Good afternoon, and welcome to the Allianz conference call on the financial results of the third quarter, 2023. As always, let me do the housekeeping first and remind you that this conference call is being streamed live on allianz.com and YouTube, and that a recording will be made available shortly after the call. If you want to ask a question after the presentation, and you join us via web call, please click on the Talk Request button at the upper right-hand side of your screen. If you join us via telephone, please press star five. Today's call will be conducted by our CFO, Giulio Terzariol, and our CFO-elect, Claire-Marie Coste-Lepoutre. That's all from my side for now, and with that, I turn the call over to Giulio.
Thank you, Oliver, and good afternoon and good morning to everybody. Welcome to the call for the third quarter results of Allianz Group. As always, I will start with the nine months view, and then Claire-Marie will lead you through the rest of the presentation. So if we move to page three, you can see that for the nine months, we have a very strong set of results. When you look at the revenue, the revenue are up 7%, and that's driven by the Property Casualty segment and also by the Life segment. In Asset Management, we see a little bit of a negative trend compared to last year, but as you're going to see in a second, in the third quarter, we have a positive growth also in Asset Management.
The operating profit is at EUR 11 billion, which is 4% ahead of the last year results, and also about 3%-4% ahead of our outlook on a pro rata basis. You can see that in Property Casualty, with a EUR 5.3 billion operating profit, we are in line with our expectation. The combined ratio is slightly more elevated than our target of 93%. On the other side, also, we are benefiting from higher investment income. So in totality, the operating performance is strong and at the level that we were expecting. In the Life & Health segments, we have an operating profit of EUR 3.8 billion, which is significantly ahead of last year. That's also due to the first-time implementation in 2022.
But more important, the numbers on, on the Life side are about a couple of percentage points ahead of our expectations. So also in this segment, we are running in, in a way which is positive compared to what we were expecting at the beginning of the year. The new business margin is stable, a slight increase. It's a very good level for 5.9%. So also from a new business point of view, we see a good development. In Asset Management, we have an operating profit of EUR 2.2 billion, which is in line with our expectation. And again, we had a quarter with positive inflow, so in total, we stand at about EUR 30 billion flows for the first 9 months. Net income, or better core net income, is 25% ahead of last year.
Here we need to run a few normalization. You remember, we had the impact of Structured Alpha last year. We had also the gain from the Voya disposal. So if we run a couple of normalization, we get basically back to a growth in core income, which is pretty much consistent with the growth in operating profit. So all in all, a strong set of results, I will say, across the different segments. And as you might recall, last year, we had a record profit, so we think that with EUR 11 billion of operating profit after nine months, we are well positioned to have, again, in 2023, a strong year and a strong delivery. And with that, I will turn it over to Claire-Marie for the quarterly view.
Thank you very much, Giulio. Good afternoon, good morning, everyone. I'm very happy to be here today, and I will now present to you our third quarter result. Moving on to page 5. There you can see that at 3Q, we deliver a EUR 3.5 billion operating profit, which is a good result in the light of EUR 1.3 billion net cat load, which is impacting our P&C segment. To put this load into perspective, this is the largest one we have experienced as Allianz Group over the last 10 years across all quarters, so you have to go back to January 2011 to find a similar cat experience. We also have, in particular in this quarter, a negative FX effect, which is impacting our operating profit.
So our operating profit, FX adjusted, will be 10% better, compared to last year. Our shareholder core net income is at EUR 2.1 billion, is basically following the operating profit, and the comparison to last year is impacted by, the 0.5 billion of positive gains, that is coming from the Voya transact- from the Voya transaction into the quarter. In terms of growth, we experienced a very good, top-line growth, in, 3Q that is stemming from all our segments, and this is also a pattern that is accelerated compared to previous quarter. If you look in particular at P&C, you can see there our very, strong, internal growth that is above 11%. Obviously, for P&C, in the combined ratio, you can see the very high effect of the net cat load.
What I think is very interesting is a very healthy underlying development of our attritional loss ratio, which is as well improving quarter-on-quarter. That's also a very good sign, I think, in the sense of the actions we have taken to offset the inflationary environment. Life is as well delivering a very nice growth into the quarter, with 8% internal growth at a very good new business margin above 6%, which is as well well ahead of our new business margin target of 5%, together with a nice operating profit of EUR 1.3 billion into the quarter. Asset management is also delivering an operating profit of almost EUR 800 million.
Double-digit net third-party inflows during the quarter, and strong performance fees that are also contributing to the operating profit. So overall, at 3Q, we see a very healthy and strong underlying business that is impacted by the cat event. We are very confident we are on the right track for year-end, and as well that we have the right base for as we are going to move into next year. If we move to page 7, and we have a look at our solvency ratio. Our solvency ratio is at 212 at the end of the quarter, which is up 3 percentage points versus last quarter.
