Good morning, this is Bernd Sablowsky from Hannover speaking. This is our six month earnings call. I am together here with Jan Wicke, as usual, our CFO. We are not alone here. Today, also, Wilm Langenbach, the CEO of our Retail International Operations, is with us to give you a bit more details about our most recent transaction, which we did in May, in Latin America. After the presentation by the two gentlemen, we are happy to answer your question. As usual, you can also raise them via the webcast. Also, as usual, you'll find all the documents on our webpage, including our financial data supplements, which has tons of specific data, which is not included in the presentation Jan and Wilm will give you. With this, I hand over to Jan. Jan, the floor is yours.
Thank you, Bernd, and good morning, everybody, and thank you for attending to our earnings call. At Talanx, we are very satisfied with the current performance of our businesses. Before we dive into details, let us take a quick glance at key figures and start with the top line. With regard to the top line, we are very happy that primary insurance revenue continued to grow above 10%. We go into the first half of the year with 12.5%, and even 14% if adjusted for currency effects. With regard to the bottom line, we are happy that all our segments deliver a return on equity above the strategic threshold of 10% after tax.
With regard to the outlook, with reinsurance and Industrial Lines business operating in a hard market, it's 80% of our business, which is in hard market, which gives us very much confidence for the full year. On that basis, we are confident that we will not only meet, but outperform our full-year earnings guidance and deliver more than EUR 1.4 billion for the full year. With regard to the primary insurance, we are really happy about the development in all three segments. Industrial Lines contributing a lot to the overall results by a very good technical performance. What you can see here, a combined ratio of 93.1%.
Retail Germany, despite some headwinds with regard to inflation pressure and claims development, they are delivering a stable or even growing EBIT with 75% of the EBIT generated by Life. Retail International, and Wilm will explain that later in more detail, has a nice earnings growth, particularly driven by a strong improvement in Latin America in the first half of the year. Let me now go to the group financials and provide you with the usual overview for the group as a whole. What you can see here on this page is that we were able to grow our insurance revenue to EUR 20.9 billion for the first six months, and which was in particular, driven by the primary insurance.
The net income, we were able to grow even stronger by 21% to EUR 827 million, and this leads to a return on equity with 18.4%, which is a record number in Talanx history, and which was also driven by an absence of devaluations in the private equity and real estate portfolios. I will dig into that one later a little bit more. This very good first half year gives us confidence that we are able to outperform our full year 2023 guidance. With regard to the insurance revenue, we expect insurance revenue to outperform EUR 42 billion. Yes, we will be dependent a little bit on the development of the currency, in particular, of the U.S. dollar to the euro with regard to that one.
With regard to the group net income, we expect to outperform EUR 1.4 billion net income for the full year. With regard to the return on equity, we expect to clearly outperform the 10% return on equity threshold. We do not expect the return on equity to stand at 18.4% at the year-end, due to the fact that we are still expecting some devaluations of private equity and real estate in the second half of the year, and therefore, we might be a little bit cautious here. We expect a figure in between or clearly above 10%, but in between 10% and 18.4%. With regards to the large loss development, in the first half of the year, we have seen a very good development.
In total, last year was affected by the Russian war in the Ukraine. We had large losses in the first half of the year, above EUR 1 billion. Now, we have reported losses of EUR 820 million. The large loss budget for the first half of the year was EUR 971 million, and as usual, we are booking the higher of the two. We've booked EUR 971 million, and this means that we will have a buffer of EUR 150 million for large losses to come in third and fourth quarter. The highest, by no surprise, the most significant event in the first half of the year was the earthquake in Türkiye, with more than EUR 300 million.
With regard to the third quarter, we also can report that part of the buffer of EUR 150 million is already used for the floods in Slovenia and Austria, for the fires in Greece and Hawaii, for some hail events in Northern Italy and as well for the Fremantle event, which has occurred. The next page provides you with an overview how primary insurance and reinsurance are contributing to the overall results. What you can see here is that primary insurance accounts for 42% of the group revenues and 44% of the net income. If we dig a little bit more into detail with regard to the primary insurance and into the segments, we can see the growing importance of Industrial Lines with regard to both revenues and bottom line.
