Ladies and gentlemen, welcome to the Allianz conference call on the Allianz Group financial results for the second quarter and first half of 2026. For your information, this conference call is being streamed live on allianz.com and YouTube. A recording will be made available shortly after the call. At this time, I would like to turn over the call to your host today, Oliver Bäte, Chief Executive Officer of Allianz SE. Please go ahead, Oliver.
Thank you, Andrew, and thank you, investors, for taking interest. I know you had a couple of calls already, so we’re trying to keep it mercifully short and focused in order to make sure we make the best out of your time. Page A two is where I would like to start. Just as context, and that you’re all aware of, we are in a very volatile environment, not just geopolitical tensions, but also enormous investor nervousness around who’s going to win and lose from AI, including the people that are actually spending hundreds of billions on building AI infrastructure. Therefore, just as a reminder, we are very focused on our three strategic priorities, which we’ve outlined the last Capital Markets Day.
Driving smart growth, reinforcing productivity now with the help of AI getting implemented into the core of the company, and further strengthening our resilience, which has now reached a new height. Just as another reminder, Allianz has made a deliberate choice to try to lead on a number of factors that we believe are important in such a really volatile environment. The first is the trust of our stakeholders. Not just shareholders, but particularly society and customers at the core of it, and our own people. We are the number one in the Edelman Trust Barometer. We’ve also captured the number one position on the Evident AI Index for Insurance as a leader in not just understanding, but implementing AI in our business. And what we believe is super important in an agentic world is to have the strongest brand that emanates the trust of consumers.
Again, we are by far the most valuable brand in the Interbrand ranking, and it’s also true for a number of other brand rankings. We believe we are well-positioned to deal with those global challenges, but we’re humble enough to understand that the world can be a very difficult place, and we cannot do well all the time and always. Now let’s move forward. Page number A three, please. What’s really interesting to see in the first six months, and I’m going to talk about six months, not the quarter. It’s obviously important for you to readdress your questions on the Q2. I’d like to talk about what we’ve done on the two businesses that we outlined. We report on three reporting segments, but the two businesses that we strategically differentiate, protection and retirement. We are on track on all of the key parameters across the portfolio.
Productivity further 30 basis points down, and that is also what we should be seeing by the end of the year. Since 2018, we have been continuously delivering and I’m very confident we keep on delivering. Why is this important? It gives us the flexibility on pricing and on reinvestments into the brand and distribution and growing the business. Apropos, our platform business continue with very strong growth momentum as promised and as indicated before. A reminder, MidCorp combined ratio at 88%, super strong despite the pressure we’re seeing on reinsurance markets in large corp. We are expanding our footprint in some of the important segments. The partnership with Coalition is one. Accessing alternative reinsurance capacity via Lloyd’s coming at very attractive rates, even relative to other items, is important. And health and protection OP stands at 1.2 billion, which is also a nice level.
On the protection side, we’re happy. The other side of the coin, retirement, we have a couple of things that are important. Record net inflows. Inflows continue throughout the years and by the way, continue as in the first half, also in July. We are further supported by excellent investment performance, as you can see on that. And we are supporting further growth with investments into building our ownership in asset management, both in PIMCO with the purchase of the M Units and our investment in UOB Asset Management in Singapore. That, combined with the acquisition of HSBC in Singapore, helps us to establish a decent presence in one of the most important wealth markets in Asia. We believe Singapore has a strong future ahead in an environment where people will be nervous where to put your money. Very strongly regulated, very well-regulated, very good rule of law.
We are big fans, and we have finally had the opportunity to invest in both areas. By the way, a coincidence that it’s happening literally within a few days of each other. What is no coincidence is that we want to strengthen both the life side and the asset management side. And Singapore has a lot of innovation opportunities. The experience that we’ve had in the U.S. with AZ Life in the wealth market will be a big asset to bring to Singapore, just as an example. A little more detail to that on page A four, where we are showing some details. I don’t want to go through this slide, actually. You could probably read faster than I can speak to it, even though I speak very fast. Just as a reminder, PIMCO buyout of minorities has been a long-term plan.
It’s happening now because we have reached a point where we can do it five years after we stopped issuing the M options. We have the right to call them, and we have agreed with the PIMCO leadership that this is a good time and to do this very good investment for many reasons, including a very decent return on a business we know very well and that’s doing exceptionally well. And we are very happy too, and very proud to partner with UOB on asset management. A very strong bank, by the way, not just domiciled in Singapore, but in some important Southeast Asian markets. So that’s quite important. On the left-hand side, again, some information on HSBC. Important is to point out, if I may say so, under the ownership of HSBC, this franchise has massively transformed in a very short period of time.
It’s not a bank assurance agreement alone. That is important because HSBC has doubled down on building out a wealth management and partnering with Allianz in Singapore. They just added another 100 relationship managers to build out wealth, but it has other distribution structures that are important as well, agents and more importantly, independent financial advisors. It’s multi-channel and we want to build that out further. It’s not just life, it’s also a health insurance platform from which we would like to build. We are very happy as we see. We think we’re going to have very good returns across these investments. By the way, a very good mix. Low risk, a bit higher risk so that we make sure you can, as investors, rely on us getting a decent return on investment on these growth investments.
Let me then go to page A five as a summary, then I’m already done. I love this slide. It’s my favorite in the deck because it nicely shows that we are not relying on a single cylinder. We’ve been saying it over all of the years that not every machine can really work all of the time. We’re in the fortunate position at the moment that all our engines are powering the group results to have a nice, diversified portfolio. We believe we will be in a good position to hit our outlooks and the midpoint, not just for the earnings outlook, but the midpoint for our strategic cycle. We are exactly 18 months, i.e., 50% into the three-year cycle. As we can say nicely, so far, so good.
Speaker 2
Company Representative
0:09:05
Thank you very much, Oliver, and maybe moving into section B. Good afternoon, everyone. As mentioned by Oliver already, we had an excellent set of results for the first half, where all segments are contributing. Again, demonstrating the rigor we put in the execution of our Capital Markets Day deliverables, including from leveraging AI. Building on Q1, we reached a 54% of full-year operating profit midpoint, and we have an excellent level of solvency II ratio. We are very confident, clearly, against our yearly and our Capital Markets Day targets. On this page, you can see starting by the left corner that our total business volume is at EUR 99 billion at the end of the first half, with an internal growth of 4.3%.
