Good morning, everyone, and welcome to Allianz's third quarter and nine months 2026 media conference call. Thank you very much for joining us today. My name is Frank Stoffel, Head of Financial Communications and Valuation Relations. I am joined today by our Chief Financial Officer, Claire-Marie Coste-Lepoutre, and our Head of Group Communications and Corporate Affairs, Lauren Day. Before going into the presentation, let me briefly cover the usual housekeeping items. We will answer all questions in English. However, if you feel more comfortable asking a question in German, please feel free to do so, and we will then repeat the question in English for everyone else on the call. If you want to ask a question during the Q&A session, press star five if you have joined via telephone, or press the talk request button on the web audio call.
If you are on an IP-based telephone, this may cause technical problems for you. If this is the case, please email media.contact@allianz.com, and we can assist you with your setup, or we can take your question and ask it on your behalf. Today's conference call is scheduled for 60 minutes, and as usual, we will answer your questions following our presentation. With this, it is my pleasure to hand over to our CFO, Claire-Marie.
Thank you very much, Frank, and good morning, everyone. I am very pleased today to report a strong quarter and an excellent nine months performance, as you have certainly already seen. Our sustained deliveries throughout the year has allowed us to raise our full-year outlook, and we are very pleased with that, clearly. From my perspective, the third quarter was an excellent demonstration of the value of our diversified business model. We absorbed in the quarter a higher level of weather events and capital market volatility, while we are still delivering in the underlying a strong level of profitability across every segment. For the first nine months, every segment is ahead of its pro rata operating profit outlook midpoint, which clearly demonstrate again the quality and the resilience of our performance. You will see that well illustrated in the pages that follow and that I am going to cover now.
Let me start on page A- 3, and highlight some points here, starting with the top left, with the top line. As you can see, our total business volume at the end of the third quarter is up around 4% on an internal basis. We continue to see good growth in P&C, as you can see in the small bubble chart, and very strong momentum in asset management, while life is matching a higher prior year level, which included some large single premium contracts. If we move to operating profit on the right-hand side, you see a strong growth to the nine months. We are up 8%, and that is supported by profit growth from all segments. As already mentioned, the third quarter included an elevated level of natural catastrophes and also severe weather claims, which impacted the European insurance industry.
We have seen a strong underlying profitability in P&C, a good profit delivery in life, and an excellent profitable growth from asset management, which all three contributed to significantly offset this natural catastrophe effect. We are in a position now to raise the upper end of our operating profit target range to around EUR 18.6 billion, with the usual caveats. If we were to deliver this amount, we will see another very healthy growth of this key metric, which I am very happy with. Moving to net income, you can see here that our year-on-year comparison still include some net positive impact from the disposal of the Indian JVs we have booked in the first quarter.
If you adjust for this, which I think gives you the right reference point, our core net income increased by around 7%, and actually, our core EPS growth is at 8% on that same basis. This 8% is, first of all, fully in line with the development of the operating profit, and secondly, is well in line with the Capital Markets Day range we had communicated back in that time of 7%-9% EPS growth. Again, excellent performance. On the same basis, still again adjusted, our core ROE is running at an excellent 19%. This 19% is, first of all, well ahead of our Capital Markets Day target, which was at least 17%, and secondly, is also ahead of what we have seen at the year-end 2025, which was 18% ROE.
What is also very nice is that all segments are actually improving versus the 2025 base. Also, very pleasant to see the development of our Solvency II ratio. We emerge with a very strong level of solvency of 219%, which is a high level of resilience for the organization. We achieve this outcome due to the fact that we are capable of generating a strong level of operating capital generation, which has allowed us actually to absorb two main effects. First of all, a larger level of volatility we have seen in the third quarter on the market side. Secondly, the fact that we have done a good accretive capital deployment with the acquisition of the M Unit of PIMCO for 5% more ownership of PIMCO in the third quarter, in line with what we have announced.
