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Karl Steinle: Good morning, everyone, and welcome to our earnings call on our results for the first 9 months of 2025. And as usual, our CEO, Clemens Jungsthofel; and CFO, Christian Hermelingmeier, will provide a brief overview of the business development so far in '25. And afterwards, Clemens will present the updated outlook for the current year. And as usual, we'll provide an initial guidance for the financial year '26. For the Q&A, we will be joined by Claude Chèvre and Sven Althoff. And with that, I hand over to you, Clemens.
Clemens Jungsthofel: Thank you, Karl, and good morning from Hannover. So on the first slide, the business performance in the first 9 months was very satisfactory. The group net income of EUR 1.96 billion reflects a strong underlying profitability and additional positive tailwind from currency translation and from tax, adding up to more than EUR 400 million. The low tax rate, particularly in the third quarter, is mainly connected to the newly enforced change in the German corporate tax, resulting in a corresponding release in deferred tax liabilities. This not only left us in a comfortable position to increase the group net income guidance to around EUR 2.6 billion for the full year. In addition, we used the extra level of profits to further strengthen our company's balance sheet. We have added significant prudency to our P&C reserves. We've taken a more cautious view on certain pockets in our Life & Health portfolio, and we have realized more than EUR 300 million losses in our fixed income portfolio. All of this improves our already strong balance sheet and our confidence in future earnings growth. In P&C reinsurance, we have continued to grow our portfolio in an attractive rate environment. As in the first half, the refinement in the calculation for the non-distinct investment component does have a negative base effect on reported growth numbers. As it does not impact earnings, this is no cause for concerns at all, also not when comparing to our 7% growth target. So on an adjusted basis, the growth is close to 10% and therefore, clearly ahead of the 7% mark. The favorable underlying growth is also reflected, as you can see, in the increase in our new business CSM to now EUR 2.6 billion. The large loss experience in Q3 was rather benign, particularly on the nat cat side. Hence, the overall impact from large losses was well below our budget for the first 9 months. But as you know, as usual in this situation, we have booked the full year-to-date budget. Therefore, the reported combined ratio does not reflect the benign large losses. On the contrary, we have actually used the overall positive results situation to add further prudency to our P&C reserves with a corresponding effect on the reported combined ratio. Nevertheless, the reported 86% is well in line with our target, pointing to an even better underlying number. In Life & Health reinsurance, the revenue is growing moderately. The new business generation increased by 16% to EUR 575 million, including a favorable contribution in the third quarter. The Reinsurance service result of EUR 671 million reflects the overall positive business development and confirms that we are well on track to deliver on our target for 2025. The ordinary investment performance was very satisfactory against the backdrop of another strong quarter, including the positive tax effects, we have decided to accelerate the loss realization in our fixed income portfolio. After around EUR 60 million in the second quarter, we have realized another EUR 260 million in the third quarter to improve future investment returns and to increase the flexibility in our investment portfolio. Hence, the return on investment of 2.8% is deliberately below our target for the full year. Finally, the capitalization remained strong with a solvency ratio of 259%. In the third quarter, the operating capital generation was slightly above EUR 1 billion. We have also been successful in deploying capital. So the recognition of planned growth for 2026 had an impact of around 6 percentage points on the solvency ratio. Furthermore, the quarterly accrual of foreseeable dividends, including the update of our dividend strategy impacted the solvency ratio by minus 4.5 percentage points. Model changes had a minor positive impact. On the next slide, the shareholders' equity increased by 2%, driven by the strong 9 months results. A mitigating factor is a negative impact from currency translation within the OCI. The CSM increased by 2.1%, mainly reflecting the new business generated by both business groups, again, also here partly mitigated by negative currency effects. The risk adjustment decreased by 7.8%, mainly driven by some model refinements in P&C as well as a negative currency effect and a new retrocession in Life & Health. Altogether, the performance of both business groups and our strong balance sheet, including the CSM and including the risk adjustment, gives me considerable confidence in current and future earnings growth. The return on equity of 22% is a further confirmation of our success. And on that note, I hand over to you, Christian.
