Good afternoon, everybody, and welcome to the Allianz conference call on the financial results of the second quarter 2022. Before we start the call, let me do the usual housekeeping and remind you that this conference call is being streamed live on allianz.com and YouTube, and that a recording will be made available shortly after the call. If you want to ask a question after the presentation and to join us via web call, please click on the Talk Request button at the upper right-hand side of your screen. If you join us via telephone, please press star five. All right. That was all from my side for now, and with that, I turn the call over to our CFO, Giulio Terzariol. Thank you, Oliver. Good afternoon to everybody. I'm going to try to go as fast as possible through the presentation so that we have time for your questions. Starting at page three, where we show the numbers for the six months. We had a good underlying performance. When you look at the revenue, they grew by 4%, and this is mainly driven by property-casualty. Indeed, the growth in property-casualty, as we are going to see in a moment, was really very strong in the second quarter. When we look at the operating profit, we have an operating profit of EUR 6.7 billion, which is basically 50% of the outlook of EUR 13.4 billion for the year. I will say that, also considering the market conditions, all segments have contributing the fair share to this delivery of operating profit of EUR 6.7 billion. When we look at the operational KPIs, we see that the combined ratio for the six months of 2022 is 94.1%, which is a little bit higher compared to what we had last year. This is coming actually from the development in Q1, because in Q2, as we are going to see in a second, the combined ratio was slightly better compared to last year. On the right side, you see a very nice development of the new business margin and also the value of new business. When we look at asset management, we see outflows of EUR 43 billion, mostly coming from PIMCO, which we think is totally normal in an environment where rates have gone up by basically 200 basis points. From that point of view, there is definitely some more pressure coming from below the line items. Overall, adjusted for Structured Alpha, the EUR 4 billion level is something which is getting closer to the kind of number that we are used to see. Overall good underlying performance for the six months. This is even more true when we look at what happened in Q2. Here you see the revenue growth in P&C was double-digit. Also, we had an operating profit of EUR 3.5 billion, which is one of the best operating profit we had for the second quarter. In property-casualty, we achieved EUR 1.6 billion+ of operating profit. This is ahead of our outlook. I'm going to speak later more in details about the driver. On the life side, EUR 1.1 billion of operating profit on the backdrop of a very difficult market environment. That's a very good number. Then in asset management, with about EUR 800 million of operating profit, this is in line with our expectation. Then on the net income, you see EUR 1.7 billion of profits. There are some below the line item that have slightly impacted this number, but clearly, it's at a different level compared to what we saw in Q1. All in all, a very strong underlying performance both from a growth point of view in P&C, from a total delivery of operating profit, and also when you look at the operational KPIs on the life side, also the combined ratio on the P&C side are actually very good numbers. Now moving to page seven as we talk about the capitalization level. We have a solvency ratio of 200%. Here you see that we are basically immunized for changes in the interest rates. That's basically our philosophy. Depending on the situation, we might have a little bit of a upside or downside on rates. In this current environment, the situation is such that we are basically immunized for changes in the interest rates. The equity sensitivity is a bit more elevated compared to what we have seen in the past. This is not driven by an active positioning. This is more driven by how the model works and also the fact that, after the substantial rate increases we have in the Solvency II model, a little bit of a lower buffer. When you combine all sensitivity, equity market rates down, spread up, and also the cross effect, in reality, the position of the company is pretty stable compared to what we had last quarter, even slightly better. I would say almost at the same level of total sensitivity. Moving to page nine on the development of the solvency ratio, I would say that as always, we see a positive organic generation, which on a pre-tax basis and pre-dividend basis is about 7 percentage points. This has offset the market impact - 6 percentage point pre-tax. This market impact was predominantly driven by the drop in the equity market. As always, we can rely on this steady organic generation. The markets sometimes go down, but sometimes they will go up too. Fundamentally, I would say that's a robust picture for the development of our solvency ratio in Q2. Now we can come to the section by segment starting from P&C, where on the growth side, we had a very nice development. It's a double-digit growth. As you see, this double-digit growth is also widespread across several business unit. That's also a reflection of the efforts that we are making clearly to make sure that we can reflect into pricing the inflation that we are seeing or we might see also moving forward. Where you also see the change in renewal, you can see that the trend is upward, and I expect this trend to continue as we go into the second part of 2022. Now coming to page 13 on the development of the operating profit in property casualty. You can see this is up 20%, and this is driven both by the underwriting results and also by the investment income. In the case of the underwriting results, you see an improvement of 30 basis points to the combined ratio, and on top you need to consider that we had also clearly a growth in our business. This is what is driving basically the improvement on the underwriting results. What we saw in the quarter compared to what I would say is more a normalized expectation is higher net CATs. On the other side, the runoff is also a little bit higher when we normalize the numbers and also we take into account that we put some conservatism because of inflation. I would say that we are definitely in line with our 93% combined ratio. I'm sure we are going to have, I'm going to get questions later on on this, on this KPI. Overall, 93.6% combined ratio, for Q2, and this is, broad in line with, our expectation. As we look into the second part of, the year, we would expect that, if the net CATs are normalizing, we are going to be also able to show a combined ratio, closer to 93%. As we go into page 15 on the operating profit, you can see that a lot of entities are, providing actually a very strong, operating profit combined ratio. I would say Germany, Australia, Italy, Switzerland, AGCS, Partners and Trade are very good combined ratio. There are a couple of exceptions. One is France, that's driven by the net CATs development. In Latin America, we are still handling the situation in Brazil. We see some first signs of stabilization, but still too early to say whether this is really the beginning of a stabilization or of a reversal trend, or this could still be a challenge as we move forward. Overall, I would say a lot of good numbers with a lot of subsidiaries delivering strong results. At page seventeen on the investment income in property casualty, you can see EUR 100 million higher investment income, and this is driven mostly by the impact coming from inflation-linked bonds. We expect we have also some improvement coming from higher yields. This is going to clearly materialize in a more pronounced way as we go into the next quarter. In Q2, the main impact was coming from inflation-linked bonds. Overall, a good performance of the investment results that's also much ahead of our expectation. In our outlook of EUR 6 billion, we were reflecting basically EUR 2.4 billion of investment income, so this means EUR 600 million per quarter. As you see in Q2, we had EUR 150 million higher investment income than what we assume in our