Good morning. This is Hannover calling with our little video show live from our studio at the HDI -Platz in Hannover. We are here with the Talanx results call for the first quarter of 2026. I'm here together with Jan, my CFO, who will take you through the results and where we currently stand. As usual, after the presentation, Jan's happy to answer all the questions you may have in relation to our numbers. We are on video today, and if you wanna pose a question in our Q&A session, please use the hand raise feature, and I'll make sure that you'll be slotted in to the Q&A thereafter. As usual, all supplemented documents, including but not limited to our financial data supplement, are posted on our website under the IR section.
A replay of this webcast will be provided shortly after our presentation today thereafter there too. With this, I hand over to Jan. Jan, the floor is yours.
Yeah. Good morning, everybody, and thank you for attending our call. It's a pleasure for me to provide you with some insights on how Talanx has started into 2026. Yes, again, it's a quarter with some records. First, we were able to grow our net income by 28% to EUR 774 million, which is the highest first quarter result in Talanx history. Second, we have a very high profitability, 22%, which is also the highest number which we've seen in Talanx history. Finally, as usual, in the first quarter, we display the results out of the external review of our claims reserves. Towers Watson, they have done their work, and they have stated that we are reserving EUR 5.9 billion more prudent compared to the Talanx to the Towers Watson best estimate.
This is an increase compared to the previous year of more than EUR 1.2 billion, which is a super strong number because at the same time, we were showing record results in 2025, and it's a clear indication that cost leadership pays off. Let me now provide you with some more details on our number, and let's start with the, as usual, with the big picture. With regard to the Insurance revenue, we have a decline of 2% in euro terms, but currency adjusted, we are growing 3%. Net income is up, as I just said, by 28% to EUR 774 million, this is driven by a very strong technical result and rising investment income. Return on equity stands at 22.3%.
The good news here is that all segments have contributed to rising net income, or shown rising net income and very, very decent return on equity. Looking at the top line a little bit more into detail. Currency adjusted, we have a growth of 3%. 5% currency adjusted growth is seen in the Primary Insurance, 1% is seen in Reinsurance, this then combines to this 3% overall growth in the Group. Looking at the bottom line, Primary Insurance was able to rise net income by 13%, whereas Reinsurance was able to rise it by 50%. Please keep in mind here that last year, Hannover Re was heavily affected by the California wildfire, so this increase of 50%, part of this is a normalization of the result.
If we combine those growth figures together also with group operations, then we have an overall growth of 28% net income in the Group. Looking at where the earnings are coming from a geographical point of view, which is quite important as we are a P&C company, you can see that only 14% of our top line is derived from Germany, 86% from the rest of the world. It's well-diversified throughout the world, which is important for us given that we are a P&C player. Second, if we look at the earnings engines or the segments in our business mix, we can say that 47% of the profits are coming from Reinsurance, 53% from Primary Insurance, so we are very well-balanced here.
Looking at the first quarter in more detail, we want to draw your attention to the fact that the large loss development was really benign. On average, over the last 10 years, we've had an large loss burden of roughly 4.5% of the net earned premiums. In this quarter, it was just 2.9%. As you are aware of our procedures, we are always booking the higher of already reported claims or the budget. In this case, we have booked the budget, so we have booked in our numbers EUR 676 million large loss burden. What does that mean? We have a buffer of roughly EUR 390 million for the quarters to come for large losses.
All of this, the strong technical performance of the book, the large loss budget, which is unused, the rising investment income provides us with a lot of comfort with regard to fulfilling our guidance. It will be a little bit more demanding to achieve a mid- to mid-single-digit revenue growth, but we are confident looking at the renewals after the first quarter that we can achieve it. We are super confident with regard to the Group net income, where we want to achieve a result around EUR 2.7 billion, driven by the strong results in the first quarter. The return on equity, if you do the math with EUR 2.7 billion net income, is around 19%. Let me now provide you with some color on how the segments have done during the course of the first quarter.
First, we always start with Corporate & Specialty. The revenues are down 2%, in 3% in euro terms, sorry. Currency adjusted, we can show a little growth with 0.3%. Group net income is up 8% to EUR 152 million, driven by very strong technical result. Combined ratio stands below 92% at 91%. Also an improved investment income, which is obviously benefiting from the portfolio restructuring in the bond portfolio in the previous years. The return on equity is at a very nice level of roughly 18%. Coming to our growth and earnings machine, Retail International. The team around Wilm Langenbach was able to grow the Insurance revenue in euro terms by 8% and currency adjusted even by 12%.
