Good morning. Ladies and gentlemen, friends and family, a very warm welcome on this very cold and snowy morning here in Munich. Today, everything is about IFRS 9 and IFRS 17. I'm not sure how many of you are looking forward to the new accounting standards. I can safely say we actually are. In particular, our today's speaker, Christoph Jurecka, of course, our CFO is here, he will take you through the slide pack we just published this morning and which you hopefully found helpful. Procedure is pretty straightforward. We will start with Christoph's presentation, which is going to take about an hour, and then we will have plenty of time for Q&A. It's now my pleasure to hand it over to Christoph. Well, thank you, Christian. Good morning also from my side. Very warm welcome. Indeed, I'm looking forward to IFRS 17, and I'm looking forward to be able to finally present it to you today. Munich Re's Christmas present this year indeed is a deep dive into IFRS 17. I hope it will be insightful for you. Again, it's my pleasure to present it today. Let's start with a quick view on the agenda on my page three. There we are. I will start with a quick introduction, giving some overview and also some guiding principle which led us through the implementation of IFRS 17. More detailed chapters will deal with the balance sheet and with the P&L. Chapter four will go through the various segments we are regularly reporting and explain how the P&L works in those segments. The idea is that once you finally get the real numbers next year, that you can look back into that presentation, it works kind of a recipe how to interpret the numbers. Finally, chapter five will give me the opportunity to comment on the outlook and on the numbers we have been pre-releasing yesterday. Let's start with introduction on page five. There we are. I think the most important message on that slide is that we are well prepared for the transition to the new accounting regime. We are close to finally going into that regime, as you know. As of next Q1, we will be reporting according to IFRS 9 and IFRS 17. Internally, it has been a long journey already. We have been working many years on the implementation. Already this year, we have been preparing comparative numbers, which we are going to release next year as prior year figures. It's important to mention here that these comparative numbers only involve IFRS 17. They will not include IFRS 9 because we decided to stick for the prior year to IAS 39 for the investments. We will use the so-called overlay approach to avoid accounting mismatches. This overlay approach allows us to have a valuation of certain assets, certain asset classes in some segments already according to IFRS 9 to avoid accounting mismatches. That is what we are going to do for the VFA business for ERGO, Life and Health, as I will also show you later in the presentation. Beginning of 2023 then, also IFRS 9 will have the transition. Again, Q1 and then the following quarters, we will be fully in the new regime with IFRS 17 and IFRS 9. A few high-level statements on page six, just to set the stage. We are welcoming IFRS 9 and IFRS 17 to a very, for a very clear reason. It's much closer to the economic steering, and it's much closer to our internal steering compared to the current accounting regime. Therefore, our clear expectation is that our strength will be better visible and our economic earnings power will also be more transparent compared to the past. This is basically for three main reasons. The first is it's consistent, so market consistence and accounting mismatches we are suffering today will be gone. The second reason is clarity. There's a very clear definition and separation also, what is insurance business, what is investment. This will be much more appropriate than in the past. Also revenue will be more appropriately reflected in the new world. The third one, transparency. This standard allows us to also show you future earnings as part of the CSM. The future margins which we have in our long-tail business will be visible. There's also a lot which doesn't change. I think it's very clear. Business strategy doesn't change. Our capital management strategy, dividend strategy, share buyback strategy does not change. Our prudent reserving strategy also is not affected at all, which is very important. As you know, this prudent reserving strategy is a key part of the way how we conduct the business. it's very relevant for us that we were able to maintain it fully. Local GAAP, obviously, is unaffected, as well as Solvency II. Also our capital strength, clearly unaffected. It's a change in accounting. It's a change which will hopefully help you to better understand what's going on in Munich Re. It does not alter our business, and it does not alter our DNA. What IFRS 17 does though is it's principle based, and therefore there are options, which companies can use or not use, or where companies have the opportunity to interpret the standard individually. Company-specific decisions are relevant in the context of IFRS 9 and 17. When we initially thought about how to, you know, how to decide on those options, we thought, well, a few guiding principles to lead us through these optionalities would be helpful. Those guiding principles are depicted here on my slide seven. First of all, we wanted to have the maximum possible alignment with Solvency II and internal steering, just to make sure that we do not add to the confusion we sometimes already have, given the multitude of different accounting standards we have to apply. The next point, we have to maintain the prudency as an integral part of how we steer our business. We wanted to have a P&L volatility, which is acceptable, so not too high. We wanted to make sure we show all earnings in the P&L so that no source of earnings is excluded from being eventually shown in our bottom line. If you take those guiding principles and then derive what they mean for the various accounting options, you end up with the decisions as shown on the lower half of the slide. First of all, discount rates. There we try to, as much as possible, use the identical curves than in Solvency II. Really use the EIOPA for Solvency II curves wherever possible. The risk adjustment is also based on Solvency II. I'll come back later to that again, use the cost of capital approach here. The reserving level, as mentioned, unchanged. OCI, we use the OCI option in order to dampen volatility wherever possible. Distinction of expenses. All KPIs will be consistently defined based on the IFRS 17 definition, of course, to make sure we have a full consistency between our financial statements and all KPIs we are using. In our case, it will be possible for you to do the calculation, so to derive the KPIs from our financial statements. We thought that was important for consistency reasons. Finally, equity instruments. We use fair value through P&L in order to make sure that also a value increase, an appreciation of stock prices will show up in our P&L. My next two slide will deal with IFRS 9, so the accounting change we are facing on the asset side. What you see here is that we use, as mentioned, the OCI option for fixed income instruments and loans in general, wherever possible. Possible means that we are in line with the so-called SPPI criterion. All other assets will be booked through P&L. You can see that this would include equities, private equity, infrastructure, real estate for VFA business. We have to book the deterioration in credit risk through P&L and also derivatives. What is the impact on Munich Re? First of all, the OCI option reduces the accounting mismatch on the asset liability management. The share of fully P&L sensitive investments will go up significantly from 1% today to 17% in the future. This includes the VFA business, and I, as I will show you later, in the VFA, we have a different mechanics to dampen volatility. Therefore, to have a good picture of future volatility, it's fair to exclude the VFA investments from the assessment here. Even if we do so, still, the fully P&L sensitive investments would go up from 1% of our assets to 13%. Still a significant increase of volatility to be expected. The expected credit loss will not have a major impact on our numbers, given the high credit quality of our book. At the last point, we'll have a very clear separation now of insurance contracts and of investment type contracts, which we sometimes, as you know, conduct out of our insurance business. From an accounting perspective, it's very clearly defined now, and we can clearly show you what is investment and what is insurance, also in our P&L, as I will also come back to later. On slide nine, a little bit more of detail of how the various assets are booked in the future compared to today. Today we have 31% of amortized cost investments, which will go down to 4% in the future. fair value OCI will increase to 79%, and then fair value P&L, as mentioned, from 1% - 17%, increasing the volatility. On the right-hand side of the slide, you see that the total investments volume goes up, and this is a reflection of the large amount of assets we value according to fair value, so with market values, and therefore the value is higher. On page 10, we will go now to IFRS 17. I'd like to start with a few general remarks. What are the key features of IFRS 17? Just to remind you're aware of that anyway. It's a current measurement of the liabilities with discounting across all lines of business based on current yield curves. We will explicitly report future profit margins from long tail business. We will have to immediately recognize losses where they arise. Also we'll have, particularly in our reinsurance business, a more adequate reflection of revenues. What does that mean for Munich Re? First of all, the discounting will lower the combined ratio. I think we'll all have to get used to the concept of a combined ratio, which is interest rate dependent due to the discounting. That's something which doesn't sound very familiar yet, but I'm very optimistic over time we'll get used to it. Economically it makes sense. Long tail business has a different characteristics, a different profitability than short-term business. Discounting makes sense in that context, although we still have to get used to it, I admit that. Next point, the CSM will better reflect the value of the long-term business. We will have in the balance sheet, the CSM, and be able to show you what our expectation of future earnings is from the in-force business. The VFA business at ERGO Life and Health will deliver much more stable earnings patterns than in the past. That was a business which was always kind of volatile. This will be much better predictable and much more stable based on the so-called VFA approach. Then we will have onerous contracts. If you want, in an accounting sense, loss-making contracts, which we have to recognize immediately with the expected loss in a so-called loss component. Here, already here on that slide, and I'll repeat that later, I'll have to really make the remark that this loss component is really driven by our conservative accounting assumptions and by the high granularity of our interpretation of how we