outlook. All in all, good results on the P&C side with a solid combined ratio and very good growth, an increase in investment income. This has all led to an operating profit, which is about EUR 150 million better than our outlook for a quarter. Now we come to the life side. That's also a very good story. When you look at the new business margin, it's over 4%. This is clearly a reflection also of higher interest rates, but that's also a reflection of the actions that we put in place in the course of 2021. If you look at the mix, you can see how the mix has further changed towards capitalized products. When you look at the production level, that's about EUR 3 billion lower compared to what we had in 2021. But if you remember in 2021, we had a couple of one-offs, especially a big one in Italy, and also, as you know, we are doing transfer of business from legacy product to new products in France, and those transfers were more pronounced last year compared to this year. If you adjust for that, the production level has been actually relatively flat compared to the level of last year. A good picture on new business margin and also business mix development. Now going to page 21 on the operating profit evolution for the Life segments. You can see clearly that the operating profit is lighter compared to what we had last year, and that's also slightly lower than the outlook for Q1 EUR 1.2 billion. But when you think about the level of volatility in the market, that's a strong sign of resilience of our life operations. I would say considering the market condition, that's a very good level of operating profit. Now at page 23, you can see as always the picture by company. The first comment is anyway on the value of new business, which is up 6%. We should always keep in mind that this value new business is also flowing into our Solvency calculation, at least for the companies, except for Allianz Life USA, which is treated differently. This is adding to our Solvency. That's definitely a good evolution. When you see the new business margin, in general very strong and also improving. Then on the operating profit by entity, as you know, there is, in this kind of market environment, Allianz Life USA is going to be weaker, especially because of the hedging volatility or the volatility coming from the VA side. In this case, considering a significant amount of increase of interest rates and also the challenges on the equity markets, we have also some impact in Allianz Leben, which is actually mostly accounting volatility driven by the derivative position that we have to hedge Solvency II. In total, EUR 1.1 billion of operating profit, so a nice delivery for the segment. At page 25, that's also something which is a positive trend. When you look at the current yield, you can see that it's up about six basis points. When you look at the minimum guarantee, this minimum guarantee is actually going down a bit. Overall, on the spread, you see that we are making further progress. This number has been developing not only now but also in the course of the last year in a resilient way. Now that we see that rates are going up a bit, you can even see that there is a widening of this spread. Overall, on the Life side, I would say a good delivery in an environment which has not been super easy from capital market volatility. Now we come to A sset management at page 27. It's no surprise that in this environment where basically all asset classes have had negative returns that our assets under management are down. The exception is by the way in the alternative area where we were able to increase the amount of assets under management. As you know, this is also part of our strategy to focus on this asset class. Now, when we go to page 29 on the evolution of the third-party assets under management, you can see clearly that there is an impact coming from flows. I would say this impact of EUR 34 billion, considering the market situation, also considering the size of our book, is from my standpoint modest. I wouldn't say this is causing any concern here. The major impact actually is coming from the market development, where you see EUR 160 billion of reduction in assets under management. In our case, this has been compensated by the appreciation of the U.S. dollar. Net, we lost about EUR 80 billion of assets under management because of market movement and FX rate. I think this is not unexpected, again, based on what was happening in the second quarter in the capital market. On the revenue side, you can see that we have benefited from the FX effects. From that point of view, our revenue are flat. When you look at the fee margin is stable. In the case of PIMCO, there is a reduction. In the case of AGI, which is driven partially by mix and partially also by higher distribution fees. Overall, we are holding the fee margin above the level of 39 basis points, which is, as you know, a good level for an asset manager. Now at page 33, the operating profit is 6% down, 7% down compared to the level of last year. Or said in another way, EUR 50 million below prior period. I would say almost 0.5% of the drop is driven also by lower performance fees, and the rest is coming mostly driven by PIMCO, where we can see also some seasonality in the cost income ratio. I would say in Q2 2021, the 55.5% was definitely a low cost income ratio. Usually PIMCO is running more towards between a 58%, at a 58% level. The 60.5% for the second quarter is also, in this case, elevated the other way around. If you look at the six months picture, we have a cost income ratio of 59% for PIMCO. You should consider that this is basically without performance fee. Fundamentally you need to normalize a little bit the cost income ratio that you see in these slides for the seasonality that you can have, volatility I would say, that you have in the different quarters. In the case of AGI, you see a stable even increasing operating profit, and also you see a decreasing cost income ratio. Overall, I would say with the EUR 800 million of operating profit, we are tracking our outlook. If you remember, our outlook for asset management is EUR 3.4 billion. That would indicate basically a little bit more than the EUR 800 million that we see here. Fundamentally, you need to think also that the performance fees are coming later in the year. At page 35, we have the Corporate segment. As you see, the Corporate segment has, in this quarter, a very minor loss, less compared to what we usually see or expect. This is driven by inflation in bonds that we have purchased, and also we had some higher investment income. Overall a good outcome for the Corporate segment. Now coming to the last page, 37 or the second last page on the net income. You can see that the impact from non-operating items is about EUR 1 billion worse compared to last year. Here we see a couple of effects. First of all, clearly, when you add up realized gains, impairment, and income from financial assets and liabilities, last year we had a positive contribution. This year we have a negative contribution. Part of it is due also to the booking for hyperinflation accounting in Turkey. That's about EUR 100 million. I would also say that on the impairment side, half of those impairments are impairments coming from bonds which are part of mutual fund. You need to apply the equity, the same accounting that you use for equity. In reality, it's not really that we are speaking of a real impairment, it's more the consequence of rates going up as opposed to have a credit quality issue. We need to put this number in a relative context. What we had is some higher restructure expenses. This is driven by the Voya integration. Finally, the tax rates was better because of country mix. Overall, when you add up all together, we ended up with a net income of EUR 1.7 billion for the quarter. Summarizing, I would say good underlying performance and also strong in second quarter with EUR 3.5 billion of operating profit. Market conditions have been definitely different compared to what we were expecting. As you saw, we had already achieved 50% of our outlook for the year. From that standpoint, we are confident that we can achieve the midpoint of the outlook. We have completed a buyback of EUR 1 billion just a few weeks ago. As you know, clearly we're going