Ladies and gentlemen, welcome to the Allianz conference call on the Allianz Group financial results for the first quarter, 2026. For your information, this conference call is being streamed live on Allianz.com and YouTube. A recording will be made available shortly after the call. At this time, I would like to turn the call over to your host today, Claire-Marie Coste-Lepoutre, chief financial officer of Allianz SE. Please go ahead, Claire-Marie.
Thank you very much, Andrew, and good afternoon, everyone. Let me start with an overview of our group results for the first quarter of 2026. Clearly for me, the picture from my perspective is one of a strong start to the year. This allows us to reaffirm really confidently our full year outlook. We can do so despite an elevated market volatility and more uncertain macro environment. Across our three strategic levers, growth, productivity, and resilience, we continue to execute with discipline and to deliver towards our ambition. If we look in more details at page A4, there you can see that overall our business volume continues to show steady internal growth. It's driven in particular this quarter by our P&C and our asset management segments.
The life business was resilient against the first quarter of 2025, where business volume was particularly high. Our operating profit momentum is excellent. We are nearly at 7% year-on-year in terms of growth, where we do benefit from the diversification of our business model. Here we see a double-digit growth in P&C, where we reach a new record level of operating profit. We see an excellent performance in asset management, which is up 6% or even 15% FX -adjusted. Life delivered a resilient performance even if it is impacted by FX and also by the disposal of our JVs with UniCredit and with Bajaj. On the net income side, we do see the impact of the completion of the Bajaj disposal for EUR 1.1 billion net.
As a reminder, as we have indicated previously, we will neutralize this accounting gain over the course of 2026 through strategic and productivity actions and as well reinvestment into higher-yielding instruments. Only a modest share of that overall amount was used in the first quarter for EUR 1.5 million net, and more will clearly follow during the year. Adjusted for the Bajaj effects, our underlying core net income achieved a strong increase of 7% year-over-year. We also achieved an ROE of 18% and as well an excellent EPS growth of 9%. Clearly, and I think it's very important, beyond this exceptional effect, the fundamental performance is very strong and fully on track towards our Capital Markets Day ambition.
At the bottom right of this page, you can also see that our Solvency II ratio ended the quarter at 221%. This is a very resilient level with well-contained market volatility and a consistently delivered strong operating capital generation. Let's move to P&C on page A5. There you can see that our top-line momentum continued at a pace that is very much in line with 2025. Our internal growth is at 7% with a split broadly 50/50 between price and volume. The price effect in the underlying has slightly moderated, overall, the renewal rates remained resilient across the book. As an example, we see retail motor that is running at +8% and within commercial, as an example, MidCorp is at plus four.
As you can see as well in the further, detailed pages, the growth across the P&C portfolio remains well diversified. You have plenty of examples of that growth momentum in the document, but some standout contributors would include our platform businesses like Allianz Partners or Direct that are both growing double-digit. We see also a strong new business in Germany and also selective growth in Commercial, where pricing meets our hurdle rates. Across the organization, very clearly we continue to be focused on our growth triathlon, achieving new customer growth, increased cross-sell, and churn reduction. Our underwriting profitability is excellent, with a combined ratio at 91% that is supported by both retail and commercial.
This outcome reflects a broadly benign Nat Cat environment. More importantly, if you go into the details, actually a robust underlying underwriting performance and an ongoing improvement in the expense ratio. The details, as always, are provided in the back of our presentation. You should as well remember when you look at those numbers that basically the year-on-year changes on attritional loss ratio and prior -year developments are affected by an offsetting accounting impact that has been introduced in the second half of 2025. Allowing for that effect, the underlying attritional loss ratio improved by 30 basis points, and the run-off impact was flat year-on-year.
As always in the first quarter and in general, we remain cautious in our booking approach, including when it comes to our initial loss ratio pick with uncertainty on the inflationary outlook at this point in time. The sustained top-line momentum and the further improved combined ratio drive our 11% operating profit growth, reaching an excellent EUR 2.4 billion of operating profit. The investment result is broadly flat, including the impact of lower equity contributions there. The realized losses below the operating line in the first quarter in non-life will benefit the operating investment income later in 2026 and into 2027 as we reinvest into higher-yielding instruments. We also continue to leverage AI across the P&C value chain for marketing and distribution of new business through to claims management.
The main focus is on customer e-experience, on uniqueness of our value proposition towards our customer to fuel our growth trajectory. As an example, at Allianz Partners, we have introduced several new large OEMs relationship in the first quarter that are supported by agentic AI tools in roadside assistance, significantly scaling our straight-through processing of claims. In Italy, France, Spain, our AI tools are supporting our agents to provide training or real-time support in assessing the risk via AI experts and also boost customer service and productivity at the point of sales. Similarly, in Commercial, our submission hub allows for a much faster and higher -quality answers to submissions via preparation, enrichment of data, and best allocation to underwriters. This is generating significant impact both in the response time and in conversion rates of our submissions.