As well, I think it's worth noticing that our sensitivities have slightly reduced versus June to the downward scenario. Overall, I think it's an extremely solid capitalization. This despite our share buyback and the growth we are seeing into the business. This solid capitalization is as well recognized by the rating agencies. You have certainly noticed that Moody's did upgrade us to Aa2 from Aa3, which is also a very good result, I would say, in confirming our situation. If we move to next page, page 9, which is basically presenting the development of our solvency ratio.
What I think is particularly interesting on this page is a very good organic capital generation of 7 percentage point pre-tax and dividend. Life is fully self-financing into the quarter, and only P&C is requiring capital for growth. So that's very good development. So overall, I would say on solvency we have no surprises whatsoever in the quarter, and we have an extremely solid base. Let's move now into the P&C segment, and let's look at page 11. I think this page 11 is actually a very good page. And that's a page which is very much in the continuation of the second quarter, if you look at it. There we see growth that remains excellent, and this almost across all our operating entities. So that's very solid.
What we see as well is a very strong rate change momentum that is continuing quarter to quarter. That is really to the credit of our operating entities which have been injecting price actions to offset inflation, and we see that clearly materializing into that page. Let's move now to page 13, and let's have a look at the development of our operating profit. So operating profit in P&C is at EUR 1.4 billion which is obviously strongly impacted by the EUR 1.3 billion of cat load I was mentioning before. You can see that on the insurance service results, which is down by close to EUR 600 million. But that's also offset partially by the investment results, which is quite supportive of the development.
If you have a look at the right-hand side of this page, starting from the bottom, on the insurance revenue, we are EUR 17.5 billion. So as I was mentioning, really nice growth. That's well above last year, and that's also above last quarter by EUR 0.6 billion. Our combined ratio clearly is up compared to last year, clearly impacted by nat cat. If you look at our attritional loss ratio in the underlying, it's 2.4 percentage points better compared to last year, and is also better compared to the last two quarters. So again, we see that we are acting on the inflationary trend and that this is showing up into the attritional development too.
Year to date, our retail combined ratio is at 95.6%, which is a solid performance given the nat cat environment. Commercial, I think continues its very strong trajectory with a combined ratio at 89.7% year to date, which is showing not only, I think the overall, the overall environment that is supportive to the commercial business, but as well the actions we have taken in that area. Just maybe before we move on to next page, a brief word on the expense ratio, which is showing higher compared to last year. Actually, the comparison to last year is distorted due to some seasonality effect and also some transitory effect associated to IFRS 17.
What I think is important to have in mind is that this 25.1% is in line with previous quarter and is also broadly in line with our expectations in terms of expense ratio. If we move to page 15, and we have a bit closer look at the operating entities, in terms of operating profit, what you can see on this page is that clearly, nat cat is impacting certain entities quite strongly, in particular Germany, Italy, France, and Switzerland. I want to point out still that if you look at the year-to-date performance of those operating entities, so as an example, you take Germany, we are at 94.2% combined ratio year to date.
If you normalize as well for the CAT event, you are below 90%, so clearly, solid, a very solid delivery. Italy is at 92.1%, also year to date, same thing. If you normalize also, you come in the order of magnitude you expect in terms of performance for those operating entities. What I think is also positive on this page, if you look at it, is that some of our markets with high inflationary pressure are stabilizing and improving. This is the case for UK, for Spain, and for Brazil. The commercial business is very strong, with AGCS at 90.7% combined ratio, also impacted by some CAT effect, by the way, and Trade is at an excellent 75.2% combined ratio.
Let's move now to page 17, and let's have a look at our operating investment result in the P&C segment. So we are very much in line with the second quarter on that page. We have an excellent performance with EUR 801 million operating profit in the quarter. What I think is particularly interesting is our reinvestment yield. You can see it's close to 5% at the end of the third quarter. It was at 1.3 in 2021. That's not on the page, but it's clearly improving very strongly and contributing positively to the performance of the segment.
Also, as you can compute, the delta between our reinvestment yield and the current yield is 1.3%, and that as well is a good sign for the future on the profitability of the P&C segment. The interest accretion is fully in line with our expectations for the quarter. So overall, in P&C, we have a very good commercial business. In retail, we see growth, we see accelerated rate momentum. We see as well supporting investment income. So all of this makes us positive in our ability to manage the inflationary environment as we move into the first quarter and into next year. Let's move to life now, and let's have a look to page 19.
Overall, I think for life, we see good developments, we see good developments in this quarter. We have a double-digit new business growth in local currency. We have an attractive new business margin that is above 6%, and we have our CSM developments and our operating profit, which are very much in line with our expectations. So now, if we have a look at more details at page 19, what we see is a very good growth. We have our PVN BP, which is up by 6.9%, and also supported very nicely by many operating entities.
So you see, we see nice growth, from, from the U.S., from our Italian business as well, which has, successfully launched, some, some new products. You also see, like, the, the very good development into the, health business of, of APKV. And also, in the current environment, I announce Germany typically, as a, as a stable, stable development as well. What you need to have in mind is that you also have this, discounting effect, which is coming into the PVN BP, because as we have higher rate, obviously, we discount, more. If you were to adjust, for this discounting effect into the PVN BP, on a year-on-year basis, actually, the growth in our, in our life business, will be at, 8.6%, so much higher up.
