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Bernd Sablowsky: Good morning from Hannover. This is the Talanx Results Call for the First Nine Months and the Third Quarter of Financial Year 2024. I'm here together with my CFO, Jan Wicke, who will take you through our numbers and answer all the questions you may have. Based on the positive feedback we received, we felt encouraged to continue doing this in a video format, but please, appreciate that this is still sort of trial and error thing. So any feedback you have to make it more efficient and more convenient for you after the call is highly welcomed. For the Q&A session, you can activate the hand raise feature so that we are aware that you have a question, and I will somehow moderate then through with your questions. As usual, all the documents you'll find in the Investor Relations section on our webpage as well as with a short delay, a replay of this webcast. And with this logistical instructions, I hand over to Jan to present our numbers. Jan, the floor is yours.
Jan Wicke: Thank you, Bernd, and good morning, everybody, and thank you for attending our call. I'm happy to present strong numbers of Talanx to you and also the outlook for both 2024 and 2025. Let me start with a quick summary of the first nine months. We are pleased to see the growth momentum continuing. Revenues are up 12%, if adjusted for currency changes even 13%. But most importantly, the bottom line is growing twice as fast as the topline, that is by 24% in the first nine months. All this crystallized in a return on equity of just under 20%, which demonstrates the strengths and the profitability of our business model. Let's go in some more detail here. So we have reached €36 billion insurance revenue after nine months. The strong gross number of 12% is of course, heavily influenced by the first time consolidation of the LatAm business of Liberty, which we have acquired. But even excluding this acquisition, there would have been a growth rate of 8%, which is still a very healthy number. With regard to the group net income, we were able to increase the group net income to €1,592 million. And looking at this, we have already earned slightly more than for the full-year 2023. And the return on equity of close to 20% is also a strong number where I do not have to add too much. Looking at the two sources of our earnings at top and bottom line, Primary Insurance and Reinsurance. We see that the Primary Insurance continues to be the key topline driver with the growth rate of 20%, including the acquisitions and excluding is still above 8%, and Reinsurance adding 6% to the overall growth of 12% in the group. With regard to the bottom line, we see a fantastic earning growth in both Primary Insurance and Reinsurance, both around 30%. On the group level, we made use that we had a positive run-off at Reinsurance, and so we decided to do some of the usual balance sheet cleanup, which is due at the end of the year already in the third quarter. So we made some provisioning for investment on group level. So this means that we have just an increase of earnings of 24% which is still a strong number. Why do we see our numbers as being strong? We had a highly elevated large loss development during the course of 2024. What you can see here is that overall we had incurred large losses of €1,760 million. We have booked, you are familiar with that, the higher of budgeted large losses are incurred. So we've booked the budget with more than [€1.870 million] in our accounts, and that does mean that we will have a buffer for large losses of more than €100 million for the fourth quarter to come. Looking into more detail, what has happened in the large losses, it's worth mentioning that in particular, flooding events accounted for in total more than €750 million. It's not only the biggest claim which were the floods in Eastern Europe was €265 million. There were also floods in Southern Germany with €135 million or in Dubai or in Brazil, which affected our large loss list here. With regard to the fourth quarter, I would like to mention that we expect Hurricane Milton to add roughly €250 million to our large loss list as well as the floods in Spain with a double-digit million amount. Looking at the sources of earnings of our Group, or we can report that we are close to a 50/50 profit split between Primary and Reinsurance. Going into more detail with regard to the primary insurance, you can see that the contribution of corporate and specialty and retail international is growing and growing and will continue to grow. And this goes at cost of the share of retail Germany and the overall profit, which is now just 7%. And given that we expect further growth of the earnings of corporate specialty and retail international will become even smaller in the near future. Given the very strong results during the course of the first nine months, we have reassessed our guidance. With regard to the insurance revenue growth, we expect a high single-digit or low double-digit number for the year end. So we are maneuvering around 10% growth slightly