Good morning, everyone, and welcome to Allianz third quarter results web audio conference. As usual, our CFO, Giulio Terzariol, will guide you through the quarterly results and will then take your questions. I hereby hand over to Giulio, please.
Thank you, Holger, and good morning to everybody. Welcome to the call for the third quarter results of Allianz. As always, going to page three. I'm going to start from the nine months result first. As you see, we have a strong set of results with a revenue growth of 7%, which is driven by the property casualty segment. So here you can see our continued effort to react to the inflation that we have been seeing, and also we see growth on this basis in the life and health insurance segment. The operating profit is at EUR 11 billion, which is about 4% higher compared to the operating profit of last year, and also it's ahead of our expectation.
When we look at the segment, in the property-casualty segment, we have a EUR 5.3 billion operating profit. This is actually in line with the expectation, also in line with prior period. Here we see a slightly higher combined ratio compared to 2022, and also compared to our expectation. On the other side, also, the investment income is higher on the background of the higher interest rate. So all in all, we end up with a performance which is absolutely in line with the outlook that we gave you a few months ago. On the life/health side, we have a very strong operating profit of EUR 3.8 billion. This is significantly ahead of last year. That's also a consequence of the first time implementation of IFRS 17 in 2022.
But more importantly, this is ahead of our expectation as defined by our outlook. And then in asset management, with EUR 2.2 billion of operating profit, we are in line with the expectation, and as you see, we had another quarter of positive inflows. So all in all, for the nine months, we are at about EUR 30 billion of inflows. The last comment on the core income, that is up 26% over last year. Here, clearly, we need to recognize also that last year we had some noise because of the Structured Alpha situation and also because of the disposal of our GI business, our U.S. business to Voya. If you adjust the number for all these special effects, you get to a growth in core income of about 4%, exactly in line with the growth in operating profit.
So all in all, very strong, performance across the segment. We should keep in mind that in 2022, we had a record operating profit for Allianz, and based on the numbers that we are seeing right now, I would say we are pretty positive that we are going to end up having a record operating profit also for 2023. And with that, we can go now into the quarter, where we have a growth rate of 9% on revenue. This is even higher compared to the growth rate that we had for the nine months. So which means there is a sort of acceleration in the growth, and this is explained mostly by the life health business and also by asset management.
So right now we see the revenue growing in asset management, as opposed to the trend that we saw in the prior quarters. The operating profit is at EUR 3.5 billion. That's clearly below the level last year, but here we need to recognize also the significant amount of net cats. We went back to see in our archives when we had something of this level, and we had to go back to 2011, first quarter 2011, to get to something similar to what we saw in this quarter. So on the basis of the amount of net cat that we had, the underlying performance actually is very, very strong. So that's also a strong sign of the fact that the business is definitely going in the right direction on an underlying basis.
On the life health, also another good quarter that's actually significantly better than our expectation by about 5 percentage points. Then in asset management, another solid quarter with EUR 800 million of operating profit and inflows, as I was saying before, of about 11 billion. So again, a sign of the strength on the underlying performance of the group. And as we talk about strengths, I would like to go to page 7, where we have the solvency ratio, which is now at 212%. That's an improvement of 3 percentage points compared to the level that we had at the end of June. And also, as you see, the sensitivities are reduced compared to what we had in June.
So overall, I would say the package or level of Solvency II and sensitivity is, definitely very strong, and that has been also recognized by a rating agency like Moody's, that upgraded our rating from Aa3 to Aa2. So now we are basically one of the few insurance companies having that kind of, rating. So very strong rating and also very strong solvency as defined by the level and also by the sensitivity. Now, if we go to page nine, on the... You see the classical waterfall, where we explain the movement of the solvency capital and basically what happened in the quarter. We benefited once again from the organic capital generation. That's about, 2 percentage point when you deduct taxes and dividend, and also the markets movement was, slightly positive.
So these are the two main effects explaining the increase of the solvency ratio to 212. Strong results on the capitalization level, and now we can move, as always, into the segments at page 11. That's actually a very good picture for three reasons. First of all, the headline number of 10.8% is a good number. The second reason why that's a good picture is because you see basically growth on all OEs, so that's a widespread growth. We don't have growth driven just by a couple of entities, but that's across the entities.
The third reason why that's a good picture is also because the rate change or renewal is keeping up a good momentum, and that's definitely positive as we think about the future development of performance of the segment. Now, we can move to page 13. That's about the development of the operating profit in the quarter. Clearly, here, because of the significant amount of net cat, we see a reduction of the operating profit by about EUR 500 million, and that's driven by the combined ratio increase of about four percentage points.