Also, Retail International is doing fine, and given that Wilm is acquiring new entities in Latin America, it will grow further in the years to come. We go to the next step now, to the segments. I would like to start with Industrial Lines here. In Industrial Lines, we have seen a very nice revenue growth with strong 10% and 11% if adjusted for currency effects, in particular, driven by commercial lines, where we are still able to achieve premium increases above inflation rate. The combined ratio stands at a very nice 93%. This is despite the fact that the discount benefit, which is included in those numbers, has been more or less set aside by a very conservative reserving policy.
The return on equity stands at 12.8% and is clearly above the 10% threshold, which is set out for our business. At Retail International, we have also seen very strong growth numbers, 28% in P&C and 39% in Life. Those were driven by some special effects, in particular by the development in Turkey, where we did not only see tremendous inflation, but also tremendous price increases. Therefore, to provide you with some numbers, if you were to exclude Türkiye from the P&C growth number, the growth would have been even above 15%, so still a very strong number.
With regard to the Life number, the 39%, the increase would have been above 12%, because in Life, we also have started a new cooperation with FIBA in Türkiye, which has also accelerated the growth numbers here. All in all, very strong organic growth in Retail International. The combined ratio stands at 95.4%, which means it is slightly above the 95% threshold. Please take into account that the earthquake in Turkey impacted, obviously, the numbers of Retail International, and therefore, the 95.4% is a good number. Return on equity stands at 12%.
For the full year, we expect the number to be below 12%, simply driven by the fact that we are sending equity to the entities in Latin America, that then they are prepared for closing the deal with the Liberty entities, and therefore, higher equity leads to lower return on equity. This will be reflected in the full year numbers here in this segment. The next page gives you an overview about Retail Germany. First of all, with regard to growth, there we have a mixed picture. We are growing in P&C 8%, and in particular, driven by the SME business, which is our strategic target to grow this business further.
In Life, we have a decline in premiums, like I assume what you've heard also from our competitors, if we go more into detail there, then we have a strong decrease in the single premium business here, in particular in the bank insurance channels. Life is contributing a lot to the overall EBIT. The combined ratio stands at 96.1%. There's quite some inflation pressure in the German motor market in particular, which is also reflected in those numbers, and which will require further premium increases for the future. The return on equity stands at very favorable 11.3%. If we were to include also the impact of the German Life business on asset management, we should then include this contribution.
It would, it would even stand at 12.5% for the first half of the year. All in all, for the full year, we are very confident that Retail Germany will exceed the 10% threshold in terms of return on equity. With regard to reinsurance, our largest business division, most of you might have listened to the call of the colleagues of Hannover Re. They have a very good insurance revenue growth, and the growth, what we've seen in reinsurance was, in particular, also impacted by a shift in the business mix from proportional reinsurance business to non-proportional reinsurance business, which goes along with better margins. We are very happy with the development that we've seen there, which was also reflected in the very strong new business CSM figures, which Hannover Re has reported.
The net income they expect for the full year to be above EUR 1.7 billion. 50% out of it, this is our share, then for us, will be above EUR 850 million. The return on equity has outstanding 21.5% for the first six months. Having said that and provided you with an overview about our segments, I would like, now like hand over to Wilm, that he can explain us a little bit more about Latin America.
Thanks very much, Jan, good morning to everybody. Let me start with an overview about the Latin American market, in which we're investing with the Liberty transaction, and why we are very happy strategically and financially with the transaction overall. Latin America is a large, and actually also growing profit, growing profitably. When you see this roughly $52 billion market size with only the top five markets, it's also a focused approach that we can run here. The top five markets represent a population of 460 million, out of which Brazil, again, is the biggest market with 216 million people.
All of the markets overall are growing in the past, above 7%, and has also been on average profitable, with a combined ratio around 96% in the past years. When you see on the next page, we do believe this is not only strategically long-term a good acquisition, but it's also a good timing. We have seen in Latin America, in our business, as well as in the market overall, very strong results. The insurance revenue have grown by 26% to EUR 1.1 billion, and the combined ratio has strongly improved from 102.2% to 92.7%, driven by a focused effort on technical excellence, especially in pricing, claims, and efficiency, leading to an EBIT of overall EUR 96 million.
A very strong improvement, actually, a record result for our Latin American entities. When you see that on the next page, that we have been at around EUR 2.1 billion of premiums in 2022 in IFRS 4, you remember that we signed a contract to buy the Sompo retail business in May 2022, which we will close tomorrow, in line with our expectation of a mid-year closing of 2023. Adding the Liberty transaction of Brazil and Andes with EUR 1.7 billion, we're actually doubling our Latin American business overall, thus gaining significant importance for us and as a strong engine for us in the future.