Christian Hermelingmeier: Yes. Thank you, Clemens, and good morning, everyone, also from my side. So on the next slide, our P&C business is growing nicely on a diversified basis, including a strong contribution from structured reinsurance. The top line growth in the first 9 months is marked by the refinement in our accounting, resulting in a one-off effect when comparing the 2025 revenue to the previous year. Excluding this base effect, the FX adjusted reinsurance revenue would have increased by 9.5%, clearly supporting the target achievement. Importantly, there is no impact on earnings due to corresponding effects in the service expenses. Furthermore, the accounting impact on reported growth should decline in the fourth quarter. In the third quarter, the NDIC refinement continued to have an impact. Additionally, the timing of bookings for some larger treaties had an impact on the reported Q3 revenue. In this respect, we expect some catch-up effects in the fourth quarter. The combined ratio of 86% is well within the target range below 88%. The impact from large losses was EUR 459 million below budget, which has nevertheless been booked in full as usual. The unused budget should be sufficient to cover the expected losses from Hurricane Melissa, meaning that full Q4 budget is available for other losses in the fourth quarter. As Clemens explained, the underlying profitability was even stronger in light of the additional balance sheet strengthening with an increase in reserve prudency. However, we have added less to the reserve resiliency in Q3 compared to the previous quarters and have instead decided to use the better-than-planned result for active loss realization in our investment portfolio. The reason is that we feel very comfortable with the current level of reserves and saw a good opportunity to lock in higher interest rates to improve the contribution from investments in the years to come. Finally, the combined ratio includes a discount effect of around 9.5%. As usual, the increase in prudency for our reserves is biased towards long tail lines with a higher level of discounting. Overall, the discount effect is still higher than the interest accretion in the reinsurance finance result, but we continue to be very prudent on the reserving side as an offset. The investment result reflects an increased ordinary income and the loss realization for fixed income of around EUR 320 million. The currency result was significantly positive at EUR 219 million, driven by the weakening of the U.S. dollar over the course of the first half year. The main contributor to the P&C service result is the CSM release, reflecting the recent renewals in a very attractive market environment. As in 2024, the CSM release includes smaller catch-up effects due to a prudent release in previous periods. The experience variance includes our prudent reserving on the business earned from current underwriting years. The run-off result has been positive in most regions and lines of business. But as explained, we have used the strong underlying profitability and the overall strong result situation to add additional prudency to our reserves. This is the main reason why we are reporting a negative run-off result of minus EUR 465 million. Apart from this, the runoff result also includes our updated view on the Russia-Ukraine aviation loss and the moderate increase in the best estimate for some pockets of U.S. liability business. The loss component from new business is quite low, confirming the attractive rate environment in P&C reinsurance. The CSM growth of 7% reflects the favorable market environment and our success in the renewal period in 2025, resulting in a strong new business CSM of EUR 2.6 billion. On the next slide, in Life & Health, reinsurance revenue increased by 2.2% adjusted for FX. The revenue increased in Financial Solutions and longevity. In traditional business, revenue moderately decreased mainly in Greater China. The result for the 9 months of 2025 is based on favorable underlying profitability. Furthermore, the experience variance was positive in all reporting categories. Assumption updates for onerous business and a more cautious position with regards to our morbidity business had a negative impact in the reporting period. Altogether, the reinsurance service result of EUR 671 million is fully in line with our full year target. The investment result reflects a good ordinary income from fixed income and the negative impact of an equity participation of around EUR 30 million in the third quarter. Altogether, the EBIT contribution from our Life & Health business group was EUR 645 million. On the next slide, looking at the IFRS components of the service result, the CSM release is the main profit driver and within the expected range. The same is true for release and risk adjustment. The experience variance is clearly positive based on a diversified contribution by line of business. The main drivers for the loss component are assumption changes for onerous business and morbidity. This is particularly driven by the critical illness business in Greater China, where we have updated our assumptions and took a more cautious positioning, reflected in an increase in the risk adjustment. As Claude highlighted at our recent Investors Day, one should focus here on a more holistic and economic view on assumption changes and experience variance. Adding up the positive assumption changes in the CSM and the change in loss component as well as the experience variance, the total deviation from initial assumptions of our diversified portfolio is positive year-to-date. The CSM development on the right side is clearly impacted by currency effects. The CSM generation, which includes the new business CSM and extensions on existing contracts, amounted to a favorable EUR 585 million based on a diversified contribution from financial solutions and our traditional business. Changes in estimates are driven by updated assumptions for our longevity business. Altogether, the total CSM would have increased by 5.2%, excluding the currency effects, nicely ahead of our 2% target. On the next slide, the development of our investments was very satisfactory. The ordinary investment income reflects the continued rollover in a higher yield environment and a strong operating cash flow. Inflation-linked bonds contributed EUR 110 million. Additionally, the contribution from alternatives was very solid. And as explained, we have