Thank you so much, ladies and gentlemen. Hello and welcome. We would like to thank the T&D team for the opportunity to present Viridium today. During our presentation, we will refer to our slides. This also includes, on page 18, the relevant disclaimer. On page three, you see Viridium is a leading life insurance consolidator with a long and successful track record. The business model is based on driving financial and operational improvements across the entire value chain of closed life insurance. Over the last 12 years, we have established a very stable and successful business model. Going forward, we plan to continue growing the business through further M&A transactions. When we go now to page four, you see that Viridium has developed leading market positions in life insurance.
This is relevant, as scale is the key to unlock operational and cost efficiencies, and it provides us with a key competitive advantage. Our business is focused on Germany. You see on the left-hand side that Viridium is not only by far the largest life insurance consolidator, but we are actually amongst the largest German life insurance groups overall. With EUR 67 billion in assets, we are actually a top five player amongst all German life insurance companies. We think this is especially remarkable as Viridium is only focused on closed life. This means we don't sell new life policies, and Viridium only started 12 years ago. You also can see from that slide, the German life insurance market is highly fragmented. There are 80 life insurance players, and only the top five players have each more than 5% market share, and Viridium is one of them.
This means two things. First, Viridium is able to generate very meaningful scale advantages. Secondly, there's a meaningful consolidation requirement for the German life sector, and Viridium has positioned itself to capture this opportunity. Viridium is also, by international comparison, a leading closed life player. In continental Europe, we are amongst the top two, and globally, we are amongst the top 10. This is a great position for our existing back book business and a great position for further M&A. We turn to page five. Here we show you that Viridium started its consolidation trajectory 12 years ago and has since acquired four meaningful businesses in Germany. We fully integrate the acquired businesses, both financially and operationally. This has resulted in a meaningful execution experience and a proven track record. We have created a single unified financial and operational business platform for the acquired businesses.
We are very disciplined when it comes to M&A. It starts with due diligence and goes to deal pricing, and when we have acquired something, it is the entire value chain of fully integrating the acquired books onto our single modern platform. We are ready for the next transactions, but we will only pursue relevant situations. With this, we turn to page six. Here we want to show you how Viridium is organized. Most importantly, on top of the page, you see since last year, Viridium has an excellent long-term shareholding structure. It is comprised of six shareholders. We have four major insurance companies. T&D is the largest shareholder with a 30% stake. We have Allianz, Generali, and Santander Insurance. BlackRock is the world's largest asset manager, and PG3, a Swiss family office. All these six shareholders are outstanding with amazing industry positions and long-term perspectives.
As no shareholder has a controlling stake, this allows Viridium to continue operating as a neutral platform in the market. Why is this relevant? We remain open for all life insurance companies who want to exit their back books. We are their partner and not their competitor. Viridium is organized with a holding company in Luxembourg, and below that sits the German group entities. We have the four life companies with Viridium Re, which effectively it acts as an internal reinsurance entity. We have the service companies which provide, from a centralized way, the administration and support functions. With this, we turn to page seven. What are our core principles for managing Viridium? Most importantly, our mission is to make existing life insurance more attractive for our customers and our shareholders.
We measure this with very clear KPIs, improved financial returns, strong capitalization, and the modern business platform to service the contracts. We maximize lifetime dividends to investors, and this focus is supported by the fact that our local German GAAP accounting means that the group profits plus the capital releases equals the distributable profits, and Johannes will talk about this more in the CFO section. We drive performance by executing improvements across the entire value chain. This is important because we optimize both from a financial and from the operational side. This means when we acquire life books, we find substantial modernization possibilities across the entire value chain of a legacy life book. These financial and operational improvements benefit both the policyholders and the shareholders. This is first of all predefined by the German profit-sharing rules anyhow.
Most importantly, we believe that creating tangible improvements for policyholders and having well-aligned interests between investors and policyholders are the key for the success of the business model and the future perspective of Viridium. You can see it, by the way, on the Viridium website, we have quite some interesting summaries, how we have improved the returns for policyholders, how we've improved the service platform and so on and so forth. This is very important, and this is very important to show the value added we have for our policyholders and for the life insurance market. We also believe that conservative risk management and capital position is beneficial for our business. This applies to all relevant aspects of Viridium, from capital investments to our local business setup. This means we are a fully locally regulated German life insurance company without any offshoring or arbitrage.
