Allianz SE (ALV) Q1 2026 Earnings Call Transcript

Ladies and gentlemen, welcome to the Allianz conference call on the Allianz Group financial results for the first quarter, 2026. For your information, this conference call is being streamed live on Allianz.com and YouTube. A recording will be made available shortly after the call. At this time, I would like to turn the call over to your host today, Clare-Marie Kost-Laput, Chief Financial Officer of Allianz SE.

Please go ahead, Clare-Marie. thank you very much andrew and good afternoon everyone so let me start with an overview of our group results for the first quarter of 2026 and clearly for me as a picture from from my perspective is one of a strong start to the year this allows us to reaffirm really confidently our full year outlook we can do so despite an elevated market volatility and more uncertain and macro environment. Across our three strategic levers, growth, productivity and resilience, we continue to execute with discipline and to deliver towards our ambition. If we look in more details at page A4, there you can see that overall our business volume continues to show steady internal growth. It's driven in particular this quarter by our PNC and our asset management segments. The live business was resilient against the first quarter 2025 where business volume was particularly high our operating profit momentum is excellent we are nearly at seven percent year on year in terms of growth where we do benefit from the diversification of our business model here we see double digit growth in pnc where we reach a new record level of operating profit we see an excellent performance in asset management which is up 6% or even 15% FX adjusted, and LIFE delivers a resilient performance even if it is impacted by FX and also by the disposal of our GVs with Unicredit and with Bajaj. On the net income side, we do see the impact of the completion of the Bajaj disposal for 1.1 billion euro net. As a reminder, and as we have indicated previously, we will neutralize these accounting gains over the course of 2026 through strategic and productivity actions, and as well reinvestment into higher yielding instruments. Only a modest share of that overall amount was used in the first quarter for 1.5 million euros net, and more will clearly follow during the year. Adjusted for the budget effects, our underlying core net income achieve a strong increase of 7% year-on-year. We also achieve an ROE of 18% and as well an excellent EPS growth of 9%. So clearly, and I think it's very important, beyond these exceptional effects, the fundamental performance is very strong and fully on track towards our capital market day ambition. At the bottom right of this page, you can also see that our solvency ratio ended the quarter at 221%. This is a very resilient level with well-contained market volatility and a consistently delivered strong operating capital generation. Let's move to PNC on page A5. And there you can see that our top-line momentum continued at a pace that is very much in line with 2025. Our internal growth is at 7%, with a split broadly 50-50 between price and volume. The price effect in the underlying are slightly moderated, but overall the renewal rates remained resilient across the book. As an example, we see retail motors that is running at plus 8%, and within commercial, as an example, mid-corp is at plus 4%. As you can see as well in the further detailed pages, the growth across the PNC portfolio remains well diversified. You have plenty of examples of that growth momentum in the document, but some standout contributors would include our platform businesses, like Alliance Partners or Directs, that are both growing double digits. We see also a strong new business in Germany and also selective growth in commercial where pricing meets our hurdle rates. Across the organization, very clearly, we continue to be focused on our growth triathlon, achieving new customer growth, increased cross-sell and churn reduction. Our underwriting profitability is excellent with a combined ratio at 91% that is supported by both retail and commercial. This outcome reflects a broadly benign NADCAT environment, but more importantly if you go into the details, actually a robust underlying underwriting performance and an ongoing improvement in the expense ratio. The details as always are provided in the back of our presentation. You should as well remember when you look at those numbers that basically the year-on-year changes in attritional loss ratio and prior developments are affected by an offsetting accounting impact that has been introduced in the second half of 2025. Allowing for that effect, the underlying attritional loss ratio improved by 30 bps and the runoff impact was flat year on year. As always in the first quarter and in general, we remain cautious us in our booking approach, including when it comes to our initial loss ratio peak with uncertainty on the inflationary outlook at this point in time. The sustained top line momentum and the further improved combined ratio drives our 11% operating profit growth, reaching an excellent 2.4 billion euros of operating profit. The investment result is broadly flat, including the impact of lower equity contributions there. The realized losses below the operating line in the first quarter in non-life will benefit the operating investment income later in 2026 and into 2027 as we reinvest into higher yielding instruments. We also continue to leverage AI across the PNC value chain for marketing and distribution of new business through to claims management. The main focus is on customer experience, on uniqueness of our value proposition towards our customer to fuel our growth trajectory. As an example, at Ilands Partners, we have introduced several new large OEMs relationships in the first quarter that are supported by agenting AI tools in roadside assistance, significantly scaling our straight-through processing of claims. In Italy, France, Spain, our AI tools are supporting our agents to provide training or real-time support in assessing the risk via AI experts and also boost customer service and productivity at the point of sales. Similarly in commercial, our submission hub allows for a much faster and higher quality answers to submission via preparation, enrichment of data and best allocation to underwriters. this is generating significant impact both in the response time and in conversion rates of our submissions so overall i'm very very pleased with the performance of our pnc segment we see good growth we see excellent and robust underwriting profitability across both retail and commercial let me move to page a6 having a look at our live panels this business where the underlying performance of the segment is considerably stronger than the headline momentum might suggest so the new business first so on the new business comparison versus previous year is impacted by a very high base in the first quarter 2025 which included large tickets in Germany strong Thailand sales ahead of a regulatory change on the medical riders and the only credit GV business which has been disposed as you may remember in the second half of 2025 adjusted for those impacts and also the ethics effects the underlying new business volumes are slightly up and the new business value is broadly stable with an attractive mix with protection and health and unit link contributing 60 percent to this one to illustrate to illustrate a bit some of the strong development versus last year, I want to mention first Italy, where really the Italian team has been doing a tremendous job in the first quarter building on the momentum of what they have already achieved in 25, where we see that the new business value is up net of minorities and including associated fees with strong unit link growth through their financial advisor network. The new business in In Asia, if you exclude Thailand, is up 12%, and we see as well a continued strong momentum in health Germany with a continuing double-digit new business value growth. On the live CSM development, we can see that despite the lower new business value, the expected in-force return still exceeded the release, generating a healthy 1.7% normalized growth. The overall CSM growth was impacted this quarter by the capital market volatility flowing through both the economic and the non-economic variances in a broadly consistent manner with our