If you look at the details, you can see that the net cat swing was more than 5 percentage points, which means actually, when you look at the underlying performance, the underlying performance has improved by about 1.6 percentage points, which, translating Euro amount is about EUR 300 million of improvement in underlying performance compared to the third quarter of 2022. So from that point of view, strong movement, positive movement on underlying performance offset by high net cat. If I do a normalization of our combined ratio, even assuming a net cat load, which is a little bit higher compared to the 2.5% that we usually assume, I get easily to a normalization of 93%, which is exactly in line with the target that we gave ourselves for 2023.
So from that point of view, as said again, underlying performance is proceeding as expected, which is a good result, considering the inflation environment in which we are currently in. And now we can move to page 15, where we show the operating profit by entities. Overall, clearly, what is eye-catching here is the combined ratio, for example, in Germany, with 104%. Here, clearly, we had a significant amount of net cat. If you adjust for the net cat amount, actually, the level of combined ratio is pretty much in line with the expectation, 90%. You see the same in Italy, where we had 98% combined ratio. That's because of net cat and also weather-related losses.
Also, in this case, if you normalize the numbers, you get back to the classical level of performance that you used to see in Italy. And then I would say the rest of the OEs are really delivering good performance. So from that point of view, you see a lot of nice combined ratio. Also, let me say, United Kingdom, 96.6 in this environment is definitely a good starting point, and we expect to get better from there. Spain, and 95 is also a very good number, also compared to what is happening in the market. And then you have some companies performing very nicely, like Australia, Allianz Trade, and then AGCS, again, at a combined ratio of about 90%. So this is becoming basically the baseline performance for AGCS.
It's not just a quarter, but that's the current expectation of performance for AGCS. So a strong picture and a strong portfolio, which is very important. And now we can move to page 17, where we see also that the investment result is up significantly by about 20%. That's not surprising, because clearly we see a nice lift coming from the interest rate level. And if you look at the right side of the slides, on the upper end, you can see that the economic investment yield went up from 3.5 last year to 4.7% this year. Actually, we're not showing here the 2021 number, but in 2021, that number was only 1.3%.
So we went from 1.3% of investment yield to 4.7%, and you need to think that in this segment, we are investing EUR 20 billion per annum of investment. So that's clearly a big swing in the performance of the segment, and this cannot be neglected. As we speak about inflation, you can see that we are reacting with rate increases, but you need also to consider that we are getting significantly higher investment income. So in a nutshell, as I'm closing on the comments for the segment, strong underlying combined ratio, also strong investment results. We had clearly an exceptionally high level of net cat . We can have a long debate about what the right normalization for net cat should be, but it's clearly not 7%, per quarter.
So from that point of view, we are very confident that, on an underlying basis, even including net cat load or a conservative net cat load, we are very much in line with our 93 combined ratio. And with that, we can move to the life segment, where we have also positive news. When we look at the present value of business premium, it is up 7% compared to last year. If you adjust for FX effects, the number will be even slightly on the double-digit side. So that's the first news here. Then, if you look at the quarterly progression, in the first quarter, the present value of business premium was down compared to the first quarter of 2022.
In the second quarter, we had already a reversion, where the growth of the production was higher compared to last year. In third quarter, we had again this kind of trend, where we see more growth compared to last quarter. So basically, we are getting to a trajectory of growth in production compared to what we saw towards the end of last year or the beginning of this year. So I think we are getting now into a different trajectory. The value of new business, it's up 2%. If you adjust for FX, we are basically up 6%. So also here you can see a nice dynamic compared to the numbers of last year, and it is clearly a 6.2% on new business margin. That's definitely a very healthy level of new business margin.
So we're totally happy with the profitability of the business, and now we see also the growth is coming back. Let's see what happens next quarter. Now we are two quarters of consecutive growth. Let's see what happens in the fourth quarter. And if we have a good fourth quarter, we should be able to have a growth for the year compared to what we had in 2022. On the operating profit side, at page twenty, oh, CSM, sorry, first at page 21. The CSM, just for you know, is making sure that we are all on the same page. That's a sort of present value of future profit.