implemented the standard. If you want, this loss component is an additional element of prudency we have been establishing when we introduced IFRS 17. On page 11, you are aware of that anyway, that is how the standard works. I will not go through that. You know that we are basically looking at discounted cash flows, deducting a risk adjustment, and then end up either with a CSM, which then would lead to earnings over the lifetime of the policies, or we would lead, or it would lead to a loss component, where losses would have to be recognized immediately. On the next slide, you see that there are two types of liabilities we have to book in IFRS 17. They are quite similar, not in detail, but from a conceptional point of view to IFRS 4. We have a liability for remaining coverage and a liability for incurred claims. Now the world would be very simple if there weren't three different measurement models in IFRS 17, and this is also shown on the slide here. There is the so-called General Measurement Model. There's the Premium Allocation Approach and the Variable Fee Approach. As you can see, many of the concepts are quite similar for the three approaches, but the devil's in the detail. Even if you have tick marks implying on that page here that it's quite similar, it might still differ in the details. Therefore, we'll have to revisit all of them later on anyway. Just here that you see that they are quite common in some sense, at least. Page 13, what you see here is our implementation, which measurement model we did implement for which business in our group. We have 30% of the General Measurement Model, which is the basic model and properly reflects the characteristics of long-tail business. These 30% are including the reinsurance Life and Health business, and they are including quite a bit of the ERGO business, ERGO P&C Germany, for example, and also ERGO international business. The Premium Allocation Approach is the simplified approach, which you can use for shorter-tail business. A simplification. We use it for 56% of our group. Reinsurance P&C, most importantly. Also across all the three ERGO segments, the PAA is being applied. Finally, the Variable Fee Approach. This is the approach specifically for participating contracts. Contracts where policyholders get a certain share of investment income. That's an approach we then use for the life and health business in ERGO Germany and also in ERGO International. On the next slide, just a few words on the transition approaches. You know, transition means how to get from IFRS 4 to IFRS 17. The standard allows for three different approaches. The first one, the full retrospective approach, is the most fundamental one, because what it's saying is more or less that you take each of your insurance contracts, go back to the inception of that policy, and then do the accounting as if IFRS 17 would have been in place back then already. As in theory, that's the best possible approach. Practically, it's very hard to do so given data constraints and given that for some of our policies, we would have to go back decades. Therefore, in reality, it was only possible to apply that approach to 10% of our book. If you are not able to do this full retrospective approach, you have two options. You have the option of a modified retrospective approach, in which you go back less years, not fully to inception of the policies, but a few years. Or you do the fair value approach if you do not have data at all to go back a number of years. The fair value approach, there, the transition is based on the current market performance, based on a cost of capital approach to determine that value. In the modified retrospective approach, we do an approximation on the historic development and try to then come as close as possible to what the value would have been with a full retrospective approach, but by the means of this approximation. As you can see, 40% fair value approach, 50% modified retrospective approach. With that, I'm at the last slide of the introduction. We can jump right away into the balance sheet. On this first slide, don't be frightened. This slide is just really to give you an overview how the balance sheet will look like in the future in our IFRS 9, IFRS 17 world. It's meant to, you know, start being used to new concepts already today. We also did publish today a straw man of our future financial supplement to give you also there the opportunity to prepare already how would the financial supplement look into the future, obviously, without any complete numbers yet. The structure is there already. You can download that on our webpage. If you look on the slide here and on the balance sheet, you can see that a significant amount of positions is really changing. We color-coded them. A few of them changing due to IFRS 9, others due to IFRS 17. If you look into the liability section, into D, you'll find liability for incurred claims again, you'll find the liability for remaining coverage again. It's all consistent. Don't be surprised, you'll also find some insurance contracts issued on the asset side. Depending on the cash flow pattern, that can happen. There, the standard does not allow you to offset assets and liabilities, so you show both of them. Everything else, I think, there will be plenty of opportunity also to discuss the details then next year, quarter by quarter. We'll obviously also support you in interpreting those new numbers in the very details we'll provide you with then. Therefore, I'd like to go onto page 17 now, and this is one of the core pages of today's presentation. This is the equity reconciliation from IFRS 4 to IFRS 17. The IFRS 4 equity at the end of 2021 was EUR 30.9 billion. Then you can see here on the slide several steps, how we go from this IFRS 4 equity to the IFRS 17 equity. The first reconciliation step is just a change in the valuation base. The second, then a risk adjustment. Third one is CSM loss component, taxes, then we finally end up with the IFRS 17 equity. What's behind those various items? The change in valuation base, in that number, you basically have all the methodological changes. We go from an IFRS 4 methodology, which is completely different from what we'll be doing in the future, to an IFRS 17 methodology based on best estimate cash flows, based on discounting across all lines of business, also as mentioned in P&C. Then also some off-balance sheet reserves in the current world will be fully included in the valuation of the CSM going forward, the valuation of the liabilities also going forward, in the so-called overlay approach. Particularly, I'm talking about the loans ERGO is holding here and also real estate. This, this is all included here in these valuation differences, change in valuation base. This adds EUR 25.2 billion to the equity. We then deduct a risk adjustment based on the cost of capital approach in line with Solvency II. There are some methodological differences still from diversification. I'll come back to that later. After having deducted that, you end up with a CSM of EUR 22.3 billion, which includes also unearned profits, including to the IFRS 17 valuation of certain unrealized gains, which in the past were in the OCI. There's also a certain shift from OCI into the CSM for the VFA business included in here. Then we have a loss component based on the conservative reserving approach we apply as before, and also the granular grouping. If you deduct all those items, then finally you end up with the equity of EUR 38.4, slightly below the equity if we had the IFRS 4. Again, the CSM, this is future earnings potential, those are the future crystallized earnings. The transparency of the equity value of our group is much higher in that number. Also the numbers by themselves are higher if you include the CSM than before. Last point on that slide, the adjusted equity is EUR 24.2. Just as a reminder, the adjusted equity is the equity we use for the calculation of the RoE, and that's basically the equity where we exclude the OCI components, so in particular, the unrealized gains and losses and the currency translation reserve. A few words on discounting and interest rates. We decided to use a bottom-up approach, and we will apply EIOPA Solvency II yield curves as risk-free rates in our approach. For exactly those companies in our groups where we use a volatility adjustment, which is a few, we will also use the volatility adjustment for IFRS 17. For others, we will not use an illiquidity premium at all. The reason for that is that we would like to be as close as possible to Solvency II, to make reconciliations simple and not to distract anybody from what is really the core reason for differences, by using different weight curves. Yeah, using the identical curves is for sure the simplest possible way of aligning the two, both economic concepts, Solvency II and IFRS 17. There might be situations where we hav to deviate from that approach, just to be very open here. For example, if we do a closing once the EIOPA curves are not yet published, then we can do the calculation ourselves, the derivation of the EIOPA curve. We cannot exclude that there is then a difference of a few basis points, given that we might not be able to fully replicate the official EIOPA calculation. That's one topic which might arise. The other thing is that if the EIOPA curve would be so far out of what IFRS 17 would allow us to do, in that case, we would also be forced to adjust our approach. This did not happen in the past, and so far, we always fully were able to use the Solvency II curves. The disclaimer I just made, you can, if you want, immediately forget it again, but for the sake of completeness, I just wanted to mention that. Wherever possible and whenever possible, we fully apply EIOPA Solvency II curves also for IFRS 17. Changes in the discount rates, this is mentioned here for the first time, we'll come back later to that anyway. Changes in the discount rate will be absorbed by the CSM in the VFA approach and booked into OCI elsewhere. The next slide is on the risk adjustment. Difficulties with clicking here. Yes, thank you. The risk adjustment, we derive it by cost of capital approach, very similar to Solvency II. We take the Solvency II risk capital based fully on our internal model. We focus on insurance risks as prescribed by the standard, then apply a cost of capital rate of 6%, also fully in line with Solvency II. The only difference then to Solvency II is that we allow for diversification in our group, which is currently not allowed in Solvency II, but we do allow for it in internal steering. It's such a core and important part of our business model, this global diversification in the cat business, you're all aware of that. That's so key for us that we decided not only to use it in internal steering rate, anyway, makes sense, but also to use it for IFRS 17, and here, consciously deviate from what Solvency II is asking us to do. Other than that diversification topic, we are fully aligned, and it feels also in that area, feels good to be aligned to that maximum extent. You see the numbers here, I will not go through them. The risk adjustment is EUR 5.6 billion on a group level, and you see the number segment by