Good morning and welcome to Allianz Group's telephone conference about our second quarter 2022 results. The conference is scheduled to last 60 minutes, as usual, and our CFO, Giulio Terzariol, will then guide you through the quarterly results and will take your questions afterward. I hereby hand over to Giulio, please. Thank you, Holger. Good morning to everybody. I'm pleased to present the results for the six months and especially for the three months. It's a very hot day here in Munich, so if you don't believe in global warming, you should just spend a couple of days in Munich, and the summer here in Munich feels very different compared to the summer 15 years ago when I came over to Germany, so coming now to our numbers, page three. I just like to flip the page. Okay. Can you see that? Sorry, guys. Okay, perfect. We have a very good underlying performance for the first six months of the year with a growth in revenue, which was mostly driven by the property casualty segment. We're going to see in a second the growth in the second quarter was extremely positive in property-casualty. We have an operating profit of EUR 6.7 billion, which is slightly ahead of the number of last year. This number also reflects 50% of the outlook for the year, which you keep in mind that the market conditions have been definitely a little bit more challenging compared to the expectation at the beginning of the year. I would also say all segments have contributed fairly to these results, subject really to the market condition that they might have affected the segment in different ways. The shareholder net income, it's lighter, EUR 2.3 billion. You remember here we had a charge because of the Structured Alpha issue in the first quarter. If you adjust for that, the number would be closer to EUR 4 billion. This is more reflective of what could be a normal level of net income for the first six months. Overall, I would say good results. It gets even better when we look at the second quarter results. When we go to page five, you can see that we had a growth in revenue of 3.6%. When you look at the growth in Property-Casualty, that was double-digit. That's really a very good delivery, and that was pretty widespread across the different business units, as we're going to see in a second. The operating profit was EUR 3.5 billion. That's actually the highest operating profit for the second quarter. That's really a nice performance. We can see that in the Property-Casualty, we have an operating profit of EUR 1.6 billion, which is ahead of the outlook of EUR 1.5 billion per quarter. Here we have a combined ratio of 93.6%, which is slightly better compared to the combined ratio we had last year. I'm going to speak more in detail later. We have some technical problems, by the way, so I apologize for that. I'm sure that we can fix it as soon as possible. Moving to the Life/Health segment, the operating profit was EUR 1.1 billion, which is a little bit lower compared to the outlook divided by four. The number would be 1.2. But here we need to keep in mind that the market conditions have been extremely challenging, especially as you know, we are exposed to the volatility in the United States. So I would say that when you consider the market environment, this number is actually really a good performance. In asset management, we have an operating profit of about EUR 800 million. I would say that's in line with the expectation for the year. If we take the outlook divided by four, we would expect something which is slightly north of EUR 800 million. But we need to consider that performance fees are usually coming towards the end of the year, so in the fourth quarter. So all in all, a very strong delivery on the operating profit. And when you look at the net income with EUR 1.7 billion, that's clearly a sort of normalization compared to what we saw in Q1. It's still a little bit lighter, but here we need to consider that when you have a market environment like the one we had in Q2, there is clearly some volatility. The main point is what is going to remain over time as you normalize for the volatility is the level of operating profit. Again, with EUR 3.5 billion, we are very well on the way. Now, unfortunately, can we flip the slides to page seven? Speaking about our Solvency II ratio, it's pretty much the level of March. It's 200. So that's a robust level of solvency. With that, we'll move straight to page nine to speak about the driver of the solvency. As you see, we have, as always, a healthy level of organic capital generation. That's very important because we can count on this capital generation basically on a quarterly basis. Then in this case, this organic generation, this positive organic generation has been used basically to compensate for the market development. As you know, in the second quarter, the equity market went down significantly on a double-digit level. But as you see, despite the difficult market condition, we have been able to keep our solvency ratio at a stable level thanks to this steady organic capital generation. So overall, robust solvency ratio 200%. And with that, I will move to page 11, where we have the growth rate for the second quarter in property-casualty. And as I was saying before, that's really a good development. So we have a double-digit growth. And what is also nice to see, it's pretty widespread. Clearly, we are growing in our global lines when you look at the bottom of the slides. But you see very nice growth rate also in many other countries. So from that point of view, we are definitely pushing on volume, but especially on rate increases. The majority of this growth is coming from rate increases. As you can imagine, this is clearly important in an environment where we clearly see that inflation is slowly, slowly picking up in volume, in intensity. When you look also at the change on renewal, you can see that the number is going up compared to the level of last year. Also, as we move into Q3, the numbers should continue to go up. We are definitely taking actions also on the right side. Very strong delivery on growth. When you go now to page 13, the operating profit has significantly improved compared to the level of last year. That was driven both by the improvement in underwriting results and also by the improvement in the investment results. The underwriting results are driven once by the increase in growth that we saw before. It is also driven to a certain degree by the improvement in the combined ratio of about 30 basis points compared to what we had last year. What we experienced in the second quarter is still a higher level on the CAT compared to the normalized level. It is lower compared to last