Allianz SE

Thank you. Yes, good afternoon from my side as well and welcome to our conference call.

As you know we have two presentations today, so I keep it brief and turn it over directly to our CEO, Oliver Bäte.

Thank very much and thank you for joining on a Friday afternoon. I have a few slides to present an overall results and where we on our journey and Giulio will - high quality is always go through some of the numbers.

The content of what I would like to present to you is highlighted on Page A2, I would lead you through the pages as we are on a call. First a quick overview on the achievements for the year 2019.

Then a little bit stock taking on where we are in our journey, renewal agenda 2.2 and targets and outlook for 2020 and how do we think about that. Let me move to Page A3.

This has been the fifth year of another record in operating profit and we are at 11.19% you may say only up, but is quite something to continuously go up on that number. Revenues have crossed the €140 billion line to €142 billion, that's 8% up, means basically more than double the growth of the global economy and shareholders income is up 6%, again almost to a record level, 207 was the highest and hope we are crossing that too.

And our earnings per share up 8% to €18.9. Dividend per share as proposed to the AGM would be around €9.6, 7% up.

Our solvency ratio is back to a very strong level at 212%. Our return on equity have reached also an all-time high with 13.6%, and total shareholder return for 2019 was 30%.

So with that, I can hand back to Giulio - no, I'm not going to do that. But I thought it's such a pretty cool page that we can sort of end here and be frank.

Now, I know we have a little bit more to do because we are not just talking about the past today and the year, but also what we're going to do going forward. So let me turn your attention to Page 4 and let's see how we're doing.

We have target for operating profit earnings per share and dividend per share. And you see relative to what we're trying to do on our target and what the implicit absolute targets are.

I think we overall fine. But let me go through the individual components.

Operating profit relative to what we are trying to achieve, I personally assess us to be good. The issue is and we'll talk more about it at AGC&S has clearly been disappointing, as has been by the way in the portfolio commercial lines at large after many years of declining claims inflation actually we've seen a continuous increase in global claims inflation and it shows a little bit how industry is rattled by many, many things.

And also by particular events in the liability lines and will talk more about that later. However, the reason why I'm confident is we have really understood what's going on.

We're taking a strong action, and we have been taking very strong action and we are really seeing the benefits whether that is from price increases or portfolio increases or changing wordings, so the improvement will be measurable. The issue is only how quickly will they sort of come into the earnings on the one hand and declining losses over the next few quarters.

Earnings per share I think it's fine. There something that we really, really established in 2015 that is very strong discipline around the use of your capital.

I think that's something that we want to continue to communicate. We had very good internal growth.

And the capital discipline ladies and gentlemen is here to stay. It's not been three years, has been four years, it is becoming a part of our culture and we're going to get better and better at it.

Are we yet at the end of the rainbow? No, we are not.

There is more questions around to all of our business earn the proper returns. We are focusing on that more and more.

So again there's more to be done, but that also means there is more upside. And dividend per share - I'm very proud of all of our people that worked very hard to deliver to you the seventh increase in dividend in the row.

We also not a small seat and also shows the consistency as we said we share the capital productivity with our shareholders and that's why we announced the share buyback yesterday. Now some people say, we are wedding accustomed to it.

And is that good enough? I think being good enough is never good enough, but we have a consistent.

We have no incentive to keep the money that we don't need to run the business. And due to a strong action on the solvency side after the August surprise and of interest rates getting negative and us being able to go back to 2000 to a numbers that very much in what where we like to be.

I'm very happy that we are not just a bit, but determined to bring capital back to you. Now Page 5, give you a few details in terms of how we think about that.

The one thing I'd like to mention is on Page A5 to the lower left, often you ask Oliver, Giulio and team is your M&A and what you've been doing the last few years actually producing value and we put on that. I think we did that very fine job on the U.K.

acquisitions. We have done a nice job on Latin America and what we've done in China, but people said, you know, didn't you pay too much on Euler Hermes when you did the minority buyout.

We're planning to free up about a 0.5 billion in capital and upstream that to us. And when you then look at what this will do to ROE just for Euler, it will improve ROE by a hold of two percentage points from 12 point something to 14.

So that acquisition so to speak and that investment is surely turning into value creation over time as well. So the last investment that we've done on the external side as much as the internal one are producing value and that is very important for you to know.

We will decide the same discipline on future M&A transactions if and when they arrived. As I always said, we only do things that really make sense for us over time.

