown a lot of courage in developing the business. So that's -- it's clearly, for me, it's a sign that if you put all the right ingredients together, you can cook a really good meal. And I strongly believe we have been doing this in the last 4 years. So we -- as I said, we had favorable market conditions. We have taken the complexity out of the structure, and we are focused on core activities. And I think that's -- that is the difference. Before 2019, specialty business was done as noncore business in various parts of the Talanx organization. And now we had one entity concentrating on specialty business being the -- being its core business. If we then look at the results, again, a brief -- yes, looking back, you can see between '15 and '18, the results have not been that great and between 2019 and 2022. And in average, it's looking much better. So we have reduced the combined ratio by more than 10%. I've already alluded to the fact why between 2015 and '18, the results have not been that good. It was a lack of focus, but it was also the balance in the portfolio. We had more delegator business, less single risk business. We were more long tail than short tail, and that is what we have changed in the last years. So the quality in the portfolio is much better. We have a set of experts looking into the business, they had the courage to take advantage of the favorite market conditions, and we had a clear strategy and a focus. So if I look back in 3 out of 4 years, Edgar, we hit our bottom line results or targets. Just in 1 year, we have not been able to do that, and I will explain why that has not been possible in a minute. So from my perspective, it was the right decision from the Talanx sports, Torsten, Jan, William, Edgar, a brilliant decision at the time. So now let's look at the underwriting results. Yes, the -- how have we been doing on a financial year but also on an underwriting year basis. On a financial year basis, if you look at our loss ratios, you will see they are relatively stable. And there's just 1 year where you have not been able to hit our financial targets, our bottom line target, that is the year 2020. That was due to go with in corona. A big chunk of what we do is also sports, leisure, entertainment contingency business. Virtually, all those events came to a standstill. They had been canceled, and you see that in our results. Nonetheless, we have been outperforming our peers for the most part in 2020 and Torsten always said relative performance counts, absolutely right. Nonetheless, it's also clear that we have not hit our target in 2020. And of course, looking forward, no matter what happens, we want to achieve our financial targets anyway. So we have already alluded to the fact that we have changed the composition of the portfolio. We are now much more short tail and more single risk than before. So we've reduced the weight of delegated authority, and we have moved away from the long tail side of things. So if you look at the underwriting year view, what you will see is, of course, in the younger years, a fair chunk of our reserves are still all of our reserves are still reserves. They are not paid on our outstanding claims that on a growing proportion of a short-tail book. I think that underlines that we believe that the quality of our book has improved, and that also -- there's a high likelihood that we will see positive results from those years going forward. The portfolio characteristics, also in combination with inflation. We do quite a few things on the specialty lines. And we had a discussion yesterday, Edgar, about pet insurance which is covered on the property. We do EUR 150 million pet insurance. So the good news is that, that is not that volatile. But it doesn't also offer not a huge margin potential. But nonetheless, it's worthwhile doing it. We do snowmobiles in Sweden, you will find that under motor. We do a bit of cyber. We do space fine arts, sport leisure entertainment covers. So it's not the traditional type of covers we do. And if we then look at inflation, if we look at Aviation, we have agreed values. So inflation wouldn't kind of do much to agreed values of an airplane. So that has less of an impact. If you look at financial lines, we don't have the property damage. We don't have the bodily injury claims. So there's also a limited impact. On the short-tail classes, it's different, but it's 3 years till usually the underwriting years are being run off. And you can take that into consideration when you price it appropriately. And of course, we take inflation on the property classes into account. We price it properly and we increase the pricing where possible, of course. And always an increase in pricing, we attempt to be ahead or above the inflation. And then we have the long tail classes where we might see more of an inflationary impact. But overall, I would say we have a good balance with different lines of business only in parts more affected by inflation, and that is overall under control. Probably a topic you also like to hear about is how are we affected by the Ukraine war-related exposures. For specialty, we have 3 lines of business, which at the very beginning was sort of a concern to us was marine high. So far, we have not a single claims notification. And even if we would get some claims, we have an extra reinsurance in place, which attaches excess -- protect us excess EUR 5 million. We have political bonds, political risk. That is from -- there are some claims outstandings. It's a 1 million digit number. So relatively minor, to be honest, that, of course, then leaves the aviation side of things. And we are traditionally a very strong aviation insurer. Having said all of that, I think we've done a very good job in underwriting. We clearly see that with the restrictions we have in our policy wordings, we believe that the impact on us on aviation will not be too severe. And with the provision we have taken into our balance sheet with EUR 30 million for industrial segment, we believe that we're on the safe side with that. So overall, much less of an impact so far than initially thought. Nonetheless, it's also fair to say on the aviation side, there is a bit of uncertainty because as you might have seen or surely have read, there is some litigation going on already in the court in the U.K. and the U.S. But we believe that we are at a reasonably safe place. So looking forward, what is coming next in the next 3 years. In the past, we were able to grab the low-hanging fruit. We set up a couple of branches. We were taking advantage of the favorable market conditions. But now, I think -- I know we want to have a more systematic approach on how we want to develop our portfolios further. We have a lot of mandates. We are not using on a worldwide basis so far, which means that we will go out and try to sell our products through the HDI Global Network. There are geographical areas where we can improve our footprint. So it's South America, Southeast Asia, but also in the U.S. But we will not lose the underwriting discipline. I think it is key that we stay disciplined and look, also when it comes to the risk selection that we take the right decisions. So the plan is by 2025, 2026 to have something more closer to EUR 5 billion. We organically will probably not achieve that on our own. So we are open, of course, to look into merge and acquisitions, which means that with the inorganic growth, we are extremely confident to hit the EUR 5 billion premium number in the future till 2025, 2026. I've already said, underwriting discipline is key. Our combined ratio ambitions so far has been around the 95% mark. We believe that we can do better than that, again, relative performance counts. Our -- some of our peers are better than us. At the same time, we want to show sustainable profits with low volatility. That, of course, means that we will not be able to write business, which is extremely volatile to a larger degree. So talking about NatCats, Edgar has already alluded to that. We are cutting back. We are not overexposed in cyber. So if it comes to systemic risks, we always try to limit that clearly. That, of course, means that we give some sort of profit potential away in the good years. but we should have more stable results in the future or going forward. And of course, we also will grow the same risk side of things and give the delicate authority, less of weight. So we continue to focus on a diversified portfolio. I've given you some examples about what we are doing, that will continue. We want to go in a stable way through the market cycle and I'm convinced we will be able to do that. Yes. And of course, the growth in the underwriting discipline are leading to another profit level surely. So we also will raise the ambition. Edgar has already mentioned it, our EBIT contribution, we clearly want and will double the EBIT contribution in Industrial segments. I've talked about increasing single risk business, and we are leveraging the -- or selling our products through the HDI Global Network whilst we continue to reduce our systemic risk. So we are extremely confident that the next 3 years will continue to be a success story for the specialty lines business, contributing to the Industrial segment and then, of course, also contributing to the Talanx Group. So what are the 3 points to summarize at the very end. I'm extremely proud that we have mastered the ramp-up phase. It wasn't an easy ride. We have heard this morning or Edgar said it, it's -- it felt like a start-up company. I think we managed extremely well in challenging conditions. We have outperformed when it comes to the growth targets, we have virtually hit the bottom line targets. But now we want to lift up to the next level and continue to become even more profitable for the benefit of the Talanx Group. And of course, Edgar said it as well, I think 1, 2, 3 times we want to become a top-tier powerhouse in specialty lines business. And I think we are in a good way. We are not there yet. It will take some time, but I'm extremely convinced that we will be there in 3 years' time. So by 2025, I might be standing here, Ulrich, depending if Ulrich has a flu or not. And then we hopefully can just confirm that we have been able to keep our promise. So thank you.