segment on the slide. Just a comment, because this cost of capital approach is deviating from the so-called confidence level approach. If we translate our approach into a confidence level, overall for us as the group, the confidence level would be around 90%. If I would look into it by line of business, for P&C, it would be probably below that 90%. Whereas for the long-tail businesses, 90% or maybe even slightly higher than 90% is the right way to look at it. Why did we choose to have it lower on the P&C side? First of all, it's more short tail kind of business. It makes sense anyway to have a lower number. Please keep in mind, we have so many sources for prudency in P&C already, traditionally, but also new ones now in IFRS 17. We didn't want to exaggerate here on the risk adjustment side for P&C. Next slide, CSM. Again, the unearned profits. You can see them here also segment by segment. As a quick reminder, it's zero in P&C reinsurance, of course, by definition, as we only use the PAA approach there. Other than that, you can see that roughly reinsurance as well as ERGO are contributing 50% each to that CSM. You see the lines who contribute, which contribute to the CSM on the right-hand side of the slide. What I would like to emphasize here is that, of course, the interest rate choice we make influences numbers like that. Using the EIOPA curve, we are for sure at the very low end. As I mentioned, for many of our business, not using illiquidity premiums at all. We have used it using the volatility adjustment, which is also in many quarters, quite a low number, would result generally in very low interest rate curves for us. Keep that in mind when looking at our CSM numbers. The last component of EUR 1.4 billion is primarily driven by the reinsurance P&C segment. There are two main reasons for that. The first reason is that we use our prudent reserving loss picks. You're all aware of them. We also use them for the derivation of the loss component, which then drives business, which on the long run, after run off, we would still expect to be profitable. Would drive that business initially into being unprofitable or being perceived as being unprofitable and being booked with a loss component. That's the first reason. The second one is the granularity. We have a very high number of group of contracts on which level we have to do the accounting here. Given that high number, obviously what you do is you have not a lot of diversification. For example, if we have one reinsurance treaty and several perils in that, we would occasionally also cut the treaty and divide it into a separate group of contracts. The offset of a profitable piece of that treaty versus an unprofitable treat piece is not fully reflected, or it's not at all reflected in the way we do the accounting. Therefore, we have quite a significant loss component also based due on that granularity, cutting sometimes even below the treaty level. We call that internally the treaty section level. Which of course, then drives up the loss component quite significantly. On page 21, let's. That's too much. Let's look and at the return on equity calculation. First of all, on the left-hand side, again, the adjusted equity. The basis we use for the calculation of the return on equity as our formula is just the consolidated net income, consolidated result divided by the average adjusted equity. As you can see, that number is stable, very much so, due to the fact that basically we took out OCI already in the past with IFRS 4. There's not a lot of change now. If I look at the segments, there is a certain element of shift. increase of the adjusted equity in reinsurance and the reduction at ERGO based on the new valuation methodology we have to apply with IFRS 17. A first view here on profitability. We expect the return on equity to increase at ERGO due to slightly higher earnings and this lower capital, so lower equity base here. On the reinsurance side, we will benefit from a higher consolidated result and also having then a higher return on equity going forward. I think the positive summary of that slide is that our group RoE benefits from a higher consolidated result going forward. That's also something you could see already in our RoE numbers in our disclosure and yesterday also of course, when it comes to next year in the outlook. Page 22, leverage. You see on the right-hand side a slightly revised definition of debt leverage. We add the CSM to equity and strategic debt and divide then strategic debt by this sum. The number is just smaller then by doing that calculation. 10.7% now continues to be one of the lowest in the industry. Nothing changed strategically. I'd like to comment on the second bullet point on the slide, though. The IFRS 17 equities is less interest rate sensitivity, as sensitive as had to be expected. At half year already, the IFRS 17 equity is higher compared to the IFRS 4 equity. Completely changed when I compare it to the transition. Well, I think that's it for the balance sheet. Let's now go into the P&L. I'll start on page 24. This is a busy slide with a lot of information, so I'll try to guide you through. We wanted to summarize the main effects on one slide to help you a little bit throughout the more technical details I'm going to show you later. The P&L better reflects the economic value creation, and we see an increase of the overall earnings level due to the transition to IFRS 9 17. Let's look at that segment by segment. In Life and Health Reinsurance, we have an earlier recognition of the earnings. Cash flow is obviously unchanged, but IFRS 4 was very much back-ended in the way earnings would then be realized. The earnings recognition is earlier with IFRS 17. That's the main effect here. The earning itself is just defined by the CSM release. That's basically what defines the earnings going forward. Therefore it's much more stable, and we would expect earnings to be very predictable on the technical side. On the investment side, we face high volatility given IFRS 9. That's also something we covered already. The impact of the interest rates is that at the transition, we locked in relatively small interest rates. New business now will be booked with current market rates, with comparatively higher interest rates for now at least. P&C Reinsurance, there we would expect some earnings volatility from interest rates and also a higher volatility from the investment results. We have to get used to the idea that P&C will be more volatile than Life. That was probably at least driven from interest rate, the opposite in the past and future. It's more the P&C result which will show a big interest rate dependency or a bigger interest rate dependency. Here, the low interest rates at transition have been locked in, and therefore the relatively low unwind of those interest rates will somewhat increase temporarily the earnings. The current claims are being discounted at the current rates we currently have, so at higher rates, which will then be a positive discounting impact on the combined ratio. As this interest difference will close, this gap will close eventually, with the run-off of the book and the more new business you write, this is a temporary effect only. Generally, the earnings level should be stable in P&C Reinsurance. Currently, temporarily, there is a benefit from the increased interest rates we currently see. ERGO, there we have a CSM and a VFA approach which serves as a buffer also for the fluctuations in the capital markets. Therefore, the earning stability would be even higher than on the Life Re side. P&C at ERGO will feel very similar to what we experience on the reinsurance side. Therefore, life more stable, but on the P&C side, also particularly on the asset side, we will see some volatility. Altogether at ERGO, we would expect slightly higher earnings compared to IFRS 4. Page 25. This is how a P&L will look in the future. We will continue to release gross premiums written as a non-GAAP measure to indicate sales performance. The actual IFRS 17 P&L starts with insurance revenue and then expenses. Expenses would also include claims here, and then you end up having the insurance service result. The next line then, the so-called result from insurance-related financial instruments, is the Munich Re specific. That's something we decided to include in our P&L. This line will cover what in the past we called fee business in Life Re, mostly. This is to make fully transparent and be fully consistent with our financial statements, what we define also externally as KPI, we introduced that line. As you know, we are writing that business out of our insurance, our reinsurance organization. Therefore for us, it makes sense also to have a proper presentation of responsibilities in the P&L to show that separately from the general investment result. Therefore, we have this result from insurance-related financial instruments. We add that to the insurance service result. What the outcome of the two is then, is the sum of insurance activities independently, if we book it according to IFRS 17 or IFRS 9. The sum of the two we call total technical result. That's also a Munich Re specific term. You'll probably not find that anywhere else. This total technical result is then also what will replace the fee income going forward. For Life Re, our target, as you could see already in our pre-release yesterday, is in the future based on this total technical result number. Which has the biggest advantage that we are able to fully see it in our financial statements, which was never the case for the fee business in the past. What we said before, clarity as a basic principle for the introduction of the new accounting regime, is clearly manifested here in the way we do it here. It should help all of you interpret our numbers in the future and see what we do in that particular business here. We have the investment in the currency result. Currency result now in the operating result as part, an integral part of our investment activities anyway. In the so-called net insurance finance income or expenses, the unwind of the discount happens. That's usually a negative number to be deducted from the investment result, reflecting the discount we have in our technical provisions. This all adds then to the operating result, and outside the operating result, we have only finance costs and taxes. No other operating, only finance costs and expenses to make it less confusing. On the next slide, insurance revenue. They will be significantly lower, particularly in reinsurance. I have to spend some time here because this is also something which is different for reinsurance compared to primary insurance. As you can see, for ERGO, it's comparatively stable. I will not talk about ERGO here. For reinsurance, we have a significant reduction of insurance revenue compared to premiums in the past. What is the reason? The reason is that we have to exclude fixed commissions or commissions which go back to the client, not to a broker. Go back to the client. Those commissions have to be netted off the turnover. The reinsurance revenue is significantly smaller than the GWP. There are also profit commissions, similar things which are in the accounting