year, but it is still higher compared to what we usually would expect, which is about 2% points +. On the other side, also the runoff was positive. Here we have also benefited from runoff related to basically a lot of prudency that we had, especially in our credit insurers during the COVID situation. Overall, combined ratio 93.6%, considering the net CAT load, is a good result for the quarter. Now moving to page 15 on the operating profit by line of business or on the combined ratio by line of business, I would say we have a lot of entities which are delivering good numbers, like Germany with a combined 91%, a very good combined for Australia, 90% also in Italy, nice development with a combined below 90%, Eastern Europe, Switzerland. AGCS is confirming the good trajectory with a combined 95%. And then also Allianz Trade is performing below the 80% level. A few challenges. One is in France, but that's driven entirely by the net CAT load, which was, as you can see in the slides, very elevated. If you normalize for that, the performance of France will be absolutely fine. And then also in Latin America, besides the fact that the rate environment is different. From that point of view, there is always a little bit of a higher Combined Ratio. We need to consider also that we are still basically dealing with the high frequency and high severity in Brazil. From that point of view, this is still a work in progress. But overall, when you look at the results, you can see a lot of companies performing at a very healthy level of Combined Ratio. Now moving to page 17, the investment result is also up compared to the prior period. That's about EUR 100 million higher. And that's also higher compared to our expectation. This is driven partially also by the increase in rates. The main factor for the increase in investment income is Inflation-linked bonds that we have in our portfolio also to offset the increase in inflation that we might see on the liability side. So all in all, when you combine the growth in premium, which was double digit for the quarter, when you combine the slight improvement in the combined ratio and also you factor in the improvement in the investment results, we ended up with an operating profit of north of EUR 1.6 billion, which is definitely ahead compared to our outlook of EUR 1.5 billion. So good results in our property casualty segment. And now if we move to page 19, we come to the life segment. Here we have a very good new business margin of 4%. This is driven clearly by the increase in the rates, in the interest rates. But also, as you see, we continue to work on our mix. From that point of view, it's not just the results of rates going up, but there's also the results of a better mix compared to what we had one year ago. The combination is lifting the new business margin over the 4% threshold. When you look at the production, which is the present value of the business premium, this is about EUR 3 billion lower compared to what we had last year. But last year, we had a few one-offs. When you adjust for those couple of one-offs in Italy and in France, then production was actually pretty stable compared to the level of last year. Overall, good performance from a new business point of view. Now moving to page 21, the operating profit on the life side is lower compared to last year. And that's also slightly lower compared to our expectation of EUR 1.2 billion of operating profit for a quarter. But again, here we need to consider the market environment has been very challenging. And we know that when the volatility is pretty elevated, which was also the case in the United States, we know that in Allianz Life, we're going to have a little bit some lower level of profit. This tends to reverse clearly as capital markets are stabilizing. So all in all, resilient results considering the environment. And when you look at page 23, at the results by entity, you can see on the value of business that we have a nice increase overall with an increase of 6%. And then you can see that basically almost all entities have contributed to these increases. There are just two exceptions, Italy and France, but that's related to the one-off I was referring before. Also, new business margin are generally on the way up, and when we look at the operating profit, again, Allianz Life in the USA was impacted by the volatility, and considering also the amount of market movement we had also, and especially some accounting volatility, we had also an impact also at German Life. This has nothing to do with indeed real economics, but that's driven basically by the accounting volatility that we have in some situation under IFRS, which will go away once we flip to the new IFRS standard next year, so all in all, good new business margin, increased new business value, resilient operating profit in a difficult environment, so a good set of results coming from the life segment. And if you look at page 25, that's also very important. We are usually focusing on investment margin. When we look at investment margin, we look always at the current yield and also what is the minimum guarantee. As you see, the current yield is going up from 95 basis points to over 100 basis points. And the minimum guarantee is in reality reducing. So this means basically that if there was any concern about the ability to keep these kinds of spreads moving forward, this concern should have been already eliminated a few years ago. But I believe now we even see that the spread is going up. And we expect this somehow to be the story and the narrative moving forward. So that's for the life segment. And now we come to the asset management segment. Clearly, page 27, clearly the market has been tough. We know that basically all asset classes have been losing value. We see this clearly reflected also in the development of the assets under management. There is, by the way, an exception when you look at the alternative asset that went up. You know that this is also part of our strategy to push this asset class so fundamentally. Clearly, we have been exposed in general to the trends of the market, but still we have been able to keep an increasing level of alternative assets. Now, if we go to page 29, on the usual waterfall with respect to the development of the third-party assets under management, you can see that they are down about 6%. Here we have on the one side the impact coming from the outflows of about EUR 34 billion. This is just a reflection of the market environment. There is actually nothing really idiosyncratic specific to our entity. So when you look across the board, you're going to see that on average, there were outflows in the markets. And then clearly you