The growth in the net income is also super strong in euro terms, stronger than the top line by 10% to roughly EUR 190 million. This is driven by technical discipline, which is displayed with a combined ratio below 92%, which is very good for Retail business. It's also seen if you look at the return on equity numbers, which are at 21.2% on a record level. It's still this one-off out of the buyout of the minorities in Poland. If you adjust for this effect in the equity, the return on equity would stand at also very favorable 20%. A very, very strong result in the first quarter.
Given that we want to further grow Retail International and next to organic growth, which is displayed here in the chart, we are pursuing inorganic growth or acquisitions. What we've did is, we have strengthened our position with a growth-oriented strategic alliance with Afirme in Mexico. The agreement has two components. One is a strategic 20-year distribution agreement with the Afirme Group, a bancassurance agreement. Second, we will take over their insurance operations and combine them with ours in order to achieve some synergies. Overall, we expect to grow our market position in the Mexican P&C market from to number six by doing that. Together with Afirme, we want to exploit the growth potential of this market. Closing is expected in nine to 12 months, so there won't be any impact for the 2026 numbers.
There will be some restructuring effort in 2027. We will display with the closing or we give you some more information with closing on the transaction. Overall, all financial yardsticks are met. M&A discipline is still ongoing. What does it mean? Double-digit return on equity is expected on the investments here, plus a risk premium for Mexico. We will continue to grow our business not only organically and also inorganically. Coming to the smallest segment within our Group, Retail Germany, which accounts in this first quarter for 8% of the net income of the Group. The Insurance revenue are down 3%, which doesn't come as a surprise given that Targobank cooperation have ended.
The good news be behind the decline from EUR 812 million to EUR 791 million is that EUR 61 million decline is related to Targobank. What does it mean? The rest of the business is growing with roughly 5%, which is a good number. Even stronger growing is group net income provided by the efficiency measures which were set up in the last year, so where we are benefiting from. We are also benefiting from higher results out of life entities due to a higher interest rate environment where we benefited from. Return on equity stands at 15.2%, above 15%. For the year end, we expect a slightly lower return on equity from Jens Warkentin and his team.
It will be clearly above the return on equity target level of above 10%, which is quite an achievement in the competitive German market. Coming to the biggest segment, Reinsurance or our participation in Hannover Re. They contributed 47% to the overall group net income. Most of you might have listened already to the conference call from Clemens, Christian, Sven, and Claude. I will not explain what they have explained. Overall, I just want to mention they are providing us with a return on equity above 20%, and we are proud minority, majority shareholders of Hannover Re. Let me now dig into some balance sheet item. To start with, what we always release in the first quarter is the resiliency. What are we doing here?
With regard to our resiliency, it's measurement. Part of our governance at Talanx is that once in a year, an external actuary assesses all the claims reserves. Or to be more precise, roughly 94% of the claims reserves are assessed by Towers Watson. They provide us with a number, how much money is needed in order to fulfill all the claims which are to be paid. The numbers they provided us with is roughly EUR 5.9 billion lower than the number we have booked in our accounts. The resiliency is at a record level.
Talanx has the strongest balance sheet ever. If we look more into the details there, then you can see, and it's displayed here in the chart, that both Primary and Reinsurers had added significantly to their resiliency, that the overall resiliency level is higher at Primary than in Reinsurance. This also doesn't come as a surprise as our Hannover Re has bigger and more diversified portfolios, so it really makes sense, and they have a super comfort level at Hannover Re as well as in the Primary Group. Overall, we are pretty strong here, and we can cope with uncertainty very well, and this will provide us also with stability for delivering earnings growth and dividend growth. The strong development in the first quarter is also seen in the development of our solvency numbers. As of end of year, we had 243%.