Overall, I'm very, very pleased with the performance of our P&C segment. We see good growth. We see excellent and robust underwriting profitability across both retail and commercial. Let me move to page A6, having a look at our life and health business, where the underlying performance of the segment is considerably stronger than the headline momentum might suggest. The new business first. On the new business comparison versus the previous year is impacted by a very high base in the first quarter 2025, which included large tickets in Germany, strong Talanx sales ahead of a regulatory change on the medical riders and the UniCredit JV business, which has been disposed, as you may remember, in the second half of 2025.
Adjusted for those impacts and also the FX effects, the underlying new business volumes are slightly up, and the new business value is broadly stable with an attractive mix with protection and health and unit- linked contributing 60% to this one. To illustrate a bit some of the strong development versus last year, I want to mention first Italy, where really the Italian team has been doing a tremendous job in the first quarter, building on the momentum of what they have already achieved in 2025, where we see that the new business value is up net of minorities and including associated fees with strong unit link growth through their financial advisor network.
The new business in Asia, if you exclude Thailand, is up 12%, and we see as well a continued strong momentum in health Germany with a continuing double-digit new business value growth. On the life CSM development, we can see that despite the lower new business value, the expected in-force return still exceeded the release, generating a healthy 1.7% normalized growth. The overall CSM growth was impacted this quarter by the capital market volatility, flowing through both the economic and the non-economic variances in a broadly consistent manner with our disclosed sensitivities if you do the underlying math. As we speak, some of those market impacts have already improved, we would expect our CSM to recover accordingly. Our life operating profit was impacted by FX and also the UniCredit Vita and the Bajaj disposals.
Adjusting for this, the underlying life profit was slightly up. There was also a modest market volatility impact in our investment result. We would expect a portion of those effects to be temporary. Overall, the life performance has been resilient in the context of a demanding comparison with last year, perimeter changes, and as well the market volatility we have seen in the quarter. Going forward, the perimeter impact will ease, and we expect an improved life investment results. We remain focused on achieving attractive risk-adjusted returns on new business, and we are confident we will deliver in line with our Capital Markets Day targets. Let's move to page A7 and have a look at our asset management business. There we had an outstanding start to the year against volatile capital markets.
Our net inflows in the first quarter reached a record level for a first quarter with strong growth at both PIMCO and AGI. Overall, the net inflows of EUR 45 billion correspond to an annualized organic growth rate of 9%, diversified across regions and asset classes. As we speak, this good momentum continues. Some illustration of this, at PIMCO, we see continued strong traction beyond the more traditional fixed -income strategies for its expanding active ETF suite and broad-based demand also across Asia and Europe. At AGI, we've seen flows across multi-assets, fixed income, equities, and alternatives with new mandate wins in Asia in particular.
The product proposition of our asset managers continue to be strongly supported by our value creation for our customers via our investment performance with at least 90% of outperformance on a one- and three-year basis across our full third-party asset under management base. We generated EUR 2.2 billion of revenues, up 12% FX -adjusted, driven by the growth of our assets under management. The fee margins are broadly resilient with some temporary impact in the quarter from upfront distribution commissions associated with the strong flows.
I am also very pleased with the productivity focus at both asset managers that is evident in an excellent cost-income ratio, delivering more than EUR 850 million of operating profit, up 15% on a FX-adjusted basis. It was a volatile period for capital markets in the first quarter, and there was a lot of debate around topics such as private credit. Overall, our asset management businesses have been selective and very mindful of liquidity considerations when growing their private and alternative offerings. Their focus in the alternative and private credit space is differentiated and focused around areas such as infrastructure or asset backed finance. Overall, the current focus on credit and liquidity risk is a tailwind for our asset managers to continue to demonstrate the strengths of their offering. Moving to AGI and our Solvency II ratio development.
Allianz further emerged with a strong solvency ratio at 221%, with a 2 percentage point increase versus year-end in a volatile market environment. Beyond the traditional effects, like share buyback and the usual dividend accrual, we also have the positive effect that we have announced coming from the divestment of the Bajaj JVs that is coming through. To be highlighted from my perspective are maybe three key points. The first one is that we have a very contained market impact. The second one is that we have a very consistent operating capital generation. In addition, we had various minor model updates which directionally can be hard to predict, but came out at a small positive in this instance. You should not assume this to always be the case going forward.
Clearly, the underlying drivers of the solvency development are very strong in a quarter with volatility. Let me move to page A9. Here I'm very pleased to announce that from this quarter onwards, we will be including in the backup slides additional disclosure providing insights into the performance of our health and protection business. As a reminder, we set out a target at our Capital Markets Day to grow the operating profit of protection and health by a CAGR of 7% through to 2027 to reach EUR 2.2 billion of operating profit by then. Our protection and health business is currently split across P&C and the life segments with different product features, which is leading to different technical accounting treatments.