What I also think is very positive in terms of growth trajectory is that this is building up quarter to quarter. So we see this coming through as we are also adjusting to the environment. We have a very good new business margin that is above 6%. And you can see that this is also nicely spread across the various entities, depending on the underlying of their business. So overall, this is leading us to a value of new business that is close to EUR 900 million. And this is also clearly up compared to last year.
If you again adjust these developments, that will be 6.1%-6% higher compared to last year. This value of new business of EUR 900 million, I just want to flag, is slightly lower compared to what you would see for typically Q1 or Q4, because the production in the third quarter always tends to be slightly lower compared to the other two, Q1 or Q4, in the development of our business. Let's move now to page 21, and let's have a look at our CSM. So there is a bit of noise on that page that is linked to some accounting effects, so you have to bear with me for a minute.
I'm going to try to explain that as nicely as possible to all of you. Normally, what we would expect to see is that the growth and the net CSM will need to move in tandem. This is not the case for this quarter, and this is due to some accounting effect. Fundamentally, what I think is very important for you to remember is that this is not impacting our forward-looking value creation. As the net CSM, which is a better indication for the value creation, is showing, because our net CSM is actually slightly up by EUR 0.8 billion. Now let's have a closer look to this, to the CSM development, and let's maybe start with the CSM release. So you can see our CSM release is at EUR 1.2 billion.
Actually, FX adjusted is EUR 1.3 billion compared to last year. And, no, sorry, it's EUR 1.3 billion. So if you-- And this one point two is actually very close to the EUR 5 billion you will expect on a, on a yearly basis. So that's very much in line with expectation. So second effect is that our normalized, CSM growth is, slightly below 1%. That's slightly below, but this is normal, and that's linked to the lower production you would expect to see in, in Q3 compared to the other quarter. So what matters is to have a look at the normalized CSM growth on a year-to-date basis, which is, very much in line with our expectation for, for the, for the entire year to be between 4% and 5%.
Our CSM sensitivities on this page, as shown on this page, are unchanged compared to last quarter, and that's also a good sign in terms of development of the CSM overall. Let's move to page 23, and let's have a closer look at our operating profit. So our operating profit for the life business is good at EUR 1.3 billion, and that's in line with the CSM release. I invite you not to look at the third quarter 2022 on this page, because it's slightly distorted by the introduction of IFRS 17, so it's not that relevant. But what I think we see when we move from the CSM release to the operating profit is that all the elements are broadly in line with expectation.
Maybe with the operating investment results, that is slightly ahead of our yearly expectations, which are at EUR 7 million, will be the only point I'd like to flag on this page. Let's move to page 25, and let's have a look in more details at our operating entities. So in general, I think this page is showing the profitability that the profitability across OEs on the life side is at a good level without any exceptions. And that's also very very good sign in terms of in terms of strength of the our life and health franchise. So overall, on life, we see good new business at a very good new business margin.
We see a normalized, CSM growth that is between 4% and 5%, and we have a year-to-date operating profit, which is at EUR 3.8 billion, which is up versus, last year, and which is fully in line with our expectations for, for the year. Let's move into, asset management, and let's have a look at page 27. Overall, our asset management business is very resilient in the current environment and delivering in line with, with expectation. Our total, asset under management are stable at EUR 2.2 trillion. And, if you, if you have a further look at, our third-party asset under management, they are up two percentage points versus last year, and this despite, the current rising yields, environment, we, we continue to see.
Moving into next page, so page 29, you can see more details on the developments of our third-party assets under management. We have seen in the quarter close to EUR 11 billion net inflows, and this is supported by both AGI and PIMCO. It's mainly then going into fixed income and alternatives. Also maybe it's worth noting that on the PIMCO side, we have seen since the beginning of the year EUR 30 billion net inflows for three, and we have seen positive net inflows for our third quarter in a row. Yeah.
In terms of third-party asset management development as well, we can observe that the negative market effect are mainly almost offset by the FX effect at this point in time. Moving to page 31, in terms of revenues, you can see that our internal growth is 4.5% as on a year-on-year basis, we have a negative FX effect, which is explaining the nominal revenue to decline. But clearly on this page, we see strong performance fees, which are stemming from PIMCO in particular, and we see resilient margins, both last quarter at AGI and PIMCO.
And if you look in a bit more details, typically at PIMCO, you have our margin level is actually may appear slightly reduced compared to last year, but you have many technical effects coming into that number. And typically in that case, that's fully explained by the number of fee days, as an example, that is used for computation here. On AGI side, the developments are also fully in line with our expectation, because you need to adjust for the Voya transaction and for... That is explaining basically the development on that page. Let's move now to page 33, and let's have a look at our operating profit.