see also what is the impact coming from the development of the equity market and also in this case on the development of the fixed income side. So there was about 160 billion of impact on our assets under management. On the other side, we have benefited from the fact that the euro has depreciated against the U.S. dollar. So there was an appreciation of the U.S. dollar. And that's a positive for our when we do our consolidation numbers. So all in all, clearly some pressure in asset management, but that's sometimes what happens when market goes down. Usually after market go down, market they go up again at some point in time. We believe we're well positioned for the recovery whenever the recovery is going to come. Indeed, we saw already some recovery in the month of July. Equity market have been up and also the fixed income and the interest rate have gone down a bit in the month of July. Now when we come to page 31 on the revenue, we have benefited from the appreciation of the U.S. dollar. So actually the revenue are basically flat over the period of last year. This is despite the fact that overall the market conditions have not been benign. And now when we go to page 33 on the development of the operating profit, overall we have about EUR 50 million less operating profit compared to last year. About half of it is coming from a lower level of performance fees. This can be an item which is kind of volatile. Again, the real story is going to be at the end of the year. Now when we look at the performance for the two entities, PIMCO is lower than last year. That's also a reflection of the fact that there is some seasonality in the cost income ratio. Last year, the cost income ratio was particularly low for the quarter. This time is a little bit more elevated for the quarter. There's more seasonality. When we look at AGI, we can see that they have been able to grow the operating profit compared to the numbers of last year. That's a good achievement for AGI. All in all, some challenges more in the market clearly, but the performance has been actually pretty close to our expectation with an operating profit of almost EUR 800 million. Now at page 35 in the corporate segment, we are much better than the prior period and also better than our expectation. That's a reflection of high investment income partially coming from inflation-linked bonds. And also we had some more income coming from interest and dividend in general. So very good results, let's say, for the corporate segment compared to what our expectation was and also what the prior period was. Now at page 37 on the shareholder net income, clearly here you see a big swing in the non-operating items. So basically compared to what we had last year, it is a swing of about EUR 1 billion. The point here last year, if you see realized gains, impairment, income from financial assets and liability, overall we had a positive contribution. There was a different market environment. In this market environment, we get to a negative contribution from these line items. Here we need also to consider that we have used hyperinflation accounting for Turkey, and this is, for example, an impact of about EUR 100 million for the six months because that's actually not only the impact for the quarter, that's also a catch-up impact for the first three months of the year, so clearly the market conditions are creating some volatility in the below-the-line items. That's also the reason why they are below the line items because they tend to be up and down, and then where we also see some higher restructuring, these are related to the integration with Voya, but then what you see, the tax rate has been lower than last year and also lower than, I would say, lower than what we usually see, but that's just driven by the country mix. So some impact on the below-the-line item, but overall with the EUR 1.7 billion net income, I think considering the environment, it's also a very, very, very good delivery. And with that, I come to the last slide. So just to sum it up, I would say good underlying performance for the six months and also especially for the second quarter with EUR 3.5 billion of operating profit. We are confirming the outlook even if the market conditions are challenging compared to what was expected basically at the beginning of the year. We are already now at 50% of the outlook and we feel confident that we can deliver on these numbers. The solvency ratio is robust. We have just completed a buyback of EUR 1 billion and clearly we are going to continue to look at capital deployment as we go in the second half of the year. So overall, strong set of results. And as usual, I want to thank our employees for the great work in the first six months of the year because these results are possible just thanks to their contribution. And with that, I would like to open up to any questions you might have. Thank you, Giulio, for these explanations. Before we start with the Q&A, let me remind you, if you use the audio webcall, please press talk request. If you want to ask a question, if you use the telephone, please press star five to ask a question. Our first question today comes from Julie Steinberg from The Wall Street Journal. Please, Julie, the line is yours. Thanks very much. I was just wondering if you could talk more about the PIMCO outflows and some of the reasons that we're seeing behind that and also when you expect those outflows to turn back into inflows. Thanks. Yeah, so thank you for the question. On the PIMCO outflows, these are actually market-related. So that's a situation where clearly investors are on the sideline because when there is an expectation, the rates might go up. Investors are not necessarily investing in bonds. I would even say the causality is almost the opposite. Investors, they go out of bonds and this is driving the outflows and this is driving then up the interest rate. So that's in reality the right process. When there are no specific reasons, also I would say it's kind of widespread because again, it's not a reason that we are underperforming a region versus another. You're going to see that basically all investors are taking a little bit of a cautious stance. We saw already some stabilization in the month of July. We still had some negative flows, but we were talking of a couple of billion negative flows. I will say that once the anxiety of rate increases, and here you need to look also at the midpoint of the curve or the high end of the curve, once this anxiety is going to be, it's not going to be there, then you're going to see clearly also the flows coming back. It's just a matter of timing. It's kind of understandable that in an increasing rate