Overall, an excellent nine months with delivery across all segments, I am again very happy with. Let us move to page A- 4 and let us have a look at our P&C business. Starting with the left-hand side, here you can see that our internal growth is at 5% and continue to be strong. This growth is higher in retail lines at +7%, while commercial overall reflects our prudent management of the market environment, which allows still for good selective growth in the underlying of our diversified portfolio. If you go into the portfolio, you will see as an example that our MidCorp business is growing by 7%, that our Trade business is growing by 5%. The overall picture is very nuanced, is this nuanced landscape of commercial.
Similarly, I think when it comes to rate change, we continue to observe a wide range of pricing dynamics across our portfolio, both from across countries, but also across line of businesses. Again, very nuanced landscape. If we look at the underwriting profitability, so in the middle, and our combined ratio, our combined ratio is running at the lower end of our 90%-93% range that we had communicated as part of our outlook. This is supported by a good level of combined ratio, both on the commercial side and on the retail side. So it's also again demonstrating the strengths of our diversified portfolio. NatCat claims were benign, as you know, in the first half of the year, but they have been elevated in the third quarter, mostly driven by a series of European hailstorm events we have seen then.
This very resilient combined ratio is as well supported by our structural focus on productivity. We are again delivering at nine months lowered expense ratio by 30 basis points year-on-year. We also have seen good support from the higher level of run-off in the third quarter. We continue as well to keep a cautious stand when it comes to inflation, and we have kept unchanged the inflation buffer that we had booked in the first half of the year, again demonstrating our focus on resilience as well as an organization. Our operating profit growth is at 3% year-to-date. It's also somewhat understating the underlying performance, given the higher level of natural catastrophes we have seen in 2026 compared to 2025.
Our operating investment result is up 16% year-to-date and is benefiting from growth in the asset base, higher reinvestment rates, and as well the inflation linkers we had invested into. Overall, if you step back and you look at the P&C business, what do we see? We see a P&C business that is continuously delivering an excellent profitability and growth despite cyclical and inflation uncertainties and NatCat volatility. We do that without impacting our resilience. Our inflation buffers are increased year-to-date, and also our growth is carefully managed, as you can see in the detail of this document. Meanwhile, the investment results benefit from the interest rate backdrop and the tactical accelerated reinvestment we have undertaken earlier in the year that were fueled by the Bajaj gains. Let me move to Life on page A- 5.
Here you can see that our Life new business momentum has continued to improve over the course of 2026 in line with expectations. While the headline growth numbers reflect the impact of divestment that were performed in 2025, FX, and some large contracts that were booked last year, our new business volume increased 4% in the third quarter on a standalone basis, with value of new business broadly stable. We continue to prioritize an attractive business mix and level of profitability. You will see in the details that over 50% of our new business value at nine months is generated by unit-linked and protection and health. Our overall new business margin is at a very healthy 5.5%, which is ahead of our Capital Markets Day commitment of 5%. We see as well a strong growth across a broad spread of Life businesses beyond Germany and U.S. Life.
This is particularly pleasing to see that growth being generated across the portfolio. In the third quarter, for example, 55% of the new business value was generated outside of Germany and the U.S., growing 13% year-on-year and broadly spread across Europe, CE, and Asia Pacific. For the German Life business, growth rates are impacted by a large single premium ticket that was booked last year in the third quarter. Our German Health business continued to deliver an excellent double-digit growth. In the U.S., we target maintaining a strong level of profitability in a competitive market. Moving to CSM in the middle, you can see that our normalized CSM growth year-to-date is at 3.7% adjusted for a correction we had to undertake, running then close to our full-year expectation of 5% normalized CSM growth.
The overall CSM has been impacted a little by market volatility, but that is absolutely logical, right, when you think that CSM, to simplify, is our stock of future profit, right? This movement is in line with our disclosed sensitivities. Our Life operating profit is developing well. It is actually up 5% like for like, and slightly above the midpoint of our outlook. Unit-linked protection and health accounts for just under half of the segment profit, up 11% year-to-date, and also contributing very nicely to the development of our overall Health and Protection profit, also again fully in line with our Capital Markets Day targets. Overall, in life, we see a good underlying performance in both life and health, and also an improving headline picture as the prior year comparison is actually the effects linked in particular to divestment are actually fading away.