used the overall result situation to accelerate the realization of losses in our fixed income book in the third quarter. In total, we are looking at the realized fixed income loss of EUR 324 million for the first 9 months. The corresponding higher locked-in interest rates will support a further increase in investment income in the coming years, and the lower level of unrealized losses will increase the flexibility for our asset managers, both helpful in the overall trading environment. The impact from the change in ECL and the fair value of financial instruments remained moderate. All in all, the return on investments of 2.8% is deliberately steered below the initial 3.2% target due to the realization of losses in our fixed income portfolio. So no concern at all as the main group target for 2025, the net income is not only maintained, but has even been increased, including an adjusted lower target for the ROI. At this point, I would like to point out that depending on the business development in the fourth quarter, I would not rule out further opportunistic steps with an eye on the remaining level of unrealized fixed income losses of more than EUR 2 billion on our balance sheet shown at the bottom of the slide. Apart from the strong movement in fixed income, you can see that the unrealized gains within the OCI have changed materially in the category others. This reflects the sale of our stake in Viridium, concluding a highly successful financial investment for Hannover Re. To conclude my remarks, the business performance in the first half of the year was very satisfactory. The positive impact from currency and tax has been used to further strengthen our balance sheet and improve future investment returns. We are well positioned to deliver on our increased target for 2025. And on that note, I'll hand back to you, Clemens, for the comments on the outlook.
Clemens Jungsthofel: Thank you, Christian. So despite the significant increase in reserve prudency and the realization of fixed income losses, the reported group net income of close to EUR 2 billion after 9 months is running nicely ahead of our plan. Consequently, we have increased the target to EUR 2.6 billion. The new target assumes a full realization or full utilization of our large loss budget at year-end. As of today, we do have significant budget available to cover potential losses in the remainder of the year. In case not all of this is used by year-end, this might provide the option to continue realizing some fixed income losses and additional flexibility for the assumption setting in our annual reserve review. These comments also need to be considered looking at the updated target for the combined ratio, which is expected to come in below 87% and the ROI target, of course, of around 2.9%. The expectation for the Life & Health service result remains unchanged. And as explained, the FX adjusted growth in P&C revenue is influenced by the refinement in the NDIC calculation. Excluding this effect, the 7% target remains unchanged. And again, this effect does not have any impact on earnings, hence, no reason for any concern here. Altogether, we are confident that we will achieve a net income of EUR 2.6 billion, higher than initially anticipated for the year. Furthermore, I'd say there are probably more upside risks than downside risks for the delivery on our guidance, potentially also providing options to further improve the basis for future earnings growth. So future earnings growth brings us directly to the guidance for the financial year 2026. The new group net income target for 2026 is at least EUR 2.7 billion. This is an increase of 12.5% compared to the initial guidance for 2025. So you can see this as a strong commitment to continued earnings growth also in a slightly more challenging market environment. Looking at the underlying drivers, we expect further growth. Our P&C business, excluding structured reinsurance, is expected to grow in the mid-single-digit percentage range. The reason why we have excluded structured reinsurance here in our guidance is the transactional character of the business. So individual treaties can be a bit bulky. And for 2026, we have an indication for some reductions in session rates on the one hand. And we do continue to see a strong pipeline for new business on the other hand. The combined effect is not easy to predict, and hence, we have decided to exclude this part of our activities from our top line guidance. All in all, it is possible that the revenue development in structured reinsurance might be less dynamic in 2026 than the average of previous years. The combined ratio target for the total P&C business is below 87%. This is an improvement compared to the below 88% target for this year despite the expectation of some softening of rates in the underwriting year 2026. One reason for this is the discount effect, which is expected to be around 9% to 10% in 2026. This is rather stable compared to this year, but higher than initially expected for 2025, so providing some uplift compared to the previous target. Furthermore, the pricing environment is expected to remain on an attractive level overall. So this means that the quality and the profitability of our portfolio will remain strong. As explained earlier, our underlying combined ratio is running well ahead of our target in 2025. This means that also the new target of below 87% does leave room for some pricing pressure, not only in 2026, but also going forward. With regards to our reserving, we feel very comfortable with the overall confidence level of our reserves. The option of adding less to reserve prudency compared to previous years adds further confidence in the ability to deliver on our target. Based on the successful new business generation in 2025 and a healthy pipeline looking forward, we anticipate an increase in reinsurance service result to around EUR 925 million in Life & Health reinsurance. The assumed CSM and risk adjustment release remains unchanged compared to this year at around 11% to 13% for the CSM and 6% to 8% for the risk adjustment. Furthermore, our strategic midterm target for the CSM growth of around 2% remains valid. The return on investment is expected to reach around 3.5%. So altogether, the new guidance highlights Hannover Re's successful and lean business model, our ability to grow and our very strong balance sheet. So this concludes my remarks, and we would be happy to answer your questions.