Effectively, you can look at us as a normal life insurance company. The only difference is that we don't do new business. What are our competitive advantages? First of all, it's focus. We only do life insurance. We don't do new business, and we have a clear regional focus. This focus allows us to meaningfully reduce complexity and drive efficiencies. Secondly, it's scale. I mentioned that already. Our significant size in terms of assets and number of customers, as we have consolidated everything onto one single business platform, that allows us to generating meaningful scale advantages. Thirdly, skills. We have developed over time a unique experience and teams which have specialized on driving value for closed life books and only for closed life books. How do we generate return improvements across the entire value chain?
You see this on slide seven on the bottom right-hand side. Within the life books, we optimize the investment result, the risk result, and the other results, so the profit sources of a life business. We have our internal reinsurance carrier, which allows us to optimize the biometric profile. On the operational side, we make very substantial upfront investments to consolidate all individual life policies on the one single modern IT platform to create one single customer service operation and one single central function. We turn to page eight. This is really because I cannot emphasize enough the importance and benefits of our single modern business platform. We make very substantial investments, so we can consolidate these contracts and service them for the entire lifetime until maturity. For this, we have the one single modern IT platform.
We have one single customer service operation, and we have one central functions. To put this in perspective, over the last 12 years, we have invested more than EUR 750 million, so effectively three-quarter of a billion, into building this platform. All its investments, by the way, have already been fully expensed through the P&L. This allows us now to manage these policies in a very cost-efficient, stable, and reliable way for the remaining lifetime. This gives us a highly scalable platform for future M&A transactions. We turn to page nine. What are our strategic priorities going forward? First of all, we continuously optimize our existing life books, both financially and operationally.
Given our existing scale, we keep finding further improvements. Very importantly, we make substantial investments into further enhancing the scalability of our platform, and especially to refine the IT migration technology. This will make future acquisitions easier to integrate and also financially more attractive. We expect further M&A consolidation opportunities. Germany is our home market and our first priority. We see multiple drivers for further consolidation in Germany. To put this into perspective, Germany is the second largest life market in continental Europe, with 1.3 trillion in life insurance policy assets. The German life market, I mentioned this already, is highly fragmented with 80 life insurance players. There's increasing structural pressure on the German life insurance sector, and this is by a combination of high fixed costs, changing new business requirements, and also new competitors emerging, especially with the reform of the German pension system.
Against that backdrop, many German life players are reviewing their strategic positioning. The sale of life books is a relevant alternative to improve the new business profile for them going forward. In addition, we're doing work to review the French market as a potential second region. Why do we do this? This is driven by the scale of the French market. This is even larger than Germany, many similar consolidation drivers as in Germany. We are at an early stage, we will obviously see over time how this develops. Overall, we are very enthusiastic about the opportunities and dialogues we're having. At the same time, I mentioned this already, we remain disciplined and note that larger transaction will take time to emerge. With this, I will hand over to Johannes, our CFO.
Thank you, Tilo. Following Tilo's overview of the business, I will present on the next pages, firstly, Viridium's cash generation, secondly, the investment approach, and thirdly, the capital position. I will start with the cash generation on page 10. Our objective is to maximize lifetime cash distributions. Viridium has a strong track record of cash generation with circa EUR 2 billion cash generation in the last five years, as you can see on the page. The cash generation is first of all, based on group cash profits. The sum of the local GAAP net income of the Viridium entities equals one-to-one distributable profits to shareholders. The majority of the profits is automatically distributed via profit and loss transfer agreements to the German holding entities. The cash is then upstreamed to VGL in Luxembourg in a timely manner via several regular cash upstreaming events.
Group cash profits are relatively stable and derived from various profit sources across the entire value chain, including unit-linked and traditional life companies, our service companies, and our internal reinsurance entity. It is important to note that the EUR 2 billion cash generation is already net of significant investments into the platform that we already expensed via the P&L, as Tilo mentioned. Secondly, the cash generation is supplemented by capital releases, mainly from the life companies that we implement following the acquisition by Viridium. Both the cash group profits and the capital releases equal distributable profits.
