Talanx AG ($TLX)

Good morning. This is Hannover calling with the Talanx results call for the full year and the fourth quarter 2025. I'm here together with my CEO, Torsten Leue, and my CFO, Jan, good morning to you, who will take you through our presentation and explain our numbers in more detail. After their presentation, Torsten and Jan will be happy to answer all the questions you might have in relation to our numbers. We are on video today. So if you want to pose a question, please use the Hand Raise feature, and I make sure that you will be slotted into our Q&A. And as usual, all our complementary documents, including, but not limited to, our financial data supplement, are posted on our website in the IR section. And with that, I hand over to Torsten. Torsten, the floor is yours.

Good morning from my side as well. So I run through the highlights from my side, and then Jan, as usual, tell you the financials more in detail. So another record year was '25 for us. You see what we have already said, a 25% growth to roughly EUR 2.5 billion. We will increase even more with 33%, our dividends to EUR 3.60. And if you see, I always say what the most important thing is what you don't see, and this is basically our high-quality earnings. Probably, we have the strongest balance sheet ever. We just realized about EUR 860 million bonds in order to strengthen our balance sheet. And as well, and we will come later to this, we significantly increased our resiliency as well on the reserving side. So this is the strongest balance sheet ever. So this was driven by our profit engine's speed on the reinsurance side with 13% growth as well on the prime insurance side with 20% growth. And the growth comes from a kind of diversified portfolio. We see that -- in the region, you can see we have 46% in Europe, and then, rest split over the world quite nicely diversified portfolio and as well from our segments quite nicely diversified. It's now 50-50. We usually said 60-40, 40-60. This is basically where we want to be, to be well diversified in our segments. I guess, the 50-50 is the kind of sweet spot we have now achieved. And you see as well and primarily as well, we have this Corporate & Specialty and this Retail International more or less the same size. And you see as well that Retail Germany is the smallest segment we have. Coming to the segments. You can see that the Corporate & Specialty, we have, as we say, global player, we call HDI Global, 10% growth and EUR 551 million net income. We see Retail International as a growth player. They have increase of 36% to EUR 611 million as well bottom line and Retail Germany. In spite of, and Jan will tell later about, losing the TARGO cooperation because of expiring. Now, we have still increased 6% our bottom line in this segment. And all this reflects to a share price, while it was end of February EUR 27.6 billion, now it's roughly EUR 1 billion higher as a market cap, which gives for the prime insurance price/earning roughly around 8. The basis of everything is we believe our Talanx business model, and you can see here the 4 ingredients. You can see, as I said before, diversification is key. We have this 50-50 kind of sweet spot achieved. We have a clear P&C focus with 80% of our portfolio with a combined ratio below 90%. It means focus always pays off. And then, we have a business model where 93% of our portfolio has a cost leadership. We defend it and a very nice as well last year kind of cost leadership we have in our markets. And then, and Jan again will tell later more about this resiliency, I talked to you about this realizing bonds. Now, we have as well on the resilience side significantly done more. I would say there's a sign above EUR 5 billion. I would say it's above, above -- significantly above EUR 5 billion. We will come up with detailed numbers. We come anyway as always every year on May, but the significant is the most important message here. Promise is a promise. I mean, this is the numbers we gave to the market, we gave to you. And basically, we achieved them. So nothing more here to comment with a return on equity of close to 20%, I think, was quite reasonable year. And again, it's important what you don't see, and again, this is what we said before of increasing our resilience in our company. We are very confident that the outlook '26, what we give here, middle single digit, around EUR 2.7 billion, return on equity around 90%, we will achieve after seeing the first months how they went because large allotted budget we have, roughly close to EUR 700 million, was not used much at all, just a little bit. So, therefore, we are quite confident how the year started. And with that, I hand over to Jan, who will give you much more details.