Operator: [Operator Instructions] The first question comes from the line of Shanti Kang from Bank of America, Merrill Lynch.
Shanti Kang: So the first one was just on the Q3 model refinements that you made in P&C. Could you just give us some color on what was driving those for this quarter? And then my second question is just going into the renewal period in January, what you're sort of expecting from conditions there? And then my last question is just on the guide for 2026 of that less than 87% combined ratio, and that's got the higher discount rate between 9% and 10%, as you mentioned. What's really driving that assumption? Has the duration of the book changed? Or are you assuming continued long-tail reserve releases? I'd expect that to come down with rates. So any color there would be helpful.
Christian Hermelingmeier: Yes, thanks for the question. So I'll take the first one, the Q3 model refinement in the P&C book that relates to the risk adjustment. So there have been some seldom combinations of contracts where the risk adjustment just by the methodology that is applied in the data was larger than the expected losses and the cash flow for the losses. And so we refined that in capping the risk adjustment to the maximum amount of the lost cash flow, so to erase the outliers that we figured out we have here and there in the book. That's basically everything. So no reference to the underlying business itself.
Sven Althoff: And when it comes to the renewals, Shanti, I mean, as we said on previous occasions, we are expecting a broadly similar market momentum compared to what we have seen in 2025. We have not seen too many firm order terms from the renewals yet. So there are too few data points to give you an update on that expectations. So from that point of view, we are still expecting similar momentum, as I said, which would be mostly on price and stable on retention levels and terms and conditions.
Clemens Jungsthofel: Shanti, it's Clemens here. So on the last one, on the underlying drivers for the 87% combined ratio guidance for 2026, a couple of points here. One is the discount rate, as you mentioned, but there are a couple of other drivers that have led us to go for a slightly lower combined ratio. One is that we -- and it's not that we expect portfolio composition. So we do expect growth rather on a diversified basis also as we go into 2026. It's a reflection on that, we still believe that the quality and the profitability of our portfolio will remain strong even if there is more pricing pressure as we go into 2026. So it's also not led to the fact that we have changed or will change our reserving approach. The prudent reserving approach is unchanged. However, just adding a bit less to the overall confidence level will already have an impact on our -- on the combined ratio. So overall, this is basically a reflection also of the fact that we have seen that the underlying combined ratio was strong in '25, and that has led us to that decision.
Operator: The next question comes from the line of Andrew Baker from Goldman Sachs.
Andrew Baker: First one, sorry, just to go back to the combined ratio target for '26. I guess, if I look at the '25 original guidance, sort of the less than 88%, you add back in the discounting of 6% to 7%, you get to sort of less than 94% to 95% undiscounted. And my understanding was, and correct me if I'm wrong here, this was sort of a through-the-cycle assumption. And then if I look at the updated guidance, so the less than 87%, you add back in the 9 to 10 points for the discounting, you're sort of less than 96%, 97%. So I guess a couple of points deterioration on the undiscounted. I hear what you're saying in terms of some of that pricing. But I guess I thought that was in the original target. So maybe just help me think through or should I be thinking about that undiscounted combined ratio or not? And then I guess, as you're looking at the 9% to 10% discounting for next year, is this still in excess of the [ iffy ]? And if so, should we expect sort of further prudent building within the less than 87% for next year?