On page 11, we describe our investment approach. Viridium has EUR 67 billion investments, of which EUR 26 billion are unit-linked and EUR 41 billion are traditional assets. The asset allocation of the traditional assets is comprised of roughly two-thirds liquid, high quality, mainly government bonds. This helps to match the duration of the liabilities.
We have about 8% mortgages, which are helpful from a duration, return, and risk profile perspective. Our alternatives portfolio is comprised of mainly private debt, infrastructure debt, and real estate debt. This supports spread generation with a well-diversified exposure of individual loans across different sectors. The investment strategy for the traditional assets is a fixed income-only strategy that fits the run-off profile of our liabilities. There are three topics that are very important for us. First, we avoid directional market risk. There is no tactical asset allocation, no directional bets, no leverage, and derivatives are only used for hedging purposes. Secondly, we focus on close duration matching of assets and liabilities. Thirdly, we plan liquidity very detailed over a 15-year plan horizon to achieve granular cash flow matching. We focus on those points and define the strategic asset allocation for each company based on the targeted risk-return profile.
The day-to-day asset management is then outsourced to external world-class asset managers. We give the asset management mandates to the best external asset managers with very specific investment guidelines. Therefore, we are in control of the investment process and closely monitor the implementation, the profile, and the performance, and intervene if necessary. The alternative portfolio is implemented via separately managed accounts. That means we do not invest directly in the funds offered by asset managers. The specific investment guidelines for the separately managed accounts define the risk profile and selection criteria of each mandate and lead to a diversified portfolio with transparent valuations. The investment guidelines include industry diversification, leverage limits, geographic limits, and the concentration limits, especially for corporate private debt mandates. Overall, we steer our investment income so that we exceed the guarantees given to our policyholders by earning stable spread income over the lifetime of the policies.
On page 12, we show Viridium Group's capital position under Solvency II. Solvency II is the European regulatory and capital framework that applies in Europe. The so-called Solvency Capital Requirement under Solvency II, which is EUR 1.8 billion for Viridium, is the amount of capital required for a one in 200 years calculated stress event. As you can see on the page, Viridium has a strong and stable Solvency II position over the last years, despite significant market and macro volatility. The group Solvency II ratio as of end of financial year 2025 was 258%. Viridium Solvency II ratio compares very well in terms of quality and quantity to Fitch-rated peers. On top, there are meaningful buffers, including unused hybrid capacity of roughly EUR 1 billion.
You can see that we follow a strict and clearly defined risk management approach. We believe that a conservative risk management and capital position is beneficial for our business. This applies to all relevant aspects of Viridium, from capital and investments to our local setup. This has worked extremely well over the last 12 years and has proved to be very stable, even in the very volatile macro situations during that period of time. In summary, you see strong and stable dividend generation from our business, which is driven by our business model and strong risk management. Many thanks for your attention. I suggest we open up for questions now.
Now we will open up for questions. The first question is coming from Muraki-san from SMBC Nikko. Please unmute and ask your question.
This is Muraki from SMBC Nikko. I have two questions. On page five, you talk about the four acquisitions you've done in the past. After the acquisition, the return was generated by reducing the cost and also elevating the investment return. That is my understanding. First, on reducing the expense ratio with one single IT operation, you are operating three million contracts held by four different books. In Germany, I think like Japan, you have long-dated life insurance policies. Managing multiple books from different operators on a single platform, I think is difficult, but how do you manage to do that?
Also going forward, if we were to acquire new life books, how much additional IT investment do you need to make so that you can continue to manage all of the books on the single platform? That's my first question. My second question is on page 11 regarding investment approach. On the asset side, what is the yield? On the liability side, what is the guarantee rate? Also on page 16, it seems that you have a lot of credit risk and exposure to credit risks. With the new setup, would you maintain the same risk profile? Those are my questions.
