Ladies and gentlemen, welcome to the Allianz conference call on the financial results of the first quarter 2021. 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 conference over to your host today, Mr. Oliver Schmidt, Head of Investor Relations. Please go ahead, sir. Thank you, Madison. Good afternoon from my side as well. Welcome to our conference call. There's nothing specific to be added from my side today. I hand over directly to Giulio. Hi, good morning, good afternoon to everybody. I'm going to go as quick as possible through the presentation, then I'm happy to take your questions as usual. If we go to page three of the presentation, you can see that we had a very good start into 2021. When we look at the revenue, the revenue are flat. This is mostly explained by Property Casualty and Life Health. In Asset Management, we see a nice development. On the operating profit, we have an operating profit of EUR 3.3 billion, which is clearly above the prior period, but that was fairly easy. The point is that EUR 3.3 billion is also above the run rate of our outlook of EUR 12 billion for the full year. Also what is a good part of the story, all segments have contributed to these results. We look at the combined ratio in P&C, we are at our target level of 93%. We look at the new business margin, in life, we are basically also at our target level of about 3%. The cost-income ratio in asset management is below 60. You see also that we had very nice inflows. We're going to see in a second, this is not just PIMCO, it is also AGI. The net income is at EUR 2.6 billion. Clearly, the net income is benefiting from the strong operating performance, also there were basically no impairment in the course of the first quarter. Overall, a good start into the year, which is also clearly encouraging as we think about the remainder of 2021. With that, I will go to page five. The insolvency ratio has improved by three percentage points. If you adjust for the call of the RT1, in reality, the improvement on a pro forma basis is more like 7 percentage points. The sensitivity, as you might see on the right-hand side, the sensitivity downwards are basically very close to what we had at the beginning of the year. A strong capitalization sensitivities, which are broadly unchanged. When we go to page seven, you can see the driver, the development of the Solvency II ratio. I would say what is definitely positive is the development of the organic generation is plus 9%. This number is before dividend, before taxes. If you adjust for dividend and taxes, we have an improvement of 4 percentage points. The market has been also favorable, especially the interest rates went up. This leads to an improvement pre-tax of 8 percentage points. Under capital management action, we have especially the impact coming from the accrual of the dividend, also we had impact coming from having called the RT1. Again, 210% is a good level of solvency ratio, I would say also the fact that one driver of the improvement was a strong organic capital generation is definitely positive. Now we go to page nine. That's about our Property and Casualty segment. That's about the growth rates. Overall, the growth rate adjusted for consolidation and FX was -1.6%. If we also remove for a second Allianz Partners from the equation, in reality, the growth rate is -0.5%, very close to a flat growth rate. Clearly, this is not the growth rate that we like to see, but here we are definitely the impact coming from also the COVID situation. On top of that, we are taking also measure in our commercial lines business in order to increase the profitability. We are very confident that as we go out of the COVID situation, we are going to see, again, our normal growth rates in Property Casualty. The rate momentum is overall stable. There is just an exception, which is Italy, but that's also the country where we have a very strong situation from a profitability point of view. We are definitely a good starting point there. Then just one comment on AGCS. The rate increases are still very strong. When we say stable, we mean that we see stable rate increases. They might be slightly below what we saw last year, but we are still speaking of double-digit rate increases in the industrial business. If we now move to page 11, the operating profit is clearly much better compared to the one of last year. Overall, we have an improvement of EUR 500 million. The driver improvement is the combined ratio, and I would say that the accident year, loss ratio, has improved by about six percentage points. Thereof, 2.5 percentage point of improvement is coming from COVID. Two percentage point plus is coming from the better development of the natural catastrophe, and a good one percentage point of improvement is coming from underlying performance. The main driver of this improvement is indeed the development at AGCS. When we look at the expense ratio, it's also improved. That's again, a quarter where we are showing an improvement compared to the expense ratio in the prior period. The runoff results, it's lower compared to last year. Here, I can tell you that we are just taking a conservative stance. I think our results, as you see, are good. They are at the level, the target we gave ourselves, and we can also say, take a conservative stand on our reserves. The quality of the 93 combined ratio is, in my opinion, very good. Moving now to page 13. We have the exhibit by OE, you can see a lot of our subsidiaries have good combined ratios, very good combined ratios. Germany with 91% or United Kingdom is even below 90%. The same applies to Eastern Europe, Italy, Spain. In Australia, we have a combined ratio which is higher than our expectation, that's because of the natural catastrophe in Australia, especially, I think in the month of January. Otherwise, you can see that AGCS has a combined ratio, 92%. This is in line with the expectation that we set at the beginning of the year. Here, I can also tell you there is a COVID impact negative of about 3 percentage points. In reality, if you adjust for that, one could say that the underlying performance is already better than the 92 that you see on this page. Then you will have Hermes with a combined ratio below 80%. It's a clear indication that at the moment, there is no pressure on claims, and we have been also fairly conservative in the choice of the loss pick. With that, let's move at page 15. The investment result for P&C is up 3%. Here what we see is that we got indeed a lot of support coming from the equity. We got dividends. There was not a drop in dividend like we might have seen a little bit in the prior year. Also we got some additional profit from our equity participation. The other side, this was expected, we see that the current yield is going down. This was already considered, if you want, in our thinking about the outlook. In reality, I would say that what we see right now is that we are running a little bit better compared to what we had anticipated in our outlook of EUR 5.6 billion for the operating profit Property & Casualty. This might be an area where we're going to have a little bit of an uplift compared to what we told you a few months ago. We can move to page 17 on the life side. Overall, you see that the production is up about 8%. Overall, remember they were always concerned about what could happen to production as we do all the product changes. I would say that the production is holding pretty nicely. We see also very nice development in Italy. We see a nice development in Asia and U.S.A. If you adjust for the FX, we see a growth rate of 8%. On the same time, the new business margin is going up by, to be very specific, by 10 basis points, although it looks like 20. The improvement is coming from protection health, and that's because of actions we are taking, especially in France, to improve the profitability of that business. In my opinion, what is very telling is the fact that in the capital efficient products, although the environment is very different compared to what we had last year, the drop in new business margin is only 20 basis points, and the actions we are taking are going clearly to have an effect in the course of the year. Indeed, also, as you know, we are calculating this new business margin based on the beginning of the period interest rate, with exception for the U.S., but for the rest of the business, we do that. As of now, even doing that, we already above the 3% level. Overall, good level of production. New business margin, which are going up and holding very nicely. With that, at page 19, we speak about the in-force portfolio performance. Overall, nice increase compared to the prior period. That was also easy, if you want, because in 2020, we had a lot of negative impact due to the volatility. We are also to recognize the EUR 1.2 billion is above the EUR 1.1 billion of runoff operating profit. Also what is nice to see, all segments, if you want, all lines of business are contributing to this improvement. Clearly, the development in the U.S.A. has played a major role in getting to this kind of result increase. I tell you, we see also a nice development in Asia and also Italy. The unit-linked business is also doing pretty nicely. With that, at page 21, we show the new business margin and operating profit by entity. Overall, I would say the new business margin is holding pretty nicely. I would say in the U.S.A., you can see that we had a substantial increase compared to last year. In Asia -Pacific, we see a new business margin of 6%. Also I would highlight in Central Eastern Europe, although the margin is a little bit down, it's still at a good level of 4%. The only area where we need to put some additional work is France, but also there you see at least that we were able to improve compared to last year. The operating profit, again, you see a nice recovery compared to last year. I think now we have a sort of competition between Germany Life and U.S.A. For the quarter, we have the exact same number of operating profit. We're going to see who is going to do better in Q2. Clearly, since I was in the U.S.A., I'm always a little bit a fan of Allianz Life. With that, let's move to page 23. On the investment margin, we have an investment margin of more than EUR 1 billion. When you look at the investment margin in relation to the policy reserve, it's about 21 basis points, which is higher compared to our expectation if you annualize that of 70-75 basis points. I would say the following, clearly, this quarter, we didn't see any impairment. Basically, there were really no impairments. This has supported also the net harvesting, this leads also to this level of investment margin. As we think throughout the year, clearly, we don't expect to have this 20 basis point recovery unless the situation remains like that. I think, most likely we're going to end up anyway, at least at the upper end of the range of the 70-75 basis points that we provided you at the end of this year. Overall, good results. I would like also to highlight anyway that our life profits are not just a function of the investment margin. Indeed, we get about 66% of our revenue, two-thirds of our revenue from loadings and technical margins. That's also something which is important to keep in mind. With that, at page 25, on the Asset Management segment, I can say results are really good. We have achieved a level of EUR 2.4 trillion of assets under management. That's the highest level for Allianz. Also what you see, both AGI and PIMCO contributing to this development. When you look at the asset classes, you can see growth in all asset classes. When you look at the regions, you can see growth in all regions. I like also to highlight that in Asia -Pacific, we have more than EUR 200 billion of assets under management. It is not just Europe and America, where clearly we are very large, but we have also sizable now presence in Asia -Pacific. If you go to page 27, on the development of the third party assets under management, you can see that the flows in the quarter have been strong with about EUR 40 billion of flows. Thereof, EUR 12 billion coming from AGI. That's the highest level for AGI. If you remember, we saw also a nice trajectory at the end of 2020. In the case of PIMCO, we have been used to see this EUR 20 billion plus now for a few quarters. When you look then at the composition, these flows by asset classes and regions, you can see that overall there was a pickup in flows across the board. As usual, we had the impact coming from market development from FX. Where you combine the two, you see that at least for the quarter, the impact coming from these economic drivers was positive. We are starting with a asset base of about EUR 1.8 trillion of assets under management. That's a good starting point as we think about also the second quarter and the remainder of the year. At page 29, the revenue are up about 9%, and we see a very nice growth in the revenue at AGI. If you adjust for FX effects, it's about 15%. PIMCO is a little bit lower, 6%, but PIMCO we had also a special effect, which is having impact also on the fee margin. We launch a closed-end fund in the first quarter, and when you launch this kind of closed-end funds, you have underwriting fees, and you cannot defer the underwriting fees. If we adjust for that effect, fee margin will be a couple of basis point higher. Also, I think the impact of that underwriting fees on our revenue compared to the prior period was about five percentage point. Once you start adjusting the numbers of PIMCO for this effect, you get to a different picture. Clearly, that's a good thing, the launch of this closed-end fund, because we're going to get revenue and profit moving forward. At page 31, the operating profit of the Asset Management segment is up double -digit, 10%. If you adjust for the FX effect, it's up 16%. PIMCO is flat, but that's a consequence of the FX impact. In the case of AGI, we have a very nice development of the operating profit with about EUR 200 million of results. Clearly here you see the impact of growing revenue on a double -digit level, and