We see good growth in our preferred lines of business with a clear focus on maintaining strong new business profitability as well. Let me move to asset management on page A- 9, where you can see that the third quarter was another excellent quarter for flows at both of our asset managers. Year- to- date, we have seen EUR 132 billion of net flows, including EUR 47 billion in the third quarter on a standalone basis, and again, stemming from PIMCO and Allianz Global Investors. I am very happy with that delivery of both asset managers. This is equivalent, so this amount of net flows is actually equivalent to an annualized organic growth rate of 9% that we have achieved in a volatile market environment, especially for fixed income. Our asset under management are up 8% year-to-date.
Flows continues to be supported by our strong investment performance and also our broad market offer, both in terms of ranges and strategies, which really cater for varying investor preferences and also for the possible allocation shifts that investors may want to do. Our revenue growth was strongly supported by a higher average asset under management, higher performance fees, and a slight increase in the recurring fee margin, which was helped by mix effects such as a higher share of mutual funds, equities, and multi-assets. The operating leverage is clearly evident in our operating profit growth of over 20% year-to-date, FX adjusted. This operating profit is the highest nine-month operating profit ever generated by the segment, so we are extremely happy with the performance of our asset managers.
And as a reminder, I already mentioned that as well, during the quarter, we have completed the acquisition of just over half of the outstanding M Units, which will increase our participation in PIMCO net results by 5% from the first quarter onwards. Overall, an excellent year so far in both asset growth and profitability, which is delivered by both AGI and PIMCO. The environment creates many opportunities for our asset managers, supported by strong track records and broad capabilities at both of our asset managers. Our capital deployment into the M Unit and also the acquisition of UOB Asset Management in Singapore will further support a healthy and growing contribution of asset management to group profit in 2027 and beyond. Let's move to page A- 7, where we can have a look at the development of our Solvency II ratio.
You can see here that our operating capital generation in the third quarter was similar to the one we have seen earlier in the year, bringing the year-to-date to a strong 18 percentage point. The third quarter has seen some market volatility, especially in government spreads, swap rates, and inflation expectations. T he ultimate outcome of this one was very manageable when you look at the impact into our Solvency II ratio. We acquired the PIMCO M Units, which impacted the solvency by around 4 percentage point, but with an immediate positive impact on future earnings as of the first quarter. And overall, the strong capital generation and the well-contained market effects mean that we ended the quarter at a very strong solvency level of 219%, even after the capital deployment we have undertaken.
Overall, we are in a very good position, both in terms of the absolute level of our Solvency II ratio, but as well when it comes to the sensitivity of our capitalization, which I think is very important in the environment we are operating into, which is a volatile environment, and our ability to generate capital through our business portfolio. This further underpins the strength of our resilience and as well as an organization. Let me wrap up on page A- 8. And clearly, our nine months performance put us very well on track for our 2026 guidance, and it is very pleasant to see strong performance spread across all our segments. Diversification of our business within and across segments is a critical source of resilience, as it was well demonstrated in the third quarter, where we delivered strong profitability despite the higher incidence of severe weather events.
I now also want to take a moment to say big thank you to all our employees for their work and also for their engagement in delivering such results. Very pleasing to see. Turning to the outlook for this year, we are in a position now to raise the upper end of our operating profit target range to around EUR 18.6 billion, bearing the unforeseen significant natural catastrophes or capital market events, as always, right? We are clearly very confident in the full-year outcome and in delivering a strong and sustainable level of profit. This gives us an excellent base from which to progress into the final year of our Capital Markets Day cycle and also achieve our targeted levels of profitability, ROE, and capital generation. With this, I thank you for your attention, and I will be very happy to take your question. Thank you. Frank.
Thank you, Claire-Marie. Please register your question now. Before we start the Q&A session, let me briefly repeat the housekeeping for your benefit. If you want to ask a question now, press star five if you have joined via telephone, or press the talk request button on the web audio call. If you are experiencing any technical problems, please email media.contact@allianz.com, and we can assist you with your setup, or we take your question and ask it on your behalf. The first question comes from Tom Sims from Reuters. Tom, your line is open.
Good morning. Are you able to hear me well?
