Talanx Aktie

Good morning. This is Hannover calling with the Talanx results call for the full year and the fourth quarter 2025. I'm here together with my CEO, Torsten Leue, and my CFO, Jan, good morning to you, who will take you through our presentation and explain our numbers in more detail.

After their presentation, Torsten and Jan will be happy to answer all the questions you might have in relation to our numbers. We are on video today. So if you want to pose a question, please use the Hand Raise feature, and I make sure that you will be slotted into our Q&A. And as usual, all our complementary documents, including, but not limited to, our financial data supplement, are posted on our website in the IR section.

And with that, I hand over to Torsten. Torsten, the floor is yours.

Good morning from my side as well. So I run through the highlights from my side, and then Jan, as usual, tell you the financials more in detail. So another record year was '25 for us. You see what we have already said, a 25% growth to roughly EUR 2.5 billion. We will increase even more with 33%, our dividends to EUR 3.60. And if you see, I always say what the most important thing is what you don't see, and this is basically our high-quality earnings. Probably, we have the strongest balance sheet ever.

We just realized about EUR 860 million bonds in order to strengthen our balance sheet. And as well, and we will come later to this, we significantly increased our resiliency as well on the reserving side. So this is the strongest balance sheet ever. So this was driven by our profit engine's speed on the reinsurance side with 13% growth as well on the prime insurance side with 20% growth. And the growth comes from a kind of diversified portfolio.

We see that -- in the region, you can see we have 46% in Europe, and then, rest split over the world quite nicely diversified portfolio and as well from our segments quite nicely diversified. It's now 50-50. We usually said 60-40, 40-60. This is basically where we want to be, to be well diversified in our segments. I guess, the 50-50 is the kind of sweet spot we have now achieved. And you see as well and primarily as well, we have this Corporate & Specialty and this Retail International more or less the same size. And you see as well that Retail Germany is the smallest segment we have.

Coming to the segments. You can see that the Corporate & Specialty, we have, as we say, global player, we call HDI Global, 10% growth and EUR 551 million net income. We see Retail International as a growth player. They have increase of 36% to EUR 611 million as well bottom line and Retail Germany. In spite of, and Jan will tell later about, losing the TARGO cooperation because of expiring. Now, we have still increased 6% our bottom line in this segment.

And all this reflects to a share price, while it was end of February EUR 27.6 billion, now it's roughly EUR 1 billion higher as a market cap, which gives for the prime insurance price/earning roughly around 8. The basis of everything is we believe our Talanx business model, and you can see here the 4 ingredients. You can see, as I said before, diversification is key. We have this 50-50 kind of sweet spot achieved. We have a clear P&C focus with 80% of our portfolio with a combined ratio below 90%. It means focus always pays off.

And then, we have a business model where 93% of our portfolio has a cost leadership. We defend it and a very nice as well last year kind of cost leadership we have in our markets.

And then, and Jan again will tell later more about this resiliency, I talked to you about this realizing bonds. Now, we have as well on the resilience side significantly done more. I would say there's a sign above EUR 5 billion. I would say it's above, above -- significantly above EUR 5 billion. We will come up with detailed numbers. We come anyway as always every year on May, but the significant is the most important message here.

Promise is a promise. I mean, this is the numbers we gave to the market, we gave to you. And basically, we achieved them. So nothing more here to comment with a return on equity of close to 20%, I think, was quite reasonable year. And again, it's important what you don't see, and again, this is what we said before of increasing our resilience in our company.

We are very confident that the outlook '26, what we give here, middle single digit, around EUR 2.7 billion, return on equity around 90%, we will achieve after seeing the first months how they went because large allotted budget we have, roughly close to EUR 700 million, was not used much at all, just a little bit. So, therefore, we are quite confident how the year started.

And with that, I hand over to Jan, who will give you much more details.

Yes. Good morning also from me, and thank you for attending our call here. Let me start first with the highlights from a CFO perspective before I dig into some more details on the capital and investment side. And later on, I explain you something -- give you some color on our profit engines, the segments who have produced this really very good result.

To start with the CFO highlights, we had super strong earnings growth, 25% to EUR 2.480 billion, and we have a record high profitability with a return on equity close to 20%. And this has allowed us to increase the dividend by 33% to EUR 3.60, and this is despite the fact that we had to finance the buyout of the minorities in Poland with a triple-digit million amount in this February, which is already done.

Assessing the performance of the year 2025. Three things come into my mind. First, it was a very good performance. Second, we have been lucky. So we should remain humble due to the large loss development. And third, we have used both the performance and the luck to further strengthen our balance sheet. We are living in times of high uncertainty, and in these times of high uncertainty, resiliency matters, and now, the CFOs in the group together can contribute to providing for the strongest balance sheet in Talanx's history.

But let me start, we have been lucky. In the last year, we had the lowest large loss burden -- budget usage for the last 10 years. So on average, we have roughly 7% of the net earned premiums as a large loss consumption. Last year, we just had 5.4%. So that means we had a windfall of EUR 630 million with regard to the large loss usage.

We don't believe that this will last. This will come back to normal. And this is why we have included in our guidance for 2026, the EUR 2.7 billion. Torsten just has mentioned, we have included in that one, again, 7% of the net earned premiums, meaning that we have increased the large loss budget to EUR 3.1 billion. Why do we believe that it will come back to normal? Also, the last year shows some indication that the risks from global warming remain.

In Europe, okay, we have just had a storm Joshua with 120 kilometers per hour wind speed. But if you go to the Caribbean scene, there has been Melissa. Melissa was a Category 5 hurricane, tropical cyclone with a wind speed of roughly 300 kilometers an hour. And it has cost us EUR 340 million net given our high market share in Jamaica. And yet now, just assume what would have happened if this hurricane would have had a landfall in, let's say, Miami or somewhere else in Florida. Then, we would be talking about a market damage of -- in the triple-digit billion area, where we would also have to pay our share, which is much lower in Florida than it is in Jamaica.

So given that, we continue to believe that, that was not a trend that we have a lower large loss burden, that there was a little bit luck. And I will explain you in more detail that we have used it and even overcompensated for the luck in strengthening our balance sheet.

Looking at the second thing, the performance of our segments. And what you can see here is the technical performance of all the segments, and we have strong underwriting performance across the board. Obviously, Corporate & Specialty and Reinsurance, our 2 global business models, have benefited most from the large loss development. In Corporate & Specialty, we've seen an outstanding good combined ratio of around 90% and Reinsurance really hit with this 84%, the league table within the Talanx Group. But also both retail segments, Retail International and Retail Germany, provided for a very strong 92% combined ratios.

So overall -- and also, if we look at the attritional loss ratios in the segments, we have very well technical underwriting in place and very good portfolios. And this provides us with a lot of comfort with regard to the outlook. We have used this good performance and the luck, which we had with regard to the large losses to further strengthen our balance sheet.

And as Torsten has already mentioned, with regard to fixed income, we have sold bonds, which we purchased in the low interest rate environment with low coupons and bought new bonds of the same quality. There was no shift in the quality with higher coupons, which will shift the P&L recognition to the future. So we have taken EUR 857 million losses in the P&C area. We have excluded the losses we have taken in the VFA portfolios here in order to provide us with higher returns.

And if you want to have a rule of thumb, this means roughly this EUR 857 million, roughly EUR 170 million more EBIT for the next 5 years every year, which will contribute to strengthen our earnings quality going forward. And also, we have increased the resiliency on the liability side. So we have strengthened the balance sheet on both sides.

With regard to the resiliency, we always get an indication, as Torsten already has mentioned, by Towers Watson, an external actuary, and this assessment is not finished yet. So I do not have the numbers right now, but we are very confident that we will be significantly above EUR 5 billion when we publish the numbers in May. And second, we are also very, very, very confident that within the split in between Retail and Reinsurance that in Retail, we will provide for higher resiliency numbers as in Reinsurance, where we have a bigger and more balanced portfolio. So for both, Reinsurance and Primary Insurance, we are at the upper end of the resiliency that we believe is efficient to cope with the volatility of the very uncertain world we are living at.

So let me provide you now with some insights on capital and investment management. I would like to start with capital management. So what have we from an NAV perspective delivered to our shareholders? This is what you see on the left side of the chart. So in total, if we add the increase of equity and the dividends we paid out to our shareholders, we have had a net asset value creation of EUR 2.5 billion. And on the right side, you can see if we extend the equity with other shareholders component, expected future profits, which are already displayed in our balance sheet, this is -- we are adding the CSM and the risk adjustment minus taxes and minority shares, then we are roughly at EUR 21.3 billion overall net asset value. This view obviously does not reflect that we want to continue our business and to write further -- to continue to write profitable business. And so it's just one part of the valuation.

Now, second, where do we generate the cash from in order to pay our dividends? So the starting point, obviously, is the net income where we have the 50-50 split in between Primary and Reinsurance. With regard to the cash contribution, the cash contribution from the primary group is a little bit stronger. They're providing for 65% of the cash, which is perceived by in the Talanx AG, and 35% is derived from Reinsurance. And both together allows us to increase the dividend by 33% to EUR 3.60 for the current year.

