Good morning to everyone from Hanover. This is the Talanx results call for the first quarter 2023. I'm together here with Jan Wicke, our CFO, who will guide you through the numbers and take your questions. As you are all aware, this is the first time we are reporting under the new accounting standard, IFRS 17. Quite a lot to learn and get used to for all of us. We are sure we manage it together. After this presentation, as usual, we will have the Q&A session. As you are also aware, everything will be posted on our website after the call. Having said that, I hand over to Jan. Jan, the floor is yours.
Yeah. Thank you, Bernd, and thank you to all of you for having me and listening to the Q1 results of Talanx. First of all, I have to say we like the performance of our business in the first quarter very much. We had some tailwinds, which you can see on page two. First of all, we have all segments were able to deliver return on equity above 10%. In primary insurance, we were able to grow the insurance revenue by more than 10%, it's 14%, and the same number currency adjusted. The capital base is very strong, with 212% Solvency II ratio. We are maintaining our strong resilience, and therefore, to start with the most important message right straight away, we are confirming our outlook that we intend to deliver EUR 1.4 billion as net income for the full year 2023.
To dig into the figures a little bit deeper, to the group financials, I would like to turn to page four. Thank you, Bernd. We were able to grow the insurance revenue in total to EUR 10.7 billion. It's a growth rate of 6% for the group as a whole. As you or most of you might have listened to the call of Hannover Re, the development at Hannover Re was flat, but very favorable with regard to the structure of the business with the non-proportional contracts. In primary insurance, we were able to grow the business significantly. The group net income grew by 31% to EUR 423 million.
This is by far more than a quarter of EUR 1.4 billion, and the return on equity grew by 4.2% to 18.8%. I have to admit, that both the net income and the return on equity was driven by the effect that we were benefiting from the lower large losses. In addition, we had some discounting effects, which will level out a little bit throughout the year. Therefore, this 18.8% return on equity is not the figure which we expect at the year-end to be there. On the next page, I would like to draw your attention how the numbers in the first quarter compare to the outlook.
What you can see with EUR 10.7 billion insurance revenue, we are well on track to deliver EUR 42 billion for the full year. It will depend to a certain amount also on the development of the currency rate, in particular the dollar, whether we are to outperform this target or not. Second, with regard to the group net income, I already mentioned that given the higher underwriting profitability which we see, we are quite. We hope we will deliver EUR 1.4 billion net income for the full year. With regard to the return on equity, the figure we expect it to be lower than 18.8%, but clearly above 10% for the full year.
We just want to highlight already at the beginning of this presentation that this regards to the volatility of the results derived from the fair value through P&L assets. We haven't seen nearly anything in the first quarter, but we do not expect that to be in all the quarters. Within our guidance, we have factored in that we expect that due to higher interest rates, there will be some valuation impact on both private equity investment as well as on real estate funds, which might result in a drag in the group net income by the year-end, and therefore we stick to our guidance of EUR 1.4 billion for the full year. On the next page, we wanted to provide you with the usual overview about our large losses.
I think it's no surprise that the earthquake caused a burden which was on a net basis, and it's still the undiscounted view you're familiar with from the previous year. It's EUR 250 million net burden. In addition, we had two events in New Zealand, which together amounted to EUR 100 million. The overall budget for the first quarter was EUR 466 million, so with EUR 490 million, we are booking in our account the EUR 466 million. You are familiar with that one, so we have some buffer for the quarters to come with regard to the large loss burdens. If we go to the next page, we would like to give you an overview on the revenue, the insurance revenue composition.
We have 40% of the revenues derived from the primary segment and 60% from Hannover Re. Within this 40%, you might wonder, if you see the amount of Retail Germany, which is just 7% of the group as a whole. This is due to the high proportion of life insurance at Retail Germany. As you are familiar with the earned premiums, we have to deduct in addition the investment component in order to figure out insurance revenue. Given that we have this high proportion of life insurance and therefore a higher investment component, this reduces the number and the relative proportion of Retail Germany in the overall revenue mix of the group. If we go to the next page, there we can see the bottom line.
How the earnings mix is within Talanx, and there you can see that not 40%, but 43% of the bottom line is derived from the primary insurance. There you can also see how much the different business segments contributed to the overall profit in the group. In total, we have a very nice picture here with regard to the diversification of the earnings streams. Let me now dig into a little bit more into the segments. To start with, like usual, I would like to start with Industrial Lines. With regard to Industrial Lines, we can report a strong revenue growth, 13% currency adjusted is the same number.
