ALIZY (ALIZY) Q2 2026 Earnings Report, Transcript and Summary

Good morning, everyone, and welcome to Allianz's Second Quarter and Half Year 2026 Media Conference Call. Thank you very much for joining us today. My name is Frank Stoffel, Head of Financial Communications and Valuation Relations. I'm joined today by our Chief Executive Officer, Oliver Bate; our Chief Financial Officer, Claire-Marie Coste-Lepoutre; and our Head of Group Communications and Corporate Affairs, Lauren Day. Before we go into the presentations, let me briefly cover the usual housekeeping items. We will answer all questions in english. However, if you feel more comfortable asking your questions in German, please feel free to do so. We will then repeat the question in english on the call. [Operator Instructions] If you are on an IP-based telephone, this may cause technical problems for you. If this is the case, please e-mail media.contact@allianz.com, and we can assist you with your setup or we can take your questions and ask it on your behalf. Today's conference call is scheduled for 75 minutes. And as usual, we will answer your questions following our presentations by our CEO and our CFO. With this, it is my pleasure to hand over to our CEO, Oliver Bate.

Thank you, Frank. Good morning, everyone. Thank you very much for your interest in Allianz 6 months and 2Q reports. I know we have a busy day today with lots of our competitors reporting, and we thank you for paying particular attention to what we are going to do. Let me start. I participate quarterly only in the half year results, and my comments will be mostly around the half year results. I will not specifically mention Q2. Claire-Marie Coste is both in the position and much better suited to give you some of the details. So I'm trying to augment what the team is going to tell you in a little while. Let me start by getting your attention, please, to look at Page A2. So the first thing is our industry overall, Allianz also is reporting excellent numbers despite an extremely volatile backdrop. And it's important to note that this is quite a conundrum for a lot of people to understand how can we do so well in this environment. Let me go back to this environment. The first one is on the left-hand side, what is the level of geopolitical tensions. It has been consistently rising and it is still at a very high level. We do not have peace yet in the Strait of Hormuz and lots of other places, we have massive wars going on, not least in the environment of the Ukraine. The second one, if that wasn't enough, we have enormous changes coming from artificial intelligence. The question is what this is going to do. Capital markets are trying to anticipate already today who are going to be the winners and the losers of the AI boom. And by the way, some of that is changing month-over-month as you see within the tech industry. First things first going up massively and then going down massively. So we have lots of volatility, lots of uncertainty in terms of what's going to happen around AI. And these are just 2 examples. I can give you many more pension reforms everywhere, strong stresses and parts of the fixed income markets because of over-indebtedness, particularly in the public space, reemergence of significant inflation because of energy costs and other items. So lots of insecurity. Therefore, for us, it's really important to remain focused on our strategic priorities, not to get confused, decipher the signal from the noise and focus on the 3 things that we have told you in December '24 that would be the agenda for the next 3 years. And we are actually exactly at the midpoint of our 3-year plan. So it's a good way to refocus on that. The first one is driving smart growth and particularly around accelerating the development of truly distinctive customer proposition to avoid commoditization across the point and be very targeted in our capital deployment. We'll probably talk about it a little more to drive future growth, to build our platform regionally and by product. And in this slide, which we'll talk about, we have been investing in broadening and deepening our presence in future growth areas, for example, as in Singapore or on the asset management side. The second component remains the same. Since 2018, we have been improving productivity every single year. In P&C, you can see this with a 30 basis points improvement of expense ratio. That is going to go and continue. And we now need to translate AI capabilities into further productivity gains to support both affordability for our clients and drive further growth. And that I think is continuously overlooked when people are reporting numbers. The cycle can turn, loss ratios can go up and down. But if you're continuously delivering on productivity gains, you can reinvest that into better pricing capabilities and better value for consumers. Last but certainly not least, further strengthening resilience. It's really important. We have not been at that level of solvency since probably 2019. We've added a further number of points. We're in an extremely strong position, both on the ratings side. I think our ratings actually should be higher relative to others because of what we've been able to do, and you see that in Solvency II. So extremely strong balance sheet. And we want to now make sure we really go into a softening cycle in the commercial lines arena with not just a strong balance sheet with enormous discipline and manage it really carefully and remain resilient in light of the macro volatility and make also sure, by the way, that as and when we deploy AI, we have best practice governance and risk controls. And we believe we're in a great position to do that because we are the #1 in the Edelman Trust Barometer. So the trust by our constituents and particularly by our consumers is super strong. It's buy and piece is super strong. We'll not talk about it separately. The second thing is we've become #1 in the Evident AI Index for insurance. That's the most relevant benchmark there is and remain by far the strongest brand in the insurance industry as evidenced by Interbrand. So that's a great position to be in, just as a starting point. Let me turn to Page A3 now, if that's okay. And what is really important because we have, particularly in the P&C industry, obviously, positive effects from at least until last month's benign Nat Cat environment in the first half of the year, but that would not do a proper job to describe how strong we have been performing. Let me start on the left-hand side, our protection businesses. Our expense ratio continues to be in line with what we told you we would do, 30 bps down. Our platform businesses are experiencing further strong growth momentum. The MidCorp combined ratio is at 88% below par. We have expanded our partnership with Coalition. We are rolling out AI across the value chain. We are building alternative access to cheaper and better capital as we speak and health and protection OP is at EUR 1.2 billion. So that's super strong on the protection side, but we're not firing only on one side of the business. It's also true for the other side, we are really trying to build out our retirement business. We have had record net -- third-party net inflows of EUR 84 billion. Remember, we are not a passive shop. We are an active shop. So that's really record numbers. The outperformance ratio is 93%, hardly anyone in the industry has that. And we have, because of the very strong momentum we see, decided after a long period of time to buy out the M units at PIMCO, which gives us an even increased share of an enormously successful franchise. And if it wasn't enough, we are now building out our presence in Southeast Asia with the acquisition of UOB Asset Management, combined with a strong distribution agreement of the parent. That's super strong. On the life insurance side, to go to the top of the page, we are with good growth on the CSM, and we're trying to grow that further. One of the levers that we are pulling now has been the acquisition of HSBC Life Insurance in Singapore. Singapore is a super important market for wealth management going forward despite the way you need to see the acquisition of the asset management and the life as a tandem. We are trying to build out a leading position in the wealth management space. And our partner, HSBC, is also growing its capacity. They recently added 100 wealth management RMs in Singapore alone to benefit from the growth in wealth management and one of the most important hubs for wealth management in Southeast Asia. So operating profit is up 9% with a very high level of resilience and a high level of financial flexibility. Let me turn to Page A4, please. I would like to go a little bit more into detail on the Life Health and the asset management side as we are thinking about it more and more in an integrated fashion as a retirement business, as we told you 1.5 years ago. So the first one, HSBC Life in Singapore, I've just mentioned it's a super attractive market. It's a global wealth hub. It's not just a regional health hub. So for example, a lot of wealthy people from the Middle East, from India are trusting Singapore because of strong rule of law, a super strong infrastructure is a place where they warehouse and through which they invest their wealth. So we want to participate. The company we are acquiring is not just a bancassurance player. It's actually a diversified distribution platform with agents and FIAs. It's super important to understand that. And then on top, we do have the distribution agreement with HSBC Singapore, making sure that we are expanding the very successful partnership we've had with HSBC also to Singapore. So we believe we have a very strong position there. And on top of that, we have acquired UOB Asset Management. The right-hand side gives you some details about what we are planning to do. On top of that, as I just mentioned, buyout of minorities, the so-called outstanding M units, the prerequisite was to have the issue of M option stop 5 years ago and 5 years thereafter, we are entitled. So people are asking why? Because now this is the first point in time where we could actually execute the call of the M units. That's why we're doing it now. We believe PIMCO is an amazing company with a lot of potential, and we want to own more of what we already know extremely well. So that's it as a piece of information. You probably will have a question of how much are we buying? We don't know that yet because it depends on how many of the M units are being submitted. We'll know that probably by the end of the year for sure. So together, the acquisitions that we have been making and the further buyout of minorities in PIMCO are strengthening the wealth and retirement business in a significant way, and we want to use the opportunity to not just show amazing earnings, but to really invest in future growth in a very targeted way. So let me go to Page A5, please. This gives you a summary of where we are after 6 months in the year. So we had an excellent first half. We are well on track. It's not just luck on the Nat Cat side, all cylinders of Allianz are pumping and doing extremely well. We are benefiting from really being diversified. I know that some of you are always asking the machine is really working on all cylinders. And if one cylinder in a quarter is not running as strong as the other ones, it doesn't matter because overall, we're really doing well. You can take any of the KPIs on the page. They look overall very, very sound, and we are ahead of our midpoint. Last but not least, Claire-Marie will say because I don't have a slide, it's not useful to look at accounting and net income numbers quarter-by-quarter. You need to look really at things over time, the 6 months income numbers are very strong. We told you at the end of last year, we're telling you again, we have a lot of volatility because of disposals and acquisitions, particularly because of Bajaj. And last year, the disposal of the Life business joint venture we had together with UniCredit, that's creating lots of noise. The underlying net income numbers are like-for-like basis strongly up. So we are with very strong confidence on the way to achieving our results by the end of the year. And I do thank you for your attention. With that, I would like to hand over to my capable colleague. Claire-Marie?