environment, investors might be on the sideline. And then when rates are going to be stable and potentially at a higher level, I would expect that we are going to see also the flows coming back in and also having a catch-up effect of the flows that we have been losing the first six months. I want also to make a point. At the end of the day, PIMCO is an asset manager with 1.4 trillion of assets under management. So negative flows of about 40 billion for the quarter for the first six months is something that we don't like, but you need to put in perspective of an asset manager with 1.4 trillion of assets. So at the end of the day, it's not as impactful as you might think. Got it. Thanks very much. Welcome. Thank you, Julie. Our next question comes from David Walker from Insurance Day, the line is yours. Thank you. Giulio, can you hear me? Yes. Great. Great. Thanks for that. One question on claims inflation, non-life claims inflation. What kind of rate is your non-life claims inflation? I imagine it's more than the inflation-linked bonds are providing in terms of extra coupon in the first half. What kind of claims inflation do you experience? Yeah, absolutely. So clearly the inflation we see now is higher compared to a coupon you get on a bond. I would also say that also because basically if you think about a bond, a bond is going to be priced assuming that inflation is going to normalize over time. So it might reflect a high inflation or a five-year bond is going to reflect a high inflation for the first year, but then a normalization afterwards. So if you want to protect yourself against inflation, in reality, you need to buy inflation-linked bonds. Otherwise, you don't get a real match. So now coming then to your question on what kind of inflation we see. As you can imagine, the inflation can be very different depending on the country and depending on the line of business. But I did some sort of personal indexation, very rough, because I didn't do a lot of weighting, but I tried to do a sort of calculation of what is the inflation across the portfolio. And I can tell you that there is a major number that comes out all the time, which is six. So when I was doing the inflation for the motor portfolio, there was an average about six. The average includes UK and includes also Switzerland, just to tell you, but the number was six. I did the same for retail, non-motor. I got six. In mid-corp, we see an inflation of six. When you ask AGCS what kind of inflation they see across their portfolio, they're going to say six. So six seems to be for the first six months somehow what you see on average. From that point of view, also when we look at the rate increases, we are actually not far away from the 6%. And we need to consider that we still have some, although diminishing, better frequency. And as we go into the second part of 2022, we are definitely going to have also an increase, an additional increase in rates. So I would say so far we have been managing inflation, in my opinion, very, very carefully. Clearly, inflation is going a little bit higher, but we are timely reacting to what we see is happening. Does it help? It does, Giulio. So does that mean essentially you don't really need the inflation-linked bonds to manage inflation? You have the rate increases, you have more rate increases coming, frequency is better. So strictly speaking, you don't really need the inflation-linked bonds? No, I would say it's always good to have also inflation-linked bonds because they also for the backbook, right? Because with the rate increases, you take care clearly of the renewal of business, but you have also backbook. So I would say that inflation-linked bonds can be a powerful instrument in reality to be a better match in an increasing rate environment. So I would definitely, it is an instrument that has to be used and we are using. So it's a combination. You use rate increases clearly for new business, for renewal, but you want to have also some sort of protection coming from some amount of inflation-linked bonds. Thanks, Julia. Welcome. Thank you, David. The next question comes from Michel Fleming from Börsen-Zeitung. Michael, the line is yours. Good morning, Mr. Terzariol and Mr. Klotz. I have three questions, please. First, when do you expect a trend reversal in impairments and an investment result when you look at the market conditions in July and up to now in August? Second one, when will you book the EUR 400 million for leaving Russia? And the third, you mentioned a service effect in the price increases in property casualty. What is meant with this? Thank you. Could you repeat the last question? Sorry. Service effect in price increases. Service effect. Okay. That's what you service effect? That's what you can you repeat the question? Service. Volume prices made. I'm not able to. Do you hear me? Yeah. So can you repeat the last question? I'm not sure I understood the last question. You're okay. In property casualty, you have a price effect of around 6%, a volume effect about 4%, and the service effect about 1.4%. The revenue Yes. Okay. So there is a revenue effect. Yeah, absolutely. Yeah. Okay. Yeah, that's the composition. Yeah. Then, on the question about Russia, we are waiting for the regulatory approval. We assume that the regulatory approval is going to happen in Q3. So if it is happening in Q3, we're going to book it in Q3. If for whatever reason it is happening later, we're going to book once the regulatory approval is coming, and I want to reiterate the majority of the impact coming from Russia is a pure accounting impact. There is basically zero impact in the ongoing calculation. In reality, the majority is we discussed. I remember in the last call, that number is pure accounting. Usually, I don't like when people say it's pure accounting, but in this case, it's really pure accounting. I can just tell you this is nothing else than accounting. The other one is on the reversal or this trend to see impairment. One thing I want to say is also some of the impairment or the impairment that we see in Q2 are mostly related to bonds that we are holding in our mutual funds. Once you have that situation, you need to apply even to a bond mutual fund the rules which are applied to equity. The rules for equity are if a position is under zero for nine months or if you have a 20% drop, then you need to do an impairment. You can imagine, let's say you have even a bond in a mutual fund, you might maybe a 20-year bond, and you have the increase that you saw in the last six months. If you have a bond in a mutual fund, you're going to have an impairment on that bond. So I want to say that the impairment that we are seeing Q2 are