below or slightly above for the full-year. With regard to the group net income, we are increasing our guidance significantly. We increase it from clearly above €1.7 billion to above €1.9 billion for the full-year. And this outlook already embeds that there will be Hurricane Milton, that’s €250 million that there will be floods in Spain with the double-digit numbers, that there will be some further house cleaning and balance sheet in order to increase the resiliency of our already very strong balance sheet even further. The return on equity is expected to be above 15%. If you do the math, we expect an average equity of €11.5 billion for the full-year. And if you divide €1.9 billion by that, then you will get a more precise number of our return on equity estimate. Let's go now into more details with regard to the segments. I would like to start with the segment Corporate & Specialty, which was formally known as Industrial Alliance and this name change reflect the fact that we have many clients outside of the traditional large cap industry sector. And I ask for your understanding, if I might slip back into the old terminology once in a while, I got used to it for many, many years. I'm working for our Group. With regard to the segment Corporate & Specialty. We can report very, very strong numbers. We have profitable growth and a very strong underwriting here. Revenues are up by 11% to €7.3 billion, and the big question within our company is whether Corporate & Specialty will reach €10 billion insurance revenue for full-year in 2024 or in 2025. It's pretty close. So they are growing, they are able to adapt prices according to the claims inflation. So it's a very profitable growth, what we see here in Corporate & Specialty. With regard to Group net income, this is already reflected in the numbers of the first nine months. We see an increase in the net income of 49% to €362 million with a combined ratio of around 90%. And if you take net-net, it's even lower, so very strong technical numbers. This is still a continued conservative reserving approach. With regard to the return on equity, there is an increase to 16.4% return on equity, and this numbers already include that. On top of the very good technical result, the segment has decided to realize some losses in the bond portfolio in order to lock in higher interest rates for the years to come in the area of €78 million during the quarter for the first nine months. So very good numbers here. Going to our segment Retail International. Retail International is our growth machine. You see a growth rate of 42%, which is heavily influenced by the first time consolidation of the LatAm business of Liberty. And we have now a revenue split of nearly 50/50 in between Europe and Latin America in this segment. Excluding the consolidation effects, the growth would have been in euro terms slightly above 8%, and in original currency 18% growth rate, which is still a very solid number. The group net income is up by 53% to €340 million net income contribution to the group bottom line, a very strong technical result, also driven by very hard markets in South America. Return on equity was 14.6%, clearly beats our own expectation, and this is an increase despite the fact that we have injected equity into the segment in order to finance the acquisition of the Andes countries Chile, Ecuador, and Colombia. So overall, very strong results here, and Wilm and his team, they will make use of the Capital Markets Day December 11 in Munich to explain you in more detail how the integration is on track and what they do expect in particular from our franchise in South America going forward. Coming to Retail Germany. In Retail Germany, we face some headwinds from the market, in particular in P&C. So the claims ratios are not very appealing here. So they have to be improved. And given that there are a lot of initiatives for repricing and efficiency improvements underway, which are not yet reflected in our profitability. Nevertheless, the return on equity in the segment is still above 10% with 11.4%, including the profits – part of the profits of Ampega. And so we have still adequate numbers here. So going to the last segment and the biggest segment, which is Reinsurance, Hannover Re, as most of you have listened to the call of Jean-Jacques and Clemens, I do not have to go into too much details here with a return on – of equity above 23%. We are proud shareholders of Hannover Re, as they were able to grow the net income contribution to the group bottom line by 30% including a run-off in Texas. But even without this shows a very strong consistent technical underwriting performance. So we are really proud shareholders of Hannover Re. Let me come to the next chapter. In the next chapter, I want to highlight a little bit capital and investment management. Let me start with the capital management and our solvency position here. So we were able to increase given the very good business development, our solvency ratio 220%, which is compared to the previous quarter and increased by 4 percentage points. And we had to adapt the