Thank you very much, Oliver. And good morning as well from my side to all of you. So indeed, as mentioned already by Oliver, when it comes to the numbers on the first half, we had an excellent first half overall, and we delivered our highest level of operating profit to the half year. And this is supported by all segments across insurance and asset management. Our performance from my perspective, continue to demonstrate our focus on the execution of the Capital Market Day levers and also provide confidence to our ability to deliver our 2026 target. And you will see because this is a midpoint as well of our full cycle when it comes to the delivery of our Capital Market Day ambition. So moving to Slide B3, where we are, I think, already now our total business volume emerged at EUR 99 billion for the half year. We are up 4.3% with growth higher in the second quarter versus the first quarter. So clearly, we see a momentum of growth building. And actually also in the second quarter, some parts of our segments are delivering extremely well with, as an example, Asset Management with a 19% growth in the second quarter as an example. Our operating profit is at EUR 9.4 billion, which is up 9% versus last year. And here as well, all segments are contributing to that performance and in particular, P&C and Asset Management. Our shareholder net income, as mentioned already by Oliver, is impacted by various effects, which are pretty complex to reconcile if you look at it because we had divestment in the second quarter of last year. We had a divestment in the first quarter of this year. And then we have the restructuring effects, which are coming in addition. So for me, what is very important is to look at the adjusted numbers for those effects. And what you see if you do a year-on-year comparison is that our shareholder core net income is up 9%, which is excellent. And also our core EPS is up 10%, which is also excellent and ahead of our target range of 7% to 9% -- our resilience is very good at 225%. And as mentioned by Oliver, this is our highest level of solvency ratio since year-end 2018. So we have a lot of capital flexibility, which also, from my perspective, supports very well the recently announced M&A. So an excellent first half overall, and let me go into more details on the P&C side on Page B4. So on P&C, we see an excellent level of profitability. We see a very good level of internal growth with a high-quality performance across the portfolio. Our total business volume is close to EUR 50 billion with an internal growth of 6%. And within that internal growth, retail is delivering 7%, which is very good. And what you see as well within retail is that the volume growth is at 3% in the second quarter, and it's up from the first quarter. Commercial is at 4% internal growth. And also what's very important from my perspective is that our internal growth is very well spread. So we have a high-quality portfolio, both in terms of growth and performance actually. And if you look at the internal growth, as an example, the platform business, which Oliver highlighted, at 11% of growth in direct, 10% of growth at Partners. We see Germany as well with a very nice level of growth of 6% at the half year, was 7% in the second quarter. CEE is at 7% as well or LatAm is at 13%. So big diversification of growth across the portfolio. If you also look at the pricing dynamic, overall pricing is resilient from my perspective. Retail is at 5% overall. Motor is at 7% versus -- within that one. And commercial has quite some diversity in terms of pricing dynamic. But what's very clear also is that we are extremely focused on cycle management, and we see good opportunities for growth across the portfolio, bearing in mind this technical excellence angle. Our combined ratio is at 91.4%. And you can see as well that our operating profit is at EUR 4.9 billion, which is up 9% versus last year. And this is a record level of operating profit as well on the P&C side. What we see is that also it's stemming from both commercial and retail that have a very high -- very good level of combined ratio as well, as you can see on the page. I also want to come back a bit, and Oliver has mentioned some of those items that we are extremely focused within the P&C business when it comes to delivering on our strategy. We continue to focus on revisiting our processes end-to-end, leveraging AI and starting with the customer. We are rolling out many, many tools along the value chain to be able to deliver better services and also more unique services to our customers. So for P&C, overall, we continue to deliver growth at an excellent level of profitability, and we are confident in our ability to leverage our technical strengths and our diversified portfolio to navigate the current environment and to deliver a strong performance. Let me move to Life & Health on Page B5, where overall, we see good results for this segment at the end of the first half. We see also good recovery in the second quarter of a number of negative effects we had observed in the first quarter. So the momentum is clearly good in the Life & Health business with growth of key indicators in line with our expectation across the board. So our value of new business emerged at EUR 2.4 billion which is broadly stable if you adjust for the F/X effect. And also, you may remember the fact that we did divest our JV with UniCredit last year, which is still coming in the year-on-year comparison. So also adjusted for that effect actually and also for F/X, our value of new business is up 4%. Our PVNBP is up 9% in the second quarter. So again, if you look at the half year versus the quarter, clearly, the momentum is very clear. We have as well in Life & Health, high quality and a diversified profile of the growth. Also, what we see is that we have a healthy share of protection of health and unit-linked in the underlying. I don't want to pick too many examples, but still it's tempting. So some examples in our portfolio, you will see that the Italian business has an extremely impressive growth adjusted for the portfolio cessation effect with UniCredit. So as an example, the financial adviser network had a volume growth of 16% in the second quarter. Also the U.S., as an example, we will see its sales performance up in U.S. dollar terms despite the fact that last year, we also were running a promotion in the second quarter. And there, as an example, the RILA segment is up 13% in the second quarter. The absolute level also of CSM has recovered well from the first quarter, where we had seen some market effect in line with our sensitivities. And what we see as well is that we have this improved momentum overall that is translating itself into a good development of operating profit that is up 5% F/X adjusted. So in the second quarter, we see as well that the operating profit is emerging in a very well-diversified manner across the portfolio as well. And also in the