the expenses are down about 7%. You remember we did a restructuring last year, so now we see the benefit of this restructuring, and the cost-income ratio is 61%. It's the lowest cost-income ratio we have seen at AGI. Corporate, page 33, is improved compared to last year. Here we have always some volatility. We have some FX effects changes, so they were slightly negative last year, they are slightly positive this year. We have an improvement in the operating profit of our Allianz Technology, and also there is some seasonality in the expense line item. You might also remember that last year we had here the impact of the solidarity charge for COVID in France. Overall, I would say we are a little bit better than our expectation, but there is also some just seasonality in the numbers. At page 35, net income is significantly up compared to last year, at EUR 2.6 billion. Clearly, we are benefiting from the strong operating performance. As you see, the impairment are basically very close to zero, so there were no impairment during the course of Q1. The tax rate is 23%, is a little bit higher than last year, but somehow lower than our normal tax rate. That's because of a one-off positive impact. All in all, I would say strong operating performance combined with benign capital markets have contributed to these very strong results in our net income. In conclusion, page 37, I would say a very strong quarter. It's not just about the EUR 3.3 billion operating profit or the EUR 2.6 billion net income. It's also about the underlying 93.5% combined ratio in Property- Casualty with quality, a decrease of the expense ratio in Asset Management. In Life, you see that our new business margin, as we speak, is already at 3.4% and we are getting premium. You can also see the operating profit is very stable. In Asset Management, we have a record level of Asset Management flows. We have also, I would say, a very strong cost-income ratio, At AGI, we are starting with an asset base, which is a very good starting point as we think about the remainder of the year. There is a lot of strength in the underlying of the business, and that's across the segments. On top of that, the solvency ratio to 210% is very far away from 180%. We feel pretty good about the starting of the year and also about how we are positioned to go into the remainder of the year. With that, I would like to take your questions. Okay. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star one to ask a question. We'll go ahead and take our first question from Peter Eliot with Kepler Cheuvreux. Peter, please go ahead. Thanks very much. Good afternoon all, great results. I have three questions, please. Firstly, on that cost-income ratio of AGI that you just mentioned, Giulio. Could you say how sustainable that is? Obviously a very good figure. I'm just wondering if, probably too good to hope for that can continue, I'd be grateful for your comments. Secondly, on PIMCO, it looks to me like you've been making a higher margin on internal assets for the last couple of quarters, just backing out the third-party funds. Is that right? Is there anything that sort of happened on the pricing structure or are you able to comment there? Thirdly, on Euler Hermes. I guess given that half the business presumably is still at a sort of 100% combined ratio, the other half is really very low indeed. I'm just wondering about your thoughts for the outlook there. Should we expect the same pattern in Q2? What about as the economies sort of open up? I guess, when you think about the sort of state scheme now, with hindsight, obviously, that was a bad deal for you because you've given away a lot of profit. I'm just wondering what the sort of outlook or discussions are on that. Anything you can add would be very helpful. Thank you very much. Okay. Yeah, thank you, Peter. Starting from AGI cost-income ratio, I wouldn't now assume that we're going to be at 61 cost-income ratio as a new normal. Definitely, if you remember, the idea was we want to be at 67 cost-income ratio, and I think this target is very easily achievable. As we go through the remainder of the year and also as we think about the future, we need to consider also how much we want to invest in the business. I think we are starting from a very good point. Now I would say that we are definitely in control of our cost-income ratio, so that's a good place to be. I would expect that, clearly we're going to set us a goal which is better than the 67 cost-income ratio, and the conversation is going to be more about how much we want to invest in the business. I think the progress at AGI has been really phenomenal, and I would say the strategic expenses or initiatives that we did last year are clearly paying off. You can see this in this number. That's important also. In this number, 61%, there is no one-off, nothing. It's a pure number. From that point of view, one could also argue, okay, that's a starting point. Again, I think we always need to consider about how much we want also to invest in the business. Again, very good situation to have. On the question about PIMCO and the internal assets, no, we didn't change anything. From that point of view, I don't know also how you derive your numbers, but there is nothing really going on from the point of view of the profitability that PIMCO is getting out of the management of the Allianz funds. The only thing might be is ARE, Allianz Real Estate, because as you know, last year we put Allianz Real Estate into PIMCO, so you might see an increase clearly of fees due to that, and also some increase in profit. Fundamentally, there is no change otherwise in the charges that PIMCO is taking on the management of the fixed income portfolio. Euler Hermes, on your question about the expectation for the combined ratio. I would say that in reality, the combined ratio, the underlying combined ratio is even better compared to the one that we are showing in the slides, because we are not seeing necessarily claims activity at this point in time. I believe we're going to be in this situation definitely also as we go into the remainder of 2021. I would expect even to see stability in 2022, then maybe by 2023, 2024, we might see a little bit of a different dynamic regarding solvency. The point in reality with Euler Hermes is we are not like a bank. We are not extending credit for 20 years, so we can always adjust our exposure basically on a daily basis. Definitely the situation looks very good, very strong. With hindsight, you know with hindsight, I would be a billionaire. From that point of view, I would say at that time, the decision, in my opinion, was the right decision. We definitely gave some profit away, but think about how people were feeling one year ago, right? There is no regret or no complaints here. We are actually, if you ask me, we are happy anyway that we are having this kind of conversation now instead of being happy that maybe we are ceding some losses to the state. I think we are in a better situation this way. Yeah, absolutely. Couldn't agree more. Many