Okay. Thanks, Ralph. Thanks, Edgar. So again, you have the opportunity to ask Edgar and Ralph questions. So Roland, first, please.

Maybe a general question. Could you comment on the pricing cycle, how you expected in terms of peak pricing in Industrial Lines and maybe thereafter? Then you highlighted that Germany has still, I think, 25% of your business. Could you maybe compare the technical profitability of Germany to the rest of the book, how that plays out? And on the over-the-cycle combined ratio of 95% target for '25, you again highlighted that you are a cost leader. I think the specialty business is maturing, getting better also in terms of combined ratio. So is that too conservative? Or what I missing here?

Yes. Thanks a lot, Roland, for the question. Let me start with the pricing cycle. What I also showed you that this year, on average, over the lines of business, we have achieved again 11% increase. And we see at the moment that trends like inflation, for example, supply chain issues, they are not stopping that because we also see the loss trends, and we monitor the loss trends, and we are fully focused on the profitability of the book. So actually, this is something which goes in line and we -- it's still doable on the market here. That's very important. The German results are fully in line with the international results. I think we discussed it also 3 years ago that Germany was the country where we had the highest losses at those times. So actually, we catched up. And also until now, Germany looks pretty good result-wise, as said, in comparison to the others. And then your last question about the ambition. Yes, we want to achieve the 95% over the cycle. What we had in the past is that we may have had something like 95, 96, but then next year is also 98% or something. And this is what we want to avoid. So 95% are our target to have this stable over the cycle there. maybe sometimes below, sometimes a bit above, but not this fluctuation in the amplitude anymore. Does this answer your question, Roland or?

How would you define the cycle? I mean, it's a 3-year target. And the cycle is not necessarily negative going forward, at least what you can see in the market?

Yes. Well, we have those cycles, especially in commercial lines. We had them in the past quite intensively. The last softening market was something like 12, 13, 14 years lasting. And for that reason, we are very much interested in stable results. We don't go into fluctuation anymore. And if we will be below 95% in 3 years, we would see, but that's the minimum promise we give.

Okay. Michael, we have a mic for you. Michael, we have a mic for you.

Can you talk a little bit about the competitive environment? I know you're trying to avoid the cycle and saying you're steady, et cetera, but we're actually interested as well to understand the environment you're operating in, whether your peers at the moment are still raising prices above loss cost inflation or not. And the second question, your 95% target, and I think the 93% also for specialty under IFRS 17 and the 2022 numbers are under IFRS 4. So I wonder if you can give us a kind of like-for-like feel for things. And then going back to the captive, it was a lovely slide, but there were -- I think it was the first slide I've seen. Really love the presentation pack within the numbers. And I just wondered whether you can give us a feel for captives, but also a general feel for this trend maybe to self-insure given how quickly prices are rising.

Yes, sure, Mike. Thank you very much. Let me start with the competitive environment. Yes, of course, we are competing with our peers, right? So actually, it's not that we are in stand alone market. But I think in the last 3 years, we have proven pretty well that we can write this cycle. Others stopped doing business because it wasn't profitable, but we use them also in a way, not only the knowledge we have, what Ralph also elaborated on in some specific lines, but the market contact we have, we have a strong relationship with the local brokers. And more than that, when the prices are adequate, then you can use the tailwind of growing. It's just really using the cycle, how you should do that. And that's what we also emphasize on the specialty lines, that the point to start specialty was a perfect one. It was a perfect timing because the market started to harden it. And it could be, of course, that in some areas, we see that some lines of business in some areas in the world may start to soften, when they are not profitable, then we will step out of this business or at least think our books. That's how we manage it. So underwriting rational and underwriting discipline first, and that's key.

May I just add perhaps to that. So for the most part, we still see favorable market conditions, although with rate increases, above inflation. But as rightly said, I mean, we already see pockets like [indiscernible], where you see rate reductions. But there's -- these areas are still very limited. -- for the most part. And it's just my personal opinion, I believe the next 18 to 24 months, we still will see very good trading conditions, both for commercial and specialty lines.

Yes. That's what we expect definitely. Your second question, Michael, was about combined ratio, IFRS 4 and IFRS 17. The shift from 4 to 17 is very limited on the Industrial Lines book. It's around -- we don't have final figures yet, but it will be around 0.3%, 0.4%, something like that. So it's more or less like-for-like. The main impact we see in industrial lines is on the gross written premium shifting that to the insurance revenue, then you will see a decrease. That's the main accounting shift, but not on the combined ratio. And the last thing, the captive grade. Yes, we are 1 of the largest IP providers in the world. We have -- we are acting in all countries, all across the world. And just to give you some numbers, and I don't want to give you the numbers of our peers, but we are leading. It's not about participating in an international program, but it's about leading the program because then you have to make the policy country by country, you have to do the claims handling and also linked to captive fronting. And then you have to serve the captive also in claims handling, bring the premium from the countries to the captive local tax, local obligatory, things like that. we are leaving around 5,000 international programs worldwide. And as far as we know that within the top 25% of the market. It's hard to get detailed figures there.

Okay. Okay. What would you like to know, Roland?