not driven by a real deterioration of the credit quality, but they are mostly driven by these kind of bonds that we are holding mutual funds, and we need to impair them. But then also automatically, we're going to have a recovery over time because there is no real impairment of the credit quality of the bond. So that's very important to understand what we are talking about. But in general, when we are going to be out of this situation, I would say, first of all, if rates are stabilizing the way they are, clearly, we are going to see less of this phenomenon. On the equity side, we didn't have a lot of impairment. As always, on the equity side, it's going to be a lot dependent on the market movement. And then a final comment, next year, we're going to go into IFRS 9 and 17. So the accounting rules are going to be very different. And what is going to happen moving forward, you might see a higher volatility coming from some position that we need to have at fair value. So you're going to get a total swing up and down on this position. On the other position, in reality, they are going to be completely neutral in the P&L. So the mechanics are going to change very much next year. In general, you're going to see a little bit more volatility below the line, which will also mean that in the future, we're going definitely to refer to an adjusting net income because the volatility below the line might be. It's not going to be super substantial, but that's definitely something which is going to be more than normal. Okay. Thank you. Welcome. Thank you, Michael. Our next question comes from Alexander Hübner from Reuters. Alexander, the line is yours. Thank you very much. It's only two questions for me. The one is the restructuring expenses that you have mentioned in the asset management business. This has obviously to do with the transfer of business to Voya. Can you elaborate a bit how much business is this and how many positions are possibly redundant with that? So this figure in how many positions does this translate? And the second question is, if I remember right, at this time of the year, you often gave a hint whether your outlook is either on the positive side or on the negative side, so the upper half or the lower half. You didn't do this this time. Can you maybe elaborate a bit on that now? Thank you. Yeah, absolutely. So coming from the first question, yes, there are restructuring expenses related to the transition to Voya. The amount of, let's say, people impact in the sense of redundancy, we are speaking about 200 people. And then clearly, in this number, we need to consider also retention payments. There was also accelerated investing for some of the people that went into Voya. But fundamentally, to come back to your specific question about the redundancy of people, we are speaking about 200 people. And on the outlook, yeah, we are confirming the outlook without now giving additional color. Clearly, we always hope to end up in the upper half of the outlook. But considering really the market volatility that we have right now, we have a war not far from here. There is an escalation of tension between China and the USA. This might not be helpful, although for the time being, the market reaction has been pretty muted. So just based on the fact that there is definitely a different level of uncertainty compared to what we the normal uncertainty, because usually we tend to forget it, but we are in a wartime. So from that point of view, we just confirmed the outlook of 13.4, and then we're going to see how the economic situation is going to develop in the next months and especially how these tensions might play a role in the big picture. Okay. Thank you. Welcome. Thank you, Alexander. We take the next question from Ian Smith from the Financial Times. Ian, the line is open. Morning, all. A follow-up on that. I suppose some of the conditions for the bond market sell-off are still there and worsening inflation, but also kind of warnings about economies weakening further. So kind of given that, what level of outflows would start to be painful over the full year for your profit guidance? Obviously, this is a pretty chunky and higher-than-expected outflow figure, particularly from PIMCO; the analyst consensus has been more than they had thought. So how bad does it have to get over the full year before it poses a threat to the group numbers? And secondly, just any update on the directors and officers insurance cover and also the Fidelity insurance cover extended to Greensill Capital? I think last time we spoke, you said it hadn't come into play yet, but I was just interested as to whether your view had changed on whether there would be any claims coming in those channels. Thank you. You mean Fidelity, you're referring to Euler Hermes or what kind of Fidelity? Yeah. Yeah. No, we don't expect anything coming from Fidelity as a problem. So no, it's not absolutely. Out in the D&O. Yeah, again, it's not a concern that we have any kind of exposure that, yeah, we are concerned about. So no. And then, on the outflows, maybe look at the end of the day, because it's a matter. It can be outflows; it can be market movements. You can assume that you can apply 20 basis points of lower profit times the amount of assets that you lose. So, let's say that you tell me we have EUR 100 billion of less outflows, and then you apply basically 20 basis points on an annualized basis. There will be about EUR 200 million lower profit, right? That will be on an annual basis. Then, there is always something you can try to do clearly on your spend side. But these are basically the kind of rules of thumb that you can use. In reality, if you ask me, when we look also what happened in the first six months of the year, the major pressure is not coming from the EUR 40 billion of outflows, but we basically it's coming more from the market movement. So that's rather the concern as opposed to the outflows. Just to give you an idea, in the month of July, the market movement for PIMCO was EUR +35 billion. And then, as I said before, we had a couple of billion of outflows. Net is EUR +33 billion. And if you apply my rule of thumb of 20 basis points, you can see basically what kind of leverage we might have on this number. Thank you. Welcome. you. Welcome. Thank you, Ian. Our next question comes from Ben Dyson from S&P Global Market Intelligence. Ben, the line is open. Hi, good morning. Thanks for taking my questions. I've got a couple if that's okay. So just one on a follow-up on non-life P&C profitability as it relates to inflation. I was just wondering if you're expecting a deterioration in the combined ratio in the second half of the year just because of