thanks. You're welcome. Okay. Once again, that's going to be star one to ask a question. If you find your question has been answered, you may remove yourself from the queue by pressing star two. We'll go ahead and take our next question from Michael Huttner with Berenberg. Please go ahead. Hi. Fantastic. Thank you so much. I think it's just for Peter, you said these amazing numbers. I think there's three point questions. One, which is what the previous, your kind of competitor which just reported, kind of said. I think they didn't say it quite like that, but I think they kind of implied they've never seen it so good. In other words, the Texas Freeze for them was paid fully by rate rises. Is that the feeling you have for the business as a whole? Here, my specific question, because this sounds very vague, is if you're all so confident, why didn't you change the guidance? That EUR 12 billion is so big, it's like, ooh. The second question, also on guidance. You have raised it in operating profit from a range of EUR 7 billion -EUR 8 billion to now, I think EUR 10 million or maybe even over EUR 10 billion maybe, I don't know. I just wondered what the moving parts are to this. My final question would be a really simple one. Your competitors are looking at back book deals. Is that something you were thinking about as well in life? Thank you. I think I got two out of the three questions. Maybe at first I answer the two and then I ask you. Maybe I tell you what I understand. They're probably only two. Okay. On the first one about changing the guidance, it's almost philosophical that we're not going to change the guidance in Q1. It's after three months. Actually, when you look at the underlying performance, we are doing fine, and to a certain degree, clearly, we expect also this underlying performance to stay. I wouldn't take the EUR 3.3 billion times 4, I could also tell you that, yeah, most likely the EUR 3 billion per quarter, we're going to be able to exceed that. In the first quarter, we are not going to change guidance. I would say it's really a matter of principle, almost philosophical. In the second quarter, we see where we are, and that's the time where clearly, we might consider to change guidance. There is nothing to read behind the fact that we are keeping this EUR 12 billion ±1. It's just a philosophical position, if you ask me. On the back book, because I didn't get necessarily the second question. Yes, we are also looking at back book. Okay. Yeah. The back book is Okay. The back book, yeah. I'll just tell you, there was very small transaction, but basically, we closed a back book transaction in. We are looking at other back books in Europe. We might consider also back books in the United States, where it's a little bit even easier to get things done pretty quickly. We are definitely also looking into this kind of tool in order to make sure that the capital allocation can be the optimal capital allocation from a return to the shareholders. We are definitely working on this dimension too. It can take time. As I said, you need a lot of education. Sometimes you need to educate regulators, because they are not used to it. There are sometimes policyholder consideration that you need to be aware of. There can be tax consideration that you need to be aware of. That's the reason why it can take time. We concluded a transaction about our Spanish back book that was about EUR 1 billion last year. It took us basically over two years to get from basically where we had the clear plan of what we wanted to do to get the final approval. Two years from once we are ready to move to getting the final approval. I believe that you are going to see some activities in the next quarters from our side. May I ask, this is on buybacks? Sorry? Buybacks. On buybacks. Buybacks, at the moment, at least in Germany, we are a little bit behind with our Corona situation, so we still have some lockdowns. I believe that after the summer break, the situation is going to be back to normal also here. At that time, I believe that also from a regulatory point of view, the sentiment is going to be different. As we clearly go into the second part of the year, we are going to potentially consider buyback. I would say on the buyback, I would say, and that's more a general statement, it's definitely our intention over time to, and that's what we did in the past, to have a very disciplined approach where we do buyback and also we can take the opportunity to do M&A. That's the philosophy that we're going to use, and that's the way we want to run the company moving forward. Clearly, you cannot do this on a quarterly basis, on a yearly basis, half -and -half, right? There can be situation where you might see more M&A coming through, and then you might owe buyback and the other way around. On a rolling basis, I can tell you that the philosophy that we're going to have is to have this healthy combination between M&A activity and buybacks. Brilliant. Thank you so much. Welcome. All right. We'll go ahead and take our next question from James Shuck with Citi. Please go ahead, James. Thank you. Good afternoon, good morning, everybody. Two questions from me. On the premium growth in P&C, Giulio, down 1.6% in Q1. The annual report has only recently been published, it was published in March, and you have 2021 targets in those numbers, and those targets were growing. We're talking about COVID and the impact of COVID, expecting P&C premium to rebound pretty strongly, 5%-6% was the number that we targeted for 2021. What's happened in the space of two or three months that we're missing by that amount? That's my first question. Secondly, on P&C operating profit. You've got the guidance for EUR 5.6 billion, plus or minus 10% in 2021. The three-year plan is actually calling for a number to be growing at a 5% CAGR. We're looking at more like over EUR 6.3 billion from that three-year plan. I appreciate interest rates are lower, so there's some real pressure, and clearly the volume growth is lower as well. Can you just help me understand the delta versus that EUR 6.3 billion, even if we are coming in at the top end, as you said earlier? Thank you. Sorry, we cannot understand you properly. The line is very broken. We got the first question, but the second one, I couldn't get you. Would it help if I look into it? Try again. I've turned it quickly. Sure. The 2021 profit target you have for P&C, is EUR 5.6 billion ±10%. In the three-year plan that was given in 2018, that called for 5% CAGR, getting to at least EUR 6.3 billion in 2021. I appreciate the EUR 5.6 billion you're now saying is going to be top end of that, so maybe closer to EUR 6 billion. I'm just keen to understand what the difference is between the three-year plan and where you're guiding to at the moment. I presume it's to do with volume growth and some of the investment yield pressure, but if you could just help me understand some of those moving pieces. Thank you. Yeah, perfect. Coming on the first question was about the premium and premium growth. Okay. I know in the annual