investment results on the Life & Health side, we benefit in the second quarter from our first-time dividend payment of both Viridium and Sconset, which is also supporting the development of our operating profit. So what we see overall is good first half results for the Life & Health segment. We see strength that is nicely diversified across the portfolio. And we are pleased with the improved momentum we see there, which leaves us really well on track for the full year guidance. Let's move to Asset Management on B6, where we had an excellent first half. We have a record level of net inflows of EUR 84 billion, as mentioned by Oliver. We have a double-digit revenue and profit growth. And also what's extremely strong is that both asset managers are contributing to that results. If you look at the development of the third-party assets under management, we have an annualized organic growth, which is at 8% for our business with PIMCO at 9% and AGI at 7%. This is clearly an impressive level, which is at the high end of the industry, in particular for active asset managers. We continue to add value to our customers. We have 93% of our assets under management, which are outperforming on a 3-year basis. We see as well clearly diversified regional expansion in terms of inflows, and we see as well the benefit of our product innovation. Our revenues grew by more than 16% F/X adjusted. And we see as well a very high level of resilience of our margin also linked to the very good level of product innovation we have been bringing forward. We also see the very strong focus of both asset managers when it comes to productivity, which is also showing up in the very good development of the cost/income ratio, which is allowing then a faster growth of the operating profit versus our revenue, then operating profit growing by a very impressive 19% F/X adjusted. So we are very happy with the performance in our asset management business and also the fundamental strength we see there, which is providing a lot of confidence for the future. In addition, building on those strengths, too, we have pursued 2 transactions, as already mentioned by Oliver, which are going to allow us to extract further value from our asset management business as well over time. On Page B7, which is sharing the development of our solvency ratio, I don't want to spend too much time because it's extremely clean development from my perspective. You can also see there the very consistent delivery of our operating capital generation at 11% for the half year, also fully in line with our expectations. And what I think is very important is that when you look to the future and when you look at the strength of our resilience, both in terms of solvency, but also in terms of liquidity, we are very confident in our ability to manage the newly announced M&A within our current capacity. So our resilience is very strong overall. We have a high ability to manage the volatile environment that has been mentioned by Oliver already as well. And this is for us a focus and clearly a very important aspect of the way we are operating and managing our business that we continue delivering that strength in resilience. Moving to Page B8, where I want to wrap up. First, I think it's very clear, halfway through the year, we are very confident in our ability to meet our 2026 targets. In addition to that, as we are -- as those results release actually coincide with the half of our 3-year strategic cycle, I want to take a bit of stock when it comes both to the financial KPIs, but as well the underlying strategic drivers. So on this page, on the -- sorry, left-hand side, you can see that we are very well on track, both when it comes to growth and profitability across our all segments. And that is very supportive of our ability to deliver our core EPS growth and our core ROE target as well going forward. We are also doing very well at this point in time when it comes to our operating capital generation. We are not yet at a status where we can deliver steadily the 24 to 25 percentage points of OCG that we have defined for ourselves for 2027. But this is actually fully in line with our expectation. We know that we have to work on that. We are working on it. The work is ongoing, and we are confident as well on our ability to deliver against that target. And on the right-hand side, when it comes to our strategic levers, we are -- and maybe starting with smart growth, where we are doing well. We are -- we see, in particular, as an example, on the P&C retail volume growth that we are building a momentum. We are not yet where we want to be. We have seen an improved momentum. As an example, the second quarter volume growth was at 2% -- 3%, sorry, as I have already mentioned. This is at the low end of what we want to achieve, that is between 3% and 4%. So clearly, we are making progress, but we are not yet entirely leveraging the full toolbox, and we see more opportunities to be able to deliver against our target on that side as an example. On productivity, we are clearly well on track against our target. But I think more importantly, what we see there is that we have a lot of fundamental work that is currently ongoing within the organization to transform our processes from a customer-centric perspective and also leveraging AI to advance the productivity. And this is a very critical dimension because it's critical for the next strategic cycle, obviously, but it's also quite critical in order for us to keep our product affordable and also ultimately to fuel the growth. So this is a deep focus of the organization from that angle, but also to support the first strategic lever I was mentioning, in particular, on the P&C side. And on resilience, I think I have covered already quite some dimensions, in particular, the solvency ratio side, but also sensitivities are very limited. We are also doing well when it comes to cash remittance. What is -- what we do actively as well to strengthen our resilience are 2 elements, which you see more in the underlying of the numbers as I have presented them, one which is around the active management of the cycle, and you see that in the dynamic of the growth and the way we are playing with technical excellence in our business. And the second aspect is around claims inflation uncertainty. With the overall environment also, as mentioned by Oliver, there is a need for extra caution associated with this environment, and we have built extra resilience within our reserves in the P&C business in the first half numbers in order to further strengthen our resilience. So overall, for me, this was an excellent first 6 months. We are well on track to deliver our Capital Market Day ambition. We are also well on track to continue to build resilience while sustaining profitable growth and also tapping into new technology across the value chain to prepare our future. So thank you very much. And I hand over back for questions to you, Frank.

