Ladies and gentlemen, thank you for standing by. I'm Haley, your Chorus Call operator. Welcome, and thank you for joining the Talendx Analyst Conference mode. And I would now like to turn the conference over to Carsten Bohler, Head of IR. Please go ahead.
Yes. Thank you, Haley, and good morning from Hannover. This is the Talan's results call for the full year 2020. And I'm here together with Thorsten Leuer, our CEO and Jan Wicker, our CFO. And Thorsten will give you an overview of the group results, and then Jan will take over and lead you through the segmental numbers.
After their presentation, of course, they will be happy to answer your questions. As usual, you can raise your questions via the phone and via the webcast. And you will find all the documents on today's numbers on the IR section of our homepage, as well as with a short delay, a replay of this webcast. With these remarks, I'd like to hand over to Thorsten.
Hello, and welcome from my side as well, and I hope you stay healthy in these challenging times we all have. And we're happy that there's some light probably this year at the end of the tunnel. So with that kind of welcome remarks, I would like to draw your attention on Page two, which gives basically a summary what we would like to address today to you. First is, we are a growing company with 4.1%. Currency adjusted actually is close to 7%.
We are a very fast growing company compared to the peers, to the market. And I would say actually last year, we grew four times faster than the main peers of all markets. So, Thailand is a growing company. Our combined ratio is 100.9%. This clearly included the corona effect.
I will draw some more details later on. And the key question for us was the underlying ratio behind, and that was 97.6%. We are below like last year if you make an adjustment for the corona effect to 98.3%. So basically, underlying business is running in the right direction. We have said that we will be significant above EUR600 million as our guidance last year.
After some months, we could give no guidance. We gave the guidance end of the year, this is EUR600 significant above. With six seventy three, we can say that is achieved and what is sometimes not seen at the first glance, 42% of our results is coming from the primary insurance overall. The dividend, we will keep our promise to stay at least on the level of last year with €1.5 per share. We had good conversations with authorities.
As you know, many authorities of the world blocks the dividends, but with our and become later to that as well. Solvency ratio was 187% after the third quarter. And actually, we are very confident to be even higher than this after the fourth quarter with the first indications we see. There was good discussions, and therefore, we can pay and keep our promise dividends as said. The outlook is 800,000,000 to €900 And as well, I could say here already that we are there's still some corona effect to come.
That is clear. I will go more details. But in that range of 800 to 900, if you ask us today is the best estimate, we could say we rather see us for the time being on the higher end of that range. On the 5% EPS target, we started the journey together in 2018 here in our strategic cycle and we promised in 2022 to have a yearly CAGR of 5% EPS. Here, we are really on track to come back this year, and we believe in 2022, this will be happened at least 5% EPS in 2018 will be achieved and therefore, totally on track what we have promised in spite of corona.
I would then come to Page four, which basically shows what I said, all the indication of our outlook we gave in twenty twenty November then have been achieved. I would not go too much detail. Maybe the only thing is that 6.9% growth of GWP, think, is a nice figure in such a challenging year. On Page five, you can see that our strategy is paying off. And giving you maybe some indications why we say that, Industrial Alliance, the programs are clean up of this Life portfolio with underlying profitability, which was improved, is totally on track.
And when we go to come later in this year to our Capital Market Day, you'd be surprised how good this was working. And actually, we have always said we want to have some volatility buffers included there. And all this, you will see them on our Capital Market Day. So there was no negative surprise on that area. Specialty, we have said that in 2022, want to have EUR 2,100,000,000.0 premium starting with roughly a bit more than EUR 1,000,000,000.
This target is already two years nearly fully achieved. So this year, we have already €2,000,000,000 So actually, again, when we come back to the Capital Markets Day, we have probably come with new targets in that area because two years ahead. Retail National, nothing special. We have some core markets, some bolt on acquisitions. In Germany, we have promised in 2021 to deliver on our course program for many years.
You have said a program discussed with us. We are very confident that the $240,000,000 will be achieved this year. And again, on our Capital Market Day, probably there will be then a new program as cost probably will be achieved this year as promised. And small medium enterprise, we are growing really significantly above the market. Actually, the start of the year was very positive as has been last year, where we could grow significant market share in that area.
And reinsurance, you have heard everything already last week. So therefore, a good performing segment in our talents group, the reinsurance part. On Page six, you see that we make our business more sustainable. The main features of that is that we have included the CO2 neutral globally for our business, what we can do ourselves directly. We have included in our coal risk as well the oil sands where we want to access in 02/1938.
And on the alternative investments, we aim to have EUR 5,000,000,000 investments. We are roughly EUR 1,000,000,000 higher of EUR 3,700,000,000.0 for the time being. EUR 2,100,000,000.0 there is actually renewable energy. So we are one of the biggest player in that area of renewable energy. And in the diversity area, we have appointed human resources actually to really push this area ahead of us.
