Good morning to everyone. This is the Talanx Results Call for the Full Year and the Fourth Quarter of 2023. I'm here together with Torsten Leue, our CEO, and Jan Wicke, our CFO, who will take you through the results and where we stand currently with our business. After that presentation, Torsten and Jan will be happy to answer your questions. As usual, you can also raise those via the webcast. You are aware that we published preliminary key results in early February. Today, we came out with a full set of results as well as the annual report of the Talanx Group and Talanx AG. All of that is available on our website, as well as our financial data supplement, which gives you a comprehensive summary of all the relevant numbers that are important for our business. With that, I hand over to Torsten, our CEO.
The floor is yours.
Yes. Thank you, Bernd. Good morning as well from my side. I would jump on page 3, where you can see that we had another record year. You saw it already in our first results we showed in February. Net income is EUR 1.581 billion. What you didn't see at that time is that we have this result supported by high quality of earnings, which means, as you can see, above EUR 3.5 billion resiliency we do expect, which means another EUR 1 billion more than we had last year. And this was both built up in the primary and in the reinsurance Hannover Re side. Jan will tell you much more about it later on. But at least it means that if you see, for example, the combined ratio, that more than 3 percentage points was the resiliency effect. We still have an order to cover and balance future volatility.
Having said that, we have decided that we will increase the dividend. We will propose to the general meeting another 17% growth of last year. So EUR 2.35 will be our proposal. And as you know, we had given you a pass of EUR 2 to EUR 2.50 until 2025. So you see, we are very close to the 2.50 already. I come in a second to the next message on that one. On the next slide, you saw already this week the strong performance of Hannover Re, but as well the primary insurance had a very, very strong performance. You see that Industrial Lines with 91.5%. I think they really become an underwriting champion. And again, having in mind the high quality of resiliency we have there, you can imagine that the combined is lower than this one.
Retail International, we are not yet number one in Latin America, but number two. So we really are a very prominent player in the region, which, in our opinion, gives us great growth opportunity in the future in these countries because you need scale in the business when you make retail. And in Latin America, for sure, we have it now. And that means, on the other side, that Retail Germany is now, after many years, by far the smallest segment. But with 11% return equity, we have a very strong, stable profit contributor here. On the next page, you see it overall in the portfolio. There was 85% rest of world. We are really very good, diversified. I would even declare that out of our home market, we are one of the most grown side of our home market, most diversified company.
I remember still times when I was working here, we had 30% only rest of world. Now it's 85%. So that means good diversification, which affects as well our risk modeling very well. The type of business, you see, we are an industrial and reinsurance B2B with 75%. And this is a good cycle, as you all know. The hard markets are there, especially in those industry and the reinsurance side. And we still have relatively high years compared to the past. So we can really clearly say with 75% of our portfolio, we have a very good cycle. Next page, you see that the promise is the promise. So I don't run the numbers through, but we just beaten what we have said. The revenues are above what we have said. And especially the group net income was EUR 1.518 billion.
It's basically nearly on the level which we have promised in 2025 with 1.6 on our last capital market. All over, this gives us a 16.6% return on equity, which is, I would say, quite okay. On the next page, you see that this return on equity and the performance and the growth was done really very nicely by the primary insurance. You can see a growth of 16%. And just remind you that the Liberty was just a couple of months in the books in Brazil, only Brazil. That means 13% is organic growth. So we are a double-digit growth machine here. And our business model seems to be working in the markets where we are in. So 16% growth.
On the other side, the reinsurance, you can say, "Why only 2%?" But you heard already from Hannover Re that there was a shift in business mix to non-proportional because there seems to be more attractive markets at the moment. And all over, that means that our group insurance revenue is increasing with 9%. But if you see currency adjusted, it's still a double-digit figure. So we are very satisfied with the growth. And that means, on the next page, that the primary insurance is now contributing as well, more or less, to the top line and bottom line with nearly 50%. You see that, again, we had 46% and a 3 percentage points increase to the contribution to the overall group net income results. And here again, I remember some years ago, we only had 30% in the primary insurance.
So it really shows you that the primary insurance does probably the right way as Hannover Re did many years before. And that, at the end, is reflected on the next page as well in our market capitalization with an increase in the last year of 49%. You can see here, and some of you do it sometimes, making some of the peer calculations. You see here, the price earnings of the primary insurance is on a good way with 4.6x taking over the end of last year. But for us, it means still we have room to improve. On the next page, you see that our strategy holds because it works. It's all about implementation. So our business model is a bit different than many others because we allow decentralized entrepreneurship in our modeling. And we have a cost leadership in many of the segments.