report, there was a statement about growth in P&C. This came a little bit from our economic research. We've been always very clear in our conversation that our expectation, especially for the beginning of 2021, was to have a flat revenue growth than what we saw. I think that statement was a little bit more forward-looking, but our expectation have always been that in reality, in 2021, the growth is going to be mute, and that's also the way we've been talking in our meetings. With regards to the Property -Casualty operating profit, yes, the point is clearly the investment income is different compared to what we might have assumed at that time. If you look, the combined ratio is 93%, is the same. From that point of view, the 93% has not changed. There is clearly the fact that rates went down compared to what we had in 2018. Consider that, I said before, we might have been conservative in the estimates of our investment income for 2021, so we might see an uplift compared to the EUR 5.6 billion that we gave you. The revenue growth in general is a little bit lower. Think also that just because of Partners and Euler Hermes, we are basically losing EUR 200 million-EUR 250 million of operating profit. If you start just adjusting for that, which is profit, which is going to come back once we get to the normal revenue basis. If you also adjust for the investment income, you see that in reality, the numbers are the one we said. Think about the fact that the combined ratio on 93% is what we are planning to hit, and we feel very comfortable about that. Expense ratio is better compared to what we said at the time. It's driven partially by Euler Hermes and Partners, and partially is also clearly there is a little bit less investment income compared to the assumption of 2018. Thanks again. The second part is clear. The premium growth one, the annual report, which was published only a couple of months ago, was talking about 5% or 6% revenue growth in P&C premium. Now we're kind of looking at -1.6% on a gross written basis. My question is more about what's happened to that expected growth of 5%- 6%. Nothing happened to that. I think the 5%-6% of premium indicated there was sort of think on a normalized basis as we go. Think also about what the total market can do, that's not the number that we ever really consider in our thinking. That's also not the number that we've been using the conversation that we had. We always have highlighted that we expect premium P&C to be flat. I would not take that as the number that we have been discussing in our conversation. Okay. Thank you very much. All right. You're welcome. We'll go ahead and take our next question from Vinit Malhotra with Mediobanca. Vinit, please go ahead. Yes, good afternoon. Thank you very much. Just if I can ask one on AGCS. Obviously, very good numbers in this quarter already. I was surprised because I was thinking 92% would be somewhere towards later part of the year, but we already caught 92%. Is there some hope that AGCS can even do more? The pricing, 22%, is stated somewhere, will obviously come in, will be earned through the year. I just wanted to understand how you think about AGCS. If I can ask about PIMCO. Obviously very strong net flows, but the perception in the market, how do you propose to change and challenge that perception that, hey, when the U.S. Treasury yield goes up, there will be a deluge of outflows of PIMCO? Is there some more data you can provide to the market to say, hey, this is the kind of revenue per strategy or obviously there is evidence of inflows coming in, but I'm just wondering if you could comment on that. Lastly, if I could just ask for an update on the M&A strategy, please. Given there's been an asset in the U.S. where there's sort of yourself as well. Could you just comment? Is there a change or should we just continue to believe that the old bolt-on approach was what Allianz was most comfortable in? Thank you. No, thank you, Vinit. On AGCS, I will say that yes, we should over time see an improvement. As I was also saying before, the 92% includes 3 percentage point of COVID impact. Also if you look at the natural catastrophe, they were not excessively high for AGCS, but they were also not low. I would say there was no benefit, let's put it this way, for natural catastrophe, in the sense that we had a low load from that. I would say the 92% is a number that if you look at the underlying is even better. We see rate increases. From that point of view, yes, the expectations that we're going to see over time better performance at AGCS. Indeed, I was also discussing the situation with them the other day, and we are at a point where we also believe that on a selective basis, clearly with a lot of discipline, we can also start thinking about growth again. We wanted to be very sure that the underlying performance is strong. We did the analytics, clearly, at the beginning of the year as we had all the information collected by year-end, and we got a good response that we are on a good track. From that point of view, I would say that the 92% is not the end of the story, but that should be the beginning of a different chapter for AGCS. The market is also helping. Let's be serious. There is a lot of good stuff that we did, and the market definitely also supporting this direction. On PIMCO and the net flows on the yield and treasury rates going up, I would always say that, yes, clearly if you have rates going up, first, you might see investors going on the sideline, because clearly they are not going to invest in a fixed income if there is the expectation that rates are going up. I would also differentiate, there are a lot of investors that are just investing fixed income no matter what, but you might have the, call it the smart money, might clearly wait. You get the flows six months later, because then their money eventually is going to flow. I would always separate what can be the volatility that you might see in a quarter, two quarters, or three quarters compared to what you have to expect on a long term. I would even say that higher rates would not be a negative for PIMCO. I would say they would be on a present value basis, rather a positive. From that point of view, I would say that something can be manageable. I would say, think about how diversified we are. At the end of the day, when you look at the diversification that we have also by strategy, I think there is a lot of resilience. I'm also sure that PIMCO will be capable to come up with some strategy also to manage maybe the situation in the short term. Yes, there will be definitely an impact if rates go up. It might be more significant or less significant, but I would not be concerned about the fact that the franchise of PIMCO is going to be very strong. In reality, we are going to benefit out of that. I'm not concerned about rates going up. I might have maybe to explain to you this quarter flows were negative, and then two quarter later, I'm going to explain to you why the net flows were so great and everything is going to be fine. On the question