Our disclosure will develop over time, but they are designed to give more insight into the components of profit and the nature of the products we are selling. On the left-hand side of this slide, you can see that we can segment the business into short-term. Typically, that will be annual policies, including medical reimbursement, health business, mostly accounted for in the P&C segment, with combined ratio as being the most relevant steering KPI for that business. Great example of that will be the international and travel health business within Allianz Partners. On the long-term side, this will include typically our term or whole life that is sold as riders to saving products or the German health business, which has unique long-term features such as the aging provision.
This business is accounted for in our life and health segment with the CSM, and its growth as being one of the most meaningful steering KPIs for the business. The overall protection and health operating profit is split roughly 60% long-term and 40% short-term. Across protection and health, we combine a strong global oversight on underwriting standards, product, and pricing with customization to local market needs. In particular, we have a global coordination for our health business through Allianz Digital Health. This will showcase at our Allianz Insights session of June 2025 and, from my perspective, is definitely a good reference material if you want to get more insights into the health business. All our businesses have initiatives in place to further grow and to strengthen technical excellence. Some examples of such initiatives are illustrated here in the middle of the page.
They cover a broad range of elements such as increased use of digital channels for selling and customer servicing, the use of AI to increase the ability of our agents to underwrite health business or more systematically leveraging cross-sell opportunities to sell health alongside P&C products. If you move to page A10, where we are showing some financial highlights for the business, and we are illustrating the new format we will use going forward. You can see the very good momentum in the operating profit, growing 10% year-on-year adjusted for the disposal of the UniCredit JV. On profitability, you can see a healthy combined ratio of around 93% for the short-term business booked within the P&C business, driven in particular by attractive margins in health.
For the business booked in life and health, our new business and new business margin are at good levels but impacted by some scope effects, in particular the disposal of the UniCredit JV, the lower level of sales of medical riders in Asia, and some additional tax on health insurance premium in France. The normalized CSM growth of around 1.5% for the long-term business is healthy, and we will expect the business to deliver full-year normalized growth at least in line with the whole life segment. Overall, the health and protection market is a huge market with significant growth potential. Also, as we see selective disengagement of some states from that part, we see a strong appetite for our products, also supported by our ecosystems.
We are very well-positioned and very confident in our ability to meet our capital market targets desire. Let me recap on page A11. Overall, we had a strong start into the year. If you normalize for the positive effect of the sale of our stake in our JVs with Bajaj, we deliver an excellent 9% core EPS growth, which is at the high end of our capital market commitments. Similarly, our productivity and our resilience focus is as well very visible in our numbers. I can thus very confidently confirm our outlook for the full year of EUR 17.4 billion ± EUR 1 billion. With that, I thank you all for your attention, and I hand over back to you, Andrew, for questions.
Great. Thank you, Claire-Marie. We're now ready for questions. Just to remind you, if you're on the web audio call, there is a button called "Talk Request." If you're on the phone, it is star five to request. It looks like our first question is from Andrew Baker from Goldman Sachs. Go ahead, Andrew.
Thank you for taking my questions. The first one, I guess just on the reinvestment of the EUR 1.3 billion Bajaj stake sales, should we assume that the remaining reinvestment will be predominantly from the realization of investment losses? I guess if not, are you able to give a bit more detail on the types of strategic initiatives that you are redeploying into outside of this? Then can you also just help me with the timing a little bit? For the rest of the year, how would we expect that redeployment to come through? I guess which benefit, which business line should we expect the benefits to flow through as well?
Secondly, just on the life and health operating investment result, there is a comment in the presentation talking about the unfavorable impact of market movements on Allianz Life and how some of that should come back in future quarters. Can you just give a little bit more detail on the mechanics behind that and how much we should expect to come back? Thank you.
Thank you very much, Andrew, for your questions. On your first one, you're right. We have now used the first quarter to do a tranche of realized losses on the bond side. We expect to use the rest of the proceeds actually to balance to support our strategic initiatives and also our productivity initiatives, in particular associated to the AI transformation and the opportunity we see associated there. Depending on the exact timing of those effects, we will also be rebalancing some of those with also bonds realization. We are still flexible.
It will depend a bit on the exact timing and emergence of the initiative. The exact allocation is not yet decided as we speak. When it comes to the exact timing effect, it's also a bit difficult to assess exactly. What I would do is that you can take the remainder and then basically go in three tranches until the end of the year. I think it gives you a good view on what may happen on the non-operating profit side until the end of the year by quarter.
Then when it comes to the line of business, it will be mostly coming into the P&C business as we see some acceleration of those transformation opportunities, I would say in particular, related to AI. Then you were asking the question on the volatility associated to the. I think what is important to have in mind is that indeed the investment component within the operating profit on the life and health side is unusually low for this quarter because we have quite some noise in this line item for the quarter.
We have actually almost EUR 60 million negative effects, which are coming from FX and from market. We also have the negative effect, if you want, coming from the comparison associated with positive effect of Bajaj previous year, right? For approximately EUR 15 million. Those two effects combined are basically mostly explaining the deviation. If you zoom into the EUR 60 million deviation we have seen from coming from more from FX and from market, actually, we anticipate EUR 30 million of that to come back to come back over time.