When you look at the CSM gross, which it means is before accounting for reinsurance, and that's also before accounting for the non-attributable cost, you can see that the CSM gross is going down. But that's due to a sort of re-classification between CSM gross and net. So when you look at the net, which is actually what counts from an economic point of view or from a shareholder point of view, the CSM net is actually slightly up compared to the level that we had in June. So that's the first one. So CSM is stable, slightly up. The second point, the normalized growth of the CSM is positive at about 1%. That's slightly below what we saw in Q1 and Q2 or in the first half of the year, but that's normal because Q3 tends to have less production compared to other quarters.
So the best view here is to look at the year-to-date number, and with 3.3% normalized CSM growth, we are well on track to be in the range of 4%-5%, which is our expectation for the CSM growth. And the final point, you can see the economic variances are negative, but that's mostly due to the fact that interest rates went up, and this is not a sign of having less profit. It's just a matter of discounting the profit. So basically, the present value of this profit is lower, but the amount of profit is actually not changing. I would even argue that the safety of those profits is high in a high interest rate environment, but then the discount is clearly going to be lower.
So all in all, I will say, as you say in German, "Alles in Grünen aber ich" so everything is, okay, and we are, very happy again to look at these numbers because they give a good indication of how this present value of future profit is, moving. Now, at page 23, we come to the operating profit, which is, as I was saying before, below the prior period, but that's because of the noise coming from the first time implementation in 2022. Actually, the best way to look at this number is, comparing it to our outlook divided by five, four, and that's, about 5% growth in profit compared to our expectations.
So from that point of view, we see that, operating performance is coming at least at the level that we were expecting to see when we put the plan together. At page 25, we had a view by companies. I will not spend too much time on the details, also because there is this noise in the comparison to prior period coming from the first time implementation. But I can tell you that basically what we see also on the OE level is very much in line with the expectation of performance for the single OE. So also here, no surprises, and message is rather on the positive side as opposed to on the negative side. So all in all, a good present value of the business premium, very solid new business margin.
We see growth coming back in, and the stability of the operating profit is there as expected, and also the next CSM is going up a bit in the quarter. Now we come to asset management. In asset management, the assets under management are stable at EUR 2.2 trillion, if you include also the proprietary assets. If you just look at the third-party assets, we are stable at EUR 1.7 trillion, and we can move straight to the next page, which is 29, where we had the evolution of the third-party assets under management. And you can see here, EUR 10 billion or EUR 11 billion of flows. They are coming mostly from PIMCO, and that's basically the third quarter in a row that we see positive flows for a total, if you remember, thirty... about EUR 30 billion for the nine months.
The flows are coming mostly from fixed income and partially also from alternative. Otherwise, you see also positive flows, especially in the U.S. The other drivers, like market movement and FX, they will set each other. So basically, the growth that you see here in the third-party assets under management is all due to organic development. Going now to page 31, on the revenue, we see now revenue growth. Once you adjust for FX and also for the consolidation of Voya, you can see basically a positive development of about 4.5%. That's also driven by the amount of performance fees that we got in the quarter.
But even if you adjust for that, you can see basically a flat growth in the basis performance fees, and that's different from the picture that we saw in the prior quarter. So there is definitely a stabilization coming in because of the market development, which is a little bit more stable, and also because we are posting positive flows quarter- over- quarter. A final comment on the fee margin. This looks like lower compared to the prior period, but here there are some technical effects, like the number of fee days or in the case of Voya of AGI, the numbers were still including Voya for a month.
The best way to look at this number is to compare the fee margin to what we had basically in the prior quarter, so Q1 and Q2, and these numbers are higher compared to what we had in the first half of 2023. So also from that point of view, we see stable margin, and actually, the quarter's been even a little bit higher compared to what we saw in the first part of the year. Now we come to the operating profit, which is stable over the 2022 level. In the case of P&C, you see a growth in operating profit of about 2%. If you adjust for FX, the growth of operating profit is about 9%.
Here, clearly, we were also supported by the performance fees, but at the end of the day, they, they are part definitely also of the performance of P&C . They are going to be increasingly relevant for the performance of P&C . So from that point of view, strong performance with a 9% adjusted FX growth of the operating profit. In the case of AGI, we see a reduction in operating profit. That's anywhere in line with our expectation. And I will say what is positive for AGI is the cost income ratio, which is at 66%. We like the expense ratio of AGI to be below 67. We think that's an okay level, and we like the expense, the cost income ratio of AGI to be potentially 65. That would be a good level.
With 66, they are very close, so we are already anywhere in a, in a area where we feel that the efficiency is already at, at, at a good level, but clearly moving to 65 seems to be very much at hand, and we are very confident that we can get there in the, in the following, in the following years. So from that point of view, we see stability coming through the asset management segment after a very challenging 2022, and we see positive flows at least until the Q3, and now we are still confident that we are going to see a good trajectory for our asset managers. Clearly, there could be some volatility in the quarters ahead, but fundamentally, the businesses are positioned for growth as the interest rate environment is stabilizing.