So then we have and this effort we have done for sure you make some transparency on the ratings and you see on the right side all the ratings, the major rating we would like to get measured, the standard ratings you can see in the market. And we have all improvements in all areas, so therefore, it was seen our efforts from the rating agency. On Page seven, you see that our yearly profit loss account and with €41,100,000,000 I think we are growing company and for sure one of the big seven company in Europe will be as a position remained, I guess. The growth is coming mainly from the reinsurance industrial sites. We speak of hardening cycles here as well from retail international or the retail business.
But here, have currency headwinds strong against us. But when you look local adjusted currencies, see as well in the BC area, we're growing market share, we're growing company, but currency have been really strong headwinds against us. So all over, we can see nice growth in our company and compared to the market. The combined ratio, maybe you draw attention to plus 2.5%, that is basically the corona effect, and I will come in a second to discuss where exactly it came from. And this is the direct effect and you have the indirect effect of corona, which is the return on investment is 30 basis points down.
The ordinary, just to give you a figure, the 10 basis points of ordinary investment income means for us €36,000,000 impact on our bottom line. So these are the two effects directly combined 2.5, indirectly roughly 30 basis points down return on investment. Coming on the next page now, talking a bit more about corona and what was underlying results to give you a feeling where we're going forward. Maybe to the two key figures on this slide is on left bottom, you see the nine forty one. That is basically our underlying performance in last year without those special effects of corona and other positive counterbalancing effects.
On the right side, you see then what's the result, what we were showing today, the $673,000,000 So that's basically what has shown the profit loss. And now I'm going to give you a bit of a feeling where do we stand for this year as well. Will be interesting for you when you come later to the outlook and why we say we are staying on the higher end as best estimate for the time being. While the $941,000,000 is not a figure we can guide this year because we have to deduct roughly €100,000,000 from that figure. And there are many reasons for that.
I give you two good ones and two, let's say, we have to deduct ones. So one fifth of the corona claims still to come this year. This is our estimation. Who knows how long the third wave will come, but our estimation from the whole pocket, we have one fifth still to come. We believe interest yields are going down.
We see it already. There's a clear indication that central banks are not changing behaviors. So interest rates continuously eating our, let's say, yields in our ordinary income, so going down. We have positive effects as well. One is the onetime effect you have already probably seen with Handelbury, the so called Voya portfolio was a significant positive effect.
And we have as well, for sure, in our ideas, that operational performance will improve. So all this effect together will bring us €100,000,000 still minus to this $941,000,000 So the baseline you could say is $841,000,000 in our ideas. But again, as I said, we believe that operational performance will be really a track and a good trend now. So therefore, we believe that we will rather stay in the 8% to nine or on the higher end of the range, which basically would mean that we are roughly 30% up from this year results and close to our record year before corona times. All this for sure is always with our CCC disclaimer as you know in the past.
On Page nine, here you can see basically a lot of numbers, but maybe the key numbers, I would say, in the primary insurance, you see the 149 as a total corona net income impact. So these are the impacts where we have all the offsetting positive effects as well included, For example, lower frequency in cars, all this as well included. So it's a net effect of claims and as well offsetting effects. And you see the reinsurance side is with $2.33 and 95, it's really much more heated. So twothree coming from reinsurance and onethree coming from primary insurance.
And maybe, and I will tell you a little bit later, the details was really good for us this year. You can see this that the 04/2002 where we talk about the unused large loss budget. So we could really this year, we were able to compensate this huge corona effect we had on the company. We could really compensate with not use large budgets. And actually, you see it with industrial part, the 72 in this column, at the end it means that the cleanup was working, that we could really stay within or even significantly below our budget when it came to nut cut events and as well man made claims.
And later on, you will see how significantly we have been above that year. On next page, you see where and which lines of business the hit of corona came. Well, basically, it's business interruption and event protection and credit. These are in the non life areas, those lines been affected. And in life, it was basically U.
Mortality. To give you a feeling which how much comfort we could have or we have, that's on the right bottom, you see the 59%. So 59% are IDNR percentage, which basically means 59% of what we have served is still on the IBNR level. Hence to as well see on the credit side, you see the comment there, especially there, we have even 95% IBNR ratio in our total reserving. So with that figure, still we believe onefive will come.
So total effect, as I said, with all the positive and negatives, will be €100,000,000 less to our underlying profit. So what all over, I think you see that it's not an aggressive reserving rather. We feel comfortable on the best estimate level with that kind of reserving. So next page, page 11. Here you see what I said before, and it's when you basically just say on the bottom, see the 71%.
And if you compare this to all the past since 2012 when we introduced this large lots budget, significant large loss budget, then you have 71. So we never so that's basically how much we use our budget. So this year in 2020, we only used it with 71%. And you see it as well in the blue column, if you compare, it has been never as low or never been as less or that level used as before. So it means man made really underwriting compared to what we did was really good.