disclosed sensitivities if you do the underlying mass. And as we speak, and some of those market impacts have already improved, we would expect our CSM to recover accordingly. Our life operating profit was impacted by FX and also the Unicredit Vita and the Badge-Age disposals. Adjusting for these, the underlying life profit was slightly up. There was also a modest market volatility impact in our investment result. We would expect a portion of those effects to be temporary. Overall, the life performance has been resilient in the context of a demanding comparison with last year, perimeter changes and as well the market volatility we have seen in the quarter. Going forward, the perimeter impact will ease and we expect an improved life investment results. We remain focused on achieving attractive risk adjusted returns on new business and we are confident we will deliver in line with our capital market day targets. Let's move to page A7 and have a look at our asset management business. There we had an outstanding start to the year against volatile capital markets. Our net inflows in the first quarter reached a record level for a first quarter with strong growth at both PIMCO and AGI. Overall, the net inflows of 45 billion euros correspond to an annualized organic growth rate of 9%, diversified across regions and asset classes. and as we speak this good momentum continues some illustration of this at PIMCO we see continued strong traction beyond the more traditional fixed income strategies for its expanding active ETF suite and broad-based demand also across Asia and Europe and at HGI we see flows across multi-assets fixed income, equities and alternatives, with new mandate wins in Asia in particular. The product proposition of our asset managers continue to be strongly supported by our value creation for our customers via our investment performance, with at least 90% of outperformance on a one and three year basis across our full third-party asset and management base. We generated 2.2 billion of revenues, up 12% FX-adjusted, driven by the growth of our asset and our management. The fee margins are broadly resilient, with some temporary impact in the quarter from upfront distribution commissions associated with the strong flows. I am also very pleased with the productivity focus at both asset managers that is evident in an excellent cost income ratio, delivering more than 850 million of operating profit, up 15% on a fixed-adjusted It was a volatile period for capital markets in the first quarter, and there was a lot of debate around topics such as private credit. Overall, our asset management businesses have been selective and very mindful of liquidity considerations, even when growing their private and alternative offerings. Their focus in the alternative and private credit space is differentiated and focused around areas such as infrastructure or asset-backed finance. Overall, the current focus on credit and liquidity risk is a tailwind for asset managers to continue to demonstrate the strength of their offering. Moving to A8 and our solvency to ratio development. so islands further emerged with a strong solvency ratio at 221 percent with a two percentage point increase versus your end in a volatile market environment beyond the traditional effects like share buyback and the usual dividend accrual we also have the positive effect that we have announced coming from the divestment of the budget gvs that is coming through to be highlighted from my perspective, are maybe three key points. The first one is that we have a very contained market impact. The second one is that we have a very consistent operating capital generation. And in addition, we had various minor model updates, which directionally can be hard to predict, but came out at a small positive in this instance. You should not assume this to always be the case going forward. So clearly, the underlying drivers of the solvency development are very strong in a quarter with volatility let me move to page a9 and here i'm very pleased to announce that from this quarter onwards we will be including in the backup slides additional disclosure providing insights into the performance of our health and protection business as a reminder we set out at target at our capital market day to grow the operating profit of protection and health by a CAGR of 7% through to 2027 to reach 2.2 billion of operating profit by then. Our protection and health business is currently split across PNC and life segments with different product features which is leading to different technical accounting treatments. Our disclosure will develop over time but they are designed to give more insight into the components of profit and the nature of the products we are selling on the left hand side of this slide you can see that we can segment the business into short term typically that will be annual policies including medical reimbursement health business mostly accounted for in the PNC segment with combined ratio as being the most relevant steering KPI for that business great example of that will be the international and travel health business within Alliance Partners. On the long-term side, this will include typically our term, our whole life that is sold as riders to saving products, or the German health business which has unique long-term features such as the aging provision. This business is accounted for in our life and health segment with the CSM and its growth as being one of the most meaningful steering KPIs for the business. The overall protection and health operating profit is split roughly 60% long-term and 40% short-term. Across protection and health, we combine a strong global oversight on underwriting standards, product and pricing with customization to local market needs. In particular, we have a global coordination for our health business who announce digital health. This was showcased at our Alliance Insights session of June 2025 and from my perspective is definitely a good reference material if you want to get more insights into the health business. All our businesses have initiatives in place to further grow and to strengthen technical excellence. Some examples of such initiatives are illustrated here in the middle of the page. They cover a broad range of elements, such as increased use of digital channels for selling and customer servicing, the use of AI to increase the ability of our agents to underwrite health business, or more systematically leveraging cross-sell opportunities to sell health alongside PNC products. If you move to page A10, where we are showing some financial highlights for the business and we are illustrating the new format we will use going forward. You can see the very good momentum in the operating profit, growing 10% year-on-year adjusted for the disposal of the Unicredit GV. On profitability, you can see a healthy combined ratio of around 93% for the short-term business booked within the PNC business, driven in particular by attractive margins in health. For the business booked in life and health, our new business and new business margin are at good levels but impacted by some scope effects, in particular the disposal of the Unicredit GV, the lower level of sales of medical riders in Asia and some additional tax on health insurance premium in France. So the normalized CSM growth of around 1.5% for the long-term business is healthy and we will expect the business to deliver fully normalized growth at least in line with the whole life segment. Overall the health and protection market is a huge market with significant growth potential also as we see selective disengagement of some states from that part. We see a strong appetite for our products also supported by our ecosystems we are we are very well positioned and very confident in our ability to meet our capital market targets day there let me recap on page a11 so overall we had a strong start into the year if you normalize for the positive effect of the sale of our stake in our gvs with badge we deliver an excellent nine percent core eps growth which is at the high end of our capital market decommitments. Similarly, our productivity and our resilience focus is as well very visible in our numbers. I can thus very confidently confirm our outlook for the full year of 17.4 billion plus minus 1 billion euro. And with that, I thank you all for your attention, and I hand over back to you, Andrew, for questions.