inflation, just because of the time it will take for the price increases to work through. So that was the first one. And then the second one, I was just the share buyback's completed. I was just wondering what options you're looking at for going forward for capital distribution and if there's any particular ones that are looking more or less favorable at this point. Yeah. So I would say on the buyback, we just completed a buyback of EUR 1 billion. Usually, we don't do back-to-back buyback. Excuse me for playing with the words. But clearly, as we go towards the end of the year, we are going to definitely take a look. As always, we look at what might be available because we also want to grow the business on the other side, especially considering the valuation. We think that a buyback can be a very good way to deploy the capital. So there is nothing specific, but just giving us a few months in order to consider the different options. And clearly, we know where the share price is, and we can do the math too. So from that point of view, it's most likely we are going to skew our decision towards buybacks. On the combined ratio, no, I don't expect a deterioration of the combined ratio. The point is we've been kind of watching this inflation starting already last year. So indeed, we had the first conversation about potential rising inflation just right after the summer of 2021. And at that point in time, although there were not necessarily signs of inflation coming through, we were already alerted. And you can see also that in the course of Q1 and Q2, you can see also that the change in renewal has been a little bit more elevated compared to what you saw in the past. And also, we are reacting very quickly to basically what we see. And I don't know if you remember, but also last year, we told you that we have been kind of the conservative side, also on the reserving because we didn't want to take all the benefit coming from lower frequencies. So we were thinking inflation can be stronger than what is expected. So overall, I would say that we should be able to keep the combined ratio. Clearly, improving the combined ratio in an environment like this might be challenging, but keeping the combined ratio is definitely the target that we have. And I think we are well positioned to achieve this target. Okay. Thank you very much. Welcome. Thank you, Ben. Our next question comes from Christian Schnell from Handelsblatt. Christian, the line is open. Ask your question. Good morning. I have two questions related to your financial targets you gave us in December 2021 with your new strategy plan. First is the earnings per share. Your target was a plus of 5%-7% related to the numbers a year before. There was EUR 50.96. You're now at EUR 5.28. Is it possible to reach, or what is possible this year? The next question is about the return on equity. Your target was 13%. You are now at 6.7%. Also far away, what is possible this year? This year, clearly, the ROE is going to be impacted by the Structured Alpha. When you adjust for Structured Alpha, anyway, the ROE is closer to 12%, and consider also that we are in an environment where on the below-the-line items, you get rather negative or positive, so I would say, in reality, if you just normalize the number in a fair way, you can get to 13% very easily, so that's the level of ROE that we have, so you just need to remove Structured Alpha, normalize for markets, and you're going to be there. That's also the reason why we are confident that as we look at 2024, we are going to be at a level of at least 13% ROE. Now, to the other question about the EPS, 5% growth, that's the same story. Clearly, you need always to adjust for volatile items or for extraordinary impacts. So the point is we are on a trajectory whereby 2024, we can achieve the 5% growth. If you look at the operating profit of the first six months, which is at the end of the day, what counts? Because, again, the volatility has to be normalized away, and sometimes can be positive and sometimes can be negative. I would say that we are definitely delivering what we need to deliver, and we are positioned to achieve the target by 2024. Is the environment more challenging? Yes, it's more challenging. The environment might stay challenging, might become maybe more benign as we go into 2023, 2024. We are going to see that. Usually, we don't set our targets in a way that we cannot absorb some sort of shock. That's also important. So from that point of view, you need to consider that the way we set our target is such that we have some level of buffer to cushion at least some level of adverse development that one might see over the next three years. Clearly, it's not an infinite buffer, but there is some level of buffer. Thank you. Welcome. Thank you, Christian. Our next question comes from Sam Casey from Insurance Insider. Sam, the line is open. Can you hear me okay? Yeah. I was wondering, how do you view the continuing prospects of profitability in the AGCS sort of commercial line section given the macroeconomic headwinds and especially possible global inflation recessions or a global recession? Yeah, in AGCS, we saw now another quarter with a 95% combined ratio, which is again a confirmation that the company is on a good trajectory. On the inflation side, what we see right now is that the rate increases we get are still slightly ahead of the inflation. So from that point of view, I would say that we should be positioned to keep anyway this level of combined ratio. That's also our target for 2024. Considering also that there is also quality around the combined ratio, I would say that, sure, the higher level of inflation can represent a headwind, which was not there a few quarters ago. But overall, the way the company is positioned and also considering the fact that we are still getting rate increases, which are north of inflation, I would expect the company to be able to keep this level of performance moving forward. That's okay? Yes, great. Thank you. Welcome. Thank you, Sam. Our next question comes from Jean-Philippe Lacour from AFP. Jean-Philippe, the line is open. Yes, good morning. I have three questions back to the outflows. So you would say there is no relation between these outflows and the fact that there was this Allianz GI litigation in the U.S., and maybe some clients want to be maybe to not boycott, but be far from your activities. So you just relate this to market movement, if I understand you well. But this Allianz GI litigation, would you say that it has an impact on our by the clients? Two other questions. We see at the time fires in California, in Europe, some parts, France, and elsewhere. Will that cost you? Might