And I don't want to spend any more time on the other things that we have on this page, not even on the share buyback. Remember our dividend that we continuously increase comes with the ratchet.

Again most investors do not remember that. It is very important to remember, in 2011 when we had the surprise around Greece and the euro crisis, we moved to an 85% or something payout ratio because we had the ratchet in.

So you're getting the dividend, you getting the ratchet and you getting to share buyback on top of it. And that you see on Page A6, so we basically paid out more than €25 billion over the last five years and you see the components how that adds up through dividends and share buybacks.

So much for numbers, capital discipline and how we're thinking about your money. Now let's talk a little bit how Allianz has performed.

As you know we find it very important to balance all the stakeholders and we know that the ability to pay dividends and generate net income is dependent on how we are outperforming vis-à-vis our clients, vis-à-vis as a constituents and all people. Page number seven shows you that we are working on these dimensions in parallel.

As of last year we are on all the relevant KPIs, the number one brand in our industry. We have the strongest rating in our industry.

And we are number one in sustainability as seen by the major indicators. And we find that very important because that talk to you a little bit about also how sustainable our business model is overall.

So one thing is to talk about the past and strong delivery on a consistent basis. The other one is how resilient is the organization to do that.

Now the Page A8 gives you a few more insights. One thing I'm very happy about is what we did last year we crossed 100 million direct customer barrier, something that's very important for us.

By the way on top of that we have more than 200 million clients that we have through B2B to C. How we think about the quality of our portfolio, the NPS numbers in terms of outperforming business has dropped a little bit to 70 because of deliberate decisions in Turkey to increase prices and cleaning the portfolio that has impacted the bid negatively and to companies in Eastern Europe.

Overall, however the most important numbers to the lower right-hand side, we have the ambition over time that at least of all business should be the number one in terms of customer loyalty in the market. We move this number over the last few years from about 30 to now 46, so we're getting close alone last year this number improved by 6 percentage points.

Now it will never be fully stable and only go up. That will be the idea where you go up or down.

But the trend is pretty clear. The same is on the employee side.

So the way as you remember, we measure employee satisfaction and motivation is through our inclusive Meritocracy index. It's based on the annual survey we do with all of our people and is comparable to hundreds of large corporations around the world.

We have already reached our 2021 target last year, 73 is world benchmark, i.e. the top companies are in that range and we're very happy to be that or tell you, give you another one.

We are now the world leader in terms of using LinkedIn Learning. So we are also investing in our people through digital means.

Just as an example of what we're doing with our people. So a healthy company has a healthy customer base and a healthy employee base.

Now, in the case of Allianz, you all know, that we have a very specific mission when it gets to climate and climate change. Just some data on A9, beyond our net-zero asset owner alliance mission that we are on that we really believe in.

We have had a neutral carbon footprint since 2012. And we are actually generating more and more revenues from sustainable solutions be it in insurance or being it in investments.

And that is being rewarded again by the leading industry ratings whether that's aerobic or some MSCI or FTSE good. So that is - and we'll remain important to who we are and who we would like to be.

Page A10, so you may ask where are you actually in your transformation on the customer side. We've told you it's a decade long journey and it's very important that we know it's a very long journey.

We need to deliver results and we have already achieved our 2021 target for the expense ratio this year. Now there was some one-offs in that for example, the canceling of the bonus pool at AGC&S.

So you need to really normalize. For that you can always - you always have to assume that you cannot have those strong momentum all of the time.

But we are very, very happy how we've been able to move both the admin expense ratio and acquisition cost down over time and we intend as we said 30 to 40 basis point on average is what we are trying to deal year over year. Now what is driving that?

The key thing is trying to simplify what we do. The first is to do that at the customer end, because the key feedback from our consumers is it is hard for us to trust you if you are so complicated of products are not intuitive and you're wasting our money with very complicated processes and systems.

So, bringing down the number of products, the number of product variations, the amount of paper that we send out is super important. And then of course to bring them a number of IT applications down.

We've given you some numbers. Just by the end of 2020 we want to have 10% fewer IT applications in the group and by 2021 we want to move to more than less to have done 20% less sorry on in our overall performance.

That should immediately give us savings, a 100 million run rate is the minimum that we expect by 2021 and to be honest, we need to accelerate that as much as we can. That is based on a simple notion.

We would like to harmonize products and product process design across countries in a step by step basis. The upside is gigantic.

Again both on the admin cost side and then on distribution. Now, M&A.