language called the non-distinct investment component. They also have to be deducted. In simple terms, every cash flow, which under all circumstances would flow back to the client, has to be deducted from the turnover, to reduce it to a comparable level. This is what's happening here, and therefore, this insurance revenue number is so much smaller. Page 27, you can see the impact on earnings in this free measurement model. If, for example, if you have changed interest rate assumptions or experience variances or assumption changes. As you can see, there's quite a bit of dampening in the IFRS 17 framework, so interest rate assumptions are, for example, either booked in OCI or in CSM. Experience variances, by the way, go through P&L in GMM and PAA. You can read the slide for yourself, so you can see how the various P&L or OCI items are being affected. On the lower half of the slide, a few comments on the change in interest rates, more generally. I mean, as mentioned, they are booked in OCI, and thereby remove the interest rate volatility from that change from the P&L. We discount new business at initial recognition with the current interest rate environment, interest rate in the current environment. Therefore, even if you use the OCI option, there's a certain influence of the current rate environment on your results, for example, in your combined ratio. The unwind of the in-force has a negative P&L effect quite regularly, but is a reflection of the interest level of the past, and it will unwind over the duration of the book. So there can be differences between the interest rate you use for new business versus the unwind from the past. The page 28, this shows how CSM could develop going forward. I say could, because first of all, it's an illustrative slide. What you see here is that the in-force CSM, by releasing it into earnings, will decrease over time quite significantly, and then eventually go down to zero, but only far beyond 2050. Then we will replenish the CSM by new business and writing new business which will then add to the CSM. As you can see, obviously, the idea is to grow the overall block of CSM. We would expect that to work nicely in Life Reinsurance. There's just a technical topic I would like to mention. We do not have the data. We have to use the so-called extended contract boundaries so that we do book the new business then as operating change, not as new business in the standard, but it's still new business, and it will still increase the CSM. Therefore, in Life Re, the expectation clearly is that the CSM of the new business will replenish the release and we will overall have a growing CSM. On the ERGO side, this is not the expectation that this will happen for two reasons. First of all, as you know, we put our life back book into runoff. A significant part of the CSM is life back book. And there, due to the runoff, no new business can increase the CSM again. That's one of the reasons. The other reason is that also in health, quite a number of years, we changed the strategy already and focus a lot on short-term health business. The short-term health business is booked in the PAA and not in the CSM. Therefore, by this strategy, you move your business away from VFA into PAA, and therefore, also have, in the future, less CSM. Obviously, you have higher profitability from PAA business, which will not show up in the CSM because in PAA, as it's simplified, you do not have any. Therefore, there is also this effect from health. Page 29, expenses. In IFRS 17, there are two kinds of expenses, attributable and non-attributable expenses. The directly attributable expenses are the ones which are directly related to an insurance contract. Non-attributable, could say overhead expenses. Those are the only two categories we are allowing for in our IFRS 17 world. What we see is that roughly 10% of the former admin expenses are now shifted into the non-attributable and other expenses. This leads to a reduction of combined ratio between one and two percentage points, depending of each, of which business segment you are looking at. We decided, therefore, to fully use this expense definition also for all KPIs, in particular with the combined ratio, because we thought consistency with the financial statements, again, would make a lot of sense. The difference of one to two percentage points does not matter anyway if everybody's aware that we have this shift here. By the way, a shift which of course is not affecting the P&L at all, given that it's only a transfer from the insurance service result into the other operating result. Page 30, reconciliation to Solvency II. First of all, I think that the basic input here is that we use the same interest rate curves, which makes it, of course, much more consistent than if you would use different curves. On the right-hand side, you also see then that eligible own funds plus CSM. Sorry, that IFRS 17 equity plus CSM is nearly, or is matching quite well the own funds. There's an other position which is just a cumulative effect from many and various methodological differences. In a nutshell, it works quite well that those numbers are similar, which should be the case anyway because it's both economic regimes. Numbers should be similar. On the left-hand side, the earnings. We, as you know, use economic earnings to explain the change in Solvency II own funds. The change in the own funds more or less, if I exclude capital management for a moment, more or less the change in the own funds is economic earnings. Now in IFRS 17, this economic earnings is distributed across various items. It starts with the IFRS 17 result. Then you have the change in the unrealized gains, so in the OCI. You have a change in CSM. And then the risk margin is different from the risk adjustment, so there could also be a difference how the risk margin or the risk adjustment, the change in a quarter or in a year. If you add all those components together, it's an ill-illustrative picture, but our internal calculations are not far away from that. It shows that also there, the alignment is quite good. Which also again makes sense, both economic regimes, they should be consistent. In the next chapter, I will talk a little bit about segment specifics, and I'll try to hurry a little bit given that we are in quite advanced in time already. I'd like to start with P&C Reinsurance. There, generally, the operating result will be quite stable to where we currently are. Short-term, temporarily, there will be a benefit from increase or the increased or increasing interest rates which we saw. If I then look at the insurance revenue, the insurance revenue is, as mentioned, significantly smaller in that segment, due to the deduction of commissions, profit commissions or the non-distinct investment component. The insurance service result in itself is in its component, not far away from the, are used to in the, in the past. There you have the cash flows, you have expenses, you have claims, you have your insurance revenue, discounted numbers though, so that's, I think, a significant difference here. Then you have, of course, risk adjustment, which has to be set up again and is one-off then at the same time. There are certain timing differences when you set up things newly for new business versus the unwind from the past. Other than that, I think it will feel pretty familiar anyway. The investment result is going to be more volatile. As mentioned, the net insurance finance income or expenses will show the unwind of the discount of our liabilities. The operating result, fairly stable, but again, currently benefiting from the difference of the unwind interest rate compared to the interest rate we use for the discounting of the new business. The next slide is the idea to show you a reconciliation of the combined ratio in the old world to the new world. To start with, our definition is on the lower right-hand side of the slide. Our definition for the combined ratio continues to be a net/net definition. We take the net insurance service expenses and divide it by the net insurance revenue. Both are after reinsurance or retrocession, as we defined it. If I then go in the picture from left to right to explain one after the other of those changes. The first one already is very significant. The first one is a methodological change, mostly the commissions. As mentioned, the turnover, the insurance revenue is significantly lower to the exclusion of the profit commissions. Obviously, the commissions are also smaller. In simple words, we go from, let's take as an example, an 80% combined ratio from dividing 80 by 100, 80%. You could in a simplified way, say, well, instead of 80 divided by 100, in the future, it's 60 divided by 80. Just for mathematical reasons, the number is significantly lower as long as the combined ratio, the IFRS 4 combined ratio initially is below 100. Otherwise, it goes the other way around, and you end up having a significantly higher combined ratio. Only due to that commission exclusion effect, the nominal value of the combined ratio looks much smaller, profitability completely unchanged, just a different way of booking the commissions. Everybody has to be aware of that now a combined ratio in the 80s does not mean we are 10% more profitable compared to the past. The next item on the combined ratio, discounting. Discounting, that's something which is also the case for primary insurers. The discounting would also reduce the combined ratio. Loss component could go either way. There's also some seasonality in the loss component development. Change in risk adjustment could also go either way. Then the expected major loss ratio here depicted as being stable. Actually, there are two developments in there. 