Ladies and gentlemen, welcome to the Allianz Conference Call on the Financial Results of the Second Quarter 2021. For your information, this conference call is being streamed live on the 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, Mr. Oliver Schmidt, Investor Relations.
Please go ahead, sir.
Thank you, Tracey. Yes, good afternoon from my side as well and welcome to our conference call. Today, I'm joined by our CEO, Oliver Vette and our CFO, Giulio Tatario. As always, Giulio will guide you through the details of the quarter. But before that, Oliver is going to share some personal thoughts with you.
Oliver, over to you.
Yes. Good morning, good afternoon, good evening wherever you are. Thank you for joining us this call, this has been an extraordinary quarter, actually an extraordinary week and an extraordinary day today. And I wanted to speak directly to you as our investors and our analysts and share a view on the health and the performance of our company as we stand today. As you've seen, Allianz reported very strong results that Really reflect the resilience and power in delivering our strategy.
And I think it's very important to note That this is not a one off that is the outcome of continuous investment in resilience and earnings power that you are seeing. And I'll talk about the Drivers of that in the second, demand for our products, as you've seen in services, growth, income, profit flow, Cash flow are on the rise everywhere, and I think that's very, very important to understand as is Customer and employee satisfaction, very important. And as you may remember, November 2018, we said we're not just targeting financial outcomes, they are the result of our unwavering focus on our customers and employees, their needs and their ability to deliver. Now the last 18 months have been incredibly tough period for our customers, you all, you are also customers And our employees and throughout we have tried to dedicate ourselves to your success and your well-being. And let me just give you a couple of examples.
In the Property Casualty Insurance, we have been really, really, really hit as an industry with substantial natural catastrophes, less Individual very large ones like we had them a few years ago, but now what we're seeing out of climate change, the number and severity are increasing across the board. 2nd, the demand for our life and health product is extremely strong, dynamic, revenue growth is seen everywhere and the margins are great. If you had asked me 3 years ago, can we really given the interest rates that we are operating at today, not the one we are envisioning in November of 2018 get a new business margin above 3%. That is coming out of really new products that are protection oriented and they have the right balance Between what customers need and want and get us benefits and the returns for shareholders, I would have found that a tall order. Today is a reality.
Even in markets that are structurally challenged, like for example, France, we've been able to innovate and come up with products that are outstanding in demand and in margin. Our Asset Management businesses continued to grow and reached again the new historic height, Not just in terms of assets under management, also in profitability. So we have momentum in all our business segments. And beyond that, our capital position remains strong. People focus a lot on Solvency II, and I think that's totally fine.
By the way, we called the RTE I bond early In order to get flexibility, made a lot of money on doing that. Despite that, we had 206,000,000, well above the 180,000,000 target and what we really need to operate. And cash flow generation from the businesses to the holding is extremely strong. So that's why we've moved The outlook to the upper half of our target range and that's why we've also been honoring our promise To do the second half, our SEK 1,500,000,000 share buyback program that because of COVID, we need to pause last year and we are delivering on our promise and we will continue to deliver on our promises to you, our customers and our employees. Now Giulio, our CFO, will speak to you in detail about these outcomes.
But before we move into the numerical I know you need to focus on all the numerics to think about what the valuation points are. I'd like to address 3 topics. The first one is customers. I want to address, for example, the storms and the floods in Europe and express our solidarity and With the people that have been affected, this is not a cynical move on, oh, now we're going to make more money, sell more flood cover at higher prices. That really highlights the role our industry and Allianz particularly play in helping to rebuild homes, helping to rebuild the lives of our customers And keep on highlighting to policymakers that climate change is not a problem in terms of the warmth of the air.
It is actually affecting our lives in a very negative way. 2nd, regarding the support of our employees, Allianz is doing a lot to continue to support our people in under COVID Restrictions, remember Europe may be doing better, many parts of Asia are not yet out of the woods and are suffering, Africans are suffering And we need to continue to put our emphasis on also making vaccination efforts much more successful there. And we need to make sure that in Europe, we don't stop The vaccination efforts, Allianz is actually part of a corporate participation in the federal vaccination campaign and we need to continue. Last, of course, I would like to provide you with a brief update on the context and perspective related to the disclosure earlier this week Regarding the reassessment of risk related to the AGI U. S.
Structure, Alpha Funds, as mentioned in our release, These things are highly sensitive from a legal standpoint. So there's very limited things that we can say about this at this point in time. I'm sorry for that, but you all know how U. S. Litigation works.
Now I can spend a lot of time in terms of what we're doing for the Flood victims in Europe, by the way, is not just Germany, it's also in the Benelux countries. We've had storms earlier this year, particularly in June, In all parts of Europe, for example, in France and in Eastern Europe, we're doing our best to support our clients wherever we can, Not just by the way, by paying money, but getting drying machines, organizing logistics, bringing things that really help people deal with it. The second part, I've just mentioned the vaccinations, pretty pleased. I say that also in terms of you potentially being clients, Make sure the only answer to COVID is not lockdowns, is not policy, it is about getting vaccinated. And we need to convince the people that have doubts That this is the only way out.
It is the only way out, at least that's what we believe. And think about it, In Allianz alone in Germany, we have been given more than 23,000 COVID shots in terms of first and second vaccinations to our people That is including their relatives, and we believe that is what has to be happening. If you think about the fact that we have about 45,000 In Germany, that's a pretty encouraging rate of things that we have done. Now 3rd, and you're probably waiting for this, I want to address The disclosure in terms of what we actively announced Sunday evening after a reassessment of risks related to the structured alpha funds at AGI U. S.
LLC. Trust me, this was not an easy week for us and it was not an easy decision. We really, really moved and spent hours in the Board of Management. We consulted with our supervisory board. But because of new information obtained on very short notice At the end of the week, with respect of the pending regulatory proceedings, particularly the involvement of the US DOJ And our reviews, we had to reassess the risks associated with the structured Alpha Funds.
In light of the investigation and litigation, please do understand I Cannot go into details, but rest assured that the underlying issues will be thoroughly reviewed, and we would like to address them in due course. And any conduct by individual employees that was not in line with our ethics and our standards will not be tolerated and would trigger consequences for those who potentially violated them. The three assessments of risk caused us To publish our ad hoc disclosure, which you have seen on Sunday evening, for the non Germans, you need to understand in difference to the U. S, we have to go out immediately Whenever we hear something that may be material for a purchasing or a sale decision and we recognize that taking the step on the weekend had a considerable Weak impact on our share price, but we have to be absolutely committed to being transparent with our shareholders And not just follow the rule of law by line, but also in its heart. And we made this disclosure, therefore, in accordance with the applicable laws.
Particularly here in Germany, given what has always been happening in the last few years, Credible's early communication is fully in line With our principle of transparency in our culture, it's not just a legal necessity. And our decision to inform the market immediately about important developments, So therefore, it was both legally driven, but also reflective of what we would like to stand for. Now please recognize that it is in the interest of our shareholders and the company to respect the integrity of the reviews and the process of these authorities. We are not just Fully cooperating, we have actively reached out and partnered with the authorities in charge of the structured alpha investigations, the DOJ and the SEC. And with respect to our civil proceedings, which we disclosed early last year, we will continue to defend the interest of our shareholders with both discipline and vigor.
Now it is important to put our most recent disclosure, however, into perspective, especially in the context of Allianz Very strong global operations and our strong track record. First, we want to underscore that this outcome is not reflect of our ethos, of our culture and certainly not of our performance. As investors ourselves, as one of the largest in the world, we Our clients displeasure, what happened around the structured Alpha investment and for some that may have not met their expectations on performance. As a company that prizes integrity, we do not measure the impact of this outcome in terms of financial terms alone. We are clear That confidence and trust are affected and it is paramount for us to restore that as quickly as possible.