Looking at the solvency number, there we also see -- there you also see a nice development, which is simply backed by our good business development, by the increase in equity. We have an increase in own funds and rather stable solvency capital requirements, and this leads to a number slightly above 240%. The audit of the solvency number is not yet finished. We will publish this also in May together with the resiliency numbers.

Coming now to some other finance information with regard to the debt leverage, we have reduced the debt leverage. This is obviously also a consequence of higher equity to 29.7% for the Talanx Group, where we have an internal threshold of 35%. And for the HDI Group, which also includes the mutual on top of the Talanx, where we even have a leverage ratio of 22.8%, which is well below the 30%, which we have set out as a threshold for the HDI Group. So the maturity profile of our debt financing is very well balanced. And you're all aware, we will have to refinance EUR 1.25 billion, which is due in June. So we will have a refinance in the next 4 months. And as you can see, we have a very balanced maturity profile here.

Coming from capital management to investment management to our investment portfolio, it's a little bit boring because it's the same message like we have had in the last calls. So we have a very conservative investment approach with more than 80% of our assets invested in fixed income, and out of that, 93% in investment grade. So we have just 17% of our portfolio allocated to yield enhancement products, which are displayed in the pie chart on the right side of this chart.

The main activity last year was realizing of the losses in the investment portfolio, but we bought the same quality of bonds again. So there was no shift towards risk on or risk off by doing that, and this will provide us a further increase in return on investment, which is displayed on the right side. Assuming we wouldn't have done this EUR 857 million realized losses, the return on investment would have been 3.4% for 2025.

Let me now dig into our profit engines. Our segments will provide us with this very good result. To start with Corporate & Specialty. Edgar Puls and his team, they were really able to provide us another year with a very, very strong result. With regard to growth, they were able to grow the business by 2% in euro terms, currency adjusted even 5%. Group net income contribution was up 10% to EUR 551 million, a very strong number, having in mind that they have strengthened both on the asset side and on the resiliency side their balance sheet again. And this was feasible because of an outstanding low attritional loss ratios with 90.3% combined ratio, which is -- which does reflect it. Return on equity stands at very, very good 17.3%.

What drives my confidence with regard to the future? We have a very well-diversified portfolio here, and it's very well diversified by both by regions and also by lines of business. And Edgar and his team was able to achieve rate changes by lines of business slightly above inflation rate during the course of 2025. And this is despite the fact, as all of you know, that we have a softening market here, so they performed really good.

And this brings me to the outlook of Corporate & Specialty. We are very confident that they can achieve growth again, that the combined ratio should remain below 92% and that the return on equity will stick above 16% for the year 2026.

Coming to the next segment, Retail International, they are our growth engine. Insurance revenue were up 4% in euro terms. They were heavily affected by currency effect because currency adjusted, they achieved 10% growth. The group net income was even up 36%, and 36%, okay, there was one special effect in it. We bought out the minorities in Poland, and they contributed these minorities, and we could account for it already in 2025. And this minority they added EUR 68 million net income in total to the EUR 611 million.

So without the EUR 68 million minority buyout effect, the growth rate would have been just 21%, which is still a super number. Return on equity stands at 19.1%. Excluding this one-off effect, it would have been 16.3%, which is a super strong number for Retail business. What provides me with comfort with regard to the future development, like in Corporate & Specialty, we have very well-diversified portfolios with regard to the regions we are in and also with regard to the lines of business. And this good diversification is backed by strong technical excellence in both in South America as well as in Europe. With combined ratios in the area of 92%, these are really very strong portfolios, and they provide us with quite some comfort that we will expect future growth in net income.

So what do we expect from Retail International for 2026? So we expect to have a mid- to single-digit growth in original currency. We expect the combined ratio to remain below 93% and a return on equity above 16%, which is a strong ambition for Wilm Langenbach and his team.

Coming to our smallest segment, Retail Germany. In Retail Germany, as Torsten has already mentioned, we had a decline in insurance revenue due to the end of the TARGO cooperation. We expect that this end of the TARGO cooperation, we will see 2/3 of the effect in the 2025 numbers and 1/3 in the 2026 numbers. And despite this decline in top line due to the restructuring efforts of the management team around Jens Warkentin, they were able to grow the net income by 6% to EUR 173 million. And the return on equity stands at around 12%, which is a decent number.

With regard to the segment, this is pretty small, with regard to insurance revenues, just 7% of the group, and also, for the group net income, it's just 7%, but it's very strong in terms of cash contribution. We have received 15% of the cash contribution of Talanx AG from Retail Germany. So it's an amount above EUR 200 million, and we expect this to continue further. This will be our cash cow also going forward.

With regard to the outlook 2026, we expect a further decline, single digit, not so big as in 2025 due to the end of the TARGO cooperation. The P&C combined ratio should remain below 93%, and the return on equity should be double digit again. Coming from the smallest segment to the biggest one, but most of you might have heard the call of Clemens and Christian with regard to their numbers, Hannover Re is growing 2%. And if you adjust this 2% for currency effect and also for some reassessment in the accounting, it would have been even close to 10%. And if you compare that to the peers, you clearly can see that Hannover Re is benefiting from the lean operating model with a cost advantage and can translate it into growth.

The group net income at Hannover Re is up by 13% to EUR 1.3 billion. This is just a 50% share for Talanx, which is displayed here. And this is backed by an outstanding combined ratio of 84%, which was heavily also impacted by the large loss development. Return on equity stand at record level, 21.7%, clearly a strong number, and we are proud majority shareholders of Hannover Re.

With regard to the outlook, we expect further growth to happen here. Despite a softening market, combined ratio should get back to normal, below 87%, with a normalized large loss development. From Life and Health Reinsurance, we expect insurance service result of EUR 925 million. And this should then lead for net income contribution for the 50% share of Hannover Re to Talanx of EUR 1.35 billion or at least EUR 1.35 billion, which translates to in 100% numbers for Hannover Re more than EUR 2.7 billion profit.

Having said that, I think it's up to you, Torsten, to provide us with the outlook for the group as a whole.

Very good. This is our business model, and it runs through all cycles, and we believe the strong ingredients, which basically reflects then the performance you see. What we say for 2026, we say net income above, let's say, plus 9%, around EUR 2.7 billion, so an increase of 9%. And we say as well a dividend, which we will then propose to general meeting next year of above EUR 4, which means above 10% double-digit growth of dividends. And that would mean if this comes in that we are, what we promised in '27, 2027, that is 1 year earlier and higher as delivery to you. And the outlook, therefore, which was said already, these are the 3 numbers you can see.

And with that, I would hand over to Bernd.

Okay. Thanks, Torsten and Jan. So we are now opening the queue for questions. If you have a question, please use the Hand Raise feature, and I will call you into the Q&A. And the first question is from Chris, Chris Hartwell from Autonomous. You are mute. You are muted. Chris, you are muted.

How is that? Can you hear me now?

That's perfect.

Perfect. Sorry about that. You would have thought 6 years after COVID, we'd get the hang of Teams chat, but I'm still learning. So a couple of questions from me, if I may. Firstly, just on the comments on resilience. So I guess, there's sort of a part A and a part B on this question. The sort of part A on that is how I should think about the combined ratio for Corporate & Specialty in 2026 and beyond. I mean it's -- the target is broadly maintained at better than 92%. Do we see that as -- I mean, is that now closer to reality in terms of what you are reporting? And then sort of part B to the question around resilience is if you sort of take away the lever of earnings management through the reserving side of the balance sheet, what does that -- where does that sort of leave you going forward? What are the -- I mean, is the only really -- any real lever available to you now on the fixed income portfolio? So that's question number one.

Question number two, if I may, is really about the situation in the Middle East. I wonder if you could just sort of share your thoughts or concerns if you have them around particularly in the Corporate & Specialty side, maybe even the Reinsurance side. And maybe also touch upon whether there's any concerns you may have in Turkey.

And then a cheeky third, if I can sort of push the boundaries a little bit, is just on the solvency ratio. I appreciate it's unaudited or unfinished at the moment, but 240% is a big uptick quarter-on-quarter. So I was wondering if you could just help me understand what the moving parts are to that at the moment.

Chris, so I start with the middle question with the Middle East, so basically -- and then Jan will give you the next -- the other questions you had. So what we feel basically, it's much too early to say really because so far what we can see is that we have a large loss burden for the first quarter and which is not used much, so everything fits in. We had no material damage at all in the time now. And we have anyway not much insured or nothing in Iran. So basically, for us, it means the question is -- and the big question is how long the war will take and how large it will become, right? And therefore, everything is open. But so far, it's much too early to say.

And all the rest, you can estimate yourself secondary effects like interest rates increasing and so on. But here, our answer would be always our business model through all cycles, when it comes to volatility, we try to have a lot of substance and strengthen in our balance sheet. We have a market risk, which could be a secondary effect. We have a slow, better approach, where basically, as Jan mentioned before, quite boring asset management portfolio, but a high-quality one. So this is really the answer, it's much too early to say. So far, we see nothing big in our portfolio, and we have a lot of space in the first quarter. There was no really nat cat events, expect the U.S. winter storm, but that's all we had.

And then, I would, the first and the third question, leave to Jan.