13% we had today, we also expect it to be 13% subject to 1/1 renewal for next year. revenue is smaller, so you would expect the 13 to go up. We also will change the definition of our major losses. The major loss threshold will go up from EUR 10 million-EUR 30 million, and this will then reduce it back to 13%. Therefore, 13% major loss expectation, still nominally the right number, but the content slightly different compared to the past. The last position here, as mentioned, one to two percentage points deduction of expenses due to the IFRS 17 cost classification. Slide 34. A few words on prudency. I've been mentioning a couple of times already that we stick to our conservative reserving approach, which basically means that the loss picks are completely unchanged. The loss picks our actuaries are taking do not change at all. The triangles look the same. It's all unchanged. What we have is, of course, we add the risk adjustment on top of that. This is an additional element of prudency, as mentioned before. Then the discount is the time value of money. We have to discount the reserves, the time value of money has also to be reflected. From the initial setup of a provision over time, and this is what's shown on the picture here, will converge towards the final loss amount. In the course of this convergence, we'll obviously have the unwind of the discount. More importantly on that slide, we will release the prudency as we did today. One element of prudency we are going to release is the prudency we have in the loss picks. Our so-called famous 4%, which we in the past in IFRS 4 always showed you. By the way, this number is going to be rather five in the future instead of four, given the different definition of insurance revenue versus premiums. Five of reserve releases based on the conservative loss picks. On top of that, we will have to release of risk adjustment. This is my next slide now, an additional element of prudence, the loss component, as you can see on the slide here, which will also over time when the final loss amount is there, will be transferred and will be released. Also the loss component is an additional element of prudence we have. You get that more or less automatically when as I mentioned before, you use our general conservative reserving loss picks and the high granularity we do the accounting in. It's not a surprise, but again, as it's booked against equity already at transition, it's an additional piece of prudency. There's seasonality in there. As you know, our renewal dates are not equal when it comes to volume, and therefore, in the renewals where we have higher volumes, which we renew, we obviously also set up higher loss components compared to the smaller renewals. Next slide is on reinsurance life and health. There, again, the P&L looks pretty much similar. I again would like to underline on that slide here, the result from insurance-related financial instruments. This is the form of fee business, which we show now in a separate line and to be fully transparent. The total technical result would then include the business we are writing out of the reinsurance organization, independently of the accounting standard we have to apply to the particular treaty, be it an insurance contract with IFRS 17 or be it a financial instrument, and then it's IFRS 9. The investment result will be more volatile. I mentioned that already. The other operating income is mostly driven then by the non-attributable expenses, which are booked in other operating result. Page 37, the reconciliation of the CSM. This is how this could look like in the future then with real numbers. Here, the CSM 13.77 is the starting value. Then you add new contracts. You have an interest accretion, you have operating changes, change in financial effects. Most importantly, the release. There is the P&L impact which is then delivered, and then you have the CSM at closing. We expect the P&L impact to be 8% of the CSM per annum. The amortization should be around 8%. That's our current expectation. Obviously, this can change with business mix, with development of new business and so on and so forth. But for now, 8% is our estimate. Page 39, ERGO Life and Health. Here we use the VFA approach. The VFA approach goes beyond what we have been seeing for Life Re in a sense that in the VFA approach, the CSM is also buffering the change of financial parameters. If you have an interest rate change, the CSM will fully buffer the effect. Capital market parameters, everything else, also technical result development, it will all be buffered in the CSM. In a way, you can expect the result in a very reliable way to be the CSM release. Therefore, also this Insurance Finance Income and Expenses line has to be interpreted differently in the VFA approach. It's the unwind in the other segments, but in the VFA approach, this line is just used to neutralize the P&L effect from investment income. Because the P&L effect should only be the release of the VFA. You have to neutralize somewhere the investment income. That's done in this Insurance Finance Income and Expenses line. The CSM reconciliation on the next page is very similar to Life Re, just simpler, because basically you only have new business, so new contracts added, and then you have operating changes. These operating changes also include the changes in capital market parameters, as long as you have a positive CSM. You have a release. This release for ERGO is expected to be 4%-8% per annum of the CSM. Careful, this includes 50% of the so-called overreturn. This is something I think I need to explain a little bit further. The CSM, as we do the calculation, is all based on risk-free projections. The risk-free rate is the EIOPA rate curve. Of course, we expect our asset managers to deliver higher returns. This expected higher return leads to then also higher liabilities towards our policyholders, but obviously also the shareholder gets his share from it. The shareholder share of the higher expected performance of our asset managers compared to risk-free, that shareholder share is the so-called overreturn, which is already part of the 4%-8% CSM amortization as mentioned on the slide. This is explained again on this page 41 here. We do the valuation based on risk-free, and again, based on our very low risk-free EIOPA curves. The overreturn comes in. This is the difference between risk-free and the expected return in our plan. This difference is distributed between fulfillment cash flows, so between what our policyholders get, and the share that the shareholder will get is immediately released through P&L. It's roughly 50% of the CSM release in our case. Why so much? Why 50%? The reason is that our low risk-free curve is comparatively low versus the real-world interest you could expect from your asset manager nowadays. Therefore, a relatively big portion of it is over-return. If you would have chosen higher yield curves instead of the EIOPA curves, obviously the real world expectation would have been unchanged. The distribution, what is expected CSM release versus what is over-return, that would have shifted the overall amount. The sum of the two would have still been the same. Just you have to be careful when you look at our expected CSM releases. If the trajectory we have been showing you before, that number is comparatively small, as it's based on the EIOPA curve. Next slide, ERGO P&C. I think nothing to add here on that slide. That's very similar to reinsurance P&C. Also here, a reconciliation of the combined ratio from IFRS 4 to IFRS 17. The one big difference to reinsurance is that methodological changes here do not play a major role. In reinsurance, the commissions, as mentioned, did lead to a significant reduction of the combined ratio. We do not have that effect in primary insurance, so ERGO is unaffected from that. All the other items are pretty similar. For ERGO, of course, consistently, we define the combined ratio as a net-net combined ratio. Next slide, ERGO International. ERGO International is a mix of various businesses, be it P&C, be it health, be it life. Therefore also all measurement models are being applied. We have PAA, we have GMM, and we have also VFA in that business. Therefore, looking at the P&L of that segment, it will be a combination of the three, and therefore a little bit harder to interpret. This brings me to the end now of the conceptual part of the presentation. Now I'll jump to the outlook. Please let me comment a little bit on the outlook and explaining a little bit or giving a little bit color around the numbers as we have been pre-releasing them. The way we do the planning, we always start on an operational plan level. Operationally, the plan as we are presenting it, is a realistic and well-substantiated plan. This operational plan now had to be translated into the IFRS 17 world, which was a first-time exercise for us based on tools which we are building or have been built recently only, and we do not have a long time series yet. As much as operationally the plan is realistic and very well substantiated, the IFRS 17 component, the translation, there we were a little bit conservative, let me put it that way. Just given the uncertainties in the methodology and that we lack experience and time series. The gut feeling is also still not there, really. which means our ambition to operationally improve and deliver our targets, of course, completely unchanged. If you look for a certain element of conservativism in our plan, you'll find it in the way how to interpret IFRS 17 in the context of those KPIs and in the context of our plan. I think that this is true for all segments. I wanted to start my comments with that. Maybe a little bit more specific. P&C Re to start with. We expect, of course, a continued profitable growth. We expect to capitalize on our superior market position, particularly also now in the 1/1 renewal, which is upcoming, where we still continue to expect a widespread rate hardening in a very positive environment. In that context then, of course, the combined ratio improvement you see here down to the 80%, 86%, is not only driven by the translation of the old number into the IFRS 17 world, but of course, there's also an element of operational improvement in there, given the very favorable market environment, which is then fully reflected also in this plan number. What we fully keep up is our prudent reserving strategy, as mentioned before. What we also expect to happen is a certain positive impact from interest rates due to that IFRS 17 transition. Also this combined ratio, just to remind you, it's a discounted combined ratio, fully in line with the IFRS 17 methodology. A few comments on Life Re. There we continue to be on that favorable trajectory. You can see here that the total technical results of this new KPI, you'll then be able to fully see in our P&L, fully transparent. There, this EUR 1 billion is just a continuation of the trajectory as which we have been showing in the past. Additionally, somewhat supported by the change to IFRS 17, where I mentioned before already that we expect a somewhat earlier profit recognition in IFRS 17 compared to IFRS 4 before. My next comment then relates to ERGO. ERGO continues to be fully on track to deliver the Ambition. Also at ERGO, I mentioned that before we see a slight upside from IFRS 17. For example, you see that in the combined ratios here. That the around EUR 0.7 billion ERGO target is a continuation of their path of operational improvements with some methodological changes which also have an impact here. My final comment then on the return on investment, the 2.2% may be a little bit low, maybe a little bit surprisingly low even. On the ROI guidance, I think the key assumption you have to keep in mind always is how much realization of unrealized losses do you allow for in your plan. We said we do want to have quite a few of them next year, so therefore the return on investment is lower than what we expected for this year and for last year. Realization of losses obviously means that you reinvest at higher yields, and that then the higher yield environment will earlier earn through into also then higher P&L in the future. In the year you do the higher turnover, obviously your result is burdened. This is why the reason why this ROI number is maybe comparatively small. It's also smaller compared to the numbers, at least I'm aware of what has been discussed in the capital markets as a consensus before. The reason is really higher turnover from bonds, where we realize unrealized losses. My summary on the outlook is then finally that operationally well on track, fully benefiting from a very positive environment, particularly in P&C Re. When looking at the 1/1 renewal, this all reflected in the usual way we do that in our operational planning. The translation into IFRS 17 done in a maybe even a little bit more cautious way than in the past. Maybe a cautious way than the planning is being done generally. In the past, we didn't do IFRS 17, I have to say. That's on the outlook. Next slide. Ambition 2025. There's an update on the return on equity target. It's no update on our strategy, and it's no update on our operational Ambition 2025. This is a mechanical translation. 