In light of the pending investigation and litigation, again, please understand that I cannot go into details, but be rest assured that the underlying issues will be thoroughly reviewed, again in full cooperation with the authorities. And last but not least, I would like to say that we are above all A meritocratic organization that will take every opportunity to learn from every lesson that can be and improve further in terms of what we do. Now we also want to say that what has happened in the structural alpha sphere is no indication Of the performance, the ethics or anything that happens at Allianz Global Investors is a very small part, very specialized part of what Allianz Global Investors does. And they have made enormous programs since the Fall and winter of 2019, when we decided together with our Board here that we want to overhaul The structure, organization and leadership team of Allianz Global Investors, the success has been extremely strong And that starts with investment performance that is now so much better than it was what it was in prior years. 77% now outperform in terms of 1 year views, 69% in 3 years, 48% of the mutual funds are now on the top decile of the 3 year Morningstar peer ranking, numbers that we hadn't seen for a long time before.
From that flow, much better net inflows and from those we have seen very strong Financial results. You see that saw that this quarter and we believe it's going to continue into the future. And we want to make sure that everybody understands Allianz Global Investors is core to what we do. Our activities in the U. S.
Are core to what we do. And that then leads me to the last comment in this regard. Asset Management is a core pillar of what Allianz does, A core pillar of our business model and a core part of our value proposition to customers. In fact, life insurance offerings And asset management offerings are integrated and are converging. Whether you today buy a product that Life insurance or asset management product is often nomenclature and we really believe we are uniquely positioned to get the best Out of combining both, and we're probably the only shop in our industry that is so strong both in life and Asset Management.
With that, I'm basically through with my comments. The numbers speak for themselves. I think we have to move forward and when people say, well, are you not afraid about the potential financial impact? Yes, it will leave a scar on our skin, But it will make us stronger. Just think about the numbers, the next 3 years at a minimum, we should be generating every year about $9,000,000,000 plus, Growing 5% earnings, we'll talk about at end of the year, but that's what the market says.
That gives us SEK 27,000,000,000 of cash, lots of buffer, Lots of ability to face not just the challenges from this one, but be able to invest in our future, to invest in our people, to invest in our clients and to invest And with that, I'll hand over to Giulio. Thank you.
Thank you, Oliver, and good afternoon to everybody. As Oliver said, the numbers are speaking from the sales, but I will still go through the numbers and explain the numbers. So if we go to Page 3, as you can see, the results For the 6 months, have been very strong with a good revenue growth of 5%. Also, the operating profit is at EUR 6.7 €1,000,000,000 level, which is not only better than the last year, but also is significantly ahead of our outlook of €1,000,000,000 divided by €2,000,000,000 And that's also the reason why we are upgrading our guidance for the 2020 for 2021. The shareholder net income is very strong at €4,800,000,000 Then when you look at the contribution by segment, you can see that all segments did a good job of delivering operating profit and also Delivering strong operational KPIs, the combined ratio in property casualty is much improved compared Last year, and this is basically in line with our EUR 93,000,000 target.
The new business margin is at a target level of 3%, and the value of new business It's with €1,200,000,000 very, very good. And then the cost to income ratio is below the 60% level With an inflow number of about €65,000,000,000 for the 6 months, so very strong operational KPIs, which are supporting clearly The operating profit delivery. If you go to Page 5, the second quarter is basically a representation of what During the 6 months, as you remember, we had a very good Q1. The Q2 has been Basically at the same level like the Q1. Indeed, in the Q2, we can even see an improvement on the revenue side.
As you see, our revenue grew by 12.6%, and those segments have contributed to the growth Of the revenue, this applies to the Life Health business, to Asset Management, but also to Property Casualty. If you remember, In the Q1, the growth in property casualty was slightly negative, but now you can see a good plus of 3.6 Percent. The operating profit stands at EUR 3,300,000,000, so that's pretty much consistent with the operating profit that we had also in Q1. And then net net income with SEK 2,200,000,000 is a very solid number. And also in the second quarter, you can see that the operational KPIs Pretty strong, but I'm going to speak about those KPIs more in details in the rest of the presentation.
At Page 7, the solvency ratio It's solid at 2 0 6%. We have a drop of about 4 percentage points compared to the level of March, but that's also Expected because we performed the purchase of EUR 1,660,000,000 of hybrid. Otherwise, As we're going to see in a second, the operating capital generation is very strong and the sensitivities are more or less in line with the sensitivity that we showed to you at the end of for the end of March. Now if we go to Page 9, and that's the good news that the operating capital generation is coming Pretty strong. As you remember, we had a Q1 with a capital generation of about 4% in the second quarter When you remove from the capital generation, the dividend and the taxes, we are at 3%.
We see now a little bit more growth coming In the property casualty side compared to what we had in Q1, so this is clearly taking down a little bit the operating profit generation, Capital generation, but overall, we are at 7% for the 6 months. And we have therefore also upgraded our Guidance for the year to a number which is in excess of 10 percentage point of capital generation. Otherwise, under capital At management, actually, you can see the impact of the dividend, the normal regular accrual the dividend and also you can see The impact of having repurchased EUR 1,600,000,000 of hydro. So all in all, this leads to a comfortable Solvency ratio of 206%. Now coming to the segments, starting from P and C, starting from the growth in P and C, We have achieved an internal growth of 3.6%.
You can see that we had a nice development in Germany. We had a nice Development in Australia, also in Eastern Europe. And then clearly, you can see a strong recovery at Allianz Partners. Obviously, Allianz Partners was affected last year by the COVID situation, especially in travel. Now we see a recovery.
We are not at the level of 2019 yet, but especially in the United States, we are seeing a recovery. So we expect to see premium Growth also in the remainder of the year. In the entities where we see a negative growth, this is driven Either by the underwriting actions that we have undertaken in the course of 2020, this applies to AGCS, so you can still see the effect on the underwriting action that have been taken throughout the course of 2020, also in the 2nd part of 2020. And then in other cases like Spain or to a certain degree also The UK or France, we are really focused on keeping profitability. So sometimes we see there is some Pressure on rates, but we try to keep our profitability and preserve the margin.
All in all, it's a good picture. And then also when you look It's the price momentum is stable. So for the time being, we also see that the prices that we are Able to get in the markets are also consistent with the loss trend that we are experiencing, so a good picture for our Underwriting performance for to date. At Page 13, the operating profit has increased by about EUR 200,000,000, And that's driven by the improvement in the combined ratio. Here, you can see there are a lot of moving pieces.
On the one side, the natural Catastrophe load is significantly higher compared to last year. Dispense ratio is also higher, but you might remember that last year, we had One off pushing down policy, one off pushing down the expense ratio for the quarter. But when you look at the 26 0.4 percent for the Q2 is definitely better compared to the 27% that we had for the full year 2020. And then you can see that In the Q2 of this year, the runoff has been a little bit more elevated 4%. When you look at the 6 months view of the runoff, We are at 2.5%, which is pretty much in line with what could be a normal expectation.
Last year, we had a COVID impact. This year, the COVID impact is basically neutral. So when you put all together and when we run our analytics, we can say that the level of performance, Underlying performance is pretty much consistent with the level that we had last year and more importantly is on target with the 93 The same to combined ratio, you can see this is even easier if you look at the 6 months number. Now at Page 15. The combined ratio for the entities, clearly, in Germany, the combined ratio is elevated, That's because of the significant amount of natural catastrophe.