So the first question was on the resiliency policy splitted between how we should -- you think about the combined ratio, and with regard to the investment income, what is expected going forward? So rather simple, yes, with regard to the combined ratio, sort of, what we have set out as a guidance is how you should think about going forward, the combined ratio with a normalized large loss development. Yes. So -- and second, with regard to the investment income and the contribution of both sources of income, investment and insurance service result, yes, we will have a higher share of the investment income. Due to the realization of the losses in the bond portfolio, they will contribute, obviously, to higher investment income, which is included in our guidance.

And the third question, with regard to the moving parts of the solvency development, on a top level, it's rather simple. We have an increased own funds, but the solvency capital requirement remains stable. Yes. And so this drives the solvency ratio up.

Why does the solvency capital requirement remain stable? We have this rather boring investment portfolio. And what we've seen at the end of the year was higher interest rates, which is a benefit for the solvency ratios in the life entities in Germany, in particular, and lower spreads and so -- at the end of the year. And these 2 effects leads to despite the fact that we are a growing company to the factor that the solvency capital requirement remained rather stable.

Okay. So if I can just come back to the second one on the resilience -- well, not really resilience, on earnings management. So just coming back to the -- I guess, the sort of question I was trying to sort of get to is if we -- I mean, let's say we go through 2026, and again, it's a relatively benign cat year. I mean, if my understanding is correct, I mean, there's going to be no real room for increased resilience within the P&L, both on the reinsurance side and on the primary side. So am I right in thinking that the only lever you will really use to absorb any excess profit this year would be through unrealized losses into realized losses? Otherwise, anything on the underwriting side just drops through to the P&L this year. Is that the correct way to think about that?

You put it a little bit to the extreme. Yes. But you're right, we are at the upper level of the resiliency, in particular, in Primary Group and in Corporate & Specialty, there you're right. But you never know whether there's some room to maneuver. I just want to draw your attention on one factor, which is quite important for reserving, which is the assumption on inflation. And one consequence of the Middle East war could be that we have higher oil prices, higher inflation, and this then leads obviously to a little bit more room to maneuver also with regard to the reserving policy. But the new -- good news, I really want to bring across, given our reserving level, which we have, we really can cope with this.

Thanks, Chris, for your questions. Next one in line is Michael Huttner, Michael from Berenberg.

Fantastic case stand. I joked with your IR, Jan, that you had, had a heart attack when you saw the dividend. I'm sure that's not the case. But I'm always asking for more. So help think us, guide us and -- because your wonderful IR did kind of say, yes, the earnings growth may be, but the dividend growth should be faster going forward. So maybe we can touch on that a little bit. I know it's looking forward and you might say it's far too early.

And then the other one -- two, I'm cheating here again. But on credit, can you give us a little bit of indications? I know it's a small number, but anything is always helpful on that topic, you always worry.

And then, on the solvency, what are you going to do with it? 240, plus you'll get a little bit of benefit from Solvency II review in January next year. So where -- what are you going to do with that? And I always think the management bathes in gold every morning, but I'm sure you do more interesting things with it. I'm thinking more deals.

Michael, nice to see you. Basically, I take the first, and Jan takes the second and third question. Well, nice try, but what we say is a 33% dividend is now. And for next year, we promise above 10%. Whatever means above, but it's above 10%, and it's EUR 4 above 1 year earlier and higher and nothing more we tell here.

Okay. And then the second question from you, Michael, is on private credit, if I understood correctly. So as you can see in our numbers, we've just allocated a small amount. We have also allocated roughly a little bit more than 1% to private credit funds here. So hence, the development in 2025 of this private credit fund was a positive one. So we earned money, which is a double-digit million number.

On deals?

Solvency and deals, 240% solvency.

Yes. So we are open for deals, but we will not release any further information on what we are going to do. So -- and as always, I just want to repeat what I'm telling you always, we have internal yardsticks on deals. Out of 20 deals we look at, one is realized. So we will have discipline. We will continue to have discipline on that one. It has to add to our portfolio in a nice matter, in nice ways. And what we've always said, we would love to do deals in Latin America, in Mexico and Colombia. We would love to do deals enhancing our Corporate & Specialty portfolios. And we are rather reluctant in both Retail Germany and Reinsurance with different reasons. For Reinsurance, that obviously would not add to Hannover Re and would be rather a risk for their culture. And with regard to Retail Germany, there's nothing available.

Maybe just to say -- just to add on this with M&A, we love M&A and totally right, as Jan said, just from 20 out of 1 is just working. When people talk about cycles, each cycle has good chances. So sometimes you have cycles where the prices are coming down in M&A, not justifying relation. So maybe you can keep time as well for M&A, as you have seen as well in the last time. So market is more active. So we see each cycle has the chances. So this could be maybe a good time. Always saying we are going to be disciplined, what our group indicators are showing, Jan takes care about it.

Okay. Thanks for your questions, Michael. And the next question we have from Iain, Iain Pearce from BNP Paribas.

It's just 1 on the large loss budget. So the increase of 11% in a large loss budget year-on-year versus the mid-single-digit revenue growth guidance. Clearly, some of that is Hannover. But could you just sort of talk a little bit about why the increase is so much bigger than the revenue growth guidance, if that reflects any change or expectation and mix over the course of 2026?

Yes. I think I should take this question, what we do in risk management? We always have a look at both, at our retail structure and on the incoming business. So it's not just related to the development of the top line. And out of that, we form our large loss budget. It's really something without any buffer. It's really coming exactly out of the underwriting and risk management tools. And so we have a slight growth in the net appetite on nat cat for the year 2025 on top of the growth of the business.

Okay. So I'm not sure, Michael, is that a follow-up question you have? Or is your hand still up from previous? And follow-up question from Mike. So go ahead, Michael.

It was just to ask on Slide 28. I love this slide on pricing. I think -- so the numbers are mostly positive except property, but they're before inflation. So I'm just wondering, can you give us a feel for how you see risk-adjusted after inflation? I know it's a complicated question.

And then, the fairly boring question as well, AI. What does it mean for you? I don't know, basically, what we've seen from some of your peers is lots of cost-cutting. Others have said it's more helping on sales, but anything would be -- any kind of feel would be very useful.

I mean, on AI this is, I take the second, and Jan takes the first question. Well, AI people say it's overhyped and underestimated, which I believe is true. How we tackle this significant focus on those areas we really can scale up and with us underwriting and claims, or more precisely in retail, it's more claims, and then, wholesale, it's more underwriting. I think the whole market is trying now to skill up their people to make some nice cases, but at the end of the question about scaling up.

And here, I mean, it's not just about efficiency. I rather would mention it's a lot of growth opportunity as well because you can handle much more offers from the brokers, you can be much faster. You can do work, which really is a simple work you don't need anymore. And let's say, it's a routine work and you can really make more quality work, I think, in the organization.

Having said that, it's very important to see it's not just about technology. This is maybe just 10%, 20% to implement. This is an easy one, yes, like an Excel sheet in your company. It's more how to use it and how to make the processes and how to change the culture, end-to-end processes. So this is much more challenging. And you always have to see that there's a business case, which you scale up. It doesn't make sense if I tell you hundreds of cases if it doesn't scale up. So really the bottom line effect, it should be really a business case.

I think our organization is -- and this is something which sounds not logical in the first step, but we have the fourth segment, and they have their clear road map, actually presented yesterday to the Supervisory Board. And it's very promising what the companies do sometimes outside of the headquarter because we have to be close to the client, close to the customer. It's not an IT project. It's a business-driven project, which really makes sense to the customer and where we can scale up. So as I said at the beginning, it's totally hyped, the whole thing, but it's totally underestimated as well. And now comes the time of scaling up in the next 1, 2 years, I guess. And we are, I think, on track.

Okay. I'll take the second one with regard to the rate changes in Corporate & Specialty. So overall, for the year 2025, we have been lucky to achieve a rate change slightly above inflation. Going more into detail, as you said, it's really complicated. Just to review a rough number together with the actuals for the group as a whole, not only in the segment, Corporate & specialty, we have assessed how many inflation indices we use for forming our expectations for underwriting. It's more than 400 now -- 400 different ones. Yes. So it's a real huge number, very often a composite of different indices.

And obviously, yes, just to look at the CPI, development is definitely not enough in insurance if you want to do your underwriting right. And this is where our underwriters work with. And yes, we have to admit that the market is softening a little bit. But given the quality of our portfolio, this is why we have set out the expectation on the combined ratio as it is. And this expectation also includes a normalization in the large loss budget usage.

Can you explain that last point, the normalization of large loss?

We have inserter -- when you have models for underwriting, then you have an attritional loss ratio and you have a large loss consumption. And we have included in the combined ratio, obviously, both, the assumption of a normalized large loss development for this year and the very outstanding good portfolio quality for the attritional losses.

So then, we have another question from Roland Pfaender, Roland from ODDO BHF.

A question on Corporate & Specialty. Could you maybe speak a little bit more about how you want to develop this business line further? So would you like to expand, for example, in North America our Specialty? And also in Specialty, is there something changing the competitive environment? We see here some market consolidation going on. So what is the future of this business set up looking into the next some years?