Loud and clear. Thank you, Tom.
Splendid. Apologies in advance for any background noise. Two questions. One, on bond turbulence. How has Allianz been navigating and positioning itself amid the sovereign bond turbulence of recent months? To what extent are you perhaps concerned about excessive borrowing by some governments? Maybe you have shifted holdings or reallocated in some way to reflect any worries or developments. A second question on the new German retirement investment accounts that go into effect in January. Standing back just a bit, what are you expecting more broadly for society as a whole, and what are you expecting for the financial industry from these accounts, and what, in particular, is Allianz doing to prepare for them and capitalize on the effort?
Thank you very much, Tom, for your questions. Maybe, let me start with your broad question on what we are doing when it comes to the govies in general and to our exposure when it comes to govies. As you know, and you can see that also in our disclosure, we are owning quite a number of government exposures across our portfolios, and in particular, across our portfolios on the life segment side. That's a very natural exposure to have. Also because, as you know, we are a liability-driven investor, so we are processing in terms of asset and liability management. We get a liability, we estimate what will be the profile of the liability over time, and then we match in terms of investment with what we believe is the right matching.
Usually, govies do offer a pretty unique profile that they can be very long duration, so they are very helpful for us in order to match, in particular, the long-duration liabilities we have on the life and side. So we feel very strong about our technical excellence as well from that aspect. While we are always, you know, monitoring the overall market, and we have very strong teams to do that, we are not taking any strong positions at that point in time. Actually, you can see as well that this is well managed in terms of sensitivities. If you look just at the third quarter on a standalone basis, just to get some views around that, because if you just look third quarter, the spread widening, as an example of French, French govies, was strong at 50 basis points. Italy was like 25 basis points.
The ultimate outcome of that in terms of impact of our Solvency II ratio was extremely well manageable, because it's only one of the elements contributing to the 4% decrease of our Solvency II ratio. Moving to the German retirement opportunity, I would say, as a whole, right? Clearly, we see that as an opportunity. We believe it's very good for people to be supported in investing in preparation of their retirement as early as possible. As you know, the German government is offering opportunities also and is also looking at offering options even for children to start investing into pensions. So we see that extremely favorably, and we believe this is the right action to take, really because we strive for protection, retirement, reassurance, and we believe it's a very important core part of helping people to sustain through their life.
Across, as Allianz, we will be ready for January 1, very clearly. We will have multiple offers across both, actually three offers, across AGI and Allianz Leben. Some of them, we will have the very simple product, which will be very, I would say, with a very low level of cost for the customer, but that will not be providing any advice. And we will have two different products with advice, one that will provide a guarantee and another one that will not provide a guarantee, so that we can answer the different needs of our customers the best possible way. Obviously, as Allianz, we are convinced that when you have to take such long-term decisions for your pension, you first of all want to make sure that your pension provider is going to be there in 20 or 30 years from now.
As such, rating, quality, resilience, security you provide is an absolute must for pension products. Secondly, you need to discuss with each and every client what will best fit to their own profile, family situation, and so on and so forth. We are strongly advocating for the advice-supported retirement products.
Okay, thank you.
Thank you, Tom. Our next question comes from Ben Dyson from S&P Global Market. Ben, your line is open.
Hi, good morning. I just had one quick question on reinsurance. I was just wondering if you could say how Allianz plans to take advantage of the current softer market conditions in reinsurance, and in particular, whether you are expecting January 1, whether there is going to be any more flexibility in terms and conditions and attachment points and things like that, in addition to price reductions. Thank you.
Thank you very much for your question. I think to be concrete on the exact effect of the renewals, it is a bit too early because those are renewal at January 1 for us. We will see. We are now starting the concrete engagement with the reinsurers to negotiate, right? To answer precisely your question is, at this stage, not entirely possible. I can give you a direction, right? Clearly, what we have seen over the last two years is a reduction in cost against exposure. Clearly, a softening of the reinsurance market. When it comes to us, we like our reinsurance program. It has been well calibrated. We will continue to optimize both the price and the conditions on that program.