We claim in 3.5 segments, we have cost leadership. With our customer orientation, we really can outgrow our market position profitable. The result of this, you can see, and this is a proof on page 11, having done the last cycle with an annual growth in the earnings of 8%, we increased it now in our cycle from 23-25. We promised, actually, on Capital Market Day with 11% CAGR from EUR 1.4 billion-EUR 1.6 billion. The reality now is what we promised today is, on the basis we have this year, that we grow in this year, 2024, with more than EUR 1.7 billion. That's what you already know, which we published. But you don't know that we grow more than EUR 1.9 billion for 2025. This is another promise we give now to the market.
We believe that our nice growth we have now with, again, what I said, with a business model where we have not an overmarket top position. If you say in industrial, we have, for example, in Germany, the top position. We have in several markets of international retail portfolio top positions. But in many other markets, we don't. And with a model of cost leadership and client orientation, I think we really have big opportunity to grow more market positions in the future. And that's reflecting, basically, the number. And on the next page, you see for sure that as a result, it means dividend payout will increase as well. We have, in the last years, let's say from 2018 to 2021, we have increased more than 10%.
Now, we have since said in the last Capital Market Day, we increased by 25% on the basis of EUR 2, as you know. Then we have said, on that basis, we want to grow another 25% until 2025. And this we do, but not until 2025, but one year earlier. So our promise today is that we propose to the general meeting EUR 2.35. And then for the year 2024, paid out in 2025, EUR 2.50. So at the end, the message is we are on the same path, but one year earlier delivered, as a promise. Coming on the next page of the promise, it means, to summarize it, that what we have said on Capital Market Day is, on 2025, an increase of more than 10% ROE. Net income around EUR 1.6 and dividend EUR 2.5.
This year, already in our guidance, is in return equity around 15%. Net income growth more than 1.7. And already, as I said, one year earlier, the EUR 2.50 dividend proposal. And that, as we are earlier than we thought due to what I mentioned before, our portfolio structure, our B2B focus, and our cost leadership model, we will publish already new midterm targets one year earlier than we thought. So we will invite you on the 11th of December to our Capital Market Day. And there, we will, again, show you three-year targets on return equity, net income, and dividends. So again, one year earlier than we thought. And with that kind of message, I hand over to Jan.
Well, thank you, Torsten. And hello, everybody. I'm happy to be here and to represent the fantastic numbers of 2023 to start with. On the next page, please, Bernd, we've had a strong revenue growth of 9%. We are very healthy with regard to profitability, 16.6%. And we are to increase the dividend to EUR 2.35. And this raises the question, where's the profit coming from? And on the next page, you can see that the profit is derived from the insurance service results. We were able to increase insurance service result on a group level by more than 30%. The majority derived from the primary group of the growth. But keep in mind that, in particular, in both, in primary and in reinsurance, we were able to strengthen our resiliency quite significantly. On the next page, you can see that the large losses remained within budget.
The three largest NatCat losses in the last year were the storm in Italy, the Turkey earthquake, and the hurricane Otis in Mexico. All in all, with regard to the year, it was a normal year with regard to large losses. What really matters is what you can see on the next page, which is that we were able to show this fantastic insurance service result despite the fact that we built up significant resilience in our liability accounting. What you can see here on this page is, on the one hand side, the numbers you already know from Hannover Re that they have increased their resiliency to around EUR 2 billion. These are undiscounted numbers here. But we also have increased the resiliency in the Talanx's primary group quite significantly.
What you can also see, if you put it into context, that the higher level of resiliency is related to the primary group with above 8%, whereas reinsurance stands around 5%. So this provides us with a lot of confidence that we can deliver on the earnings growth path, which Torsten just has mentioned to you. So all in all, we expect the external actuary to confirm resiliency above EUR 3.5 billion for the year-end in an undiscounted way. So on the next page, we have some color on our investment portfolio. This investment is a second source of income for us. Overall, we are pretty conservative here. So the majority of our investments is related to bonds.
And there, in the higher quality area, investment rate with more than 92% of our bond portfolio, we benefited last year from a strong increase in the reinvestment yield from 2.8% to 4.6%. We were always very sensitive about the volatility derived from the fair values and P&L assets. But looking at the last year, we haven't seen any in total. We have had a positive impact on those assets in our overall result. Having said that, the strong insurance service result and a very stable investment result support our earnings growth path. We want to deliver more than EUR 1.7 billion next year and more than EUR 1.9 billion 2025. This translates to an increase in the earnings per share of an average of 17% if you start 2022 to 2025.