If you adjust for that, you can see that there is a very strong underlying performance In Germany, we had also a little bit of positive runoff resetting the load from the natural catastrophe. There you can see a lot of Strong performance at the OE listed below like UK, Australia, France, Italy, Especially Italy, Eastern Europe and Spain. And then as always, Latin America and Turkey, they tend to have higher combined ratio. But here, we should Keep in mind that the interest rate level is much higher. So you can run at a combined ratio of 100%, it still generates value For the shareholder.
AGCS is 97%, which is in line with the 98% that we want to achieve by the end of the year. And then what is clearly a little bit of an outlier, if you want, is the combined ratio of Eure Hermes. It's 63%, which I think you know by now that the development of claims in the credit insurance is extremely favorable. So from that point of view, we achieved a combined ratio, which is exceptionally good. We are also exiting the state schemes In most of the countries, so moving forward, we are very encouraged to see this kind of performance coming out of Euler Hermes.
So overall, A good quarter, clearly, with a significant amount of natural catastrophe. But despite that, we've been able to achieve a 93.9% combined ratio. And also when you look at the 6 months, we are at the level 93.4%, which is very close to our target to 90% 93%. At Page 17, we are showing the investment results, which is up compared to the prior period. This might appear surprising because usually there is an that the investment results is going to go down.
But what happened this quarter, we had a stronger performance from dividend from our the Private Equity Funds, there was the opposite last year because of the COVID situation. So overall, the dividend income has been very strong And this is supporting clearly our operating investment results. We are running now, when you look at the 6 months Figures, it's EUR 1,300,000,000 of operating investment results. Our assumption for In the plan was about EUR 100,000,000 to EUR 150,000,000 lower than that. So this is definitely a positive compare to the assumption that we have put in our And now let's come to Page 19, Life business.
I'm very pleased With the performance of our Life operations, and this is a strong performance across all KPIs, but we can start From the present value of new business premium, which is up 70%. Here, we have a couple of effects, Which I'm going to explain in a second, but even if you remove these effects, the growth rate of the present value business premium is 36%. Now you might say that's easy because last year we had the COVID situation, which was bringing down the production. But I can also tell you that the adjusted number is Higher compared to the production that we had in 2019. So I know your concern was always, are you going to be able to do the product changes and We get the production in the system, and this is a proof that we have been able to do so.
On top of it, We are managing very aggressively our Infos business. So in Italy, we have been able to renegotiate a large contract of EUR 2,600,000,000 With better condition and also in France, we are offering to our customer the new product we've seen the new product is more Suitable to the current environment. So we are basically bringing Force customer into the new solution that's also a good event. When you look at the new business margin, it's for the quarter above our target of 3%. And then all segments have contributed both to the growth of the production and also to the improvement of the margin.
So that's a pretty good performance across all business line within the Life segment. Page 21, the operating profit is 30% above the prior period level. Here, we have basically 2 main driver. 1 is the increase of the loading fees of 6%, and this reflects The growth also in the Unileam business, we have been able to grow reserves significantly in our Unileam business. On top of it, investment margin is over EUR 1,000,000,000.
There is a part of a stabilization compared to What we saw last year, but also I will say this level of investment margin is even better than our expectation. That's because the markets are Extremely favorable benign at this point in time. Also, you don't see this in the numbers because we are always Including the commission in our expense picture, but if you remove the commission from The expense line, in reality, we are managing expenses on a flat level. So basically, we have a combination of increasing loading, also better Investment margin, the expenses are flat. So this is definitely good for the operating profit development.
And then on the right hand side of the chart, you see that all lines of business have contributed to the growth in operating profit, so very good picture for the segment. At Page 23, we are showing, As always, the numbers for the selected entities, overall, the new business margins Increasing or stable, the majority of the OREs, we adjust a few exceptions. And then when you look at the operating profit, we see a nice We're strong swing in operating profit at Allianz Life USA. This is not surprising. Last year, the volatility was higher.
This year, the volatility is very, Very low. So automatically, you see a very strong performance in the United States. Italy, it's a very good story. We are approaching the EUR 100,000,000 of operating profit per quarter, and that's because the Unilin business is really doing very nicely in Italy. And then in Asia Pacific, as always, you see that there is fundamentally a growth trajectory, not only in the production or in the VNB, but also The operating profit is overall a strong pitch also when you look at the delivery for the single entities.
And now at Page 25. The investment margin is strong at 21 basis points. You know that Our expectation was to have a new business, an investment margin between 70 basis points, 75 basis points for the year. So we are running definitely Hi, Ethan. You can see the current yield is very strong at 95 basis points.
Here, we have the same explanation like For the P and C business, the dividends that we're getting out of our equity investment is pretty strong, stronger compared to what we had last year. You can see that we are constantly reducing the guarantee level. So overall, this translates in a good investment margin, Even if we didn't have any meaningful contribution coming from the net harvesting, you see the net harvesting is very low at one Basis points. So I think the number of 21 basis points is a good number. The quality of the number is even better because basically there is no Good part coming from Net Harvesting.
So overall, very good performance on the in the Life segment, both with respect to The new business and also to the operating profit and especially, I think we are getting confirmation that the actions that we put in place are Page 27, Asset Management also the underlying performance is strong. We had again a quarter with a record level of assets under management, but we decided not to use The headline again, what is more important is that all asset classes and regions are contributing to the growth 3rd party assets under management, so that's a stronger picture that shows also that All strategies are performing. And when you go then to Page 29, on the inflows, We had for the quarter EUR 26,000,000,000 of inflows. This time you see very strong inflows at AGI. That's the highest level of inflows for the quarter at the GI, and the GI has been able over the last 6 months to Record €30,000,000,000 of inflows.
In the case of PIMCO, the inflows at €9,000,000,000 they look relatively small compared to what we are used to. But here, we need to recognize that we had an outflow of a Large mandate of about EUR 18,000,000,000 with very low fee. So fundamentally, there is no real impact on the revenues On the profitability, we adjust basically the inflows of PIMCO for these outflows. You are Back basically to the EUR 25,000,000,000 plus of inflows that we are used to. When you look at the composition, the inflows by asset class in a region, you see also that every class contributed to the development and also you see that we are getting more inflows in the mutual fund, Which is usually good from a performance point of view because we have a higher fee margin in the mutual funds business.
The final comments over the last 12 months, I'd like to see some time things on a 12 months perspective, on a rolling perspective. We have been able to Record EUR 120,000,000,000 of inflows, which is a very strong number. And also, if you look at the quarterly development, in total, it was Pretty much consistent quarter per quarter, so a good trend for the Asset Management operation. And now coming to Page 31, clearly, when the assets under management and the inflows are doing well, you're going to see also an increase in the revenue, which is 16%. If you adjust for the FX effect, we are even over the 20% level.
And both PIMCO and AGI have contributed to the nice growth in revenue. One driver, as I was saying before, is clearly the increase in assets under management. The other drivers also, at least for the quarter, you see an improved fee margin and improved fee margin as a consequence of the better business mix. And then on Page 33, as always, when the revenue are growing, you get also extra Yes, in additional growth regarding the profit, you don't get just the growth because of the revenue increase, but also because of the operational leverage. So all in all, we are getting to a very good growth rate of 29% for Asset Management.
And if you remove the exchange rates, which has been kind of negative because of the U. S. Dollar depreciation, We would have had even a 40% about 40% growth. Both PIMCO and the GI are contributing to the growth in operating profit. The costincome ratio for the segment is about 59%, and one of the major drivers for the improvement is the Big reduction in the costincome ratio of AGI.