Could you maybe speak about reinsurance protection you are buying maybe for both segments? And at least from my point of view, reinsurers might change their underwriting style. So are you exposed to the lower layers and higher frequency or something like this? And maybe the pricing you see, you have to put on the table.

Yes, it's a good point. Roland, thank you very much, and that pretty much links to the question, Thomas, you raised, which Torsten forwarded to me. Of course, we see that and we have anticipated that in our plan. We do see increasing reinsurance costs in some areas there significantly increasing, but mainly when you have a look to NatCat exposure. So I would really, at the moment, Ralph, you could add something on the later segregate NatCat exposure reinsurance from the standard reinsurance here. And what helps us, first of all, we combine, we have 1 HDI Global book. And we, for example, all the NatCat reinsurance, we do that together and we buy it together for 1 book of business. The shrinking of exposure and you may remember the slides, it was more than 50%, our exposure shrinked. This pays out now in buying reinsurance. Yes, there will be a rate increase, but in overall numbers, it won't hurt us significantly, and we've already planned it. For all the other lines of business, it's still a question of profitability. And when you have a look to our other results, we are very much profitable. And also reinsurers are still interested in participating in those reinsurance programs because also in the last years, they made money with that.

Yes. I mean not more to add, Edgar, on the NatCat side, I think we have taken the right course of action in the last 18 to 24 months by reducing our exposure substantially. So as you rightly say, even if the rate moves up with a lower exposure base. I mean it's -- of course, it's still more expanded. But in absolute terms, it's -- we are of the opinion that it's something we can live with. Yes.

And there was also, Thomas, from your side of the question about the higher net exposure. Yes, of course, we check our net exposure year-by-year. And in the last years, we already increased our net exposure, but not due to reinsurance pricing, but due to our overall amount. So as we -- when you remember just gross written wise, when we started with 5.6% and we end up now close to 9%, of course, we will also increase our net exposure because we can balance it out much better in the group and try to keep as much profit as possible within HDI Global and then finally also within the group.

Okay. Further questions? Let me first check whether there is someone on the screen, who would like to raise a question. Does not look like that. Encouraging them as well before I hand over to Michael, again. Michael.

It was just 2 little questions. One is on the growth and the one is on -- because you've shown numbers for specialty and for the total. On the growth, it looks reading the numbers like an analyst being really nasty that's the global is shrinking and the specialty is growing because you're going from EUR 3.2 billion to EUR 5 billion, whereas the total is going from EUR 8.7 million to EUR 10 million. It's a bit of a funny question because you said there's M&A, but maybe it opens the vote to explaining a little bit where you could potentially see this M&A in specialty? And then the other question, you gave a very precise numbers in terms of underwriting profits for the specialties, it goes from 55 to over 100. On my very rough math, and I'm not particularly good at this. the underwriting profit in the total would go from EUR 340 million to EUR 500 million. So effectively, specialty is 1/3 of the increase. Is that about right? Or am I missing something? Is there?

Sorry, the last part especially is going to what?

If you go from EUR 96.5 million or EUR 8.7 billion to 95% of over EUR 10 billion, it go from EUR 340 million to EUR 500 million, that's an extra EUR 160 million. Whereas in specialty on Slide 76, you see the EBIT going from up by about 50. So specialty is about 1/3. And I'm just checking to check if that's about the right way of thinking.

Okay. Let me start, Michael, with your first question. Yes, the growth, we said that we will be above EUR 10 billion, right? So actually, in the past, in the last years, we grew 50% in commercial and 50% in specialty the last years. In absolute number relatively is, of course, the growth in specialty is higher as the starting point was much lower. But it was 50-50 in the past, and it will be roughly in this area, what we plan also for the future. Regarding the underwriting profit, you've seen that in the past years, especially in the starting years with something like EUR 3 million EBIT and average for the year '19 and '20. Specialty was really lacking behind when you look the share on the gross written premium to EBIT and they are now catching up. And when you have something like 1/3 of the gross written premium, we expect to level that out that we will have overall to 1/3 of the profit than the EBIT [indiscernible].

Okay. So then [indiscernible].

Yes, 2 questions. The first one would be on the growth path for commercial and specialty. I think that in the U.S., there is a big deal currently around growing into MGAs. Obviously, there has been a quite successful start-ups, which have been created over the past years. So is it something that you're looking at? I think that you mentioned that you have scaled down your delegated authorities, but when you are aiming to grow U.S. maybe through M&A, I mean, does that mean as well going through distribution acquisition of MGAs or something like that? Or anything that you could say on that in order to reassure us that actually you're not giving the pen to other people? And maybe one thing as well related to the combined ratio. So actually, you're shooting for 90s -- you're shooting for 95 compared to 96.5, which looks again a bit conservative, having in mind the 93 of the specialty. So we got the feeling that a lot of economic profits are going to be generated over the past -- over the next 2 or 3 years. But I mean, how are you going to manage your resiliency reserves? Because it seems to me that you're still willing to build up the buffer. So we got the feeling that a lot of economic profits are going to be generated over the past -- over the next 2 or 3 years. But I mean, how are you going to manage your resiliency reserves? Because it seems to me that you're still willing to build up the buffer. So i.e., as if you are going to create economic earnings, but you are likely to be unwilling to show everything down to the bottom line. So where are you going to set the balance between both.

Yes. Thanks a lot, Thomas. And maybe when we talk about -- start with the MGA question as all the delegated authorities with specialty. And Ralph, maybe you can start...

I'm more than happy to answer that, Thomas. I mean even if I said we put more emphasis to single risk and less to delegated authority. If you just look at it, then I think the -- I know the plan is that we want to have 60% single-risk business, 40% dedicated authority business by 2025. If you work that on increased turnover or premium volume basis, then we also will continue to grow the delegated authority business, but it's a lower speeds than on the single-risk side of things. The U.S. has always -- has always been on one of the large dedicated salty markets, and we are present there. We're extremely cautious. We rather look at specialty segments and a bit of short tail. We also do a bit of excellent prone liability business in the U.S. So the U.S. is clearly a market where we want to have a larger footprint also going forward in single-risk but also delegated authority.

And then coming, Thomas, to your second question about building up the resiliency buffer. I think Jan, also elaborated quite some things on that. And we showed you the figures for the primary group. And as I said, we won't make a deep dive into the segments. And when you have a look to the last 2 years, we had quite some hits there, I think about inflation and all the other things that we have been in the situation that we could stably follow the path we have promised. And for that, you need, of course, a bit of resiliency, but also in the range. Jan, I think you showed it last year at the Capital Markets Day, Jan, that there will be also a top seating. So it's not that we put, let's say, a too high amount of profit in the resiliency.