way how we calculate the regulatory solvency ratio due to some regulation set out by BaFin and [IOPA]. So we had to deduct the expected future dividend completely. We did that, and this is 2 percentage points for us. Or put it in the other way, if we would not have to do it, the solvency ratio would have been 2 percentage points higher compared to the 220%. So very strong numbers here. And our very wealthy development at Talanx is also shown on the next page, which is, and you are aware of it, my favorite slide. First on the left side, you see the development of the equity, which is a good indicator for the economic development after we have this accounting change to IFRS 17. So what you can see is we were able to increase our equity from €10.4 billion to €11.4 billion. If we then add the dividends paid to our shareholders, there's a total direct value creation for our shareholders of above €1.5 billion as you can see on the chart. What I even found more interesting is the right side, the shareholders capital components where you can see the full intrinsic value, which is already reflected in our balance sheet. And then we are adding to our shareholders equity on top the contractual service margin, which reflects future profits after tax with a standard tax rate calculated and after minorities, because a large part of it is embedded in Hannover Re and the same for the risk adjustment. And if we add up all those numbers together, we have €19.2 billion. Shareholders total value reflected in our balance sheet. And if we divide that through 258 million shares, then it's €74.4 per share intrinsic value. And this does not reflect any resiliency, which is embedded in our balance sheet, and it does not reflect any future franchise value. And I want to ensure, if you want to continue to write, underwrite a profitable insurance business in the future, and this should provide all of you who are invested with some comfort with regard to the share price. Coming to the investment portfolio and the sources of our profit, which are investment in insurance result, as you are well aware of the focus where we are looking for risk is insurance side and less the investment side. And this is reflected in our investment portfolio. So it's a low better approach. The main part of our assets are invested in debt instrument of very, very high quality. And the result out of it is that we have, due to the changes in the interest rates, an increase in the return on investment to 3%, we have realized not only in the segment Corporate & Specialty, but also in other segments, in some bond portfolio, some losses in order to lock-in higher interest rates in total €127 million were done during the course of the first nine months. On top of it, we had depreciation on our real estate portfolio. This doesn't come as a surprise. It was embedded in our guidance. €257 million write-downs in total, which translates into a bottom line effect of roughly €80 million for the first nine months. And having done that, I expect that we are through with up to 80%, 90% of the write-downs, which were necessary for the current year. Coming to the outlook. And my final slides makes me particularly happy. We are increasing the net income expectation for the current year and for the next year. For 2024, we increased our outlook to more than €1.9 billion, which is a strong number, which already embeds that we expect Hurricane Milton to add another €250 million to our large loss list and a double-digit number for the flooding in Spain as further due – and further depreciation on the investments on the small ones – on the investments in our investment portfolio. With regard to 2025, we expect, based on our confidence in the technical performance of all of our segments, we are increasing our outlook to more than €2.1 billion. And this reflects the growth rate of more than 10% for the earnings per share, which is, I believe a strong number in the uncertainty of the world we are living in. With regard to the dividend, I will stick to the €2.50, as expectation for 2024 to be paid in 2025. But I would like to add that on the Capital Markets Day, we are currently reassessing our dividend policy. We will not only give you an outlook for the next three years with regard to our financial targets, but also with regard to our dividend policy. And I would love to see all of you in-person in Munich, December 11, and then we will explain that in more detail. Overall, let me summarize. We are monetizing our growth. We are focusing on earning growth with lower volatility, and we will deliver also a nice dividend to our shareholders. Thank you for attending this first overview. And now I'm really happy to take your questions.
A - Bernd Sablowsky: All right. So that was a quick run through our numbers and we now turn to the Q&A session. As I said earlier, you just raise your hand by using the hand raise feature and I will then pick you up. The first question, I'm looking at the screen here where I can see all of you. The first question is from Ismael Dabo from Morgan Stanley. Ismael, please go ahead.