Now let's move to page 37, which is the, 35. That's corporate. On this one is enough to say that results are better than our expectation. And then we can move to page 37, which is about the below-the-line items. Here, you can see the -EUR 662 million swing compared to the third quarter of 2022. But, that's, primarily to do with the fact that in 2022, we had a big, gain out of the disposal of AGI U.S. to Voya. So if you adjust for that, actually the swing will be, much, much less. All, the other positions are more or less offsetting each other. So all in all, we end up at EUR 2.1 billion of, net income, core net income.
This is slightly below, clearly, our normal level of performance, but that's just because of the amount of net cat that we had in the property casualty segment. So if you adjust for that, again, a very strong underlying performance and also a healthy level of core net income. Now we move to the last slides. Here we are going back again to the nine months view. To summarize the results of Allianz on a year-to-date view, we have growth in revenue, we have growth in operating profit. You should remember that last year we had record operating profit, so from that point of view, we are well positioned to get to another year with record operating profit. The solvency ratio at 212 is very strong, and the sensitivity level has been reduced.
And as you know, we got this upgrade from Moody's. So we on the capital deployment, you can see here the EUR 1.5 billion of capital buyback that we are basically concluding as we speak. I'd like to also remind that in 2022, in November, we announced a buyback of EUR 1 billion. So basically, in a period of 12 months, we have made buyback for EUR 2.5 billion. So that's a significant amount. And also we have completed a small acquisition in Italy. We have completed a small acquisition in Italy, so we have deployed EUR 3 billion of capital, basically in the last 12 months. And as always, we try to combine buyback with also growing our franchise on a consistent matter.
So a lot of good news, as you can see in the results. And, you know, we have 140,000 colleagues that are behind these, great results, and so my thank you, as always, goes to these wonderful colleagues. And with that, I'd like to, take your questions.
Thank you, Giulio. Before we start with the Q&A, if you want to ask a question and you joined via web audio call, please press talk request. If you joined via telephone, please press star five to raise your hand and to signal that you want to ask a question. Our first question today comes from Michael Flämig from Börsen-Zeitung. Michael, your line should be open now.
Good morning, Mr. Terzariol, Mr. Klotz. I have three questions, please. Mr. Terzariol, you said we could have a long conversation about the right level of normal net cat . The number in the first nine months is even higher than the 2.5%. So what is the right level in the future? The second one, to the operating profit target, what do you think? Will you land in the upper end of this target range or on the upper half, in the upper half? And the third one, you made a cost correction in Life Germany. Could you explain this effect, please? Thanks.
Oh, thank you. So maybe let's start from the last one. On the cost correction, that's a sort of reclassification at the end of the day. That's the way I would explain it. So in the new account, you need to determine to split the cost between attributable cost, which are costs that are attributed to the product, if you want, and overheads, non-attributable cost. And basically, this allocation has been changed. Should have been different from the very beginning. So this causes just a reclassification. There is no impact on two things. First of all, there is no impact on the CSM, we net, which is the real economic view.
But there is also no impact on policyholder because that is just a split that is done for IFRS purposes, but from a local accounting, from a policyholder point of view, in reality, all cost counts. So that's you can look at that as a correction of a right allocation expenses between two different buckets. That's how we define it, and without economic consequences for any stakeholder. So that's on the cost correction reclassification for Allianz Leben. On the amount on net cat s. Okay, so you know, that's how much should be the load? I can just tell you that's always a little bit of a art as opposed to be a science, although we have a lot of scientists, obviously, in Allianz, and we are not far away from Munich Re, so we can also talk to them.
But eventually, nobody really has a crystal ball to say what the net cat load is. You are right, the net cat load is, this for the nine months higher compared to, the 2.5. Also, if you check last year, and if you check 2021, you end up usually about a 3% net cat load. So that could be a suggestion, that's, that could be a level to consider. Indeed, when I was mentioning the normalization before, that I'm-- I was doing, where we get back to 93, I, I was using 93 and 3% as a load, for net, okay. So that could be a good way to look at that. And assuming this 3% level, we are basically, as we speak, already at about 93.