And the NAVCAT events have been, in spite of all this frequency, there were for sure some luck that hurricanes did not go the wrong direction because we had a lot of hurricanes last year. But our risk appetite was really very much focused and limited in that kind of large nut cut. So therefore, over and it was a good timing, let's say, that we were the lowest level ever in our usage of the large loss budget. It gives us confidence again of the quality of our underlying business and risk appetite where we allocate our risk appetite. On the Page 12, you see then summarized basic and our technical combined ratio.
And we always have said and that is therefore in the Capital Market Day going forward that we will give you some more comfort because we have said one thing is a combined ratio, the other thing is the kind of volatility buffer we want to build up in our business models as Henry has done in the past as well as the prime insurance as well. So here you see that 98.3% is last year and we are above 100%, but again, that was the corona effect. And as I described to you, deducting all this, we would be a bit lower with 97.6. Good message is the underlying business industrial lines is 98.7% is profitable. As you know, we had many years technical negative results.
Now it's getting to positive area. In Germany, we have promised EUR $240,000,000 EBIT, but as well, we have promised 95 percent combined ratio. In 2020, we are already on that level. So 95% is finally achieved. And well, basically, retail national, nothing much concerning with 97.4% ex corona effect is basically just more comfort in the redundancy levels.
So there's no others I would comment on these ratios as they're not material or not really with big headaches. You know that if you work in retail, this retail motor business, for sure you have some benefits of less frequencies. Yes, severity is going a bit higher because of supply chains may be collapsing, but generally speaking, frequency gives you more positives and severity gives you negative to higher severity average. On Page 13, here you see our share of the primary insurance to the total show, I would say, this 42%. So basically, it means that if you compare to all the last years that nearly half of the profit comes from the prime insurance.
And the average was 37% in the past with $323,000,000 and we are above the average and above the absolute amount. And last year, it was with $3.26 above. So basically, means, and there's a good picture, diversification in the group that comes from all the segments. And again, the full prime insurance brings us 42%. And the last page, talking about cash, about the dividends.
Well, I mentioned already that our solvency ratio is quite comfortable at 187% we had in the third quarter, and we are optimistic that it will be even higher and very upper end of our range, 150 to 200 when it comes to the year end figures when we will publish them. And maybe one thing you can't see that we promised the 150,000,000 that leaves us at least on the dividend of last year. So 150,000,000 we will promise propose to the general meeting. But behind the figure as well as the figure where the cash flow, which was always a 2018 message to the market, where we said 1.5 to two is something we need to probably revise or rethink our dividend strategy. And that kind of path, we are now at the level of 1.3, coming from 0.85 a year before.
So we're going to right path. We do not see anything we will change this year for sure. But the path is the right way. So last year, 0.85. This year, 1.3 coverage of one year dividend.
So with that word, I would hand over then to Jan Wieke.
Thank you, Thorsten. And I'm happy to share with you some insights of the business units. Let's jump right into Industrial Alliance on Page 16, please. Okay. What are the key messages?
First of all, in Industrial Alliance, we are growing 7% year on year and the biggest contribution is again coming from the specialty business, but I will discuss that in more detail in a minute. And even more important than the growth is improvement in profitability. So what you can see here is an underlying combined ratio of 98.7% for the full year 2020 if you were to exclude the corona effects after 101.4% in 2019. And please keep in mind that this improvement in the combined ratio also includes that we have built up some volatility buffers, which we have announced already last year. What's the outlook with regard to the industrial lines?
And here, as previously communicated already, we plan to reduce the combined ratio approximately by one percentage point every year for the next years. And at the same time, we want to reduce the volatility of our results. This is why we have built up some volatility buffer in 2020. So overall, it's right to state that Edgar Puls and his team, they really have performed very well, and we are happy about the fact that they have outperformed the initial plan, which was set out. What gives us positive outlook?
If we turn to Page 17, and why do we believe that we can improve the combined ratio one percentage point per year. What you can see here is the rate increases for January 1, which was very pleasing and healthy, 20% in fire, marine 11%, engineering 8% and casualty 12%. So overall, we are very happy with what could be achieved in cleaning up the portfolio. Overall, if you look at the FHIR portfolio in particular, because this was one area of concern where we started with somewhat disappointing 140 combined ratio in 2018. So over the years, we have now improved the combined ratio into 2020 by more than 40 percentage points.
Overall, we have to see that we have some in Industrial Lines, excluding specialty, we have shrinking premium in the fire line. And this is due to two reasons. First, we have reduced not adequately priced business, and we have lowered the share of exposure in some with some contracts in order to avoid future volatility. Second, in fire, please keep in mind that we have a lot of contracts where the premium is related to the revenues of the company. And due to corona, we see some significant premium effects as we have to reduce the premium collected from the companies due to the fact that they have less revenues.