This doubling in size also means that on the next page, we will actually be able to reach market leadership in Latin America with a top three position, and a very strong position in Brazil, number two the largest market, representing in the transaction about 70% overall, and in Chile, reaching a number one position. I should say as well, in Colombia, we are moving significantly ahead, becoming a top seven player, close to being a top five, also in the attractive market of Colombia. This means that overall, for us at HDI International, we will also have a much more balanced regional business mix. This was one of our strategic targets, to be less dependent on Europe, especially Varta and Italy.
We will actually be pretty much balanced on 2022 IFRS 4 numbers. It's 45%-55%, LatAm versus Europe, in terms of size. Actually, when you look at it, in IFRS 17, we are very probably even closer to a 50/50 split between LatAm and Europe, given the insurance revenue will be a little bit smaller in Italy due to the life savings business that we're having there. On top, we believe that the Liberty LatAm acquisition is also for the group overall financially attractive.
It's going to be accretive with an earnings per share growth above 4% in 2025, and also the ROE should increase by roughly half percentage point, assuming a fully debt finance structure with a mix of cash and, and debt, as the group is able, able to do. I would like to give you as well, an update on where we stand, because, of course, since May, we have worked heavily on the preparations for the closing. So as we told you, we expect a closing in first half of 2024.
This is still correct. However, we are quite confident that there is a good probability that Brazil, the 70% part of this transaction, might actually even close in Q4 2023. We have received the authority, the authorizations, of the antitrust authorities in Brazil, and in Colombia, and in Ecuador, we didn't need one, but there I've already received also the authorization of the insurance authority. We are well on track to achieving this goal. With that, I'm happy to hand over back to you, Jan.
Thank you, Wilm. Thank you for this overview. Now, I'd like to provide you with some more data from the CFO desk. To start with, I would like to start with the solvency ratio. Solvency II ratio increased 5 percentage points in Q2, due to an increase in own funds in all primary insurance segments. Given our solid capitalization, we will remain at 200% even after closing the Liberty deal, given the strong position we currently have. From my point of view, this is the most important page of the presentation. We show the book value per share, this page also should answer the question from an investor's point of view, how much value have we created in the first half of the year?
On the left side of the page, we can see that we have increased the shareholder's equity from EUR 8.7 billion to EUR 9.3 billion, despite paying a dividend of EUR 500 million during the course of the first half year. We have seen an increase in the book value per share of above 7%, depending on whether you include goodwill or exclude goodwill, it's in between 7.1% and 7.6%. On top of that, on top of increasing the shareholder's equity per share and paying dividends, we have also strengthened the future earnings potential as we were able to grow the shareholder CSM and risk adjustment. This is reflected on the right side of the page, where you can see the shareholder CSM and risk adjustment.
The CSM adjusted for minorities, which is in particular important with regard to Hannover Re, and also adjusted for with a standard tax rate. What you can see here is that CSM and risk adjustment together account for EUR 28.15 per share, and it was up 3.5%. My conclusion out of this page is that we've seen a very favorable first half of the year. Not only having a very strong net income, not only paying a EUR 2 per share dividend, but also increasing the future earnings potential, which is reflected in CSM and risk adjustment. On the next page, you can see that we haven't achieved this target with a risky investment policy. We continue with our low beta investment portfolio, with more than 80% of our investments allocated to the fixed income part.
Within the fixed income part, we are looking for very good quality of the fixed income, so on. On the next page, you can see how the higher interest rate environment is coming through. Ordinary investment results are up by 11% to more than EUR 2.1 billion. The net return on investments for own risks, which is in the lower right box, there we have an increase of from 2.1% to 2.7% during the course of the first two quarters. What is worth mentioning that we haven't expected it, but that we haven't seen any devaluation of private equity and real estate investments, which we have, and which are accounted fair value through profit or loss during the course of the first half of the year.
Instead of that, we have seen an increase of EUR 16 million, which was reflected in the half year number. Given that we still expect devaluations in private equity and also in the real estate funds in the second half of the year to come, we have provided you on the next page with some sensitivities with regard to our portfolio. How should you read this chart? If there would be a decrease of the valuation of our very well-diversified private equity portfolio by 10%, that would result in a reduction of net income of EUR 185 million. For real estate funds, a 10% decrease in value would result in EUR 83 million.