Yes. Good morning also from me, and thank you for attending our call here. Let me start first with the highlights from a CFO perspective before I dig into some more details on the capital and investment side. And later on, I explain you something -- give you some color on our profit engines, the segments who have produced this really very good result. To start with the CFO highlights, we had super strong earnings growth, 25% to EUR 2.480 billion, and we have a record high profitability with a return on equity close to 20%. And this has allowed us to increase the dividend by 33% to EUR 3.60, and this is despite the fact that we had to finance the buyout of the minorities in Poland with a triple-digit million amount in this February, which is already done. Assessing the performance of the year 2025. Three things come into my mind. First, it was a very good performance. Second, we have been lucky. So we should remain humble due to the large loss development. And third, we have used both the performance and the luck to further strengthen our balance sheet. We are living in times of high uncertainty, and in these times of high uncertainty, resiliency matters, and now, the CFOs in the group together can contribute to providing for the strongest balance sheet in Talanx's history. But let me start, we have been lucky. In the last year, we had the lowest large loss burden -- budget usage for the last 10 years. So on average, we have roughly 7% of the net earned premiums as a large loss consumption. Last year, we just had 5.4%. So that means we had a windfall of EUR 630 million with regard to the large loss usage. We don't believe that this will last. This will come back to normal. And this is why we have included in our guidance for 2026, the EUR 2.7 billion. Torsten just has mentioned, we have included in that one, again, 7% of the net earned premiums, meaning that we have increased the large loss budget to EUR 3.1 billion. Why do we believe that it will come back to normal? Also, the last year shows some indication that the risks from global warming remain. In Europe, okay, we have just had a storm Joshua with 120 kilometers per hour wind speed. But if you go to the Caribbean scene, there has been Melissa. Melissa was a Category 5 hurricane, tropical cyclone with a wind speed of roughly 300 kilometers an hour. And it has cost us EUR 340 million net given our high market share in Jamaica. And yet now, just assume what would have happened if this hurricane would have had a landfall in, let's say, Miami or somewhere else in Florida. Then, we would be talking about a market damage of -- in the triple-digit billion area, where we would also have to pay our share, which is much lower in Florida than it is in Jamaica. So given that, we continue to believe that, that was not a trend that we have a lower large loss burden, that there was a little bit luck. And I will explain you in more detail that we have used it and even overcompensated for the luck in strengthening our balance sheet. Looking at the second thing, the performance of our segments. And what you can see here is the technical performance of all the segments, and we have strong underwriting performance across the board. Obviously, Corporate & Specialty and Reinsurance, our 2 global business models, have benefited most from the large loss development. In Corporate & Specialty, we've seen an outstanding good combined ratio of around 90% and Reinsurance really hit with this 84%, the league table within the Talanx Group. But also both retail segments, Retail International and Retail Germany, provided for a very strong 92% combined ratios. So overall -- and also, if we look at the attritional loss ratios in the segments, we have very well technical underwriting in place and very good portfolios. And this provides us with a lot of comfort with regard to the outlook. We have used this good performance and the luck, which we had with regard to the large losses to further strengthen our balance sheet. And as Torsten has already mentioned, with regard to fixed income, we have sold bonds, which we purchased in the low interest rate environment with low coupons and bought new bonds of the same quality. There was no shift in the quality with higher coupons, which will shift the P&L recognition to the future. So we have taken EUR 857 million losses in the P&C area. We have excluded the losses we have taken in the VFA portfolios here in order to provide us with higher returns. And if you want to have a rule of thumb, this means roughly this EUR 857 million, roughly EUR 170 million more EBIT for the next 5 years every year, which will contribute to strengthen our earnings quality going forward. And also, we have increased the resiliency on the liability side. So we have strengthened the balance sheet on both sides. With regard to the resiliency, we always get an indication, as Torsten already has mentioned, by