Clemens Jungsthofel: Andrew, just briefly, I'll start and then probably Christian can also complement. And that is, in fact, the discount and the, let's say, the management of the volatility of the discount, which we have done in the past, also have a compensating effect. So that had an impact on our underlying combined ratio last year. As you know, we -- it was a tailwind when you compare the discount impact versus the unwind of that discount. And we have also -- we've always taken the approach to not take advantage of that tailwind, but increase our loss assumptions in roughly in the sort of size of that delta. That has also fed into our 2026 combined ratio assumptions. So there is -- and I'm just looking at Christian, there is still expected to be a slight tailwind. So therefore, that will also have an impact on the combined ratio in our assumptions. So there is a smoothing impact overall if we look at the combined ratio.
Christian Hermelingmeier: Yes, Andrew, and I can absolutely confirm this view going forward. So as Clemens also briefly mentioned, we think with our combined ratio guidance more over the cycle and midterm, so this has not changed here. So this is no short-term impact from changing interest rates. This is really just the overall balance of profitability and the positive impact that we currently still see. We are in 2025, around 2% of this tailwind. This is well covered by our very prudent and conservative reserving.
Operator: We now have a question from the line of Kamran Hossain from JPMorgan.
Kamran Hossain: Two questions. The first one is just on the decision-making process around some of the financial steering in the quarter. I hear what you're saying on taking -- adding a little bit less prudence into the reserves and doing more on kind of realizing losses and therefore, allowing the fixed income to, I guess, returns to pick up going forward. What's the decision-making behind that? Was there really -- is it an either/or? Could you do kind of more -- could you have done more reserving and less realized losses? Or is this a sign that you're reaching the top of what might be like an acceptable level of prudence in your reserves to auditors so you can't really add that much more, so you're choosing to do other things. The second question is just on the guidance on the [ HA ]. This is not a complaint at all. I can't remember in all my years when you've guided above consensus, so clearly very positive. But why now? You talked about -- over the course of the last couple of years, you talked about keeping the combined ratio stable. I think earlier in the year, we heard it might have been 88% for the medium term, and now it's moving to 87%. Just trying to understand kind of why now. And is the 87% now the medium-term guidance of it's not going to get worse than that for the medium term?
Christian Hermelingmeier: Yes. Thank you, Kamran. Christian here. I'll take the first one. So you asked for the decision-making process, and there is no fixed rule. There is no automatism and there's also no either/or. So we have to assess the business, look at the development, and we can pronounce one measure over the other or we could balance both, and I would explicitly not rule that out for the future. So here, as we are already at a quite comfortable reserving level for our P&C business, we decided to focus more and act a bit opportunistically to lock in the higher interest rates. But this is -- and I want to emphasize this, there is no sign at all that we reach the maximum level of reserves or something like this. So there is still room to continue with our very prudent reserving approach also in the future, and we will see how this is used also for the rest of the year.
Clemens Jungsthofel: Kamran, just on the overall guidance for 2026 and to add a bit of color here. So you should still see this guidance, the way we come up with the overall guidance has not changed at all compared to previous years. So you should still see this guidance in light of having built in some resilience, some level of prudency into that overall guidance also for 2026. I think this is a reflection of a strong underlying result, both coming [indiscernible] and Life & Health. It has allowed us, particularly in the third quarter, as you would have noticed come to realize some losses on the fixed income side, as you said, that will, of course, come through over the next 1 or 2, 3 years. So given the duration of the portfolio, we will see some of that increased run rate in our fixed income portfolio already into next year. So that has driven a bit our overall guidance for 2026. On the combined ratio, in particular, this is also a reflection of that we've seen a strong underlying combined ratio this year. Then we have the discount impact again, which is smoothened to some extent by way of not taking full advantage. And overall, we wanted to bring it, in fact, to a more realistic combined ratio. Still no change in prudency when it comes to our reserving approach, but we do this consider as a more stable combined ratio, a consistent combined ratio also over the midterm. So through the cycle, that's how you can read it.
Operator: The next question comes from the line of Chris Hartwell from Autonomous Research.