We achieve a good level of operating profit that is close to EUR 801 million at 3Q. That's in line with last year, and that's above last quarter. You can see nicely on this page that the revenues are contributing positively, and that we have this negative FX effect that is coming into the development of our operating profit. What I think is really interesting to see is the development also of the operating profit of PIMCO. If you FX adjust this one, we have a positive development of our operating profit year-on-year by close to above 9%, which is an extremely strong result.
And we have as well, for both, PIMCO and AGI, improved cost-income ratios that are definitely moving in the right direction. In particular, for AGI, as we want to drive our cost-income ratio further down towards below 67%, and over the midterm, towards 65. So also overall, cost-income ratios or productivity, that is positive at both, PIMCO and AGI. And that is at 60.5 for the segment, better compared to our yearly expectations, which are at 62. So to sum it up, on the asset management side, we are very stable and resilient in the current yield environment. We are well-positioned to benefit for growth when rates will stabilize.
With an operating profit at 9M, and that is at EUR 2.2 billion, we were- we are where we expect asset management to be. I'm going to skip page 35 because there is clearly nothing to mention on the corporate segment. I'm going to move directly to page 37. To comment on our shareholder core net income, that is at EUR 2.1 billion, and that's a good level given the CAT effect we have seen into the quarter. This is... I don't think there is much to comment on 2023. This is mainly following the operating profit development.
Just on the comparison to last year, as I was mentioning, you can see the effect of the Voya transaction that is showing up on the line item, Realized Gains, where you can see the positive effect of the realized gains that came through from the selling of the US AGI business to Voya. At 9M, our shareholder core net income is at EUR 6.8 billion, which is clearly solid and clearly also in line with our yearly expectation overall. Now let me move to page 39, and let me recap as we have a look at our year-to-date status. I think year to date, we have a very, we have a strong status across all dimensions.
We see a good level of growth with EUR 1.2 billion revenues. That is mainly stemming from P&C. We have EUR 11 billion of operating profit, which is above last year. And I want to remind you that last year was a record profit year for the Allianz group. Our shareholder core net income is close to EUR 7 billion. We have a very strong capital base at 212% solvency ratio. And we have a very healthy capital generation while we are delivering on our buyback.
So all of this, when we step back and we look at this strong status, makes us positive on our ability to deliver towards year-end, and clearly position us really well as we are going soon to move into 2024. So with that, I hand over to you, Oliver.
Yeah. Thanks, Giulio. Thanks, Claire-Marie. We are now happy to take your questions. And the first question will come from Andrew Ritchie, Autonomous. Andrew, please go ahead. Your line should be open now.
Oh, hi there. Thanks for taking my questions. I just wonder if you could talk generally about catastrophe loss loading and expectation. I appreciate there's an unusual cat load this year. Not suggesting that should be extrapolated, but clearly there might be some trend in severe convective storms, especially in Europe, and your reinsurance attaches higher than it used to. So should we think that the cat load ongoing is higher? Would that be offset, in your view, by a better attritional? So that's just the first question. I think, by the way, in relation to that, on the media call this morning, you mentioned something about Q4 catastrophe load as well. So just clarify that. My only other question was German P&C. Why is it so good? I'm talking ex-weather.
There's been a lot of color that German Motor has got progressively worse for the market over the year. German Motor is a large part of your portfolio. How come it's your profitability at nat cats' held up so well? Is this just some of the inflation reserves being fed back through on the calendar year result, or is it genuinely good on an accident year basis? Thanks.
Thank you very much for your question. On the cat loss loading, I think it's a very good question and very timely question as we are currently in our planning process. I think if you look at our year-to-date cat load, we are at 3.1%, which is, I mean, close to our 2.5%, but indeed higher. If you look as well at the recent years, we see that this cat load is more around 3%, I will say, as opposed to 2.5%.
So as we are planning now and revisiting, and also running our models, likely, we are going to consider increasing this cat load into our planning assumption and moving that up. I don't think it's going to be a massive move up. I don't think it's needed as well, but certainly a couple of basis points we are going to consider to do so. Maybe to your second question around the P&C performance. I think we have two effects there. First of all, we benefit from continuous, very strong developments into our commercial business, and ex-nat cat, because also commercial has been impacted by some cat effects. So the underlying combined ratio is definitely very strong here.
But as well, when you look at our retail business across the board, we have been acting very strongly in terms of pricing actions, in terms of re-underwriting actions, also into some of our books. And this is showing up. That being said, fighting inflation is a constant journey, I would say, because as you certainly know, the claims inflation is lagging the headline inflation, so it's still continuing to show up.
So we need to make sure that we stay on the topic and also we continue the full toolbox of actions against inflation that we have implemented, that is not only integrating pricing actions, but also claims management actions, productivity actions, and so on and so forth, so that we can manage the situation.
Sorry, can I just follow up? What the... I was also after the clarity on the comments you made on the media call around Q4 weather, and then just the other clarity was, you might add a couple of bits, you said, to the cat load. Do you think that's an overall addition to the combined or do you think you would be able to offset that in the traditional?