What I would now like to do is to give you some color on the capital management within the group. First of all, I would like to start with the value creation, which you can see on the left side of the chart. Last year, we were able to deliver, in terms of capital creation, EUR 2 billion if we adjust the change in equity for dividends paid and capital increase. It's more than 2, even slightly more than EUR 2 billion. But on top of this - and this is my favorite chart in this presentation - we were able to grow the contractual service margin and the risk adjustment as we have presented it in the previous quarterly calls. We have adjusted here the CSM and the risk adjustment for minorities and taxes.
What you can see here, if you add up the shareholders' equity plus CSM plus risk adjustment adjusted for taxes and minority, we end up close to EUR 18 billion in the shareholders' total capital. On the next page, you can see this translates already also in our market capitalization. At the year-end, we were able to create more than EUR 5 billion value throughout 2023, which was a 46% increase in the share price, slightly better than our peers. We were also happy that our capital increase resulted in much higher trading liquidity. Now, we are around EUR 10 million trading liquidity, trade volume a day, which is close to 3 times what we had before. It has worked out pretty good.
On the next page, I want to give you some insights on profit and cash contribution from the subsidiary, as this has been a question from some of you. So first of all, as Torsten already mentioned, with regard to net income, primary group is slightly below 50% of the group net income. But if it comes to cash contribution, they are clearly above 50%. So all in all, we have a very balanced view here on primary and reinsurance, what you can see here. On the next page, you can see how we have funded Liberty. And I'm talking now about not only Brazil but also about the Andes countries, Chile, Colombia, and Ecuador. So in total, we had to fund EUR 1.4 billion. EUR 750 million out of it will be financed by senior debt by the mutual, the rest by the cash which was generated within the group.
We were able to close the transaction in the Andes on the 1st of March this year, whereas in Brazil, we already closed this last year. So now, all the work is progressing pretty fast with regard to the integration work which needs to be done in Latin America. On the next page, you can see that our solvency ratio due to the strong increase in capital generation will be even higher. I expect it to be even higher than end of last year despite the fact that Brazil and all the risks related to Liberty Brazil are already included in this number. So rough estimate is we will be around 215 for the year-end, which really reflects also the strong capital generation which we were able to do last year. So we are able to finance our growth.
And now, this brings me to a summary on a group level before I dig into the segments, which is on the next page. Profitable growth matters to us. We want to continue to grow our earnings per share. 17% is what we have set out as targets to 2025. The shareholders will benefit from it. We are to grow the dividend to EUR 2.50 by 2024, which will be then paid out in 2026. And we will report new targets for both earnings as well as dividend in our Capital Markets Day in December this year. So having said that, I want to give you some more details on the segments now. Let's start with Industrial Lines. In Industrial Lines, we were able to deliver a strong growth with 10%. And if you adjust this for currency, it's even 12% to more than EUR 9 billion.
The Combined Ratio, despite a significant increase in resiliency, was at 91.5%, a very good number. And as Torsten said, they are really close to being our underwriting champion here. And Return on Equity stands at 14.3%. If we look on the next page, we can see the sources of growth, which are on the one hand side, the net new business. So we are growing. And on the other side, rate changes, which are needed due to inflation. If we have a closer look to the adjusted rate changes, we can report that, on average, we will be slightly above inflation, what we were able to execute at the beginning of this year. On the next page, we can see how well Industrial Lines is diversified by both, by regional diversification as well as by line of business.
I do not want to dig into that one in more details. I think it's self-explanatory. On the next page, we have then the outlook for Industrial Lines. We want to continue to grow our business. The target is a high single-digit number. The Combined Ratio will be below 93%, I would say. Yeah, significantly below. Return on Equity should be around 13%. These are the numbers for Industrial Lines. Let's continue with Retail International. Retail International in 2023 was our growth machine. They will continue to grow during the course of this year, 33%. If we were to adjust it for currency impact, it was even above 40%. If we deduct from the 33% the M&A, the inorganic growth, it would be just 22%, which is still a strong number. We are growing here in a very good way.
The combined ratio stands at very solid 95%. The return on equity stands at 11.2%. I just want to repeat what I've said during the last call. We have injected some equity in Retail International in order that they can finance that they can finance Liberty transaction. This has lowered their return on equity in the next year as we have done so again at the beginning of this year, that they can finance the acquisition in Chile, Colombia, and Chile, Colombia, and Ecuador. This will be another equity increase, which then, at the beginning, minus a little bit the return on equity. But in the long run, this will pay off. We are very, very confident that they can deliver a double-digit return on equities here. On the next page, we've seen some insights to the strategy of Retail International.