Towers Watson, an external actuary, and this assessment is not finished yet. So I do not have the numbers right now, but we are very confident that we will be significantly above EUR 5 billion when we publish the numbers in May. And second, we are also very, very, very confident that within the split in between Retail and Reinsurance that in Retail, we will provide for higher resiliency numbers as in Reinsurance, where we have a bigger and more balanced portfolio. So for both, Reinsurance and Primary Insurance, we are at the upper end of the resiliency that we believe is efficient to cope with the volatility of the very uncertain world we are living at. So let me provide you now with some insights on capital and investment management. I would like to start with capital management. So what have we from an NAV perspective delivered to our shareholders? This is what you see on the left side of the chart. So in total, if we add the increase of equity and the dividends we paid out to our shareholders, we have had a net asset value creation of EUR 2.5 billion. And on the right side, you can see if we extend the equity with other shareholders component, expected future profits, which are already displayed in our balance sheet, this is -- we are adding the CSM and the risk adjustment minus taxes and minority shares, then we are roughly at EUR 21.3 billion overall net asset value. This view obviously does not reflect that we want to continue our business and to write further -- to continue to write profitable business. And so it's just one part of the valuation. Now, second, where do we generate the cash from in order to pay our dividends? So the starting point, obviously, is the net income where we have the 50-50 split in between Primary and Reinsurance. With regard to the cash contribution, the cash contribution from the primary group is a little bit stronger. They're providing for 65% of the cash, which is perceived by in the Talanx AG, and 35% is derived from Reinsurance. And both together allows us to increase the dividend by 33% to EUR 3.60 for the current year. Looking at the solvency number, there we also see -- there you also see a nice development, which is simply backed by our good business development, by the increase in equity. We have an increase in own funds and rather stable solvency capital requirements, and this leads to a number slightly above 240%. The audit of the solvency number is not yet finished. We will publish this also in May together with the resiliency numbers. Coming now to some other finance information with regard to the debt leverage, we have reduced the debt leverage. This is obviously also a consequence of higher equity to 29.7% for the Talanx Group, where we have an internal threshold of 35%. And for the HDI Group, which also includes the mutual on top of the Talanx, where we even have a leverage ratio of 22.8%, which is well below the 30%, which we have set out as a threshold for the HDI Group. So the maturity profile of our debt financing is very well balanced. And you're all aware, we will have to refinance EUR 1.25 billion, which is due in June. So we will have a refinance in the next 4 months. And as you can see, we have a very balanced maturity profile here. Coming from capital management to investment management to our investment portfolio, it's a little bit boring because it's the same message like we have had in the last calls. So we have a very conservative investment approach with more than 80% of our assets invested in fixed income, and out of that, 93% in investment grade. So we have just 17% of our portfolio allocated to yield enhancement products, which are displayed in the pie chart on the right side of this chart. The main activity last year was realizing of the losses in the investment portfolio, but we bought the same quality of bonds again. So there was no shift towards risk on or risk off by doing that, and this will provide us a further increase in return on investment, which is displayed on the right side. Assuming we wouldn't have done this EUR 857 million realized losses, the return on investment would have been 3.4% for 2025. Let me now dig into our profit engines. Our segments will provide us with this very good result. To start with Corporate & Specialty. Edgar Puls and his team, they were really able to provide us another year with a very, very strong result. With regard to growth, they were able to grow the business by 2% in euro terms, currency adjusted even 5%. Group net income contribution was up 10% to EUR 551 million, a very strong number, having in mind that they have strengthened both on the asset side and on the resiliency side their balance sheet again. And this was feasible because of an outstanding low attritional loss ratios with 90.3% combined ratio, which is -- which does reflect it. Return on equity stands at very, very good 17.3%. What drives my confidence with