Chris Hartwell: Just a couple of quick questions. First one is on the Life side. New business appeared quite strong in the quarter. Just wondering if you could give a little bit more color on that. And secondly, probably a little bit of an extension to the previous question from Kamran. You commented that the target for 2025 is not a reflection of the loss benefit so far. And I guess I was a bit intrigued by your comment around more upside risk than downside for forward earnings guidance, particularly given, I guess, the historical nature of finding either realized losses or prudence or so on. So I was just again wondering on your sort of thought process if Q4 does or doesn't throw up anything particularly exciting on the loss front? And if I can have a sort of part B on that second one. You also sort of commented about Melissa being sort of contained within budget. But given how much budget you have still available from the first 9 months, that seems to put a number in the range of like 0 to almost EUR 500 million. So I was wondering if you can give a little bit more color on your Melissa exposure.
Claude Chevre: Yes. Maybe let me -- it's Claude here. Let me start with the Life & Health question on the new business. This is really, as Christian already alluded to, it's the result of one -- mainly the result of one bigger transaction that we have written in Q3. And as you know, the new business CSM Life & Health is transactional, and this is really depending on some bigger transactions. This is the case here in Q3.
Clemens Jungsthofel: Chris, on the guidance for 2025. So if we were observing another benign fourth quarter, mentioned there's still quite some budget left for the fourth quarter. So if that would be the case, as Christian said, I think there are mainly 2 things that we will consider at year-end. One is, of course, further realization acceleration of fixed income unrealized losses, which will support future earnings growth. Second, we do feel comfortable with our reserve level now. I think we significantly built reserve resiliency over the last couple of years, but there's still some room to increase those further. At the same time, I wouldn't fully rule out that some of that potential tailwind that we might see touch wood on Q4 would also have an impact on the P&L. But again, that's something to consider late in the year.
Sven Althoff: Yes. And then on Melissa, Chris, it's Sven, I don't have a number for you yet. It's still early days. So we are still gathering all the information. But to narrow the range a little bit for you, if you look at the EUR 450 million unutilized budget for Q3, we are not expecting Melissa to use all of this EUR 450 million. On the other hand, we expect this to be a 3-digit loss for our share. And Jamaica, from a territory point of view, is where we have a slightly above average market share. So I hope that gives you a little bit of color, but we don't expect that the EUR 450 million unutilized budget is fully used for Melissa.
Operator: We now have a question from the line of Darius Satkauskas from KBW.
Darius Satkauskas: Can you tell us what was the market impact in the quarter in your Solvency II ratio? And then the second question is, I know you sort of carried the reserves in Life & Health as best estimate. But obviously, you're quite conservative in your assumptions. So I'm just wondering how much of the new business loss component impact in Life & Health would you attribute to building prudence in regards to China morbidity and what was needed due to the underlying trends?
Christian Hermelingmeier: Darius, Christian, I'll take the first one. On Solvency, if I got you right, you asked for the impact of the -- market impact on the Solvency ratio. And there, I can say that the impact of risk-free rate and spreads together were rather neutral.
Claude Chevre: And this brings us to your question on the Life & Health loss component. I mean the new business loss component, as we said, is very small. It's just about EUR 10 million. And the rest of the loss component that you were referring to the Chinese morbidity business, Greater China morbidity business is approximately 50% of this is coming from the Chinese morbidity business.
Darius Satkauskas: So my question is more, should we see it as sort of reserve strengthening? Or is there an element of prudence in that number? And how much...
Claude Chevre: Sorry, I got you. No, it's really an element of prudence. We did it via the risk adjustment. So it is pure prudency.
Operator: The next question comes from the line of Iain Pearce from BNP Paribas.
Iain Pearce: The first one was just on the insurance revenue in P&C. Obviously, that was quite a big miss. But if you could just give us a walk so we can understand sort of the different contributing factors because how much was NDIC, how much FX and how much was due to some large contract impacts that I think you flagged? And also, can you give us some guidance for how much NDIC impact you would expect in Q4? And if there's any expected to roll into Q1, Q2 next year as well? And then the second one was just on the discounting benefit, obviously slightly higher discounting benefits for next year. Could you just explain sort of why you're expecting that given where interest rates are? And then the third one, just on the tax rate in the quarter, that was obviously very low. Could you just give us a bit of an expectation as to what drove that and if anything to go forward to think about with tax rates?