Yeah. I think if you, if you today, I mean, as an example, if you take Q3 and you normalize Q3, and you add three percentage point of cat load, you are around 93% combined ratio. If you do that on a year-to-date basis, we are more around 93.5. Clearly, I think for next year, 93 combined ratio is a good, would be a good level for our business. And over time, I think striving towards 92 for our business will also be, for me, a healthy level we should be striving towards. So I would not take it in addition at this point in time.
Maybe on, then on your question related to Q4, I think clearly we have seen cat activities that has happened in France in particular, and also in Germany, over the last 10 days. We still see cat activities clearly in Q4. So at this point in time, I would not expect that this is going to impact our cat load well above, but I would expect our cat load for the quarter to be in the normalized level we expect, so around 2.5, yeah.
Thanks very much.
Thanks, Andrew. We will take the next question from Peter Elliott, Kepler Cheuvreux. Peter, please go ahead. Your line is open.
Thank you very much. Hopefully you can hear me. First of all, very sorry to see you move on, Giulio, but it seems like you've left the business in very good hands. Three questions, if I may. The first one, congratulations on the good results. But I guess one of the very few areas of where there was a bit of weakness was the non-life expense ratio. I mean, you mentioned it, Claire-Marie, and I appreciate you can't really look on the year-on-year comparison, but I guess if we look sort of quarterly, maybe we're not quite seeing the same sort of improvement that we're used to. Just wondering if you could comment a little bit on the likely trajectory from here.
Secondly, I guess we've seen a couple of regulatory developments recently. We've seen Department of Labor's fiduciary proposal keeps sort of coming and going, but they seem to be trying to do something, and we're going to get a life guarantee fund introduced in Italy from next year. Just wondering if you might be able to comment on the impacts you see from those, and anything else that I've missed, but that's sort of on your radar at the moment. And maybe as the third question, would you be able to give us an update on your persistency experience and how you think about your sort of CSM assumptions in light of that? Thank you very much.
Yeah. Thank you very much, Peter. Let me maybe start with our persistency situation in the life business. So what we see is that our lapse lapses level are actually being normalized in the third quarter. So you may remember that we have seen, in particular, beginning of the year, some strong lapses, in particular, associated to our Luxembourg business on the French side, which is a very specific business. But typically, across the board, we now see lapse level which are in line, which are very, very much in line with what we have seen previously. So these are stabilized quite nicely.
We would not expect to adjust our CSM assumptions associated with that one at this point in time. On the non-life expense ratio, there is indeed really some accounting effects which are coming through into that one, and there is clearly some seasonality effect into the quarter. Year-on-year, in the underlying, I think the right way to look at our expense ratio is always to distinguish between, you know, what we call the run and what we call the change.
Because what is very important is that we drive the run towards higher productivity levels, so we make sure that the run part in our expense ratio is improving steadily, and that we see in our numbers currently. And so meaning our productivity actions are showing up into that number. And then there is a change budget, meanings like how much do we invest into the future of the organization to support the transformation? And this number needs to be looked at separately. So we can come back to you with more details on the expense ratio, but the underlying is very much in the direction that we expect strategically.
On the situation related to the regulatory developments, you know that for us at Allianz, actually, we take our fiduciary duties extremely seriously, so that has been a constant focus across all our life operations. So we are aware of the development of those regulation. We monitor them, and we also act accordingly in the various markets as required. But we are not particularly worried at this point in time, yeah, in connections to those developments.
Perfect. Thank you very much. Thank you, Peter. We will take the next question from Andrew Sinclair, from Bank of America. Andy, please go ahead. The line is open.
Thank you very much, Oliver, and congratulations, both Giulio and Claire-Marie, on your new roles. 3 questions for me, as usual, please. First is on reinsurance. You're one of the relatively few that still has a catastrophe aggregate cover in place. Just really wondered how far are you from that kicking in? And just any thoughts that you have in terms of your reinsurance program for 2024. Do you expect that to look similar to 2023 or anything that you're looking to change? So that's my first question. The second was just on the investment results in P&C, good results. Just really wondered if you can give us an update on some of the guidance that you've given us on the key lines there.
And third was just on pricing change. Again, generally it looks pretty good, but Allianz Partners seem to be a bit slower in Q3. I think it was 6.8% rate changes for the nine months, but it was 11.6% for the first half of the year, which suggests virtually nothing, maybe even slightly negative pricing momentum in Q3. Just wondered if you can give us any color there. Thank you very much.
Yeah. So hi, Andrew. So on the pricing change, maybe for Allianz Partners, indeed, that's actually the only operating NPT that has a pricing momentum that is reducing compared to previous quarter. That's actually mainly linked to business mix effect. We have, in particular, our U.S. travel business that has been performing very well, where we had also to adjust our pricing environment to manage the growth there. So that's the main reason for the developments on Partners side.
But there is otherwise on the, on the rest of the Partners business, really a very good, very good development, I would say. On the reinsurance side, so, indeed, we have this reinsurance aggregate cover that is in place to protect us against exceptional yearly cat load. If you look at our year-to-date cat loads, we are at 3.1%, which is not that far away from 2.5%. So which means we are not in an exceptional cat load, if you look at it year-to-date. So our aggregate cover is not to be triggered at this point in time. You will need to have...