You should also keep in mind that in the last year, we went up with the net cat load, so we've been reacting, reacting always to the experience that we were seeing. Most likely, we are going to again react to this, to what we are observing right now. We are not speaking in way of percentage points. We are speaking, if you want, of basis points, so you need to put things into context or, having 3% instead of 2.5% is not going to delay all the strategic plan or the performance of Allianz. So that's all very, very manageable. Your last question about the outlook. I would say we are pretty positive that we are going to end up in the upper half.
The only point is we see some net cat activities, and so we want to be cautious because we don't want to send a signal that we might end up significantly in the upper half, where we might end up more moderately in the upper half. So that's the only reason why we decided to be on the cautious side. But mathematically speaking, it's very hard to imagine that we are not going to be in the upper half. We just need EUR 3.2 billion of operating profit, mathematically, we are already at EUR 14.2 billion. So it's just a matter of signaling that due to the net cat s elements, you know, we are going to be in the upper half, but at what level is something that we need to see. That's okay?
Okay, great. Thank you very much.
Welcome.
Thank you, Michael. Our next question comes from Ben Dyson, from S&P Global. Ben, your line is open.
Oh, hi. Good morning. I've got a couple of questions, if I may. I just wanted to ask, first of all, about the amount of net cat on the P&C side in the third quarter. I'd just be interested in this EUR 1.3 billion. I just... If you can sort of spell out what, you know, what the biggest contributors to that were and what the amounts were, if possible. And also just further on the net cat , yeah, whether how much of that is down to changes that the reinsurers have been making and Allianz retaining more, and whether this is going to affect your reinsurance buying strategy.
The second question I had was really around fixed index annuities in the U.S., because the U.S. Department of Labor is proposing changes to the definition of investment advice fiduciary. And they're particularly concerned there, I think, about advice given in the fixed index annuity market, where I think Allianz is a market leader. So I was just interested if you had any comments on what you think about the Department of Labor's proposals there, and whether those proposals, if enacted, would have any impact on Allianz's sales in the fixed index annuities in the U.S. Thank you very much.
No, thank you for your question. So the first question was, because it was not always easy to understand you because the line was breaking up a bit, but I understand the first question was the sort of split of the net cat s. I can tell you between the different drivers, I would say we had a lot of activity between Italy and Germany. Then we had also some activity in Austria. We had also a little bit of exposure from Hawaii. But I can tell you, in Germany, we are running out of names. We had Sturmtief Denis , Erwin, Sturmtief Bernd, Hailstorm Unai , Sturm Tiso . So there were a lot of activity, and the major one was the storm Denis, Erwin, with about EUR 330 million.
It might be even a little bit higher than that, so we are speaking of about EUR 400 million just coming from that event. And then we have another sequence of smaller events. And then Italy was also contributing, when you put all together, to about EUR 400 million. So what happened this quarter was a little bit different. You know, you don't have maybe the major super net cat , but we had a frequency of a lot on net cat , and some net cat were mid-size. So, but if you ask me, the biggest event that we had was on August twenty-fourth, and that's called Denis, Erwin. Here, you need to think about EUR 400 million of impact coming from that, and then consider a lot of hailstorms in Italy, in Germany, or smaller, small events.
So the issue was more the frequency as opposed to be the severity of one or two single events. So that's on the cats. On the reinsurance, what is going to happen? That was your question, I understand. I will say the following: So first of all, as you see, reinsurance companies are making good money right now. So from that point of view, I would not expect that, reinsurance companies are going to go higher with the price. It was already a big change in price and capacity in 2022. So from that point of view, I think that, the market is going to be pretty stable.
As far as Allianz is concerned, we are not ceding a lot of losses to reinsurance companies right now, so I expect that we are going to be definitely capable to renew the program at this level in 2020 for 2024. And then also I would say, always consider that assuming the price environment gets more complicated, we are a well-diversified business, both in P&C, where clearly we could also potentially retain in reality more more risk. And then we have also diversification with life and asset management, and there is no correlation between the cats and life and asset management. So from that point of view, we can, if the price for ceding risk is getting too high, we can always. We have always the option to retain the risk and make some money in-house.
From that point of view, we are very confident about our position as we go into the negotiation. And then one thing, yes, it's possible that we need to think differently about net cat , and that's also what we do, but the reference point is not the 7 percentage point of the quarter. It's more about thinking about the 3 percentage point here today. We need to put things into context. Again, we are now speaking of percentage points. Eventually, we're going to be speaking about, let's say, basis points. And DOJ, oh, DOJ. So DOJ, yeah.