Given that we expect expect some devaluations to come for the second half of the year, we have included that in our outlook, which I would like to present now to you. What do we expect for the full year to come? It's always early to come out with numbers before the hurricane season has started. With regard to the revenues, we expect to outperform EUR 42 billion revenues. It's a slight, obviously, it's dependent on the currency development, in particular, the U.S. dollar. With regard to the group net income, we do not only expect to meet EUR 1.4 billion, we, we expect to outperform EUR 1.4 billion for the full year. We have included in this view already that we will have some devaluations in the fair value and P&L assets.
With regard to the return on equity, we expect that to be clearly, clearly above 10%, but maybe not at 18.4%, which was a record result in Talanx history. With regard to the dividend, we've promised to you, and we will deliver a dividend above the EUR 2, which we've paid in the current year, and which will be paid the number above EUR 2 in the next year to come. Having said that, we are very happy with the first half of the year, which, which gives us a lot of confidence for the second half of the year, and we are now ready 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 to register for a question. If you wish to remove yourself from the question queue, you may press star followed by two. Questions 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 the questions asked by telephone. Anyone who has a question may now press star and 1 on the telephone, or type a question using the chat box. We have the first question from Michael Huttner with Berenberg. Please go ahead.
Fantastic. Thanks, Jan, thanks W ilm, and thanks, Bernd, for lovely numbers. I had three lots of questions. I'm not sure, I'm probably too greedy. First of all, I just wondered, Wim, if you could actually give us the profit numbers for these deals? Because I can see you're saying the ROE and all these things go up, but they go up from a base, which is still itself going up. And I'm not good at double derivatives. I t's too complicated. Any indication would be very welcome, both on Sompo and Brazil and Andes.
I suppose we'd have to treat them separately, because they all arrive at different times. The second is on the Q3 losses. You said, Jan, that you, you would use up a lot of the reserve prudency. I just wondered, can you, can you remind us how much budget you have normally in Q3? I know the excess you have, which is EUR 151 million, but maybe also you can give an idea of the losses you can see to date. You, you've mentioned wildfires, Fremantle and flooding in various regions.
Then the, the last lot of details, thanks, actually, and I shouldn't say this, but to your lovely IR, who kind of said, "Well, motor in Germany is not great, SME is okay, and bancassurance is fantastic." I just wondered if you could give us the combined ratios for these three business lines, so we can have a better feel for how things are developing. Thank you.
Well, thank you, Michael. I think Wilm will start with Liberty.
Yeah, Michael, thanks very much for those questions. We do expect from some form in 2023, of course, still a marginal impact only. What I can tell you is that in 2025, we do expect a net income of above EUR 50 million from that transaction. Keep in mind that this is not yet the full run results that we're expecting from this overall. What I can tell you about Liberty, when you do the math for 2025, with earnings per share accretion, before financing costs, we expect there's something above EUR 120 million as a net income contribution.
This is before funding costs, the EUR 120?
Yep. Yes.
Yeah. Cool. Excellent. Lovely. Thank you.
With regard to the large loss budgets in the third quarter, where we start with a buffer of EUR 150 million, the budget for the third quarter, given that it is a hurricane season, is EUR 720 million. If you add up EUR 150 plus EUR 720 million, this is what's left for the third quarter then, which is a very strong number. Nevertheless, I wanted to mention that part of this buffer has been already used, and this was the intention. With regard to the combined ratios in Retail Germany, I first would like to bring to your attention once again, Retail Germany, if you look at the numbers as whole, we are talking about 3% of the insurance revenue of the group. We are talking about small numbers.
Nevertheless, the combined ratio in the motor business is at 110%, which is not very nice. Whereas the combined ratio in bancassurance is at 97, sorry, 78, 78 with that one, and the 97, the 97 is with the SME business. Oh, yeah.
I have-
Michael, sorry. I have once again, 110 is for the motor business. It's not 70, 78. It's 73.8, which is the combined ratio in the bancassurance. It's 97.6 for the SME business.
Fantastic. {crostalk}
Okay?
Thank you so much.
Then we have your questions. Next questions, please.
The next question is from the line of Bhavin Rathod with HSBC. Please go ahead.