If we get similar events as the type of events we have experienced until Q3, you will need to get something like EUR 3.1 billion of total cat load for the year, which is far away from what we have experienced, and obviously is not something that we wish to experience this year. Our reinsurance program, actually, we are quite happy with the reinsurance program structure we have.
As you know, we have had to adjust it last year to also optimize from a risk return profile, but as well as reinsurance change risk appetite, and we had to move up our attachment point to our, in particular, on 3.2 to certain cat events. But clearly, we are happy with our reinsurance program. Broadly, we want to keep it the way it is. We are always looking at options to simplify a bit our reinsurance program, so that's clearly something we are going to aim at further in 2024 And I'm quite confident that we are going to enter the conversations with the reinsurers in a very good way, so that we can close the renewals in a good way overall. So I think for more details on reinsurance, actually, you can also join us at our Inside Allianz series that is going to take place on twenty-fourth of November, where Holger Tewes-Kampelmann
So we have from interest and similar income, we have generated EUR 1 billion operating profit, where you need to deduct basically the interest accretion, which is at -EUR 140 million for the quarter. The guidance for the interest accretion for the entire year is around. So what we expect for our estimate for the entire year is around EUR 700 million, so that's unchanged. And the valuation results and other is actually at -EUR 122 million. That's normally what we expect in the quarter is around EUR 200 million, but that's better, mainly linked to some FX effects.
So you should expect to see some volatility in into this valuation result and other, due typically to that, to those FX effect in particular. Maybe just on interest accretion, this is naturally going to diminish quarter to quarter. As you know, the interest accretion the way we so is linked to our reserves associated to the previous year. You have a locked-in interest rate, so during the year, it will not be impacted by the development associated to the interest rate.
And as a reserve, naturally, part of the reserve runoff, and you get also the payout pattern, you should expect that we start from a higher interest accretion in the first quarter, and this is going down steadily towards Q4. Yeah.
Super helpful. Thank you very much.
All right. Thanks, Andrew, and we will take the next question from William Hawkins, KBW. Will, please go ahead. Your line is open.
Hello, Giulio, and hello, Claire-Marie. Thank you very much. First of all, yeah, on slide 23, you just talked about the non-life investment income, but can you help me with the life investment income, please? You, you highlighted the very strong figure in the third quarter, and you highlighted that it's above your expectations of EUR 700 million, but I'm not sure if the implication of that is that your future expectations are now going to be higher, and if so, why? Or whether there's something one-off going, and we're going back to EUR 700 billion. So can you help me have an understanding of what the life and health investment income should be hereafter, please?
And then secondly, keeping it simple, can you give us an update on where we are in asset management flows in the fourth quarter, please, for PIMCO and AGI? Thank you.
Yeah. So on the life investment income, indeed, we are a bit higher compared to our yearly expectation. I think what you should expect from that numbers going forward is that it's going to be a bit volatile, because it's coming out with some complex accounting effects related to our BBA and VFA business. So this quarter is higher. I think it's, and maybe Oliver can confirm, but I think it's mainly related to some positive effects that came from our U.S. and French business, which are contributing positively. But I would not take that as a forward-looking expectation that you should normalize going forward. So I think the indication we have given of EUR 700 million is the one you should have in mind.
Then on our asset management flows, we have seen approximately EUR 6 billion of outflows in the quarter that are mainly stemming out from PIMCO. I think given the volatile environment we have experienced in the last few weeks, in particular associated with the geopolitical instability, the uncertainties around the rate developments or actually like the postponing eventually of the stabilization of the yield environment, that's quite logical that we have seen that effect in October.
As mentioned, I think we expect that the yield environment is going to stabilize, and as such, that PIMCO will be extremely well positioned to benefit from that environment, and we should expect to see growth there.
Lovely. Thank you very much.
Thanks, Will. Yes, we will take the next question from Ashik Musaddi from Morgan Stanley. Ashik, please go ahead. Your line is open.
Thank you, Oliver, and congratulations, Claire-Marie and Julia, for your new roles. Just a couple of questions I have is, first of all, on German life and health. I mean, if I look at German life and health, both volumes and new business value and also the CSM development in the quarter, I mean, it looks a bit negative. So any color on that would be very helpful to get, because I thought rates went up, so that should be good rather than negative. So that's one thing. And secondly, like, you did a buyback of EUR 1.5 billion at the beginning of the year, I think in first quarter. So,...
Should we be expecting that for this year, for 2023, the buyback is done, or this will—this could still be in consideration at the full year results? So any color on that would be helpful. Or if you can give some color in case the, if cash capital has been utilized elsewhere. Thank you.
Mm-hmm. On the German life and health results, what I think, if you look at year to date, the GWP of our Leben entity are basically stable, compared to last year. What we have seen in this quarter is, I mean, what we see in general is that we have good developments in our recurring premium coming in particular from younger customers, which is demonstrating really the strength of the offering of Leben. Where we see less positive developments currently compared to previous year is associated to the single premium business, in particular, coming from our banking channel.