[Operator Instructions]. The first question comes from Alexander Hübner from Reuters. Alexander Hübner: Can you hear me?

Loud and clear. Alexander Hübner: Perfect. In fact, it's 3 questions, I apologize. The first one, I think, is quite simple. What makes you hesitate given this truly excellent first half to lift the outlook for the current year already now. I think you're clearly aiming at the top of this range, if not more. The second is probably to Mr. Bate. There have been 2 acquisitions in Singapore, especially within 2 weeks, I think. Is this just coincidence? Or is there some great plan behind in life insurance and asset management there? And is there more in the pipeline in the region, given the fact that the acquisition now is not as big as the one of income insurance that you had originally planned? And the third one is given the wildfires in France and Spain and other regions that we see also in Germany, in a lesser extent, it looks like this is a risk in some regions, especially in Middle Europe and Central Europe that hasn't been reflected in many of the insurance contracts. Is there an insurance gap in wildfires? Does this probably have to be integrated in this Elementarschaden insurance in Germany that is probably planned?

Why don't we start with -- this is Lauren. Hi, Alex. Why don't we have Claire-Marie start with the guidance? Maybe Oliver, you could provide some overall context on the Asia strategy, and then we can come back to the wildfires for France with Claire-Marie.

Yes, pleasure. So I think on the operating profit outlook, which indeed we maintain at EUR 17.4 billion, plus/minus EUR 1 billion. You are right that we had an excellent first half, but it's only the first half, let's put it this way, right? There is still, I mean, volatility that can emerge in the second half associated as an example, to the F/X effect to the natural catastrophes you just referred to, but as well to the market movement. So that's why it's too early actually to adjust our outlook despite the fact that we are very confident again.

Oliver?