Speaker 2
Company Representative
0:09:53
In Q1 we were at 4%, in Q2 we are at 6% internal growth, clearly there is an accelerated momentum in terms of internal growth in our numbers. You can see as well in the underlying that we have very strong performance. As an example, asset management is at 19% growth in the second quarter. This level of growth in the first half of 2026 is building on a 10% internal growth that we have achieved in the first half in 2025. If you bring the two together, we achieve a high single-digit level of growth over the last two years. The development of our operating profit demonstrate from our perspective both our technical excellence and as well our ability to grow profitably. We emerge at a EUR 9.4 billion level of operating profit, which is our highest level ever for a first half.
Speaker 2
Company Representative
0:10:50
We have been growing that operating profit by 9% compared to last year, which is an excellent level to which all segments are contributing, including our health and protection business. The health and protection business, you get more details as we are building on the first transparency we have been providing in the first quarter this year. It is basically displayed transparently in the backup of this document. You will see there that we have a 9% of underlying growth, which is also an excellent level. Our shareholder core net income emerged at EUR 6.4 billion. You have seen that already that in the year-on-year comparison of the net income, we have many effects this year at the first half. We have effects coming first from the disposals that we have seen both last year and this year. We have also the effect from the restructuring.
Speaker 2
Company Representative
0:11:49
As mentioned in the first quarter, we are leveraging the gains we are generating on the sale of Bajaj, of the JV with Bajaj, to advance our AI-driven transformation. If you adjust for both effects, meaning the disposals and the restructuring or the excess restructuring, our shareholder core net income grew by 9%, which is an excellent level. If you also further look into the analyst presentation, you will get more details on our estimate for non-operating profit for year-end. As you know, there is quite some natural volatility in that number that is linked in particular to the hyperinflation effects. It is important to note that in addition to the approximately EUR 600 million of further offset of the Bajaj gain, further restructuring could be expected in the second half, in line with past experience.
Speaker 2
Company Representative
0:12:46
As an example, the -EUR 200 million that we have seen as per the first half of 2026. Coming back to the development of our core EPS, you can also see that our adjusted core EPS is up 10%, which is better than our target range of 7%-9%, also at an excellent level. Resilience continues to be very strong with our solvency ratio at 225%. As well, our operating capital generation is very good at 11 percentage points, fully in line with our expectations for the year. We have a very healthy level of coverage and also a very high financial flexibility into our numbers. This supports very well the transaction that we have announced recently. Moving to P&C on page B four. Here you can see our excellent level of profitability.
Speaker 2
Company Representative
0:13:46
You can see as well the very good level of internal growth we have with high quality performance across the portfolio when you go into the further details. Our total business volume is close to EUR 50 billion for the first half. Our level of internal growth is 6%, and as part of that internal growth, commercial is at 4% and retail is at 7%. That 7% is very good from my perspective. What you see as well in the underlying is that volume growth is building up from Q1 to Q2. Q2 is at 3% volume growth in retail. Our internal growth is as well spread. You can see in the further details as an example, the very strong performance of Germany that is at 6%. Also even Q2 is at 7%.
Speaker 2
Company Representative
0:14:35
Eastern Europe is at 7%, LATAM is at 13%. We see as well the continuous very strong dynamic in our platform business, where direct is at 11% and partners is at 10%. In terms of pricing dynamic, we see a resilient environment overall. In retail, we are at 5%, in motor we are at 7%. Commercial continues to present quite a diverse picture, and where we are clearly focused on cycle management with good opportunities we continue to see across the portfolio. Our combined ratio is at 91.4% for the first half. Our operating profit is at EUR 4.9 billion, which is up 9%. This is a record level of profitability for the first half. This record level of profitability is delivered both via the technical result and as well as the investment results.
Speaker 2
Company Representative
0:15:41
Both commercial and retail have a very strong level of combined ratio as you can see as well. If you look further into the details of our insurance technical results, there you will see first, that our underlying loss ratio is essentially flat year-on-year against a very strong prior year base. From my perspective, this is a very good result that has been achieved while we have also added to our inflation buffers, in particular in commercial out of caution. Our caution is similarly reflected in our lower level of run-off versus prior year. In total, if you take those two elements together, the extra build-up of inflationary reserves we have performed in the first half represent approximately one percentage point of combined ratio.
Speaker 2
Company Representative
0:16:34
Our expense ratio as well, as mentioned by Oliver, continues moving toward our long-term target, and we achieve 30 basis points reduction year-on-year of the expense ratio. In terms of transformation, we continue to be very focused as an organization on revisiting our processes end-to-end, leveraging AI, starting and putting the customer at the center. We are rolling out numerous tools as an example, to improve ultimately our growth via better services or also rate adjustment. As an example, what we see there is that we are embedding AI to help the productivity of our agents. We are growing the AI-assisted search and brand visibility. We are also achieving automated quote and buying capabilities where we see as well that the funnel of success is improving also quarter after quarter.
Speaker 2
Company Representative
0:17:33
On commercial, we continue the focus that we had presented also already in the first quarter, mainly on helping growth as an example, through faster response and booking times to support the development of the business. If you look at the P&C at the end of the first half, we continue to deliver growth at an excellent level of profitability. Clearly, we are confident in our ability to leverage our technical strengths and as well our diversified portfolio to navigate the current environment and to deliver strong performance. Moving into Life and Health on page B five. Overall here we see good results for the segment at the end of the first half. We see good recovery in the second quarter of a number of negative effects that we had observed in the first quarter.
Speaker 2
Company Representative
0:18:24
The momentum is good with growth of our key indicators in line with our expectations. The value of new business is at EUR 2.4 billion, which is approximately stable if you adjust for the FX effect and as well for the impact of the disposal of the JV with UniCredit. Also adjusted, our VNB is up 4% and our PVNBP is up 9% in the second quarter standalone. Clearly, good momentum there. The high quality and the diversified profile of the growth is also supported by a healthy share of protection, health, and unit link in the underlying. We have some examples of that. If you go into the details of the portfolio, we have CE that is showing double-digit growth on top of a very strong previous year.