In total, the segment is posting EUR 1,600,000,000 of operating profit for the 6 months. If you remember, the outlook was €2,800,000,000 So at this point in time, if the markets are staying stable, we are going clearly To expect to see in the 2nd part of the year at least the performance that we saw in the 1st part of the year because we are also starting from a higher Asset basis, so very good news regarding the underlying performance of our Asset Management operation. And now moving to Page 33, it's enough to On the corporate operating profit, that's the numbers are better than prior period, and they are also better compared to our Expectation and then at Page 37, as always, we are showing the non operating items. Yes. No major development, maybe just a couple of comments.
The impairments are very low. We are basically now seeing impairments In the system, the restructuring expenses are more or less in line with the amount of restructuring expenses we had last year. And then finally, the tax rate at 25 percent is in line with our expectations. So the combination of The strong operating profit and also of a favorable below the line development is leading to a Net income of EUR 2,200,000,000 for the quarter. So all in all, on Page 39, I think we have really a strong delivery For the 6 months, it's also nice to watch that the deliveries being consistent between Q1 and Q2.
So we're not jumping up and down. So There is a consistency of delivery. That's basically something that if you go back and you look at our performance last year, You are trying to adjust for the COVID noise was already developing about a year ago. So that's definitely A reflection of the strong action that we have been putting in place over the last years and our strategy It's clearly delivering also the operating profit performance that we would at all even Better than what our expectation was at the beginning of the year. We have upgraded our outlook, as you know, to the upper half Of the range, you're going to ask me why not the upper end.
We'll start with the upper half and then we'll see as we go where we are going to end up. And then also, We have today announced a buyback. This is something that we committed to do a few a couple of years ago, 2020 was last year. So we committed to do last year. Then because of the COVID situation, we had to clearly stop it.
But there was always Something that we wanted to return to you guys. There was a commitment. And so today, we are coming through to our commitment. We had the capital strength and also The underlying performance, and so we are happy to stay true to our commitment. And with that, I would like to open up to the questions
We will now take our first question from Peter Eliot from Kepler Cheuvreux. Please go ahead.
Thank you very much. I guess the first question, Oliver, you were quoted on the wires this morning saying that you'll do everything to put this Issue the structure, alpha funds issue behind you as quickly as possible. I mean, I guess, DOJ inquiries can typically take years. I'm just wondering, is it realistic to think that we can get clarity quickly? And maybe related to that, Is there any idea can we have any idea when you might be in a position to make a provision for it?
Secondly, just in terms of maybe providing some help on the numbers that we're dealing with. I mean, you've given us a €13,000,000,000 figure for the value of the funds at their peak, and we know there are sort of €6,000,000,000 Of claims. I'm just wondering if there's anything else you can give us in terms of numbers to help narrow down a little bit what we're looking at. Maybe what about what were the funds at the trough, for example, or anything else that you can give us there to help us? And then just to provide some relief from the structured funds issue, I was very interested in the back book Well, the in force management, the 2 things that you've done.
I was wondering if you could say What impact, if any, they might have on capital, P and L, balance sheet, either within these results or going forward in the future? Thank you very much.
Yes. So thank you very much. Let me answer it right away and then I'll hand over for the details of back books, but can Make a general comment on that. So unfortunately, we are so strictly, guarded by U. S.
Law that I'm Not asked, but ordered not to comment on anything. And we are following the proceedings of the DOJ. We are not driving them. They drive it and it can take their time. But we are an active participant.
We are not just following it, yes. We are in there and working with them very closely. So we'll do whatever it can be done to create clarity. The second thing, we cannot make any comments on the numbers. It's just not possible, but remember there are 2 components to it.
There's the civil litigation and there's the DOJ investigation and that may have different timelines. So if and when we Have anything to say we are going to do that as much as possible. We know how difficult your job is to be done. But again, I would like to put that into perspective and it sounds a Odd. And I'm no more the CFO, so Giulio will forgive me for my a bit crude math.
Okay. Before this thing happened, Allianz was not, In my opinion, fully valued close to where it should be valued, right? So any decent analysis shows that our PE Has not expanded the last 2 or 3 years, even though we've been outperforming operationally almost any peer. So when you then look at sort of what the market has Counted in terms of value, you may say that is correct or that is too much, but you have to say what level it actually came down from and that was not a very high level, The first one. And if you compare that to a number of the KPIs you see in the current 6 months result, We have a 13% ROE in life insurance.
Can you tell me any company with this book and the size and this performance that has 30% ROE in life insurance? I don't know any. Do you have any other insurance company that has a world leading asset management franchise? We're probably the number 2 active asset manager in the world now. We're not this is not reflected in our numbers.
Pinsale is subdued by natural catastrophes and still have the run of the Commercial Lines performance. This is the strongest fortress that exists in Europe. That's not in our share price. So if you think about what's happening and even what happens, The cash flow generation power is up to $30,000,000,000 in the next 3 years, whatever it is. So what the heck are we talking about?
So I understand the nervousness and I know some investors can't invest as long as we have an investigation. But if you think about the underlying value power We are starting a process where this industry will consolidate and I'm absolutely convinced with the strategy that we are pursuing, what you see The additive growth in the segments is very strong. The second thing I'd like to say, the concern that people have was the life insurance When interest rates went down last year, again, I said, oh, another shock for life insurance and these people will make no more money. The products will be horrific for clients. They will be horrific for shareholders because of the capital requirements.
It's nonsense. It's true for the average temperature of the hospital. That's very true. The weak Competitors have a problem to meet the guarantees. They have a problem to produce good results, but ask some of your peers.
Allianz is not just giving great margin. It is also offering in many markets the best value that you can get as a consumer and that will make us win. Sorry for being very confident, but that is what is required at this point in time. So when you fill in your spreadsheet, remember, we're not starting with a 15 PE that we're coming down from, Yes. We are starting with a 12 PE and that's why I have a lot of optimism.
And I'm not ignoring The downside that such an investigation, but I'm just trying to put it into perspective, sorry to say. And therefore, the relief on the back book is a specific question. We have said a number of years ago with the launch of the strategy that we are fundamentally changing new business into products that are more capital efficient, but also better for And you see this in the cycle because we can offer higher upside and diversification into new asset Probably one of the leading investors in alternative assets that provide different sources of income than fixed income or buying, I don't know what Tesla offers you in the short term, right? So getting decent long term sustainable returns. That's one thing.
We've also said That we are going to address the enormous capital consumption on the guaranteed business. Now you can say and go out and say, hey, I'm selling a back book, huge run to somebody and we're getting rid of the problem now, small problem. You have clients in there that we promised too many years ago That we would be their partner. So we're not taking this lightly, number 1. Number 2, as we've just seen in Italy with the transaction, It takes much longer, but it's much more economically successful if you renegotiate contract, not sell them at a loss and say, oh, I just sold my loss.
And this is what we've done in Italy, taking a traditional product with a 1.5% guarantee, which is not high by the way by Italian standard, but still far too high relative to what is Economically sustainable and move it to a zero guarantee. And these things generate 100 of 1,000,000 of additional value and Giulio give you the number. So we are as much as possible are being dealt with in a fair way. And with that, I hand over to Giulio.
Thank you, Oliver. And on your question, specifically on what We did in the Q2. In Italy, it's a renegotiation of a EUR 2,600,000,000 of the group business. Just to give you an idea, we brought down the guarantee from 1.5 to 0. So that's a big change.
Clearly, there is always a trade off. We Allow now to put some new business for the next 2 or 3 years, but fundamentally, it's very positive transaction. And when you look at In the France, we are basically offering to our in force customers the new products. The new product has more unit linked Component compared to the old products, it's a win win situation. From our standpoint, clearly, there is Less risk, but also from a customer point of view, it's not necessarily good to be at a product with 0 TCREDIT is basically very little.