Now I'm back online. So wildfires was -- let me start with that. So there are very significant protection gaps across the entire day. The biggest protection gap, however, is the lack of resilience in public infrastructure and preparedness for these wildfires because in every market, you can see that a lot of the things that the industry, not just Allianz has been describing that should have happened, and I'm not talking about climate change resilience in a smaller level are not happening. So that's the first observation. I'll start with the fact that the firefighting airplanes that were dispatched are probably less than 20% of the required capacity, just a very simple observation. We can't even fight them properly in Europe. So a lot has to happen. Second, we do offer cover where we are present and where the price of the risk that we need to charge can be charged to the consumers and is proportionate. There are some areas where the risks are so high because buildings do exist in the wrong places where things are uninsurable. So the second thing that has to happen is people need to move to places that are actually insurable, i.e., where the economic can be borne. Otherwise, it will always result in a wealth transfer from those people that live in safe places to those that live in unsafe places, whether that's on a river or in a forest that can burn down. And then the third one, we are working systematically with public and private institutions to expand the preparedness for our clients. And I don't see that in my best estimate, you will particularly see in the third quarter quite an industry a loss on all the various components of whether it's fires or storms, and that's what we are here for. People tend to forget that this is not about just what numbers we show in terms of profits is are we actually helping our clients. And I think both as an industry and we are certainly there, whether it's in Germany, France and in Italy. So Nat Cat activity in Q3 is likely to go up, and we're seeing it every day on TV. It's not yet in the numbers because it's Q3, and we don't know what it is, but it's certainly going to be more than we had in the first half year. Now Singapore, super important. We've been working on strengthening Southeast Asia for more than a decade now. Sometimes these things work and sometimes this time they work accidentally at the same point in time. So to your question, Mr. Hübner, this was not a grand design to announce it within 2 weeks, but it's a grand design that we are announcing it. So we have been systematically, working on it, and we are very happy that it is working as we speak. But the acquisition, as we all know, is just the beginning of the work. It's not the end of the work. It's the beginning of the work, and we are super excited to build out our presence in Singapore as a city state because strategically, if you go 20 years back, one of the things that Allianz missed is to be present in the city states, the most important being Singapore. So that gap we are closing as we speak. And maybe one additional comment is it's very important that we see asset management and life insurance the way we run it in an integrated way because there are basically 2 components of an integrated wealth management offer. So there is -- if you look at it on the product side, we report it differently from a customer perspective, there are 2 components of an integrated product offering for our consumers. So we are doing well in both areas, and that's important. Thank you for your question.

Our next question comes from Mark Böschen from NZZ. Mark Böschen: Good morning here from Digital Finance Magazine, The Market, NZZ. My question regards something mentioned on the slide. I read there that you see growth opportunities from German pension reform. Could you please elaborate on that, how significant that could be and what you are expecting there and in what time frame?

Yes. Thank you very much for the question. Indeed, we are happy with the proposed pension reform as also an opportunity to have more and more conversation with our -- with new customers as well when it comes to their pension need. So we are preparing ourselves to answer to the reform, I will say, with products, both coming from the asset management side, so from AGI and as well from Allianz Leben side in particular, and we are going to make offers all along the frame of possible type of product, a very simple product with very low cost and low advice as well towards more -- either with guarantee or without guarantee products with more advice. What is also quite interesting when you look at it is that we have been surveying many possible customers. And what's coming out from this one is that 75% of the customers we have asked would value advice as part of the product. And we believe it's very important. And also it's something that we think is essential for customers to make the right choice when it comes to their pension -- future pension decision to also have that interaction beyond the cost-efficient product without advice. So we are actually very excited towards 1/1. Our products are being lined up, and we are ready with attractive offerings. And then let's see how it's going to materialize itself, but we are very confident it's going to be quite nice.

The next question comes from Lorenz Klein from Versicherungswirtschaft Heute.

Mr. Bate, recently, there has been a rise in reports of accidental cyber attacks triggered by AI. And I would like to know if we might be heading towards a scenario where cyber risks are no longer insurable, can you take on this debate?

Thank you for the question. Very good one. Of course, the risks in deploying AI are super high in many ways. We still have particularly many of the LLMs still quite strongly hallucinating. Let me start with that. When you get to health care questions, you need to be super careful in terms of what you get. And we are really amazed how little regulators are taking a look at what the answers actually are and what they can create. Second, rogue, so to speak, agents are very important to control. You have seen some of these control failures within Allianz and within the insurance environment, we are very strong. This is why we are, by the way, partnering more strongly with coalition as one of the leaders in the world on cyber insurance, not as insurance, but also in cyber diagnostics. Please have a look. My personal opinion is that cyber insurance would only work in the future if you're real-time scanning the exposures of your clients. And that's easy for a small business. It's very hard to do for a large global business. So that's a very important point that you're making. And then the question is, how can you ensure the developers of these models, and that's a very difficult thing to do because they are in the experimentation phase, and we would be rather cautious in providing cover there. But it's true with many foundational technologies, you need to be very careful in how you do it. I don't think they will become uninsurable because of the way that's being worked, it's not the AI itself, but what it does, i.e., intrusion is the key issue. And we've had that before, just at a much higher level. So the nature of the risk has been there before. It's being amplified with new tools to a very high degree.

May I ask a follow-up question?

Sure.

You have repeatedly warned of an AI speculative bubble in the financial markets. Yet Allianz itself has exposure to AI-related bonds through to PIMCO, I think. I would be interested to know how you assess the associated risk.

So again, a very, very good question. So first, PIMCO is a world leader in fixed income investment and as such, has a very detailed view on the risks and the returns. And it's very important that we look at what PIMCO does and what we do. By the way, only a small portion, Claire-Marie can give you the numbers of our fixed income portfolio we hold for our insureds is invested in direct tech and AI-related bonds. Second, PIMCO makes sure that for its clients, including Allianz, we get the proper risk-adjusted returns. So their underwriting stance is super selective and they have been excellent in trying to make sure where there is real economic value to be created and we're not. To give you an example, when we finance data centers, we only do that if we have long-term lease contracts from very highly rated underwriters and committed contracts that they cannot get out of, which is a risk that other people are taking. So we are very careful or they are very careful on the investment side to see what they underwrite and what returns they are getting. And we can -- we don't have the time today, but we are very comfortable with the underwriting stance they are taking. And by the way, overall, in the portfolio of PIMCO that it manages for its clients, the AI exposure directly and indirectly is very limited and very carefully managed.