You go into deeper detail there, Commercial Lines, so the traditional, Industrial Lines business, grew by 15%, whereas the Specialty Lines business grew only by 11%. It's still growing, but we have a more risk-adjusted approach at Specialty Lines, in particular, did some de-risking in some Nat Cat exposed lines, and also had an effect on the transaction related business like M&A insurance and so on, which was somewhat lower than compared to previous year. With regard to the technical performance, we are very pleased with the performance in the first quarter. Combined ratio stands at 93.2%. If we were to apply for a net-net combined ratio, it would be even lower than this month.
We have to, at this time, we have to announce also that there are some discounting effects in both in the combined ratio and in the return on equity. You have always to keep in mind that there are two effects. One is the discounting of the current year claims, and the other one is the unwind effect. The interest accretion of the reserves which we have on the balance sheet as a whole. Those two effects are not perfectly matched, so the discounting effect on the current year claims was higher than the unwind effect which we see.
Over the year, the unwind will grow, and therefore, this will lead to the situation that the overall effect will shrink during the course of the year to a certain amount. All in all, we are very confident that we can deliver a combined ratio clearly below 95%, for the full 96%, excuse me, 96% for the full year 2023. The return on equity, which currently stands in this segment at 12.2%, should be above 9%. I think it's fair to say that we even expect it to be above 10% for the full year, given that Industrial Lines is really very well on track to deliver. We go to Retail Germany. With regard to the insurance revenue, we have a split picture.
In the P&C business, insurance revenues are up by 8%, in particular, driven by a favorable development in the small and medium enterprise business, where we are up even a little bit higher than 8% and where we are also well on track to achieve all our growth targets. In Life, like the whole German market, we have decreased insurance revenue by 8%, which is also related to a certain extent to the fact that our distribution is highly dependent on bank insurance. Within the bank insurance, there is a certain shift within the bank and in the banking towards more attractive banking products currently going on, therefore, we have less insurance revenues there.
All in all, it doesn't come as a surprise that in the current environment it's slightly lower. With regard to the combined ratio in P&C, we will work hard to achieve the full year target, around 97%. The return on equity currently stands at 10%. We will also work to keep it there so that also for the full year, this business segment can achieve that one. If we were to include the asset management results as a part of the asset management result, which is related to the business segment, it would already stand at 11.8%, but we want to achieve this 10% even without that for the full year.
With regard to the capital ratios of the term life entities, they remain very robust. It's without transitional end of March, it's 277%. Let's now go to Retail International on the next page, please. First of all, we have the growth machine. We are growing in both P&C and life insurance here. With regard to P&C, the growth is coming really from all countries, but in particular from those where inflation affects the businesses. We have seen some favorable price increases, for instance, those in Latin America, but also in Turkey or Poland. For the full year, we expect this very positive growth figures to come down a little bit, so they will not stick at this very elevated level for the full year.
With regard to the growth in life of 33%, there's one special effect included in that one. This is a new cooperation agreement with the Fibabanka in Turkey. If we were to adjust the growth figures for this new bank insurance agreement, it would be just flat 7%, which is also a good number. With regard to the technical performance, we already achieved a very favorable 93.4%. We are well on track to achieve a combined ratio for the full year of below 95%. Return on equity stands at 13.3%, given that in particular in this segment, we expect the unwind effect over the year also to increase.
Therefore, we have to work to have it above the outlook of 8.5%. Currently, the return on equity is very much supported also by a strong return on investment, because in those countries where the inflation is high, also the investment returns have increased significantly. Finally, a few words on reinsurance, but given that you heard already the presentation from Jean-Jacques and Clemens, I will leave it to a few words. With regard to the insurance revenue development, the development is nearly flat, but they still stick to the outlook to achieve a 5% growth.
The very positive news in this insurance revenue development is the structure of the new business, where they were able to execute a shift from proportional to non-proportional business, where we have higher profit expectations. Excuse me. Which is clearly affected, reflected in the very, very positive development of the contractual service margins. Net income stands at EUR 247 million, so they are well on track to deliver on their target. This is just 50% of the figure you are familiar with when you hear the Hannover Re reporting, and the return on equity stands at outstanding 21%. For the full year, we expect it to be slightly lower, but nevertheless, an outstanding number is to be expected. Let me now switch to investors capital and sustainability. To start with the capital situation.
The overall solvency ratio stands at 212% end of March. Slightly above our target range of 150%-200%. Rating is stable, and it's good rating. On the next page, you see the sensitivities with regards to our Solvency II ratio. Overall, it shows that we are very well balanced and that we don't take too much capital market risks on our balance sheet. On the next page, we have what we call resiliency embedded in our best estimate reserve. You are familiar with this concept given that Hannover Re has published these figures for a year. You can regard this resiliency on top of the Solvency II resiliency.