to continue to deploy capital in a way that we can create value for our shareholders. With that, I would like to open up to questions you might have. All right. Thanks, Giulio, for your presentation. Yeah, we will now take your questions, and we will take the first question from Andrew Sinclair, Bank of America. Andrew, go ahead. The line should be open now. Thank you very much. Afternoon, everyone. Three from me, please. Firstly was just on AGI. After the U.S. assets are gone, just wondering if you could give us a pro forma cost income ratio, and some idea of where you think that needs to get to over the medium term for AGI. Secondly was just on P&C business, just as investment income rises, what sort of pressure are you seeing on underwriting income from pricing as competitors or perhaps leaning a bit more on investment income? I guess particularly in retail markets, just how is that looking across your businesses? And thirdly was just on reserve releases. Just really wondered if you can give us an idea of your expectations for reserve releases amidst a higher inflation outlook? Thanks. Okay, very good. Starting maybe from AGI, I would say the cost income ratio that we expect to see moving forward is going to be more towards the 67%. Right now we were running 63%, as you see. Indeed, we were. The idea was even to be able to go down to 62%. But after the Voya transition, I would say 67% could be the level we start with. You need to consider also that the market has been not necessarily the most favorable market. This is the level we will start with, and then clearly we will try to do our best to get to a even better level of efficiency. That will be the starting point of how we see basically AGI cost integration, this kind of environment after the transaction with the Voya is completed. On the property and casualty rates and whether they are affected by increased investment income, I wouldn't say so. Also because right now I believe everybody is more focused on clearly what the impact from inflation could be. From that point of view. I would add, yes, rates are going up, but as you see, they're also coming down a bit. I wouldn't say that there is already this massive change in investment income coming through. Fundamentally, for the time being, I would say the impact of higher investment income on the pricing might be limited. This can change if we really see over time that there is a higher investment income. To a certain degree, next year, the company reporting under IFRS 17, they are going to have a discounting including in the numbers. Potentially this might change if there is really a substantial change in the investment income that we or our competitors are going to get. At this time, I wouldn't say it's playing a major role, or at least it's not playing a major role in our thinking. We are not changing our pricing philosophy because of the increase in rates that we saw. Now, the last point was about reserve releases. As you have seen, the runoff for the quarter was a little bit more elevated than usual with 4.3%. Here we need to consider that we had some also positive runoff coming, especially from the reserves that we had in Euler Hermes or Allianz Trade, that's the name now, in the COVID situation. From that point of view, that's part of the explanation for the higher runoff. Otherwise, I would say that usually we would expect moving forward our runoff to be about 2.5%. Again, we have definitely the situation where I would say we have definitely sometimes pockets that might lead the runoff to be a little bit higher than the 2.5%. From that point of view, that could be the normalized expectation, but don't be surprised if in a quarter it can be higher because of this pockets of conservatism that we have here and there. Just on those COVID provisions, can you give us an idea of how much is left at the moment? Okay. I would say for specific to Allianz Trade, I think we are coming more or less to an end of this COVID provision. I'm just and I'm referring really to what is even specific COVID provision because we have a very healthy margin that still remaining Euler Hermes. Specific to this COVID provision, we might come to an end, but we are not coming necessarily to an end of COVID provision that we have set for in other lines of business. That's great. Appreciate it. Thank you very much. Thanks, Andrew. We will take the next question from Michael Huttner from Berenberg. Michael, go ahead. The line should be open now. Fantastic. I've been unmuted. Good morning or good afternoon. Sorry. I'm getting very confused here. Sorry. You were saying you would like to talk about the underwriting and the 93%, so maybe you could talk about that? It's not immediately obvious from the numbers, for anything you can would be very, very helpful. The other two mini questions to make it really easy is what are the net outflows you're seeing now at AGI and at PIMCO? Also, what is the Solvency today, and should we expect maybe a change in the way Solvency moves if you reduce equities, for example? Thank you. Okay. Starting from the combined ratio, maybe, you know. Usually I like to take more the six months number as opposed to just take the quarterly number, but the calculation will be the same. If you normalize, the outcome will be basically the same. If you take our six months combined ratio is 94.1%. If you do basically normalization, you're going to first end up almost to the same level. Here you need to consider also the impact coming from Brazil and Turkey. I would somehow adjust for that because especially Turkey might be slightly different, but in Brazil, eventually this combined ratio has to normalize to a different level. That would already bring basically this 94.1% below the 94% level to about 93.6%. I tell you for the year, we had about a good 1 percentage point of reserves that we set aside for inflation. In that case, you even go below the 93%, and then clearly we can have a conversation about how much of those reserves are going to be needed or not. Fundamentally, you need to consider that both for the quarter and also for the six months, we have about 1 percentage point for the six months, a good 1 percentage point of reserves which are set aside specifically for potential future inflation that we're going to see. That's on the combined ratio on AGI. Outflows today. I just tell you for PIMCO, the outflows were about a couple of billion outflows for July. For AGI, we are also speaking of minor amounts. What you should consider equity market and also rates went in the right direction? For example, in the case of PIMCO, we have more than EUR 30 billion of increase in assets under management in the month of July. Michael, if you ask me in reality, the outflows that we are seeing are totally moderate in my opinion. Especially think back if somebody had told us rates are going to go up 150- 100 basis points, what is going to happen to the outflows of an asset manager? I would have expected even larger number. We also see that what is happening to PIMCO is basically something that is happening everywhere. When we check what is happening to the majority of the competitors in the U.S., and also put this outflows in relationship to the size of PIMCO with EUR 1.4 trillion of assets under management. The real issue in reality is more the market development in general. That's where the asset base is fluctuating. The inflows or outflows per se is a little bit of noise at the end of the day. I would also say when the situation is stabilizing, I'm pretty confident that the flows are going to turn into positive and potentially we're going to have a catch-up effect because then investors are going to be more willing to invest in fixed income moving forward. The last point was on the Solvency II and how we look at that. I would say two things on the rates. Interest rates, our philosophy is to be matched, right? That's fundamentally what we try to do. Clearly, when you run the model, you might get some exposure one way or the other, but fundamentally that's the philosophy. We're going to continue with this philosophy and, you know, yes, rates went up, but as you see in July, they are going down. We believe being the interest rate neutral is a good position to be in. On the equity market, the 20% sensitivity