regard to the future? We have a very well-diversified portfolio here, and it's very well diversified by both by regions and also by lines of business. And Edgar and his team was able to achieve rate changes by lines of business slightly above inflation rate during the course of 2025. And this is despite the fact, as all of you know, that we have a softening market here, so they performed really good. And this brings me to the outlook of Corporate & Specialty. We are very confident that they can achieve growth again, that the combined ratio should remain below 92% and that the return on equity will stick above 16% for the year 2026. Coming to the next segment, Retail International, they are our growth engine. Insurance revenue were up 4% in euro terms. They were heavily affected by currency effect because currency adjusted, they achieved 10% growth. The group net income was even up 36%, and 36%, okay, there was one special effect in it. We bought out the minorities in Poland, and they contributed these minorities, and we could account for it already in 2025. And this minority they added EUR 68 million net income in total to the EUR 611 million. So without the EUR 68 million minority buyout effect, the growth rate would have been just 21%, which is still a super number. Return on equity stands at 19.1%. Excluding this one-off effect, it would have been 16.3%, which is a super strong number for Retail business. What provides me with comfort with regard to the future development, like in Corporate & Specialty, we have very well-diversified portfolios with regard to the regions we are in and also with regard to the lines of business. And this good diversification is backed by strong technical excellence in both in South America as well as in Europe. With combined ratios in the area of 92%, these are really very strong portfolios, and they provide us with quite some comfort that we will expect future growth in net income. So what do we expect from Retail International for 2026? So we expect to have a mid- to single-digit growth in original currency. We expect the combined ratio to remain below 93% and a return on equity above 16%, which is a strong ambition for Wilm Langenbach and his team. Coming to our smallest segment, Retail Germany. In Retail Germany, as Torsten has already mentioned, we had a decline in insurance revenue due to the end of the TARGO cooperation. We expect that this end of the TARGO cooperation, we will see 2/3 of the effect in the 2025 numbers and 1/3 in the 2026 numbers. And despite this decline in top line due to the restructuring efforts of the management team around Jens Warkentin, they were able to grow the net income by 6% to EUR 173 million. And the return on equity stands at around 12%, which is a decent number. With regard to the segment, this is pretty small, with regard to insurance revenues, just 7% of the group, and also, for the group net income, it's just 7%, but it's very strong in terms of cash contribution. We have received 15% of the cash contribution of Talanx AG from Retail Germany. So it's an amount above EUR 200 million, and we expect this to continue further. This will be our cash cow also going forward. With regard to the outlook 2026, we expect a further decline, single digit, not so big as in 2025 due to the end of the TARGO cooperation. The P&C combined ratio should remain below 93%, and the return on equity should be double digit again. Coming from the smallest segment to the biggest one, but most of you might have heard the call of Clemens and Christian with regard to their numbers, Hannover Re is growing 2%. And if you adjust this 2% for currency effect and also for some reassessment in the accounting, it would have been even close to 10%. And if you compare that to the peers, you clearly can see that Hannover Re is benefiting from the lean operating model with a cost advantage and can translate it into growth. The group net income at Hannover Re is up by 13% to EUR 1.3 billion. This is just a 50% share for Talanx, which is displayed here. And this is backed by an outstanding combined ratio of 84%, which was heavily also impacted by the large loss development. Return on equity stand at record level, 21.7%, clearly a strong number, and we are proud majority shareholders of Hannover Re. With regard to the outlook, we expect further growth to happen here. Despite a softening market, combined ratio should get back to normal, below 87%, with a normalized large loss development. From Life and Health Reinsurance, we expect insurance service result of EUR 925 million. And this should then lead for net income contribution for the 50% share of Hannover Re to Talanx of EUR 1.35 billion or at least EUR 1.35 billion, which translates to in 100% numbers for Hannover Re more than EUR 2.7 billion profit. Having said that, I think it's up to you, Torsten, to provide us with the outlook for the group as a whole.