whether we can give you revenue or margin by strategy, the answer is no. We cannot do that, you can imagine, right? If it's a commodity fixed income, it's going to be lower fees. If it's some alternative asset, it's going to be higher fees. I think that if you do some normal market research, you're going to find out that what could be the revenue strength by asset classes. I can tell you that due to the quality of our franchise, usually we can get fees which are at least at the market level. Let's put it this way. I cannot give you internal numbers by revenue, but there is no major secret. On M&A strategy, no, there is no change compared to what we have done so far. If you look basically at the latest transactions, they are not different. They might be a little bit larger in size, because clearly the Aviva Poland transaction was larger. From a philosophy point of view, it's clearly trying to strengthen our franchise in countries where we tend to have a presence, where we can create some synergies. There is no change to the M&A strategy. As I was saying before, there is also no change to this idea that we want to combine buyback and M&A. As I was saying before, we cannot do this on a quarterly or yearly basis. On a rolling basis, definitely you're going to see this balance coming through. Just if I can follow up, please. On COVID, there seems to be a very low impact in 1Q. Do you have an outlook update for 2021, and if it is going to affect your 2021 targets? On COVID, I can tell you the impact in Q1 was indeed neutral. We still had some business interruption losses. Also, as I was saying before, there was an impact of about 3 percentage point at AGCS. On the other side, we have the frequency in motor, which is lower. As I look to the remainder of the year, I would say that I would not expect a negative impact from COVID. We might see in some legislation still some development on business interruption. On the other side, we also know that the frequency in motor is going eventually to normalize, but as on now, it's still lower than normal. I would say the COVID situation is not going to have any impact on our numbers. I would also expect that as travel is coming back, that we're going to see a lift in revenue and profitability at Allianz Partners. Also, we are going out of the state scheme in July here in Germany. We should also see some more profit coming from credit insurance. Overall, I would say that COVID should be neutral, and in reality, I think we might still take the opportunity to even add to the quality of our balance sheet as we are doing right now. Yeah. Thank you. Welcome. All right. We'll go ahead and take our next question from Farooq Hanif with Credit Suisse. Please go ahead. Hi, everybody. Good afternoon. On reserve releases, when do you think the conservatism and visibility on some of the IBNR clears up and then you move back to the more normal range? That's question one. Question two, you've painted obviously a very bullish picture for AGCS, but on the reverse side, do you think there's potential risk of liability claims inflation coming back as the economy opens? Lastly, on illiquids, are you still at close to the 21% level? Do you think now, particularly as we go into new IFRS, do you think now there's an opportunity to even further increase exposure to illiquids? Thank you. Okay. The first question on the runoff, I would say that we might change approach as we go into 2022 and beyond. For this year, I think we are going more or less to follow this approach. Next year, 2022, 2023, 2024. You are raising, by the way, the question of inflation. We're not concerned, honestly speaking, about the big spike in inflation, or we might see some inflation happening here and there. General inflation is not necessarily the claims inflation. It is something, anyway, that at least we need to consider. Having a stronger reserve basis might be, anyway, also a solution in the case, or on your side, in the case, indeed, inflation is spiking up and is impacting the claims inflation. For the time being, we are doing analysis, definitely. We are not seeing, I tell you right now, that there is an increase in claims inflation. At least, let me say, we don't see this across the board. You might see in some specific country, but we don't see a trend now generalized about an increase in claims inflation. Now on the illiquid investment and IFRS 17, I don't think necessarily that IFRS 17 is going to have an impact on the amount of illiquid that we are holding because, at least on the debt side. Okay, we need to consider what the classification might be. If we end up having a classification, some illiquid that we need to use fair value, we might reconsider the exposure to those illiquid. I would assume that there are plenty of opportunities to find illiquid, which are going to be treated from an accounting point of view the same way that we are accounting now. I think that in general, in the portfolio, you might see some movement, but it's not going to change our approach and our appetite for illiquid assets. Okay. That's great. Thank you very much. Welcome. All right. We will go ahead and take our next question from Ashik Musaddi with JPMorgan. Please go ahead. Yeah. Thank you. Good afternoon, Giulio. Just one question I have with respect to, again, going back to Farooq's question on runoff. Runoff in this quarter was quite low. I think one point something versus a two, 2.5% normal run rate. At the same time, obviously, cat was a bit lower as well. Even if I normalize both of them to your historical levels, it looks like you could be hitting 92% or 92.5% of combined ratio. That's what I'm getting, a bit more cleaner number, which is better than your 93% ratio. Now, typically, I don't want to go into decimal places, because 0.5% or 1% is still relevant combined ratio, I just want to get a bit more color. Is this the right way of thinking about it? You also mentioned that travel is coming back. The state scheme will give you higher profits, which will offset any motor. There is no negative drag from there. Any thoughts on that would be helpful. I would say that, okay, the only thing I can tell you, the quality of the 93% combined ratio is good. Clearly then, if I say this statement, one can also derive the conclusion that the 93% can be lower than that. I would really not go into this kind of consideration on a quarterly basis. The only thing I can tell you, the quality is good, and also, as we are thinking about the future, we might think about definitely bringing this combined ratio 93% as an indication below that level. It might be that we are already positioned well to do that. I would not really overanalyze a quarter. The only message I can give to you is that we have our 93% combined ratio. We feel good about the quality of the 93% combined ratio. Okay. That's very clear. Thank you. Welcome. We'll go ahead and take our next question from Michael Haid with Commerzbank. Please go ahead, Michael. Thank you very much. Good afternoon to everyone. Two questions. First, on