We will clearly, we are planning to take advantage of the softer conditions to introduce what we call more tactical reinsurance structure into our program, where typically the cost of capital offered via the reinsurance structure is cheaper compared to our own cost of capital. We have a number of options we are looking at. In particular, as an example, elements which will entail like aggregate covers, which are always very useful for us typically to absorb volatility further.
Thank you very much.
Thank you. Next question comes from Florian Müller, Financial Times. Florian, your line is open.
Good morning, and thank you for taking my questions. I have three, but two of them are actually interconnected. The first one is following up on Tom's question about the German pension reform. How worried are you overall of a ruinous competition in that market, given that so many of the retail platforms have said that they will waive fees almost entirely? Can Allianz compete on those terms overall? Does Allianz want to compete on those terms? The other question would be, during the second quarterly call, you gave some updates on data center exposure and also on private credit. On the data centers, how has the outcome of the U.S. midterm elections changed the outlook on data centers and on the AI boom overall? Do your asset managers still find attractive deals out there, or have you halted lending?
The second question, overall private credit, how do you judge Allianz's current portfolio? Have there been any changes in that? Thank you.
Thank you very much for your questions. Let me start maybe with the third one on the private credit portfolio. We have displayed fully transparently the structure of our credit portfolio at year end, so you can always refer to this one. The structure per se and the allocation to various buckets has not moved significantly since then. Let me just zoom maybe into the middle market lending, which is the part of the portfolio that is the risky part, I would say, and is relevant, I think, when it comes to this development of the market. As you know, we are very conservative when it comes to the underwriting and the pricing of that book. We do underwrite with a loss assumption of something like 120 basis points at point of underwriting.
While we have seen over, I will say, 2024 and 2025, and now at this point in 2026, slight increase in our loss experience, it's extremely below the pricing level of 120 basis points. We are monitoring, and there is maybe a higher level of default, but our recovery rate is extremely high. As such, we see, we see good performance. That's for middle market lending. On the data center exposure. As you know, the way we are looking at data center for us as a business opportunity is clearly, I mean, is threefold, I would say. We are looking at data center as an opportunity for PIMCO in particular to source, to source good deals that can basically fuel their investment universe.
This is also an opportunity, by the way, combined, which is pretty unique with AGCS, that is a provider of reinsurance on data center as required. I am going to come back to that. Lastly, similarly, also Allianz Trade as part of this data center exposure can also offer a dedicated product on the construction path of the data center. So for us, business-wise, it is a good opportunity in multiple parts of our portfolio.
The last part, which is more what do we do on the asset side, are we an investor or not into a data center in addition? So maybe to answer with the last point, when it comes to our exposure into data center on the asset side, is actually extremely minimal. I think it is something like 1%. It is below, I think it is 1% of our overall asset under management, so it is quite low.
On the underwriting side, it's actually also something we are looking at quite carefully, right? Because data centers are coming with dedicated type of exposure, and they have unique type of risk and features. So we do underwrite them, we provide capacity, but we are very mindful of the accumulated risk we may have associated with data center. So overall, I will say, the environment is supportive of us. I would not think that what is happening currently post-midterm will impact our trajectory, because we are cautious in the way we are looking at it across the full range, I will say, from PIMCO, Trade, AGCS, and also what we are putting on our own balance sheet.
When it comes to the German pension reform and competition, so you are rightfully highlighting the fact that there is competition out there, competition out there usually mostly positioning itself on the cheaper product, and also making promise, which, by the way, if you look at the tiny print, are usually quite restricted in time. What matters clearly is also what will be there for customer over a very long period of time, because we are talking about pension products, right?
So you should look at it for 20- 30 years, and I think if you are planning to invest, you should be very mindful of the trust you have in the institution, the quality of the balance sheet of the institution to secure the fact that this institution will be there long term, and what is also the quality of the services and the diversification of the underlying product you can provide. So in that overall environment, first of all, we are really convinced we can compete in leveraging our assets. Please also have in mind that Allianz Leben is by far the largest life insurer in Germany, and our cost of delivering a service is by far the lowest, and it is extremely difficult to beat for anyone entering that market. So we are very confident we can compete in that environment.
Thank you.