downwards, this is not coming actually from active adding to the exposure. In reality, we have reduced to a certain degree our exposure to public equity, for example. This is more driven by how the Solvency II model works when especially when you have a little bit less unrealized gains Allianz Leben. What we are going to do is clearly we try to reduce this sensitivity a bit towards the level that we usually have, which is about fifteen the 15% level. This is something that we are going to work on in order to get back to what we usually show as a sensitivity. A Solvency ratio today, I would say it's. You saw the comments that there is some impact coming from a regulatory change. On the other side, we have the business evolution clearly that is going to come in and also the equity market has been relatively favorable. I would say as of now, we should be basically stable, maybe slightly better. Lovely. Thank you so much. Welcome. Thanks, Michael. We will take the next question from Peter Eliot from Kepler Cheuvreux. Peter, please go ahead. The line should be open now. Great. Thank you very much. Maybe if I can start with a couple of quick follow-ups actually on those previous questions. Giulio, you mentioned 1% set aside for inflation. Would you be able to talk us through the process of sort of arriving at that and, you know, how you'll repeat that process in future periods? Just wondering, you know, what we should sort of expect going forward? And then on Allianz Trade, I was interested what you said about sort of the releasing most of the COVID reserves. We did hear at your Inside Allianz event recently that the idea is to be better reserved there post-COVID than you were pre-COVID. I presume there's probably gonna be something left, but it's just you've released most of what you intend to do. If you could confirm that would be great. Maybe just wondering if you could give us any thoughts on capital management that might be relevant? I mean, you mentioned you were keen to deploy it. Just wondering what opportunities you're seeing? I mean, you're obviously not buying back any shares currently, but I'm guessing you've got to be thinking that's a pretty good option at the current share price. I'm just interested in your thoughts. Sorry, if I can ask on maybe Germany in particular from the sort of trends you're seeing? We've heard comments from others saying it's sort of quite a competitive market at the moment. Interested in your thoughts. In particular, I mean, when we came to your Inside Allianz event, I was very pleased with the EUR 9 monthly ticket available. I'm just wondering what impact those or any other schemes are having on public behavior. Yeah. Sorry, I went on a bit. Thank you very much. The nine was your rating please? This was it? Okay. Maybe let's start from trade. Look, Allianz Trade has a significant amount of buffer. I was just specifically referring to, you know, the COVID buffer, but clearly they are not the only buffer. From that point of view, the reserve margin, your Allianz Trade is definitely still very healthy, and that's definitely higher compared to what we had, still higher compared to what we had pre-COVID. Also, because when I speak about COVID, I'm referring actually to 2020. You know, the, it's actually, you know, COVID. Even in 2021, there was definitely a very good development for Allianz Trade, but I'm not counting that as part of COVID because it's not coming from the 2020 accident year. That's on trade, so that there is no misunderstanding on that. On the process for inflation, basically, okay, when you run a claim triangle today, you might not necessarily reflect the inflation that we might see because the claim triangles is basically having the experience of the last five or six years. That's where they actually need to put something on top. This is also then a process that you need to do based on the conversation you're going to have with the claims people, right? Because depending on the confidence level that they are going already to reflect this, the inflation, the case reserve is going to make the need for an additional reserve lower or higher. Moving forward, we are going to definitely see a situation where the need to put any additional reserve on top is going to diminish. We are going to start having a sort of blending because most likely the claims triangles are going to reflect the high inflation. If you have claims people, they might not be so forthcoming. They will definitely start changing also their view on case reserve. Right now the process is basically in every company, we don't necessarily just rely on what is coming out of the claims triangles. We tend to say, "Let's put something on top," because what we're going potentially what we're going to see down the road is going to be a little bit more compared to what's the claims triangle based on the latest estimate of the case reserve might indicate. It's a level of conservatism that we're putting on top. I believe some of that is going to be needed, by the way. Maybe some of that is not going to be needed, but in an environment like this, it is definitely better to be on the conservative side. On the capital, and keep in mind that the operating profit for property casualty was under EUR 50 million higher than the outlook. You always need to keep these things in mind. There is a point where, you know, you think also how you protect the future. That's an important element of consideration. Now, on Capital Management and speaking about deployment of capital, I wouldn't say that we see big opportunities out there, but there is clearly always something, also minor things that can be interesting. For example, you saw that we did the acquisition in Greece. You saw that we did also a small investment in Coalition. We did a couple of investment at the beginning of the year in Asia. That's the kind of things that might come across. That said, I also agree with your statement that, especially the current share price, investing our stocks seems to be an excellent idea. From that point of view, I believe this is going to be also the direction that we're going to take down the road. Germany? Germany. First of all, let me say, because, you know, this comment about the 9% rate increase [audio distortion]. No, sorry, EUR 9 ticket. Huh? What? The EUR 9 ticket. It's a free ticket for public. For the, yeah. Transportation. No, I know about that. It reduces frequency of car traffic. I would say that overall, in most countries we see a normalization of frequency towards the pre-COVID level, maybe still slightly below. But definitely we didn't see any material impacts, let's say from the EUR 9 ticket on the frequencies. If you tell me, yes, frequency might be slightly lower compared to the pre-COVID level, but it's pretty much normalized at this point in time. Great. That's very clear. Thank you very much for that. Sorry, you had a question, the competitive situation in Germany. Look, you know, I would say that in Germany, when you look at the combined ratio, it's 91.3%, and that's not an unusual combined ratio. What is competitive or not competitive is always relative. I would say every market has a level of competition. I wouldn't say that the German market has a super fierce level of competition. But yeah, that's what I would say. It seems to me a relatively competitive market, but nothing abnormal compared to what we see in other markets. Great. Thank you very much. Welcome. Thanks, Peter. All right, we will take our next question from Andrew Ritchie from Autonomous. Andrew, please go ahead. The line should be open now. Oh, hi there. Giulio, I guess I just need a bit more detail on the P&C inflation impact. I guess I'm concerned that the one point load will repeat or even grow unless you're able to reprice the front book. Could you give us some detail on what you're doing vis-à-vis or with respect to pricing at the front book to try and match inflation or any other initiatives? I guess this is focused on personal lines, mostly personal motor in continental Europe. Other than that, I can just see I think your normalization of the combined was probably overly generous if there isn't a lot of action taking place. Second question on investment income. You said it's running higher. I think it's running