After the first quarter, there's another increase to 249%, which is simply driven by the profits which are seen in the IFRS account. We have more own funds. Capital generation is working very well. Also these numbers are pretty good. Looking at the net asset value development, there is a net asset value creation in the first quarter of roughly EUR 840 million, so that we now have an equity of roughly EUR 14 billion. If we add to the net asset value also the CSM adjusted for taxes and minority and the risk adjusted for taxes and minority, then this adds up to EUR 22.5 billion as an extended net asset value, if you want me to tell it like this.
This is definitely a strong number with regard to the strengths of our company. You obviously, for valuation purposes, it's recommended that you add some franchise value because we do not want to stop business. We want to continue to underwrite profitable business. Looking at the asset side of the balance sheet, our investment portfolio is just pretty much unchanged. 83% of our assets are invested in fixed income, whereof 93% in investment grade. Pretty prudent investment approach and the rationale behind it, you're well aware of it. We want to take insurance risk because we can diversify this risk much better than the investment risk. Our insurance risk is geographically spread throughout the world, so it's very, very, very, very, very well diversified.
Investment risk, given the correlations of the capital markets in the world, is much more difficult to diversify, in particular in tail risk situation. Out of the investment income, we benefit from our activities in the portfolio management in the previous year, where we have realized losses on the bond portfolio, out of the selling fixed income with low coupons and buying fixed income with higher coupons. This is well reflected in the numbers here. The investment income is up 11%. Return on investment is up to 3.8%. The finance and investment result, where also the unwind of the discounting of the claims reserve is reflected in this even up 17%. I think this is the most important number. This is + 17%.
This is clearly backing our earnings guidance for the full year. Coming to the outlook, we are very confident. We are very happy how we have started in the first year. With regard to the mid-single-digit growth, currency adjusted, that will be a little bit more challenging, but we are confident that we can achieve it. Group net income, we are super confident that we can reach a Group net income around EUR 2.7 billion. If you then, this translates then into a return on equity of 19%. Achieving EUR 2.7 billion means that we will fulfill our strategic three-year plan one year early, and we will outperform it significantly. The initial target was EUR 2.5 billion by 2027. What you can see here is I have done the math, really in detail.
That would represent an earnings growth of 9%. You should be aware that the management has the ambition to deliver double-digit net income growth, as well as we will deliver a more double-digit dividend growth. We will provide you with a dividend of clearly above EUR 4 for the full year 2026. With that, Bernd, I think I hand over back to you for managing our Q&A session, please.
Yes, happy to do so. Let's delve into the details. Q&A is open. If you wanna pose a question, use the hand raise feature. We start with Michael Huttner from Berenberg. Michael, please unmute your microphone and go ahead.
Fantastic. It's a really easy question. You gave us a hint. It was completely unexpected. You say dividend clearly above EUR 4. Consensus Bloomberg is EUR 3.7. Can you give us a little bit more feel for this? That'd be so good. The other question is on volume growth. 3%, I think, is the kind of like for like figure. You're saying 5%. I'm not sure if the like 5% is mid-single digit for the years like for like or on a reported basis. Clearly you're seeing kind of positives which we don't see, and I just wonder where they are. Thank you.
This, the first one is pretty simple. For the second one, I need to better understand your question. The first one was that for euro we have already announced that we want to grow the dividend above EUR 4 for 2026, which is then paid out in 2027. Obviously, if you see the capital generation, the solvency number, we have the capability, even though financing Mexico out of own funds, to provide you with a dividend above EUR 4. We will come with more details.
You said clearly above four. You didn't say above EUR 4. You said clearly above EUR 4.
Yes, we will fulfill our promise. We will fulfill our promise, Michael. This is for sure.
Do you remember you had on resiliency, it was clearly above EUR 5 billion. Is the clearly in this sense similar? 'Cause you actually achieved close to EUR 6 billion, right?
We will make our dividend decisions, Michael, after we've seen the full year results. It's not the time to discuss it right now. We will stick to our dividend policy. This is a promise, always up, and we will also stick to the guidance, and it will be above EUR 4. If you look at the development in the first quarter, which was definitely not too bad, obviously, if this continues, we will have our considerations.
On the volume, yeah, just to make it clear, I'm sorry, I'm a little bit excited this morning, due to your good results. Can you say, because you said many times mid-single digit, you maintain your target growth for mid-single digit percentage for the year. You say it's challenging, but you're kind of confident. Can you give us a feel for what the moving parts could be? And w hich get you that?