We talk about it all the time. Everybody comes on, so you can do anything you want, but don't buy anything big.

Funny that you read sort of a newswire article and says, Allianz fails to do big deals. I think it's actually for many of you would say that's a big success.

Now, let's talk about what we've actually done. Page 11, the most important ones with three was what we have done with acquiring this sort of second half of LV in the United Kingdom and doing the portfolio with a legal & general.

That has being executed, has moved us officially to number two in the country. By the way this is before adding in Euler and AGC&S.

So there is even more that actually should be in the cake. The second one is what we've done in South America.

We've discussed it last year extensively and we now in separation and that would lead us to be the number of three P&C insurer in the country, actually number two auto and motor gives us the scale that we need to have in the largest economy in Latin America with more than 200 million people. And as you know we were the first to have the wholly owned foreign financial holding company which is very important, because we are going to build up our asset management and insurance asset management capabilities over time and our joint venture with JD is working extremely well far ahead of plan.

And as we go into more liberalization once China is back in business we'll also address the life insurance side. And that's why we've been taking a stake in the largest privately held company we have in China that is taken.

So that's all of them. There's many more strategic ideas we have, we can't talk about them today.

But China will remain on our priority list very high also for asset management that may even be a big opportunity than insurance. But it is going to take time.

So before we we're going to arrive at very high earnings from China a few years will go by. But we need to keep on investing in what will be one of the biggest financial markets on this planet who already is in many ways.

Now Page A12 gives you a nice little record on where we are and where we have been in terms of our ambitions over time. We had a target range coming from 2016 €10.5 billion and going up consistently.

For 2020, we are planning a midpoint at €12 billion with the usual €500 million up and down range. And again let me given particularly what is already happening in the first quarter.

This is before a major distortions around nat cat and other major economic crises. And that is very important to understand.

We've also been able to over achieve our midpoint in the target and we obviously working hard to trying to do that, but that cannot always be guaranteed. It's just a matter of numbers and statistics.

Now, let me give you one last Page that is A13, because it is not really the only question whether we and what we do in 220. But how do we think about the 2020 targets -2021 targets that we laid out last year.

And we are sticking to these targets. Very important, so the EPS growth is supposed to be larger than 5% of which we would like to have 4% organic, ROE north of 13% is clear and has been at record level 13.6 this year and we should be north of that of course going forward.

The Solvency II ratio we've talked about. Customer centricity, we've also talked about.

So we're working on getting to the 75% plus range. And again on IMIX, as I had mentioned before, we are already where we want to be.

But it's tough to stay there. So it's not going to be easy as we continue to transform this company.

So overall is Allianz is very much on track to make its 2021 ambition, despite the noise we've had in the P&C segment and we will probably talk about that. There's lots of things going on in P&C to make sure that we improve the loss ratios and everybody has hands on deck now.

And with that, I hand over to Giulio.

Thank you, Oliver. And we can move Page B03 and I'm going to give a quick update on the fourth quarter results and then I'm going to speak little bit more in detail about the 2009 for the full year.

So when you look at Page 03, our results for the fourth quarter, I would say that [technical difficulty] you also look at the operating profit development in life/health and asset management. And also when you look at the net income evolution, but clearly what is taking out in this slide is the development of the combined ratio with 99.6.

And this is mostly driven by AGCS. I am sure, we are going to have time to discuss this later, but otherwise I would say that quarter looks pretty good.

And also I'd like to highlight the business margin on the life side with 2.9 despite negative interest rates. That's a very strong message about the work that has been done over the last years to make sure that our production is profitable also in the difficult environment.

And then also there are flows in asset management have been again positive in this quarter was not just because of PIMCO, but also because of the contribution coming from AGI. So, a lot of good things in the quarter.

And then as you see those and the headline, we had the result strengthening at AGCS. If we move now to Page 05.

When we look at the full year and discuss in no surprise, our revenues have increased by about 6%, so you just see what we discussed already in the last quarters and the growth in revenue has been driven by the life business and also which is that and also by our property-casualty business. The evolution, the operating profit where we got an increase of about 350 million see a deterioration due to the reserve strengthening at AGCS.

On the other side, you can see the other segments have contributed to our operating profit. And this is again a sign of the strength if you want of our franchise of our business model, or the diversification that we can bring to the table on the net income, you can see very good results.

I think you know the number now. We're very pleased with the ROE of 13.6%.

And we're also very pleased with the development or the earnings per shares. If we go now to Page 7, the capitalization is strong.