Great. Thank you, Claire-Marie. Okay. So we're now ready for questions. So just to remind you, if you're on the web audio call, there is a button called talk request.

If you're on the phone, then it is star five to request. um okay so with that it looks like our first question is from andrew baker uh from goldman sachs go ahead andrew thank you for taking my questions um the first one i guess just on the reinvestment of the 1.3 billion budget stake sales should we assume that the remaining reinvestment will be predominantly from the realization of investment losses and i guess If not, are you able to give a bit more detail on the types of strategic initiatives that you are redeploying into outside of this? And then can you also just help me with the timing a little bit? So for the rest of the year, how would we expect that redeployment to come through? And I guess which benefit, which business line should we expect the benefits to flow through as well? And then secondly, just on the life and health operating investment result. There's a comment in the presentation talking about the unfavorable impact of market movements on Allianz life and how some of that should come back in future quarters. Can you just give a little bit more detail on the mechanics behind that and how much we should expect to come back? Thank you.

So thank you very much, Andrew, for your questions. So on your first one, so basically, you're right, so we have now used the first quarter to do a tranche of of realized realized losses on the on the bone side we we expect to use the rest of the proceed actually to balance to to support our strategic initiatives and also our productivity initiatives in particular associated to the to the ai ai transformation and the opportunity we see uh associated associated there and depending on the exact timing of those effects we will also be rebalancing some of those uh with uh with also bonds realization so we will we are still flexible it will depend a bit on the exact timing and emergence of uh of the of the initiative um but but so so the the exact allocation is not yet decided uh as we as we speak when it comes to the exact timing effect it's also a bit difficult to to assess exactly but what i will do is that you can take the remainder and then basically go into three trenches until until the end of the year i think it gives you a good a good view on what may happen on the non-operating profit side until until the end of the year by by quarter and then when it comes to the to the to the line of business it will be it will be mostly mostly coming into into the pnc business as we will as we see also some some acceleration of those transformation opportunities i will say in particular related to to ai now and then then you were asking the question on the on the um uh on the uh volatility associated to uh to the so so i think what is important to to have in mind is that indeed the uh the investment uh the investment component within the operating profit on the life and health side is uh unusually low uh for this uh for this quarter because we have quite some noise in this line item for the quarter. We have actually almost 60 million negative effects which are coming from FX and from market and we also have the negative effect if you want coming from the comparison associated with a positive effect of bad judge previous year right for approximately 15 million euro. So those two effects combined are basically mostly explaining explaining the deviation and then if you zoom into the 60 million deviation we have seen from uh coming from more from ethics and from market actually we anticipate 30 million of that to come back to come back over time and maybe just to give you the big picture on that maybe two big pictures on that on that item i would say going forward i would say the investment the investment line item in the in the life and health business should be in line with our outlook guidance which is below 500 million euro that's basically what you should keep in mind so there is no we don't anticipate that to change and on the easy life side what is creating these these effect is that because the market were negative we have seen volatility as well the edging costs went went up and basically those those costs actually will also will be deferred over time so that's why we are going to see this recapture over time now really clear thank you okay thanks andrew next question is from ian um ian pierce um from um exam bmp go ahead ian i think your line is open hi thanks my questions were just on