Yes. Thank you, Ron. Very good question. I mean, this segment of Corporate & Specialty or Specialty business itself really doubled last year. It was a good cycle, and we love this business. So, therefore, if you love this business, you have really to go to America as well. I mean, we are there, but we would like to do more here. America is 50% of the worldwide corporate specialty market. We have approach where we rather think about niches, about special things in the Specialty area and not give a large acquisition here.

And yes, the market was very active, as you have seen, and I think it will continue to be very active. And we are part of searching and seeing pipelines, and there's a clear focus where we want to grow, but it has to make sense economically. And again, if the cycle is as it is now, maybe it's a better chance than a cycle which is high, which makes economically more sense actually for us. So, yes, U.S. is a target market. We are looking, but there's nothing concrete in the pipeline, so -- which we will have to announce. But basically, we are there, absolutely. And we can allocate our capital there.

Okay. So let me check the screen whether there are more questions. Any further questions? Final call for questions. Michael, Michael is approaching the question limit. Michael, any...

Yes. One more. One more. And it's just a very simple one. So you have 93% -- so 2 questions, sorry, cost advantage in -- across your businesses. I assume that's Corporate & Specialty, Reinsurance and Retail International, but not Retail Germany. Is that -- is the gap to your competitors increasing, narrowing? I suppose the question I'm asking is how much of an edge do you have, your peers? And is that moat, if you like, getting bigger?

And then the second question is much simpler. You kind of alluded to it. You said high interest rates help the solvency of your German Life unit. I'm always curious on that. I know it no longer matters, you've got so much money, but what's the ratio there now?

So when it comes to the efficiency gain, well, we don't have the numbers yet of our peers from last year. But the feeling is that we didn't have any difference to the distance, to the market and each segment has different kind of ranges. I think we talk about, let's say, roughly from 3 to 8 percentage points difference in our cost positions wherever we are in the countries. And overall, we don't see we lost it.

Just remember, we have still 300 people, actually 291 people in the headquarter and roughly 30,000 out there. So we have a lot of cost measurement in place. But basically, this measurement are not severe. It's more about transparency because the culture of people, and this is long-lasting since the mutual at the end was founded. It's a very strong cost culture where we are really aware, not just because we're sitting in Hannover by chance and not in the more expensive towns, but basically the structure itself. So structure-wise, we have not built any add-on bureaucracy in the company, rather stable on the cost in some areas. And we don't feel at all we have lost this advantage last year. But again, the transparent we only have mid of the year.

And I think, Jan, you can help with the other, with the Life portfolio. Yes.

Yes. The solvency ratio in the Life portfolio has increased. Yes. I do not have the numbers in -- because we have very different life entities, but overall, it has increased quite substantially. And the reason is rather simple. We have a higher interest rate, which is good for the ALM. And second, we have a spread tightening, which is good for -- given that the market risk in those businesses is a huge part of the overall solvency capital requirement.

Okay. So final call for any further questions if there are any. Checking the screen. So there do not seem to be more questions. So then I hand back to Torsten for some concluding remarks. Torsten?

Well, I only want to conclude. Thank you very much for your trust and for your comments and your questions, and let's continue our dialogue coming up, and promise is a promise.

Thank you.

Thank you.

Good morning. This is Hannover calling with our little video show to present the Talanx results for the first 9 months and the third quarter of the current financial year 2025. I'm here together with my CFO, Jan Wicke, who is happy to take you through the details of all our numbers. And after the call, we are happy to answer your questions during our Q&A session. We are on video today. [Operator Instructions]. As usual, all the documents that complement our presentation today are posted on the IR section of our website, and you will find there not only our presentation but also the much more comprehensive financial data supplement.

And with that, I hand over to you, Jan. The floor is yours.

Well, thank you, Bernd, and good morning, everybody, and thank you for attending our earnings call. And I'm glad to give you some insights on the recent development of Talanx. We have very good numbers to be reported. First of all, during the first 9 months, we were able to grow our net income by 23% compared to the previous year to EUR 1.964 billion. And by that, we are even close to the full year earnings numbers from 2024. This strong earnings growth is driven by a strong profitability.

Return on equity stands above 20%. And this gives us the confidence that we have increased both the outlook for 2025. We intend to achieve a result above EUR 2.4 billion for the full year 2025. And we expect another double-digit earnings growth for 2026 and want to deliver a result around EUR 2.7 billion in 2026. What gives us the confidence that we can deliver on that one? Insurance. In insurance, it's all about good diversification. And we have a high degree of diversification in both ones, what you can see here by geographic diversification, a really well-balanced portfolio and second, also by business model.

In the first 9 months, roughly 51% of the net income was derived from primary insurance and 49% from reinsurance. So it's really very well balanced, what you can see here. Looking into more detail into the numbers, we can report that insurance revenue measured in euro were stable, whereas adjusted for currency, we see a 2.7% growth. If we further adjust this number for what the colleagues of Hannover Re have explained to you, the refinement of the calculation of reinsurance revenue, then it would be even a growth rate of 6% during the course of the first 9 months.

Profits are up 23%, and this is mainly driven by an outstanding technical performance. We were able to achieve a combined ratio of below 90% for the group as a whole. And this is, to be honest, even if you adjust for the discounting effects and so on, we did some math here with the controlling team. It was the best number after 9 months in the Talanx history.

Return on equity stands at 21.5%. Yes, we have some benefits from the currency accounting. But even if we adjust for currency impact, then it's still 19%, which is a very, very healthy number. What makes our numbers even stronger is the way how we're considering large losses. As you are well aware, we are booking either incurred or budgeted numbers. We always take the higher off. And in this 9 months figures, we have included roughly EUR 2.2 billion large loss burden, even though just incurred and reported up till now just EUR 1.523 billion.

What does that mean? We have a large, large loss buffer for the fourth quarter to come with more than EUR 660 million. Part of it will be consumed by the hurricane in Jamaica and some other events, but nevertheless, we have a huge buffer for the fourth quarter. You may now raise the question whether we are too conservative with regard to the calculation of our large loss budget. And this is why we have included this chart here in the presentation.

What you can see here is the large losses compared to budget over the last 13 years. And what you can see easily that on average, we had an overutilization of the large loss budget in the third quarter, which is a hurricane season by more than EUR 100 million. But in 2025, we had the lowest ever number in what we have seen. The good news is we can deal with such a volatility.

So all in all, the very good technical performance, the very prudent accounting gives us the confidence that we can deliver more than EUR 2.4 billion in net income for 2025 and deliver also return on equity of above 19%, which is just if you do the math.

Let me now explain you more into detail where the profit is coming from during the course of the first 9 months. So I will guide you a little bit through the segments. To start with Corporate & Specialty. In Corporate & Specialty, we have seen a healthy growth of 4% measured in euro, currency adjusted even 6%. If we go more into detail, we had a little bit more growth in Corporate, a little bit less growth in Specialty, but very healthy.

Group net income is up 13% to EUR 409 million net income. And again, the team around Edgar accounted for the 9 months figures very, very prudent. So we used all, again, certain things to strengthen the balance sheet. For instance, we took some losses in the fixed income portfolio in order to buy new bonds with higher coupons, which will then support the earnings growth in the years to come.

The return on equity stands slightly below 17%, clearly outperforming internal targets. We are very, very satisfied with this consistent outperformance in this segment. Going to Retail International. In Retail International, the growth measured in euro of the insurance revenue was 2%. Adjusted for currency, it was 8%. So the currency effect was quite large due to the devaluation of South American currencies compared to the euro.

Looking at the group net income development, we see an increase by 40% to outstanding EUR 474 million. And this was, in particular, driven by a very good technical performance, which if you go more into details, part of it was the loss development and the other part, nearly half of it was also cost development, working on the cost positions in the various countries.

Return on equity stands at 19%, 4.5% better than in the previous year, but there's one special effect needs to be mentioned.

Due to the buyout of the minorities in Poland, I explained that in the previous quarterly call, if we adjust for this one-off effect, then the return on equity would stand at 16.4%. So we already can account for the profits, but we are paying it the minorities out in the next year. So there's no equity burden on it, and this gives a double lever on those numbers. But nevertheless, 16.4% return on equity in retail, this is an excellent number provided for by Wilm Langenbach and his management team.

Going to Retail Germany. By no surprise, we have a decline in the insurance revenue by 7% due to the end of the Targobank distribution agreement. And to give you also some guidance what is to be expected for next year. In this year, we will have the majority of the decline due to the end of the Targobank cooperation. And then there will be roughly half the effect again next year. And then we should grow again in Retail Germany.

Despite the decreasing insurance revenue, the management team around Jens Warkentin was able to increase the net income by 5% to EUR 123 million. And this is driven, one, by a very good technical performance. And if you go there into detail, there was a portfolio restructuring in non-life, which worked out pretty well, but also cost management. So the total costs in the segments are down 10% compared to the full previous year. That's really an outstanding achievement what they have done during the course of this and the past year.

Return on equity is double digit, and I expect it to be above 12% for the years to come, given that this segment contributes a lot to the dividend -- in terms of dividend payments to the group. So we are lowering the equity due to the lower business volume.