Thank you very much. These are very good and very important questions. Let me start with the first one. Indeed, what we are doing at Viridium is very unusual in the life insurance consolidator space. Yes, we indeed migrate all policies onto one single IT system. We are able to manage those policies on one single IT platform. Each book, by the way, has a lot of different tariffs. We effectively take them out of their old IT systems and put them into a single modern new system. This is why we have these huge upfront investments. This is also what gives us then the opportunity to run those contracts cost efficiently for a long period of time. Also, we have a system that really is able to administer these policies up to the end of their lifetime.
Sometimes this can be 30, 50 years out from today. Yes, when we buy new books, it's part of our due diligence. We spend a lot of time looking into what is the old IT system, or do they have a new IT system? What kind of IT system are the policies currently being run off? Then we usually expect indeed, again, meaningful upfront investment to put them all onto our IT system. We've given that number for the Generali Leben acquisition. The last one, which was obviously well above 2 million policies. There the IT modernization loan that cost some EUR 250 million. That's why I said earlier on, a huge upfront investment, but all expense through the P&L already. I think that was on your first question on the IT system.
Johannes, do you want to respond to the asset and liability side?
Yes. Thank you, Tilo. I think your first question was regarding the yield and the guaranteed rate. The guaranteed rate differs by policy. The net yield of the overall portfolio, we don't publicly disclose. What I can explain you, that we steer the investment result meaningfully above the average guarantee of our policies. The net yield that we generate has significant buffers above that average guarantee. Then there are 2 additional buffers due to the setup of Viridium and due to the local GAAP in Germany. First of all, there's an interest rate reserve that the regulator asked us to build over the recent years. Then secondly, there's also a possibility to combine the 3 different results that Tilo mentioned earlier, the risk result, the other result, and the investment result, in case required.
To your answer, in short, our investment result in the long term is significantly above the guarantees, and there are several buffers built in our system.
Maybe also the last one on, do you want to take that or shall I take it, on page 16, the credit risk. I think maybe I start on, yes, we've deliberately, obviously, put in page 16 to give you the breakdown, and these are only the alternative investments. I think your question on credit risk is obviously one that overall, the entire industry is currently focused on. We can say this was already by design from the beginning, how we planned to make our investment side work. We have to say, we had really good experience over the last, now, time since Viridium existed. We have, by the way, always expected there's going to be, at some point, a credit cycle. When you really look at it, the last couple of years have been really good for credit investors.
I think an insurance company, by default, should and is able to invest in attractive illiquid assets. You also need to be aware that there will always be some kind of credit cycle. I think what we can say is from the performance of the book, this is very much in line with our across the cycle assumptions. We don't see anything that worries us. To the contrary, it has really proven that this has been a very good investment strategy, and we will continue it, and we will also expect it to implement it for further transactions. Maybe I stop here and hand back to the questions.
Thank you very much.
Next question will be from BofA Securities, Tsujino-san. The floor is yours.
Thank you for the opportunity. I have two questions. Regarding credit operations, the private debt portion is high. How are you thinking about the duration here? Related to this, you have 25% of alternatives. Oh, 25% increase in the alternatives. That means within the life insurance duration, some kind of management is necessary. Could you spell out your thoughts behind this? Second, regarding private debt, the default situation, the delay, as of 2025, after the credit event, how long does it take? How is it increasing year-on-year? If you are closing the numbers by the end of December, after January, compared to 2025, how is it progressing? Lastly, this delinquency rate increase could lead to decrease in income yield. Are you seeing this happening? That's my second question.
Thank you. Thank you much for the question. Maybe I start with the first one. Overall, our investments in alternatives, actually, in private debt, have been very stable. We are at our target allocation. I think it's a question of debate, whether they are high or not. When you look at it overall, our private debt as a percentage of our book value of assets is below 20%. Yeah. We feel this is, for an overall portfolio, actually very good. Also keep in mind, we have, as Viridium, no investments in equities. We only invest in fixed income. We don't have investments in private equities and shares. We don't do a number of other investments. This is our main source because we found it actually very attractive from a yield perspective and from a stability perspective.