Very good. This is our business model, and it runs through all cycles, and we believe the strong ingredients, which basically reflects then the performance you see. What we say for 2026, we say net income above, let's say, plus 9%, around EUR 2.7 billion, so an increase of 9%. And we say as well a dividend, which we will then propose to general meeting next year of above EUR 4, which means above 10% double-digit growth of dividends. And that would mean if this comes in that we are, what we promised in '27, 2027, that is 1 year earlier and higher as delivery to you. And the outlook, therefore, which was said already, these are the 3 numbers you can see. And with that, I would hand over to Bernd.

Okay. Thanks, Torsten and Jan. So we are now opening the queue for questions. If you have a question, please use the Hand Raise feature, and I will call you into the Q&A. And the first question is from Chris, Chris Hartwell from Autonomous. You are mute. You are muted. Chris, you are muted.

How is that? Can you hear me now?

That's perfect.

Perfect. Sorry about that. You would have thought 6 years after COVID, we'd get the hang of Teams chat, but I'm still learning. So a couple of questions from me, if I may. Firstly, just on the comments on resilience. So I guess, there's sort of a part A and a part B on this question. The sort of part A on that is how I should think about the combined ratio for Corporate & Specialty in 2026 and beyond. I mean it's -- the target is broadly maintained at better than 92%. Do we see that as -- I mean, is that now closer to reality in terms of what you are reporting? And then sort of part B to the question around resilience is if you sort of take away the lever of earnings management through the reserving side of the balance sheet, what does that -- where does that sort of leave you going forward? What are the -- I mean, is the only really -- any real lever available to you now on the fixed income portfolio? So that's question number one. Question number two, if I may, is really about the situation in the Middle East. I wonder if you could just sort of share your thoughts or concerns if you have them around particularly in the Corporate & Specialty side, maybe even the Reinsurance side. And maybe also touch upon whether there's any concerns you may have in Turkey. And then a cheeky third, if I can sort of push the boundaries a little bit, is just on the solvency ratio. I appreciate it's unaudited or unfinished at the moment, but 240% is a big uptick quarter-on-quarter. So I was wondering if you could just help me understand what the moving parts are to that at the moment.

Chris, so I start with the middle question with the Middle East, so basically -- and then Jan will give you the next -- the other questions you had. So what we feel basically, it's much too early to say really because so far what we can see is that we have a large loss burden for the first quarter and which is not used much, so everything fits in. We had no material damage at all in the time now. And we have anyway not much insured or nothing in Iran. So basically, for us, it means the question is -- and the big question is how long the war will take and how large it will become, right? And therefore, everything is open. But so far, it's much too early to say. And all the rest, you can estimate yourself secondary effects like interest rates increasing and so on. But here, our answer would be always our business model through all cycles, when it comes to volatility, we try to have a lot of substance and strengthen in our balance sheet. We have a market risk, which could be a secondary effect. We have a slow, better approach, where basically, as Jan mentioned before, quite boring asset management portfolio, but a high-quality one. So this is really the answer, it's much too early to say. So far, we see nothing big in our portfolio, and we have a lot of space in the first quarter. There was no really nat cat events, expect the U.S. winter storm, but that's all we had. And then, I would, the first and the third question, leave to Jan.

So the first question was on the resiliency policy splitted between how we should -- you think about the combined ratio, and with regard to the investment income, what is expected going forward? So rather simple, yes, with regard to the combined ratio, sort of, what we have set out as a guidance is how you should think about going forward, the combined ratio with a normalized large loss development. Yes. So -- and second, with regard to the investment income and the contribution of both sources of income, investment and insurance service result, yes, we will have a higher share of the investment income. Due to the realization of the losses in the bond portfolio, they will contribute, obviously, to higher investment income, which is included in our guidance. And the third question, with regard to the moving parts of the solvency development, on a top level, it's rather simple. We have an increased own funds, but the solvency capital requirement remains stable. Yes. And so this drives the solvency ratio up. Why does the solvency capital requirement remain stable? We have this rather boring investment portfolio. And what we've seen at the end of the year was higher interest rates, which is a benefit for the solvency ratios in the life entities in Germany, in particular, and lower spreads and so -- at the end of the year. And these 2 effects leads to despite the fact that we are a growing company to the factor that the solvency capital requirement remained rather stable.