Ismael Dabo: Hi. Good morning and congrats for a good set of results. I was just wondering for your 2025 outlook. Can you give us a sense of some of the underlying assumptions behind the net income target, i.e. the combined ratios for the different lines of business? And my second question is in relation to like the Retail Germany book. Obviously I know you guys are not the largest player in the motor market there, but I was just wondering if you could give us a sense of some of the underlying trends and effectively what you're expecting them – well, yourself and the market to do in 2025.
Jan Wicke: Well, thank you, Ismael. So first of all, what are the underlying assumptions with regard to our increased outlook for 2025? The underlying assumptions are that we might have a combined ratio in the group overall of around 90% to 91% for the years to come. And this already reflects two aspects. First, further price increases in line with the claims inflation. And second a higher frequency and severity also of not cut claims in the years to come. So climate change is there and we have to reflect it and it is reflected in our underwriting this I want to bring across. And second, well, we did our planning process as usual. We do not expect significant deviation from the current capital market developments or rather stable development here. This is also reflected as an assumption. Yes, that's with regard to the first question. And with regard to the second question to provide some color on the Retail Germany market. Yes, we are just a small player here. And overall, the contribution of retail Germany P&Cs, I think just 3% of our group revenues. But nevertheless, the whole market is currently soft in Germany. And it needs a significant price adaption in order to come back to profitability. So the German Insurance Association expects the combined ratio to be significantly above 100% for the full-year. And this is driven by claims inflation, in particular spare parts, and the costs and garages are up significantly. This obviously has to do with the weakness of the German car makers. Yes, they try to make margins in the after sales area. And this is then reflected in the insurance prices. So in the market overall, I expect significant price increases, a double-digit percentage, low double-digit percentage numbers here. And this will help to bring the market back to an adequate profitability. Will it be already fully profitable in 2025? I’m not sure. But for 2026, I would expect combined ratios to be significantly below 100%. I hope, Ismael, that answers your question.
Ismael Dabo: Yes. Sorry, I just wanted to ask a really quick follow-up.
Jan Wicke: Please.
Ismael Dabo: On the combined ratio that you mentioned, 90% to 91%, was that the primary portfolio or was that the overall, including the reinsurance side?
Jan Wicke: That's the overall number including the reinsurance.
Ismael Dabo: Great.
Bernd Sablowsky: All right. Thanks, Ismael. And next question from Michael Huttner. Michael, please unmute your mic and go ahead.
Michael Huttner: Thank you. Yes, just like Ismael said, well done for amazing results and not just amazing results. So I assume, and that's my question, how much in total can we kind of think about adding to prudency? Because I think, if I do it, you have various levels, right. You have the €80 odd million impact from realizing bond losses. You have the €120 million odd adding to interest rate, volatility risk at the center. And you have an unknown number. And maybe you can help me on that, on the resilience. But I don’t know how you can answer the question. But maybe you can kind of walk around it in some way. And then the second question is, obviously you kind of alluded to it. On the 2025 budget, how much is the budget from memory 2020 for large losses? 2024 was €2.4 billion. So I'm interested in that. And then the last question is, given that the LatAm deal have been so, so successful. Maybe you can help me on two things. One is, what is the contribution now and going forward you expect versus what you had originally planned for Liberty? I think it was €80 million. But I'm not sure that number in terms of net profit. And then any updates on deal appetite in Mexico? Thank you.