Okay. So final call for questions for Edgar and Ralph. Any further questions? Michael.

I was really asking the Thomas question, excellent question. The 95% versus 93%, does it mean that -- so it's roughly 2/3, 1/3. So -- the industrial must be at 96%. Is that right? That's your target. So if you're -- if 1 is much better, the other one might be a little bit worse. What's happening there?

You're absolutely right, Michael. When you take the 95% on the point for 2025 and specialty has a 93%. That would mean actually you said you're not good in calculation, but I see that you're very good in calculations over -- that it would be a 96%, but the 95% is just over the cycle. So it can be that we are also below. And when we have -- we don't plan a worse combined ratio in commercial than in specialty and the 95% is ahead over the cycle that the average as from [ 25 ] all the years.

Okay. There is one urgent question and that's the final question from Thomas.

Yes, I just wanted to speak about. The recessionary environment? Because I mean it's pretty clear that we're going to have economic slowdown ahead of us, probably minoration in Europe, who knows. So how is your book currently structured to absorb this kind of recessionary environment in terms of claims or anything that I mean is making you confident that actually you're not too macroeconomic exposed?

Yes. Well, that's a great question, Thomas, and we are thinking about that for every day. On the one hand side, when we talk about the pure inflation, I think we have well managed so far to compensate the inflation forward-looking, but also backward-looking. Jan, also told you something about that when you talk about the claims reserves, of course, also their inflation hits you. But also here, we are pretty well settled. And looking forward, I'm not scared about that because we started to manage inflation pretty fast and pretty early already in this year, and also all of our clients are dealing with that. They're also dealing with higher inflation with energy cost and so on. So that's something what we are discussing with them. Looking a bit more to a potential slowdown of economics that's hard to forecast, honestly, and that's for me, more or less looking into a crystal ball, but we have a great regional split. We have a regional split all across the world that we are not dependent on one economic anymore, right? That would have been different in 2018. Then we have a great line of business split. We also checked our industry split here. Is there any industry where we very high share, but it's very well balanced in the book. And then coming also to specialty with 36% of our growth written by the end of the year. Ralph gave you some insights about the lines of business which are written there, and they are also, in some areas, far less sensitive to a slowdown of economics. So all in all, we think that we have broadened the book, we have over the industries and also segments in the world that we think we are at least well prepared.