Next question comes from Herbert Fromme from Versicherungsmonitor.

I wonder whether you could enlighten us on the situation of industrial insurance and in view of the fact that AGCS has again seen a drop in profit. What's your outlook there? And will you withdraw from certain lines as they are no longer delivering returns? Coming back to AI, is there any news on the job side for Allianz? And are you worried about your customers using AI and thus being more able to differentiate offers, et cetera? Is customer power -- customer AI power worrying you? And finally, again, coming back to what Lauren said, you seem very relaxed about the situation of the stock market and the AI trade. Could you remind us of your precise quota of shares in your portfolio for your own customers' risks? And also, what you have seen the 2001, 2003 crash, you have seen the 2008 crash. Does it smell of another crash?

Oliver, you take it away. Perfect.

Yes. Let me start first. Claire-Marie will take the question on AGCS. She's been the former Deputy CEO, she knows the stuff inside out. So the first one, let me talk about -- and then the detailed numbers on what is our exposure. Just overall, just as a reminder, when you look at solvency sensitivity, it gives you a bit of the answer. Our equity -- liquid equity exposure is very well hedged. We have decided to make sure that the sensitivity in solvency has to be very limited from exposure to traded markets because we are quite at elevated levels, and there's a lot of volatility, more to come. So we would share your point of view that a lot of the valuations in equity, not just for some of the AI stocks are rather high, let me be polite. And we are not invested in things like SpaceX and other [ meme stock ]. Now the other thing that is really important is to understand where -- how we are preparing. We really believe that the opportunity and the risks are not aligned. So in terms of general exposure, we are trying to take a very conservative stance, Mr. Fromme. It's really important. The investment portfolio. I've been with Allianz now almost 20 years, has never been as low risk as it is today. That doesn't mean that you cannot have exposure. It doesn't mean that you cannot have individual write-downs. But from an overall standpoint, we are managing the balance sheet in the most conservative way that I've seen since I've joined Allianz. And we do it for a very good reason. Second, to your question on where the cycle is, and then I hand over to Claire-Marie. We are at a phase where prices, particularly in property are now falling further, and we have some other lines that, in fact, does mean when the technical price is now higher than the market price, you're absolutely correct. We need to withdraw capacity where we're not getting the proper return, and that is a success. And I think it's really interesting. Now what does it mean for earnings? The industry, I'm noting industry now has really strong balance sheets for a couple of quarters. So therefore, you're going to see increasing runoff to support earnings. And there's another one if people are using reinsurance cleverly because reinsurance prices have been falling faster than primary insurance prices, from an earnings perspective, intelligent underwriters can still create good value for some time to come. But it's pretty clear the cycle is softening, particularly in large corporate. It's much stronger in medium corporate and SMC. You have very different dynamics there. And as you see and it's evidenced in our numbers. With that, I hand over to Claire-Marie.

Yes. Thank you very much, Oliver. So maybe 2 points I wanted to add also around the questions you were asking about our exposure sort of AI-related and how we are thinking about it in general. So as mentioned by Oliver, our approach is to have an extremely diversified portfolio, and we have been extremely cautious both when it comes to our software-related exposure in our assets under management, but as well overall exposure to data centers across our entire balance sheet, right? So I think it's very important to have that in mind. And just to give you some elements around that. So as an example, everything that is software-related represent less than 2% of our total assets under management. That's very low when you look at just sheer weight of software-related type of financial exposure. So that's extremely low. And to data center, we are below 0.5% of our overall assets under management. So also extremely low to just further enhance the very cautious and diversified approach we are taking when it comes to the management of the assets. So now your question to AGCS and basically the AGCS number in the second quarter on a stand-alone basis. So you are right that there we have seen lower level of growth and lower level of operating profit. On the one hand, there is clearly the fact that AGCS is, from my perspective, doing a very good job at managing in the cycle, as mentioned by Oliver. And also what we have done very clearly in those numbers beyond the fact that there is a higher level of natural catastrophes that came into the combined ratio of AGCS is the fact that we have been very cautious and very cautious in particular, related to the possible impact of inflation that could come into the reserves of AGCS. So we took the opportunity that overall, we could do that to clearly do that strengthening, and this is the main driver actually of the reduction of operating profit of AGCS in the quarter. So I will not read anything related to the attritional performance of AGCS, but more that cautious approach at this stage in the cycle.

And Herbert, I think you had a third -- you invited us to talk about AI with respect to customers and people and Oliver and Claire-Marie can expand on that, but I'd also say at our media event a few weeks ago, we covered that in depth, and I'd be happy to go through that with you again.