So the basis of everything is technical excellence, a Combined Ratio now around 95%. They have increased their diversification. And they have, in particular, strengthened their access to customers due to the digital transformation. And this was done by M&A and partnerships. So we have a lot of new partnerships which provide us with digital access to customers. And there, you can see this strong increase from 15.5 to around 70 million people, in particular, in South America, which will be also a basis for our future growth. On the next page, you can see what we have achieved so far in Retail International. We always said that, in core markets, we want to be among the top five. What you can see is that we are even better here, number two in Poland, two in Brazil, one in Chile, and so on.
Overall, we are also able to diversify, from a regional perspective, our Retail International portfolio in a better way than we are now close to 50/50 with regard to Latin America and Europe. The outlook for Retail International is a positive one too. With regard to growth, we expect I want to underline double-digit but a low double-digit growth in the P&C area next year. In Life, a mid-single-digit combined ratio should stand around below 95%. Return on equity due to the already mentioned equity injection will be above 8.5% for the year to come. Let me now go to Retail Germany. In Retail Germany, we had a growth in insurance revenues of 4%, which was driven by the P&C business, whereas in Life, the revenues were rather stable. The combined ratio is still below 100%, 97.5%.
You all know that the overall market development in P&C in the German market was quite demanding last year. Return on equity stands at good 11%. If we were to include the profits related to the Ampega business in it, it would be even above 12%. On the next page, we can see how Retail Germany fits into the overall picture. So Retail Germany, given the growth of the other segments, is now accounting for just 8% of the insurance revenues of the group. And it's a predominantly life business, what we see here. You can see that also in the group net income. It's 9%, whereas 6.6% is derived from life. And where Retail Germany really contributes to the group is with regard to the cash contribution. So they accounted for 25% of the capital upstream to Talanx AG, which is a very healthy contribution derived out of it.
So what is the outlook for Retail Germany? On the next page, we expect the insurance revenue to be stable. Combined Ratio should stand below 98%. We want to increase the new business value in life for above EUR 300 million. And the Return on Equity should remain above 10%. So on the next page, we have the reinsurance numbers. I think most of you already have listened to the earnings call of Jean-Jacques Henchoz and Clemens Jungsthöfel. So I keep it brief here. So insurance revenue has been up 2% but driven by a strong shift from proportional reinsurance to non-proportional reinsurance business, which is by far more profitable. Currency-adjusted, this number stands at 5%. The insurance service result was up 24%. Return on Equity stands at favorable, fantastic, 19.4%. So very strong numbers here despite all the resiliency they've built up in the last year.
The outlook for Hannover is also very positive, also from a group perspective. The insurance revenue should grow about 5%. In P&C, we expect the combined ratio to be low 90%. Return on equity should be above 14%. If you do the math, then you will figure out it should be clearly above 14% for the last year. Having said that, I would like to hand over to Torsten for the outlook of the group.
Thank you, Jan. On page 44, you have nothing new, what you said already. This year targets, which is new to you, is now the EUR 250 we pay in 2025 for this year. For next year already, we promised more than EUR 1.9 billion. Again, on the 11th of December, I hope many of you can see there because we will announce new three-year targets going forward. With that, I hand over to Bernd because we are finished with our presentation. Now, it comes to Q&A.
Yes. We are now having our Q&A. Can the moderator please explain to everyone how it works?
Certainly, sir. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Questioners on the phone are requested to use only handsets and eventually turn off the volume from the webcast. Webcast viewers may submit their questions or comments in writing via the relevant field. Anyone who has a question may press star and one at this time. The first question comes from the line of Ismail Dabo with Morgan Stanley. Please go ahead.
Hi. How are you guys doing? Thanks for the results today. So I'm just looking at the reserve resiliency. We've had some commentary from Hannover Re on the reserves. Just wondering, on the primary side, can you tell us possibly what lines of business that the reserves have gone in? Has it been Retail Germany? Is it Industrial Lines? Possibly, what accident years? And additionally, I know that Hannover Re put some I think it was about EUR 200 million extra into the current accident year. Just wondering if we saw any of that on the primary side as well, which would put your reserve position actually more than I know you say more than EUR 3.5 billion but even more than that. Second question is, now that the Liberty Mutual deal is behind you, just wondering what the M&A strategy is going forward.
Should we expect further expansion into LatAm, given you want to increase your share there? I know you're number two right now. When I'm actually looking at the slide that you gave with all of the market positions, you want to be in top five. The only one outstanding there is Mexico, where it seems like you're number nine. Just wondering, is Mexico the next area on the docket? Thank you.