Good late morning together, and welcome to Retail Germany. Some of you I already met last night, I'm Jens Warkentin, the new CEO of HDI Germany. And on the screen, you see the team I brought with me. All of them are senior leaders within there are segments within the group and in within their particular markets, two of them are the market guys that's Holm and Thomas for the bancassurance and from the broker parts. They are really within the market. and Thorsten Pauls is following as CFO. He's been my risk manager for a long period of time, and he's an IFRS 17 native that helps nowadays. Torsten and Jan already said something about me, about marathon, et cetera. I'm still the acting CFO until year-end. And I've been Chief Operating Officer for many, many years. So the passion is not only marathon, it's processes and operations as well. That's all you need for retail. Retail is in the end, a cost play. So therefore, you need to get operations under control and you need to command over it. That's my passion. And marathon is about and retail, it's all about keeping pace, in particular, in the kilometers 13 onwards. I don't lose pace. So -- what's our strategy? What are our goals? The GO25 strategy as presented in the last year still remains unchanged. I've been involved. I have been part in the strategy team. So therefore, our GO25 strategy is the right one, and we're going to execute it. You see on the right part, our ambition is achieving a return on equity, which is in line with the group's ambition. In the last 2 years, this year and last year, we had a return on equity between 5% and 6% that does not at all fulfill our ambitions. So therefore, we will double it at least to 10% or more and at latest at '25. So regarding supporting the 25-25 dividend strategy, retail is cash strong. So therefore, we -- you can see the numbers in a later slide as well. We generate cash, and that is the strength of our retail business. And for a period of 3 years, we're going to increase our dividend capacity and capital upstream to the group by 44%. That is a remittance ratio of 90% at least. So that is the core, and that is the strength of retail. We're going to provide stable dividends. Coming to the segments, which we have. You see on the slide already the number under the new regime, IFRS 17, where part of the saving component in the life insurance goes out compared to IFRS 4, and we are still a strong and enlarged life insurance carrier. So 55% of our business is life insurance, and 44% is about the P&C insurance. And those are the headline numbers. And the good thing about it, since we've accomplished our derisking mission for German Life, we can write the wave of interest and life is not a burden anymore in the current market environment. As I said to some of you last night life is fun. So that is what we do in life insurance, we can get money out of it. So we are very happy having this life book in our portfolio. Why is life fun? And we can start 2 things. We can start releasing the ZZR. We have a big stock of the ZZR, additional premium provision of Zinszusatzreserve which we've explained in the last year or years. So I will not further elaborate on that. We can start releasing the ZZR. The ZZR belongs mostly to the policyholder. That's clear. However, of course, it was a burden building up EUR 5 billion or exactly EUR 4.8 billion. So releasing that increases our financial flexibility in finding pockets for the shareholder. Even more important. We have always a spread over the current yield over the guaranteed yield. So we have a risk is over or much lower and fun with our capital-light products, which we offer on a very focused manner is our future. So talking about risk, one thing in life insurance. You can see here the number of the Solvency II. So we -- as said, we rigidly worked on improving the risk profile of German Life and derisked the entire book substantially that results in a Solvency II ratio of 380% for September this year. That's one thing regarding risk. Now regarding fund dividend capacity. You can see here on this slide, only our largest carrier, the HDI Lebenscersicherung, which has retained earnings of EUR 174 million, ready to be distributed to the shareholders. So we have substantial volume in our balance sheet, has retained earnings to support the 25-25 strategy Jan and Torsten just laid out. This year, the HDI Leben, will according to current plan will about to distribute EUR 60 million this year. To and contribute to the dividend of the group. So there's still remaining a significant number for the coming years. Talking about growth. In bancassurance, we've always been successful to the long-standing track record in industry. So we're going to -- you can see here the new business numbers. So we are sure that we can further build on this long-term success and keep on growing in this very profitable segment. An example, we have -- we're just going to start in first January 23. Our new partnership with Deutsche Bank and Postbank, we're going to provide payment protection to this partner. So this will add up nicely to our top and bottom line. On top of that, we are -- we do have a very well market position in the Sparkasse sector, so that ensures our top line and bottom line as well. Our goal is clear. At the moment, we are top 5. We will not stop fighting before being top 3 in this particular segment. So having talked about fun. There was life insurance. Now we come to P&C, the hard work section. And here, what we see, we see some headwinds we had NatCat events in the P&C part. But that we're going to manage as well as inflation, plus we're going to grow in the SME segment. NatCat. Last year, everyone talked about NatCat because we had this huge band event. What we did was we had -- we increased our retention. So we had a number of storms in February, plus the 1 known Emmelinde, which did fall completely into our retention. So we have about EUR 36 million NatCat gross equal to net this year in our account, which you've already seen in our Q3 numbers. That's about 2% of the combined ratio. Plus, we put aside about EUR 30 million additional inflation reserve this year. So NatCat is 1 thing. We have had very calm, NatCat years in the last years. So this year was for our book was about double compared to our experience that is one thing. We're going to attack and rest. Next thing is about inflation where we've had many questions from you last night and prior to that. How to tackle inflation for German Retail that you can see on the right part of the chart. The advantages for German retailers inflation can be managed on a portfolio basis and not on a contract-by-contract basis. We have for 76% of our book. It's been -- it can be managed on a portfolio basis. That is what we call built-in stabilizers. So those are indexed-linked policies, which we have. And the next is the normal price increase we have in motor, et cetera. So that's going to be attacked on a portfolio basis. The rest is contract-by-contract as known for the corporate business as well. So how to do it and how to push through prices. That is -- I'm an operations guy, and I'm a bottom line guy. Pushing through prices is just a matter of consequence. The top line is more or less the variable. The bottom line is fixed. So we pushed through the pricing with proper processes and operations with no room to maneuver on a local level to bypass pricing or to bypass the price and the requirements we had from headquarter. That's more -- that's done more or less for the change of the year. So we are quite happy in what we've pushed through in the pricing for the coming years. So inflation as such, from a process point of view, does not cause us headaches because we do not any leave room for losing pace, pushing through the prices in German retail. So now we are coming to my passion part. Retail is a cost play. In the end, it's a cost play, products, you can copy pricing and the underwriting technique, you need to control, you need to have proper processes and tools. We are part of a big group so we know how to do pricing. We have the best actuaries in the market, we believe. So being successful in the end is managing the costs. Came some way, so we had -- you see here the number of EUR 838 million in '21 and coming down to EUR 775 million in '22, resulting in a cost ratio of 35% for the P&C book. And we have, at the moment, in the plan 32 -- 35% does not fulfill at all my personal ambitions and requirements for a retail organization. So that is being an operations guy, that's the first and the last thing I'm going to attack and address because that is the basis for everything for being competitive in the retail segment. So no way that we're going to stop and stay by the 35% cost ratio. So -- coming to top line, the SME segment. We've had a nice growth in the SME segment. We have from the tradition of our sales force. We have a good position in SME. So and we're going to continue our growth path in the SME segment. However, bottom line first. So we believe we have with our bottom line requirements, we can still grow nicely with the CAGR of 7%, given our market position and -- but we're going to continue, in particular on short tail business, and that will then add up nicely to our top and, of course, the bottom line. Talking about retail results. The private segment, I'm proud serving 2.5 million customers. And I'm happy the private retail segment is a very profitable one. So here is this strategy quite straightforward and clear, keeping the number of contract steady and stable because that is the segment which is very cash and profit positive. So we want to keep that segment stable. The KuRS strategy has been accomplished find. So we have -- so we want to keep that portfolio stable. Having said that, the result is then cash. And here, you can see our ambition having stable processes, having a good cost position then the nature of the retail business is providing dividends. Here, you see the number that we have accumulated cash upstream of EUR 650 million from '22 to '25 for this 3 years period, which is a remittance ratio of 90%. And we are very certain reaching that number since we've strong balance sheet and the nature of the business gives us a very good outlook for this. Summing that up profit transfer, I already mentioned. Combined ratio, bottom line first, we will reach a combined ratio of 94% by '25, and we're going to continue the path, making sure that we reach the combined ratio. I must say, it's not on the slide, but Life is still fun, as I said in the beginning of the presentation. And that, in particular, on the Life business will end up in having a return on equity by 10%, as I said, at least 10% at latest '25. Summing up the key messages the GO25 strategy, 10% at least return on equity. The growth focus in SME on a very focused approach in the SME and in the bancassurance world, with a very focused and capital-light product approach in the life insurance. And therefore, our point, our point, our position within the group is supporting the 25-25 strategy since we will be and we already are a significant cash contributor to the group. Thanks for your attention.

Thanks, Jens. So we have 15 minutes Q&A for Jens before we start with Retail International. So Thomas, what is your question to Jens. And do we have a microphone for Thomas?

Two questions. The first one would be on pricing. Can you be a bit more specific on what kind of pricing you're pushing through at the present time, I think that we were close to the end of the renewal period in Germany. So what's the outcome? And -- what have you seen in your book any lapse rates coming up and how the competition as well has been moving in these last few weeks? That would be the first question. And on the cost side, I think that it's been yours that actually the German P&C business has been trying to improve the cost. We've been hearing in the past about data centers, about decommissioning IT software, something like that. So I guess that a lot of the low-hanging fruits have been already done. So what gives you confidence that actually you can shoot for the [ 32 ] and where this is going to come from?

Okay. Starting with the renewal of the prices, you're completely right, Thomas. The renewal for the next year, I mean, its history is done. So we do not provide detailed numbers on a segment by segment, but I mean you've heard from the market, what are the average price increase which we have. So we're going to attack at least the inflation segment by segment. Regarding what is the lapse experience we have at the moment. I'm talking about market-wise, we still see a quite calm market. So it's not this huge change in movement in sure to ensure, so therefore, we do not see, I would say, exceptional lapse rates at the moment. It's quite calm surprisingly, surprisingly calm. So therefore, that gives us confidence and keeping a profitable portfolio together. Regarding costs, it's exactly as you said. I wouldn't say the low-hanging fruits are done. The big things like decommissioning IT, so the big investments in IT have been done. Jan, has within the course initiative, I think, has a number of years ago, has presented that -- the rest is what needs to be done. And retail operations is a big number of many small things and pushing that through and throughout a decentral organization. So it's like getting processes detail by detail in order and then thinking about how to automate it. Complicated processes to be complicated in IT is an expensive IT. So that is we don't do. What gives me confidence, I've done it before, I would say, in much larger operations.