higher both in life and non-life. Some of that is the inflation-linked securities. They lag typically, so I'm assuming there's another gain from those still to occur in the rest of the year. There's your hope that we don't lose that inflation-linked income next year, or we do lose it, but we'll get the underlying non-linked portfolio picking up at the same pace. If you understand what I'm asking. My final question was just, it was suggested when you entered the Voya deal with AGI, particularly from your IR team, that there was possibly some upside from the joint venture, and ongoing distribution agreements with Voya. Can you give us any color as to materiality of that? Thanks. Starting from property casualty, yeah, the idea is definitely not that we book some money for inflation. We do nothing. If you look at page 11, if you have a growth of 11% in P&C, this is not necessarily coming from volume. There is also volume component. A lot of this growth is driven by pricing. From that point of view, just the fact that we have a 11% growth rate, this should give you an idea of the effort that we are putting in reality from an action point of view. As we go into the second part of the year, rate increases are going to be even more pronounced. Just what you see now in our presentation today tells you that there was a big push already. Clearly in the second half, you know, in general, we are going to see higher rate increases on renewal, also on new business. You saw also the situation in the U.K., where at the beginning of the year, there was also the situation with the dual pricing. Now it's pretty clear that there will be rate increases in the market. In some products, we have indexation. Fundamentally, we have already taken action. We are consistently taking action also in the second part of the year to make sure that we can protect our combined ratio. From my standpoint, we have been doing definitely also already now a very good job by keeping things in check. That's on what we do on the P&C side. On the inflation-linked bonds, yes, there is a delay of a couple of months. Fundamentally, you're going to see also a higher investment income in Q3. Fundamentally, you're going to see high investment income as long as inflation stays elevated. At the moment that inflation is going to come down, clearly at that point, an inflation-linked bonds might perform from an investment income point of view at a lower level compared to a nominal bonds. I would say inflation-linked bonds are a very good instrument in order to protect you, especially when inflation is picking up and you maybe need also the time to put the action in place, right? I would say being as proactive as possible in taking action on the rates and also combining this with the inflation-linked bonds is the best way really to manage the situation. If you ask me what is going to happen, you're going to see high investment income also in Q3. I would also say in Q4. Next year, we see what inflation is. It can go two ways. Either the inflation is coming down, then you're now going to see a lot of investment income coming from the bonds. But also we have priced at a point in time a book for a much higher inflation level. Then you're going to see the benefit basically on the writing side. If inflation continues to be high, you're still going to have this sustaining element coming from the inflation-linked bonds. I think it's a very healthy instrument to have to manage inflation. On the Voya transaction, the comments we made on that is basically we are entering this a distribution agreement with Voya, and we think that down the road, this might bring other opportunity. That's more of a strategic thinking of what could potentially be possible down the road as opposed to be now a specific action plan. For the time being, we are focused on making sure that the transition to Voya is successful. We have been completing this now to making sure that the cooperation, the distribution agreements that we have in place is working properly and working fine. Based on what we are going to see, this could open up clearly other opportunities. Okay, thank you. Welcome. Thanks, Andrew. All right, we will take the next question from William Hawkins, KBW. Will, please go ahead. Hi, guys. Hi, Giulio. Thank you for taking my questions. Giulio, as I've asked the other big companies this week, it's interesting to see the change in the operating profits in the first six months. What do you think you might be saying to us that would be different if you were accounting under IFRS 17 and IFRS 9? Are there any particular, you know, drivers that could be having a different impact relative to what we're seeing in the profits? Any kind of qualitative or directional comment would be helpful. Secondly, can you just remind us what's been booked and whether there's anything else that you guys are reviewing with regards to the war in Ukraine? I think we have the EUR 100 million credits charge in the first quarter. There's kind of no update on that. You know, I know your exposure may not be big, but just like to get an update on that, please. Lastly, given the volatility in the bond market, are there any specific credit trends of note that you're seeing in your investment portfolio? I'm thinking about rating migration or any surveys that you've been doing of risk in the high yield or private investment portfolios. Thank you. Okay. Thank you, William. Maybe starting from IFRS 9 and IFRS 17. What we will see now in IFRS 9 and IFRS 17 on the P&C side. Since rates are going up, the element of discounting will be higher compared to the unwinding, you know, the of the discounting coming from the past. That will be a positive. We did some numbers for Q1, and we saw already this to be a positive, which was a little bit more than EUR 100 million of positive impact coming from the discounting and effect. In Q2, that will be even higher because rates went up. On the P&C side, definitely is a positive. On the life side, in reality, you know, it's pretty much of a wash. One complexity that we have on the life side is the following. When we do hedges, let's take also, for example, the Allianz Life. They do hedges based on economy, but they do also hedges thinking about what the volatility of reserves or of IFRS 4 could be. The liability movement under IFRS 17 is going to be different from the liability movement that you have under IFRS 4. Right now we have hedges in place that are not necessarily geared to IFRS 17. When we run a calculation of IFRS 17, we have the liability moving in a direction which is not necessarily synchronized as we would do, you know, with the hedges. We pick up a little bit of volatility, if we do a comparative right now. If you tell me in an environment where we are under IFRS 17, where we're also hedging accordingly the operating profit should or the net income shouldn't be much different. From that point of view, I would say more or less the same level of net income on the life side. On the P&C side, because of the discounting impacts high operating profit. One thing that we saw was that you know because of the IFRS 9, where you have some position fair value, the volatility below the line would have been in Q1 higher compared to what we saw, and that's clearly normal considering the market development. Which means when you have an upward momentum, you're going to see also more of a swings up. Does it help or did I confuse you? No, that's perfect. Thank you. You did just clarify at the end that any volatility from IFRS 9, you think you'd be taking below the operating line? Yeah, absolutely. Yeah, absolutely. It's not a massive volatility by the way, but still, you know, especially if you have a swing from positive to negative, this can make a little bit of a difference. We are going to add that not only below the line, we also think about having an adjusted net income. If you remember also when we did a Capital Market Day presentation, we said that also for the dividend calculation moving forward, we are going to use an adjusted net income because we were thinking about the impact of IFRS 9 especially on the net income. Absolutely. Not only below the line, but it might be below the line. That's definitely just pure market volatility that doesn't make any sense to