We discussed in the last quarter so with a reduction of the Solvency II ratio because of the interest rate environment. And now you see in the fourth quarter when the interest rates have changed direction, at least for the quarter, the Solvency ratio went up significantly to 212%.

And the main driver is the development of the interest rates. And on top of that we had also a model change.

The business evolution in the quarter has been negative because of the AGCS strengthening and also because of a catch up effect. I'm sure we’re going to get question on these later also we'll use the Q&A to go into the technical explanation what happened in the fourth quarter.

What is important anyway is really to look at it 12 months. So when we look at the business evolution of the 12 months.

So we go to Page 9, when removed the dividend and the taxes from our business evolution that was 7% at the end a 1%, because of the AGCS strengthening and then to be an 8% of business evolution, which is a good number and that's also the guide that we are giving for 2020. One thing to highlight that if we deduct the buyback performance on the 212% of solvency ratio, solvency ratio will be 209.

So that's if you want to adjust level considering the pro forma for the buyback. Moving to Page 11 and we can see here the growth rate in the P&C business and as you see the growth rate adjusted for a fixed and also for consolidations has been 4.7%.

The growth rate is driven 60% from price changes and 40% of the growth is coming from volume. All entities have posted a positive growth with exception of Spain.

As you know, we've been clearing the portfolio in Spain after the surprise of 2000 that we got in the course of 2019 at the end of 2018. The price changes on renewal positive across the board 3% and this also was a price changes that at least in line with inflation sometimes can be above inflation clearly the development at AGCS is particularly important.

And we say that the price increases that we are getting as we go into 2020 in excess of the inflation that we are predicting, we are kind of cautious anyway on the expectation for inflation moving forward. Page 13, the combined ratio for the year has been 95.5 if you adjust the combination for AGCS.

So if we remove AGCS from the equation for one second, the combined ratio will be 93.5. So when you look let’s say the group performance excluding if you want the one-off, I will call it of AGCS.

We are indeed at a very good level at 93.5. Also what is important is the evolution or the expense ratio as you see we have any expense ratio now of 27.5 Oliver mentioned that before.

If you think just two years ago, we were at 28.7. So, there is definitely a nice improvement and I will say we are not done with looking for further improvement in the space ratio down there.

So I will say clearly the combined ratio might look disappointing when you look at 95.5. But again, if you look at how the majority of ROEs have performed in reality, we have a lot of things to be very proud of.

And we can see this at Page 15. Germany is definitely doing very, very good.

We had a combination 92.4 sometimes you know I like to go back in history and there were times with the combination Germany was not 92.4 that was maybe 5, 6, 7 years ago. So we should also recognize that we have been able over the last five years to achieve a massive improvement in a company which is making more or less 20% of our net premiums.

So this is not a small thing. Italy is performing always at a very good level.

In France I will say there is some work to do, but to be frank, there was also lot of volatility, large losses and weather related in the fourth quarter so the fourth quarter was kind of challenging for France. And then we are very pleased with the development in Eastern Europe.

That's also a region which was operating at very different level a combined ratio just a few years ago, and now we are below 90. Spain we discussed during the year the results of Spain, we expect to have better results as we move into 2020.

In the case of the United Kingdom, we had some one-off adjusted for the combination will be closer to 96. And then AGCS clearly, the number is very high and there is a strengthening is about 600 million if you look at the accident here, the combined ratio that's slightly north of 100.

We also should recognize a waiver that the net cat activity on AGCS was very low. So in reality if you normalize the number for AGCS you might be closer to a combination of about 105 on a accident year basis.

So all in all, I would say clearly some work to do at AGCS, but that's not just Allianz, that's also market issues. And the most of the operations, delivery according to our expectation.

Moving to Page 17, investment income, if you look at the interest of similar income because, in the position at harvesting we had some volatility when you look at the core or the investment result that’s very stable. And that's a good sign because despite the pressure coming from lower interest rates, we’re being able somehow to maintain a stable insurance and similar income.

Clearly as we move forward, we're going to see some reduction, but this also shows that we are not just exposed to the market dynamic there are also place that we can do in order to mitigate a challenge can be from the low interest rate environment. And now we can switch to the Life business at Page 19.

First of all, we're very pleased with the new business margin over 3%. And again, the interest rate environment in 2019 has been brutal.