Yes. But I apologize because indeed, we missed the third question. So in fact, I think you're absolutely right. What do I mean? Everyone talks about automating claims, call centers, and this is where the AI will take a lot of jobs and then particularly in finance functions and others where we do a lot of data reconciliation. It's all true. It will all take time because regulators are carefully looking that now we have stability in the ops and the customer service, but the key change is going to happen at the customer interface. And we already see that, not just the share of searches through LLMs are rising, but also the feedback from the LLMs to the customers are totally different from when you ask Google. In the past, people would say, give me the best or give me often the cheapest car insurance, and then you would get a very specific answer to that very specific questions. Today, when you go in and says who has the best life insurance product, you may get back, "it's company X, but by the way, company X has the following things that others don't have or it may say, by the way, that product is very good, but there are others out there. And by the way, you should not own life insurance, you should own an ETF." So the answers from the LLMs are much more varied. They're much deeper, at least at the moment and particularly as long as these tools are free. We should not forget that for the moment, for consumers it's free and many parts are for the customers. So we will be heavily depending on the pricing model. Mr. Fromme of how pervasive this will be because, again, the industry is ratcheting up billions and billions and billions of losses and assuming at some point, consumers will pay for it. I'm not so sure that it's as linear as that. So what are we doing about it? There's a couple of really important consequences. One, there is no more hiding. Remember that the last 11 years, we've been driving the focus on Net Promoter Scores across the portfolio and across the world, we have now 70% of our business being loyalty leader. It remains super important to be the #1 also in this media, and that's very hard based on what the things I just mentioned. And the second thing is, for the first time, Mr. Fromme, you have spillover effects. If you are really great in one product and not so great in another one, consumers will have the information. Again, in difference to the Google searches in the past. So we can not say, well, I'm amazing in car insurance, and I'm not so great in pet insurance because people will find out in one negative performance will infect the name brand product. So we need to be very good in what we do across product spectrums and across interfaces. It's really a big challenge, therefore, to integrate and to manage that really well. So a big portion of what we do, Mr. Fromme on AI is actually making sure the consumer experience in the new world is where it needs to be, and it's going to take a lot of effort, a lot of money and some time to get that done. We don't have the time today, but it's worth going deeper. As Lauren said, we already spent some time and the insight series when we're happy to field further questions. Thank you.

I mean you can't mention several times that productivity will go up further and costs will come down and not say a word about job losses.

Why? Let me not say further because we have been doing it since 2018 every year, 30 bps every year. The number of people relative to revenues has consistently been down. The only difference is in Allianz because we do it consistently, we don't need to do on average major restructuring programs. We don't do that. And by the way, we are supported for the better or the worse in many of the societies that we're operating is with a fast aging workforce and a fast retiring workforce. I'm part of the baby boomers, and we are going to retire. So that helps the company to reduce the workforce over the next few years in quite a substantial way.

But you did that with Allianz partners in a one go reduction in the workforce. Are there other Allianz companies expecting a similar fate?

No, I don't think so. It will be across the board and on a continuous basis. By the way, even for partners relative to their size, that is quite a manageable number.

I think we need to -- thank you for your questions, Herbert. I think we need to move to the next questions. We still have a few more in the line. And the next question comes from [ Steffen Weier from dpa-AFX ].

This morning, Munich Re and yesterday, Swiss Re published their results also of the renewals in July. The prices are shrinking. And Mr. Bate, you told us that Allianz has the lowest risk since you joined the group. So is this reinsurance pricing affecting your reinsurance policy? Will you react? Will you buy more reinsurance cover? Or are you just derisk it enough?

Great question, Claire-Marie, do you want to take it?

Yes, yes, I take it. So I think like when it comes to reinsurance and reinsurance environment, so for us, as you may know, we are a net buyer of reinsurance. So for us, it's -- I think it's positively supporting our business, the fact that reinsurance prices are coming down. We already experienced a reduced level of reinsurance price when we did renew our entire program on the 1st of January of this year. In general, we like very much the reinsurance program we have. It's a stable reinsurance program that gives us a lot of really good protection, in particular against what we call the tail risk, which are the more -- like the risk which are a bit -- which are rare or very rare and are coming very far away in the probability of occurrence. And what we have done already on the 1st of January this year is that strategic -- tactically, I will say, for some parts of the program, we did add a bit when the prices against return against capital reduction was attractive. So that's what we have done. We did that already. We are happy with the outcome. I cannot yet judge what we will do for the next renewal, but that's where we are, right?

Next question is from Jean-Philippe Lacour from AFP.

You can all hear me here in Frankfurt.

We can hear you.

So I have 2 questions. Back on July, during your press summer event, Board member, Barbara Karuth-Zelle said that Allianz identified security gaps following this Matos AI thing and was working to address them one by one. Can you just say where do you stand today? What concrete measures have been implemented since then? And the second question is back to the global risk of nat catastrophes. If I am correct in my research, you came back on the cat bond market 2 years ago in 2023. And with now Allianz has a very comfortable capital buffer. So do cat bonds still make for you a sense, it's still an issue to issue one of these bonds in the coming period despite we have this growing climate-related risks that could really justify maybe to see externally this kind of growing risk.

Maybe I take your 2 questions. I think on the first one, on the security gaps, I think like everyone leveraging those new tools and given the power of what you can get as insights from AI, we have identified indeed a number of items that were in the need to be further solved. And we have done very, very good progress on that one. The execution is absolutely stringent, and we are closing -- I mean, actually, the closing of almost all critical gaps has been secured at this point in time. So we are very happy with the progress we have made from that angle. And then on the point you were making on finding further capital to address the cat risk via cat bonds. So indeed, we -- using cat bond is a good idea. We have decided to use it as a way to diversify the source of capital. In general, we are very happy with the support we are getting on our cat program. So we have no concern from that side. And our overall cat management is extremely strong and very well done within the Allianz Group following the best standard when it comes to technical excellence. So I think for me, the key point is a different one and is the one that was highlighted by Oliver is around how do we collectively work on prevention measure to make risk affordable. I don't think there is a topic of insurability in general because you can always insure anything at any price, but the topic is affordability and how we collectively work on that. And there is a lot of work that we are doing within the Allianz Group that is very cool and very nice to see on the prevention actions. We even have like some companies that are offering for someone to come to your home to review your home, to give you advice and then you get a discount on your premium. So we have tons of things we are doing on the prevention side, but we cannot do that alone, and there are much more fundamental aspects also that needs to be tackled that Oliver was mentioning, like where do you build, ensuring that what is built is protected and so on and so forth. So there are a lot of societal components to insurability or affordability that are very important we work on altogether.