consider. On the Ukraine-Russia situation, yes, overall we have about EUR 150 million now of impact in our underwriting results. As you said, EUR 100 million+ was coming from Q1, and then we added a little bit in Euler Hermes in Q2, but the number has not changed significantly. We also believe we are on the conservative side, but in total, we have right now EUR 150 million for the situation in Ukraine. On whether we see any particular movement in credits, no. I will say no. We also took a look at the portfolio in the United States, where we have some commercial mortgages and so on, and we don't see really. We see basically, I would say no movement. From that point of view, as you know, when we run our Solvency tool calculation, we are basically attaching a credit rating to our investments, and we take clearly what is the credit rating coming from, credit agencies. In the case the assets have a credit. We also look at the credit default swap, and then also we do our own evaluation. Based on all this, we determine whether there is a rating downgrade or not. We didn't see any particular movement except for Turkey. In the first quarter, there was a downgrade on Turkey, but otherwise, when we look at the rest of the portfolio, nothing meaningful has happened. Fantastic. Thank you, Giulio. Welcome. Thanks, Will. All right, we will take the next question from Vinit Malhotra from Mediobanca. Vinit, please go ahead. The line is open. Thank you. Thanks for the opportunity. Giulio, just moving on to the asset management, and I appreciate that, you know, one day, higher interest rates will be your investors' bank. At the moment, I mean, we are seeing one thing different in Q2 versus Q1, which is that the mutual funds are seeing bigger outflows in your portfolio. I mean, does that give you? I mean, are you still comfortable with the fee margin impact that could have? Because I remember in the past you have been saying to us, "Don't just look at the flows, look at the revenues." With this mix difference, I'm just curious about that. That's the first question, please. Second question was, just more a clarification. You talked about the inflation-linked bonds earlier in 1 Q, but I seem to recollect it was a small, very small, EUR 20 million. I think it was even in corporate center, not really P&C. Did you add more in Q2, or is it just the natural effect of high inflation in Q2 and the lag effect that we are seeing more and more of this? One question please on the Solvency to equity sensitivity. In the past, I've noted that there used to be a different number for listed equities only, and I know. I've seen that you said that you want to bring it back to 15% or so from 20% now, so in the - 30. What is the listed impact and why is that different? Last thing is very much quick clarification. The combined ratio 93%, is that your reaffirmation of target for the full year, or was it for second half? Just wasn't pretty clear. Thank you. What was the last question? Sorry. Can you repeat the last one? The 93% combined ratio. Yeah. Is that full year or 2H now? Say again, sorry. The 93% combined ratio target for full year or second half? Starting from the first question, which was related basically to the flows, outflows and fee margin impact. For example, when you look at PIMCO, basically the fee margin didn't move much. From that point of view, you know that then clearly, you know, now you have a quarter where the flows can be lower in a mutual fund where clearly fee margin are a little bit higher, but this is not necessarily now the beginning of a trend, and we speak only of a small fraction. On the other side, as we were seeing before, alternative went up. Alternative can have very strong fee margin. Just look at the total number for PIMCO and you see that in reality the movement is pretty moderate. I wouldn't be overly concerned about a tectonic change in fee margin just because in a quarter the mutual funds development might have been a little bit poorer compared to what we saw on the institutional side. That wouldn't be a concern from my standpoint. There was a question about the inflation-linked bonds. I would say that yeah, there was. We added a little bit of inflation-linked bonds. Also, there was a purchase of inflation-linked bonds that we did in this was more at the corporate level that we did in the course of Q1. For the full now for Q2, we had basically this position for the entire quarter, where in Q1 was just for part of the quarter. Some of our companies have also increased a bit inflation-linked bond. That was part of the conversation that we had with the companies and as part of our strategy clearly to also mitigate what impact from inflation could be. That's not a coincidence. That's really part of a list of actions that we put in place to manage the situation. On the listed equity, I would say the sensitivity is not really changing on the listed equity because in reality, on the listed equity, as I was saying before, in reality, we didn't really increase our exposure. I would even say that on the listed equity, when you take the position after hedging, the exposure went down, but then it goes, the sensitivity goes back to the previous level because of basically the entire calculation, the Solvency tool, where you have less buffer. Think about that on public equity in reality by reducing the exposure and also especially via hedges, we have mitigating basically the increase in sensitivity. On the private equity, in that case, we don't have a specific hedging on private equity, and this explains why the sensitivity is coming from the non-public equity side. Was it clear? Yeah, yeah. I'll take it offline as well. In fact, thank you for that. Very good. Thank you. Yeah. On the combined ratio, I will say, look, at the end of the day, our idea is, you know, to target to keep targeting this 90%, 94%, 93% combined ratio. This is more like a target that we have in front of us. This doesn't necessarily. Now we were running for the first six months, we were running at the 94% level, so sure, we might end up in the year a little bit higher than the 90%, 93%. I'm not necessarily saying that we are obsessed with targeting 93% combined ratio for 2022. We want to be anywhere at the level 93% combined ratio then, as you know, in the sense of a normalized level. As you know, for the time being, we have not changed our plan that we want to be a 92% combined ratio by 2024. On that one, clearly, we're going to see how the development of inflation is going to be also in the course of 2023, but the targets are not changing. Normalized 93% combined ratio and also for the time being, we are definitely giving the target to our subsidiaries that we want to achieve a 92% combined ratio by 2024. Okay. Thanks, Giulio. Thank you. Thank you. Yeah. Thank you, Vinit. Perhaps for the sake of everybody, because this is a little bit hidden in our presentation. In case you're interested in the Solvency II sensitivity, this regards to listed equities only as well. On page seven, in footnote four, we give those numbers specifically, and there you can look them up and find them. All right, we will take our next question now from William Hardcastle. Will, please go ahead. Afternoon. Thanks for taking the questions. Firstly, it sounds like you've put in around EUR 300 million or so for inflation load. I guess just to be clear, that's coming through on the current year loss ratio, is that right? And in which lines is it being allocated in geographies? And are we a bit lopsided at this point in terms of what's come through from inflation-linked bond moves versus what's gone on to the reserving? And do you feel pretty well matched at this point? I guess the second one is, can you give us an update? Sorry if I missed this, I got cut off at one point in the call. Any update on the deductible on the catastrophe aggregate that's been consumed at this point? Thanks. Yeah, absolutely. Starting from the reserve for inflation, I would say it's basically across the different entities and also across different lines of business. It's pretty widespread. And to your second question, which I understood there is a sort of correlation between what is happening on the inflation in bonds and the reserve, if I understood the question properly. That was your