cost you something during this quarter, or is it, of course, too early, but you have a feeling for this? And in Russia, you said, yes, the closing is to be expected in the next months. This sale of the shares, would you say it was made for a symbolic euro, like Renault did in the automobile sector, because you have a loss of EUR 400 million? And would you be transparent about the financial conditions of this sale? Thank you. Okay. So maybe coming from the last one, what we do in Russia, we are basically bringing down our participation below 50%. We are going to be a minority shareholder. We don't have any representative in the board of management of the company. So that's the step that we are doing right now. And then clearly, we're going to evaluate our option, not in the sense of reinvesting, but whether we want to do an additional move down the road. But fundamentally, now we don't have any say in the company. Now, the question could be, why didn't it go down all the way to zero? I would say also that there are also some doing complete fire sales maybe is benefiting the counterparty, and that's not necessarily what the idea is. But we are definitely not invested in Russia the way we were invested before. The second point was on the wildfire. Specific to California, we don't have any more meaningful exposure to the wildfire in California, but there are a lot of wildfires also in Europe. For the time being, we didn't get any notification from our company, so we don't expect that we are going to see here and there some losses, but we didn't get any notification from our subsidiary telling us that there are major losses, at least not at this point in time. On the outflows, I can tell you there is no impact on the outflows of PIMCO. By the way, if you ask me personally, if somebody would have told me rates are going to go up to 100 basis points, what is going to happen to the outflows of PIMCO, I would have put a bigger number. I'm always thinking about the level of shock. From that point of view, I think the outflows of PIMCO are totally fine. If you look at the GI or the EUR 5 billion outflows that we have this quarter, we quantify that maybe €1 billion might be related to Structured Alpha. So we are not really speaking of even for a GI of a meaningful impact on the flows because of the situation specific to the United States. Just to understand the fact that the equity markets were down in the second quarter, this is the reason why? Yes, the main reason for the GI. Yes, the main reason. And you saw also there is a competitor sitting in Frankfurt. If you see in the first quarter, they had positive flows. In the second quarter, the flows were negative. And basically, you can observe the same trends for AGI. So it's all related mostly to the market conditions. Yeah. And for PIMCO, the reason was? Definitely market condition. That's coming from basically PIMCO is a fixed income manager. So where we see the outflows. And by the way, you can see also if you look at the slide, the page 29, you are going to see also where the outflows are coming from. And as you see, there are substantial outflows in fixed income. This is basically PIMCO. When you look at the equity, this is going to be basically AGI. Thank you. Welcome. Thank you, Jean-Philippe. The next question comes from Friederike Krieger from Versicherungsmonitor. Friederike, the line is open, please. Hello. Can you hear me? Yes. Okay. Wonderful. You talked about additional price increases this year. Can you give a little bit more details in which business lines price increases are really needed for Allianz and how big they will be? And how is it with Motor? Generali announced recently significant price increases in Motor due to inflation. Is it the same with you? No, thank you for the question. I believe we are always exposed basically to the same trends, right? Because this kind of inflation is impacting everybody, then as always, there are things you can do to mitigate the impact on inflation, which is how you're going to do claim steering. Also, what kind of negotiation you have done with the repair networks. So from that point of view, there is a systematic trend that is affecting anybody, and then clearly, there is always how you've been able to react on inflation using the levers that you have at your disposal. That said, eventually, at this level of inflation, clearly, this is a predominant factor. So we are also taking rate increases, and we're going to have an acceleration of rate increases. In some cases, there can be double digit. I would say not high double digit. We are speaking clearly. We're not speaking of emerging markets. In emerging markets, you go even for very high double digit. Once we speak more of conventional markets, you might have a situation where the rate increases can be low single digit, low double digit. In other situations, I would say we're going to be more in the mid to high single digit. So I would say this could be the expectation for a general trend. In some cases, we have indexation. So automatically, for example, in the home portfolio, in many countries, we are going to see rate increases, which are going to be pretty much in the high single digit. So definitely, there is a movement upward. So when you look at the change in renewal, we should expect these numbers to go up as we go into the second part of 2022. And in Motor, will there be double digit increases? Motor, sorry, but I'm speaking generally, right? Because I don't want to go into a conversation about what is going to happen in a country versus another country. But I tell you, in some countries, it's going to have rate increases north of 10%. In other countries, it might be that we're going to have maybe 5%. I would say something between 5% and 10% could be broadly what you see. But I'm not going to make a specific comment on a specific country. Okay. Thank you. Welcome. Thank you, Frederike. The next question comes from Angela Maier from WirtschaftsWoche. Angela, the line is open. Yeah, good morning. I would like to ask a couple of questions on AGI first. So how high do you estimate the cost of lawyers Allianz has to afford for the whole lawsuit? I think this is still a procedure going on maybe, but yeah, maybe you could the most should have been done, so you could maybe give an estimation for the cost. And then are you considering to ask Greg Tournant and the other two managers for compensation for all the damage Allianz suffered? And are you also considering to file a claim for the damages? And the next question would be Allianz AGI, AGI U.S. has accepted a guilty plea. So why did they do this? So was it just to avoid even harder measures? And yeah, what