On the health and protection, the new disclosure, thank you for providing that, it's very useful. Just on the sort of outlook, so is the best way to understand this that you're expecting sort of 4% to 5% growth in operating profit in the long-term business, and does that imply double-digit growth in the short-term businesses? and then also on the disclosure for q1 that's in the 550 obviously that's that's on run rate for your cmd 2027 target already uh so just sort of if you could talk about the performance relative to target and if you sort of expect to um or how comfortably you expect to exceed the 2027 target and the health and protection operating profit thank you yeah uh so basically um what i expect

When you look in terms of relative growth, I expect the short-term business to grow faster compared to the long-term business, which is quite logical as well because the short-term business entails partners, entails Turkey and Italy, which have faster growth. and also the then the earning of this growth into the operating profit is actually faster on the short-term side versus the long-term side so that's for the sort of overall overall view but basically then in terms of and and the fundamental growth i expect rose around eight percent for the short-term side and basically six percent around the long-term long-term side And then when it comes to the underlying features of profitability to those businesses, on the short-term side, I expect a mid-to-low 90s type of combined ratio. And for the long-term part of the business, I expect the CSM indeed to grow around 5%. The release is around 8% to 9%, so not so differentiated compared to our fundamental business. business, and the new business margin is obviously well above 5% for that business. So we are on track, that's what I would use. Maybe it's a bit conservative actually at this point in time, but this is still what I would use as an overall reference point towards 2027.

Great, thank you.

Thanks Ian. Okay, next question is from Farhad. Farhad Changhazi from Kepler-Shriverau.

Go But could you comment on the retail PNC volume growth outlook for the remainder of the year and compare to plan target as well in terms of how should we see that shape? And could you just comment a bit more on what is happening with AGCS, where we had strong internal growth with rates negative, just to see the dynamics and the outlook for that business and which lines you're playing in.

Yeah, thanks a lot for your question. Maybe let me start with AGCS, right? So we have a couple of items which are coming through in the growth of AGCS. So we have some booking time effect, which have accelerated a bit some of the booking in the first quarter, which is showing up with increased growth. And then we are clearly working on developing our franchise we have invested in two teams we have strengthened our offerings as well and we also have new good tools in place as i was highlighting you know related as an example to our ability to treat the submission that is really making also a difference in the way we are interacting with the market so we have that combination of both sides clearly we are extremely mindful of the environment and we are growing where we can achieve a good level of what we called a ptp which is actual price against technical price because we see that this is a very nuanced environment and so you have to be careful in the way you are proceeding so i think they are really good support and fundamental driver for that growth but i would also not multiply by four the growth we have seen in the in the fourth quarter and two once to once year end then you were asking the question on the retail volume growth and where this is that we stand So our volume growth for the first quarter on the retail side was at 2.4%, which is below our ambition of 3 to 4% volume growth as communicated as part of the capital market day. What we see first of all overall in terms of positive driver is that we see growth in number of policies and customers across all our major retail entities nonetheless what we have seen is that we we we have some operating entities where we had despite the fact we had a good momentum we are slightly below target linked to some seasonality effects so that's typically the case for germany and france in some of our operating entities we see clearly very good traction like the uk italy or typically our platform business we are double digit growth also in retail there in direct or partners retail as an example so we are on it i think clearly we are working on our capital market delivers i still a lot of work to be done i think as we mentioned before there is a very strong focus from the organization we are very confident we are going to get there. And we see in the underlying really good momentum.

Okay. Thanks, Fahad. Next question is from William. William Hawkins from KBW. Go ahead, William.