12%-14% will translate into 14%-16%. Again, this translation done in a cautious way. 12%-14% translated into 14%-16%. This 14-16 then, as in the past, the 12-14 would equally apply to reinsurance and to ERGO. Well, that's it. Sorry, a little bit more than an hour. I hope it was not too tiring. It's a big shift. I would really say an accounting revolution, but I hope I was able to convince you and to show you that it makes sense closer to economic, or economic perspective, closer to internal steering, and more consistent with what we're doing elsewhere. Therefore, it should be helping you in the future to assess what we are doing, our capital strength, our financial strength, and our operational excellence. Thank you very much for your attention. With that, I'm very happy to hand back over to Christian. Thank you, Christoph. That was very comprehensive and detailed. Therefore, I do expect quite a few questions. As usual, I would like to ask you to reduce or limit the number of your questions to a maximum of two per person. With that, please go ahead. Ladies and gentlemen, at this time, we will begin the question-and-answer session. If you would like to ask a question, please dial in via phone and make sure you mute the webcast player. Anyone who wishes to ask a question may press star followed by one. If you wish to remove yourself from the question queue, you may press star followed by two. Anyone who has a question may press star followed by one at this time. One moment for the first question, please. We have the first question from Andrew Ritchie from Autonomous Research. Your question, please. Oh, hi there. Thanks very much for this incredibly comprehensive presentation. First question, Christoph, you mentioned the phrase you used, whether there's lots of new areas for prudence outside of the risk adjustment. Could you just clarify what those areas are and maybe just give us a sense as to what, you know, how you've dealt with that? Could I also ask on the loss component, the second question, what should I do with that? I mean, what's the period of time I should expect that loss component to reverse into the P&L? Would I be just incorporating that within my reserve releases? Linked to the loss component, does this mean that your underwriting, sorry, your service result in P&C Re will be very depressed in Q1 and Q2 with renewals? Thanks. Yes. Well, thank you, Andrew. What I meant with the additional areas of prudency, starting with the loss picks, which are unchanged, I actually meant the risk adjustment which comes on top, and I meant the loss component. Basically those two things. The loss component, how does it move into earnings? Basically, it parallel to the release of the prudency out of the reserves. You have to be careful. The loss component, of course, for new business is then also being set up again. In a steady state or year-on-year, there shouldn't be a lot of change then. Only once we would run off our company, you would really benefit then from the releases. So therefore, it's more lack of a conservatism, where in a steady state, not a lot happens, really. Similar like the 4%. Also, the 4% in reserving, you know, release them after a number of years. We also, you know, for new business, we set it up again. It's a similar kind of mechanics for the loss component, like for the prudency in our reserves. Seasonality, well, there's various sources for seasonality. One is the loss component, so indeed, in Q1 and Q3, or depending on the renewals, the loss component could be bigger or smaller. On top of that, all these items are discounted, so interest rate shifts between the quarters can make a difference. Would also lead then to seasonality or to volatility between the quarters, let's put it that way. On top of that also the reserve releases. In the past, we booked the 4% releases pretty stable over the quarters. There might also be more volatility in that going forward, maybe even offsetting part of the loss component volatility. Which then again would dampen it to some extent again. If I summarize all of that, I think it's a little bit too early to give a final judgment how really the individual quarter would look like. Generally, I would expect the volatility to be significantly higher than today, already alone due to the interest rate component. Okay, thanks. The next question comes from Kamran Hossain from J.P. Morgan. Please go ahead. Hi. Morning, everyone. Thanks so much for, you know, the amazing comprehensive presentation. I had one question on onerous contracts. When you're in a growth stage, this is probably a stupid question, should we expect that to be a bigger drag on earnings for now? I guess if you're growing, there's more onerous contracts, over time, if you start to shrink or start to hold the top line, that unwinds a little bit faster. Secondly, I guess on the combined ratio, clearly, it's a very different basis. How should we think about the 86 on a discounted basis versus the 94% target last year? Just interested if you've got any thoughts on that, if you looked at it on an undiscounted basis. Thank you. Sure. Onerous, in my view, no drag on earnings at all because the loss component, we book it at transitional already in equity. As I said, in a steady state, it should be pretty stable. When we grow our business, there might be a certain financing to be done. Generally nothing I would be concerned with at all. No drag to be expected from that. It's just a different presentation. The combined ratio, we did not do an IFRS 4 planning process. Therefore, what I cannot tell you, also because I don't know, is how the 86% would look in an IFRS 4 plan, which we don't have. What I can tell you is that of course, going down from 94 - 86, a very significant part of that reduction is driven by methodology. On top of that, there's the operational improvement. You know us, ahead of 1/1, we're very reluctant in sharing, particularly concrete numbers. Therefore, we would try not to say anything today. Yeah, I mean, the environment is very positive and we should and we do expect an improvement, which would then also be clearly beyond what the inflation currently would mean. Fantastic. Thanks very much. The next question is from Vikram Gandhi from Société Générale. Your question, please. Hello. Thank you for the opportunity. Clearly, a detailed presentation. Couple of quick ones from my side. One is, Christoph, on the various choices the group has made with respect to this principles-based approach, just curious to understand why IAS 39 overlay and not IFRS 9, why equities movement through P&L and not OCI, why no retro results separately? So far, that's the impression I got by attending the presentations from primary insurance companies, that they have a reinsurance result separately. Likewise, I would have expected a reinsurance and a retro result. That's really question one. The second one is, it's a pleasant surprise to see the 2023 net income target ahead of the one-one renewals. Can I ask, to what extent have you factored in the positive development that the industry is expecting for 1/1? In other words, the risk to the EUR 4 billion figure is to the upside or the downside is all I'm trying to gauge. Thank you. Vikram, thank you. I'm sorry. I didn't get the third one of the choices you were mentioning. May I ask back, please? The first one was the overlay approach, second was the equities through P&L. The third one I didn't get really. What's the net? It was from the IFRS 17 presentations that we've had from the primary insurance companies, what I understand is there is a gross insurance result, and then there is a net reinsurance result that they would report to arrive at the insurance service result. Likewise, I would have expected from a reinsurer to report a pure reinsurance result or which is an insurance result for you, and then a net retro result. Yeah. Okay. Thank you. Got it. Well, choices overlay approach, very simple choice. If we would have done IFRS 9 completely already for the prior year numbers, so for the comparative period, the costs would have been significantly higher. We would have had to upgrade our systems quite significantly, which would be just an expense for a one-year transitional period, which we just didn't want to bear. That was only for cost reasons. Equities to P&L. Well, I showed you one of our guiding principles, which was that we want to have all earnings components eventually in the P&L. If you would have gone for equity through OCI, the increase in value would never be booked in the P&L, which we just think is fundamentally wrong. An accounting framework should eventually show all earnings components in the bottom line. Otherwise, I don't know really what the bottom line is all about. Therefore, we decided to go for the fundamentally correct way, despite the volatility, which will be significant. On the volatility, on the other hand, you still have to see that anyway, in our case, we are facing volatility quite regularly on the loss side already. The biggest volatility I would be afraid of is still not on the asset side. It's really in case a large storm hits us, it is still the liability side. Therefore, I think we are quite used to bearing volatility. I think also our investors and you as our analysts, you understand what's going on anyway. Therefore, we thought, well, let's take a choice that everything will show up in the P&L eventually and accept the volatility. Combination net-net, there the driver for the decision was the alignment with our internal view. Everybody's so used to net-net. That's also what we do for ages internally. We also looked at the numbers, and they look very similar in our case, as far as neither retro nor external reinsurance on the ERGO side, plays such a significant role that if you look at the nominal values, they would be very similar. Everybody's so used to net-net, and that we said, well, no reason really to change it. Then net-net is what we did in the past. Yeah, you were mentioning the 1/1 renewal, the positive environment. I think I can only repeat myself. The guidance, it's included to the extent we are aware of it already. I mean, we do not know everything yet. I mean, the renewal is still ongoing. It's in various parts of the market, a very late renewal, so things are still ongoing. What we know already is reflected in there. As it's still early, of course, in a somewhat conservative way, as we always do it. Again, I'm in no position to speak about a more concrete expectation for one-one today. Other than of course, we are very optimistic, and the environment is a very favorable one, but that's something you know anyway. Sorry, nothing