If we now turn to Page 18, then we can dig into Specialty Lines a little bit. It's really the key growth engine in our industrial lines business. And as Thornton already has mentioned, since the original target was achieving €2,100,000,000 in premium target for the year 2022, We have already achieved $2,000,000,000 by 2020. And obviously, we will have to reassess our targets for this line of business with regard to growth. But what is even more important is that we have profitable growth.
So if you were to exclude the corona impact from the figures, then we are already at 99.9% compliance ratio. And if you adjust it for corona, 94.7%. So this is already in a range where the business starts to become profitable. But please keep always in mind, if a business is growing very fast, it really makes sense to build up volatility buffers in the initial phase in order to show stable results over time. And we will have a close eye to that one.
And we already have improved the volatility of others during the course of 2020 also in this line, but there's some way to go. So if we then turn to Page 19, we go to Retail Germany. And maybe please keep that in mind, I'm a little bit biased here as I was responsible for this segment until September until August, August. So overall, we are quite pleased to report that excluding corona, we have nearly achieved the 2021 EBIT target of at least €240,000,000 already in 2020. The number excluding for corona is €237,000,000 But there is a decrease in premium both in profit P and C business as well as in Life.
And this also reflects the dampening effect of the lockdown measures in particular, in the bank assurance, which accounts for more than half of the premiums of this segment. And with regard to the bank assurance, they were affected by the close down of the lockdown of the banks, very simple. And therefore, the growth figures went down significantly. So if we look at Retail Germany as such, then we see EBIT decline from 2019 to 2020, including the corona effect, which is solely attributable to the Life segment. And this has also to do with some de risking measures, which I will explain later in a little bit more detail.
If you turn on to Page 20, then we see the P and C business, where we see operating results really have improved significantly as planned also. And so despite the negative corona effects of roughly €18,000,000 the EBIT is up by 36% to €134,000,000 and this is mainly due to technical improvement. The combined share issue stands at 95.4%, even including the corona impact. And but this is also due to a favorable reinsurance structure. So overall, we have just €24,000,000 net corona related claims, given that the gross figure is much, much, much higher due to the fact that we paid for the claims in business interruption and achieved a very good reputation in the German market, which then translated in as Totten has already mentioned, very benign SME growth figures at the beginning of this year.
So the negative point with regard to retail Germany is the development of the gross written premium, a decrease of 5%, which was caused by lower motor business and also reduced sales via the bank assurance channel, in particular, in the unemployment protection, which was down by EUR 40,000,000. If we then turn to the next page, please, it's 21. I'll go to the Life. And there we see I understand well that Life germline in particular is not so easy to read. But what you can see here is the following.
So overall, we have a reduction in the EBIT also due to some conservative accounting for PVFPs, also due to some investments in the prolongation of the Deutsche Bank, Kostbank partnership. But also, what you can see here in the figures is the reduction in premium, which is driven by two things. One is we have sold less single premium business. Second is the already mentioned lockdown of bank shops, which have led to lower new business. What is really worth to mention going forward is that we have continued and accelerated strategy.
So we have bought our products and the product mix has changed to selling more unit linked policies. We have reduced the single premium business again. We have reduced the guarantees in the traditional business. So overall, we are happy to mention that you will see also a strong improvement compared to the third quarter in the solvency ratios of our life carriers. On average, they will be clearly above 150% at the end of the year.
If we go to the next page, there you have some more details on the changes in the product portfolio, what we are selling. So the non capital efficient part of the new business has dropped below 25%, what was an initially set target for 2021. So this is already achieved. And within the 23%, please keep in mind that there are some contracts in it, which are due to the high cost loading, still efficient despite the fact that they are not very capital efficient, but we can earn some money to it. What is also to be mentioned is the spread in between the average guarantee rate and the average investment income, what you can see on the right side of the page.
So we are clearly above the average guarantee. What we had to do during the course of twenty twenty one twenty twenty two twenty twenty is that we had to allocate much more investment income to fill up the ZZR since Zuzapgrasar. So we have to realize €626,000,000 to buffer the ZZR, which has now achieved a total of €4,500,000,000 in order to cope with low interest rate environment. And this is also a strong signal on our robustness. So moving on to Retail International on Page 23.
First of all, if you account for in euros, we have a 10% premium decline. But this premium decline was one on one hand side related to Italian Life and second related to a significant deterioration in local currency, particularly in Brazil, Turkey and Mexico. And maybe to explain that, we should first switch to Page 24 before I come back to this page. What you can see on Page 24 in this page, we have added to our presentation as a request from both investors and from you. We have added this page in order to show you also the currency effect.