Speaker 2
Company Representative
0:19:23
In the U.S., the sales are up in U.S. dollar term, despite a promotion that was running last year in the second quarter. In particular, in the RILA segments, we are doing very well with a 13% growth in the second quarter. In Italy, we continue to see a very impressive development if you adjust for the disposal of the JV with UniCredit. Our volume, as an example, with financial advisors is up 16% in the second quarter. We see as well a good level of development of our normalized CSM, which is at 2.7%. This is fully in line with our full-year outlook. Also, the absolute level of CSM has recovered very well from the Q1 market effect, fully in line with our sensitivity. You see very well the briefing of the CSM in the further detail.
Speaker 2
Company Representative
0:20:20
This improved momentum is as well clearly translating itself into the development of our operating profit, which is up 5% FX adjusted, and emerging at 2.9%. Just to illustrate this recapture of momentum as well into the operating profit, the operating profit was down 2% in Q1. You really see well the positive development there. In Q2 as well, we see that the operating profit is developing positively across a widespread base of operating entities. We see as well that our investment results include the reversal of some of the market volatility we have seen, in particular coming from the U.S. in the first quarter. We also see in the investment results in Q2, the first time dividend coming from Viridium and Sconset. Overall, for the first half, we have good results with strengths nicely diversified across the portfolio.
Speaker 2
Company Representative
0:21:24
We are pleased with the improved momentum, which leaves us well on track for the full-year guidance. Moving to B six, and that’s also one of my favorite page of the deck overall. We see the excellent first half results of the asset management business here. We see record net inflows of EUR 84 billion. We see the double-digit revenue and profit growth emerging from the asset management segment. This is coming from both asset managers, which are contributing there. Our annualized organic growth is at 8%, PIMCO is at 9%, AGI is at 7%, and this is clearly an impressive level, which is at the high end of the industry, in particular for active asset managers. Clearly, what we see there as well is that we have a nice regional diversification of emergence of the net flows.
Speaker 2
Company Representative
0:22:22
We see as well the product innovation that is coming from both asset managers, which is clearly supporting as well the good development of the margin. We see that quarter after quarter, we continue to add value to our customers. Our performance is very good. We have 93% of our asset under management that are outperforming their benchmark on a three-year basis. I think it’s fair to say as well that while the environment for asset management is not so straightforward right now, with many questions as an example on the direction of rates, on credit markets, on AI financing, et cetera, our asset management business continues to respond very well with a differentiated offering. That’s also one clear element that is contributing to their success.
Speaker 2
Company Representative
0:23:13
In July, actually as we speak, we continue to see flows that are continued emerging, following the same pace, in comparison to what we have seen in the first half. Our revenues grew by 16% FX adjusted. As mentioned, you can see as well a very resilient level of margin. Our operating profit is up by an impressive 19% FX adjusted too. Good development as well of the cost-income ratio is supportive of the overdevelopment of the operating profit against the revenue growth. We are very happy with the performance in our asset management business and as well, the fundamental strengths we see there provide confidence for the future. In addition, building on those strengths, we have pursued the two transaction already mentioned by Oliver on the asset management space, we are going to extract from that future value over time.
Speaker 2
Company Representative
0:24:17
Moving to page B seven, where you can see the very clean development of our solvency ratio for the first half. We are emerging at 225% of solvency ratio, which is our highest level since 2018. You can see as well, sorry, on this page, a very consistent delivery of operating capital generation, which is at 11% and actually almost exactly at the same level for Q1 and Q2. This is fully in line with our target of at least 22 percentage point for the full year. As mentioned, for the future, the aggregated impact both in terms of solvency and liquidity of the M&A or the transaction we have announced is highly manageable, we will as well generate, over time, attractive returns from those operations, which are going to further support our positive development. Our resilience is very strong.
Speaker 2
Company Representative
0:25:22
We see high ability to manage the volatile environment in our resilience overall, as already mentioned by Oliver. This is clearly a focus for us as an organization, this is a fundamental way we are operating our business into. If we move to page B eight, to wrap up. Here you will see that first, just as a repetition of what I said on my first page, halfway through the year we are very confident in our ability to deliver against our 2026 outlook. We are very well on track. In addition, I want to spend a bit of time reviewing our status against our three-year strategic cycle, as we are exactly midpoint through the Capital Markets Day journey. What you can see on the left-hand side is that in terms of financial KPIs, we are very well on track.
Speaker 2
Company Representative
0:26:23
Both our growth and our profitability across all segments are very supportive of the development of our core EPS growth and also the development of our core ROE. For both, we are trending ahead of our targets, as you can see. On the solvency II operating capital generation, we are also performing well against our own expectations. Clearly, there is still a way to go, and we knew that, and we are pushing on the levers we have identified. The work is ongoing, and the work is going very well. We are confident on our ability to deliver there. In terms of strategic delivery against our three main levers. On driving smart growth, I think you have seen in the document a lot of good illustration when it comes to, as an example, third-party net inflows, but also development of the operating profit of protection and health.
Speaker 2
Company Representative
0:27:21
On the P&C retail volume growth, we see progress in our numbers. At the end of the second quarter, we were at 3% volume growth, which is at the low range of what is our target to achieve 3%-4% volume growth as part of driving smart growth. There is still work needed as part of our Growth Triathlon initiative in order to be able to deliver, including leveraging AI to support our journey. When it comes to reinforcing productivity, here we are on track against our target very clearly. But even more importantly, I think what we see across the organization is a lot of fundamental work in terms of rethinking the processes from a customer-centric manner, and also harnessing AI to advance the productivity across the organization.
Speaker 2
Company Representative
0:28:17
This is very important, not only to deliver on the targets right now, but also for the next strategic cycle and for the fundamental transformation required on the way we are servicing our customers. When it comes to make our product affordable for the future. Finally, on resilience, a lot of elements ongoing, as I was already mentioning, together with the fact that I want to maybe reemphasize the point I was making on the P&C business, that we are actively managing the cycle, which is clearly part of building resilience. Also on claims inflation, given the uncertainty that is currently ongoing associated to the inflationary environment, we have built extra resilience as an example in the first half of the year. Overall, this was an excellent first six months. We are very well on track to deliver our Capital Markets Day ambitions.