Hi, Claire Marie. Thank you very much. I'm checking in with all the companies on expense leverage after some work that KBW has done. And I mean, one observation is that you seem to have remarkably low expense ratios in Germany and America, which is good, but I'm still trying to sort of figure out. Leads to two questions. Where in general do you think your expenses are best of breed and where do you see the need or opportunity for meaningful improvement in expense efficiency across the business units? And then secondly, please, when you're thinking about the impact of expense management on your EPS growth targets, do you ever envisage admin expenses actually falling as a profit driver or is this always going to be a relative game of making good investments so that your expense ratios may be improving but the absolute number isn't coming down thank you so um i think first of all i mean we are um maybe you are there are clearly like two components in our expense ratio wise is uh the admin and the acquisition part um and we are focused overall as an organization on the delivery of the 30 bips improvement year on year which we

think is very distinctive and is also a very strong driver also of our ability to work and to to sustain some of the growth trajectory we want we want to achieve because part of that and that's also associated with some of the ai actions we are doing today is that there will be benefits as we are working in terms of customer experience optimizing the processes as as part of that basically productivity becomes a sort of byproduct of of the optimized processes that then we can re-inject into making our product in terms of pricing points also more attractive to to fuel the growth which is a very important important item then i i mean i i'm not so sure which expense ratio you did look at for the us because we don't have um us-based really business they are part of our global line so i would really not really look at that so i'm not so sure but basically what we do in general is that we are we benchmark our our businesses quite fundamentally within their within their own markets also against best in class peers and then against internal benchmarks and what we what we and that's a part of a challenge we are we are operating because we believe it's also key to the to the strategy i was highlighting in particular on the on the retail side now how this is going to evolve going forward i think it's too early to say but at this point in time i will just take our 30 bips improvement as being the base until year end 2027 and then we will further communicate on that aspect as we also see our AI overall is also providing support to our own processes that's really helpful if you allow me just to come back through my observation about America was about life not about non-life and I did just wonder you know beyond the 30 basis points you're talking about in non-life which is clear and great do you have any similar observations about on the life side of the business please life is always a bit more tricky but we also actually do have we also look at at the different productivity kpis for our life business so we have a we have multiple kpis we are looking at against reserves in terms of unit cost and so and so forth so we we look at different elements and we do we do have targets and that we are also balancing also in terms of in terms of impact overall so so i mean if you take and some of our business are definitely best in class by far and we'll have an unbeatable unit cost that is also very supportive for some of the future strategic development easy life is also doing really well and we are we continue to look it because we believe it will be a differentiator going forward and so on and so forth so we we also challenge our businesses because again the fundamental logic of having a better better competitiveness in terms of productivity is also a fuel for customer satisfaction and for growth and and william i think we've discussed it the the mix effects in your comparison on life expense ratios are massive um between savings and protection as well which i think might impact some of your regional comparisons.

Understood. Thank you very much both. Thank you.

Okay. Thanks, Will. The next question is from Ben. Ben Cohen from RBC. Go ahead, Ben.

Hi there. Thanks for taking my questions. I wanted to ask on two things. Firstly, on the PNC side, on the commercial rate, it looked like the improvement there was slightly stronger, plus 2% in the quarter versus plus 1% for the full year. I know that's a small change, but could you say anything about whether you are seeing better momentum in terms of commercial pricing across the book? And specifically in terms of geography on the P&C side, could you talk about the very strong improvements that have been in the combined ratio both in the UK and in Italy in particular? and i suppose on the uk was a bit surprised because others have talked about how competitive uh the market is in general both on the on the personal and the uh commercial side thank you sure um so on commercial rates uh overall uh so indeed for the for the quarter uh we are at plus two percent for the uh for the commercial scope uh the main driver of that is actually the the

mid-corp business where we have seen a bit of strengthening of rate across some of our portfolios leading to mid-corp having a plus four percent rate increase overall i think it was driven by some specific markets on top of my mind i would have germany in mind as an example but we have few others where where there was a need to to inject some some further price increase also from a from a market perspective i want to highlight that on maybe businesses like more the agcs business which for us is approximately 15 percent of uh of a bit less than 15 percent of our global top line right there the the cycle is definitely not not over we we clearly see that that there is some of the some of the line of business or regions that where competition is fierce i will i will put it that way and where rates are softening that a good example of that would be property large large businesses as an example financial lines also continue a bit on that path and we see some improvement in some in some in some other line of business but clearly that's a very nuanced landscape on the large corporate side large corporate and specialty side and then um and then you you were you were asking some questions on um on basically the combined ratio improvement right first of all i think you were asking for for the for the uk i think so in the in the uk what what we see that there has been a lot of work associated to to expenses expenses management overall so productivity focus from from the uk team also a lot of rationalization that is that is coming through also as you can see on the page i think b14 the natcat impact is is is contributing is contributing positively to this development of the combined ratio is actually the main driver of that and in the underlying alliance uk has been cautious when it comes to to to runoff runoff in general so i think that's the main driver so i would say in a nutshell i would say good focus on transformation on the uk team showing up in the expense ratio and also mainly benefits from the from the nat cat side while still being from a technical perspective quite conservative and then on italy um so what what what we see uh what we see there contributing to the to the development uh first of all i think very good uh very good development when it comes to the to the expense ratio which are flowing through also some of the mix effect related to uh to some of the acquisition from from that perspective and also the fact that they had they had simply a very good also experience during the first quarter that came through into the attritional loss ratio so overall i think the italian team is doing an outstanding team in outstanding work when it comes to technical excellence and balancing basically selection and growth at the same time.