Thank you, Florian. Our next question comes from Herbert Fromme, Versicherungsmonitor. Herr Fromme, your line is open.
Good morning. You covered the high NatC at losses by higher reserve releases from previous years. How long can you go on with that? I mean, to increase reserve release to that level looks a bit desperate. In order to keep your results within your corridor you wanted, you had to give up reserves big style. My second question, at AGCS, the renewal rates are down 5.7%. They were down 3% last year. When is this business no longer attractive for you? Are you prepared to withdraw from some business if the markets continue to weaken? If you look at the overall picture, asset management is the main driver of your earnings growth. Is that sustainable? You also talk of, in the presentation, there were some one-off effects. How large were they? What could you deliver in weaker capital markets?
Finally, you made a couple of years ago headlines with Allianz Partners announcing AI-induced job reductions. In the meantime, Munich Re and Generali have indicated how many jobs will go as a result of higher AI use. Will Allianz give us an indication for a group-wide reduction in jobs because you use more AI?
Thank you very much for your question. Let me start maybe with the AI topic. I think it is very clear that we are not thinking about AI along those lines. For us, AI is clearly a source of growth. That is the way we are thinking about it. Maybe if you step back fundamentally and you look at the development of the insurance business over time, you will see that in many countries, even in Europe, but also around the globe, insurance is under-penetrated. Why so? It is because the cost of advice is so expensive. It means that many people are actually not in a position to afford the cost of advice that is associated with insurance.
With AI, there is clearly an opportunity to address this point and to make more advice possible to many more people so that they can benefit from insurance protection, which we clearly see being a massive opportunity for us midterm. That is the way we are thinking about it. We are doing our work. We are optimizing the delivery all along the value chain to deliver a much more customer-centric experience, better, faster quality of delivery of the services to our customer. This is fueling higher level of customer satisfaction. Obviously, when you have leaner processes, those processes are costing less, and this is fueling growth, which then is also fueling productivity. This is the mindset into which we are entering into leveraging AI as an organization.
We clearly think that we are really well positioned to win in that environment because we have a very well-recognized brand. We have the number one insurance brand in the world. We have a high level of customer satisfaction on which we have been working for many years, and not focusing on one single product, but on all products, which is very important also in the LLM-driven world. We have a lot of tangible physical assets which allow this different customer experience, which matters a lot in terms of delivery of services. Obviously, we have many, many super talented people who are at the base of making all of that possible. We see ourselves extremely well positioned to be able to win in that AI environment, supporting more growth, and that is the main driver of our productivity increase.
We don't think we are in the need to take any type of radical job reduction. You have seen that over the many years, we have been reducing our expense ratio by 30 basis points year-on-year. Also, clearly, we are in an environment where we have the baby boomers that are also going to come into retirement, and that is going also to help via the age pyramid of us achieving what we think is the right situation for the future. That' s for AI. Looking at asset management overall, there were some smaller one-offs. I don't think this is super relevant to go into a lot of details there. We have seen some one-off in particular coming into the cost income ratio. We have an exceptionally low cost income ratio in the third quarter.
You should not think that this low level of cost income ratio is going to repeat, as an example, on the fourth quarter on a standalone basis, in particular as well, because there will be also further catch-up for variable compensation, which makes a lot of sense given the excellent performance of the asset management segment. Now, when you look at what we are fundamentally doing in the asset management environment, right? First of all, we have a very strong level of performance we are delivering for our customer, which I think is the base for customer satisfaction, clearly. We have also worked structurally on having an enhanced offer in terms of product offering.
We do offer quite a large variety of products with also different price tags across the full range, and we allow flexibility for investors to move depending on the environment, which I think is extremely important also for resilience of the performance of the asset management segment. Last but not least, if you focus only on PIMCO and if you focus only on rate dynamics, then you may come from that angle that short term, there is clearly a lot of volatility, and this volatility may have an impact immediately on the flows of that business. But clearly, the level of rate, and also what the rate level is offering in terms of benefits once you start also to see the reinvestment of dividend at a very high level of rates, this is a highly constructive environment midterm for PIMCO as well.