Hello, good morning, thank you for taking my question. I have three, one from each of your primary segments. The first one would be from the Retail Industrial Lines, wherein you clearly mentioned that the bulk of the discounting benefit was rather absorbed by reserve resiliency buffering. Could you just provide an indication, how should we think of this trajectory going forward into 2023 and in 2024? Should we still expect this discounting benefit to be rather absorbed by this reserve resiliency, or should we be expecting some sort of normalization over here? The second one would be on Retail International combined ratio. We can see that the combined ratio in Poland, particularly Warta, was much higher in standalone 2023 at 95.7%.
It's also running significantly above the quarterly run rate we have seen over the last few quarters. Could you provide any indication what we are seeing in this market in particular and what led to this increment? The third and the last one would be on Retail Germany Life, wherein the quarterly EBIT was much higher than what it was in the previous quarter. We just wanted to understand, was there any one-off or in the second quarter that we should be mindful of, or would you say it was more of a quarterly noise, and we should rather be looking at the first half EBIT, just to make up our mind for our, our forecasting for full year averages? Thank you so much.
We will try to answer your questions, but I have to admit that the sound quality was very difficult, so we tried to listen carefully to your question. If we haven't understood the question in the sense you wanted to ask the question, please do it again so that we can answer. First of all, I understood your question with regard to the Industrial Lines, that you would like us to provide you with an outlook on the combined ratio, taking into account that we've seen a very strong discount effect due to the new accounting rules during the first half of the year, and that we have already built a lot of resiliency in our reserves there.
I just can agree to that, yes, we have a very, very, very comfortable resiliency level now in Industrial Lines, and what will be the outlook for the full year there. With regard to that question, if I understood this question correctly, I would hint, or I would set out the expectation that the combined ratio for the full year can be even better than what you've seen in the first half of the year, assuming that we won't have bad hits by the hurricane season, and that we will see a very strong result for Industrial Lines for the full year, maybe at cost of a lower net investment income.
As we are considering, due to the very, very strong technical performance, to realize some losses in the bond portfolio in Industrial Lines, to manage also the expected growth of unwinding effect or interest accretion in the years to come, because earning growth really matters to us. In a nutshell, technical results can be even better, most probably at cost of the investment result. Yeah? This was the first one. The second one was with regard to the combined ratio in Retail International, and there, in particular, Poland. I hand over to Wim, because he is the expert here.
Sure. With pleasure. Well, what I can tell you is, is the following. You see for the six-month numbers, which I would like to highlight, the 91.3% combined ratio. I would like to ask you to look at both quarters in parallel, because they are very different, and that is the more relevant number, how we see the overall performance. If you compare that as well, given where we ended last year, the IFRS 4 numbers in 2022 were 93.8%. You can see that this is a very strong combined ratio. In terms of outlook, we see in the market, of course, still inflation.
We see also some increasing frequencies, in especially the MGTS business. MOD runs very strongly, so we do expect to be in this range of 91%-92% going forward.
You had a third question with regard to Retail Germany Life. Could you repeat this question? We are struggling a little bit with getting the understanding of the question, given the quality of the, of the line.
Sure. Sure, yeah. Just looking at the second quarter, EBIT, it was at EUR 75 million, and when I compare it against the first quarter, it was at EUR 36 million. Just wanted to understand if there's any quarterly noise in the second quarter, or would you suggest that we should rather be looking at the first half number, which is closer to EUR 110 million, and that is what we should be using for, our, our forecast going forward, as an annualized rate?
Sorry, now it was better. I would strongly recommend to take the first half of the year. Quarterly results in Life are also always driven when you do assumption resetting in the Life books. Therefore, I strongly recommend to take a longer period, the first half of the year with the EUR 75 million. We were very happy with the development in the Life entities and their contribution to the overall EBIT of Retail Germany.
Perfect. Thank you so much.
Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star followed by one on your telephone or use the chat box on the webcast. The next question is from the line of Phil Ross with Exane BNP Paribas. Please go ahead.
Oh, hi, good morning. Thanks. Thanks for all the detail on the LatAm acquisition. I'm just looking at slide 15, where you give the average combined ratio as 96% for those markets over the five-year period. Thinking about the component part, I had thought historically, the Brazilian market overall was very profitable, maybe sub 90% combined ratio. On that basis, that might push the other segments to at or above a 100% combined ratio. Just wondering if that is correct. If so, how do the acquired assets that you're purchasing compare to the market averages in Brazil and the other segments? Are they better or worse than the market combined ratios? Thank you.