Thank you very much for the question. I take the second one. And Jan will take the first one. Well, I mean, we stay we do what we said many years. We will grow. And if we think about inorganic growth, the focus is in the international. So Retail International portfolio, Latin America and Central and Eastern Europe, especially Central and Eastern Europe. And in the Industrial Lines, let's say, maybe like much the specialty markets and here, especially North American markets. So that would be the focus when it comes to M&A. And in Latin America, yes, we are number two. We are not yet number one. At least right here, you have seen Mexico. We have not a position which is our aim. So important to say is, we look to everything which is there on the table, but we have to be disciplined.
Our hit ratio is 4% until now. That means, from 100 deals received, 4% is realized at the end due to whatever economic parameters, mainly. That is important for us to see. Yes, I mean, we have to grow. We can still grow. We are not yet number one. We will stay disciplined as have been in the past. Jan will tell something to the resilience position.
Yeah. With regard to the resiliency, we are just used to give you an outlook on the assessment of Willis Towers Watson, which will be published at the beginning of May. And we just give figures on the primary group as a whole and the reinsurance as a whole. But I want to give you some color already now. We are, with regard to the resiliency, at a very, very comfortable level at Industrial Lines. We are on a very comfortable level also in Retail International. And what we have always in mind and we have also strengthened, like Hannover Re, the recent underwriting years during the course of 2023. All of that is included in the primary group as a whole. What I also want to mention is that we look at the resiliency within our estimated liabilities from two sides.
The one side is that we want to have a certain buffer to deal with volatility. And the other side is capital efficiency, yeah, capital efficiency. And with regard to the capital efficiency, therefore, we also have a look that we do not want to grow the resiliency embedded in the technical liabilities to grow because then, in the end, would be capital inefficient. So we have upper and lower limits for resiliency for each part of the group. And we are steering our results a little bit according to that one.
Second, what I would like to mention is that, next to the resiliency embedded in our best estimates liabilities, we also have realized losses in our bond portfolio during the course of the last year, in total, roughly about EUR 300 million, which will then translate into increased ordinary income for the next 5 years of EUR 60 million annually, which also supports our earnings growth part, which Torsten has outlined at the beginning of the call. I hope this was helpful.
Yes. Thank you very much.
Thank you. We now have a question from the line of Michael Huttner from Berenberg. Please go ahead.
I wish I was from Talanx. I'm still from Berenberg. But good morning. Sorry, I probably misapplied when I registered. I have fantastic results, Torsten and Jan. And I have two questions, well, three. The first one is Turkey. So I think you did a deal in Turkey. And maybe you can talk a little bit about the prospects and when we might see some earnings on a euro accounting basis. The second is, this magic period of more earnings, more cash, more reserve resiliency, how long can it last? Maybe you can get a feel for where you see the market. And then the final question, which is really kind of fairly a little bit unfair given how strong your results are, can you talk a little bit about the German combined ratio, the 97.5%, and maybe split the German motor from the rest to give a feel?
I know you are fantastic. IR said you'd raise pricing by 20% in German motors. So that's nice. So that seems to be back on track. But maybe talk a little bit about the rest as well. Thank you.
Good. Thank you, Michael. I mean, three questions to start. So Turkey, yes, there was a deal done called Fiba, which is a big bank, which closed a lot of entrance to new customers. And this is a very profitable joint venture. And already, we have, I think, this is a double-digit lower field average income we already have after this small, say, time of working together. So it's profitable, double-digit already. And it's going forward. Your big perspective is much better than we thought. And I'm sure, on the capital market days later in November, I will tell you much more about this. And you will see it's a very promising deal we have done in Turkey. Second point is, how long the markets will be hard? And until now, we don't see a big sign that side money comes into the market.
We see high discipline, probably because the soft market was so many years before happening, especially in the B2B market, that the shock is still there within the companies. And so I think it will last a little bit more. I cannot give you the rough months for how long it will last. But I don't see this year and probably not next year a big softening market. I don't see it for the time being. The third one is, when it comes to German combined ratio, again, this is a very small part of our portfolio. But Jan, you will tell it.
Yeah. In total, Michael, as you are aware, we are talking the German P&C book is, I think, 1.3% of the group revenues. Or the motor book is 1.3% of the group business. So pretty small. So the overall combined ratio of 97.5% is derived from two positive and one negative effect. Positive is the bancassurance business, very healthy contribution combined ratio-wise, and the SME business. And on the negative side, I think this is why this is the motor business, where we had a combined ratio of 118%. So obviously, there's some work to do there. But please keep in mind, we were able to increase the premiums by, on average, 19% at the renewal first of January. So there are measures underway to improve that.
Thank you very much.