That's quite logical in the rate environment that this is the case. So I'm not... I mean, I think this is positive because that's stable and clearly we are also going to continue our focus to provide good and differentiating offering to our clients, more from a single premium perspective. We have, as an example, the PrivateF inanceP olicy that is working well, also in this environment, and will continue to be a focus on the Leben side, typically. New business margin is actually strong, so that's just the translation of the volumes effect into the performance of Leben.
So we are confident in our Leben franchise very clearly, and we expect stable operating profits to be continued to be delivered by Leben. Yeah.
Thank you.
Then on share buyback, so clearly we have put through EUR 2.5 billion of share buyback in this year, and I'm not going to comment on what we are likely or not likely to do, to answer your end.
All right. Thank you for this. Then we will take our next question from Vinit Malhotra from Mediobanca. Vinit, please go ahead. The line is open.
Yeah. Thank you, Oliver, and thanks, Tom. Just if I can go to slide 15, please, and just I'm very curious about two numbers there which stand out, one or three, but two for sure. Italy has only 5% of nat cat, which is maybe EUR 40 million-EUR 50 million. I mean, comparable large insurance in Italy are running in hundreds of millions, EUR 300 million-EUR 400 million, just we heard from this call on the weather events. I'm wondering if there's any big reinsurance recovery there or any comment there that you would like to flag? Also in a similar way, in Germany, 19%, probably one of the highest weather events, if there's anything to add there.
Lastly, on the slide, Switzerland, I mean, combined ratio of 90% with a 15% CAT loss must have a lot of reserve releases or other factors. If you could comment on these three numbers for the combined ratio, that would be really good. Second topic, please, if I could ask, is on the life CSM. And I know that, I mean, even the next CSM is flat versus, you know, we're talking about higher growth of the normalized. I mean, what's the risk that we all look at normalized CSM within 3%, 4%, 5% growth rates, but actually the real world CSM, if I can use that term, seems to be much more sensitive to market, much more, you know, flattish and/or downward trending?
How do you see the risk that we should rather be looking at a lower number of CSM, or how should we look at this real world versus normalized CSM in your view? Thank you.
Okay. I think the line was not very good, so I'm a bit unsure. But I think your first question was related to Italy and the high level of Nat Cat we are seeing in Italy, and why this is actually lower compared to the German Nat Cat effect. So in Italy, we have seen indeed a very high level of Nat Cat that has impacted the performance. The reinsurance program of Italy was attaching a bit lower compared to the reinsurance program of Germany, and that's explaining why you have a lower cat load effect into the Italian performance compared to the German performance.
On Switzerland, we have a high cat load, but also, actually, we have high cat load, but we have a low weather-related cat load, which is also coming as an offset to this, to this, high cat load, and we also have some runoff effect that are coming through. And again, I think like for both Italy and Germany, if you, if you adjust for nat cat, the underlying performance is actually very, very strong. Yeah, which, in the inflationary environment we see, is also a demonstration that, that, the teams are acting very strongly and that we are maneuvering well, in this, in this environment.
Vinit, this is Oliver. I, I'm not sure if we fully understood your question about this CSM, but perhaps from my side, what you could do is, when you go back to our Inside Allianz series slides that we published in June this year, there's one slide in there where we give more details about this CSM work and how the real-world assumptions basically feed into the CSM via expected and forced return. This may answer your question. If not, I propose you just come back to us, and then we can go more into detail, if that's fine with you. Okay?
Excellent, Oliver. Thank you so much for that. And thank you, Claire-Marie. Thank you.
Thanks, Vinit.
Thank you.
All right, then we will take the next question from Ian Pearce from Exane. Ian, please go ahead. The line is open.
Hi, thanks for taking my questions. Just two, hopefully quick ones on life. Firstly, what's in the Italian business seems to be really strong new business premium growth. Just wondering what's driving that, and if part of that is sort of recapturing customers that are churning, leading to an elevated number? And the second one is just on the new business margins in the U.S. being down year-on-year. Anything to flag there? Thanks.
Sure. So on the Italian business, I think, adjusting to the new interest rate environment, our Italian team has injected new product innovation. So they have launched three new products for the value channels, which are either a pure unit- linked or a combination of capital-efficient products, together with unit linked. And that is working very well and is being really welcomed by our market... by the market and pushed, I mean, I would say, like, appreciated by the agents as well. So that's really product innovation, I would say, on the Italian side.
New Business Margin in the U.S., I think you should not read so much into the year-on-year comparison, in particular for AZ Life. No, sorry, the new business margin for the U.S. business is aiming at delivering the internal rate of return that is needed for our own profitability. So you should expect to see some movements there. But overall, AZ Life is returning the expected level of profit to us, adjusted to the environment.
Okay, thank you.
Thanks, Ian. We will take the next question from Michael Huttner from Berenberg. Michael, please go ahead. Your line is open.