Yeah. No, I know. Oh, yeah, sorry, Department of Labor. Sorry, yeah, Department of Labor. I was in Allianz Life, you know, back in the days, and when I was in Allianz Life, that was before 2016, we had similar conversation about the Department of Labor, and what the implication for fiduciary duty, all these kind of things are. So from that point of view, it's not necessarily a new conversation. Let's start from there. So it's something that the organization knows. It's also something where, as an organization, we have always been preparing, because at the end of the day, we put suitability front and center with the way we run business. That was always a big important topic for Allianz. And so from that point of view, we think our market practices or sales practices are definitely of high quality.
So if something is changing happening, I see this not as necessarily modifying the way we do things, but this creates more bureaucracy, sometimes more cost. So I would say that was the concern at the time, when I was in Allianz Life. The concern was not that, fixed index annuities are now going to be on the shelf of our distributors, because fixed index annuities are definitely fulfilling a purpose that the customer needs. The concern was more about the amount of, additional cost that you might have in order to ensure this kind of compliance or suitability according to some specific regulatory standards. But from a practice point of view, I would say that, this is something which is clearly already very high on our agenda. We sell Fixed Index Annuity only to customers that, are for which for them is...
That the product is suitable, and also, clearly, we make sure that our distribution has the right qualification training.
Okay, thank you very much.
Welcome.
Thank you, Ben. Our next question comes from Herbert Fromme, from Süddeutsche Zeitung Versicherungsmonitor. Herbert, your line is open.
Good morning. Three questions. On page three, when you break down the Combined Ratio for property casualty, you say that it has worsened by 0.5 percentage points, but that net cat was less of an impact than the year before, and most of the impact came from less reserve releases. Now, is that a result of inflation and you having to strengthen reserves in motor and other lines? And do you expect more, with inflation biting, in reserve strengthening, how will that impact your profitability in the medium term? Second question, page 15, you show that German property casualty had zero profit in the third quarter. And you mentioned a number of storms that hit, especially the German operation.
Perhaps you could give us the names and the figures for the two biggest again, because I, I failed to understand that. Third question is, what's the schedule for your, for you handing over to your successor, and when will you sadly be leaving Germany, sir?
When I'm going to leave Germany? There were-
Mm-hmm.
When I'm going to leave Germany. Oh, okay. So maybe let's start from the last one. I'm going to be moving in January, but I will not leave Germany. Germany is still a very nice place, so I'm going to... We are pretty rooted here in Germany, also with my family, so I'm going to move professionally to Milan, but I will still be around here in Munich. So from that point of view, I'm not really leaving the country, let's put it this way. On the other one, I would say it's on the, and for my successor, she's—by the way, she's here right now.
You're going to hear from her at the end of the conference, and then clearly we are working very closely together, and she's going then to be the CFO starting January first. I would say she's already the CFO now, so I'm reporting to her as we speak. Just, I'm just kidding. On the natural catastrophe, I would say the first one was Denis, Erwin, and the second one, which was, I would say, about EUR 400 million of impact, and the second one is Bernd. And this Bernd had an impact of about EUR 100 million plus. So these are the major two.
Denis, EUR 300 million?
Yeah, he's almost 400.
... EUR 400. And the second, and the name of the storm was Bernd?
Bernd, yes.
Bernd. Yeah, yeah, yeah. Okay.
Yeah.
That's EUR 100 million.
One was on the twenty-fourth of August, and the other one-
Yeah.
Was on the thirteenth of August. Yeah. And then-
Over EUR 100 million net?
Yeah, when you 100, if you want to be precise, 109. Yeah.
Thank you.
Yeah. And then you had a question about the combined ratio for the nine months. I would say, you know, when, when you look at the 93.5 combined ratio, it is pretty much in line actually with our expectation, just because you were comparing to the prior period. But I like always to compare to expectation. So the 93.5, it's basically very close to 93. Now, our expectation of 93 are set on a net cat load of 2.5. So if I go basically for the 93.5 and adjust for the 2.5 net cat s load, that will bring me basically below the 93%. If I use the 3.1 and the versus the 3%, then I'm getting to 93.4.
The expense ratio is a little bit more elevated compared to our expectation. So from that point of view, we are going to be back to a level which is very close to the 93, as I was saying, I was saying before. From a run-off, you can see that we have less run-off compared to prior period. I think that makes absolutely sense. In a situation where you have more inflation, you're going also to release a little bit more, less, run-off. But the good news is you still see anyway, that despite the high inflation, we had the capability to release positive run-off. This tells you something about the level of conservatism, which is in our reserves. That's okay?