Jan Wicke: Well, thank you, Michael, for your questions. First of all, you are absolutely right. It's difficult to answer the question of the prudency. But let me start with the following in order to give you some color here. We believe in the uncertainty – in the current uncertainty of the world, a very strong balance sheet and very strong resiliency provides us with the ability to manage volatility and earnings growth in parallel. Yes, so earning growth really matters to us, and this is how we are. We will also do the year end steering. And we have certain areas of resiliency. One is very transparent and will be published in May next year, again, which has the resiliency, which is embedded in our best estimate liabilities when we provide all of you with the assessment of Towers Watson, how they assess our liabilities. And then you can do the maths and see the difference between our booking and their assessment. And this is what we always explain to you as resiliency embedded in the best estimate liabilities. The second area of prudency is the investment portfolio. Next to the valuation of assets like in real estate and so on, we can do portfolio shifts in the bond portfolio, given that the interest rates are now higher. So we can realize some losses here in order to lock in higher ordinary investment income then for the future. We did that not only in this year, also in the previous year and which also stabilizes our earnings [indiscernible]. And lastly, and this is what we usually do as clean up, is that we run through different positions in investments and claim situation where the legal negotiation and look for some prudency. This is hard to justify. Just want to give you the impression that we really do our homework here. And yes, this will result in a very conservative balance sheet in the end with a lot of prudency. But I'd also want to highlight, if you do a rather prudent accounting, you do not show less profits, you just show them later. And this provides you with the opportunity to manage earnings growth with lower volatility. So this is I hope that you see a little bit of the philosophy, which is backing our prudent approach. Second, the budget of large losses for 2025 is €2,720 million for the next year, which is quite a significant increase to the current year which was roughly above €2.4 billion for the current year. And now with regard to the Liberty contribution going forward, we have set out the target to achieve a net income contribution of the newly acquired Liberty entities of €80 million after financing costs for 2025, it will not come as a surprise that Liberty is really, and Wilm and his team is really ahead of schedule here. But I think it would be a little bit unfair if I now release all the positive news already on the Capital Markets Day, December 11, Wilm and his team will present. What's the current status of Liberty integration is. How big the already the net income contribution is. And I just want to highlight it's much better than we initially expected and we are very happy with the integration and with the management performance here. With regard to the deal appetite for further M&A deals. Yes, we do have deal appetite, but we tend to be very cautious here. So if we look at M&A targets, we realize one out of 20, so the hit rate is pretty low. But I'm the CFO of the group. I'm happy because we have discipline here and we will continue to have discipline here [indiscernible] to the areas for M&A deals is what I said already in the last calls. We could imagine to enhance our business in Corporate & Specialty, we could imagine to enhance our business even further in retail international, in particular in Mexico. We could imagine to enhance it also in Eastern Europe parts. So we are very focused with regard to the regions we are in. We would love to enhance the business in Germany to become more sizable. But so far, I haven't seen any targets there. And we are not looking for any acquisitions in the area of reinsurance, given that Hannover Re has an outstanding specific culture. They are traditionally different or slightly different and they are already number three in the market. So there's no need for further acquisitions. And I hope, Michael, this provides you with an overview of our thoughts.
Bernd Sablowsky: Okay. So then we have questions from Roland, Roland Pfänder from Oddo BHF. Roland, please unmute your mic and go ahead.
Roland Pfänder: Yes, good morning. I would like to come back to retail international. You had a rather strong combined ratio in the third quarter at 94%, despite high net head losses. Did you book any size of the run-offs against it or could you hint to a more clean figure as the run rate for retail international maybe also as an indication for next year? Also for retail international related to the integration costs, do you plan on booking further integration costs going into next year or will this be done in the current year? And maybe the second question on the specialty business, you're entertaining. Could you give an overview what you see here in the market and with respect to your business in terms of growth, profitability and outlook, what you expect for this segment in the Corporate & Specialty? Thank you.
Jan Wicke: Well, thank you, Roland, and thank you for, in particular, the first two questions hinting at retail international, combined ratio, and you're pretty right. This is a very strong combined ratio, what we've seen in the first nine months here, driven by a hard market cycle in South America. And yes, we already have offset, I guess it was €67 million integration costs during the course of the year and combined with some integration costs last year. Yes, even above €80 million integration costs which are already booked in our numbers here and so it's also conservative accounting here. And with regard to the combined ratio, we had this large loss effect. We will follow-up on that one. I give you now an answer out of my head is that we are roughly, I think €40 million above the expected large loss budget, which is embedded in the numbers, where always booking are higher off incurred where this budget, so €40 million more losses compared to the budget is by rule of thumb where we are standing here. And then third question was on specialty. Specialty is growing. The specialty lines business and the profitability outlook we expect a combined ratio, clearly a low 100% in the areas of 90s. So it's growing, it's profitable growth and we are participating in the growth areas here.