Life insurance. The new business margin you mentioned in France is still insufficient, and you said you need to do additional work there. Can you elaborate a little bit on what you want to do in France? Second question on Allianz Direct. The gross premium development in the first quarter was fairly low, in my view. Looks a bit disappointing. I would have expected in times of COVID that Allianz Direct would grow more. Instead, you shrunk. Is Allianz Direct below your expectations? Internal growth there was -11%. What is going wrong at Allianz Direct? Okay. Thank you for the question, Michael. Starting from France, the point in France with the new business margin, we are taking action, and indeed a new product that we launch as a new business margin. You need to do some economic calculation. We're not going to go into the details, but let's say the new business margin, the product is more about 1.5%-2%. Over time, you're going to see that flowing through, but we need to clearly build up that business more over time. We need to get to a better performance in our protection business, and then potentially, we need to try and see how we can push more pure unit-linked business. I wouldn't say that we're not taking action. We have been taking action. You see there is already at least an improvement compared to the Q1 last year. We think that by the end of the year, you're going to see an improvement compared to the full year 2020. That's an area where we need to push a little bit harder on the mix. We need to see whether the new hybrid product that we have been launched is going to be enough to position the company the way we like, or whether we need to have even a stronger change in the mix and think more about unit-linked solution, the same way we did in Italy, where the reposition has been extremely strong. I want to also highlight the 1.5% of new business margin in Italy, in reality, is very good because we are talking about unit-linked with very high efficiencies, also short-term unit-linked. Sometimes it's also important to understand that the new business margin is a KPI that one has to really look into to appreciate the quality of the KPI. In France, we are taking action. We are not there where we want to be, but if we need to take stronger action on the mix, we are going to do that. I think we're going to have the response in the course of 2021. On Direct, the reason why premiums are down compared to the prior period is that we basically decided to go out of the aggregator. There was a decision in Germany, and the reason was that the profitability was very poor. We basically canceled that business. Also in Italy, we are still in the aggregator, but we decided to follow a sort of hard line on profitability. From that point of view, yes, you see premium going down, but that's almost adjusting the baseline. We are basically creating a new IT platform. We are creating a new business model, and also we have a different view on what we think it's good and profitable and what we think is not really good and profitable. This explained that. Think also about that if you had this aggregator business, which was not very profitable, and this was part of the giant Allianz, the impact was relatively minor. When you put this on a smaller scale, then you see things that you don't like. I would say that from a discipline point of view, that's a positive because clearly what was maybe just a very minor issue in a bigger portfolio, this becomes a little bit of a more visible issue in a smaller portfolio, and we didn't like it, and we made changes. Other point to say on Direct, I will not measure the success of Direct in quarters. Strategic decision, this relevance, they had to be measured over a time horizon of years. From that point of view, I think we have now created the platform. We have created or pruned the portfolio in a way that we think it makes sense, and then let's see what happens in the next two, three years, and then we're going to judge the success of this initiative. Thank you very much. Excellent. Welcome. All right. We'll go ahead and take our next question from Dominic O'Mahony with Exane BNP Paribas. Please go ahead, Dominic. Oh, hello. Three questions from me, if that's all right. Firstly, I see you've extended the duration of your assets to beyond the length of your liabilities in Life, in addition to P&C now. Just curious to understand the rationale for that. Is this to control the rate sensitivity in a Solvency II position, or is it something else? Second question, just on AGI, very strong flows. Could you just remind us of the changes there? You're familiar with the cost and sort of efficiency changes, but could you just remind us, maybe on the product side, if there's anything driving the very strong flows there? Thirdly, in April, EIOPA announced a review of value for money in unit-linked and hybrid savings products. Can you just comment on any expectations, any potential risks you see from that review? Thank you. Yeah. I couldn't get the first question, by the way. Asset duration extended. Why? Oh, okay. On the asset duration, sometimes this happens, we extend asset duration because we might be short, we go longer, rates go up, you end up being on the other side of the spectrum. It's always a little bit of adjustment that we do as we see what is happening on the market, but we are always a little bit behind. That's the reason why sometimes we are undershooting on the duration, sometimes we are overshooting. Fundamentally, the idea is that we want to be duration neutral, we are not going to run with the duration game one way or the other on the life cycle for an extended period. Again, always keep in mind that rates are moving, and we are always kind of following a little bit the rates movement. On AGI and the flows, when you look at where the flows are coming, basically from, I would say from Asia -Pacific, we see more flows than we saw in the past. That's definitely something new, and we have a very strong equity story, especially in Asia, but we also saw nice flows coming in Europe. From a distribution point of view, we are pretty strong in these two areas. From a production point of view, where we are producing the asset, this is coming also from the United States. We have, I think, a good combination of a strong manufacturing platform, and then we are capable to place the solution in Europe. Right now, there is a lot of growth also coming from Asia -Pacific. I think also the ESG topic is something that we are stressing that can be helpful. Also, I would say, before, we were trying to push a lot of different strategies. Maybe when you push too many strategies, then you lose focus, and then maybe you are more confusing for the clients when you are putting more focus and pushing just a few strategies. You might not have the same level of diversification if you want, but if you are doing a good job, you might get a better effectiveness. I think these are the changes that the new management team has done, and they are playing pretty nicely. I would also not