Christian Hermelingmeier: Okay. Iain, I'll take the 3 questions here. So first, on the insurance revenue in P&C, just to give you the walk again. So we had an FX impact of roughly 2%, and the NDIC impact was year-to-date around 7.5%. And I mean, you can do the math yourself, I know, but it's roughly EUR 1 billion of impact. And I would expect that we see not the same amount for the fourth quarter. It will go down substantially. And for Q1 and Q2 the next year, I would virtually expect that it's just -- yes, not substantial or relevant anymore. And the last impact that I mentioned was the timing of booking of some larger contracts. And this is an amount of a bit more than EUR 100 million, so 0.5 impact on the gross rate in P&C. The next question was regarding the discount rate. And here, yes, you referred to the capital markets and where rates currently are. But here, you have to see that we are talking about the earn-through of the interest rate. So we look not just at the very current renewals, but we look at more or less 2 to 3 underwriting years that we see here in the earnings pattern. And so we still see some catch-up for the interest rate environment. The last question referred to the high -- or the low tax rate, so a high one-off impact here. And this is the coming reform of the German corporate income tax. So to remind you all, starting in 2028, the corporate income tax in Germany will be lowered by 1 percentage point each year for consecutive 5 years. And this is the reason why we could release a substantial amount from our deferred tax liability that we carry under IFRS. And so this is a bit more than 8 percentage point positive one-off impact. And yes, as I said, it's a one-off.
Operator: The next question comes from the line of Vinit Malhotra from Mediobanca.
Vinit Malhotra: Some hopefully, 3 quick ones, sorry. In the combined ratio, I'm just curious, the slightly lower prudence in 3Q, where obviously, 3Q was also as, let's say, good a quarter as 2Q. And maybe it's a little bit of a follow-up here. But you said, obviously, you had no compulsion, no restrictions on reserving and prudence. And I'm just curious, was there any reason that you kept the prudence a bit lower in Q3? So that's the first question. Second question is on the top line for next year. I mean, from your comments about structured, which I understand is hard to predict. But if you could just comment what's changing in that area? Why is it that -- why do you think that this is becoming a little bit of a may be a headwind even to the growth, if my understanding of your comment is correct. And lastly, this kind of step-up in realizing bond losses, I think in the CMD or Investor Day of last month, we talked about maybe 10 basis points of pickup in yield. With these measures, could we expect that to kind of go up a little bit because that's hopefully the motivation behind that?
Christian Hermelingmeier: Yes. Thank you, Vinit, for your questions. And I'll comment on the first one. So you asked for the lower prudency reserves in Q3 stand-alone. And I can see there are no restrictions that drove our decision here. But I would look more for the full 9 months of the year. And as you know, this already increased our resiliency in the reserves substantially. So from the overall view, it was a good opportunity to now shift a bit more to focusing on the investment side and use opportunistically the realization of hidden losses to increase the resiliency here and fuel a bit the future earnings by that measure. And maybe I directly jump to the third one and take that also. So as you said, and I elaborated on that on the Investors Day, we expect just from the rollover from our investment book, roughly 10 basis points increased running yield each year going forward. And you are completely right with your assumption by the over EUR 300 million of realizations we did in the 3 months. This will give another upside of around 7 to 8 basis points would be my rough guess. And this is already also reflected in the new guidance on the ROI. We started in 2025 with a guidance of 3.2%, and now we face 3.5% for 2026. And one of the drivers here is exactly the realization of losses.
Sven Althoff: Yes, Vinit, and then on the structured side, and please keep in mind, the guidance we have given is for '26 only. It's not an over-the-cycle statement we are making on the structured side. But I mean, some of the buying when it comes to risk remote reinsurance can be transitional. So when we have looked at the guidance for next year, we had a few clients telling us that they will reduce their sessions. That does not necessarily mean that our market share will reduce more the opposite, very often in a situation where a client is reducing the session, our signed line is protected better compared to the average. But nonetheless, given reduced sessions, we have a little bit of a headwind. On the other hand, we can say that the demand for structured products is still strong. So we have a very good pipeline. We have already closed a few transactions, but as part of the pipeline, there are still quite a number of deals where the negotiations are not such that we can say with 100% confidence that we will close the transaction. And therefore, given the bulkiness of the business, to be on the cautious side, we have decided to let you know that the guidance is for the traditional business only, and that we have to wait and see the outcome on the structural side of things.
Operator: The next question comes from the line of Will Hardcastle from UBS.