So from that point of view, also the customers, they like now solution where they can get more exposure to Unalim Business, when you look at the impact on our numbers, I tell you the present value of profit or I would say More correct to say the present value of EBITDA because every time we speak about BNB or some similar metric we are speaking of present value of EBITDA It's about EUR 100,000,000. And why you say EVA instead of profit? The profitability might not change significantly, but the risk It's very different. And then when you look at the SCR release, you're speaking about EUR 50,000,000 of SCR Release when you combine Italy and France. We are going to pursue similar initiative as we Going to the future, so we are clearly looking for a similar negotiation.
In Italy, we have Clearly, this action in France is going to be performed also for the For Cboe for the future quarters. And then in Parador, we are still working on the more traditional back books. But the message here is, when we speak about buy book, it doesn't necessarily mean that we need to Sell and buyback, there is also rework, that's the way we call it, that we can do in order to improve the performance or to mitigate The risk that we have in our in force business. This said, I'd like to stress again the point of Oliver Beta. We are making 13% ROE.
So again, we have anyway very a good performing Life business. Clearly, we want to Make sure that this book of business is performing as much as best as possible. So we want clearly to create as much sustainability as possible. But the fact is that our Life business has generated double digit ROE over the last years.
That's great. Thank you very much Giulio and Oliver. Could I just very quickly ask what the other side of the Italy deal Is that what you're giving away to get that guarantee reduction?
The only point is we're allowing the Counterparty to put no business for a few years.
But it has a cap per annum that is clearly cap. So they cannot put a huge amount of premiums in that. Now the reason you will ask why is this possible, in the Italian pension law, there's an explicit provision that says if interest rates drop And to a certain point in market conditions is you can renegotiate and you can even exit the contract. So this is a highly valuable Client a set of clients, but we wanted to make sure that we get to a more even distribution of upside and downside. Now the other point I'd like to mention is That we'll discuss probably more intensively at the Capital Markets Day that with what we're doing, we're not just looking at increasing ROE or reducing risk capital.
We're actually also Trying to reduce the volatility and the potential volatility of the capital requirements, which is super important because today investors are Spooked by the Life back books for two reasons, one, the very low ROEs, which by the way in our case is not the case like many others, But because of the volatility in the Solvency II models that you constantly see out of these liabilities, they're often, in my opinion, a bit mathematical fake, but they are real because we show them, not because they are there, but they are part of the model. Now with that, we have the intention over the next years Systematically reduce the risk capital consumption and the volatility by growing earnings. That's been our vision for a while and every time I thought we're turning the corner, Interest rates dropped yet again. Wait for the end of the year and this is where we are on route to really totally decouple capital consumption from the growth of the underlying earnings, and that is the objective we are pursuing. So this will become over time more protection business And more an asset management business rather than a strongly capital consumptive business that you're used to.
This is the strategic objective It has taken more time because every time you improve, you get another hit on rate, but that's it. Yes, this year will show you the turning point. Now with that, let's go, if it's okay, to the next question.
We will now take our next question from Andrew Ritchie from Autonomous. Go ahead.
Hi, there. Also, I appreciate you restricted what you can say. You did make comments at the press conference this morning Just about the process of investigation on the stretched alpha. Could you just clarify comments This morning and in the footnote of the report, the an investigation has been ongoing since July or the footnote implies You've just started a new investigation internally post the DOJ intervention. I'm just trying to understand how long To give us a sense of timing, how long you have been internally investigating this topic?
That's my only question on that topic. Second question, I'm just trying to interpret the buyback being switched back on. You talk about it in terms of fulfilling a promise, which essentially was related to the 2019 financial year. But should we assume that we are back on to, I guess bolt on plus buyback as the kind of ongoing capital Deployment strategy or is that over interpreting the message? Just the final topic is, Julia, could you just give us an update on Frequency and severity trends in Non Life in your core markets.
Thanks.
Yes. So maybe I'll start from the first one, which was the question about our Investigation review. We started a review already last year. So basically, we set up a cross functional team last year, Also with the support of external legal and economic adviser to look into the product performance. So the reviews have been ongoing, but Recently, we started also a foreign share review, but clearly, we've been looking to this issue now for a long time and now we are doing The forensic review, so we'll not be sitting here just watching, waiting and test the status of what we've been doing.
We are going to clearly to do the review, for ANSI review and then clearly we are cooperating also with the DOJ and with the SEC. So that's about what we are doing from our side. And on the buyback, I can tell you at the end of the day, nothing has changed in the sense of we're not going to make forward looking statements about when the next Payback might be, but as always, we look at our underlying performance, we look at the capital position that we have The capital position is a function. Underlying performance market development, we might have also clearly to digest I mean, Pat, coming from the issue we are talking about, but based on where we are going to be, we're going to clearly decide our capital deployment. So there is no Change in our philosophy moving forward.
I think the positive is we are generating strong capital, right? We have a capital generation per annum of, I would say, 10 percentage points. So from that point of view, I think this is Clearly, something that give us flexibility. Also, as Oliver said before, we have been calling Some hybrid, which means now we have also flexibility on the financial hybrid point of view. So there are The things we can deploy clearly from a capital point of view and also from a liquidity point of view.
So again, nothing is changing, and we are going to evaluate As we go through the next quarter, we go through next year. On the Frequency severity, I can tell you, motor is always a little bit complicated to look at the statistics in the sense of last year. What we saw was basically that as the frequency was coming down, the severity was coming going up. And now you see a little bit of a reverse as the frequency clearly is going up because we see higher frequency. You can see the severity coming down.
If you ask me for a forward looking statement of frequency severity, the overall expectation will be once COVID is behind us, right, that You're going to see in reality lower frequency in general because there are a lot of things pushing frequency down, improvement In the driving assistance system. And on the other side is where it is going to go up because clearly, You know cars are becoming more expensive. But as of now, I will say you basically almost see that the frequency is going Up again, the severity is coming down. When I look at the property line of business, I tell you that I was looking at the statistics In Italy, France and also UK, you couldn't see a lot of increasing severity. One country where we see some increase in severity is in Germany.
And that's related to the fact that overall, the value of the house is going up. And also right now, there is The cost of wood or even the cost of getting a repair is going up. So we see a little bit Of severity going up in Germany, the assumption that we are watching, you need to keep in mind that there is Automotive system of adjusted inflation in the price, clearly, you might have a business risk effect, but fundamentally, The price of the property policy knows this kind of automatic adjustment if inflation going up. So all in all, when I look at Going up at the same time, it causes problems. So most of the time, you might see a setting situation.
And I will say there is, at this point in time, not a significant pressure coming from the loss trends in our different ways.
Is the question properly answered on the investigation because that's very important for you to understand Andrew?
Yes, I think so. I'm still a bit confused as to why there was an ongoing investigation, But clearly,
you want the loss to be Let me repeat. No, no, no. It's yes, yes. That's why important that I follow-up on your question. So When the lawsuit came in, we immediately started an investigation because the lawsuit assumes or pretends to say That the Fund underperformed relative to expectations because it was not clear it was as risky as it turned out to be.
So we hired Experts into the economic assessment, but also the legal assessment from the very day and very quickly the SEC came in And we have been working side by side, not in addition with the SEC on all of these things. And then as of May, the DOJ came in and looked at some additional items and we've also been working with them side by side Voluntarily on these items side by side is also important. And based on that and also these items, we have Additionally launched internal forensic review and a number of additional matters that go beyond the economic performance. I think that's what you saw. We have neither been complacent nor late nor other.
It's just that the matter and the viewpoints have changed and we have done additional items on top of the additional work. I'm looking at my Chief Legal Counsel, who's sitting next to me and I'm looking and he says, yes, but now shut up. Okay.