Speaker 2
Company Representative
0:29:16
We want to continue building resilience while sustaining profitable growth, and also while tapping into new technology across the value chain. With that, I thank you all very much for your attention, and I hand over back for questions to you, Andrew.
Great. Thank you, Claire-Marie. We are ready for questions. Just to remind you can either use the talk request button if you use the web to join, or I think it’s star five if you’re joining by phone. Again, if you’ve got any problems, we’re happy to take emails to me or any of my team, if you have logistical issues. Okay. Look, with that, I think our first question is from Michael Huttner of Berenberg. Go ahead, Michael.
Thanks so much, and congratulations. Lovely numbers. Two, one, all these deals that you’ve done, I’m sure you’ve got the numbers right there at your hand, and I don’t. Can you give us the pro forma impact both in solvency and operating profit? Whatever metrics you think we use. I know you might use slightly different ones. The second is on AI. The benefits are coming through, which is lovely. The bits I can’t quite figure is the cost of it. I just wondered if you could give us an idea of either the cost or how you account for it in the expense ratio, whatever. In particular, if suddenly we all decided AI, we didn’t like it, is there a kind of potential write-down risk? Thank you.
Okay. Claire-Marie, do you want to take the first question and then.
Speaker 2
Company Representative
0:31:15
Yeah, sure. Just because the line was not so good on our side, what you are mostly interested into is the solvency ratio effect of the three deals, right?
Yeah, not the solvency. That’s easy.
Speaker 2
Company Representative
0:31:26
Overall.
I want to know the operating profit. Yeah, of course.
Speaker 2
Company Representative
0:31:28
Yeah, that’s fine.
Speaker 2
Company Representative
0:31:30
No, I wasn’t sure. We are very rigorous in the way we are doing M&A, as you know. For each of those capital deployment what we always ensure and we are looking at is at delivering a double-digit level of ROI in the medium term. Here what is a bit tricky, obviously, to give you the exact number is that we need to wait for the deals to be completed to really tell you what’s going to impact overall as part of our trajectory, but we’ll do that once we get there.
Speaker 2
Company Representative
0:32:06
I think just to give you maybe some indications for each and every of those deals, if you start with the PIMCO M unit, which is maybe the straightforward one, what will happen depending on the share of the overall net income we are getting associated with the buyout of minority, you will get an equivalent effect into the net income. The minimum level of extra ownership of PIMCO we are going to get is 4.4%, which corresponds to the former employees. We may have a higher take-up also with the current employees. Basically that positive effect will not come into the operating profit but will come into the net income, and you can expect from 2027 onwards to have already there a triple-digit benefit to come into the net income.
Speaker 2
Company Representative
0:33:13
For UOB, this is currently a business where we have. Actually, maybe to give you directly the effect, both for UOB and for the HSBC Singapore, we have not yet closed. The closing will happen later on. What you should expect is more starting 2028, I would say, to start seeing a triple-digit positive impact in terms of operating profit, from which we expect also to see quite some fast growth over time because this is definitely a growth focus. I think once we get the further details, we will be happy to provide you with more insights. Your other question was around what is the effect of AI, right? From the restructuring, I believe that was the question.
Yeah, Michael, I didn’t quite get, what was your second question? The cost of AI or?
Yeah, the cost of AI, also how you account for it. Is it capitalized straight off? Is it in the P&C? Just to have a feel for it.
Are we activating the investment into AI? If we are on the wrong tech, do we need to write it down at some point?
Speaker 2
Company Representative
0:34:36
Basically, I think we are tapping into AI across the organization. That’s also, as an example, that’s also the case in asset management, and that’s also one driver of the very strong improvement of the good development of the cost-income ratio, as an example. Obviously also leveraging it very much on the P&C side, as I was already mentioning. There we have very strict approach when it comes to everything that is activation of those new technology where we are very strict across the organization. Because simply, this new tech is much faster compared to old historical development. Maybe because, connected to your question, what is also very important is that the restructuring we have already done will come with ultimately a very good level of return as well.
Speaker 2
Company Representative
0:35:44
We expect to have an overall return that is above 20% for the restructurings that have already been booked today.
Okay. Thanks, Michael. The next question is from Andrew Baker from Goldman Sachs. Go ahead, Andrew.
Great. Thanks. Thanks for taking my questions. First one, just on the Life and Health investment income. I believe there was EUR 87 million of dividends from Viridium and Sconset Re. Is it fair to assume a similar level of dividends going forward? Are there any one-offs to consider in this? I guess, can you just confirm that we should expect these dividends to come through annually just in 2Q? Secondly, just curious on the alternative reinsurance capacity capabilities that you mentioned, are you seeing any material differences in either rates or terms and conditions between what you can get on the alternative reinsurance side that you’ve developed versus what’s available through traditional capacity? Thank you.
Speaker 2
Company Representative
0:36:53
I think on the dividends, basically the highest contributor to the dividend we have received is coming from Viridium. As you know, we are just an investor, so we are just a shareholder of Viridium, so we don’t know what will be the level of dividends and what will be the pattern of dividend as well. Also what we have received this year for multiple reason is more than a yearly dividend. Likely also lower on a steady state basis. Again, we don’t know what should be the right level. You were mentioning on alternative reinsurance. I think the main play with this alternative reinsurance approach is actually to ensure that we have a diversification of capacity and diversification of capacity at high quality, and a very good level of rating. That’s one angle to it.
Speaker 2
Company Representative
0:38:09
The overall environment when it comes to competition for reinsurance capacity is obviously more on our side as we are a net buyer of reinsurance as opposed to the other way around at this point in time.
Thanks, Andrew. Next question is from Fahad Changazi from Kepler Cheuvreux. Go ahead, Fahad.
Hello. Thank you for taking my question. Could I just touch upon the plan and where we are still in retail volume growth? I think year-to-date, the category is 2.5% versus plan ambition 3%-4%. You’ve sort of highlighted geopolitical concerns, and you take inflation buffers. Can we or can we not expect a volume acceleration in H2 2026? In view of this, does the plan’s ambition of 3%-4% retail volume growth still stand? Again, just a plan related question on solvency II capital generation. Could you remind us again of the management actions you’ve taken already, along with the recurring uplift in capital generation to date? Any update if there is visibility on future actions within the plan period. Thank you.