question, yeah? Yeah, that. Yeah, there is a little bit. Yeah, that. In some cases. Like in Benelux, where there is also a work accident book. Definitely in that case, there is a correlation, I would say, between the inflation-linked bonds income, and I would say the annual reserve or just also the case reserve going up. There is definitely also a correlation between the two things. It might be more pronounced in some countries and less pronounced in others. Again, as you can imagine, a local CFO that sees a nice chunk of investment income coming from inflation-linked bonds is definitely going to use it to put in the reserve. Also, because that's the idea of inflation-linked bonds. We are not speculating with inflation-linked bonds. That's an instrument to manage, basically claims inflation as a sort of hedging, if you want. On the aggregate, I tell you that as of now, we have basically utilized half of the aggregate. What we saw, which is interesting, we saw in reality this year a big natural catastrophe, which was the one in Australia. Which by the way, from a consideration of the aggregate, it's not necessarily just one, but we can see there was a significant natural catastrophe. Then we had a bunch of smaller natural catastrophe. Since the aggregate is working with a deductible, from that point of view, it's still effective, but maybe slightly less effective for them, compared to a situation where you have fewer natural catastrophes but with a higher amount. That said, we will say that if we see a repeat one-to-one of what happened in Q1, our net CAT loads will be basically at the 4% level that you saw in Q1. That would be in the first half of the year. That would be basically the maximum amount that you could expect in the case you have a repeat of the situation of the first half of the year, which was a little bit unusual from the way this natural catastrophe came through. That's great. Thanks. Welcome. Thanks, Will. All right, we will take the next question from Dominic O'Mahony from BNP Paribas. Dom, please go ahead. The line will be open now. Hi, folks. Thank you so much for taking questions. I've only got two left. One is, Giulio, you were talking earlier about the extent to which, you know, higher bond yields might impact underwriting margins and your view that, at the moment you're not seeing that in the market. You also raised this question about IFRS 17 and the fact that liabilities are discounted and whether that might have some impact. I was really just curious to understand how for you folks internally, when you're saying to your business units, "I want a 92% combined ratio by 2024," is that using discounted or undiscounted liabilities? When you set your hurdle rates for the capital allocation and choosing, you know, which lines to emphasize, do you look at just the underwriting margin or do you take into account the investment return you're expecting from that? Second question is on leverage. I think the way that you folks the leverage ratio that you publish is just debt over debt plus shareholders' equity. Now purely mechanically, given what's happened with the unrealized gains, shareholders' equity is down. That's non-economic. We all understand that. The leverage ratio I assume has gone up correspondingly. When you folks think about the structure of your capital stack and where you want that ratio to be, do you use that leverage ratio that you sometimes publish for us? Actually do you take a sort of a different view, maybe a view based more on Solvency or cash or something else? I just want to understand how you folks think about what the appropriate amount of debt in your capital stack is? Thank you. No, thank you for your question. On the first question, whether we are looking at combined ratio after discounting or before discounting. No, we are still looking, let's say, at combined ratio before discounting. Now, in reality, when a pricing actuary is going to do pricing, they always think about investment income. So the investment income is a component that's pricing actuary have in their mind. Now, I wouldn't say that, you know, rates didn't go from 0%-5%. So we had a movement up. They're coming down as we speak. At this point in time, regardless of the discounting IFRS or not, a pricing actuary is not going necessarily to change, you know, the pricing because of the increasing rates, and especially then in reality the main concern of a pricing actuary now will be to take out the inflation element. To your question, as we look at our combined ratio today, are we thinking pre or after discounting? We are thinking pre discounting. Now, once IFRS 9 and IFRS 17 is going to be implemented, you need to keep in mind that, we as a public company and our competitors that you know, we are going to be on a discounting calculation. A lot of local players, they, for example, in Germany, you don't need necessarily to use IFRS, you can use HGB. We are not going to have necessarily all players looking at combined ratio after discounting. That's also something to keep in mind. Again, price is important. Price is going to reflect the investment income that you need to expect. I will say what might be different in the future to a certain degree is how you're going to also manage results. Clearly, if you have a discounting impact coming through your numbers, you might make a little bit of a different decision on the loss ratio that you're going to pick, because that's also clearly always a consideration. On the leverage. Okay. Clearly rates went up, and so from that point of view, this is causing the leverage to go up. We have always considered that, you know, you want to look at the leverage ratio also from a normalized point of view because you know that realized gains also eventually are going to go away. They can go away when you have a swing of the rates, or they can go away just over time, you know, as the book is maturing. The same applies to unrealized losses. From that point of view, we are clearly not just looking at the leverage ratio based on the reported equity under IFRS. We are looking at a sort of normalized level for unrealized gains. We are looking also at calculation that we do for the Solvency tool. I personally look also at the leverage ratio in relation to the amount of, profit, that you generate or cash that you generate. There are a lot of elements that come into this, consideration. The bottom line is, we feel, that we have the right amount of, leverage, so we don't have any intention to increase our leverage. On the other side also, we don't have any program where we say we had too much leverage and we need to bring it down. We think that, the position is, exactly the one we want to have, and that's also the outcome of the fact that, there are many elements that come into the the determination, the amount of debts we like to have. Really helpful. Thank you. Welcome. Thank you, Dom. All right, we will take our next question from Thomas Fossard from HSBC. Thomas, please go ahead. Yes. Good afternoon, everyone. Two questions on my side. The first one would be back on inflation and really, your comment earlier today on, you know, your assessment that the inflation, year-to-date inflation on the European motor claims were around 6%. We're just wondering how much this was comparing to your initial or start of the year expectations? And potentially, you know, what was your outlook for this claims inflation by the end of the year? Are you still seeing this 6% going up, or you believe that we have now reached something which is relatively stable and you need to match this 6% with higher prices? And the second question would be related to your PIMCO, the PIMCO cost income. Clearly we've seen in Q2 and H1 revenues falling slightly faster than expenses. I was wondering if you know you were considering doing things on expenses or cost in order to bring the cost income lower by the end of the year or you're okay with the current situation, waiting for the flows to come back? Thank you. No, thank you for your question. Starting from the inflation, yeah, 6% is what is on average what we see in the book. I would say this number is maybe a couple of percentage point higher compared to what we were expecting, and clearly the situation can be slightly different country by country. You