Coming to reinsurance. In reinsurance, I'm sure you might have listened to the call from Clemens and Christian. They are growing profit 7%, achieving a return on equity above 20%. We are proud majority shareholders of Hannover Re, and we are really appreciating their outstanding ongoing and consistent outperformance.

Digging a little bit more in capital management. Here, I also have some good news with regard to our solvency ratio. So solvency ratio is up 9 percentage points compared to the last quarter to 233%. If we look into the details, so the solvency capital requirement on a group level is rather stable, but we have this nice profit. So we have more own funds, and this is what's increasing our solvency ratio here.

So risk capital requirements are rather stable. This has also to do with our rather boring investment portfolio where we follow a low beta approach. What you can see here still more than 80% of our investments are in fixed income and more than 93% -- 90% in investment grade. So a pretty prudent investment style what you see here. And nevertheless, we are able to grow our ordinary investment income by 7% compared to the previous year 9 months numbers.

The portfolio yield is increasing step by step, and we are accelerating this process by realizing losses on the fixed income portfolio in order to lock in higher interest rates for the future. We did so not only in the years 2022 to 2024 by more than EUR 1.2 billion. We also did it during the course of the first 9 months where we have realized more than around EUR 380 million losses, what you can see here on the chart.

And to give you some guidance for the full year, I would be very much surprised if the number is below EUR 500 million for the full year. So we are continuing to do so in order to support the earnings growth in the years to come.

Coming to the outlook. We are very, very confident. What drives our confidence is our distinct business model. First of all, we have a very good diversification. 51% of the net incomes were derived from primary insurance. We have a very good 50-50 mix and also the geographical diversification, which really matters in P&C business is very benign.

Within our company, we have a focus on P&C business. More than 80% of our premium volume is derived from it. And so if you walk the floors here, there's a lot of discussions about where risk materialize, how risks develop and so on. So it's a kind of underwriting cultures. And this enables us to deliver a combined ratio this year even below 90%.

Where we are really passionate about is our cost leadership. In 93% of our businesses, we are cost leader. And this enables us to deliver more value for money to our customer. And this will enable -- this gives us a competitive edge. All the 3 elements, diversification, P&C focus and cost leadership brings our business model to another level. But next to that, we have something which is our resiliency, which in a world of higher uncertainty is really important.

We have reported at the year or at the first quarter in this year that external actuaries have assessed our reserves and found a resiliency of EUR 4.7 billion. They will do it again end of this year, and we will report this number in the first quarter. And I would be very much surprised if the number is lower. So we are still strengthening the resiliency to cope with the higher uncertainty in the world we are living in.

So putting all together, a strong balance sheet, cost leadership, good diversification, P&C focus, this gives us really the confidence that we have a competitive edge in our cyclical markets. And this drives our overall outlook. For the year 2025, we expect to deliver more than EUR 2.4 billion. And for 2026, we set out a guidance to around EUR 2.7 billion, which is another double-digit increase compared to the previous year. And by that -- by the way, we will achieve our midterm target, which was initially set out for 2027 to achieve a result above EUR 2.57 billion one year earlier and higher. And so we are quite happy to report these numbers and this confidence. And with that, Bernd, I hand back to you to take the questions.

All right. So then let's dive into our Q&A. And the first questions come from Hadley Cohen from Morgan Stanley.

So a few questions, please. Firstly, with regards to the outlook, Jan, congratulations on raising it to the extent that you have. I'm just wondering how we think about the dividend in that context because you were previously targeting a EUR 4 dividend in 2027 based on EUR 2.5 billion of net income. And now you're targeting EUR 2.7 billion in 2026. So how should we think about the dividend trajectory in that context?

And then another question on the outlook is you're implicitly getting -- you're already at the 50-50 split between Primary and Reinsurance currently and expecting it in 2026 as well. How are you thinking about the relative growth of the 2 business lines, Primary versus Reinsurance going forward? Do you expect them to be broadly similar? Or do you think the Primary can outgrow Reinsurance over the medium term?

Second area is on C&S and the top line there. I mean I think it was a little -- it missed slightly versus what I was expecting, I think in part FX driven, but also I think you're being quite selective in some of the business that you're writing. Can you just give us a quick update on the underlying pricing dynamic there and which lines of business you're seeing is still attractive and where you're sort of reducing exposure, please?

And then finally, just a very quick one on the German Retail combined ratio, incredibly strong at 87.4%, I think, for the 9 months. I know that there was some favorable elements earlier in the year, but how should we think about the sort of normalized run rate there?

Thank you, Hadley, for your questions. Quite a few. I'll start with the dividend outlook. It's -- so first of all, the dividend policy will remain unchanged, always up, and we will decide after the year-end closing on how much upside we will provide to our shareholders. I just want to bring across the message that capital efficiency matters to us. And second, also, please keep in mind that we have to pay for buying out the Polish minorities in the first quarter of the next year. So this has to be also kept in mind when you do your calculations how much dividend will be decided on after year-end closing.

But the good news is pretty clear, given the earnings development, we have more room to maneuver. So this is for sure. Second question was with regard to the growth outlook, Primary versus Reinsurance. First thing, I have to admit something. We are not setting out top line targets to our entities. So what we are setting out is earning growth targets. And this is what we are discussing. And it's even written in our underwriting guidelines that there's one sentence, which is really famous with another company, which is volume is vanity, profit is sanity.

And the mindset is we want to grow where we see profitable growth. So the growth from Primary and Reinsurance, well, we will capture the business opportunities where they are. And so it's a little bit difficult to give you there a straight answer on that one. And given the cost leadership we have in most of our markets, we are very confident that we are able to capture them.

Third question was on Corporate and Specialty top line development. It's 4% in euro, 6% currency adjusted, a little bit more in Corporate and a little bit less in Specialty, the growth. In total, we see still a positive range change of around 3%. Where are we more cautious? We are more cautious in those lines where we believe that inflation impact is a little bit stronger. So it's always keeping in mind how much inflation. So we have to make a bet on the expected inflation when doing the pricing.

And we do see some inflation. So this is what needs to be kept in mind. In detail, it's a little bit more complex because we have to distinguish between line of businesses and geographies. So it's -- but in a nutshell, overall, I would expect us also in 2026 to grow a little bit more in the Corporate than in the Specialty segment.

The fourth question was on German Retail, the combined ratio, and it's really an outstanding combined ratio, what we've seen, and there was this one-off effect, you reminded correctly that due to the assessment from the external actuaries, they found something where we had to release some reserves and as an effect of it. If we normalize it, I would expect in the low 90s combined ratio in the next year to come, but not at this level. This is really outstanding. I hope I've answered, Hadley, your question.

Yes.

Then we go on with the next questions that come from Chris Hartwell from Autonomous.

So just a couple of questions actually, maybe 3. So firstly, just on the sort of the broad question of balance sheet prudence. I mean you mentioned that for the first 9 months, you are running way, way, way below the large loss budget. I mean you've talked about realizing losses. So that's a couple of hundred million more in Q4. I was wondering also if you could just give a little bit more color on other thoughts on where you may also find a place to strengthen the balance sheet or put into the balance sheet, if that's a better phrase.

And secondly, I just want to sort of come back to the target and obviously, the previous comments, just wondering if you can give a little bit more color on the construction of that EUR 2.7 billion. We've obviously got the Hannover Re element of that. But I was wondering if you can maybe sort of talk a little bit about your relative bottom line excitement as you see it in the various retail and other businesses.

And then thirdly, just a very quick question, just on the structure transformation into an SE. If I cast my mind back, I think, quite a few years now when other companies did similar, there were capital benefits, I believe, from that. I was wondering if you may see the same from that also.

So first, with regard to the balance sheet prudence, Chris, -- so the primary -- the first focus will be realizing some losses in the fixed income portfolio. The resiliency embedded in the liabilities is really already very strong. And also from a capital efficiency point of view, there's just a few millions to be added, but it's not huge because we are -- it will be much better than the resiliency, which we published last year.

But for the fourth quarter to come, the main focus is on fixed income, and we will also have some prudence in the tax accounting going forward. Overall, the balance sheet, I really can tell you, it's the strongest balance sheet Talanx ever has had. So we are already on a very high level.

With regard to the second question, EUR 2.7 billion target. We -- Hannover Re has published their guidance for 2026 as well. They want to deliver also EUR 2.7 billion. So -- and we have then the primary and then the corporate operations, which usually contributes negatively to the overall results. So it will be again a 50-50 split of the revenues to come.

We will see very nice growth in the earnings in both Corporate and Specialty and Retail International. So we are confident that we will see further earnings growth there, a little bit less earnings growth in Retail Germany due to the fact that they are still shrinking. So the results there will be rather stable. And I hope this provides you with some color on the development of the earnings contribution. With regard to the Societas Europaea, the SE construct, there is no capital release related to that one.

Next questions come from Michael Huttner from Berenberg.

Well done. Fantastic. Lots of upgrades. Lots of questions on the M&A budget, can you remind us how much you could spend, you're willing to spend? And if there's anything in the pipeline, I always remember that Mexico and Specialty are kind of areas. The second is on life solvency. So your wonderful IR team highlighted that it has gone up from 270% to 332% in the last quarter in Germany.