Okay. Fahad, sorry, your line wasn’t great. You want retail volume growth update and cap generation.
Yeah. I can do that, Andrew.
Okay. Yeah, go for it. Oliver, you take the first one. Claire-Marie, the second one.
Speaker 2
Company Representative
0:39:46
Okay.
Yeah. Thank you, Andrew, and thank you for the question, because it’s a very good one. First, we had a slow start in the year. It’s improving in the second quarter, and I hope that we are making progress throughout the year. What is good, because it’s a effect between how much do we get in and then how much do we retain. The customer acquisition side is actually going very well. What is not yet according to plan, at least from my expectation, is the improvement in retention that we had planned to do. And there’s two or three drivers for that. There is rising price elasticity in the customer side. And as we are very focused on making sure we reflect increasing claims inflation into pricing, we need to do even more to balance that with higher retention.
Helping clients, for example, to adjust their deductibles, their covers, in order to make sure affordability is balanced with margin even more. That’s a muscle that as an organization, we have to train. The second component that is important, the low growth, particularly in the core of Europe, of disposable income is further increasing sensitivity. People are actually also insuring less overall. That’s a very good call, a good question, and we need to do quite a bit of more work. The good news is customer attraction to our brand is super strong. The upside is higher retention.
Speaker 2
Company Representative
0:41:23
On your question on the capital management action. We have already done a lot when it comes to really looking at the portfolio performance, capital intensity ratio of the businesses. A lot of work has been going there, which has been very helpful, I think, to also revisit and question if we were performing or developing the business with the right level of capital consumption. This is what has been fueling quite a lot some of the positive developments over the last 18 months. We are working in parallel on a couple of more fundamental levers. You may remember, from the Capital Market Day presentation, we were in particular showing the share of what is a business that is operating on the internal model as opposed to the standard model.
Speaker 2
Company Representative
0:42:20
There is quite some work ongoing to move more of our business into the internal model that will give us a further support when it comes to the capital intensity of our business. That’s where we know the work is ongoing. We are working also closely with our regulators, and we are confident it’s going to get there. By the way, there will be also further benefit after 2027. That’s what is also creating that sort of one-off effect a bit later on.
Thank you, Fahad. The next question is from Vinit Malhotra of Mediobanca. Go ahead, Vinit.
Yes, good afternoon. Thank you very much. I hope you can hear me. I’ll take one question, which is on the internal growth. I’m more curious about commercial lines, where there’s been a bit of up and down. I mean, 4Q was not so good, then 1Q was a bit of a jump, and now again, we have a 1%. I can see some of these numbers, AGCS is -1.8, but also maybe U.K. has a minus sign. I don’t know if it’s linked to the commercial topic. If you could just comment on commercial and maybe also throw in a comment on these two OEs, which are showing a negative internal growth. That would be very kind. Thank you very much.
Speaker 2
Company Representative
0:43:55
Sure. I think indeed you are right. There is quite some volatility in the numbers, in particular when you look at Q1 versus Q2. This is also linked to some technical effects in the underlying. For me, what I would do, I think that the most interesting way to look at it, is more to look at the first half overall together. What you see if you do first half overall together is actually that the volume growth is actually flattish. That’s what you see in the underlying. You have a very nuanced and diverse picture across our various parts of the portfolio. First of all, you will have the MidCorp business, which is actually performing in a robust manner in the overall environment, with also a good level of rate overall, at the first half level.
Speaker 2
Company Representative
0:45:03
You will have, in the case of partners, a very good dynamic, which is fueled as well with different parts of the business which are responding quite well. In particular, I think the travel business is doing well, as an example. You will have trade that is doing well in terms of volume growth, in particular building on the diversified picture between surety and credit. What we see overall is that the rate environment continues to closely follow, in the credit part, the current economic environment we are operating into. In the case of AGCS, we have observed a rapid softening in the second quarter, in particular around property, around natural resources and construction, as an example, as a type of business.
Speaker 2
Company Representative
0:46:09
The team is doing a very good job also at continuously tapping into the areas where they can perform well in terms of technical excellence. I think overall, I’m happy with the picture I see in commercial and how the various parts of our comprehensive commercial book are responding in the environment.
Thank you. Can I just also ask my second question on inflation, please? The inflation buffer, that’s coming in the commercial book, isn’t it? There’s a comment somewhere on that.
Speaker 2
Company Representative
0:46:44
Yeah. Basically, for the overall book, we have built 1 percentage point of further inflation buffer into our numbers. It’s an increased level. It’s mainly into commercial, but it’s not only into commercial.
Thanks, Vinit. Next question is from William Hawkins of KBW. Go ahead, William.
Hello, everyone. Thank you for taking my questions. First of all, could you talk a bit about your view of the sustainable growth rate for Life new business value, please? You are still down in the first half, and I know the reasons for that, but I am kind of wondering what you think you can accelerate to. For businesses your size, is it 5%-10% or could you do better than that?
Sorry to be very short term, I am not very clear about the seasonality of your new business value. Is the second half expected to be better than the first half, or are there structural headwinds? Secondly, Oliver, around your slide on A three, I appreciate this is a very big topic, so just asking you for key top of head views. After the Singapore deals, how do you view Allianz’s positioning for growth in Asia? Do you think you have kind of taken your main actions now, so it is all about execution, or is there other stuff you need to do to be really comfortable with your footprint and growth potential? Thank you.
Claire-Marie, do you want to kick off first?
Speaker 2
Company Representative
0:48:14
Sure. Indeed, you are right. It is a bit noisy, but the way I will think about it is that you can also, now is last quarter where we have seen the effect associated with the UniCredit JV. You can take the second half of last year as being a reference in terms of PV and BP, and you can apply our expected growth rate of 5% as we have communicated in the Capital Markets Day. I think that should give you a good order of magnitude.
Can I take the second one, Andrew?