If you take all of that together, we are clearly very confident when it comes to the future performance of our asset management business. On AGCS, where you were mentioning that indeed rates are down. They were also down previous quarters. That is clear that AGCS is operating in a softening environment. I n that environment, clearly, because we are not that big, and there is a lot of opportunities, and we have also specific skills, we are clearly confident that there is part of the business where there is good opportunity for growth, and we are capable of tapping into these opportunities for growth. If you zoom out and you look at the overall commercial segment, which is the way you should compare ourselves, by the way, against any competitors, because competitors will report commercial segment overall. In that commercial segment, this is extremely nuanced, right?
AGCS on a standalone basis is only 13% of our total top line in P&C. In the overall commercial segment, we do see growth at Allianz Partners. We see also growth at Trade. MidCorp has an excellent level of growth. I think in the third quarter standalone basis, MidCorp was growing at 10%. We do have, in our very diversified portfolio in commercial, also a lot of opportunities we feel very comfortable we can tap into. I think AGCS is doing a very good job at managing in the cycle in a very technical, excellent way. On the reserve release, I want to reassure you, the quality of our balance sheet completely unchanged as it stands.
I was highlighting the fact that we have further strengthened our balance sheet, also building an We have built an inflation reserve to the mid-year that is unchanged, so that is there. What came through in the quarter are natural runoff out of good performance, in particular, I will say, in motor, in some of our portfolios that has been flowing through.
Thank you, Claire-Marie. Angela Maier, Börsen-Zeitung, has sent over a few questions which I am going to read out. The first question is on the outlook range. The outlook range was already very wide and has now become somewhat wider. Why did you not raise the entire range, for example, from EUR 16.6 billion- EUR 18.6 billion? Second question, P&C total business volume grew by 6% in the third quarter and by 5.5% in the first nine months. If you strip out price increases, did you still grow without price increases? If so, by how much? The third question, net income declined by 1.7% to EUR 3 billion, despite a 6.2% increase in operating profit. Could you please name the main factors for the difference?
Maybe I can start with the last question. It is actually very good points indeed when you look at the There are some elements which are contributing to this reduced level of shareholder net income growth versus the operating profit growth in the third quarter. Some of them are linked to the market volatility we have seen, which came with negative effect into our numbers. There is a second effect which is related to the fact that we had a bit higher restructuring expenses in line with what we have announced with the offset of the bad debt gains that were booked in the first quarter. That' s actually going into that direction. Then we have a technical effect which is related to the fact that in the third quarter last year, we did acquire iptiQ.
That was a company that was in distress, and so we had to book a bad will, which is pretty unusual. That contributed positively to our non-operating profit, so contributed positively to our net income in that year. Then we have a higher level of tax rate in the third quarter on a standalone basis versus last year third quarter, for two reasons. One is the fact that the German tax reform came through in the third quarter last year, so that was a positive to our tax rate. The second effect is related to the fact that because iptiQ was a bad will, it was tax exempted, and so that also contributed positively to our tax rate. That altogether represent 2 percentage point of tax rate. That is quite an effect. Those are the main drivers.
That is why I think it is very important to look more at the nine months and to look at the normalized, which I think really gives you a good sense. There you see the symmetry between operating profit and net income development. Then I think you had a question on outlook. Clearly, we have raised the upper end of our outlook range as a very strong sign of confidence that we will be in that upper end of the target range. As such, I think what is going below is not so relevant from our perspective.
Sorry, there was one more question on property casualty total business volume, 6% growth in the third quarter. How much of-
Yeah, indeed. Sorry. So you are absolutely right. There is volume growth in the third quarter, so we see almost 2% volume growth in the third quarter in P&C.
Thank you. Next question comes from Maximilian Volz, PLATOW. Maximilian, your line is open.
Hello. Thank you for taking my question. It's a very short one. It is a very easy one. I want that you please give me a short summary about the German market, which parts increased, which parts decreased, and then maybe a little bit of an outlook. Thank you very much.