We are very positive on the development at Retail International. They already have shown us 8% growth in the first quarter and will continue to grow. We are also positive, but this is given the size of the portfolio, just a smaller part of the development in Germany, is that it will be less declines than initially, slightly less decline than initially expected. With regards to both Corporate & Specialty and Reinsurance, we have seen pretty good renewals in April. Yeah. Obviously the first quarter really matters in both of it. Yeah. Given that you know how the seasonal split of new business is, the first quarter is the most important one.
This impact will also impact the other quarters a little bit. Second quarter renewal was pretty good, and now we are waiting for June and July.
Thank you.
All right. Let's continue. Next in line is Chris Hartwell from Autonomous. Chris, please go ahead.
Oh, good. Oh, there you can see me a bit now. Good morning, all. A couple of questions. First of all, just trying to think about the resilience reserve. I think you've previously said that that was broadly full. I mean, I think given how big it is now in the Primary side, I assume that's very much more than full. I wonder if you could just give a little bit of color on where that sits, and I guess the philosophy now about how that will be utilized. I mean, if I look at the, the growth of the buffer relative to, say, the Primary results, I mean, it does suggest that the underlying earnings last year were much higher than what you've actually reported.
I wonder if you could just give a little bit more color there. Secondly, just on the Corporate & Specialty division, I mean, revenues, a little bit, I guess subdued, through Q1. Can you help me sort of think about where you see opportunity to accelerate the growth in C&S? Or do you think now this is about defending revenues and margins given the cycle conditions? Thank you.
Yeah. Well, thank you, Chris. First, with regard to the resiliency reserves, we are definitely in many parts of the Primary Group at the upper end. If you look into the more details where you ask where they're sitting, there's a lot of resiliency, in particular, in the long tail business of Corporate & Specialty in the Primary Group. Looking at the future, obviously inflation assumptions will play a major role when assessing what needs to be done, and capital efficiency is also on our cards we are looking at. What you really can see out of this resiliency is the following.
Looking at last year results where we achieved a result of roughly EUR 2.5 billion, we were able to achieve this. On top we were able to build the resiliency. This is really the indication that our cost leadership really pays off. We haven't seen even better earnings growth than most of our peers. On top of that, we were able to build this resiliency due to our cost leadership. This gives us you also a feeling for your second question with regard to the revenue development in Corporate & Specialty. Looking at Corporate & Specialty, we are in a position that we are by far cost leader in the segment compared to our peers. When for others, they have to start to become much more selective on business because of their writing losses, we still can make profits.
We have more optionality in our business model, and this provides me with comfort, even though I have to admit that the market is softening here. There are also some parts of the business where we have to be selective, despite the fact that we have this fantastic cost position. I hope that gives you some color on those questions.
Okay. Hadley is next in line. Hadley Cohen from Morgan Stanley. Hadley, if you could unmute your mic and give us your questions, please.
Yeah. Morning, everyone. Thanks very much. A couple of follow-ons from Chris's questions, please, and then a couple of extra ones. Firstly, the follow-ons. Your cost advantage is clearly impressive and, you know, as you say, supports your earnings trajectory from here. I'm just wondering how you're thinking about AI in that context and the extent to which AI could narrow that relative cost advantage going forward. Then linked to the Corporate & Specialty business, I'm just wondering if you're now sort of maxed out in a lot of your resiliency buffers and what have you, how presumably that suggests more can flow through to the bottom line?
I'm just wondering to what extent does that get reflected in an improved combined ratio from here, or are there other ways that you can manage the combined ratio to offset that? The other couple of very quick questions. I think, Jan, in your opening remarks, you talked about obviously the Mexico deal is a step in the right direction. I think you implied that there's maybe more to come. I mean, as I understand it, I think this deal has been in the pipeline for a long time now. You've shown the market in Mexico is clearly very fragmented.
I'm just wondering to what extent you see there is an opportunity for further consolidation in the Mexican market and how likely that is. Final very quick question. Sorry, there's a few. The just looking through some of the detail, it looks like your ordinary investment income in Primary was lower year on year, which I guess is a little bit surprising given the extent to which you realized losses on the fixed income portfolio and what have you. If you could just let us know what's going on there and how we should think about the outlook from there. Thank you.