about your risk control system? Have you changed anything since the Structured Alpha case came out? Or yeah, could you elaborate a little bit on that topic, please? Thank you. Yeah. So maybe on the legal fees, I can tell you. At the end of the day, the real impact coming from legal fees for Allianz was very minor because we had insurance coverage. So from that point of view, I would say that amount is negligible because basically it was covered by an insurance contract. On damages against the three individuals, clearly, we cannot speak about that. I don't have my head of legal here, but I'm sure he will look at me like this is not something we can speak about. On the guilty plea acceptance, at the end of the day, it's what it is, right? And there was also the decision coming from the DOJ. And so that's what I can say. And then on the control system, again, I really strongly believe our control system, our Allianz is a strong control system. Unfortunately, we had this accident, and we are very sorry for that. So I want to be very clear. We are extremely sorry for that. And I would not say that, okay, we had an isolated accident, now we move forward. Clearly, we are looking to what happened, and we are going to also make refinement to our control system based on lesson learned. But the starting point is that we have a strong control system, and definitely, there are some lesson learned where we can try to improve it. But I would say we are starting from an overposition of a robust environment. Thank you. Welcome. Thank you, Angela. The next question comes from Maximilian Volz from Versicherungswirtschaft. Maximilian, your line is open. Hello, Sirma. Thank you for taking my questions. I have a few. The first one is the short one. Your P&C score in Australia is very good. And I'm wondering how do you do this? Because in Florida, there's always a flood. Then the next question is about the life insurance. We saw much of a decrease in France and Italy. You said it's about its cost of the runoff. Was the runoff a mistake, and do you expect a bounce back in these areas? Then the next question is more generally. How does the reinsurer prices impact your business, especially in P&C? And the next question is, are the interest rates, the increased interest rates, more influential than the inflation on the business? And the last question is, in which areas and countries do you expect increase in the second year of the in the second part of the year? Thank you very much. Okay. So I got a combination Australia. There was a question about life insurance in Italy, correct? Okay. Yes. And France. Then there was a question about where we expect rate increases, right? Yeah? In P&C? Yeah? And then the other there was another question, sorry. The reinsurance prices. The other insurance prices, they're going up or down? Okay. Perfect. So on the combination Australia, okay, you are right that in Australia, you have some volatility because of the nat cats. In the Q2, there were no substantial nat cats. And the underlying profitability in Australia is very good. So in reality, from an underlying point of view, it's definitely our book is very profitable. Then you get this volatility because of the nat cats. In Q1, the nat cat load was elevated. Second quarter usually tends to be lower on nat cats. We had a flood, by the way, in July. This was about the estimate is about EUR 40 million. Usually, Q3 tends to be also kind of moderate. You might have again nat cat in December, like hail. This makes my Christmas break always very interesting because a hailstorm in Sydney can happen also on Christmas days. The underlying profitability is good. On the nat cats, I just tell you specifically to Australia, we are indeed taking a look at whether we want to structure a different reinsurance program, which is going to cost some money. Again, the underlying profitability is good, so we can definitely pay for it. By the way, we are also increasing pricing in the market, and the volatility then could be lower. From that point of view, you make a good point. But I will say that we start from, which is a positive, an underlying profitability which is pretty solid. Then maybe I go straight to the question about reinsurance pricing. We're going to see what happens in the renewal season because right now, there are not many negotiations happening. I would say that the price of reinsurance is going to be determined by what kind of experience you're going to have. So let's say that if we have a lot of recovery on our insurance program, then we need to be ready that price could go up. In the case there are no substantial recovery, I would not expect the price to go up also because there was already a sort of increase last year. It's going to be really a function of whether the single accounts are going to have a loss or not. On the rate changes, I would say they are going to be kind of widespread. It's just a matter of the extent, as we were saying before. In some market, they might be more pronounced. In some market, they can come earlier. In some other market, they can come later. But fundamentally, we are going to see rates going up across the different geography and also across the different lines of business. And then on the life insurance, there was actually no mistake that the runoff is in reality we had renegotiated some contracts. So that's about the fact that last year, we had a renegotiation, let's take Italy, of a contract when we do a renegotiation discounts as a new business because we had new business features that we put into this contract. So there was no mistake. It was just a one-off transaction, which was, by the way, very helpful because there was a risk mitigating action bringing to more value from our side and also basically reducing the amount of capital that we need to keep for that book. So in reality, we would like to make more of this transition if possible. Okay. Thank you very much. Welcome. Thank you, Maximilian. We are already over time, so we'll take one last question. And it is from Stephan Kahl from Bloomberg. For all the other questions, we can answer them offline. Yes, hello. Just a quick follow-up question on the Russian operations. Do you have any sort of option to actually raise your stake above 50% down the road, maybe after the war, or things, yeah, get better down the road? No, we don't have any option. Okay. That's a quick answer. Thank you. Okay. Ciao. Okay. Then thank you for your interest and apologies to those who we couldn't take the questions. We're happy to answer them offline. With that, we say goodbye and wish you a relaxing summer break. Okay. Have a good day and a good summer break. Thank you.