And what you can see quite clearly here that Brazil, the Brazilian real was down 41.2 during the quarter of twenty twenty, the Turkish lira 35% and Mexico 15.8%. And this explains well the development the premium development in euro as Thorsten already has mentioned, as we are in local currency and in the P and C business, we are still growing and we have very favorable positions in our core markets. Going back to Page number 23, what can we see out with regards to the segment Retail International? We have very, very strong operational results there. Despite the fact that we have significantly lower that we have significant impact on the investment income in 2020, we've seen very strong combined ratios here.
Overall, you can see this also in the pages, which Thornton has already commented. You can see that the overall effect of corona was a positive one in Retail International, given that the lockdown has lowered the claims frequency in motor. But even if you were to exclude for that, the combined ratios look very good. And so our midterm return on equity ambition therefore also remained unchanged. It should be around 10% to 11% over time.
So then let's go now to Page 25. There you can see reinsurance results. I just want to mention that and I can only reiterate that we are proud majority owners of this very profitable and high performing company called Hannover RIC and have a return on equity despite corona of 8.5, and they are growing faster than the market. So we have a very, very positive development here. So that's what I wanted to comment on the segments.
And now I would like to spend a few words on investment and the capital development. So let's turn to Page 27, please. So in a nutshell, the net investment income remains under pressure due to the capital market conditions. This is no surprise as you are all acting in the capital markets. What has we seen during the course of 2020?
The U. S. Treasuries went down by 100 basis points to 92 basis points. And the euro government bonds, if you look at the index, they went down 53 basis points. So overall, a strong decrease in the interest rate environment.
And this is what you can see in the ordinary investment income, which is despite our growth below the previous year, minus 5%. With regard to the extraordinary income, there are some things to mention here. First of all, that we had an extraordinary gain, 100,000,000 in 2019, which you should keep in mind. Second, that we had to increase our contribution to the Zepeda trial. I already mentioned that.
So the €622,000,000 which we had to realize in 2020 compared to $443,000,000 in 2019. And third, we took opportunities in 2020 when the markets were down. We realized some reserve book reserves on bonds in order to reenter the equity markets, which has developed quite pleasing. And therefore, we had some additional capital gains to this. And so this is why the extraordinary investment income is plus 9%.
So there are three reasons for it. Please keep that in mind. So having said this, I would like now to turn to Page 28, where we show the development of the shareholders' equity. The shareholders' equity is up 2% and stood at EUR 10,400,000,000.0. If you calculate the book value per share, including goodwill, it's EUR 41, excluding goodwill, 37,000,000,000.
So those valuations are above our current share price. So you know what you have to do. So and then let's go to the solvency ratios, which are shown on Page 29. So you see the solvency development since 2017. So in the third quarter, we reported 187.
Our year end result will be communicated officially on May 6, but I already want to give you an indication we will be at the upper range of our target at the upper end of our target range and clearly above 187% at the year end. So also here, we have a positive development. And this is also due to the fact that we have improved not only in the reinsurance where you have already heard the year end Solvency II figures of Hanoverallia, but also improved in the Life business due to the accelerated derisking, which is on the way. And so we will end up at the upper end of our target range here. So having said that, Thorsten, I think it's your turn to the outlook, please.
Thank you, Jan. So on Page 31, maybe just more comments. We are still and believe our growing company even this year around 5%. And again, the last years, we always grew four times faster than the main peers in the market. So we will continue to be a growing company.
Group net income, in spite of corona, the €150,000,000 you see there, we believe 800 to 900,000,000 is for us realistic. And even we said, we believe we will come rather to the higher end of that range for the time being, if you would say today as the best estimate, and then be really close to our record year in 2019 and close to the before corona times. With that, more or less roughly 30% increase of profits, we would have a return on equity above 800 basis points, which is our long term target, and this is on Page 32. When we started the journey in 2018, we have said that we want to have at least 800 basis points basically to earn our cost of capital in the group. There, we are in a good way.
We have set the 5% average per year EPS growth and sometimes forgotten in 2018, we started this journey on the base of 700,000,000 because we had to clean up some higher portfolio or it was starting to clean up. We said, no, we don't start on 700,000,000 we start on $8.50 was originally the guidance we gave in that year and that higher level in 2018, 5% each year up. Dividends, it's clear this year we are even above that range what we have said. And the stabilization Jan said, with the high end of the range already in this indication. And on the right side, diversification as well, this is a quite interesting development in 2018, just to pick a number, 52.8%, let's say, was outside of Germany.
Now we have 58.6%. So we are on the way to twothree prime insurance premium from outside of Germany, which means another diversification impact as well to everything when, for example, talking about solvency ratio. I think with that words, thank you for listening. And I guess probably there will be some questions. I leave it to Carsten.
Yes. Thank you very much, Thorsten. Thank you very much, Jan. Haley, I think I'll pass it to you, and you will lead us through the Q and A session.
Ladies and gentlemen, we will now begin the question and answer session. Questions. And the first question comes from the line of Paris Hajjiantonis of Exane BNP Paribas. Go ahead.