Could you elaborate a little bit more on your experience you made growing the SME business? So how profitable was it? And looking at your current plans for growth, I remember that growing this business line gives you additional expenses on top of the average. So that might be in contrast to bringing down the costs from my point of view. So that's one point. The second one, you're managing your other retail P&C lines as a cash cow, not really growing it, but is it long term an option. The segment per se is not the biggest and if you're not trying to improve it and to grow it, where should it had to?

Yes. Coming to the first question, and I missed out 1 from Thomas regarding the commission rates. We're commissioned, commission rates are in line with the market, I would say. We have broke a segments. So we are in line. So we don't see any exceptionalities in there. Well and you're completely right, the business mix, the SME segment is per se is a bit more manual compared to the private ones. So you need to be competitive in each segment. So a change of business mix would per mechanics would change in an average and cost ratio. So as I said, I need to push down the 35% on [indiscernible] levels, right? So you need to get the costs under control in both segments. In the SME segment, the cost ratio is per se a bit higher. So -- but I'm not worried about it. Regarding the private segment, you're right. It's keeping it stable, keeping the number of contracts stable. That is the target in a mature market and gaining market share. I've not seen it often or actually never that you gain market share in this very competitive mature market without having -- doing compromises on the pricing. So that we won't do -- we want to. So we want to keep the number of contracts stable. And for the foreseeable future, we believe that provides good profitability as long as the German economy is going forward as it does. Regarding the prices, it's clear. 94% combined ratio target and in the SME segment as well, we don't do any compromises on that. And that depends. We had a very good book, for example, in the [indiscernible] reasons for the Jan. And there, we had the hit regarding corona. But I mean, that's been done. Overall, in the last years, we were happy with the SME business. That is clear. Otherwise, we wouldn't be trying to grow in this segment. Michael?

So on the dividend, EUR 450 million becomes EUR 650 million, of which EUR 174 million is the life of it. So the other bit grows by EUR 24 million. So effectively, there's no growth from the other, That's be my question. And the second, pretty much rather not a question, but is that a demographic cliff in other words, you're keeping these people, and it's lovely that you're keeping them, but they're probably getting older, right? So at some stage, you won't have them anymore. And I just wondered what's that. And then on the costs, so you gave us precise numbers, EUR 775 million become EUR 675 million. You said that the mix changes a little bit, but it's not a big problem, but we've got inflation. Are these real? Are these nominal numbers? In other words, excluding inflation, the EUR 775 million becomes like EUR 500 million or something?

Yes. Starting with the later with your last question, you're right. Those are gross numbers. So the costs we need to reduce are on top of inflation. That is clear. So the reduction number is already including inflation. So the real numbers to be saved is a bigger one. You're completely right. And I mean, but 32% cost ratio is not like rocket science, has been done, and I have it already done. So that's going to happen. Regarding the dividends, you said, it's all the business segments do contribute to that. I mean it's not only life, the HDI Versicherung, the retail carrier is providing profits as well. There, we are -- and those profits are -- these dividends are very sure because we already have an exact plan how to do it. So the HDI Versicherung will contribute to the dividend as well. As well as the small P&C carriers, which we have [indiscernible], et cetera. If you take a look at local accounts, you see they are quite profitable as well.

Okay. So there would be...

[indiscernible] Democratic.

Yes, sorry. You're right. If I say the number of contracts and the clients will stay stable, it won't be 100% the same clients. So keeping the number stable is from the growth perspective is more ambitious as it looks on the first glance. So you need to have a hard-hitting distribution force doing so. We have about in the tight agent force. We have about 1,000 sales people out there and keeping is always a number of having boots on the ground. And that is the point keeping the distribution force stable, and that is -- it's fun as well, but that is busy block.

So there will be an opportunity for a final question, checking out the screens. Roland. Final question to Roland.

Maybe coming back to reinsurance. I think you mentioned that you had some NatCat frequency losses or losses coming in as you reduce -- you cover it this year. So is there any change to this.

No, we do not -- we will not change the reinsurance strategy or structure. We did so last year. So we increased the retention, and that is the structure we're moving forward as well. But this increased retention this year hit us for the 36%. But is per se is the right strategy because reinsurance does cost money. So therefore, the higher retention is the rational restructure. We already put in place this year, and we will move forward.