Thank you very much.

Thanks, Ben. Next question is from Michael. Michael Hutner from Berenberg. Go ahead, Michael.

Fantastic. Thank you. One is the capital generation, the 6%. I know every time I ask, you always say, no, no, the number is far too high. You should normalize it. But you keep beating it. And from speaking to excellent IR, it sounds as if it's more structural now. Can you say a little bit what's changed here? And the other one is kind of, you're going to be very disappointed, but Tanank said this morning AI is incredibly cheap at the moment because basically the AI providers are providing it at below cost, but it might go up in cost once it's embedded. But you sound as if it's very expensive, but putting the question really simply, what's the payback you're assuming on these investments, just to gain a feel for it, And then just a number question. I know it's tricky. What's the number for PIMCO inflows in April?

On the flow question. So I said, I did mention, right, that the momentum is continuing. We are in the low double digit net inflows as we speak at both HGI and PIMCO. um that's yeah that's uh quarter to date or monthly no quarter to date but we are big it's still like it's uh yeah and that's collectively um the aggregate of the total okay and um there is a delay as well in the reporting but basically that's quarter today uh and then i think you were asking the questions on um on the a on the cost of ai right um so So I think the way we look at it is that, I mean, from my perspective, it depends. You have to nuance a lot the cost of AI from one type of tool to another type of tool, depending on what you are using it for. so i think it's a very generic sentence while because the the reason why i'm i'm coming from that angle is that if you think about it with the way we are using ai we are using it along the value chain to optimize in most cases our customer experience and what is happening is that sometimes you need a voice sometimes you need something that is more imagery image related something so so you have very different type of ai agents you are using and they come with different price point where i agree is that we are building our processes and the optimization of our processes in a flexible manner so we usually put in competition two different providers we select one but we we we don't want to be constrained because that technology is evolving very fast so we want to be in a very in an easy way capable of replacing that technology with another technology if you want and then the way we are looking at it is that we are looking at the value delivered against our overall targets all along of those processes if you want so i cannot really say it's cheap or it's not cheap because some of that is cheap some of that is not cheap depending on what you are looking at what matters from my perspective is what is it that we are really delivering in terms of impact fundamentally into the various business cases. And that's the way we look at it. So I think on the OCG side, so first of all, thank you very much. As you know, we have been working a lot as an organization on making progress on on driving operating capital generation and we see indeed that there is good good value creation across our businesses the reason why i would not say you can always take that number and then multiply it by four and have it available is that there are always various components that are coming into the into the ocg so you may have a bit higher growth as example in some markets which is consuming a bit more capital while value creation is going to come later on you can have different mix effects so just maybe if you compare this quarter compared to same quarter last year as an example this quarter we had we had less capital consumption in in life and else while we had more capital consumption in pnc as we had some some mixed effects that did come up into that number so where i'm with you is that uh there is clearly focus there is clearly steady and good value creation into the uh into the ocg there is as well just by nature and given the kpi uh like some volatility associated to the underlying of what's happening with our business and we will always have that so that's why i'm very confident with the strictly above 22 to percentage point we have communicated and we continue to strive for a good development in that KPI.

Lovely. Thanks, Michael. The next question is from William Hardcastle from UBS. Go ahead, Will.

Thank you. You mentioned there that you remain cautious on the initial loss picks with uncertainty on inflationary risk at this time. I guess with that line, are you suggesting there was perhaps more caution than normal in light of the near-term inflationary risk when you booked this quarter, or just a similar level of caution and you're just flagging it at this stage? The second point on is, first of all, thanks for mentioning some AI use cases. We've been at risk of not actually discussing AI all that much through the results season this time around.