Roland Pfänder: Maybe just coming back to Retail International, did you have any runoffs there?
Jan Wicke: Just the usual ones. The vast majority of the Retail International business is short-tail business compared to the rest of the group, rather low duration. But then no, no, we didn't do specific runoffs in order to show a combined ratio of 93. We were rather looking for prudent reserving.
Roland Pfänder: Thank you.
Bernd Sablowsky: And there is a follow-up question from Michael, Michael Huttner from Berenberg. Michael, go ahead.
Michael Huttner: Thank you so much. And you showed they kindly on one of the earlier – two of the earlier slides, the split in profit between reinsurance and well, it's in one slide. And the various divisions of your primary business. How does the cash outlook look like? The reason, my question is, I'm going to be a little bit extreme here, so apologies if it sounds really kind of, well, like me a bit crazy. If I looked at that pie, I would say, well, retail in Germany, it's kind of diluting everything. If anybody wants to buy it, I know you said you'd rather buy rather than sell. But it doesn't – it's not one which stands out. And my feeling is part of the reason you like the Retail Germany business despite numbers, which at the moment are quite moderate. And is the cash, I just wondered if you can give a feeling for how this pie would look like. I think it's on Slide 8, if you were to think of cash upstreaming or [indiscernible] or something. That's my only question and thank you very much. And yes, thank you.
Jan Wicke: Yes. Well, thank you, Michael. So overall, I do not know whether we can see the chart, which Michael just have mentioned. I've put it here on the screen. Could we? So what you can see is that the net income split of Retail Germany is just 7%, and you're absolutely right, if it comes to cash then Retail Germany is delivering significantly above this 7% to the overall capital upstream. There are two messages. First of all, if I look at the whole, I will explain that on the Capital Markets Day in more detail. So it's just a preview what I'm doing right now. But what you can see is in general terms that regard to the 50-50 net income split, if it comes to capital upstream, then Primary Insurance is first of all delivering significantly above 50%. And second within Primary Insurance, the share of Retail Germany is much, it’s the double-digit share. It’s much higher because given that the business is not growing so fast, it’s even flat. Yes, then obviously we take more money out because we do not need to finance growth. And so the remittance ratios of Retail Germany are pretty, pretty high, even in some lines of – some legal carriers above 100% because we want to make use of the capital elsewhere in the group where we can grow the business profitable. Does that answer your question, Michael?
Michael Huttner: Yes. It's lovely. Maybe CMD, I was hoping that you'll give us the actual pie. That's my wish. Sorry, my wish.
Jan Wicke: It's the actual pie. I just get some help from my colleagues here. For 2024, we expect the cash contribution of Retail Germany to be 14%.
Michael Huttner: Brilliant. Oh my gosh, thank you so much. Super.
Jan Wicke: So which underlines your assumption.
Michael Huttner: Fantastic. Lovely. Thank you very much.
Bernd Sablowsky: Okay. So let me just check the screen. There are no more hands raised. Last call, any further final questions, if that is not the case, which seems to be true. We conclude today and welcome you in Munich and I give back to Jan for some concluding remarks.
Jan Wicke: So, well first of all, thank you for attending our call. I hope I could convince you that we have quite strong numbers and that we have continued to build the resiliency of our group, which will provide us with the opportunity to manage earning growth in the future. We have increased our outlook for 2025 to €2.1 billion. And we want to manage is with lower volatility. We cannot avoid volatility completely. You're aware of it, you are experts. But we try to do that and this is why we insist so much on resiliency embedded in our balance sheet. Thank you so much for attending our call and all the best to you and I hope to see you in person in Munich, December 11th. Munich in this time of the year is very nice. You should consider to come there, please.
Bernd Sablowsky: All right. See you next time. Bye-Bye.
Jan Wicke: Bye.