Maybe just to give you the big picture on that, maybe two big pictures on that, on that item, I would say going forward, I would say the investment line item in the life and health business should be in line with our outlook guidance, which is below EUR 500 million. That's basically what you should keep in mind. We don't anticipate that to change. On the AZ Life side, what is creating this effect is that because the market was negative, we have seen volatility as well. The hedging cost went up, and basically those costs actually will also be deferred over time. That's why we are going to see this recapture over time now
Really clear. Thank you.
Okay. Thanks, Andrew. Next question is from Iain. Iain Pearce from Exane BNP. Go ahead, Iain. I think your line is open.
Hi. Thanks. My questions were just on the health and protection, the new disclosure. Thank you for providing that. It's very useful. Just on the sort of outlook, is the best way to understand this that you're expecting sort of 4%-5% growth in operating profit in the long-term business? Does that imply double-digit growth in the short-term businesses? Also on the disclosure for Q1, the EUR 550, obviously that's on run rate for your CMD 2027 target already. So, just sort of if you could talk about the performance relative to target and if you sort of expect to or how comfortably you expect to exceed the 2027 target in the health and protection operating profit. Thank you.
What I expect, when you look in terms of relative growth, I expect the short-term business to grow faster compared to the long-term business, which is quite logical as well because the short-term business entails partners, entails Turkey and Italy, which have faster growth and also then the earning of this growth into the operating profit is actually faster on the short-term side versus the long-term side. That's for the sort of overall view. In terms of the fundamental growth, I expect growth around 8% for the short-term side and basically 6% around the long-term side.
When it comes to the underlying features of profitability to those business, on the short-term side, I expect a mid to low 90s type of combined ratio. For the long-term part of the business, I expect the CSM indeed to grow around 5%. The release is around 8%-9%, so not so differentiated compared to our fundamental business. The new business margin is obviously well above 5% for that business. We are on track. That's what I would use. Maybe it's a bit conservative , actually, at this point in time, but this is still what I would use as overall reference point towards 2027.
Perfect. That's great. Thank you.
Thanks, Iain. Okay, next question is from Fahad. Fahad Changazi from Kepler Cheuvreux. Go ahead, Fahad.
Hello. Thank you for taking my question. Could you comment on the retail P&C volume growth outlook for the remainder of the year and compare to plan target as well in terms of how it should receive that shape? Could you just comment a bit on what is happening with AGCS, where we had strong internal growth with rates negative, just to see the dynamics and the outlook for that business and which lines you're playing in? Thank you.
Yeah, thanks a lot for your question. Maybe let me start with AGCS, right? We have a couple of items which are coming through in the growth of AGCS. We have some booking time effect, so which have accelerated a bit some of the booking in the first quarter, which is showing up with increased growth. We are clearly working on developing our franchise. We have invested in two teams. We have strengthened our offerings as well. We also have new good tools in place, as I was highlighting, you know, related as an example to our ability to treat the submissions that is really making also a difference in the way we are interacting with the market.
We have that combination of both sides. Clearly, we are extremely mindful of the environment, and we are growing where we can achieve a good level of what we call the APTP, which is actual price against technical price, because we see that this is a very nuanced environment, and so you have to be careful in the way you are proceeding. I think there are really good support and fundamental driver for that growth, but I would also not multiply by four the growth we have seen in the first quarter towards year-end. Then you were asking the question on the retail volume growth and where this is that we stand.
Our volume growth for the first quarter was on retail side was at 2.4%, which is below our ambition of 3%-4% volume growth for the as commented or communicated as part of the Capital Markets Day. What we see, first of all, overall in terms of a positive driver is that we see growth in a number of policies and customers across all our major retail entities. Nonetheless, what we have seen is that we have some operating entities where we had, despite the fact we had a good momentum, we are slightly below target linked to some seasonality effects. That's typically the case for Germany and France.
In some of our operating entities, we see clearly very good traction, like the U.K., Italy, or typically our platform business. We are double-digit growth also in retail there, in direct or partner retail, as an example. We are on it. I think clearly, we are working on our capital market delivers. There is still a lot of work to be done. I think as we mentioned before, there is a very strong focus from the organization. We are very confident we are going to get there, and we see in the underlying really good momentum.
Okay. Thank you.
Thanks, Fahad. Next question is from William. William Hawkins from KBW. Go ahead, William.
Hi, Claire-Marie. Thank you very much. I'm checking in with all the companies on expense leverage after some work that KBW has done, and I mean, one observation is that you seem to have remarkably low expense ratios in Germany and America, which is good, but I'm still trying to sort of figure out. leads to two questions. Where in general do you think your expenses are best -of-breed, and where do you see the need or opportunity for meaningful improvement in expense efficiency across the business units?
Secondly, please, when you're thinking about the impact of expense management on your EPS growth targets, do you ever envisage admin expenses actually falling as a profit driver, or is this always going to be a relative game of making good investments so that your expense ratios may be improving, but the absolute number isn't coming down? Thank you.