Well, thank you for your question. First of all, the strategic question on AI. It's definitely the case that we believe that AI will change the composition of the cost structure in a company. Yeah? We can already see that. The missing variable in our in the formula is very often how do you expect that the costs for the usage of AI will development, and how to have you have to design your value chain from elements of humans, of the people who are working from us, deterministic software and generative AI because you need different layers. Using AI implies, at currently it's quite efficient, given that the tokens for the usage of AI are still relatively cheap, but this may change.
Yeah. Given all the investments the hyperscalers and the AI companies have done, they need to earn it back. This is something where we are closely looking because we want to continue to be cost leader. We are investing in AI, we try to invest in a way that we have agnostic AI, that we can choose in between AI models that really matters to us. We want to continue to be cost leader also with AI. Yeah. It's to a certain extent it's research and development now. Second, how do we manage our combined ratio? I would like to put that in a broader context. We try to manage the net income. We try to manage that dividends are always up. This is the first priority. The second priority, earnings growth with lower volatility.
In the light of that, where the resiliency buffers are at the upper end, obviously it will fall through in the combined ratio. We still have some options, realizing some losses on the bond portfolio and some other things in order to steer results. We are not limited to steering combined ratio when we want to steer in the end the net income development. Third question was on Mexico further consolidation. We have waited for a long time to capture the first consolidation option which was there in the Mexican market. First of all, we have now to do the work to combine the entity, to exploit the growth potential for the future.
Obviously, we do, and by organic achievements, we believe we will achieve a number five position in this market. Obviously we are open to further to a build and buy strategy, to a buy and build strategy to do further consolidation in the Mexican market if opportunities arise. The third one was on the ordinary investment income, where you found out, and this is pretty right, that there was just a little flat development in the ordinary investment income and how does it fit to the realization in the fixed income portfolios last year. The reason behind this is that the outflows or the dividends out of private equity funds are also in the ordinary income.
We had a last year, in 2025, we have an unusual high dividend flow out of this private equity investments, and this quarter, it's rather slightly below the average what we've seen, and this is the difference. Overall, looking just at fixed income, we have a nice increase. I guess, I have to, and you might double-check this with this Bernd. I will say more than EUR 30 million more than previous year just in fixed income. Yeah? Also, if you look at fixed income as standalone. Hadley, does that answer your question?
Oh, very clear. Thank you.
We have questions from Kamran. Kamran from JP Morgan. Please go ahead.
Hey, good morning. Two questions from me. The first one is just coming back to the resilience. I think on Monday, Hannover Re kind of flagged, suggested they had added in Q1 to the resilience. Something like EUR 250 million-EUR 300 million. Can you just talk maybe about what you did in Q1 within the Primary business?
You know, if you can give any comments there. The second question is just on the Corporate segment. I understand the internal reinsurance came in quite a lot better than last year. Could you maybe talk about how we should expect this to develop over the year? Whether kind of Q1 just reflected like a really light Q1, or there's some other way to think about this. Thank you.
Well, thank you. First of all, with regard to Q1, we do not have an actuarial assessment for the end of Q1. What we do have, obviously we are talking to our actuaries, and we have something which I would call a feeling, yeah, about what was done. I do not have a precise number on Q1. As you have heard from Hannover Re, they have added to the resiliency during the course of Q1. We have also added a little bit to the resiliency in the Primary group, in particular in Retail Germany. We have added a little bit in Corporate & Specialty, not in the long tail segments, but in others.
For Retail International, it's in line with the growth of the business. Yeah. The business is nicely growing at Retail International. The second question was targeted at Group Re. Yes, you're right, we had a much better result in Group Re due to the low large loss development. Overall, you raised the question, how do we look at? In Group operations, there is, on the one hand, Group Re, the internal captive for buying our reinsurance protection and also to reinsure some of our subsidiaries. Second, there is Ampega, our asset manager in it. Thirdly, we have in group operations the Group financing costs, which you have to keep in mind.
The good news is that both Group Re and Ampega are developing nicely. In Group Re we have seen a build-up for the last five years. Now we also have some nice resiliency on Group Re level. If then a quarter happens with such a low, large loss burden in the group, then obviously the results are better, and this is displayed here in the first quarter numbers.
Thank you. It's very clear.