That's great. Thanks. Thierry, could I just follow-up? Are you formally changing the guidance on capital generation from 8% to 10% plus? Or is that just for this year?
Yes. Okay. I will say that there is a high likelihood that we're going to change the guidance also for next year because this year we're going to be about 10. And I will say next year, assuming that we're going to see higher growth in property casualty compared to what So this year, I would not go about 10%, but I think there is a high likelihood that we're going to lend to a 10% capital generation. I can also tell you that on the Life business, basically, there is 0 capital increase because they even if they put a lot of new business, This is very low capital intensive, and that's the capital intensity is completely offset.
Just talking of the SCR, let's forget about the VNB, which Definitely then helping the capital generation. Just speaking on the SCR, I tell you that the increase in SCR because of new business is completely offset By the release of the in force.
And this is a very important point, Andrew. What our objective is for the next few years is really to make Solvency II over time less and less and less of a relevant issue for us to really guide. It will always be important as a regulatory standpoint in terms of Capital distribution, the objective is to become less and less dependent on the number and the volatility of it. That has been the objective now that the plumb in rate and COVID Hasn't really helped to achieve that objective faster, but it's a very important objective for us, because we really believe it's a key part for the valuation of this company.
Okay. Thanks.
All right. Very good.
We will now take our next question is from Michael Huttner from Berenberg. Please go ahead.
Fantastic. I stay away from the obvious. So on cash, you gave some really interesting kind of numbers, I think SEK 9,000,000,000 a year or SEK 10,000,000,000 a year. And last figures we've seen, I think it was SEK 7,200,000,000 or SEK 7,300,000,000 average. So I just wondered if you can say where is this increase coming from?
And the second question is on the asset flows. So we have 2 one offs, one negative, I think, in PIMCO and one positive in AGI. I wonder if you can give a little bit more detail about the AGI positive, what is the nature or the profitability or I know you can't say the client, but anything which would help here? And the last point, I know you've been You said severity in property, but nat cats are a lot higher. And I know you don't Kind of budget figure you just said, well, historically, it's been around that level.
But are you going to be raising pricing? Because I imagine you'll be paying your reinsurers more, For example, in the EUR 400,000,000 figure for the floods, you've got EUR 100,000,000 reinstatement premium. Thank you.
Okay. So maybe starting from the first point, I think Oliver was referring to net income of EUR 9,000,000,000 from a cash point You know our numbers and usually you can use a sort of proxy that 80% of our income is going to translate into cash flow. That will be the relationship that you can hold if you want to use a rule of thumb. As we come into the second question, which was the flows at AGI, I can tell you it's pretty widespread. So we see, for example, good flows coming fixed income in equity and also multi assets.
So from that point of view, when you look at the different asset classes all are Contributing, also when you look at the regional contribution, you see good contribution coming from Europe, but So from the U. S. And Asia Pacific, and we see also because sometimes you can look at flows from a production point of view where the Statages are developed, and then you can see look at flows where the distribution is taking place. So we see also, from a distribution point of view, Good growth in Asia. And regarding the profitability, I cannot give you the number, but So it's the overall very profitable flows.
We had maybe a larger mandate where clearly the fee is going to be lower. But fundamentally, When we are looking at profitability of the flows, I will say it's really good. And then your third question about Increasing premium because of natural catastrophe, that might happen. Then as always, it's a matter of what the competitive Environment might be, but I will say from a technical point of view, one might argue that That is something that we're going to look to do to a certain degree. But at the end of the day, as always, price increases are also So a function what, in general, the market is going to do.
And just on thank you so much. On This net inflow@agi, so That's what I'm really saying is, what's the number I can model? Or put it another way, what is the figure now as of kind of almost mid Q3?
I can tell you that in the 1st in the month of July was about for AGI was about EUR 2,000,000,000
I hear silence. I'd better leave it then. Thank you.
Okay. Michael, are you fine with the answers or anything else?
I didn't hear the PIMCO figure if there is one.
Sorry, what is the question?
The question, the net inflows in PIMCO into line.
Okay. That's about okay. That was as of little bit before the end of July, it was about EUR 5,000,000,000.
EUR 5,000,000,000.
EUR 5,000,000,000. EUR 5,000,000,000. EUR 5,000,000,000. EUR 5,000,000,000. EUR 8,000,000,000.
EUR 8,000,000,000. EUR 8,000,000,000. EUR 8,000,000,000. You can almost say it's about EUR 8,000,000,000.
EUR 8,000,000,000. That's fantastic. Super, thank you very, very much.
We will now take our next question from William Hawkins from KBW. Please go ahead.
Hi. Thank you very much. First of all, Oliver and Giulio, the SCR in your Asset Management business is about EUR 1,000,000,000 And in particular What's going on? That feels like an extremely low number against €1,800,000,000,000 of funds under management. And you seem to be allocating all to operational risk, not much For market risk, clearly for a fund manager, there's going to be a gray area between market risk and operational risk.
But I'm just wondering, can you remind us how you get to the €1,000,000,000 figure? And do you think that may be a number that you need to review, particularly in the context of the current experience? And then secondly, please, You highlighted in your Life business is another quarter of an incredibly strong investment margin. I think you're still We're talking about sort of 70 to 75 basis points. I think that was the last thing you said, and you're still at sort of mid-80s, so you're significantly above that.
Again, you said something in the call, but can you just remind us, are we at this more elevated level structurally? Or is it going to normalize down to that 70 to 5% this year or next year. And if it does normalize down, what's the driver of that? And then lastly, please, you flagged in the presentation the 9 percentage points Impact on the Solvency II ratio from the various transactions you've been doing. Could you just remind us how much of that comes from the SCR going up and how much from the eligible loan funds going down?
Thank you.
Yes. So maybe starting from the first question. First of all, the way we do the calculation of the SCR for the group, we are Using the Solvency II according to the Solvency II, by the way, principle is for the sectoral On fund and SEI, so which means basically what is non insurance, you use whatever regulation you have applying to those sectors. So for the banking, we are going to use basically what is the regulation for banking. And in the case of Asset Management, we are using whatever regulation is for Asset Management, which is the SEI's percentage of the Expensive.
So it's not that we are coming up with any kind of special model. We have any kind of Allianz way to calculate the ACR for asset management. This is Coming from the frameworks, obviously, too, that tells you includes the asset managers with whatever Regulation, therefore, as a management. So that's the way it works. And then clearly, we are going to hold reality, more capital compared to what the requirements is, but again, it's not something that is up for deliberation of much SCR you're going to include Your Solvency II model.
The second question was on The investment margin on the Life side, I would say that we have been running now for a couple of quarters at Performance which is higher compared to our original expectation of 70 to 75 basis points. We need anyway to consider also that the volatility in the Stage is pretty low, so they might have a little bit of a lift that I will not necessarily always consider that KPI. But I would tell you that at least I would say that it's realistic to expect that we will be at the upper end of the range 70 basis points to 75 basis points as we move forward. So that's something that I would feel comfortable to say Today, whether we are now at 80 basis points, I think that's I would like to see more evidence as we go through more quarters to make a statement like that. But the 75 basis point, the upper end might be more indicative of what the range might be.
And then when I think about the impact on The 9% coming from the acquisition that we do, the majority is coming reality from the owned funds. There is not a lot of SCR that we are going to add there. But if I should tell you, I would expect to be like 2 thirds Coming from the own funds and onethree even less maybe coming from the SCR increase.
Great. Thank you. If I could come back, Giulio, I appreciate what you said about the SCR for Asset Management being largely a regulatory figure. Correct me if I'm wrong. The eligible loan funds, correct me if I'm wrong, I think they're still only about €2,000,000,000 So it's not as if you have disproportionate coverage So I'm wondering, have I correctly understood that €2,000,000,000 of eligible loan funds?