Thank you for the question. This was very important for us because, again, we had a gap in Singapore. We established presence there in 1991. We never really had a strong operating business on the life and health side in Singapore itself. As you know, we’ve been trying for a while to build a proper beachhead that reflects the power of the brand. This has been achieved. If you are asking for additional investments, we always are open. We are happy with now having closed that chapter, there’s tons of opportunity in Asia still coming, and we will always continue to look at it, as we have said in the past, always on a market-by-market, asset-by-asset basis.
Sorry that I don’t give you, I have a gap in this country or a gap in this. In terms of materiality, though, we have to say Singapore has been one of the most important things to be looking at because relative to the national size, you would say, why do you invest in something that has only 6 million people or 6.5 million people now? It is the most important growth market for wealth in Southeast Asia. That was essential. We’re never done.
Thanks, William. The next question is from Andrew Crean of Autonomous. Go ahead, Andrew.
Afternoon, everyone. I just had a couple of questions. Firstly, your restructuring provisions this year, which look to be about possibly EUR 1.3 billion-EUR 1.5 billion by the time you’re finished. Could you tell me how much of that is writing off software as opposed to active investment? Can you give us a sense as to what the return on that billion-plus investment will be over the next couple of years? That’s the first question. Second question is a very small one. Your corporate center losses are just 21% of your target for the full year. Can you give us a sense as to where you think that’ll land this year? Because it’s clearly not going to be -EUR 800 million.
Speaker 2
Company Representative
0:51:08
As mentioned, Andrew, overall, from what we have already performed in terms of restructuring at this point in time, we have the EUR 200 million of debt losses. On that one, we expect to get EUR 40 million OP more on a full-year basis. Obviously, at the end of this year, we will already have seen three-quarter of the benefit coming through. For the EUR 400 million of acceleration of decommissioning of IT system associated with AI that went through in the second quarter, you should expect to see something approximately like EUR 70 million of operating profit to come through forward through lower future amortization. I think from what is going to come on top, I would expect as well to see further positive associated benefits as things go forward. I think you were on the corporate centers. There is, as always, a lot of seasonality.
Speaker 2
Company Representative
0:52:21
As you know, in the corporate center, we see usually 40% of the cost coming in the first half of the year, 60% of the cost coming in the second half of the year. This year as well, in addition, given the inflationary environment, we have seen higher benefit coming from the inflation-linked bonds. There is always conservatism in the -EUR 800 million we are seeing there. I think you can take some assumptions, but in particular, I think you can reflect as an example, the effect of the inflation-linked bonds as an example.
Thanks. Andrew, I love your question. Can I give a bit of strategic context, if that’s okay, also to our friend, Mr. Crean?
It’s very important. There was obviously a reason when we said that the Bajaj disposal will be reinvested. What we mean by that is that the AI revolution will fundamentally change the way we will build and deploy software. That has two components. One, we need to continuously look at the investments that we’ve made to date, and are they valuable. Two, can we use the new tools already to expedite restructuring, and that basically means transforming the operations and the tech stack that’s involved. The third one is how do we have to think about the longevity of investments into technology, and that’s something that we need to debate a bit more into the future, i.e., is it really useful to activate software for a decade where you have no idea how software will look in 24-36 months.
The last one I don’t want to discuss today because it’s more for the broader investor community to have a look at it, at what people do. We are therefore using the very strong gains that we have to make sure we do everything we can in order to keep our tech stack, not just technically, but economically updated. It’s exactly right how you’re looking at it. It’s not a one-quarter thing. It is an acceleration of what we’re doing in order to make sure that our ops space stays economically viable. You don’t have, at the end of the day, at some point, the tech assets on the balance sheet where anyone would ask himself or herself, what’s that actually really worth? Thanks for the question, because it’s quite a very important point for us.
We’re doing everything to not just get the benefits, but making sure we invest and restructure properly to stay future ready. Thank you for the question.
Okay. Thanks, Andrew. The next question is from Iain Pearce from BNP. Go ahead, Iain.
Hi. Thanks for taking my questions. First of all, just following up on this restructuring stuff and the benefits going forward. First part of it is, if you are to have further positive experience, and clearly you’re running ahead of plan, do you see opportunities to go further? Would you be willing to go further on this? Obviously, if it’s generating a 20% return, that’s pretty attractive. Would you like to do more and reinvest any further positive experience you might have into some further restructuring? Is it mainly the reduction amortization that is the main benefit, or should we be expecting other items as well? Maybe you could just elaborate on that. The second one is just on the cash position and liquidity buffers that you have at the moment.
Because there are going to be a lot of ins and outs on cash with the acquisitions and disposals. I was just wondering if you could give us an update on where you see yourself on dispose and the funding of these deals. Thank you.
Speaker 2
Company Representative
0:56:23
Basically, starting maybe with your second question on cash. If you look at it overall, and maybe if you start from what we had shared with all of you as part of the Capital Markets Day, where we are saying that we have a conservative liquidity buffer of approximately EUR 8 billion. What we meant at that point in time with a conservative liquidity buffer of EUR 8 billion is that we had more than EUR 8 billion. I think you can use that as a starting point to do the math and see where we are after the acquisition we have announced, or the transactions we have announced.
Speaker 2
Company Representative
0:57:06
I think you can easily take the dividends, the share buyback, also take into account the fact that we have received, in terms of proceeds from the two disposals, approximately more than EUR 3 billion, and so on and so forth. If you do that, what I think you can see very easily is that we land in a similar order of magnitude compared to the conservative liquidity buffer we have been announcing. Overall, what it means, and that’s also what I was mentioning when I was presenting, is that both from a solvency ratio and from a liquidity perspective, we can really do those transactions in a very good manner.
Speaker 2
Company Representative
0:57:51
Also because we have been very conservative when it comes to M&A, we have not undertaken M&As for a long period of time, beyond small things that we have been doing on an ongoing manner. When it comes to the question you were asking on further type of actions, I think we don’t dictate what is the type of restructuring to do or not to do. They come associated with the transformation and what we think is meaningful against the transformation we are performing. For me, what is very interesting is that as we are pushing with AI and as we are pushing in terms of transformation of our processes, what we see clearly is that there is more and more opportunity in terms of what can be transformed and where we can create more accretive value for our shareholders ultimately.