With it. Let me start to go in with the slide that Torsten has already presented. So the overall ambition, the overall targets do remain the same, double-digit ROE as well as becoming top 5, not only in motor but also in P&C in our core markets. And please allow me to go a little bit more deeply into the 4 key areas, the 4 key strategic pillars on which we have built our strategy to achieve the profitability levels and the strategic positioning in our core markets. On the technical excellence side, which is even more important now than when we presented it to you last time, we do continue to progress and invest. We are a little bit above the 95% combined ratio ambition that we told you that we want to achieve by 2025. But as I will show you later on, we are on a good track there overall, and mitigating the inflation impacts, which have been quite significant throughout this year. On the diversification side, we have not only in 2021, but also in 2022, made significant progress of increasing our non-motor business, which is, if you remember, the second pillar continuing to grow motor business but also strengthening our diversification into the non-motor business overall, reaching roughly EUR 550 million additional business and therefore, well on the track to the EUR 900 million that we want to achieve. The third pillar, which is crucial for us in retail beyond the technical excellence and somewhat diversified book is as well continuing of digital transformation. And one key thing also in our retail markets and especially in our core markets, is expanding our reach to our clients digitally, and we are now able to reach about 13 million more clients through our specialty bank partners with BancoEstado, but also now with Fiba, you've just seen that we are entering also the bancassurance business in Turkey starting next year. And finally, we said we want to work heavily organically, but we also want to continue to invest in a diligent way on M&A and partnerships. And you see that we have been quite active. Last time I told you that we have signed BancoEstado, we have started that now. And this year, we have further made moves also in Latin America with Sompo in Brazil and with Fiba in Turkey overall. The ROE, we're not quite there yet with a 10% profitability level, but we are pretty sure to be above 9% at the end of this year. And we've also made a further step in our strategic positioning reaching now in 3 markets, a top 5 position in P&C of the core markets that we're having. So one further, that is especially Turkey. Now let me go into one -- each one of those 4 pillars. When you look at what we have been in Retail International, we have always been pretty stable retail insurer with a portfolio that has always delivered around 95%, 96% combined ratios, and we intend to do that also going forward. We have a very high resiliency overall. We have already talked about the resiliency reserves. I think overall, it's fair to say that also Retail International is probably at the upper end of what we have in the group overall, and we want to continue to outperform our peers in our combined ratios. And therefore, the ambition to be below 95% will absolutely remain the same for 2025. The inflation impact. How do we manage that? If you look at that, the most exposed segment has been the motor insurance business. And there, you can see that we have worked heavily on that. Also in relation to the market overall. Yes, we did see some impacts of that. But what did we do? We work through inflation-adjusted repricing of our portfolio. We are rather short-tail motor, especially in Latin America is very short tail 1 to 2 years. And if you look at our portfolio overall, we have not only increased our prices, but we have also worked heavily on selecting better clients. So if you have a lower frequency that has an inflationary environment, of course, as well very much. And overall, we have been able to increase the whole book of our motor business, which is close to 68% of our total portfolio, price increases of about 30% and we did not only start at the mid of this year. We actually started at the end of last year. And so we are starting to see the earning impact of that also very nicely in our P&L. Beyond the pricing, what's critical, of course, as well is optimizing our claims handling. So we are working, for example, very heavily about accelerating the claim settlement, which helps an inflationary environment as well. And the claims steering, leveraging our repair network that we have, where we have lower prices for labor as well as for parts and therefore, can manage the claims also comparatively to our competitors in a good way. And final point, let's not forget that it's also about cost. The digitalization that we are driving forward helps in that way as well to manage our expense ratios in a better way than our competitors. If you go to the diversification side, we told you on non-motor, we wanted to reach roughly EUR 2 billion by 2025 or more than EUR 2 billion by 2025, and we started from EUR 1.1 billion. So it's roughly EUR 900 million that we wanted to add. We are now roughly at EUR 1.7 billion, so already good, more than halfway through that with a growth of roughly 20% non-motor, driven partially, of course, also by the acquisition, which we call now HDI Italia, which was former Amissima, as well as the BancoEstado business has actually come to a good start. We expect roughly EUR 100 million, EUR 95 million of premiums already throughout 2022. On Life Protection and Health, you remember maybe last time I showed you 2 bars for that. Given that we're looking forward to IFRS 17, it didn't make so much sense to have a live revenue perspective alone, because the savings business, of course, is going to be accounted in insurance revenues differently than it used to be with the premiums. So what we've done here is putting this both together also because we see that the business actually is oftentimes sold conjointly Life protection and health in the portfolios that we are driving. We have done a bit of derisking. You remember that we sold our Russian business, which was mainly a life savings business with CiV Life. And we've also reduced our exposure a little bit on the life savings side in Italy, and therefore, managing very carefully also our capital efficiency in the environment that we're currently working in. The focus is on building life protection growth, and we are there off to a good start. Sompo is going to add to that. Fiba is also going to add to that. And the WARTA transformation that we've done over a couple of years continues to show also a very nice growth. And also the Health Corporation that we started with Bupa is starting to take hold, so that we do expect roughly EUR 0.5 billion or more in terms of insurance revenues for 2025 in this business of Life Protection and Health. I should say we are not targeting pure growth. We do expect more profitable business from this. This is, in general, more profitable than motor business in the market, and that's why we do like to grow in this area. In terms of digital transformation, we have 3 elements that are critical for us. I mentioned already the expanding our customer reach, not only BancoEstado and Fiba adding to that. You might know that we also have a very digital business with Santander in Brazil, which is also off to a good start and especially also very profitable even in this environment, adding very good combined ratios, and we will continue on that. And we will also leverage -- continue to leverage utilization for especially advancing in our risk selection, pricing and claims management practices by leveraging data in the best possible way. I think we have some companies like WARTA, but also the Brazilian entities, the Mexican entities, all of us were working very heavily on not only leveraging our own proprietary data but also nonproprietary data to have the best pricing and best selection that we can have and to be at the forefront that. And that's not only in motor but more and more so also in non-motor. We do leverage as well digitalization, as I said, for the expense ratio. It's critical for us. We have been a cost leader in our markets, and we want to continue to be so. So what we've shown here is only the admin ratio because it of course depends a little bit on the distribution structure that you have, what you pay in terms of commissions. That's why we also do look at this overall admin cost ratio. We are continuously improving that over time. And we want to stay as well better than our peers. So relative performance does count here very much. And we have been also doing that throughout 2022, improving our cost ratios in that sense. In terms of M&A, we have -- as I said, we have been quite active. We have a very clear strategy. We are very much focused on our core markets to improve our positions in those growth regions and to strengthen our competitive position. We are especially also focused on strengthening our non-life and life protection business, as I said before. And when you look at it, we had a couple of bolt-on acquisitions with Amissima in 2020, with Sompo now in 2022, Fiba coming also and BancoEstado for the local partnership in Chile. So overall, this roughly adds EUR 650 million in gross written premium, if you were to take the 2022 numbers. Of course, you need to wait for the closing of Sompo and Fiba, but EUR 650 million in terms of non-life premiums and roughly EUR 100 million of profitable Life Protection and Health business. And at the same time, a relatively minor impact in terms of volumes that we have been losing by selling CiV Life. At the same time, of course, we are very happy that we were able to do that and close that before the Russian war on Ukraine. So what the Sompo add just to give a little bit of a highlight because this is one of the larger transactions or midsized transactions, where basically, it helps us to get closer to a top 5 position in Brazil. We will be in P&C #7, if you take the 2021 numbers. But beyond that, what is helpful is -- it's helping us to strengthen first, our motor business in the geographical areas where we have a little bit weaker. We have our stronghold in the south of Brazil with the Sompo business, we will add especially Sao Paulo, which is the largest region, in terms of population, and we will gain a lot of share there, which is for us very helpful to get further cloud and distribution capabilities, but also pricing capabilities in those regions. And so geographically, it adds not only scale overall, but also especially in those areas where we wanted to also further grow. And secondly, it adds, as I said, diversification because it will build up our non-motor business. We have been a very much focused motor business in Brazil. This will add a good chunk of non-motor business as well as allow us to get into the life protection business, which is mainly group life. So really risk protection business that we are going to be doing there. So we are very happy and disciplined in the execution of this transaction. We do expect it to close between Q2, Q3 next year. It's a very diligent process that we need to run through with the regulators, but we are well on track to achieve those steps so far. So with that, our ambitions do remain the same. We have the ambition to get to the ROE above 10%, a combined ratio of 95% and as I said, we want to outperform our peers and get in the top 5 position in our 5 core markets in Latin America and Europe. And so therefore, to sum it all up, I think overall, we made good progress. Happy to say so and a big thank you to all the teams that have been working very heavily on this in a very intensive year 2022 to implement the strategy and to reach those 2 ambitions of profitability and strategic advancements that we want to have. While very diligently focusing on technical excellence, especially in this environment where it's very, very crucial. Thank you very much, and I'm happy to take your questions.