And if I have, Is that a reflection of the capital and the cash position of your asset management business? Or is that sort of Somehow bigger capital or cash position in your asset management entities?
Yes. I would say with the EUR 2,000,000,000,000 also EUR 2,000,000,000, you are correct. I would like to say that's also what you need to keep for H and P to have a AA in 'eighteen. So you can debate Well, it is only SEK 2,000,000,000 in Justeo is twice the ACR, and that's also what basically gives you a AA rating under S and P.
Got it. Thank you very much.
Welcome.
We will now take our next question from Farooq Hanif from Credit Suisse. Please go ahead.
Hi, everybody, and congratulations on the Volpe today. Just going to your Investor Capital Markets Day, How are you going to frame targets in this state? Have you decided whether it's going to be some IFRS, Cash or Solvency II? I only asked because of the comments that you made about how you believe you're undervalued. I mean, should we be really sharpening our focus on Solving for two numbers here to try and understand that.
Secondly, going to your debt headroom, Can you just give us an update of if you needed it for whatever reason what the headwind would be? And lastly, going back to AGCS And the very strong volume decline, which is over 20%, obviously. Is this still just Yes, pulling out of liability lines or is it something else? And when does it end? Thank you.
Yes. Your first question about the Capital Market Day, like clearly, we're still going to be focused on IFRS number because at the end of the day, these are the numbers that We discuss every quarter. So clearly, there is a little bit of a challenge because of the IFRS 917 implementation. We think that we are not going to see major changes because of that. So IFRS is going to be To be aware how we communicate our targets, we are going anyway also to put focus on cash generation at the end of the day.
I did hear that, that will count how much cash are you able to generate or capital that you can generate and deploy it and buybacks on M and A. So fundamentally, we're going to have We are going to have definitely a session related to capital and cash generation. And especially on the Life side, we want to show also Like, for example, Jans Leben is capable to produce very stable cash flow and cash flow generation and also growing cash flow generation. So this is going to be something that we are going to talk about in the Capital Market Day. Then the other question was on the deck capacity.
I would say we have definitely significant debt capacity. So as of now, as of today, I think our leverage ratio is about 22%. And clearly, you can go easily to 25%, 26%. We have been just a few years at 27%, 28 Leverage ratio, so from that point of view, the financial flexibility that we have on the financial leverage It's pretty high. We also like to preserve it.
But in the case we need to use it, we are going to use it. And then on AGCS, I think your question was specific on liability, but I can give you a little bit more color in general on AGCS. I will say, as of now, in liability, we are not really growing, but that's an area where clearly, cautiously, we're going to look at growth again. Also, I will say, an area where we see less growth, That's because of the strong re underwriting that we did last year is in Marine and B Corp. Where we see growth, We are very encouraged by what we are seeing is in financial lines and also in property.
And just to give you an idea In these lines of business, in the 6 months, we have been able to post combined ratio below even below 90% On the property side, it's also because the net cat load has been pretty benign. So overall, we see Some growth in some area, but clearly, there are other areas where the underwriting was extremely strong. As we move forward, we are definitely going to look also at potential for additional growth. At this point in time, we believe rates are pretty good, and you need to be always selective. Clearly, you need to have Always strong underwriting, but fundamentally, we are at a point where we believe that our re underwriting action and our Cleansing has been successful.
The management team is getting more and more confidence as the numbers are flowing through. So I will say that as we move forward, as we go into 2022, we are going definitely also to have a growth agenda. And that's also consistent with what we always said. We always said, look, before we start growing, we want to have a good degree of confidence that The level of profitability is going to dilate.
Yes. Let me reiterate what Giulio just it's more about Not about numbers, it's also about confidence. So we are very pleased with the progress that we've seen in AG CNS And that's a bit masked by 2 factors. We had some follow on, on COVID from last year and with some policies that are only, tapering off in the first of the year, sort of entertainment, for example. And the other part is they also have some effects this year from natural catastrophe.
So some of the flood exposures They will also get hit by I'm still confident that they will make their 98 target unless we have a sort of brutal second half of the year, Which is no small achievement, given what we've seen. And just to iterate what Julius said, we need now need to change the tack and make sure We've cleaned the portfolio that we take advantage of one of the hardest markets that we've seen probably in a decade and we don't miss. But we wanted to make sure that before we write something, know exactly what to write and how to write it, but they're making a very, very good progress. Thanks.
If I just quickly can Return on your comment on the CMD targets. You said that IFRS 17 won't make a big difference. Do you mean philosophically or numerically?
I don't think it's going to make a big difference. So we are already doing runs based on IFRS 17, so we don't see a significant difference, but I wanted just to say fundamentally, the IFRS 19 17 Might represent a complication because you need to think on a different accounting standard. But based on what we have seen so far, We will not expect in our case to have a significant difference. But you're learning every day something. That's the reason why I would tend to be cautious and always say there is a new standard coming up.
So that's clearly creating some complexity. But fundamentally, I think that should be manageable.
Good luck with that. Thank you very much.
Thank you.
We will now take our next question from Vinit Malhotra from Mediobanca. Please go ahead.
Yes, good afternoon. Thank you very much, Christian. Just so the two questions I would raise is, one is Just on the topic of growth and confidence, we are hearing all these very positives. We've seen the life and health Resurgent in growth, you see the P and P resurgence in growth in 2Q and I can see where that's coming from. But I mean, Last year, I think the messaging was that growth will be a bit subdued this year.
And I think it's coming back a bit more. We've seen it in other Insurance reporting in the U. S. As well, the economy as such. So, I mean, of course, you talked about HS2 just now, but generally, Should we be feeling more bullish about P and C growth as such this year, maybe even a bit more next year?
So I'm just curious Good day. I have a thoughts on P&C Growth. Second thing is, you reiterated the AG CNS target, but Also Germany had a fantastic combined ratio supported by runoff in 2Q. Could you comment a bit about Granite as well? I'm sure there are other things as well positive in Germany.
But is it is Where are the tramas coming from? And is there more buffer there for Even the 3Q flooding, for example, suggestion, any idea on the buffer there? And lastly, it's more a follow-up, and I apologize Sorry, not being attentive enough. Oliver, did you just say that the DOJ Investigation or requests for warrant, request for documents was received in May, whereas I think from the press release we've Like last Sunday, we thought or I thought it just came in. So I'm just curious just as a follow-up on the timing of
Thank you for the question. As I said earlier, I have a really strong and really, really, Really, really strict. Chief Leo comes next to me and he says whatever we said earlier is the only thing we can say. I do apologize. But there is no delay, no nothing.
We are just following through, all right?
Okay.
Okay. On your question, maybe start from the growth rates. First of all, sure, we're going to see More growth also coming from Allianz Partners to a certain degree, maybe more on the NPE basis, not so much On the gross basis also from Jura Hermes and when we're looking at the geography, I will say that, yes, as The situation is further stabilizing. We might see also more growth in other geography. When we speak about growth in property I'm always anyway very cautious, very easy to grow and then you can regret one day.
So it's all a matter of whether you have quality growth or not and Growth is always going to be a function of the pricing environment. So from that point of view, I would say the trends, I would expect that we're going to go back to the growth that we had before COVID. If you remember, we were running 3% to 4% growth. I believe that's our natural Growth capacity or capabilities, but again, at the end of the day, growth for me is always a function of the pricing environment. Coming then back to your question on Germany.