So - we got negative interest rate for the majority of the year despite this development we ended up at a good level of doing business managing. The business makes is consistent with our target and also we have been able to increase production especially in Germany Life, but also in the U.S.

we had a good 2019. On Page 21, the operating profit for the Life business has been very, very good.

As you remember, yes we had also a couple of one-off like the deck, changing deck in Q3 in Allianz Life but there is also a strong underline performance. I like to highlight the loadings and fees which are increasing 8% and clearly not the entire amount of loading and fees translate one to one into profit.

But I will say about half of it is operating profit that should be speaking moving forward. So, from that angle, I will say that also compared to what we thought when we put together the plan in the Capital Market Day.

We see definitely more, more traction on this position that we were thinking just 18 months ago, and this is something that should support our profitability for the Life business also moving forward. So, the bottom line of the story is a good development from the underlying performance and then on top of it, we have - had also the deck change and in the fourth quarter the amount of realized gains has been a little bit more elevated and normally and that's because of the changes that we had to do to - extend duration in an environment where the duration the liability is getting longer.

And also, the volatility in the market has been very low in the fourth quarter. And on top of that, we didn't have basically impairment on the equity side that's also very different from the situation that we had last year in the fourth quarter 2018.

With that at Page 23, you can see which ways have contributed and the most to the nice improvement in operating profit in the Life segment. Clearly the United States and that's a combination of low volatility also the exchange, good underlying performance or everything went in the right direction for the United States.

And I - since it is my former company I like also to see that now, they had the biggest contribution, operating profit even more than Germany Life. And I'm sure that the colleague in Stuttgart are going to do all the best they can to be again, number one in operating profit.

In Asia Pacific also we have a very nice development. Just a few years ago the profitability coming from Asia Pacific was half.

This profitability and if we, when we add Korea there was even a question mark if we're going to have a profit or a loss. So now we are in a very different situation.

And then we see also a nice development in Italy in France. And in Italy in particularly the development is driven by the unit-linked because clearly in market like this - the assets basis is going up significantly.

At Page 25, investment margin as you see is stable. And during the year we guided you to something closer to 80 basis points.

So at the end of the year, we ended up at 86-basis point. Again, here we have the Fed the fourth quarter has been very strong because of the reasons I mentioned before.

But overall, we are pleased to see that there is - overall some more resilience compared even to some of our expectations. And as usual, the asset base is growing.

And this is kind of support anyway the stability or the investment margin when you look at that in absolute terms. So now, we can switch to the asset management segment.

So we have in total 2.3 trillion of assets under management. So that's a really staggering number.

And when you look at the assets, third-party assets we are 1.7 billion and as we are going to see in a second this is a higher base as compared to what we had in 2018 which is also kind of promising for the development in 2020. We give you also now some - the pie chart where you can see the composition of our assets by different classes and also by regions.

One thing I like to highlight is not no to you, but maybe now it’s even more evident. We are very much if you want geared to fixed income 80% of our assets are in fixed income and even when you look at the multi-assets, more than half of it is also fixed and co-related So from that point of view, I will say we are not so exposed to the pressure coming from - on the fee because in the fixed income there is less pressure compared to equity.

And in an environment like this clearly also when rates go down clearly we are benefiting from this development which might offset some of the negative impact that low rates have on other parts of our business. So, this plays into the diversification element I was talking before.

At Page 29, as you see the assets under management for third-party increased by 17% and everything went in the right direction. The flows have been positive and also consistently positive over the quarters.

And as I said before, AGI had also positive flows in the fourth quarter and then also the market development was favorable, and even the exchange rate being favorable. So when you get a situation like this, clearly we have a nice increase of the assets.

At Page 31, the revenue went up 6% if you adjust for the exchange rate, the growth was 2%. Here we had the effect coming from the first quarter of 2019.

Because as you remember, the first quarter of 2018 was very, very bad for the capital markets and that has played a little bit down the revenue in the first in the first quarter. But then clearly, we saw a different trajectory in the remaining quarters.

So we should see also this play out in 2020. The fee margin, it's a little bit lower both at PIMCO and AGI compared to last year, but half of the reduction in fee margin is due to investment that we have done in close-end funds , and this acquisition costs cannot be deferred in the IT that’s positive because clearly when we look at a business case we make a nice IRR out of this close in France so that's just a timing issue.

Otherwise, I will say the mix has led to a little bit lower no business - fee margin, but overall we have a very, very strong picture and we can see these at Page 33 where we can see that the operating profit has gone up. We also adjusting now or show you the adjusted operating profits, if we remove the performance fee so that you can get a little bit of sense, what is the underlying trajectory versus potential volatility introduced by the performance fees.