underestimate the new CEO who was the head of distribution. If you put me in charge of AGI, you might see a different outcome. Everybody has to do his job, and I think that there might be also a reason why we see a different distribution effectiveness in AGI. The last question, the hybrid, and we always look internally at what is the value for money for our policyholder. We do this in Life. We do this also in Property- Casualty. By the way, one of the reasons why our growth in France in Property- Casualty was low this quarter is because we decided to dismiss some business because we were not happy with the amount of commission versus the loss ratio. These are considerations that we always do. From that point of view, we should be positioned in a way that when the regulator is going to come out with any kind of specific guidance, we should be able either to be already there or to adjust to it very quickly. Customer value has been since years for us on the P&C side, and even more, I would say on the life side, has always been one of the things that we look at. We have a framework here at Allianz where we are rating our products in different categories like AA A, A A, A, all this way, all these kind of an S&P rating. One of the criteria in order to be a AA A product is that there is customer value. Otherwise, if you don't take customer value, I think that's almost an entry point to have a conversation about the product. Very helpful. Thank you. Welcome. All right. We'll go ahead and take our next question again from Michael Huttner with Berenberg. Please go ahead. Thank you very much. I'm very lucky. Thank you. Can you say three things? One, a word about flows as you see them at PIMCO and AGI. Second is, everything sounds so positive. I just wondered if you could give us a few risks as well. Otherwise, the profit consensus numbers might go very high. The last point, you've given us a few hints already for the next three-year plan. Lower combined ratio is one of them. Can you give us a couple more hints, please? On the flows on Asset Management, and you can also then look at page 27, you can see where the flows are coming from. I can give you a little bit on idea, because you're asking also maybe PIMCO versus AGI. When you look at the flows at page 27 from in fixed income, clearly, they are mostly coming from PIMCO. When you are going to look at the equity side, they are coming from AGI. I would say when you look at multi assets and alternative, it's a fair split between the two. Basically, you see the strength of PIMCO playing fixed income, you see the strength of AGI playing equities, and then on the other two asset classes, both are contributing. When you look at Asia -Pacific, as I was saying before, clearly there is also a nice contribution from PIMCO. I would say the contribution from AGI is pretty strong and over proportional. When you look at Europe, you can imagine that the AGI is a little bit stronger than in America. PIMCO is definitely taking the lion's share. Overall, I would say you see strength across the board in both entities. Clearly, one is playing some strengths more than other, but it's very well diversified, especially when you put the two entities together, you get a very nice diversified flows revenue, and I think that's very important. The other day or a couple of months ago, I don't know why, but I was looking how S&P is doing their rating of asset manager companies. There was a very interesting reading that's a lot about the diversification of revenue, the diversification by geography, the diversification also you might have in your distribution channel. This is something that we are keeping in our mind, how we can create as much as diversification as possible, and I think this picture tells you that definitely we are getting flows from different areas of our portfolio. On the profit consensus, I do my job, you do your job, you come up with a consensus. Okay. I will look at that, and we make our comments, and on the expectation for the future, I would say, we talk in the Capital Markets Day, that's where we can really talk about that. I can just tell you that based on where we are now, we think we are going to have a good set of numbers this year, and then this is going to be a good starting point for the future. Thank you. Yeah. Sorry. No, no, you say it. Sorry. No, I wanted to say we're looking forward to seeing your reaction. Oh, yeah. I'd love that. Can you say a word about flows in April and May? Yeah. I can tell you the numbers of April. There were EUR 8 billion flows, half and half between PIMCO and the AGI. Thank you very, very much. Thank you. You're welcome. Once again, if you would like to ask a question, please press star one. We'll take our next question from William Hawkins with KBW. William, please go ahead. Hi, it's still KBW as far as I know. Giulio, can you just tell me just one question? Why is the ratio of acquisition expenses to PVNBP so low in your life division this quarter? Your disclosure says it's 6.8%. It's normally about 8%. It's quite eye-catching that whilst your revenue's been strong, your acquisition expenses have gone down. That's happened in all four of the parts of the life and health, so it doesn't seem to be a business mix issue. No, I think it's a business mix issue at the end of the day. Because we didn't really change the compensation structure in a significant way. I can also give you an example. That's always easier for me to talk about Allianz Life. There you see, for example, a reduction of this ratio, and that's driven by the fact that we are selling more FIA, so it's fixed index annuity. In FIA, the present value commission over the present value of new business premium is going to be lower. It's also shorter duration product, by the way. It's mostly mix related and the case of Allianz. Sometimes even within a company, you might see a reduction, you need to dig deeper into the company, you're going to see that change in business mix within the companies can make a difference. Think about the fact that we are changing business mix significantly. Just to come back to the point of Allianz Life. Right now we are basically 50/50 between fixed index annuity or FIA. The FIA production is matching the fixed index annuity production. That was not the case last year. There are other similar cases in other resource. That's also a sign of the change in business mix that we are doing. Okay, thanks. It's just strange because it seems to have affected all major divisions, and it's a very big change. No, no. Thank you. Yeah. You're welcome. That it appears there are no further questions at this time. Mr. Schmidt, I'd like to turn the conference back to you for any additional or closing remarks. All right. Thanks, Madison. Yeah, if there are no further questions, let me thank you for joining our conference call, and I wish all of you a pleasant remaining day. Goodbye from our side. Thank you, guys. Have a good rest of the day. Bye. This concludes today's call. Thank you for your participation. You may now disconnect.