to add. Thank you very much, Christoph. The next question comes from Will Hardcastle from UBS. Your question, please. Hey, good morning, everyone. Two questions, please. What's the strategic or macro thinking behind making you think it's appropriate to be selling more bonds in 2023, so realizing the losses in order to reinvest in those higher yields? Secondly, just picking up cat budget change, the large loss assumption threshold. Can you maybe talk behind the rationale behind the uplift? And have you done any back testing, maybe what this would have done to the cat budget and what at the volatility it would create what we sort of so-call the underlying combined ratio? Thanks. Yeah, sure. Capital losses, it's not like that we will be driving a huge initiative to realize losses. What we want to give our asset managers is the liberty to really trade and do what they want without a lot of restrictions. This very natural will lead to higher loss realizations. Therefore, we included budgets for that. Then we'll decide in the course of next year to what extent we will use them or not use them. Maybe we go even beyond them. As a planning assumption, we included really loss budgets for the asset managers in order to be able to allow them to act as unrestricted as possible to make sure they can capture opportunities in the capital markets as they arise. The changed large loss threshold, well, we did a few internal calculations. Of course, we did that, but the driver for doing so was not so much driven by any numbers and also not driven by IFRS 17, but merely by the fact that we have been growing our book so much. Where in the past the EUR 10 million threshold seemed to be adequate. Now, as we are so much bigger, we ended up having more and more, let's call them big attritional losses, being part of our large loss ratio. Therefore, we said 30 would be more adequate. If you are above 30, then it's really fair to say that it's a large, an exceptionally large loss and makes sense to handle it separately. Whereas losses around EUR 10 million, given the size of our book, they are not so spectacular. Therefore, also in alignment with our internal steering approach, we increased the threshold to 30%. We will also, in the future, provide you with a normalization of our combined ratios. I mentioned the 13% already to be reviewed after one-one. If the composition of our book would change drastically, maybe the 13 will still change. For now, the 13 is our best estimate. We will also normalize for reserve releases. I mentioned in my presentation that the 4% we have today will develop closer to something, maybe five. That's due to the reason that the premiums are now insurance revenue. They are smaller, the four becomes a higher number then. We'll also normalize, that's the plan of today for the loss component volatility. At least when we look at individual quarters. In order to make Because in a steady state over the year, it should be more or less zero. A quarter could be very much distorted by the setup or by the release of a loss component. The plan is also to normalize for that. There will still remain more uncertainty in that calculation, because as said, the combined ratios will all be interest rate dependent. Even after those normalization steps, if you then compare the combined ratio with what has been the plan, we at least have to take a step back and look if interest rates did change significantly or not, and what the impact of that shift was on the combined ratio. That's something we could then also provide you with as an additional piece of information. Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star followed by one. Got this one? We have the next question from Thomas Fossard from HSBC. Your question, please. Oh, yes. Thank you. Good morning, Christian. thanks for the presentation again on my side. maybe two questions related to reserving, because clearly this is a key feature of your investment story for investors and also providing a lot of reaction on your shock absorbance capacity. Just I understand everything you said on maintaining the level of prudence in your reserving. I think that in the past, you talked as well about unallocated bulk IBNR reserves, which was on top of every conservatism you have already in the balance sheet. I mean, can you say this unallocated bulk IBNR are still available to you under IFRS 17? That would be the first question. The second question is, can you help me to understand, and maybe this is, now with the benefit of hindsight of all the presentations, but a couple of quarters ago, I thought that, you know, the overall message of the industry was that keeping such high level of conservatism in the balance sheet would be probably more difficult because everything will have to move to best estimates, right? Now I think that the message we are getting from the company is that, "Oh, we find ways to transfer part of this buffer." Was my understanding wrong at the beginning, or, I mean, is it just because the framework is principle-based and bring a lot of functionality and way to construct the norm? The third question, if you allow me, would be on, you know, probably in 2022, it's fair to say that in order to keep the guidance, the net profit guidance unchanged, you have potentially used up some of this conservatism you had in the balance sheet. How should we think about potentially replenishing this reserving buffer into 2023 or 2024 in order to come back to the initial starting point? Thank you. Sure, Thomas. Thank you. Yeah, at first, I think I can very quickly and very easily confirm that all the various components of our reserves we had or we still have in IFRS 4, they will all survive and all still be available in IFRS 17. All, be it individual IBNRs, be it bulk positions we hold, all these various items, they are still available. No change. When it comes to your question, if it's surprising or not that there is still a lot of conservatism possible in the framework of IFRS 17. Well, I mean, the way we define our reserving for a long time already is anyway, that what we do is the best estimate. It has to be because we use it for Solvency II and in the past for IFRS 4, and now the reserving is used for IFRS 17, and the only big difference basically is that we discount it as suggested by the standard. That's pretty much unchanged. I wouldn't say that that is a surprise. That's something at least we wanted and we intended all the time. Given that it always was the best estimate, it was for us clear that also in the future, it would be a best estimate. Admittedly, it's a cautious or prudent best estimate. What our actuaries do is you always have a range of possible outcomes, how the reserve could be defined. What we do is we try to be at the upper end of that possible range. The complete range would be a possible best estimate. Therefore, on that reserving side, not a lot really changed for us, at least. What comes on top, though, when it comes to conservatism or prudence or however you would like to call it, I mean, the risk adjustment is something where the standard is just suggesting we have to book it. I think we could have a long debate if we really need the risk adjustment, particularly in our P&C business. That's also why I've been commenting that the quantile for us in P&C is lower than on the life side. Because... If I look at all the various elements of prudence we have already, do we really need that risk adjustment on top of that? Or is it just similar like the CSM, a future earning component? And there I leave the judgment to you. I mean, it's your view if that's really, I mean, is it future earnings, or is it the prudence we need, really? Eventually we'll anyway then transfer it into the P&L. That's clearly something the standard is suggesting we do, and the whole industry does. I think that there's a broad alignment anyway. In line with how we interpret financial steering, I think it's no surprise that our quantile with 90% is maybe a little bit higher than what you could hear elsewhere here and there. I think then that's then consistent again with what we're doing everywhere. I personally also still feel very comfortable, being really, you know, really market-faced in the business itself. Doing the steering, the risk management, the financial reflection of everything we do in a very conservative way, and given also the peak risks we are taking, just makes me feel much more comfortable. I think it's a perfect base also to make use of the opportunities we find in particularly the current market environment. This is a great environment to grow, but you need to be able to afford the growth based on the prudence on your balance sheet. There we are extremely well positioned and just continued that positioning into the IFRS 17 world now. The last question was if we used up some conservatism, or I think it was your assumption we would use up some of the conservatism going forward now to achieve our target this year. Let's discuss that when we finally are there. If and to what extent we really used up some conservatism. That's a debate I'm happy to have then in February next year when we release our Q4 numbers. What I can say, though, is on a more long time horizon, obviously we do have the buffers to make use of them once they are needed. In very good quarters or very good years, you have to refill them, otherwise you don't have them. That's part of this overall integrated, let's call it prudence financial and risk steering, which is the basis for us to grow significantly and successfully into very attractive markets right now. Taking quite a portion of peak risks also, based on strong capital, strong Solvency II ratios, strong financials, strong reserves. This is just the basis to conduct business like we do. Therefore, we'll always, you know, continue with that. Be prepared in case we used up buffers, we would also, of course, then fill them up over time or eventually whenever we can afford it again. Yes, fully understood. Okay, thank you, Christian. We have a follow-up question from Vikram Gandhi. Please go ahead. Hello, thank you. Just a couple more from my side. One is, now that we should expect more volatility going through the P&L, is there a temptation to introduce a range for the net income instead of a single point figure? Secondly, how closely do the P&C reserves on a nominal basis under IFRS 17 resemble those in the Solvency calculations? Or put differently, what are key areas of divergence? Sorry, can you repeat the second one? I didn't really hear it. On a nominal basis, or P&C reserves, how closely do the IFRS 17 results resemble those under the Solvency II calculations, or are there any areas of apparent difference? Yeah. Okay, thank you. I started with a serving question. It fits nicely to the other discussions we had already today. It is more or less identical, because there's one best estimate for us, and the one best estimate, we use it for Solvency II equally, like for IFRS 17. Also the discount weights are similar. There is a lot of similarity in that. It was like that also in the past with IFRS 4, but there we didn't have any discounts. The major difference now is the discounting going