Your question on the default situation, you need to differentiate two things. Actual loan losses at this stage are still very minimal, are literally super small. What we obviously do is we monitor the credit quality, and in such a large portfolio, you always have some loans that are not performing well. For those, we build impairments. Those impairments, they do change over time. We would have always expected some volatility. We have seen some increase over the effectively last year, but from a very low level. Yeah. I think also what you read in the news, that there is some deterioration of credit quality is certainly true, and we also see it. We still see that the overall level is actually not very high.
The way we really think about, I think you should think about as an investor, this really gets to your third question, do we see a decrease in yield? Not really. Yeah. When you really look at it, these are loans that have eight, nine, 10, 11% of interest. Yeah, we have very few PIK notes. We actually have investments that are properly yielding. Obviously you have a deduction for, because we do interest rate hedging, you pay the asset manager and so on. The net yield is still so substantial that even if the impairments would multiply from the current level, it would still be a profitable investment. Yes, I think part of your second question was, or the first one was on duration.
This obviously, these loans, interestingly enough, despite they are called illiquid, yeah, they usually have a maturity, say, of around about three and a half years. Obviously that we put into our overall duration matching strategy. We're obviously aware of it, and it is part of how we manage the asset liability side. Maybe I'll stop here. Johannes, maybe just really to say, the 25% overall alternatives on page 11, that's not the increase, but this is the share. Yeah. Then it's not an increase, but it's the share.
Thank you very much. I do have a follow-up question, if I may. First of all, regarding duration, three and a half years for private debt. Yes, that is the case. However, if a serious situation arises, then you need to elongate the term. That kind of request would come in. If it's a regular fixed income, then you can end it there. If it's a loan, that could be a potential situation that you need to take into consideration. If you want to supplement your initial explanation, please do so. When it comes to default impact, which is limited in your point of view, but Fitch has a lot of statistics that they published, and latency 12 months, 6% of private credit default is something that we are seeing. Compared to that type of data, how good is your portfolio?
Are you close to average or are you lower? Please explain.
Well, thank you very much and thanks for the opportunity to further clarify this. First of all, you're absolutely right. The three and a half average years can be significantly longer for the loans that have troubles. This obviously is part of our overall expectation, that a share of the portfolio in reality will take much longer. This is not a problem for us at all when you really look at it. Our book runs off extremely slowly. Yeah. Our investments are actually here for the long term. If some loans or share of the loans take longer, this is already effectively part of our assumptions from the beginning. Yeah. Again, we are at the moment a bit surprised because some credit investors seem to find out very basic assumptions about credit that everyone should have known who invested into the sector.
The second thing is on the default rate. We are very much lower than the 6% you mentioned. It's really a fraction of that. I don't know what kind of loans they have in there. What you need to know is, we, and Johannes mentioned this already, it's a very important point, we don't invest into funds of credit managers. What we do is we give to them a mandate and tell them what kind of selection criteria for the loans we want to have. What's the loan-to-value? What kind of profiles of loans we want to have? With that, we've done really well because obviously as insurance company, it seems we have really avoided a lot of the sectors that may experience default. The other thing that's really important to know is our portfolio is extremely diversified.
I think we mentioned this on page 16 as well. These are over 3,000 loans. The average borrower exposure is below EUR 6 million. This really means we always from the beginning assume, yes, some loans will have issues, but we want to make sure. By the way, you never know which one it is and which kind of sector gets hit. That's why we have a regional diversification, we have a sector diversification, and the overall exposure to each individual loan is relatively small. Again, we think this is a very important part of getting then to a very balanced portfolio. Again, this very much in line with our expectations. Again, we are surprised by credit investors at the moment finding out that these are illiquid. Yes, they are illiquid.
Credit investors finding out that there will also be losses over time. Yes, everyone should have known this, and we had this in our assumptions from the beginning.
We go to the next question. Watanabe-san from Daiwa Securities, please.
Hi.
Yes, this is Watanabe from Daiwa Securities. I have two questions. The first question is about the profit outlook. Do you have a midterm profit guidance or target? For example, do you have anything for 2030? How much profit or cash generation are you expecting for 2030? My second question is regarding M&A. The book valuation in Germany and France, is the valuation going up or coming down? Looking at the French Life market, if you do M&A, will you be able to use your excellent single IT platform? When you do the acquisition next time, is there a risk that the lump sum depreciation of the system may lead to a big loss for your performance? Those are my questions.