We have questions from Roland Pfänder from ODDO BHF . Roland, please unmute your mic and go ahead.
Yes. Good morning. Thanks for taking my questions. First question is regarding inflation protection. Could you provide us an update on the inflation linkers and other measures you have in the company? Secondly, on Germany, I think you're a little bit more optimistic on the business, could you provide us an update how far you are with the repositioning? Maybe also an update on motor pricing and volume development here, and maybe any future plans on life distribution if something should change there or you're targeting. Thank you.
Okay. First of all, for inflation-linked bond, how much we do have, I need to ask my colleagues here, to be honest. We have some billions in inflation-linked bond to protect us, which is usual part of our risk management. Second, let me therefore take the second question first. With Germany, the repositioning, the first thing which needed to be done was an efficiency improvement. Looking at the cost ratios at Retail Germany, you will find out that they have improved, and they continue to improve that. It's tough work, but they are proceeding with it. Second, with regard to motor pricing, we were able to adapt the prices to the claims inflation. Yeah. We have increased our pricing compared to the previous year.
Overall, the volume development was flat. With regard to life distribution, yes, we are a little bit more focused in life distribution, and we are trying to build new partnerships, but there's nothing yet to be announced here. It's hard and tough work what Jens Warkentin and his colleagues are doing there. Now with regard to the inflation-linked bond, it's roughly EUR 5 billion of the investment portfolio is in inflation-linked bond.
Thank you.
Okay. Michael seems to have follow-on questions. Michael, go ahead.
Thank you so much. Thank you. On solvency and on private credit, so solvency, 243 up to 249, I think you said it's mainly due to earnings. I can't remember. Do you deduct a dividend accrual or not? Does the figure then equal the EUR 774 million, or is there kind of extra coming through? Also, I can't remember your target, but I think you're about 220%, so 29% of EUR 12 billion, there's quite a lot of excess there. I just wondered where is it sitting? Is it sitting where you see it, or is it sitting in your parent? The other question is on private credit, that's probably incredibly short.
I just wanted to know how much you've got. Thank you.
Okay. Let's kick off this private credit because this was the obvious question which we could prepare in advance. We invested roughly EUR 1.6 billion in private credit funds, mainly in German Mittelstand private credits, and they are in super senior. Up so far has performed pretty well, we do not see any need to change it, we want to continue with this investment. We are happy with it. Second, with regard to solvency, it's a proportional reflection on dividends embedded in the internal model. Third, the target for solvency, I want to be pretty clear here. The official target is 150%-200% solvency ratio, where we are clearly above.
On top of it, we are looking to our solvency ratio compared to our peers. You should always keep in mind that we are in the wholesale business with 70% of our business. We feel comfortable with the solvency ratio, which is super strong. We also have a little bit within our thinking is that the uncertainty in the world we are living is, compared to the past, is on a higher level. Overall, both the solvency ratio and the buffers which we have in our balance sheet are above the usual average level, and we feel comfortable with it. The good news is, linking back to your question with dividends, we feel now also it's coming to an upper end, and we take up some considerations there.
Thank you.
Okay. Just checking the screen whether there are further questions. That does not seem to be the case. Final chance for final questions. Michael, do you have any more, Michael?
Always, always, always. A really simple one. You talked about Mexico and deals. The other business which is now you're nearing your targets and, you know, above 10% ROE, et cetera, is Retail Germany. Would you ever consider a deal in Retail Germany to kind of get scale or something?
Yeah. Michael, definitely we would consider it if we can find an opportunity to grow the German business, to scale it a little bit better. Yeah. Because scale in Retail business really matters. Yeah. In particular in P&C. Yeah. Yes, we would, but there's nothing adequate available in the German market.
You don't want to buy the big company in Munich?
Will take some time, yeah.
All right. That concludes our Q&A session, and I hand back to Jan with some final remarks. Jan.
First of all, I want to thank you for attending our call, and also thank you for your questions. Some of the question, if I've listened carefully, embedded some hints what you would like to see for the future. Thank you for that. I hope you received the message that Talanx is super confident to deliver on both net income growth according to our guidance, and also to dividend growth. This is backed by a strong technical performance, rising investment income, and a benign large loss development in the first quarter, which provide us with an additional buffers to fulfill those targets.
Thank you for attending our call.