I just wondered in terms of capital or cash release, how much of a benefit could that be? And if you could remind us how much you take every money from every year from Retail Germany. I think it's EUR 200 million, but -- and then the more philosophy -- the more complicated question. You're making huge amounts of money in Corporate and Specialty. But clearly, the margins -- or your growth is more selective. So clearly, the margin outlook is possibly shrinking a little bit, I don't know. How does one think about that?

So you start from a high point and go down. That's always uncomfortable, analysts want everything to go up. I don't know how to think about that. Any help the way you look at it. Then a couple of -- Melissa, if you could maybe -- and also exposures to the -- was it First Brands and Tricolor if there were any? And then the last point, I can't quite square the math. So EUR 660 million is the unused budget in Q3. You've got another lot to come in Q4, EUR 613 million. So Melissa presumably would be coming out of that. So if I spend EUR 120 million in fixed income going from EUR 380 million to EUR 500 million in terms of realized losses, I'm still left with EUR 540 million. Are you going to put EUR 540 million in tax? There we are. That's it.

To answer the last one, no, we do not put EUR 500 million in tax. But let me start with the other question. First, with regard to the M&A budget, yes, we have the financial strength to execute M&A, but we remain disciplined here. So discipline is the key. By numbers, yes, we can do a EUR 5 billion deal. Yes, we can do even bigger deals, given that we also have the support from the mutual, which we also always have to take into account when it comes to M&A.

With regard to the pipeline, this remains unchanged. We would love to do something in Mexico or to strengthen also the specialty books. But obviously, price discipline really matters to us. So all these targets have to fulfill return on equity targets and return on investment targets. And it's a little bit also my role to insist on that, and I do so.

So second, with regard to life solvency, which is up, you're right. We have a positive development that meant there due to the interest rate development. So we have lower market risk here. And this leads to the opportunity to take a little bit more money out. So -- but it will remain around EUR 200 million from Retail Germany every year. Also in the years to come, the average contribution is around EUR 200 million, what we call.

Third question was on the margin outlook at Corporate & Specialty. First of all, you're right, we will have a little bit lower margins. There are discussions about price and a lot of discussion also with clients about the expected inflation, which we have to embed in our underwriting calculation. But nevertheless, we are very, very confident to deliver very good results also in 2026 and the years to come.

The next question was on Melissa, the hurricane in Jamaica. Given that Hannover Re has a very high market share in Jamaica, we expect it to be a triple-digit number, which we will have to pay for. But it's okay. This is what we are built for. So -- and it's well absorbed by the large loss budget. So we have no worries with regard to paying that. Then there was a question on the assets on First Brands, we have no -- we expect no impact from First Brands. And I think -- I do not know, Michael, but I have covered all your questions. Or did I miss one?

The last one, what you're going to do with strengthening.

Yes, strengthening. Well, we try to find a little bit more than EUR 120 million in the fixed income book in order to strengthen the return on investments in the years to come. So we expect some of the earnings growth to be derived from a rising return on investment in the coming years.

All right. Thanks, Michael. And then there are more questions from Roland Pfäender from ODDO BHF.

Two questions from my side, please. Could you speak a little bit about the reserving policy going into next year, which is embedded in your new target? Would you expect resiliency reserves to go up, to be stable or actually to come down. So what's the assumption here? Then Retail Germany, the expense ratio, I think, came down for the first time more markedly in the third quarter, below 30%. What would be a long-term target? Do you think you could manage it down in the future?

So first, with regard to the reserving policy, we expect the resiliency in 2026 to remain stable in percentage points compared to the liabilities. So this means a small increase is embedded in our plan, but it's just to give that we are growing to keep that stable. The overall reserving policy, and I really like your question, is the following. We have set out minimum targets for resiliency, but nowhere in the group, we are close to the minimum targets. And we also have set out upper limits, and we are reaching upper limits.

And upper limits we have set out because of capital efficiency. So we are really calculating for actuarial segments what you need in order to cope with the volatility, which is inherent in our book. So you will have a high threshold if you have a small portfolio, which is very focused, which is not very well diversified, then you will have a higher threshold. And if you have a broad portfolio, take Hannover Re, for example, which is very well diversified, you have a lower threshold where we start to have discussions on capital efficiency with the segments on that one.

And we keep that in mind. So I just want to bring that across and the reserving policy for the future is what is driving our thoughts also is that we believe that we have a growing uncertainty that the number of large losses, even though they have been incredibly low during the course of this year, but they will rise again, they will normalize. This is what we embed in our policy.

And the numbers, the severity, what is to be absorbed will rise too. This is in our models, in our thoughts, and I can bring across a good message, we are prepared for it. So second, Retail Germany expense ratio, they will do further steps on the expense ratio in total, but I have to be very careful. They have set out an efficiency program there, which they are conducting. They are slightly ahead of plan. Really. It's really very well managed by Jens Warkentin and his team. So I wouldn't be surprised, let me put it like this, if they were able to reduce the cost by another 10%.

Thanks for your questions, Roland. So let me check the screen whether there are further questions. I'll give you some more seconds to make up your mind whether you want to know anything more. That does not seem to be the case. So thank you for the time you spent with us and give back for concluding remarks to you, Jan.

Well, thank you, Bernd. So thank you for all your questions. I hope I could give you some color on our recent development. And in brief, we have had a fantastic first 9 months. We are very confident with regard to our outlook for both for this year and also for the next year, and we will deliver. Thank you for attending this call.

Good morning. This is Hannover calling with the results for the first 6 months and the second quarter of the financial year 2025 for the Talanx Group.

I'm here together with my CFO, Jan Wicke, who will guide you through our numbers and tell you where we stand on the delivery in the current financial year. And after the presentation, as usual, we are happy to take your questions.

We are on a video conference today. [Operator Instructions] All the details complementary to this call, including, but not limited to, our interim report as well as the financial data supplement are posted in the IR section of our web page. And obviously, the IR team is available for any further questions you may have after the call. And with this, I hand over to Jan. Jan, the floor is yours.

Thank you, Bernd. And as you can see, climate change is happening, and we have very different perceptions of what does this mean for us. So Bernd is able to stand the heat, and I have to take off the jacket.

But next to that, thank you for attending our call, and thank you for spending some time with Talanx. We have some very good numbers to report, and let me just kick in. I have 3 messages, which I want to bring across.

First of all, we've had a very strong technical performance during the first 6 months of 2025. This resulted in a record result with EUR 1.373 billion net income, and this has led to our conclusion to improve -- to provide you with an improved outlook or to raise the guidance to around EUR 2.3 billion for the full year 2025.

Where is the profit coming from? Primary versus reinsurance. So we are now at 51% primary insurance after 48% in the previous year, so roughly 50-50. And looking into primary insurance in more detail, 25% of the result is derived from Retail International, slightly above 20% Corporate and Specialty, another 6% by Retail Germany and 49% by Reinsurance.

But now let me explain in the usual format a little bit what has happened during the course of the first 2 quarters. So first of all, we are growing currency adjusted 4.5%. And those of you who have listened to the call of Clemens and Christian this week, they know that in Hannover Re, we've had accounting refinement with regard to the insurance revenues, the nondistinct investment component in it.

And if we were to adjust for it, the growth rate, currency adjusted, would be even above 7%. Bottom line is growing much, much faster, 26% positive growth to EUR 1.373 billion, which is another record in our history. And this translates into a very strong return on equity of 23.4%, which also had some tailwind from currency.

If we adjust for the currency effect in both in the net income and in the equity, the return on equity would have been 20%, which is still not a bad number. So we are very satisfied with the results which we have seen in this first 6 months. I already mentioned that we had a very, very strong technical result, and you can see that in the development of the insurance service result.

We had a strong growth delivered by Primary. So our Primary is outperforming in growth numbers by the insurance revenue -- insurance service result, reinsurance with 14% growth. And for the first time in history, we've seen an insurance service result in Primary above EUR 1 billion after half year. Whereas, in Reinsurance is outperforming Primary Insurance with regard to the combined ratio which is 88.4%.

And together, Reinsurance and Primary, we are able to deliver a record in both; a record with regard to this 90.7% combined ratio. It's a record combined ratio for the Talanx in history and also a record with regard to the insurance service result, which is for the first time after half a year, above EUR 2.5 billion.

We have been a little bit lucky after we have had 2 very, very different quarters in this year. The first quarter -- in the first quarter, we were hit by the Los Angeles wildfires. We were exceeding our large loss budget by far after the first quarter. And the second quarter, the frequency of large losses was super low. So -- and together with regard to the net large losses, we have booked our budget after 6 months, EUR 1.273 billion in our accounts, but we have just incurred large losses of EUR 1.134 billion. So what does that mean? We have a buffer of roughly EUR 140 million for the coming 6 months and also for the hurricane season derived from Primary Insurance.

The balance sheet is super strong. Solvency II capital adequacy ratio stands at 224%. It's slightly down from previous quarter by 5 percentage points. Roughly half of it is due to the nonrefinancing of EUR 500 million subordinated debt at Hannover Re. The other effect is related to currency effects and also the dividend payment in the second quarter.