Okay. So if I can just come back to the second one on the resilience -- well, not really resilience, on earnings management. So just coming back to the -- I guess, the sort of question I was trying to sort of get to is if we -- I mean, let's say we go through 2026, and again, it's a relatively benign cat year. I mean, if my understanding is correct, I mean, there's going to be no real room for increased resilience within the P&L, both on the reinsurance side and on the primary side. So am I right in thinking that the only lever you will really use to absorb any excess profit this year would be through unrealized losses into realized losses? Otherwise, anything on the underwriting side just drops through to the P&L this year. Is that the correct way to think about that?

You put it a little bit to the extreme. Yes. But you're right, we are at the upper level of the resiliency, in particular, in Primary Group and in Corporate & Specialty, there you're right. But you never know whether there's some room to maneuver. I just want to draw your attention on one factor, which is quite important for reserving, which is the assumption on inflation. And one consequence of the Middle East war could be that we have higher oil prices, higher inflation, and this then leads obviously to a little bit more room to maneuver also with regard to the reserving policy. But the new -- good news, I really want to bring across, given our reserving level, which we have, we really can cope with this.

Thanks, Chris, for your questions. Next one in line is Michael Huttner, Michael from Berenberg.

Fantastic case stand. I joked with your IR, Jan, that you had, had a heart attack when you saw the dividend. I'm sure that's not the case. But I'm always asking for more. So help think us, guide us and -- because your wonderful IR did kind of say, yes, the earnings growth may be, but the dividend growth should be faster going forward. So maybe we can touch on that a little bit. I know it's looking forward and you might say it's far too early. And then the other one -- two, I'm cheating here again. But on credit, can you give us a little bit of indications? I know it's a small number, but anything is always helpful on that topic, you always worry. And then, on the solvency, what are you going to do with it? 240, plus you'll get a little bit of benefit from Solvency II review in January next year. So where -- what are you going to do with that? And I always think the management bathes in gold every morning, but I'm sure you do more interesting things with it. I'm thinking more deals.

Michael, nice to see you. Basically, I take the first, and Jan takes the second and third question. Well, nice try, but what we say is a 33% dividend is now. And for next year, we promise above 10%. Whatever means above, but it's above 10%, and it's EUR 4 above 1 year earlier and higher and nothing more we tell here.

Okay. And then the second question from you, Michael, is on private credit, if I understood correctly. So as you can see in our numbers, we've just allocated a small amount. We have also allocated roughly a little bit more than 1% to private credit funds here. So hence, the development in 2025 of this private credit fund was a positive one. So we earned money, which is a double-digit million number.

On deals?

Solvency and deals, 240% solvency.

Yes. So we are open for deals, but we will not release any further information on what we are going to do. So -- and as always, I just want to repeat what I'm telling you always, we have internal yardsticks on deals. Out of 20 deals we look at, one is realized. So we will have discipline. We will continue to have discipline on that one. It has to add to our portfolio in a nice matter, in nice ways. And what we've always said, we would love to do deals in Latin America, in Mexico and Colombia. We would love to do deals enhancing our Corporate & Specialty portfolios. And we are rather reluctant in both Retail Germany and Reinsurance with different reasons. For Reinsurance, that obviously would not add to Hannover Re and would be rather a risk for their culture. And with regard to Retail Germany, there's nothing available.

Maybe just to say -- just to add on this with M&A, we love M&A and totally right, as Jan said, just from 20 out of 1 is just working. When people talk about cycles, each cycle has good chances. So sometimes you have cycles where the prices are coming down in M&A, not justifying relation. So maybe you can keep time as well for M&A, as you have seen as well in the last time. So market is more active. So we see each cycle has the chances. So this could be maybe a good time. Always saying we are going to be disciplined, what our group indicators are showing, Jan takes care about it.