Next question is from Maximilian Volz from PLATOW.

I have a question about the hidden business impact of rising heat in Europe beyond the visible catastrophic damage. Question one, infrastructure. Are you already seeing business interruption claims tied to infrastructure failure from sustained heat independent of single catastrophic events? Second one. Beyond heat death and catastrophe losses, are you seeing more claims in maybe motor liability or disability insurance on extreme heat days due to human errors or from exhaustion? And does that mean you need to recalibrate pricing models since heat becomes a chronic cost driver rather than just an extreme event risk?

I think we will not have the precise answer to your question. The way it will be addressed naturally is when we do the pricing exercise. In any case, we will always look at how frequency, severity is evolving depending on the various situation, and that will be taken into account as part of the pricing. That's very natural, and we constantly do that. And actually, like we see other example of that, like now there is a big heat wave, so we are discussing about it, but there are certain winters where you see massive level of frost as an example. And then you have an increased frequency as an example of motor accident and we price on that as well. So I think that's just for us, normal business, I would say.

Yes. But I can -- if I can add because it's an excellent question, I would like to turn your attention to a really good publication from Allianz Economic Research, who have been looking at the effect of rising heat on economic growth. And the case study, the first one we did 3 years ago on what the heat waves in China, and it cost them quite a bit of GDP just because people couldn't work in non-air conditioned factories. So your question is a really good one. And because we are not properly prepared in Central Europe with cooling devices, right? So we have amazing things in Munich that basically reduced the temperature in the building 5 degrees below what it is outside. When you are outside at 40, then being at 35 inside is not really helpful. So the thing -- the infrastructure investments we need to do on a societal level to deal with heat in order to make sure productivity doesn't drop will be enormous. So you're up to something good. And again, the colleagues from communications can send you the reports. We just did an update a couple of weeks ago. And there you can see a very nice way to compute GDP pressure, not just claims, but GDP pressure from -- because sickness rates are going up, people can't work and things like that anyway. I don't want to go into the detail. We don't have a lot of time. But please get the data. It's scientifically, in my opinion -- personal opinion, quite well done.

Next question comes from Angela Maier from Börsen-Zeitung.

First, a couple of questions regarding Asia. I think Asia has been a portfolio gap for many, many years. And so why are you now investing in acquisitions when your era at the top of Allianz is heading towards an end? And my second question, why not earlier? Why didn't you do it earlier? And my second question is, is there more to come? What about your pipeline? And then I would like to ask about the provisions on the IT. Could you shed light a little bit what are you doing? And why didn't you do this earlier? I think Allianz business system has been quite difficult legacy system for many years. So why now? And is there more to come?

Asia, very important. There's always 2 dimensions, Maier. One, what would you like to do? And when can you do it? So it's very true that we have been trying to build out Asia for over many years. The problem has been very explicitly that relative to underlying value creation, prices for M&A used to be extremely high. Price is still high, but we have found now 2 opportunities, and we have had a few in Australia, by the way, before where we believe the synergies are such that we can justify the investments. So we are very happy now with the acquisitions, and it's very good timing. By the way, don't always overestimate the role of the CEO because CEOs come and go. We have a great team that makes these decisions, not only Bate making the decision. And last but not least, I'm here until May '28. So I'm not thinking about anything beyond that. Next one was around IT. Since I was the first COO, I'm very happy to report that our technology is getting better and just as a requirement including AI, and that's on any dimension, whether that's safety, security or AI professionalism, we are at the forefront of our industry, not at the back end. Most of our competitors don't even have multi-country operating IT systems. We do have them. And now we have a microservices infrastructure that, particularly on the property casualty side, enables us to scale what we do across markets. The way we do that now, it's run by business people. And the good news of AI is, by the way, as a general comment, it will make technology less and less of a bottleneck because both the amounts of money and the speed to deploy the needs of the business is really getting better by the day. So I'm very much looking forward to expanding. As you may know, on the Life side, we have a totally different strategy. We do it country by country because the regulatory requirements between the various countries, the longevity of the countries are such that it doesn't make sense to have a back-end system architecture that is the same across countries. So we separate between P&C, Asset Management and Life, and we are very happy with what we're doing. What I'm not happy about to also be transparent is the speed of deployment is as people say, culture eats strategy every day for breakfast, the key thing we still need to get better at for Maier, and you know that is the strength of our federated approach is also its weakness. It always takes a little longer in Allianz until we get it done, but we typically get it done very well.

Good. Thank you very much. I think we are perfectly on time. This was the last question in the queue. I thank you all for your excellent questions and for the very good discussion that we had this morning. Just for your calendars, as usual, we will report our 3Q results on November 12. So we look forward to talking to you then again. I wish all of you a remaining nice summer, hopefully a nice summer break. And this concludes today's media call on our 2Q and 6 months 2026 financial results. Thank you for your participation, and goodbye.