So all in all, we are very satisfied with the solvency. And please keep always in mind that the resiliency we have on our balance sheet also translates into a resiliency under Solvency II. So the capital adequacy is very good.

So having said that, strong balance sheet, very strong technical performance. This translates into our confidence which has driven the decision even before the hurricane season to increase the group net income outlook to around EUR 2.3 billion. And this also translates in a higher return on equity guidance. We have increased it to 18%. If you do the math in more detail, it's slightly above 18%, but you know how we do it.

So digging into the numbers a little bit deeper segment by segment. As you are familiar with this procedure, starting with Corporate and Specialty. In Corporate Specialty currency adjusted, we are growing 8% and nominal 7%, strong rather volume-driven growth, what we see here. Group net income is up 23% to EUR 274 million. And we have continued to do our reserving very prudently here.

And on top of it, out of this EUR 140 million buffer on a group level as a whole, more than EUR 100 million or EUR 111 million, a large loss buffer for the second 6 months of the year are allocated here in this segment. So very, very, very strong numbers here. Return on equity stands at 17.4%, clearly above the guidance of 15%.

Going to Retail International, where Wilm and his team is also, like Edgar and his team, exceeding our own expectations by far, starting with the top line development; currency adjusted, the growth number is 9%. And if we were to adjust this also in addition for the sale of Argentina, Uruguay and Ecuador, then in total, it would be even above 10% growth in original currency.

Yes, we were hit by the currency development here, which you can see in the nominal growth rate. The group net income, which is accounted for in euro is up 49%, outstanding number here from Wilm and his team. And the combined ratio stands at 19.9 in retail below 91%. We believe this is really excellent. And if you keep in addition in mind that in Latin America, in 3 countries, Chile, Brazil and Colombia, there are mergers ongoing, then delivering such a great technical excellence here is really good, and it's far above our own expectation.

And this group net income is also benefits from one effect, which was -- which I explained already in the last call after the first quarter. We bought the minorities in Poland. They contributed slightly roughly a little bit more than EUR 30 million to the group net income in these numbers. And also with regard to the return on equity as we have to pay for the stake in the Polish minorities next year, not this year, there is a positive one-off effect on the return on equity of roughly 3%. So without it, the return on equity would have stand only at 18% within it's above 20%. So very, very strong numbers. And this is why we also have increased the outlook for this segment with regard to the return on equity to above 17%, which is strong for retail.

Coming to the smallest segment, Retail Germany, which accounts for 6% of the group net income. We have a decline in insurance revenue here by 8%, which doesn't come as a surprise given that we knew that the TARGOBANK corporation will end starting from 1st of July. They have started to do the distribution of ACM products here. The group net income, despite this decline in insurance revenue, we were able to keep it stable even to grow it by EUR 2 million to EUR 84 million.

Very strong technical result in Germany. The motor business and the rest of the business is delivering positive results here. And all in all, we have a combined -- we have a return on equity of roughly 12% here, which is strong and which is a great performance of Jens Warkentin and his team to manage this transition.

Coming from the smallest segment to the biggest segment, which is Reinsurance. You might have listened to the call of Clemens and Christian. Insurance revenues are up and even keeping in mind this accounting refinement effect of the nondistinct investment components, then they are well in their target growth rate of 5% to 7%.

Group net income is up stronger, 13%. They have a great technical performance, looking at the combined ratio and return on equity stands at 23.5%. And if we were to adjust it for currency effect, it's around 20%. So we are proud majority shareholder of Hannover Re, what needs to be done.

So coming to the outlook, first of all, I want to underline a little bit why we are so confident. Looking at Talanx as a whole, you can see we are participating in different insurance cycles. So we have hardening cycles in Poland. In Germany, we have some softening cycle like P&C Re property business. We have -- so all in all, we have a very good diversification and so we can balance the result development.

Second, we are predominantly an P&C player. So we are less dependent on capital markets compared to those composite players who have a larger life and health book. The cost leadership is something which we are really passionate about and which gives us a competitive edge throughout the cycle. We are cost leader in more than 90% of our business. And in some areas like HDI Global, we have cost leadership of 5 percentage points.

And this really drives our confidence that with this is cost leadership and this is strong -- super strong balance sheet. Given the resiliency we have, we are well positioned for our future to grow, first of all, steadily our dividends; and second, also to deliver earnings growth with lower volatility. We cannot absorb all the volatility, in particular, not those which is derived from capital markets, but to deliver earnings growth with lower volatility.

And this has driven the decision to increase the outlook already here after the second quarter to around EUR 2.3 billion for the full year and also the return on equity number to around 18% for the full year.

And with that, I'm happy to take your questions with regard to our numbers. Bernd, I think you're organizing it.

I'm trying to organize. So now Q&A. [Operator Instructions] First question comes from Michael Huttner.

Fantastic. Thanks for amazing results and raised guidance. Two points. One, change in management. So we've seen change in management, I think, at Munich Re at your subsidiary Hannover. Can you reassure us about the management at Talanx? Every time there's a change in management, the numbers never look quite as good. So that's the reason I'm asking.

Second, M&A. With so much solvency and such a strong outlook, you clearly and buffer building, et cetera, my guess is and maybe despite -- I mean, I know you're saying you've got a balanced book, but bits of it are slowing. What's your appetite for acquisitions now? Is it up or down or the same? What does it look like?

And then the final point is the thing which Munich Re was a little bit weak on is the top line. So I know you explained top line if you adjust for this half and the other. But given where the cycle is for some of your businesses, so in Primary, I'm thinking more of a Corporate and Specialty where it looks like the Q2 number is a little bit not quite as strong as the H1. Can you give us a feel for what top line might do?

Well, first of all, with regard to change in management, I'm not aware of any. So no, we want to continue, we have fun together and then we want to deliver. So this is the first one.

Second, with regard to the M&A appetite. As we always said, we are ready to do acquisitions, but they have to fulfill certain yardsticks. And financial discipline is key. What you also have seen, we have sold our entities in Latin America, the small ones, Argentina, Uruguay, Ecuador, where we had just very little market size or market share because we want to focus.

We really believe in focused management, this will pay off. And so yes, we are ready to do M&A. We would love to, and I continue what I always said in Mexico, we're still looking for whether we can strengthen our position one day. In Corporate and Specialty, we would also be ready to increase our business when we can leverage our cost ratio. This is really something which would add value.

And for Reinsurance, I would rule it out given the strength of Hannover Re, their lean business model, their unique culture, I would rule that out. And for Retail Germany, well, you have to find something which is sizable and good that it adds value, yes? So it's a little bit a difficult task. But if there is something, we would take a close look at it to strengthen our market position.

And finally, with regard to the top line, Michael. Well, we are looking to currency-adjusted growth rates, and we keep our guidance a mid-single growth number for the full year. We have some special effects in it, like what was explained by Hannover Re by the colleagues, which is roughly 3% in currency-adjusted growth rates for the Talanx Group as a whole. So it's quite significant. So I'm -- and I really love to look a little bit through the cycles. We are a cost leader. We have a lot of resiliency. So let's put it like this, we have the right to grow profitable.

Okay. Thanks. The next question is from Roland Pf ender from ODDO BHF.

Two questions. First one would be on your Corporate and Specialty business. You showed an FX-adjusted growth of 8%, which is quite remarkable. Could you decompose this in price variation? Where are your growth momentum pockets in Specialty or Corporate? So where is this growth coming from? And maybe you could provide an outlook on the pricing side of both businesses, just to get a better feeling what's going on there?

Second question is on Retail International. I saw your expense ratio trending down in the first and second quarter. Is this a new base level also for the second half of the year? Is it related to your bringing together the companies there and saving costs and will this continue? So is this 26% ratio a more normalized level, what you would expect also going forward?

Thank you, Roland, for both questions. With regard to the first one, price and volume development. It's roughly half-half volume and price given the 3 segments within Global, which is short tail, long tail and specialty.

In short tail, we see rather some pressure from the prices; in long tail, the prices are okay; and specialty also inflation rates are slightly above price increases. So all in all, if you look at also at the future, it will be a little bit more volume than price driven the growth, what we expect for the future. But given that we have the substantial cost benefits there, I'm very confident that we will write profitable business also in the future.

With regard to Retail International, you guessed exactly the right way. We are here in Latin America on the way of integrating -- merging the Liberty entities with the HDI entities in Chile, Colombia and Brazil. And this leads to cost savings. We are well on track there in all of the 3 countries.

And given that I was myself responsible for some mergers in my past, I know this is a tremendously difficult task, and I think the management in all of those 3 countries from Wilm Langenbach, they can really be proud on what they have achieved so far. It's not yet over. Still a lot of work to do. So it will take another 1 to 2 years depending on the countries.

But you can already seen the first positive development in the cost lines. And the target is pretty clear. We want to become cost leaders in those markets because we believe, as a strategic position, if you are significant among the top 5 and your cost leadership position, this is really the strategic target position, which we want to be in, in order to get a little bit more margin than our competitors.

Okay. Next one in the line is Chris Hartwell from Autonomous.

Just a couple of quick questions. One is actually a little bit of a follow-on from the previous question just on Corporate and Specialty. When you were talking sort of more holistically around the Primary group, you were talking about the various cycles. So obviously, you didn't really mention Specialty there much.