Speaker 2
Company Representative
0:58:49
That’s why I think beyond the operating profit effects, that as an example, is associated currently to some of the accelerated decommissioning we have been mentioning. I think more building on the point of Oliver, what we believe is going to create a lot of value is a modernization of the environment, allowing us more flexibility and faster ability to evolve as well in the future.
Okay. Thanks, Iain. The next question is from Henry Heathfield from Morningstar. Go ahead, Henry.
Yes, thank you very much for taking my questions. Just two from me. I was wondering if you might be able to give me the discrete quarter two rate change on renewal within property and casualty, if possible. Secondly, on the attritional loss ratio, I was also just wondering if you might be able to give a bit more color on the 50 basis point change between quarter two this year and quarter two last year. Thank you.
Do it again. I think it’s the accounting change he’s referring to. Sorry. Henry, sorry, just to clarify, you wanted the renewal rate change discrete Q2. I think we only provide the six M YTD, and you have the six M, and you have the Q3, and there’s some mixed changes. I’m not sure we’ll go for discrete Q2. Your second question was the attritional loss ratio delta Q2 year-on-year or six M?
Speaker 2
Company Representative
1:00:51
Basically, just to provide you with the six M rate change on renewal. You can see that on page C12. It’s basically 3.3% for the rate change. The delta in attritional loss ratio, you can also find on page C14. Basically, Will be 0.7% in the quarter. What I think, just to put that quarter delta into perspective, you have two elements you need to have in mind. There is one which is associated to an accounting change between attritional loss ratio and run-off ratio, which is approximately 0.4 percentage points that you need to correct to, that will basically reduce that delta. You will have also the buildup of the inflationary reserve I was mentioning that is contributing to that delta.
Speaker 2
Company Representative
1:01:53
For me, what is also, again, important to have in mind is the fact that last year, second quarter was a very low level as well for the undiscounted attritional loss ratio. If you want to have a good sense of the development, you should better refer, I believe, to the full year 2025 to understand the positive development. That’s why I was mentioning that I’m very happy with the development of the attritional loss ratio.
Just if I can clarify, how much of inflationary reserve buildup is there in that delta? Is that 10 basis points?
Speaker 2
Company Representative
1:02:33
We are not displaying the exact effect of the inflationary reserve into the attritional loss ratio. Overall, between both undiscounted attritional loss ratio and run-off ratio for the half year, we have put through one percentage point of inflationary reserve.
Thanks, Henry. Next question is from Ben Cohen from RBC. Go ahead, Ben.
Good afternoon. Thanks for taking my questions. I had two questions, please. The first is on asset management. I think this is the fourth quarter now in a row where you’re comfortably better than your sort of 61% cost-income ratio target for the division as a whole. I just wonder if you could give us some outlook in terms of how you see that improving going forward and maybe the sort of the leverage to sort of top-line growth. My second question was, I guess, a sort of a bancassurance question. I just wonder the opportunities and risks that you see from the kind of bank M&A that we’re seeing playing out at the moment in Germany and in Italy. Do you think that there might be opportunities coming out of that? Is there any risk to any of the distribution arrangements that you have? Thank you.
Claire-Marie, do you want to take the cost-income, and Oliver, do you want to talk about commerce or the bancassurance threats, or I think that Ben was referring to in terms of any changes to bank ownership, et cetera. Claire-Marie, do you want to go ahead first?
Speaker 2
Company Representative
1:04:10
Yeah, sure. Basically, cost-income ratio, we have said strictly below 61. I think it’s still a good reference to use, strictly below 61. You are right. I would expect we continue on a good path, but we are also always dependent on some seasonality effect there that are also coming through later on in the year.
Oliver, I think that you’re on mute.
No. Bancassurance. Just trying to make sure my sneezing here is not on online. Thanks on the question. Two or three comments, generally. Bancassurance remains a super important topic globally for Allianz. It’s a very important distribution channel, and it’s growing. There are very different reactions to things like Danish Compromise and others by region. As you can see from HSBC, just as an example, they are very focused on where they do bancassurance themselves and production in Hong Kong, and they’re very clear where they need world-class partners like Allianz, and Singapore is an example of that. There is no sort of singular trend on banks are insourcing insurance production or outsourcing insurance production.
One thing is what you would like to do, what capital regimes tell you what to do, and the other one, are you actually capable of doing what you may want to do on paper. Second obvious conversation, particularly in Europe, the Danish Compromise is a farce in terms of regulation. It’s just simple capital arbitrage. By the way, it’s relevant economically, just for you to know, mostly in capital-intensive life insurance, particularly where there is a lot of risk that is not put under capital. What do I mean? You still have the doom loop risk in Europe, where capital is not required for investing into domestic government debt. As a reminder, we believe that’s just not wrong from a regulatory standpoint because it creates huge risks if and when we have a government debt crisis, and we may have one in the future.
Three, we believe we are very well positioned to deal with that because at the end of the day, the quality of the product, the service, and the brand behind it will determine the success. In our mix of channels, we feel very well-positioned. The practical example is UniCredit Italy. One year after we ended the joint venture, we’re almost as where we were before because of the strengths that we have in Italy with our IFA and agency distribution. Thanks for the question. It’s highly relevant, but we feel well-positioned. By the way, we have more inbound inquiries in working with banks than we have risks added. I expect us to grow very successfully with our bank partners. A few examples are going to come over the next few years. HSBC is just one of them.
Thanks, Ben. Michael, you have a follow-up question. I’m being generous on this summer’s day. Go ahead. Michael Huttner from Berenberg.
Thank you so much. It’s back to the topic of software and stuff. Two questions which relates. In the balance sheet, you have EUR 18.6 at the year-end in intangibles and now you’ve got EUR 18.8, probably not quite the same number. Out of that, how much is software? Which you could write off and reinvest at this lovely 20% rate. Basically that’s the question. I just want to have a max number, if you like.
Speaker 2
Company Representative
1:08:10
Sorry, what was your second question?
That was it. I couldn’t think of a I do have a second question. One of your peers, yesterday, in terms of a neighboring country, are growing fantastically in Germany, I was thinking, how can that be? How is Allianz letting a competitor grow? You probably know who I’m referring to, but I’d be interested to understand why you haven’t covered all the bases there.