I'm quite happy to report that there's still a resiliency embedded in our best estimate of EUR 2.65 billion despite all the effects of inflation in our on our balance sheet, which provides us not only a buffer with regard to volatility, but puts us also in a very strong position from a capital point of view. With regard to reinsurance, there was a drop. I think JJ and Clemens have already mentioned that they will rebuild the resiliency level to their comfort level during the course of the year, and they have already done so in the first quarter. On the next page, you can see what the new accounting standard offers as an additional insight. I think which is quite helpful.
First to start with is the shareholders' equity development. As you can see, we have an increase by more than EUR 600 million shareholders' equity during the course of the first quarter, which splits up between a change of EUR 423, which was the net income, and the OCI development of EUR 200 million. On top of that, we have the development of the shareholders contractual service margin and the risk adjustment, where we will see those figures be released with the release of risk over time. What we are providing here you with a figure which is adjusted, CSM figure. It is adjusted for tax effects and for minority.
The CSM of Hannover Re is just accounted for 50% of what you know from their figures. Also the tax effects are taken care of here. If you add that, then we have EUR 29 per share contractual service margin and risk adjustment, which you can see out of our balance sheet as of 31st of March. On the next page, there is the usual breakdown of our investment portfolio, and it's a little bit boring because there's not much change. We are still heavily invested in bonds, and we are still very conservative, but we are continuing our low beta strategy. Nevertheless, there's something I would like to draw your attention to, and this is on the next page.
These are the folks, the assets which are accounted for fair value through P&L. What we try to do here, and maybe we will change the way how we report on that one over the time. We try to provide you with a fair value through P&L equivalent figure, so it's not the real fair value through P&L assets what you see. We have in the appendix on page number 33, we have all of our fair value through P&L assets reported, which you find in the balance sheet. What you here see is the effect of fair value through P&L assets which have a material relevance for the Talanx's P&L.
It's the figure after minority, after taxes, and taking into account that the various asset classes within those fair value and P&L asset are taxed differently. It's also without primary life, where we have fair value through P&L assets in the variable fee approach, of course. In total, if you look at the numbers here, we have more than EUR 4 billion, which are exposed to the P&L and a 10% change. Those, EUR 4 billion would result in EUR 400 million change in the net income. It's quite material impact. We haven't seen any material impact during the first quarter because it was below EUR 10 million, but that does not mean that this effect will be always so low.
This is why we wanted to draw your attention to that one, and this is given that we are a little bit. We do not want to rule out that the higher interest rate level, if you take economic textbooks, should lead to some valuation impact in both private equity and also in real estate funds, which we haven't seen so far, but it could happen. Therefore, we are a little bit more conservative with the full year, a year. And that is why I wanted to draw your attention to that one. On the next page, I want to give you some highlights with regard to our sustainability reporting. Just to mention the two on the top of the chart.
We were able to reduce our carbon emissions in operations by 37% compared to 2019, and by 20% with regards to our investment portfolio, which is pretty good. With regard to the sustainable investment target of EUR 8 billion, we have prepared another page for you on the next page, please. We are already close to fulfill this target. Maybe we will achieve that already during the course of 2023. There you see also a split of our sustainable investment. With regard to the outlook, we stick. Next page. We stick to our guidance with regard to the insurance revenue, EUR 42 billion is the full year target. With regard to the group net income, EUR 1.4 billion is the full year target. The return on equity should be clearly above 10%.
If you just do the math, EUR 1.4 billion at an average equity of, let's say, EUR 9.5 billion for the full year, you can figure out the number which is reasonable from today's point of view. The dividend per share, where we just have delivered the EUR 2 for the year 2022, will be increased also for 2023. We don't know yet by which amount, but we will increase it going forward. Having said that, I just wanted to give you a brief overview. I'm happy now to take your questions.
Ladies and gentlemen, we will now begin the question-and-answer session. If you have dialed in by telephone, please press star followed by one on your telephone to register for a question. If you wish to remove yourself from the question queue, please press star followed by two. Question can also be raised by using the chat box on the webcast page at any point during the session. Kindly add your name, function, and email to be identified. The Q&A session will begin with a question asked by telephone. If you are using speaker equipment today, please leave the handset before making your selections. Anyone who has a question may now press star followed by one on the telephone or type a question using the chat box. The first question is from Roland Pfänder of ODDO BHF. Please go ahead.
Yes, good morning. Two questions from my side. Touching on the resiliency reserve of the primary insurance business. Could you split this a little bit into the different parts where the movements were in the last year? That would be interesting. Second question on the advantage or positive impact you had from the discounting. I guess that's linked to the interest rate environment we are in. Let's assume just for a moment that interest rates would remain where they are. How long would you have this positive impact fading out by time? Would that be there for three or four years, or how would we need to see it? Maybe you could give us an indication over the first quarter, how much it was actually in numbers. Thank you.