Yes. Good morning, everyone. Hope you are doing all well. So a few questions from my side. Firstly, on the central liquidity or what we call the cash pool.
I think, Thorsten, you said that we are currently at 1.3 annual dividends, which is pretty close to essentially your target of 1.5 to two times. Now if my numbers are correct, that implies an increase of about €160,000,000 year on year. So the first question I have relating to that is where are the money coming from? Is it mainly retained earnings, or is there upstream of of some excess capital that you have in the subsidiaries? And, you know, if there is some upstream of excess, is there more to come over the course of 2021?
And also relating to the cash pool, when should we really expect you to be rethinking your dividend policy given that we are pretty close to that 1.5 to two times that you have set as a target? Then I have a couple of small questions on Retail Germany. Firstly, on course, which I think it has been now more or less concluded. I think you have alluded to a new program going forward, which we might hear about in next Capital Markets Day. The question basically is what do you think needs to be addressed further in the Retail division?
There is some improvement over the past few years. Obviously, I assume that you would be targeting a better ROE. But what do you think are the areas that you can improve further within the Retail Germany division? The last is a general Retail Germany and Traditional Life. Now you have been quite successful in actually defending that spread that you're giving every year.
I am wondering what kind of visibility do you have for that spread, which is, I think, at 80 basis points right now going forward, given that the investment yield remains or the reinvestment yield remains quite low. So where should we be expecting that to be going, going forward? All
right, Terence. Thank you very much. So I'll start and then Jan will continue. When it comes to the liquidity cash for the €1.3 so we have said and the timing of which is clearly in interest of you, we have always said the range 1,500,000,000.0 to 2 And as you can see in our documents, we always aim the higher range of this. So what I'm saying is that we will complete something when we are around 2% on the higher end to come up with some new message on the dividends.
So therefore, we're not that close, and we're just on a good way, as we can see. And you can see as well this year, you have, for example, a bit lower dividend from Hannavelliri. We don't know what regulator will do all over the world, blocking dividends like they have done last year. So there are still some things we have to keep in mind. But this regarding, I think, the dividend and where exactly this increase is coming from.
Jan, maybe you can send the details.
I can. So overall, you asked the question what is related to capital Upstream and what is related to other measures. With regard to capital Upstream, we had to compensate for some dividend constraints, which we had in some countries like Poland and Italy, where the regulators did not want us to upstream dividends. And therefore, we had also calculated for write ups and write downs in the overall portfolio. And if we do that in total, then this sums up relatively close to the figures you have mentioned, the write downs and write ups in the portfolio, which we can potentially see in the local territory results.
With regard to the outlook of the cash pool, which Thorsten has given, I just want to add one additional thing. I think it really makes sense to reassess our payout policy in the light of the changeover of IFRS 17. And therefore, we will clearly wait for some more things in there so that we can give you a precise outlook on the future dividend policy also in the light of IFRS 17.
Good. This probably will be end of the year Capital Markets Day. Probably, we have some more insights of IFRS 17 and impact to give to you. And but just we want to show to you that the way to the increased cash flow, are not let's say, it's not a way we don't have on our observation. We are on a nice track actually here.
And we are actually find this a very interesting way for you as well probably. On Page on the second questions you had. Again, allow us first to deliver on the course program, right? We have the $240,000,000 in our target. We have the 95,000,000 combined with what we delivered.
And as we have a new Board member, successor of Jan, he's hardly working on coming up with something new to the markets. And for sure, I don't want to say something before, but again, hopefully, we will discuss it with you then in Paris on the Capital Market Day. But without saying some insight of the strategy he's working on, for sure, we have to strengthen our strengths. And in some areas, we're very strong, like in the small, medium enterprises. And for sure, this will be part of the strategy as well that we strengthen also where we are very strong already.
But please, I would not say much more before we discuss this is ready basically. And first, deliver, of course, and then comes to the next. And at the end of the year is a good point of discussion when you see us on the Capital Market Day on that. Please wait there a little bit. And the question regarding the reinvestment yields, maybe Jan will give some
detail Well, on it's obvious that the reinvestment yields are going down due to the lower interest rate environment. And therefore, this was the reason for accelerating the derisking strategy in Life already for the existing book and having additional changes in the new business portfolio going forward. But I think what has Thorson already mentioned, we will explain on that one in more detail on the Capital Markets Day to give you much more comfort with Life going forward.
Was it okay, Paris? Question and answers?
Yes, more or less. Just coming back to the last one on the investment yields and the spread. So I assume that, obviously, that spread could be impacted a bit by the lower investment yield. Am I right on that? Or do you think that the average guarantees are all coming down quite materially?
I assume not as fast.
That's right. But if you see it in on a long term period, we are very confident that we can match the guarantees or even not only match, but we will earn more on the investment side than what needs to be paid for the guarantees. We have all the results long term studies on that one.