Okay. Thanks for your questions, Michael. And the next question we have from Iain, Iain Pearce from BNP Paribas.

It's just 1 on the large loss budget. So the increase of 11% in a large loss budget year-on-year versus the mid-single-digit revenue growth guidance. Clearly, some of that is Hannover. But could you just sort of talk a little bit about why the increase is so much bigger than the revenue growth guidance, if that reflects any change or expectation and mix over the course of 2026?

Yes. I think I should take this question, what we do in risk management? We always have a look at both, at our retail structure and on the incoming business. So it's not just related to the development of the top line. And out of that, we form our large loss budget. It's really something without any buffer. It's really coming exactly out of the underwriting and risk management tools. And so we have a slight growth in the net appetite on nat cat for the year 2025 on top of the growth of the business.

Okay. So I'm not sure, Michael, is that a follow-up question you have? Or is your hand still up from previous? And follow-up question from Mike. So go ahead, Michael.

It was just to ask on Slide 28. I love this slide on pricing. I think -- so the numbers are mostly positive except property, but they're before inflation. So I'm just wondering, can you give us a feel for how you see risk-adjusted after inflation? I know it's a complicated question. And then, the fairly boring question as well, AI. What does it mean for you? I don't know, basically, what we've seen from some of your peers is lots of cost-cutting. Others have said it's more helping on sales, but anything would be -- any kind of feel would be very useful.

I mean, on AI this is, I take the second, and Jan takes the first question. Well, AI people say it's overhyped and underestimated, which I believe is true. How we tackle this significant focus on those areas we really can scale up and with us underwriting and claims, or more precisely in retail, it's more claims, and then, wholesale, it's more underwriting. I think the whole market is trying now to skill up their people to make some nice cases, but at the end of the question about scaling up. And here, I mean, it's not just about efficiency. I rather would mention it's a lot of growth opportunity as well because you can handle much more offers from the brokers, you can be much faster. You can do work, which really is a simple work you don't need anymore. And let's say, it's a routine work and you can really make more quality work, I think, in the organization. Having said that, it's very important to see it's not just about technology. This is maybe just 10%, 20% to implement. This is an easy one, yes, like an Excel sheet in your company. It's more how to use it and how to make the processes and how to change the culture, end-to-end processes. So this is much more challenging. And you always have to see that there's a business case, which you scale up. It doesn't make sense if I tell you hundreds of cases if it doesn't scale up. So really the bottom line effect, it should be really a business case. I think our organization is -- and this is something which sounds not logical in the first step, but we have the fourth segment, and they have their clear road map, actually presented yesterday to the Supervisory Board. And it's very promising what the companies do sometimes outside of the headquarter because we have to be close to the client, close to the customer. It's not an IT project. It's a business-driven project, which really makes sense to the customer and where we can scale up. So as I said at the beginning, it's totally hyped, the whole thing, but it's totally underestimated as well. And now comes the time of scaling up in the next 1, 2 years, I guess. And we are, I think, on track.

Okay. I'll take the second one with regard to the rate changes in Corporate & Specialty. So overall, for the year 2025, we have been lucky to achieve a rate change slightly above inflation. Going more into detail, as you said, it's really complicated. Just to review a rough number together with the actuals for the group as a whole, not only in the segment, Corporate & specialty, we have assessed how many inflation indices we use for forming our expectations for underwriting. It's more than 400 now -- 400 different ones. Yes. So it's a real huge number, very often a composite of different indices. And obviously, yes, just to look at the CPI, development is definitely not enough in insurance if you want to do your underwriting right. And this is where our underwriters work with. And yes, we have to admit that the market is softening a little bit. But given the quality of our portfolio, this is why we have set out the expectation on the combined ratio as it is. And this expectation also includes a normalization in the large loss budget usage.