Thank you. The next question is from the line of Bhavin Rathod from HSBC. Please go ahead.
Hello. Good morning. Thank you for taking my question. The first question that I have is, again, on reserve resiliency. Obviously, we have seen a strong resiliency or strengthening in the Industrial Lines. So can you just talk about how should we think about that going forward? Are you seeing any further pockets where this resiliency could further be strengthened? And how should we think about that outlook in 2024 and 2025? And the other one that I have is on your net income guidance for 2024 and 2025. It seems you benefited quite a bit from favorable experience on the fair value gains side. Can you talk a bit about how your normalized expectation is for these fair value gains or losses in your 2024 and 2025 targets? Thank you.
Yep. I think I will take the two questions. First of all, with regard to Industrial Lines, as I already mentioned, that Industrial Lines has a very, very healthy resiliency level. We expect better results to come from Industrial Lines, also with regard to the combined ratio, which we can show. Nevertheless, Industrial Lines business, by the nature of the business, is quite volatile. You never know how many large losses you have to cope with during the course of the year. And so the outlook is like the outlook is. But overall, we are confident, very confident, with regard to the delivery of the technical results here. Second question, with regard to the net income. And given that you have been a little bit difficult to understand, please ask again if I didn't get your question right.
I understood you asked for the impact of the fair value on P&L asset and how we have accounted for it in our outlook. We have included that we expect some burden from the real estate funds in the years to come, which is also already reflected in this group net income outlook. So this is a 5% write-down. It could be easily handled within our guidance. Given the overall resiliency we have, not only in the technical liabilities but also in a very conservative accounting in our assets, I'm very confident that we can deliver both the EUR 1.7 billion by 2024 and the EUR 1.9 billion by 2025.
If you ask me just generally, just to add about resiliency development, the law basically is, when the markets are hard and in good conditions, then we don't expect. We never know if there's high volatilities, bad things happening, totality of volatility. Generally, we don't expect to reduce it. That would be rather an increase and reduction. It depends. It's hard market. We'll continue like it is.
All right. Thank you. Can I just quickly follow up on that hard market topic? Obviously, you've got this strong rate increases in 2023. Can you talk a bit about what are the dynamics you are seeing going into 2024? Are you seeing any normalization of this strong rate increase that you saw in the Industrial Lines?
I'm not sure if I got this question right. But had I tried, you could just follow up with the question. So we have indicated what the average price increase we have done in Industrial. And you've seen it as well in Reinsurance. And so when it comes to your question, probably of capacity, which jumps into the market, we feel it's still a very good market situation for us at the moment.
Very good. Thank you so much.
Thank you. The next question comes from the line of Roland Pfänder from ODDO BHF. Please go ahead.
Yes. Good morning. Two questions from my side, please. Could you comment on the cash pool level of year-end? I think it was around EUR 1.5 billion end of 2022. So how much is this supporting your dividend aspirations? And let me ask maybe the question, what would it take to get to a payout ratio closer to 45%, which would be the upper level of the target range? Is it a matter of growth or higher dividend of Hannover Re? Because I think the EUR 2.50 early indication, that's already well covered. But higher dividend, which Hannover Re already indicated. Second question, that's German life business. If I look at the CSM stock year-end, it declined slightly by 3%. Nevertheless, new business was up close to 50%. So what are the moving parts here that the CSM stock declined actually towards year-end? Thank you.
So with regard to the first one, the cash pool stands at EUR 1.4 billion. And if you translate that, we always call it dividend reserve factor. How many times the future dividend is covered by it, it stands at 1.31. So this is what we are looking at, that we have a recent, in German, Gewinnvortrag to pay out the dividend. And the second question was, with regard to the CSM, could you repeat that one? You said the CSM overall declined. Or was it just for one? I didn't get the beginning of your question, Roland. Could just.
If I saw it correctly, the CSM stock declines year-over-year slightly by 3%. Nevertheless, the new business was up 50%. So what are the moving parts here? Did you have very high releases? Or are there other operating changes affecting this number?
I'm wondering. So on a group level, we had end of 2022, we had EUR 9.5 billion or EUR 9.6 billion in CSM, in the net CSM. By the year-end 2023, we have an increase to EUR 10.7 billion. So.
Yeah. I'm just talking German life.
You're talking German life. No, there has been an adjustment in the MCEV models, which was a driver here. And therefore, the change in future expectation was the majority of the driver. The release of CSM was just EUR 254 million, whereas we were able to build up more than EUR 300 million or EUR 338 million in new business. So the majority is derived from a model change here.
Just a follow-up on the payout ratio. Is there a chance that you can get to a 45% ratio the next years? Or what would it take to get there?