I think first of all, I mean, we are, there are clearly like two components in our expense ratio. One is the admin and the acquisition part. We are focused overall as an organization on the delivery of the 30 basis points improvement year on year, which we think is very distinctive and is also a very strong driver also of our ability to work and to sustain some of the growth trajectory we want, we want to achieve. Part of that's also associated with some of the AI actions we are doing today, is that there will be benefits as we are working in terms of customer experience, optimizing the processes.
As part of that, basically productivity becomes a sort of a by-product of the optimized processes that then we can reinject into making our product in terms of pricing points also more attractive to fuel the growth, which is a very important item. I mean, I'm not so sure which expense ratio you did look at for the U.S. because we don't have U.S.-based really business. They are part of our global line, I would really not look at that. I'm not so sure.
Basically what we do in general is that we benchmark our businesses quite fundamentally within their own markets, also against best-in-class peers, and then against internal benchmarks. That's a part of a challenge we are operating because we believe it's also key to the strategy I was highlighting in particular on the retail side. How this is going to evolve going forward, I think it's too early to say, but at this point in time, I would just take our 30 basis points improvement as being the base until year-end 2027, and then we will further communicate on that aspect as we also see how AI overall is also providing support to our own processes. Yeah.
That's really helpful. If you allow me just to come back. Sorry, my observation about America was about life, not about non-life. I did just wonder, you know, beyond the 30 basis points you're talking about in non-life, which is clear and great, do you have any similar observations about on the life side of the business, please?
Life is always a bit more tricky, but we also actually do have, we also look at the different productivity KPIs for our life business. We have multiple KPIs we are looking at against reserves in terms of unit cost and so on and so forth. We look at different elements. We do have targets that we are also balancing also in terms of impact overall. If you take some of our business are definitely best in class by far and on SLB, and we'll have an unbeatable unit cost that is also very supportive for some of the future strategic development.
Easy Life is also doing really well, we continue to look at it because we believe it will be a differentiator going forward, and so on and so forth. We also challenge our businesses because, again, the fundamental logic of having a better competitiveness in terms of productivity is also a fuel for customer satisfaction and for growth. Yeah.
William, I think we've discussed it. The mix effects in your comparison on life expense ratios are massive, between savings and protection as well, which I think might impact some of your regional comparisons.
Understood. Thank you very much, both. Thank you.
Okay. Thanks, Will. The next question is from Ben Cohen from, RBC. Go ahead, Ben.
Hi there. Thanks for taking my questions. I wanted to ask on two things. Firstly, on the P&C side, on the commercial rate, it looked like the sort of the improvement there was slightly stronger, +2% in the quarter versus +1% for the full year. I know that's a small change, but could you say anything about whether you are seeing better momentum in terms of commercial pricing across the book? Specifically in terms of geography on the P&C side, could you talk about the very strong improvements that there've been in the combined ratio, both in the U.K. and in Italy in particular?
I suppose on the U.K., I was a bit surprised because others have talked about how competitive the market is in general, both on the personal and the commercial side. Thank you.
Sure. On commercial rates overall, indeed for the quarter, we are at plus 2% for the commercial scope. The main driver of that is actually the MidCorp business, where we have seen a bit of strengthening of rate across some of our portfolios now leading to MidCorp having a plus 4% rate increase. Overall, I think it was driven by some specific markets. On top of my mind, I will have Germany in mind as an example, but we have a few others where there was a need to inject some further price increase also from a market perspective.
I want to highlight that , maybe businesses like more the AGCS business, which for us is approximately 15% of a bit less than 15% of our global top line, right? There, the cycle is definitely not over. We clearly see that there is some of the, some of the line of business or regions that where competition is fierce. I would, I would put it that way, and where our rates are softening. A good example of that would be property large businesses, as an example. Financial lines also continue a bit on that path, and we see some improvement in some, in some, in some other line of business.
Clearly, that's a very nuanced landscape on the Large Corporate side, Large Corporate and Specialty side. Then you were asking some questions on basically the combined ratio improvement, right? First of all, I think you were asking for the U.K., I think. In the U.K. What we see that there has been a lot of work associated to expenses management overall, so productivity focus from the U.K. team. A lot of rationalization that is coming through. As you can see on the page, I think B14, the Nat Cat impact is contributing positively to this development of the combined ratio, is actually the main driver of that. In the underlying, I know U.K. has been cautious when it comes to run-off in general. I think that's the main driver.
I would say in a nutshell, I would say good focus on transformation on the U.K. team showing up in the expense ratio and also mainly benefits from the Nat Cat side, while still being, from a technical perspective, quite conservative. What we see there contributing to the development, first of all, I think very good development when it comes to the expense ratio, which are flowing through. Also, some of the mix effect related to some of the acquisition from that perspective, and also the fact that they had simply a very good also experience during the first quarter that came through into the attritional loss ratio.