I wanted to get an understanding of how you're ensuring you're staying ahead of competition in the use of ai beyond just that heavy technology spend and do you have a strong view whether the scope of gaining edge over competition here is greater in retail or commercial it sounds like mostly you're pointing to retail thank you um so maybe let me start with your first question uh so i was alluding to two points uh with my with my comment there is one which is obviously at the beginning of the year we are we are generally more cautious when it comes to the accidental loss ratio peak in particular because we have less evidence before being capable of reflecting how the year has unfolded so actuaries tend to be to be more conservative so that approach we have kept and that's definitely into our numbers in addition to this one given the overall environment in the in the middle east we have also done both bottom-up and top-down scenarios on what the implication of the situation in the Middle East could have on our reserve strengths. And we have also further added, if you want, to our inflation buffer reserves that we had also already in place previously, where we have contributed in addition in the first quarter to that one. um now to your question on ai development and how we how we we benchmark ourselves against against competition i will say um we we i mean we we are fundamental i i mean i will say first of all i think we are ahead of our competition uh from a different angle i mean if you look at our capital market day presentation that was one year and a half ago and what we were presenting already in terms of how an optimized customer experience is looking like when you use AI. It's actually already quite striking. That's a presentation from Sierma and you also have quite some insights in terms of what we were also already doing in the presentation from Klaus Peter. And from there i think clearly our further enhancement and developments have been accelerating themselves because the technology is faster and we see an acceleration of of impact and also the new technology and the ability to replace the already used technology with new technology is actually quite quite striking then i will not differentiate so much actually between retail and and commercial we see within commercial striking examples of what we can do within partners as an example i mentioned those oems relationship we have onboarded all those oems relationships have actually been onboarded with zero added employees we do that 100 percent ai agentic ai driven that's very impressive already today i mentioned within alliance commercial all the developments which are done along the value chain when it starts to submission but also to booking or to claims processing with ai is also extremely impressive as we as we speak and then on the retail space we are working more around verticals associated with our bmp approach so basically our our platform where we are embedding actually ai within the within the common vertical so that the operating entities can tap into it. From what I see, I think it's pretty distinctive. It's also pretty distinctive in terms of product offering overall, and we see that in some of the pick-up of those products.

Okay. Thanks, William. Next question is from Andrew Crean from Autonomous. Go ahead, Andrew.

A couple of questions. Firstly, on the retail, looking forward into the second half, forward to the back end of the year, what are you expecting in retail pricing relative to what you're expecting at the beginning of the year? My sense, I suppose the background to the question is whether the Iran war and worries over inflation will have made you think that actually you need greater resilience and that the tough market or strong market in retail will continue longer. And then secondly, I just want to ask on the commercial lines combined ratio. I mean, there's a good improvement of about 1.4 points to 90.3%.

Could you give us a sense as to what the commercial lines' current year attritional call looks like first quarter to first quarter, making that allowance for the change in balance between PYD and attritional? yeah on your second question you know that uh normally i don't like so much to comment in the underlying but basically i can tell you that it's more or less flat uh year on year on the on the commercial side and then when it comes to uh to retail pricing so um so indeed i think like so first of all we are comfortable uh at this point in time where we are in terms of uh pricing against against inflation trend right and you know it's different and it has to be nuanced also by by geographies and for different type of products in particular if you look at at markets like uk or australia different situation compared to france italy or germany and so on and right that i mean we are observing very carefully the inflationary trend in the current environment so we have further reinforced what we call the the triangle between pricing claims and reserving to be able to react very clearly we are ready to to price up as required we also feel comfortable that the market is ready to do so in the in the current environment at the same time we are also exercising a lot of nuances i would say from two angle we have now even further pre even more precise technical technical abilities which allows us to have even more nuance price increases we also have an ability to reprice that is much faster as an example compared to the post-covid post-covid environment and we continue to push a lot on our distinctive assets in particular related to our ability to reduce the cost of claims also tapping into our platforms like so typically what we can achieve via solved is a very good example of that but also what we can achieve via basically optimization of our processes. Ultimately, what we really want to do is to balance the two and then to reinvest as required also into pricing power to fuel the growth. So basically to maximize value creation. That's the way we want to work with that.

Great, thanks. Thanks, Andrew.

Okay, we're on round two, which I'm allowing because it's a relatively light round two at a minute. so um michael you're first on round two for your uh your second questions michael huttner from from berenberg go ahead again thanks andrew um the uh so low re-insurance cost is that coming through and um amazing germany maybe you can give us a feel for are we going to stay at 87.6 this looks i've never seen this before um there we are that's it thank you very much i think like you know so I think commenting on the reinsurance ratio I will not do right because from my

perspective reinsurance ratio are always been difficult to predict because you also have like topics associated with the recoveries on balance we expect even the given how the reinsurance round went at at your end to see to see a supportive development from from that angle into our into our performance for for the year then yeah and access just to give you a feel for the direction my question access said um last week two weeks ago it was almost uh material i almost five percent on the earnings would it be the same for you i cannot comment on the views of axa on their technical numbers i think for me re-insurance ratio in our case i find i mean i will see difficult to go along those lines given uh given the underlying elements which are going into the entrance ratio so but we we are very confident given what we have achieved in terms of uh in terms of rentrance benefits at uh at one one that this is going to be supportive of our performance thank you and then germany indeed super nice i'm glad also you are highlighting it i think we also need to praise other operating entities right when we look at this page b14 which is really really nice to look at right um i mean like i will not i cannot predict where where islands first is going to to finish the year but but they are clearly on a very strong performance track both when it comes to to underlying underlying technical excellence but as well when it comes to their to their growth trajectory so we are very proud of of the business as we are i think as well very proud of of many of our of our businesses i name a few already but but we have a lot of very very strongly performing entities i also want to highlight as an example on this page the super nice performance of alliance trade as well which we are not always naming but it's also very impressive with the 80 percent combined ratio in the first quarter.