need to consider that anyway, on the frequency side, we were slightly more conservative compared to what we see. But just focusing on the severity, I will say a couple of percentage point of higher inflation compared to the initial expectation. For the future, we don't necessarily expect inflation to be substantially higher, but we are definitely putting rate increases that they need to match the inflation. Considering anyway from for frequency development. I tell you in certain cases also we're putting rate increases. If there was more of a larger gap between the inflation assumed in the pricing and what happened, the rate increases they need not only to adjust to the level of inflation but also catching up a little bit on the gap. This is what is happening in some countries. I would say overall a little bit of higher inflation compared to the expectation. In most cases compensated also by frequency element and rate increases are anyway going to be high in order to make sure that we can match the inflation or rely on lower frequency moving forward. That's on the price element. On the cost income ratio of PIMCO. First of all, there is some volatility, you know, on the cost income ratio. Keep in mind that for the six months it's 59.1%, and this is without any performance fees. Because when we say that we are basically targeting a combined ratio of about below 60%, let's say 58, this is percentage, this is also considering the annual view where the performance fees are kicking in. So from that point of view, I would say the position in which we are right now is not drifting away from where we want to be. Also, clearly, if markets are strong or weaker, the number can fluctuate a bit. A final comment. In reality, if there is a company where I'm not overly concerned about the cost income ratio, is PIMCO because they, you know, have also profit-sharing mechanism. Anytime the cost income ratio goes up, they also are directly affected by the increase of the cost income ratio and the other way around. From that point of view, there is a natural incentive at PIMCO to manage the company in the most efficient way, but also clearly having a focus at investing when there is the need for investing. That's in my opinion, a very effective setup because there is a line of interest in this case. I think that's the reason why generally when we talk to PIMCO, we are very much aligned on the way to manage the cost income ratio. Excellent. Thank you, Giulio Terzariol. Welcome. Thanks, Thomas. We will take the next question from Fulin Liang from Morgan Stanley. Fulin, please go ahead. The line will be open now. Hello, good afternoon. Thank you. I got three questions, please. The first one is, you clearly mentioned that the further capital kind of deployment is on the agenda and your current buyback has run kind of like finished last month. Just wondering what prevents you from just announcing another buyback today? That's the first question. Second one is just to clarify actually one thing. You mentioned that the Allianz Trade, the large runoff is mainly due to the COVID provision release from Allianz Trade, which pretty much approaching the end. Should we expect the PYD release to normalize from next quarter onwards? That's the second question. The last one is just so I'm clear, to cover one thing, the 1%, let's say inflation margin you mentioned in the claim ratio, if I understand correctly, that, as you said, will fluctuate based on the gap between inflation and your pricing. When would you consider, if I understand that if the gap remains as it is, the 1% will eventually release into the combined ratio? Is my understanding correct? What would need to happen to convince you to start releasing that 1%? Thank you. Yeah. Starting from capital deployment on, what is preventing us from announcing buyback today? You know, the idea is now that we are going to do back-to-back buyback. You know, that's what I like to say. From that point of view we just completed buyback. We are normally then clearly before we announce a new buyback, usually we take a few months, could be a few quarters. Then based on you know, what opportunity we had and based on development in the market, then we take a decision about what to do. As I was saying before, in a situation like this, buying back our stocks seems to be a very good alternative compared to other opportunity. Definitely, you know, we never did really buyback following straight another buyback. We also want to be considerate, and you need to consider that we have also different stakeholders, that you know we don't want to overwhelm stakeholders with buyback and then another buyback and another buyback. That's one, the point on capital deployment. On Allianz Trade, again, if you look at the runoff in Allianz Trade, that was substantial. Clearly you cannot expect to have basically almost EUR 200 million runoff per quarter. But from that point of view, that's definitely something which is not going to happen every quarter in the future. From that's definitely not going to be the case. Again, definitely there is a lot of positive margin Allianz Trade. That's the main message. Having a positive runoff of almost EUR 200 million per quarter on a consistent basis, that would be something very unusual. On the pricing, first of all, there is not really a gap between pricing and the loss trend that we see. Because in the loss trend there is the inflation component, but there is also the frequency component. That's first of all important that we understand when we put the two things together, we don't see necessarily a. I'm speaking here across the book. We don't see a gap in pricing between the price that we are putting in the market and the loss trend. Specifically then to your question about the inflation for reserve. In reality, this inflation for reserve is going to be released not based on pricing consideration, but it's going to be released based on how the claims are going to develop, right? Fundamentally, it's going to be released over the next, I would say two years. Depending on the inflation level that we are going to see, there might be just matching claims or might come in the form of a positive runoff down the road. Good. That's very clear. Thank you. Welcome. Thanks, Fulin Liang. All right, the time for the call is almost up, but we will take, therefore one last question, and that question we will take from Michael Huttner from Berenberg. Michael, please go ahead. Your line is open now. Fantastic. There are just two numbers. The first one is, what is PIMCO performance fees, which we could think about for the second half. The second, you didn't revise your capital generation number, the one net of dividend, 10% for the year. We had 4% at the half year. Where does the extra come from? You know, is it still fair to assume 10%? There you go. Thank you. Okay. On the performance fees for PIMCO, that's always very hard to estimate, but you shouldn't be completely surprised if you're going to see a level consistent also with what we had last year. Again, this is a number that can really change. It can also go higher, it can go lower, but you might see a level of performance fees which is not that different from the level of last year. This item can be very volatile. Just take this as a sort of comment. It's not a sort of forecasting because it's very hard to forecast performance fees. For the capital generation, I would say you saw that in Q1, Q2 was about 2 percentage point. It's a little bit lower compared to the 2.5% per quarter. The reason for it is that we are growing more in property casualty. You see the growth that we have there is definitely more pronounced compared to what you usually assume. From that point of view, as long as we are going to have this kind of growth in P&C, you're going to see capital generation, which is more at the level of 2%. We are actually pretty pleased with this development because clearly we like to see the growth in P&C with a correlated price strength coming through. Fantastic. Super. Thank you. Welcome. All right. That concludes today's call. Thanks to everybody for joining us, and now we say goodbye to you all and wish you a very pleasant remaining afternoon. Thank you guys. Have a good rest of the day and also a nice summer break.