That's a good question. So first of all, I want to maybe we could see the page again where we have the net income and the cash contribution in the group. So what you can see on page 25 is that we have a result of EUR 1.5 billion, close to EUR 1.6 billion, and just the cash contribution of the group of EUR 750 million, so 50% out of it. And where is this coming from? And there, the discounting effect of new accounting standards really matters because, in most of our entities, local territory accounting is with undiscounted numbers. And therefore, we see the cash contribution from the subsidiaries with a time delay. Yeah? And this is something, in particular, if you have a strong growing company, what we are. And we want to continue to grow strongly, yeah, because we believe we can grow profitable.
This is something what you also have to expect for the future. Nevertheless, as I pointed out, we want to grow our dividends in the years to come by EUR 2.50 for 2024 already, one year early, which makes the dividend growth of 12% on average for the last year.
Just to add on this, I can invite you again on December because we have to do it anyway to revise our dividend strategy. Let's wait on December.
Okay. Thank you very much.
Thank you. The next question is from the line of Michael Huttner. Please go ahead.
It's a follow-up from the last one and also a little bit on NetCat. So you've given the figure for cash upstream. So this is a cash 2023 based on 2022 earnings, I guess. So my guess is, because the earnings jumped, they must have jumped as well in the statutory. Can you give a feel for how much this EUR 743 million might be in the current year? And then the other question, and it's probably in the slide deck, and I'm really sorry, you have a large loss budget last year of EUR 2.2 billion. And you're within that. Is there any update on the current large loss budget?
So the last one I can take, we talk about update of EUR 2.4 billion. Updates, we have to increase because we are growing. So within our guidance, we have a 2.4, around 2.4 billion loss budget. And the first one, Jan takes it.
Yeah. Obviously, we will also grow our cash from subsidiaries during the course of this year. We do not set out guidance for that one because we are obviously also steering that. But it will increase. It will healthy support the EUR 2.50, which we intend to pay for the current year for 2024, EUR 2.50, which will be paid then in 2026. Sorry, 2025. 2025. I'm sorry. Yeah.
Yeah. Lovely. Thank you.
Thank you. As a reminder, if you wish to register for questions, please press star and 1 on your telephone.
I think we have.
Sorry. Go ahead, sir.
Yeah. We have some questions that were raised by the webcast tool, which I will handle and read out. We have Hadley and Phil. Hadley from Deutsche. Hi, Hadley and Phil. Good morning, Phil, who raised questions via webcast. I start with Hadley Cohen's questions from Deutsche and read out what he wants to know. Is it possible to give us a sense of what the normalized combined ratio was for Industrial Lines in 2023? Reported ratio was 91.5. But if we adjust for resiliency buffer build, then perhaps closer to 88. Maybe NetCat's a little lighter than expected. The point being, despite your guidance, why should we not expect Industrial Lines to deliver a sub-90% combined ratio in 2024, particularly if resiliency buffer's now close to the maximum? That was the first question. The second question that Hadley raised is relating to the Solvency II.
He asks, is it possible to quantify what you currently expect to be the benefit from the upcoming Solvency II reform? Talanx is one of the most adversely impacted by the risk margin. So presumably, you should be one of the biggest beneficiaries of any potential changes. Are there any offsets we should be mindful of? So those are the two questions from Hadley.
I think the first one, rightly observed. On the resiliency level, if you normalized it, the combined, there would be above 3 percentage points effect. If you say proportionally, it would be the same for industrial or even a bit more. So now, Jan has said before, it's significantly below 93. Your assumption that I didn't mention your number. But it could happen that it will be below 90 for sure. But you're rightly observed that that's what it is. So the real performance of the company in industrial. Jan takes the second.
Yeah. Okay. The changes in the Solvency II, on a group level in total, will only have minor impact. You're absolutely right that the new calculation of the risk margin will result in a positive one. And then there is the volatility adjustment, which is more or less neutral. And then the new calculation of the extrapolation will be slightly negative. And the more negative, the lower the interest rate development is. So in total, on a group level, rather minor impact from Solvency II. Maybe I should add the risk margin. The positive impact is also derived to a large part from Hannover Re. And with regard to the Hannover Re solvency consolidation within the Talanx group, there's a huge haircut on that one, on this positive effect.