Thank you.

Thanks Michael. We have a quick follow-up from William from KBW. Go ahead William.

Hey guys I'm so sorry I know it's bad form but I kind of feel I've got lost in the detail on this discussion about underwriting so just can I come back the outlook for the combined ratio you've guided to 92 to 93 for the full year and yet you've just printed 91% and everything that I've heard you talking about is all about conservatism in Lost Bix and normality of reserve development and the rest of it. So I just wanted to kind of cut to the conclusion. You know, are we getting a message that you're comfortably running ahead of your guidance already or what are the obvious things that's going to drag you through to the end of the year? Maybe I'm just underappreciating that, Kat, so it's been a light quarter and the rest of the year is going to be tough. But can you just help me with the overall punchline here about why 91 is so good against your guidance?

So basically, indeed, in our guidance, we have communicated 92 to 93 percentage, 92 to 93 being the guidance for the combined ratio. If you look at our 91 for the quarter, if you neutralize all the other effects, right, and you look at it and you step back, it has benefited from a lower level of natural catastrophe. So if you normalize for NADCAT, we are basically in this 92 to 93 range of combined ratio. So this is only Q1. So I feel very comfortable with our guidance 92 to 93. We are definitely on a very strong track, but I think it's too early for adjusting that guidance as things stand. Helpful.

Thank you.

Okay. The next question, apologies, Vineet, I didn't see you on the queue there. Your first round of questions, Vineet, is Vineet Malhotra from Mediobanker. Go ahead, Vineet.

Thank you, Andrew. So my two questions, please. One is on growth and one is on pricing. On growth, if I could just maybe follow up, maybe just get a bit more, because, you know, when we've talked about Germany, for example, we've always talked about how retaining customers, how getting more customers, some more, you know, more retail focus as well. And I think you mentioned earlier in the call that there was a bit of slowdown in the retail side in Germany. Could you help us understand that? And just staying on the growth topic, sorry, just a little more, the commercial growth, 6%, up from 3% in 4Q, and, you know, pricing was only 2%. So you said you're comfortable with the business, but is that, just to reiterate, could you just clarify that, you know, exposure kind of growth, if you like? And on pricing, when I look down the pricing data between 12 months and 1Q, many OEs are, you know, reducing pricing or seeing lower prices. But obviously inflation is a risk you mentioned, you just highlighted, you added to the buffer. Is that to be expected? Are you expecting it to change the direction of travel, of pricing? Or what do you think is happening there? Thank you.

So let me start with growth. So what I wanted to say when I was answering, so starting with growth in retail, what I wanted to say is that we see that there is on the volume path clearly strong underlying dynamic within within our operating entities and there is a very strong focus on the execution of what we call the growth three at land right these new business retention and cross sell so that's what we see across the businesses and we see very good peak of that momentum in the underlying businesses and that's what we also seen in the second half of the year starting right what we have seen as well in the first quarter sometimes is a bit more of of some of the some seasonality effect if i may put it this way related to and mix when the business is coming up for renewal and what that means and that's also has contributed to some of those lower volume effect in in in our german business in particular so during the as the year is going to unfold, there will be a catch-up that is going to contribute to the volume growth of our German business as the year unfold, to be precise. Then on the commercial side, we have indeed a good internal growth that is resilient. We are around 6% for the entire commercial business. And there we have different businesses, right? So I think you need to have that in mind. We have our partner business. We have Allianz Trade that has seen also good growth development in Shorty as an example. We have Allianz 3, which also has seen good growth, which is more like, you know, this type of transactional business. And then within AGCS, we have the elements I was mentioning. So this catch-up effect, which is more technical effect, I would say. and then secondly these appreciation of the franchise the new tools being in place and a different way of engaging with the market and all of that being done being extremely cautious in the overall pricing environment so that's where we are and sorry i realize i did not answer your question on i don't know sorry coming into your question on pricing uh when it comes to uh to retail i think uh my answer will be nuanced right i think we are ready to increase prices uh we are we feel confident we can do so for the various reasons i was mentioning in terms of technical ability to do and operational ability and feasibility into the system and at the same point the fact that we want to maximize value creation so we want to optimize the price against the volume and that's basically what we are aiming at so i cannot predict exactly how the markets are going to react and what would be the inflationary effect in each and every market. So that will depend on that and then we will be doing that optimization. I think that's the way to look at it.

Thanks, Vinit. We have no more questions in the queue. We had one question by email to the team just to clarify a comment made about our flows, net asset management flows since the quarter REND. So to clarify, it's low double digit for the asset management segment. So the combination of AGI and PIMCO. So momentum continues for the segment at that level. With that, we have no more questions. So thank you very much. This concludes today's analyst call on our 1Q2026 financial results. Thank you for your participation and goodbye.

Bye-bye, everyone.