Yes, I tell you, Germany has a very strong balance sheet, and it's Also consequence that we have been kind of cautious. I always told you also last year that we have been very cautious in Booking our reserves, you remember last year, we didn't release a significant amount of runoff. It was very low. So Fundamentally, there is a strong balance sheet, and Germany is definitely one of the company where we have a lot Quality in the balance sheet, but even more important, Germany has been one of the of our subsidiary having the one of the strongest developments On the underlying over the last year, so I'm very always very pleased when I have meetings with our German team because we are very Actually, we're very focused on driving our strategy, our agenda. They have embraced that strategy.
You can see that the Combined ratio, the target is much better compared to the combined ratio that we had a few years ago. I can also tell you, Oliver is also spending always a lot of quality time with Germany, like to play with them and spend time with them. So I have to say it's a nice development that's important for us because Allianz Chairman, at the end of the day, is almost 20% of our NPE On the property casualty side, so heavy, strong German business is clearly A very good starting point for the profitability of our Property Casualty segments.
Right. Thank you very much.
We will now take our next question from Asik Mazadi from JPMorgan. Please go ahead.
Yes. Thank you and good afternoon, Giulio. Good afternoon, Oliver. Just a couple of questions I have, if I may. First of all, the $750,000,000 buyback, I mean, how do we think about this?
Was it just coming as a regular capital management exercise? Or Was it done to showcase your confidence on the capital, regulators' confidence on the capital, so Pacifi 1? The second thing is, I mean, Giulio, you mentioned that we are going to ask you why not towards the EUR 13,000,000,000, why EUR 12,000,000,000 to EUR 13,000,000,000. I mean, clearly, you are running the current run rate is giving you $13,500,000,000 So what are the Elements that will take it down from $13,500,000,000 I mean one is clearly flood losses, but is there any other things that you would flag that Was very supportive in first half, may not happen in second half. And second and the third one is The 93% combined ratio guidance you have for P and C versus 93.5%, you are running at first half And then you have the European flood losses.
So I mean, would you say that EUR 93,000,000 is still achievable? Or would you say that, that might be on the optimistic side? Thank you. Okay.
So first of all, on the buyback of the 750, if you remember, we talked about also the buyback in the 1st, in the call for the Q1, indeed, one of you even put a headline, the buyback is back. So from that point of view, you This is not something that we have been thinking between Sunday evening and That's nice. So that's something that was basically in our thought process for a while. And as I said before, That was partly EUR 1,500,000,000 that we committed. So there was not any sort of spontaneous decision a couple of days ago.
On your question about the projection for the remainder of the year, Fundamentally, on the P and C side, it's a little bit about the amount of natural catastrophe that we're going to see. So And also, I would say, so we need to clearly, having started the Q2 with the event of burns, we are Be cautious because we still have the hurricane season in front of us. And then also, I will say that the investment income is going to be higher than planned, but in the 2nd part of the year, we don't expect to run with the same level of investment income that we had In the first part of the year. So fundamentally, I will not necessarily take the EUR 2,900,000,000 of the first quarter, therefore, the first half and 2x2 for the property casualty side, and we're going to see clearly what happens, but I will be cautious in doing that. On the Life side, we have been running EUR 2,500,000,000 of operating profit.
Now you can do this time too, if you believe that the markets are going to be Always stable. We need to be a little bit cautious and thinking that we might get at some point in time some volatility. So also on that one, I will not necessarily do Times 2. And in Asset Management, in reality, you have very good reason to do Times 2. I still wouldn't do that just because of being a little bit prudent.
But At the end of the day, I would say, yes, definitely. There is a possibility, if markets are very stable, if natural catastrophe are very, Very they are pretty much frightening. As we move forward, there is a possibility that we are going to end up with the Compared to the year, which is close to the 1st part of the year. But you need to make the assumption that we're going to have other This month, so very, very stable markets. And based on my experience, at some point in time, you get a little bit of Volatility.
And this can take away EUR 100,000,000 of profit from our Life segment. This can dampen a little bit the development in the Asset Management. So from that point of view, I will say we had a very good first half. You can look at the numbers. You can definitely say there is strength in underlying.
And then at the end of the year, we see where we are, but it looks like we are heading for a good operating performance in 20 21. On the 93.4 percent combined ratio versus 93 First of all, my comment will be, if you just look at the natural catastrophe at 3.1% For the 6 months, you just normalize that to the normal level of EUR 2,000,000,000. You can see that we are better than EUR 93,000,000. So from an underlying point of view, I feel very confident about our ability to achieve the 93% and then the amount of natural catastrophe clearly can create a little bit of noise up and down. This doesn't change for me the fundamental fact that on the underlying basis, we are in 90 3 for sure.
And then if you're going to have a few more basis points because of natural catastrophe, in my opinion, this doesn't make any difference.
Thank you.
Okay. Before we continue, it's half past. We have time for one last question and then we have to close the call. Tracy, one last question, please.
We will now take the last
question from Susan Lianne from Morgan Stanley. Please go ahead.
Thank you. I'm lucky you've got the last one. Sorry, I got only 3 very quick questions. The first one is your U. S.
Life business, obviously, new business grows very, very strongly. Just wonder is that are you actually taking shares in the market? And what specifically actually you do if you are kind of increasing your shares there? And then secondly is just very quickly, we know that you wanted to actually expand your footprint in the U. S, Especially in the P and C side, but will the whole kind of DOJ thing affect or Change your views, you'll change your risk assessment on the U.
S. Market in general. And then last one is The Solvency II market movements was 0 actually year to date for the first half, which means The movement in the second half was negatively kind of wipe out the whole kind of movement positive movement in the Q1. Actually, but if I look at the interest rate, it's better than the beginning of the year. The equity market is better than the beginning of the year.
And then the Credit spread is also kind of very stable. I just wonder actually why we shouldn't see a positive year to date kind of market impact and what actually have I missed in those market movements? Thank you.
Maybe starting from the last question, when you look at what happened in the Q2, in reality, the market movement is Just slightly negative. So if you look at the slides at Page 9, we have minus 0. If you run the calculation and you put excess On the Home Funds, there will be a negative impact of about 50 basis points. And the point is, Yes, rates have been kind of stable and also the equity market has been okay. But We have also sensitivity to credit spread.
In reality, there was a slight widening of the credit spreads On the government bonds, and there was a little bit of a narrowing of the credit spread on the corporate bonds, and we are exposed to negative To positive spread widening in the corporate bonds, but we are really speaking of a very minor amount. So basically, almost And if you're looking for the explanation why it's not being a completely neutral because of the credit spreads development. Your question about appetite in the United States for acquisition, I don't think there is any change fundamentally to our strategy? I think we need to separate our strategy, our underlying performance compared to The situation that we are discussing, but I wouldn't say that because of the X, we're going to do Y and Z. And then to your first question, it's about the market share in the United States.
In order to see whether we are growing or not in the United We need to wait to get the statistics for the Q2, which are not available yet. Mahesh, I'll tell you anyway about What happened in the prior quarter, we are not necessarily growing market share and fixing this annuity. That's also a line of business where we continue to be strong, but that's not where we are putting the primary emphasis. We are emphasizing The IVA business, which basically is a hybrid VA or register index annuity. And in that line of business, I would expect we are seeing definitely good progress.
And as we are putting more focus, I would expect that we are going to be One of the key players, we have also launched a product for the advisory channel. So I'm pretty confident that we're going to see a good growth trajectory in our Life business in the United States. But With respect to your specific question, whether we are gaining market share and now we need to wait for the statistics of the market.
Thank you.
Welcome.
Okay. This concludes our call. Thanks to all
of those who have joined. We wish you
a very nice remaining day and a nice weekend.
Thank you, guys.
Thank you very much. Have a nice weekend.
Thank you and bye bye.