William Hardcastle: The first one is coming back, I'm afraid, on the uplift in discount rate, 3 percentage points year-on-year. It's a really large uplift. I appreciate you said to Iain's question, it's a 3-year rolling on locked-in rates. Is there anything else underneath that's caused that? It seems like a huge jump. The second one is it's really tough to unpick the combined ratio guide year-on-year. I guess you're saying it's more of a cross-cycle guide almost. Is that right? And you're willing to say -- are you willing to say essentially that you'd be operating better than that cross cycle underneath the bonnet at the moment and for 2026? I'm just trying to work it out because you've improved at 1 point. There's 3 points more discounting benefit. You're suggesting that reserving prudency won't need to be as much additions either. So you might have something like 5 points of improvement year-on-year just from those things. So I'm trying to back out essentially what's the year-on-year deterioration that you're assuming in it from an underlying level. Are you able to help us out on that?
Christian Hermelingmeier: Yes. Thanks, Will. And let me start looking at the discount again, and that's absolutely true. That's a substantial move if we just compare the numbers. But as I said, there are different elements here driving this. And one is the earn through we see here, I already mentioned from the different up to 3 underwriting years. And of course, we also see the reserve increases and the reserve actions here. So as we added and not just expect this for 2025 and the numbers on reserve and prudency buildup also for 2024, this is predominantly done in the long tail and very long tail lines as there is also the most substantial portion of the reserves. And of course, this also drives the duration of the overall portfolio a bit and gives another increase a bit like self-feeding on the discount increase. So it's not the one driver. It's really a composition of that. And last, I would also mention that as we now have quite some experience on IFRS 17 and IFRS 9, I think we are also bit more confident in doing forecasts and trying to utilize our models and our predictions with the methodology here.
Clemens Jungsthofel: Will, and on the combined ratio, yes, as you mentioned, it is a mix of certain factors that are all meant together when we looked at it to bring us, in fact, to a running combined ratio, a guided combined ratio that is to be viewed over the cycle, really midterm to bring us to a more stable number. Again, one of the driving factors is the discount rate, yes, but also potential pricing and rate movements as we go into 2026. So it's also a reflection on the quality diversification of the book, of course. So hence, the underlying combined ratio has been very strong in 2025. So you should also see this combined ratio being, again, a bit more realistic. However, it gives also room for pricing dynamics as we go into 2026 or even beyond that.
William Hardcastle: So I guess just to verify on that, do you think 2026 is likely a better than cross cycle, all else equal?
Clemens Jungsthofel: On the combined ratio, you mean or?
William Hardcastle: Yes, on that versus 87%.
Clemens Jungsthofel: Yes. I mean the underlying combined ratio is expected to be below the 87%, of course. But again, it allows for some prudency depending on how the renewal goes, how the pricing environment will change.
Operator: We now have a question from the line of Roland Pfaender from ODDO BHF.
Roland Pfänder: Two questions on Life side, please. You had quite solid results on the Life new business in this quarter. Could you talk a little bit about the composition? Was it more mortality, longevity or financial solutions in the end? Then secondly, reinsurance service result, you added EUR 50 million towards '26 in your guidance. Is this entirely fueled by a better loss component? And maybe you could elaborate a little bit about your expectations regarding loss component going into next year?
Claude Chevre: Yes. Thank you very much. It's Claude talking. So you talk about the new business CSM and in particular about Q3, I guess. Again, I said it before already, it's driven by one larger transaction, and this transaction is coming from the financial solutions business. So that's the question to your first -- the answer to the first question. Then afterwards, the increased reinsurance services of EUR 50 million is mainly driven by the increase of our business in general. As I told you probably in the Investors Day, I don't know whether you were there, with the size of our portfolio, you always have to expect some loss component, additional loss component, the same as you can expect some experience variances and changes in estimates. We have obviously included some prudency in this figure that we have shown there, but still it's coming really out of the growth of the Life & Health business.
Operator: Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Clemens Jungsthofel for any closing remarks.
Clemens Jungsthofel: Yes. Thank you very much for your interest this morning. Just to reiterate, I guess, overall, the new guidance highlights Hannover Re's successful and lean business model. That lean business model will support further efficient growth in the future, together with our strong -- very strong balance sheet, I'd say, that will allow us to grow our earnings throughout the cycle. And together with these capital returns, this will sustainably create value for our shareholders. And with that, thank you again, and speak soon.