Excellent. Thank you very much.
Thank you very much, Paris. Next one, please.
The next question is from Vikram Ganhai of Societe Generale. Please go ahead.
Good morning, everybody. It's Vikram from Soc Gen. I hope you can hear me alright. I've got a few questions all related to industrial lines, I'm afraid. For the looking at slide 16, I noticed a change in communication or maybe I'm over interpreting things here, The which says premium reductions related to ongoing measures in motor and marine casualty property.
Now this this bullet point hasn't been there in the past four results, including the FY 2019 results presentation. So my is really what has changed so that this point needs to be highlighted back again here. Staying on the same slide, the guidance of one percentage point improvement in combined ratio. What should the base figure be? Your original guidance of 100 or the actual ex corona figure of 98.7%?
The third question was the the other impact of minus €90,000,000 or lower due to the growth in specialty business that you're guiding to. So for how long do you foresee this impact? When should this really trend down or get to zero is the question? And the last one is on Slide 18. The targeted underwriting result of EUR 100,000,000 for 2022.
What does this 100,000,000 figure translate in terms of the bottom line net of minorities? Those are my questions. Thank you.
All right. It's a very good question. I guess, Jan, you will answer this in more details. But whenever you see some figures which looks maybe too conservative to you, I can tell you, yes, because we are conservative in that kind of year end results. But Jan will give you now more details on that.
Yes. First of all, I'll start with the first question where you if I understood you correctly, and please correct me if I'm wrong, you wanted to have some explanations for the reduction in premiums in some lines of the business, where we have increased the prices quite significantly. But therefore, we have also lost some business, which was not adequately priced. And so what you see here is the consolidated the dated effect of both prices increase on the one hand side and second that we have lost some part of the business. With regard to fire, I also want to add that we have intentionally reduced our share in some coverages in order to avoid the volatility in results.
So this is also which needed to be taken into account when explaining that one. So second question was with regards to the decline in combined ratio by one percentage point. Yes. So yes, we expect that the underlying combined ratio will be improved by approximately one percentage point per year. So and I really want to draw your attention that this should be on average over the year.
We know the nature of the business industrial lines is volatile, yes? And therefore, having an improved combined ratio by one percentage point per year, is that what we want to show? We will continue a little bit in building up volatility buffers in case of that we have a very pleasing year with regard to large claims. If not, we will also be able to show an improvement we would be in a position to show an improvement. We will decide on it, having a look on the overall results.
Okay. This is the second one. And third one was with regard, I guess, the €100,000,000 out of specialty lines, which what we want to achieve in 2022. This target has remained unchanged. With regard to the minority effect, which are in that given that this is a joint venture in between Anofari and Talan, this is quite a complicated figure to figure out.
So this should well, I guess I think it's best if you ask Karsten after or Karsten and the team after the session, and we will come back on that one because this needs some more explanation due to two reasons. First of all, we have this fifty-fifty joint venture. Therefore, we have the minorities in Hannover Re to be deducted. Second, we have some old business, which was brought in. Therefore, we have not a fifty-fifty reinsurer quotas on that one.
So this turns out to be a little bit more complicated. So I think that you should decide on that. For us as steering instrument, we focus on the €100,000,000 And we are very comfortable with the plans which we have seen so far and with the development of the business so that the phasing underlying business will be profitable and contribute to the bottom line in both Hannover Re as well as in Talend Energy. And from the general management point
of view, the team under the guidance of Udi Berlin, former CEO of Hannover Re, clear and bottom line orientated growth machine. And therefore, say, basically, you could always wonder why this growth is so significant. It's because the market are very hard, and that's just kind of really it's running the good cycle at the moment and with, I could guess, good underwriting skills and finding good teams to support the growth.
And the 90,000,000 impact, when do you expect this to pay the way?
I think we did get the
last point, Vikram. Could you repeat
the question? The 90,000,000 impact that you're flagging on the industrial lines, the minus 90,000,000 because of the growth in specialty, when should we expect that to fade away in future?
Oh, this is 90,000,000. Where do get 90?
Trucking with the 90,000,000, Vikram.
Your Yeah. The other the other result of minus 90 or lower from 2021. So that's the yeah.
No. No. We got
it. We
are just looking at sorry for a second. Oh, this is okay. And so it's $23.16. Yeah? You're looking a second.
You paid it. It will remain. Yeah? Those effects will remain. Yeah?
I think there's notes. So you're basically your question is on page 16, I understand. Right?
Yes. Yes. So if if we should be expecting this 90,000,000 to fade out at some point in future is the question. Should kind of have that in all the way in future. So that's kind of a fixed cost that is coming because of specialty business.
Is that how we should look at it?
Yes. I think, Vikram, it's an effect that we already reflect on the Capital Markets Day with Industrial Alliance in 2019. And we marginally increased it to this minus CHF 90,000,000, I think,
in the last call. Yes. Exactly. And that will remain at least for 2021.