Thank you very much. I had one numbers question and two very general. The numbers question is, can you talk about the net inflows in life? I think you did broadly mention it, but I probably missed it. I'm sorry. And then two more. One is, Allianz normally raises guidance, particularly when the numbers are ahead, and it didn't this time. Maybe you can comment on that. And then the third one is really for Giulio. I don't know how to say it. The...
If you think about what is effectively a handover today, and normally I associate a handover and say: "Well, I'm, I'd better make sure everything is super conservative." Is there any way that you can show us where that extra conservative might be, if there is one? Thank you.
So you're asking me, Michael, to show you the extra conservatives? That's the question?
Yeah. That's right, yes.
Maybe I tell you after January 1st. I don't know how to answer this question. So we'll leave it at that, okay? Yeah. Thank you.
So maybe, like, let me, let me comment on the, on the outlook. So I think overall, we are positive that we will end up above the midpoint, when it comes to our outlook. But considering the elevated amount of Nat Cat we see, also currently continuing into, into Q4, we have decided to be cautious, because we do not want to set the expectation that we will be significantly ahead of the midpoint, while we might, just be moderately ahead of it. So that's, the main reason why we have, kept, our outlook, stable, unchanged.
On the net, inflows in life, actually, year to date, our net, net flows were strongly positive for, for the, for the U.S., for Asia, for Latam, slightly, slightly negative for Spain, and, and negative by EUR 600 million for Germany, and as well, negative for Italy and France. So overall, our net flows will be negative at 9M. I think you should also take into account that traditionally, 9M will be also a moment in time where this is coming across as more negative, because we have less production in, in, 3Q to offset some of the outflows we are seeing.
So overall, as I was mentioning, I think we see a good momentum in our life business. And we are really demonstrating that we have a solid franchise that we are operating across the various regions.
What is the total net outflow figure?
Do you want it for the quarter or for the year to date, Michael? EUR 2 billion. It's EUR 2 billion in both cases.
2 billion, yeah. Yeah.
By the way, for those who have not spotted it yet, and probably you are part of that group, Michael, we published this number in our supplement.
That's what I'm looking at. Sorry. I'll look again.
It's relatively new, so, you are excused.
Thank you.
All right, I have one last analyst on the line. Kamran, that's you. Sorry, you're last, but definitely not least. The line is open, and so please go ahead.
Oh, hey, Oliver. Oh, sorry, all my questions have been answered. So, I guess no, no follow-ups for me, so thank you.
Perfect. Even better, but I see Michael again. Michael, do you have another follow-up question? If yes, please go ahead. Your line is open.
Can you talk in more... I know you covered Germany in broad terms. Can you talk a little bit more in detail about pricing and claims inflation and all these kind of moving parts in the motor part, in particular, in Germany? Just to give you a bit of how I see it, is I perceive pricing might just struggle to reach 10%. The renewals, which are coming up or which are ongoing, with claims inflation is probably just below, and my feeling is in motor standalone, you'd probably only return to where you'd like to be in 2025.
Yeah, so I would say, clearly, for Germany, we would expect to be where we want to be in 2025. And in terms of Combined Ratio performance, we have observed in Germany, overall, a bit higher inflation effects compared to what we had anticipated initially. But we have taken rate actions, and we have acted structurally over the portfolio, and that you can see with our year-to-date rate momentum, which is above 6% for Germany overall.
Now, to your specific point around pricing for Germany, I think our operating entity, our German operating entity is very well advanced in terms of technical excellence. We have pricing models which are very precise and capable of also estimating what we would need to have in the given also as an example, in our own business, given the localization of the business and so on and so forth. Then obviously, there is a difference between the in-force book and the new business, and we are slowly converging the in-force to the. We are slowly converging and merging the pricing level across the portfolio.
So, I think we are maneuvering the inflationary environment in a very good way at our German entity. And I would expect that to show up into our performance definitely towards 2025.
Is there hope that we might get a double-digit rate rise in motor at renewals just now? Or is... Sorry to be so-
Michael, this is Oliver. I can give you a real-life example.
Yeah, yeah.
My premium went up by 7%, and I never drive. I mean, I park my car all day long. So I... You can trust that, everybody, all the customers that we have that do drive their car from time to time, got a double-digit rate increase already now.
Brilliant. Fantastic. That was the answer I was looking for. Thank you so much. Thank you, and good luck, both of you. All three of you, sorry.
Thank you.
All right. Thanks, everybody, for your contributions. That's the end of our analyst call. So we say goodbye, and thank you to everybody. But before I leave, let me just remind you that we have the upcoming Inside Allianz series in London in two weeks' time. And this event will be joined by both, by Claire-Marie and by Giulio. So if you want to say goodbye to Giulio and hello to Claire-Marie, that's the perfect opportunity, and I hope we all see you there in two weeks' time in London. Thank you, and goodbye from my side.
Thank you. Bye-bye.
Goodbye, guys. See you in London. Bye.
Bye. Bye-bye.