Sure. Well, actually, the markets have been, of course, somewhat varying across these, across the time. I would advise you to look at the 96% overall. This depends on the interest rate environment as well as on the inflation environment that the countries have been in. We took out the year 2022, to be honest, as well, given this was a very particular year, year after the pandemic and the inflation and the supply chain effect. The 96% we put because we feel it's quite a good example. The only market that stands out is actually Argentina, because it continues to be a very high inflation market, and has definitely higher, higher combined ratios.
What I could tell you, beyond on, the current status and why I was talking also about the good timing is that what we see here in our business with the 92.7 is also a good evolution that we see, particularly, in Brazil. If you look at the half year numbers, for also, Brazil, you see, that we have been actually even below 90% in terms of combined ratio. Also the Liberty entities overall have performed very, very nicely. The local numbers there, I can only give the local published numbers, for the six months, have also been at 88% combined ratio.
That's why I meant, we are, supposedly assuming closing, as I described, coming in, it's a good market timing as well. Our expectation is, of course, given we are going to be, especially in Brazil, also in Chile, a number two or number one player in the market, to be not only average, but we expect to be getting close, if not, to best practice.
Okay, thank you for the detail.
We have a follow-up question from Michael Huttner. Please go ahead.
Fantastic. Thank you. I had three more, please. On the CSM, which is a lovely growth, I, I just wondered if you can give us what I, I would, I would describe as organic growth. I'm not sure how to define it, so it's a little bit up to you, but I think it would, it's the new business less the release, plus the investment income, and I'm never sure whether it's just the expected or the real world. Then on the reserve prudency, I think, the impression I have is that you use the discounting in Industrial Lines to actually add to reserve, or maybe you added more. I just wondered if you can give a feel for what the reserve prudency has done or how you would see it.
If I use 3% on EUR 2 billion, that's EUR 60 million. If I, if I'm more optimistic, that's EUR 100 million, and I'm just wondering if you can, if I didn't hear, you can kind of maybe. The last point is on Retail International. You said, the ROE would go down because you've increased the equity, and of course, the deals close later, and there'll be various costs and stuff. Can you say how much money you've sent them, maybe? Thank you.
Let me start with your second question with regard to the reserve level, where you asked whether you should be optimistic or more optimistic with regard to the resiliency set aside. You can be more optimistic here, with the resiliency set aside. Let me just stress a little bit the thought of a CFO with regard to resiliency. We have a policy which we published at the Capital Markets Day, I think two years ago, which is that we define a lower threshold and an upper threshold for the resiliency, which we would like to have in the business segments.
Depending on the volatility of the business, which is obviously high in Industrial Lines, yeah, and so, but we do not want to exceed also the upper limit of resiliency, because then it turns out to be not capital efficient.
I just want to bring across in, in my words, that we have reached now a very, very, very comfortable level of resiliency in Industrial Lines, and therefore, also, with the question of somebody else here, I just want to advise you a little bit to think of that we might see, assuming an average hurricane season, the combined ratio at the end of the year, even better than this 93.1%, but at cost of of realizing some losses in the bond portfolio to provide for higher ordinary investment income in the years to come, so that we can also see earning growth in Industrial Lines for the years to come. This is what I would give for your second question.
With regard to the first question, the CSM development there, it's a complicated question, but it's a very, very good question, Michael. Why is this complicated? It depends on where we apply CSM, where we apply GMM or VFA approaches in accounting. We do have GMM accounting in Hannover Re. The majority of the CSM development is driven by Hannover Re. We have VFA accounting in both Retail Germany and Retail International. With regard to Retail Germany, then the second biggest impact of the increase in CSM, it was driven by a new business development or new business value development, where we've seen a very favorable increase of EUR 100 million in the previous year, to EUR 100, close to EUR 150 million in the current year.
EUR 50 million more new business value in the long-term life book compared to previous year, which was a good number. Compared to the overall size, this number if you compare that to the CSM development at Hannover Re, where we've seen EUR 1.8 billion new business CSM in the reinsurance P&C book, compared to EUR 1.2 billion in the previous half year, these numbers are also rather small.