Yes. Thank you very much. I will take the first one on the profit outlook. First of all, we don't publish any profit outlook or guidance going forward. What we can say, and this was also part of the presentation, is that our cash flows are very, very much diversified across the entire value chain of our business and therefore relatively stable. The second point that I want to highlight is that the German market has very sticky and long-term policies. Our policy holders tend to be with us for a very long time, and lapse rates are very low. Just to give you an example, if we were not to do any further acquisitions, in 30 years' time, we would still have half of our assets and liabilities. The runoff profile of our business is very slow.
This also varies by Life company. For example, our unit-linked Life company, Heidelberger Leben, is still growing in assets with the same number of policy holders due to the development of the existing assets, but also the incremental premiums that are being paid in. The traditional Life companies decline in size on a relatively low level. We expect profits to be slightly declining over time, but overall, relatively stable. The second question, I would let you go first.
Yes. On M&A, this is a very important question that's hotly debated, whether the valuation for closed Life books is going up or down. I think I can say the following. First of all, we see that we look at each transaction individually and really go through how much investment does the IT system need? What's the cost position? How much efficiencies can you have out of this book? Also on the financial side. In reality, we value each book differently, and these books are quite different. It's not actually that easy to say generally whether valuations go up or down. We do see some excitement on the seller side who will say, "If the interest rates go up, then my book should be worth more." In reality, it really depends on the liquidity position of these books.
We see a lot of books that have meaningful unrealized losses due to the long-term nature of the investments, which actually make it sometimes very hard to change the strategic asset allocation and to have even enough liquidity to invest at the higher interest rates. This is a long way of saying it really depends on the individual book, and we need to really on each book due diligence and to determine what we can pay for it. For France, we think we can use some parts of our platform, but at the same time, we realize that the contracts in France are very different, and therefore, quite a number of our platform will need to be French specific. It will really also depend on the specific acquisition. We can leverage a lot from our skill and experience.
We can leverage some parts of our platform, but some parts will be local. To give you an example, customer service will need to be a French call center. We will not be able to use the German one, for example, just due to language barrier. A lot of things we can use. What we're already seeing is that what we've done in Germany, our trajectory and our ability to show to people what we do, and especially that this is good for clients, and that clients get a higher return, and that afterwards, effectively, this is a better business for clients and for shareholders. We see that helps us a lot for our dialogues in France. You had a question on the depreciation of the platform. To be very clear, the entire platform is fully depreciated already. There is no depreciation necessary anymore.
When you look at our profitability over the last couple of years, this is already after having made all those investments, and they all flew through the P&L, so there's no risk of any platform depreciation because it's already fully amortized, which is very unusual for the sector, and we know we've been very conservative here in our approach, but we thought this is a good thing to do.
Yes, the last part I want to check. If you do another acquisition, you will not make additional IT investment nor will have to book any additional depreciation. Is that correct?
For most acquisitions that we see, we expect that we need to again do the next IT migration. We would expect again that we have costs for the next transaction, and by the way, that's part of our overall calculation of the transaction. Nothing that surprises us. We look how we can improve the investment portfolio, how we can improve other positions, and how much we need to invest effectively in bringing that business on a new IT standard if it's not already on a new one. Yes, we would expect further investments into IT, and this will be part of our calculation. No surprises here. In the future, we would need to see whether we fully expense it or we amortize some part of it, so that we will decide depending on the situation.
Moving on to the next question. From JP Morgan, Sato-san. Please unmute yourself and ask the question.
Yes, this is Sato from JP Morgan. I have one big question. For the existing shareholders and your relationship with them, I would like to dive deeper on this topic. To be more specific, based on your explanation today, you have diversified shareholders, and Viridium is being able to maintain the standalone platform position that has been reiterated by you. The Allianz and BlackRock, these are your shareholders. Are you expecting any synergy effect with this shareholder lineup? I am personally interested in Allianz. In the future, they might become a block supplier in the future. Is that something that we can expect? From another point of view, compared to when Cinven was the shareholder, has anything changed?