Overall, I think the Italian team is doing an outstanding team, an outstanding work when it comes to technical excellence and balancing, basically, selection and growth at the same time.
Great. Thank you very much.
Thanks, Ben. Next question is from Michael Huttner from Berenberg. Go ahead, Michael.
Fantastic. Thank you. One is the capital generation, the 6%. I know every time I ask, you always say, "No, no, the number is far too high." You should normalize it." You keep beating it, and from speaking to you excellent IR, it sounds as if it's more structural now. Can you say a little bit what's changed here? The other one is kind of bit broad question. You're going to be very disappointed, but Thailand said that this morning, AI is incredibly cheap at the moment because basically the AI providers are providing it at below cost, but it might go up in cost once it's embedded.
But you sound as if it's very expensive, but putting the question really simply, what's the payback you're assuming on these investments just to gain a feel for it? Then just a number question. I know it's cheeky. What's the number for PIMCO or inflows in April? Thank you.
Okay. On the flow question, I said I did mention, right, that the momentum is continuing. We are in the low double-digit net inflows as we speak at both AGI and PIMCO.
That's-
Yeah.
That's quarter to date or monthly?
No, quarter to date, but we are big still like it's.
Yeah. That's collectively.
Yeah.
The aggregate of the total.
Okay.
There is a delay as well in the reporting, but basically that's quarter to date. I think you were asking the questions on the cost of AI, right?
I think the way we look at it, I mean, from my perspective, it depends. You have to nuance a lot the cost of AI from one type of tool to another type of tool, depending on what you are using it for, right? I think it's a very generic sentence. The reason why I'm coming from that angle is that if you think about it, the way we are using AI, we are using it along the value chain to optimize, in most cases, our customer experience.
What is happening is that sometimes you need a voice, sometimes you need something that is more image re-image related. So you have very different type of AI agents you are using, and they come with different price point. Where I agree is that we are building our processes and the optimization of our processes in a flexible manner. We usually put in competition two different providers. We select one, but we don't want to be constrained because that technology is evolving very fast, so we want to be in a very easy way capable of replacing that technology with another technology, if you want.
The way we are looking at it is that we are looking at the value delivered against our overall targets all along of those processes, if you want. I cannot really say it's cheap or it's not cheap because some of that is cheap, some of that is not cheap, depending on what you are looking at. What matters from my perspective is what is it that we are really delivering in terms of impact fundamentally into the various business cases, and that's the way we look at it, yeah. I think on the OCG side, first of all, thank you very much.
As you know, we have been working a lot as an organization on making progress on driving operating capital generation. We see indeed that there is good value creation across our businesses. The reason why I will not say you can always take that number and then multiply it by four and have it available is that there are always various components that are coming into the OCG. You may have a bit higher growth, as an example, in some markets, which is consuming a bit more capital, while value creation is going to come later on. You can have different mix effects
Just maybe if you compare this quarter compared to same quarter last year as an example, this quarter, we had less capital consumption in life and health, while we had more capital consumption in P&C, as we had some mix effects that did come up into that number. Where I'm with you is that there is clearly focus, there is clearly steady and good value creation into the OCG. There is as well, just by nature and given the KPI, like some volatility associated to the underlying of what's happening with our business, and we will always have that. That's why I'm very confident with the strictly above 22 percentage point we have communicated, and we continue to strive for good development in that KPI.
Lovely. Thank you.
Thanks, Michael. The next question is from William Hardcastle from UBS. Go ahead, Will.
Thank you. You mentioned that you remain cautious on the initial loss picks with uncertainty on inflationary risk at this time. I guess with that line, are you suggesting there was perhaps more caution than normal in light of the near-term inflationary risk when you booked this quarter, or just a similar level of caution, and you're just flagging it at this stage? The second point is, first of all, thanks for mentioning some AI use cases. We've been at risk of not actually discussing AI all that much through the results season this time around. I wanted to get an understanding of how you're ensuring you're staying ahead of competition in the use of AI beyond just that heavy technology spend. Do you have a strong view at whether your scope of gaining edge over competition here is greater in retail or commercial?
It sounds like mostly you're pointing to retail. Thank you.
Maybe let me start with your first question. I was alluding to two points with my comment. There is one which is obviously at the beginning of the year, we are generally more cautious when it comes to the attritional loss ratio peak, in particular because we have less evidence before being capable of reflecting how the year has unfolded. Actuaries tend to be more conservative. That approach we have kept, and that's definitely into our numbers. In addition to this one, given the overall environment in the Middle East, we have also done both bottom-up and top-down scenarios on what the implication of the situation in the Middle East could have on our reserve strengths.
We have also further added, if you want, to our inflation buffer reserves that we had also already in place previously, where we have contributed in addition in the first quarter to that, to that one. To your question on AI development and how we benchmark ourselves against competition. I will say, we, I mean, I will say, first of all, I think we are ahead of our competition from a different angle.