In German market, in P&C, we are extremely happy with the performance of Allianz First. They are doing extremely well. We continue on our trajectory of gaining market share, both in motor and in non-motor, and that is really fueled by the quality of advice, the enhanced product offering, and the way we are engaging also from a distribution perspective. That is where we stand, I would say, from a growth perspective. We clearly see as well that from a profitability perspective against the German market environment, we are also performing better. So we maintain, if you want, the competitive advantage we had also in terms of profitability versus market as it stands.
Thank you very much.
Thank you, Maximilian. The next question comes from Steffen Weyer, dpa-AFX. Steffen, your line is open.
Good morning. Just one question left for me, from my list, concerning the NatCat losses in Q3. May you tell us which were the most costly catastrophes and what was the comparison figure from Q3 last year?
Let me look for, because that level of details, I wouldn't have—
Could you just say that one more time? Could you repeat your question one more time, if you don't mind?
Yes. No problem. Concerning the EUR 1.1 billion nat cat losses in Q3, which were the most costly catastrophes in the quarter, and what is the comparison figure from the year before, Q3 2025?
Okay, now let me go through it. I think, clearly, what in the third quarter, we have seen a lot of events which are the major driver is, as I have mentioned, is related to hailstorms. We have had a large hailstorm in July and another large hailstorm in August that went through the European market, so in particular Germany, France, Italy, Spain. In total, for those two, it represent almost more than EUR 700 million for those two events. We also add the wildfire, as you know, both in Spain and in France, and they also represent a significant amount. And then we had smaller events, which contributed to the full total of almost, I mean, a bit more than EUR 1 billion net, so EUR 1.1 billion net of NatCat event for us.
In addition for that, you will not see that in our NatCat numbers, but that is contributing into the attritional loss ratio. We have had quite a high level of weather-related events and also subsidence in the U.K. in particular, that are also contributing to the overall weather-related impact we had in our numbers. For the third quarter last year, we only had EUR 60 million net of NatCat event in the third quarter. You can see a massive delta between the two quarter.
How many million was it last year? I did not get the figure.
Sorry, 60. Six, zero.
Sixty?
Yeah.
Okay.
It was 1.1, 3Q, and 60 for last year.
Okay. That's nearly nothing for you. Okay.
Thank you very much.
Thank you, Steffen. Next question comes from Jean-Philippe Lacour, AFP. Jean-Philippe, your line is open. Jean-Philippe, we can't hear you. Please send us your question, and we will come back to you on your question after the call. We've got one follow-up question from Herbert Fromme, Versicherungsmonitor. Mr. Fromme, your line is open.
In this struggle for the future of German old age provisions, you made quite generous offers to brokers for commission payments for the new system. Is that an attempt to shove competitors out of the market? Will you use this as a kind of market consolidation tool?
I mean, clearly, I think this is, from my perspective, that is a very different type of topic. First of all, I think what was communicated and what is really going to be priced into for customer is still in the making because we are waiting for some further technical elements associated with the overall setup of the pension provision products. Also, maybe if I may bring you back to the point I was making on the fact that we believe that advisory is a very important component, and secondly, that we are able to compete in that market given the fact that we offer, given our scale, very unique advantages that we can tap into. This will be looked at in connection with the fact that what matters most for us actually is to provide trust, reassurance, and transparency to our customer, right?
What it is that we have been selling for hundreds of years to customer is clearly the fact that they can trust us, and we will be there for them when it matters, right? So there is no thing we will ever do that will impact negatively this level of trust we want to provide to our customers. So clearly, there will be high transparency, and we will be very clear on what is the offering we are providing back to our customers.
With respect, you did not answer the question. The question was simple. You offered high commission for the new system, higher than anyone else has offered so far. Is that a tool for you to consolidate the market and drive others out of it?
My answer was implicit in what I have already replied to you, right? Is that, I mean, your facts are simply not right. If you want to discuss the facts in more detail so that you can have a fully comprehensive overview on what that means, we are really happy to take that as well with the experts going into more details.
Good. Thank you very much. This was the last question of today's call. Thank you very much for the very interesting discussion. Just for your calendars, we will report our fourth quarter and 12 months 2026 financial results on February 24th, 2027. This concludes today's media call on our 3Q and nine months 2026 financial results. Thank you very much for your active participation, and goodbye.