And we do not have any CSM development in the Industrial Lines, as we are counting Industrial Lines with the PAA approach, and we do not have any CSM development also in the P&C books of VIM and Retail International, as we also apply PAA there. Sorry for this very complex answer, but I think we all have to get used to the new accounting standards, and this is why. Now with regard to Retail International, then if you could
Yeah, Michael, that's of course, a good question. It's a bit premature, however, to answer it, given, that we're before closing and still fine-tuning our financing structure. What I can tell you at this stage is that you can expect a mix of equity and debt for Retail International, to be used for the financing of this transaction internally. That's how we will proportionally put that. The exact mix is currently being determined.
Brilliant. Just on the, on the, reserving the, this extra reserving in Industrial Lines is, lower and upper threshold. Is that included in Solvency II, capital Own funds?
Unfortunately, no. If you are increasing your reserve level, this is a negative for the Solvency II ratios, given that it increases liability and therefore reduces the Own funds.
This is just to be clear, I'm sorry, I'm taking up time, but I really do want to understand this properly. In the language of Solvency II or IFRS or whatever, the, the reserve prudency is included in best estimate liabilities, it is not above it?
Exactly.
Cool. Excellent. Thank you so much. Thank you.
We have another follow-up question from Bhavin Rathod. Your question, please.
Hi, apologies. Just a couple of more questions from my side. The first one would be on Retail Germany P&C. Could you provide any indication of the reserve resiliency situation over there in light of the higher claim inflation that we have seen? If you could provide where do we stand currently at the bottom end or of the comfort range, or any colors over there? The second one would be on your expectation of losses from the FVPL asset. Jan, if I remember correctly, last time you provided an indication that in your full year guidance, you were expecting somewhere around double digit levels of impact. Would you say that this still remains the case for the second half of the year, your expectation of losses from FVPL assets? Thank you.
Okay, to start with, in Retail Germany, we have a very still, a comfortable reserve level, and the resiliency level is comfortable. We have even slightly increased the resiliency level during the course of the first half year. With regard to the expected losses, fair values through PNL, Hannover Re already has given some indications what they have included in their forecast, which was, I think EUR 200 million, have they included, and we have to take account for half of it. On top of it, we have accounted also for a large, larger EUR double-digit million number for the primary group to come during the second half of the year. Does it answer your question?
Good. Yes, it does. Thank you so much.
So far, there are no further telephone questions. I hand back to Bernd Sablowsky for the written questions.
Yes, thanks. Hedley came in, Hedley Cohen from Deutsche Bank, came in with some questions, posted on the webcast, which I read out as follows: There are two questions from Hedley. First one is, can you talk a bit more about the higher frequency inflation trends you are seeing in Germany? Several of your competitors, but not all, have cited similar trends, but not clear for how long it is expected to last. Question one about inflation and frequency. The second question, with, with the recent acquisitions, does it now make more sense to split out the international business, Retail International business, between LatAm and Europe, given both at similar scale now with very different macro backdrops? That is a question as to how we design our reporting on a segmental level going forward. Jan?
To start with the higher claims frequency, and you, you, Hedley, first of all, you're right. Not only us, also our competitors have reported about a normalized frequency after the dip, caused by corona, in the German motor business. On top of it, and this is something which can be heard, the combined ratio, there's claims inflation, in the motor claims, and which will require, on my point of view, a significant increase in the premiums to come so that we can cope with the higher inflation what we see in the claims. With regards to the split, LatAm/Europe, I just can say we are not intending to do that.
We believe that, it's a very good diversification for the Retail International business, that they are no longer so dependent on the development in Europe, and that we are very, that we are simply better balanced now by doing that. Obviously, yes, we will provide you with some information about those regions going forward.
All right. Thanks, Jan. There is a final follow-up question raised by Michael Huttner. Back to Michael for final follow-up.
Fantastic. Thank you. It was, it was really just on the Solvency, the rise in Solvency, so lovely. I just wondered if you can, if you can maybe give some of the main items which, which drove this, please?
The main driver for the increase in the solvency ratio is the increase in the own funds, in particular, driven by the primary insurance group, and which is also reflected on IFRS accounting in the nice net income, which we've seen in the first half of the year. This is the main driver. There was rather, very small changes with regard to, the Solvency Capital Requirement, so it's driven by own funds.
Brilliant. Thank you.
Far, there are no more questions, and I hand back again to Bernd Sablowsky.
All right, thanks for everyone to listening to us and asking questions. As usual, the investor relations team is available throughout today, and obviously the days to come, to take other questions you might have while reading through and digging through the numbers. For now, thanks for listening and talk to you soon. Thanks, and bye-bye.