My understanding is that Cinven, because of the Eurovita case, you could not gain sufficient support that I imagined. This time around, you have a new shareholder structure, which could have brought about some change. If that is the case, I would like to know. Thank you.
Yes. Thank you very much. Maybe I start with your last part of the question. We can really say Cinven has been a shareholder and effectively, Cinven has created this business at its very beginning. It has set up the overall strategy and we, from the German perspective, can only say that they've done really an excellent job. Having said that, times have changed. Indeed, due to our shareholding structure, we were not able to make further acquisitions, and that's why we had also an M&A process and have established the new shareholding structure. This is the key change now, really, that Viridium is again able, effectively since last summer, last autumn, to again pursue M&A transactions. That is the biggest change.
I can assure you, Cinven was a very active shareholder, I can also assure you that the new shareholders are very active and are making sure that they monitor the business. You see this on our webpage. We have a supervisory board with nine people. Five of them are representatives of the investors. By the way, two of them are from T&D, and we have four very strong independents. I think from a governance perspective, the business is very closely monitored and supervised as before. The real change is really through the now having this permanent long-term industry players allows us to do acquisitions again. This really brings us back to your question on synergies. Overall, the most important part for us from a business perspective is that we have now this new setup and can pursue acquisitions again.
We also do have some business relationships already before they became shareholders with some, for example, BlackRock and Allianz and Generali, who have also been asset managers to Viridium before, because as Johannes mentioned, we outsource effectively, we give all our mandates to external asset managers. This is on purpose, so we effectively pick the best ones. That's obviously something we're going to continue. Now having these parties who have been important asset managers to us already in the past, obviously helps us to further use their asset management expertise. Yeah. Overall, yes, I think we are a large company on a relative basis, but when you look at the asset management capabilities our shareholders have, is absolutely incredible, and this is for us, an important source for synergy where we can get their input and support.
Really, your other question was on Allianz, whether they are a supplier in the future. The answer is, I cannot tell you. This is not a question for us. It's also a question for Allianz. Overall, the way you should really think about our business is that we are, as I said, by definition and on purpose, a neutral platform. We are open to anyone who wants to sell their book, because Viridium will manage it not only in a very good way, but also to the interest and benefit of the policyholders.
The next question is from Sasaki-san from Nomura Securities. Please unmute and ask your question.
Yes, this is Sasaki from Nomura Securities. On page three, I have one question. Single, modern, and a scalable business platform, as the differentiating factor, I think is on slide three. In a financial business, system does not really become the common factor to differentiate. Can you elaborate how you differentiate with your unique system? From the perspective of the business platform, how are you different from the peers?
Yes. Thank you for asking it because it is, I think, something where Viridium Group is very different amongst the life insurance consolidated space, but probably also amongst a lot of financial institutions. What you see generally in the sector is, and just talking about German life insurance companies, they often have many different IT systems. A lot of the IT systems are very old. Very old, I'm really talking about some of them go back to the '50s and '60s of the last century. These are systems coded in languages that few people still understand. They are well before even the internet existed. Effectively, they become not functional anymore. Because this is especially important in the life insurance space, because some of these contracts do run for 50, 60, or longer years.
We effectively have our oldest contract at Viridium Group is, I think, some 90 years old, and our youngest contract, we think, is going to run for probably another 90 years. When you want to do an efficient administration and efficient, not only in cost way, but also really Think about things like cybersecurity, having the right data for the customers, being able to build a modern customer service platform. This actually is very, very important. The IT infrastructure in financial institutions is often not a topic a lot of people look into, not a topic a lot of people like to talk about. We found that from a cost efficiency, but also regulatory and client perspective, it is incredibly important.
That's why you see that's why we've made this huge upfront investment, and that's why we are saying it is a differentiating factor and a competitive advantage. When we buy the next book, we can put it onto this one single platform, we make the investment to integrate it, then we can run it in a cost-efficient but also in a high-quality and compliant way. I hope that answers your question. I think it's actually one of the most interesting topics that few people in insurance, but also more broadly in financial institutions, actually talk about.
Yes. Thank you. I have a follow-up question. For example, to integrate a fragmented system, if that is the source of your competitive advantage with cloud, the system that you were not able to integrate before. Recoding the languages, I think is something that the other IT vendors are starting to offer. Would the evolution of AI be impediment to your competitive advantage?