Okay. Well, thank you, Roland, for your questions. First of all, to give you some insight with regard to the resiliency movement in the primary. First of all, I have to admit that we have decided just to release the resiliency figure for the primary group as a whole. Nevertheless, I would like to give you some insight. We feel very comfortable with the resiliency level in Industrial Lines, which even has increased during the first quarter. We feel comfortable with the resiliency level at Retail International, where in the last year we had to reduce it because the resiliency level was so high that the auditor didn't accept this level of resiliency. They believed it would be too much.
In 2022, there was a must-have release, which was then included also in the IFRS 4 pickups in the results. With regard to Retail Germany, there where we have seen some impact of inflation in the resiliency embedded in the best estimate. We are still comfortable, but not as comfortable as we were at the beginning of 2022. To give you some more insight, it has to do with some reserves in long tail business, liability business, which are affected due to the long duration by the new inflation assumption, which we have factored in. This is that with regard to the resilient effect. The second question was on discounting.
When will the discounting of current year effects and the unwind, the so-called unwind, the interest accretion, for the reserve on stock will level out. I would, as a rough number, I would expect it after roughly five years to level out to more than, let's say 60%, 70% of them. That would be currently estimated. I have to admit, let me just check. We have calculated that not on the current, on current forward rates, not on stable. You asked for stable interest rates. We will double-check with that one, and you can ask the colleagues of Investor Relations on that one afterwards. Okay.
Maybe just one follow-on. The current effect in the first quarter, was it around 1.5 combined ratio points, or do you have a precise number?
To be honest, it is very difficult to prepare, give a precise number due to the fact that we have applied different accounting standards from GMM to PAA in different currency environments. I do not have a concrete number, but I think 2% on average, I is a good number here.
Okay. Thank you.
The next question is from Michael Huttner of Berenberg. Please go ahead.
Thank you very much. Excellent results. Well done. Thank you very much. I had three questions. One, the leverage ratio, if you could have a figure. The second on the German Life solvency. I can't remember a figure before the 277. Maybe you could remind us and maybe tell us what you're going to do with this money. I always worry when money is kind of not used, that people start kind of thinking, "Oh, I could throw a party or something." In other words, that the capital discipline becomes less.
On the international, I just wondered if you could give us a little bit more feeling for the very strong results, you know, which Turkey is less negative, or Russia. I'm saying these things, I don't know. I did have one extra one, and I'm really sorry. The share price has been really, really strong since you had your AGM. It would be nice to think it wasn't only because of the AGM, but maybe there are other things at work, and maybe you have some insight. Thank you.
Okay. Let me start with the Solvency II numbers for the German Life entities at the year-end. Without transitionals, it stands at 290, now it stands at 277. This is also due to the fact that we are distributing dividends from the German Life entities up to the holding and to provide our shareholders with increased dividends. We feel very comfortable with this 277%. Third question of you was international results. To give some more color on that one, we had a very pleasant development at WARTA on the one hand side. Italy was also very strong and well on track to fulfill all post-merger targets there, very good results in both WARTA and Italy.
Whereas in Turkey, we had to bear some burdens due to the earthquake. I think this doesn't come as a surprise. With regard to the LatAm region, we've had a very favorable development, in particular in Brazil, where a turnaround was managed, and we were able to account for adequate prices and had a positive result. The share price development is also related to the fact that we were included in the MSCI Germany Index as of May 31st. I think some index funds already have started to build up a position here, but we don't know whether they have already finished. Finally, I need some support from my colleagues with regard to the leverage ratio. We will park the question you asked for the leverage ratio.
Could you. They will provide me that in a minute, so maybe we take some other questions first, and then, we will give you an info on the leverage ratio.
Um-
Okay.
Can I ask this one maybe, yeah, maybe, how much cash from Germany, from German Life?
Hang on a second. We need to check on that one. We will check that.
Sure.
We deliver that in a minute.
Thank you.
There are no further questions on the phone at this time, so I hand back to Mr. Bernd Sablowsky.
Yes. Thank you. We have a couple of questions that have been raised over the webcast. They are coming from Hadley Cohen from Deutsche Bank. Thanks for your questions, Hadley. I read them out, and then Jan will handle them. Hadley is saying, optically, we've got a combined ratios, also below guidance, above reported levels. We are seeing it in the sector under IFRS 17. Can you please provide some of the components with the combined ratio disclosure? Specifically, what are the discounting effects, and how much are you allocating for reserve buffer build-up? That was the first question, discounting effect and how much we allocate to the reserve buffers. Second question-
Let's do it question by question.
Okay.
With regard to the overall discounting effect, there are two discount effects: first, the discounting of the current year; second, the unwind, the saldo, so the sum of those