I mean, if you look at our Capital Markets Day presentation that was one year and a half ago, what we were presenting already, in terms of how an optimized customer experience is looking like when you use AI, it's actually already quite striking. That's a presentation from Sirma. You also have quite some insights on, in terms of what we were also already doing in the presentation from Klaus-Peter. From there, I think clearly, our further enhancements and developments have been accelerating themselves because the technology is faster. We see an acceleration of impact; also, the new technology and the ability to replace the already used technology with new technology is actually quite striking. I will not differentiate so much actually between retail and commercial.
We see within Commercial striking examples of what we can do. Within Partners as an example, I mentioned those OEMs relationship we have onboarded. All those OEMs relationship have actually been onboarded with 0 added employees. We do that 100% AI.
agentic AI -driven. That's very impressive already today. I mentioned within Allianz Commercial all the developments which are done along the value chain when it starts to submission but also to booking or to claims processing with AI is also extremely impressive as we speak. On the retail space, we are working more around verticals associated with our BMP approach. Basically our platform where we are embedding actually AI within the common vertical so that the operating entities can tap into it. From what I see, I think it's pretty distinctive. It's also pretty distinctive in terms of product offering overall, and we see that in some of the pickup of those products.
Okay. Thanks, William. Next question is from Andrew Crean from Autonomous. Go ahead, Andrew.
Hello there. Couple of questions. Firstly, on the retail looking forward into the second half or into the back end of the year, what are you expecting in retail pricing relative to what you're expecting at the beginning of the year? My sense, I suppose the background to the question is whether the Iran war and worries over inflation will have made you think that actually you need greater resilience and that the tough market or strong market in retail will continue longer. Secondly, I just want to ask on the commercial lines combined ratio, I mean, there's a good improvement about 1.4 points to 90.3%.
Could you give us a sense as to what the commercial lines current year attritional core looks like first quarter to first quarter, making that allowance for the change in balance between PYD and attritional?
Yeah. On your second question, you know that normally I don't like so much to comment in the underlying, but basically I can tell you that it's more or less flat year on year on the commercial side. When it comes to retail pricing, so indeed, I think , like, first of all, we are comfortable at this point in time where we are in terms of pricing against against inflation trend, right? You know, it's different and it has to be nuanced also by geographies and for different type of products. In particular, if you look at markets like U.K. or Australia, different situation compared to France, Italy , or Germany, and so on and so forth.
You are right, I mean, we are observing very carefully the inflationary trend in the current environment. We have further reinforced what we call the triangle between pricing , claims, and reserving to be able to react very clearly. We are ready to price up as required. We also feel comfortable that the market is ready to do so in the current environment. At the same time, we are also exercising a lot of nuances, I would say from two angle. We have now even further, even more precise technical abilities, which allow us to have even more nuanced price increases. We also have an ability to reprice that is much faster, as an example, compared to the post-COVID environment.
We continue to push a lot on our distinctive assets, in particular related to our ability to reduce the cost of claims, also tapping into our platforms like so typically what we can achieve via Solvd is a very good example of that, but also what we can achieve via basically optimization of our processes. Ultimately, what we really want to do is to balance the two and then to reinvest as required also into pricing power to fuel the growth. Basically to maximize value creation. That's the way we want to work with that.
Great. Thanks.
Thanks, Andrew. Okay, we're on round two, which I'm allowing 'cause it's a relatively light round two at the minute. Michael, you're first on round two for your second question. Michael Huttner from Berenberg. Go ahead again.
Thanks, Andrew. Lower reinsurance cost, is that coming through? Amazing Germany, maybe you can give us a feel for are we going to stay at 87.6%? I've never seen this before. There we are. That's it.
Thank you very much. I think, like, you know, I think commenting on reinsurance ratio, I will not do, right? Because, from my perspective, reinsurance ratio are always bit difficult t o predict because you also have, like, topics associated with the recoveries. On balance, we expect given the, given how the reinsurance round went at your- end to see a supportive development from that angle into our, into our performance for the year. Yeah
AXA, just to give you a feel for the direction of my question, AXA said, last week, two weeks ago, it was almost material, i.e., almost 5% on their earnings. Would it be the same for you?
I cannot comment on the views of AXA on their technical numbers. I think for me, reinsurance ratio, in our case, I find, I mean, I will see difficult to go along those lines given given the underlying elements which are going into the reinsurance ratio. We are very confident given what we have achieved in terms of in terms of reinsurance benefits at 1/1 that this is going to be supportive of our performance, yeah.
Thank you.
Germany, indeed super nice. I'm glad also you are highlighting it. I think we also need to praise other operating entities, right? When we look at this page, B 14, which is really nice to look at, right? I mean, like I will not, I cannot predict where Allianz Versicherung is going to finish the year. They are clearly on a very strong performance track, both when it comes to underlying technical excellence, but as well when it comes to their growth trajectory. We are very proud of the business. As we are, I think as well, very proud of many of our businesses.