Sorry. Let’s answer your first question first. We didn’t quite understand your second question. First question, software?
Speaker 2
Company Representative
1:08:45
Yeah, software on the balance sheet, right? It’s something like EUR 3.5 billion at this point in time. It’s going down, obviously, after what we have done. Also, as mentioned by Oliver, we are very strategic on the way we are capitalizing software in the sense that we have reduced dramatically the way we are capitalizing software as well now.
What was the second question, Michael? In simple terms.
Well, I mentioned, yesterday, ING said they were going for MGAs in Germany hugely. I was thinking, how can that be? How is Allianz letting this opportunity go by? Obviously, you can’t say what your competitor is doing, I was just wondering whether there’s bits of growth that you’re missing.
Speaker 2
Company Representative
1:09:36
I think it’s a bit difficult to answer because I don’t know what they are exactly going after. Obviously, we feel very confident about our positioning in Germany across our businesses. If it’s life, I think it’s also self-answered with what Oliver was mentioning. When you look at the size of Allianz Leben, the ability of Allianz Leben to operate at a certain scale and cost level is very difficult to replicate by competition.
Maybe if I can add to what Claire-Marie just said. Germany is an example, but it’s an interesting one. When you, as a broker or a bank advising a client in Germany on buying a pension product, and you don’t have the best performing company in terms of customer benefits, in terms of unit costs, in terms of brand on your advisory schedule, you are exposing yourself to mis-selling advice. We’re damn serious. So it’s really interesting that a lot of these, and I personally expect therefore, a lot more changes to the bank assurance market and its agreements. You have to not just be big and have great technology and great product, you have to have all of it. So scale will matter, but what matters more is customer value. This is not true yet in every market.
There are some markets in Europe where stuff is being sold that’s not very good for consumers because the level of rigor by regulators to look at distribution practice is very different market by market. Let’s bear that in mind. We often think about supply-side dynamics. My personal point of view, after 10, 15 years of capital regulation, colleagues and investors, we ain’t seen nothing yet on consumer protection regulation that’s about to come. The only answer is to be loyalty leader in what you do. So I think you’re playing too many games in terms of people trying to in-house stuff. You have to be good. By the way, last comment, I believe, is again strategic. AI will even exacerbate the pressure of integrated product providers and sellers to improve quality.
When you ask intelligent models, you’re getting really good answers to things that you couldn’t get answers in the past. My point of view is I don’t believe in the closed shop. I sell my crap across all channels all the time. It does not work. That’s a very personal point of view.
Okay, thanks, Michael. The final question is from William Hardcastle at UBS. Go ahead, Will.
William Hardcastle
Analyst
1:12:27
Thank you. Just coming back to something you said earlier, Oliver, on the customer elasticity increased in retail. I guess, is there any potential that some of this is structural with greater insight and pricing trends perhaps available through AI? What prevents the younger customer in particular essentially behaving like a U.K. motor market in that environment? Just coming back to the actions you’re taking to try and improve that retention. Then it should be a very quick answer, hopefully, just any initial comments on the July weather events that have happened across Europe. Thank you.
Okay. Oliver, do you want to kick off? You’re on mute. Okay. Hang on, we seem to have a technical issue. Claire-Marie, do you want to start on the July.
Speaker 2
Company Representative
1:13:18
Yeah. I will take the July weather. Then we see if we can fix on explaining more what is dynamic on customers. Otherwise, I’m happy to take it. On the July weather, you’re right. We have seen quite a lot of secondary peril activities across Europe with the wildfires but also hail as an example across Germany and Italy. It’s a bit too early to assess what will be the impact for us. As things stand, we expect the overall cat load of, basically cat loss to be within our quarterly cat load.
Could you repeat? Sorry, that’s why I had put on mute. I couldn’t really hear the second part of the question. Could you repeat it for me?
Go ahead, Will. Can you repeat the question on price elasticity?
William Hardcastle
Analyst
1:14:21
Yeah. Absolutely. Just going back to your customer elasticity point on retail and trying to understand if any of this could be structural with customers being able to use more AI to see competition in pricing, et cetera, and the danger that could extrapolate to be a bit more like U.K. motor across Europe or, and then just trying to understand the actions you’re now starting to undertake or are undertaking to improve that retention.
Yeah. It’s a really interesting debate we have always internally. It depends what country you come from. Andrew is also from the U.K., and therefore, we get this question. My personal point of view is as follows. AI has the ability, depending on the price, by the way, of AI, we shouldn’t forget a lot of these tools are provided for free at the moment, and customer behavior may change in scale and particularly depending on what the price of the token and the use of the tools would be. The first observation is you get richer information back. When people ask, for example, as in the U.K., often, what’s the cheapest car insurance because it’s considered a commodity, you get more differentiated questions and answers on how good is the claim service, what’s the reputation of the brand and things like that.
By the way, also spillover effects from other products, which is very important for us to know, which means you cannot be strong in one product area and weak in the neighboring area. It makes things more complicated in a multi-product environment. For example, the LLMs tell the customers, you should be asking for a bundle bonus if you have both home and motor, right? It’s a longer conversation, and we need to talk about it at the time. My personal point of view, it’s not a threat. It’s a huge opportunities because you can really, in a positive sense, teach the LLMs to look at more than just price only, and we already see. The second thing, which is a huge opportunity that we already see, we are performing strongly on product, service, and brand. The conversion ratios are a lot higher than on traditional search.
The effectiveness, again, depending on how expensive the tools are going to be, can be significantly higher. I’ve seen conversion ratios three to four times higher into the Allianz brand than before. Yes, there are threats, particularly if you’re weak on a product service, if you cannot really offer clients choice in terms of optimized risk cover versus price and versus service, and we need to be a lot more concrete about why it’s worth paying for something, it’s also a tremendous opportunity to differentiate beyond price.
Okay. Thanks, William. Thanks, Oliver. We have no more questions, thank you for your interest. I know it’s been a long week. Have a nice summer break. This concludes today’s analyst call on our 2Q 2026 financial results. Me and my team are available for follow-up questions. Thanks for your participation, and goodbye.