The nine-month figures for 2022 have been adjusted to IFRS 17?
Yes, absolutely. That's all on the same basis. Absolutely, yes.
Okay.
Yeah.
Yeah.
Welcome.
Thank you, and good luck.
Yeah, thank you.
Thank you, Herbert. Our next question comes from Stephan Weier from dpa-AFX . Stephan, your line is open.
Good morning. Oh, no, nearly noon. Mr. Terzariol, just some question because you... I'm slow for you, or you two are fast for me today. Perhaps just a colleague asked about the profit guidance, I guess. Did you say the upper end of the profit guidance is possible or might be reached? I remember in August you said it will be probably in the upper half. Just to be precise, what is your expectation now? Then on the P&C business, the price increase in Q3 was a bit more than 5%. In Q2, we had a bit more than plus 7%. So why are the price increases shrinking?
Is this in some markets or is it in your whole book? And concerning the losses, the net cat losses compared to third quarter 2023 to third quarter 2021, when the flood catastrophe in Germany happened, the net cat losses are now twice as high. Did you retain more risks in your own books, or are the whole losses so much higher? And what do you think now, you said something about this, to buy more reinsurance cover or let it be like it is at the moment?
No, thank you. No, thank you for your question. So the first point on the outlook, no, we are going to, and we are very confident, I suppose. We are positive we're going to end up about the midpoint. So it's... But, you know, about the midpoint, then you might have at the end or the upper half or in the middle of the upper half. So I will not set the expectation that we're going to be at the upper end or the upper half, but we are going to be most likely in the upper half, so basically about the midpoint. So that seems to be, at this point in time, you know, very likely. But yeah, we need to see some net cat s.
That's the reason why we don't want to set the expectation that we might end up in the upper ends of the range, but definitely, we should be about the midpoint in the upper half. So that's on that, question. Then the other question was on the, rate change or renewal. Actually, yes, you are correct. If you look at the six months figures, the rate change or renewal were slightly higher compared to the nine months. But that's due just to, Allianz Partners, where the rate change or renewal went down. In reality, if you look at, all other entities, you see stable rate change or renewal. In Germany, you see even a lift in the U.K., you see slight increase in France, an increase in Australia, slight increase in Italy, an increase in Spain, an increase in Switzerland.
So from that point of view, in reality, we are speaking just of a mix issue, if you want, and there is a difference in rate changes at just partners, which is not anywhere the business where inflation is representing a problem. In all the countries where we need to react to inflation, the rate change or renewal are either stable or going up. And if you ask me, my expectation will be that they're going to continue to go up, because fundamentally, we are geared to do some additional rate changes as we go into the end of the year and at the beginning of next year. On your last question about if we are taking more risk, yes, but this has nothing to do with the amount of net cat load.
So fundamentally, in the renewal program of 2022, reinsurance company went up with the attachment point. So you cannot buy reinsurance at the same attachment points we were buying before. That's a fact. So from that point of view, there is a movement upwards. So from that point of view, yes, we are taking more risk. The reality is, even with the old reinsurance program, we would have the same amount of net cat that you see, because basically, we are not dealing with huge net cat s. We are we, which are hitting the attachment point. We are dealing, not even, not the previous attachment point. We are dealing with more frequency of net cat s. So the fact that we had a EUR 1.2 billion net cat load has nothing to do with the change in insurance program.
That's just the way it is. That we are taking some more risk, if you want, that's also correct, but that's all marginal. And, as I was saying before, considering the size of our operation, considering the diversification of our operation, I would say we are a very low risk company. And don't forget, nine months, EUR 11 billion Operating Profit, record profit. So I, I would say that you need to put always into the right context. So from that point of view, I think we are an extremely, extremely stable company.
Thank you. Just one additional question concerning the net cat . You say Central Europe, we had Italy, and we had Austria, and then Slovenia and Croatia. Is this right? Or is there some markets where you are not very exposed?
Yeah, we had... Well, Italy for me is now Central Europe. Yeah, but Italy, that's definitely, and then we had also Slovenia, Austria. We had also... Which was the same event, I understand. So we had also-
Mm-hmm.
Some losses coming from there. But we had also some losses coming from the U.K. We had some losses coming from France. So at the end of the day, it's a laundry list of small activities, but philosophically, I would say the main activities were in Germany and in Italy. That's where you got the bulk of the net cat load for the quarter.
Can you split this up, the EUR 1.3 billion?