forward. Data and the data flows, these kind of things might differ between Solvency II. The loss component is different, risk adjustment is different. There are certain differences, but really nominally on an aggregated level, they're highly consistent between IFRS 17 and Solvency II. As again, it may only make sense to have one best estimate, we shouldn't have different ones. Also not to confuse ourselves or confuse our external stakeholders. The question on the range for a result target is always a good and a relevant one. We've asked, we've been asking ourselves quite regularly if we should have a range or not. What happened in the past, whenever we had a range, given that we are famous for being a little bit, yeah, conservative. What happened with the range is that nobody accepted the range, but it was always the upper end of the range, which had been found its way in, in, into the consensus anyway. Therefore, in reality, a range never worked. That's why we stick to point estimates. In, you know, in real life, a point estimate always comes with a range. Given that volatility, and also the reduced steering possibilities we have in the new framework. It will. Of course, there will be noise around that point target. Then we think that first of all, the standard is made like that, so it's intentionally like that. We also think the public will understand that. Thirdly, we'll be able to explain it. Therefore, I'm not really concerned by that. Fantastic. Thank you. We have another follow-up from Andrew Ritchie. Mr. Ritchie, your question please. Oh, hi there. Just slightly odd one maybe. Do you think you'll have to communicate a different combined ratio to your clients? Mm-hmm. I guess my concern is that 86 looks like a low number. I appreciate one of the big factors is the ceding commission has been taken out of numerator or denominator, and you're still paying that ceding commission. I don't know if you see what I mean. given the vast amounts of the industry will have a different combined, you don't wanna be looking like you're making excess profit. Is there a sort of supplemental communication required? That's just on. Mm. One question. Second question, tax. Is there a big issue on your tax rate because there's a bit more variance between local and IFRS group now going forward? Final question. One of your 2025 targets is economic earnings. I think it was EUR 20 billion over by that point. Economic earnings should be higher than IFRS 17 broadly. You've given us EUR 4 billion for next year already on IFRS 17. When will you update your 2025 economic earnings number? Andrew, thank you. The client communication is a relevant point. I mean, the good news is our clients are professionals. They're all insurers, that they know what's going on. I think we will be able to explain to them that the very low nominal value of the combined ratio is a calculation effect, and does not imply the margins are so much higher than before. Obviously, we will have to communicate that very carefully and very openly and obviously also internally, we have to make all our underwriters, all our staff aware of the effect. That's something we, of course, are doing and intensively discussing with them. On top of that, for operational steering, we use a management view. Management view is not based on IFRS 17. Therefore also for the operational steering, nothing changes really. Which I think is also relevant in that context. Therefore, I, as much as I would see the risk you're mentioning, or you're guiding at, I think we can control it, and we should be able to control it. There was also no other way with the combined ratio. I mean, that's how the standard works. Our revenue goes down significantly and then this is a reinsurance topic. For primary insurance, it's different. We rather explain it in a good way, but not sticking to the standard, I think would have been the worst option. The target economic earnings. I mean, in the strategy presentation, I think we said illustrative to some extent. I would not even say that, you're, you're. That, that. There's a fair base for your question. We're doing well. EUR 4 billion is quite a good number. I showed you the transition. There's also CSM change, there's the change in OCI, so there are more components as you mentioned. So I think what you can take from that is that we are doing well in our strategy execution. In the economic earnings term, similarly like also in IFRS and also like operationally. We refused so far from updating our operational targets for the strategy. Also today, the idea is really to give an update on the accounting, not on the operational development. What I can say, of course, is that when we first gave those targets, the assumption was not that markets would be hardening so much and so long. We have more support than what we assumed when we defined our Ambition 2025. Now, it's on you if you think this hard market is going to last until 2025. If yes, I think it's a simple calculation that there would be upside then. If no, and that the markets would soften again, obviously we would then have faced a more difficult market environment in traditional reinsurance again, which was the assumption anyway when we did set up the strategy. As you remember, the idea was then to replace it with specialty business and replace it with stronger contributions from Life Re and from ERGO. This is also something which we are doing in parallel. Therefore, to cut a long story short, we are benefiting more from the traditional reinsurance business than we thought. The longer it lasts, the more we are going to enjoy it. If it lasts until 2025, it will provide us with upside compared to what our initial strategic targets were. The next question is from Vinit Malhotra from Mediobanca. Your question, please. Yes, good morning. Thank you very much. Just one thing that I would like to just check on. Christoph, you said that the 86% was not just a mechanical translation, it was also considering the market environment. What have you quantified that? Sorry if I missed it. Quantified whether it's, say, 1% or something like... What is this benefit that you're assuming? Okay. Thank you very much. Yeah, Vinit. Yeah, sorry, I can't, to be honest, for two reasons. First of all, we do not have an IFRS 4 plan which is comparable, where I could compare the IFRS 4 combined ratio to our current run rate. We just don't have that. On top of that, if I would do so, I would already guide you today what the 1/1 renewal outcome would be. That's also something, as you know, we don't do ahead of the renewal, once it's still ongoing. Also due to the fact that in reality, we don't know, really. Therefore, the only point I can make is that obviously, everything we know, how positive the environment is, how really boldly we see hardening, terms and conditions and prices across, very relevant markets for us, that that's included in the guidance, but I cannot give you a number. Right. Yeah, fair enough. Thank you very much, Chris. The next question is from Freya Kong from Bank of America. Please go ahead. Hi, good morning. I was wondering. I'm sorry if you explained it already. Could you help give a little more color on the updated major loss budget of 13% in the context of your 86% combined ratio target? Any color on how this might grow on a like-for-like basis, has this increased? Secondly, on reserve releases, historically, 4% contribution or benefit to your combined ratio, I think you mentioned it would be 5% going forward. Would you give the breakdown of the run-off from liabilities versus risk adjustment? Should this be fairly stable? Thanks. The EUR 30 million threshold reduces the large losses we expect. If you look at the ratio, the ratio will go up due to the fact that we have a lower insurance revenue compared to premiums. Having less large losses above EUR 30 million than today above EUR 10 million, and at the same time have lower insurance revenue versus premium, they cancel each other out more or less. Nominally 13% large loss loading was the number in the past and also is the number in the future, but the content is different. The reason why we updated the EUR 10 million threshold to EUR 30 million, is basically the growth we have been seeing in recent years, in order to avoid to have too many attritional or similar to attritional losses in our large loss number. You are right, I mentioned the reserve release number from 4%- 5%, approximately. That's a number we didn't mention in writing in the presentation because it still might depend on insurance revenue, detailed numbers, and so on and so forth. Roughly five. We'll update on the normalization of the combined ratio then in more detail in one of our next releases anyway. Five is the right number to look at for today. The release of the reserves, the release of the risk adjustment, well, the reserves, they are released in line with the claims settlement. The risk adjustment is released in line with how long are we at risk. This is not dissimilar to put it that way. Although there might be, of course, a few, you know, differences in the details, largely comparable. That's what I would say. Okay, thank you. That's very helpful. The next question comes from Darius Satkauskas from KBW. Please go ahead, sir. Afternoon. Thank you for taking the question. Could you help me understand how to think about the upcoming renewal disclosure for what you have achieved January, April, and June, July review? I'm not sure the risk-adjusted rates will be comparable due to the past, so what changes do you expect? Will you help us bridge due to sort of deliver to the past? Thanks. The line was a little bit broken here. Yeah. Did you ask about the regional distribution? I didn't get the question. No, no. We didn't get the question, Darius. Okay. Cool. I'll repeat it. Yeah. I'm just wanting to get some color on how I should think about the upcoming renewal disclosure. Mm. In terms of what you will have achieved at January, you know, April, June, and July. I'm not sure the risk-adjusted rate increases will be comparable due to how you sort of measure that and. Mm. Do you expect any changes? If so, what? Will it help us bridge it? Thank you. Yeah. That's something we have not finally decided, but we clearly have to look into that before updating you on the 1/1 renewal early next year. There's nothing I can really talk about already today. Obviously, you have a point. We have to make sure that we somehow bridge the old renewal disclosure versus the new IFRS 17 world, or give you some help at least to interpret it. That's something we are working on. Thank you. That was our last question for today. I hand back to Christian Becker-Hussong for closing comments. Thank you very much. Thank you to all of you for your questions and for attending our presentation today. Hope that was comprehensive and detailed enough for you. We are happy to help you with further questions. Please get in touch with the investor relations team. Happy to help. Aside from that, there's only one thing left for us, and this is to say again, thank you and happy holidays to all of you. Looking very much forward to seeing you early next year again. Bye-bye for now.