But I was wondering if you can just dig a little bit more or sort of go a level deeper in terms of what lines of business you are still seeing growth opportunity, obviously, notwithstanding what your overall comment on the sort of the price leadership, but I wonder where you really see the opportunity there in C&S currently?

And secondly, just I know it's a relatively small part of the business, but I was wondering what you are seeing and what your experience has been so far this year across German Motor?

So I'll take the second one first. In German Motor, we are writing positive results. So combined ratio is clearly below 100% for the first 6 months, and we expect it to remain there. So we have seen a hardening in the market as a whole, and we are benefiting from it.

With regard to Corporate and Specialties. Well, we do see opportunities, sorry for saying that, nearly everywhere, given our position. But we, obviously, we observe the market also in casualty, we've seen a quite nice development also of both prices and volumes. In property, we've seen a decrease in the price or the price increase was below the inflation increase, but nevertheless, we are able to write profitable business here.

In motor, the prices have gone slightly up because we have some fleets, particularly in Germany, where we had this increase in the motor premium, so we are positive here as well. And in Specialty, as I already mentioned, and Specialty is a bunch of various different businesses, we've seen overall that inflation rates have exceeded the price adoption.

So there we will do a little bit less business then because the main focus is in the end always to grow the bottom line. But even in Specialty, we see some growth opportunities. I hope this -- Chris, I hope this answers both of your questions.

Yes.

Thank you.

Okay. So then I can see you on the screen that Michael Huttner from Berenberg has another question.

Fantastic. So on Germany, so the bits where the sales are coming down, they're linked to TARGO. Can you just give us a feel for -- presumably, there will be a profit impact at some stage. I just wondered if you could give us a time line for this? Clearly, it will be delayed, but -- and the other -- just going back to Retail International.

So the feeling I have is the improvement in cost is -- there's quite a bit to come from LatAm. I just wondered if you could put a number to that? And then in Poland, the extraordinary improvement in profitability from already a very high level, can you give us a feel for where you see that going? Is this kind of sustainable?

Yes. To start with TARGO. TARGO has contributed to both top and bottom line. So Retail Germany has to compensate for it. The good news is if -- well, the end of the cooperation does not lead to a stop of profits right now because the portfolio is winding up with some profits over the time.

So they are able -- together with some restructuring measures, they are able to compensate for it. And the target for Retail Germany is to keep the bottom line flat. The bottom line currently roughly EUR 160 million flat. But the good news, as you're always asking for the capital upstream, so it should be around EUR 200 million on average from Retail Germany.

So they are a strong contributor of dividends to the Talanx AG, and therefore, enables us also to finance growth elsewhere. So this is the role of HDI Germany. It's a tough management task for Jens Warkentin and his team, but they are doing very well so far, and they will continue with it.

With regard to South America, we are well on track or we are exceeding the initial plans by far. It's really what Wilm Langenbach and his team has done there, but we are still not where we want to be with regard to the cost position. So there's more to come. But we would be also ready to invest a little bit into making positive growth in the near future.

But the next year we'll be still focused on getting the mergers done. And then in 1.5 years, next steps might arise here. And we also have to look at the market sentiment. Currently, the pricing level in South America is very benign. So it's a nice place to be.

In Poland, I think it's an extraordinary performance of the management team [indiscernible] there. They are growing market share significantly. So we are growing much faster than the market. But again, out of a position of a cost leader, you know we are a little bit passionate about that. And this enables us to earn money with less premium than our competitor. And in some areas, price really matters to the customers. And so we are very confident that we are having quite profitable growth here, and we want to continue with it. So this is the development of Poland.

The growth rate of Poland, I wouldn't do an extrapolation. There were some one-off effect due to the competition and that some of the competitors were focused on different things like taking care of the customer. So we benefited a little bit from it. But nevertheless, we want to keep the customers which we gained and continue the relationship with them.

All right. There is a follow-on question from Roland Pf ender from ODDO BHF. Roland?

Yes. One follow-up question. You increased your guidance to around EUR 2.3 billion. May I ask you which combined ratio did you factor in for the Retail International? And what would you expect to be the more normalized combined ratio run rate going forward, looking at the expense ratio improvements, which look a little bit more underlying?

So to start with, Retail International, you shouldn't take the result of Retail International multiplied by 2 for the full year because at the end of the year, there will be some steering measures also in Retail International, combined ratio should remain below 93%. This is what I currently guess, but there might be some steering measures. Please give me this carve-out by the year-end.

Okay. So checking the screen for more questions. Are there any more questions from the audience? Give you some more seconds, Michael?

It's more kind of philosophical, so if -- I mean, you have this cost leadership, but in some areas, pricing is, as you said, a little bit below cost inflation. When you -- I know you're very careful when you do your profits. But at some stage, are we going to arrive at peak profit? Is there such a thing? Or are we close to it?

It's just that always -- we like to do straight lines, but we're always worried about the bit afterwards. Is there any fear we should have? Because the reason -- I don't know how to put it, but in my life, I've never experienced insurance companies making 20% ROE. That's why I'm kind of thinking, is there kind of -- are we over-earning or I don't know how to express it.

That's a philosophical question. So my CFO team and I myself, we first want to provide for balance sheets, which can deliver steadily growing dividends. This is the first priority.

The second priority is that we want to produce earnings over time with lower volatility than our peers. And the obvious thing is if there are capital markets events and so on and fair values through P&L assets decline significantly and so on, there is some volatility, which we cannot absorb. But we have built over the past year, a very, very strong balance sheet, which can absorb quite some volatility.

So -- and so we are quite confident that we can deliver on earnings growth with lower volatility. Obviously, given the current profitability, and I share your view, we shouldn't keep always 20% return on equity as a given forever. The result out of it will be increasing competition if return on equity is so high. And therefore, we have to prepare for competition.

And we believe that's our core belief, and then you may -- I'm repeating, repeating, repeating. We believe that cost leadership is really key to that. Cost leadership and good diversification because that are the 2 components of the price of an insurance. So if you look at the price from a customer perspective, it's about the admin costs, and it's about the relative costs of a risk, which is contributing to the overall portfolio.

And this depends on the degree of diversification. And this degree of diversification within the Talanx Group is really very, very good. Operating in 175 countries in the world, we have a very good regional diversification. We have a very good diversification over various cycles. And this is what drives our confidence. Yes, we would like to add certain things already to the market where we see some -- still some improvements for diversification. We are ready to grow also externally to do so. But overall, we are already in a very, very competitive position for that.

May I just add, is there anything to say on Turkey?

On Turkey? Yes, Turkey, they have improved their technical results quite significantly by more than -- the insurance result is better by more than EUR 30 million out of my mind, quite strongly. Combined ratio stands slightly above 100%, which is not a dilemma given the high interest rates there, we are earning money. Nevertheless, operating in a high inflation environment is always challenging.

Second, in Turkey, they have some -- there are currently new solvency standards for local purposes under consideration. This may have an effect on the cost of capital -- on the amount of capital which you have to do in the business. With regard to the current earthquake, I haven't heard first numbers out of it, which have been there, but if it would have been above a certain threshold, I would have heard it. So this, I cannot give you some more insight.

There's another follow-on question from Chris Hartwell.

Sorry, me again. Just a very quick one, and apologies, this is probably a subject you talk about a lot that I'm sure relatively muted stock. I just want to come back to the resilience sort of building. I think from the 2024 year-end position was like EUR 4.7 billion, I think, from memory. With Hannover the other day, I mean, I was coming out with something close to sort of EUR 400 million of additional resilience built through the first half of the year, maybe a little bit less than that, but somewhere around that number.

And I guess if I look at your primary business, and I guess, assume you've recycled all of the favorable cat experience variance, getting another, whatever that is EUR 100 million, EUR 150 million or something. So that would get me to something like EUR 0.5 billion-or-so of resilience. I mean is that the right way to think about it? Or I suppose, looking at the question another way around, can you help me sort of walk through potential sources of resilience build over the course of the first half, please?

Yes, I can. And I think I like the way how you thought about it. First of all, all the liabilities are estimates. And once in a year, we're doing this additional assessment where we then say in concrete numbers, the resiliency as a difference between the Towers Watson assessment of our liabilities and what we have booked. But I think how you guessed about it, that's pretty okay.

I just want to draw your attention that next to resiliency in the liabilities, there are some other position in the balance sheet where we are also quite prudent like tax accounting, like what we did on the investment side. So we realized some losses during the first half of the year in the bond portfolio in order to achieve higher interest rates going forward. So it's more than just the resiliency on the liabilities, but I liked what you thought through, Chris.

Okay. So checking screen, some more seconds, anyone else with a question? Does not seem to be the case. So then I hand back to Jan for some concluding remarks.

Yes. Well, thank you, Bernd. And once again, we had a very good first half of the year with an outstanding technical -- really outstanding technical performance here. And this has led to the confidence that we are increasing our guidance to around EUR 2.3 billion, and we are happy to deliver on that, and we will see each other in the next quarter after the hurricane season or after a large part of the hurricane season. And then we will know more about how to steer the year-end results and so on. And we're happy if you could attend this call, too.

All right. Bye.