No, we can do that. Maybe let's do that, because I have the numbers in front of me, but I will not start saying EUR 10 million here, EUR 5 million there. Holger can give you the number-
Oh, okay.
Because here we have really a longer list. I start from... I have all the names that you can imagine in Germany, so Holger can give you the split, because right now, just starting giving you at least 15 numbers, I don't, I don't think it's...
No, no, no.
... But we do that.
You will do that.
Yeah, we do that. Absolutely. Yeah. We can give you in all kinds of slices, forms, and shapes. Yeah.
Okay.
You are welcome.
Thank you, Stephan. So you will get from me, more details. Our next question comes from Stephan Kahl from Bloomberg. Stephan, the line is open.
Yes, good morning. Also from my side, I have one question regarding buybacks. There is some speculation among analysts that Allianz actually might be abandoning those spot announcement of buybacks and move more to an annual disclosure of, buybacks. We didn't see a buyback announcement today, so I'm just wondering, is this a sign of Allianz indeed moving to, like, yearly disclosures of buyback versus, like, having, you know, smaller ones, maybe two throughout the year?
No, okay. Thank you for your question. So I absolutely would say that would be our desire and wish to move the conversation more on an annual basis instead of having this conversation basically on a quarterly basis. I'll give you an example. In May, just that you understand how it works, in May, we announced a buyback. The call we got in the morning was not about tell us about the buyback, it was about when is going to be the next buyback. You know? So that's exactly what we want to avoid.
I think on our side, maybe I didn't do a good job to put a sort of pace and rhythm, so we want to change that so there is more clarity about, you know, when we are going to announce a buyback, and we don't have this debate every quarter, because that's fundamentally not a super healthy debate. What you can be assured is that we are going to deploy capital, so nobody here is sitting on any capital. As I was saying just a few minutes ago, from November 2022 to now, basically, we deployed EUR 2.5 billion of capital. We had done also some small acquisition. We also done some disposal here and there, very minor ones.
So we are constantly moving the portfolio, and we will continue clearly with a healthy policy of buyback and also invest in our, in our business. But definitely, I think the idea is to start talking about buyback with a pace which is known to everybody, instead of having this kind of conversation on a quarterly basis. That is not potentially, you know, the best use of our time and also our investors' time.
Thank you very much.
Welcome.
Thank you, Stephan. Our last question comes from Maximilian Völk , from Platow Verlag . The line is open. We seem to have technical problems. Maximilian, can you solve these problems? If not, then please send me your question, and we will make sure that Giulio will then answer them via email to you. Sorry for that, Maximilian, but thank you for raising the hand. So that was our last known question, unfortunately.
Perfect. So since, as you know, that's my last call with, with Allianz, I, I want just to tell you that it's been a pleasure really doing this, quarterly call from you, and I found the interaction always to be very fair and, constructive. So really was a pleasure. So thank you really for, for that. And now I would like to introduce you to my successor, Claire-Marie. She is... Just a few words, she's an actuary by training, and she's a French actuary by training. She has an extensive industry experience. She did P&C, and she did Life. She was in a reinsurance company doing capital management before, so she saw basically everything. She has been, in the last years, the CFO of AGCS.
Have you seen the combined ratio of AGCS is pretty cool, actually, and that's clearly the effort of a lot of people, but Claire-Marie has been leading definitely together with Joachim that effort. So I think that's a very good visiting cards. And as you might know, I like to do Excel models on the weekend. That's what I like to do. Claire-Marie likes to read science fiction book, and she told me she likes science fiction because she sees mathematical pattern behind the science fiction book. So both of us like math, just in different shape, and that's something good for a CFO. And the last point is, she's a wonderful person.
She's really a wonderful person, so I'm very, very happy that she's taking ownership of the finance function and which is clearly a function which is very close to my heart. And with that, Claire-Marie, I turn it over to you.
So thank you very much, Giulio. I'm actually quite moved because I was not expecting such nice words today. So thank you very much also from my end. You know, you have been a great mentor to me for many years, and I will dearly miss you within Allianz, but I'm also looking forward to the ongoing conversations we will for sure keep. So now, maybe to all of you, I'm very happy to have had the chance today to listen to the conversation. I'm actually really looking forward to further exchanging with all of you as I move into my new role, as of 1st of January.
Until then, I would like to thank you very much all again for, for attending this call, and I hand over back to you, Holger.
Thank you, Claire-Marie. Thank you, Giulio. So this concludes our earnings call for today. We meet again for the discussion of Allianz's fourth quarter numbers on 23 February. Thank you, and bye-bye.