I name a few already, but we have a lot of very, very strongly performing entities. I also want to highlight as an example on this page the super nice performance of Allianz Trade as well, which we are not always naming, it's also very impressive with 80% combined ratio in the first quarter.
Thank you.
Thanks, Michael. We have a quick follow-up from William from KBW. Go ahead, William.
Hey, guys. I'm so sorry. I know it's bad form, but I kind of feel I've got lost in the detail on this discussion about underwriting. Can I come back? The outlook for the combined ratio you've guided to 92%-93% for the full year, and yet you've just printed 91%. Everything that I've heard you talking about is all about conservatism in loss picks and normality of reserve development and the rest of it. I just wanted to kind of cut to the conclusion. You know, are we getting a message that you're comfortably running ahead of your guidance already? Or what are the obvious things that's gonna drag you through to the end of the year? Maybe I'm just underappreciating that cat, so it's been a light quarter, and the rest of the year is gonna be tough.
Can you just help me with the overall punchline here about why 91 is so good against your guidance? Thank you.
Indeed, in our guidance, we have communicated 92%-93%, 92-93 being the guidance for the combined ratio. If you look at our 91 for the quarter, if you neutralize all the other effects, right, and you look at it and you step back, it has benefited from a lower level of Nat Cat. If you normalize for Nat Cat, we are basically in this 92-93 range of combined ratio. This is only Q1, I feel very comfortable with our guidance, 92-93. We are definitely on a very strong track, but I think it's too early for adjusting that guidance as things stand now.
Okay. That's helpful. Thank you.
Okay. The next question, apologies, Vinit. I didn't see you on the queue there. Your first round of questions, Vinit, its Vinit Malhotra from Mediobanca. Go ahead, Vinit.
Thank you, Andrew. My two questions, please. One is on growth , and one is on pricing. On growth, if I could just maybe follow up, maybe just get a bit more because, you know, when we talked about Germany, for example, we've always talked about how retaining customers, how getting more customers, so more retail focus as well. I think you mentioned earlier in the call that there was a bit of slowdown in the retail side in Germany. Could you help us understand that? Just staying on the growth topic, sorry, just a little more. The commercial growth, 6% up from 3% in 4Q, you know, pricing was only 2%.
You said you're comfortable with the business, but is that just a rate trend? Could you just clarify that, you know, exposure kind of growth, if you like? On pricing, when I look down the pricing data between 12 months and 1Q, many OE and many OEs are, you know, reducing pricing or seeing lower prices. Obviously inflation is a risk you mentioned, you just highlighted, you added to the buffer. Is that to be expected? Are you expecting it to change this direction of travel of pricing, or what do you think is happening there? Thank you.
Let me start with growth. Starting with growth in retail, what I wanted to say is that we see that there is a, on the volume path, clearly strong underlying dynamic within our operating entities. There is a very strong focus on the execution of our, what we call the growth triathlon, right? This new business retention and cross-sell. That's what we see across the businesses, and we see very good peak of that momentum in the underlying businesses. That's what we have also seen in the second half of the year starting, right?
What we have seen as well in the first quarter sometime is a bit more of some of the, some seasonality effect, if I may put it this way, related to a mix when the business is coming up for renewal and what that means. That also has contributed to some of those lower volume effect in our German business in particular. As the year is going to unfold, this, there will be a catch-up that is going to contribute to the volume growth of our German business as the year unfolds, to be precise. On the commercial side, we have indeed a good internal growth that is resilient.
We are around 6% for the entire commercial business. There we have different businesses, right? I think you need to have that in mind. We have our partner business. We have Allianz Trade that has seen also good growth development in short-term as an example. We have Allianz Re, which also has seen good growth, which is more like, you know, this type of transactional business. Then within AGCS, we have the elements I was mentioning. This catch-up effect, which is more of a technical effect, I would say. Then secondly, this appreciation of the franchise, the new tools being in place, and the different way of engaging with the market.
All of that being done, being extremely cautious in the overall pricing environment. That's where we are. Sorry, I realize I did not answer your question on I don't know. Sorry. Coming to your question on pricing, when it comes to retail, I think my answer will be nuanced, right? I think we are ready to increase prices. We feel confident we can do so for the various reasons I was mentioning in terms of technical ability to do and operational ability and feasibility into the system. At the same point, the fact that we want to maximize value creation, we want to optimize the price against the volume. That's basically what we are aiming at.
I cannot predict exactly how the markets are going to react and what would be the inflationary effect in each and every market. That will depend on that, and then we will be doing that optimization. I think that's the way to look at it.
Sure. Thank you.
Thanks, Vinit. We have no more questions in the queue. We had one question by email to the team just to clarify a comment made about our flows, net asset management flows since the quarter end. To clarify, it's low double-digit for the asset management segment, so the combination of AGI and PIMCO. Momentum continues for the segment at that level. With that, we have no more questions. Thank you very much. This concludes today's analyst call on our 1Q 2026 financial results. Thank you for your participation, and goodbye.
Bye-bye everyone.