Okay. And That's a question
where you the combined on the other end part of this business due to the special construction of the joint venture is more booked than the other. But at the end, you have to look on Page 18 where the final result will be, and the final result is EUR 100,000,000 where we see as a whole company as a joint venture basically. But then the question is where you book it in the combined or on the other. Account.
Okay. Okay. And and I'm not sure I understood the answer correct on the improvement in combined. So you say the underlying combined should improve. So presume you're referring to the 98.7 then.
So it should improve further one percentage point from there over the Yes. Yes. Again, when we
would like to give you some what we said, when you start to clean up the portfolio, is a volatile business model itself. So we would like to show like we have done in the past sometimes to show volatile results. So we need a volatility buffer, and then we have done as well for their segment. And we are in a very good way to do that as well. And you will get more comfort on the Capital Market Day where we show it to you that it's not just talking.
So far, you see it only in runoff results afterwards where we are. But, again, this is due to IFRS 17 and so on. We have to give some comfort where we understand it. It's not just saying we do some bullet buffer, but we need some credentials, and you will get the credential.
Okay. Thank you.
Surprised with the credentials that I can say already.
And the next question is from the line of Michael Haid of Commerzbank. Please go ahead.
Thank you very much. Good morning to everyone. Two questions from my side. First, on Retail International. Can you talk a little bit about the competitive environment you observe in especially in motor insurance in Poland, maybe also in Turkey and as well as especially in Latin America?
What are your expectations regarding premium volumes in these markets? And do you expect pricing to come under pressure given the frequency benefits you incurred in some of these markets? Second question on Industrial Lines. Can you talk a little bit about the your reinsurance protection in Industrial Lines given the increased pricing you see both in your own portfolio as well as on the reinsurance market? How did you change the reinsurance protection in industrial lines?
Thank you, Michael. So Retail International, for sure, it is in the shocking event of the first, second wave, you have lower frequency in motor, but coming out of corona, see as well effects where the frequency is normalizing itself. It's a function of how much home office, on the other side, people travel more with a car, when it goes to holidays and whatever. And the severity of the claims is not shrinking actually because of supply chain constraints in the market. So well, looking forward, I would say, and having the pressure of the interest rate, yields going down because especially in those markets, see significant decrease in interest rates.
I don't see that there is, for example, long lasting now in front of our soft cycle in the motor business because interest rates are pushing some of our technical profits and the frequency is coming back. Even if it's a bit lower than before corona times, let's say, afterwards, the severity of the claims will not decrease. The car accidents, in general, the average are more expensive. So I would guess there's an answer of being neutral for the overall picture of the portfolio when it comes to average pricing due to the different effects. When one of the markets can find aggressive competitors, The broad is a general picture, but overall, I would say there's a more neutral pricing going forward.
In the industrial line, well, I mean, it is clear that the portfolio is performing better, if the reinsurance conditions such as one of the big industrial segment could have, then maybe Andy give someone a hand.
So are you pleased with the renewal of our reinsurance treaty for the industrial lines. It sounds funny given the rate increases we've seen in the reinsurance market, but this is really due to the improved quality of our portfolios. And we have been reimbursed by the reinsurance companies for that.
And
therefore, reinsurance result in Industrial Lines is upside for 2021.
Actually, we did not change much the structures regarding the pricing. The structure is set up.
The next question is from Fossard of HSBC.
Yes. Good morning, everyone. I just have one question relating to the industry lines and the volatility buffer. You are growing year on year. I understand that you would provide more granularity at the time of the Capital Market Day, but could you remind us the pace that you have started to build this buffer, Maybe be a bit more precise on how it has improved in 2021 and remind us what the kind of overall volatility buffers you're aiming to build just to replace this in the context?
Thank you.
Well, let me just first message we would like to discuss in more details really with you on the Capital Market Day. What we have said so far to the market is we aim midterm to 95%. And in that journey to the 95% year by year, down with one percentage point. At the end of the midterm, we would have a situation where the wallet buffer adds at least one year profit. And that path, we are going now.
And then again, the more details, we will provide you on Capital Market Day. And probably, this is a part where we would look a bit more optimistic than the provision part we have said. Is it okay, Thomas, for the time being?
Perfect. Thank you.
Okay. Thank you very much, Thomas. Haley, any more questions?
There are currently no more questions at this time.
Thanks then. Right. So then hopefully, everything was clear from my side. I'm happy to talk to you again because the year's results, it was really a pleasure to talk to you for sure. I hope that it's very long time to get to market at end of the year, but still the latest just to talk and to see you there.
And until then, I wish you really all the best and stay healthy. Thank you very much for listening to us and interest in our shares. Thank you.
Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephones. Thank you for joining, and have a pleasant day. Goodbye.