Yes. It's very simple. With all the AI tools, they emerge at an incredible speed. You will see that the modernization of IT systems can be made cheaper, and it will become cheaper. There's no question about it. I think two things that are important. One is, given that we are the ones in the German market who repeatedly do these IT migrations, we are the ones who probably make most of the investments and are at the forefront of using these tools. We actually think that the difference between our migrations and other people who haven't done a migration for a long time will probably rather increase. Secondly, we do see limitations of using those AI tools. One key limitation is, in those migrations, you often have significant data gaps.
You really need to sit down and interview the actuaries to find out what is actually happening. Yes, you can use these AI tools, but at the same time, you will see that there are actually significant limitations. Really an area that's developing fast, an area where we are investing a lot of money to stay at the forefront.
I see. Thank you. Thank you very much. We have passed the scheduled hour. Next will be the last question. From Morgan Stanley MUFG, Takemura San. You can unmute yourself and ask your question.
Thank you very much. I have one question. I have a question regarding the future pipeline and how we should understand it. The last M&A took place in 2019. It's been a while. As you mentioned, the shareholder structure has changed, and you are going to shift more towards M&A. I think there is a higher possibility of M&A going forward. Is my understanding correct? In slide number nine, you talked about the German pension reform. I would like to know how this could lead to your business opportunity. Thank you.
A few things. You see this really on the slide where I showed you the history of our acquisitions on page five. Overall, Viridium is not a business that is doing a lot of M&A. When we do it, they tend to be larger transactions. Then we integrate them. Overall, I think when you look at our business, you should not expect that we have a lot of transactions, but the transactions we do tend to be meaningful and profitable. Really, when you go back since 2019, when we bought Generali Leben, at the time, we said we're going to need three years to integrate, just given how large the Proxalto acquisition compared to our existing platform was at that time. Once we are done with that, we told the market we are ready again for M&A.
You remember, the Zurich and the AXA acquisition came up to the market. You know, we were busy then with the Zurich transaction, which we couldn't complete due to our ownership structure at the time. We had our new process of establishing the new shareholding structure. Really, when you look at Viridium, we are really back into the market only for effectively something like nine months. We are in different dialogues, and we will see when and how a transaction will emerge, because these large transactions do take some time. This is very attractive what we are seeing, but it will also take time. On the German pension reform, on page nine, I think it's a little bit too early to say.
What we really see is that the German life sector will get for new business, more competition, including from banks, new brokers, asset managers. All of the life insurance companies need to think through how they position themselves in this new environment after the pension reform. What we are seeing is that some people are saying, "I really want to focus on this new pension reform environment, and I don't want to spend time optimizing the back book myself." I really speak with Viridium, whether we can help them to better optimize the existing back book. We're seeing a strategic dialogue emerging out of that pension reform, but it's really relatively early days.
Thank you very much. On your first point, if that is the case, the M&A environment, is it becoming more challenging, more competitive, and more difficult for you? Or is it a very good opportunity that is in front of you? What is your take?
Look, we are always very respectful because each M&A transaction, these are large strategic decisions for the sellers. Always a lot of work goes into it. I don't have the impression that it's getting more difficult. To the contrary, we rather feel that given our business is established, given we have this excellent new shareholding structure, given all the dynamics in the market, we are seeing a lot more strategic dialogues that people are having with Viridium than ever before. Literally, we have never had so many dialogues and so many specific dialogues as we have now. At the same time, we just need to see which ones of these really then translate into an M&A acquisition. Overall, we've never been in a better position than today.
Thank you very much. Understood.
With that, we would like to conclude the Q&A session. We would like to ask Dr. Dresig to make a closing remark.
I can really say, ladies and gentlemen and dear M&A team here, but also dear T&D team, thank you very much for giving us the opportunity presenting Viridium today. Thank you for all your good questions. We hope you found the session interesting. You can see we are very excited about our business, we're excited about what we've built so far, and we're excited about the outlook. We hope we could help you to give you an insight into how our business works. Thank you very much for your time today.