Can you explain that last point, the normalization of large loss?

We have inserter -- when you have models for underwriting, then you have an attritional loss ratio and you have a large loss consumption. And we have included in the combined ratio, obviously, both, the assumption of a normalized large loss development for this year and the very outstanding good portfolio quality for the attritional losses.

So then, we have another question from Roland Pfaender, Roland from ODDO BHF.

A question on Corporate & Specialty. Could you maybe speak a little bit more about how you want to develop this business line further? So would you like to expand, for example, in North America our Specialty? And also in Specialty, is there something changing the competitive environment? We see here some market consolidation going on. So what is the future of this business set up looking into the next some years?

Yes. Thank you, Ron. Very good question. I mean, this segment of Corporate & Specialty or Specialty business itself really doubled last year. It was a good cycle, and we love this business. So, therefore, if you love this business, you have really to go to America as well. I mean, we are there, but we would like to do more here. America is 50% of the worldwide corporate specialty market. We have approach where we rather think about niches, about special things in the Specialty area and not give a large acquisition here. And yes, the market was very active, as you have seen, and I think it will continue to be very active. And we are part of searching and seeing pipelines, and there's a clear focus where we want to grow, but it has to make sense economically. And again, if the cycle is as it is now, maybe it's a better chance than a cycle which is high, which makes economically more sense actually for us. So, yes, U.S. is a target market. We are looking, but there's nothing concrete in the pipeline, so -- which we will have to announce. But basically, we are there, absolutely. And we can allocate our capital there.

Okay. So let me check the screen whether there are more questions. Any further questions? Final call for questions. Michael, Michael is approaching the question limit. Michael, any...

Yes. One more. One more. And it's just a very simple one. So you have 93% -- so 2 questions, sorry, cost advantage in -- across your businesses. I assume that's Corporate & Specialty, Reinsurance and Retail International, but not Retail Germany. Is that -- is the gap to your competitors increasing, narrowing? I suppose the question I'm asking is how much of an edge do you have, your peers? And is that moat, if you like, getting bigger? And then the second question is much simpler. You kind of alluded to it. You said high interest rates help the solvency of your German Life unit. I'm always curious on that. I know it no longer matters, you've got so much money, but what's the ratio there now?

So when it comes to the efficiency gain, well, we don't have the numbers yet of our peers from last year. But the feeling is that we didn't have any difference to the distance, to the market and each segment has different kind of ranges. I think we talk about, let's say, roughly from 3 to 8 percentage points difference in our cost positions wherever we are in the countries. And overall, we don't see we lost it. Just remember, we have still 300 people, actually 291 people in the headquarter and roughly 30,000 out there. So we have a lot of cost measurement in place. But basically, this measurement are not severe. It's more about transparency because the culture of people, and this is long-lasting since the mutual at the end was founded. It's a very strong cost culture where we are really aware, not just because we're sitting in Hannover by chance and not in the more expensive towns, but basically the structure itself. So structure-wise, we have not built any add-on bureaucracy in the company, rather stable on the cost in some areas. And we don't feel at all we have lost this advantage last year. But again, the transparent we only have mid of the year. And I think, Jan, you can help with the other, with the Life portfolio. Yes.

Yes. The solvency ratio in the Life portfolio has increased. Yes. I do not have the numbers in -- because we have very different life entities, but overall, it has increased quite substantially. And the reason is rather simple. We have a higher interest rate, which is good for the ALM. And second, we have a spread tightening, which is good for -- given that the market risk in those businesses is a huge part of the overall solvency capital requirement.

Okay. So final call for any further questions if there are any. Checking the screen. So there do not seem to be more questions. So then I hand back to Torsten for some concluding remarks. Torsten?

Well, I only want to conclude. Thank you very much for your trust and for your comments and your questions, and let's continue our dialogue coming up, and promise is a promise.

Thank you.

Thank you.