All right. So that were Hadley's questions. I have two more questions from Phil. Phil Ross from BNP asked about the resiliency reserves. We are curious to learn whether we have a target in euro percent level for the resiliency reserves or would like to know whether it's more opportunistic, adding when we can afford. On the cash contributions, he would like to know how Retail Germany can upstream above its weight. Is it because of the other units need to retain cash? Or is it Retail Germany so highly cash-generative in both life and non-life? And the next and final question, final question from Phil, relates to M&A. You gave us some details on the potential areas of appetite to grow inorganically. But what is the bandwidth? Do you need to wait to finish Liberty and LatAm first before you think about the prospect of any other deals?
Yes. Well, I mean, I start with the first and the last one. So the resiliency, yes, we take a more opportunistic approach because the idea is to balance future volatility. And as I was indicating before, in a hard market, you build up. And when the market gets sour, it happens as well. One day, you have. And this is what you need to match volatility. The third question was regarding M&A. Well, I mean, it's clear that a merger, you need one, maximum two years to integrate. If you don't do it in that time, then it's very difficult to get the economics right. They're on the way. But it doesn't give us any limits to grow somewhere else because of different teams and different approaches as we have in the group. But again, so yes, we could imagine doing something more.
But again, with the discipline of M&A approach, so we look very careful to all the opportunities we have here. So there's always the idea of growing organically and as well inorganically. And the second question regarding the cash of Retail Germany, Jan?
It was 25% of the overall contribution that we've seen during the course of 2023.
Yeah. But the question was, why is it above net income, this cash distribution?
Yeah. We were able to get the cash contribution out of local territory accounts. Given that the company is not growing so fast compared to the other parts of the group, therefore, we can receive higher retention rates of the profits there.
Future, we say cash cow.
Our cash cow, yeah.
All right. So those were the webcast questions. And I see we have lined up more questions by phone. Can the operator take over? And I remind everyone, there are two minutes left. So please limit your questions a bit. Back to moderator organizing the questions, please.
Sure. Thank you. We have a follow-up question from Roland Pfänder from ODDO BHF. Please go ahead.
Yes. Just very quickly, on your LatAm business, fourth quarter combined ratios were below the levels you had in the first nine months. So is there something structural going on? And secondly, you have the restructuring costs on Liberty deal in the current year. Could you indicate what you expect for these restructuring costs and if you expect a net positive contribution for the current year from this deal?
Yeah. So I start with the second one with regard to LatAm Liberty. We expect already this year a positive contribution despite setting aside already the restructuring or a large part of the restructuring costs for the Andes countries. Second, we expect the net income contribution to be above EUR 80 million for 2025 out of the LatAm business. The start was very positive in Latin America, both with regard to the market profitability as well with regard to how the integration of the Liberty entities started within Brazil already. And now, we have started with it in Chile, Colombia, and Ecuador. So overall, a positive picture. With regard to the fourth quarter, there may be some prudency in our accounting too. So overall, we are very confident with regard to the contribution of the LatAm.
And again, we will tell you in the capital market day much more details about transactions, the starting point, because the market is very hard, is very good. You will see that we bought something here where the price earnings are below 10. You will get all the details on the capital market day. The starting point, again, we were very lucky about the market cycle at the moment.
Thank you.
Thank you. A follow-up question from the line of Ishmael Dabo from Morgan Stanley. Please go ahead.
Hi. Thank you for taking my follow-up question. Just circling back on the normalized Industrial Lines Combined Ratio, I think you said that it was about if you normalized Large Losses and the reserve resiliency, there was about 300 basis points improvement there. Or it would basically be below 90%. What I'm trying to figure out is, when you give your guidance for less than 93% in 2024, say, for example, if the underlying does come in below 90%, would you then add that back into your reserves and build further reserve resiliency? Or would you let it all flow through the bottom line?
Well, what we will do is, we have a guidance of above 1.7, above 1.9. Please allow me to say here, we will stay with what we said for the total group. The rest, we will then steer accordingly.
Yeah. Thank you.
Thank you. We have a follow-up question from Michael Huttner. Please go ahead.
I'll keep it very quick. Clearly, Retail Germany, I mean, the SME business is good. The bancassurance is good in non-life. But the other bits are maybe not your favorite businesses. Would you ever sell them?
In Germany, we are, let's say, on a side to be looking for buying if you have something for us to buy because that's our home market. That's not the question we have now.
Okay. Cool. Thank you.
Thank you. Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Bernd Sablowsky for any closing remarks. Over to you, sir.
All right. Thanks a lot. Thanks to everyone joining and listening and asking. Concluding remarks to come from our CEO, Torsten Leue.
I just conclude in order to thank you very much for listening and asking questions and be interested in our stock. On the 11th of December, again, we will come up with some news. Hopefully, it will be interesting. Hopefully, you will come and listen and look into us there. Until then, I wish you good weeks and months. Thank you very much.