Okay. Thanks, Wilm. So next round of questions, Roland?

Could you help me to better understand the current challenges you have regarding the technical profitability? So could you provide us a more clean combined ratio ex reserve releases for the current situation? And I would be interested how fast can you turn this around. So what is the outlook for next year actually? Then a second question on Sompo. I think I remember that once there was mentioned as the Sao Paulo area is a little bit more difficult in terms of motor underwriting, competitive environment. So what's the technical profitability currently in the situation for this company you're integrating?

Roland, thanks very much for those questions. So first, as I said, the motor business is especially a short-tail business that we have, and we have been working very, very diligently. You remember that especially for example, in Brazil, but also in Turkey, also in Poland, the inflation has been increasing much earlier than what we have seen here in maybe Continental Europe, Germany and similar. So we have already been taking pricing measures very early. However, as you've seen, the market in Turkey or in Brazil has been suffering throughout this year because the claims impact is immediate. Why the prices, you can increase, but you still need to earn them over time. I would say that we are roughly 75% through in earning that inflation impact throughout this year already. And therefore, we are very confident that in 2023, we will be on good terms in not only the markets in Brazil and Turkey, but also the others, where we continue to show very good profitability, as you've seen also in the month results. With regards to Sompo we have been in the very profitable parts of the Southern business, southern regions of Brazil, that is absolutely true. Nevertheless, our Sao Paulo and also Rio de Janeiro, you can do very good profitable motor business in those areas. But you need a certain scale and that was a bit more difficult for us in the past. With the addition of Sompo, as you have seen on the chart as well, we will have much more scale, much more cloud with the distributors there as well. And therefore, the ability to price also better. We will remain very diligent in improving that and focusing on the technical excellence in Brazil. What is good to say as well, I think, is that you've seen that the market overall has reacted. It's not -- has not been only us. The whole market has been under pressure not only because inflation has come up, but also because frequency has come up much faster, for example, in Brazil. And that has led to the fact that everybody has been starting to increase prices, even the ones that you might have thought maybe can wait a little longer, but they did not. And I think that's very positive to see.

Michael with next questions.

I had three. One is on cash upstreaming. The second is on deals and the third is a bit of a surprise on Santander. So on cash upstreaming, at the beginning, we heard that all the operating units are supposed to send up more. Maybe you can talk a little bit about what it looks like, what the numbers look like. We had some numbers from Retail Germany. On deals, I imagine the deals -- the obvious ones would be just to get to the #5 position in P&C overall and maybe -- but maybe you can talk a little bit about that and give us a more precise feeling because the impression I get is that your neighbor is giving you cash to do deals if it's EUR 650 million? Or is it more, I don't know. And then the last question is on Santander. I thought Zurich was at Santander partner. So I was a bit surprised to hear the name.

Sure. Well, let me start with the capital part. First of all, as I said, our focus is on also further increasing our profitability and our profit contribution to the group. This shall also translate then in higher cash remittances to the group. And even on relative terms, also there, our cash remittance for Retail International will also in percentage wise compared to the local results also increase. That said, it's not going to be at the same level as for Germany because we are a high-growth division business segment. And therefore, yes, we do balance our overall contribution to the group, with the opportunities that we have at hand in our markets. As to the deals, we don't have an exact figure in mind that we're going to be investing. We are looking very diligently at what the opportunities are and how they can help us in our strategy not only to reach a top 5 position, but also strengthening our business. As you've seen, be with BancoEstado, Sompo and Fiba, they do add capabilities and strength in the market, not only in terms of scale, but overall to the business. And I think maybe Torsten and Jan can add. I think we have enough firepower if we wanted to do also these kinds of midterm deals like Sompo, we are very happy to continue to do that. On Santander, in Brazil, you are right. Zurich has a cooperation with Santander. But we do as well. We have a joint venture on the Santander Auto business. So it's a pure motor purely digital business that we have started around 2019 and is now starting to bear fruits. It's a pure greenfield and the consumer finance business that we're working under, and this is a lot of fun for actually to see what we have started to build there.

Okay. Are there any -- Thomas has the question.

Just a question on M&A. When you're thinking about further M&A deals, I mean, how are you balancing the strategic opportunity versus the disciplined financial valuation KPIs that Jan, will be looking at? Can you remind us what are the hurdles that you have to cross from a financial point of view?

All right. It's actually relatively simple. It needs to be ROE enhancing earnings per share accretive, and we need to earn our cost of capital. So it's -- there is no trade-off being made. We're looking at it from, does it strengthen us strategically as well does it fulfill those hurdles?

So then, we thank you for your questions to Wilm and earlier to Jan and hand over to our CEO, Torsten Leue, for concluding remarks.

Good. Thank you very much. Maybe make one slide more to get the concluding remarks. So -- thank you for being here with us and sharing a bit the perspective until 2025. And before I conclude, really, I'm so fortunate in this company, it's so much fun to work with such a team. And I include here Caroline Schlienkamp, who's not here, is Head of HR, as you have seen as well, J.J. It's really atmosphere where I'd say it's just a pleasure way to come to work. And we are more healthy than before. It means that we can run even faster and accelerate our development. The message we want to transform to you that is the authentic here. It's not just some game or shows what we own here. It's about prime insurance really unchanged. It was a titled that, we believe it's now a run, and we really can catch up, let's say, with Hannover Re path and the same development we do with the prime insurance. The 10% we want to give to you is significantly above 10% as a message. And then we play a little bit around with the '25 numbers. So income has increased 25% and the dividends immediately and plus the booster until 2025, another 25%. So if we like it, we're even better in time than we thought. But this is a good message because we should not talk much around, we just to deliver promises the promise we did in the past, and we are sure and confident we do it in the future as well. Promises is a promise. Thank you very much for participating. And the lunch is waiting outside for you. Unfortunately, the screen, there's a screen, I guess, not for you, but thank you for watching and hearing us as well. Thank you very much.