And when you look at 2019, you can see that the underlying performance was pretty much similar to the total performance that we see on the operating profit. PIMCO has been positive clearly, we have also a fixed effect here, but overall PIMCO has been able to increase the operating profit adjusted for a fixed by 4% and if I were to adjust also for the investment in this closing plan at the beginning of the year the growth rate will be 5%.

In the case of AGI you can see - there is more reduction of the operating profit, but also here we have this impact coming from a closing fund adjusted for that the growth will be to 2%. So overall, I will say a good year for asset management and also very good basis to go into 2020.

Corporate on Page 35, it's a significant improvement compared to what we saw in 2018. And even the prior periods and improvement is mostly driven by Allianz technology.

Now we are coming to a different phase. So this is also something that is going to stay more or less at this level in the future.

So now we are in a different situation compared to what we had just a couple of years ago. And with that I will move to Page 37 where you can see what happened below the line.

I will now go into this slide. If you have any questions, I'm happy to get your questions in the Q&A.

Now we come to Page to the last one, which is maybe the most interesting will show you because I'm sure that you know our numbers by heart by the time. So for 2019, so let's speak about 2020.

Overall as Oliver has mentioned before, we are targeting a midpoint of 12 billion plus minus the customer is 0.5 billion. When we look at the different segments in P&C, we want to PI to have a different performance compared to the 5 billion that we posted in 2019.

And clearly part of this improvement is going to be driven by different results at AGCS. In the Life side, we are kind of normalizing the results of 2019.

But with 4.4 we are definitely significantly above the midpoint that we set for 2019. And we should consider that we had in 2019 [indiscernible] by the joint venture profit and starting from 2020 we don't add this profit anymore in our in our operating profits.

On the asset management, we are kind of keeping the forecast for 2020 flat over 2019. This is definitely on the conservative side if the markets are staying the way they are.

And if the U.S. dollar is staying the way they are clearly there is some upside potential there, but we'll always like to take a little bit of a cautious stance on this one.

And then our corporation is more or less the level of last year, just adjusted for some volatility in the in the investment income. So overall with €12 billion, we are looking to another successfully year in 2020 and again I believe we had a very strong performance in 2019.

So we have all the reasons to be optimistic about this year. Thank you.

Yes. And with this we are happy to take any questions.

Thanks for that lovely buyback. And I just have two questions.

The first one you said, please ask. So this is the organic capital generation, the minus 1% in Q4.

You said there were two effects; AGCS and one other. And the other question is for your guidance of €12 billion plus minus.

And what is it that you're assuming for AGCS and where you at? And if I may, that's the last question.

I was speaking to one journalists and he was saying, there had been IT kind of offsets which means interruptions. And I just wondered if that's included in your cost assumptions?

Thank You.

So maybe I guess with a capital generation. So, we had two effects; one is AGCS, AGCS is strengthening.

The other one is related to Allianz Leben and that's more of a true-up if you want in the calculation. Because just at the end of the year we have the statutory accounting gross margin, how much we put here, how much we have for a real declaration.

And also unrealized gains we have. So, during the year, we don't have all this number because clearly, this happens just at the end of the year.

And so clearly we need to do a better job, try to estimate what a year end could be. This said, when you look at that 12 months a generation coming from Allianz Leben included a new business is about €2 billion even more than what we had in last year.

So that's just if you want, call it this way, sort of accounting effect in the fourth quarter just because our model ended up produce if you want too much Solvency II earnings for the first nine months and then there is a catch-up to what should be the expected level by 2000 - by the end of the year. So we're going to work on refining that.

There's also important realities is a switch between solvency to earnings and surplus fund. So fundamentally especially for Allianz Leben the reserve - their own plant are not really changing our case because of the transferability restriction.

There is a little bit of an impact, but fundamentally just if you want an accounting or actual true-up at the end of the year. The main point is capital generation for the year is at 8% adjusted for AGCS and that's also the level that we anticipate for 2020.

The other question was on the AGCS and what is our expectation for AGCS? I will say that, we had two expectations for AGCS.

One is potentially combined ratio of 100 could be also slightly above 100. And so I would say that this is somehow how we are thinking about the performance of AGCS in 2020.

So in a possible case to go to 100, but that could be also slightly above 100. And this would depend on, let's set aside clearly natural catastrophe that's a totally different conversation.

This is going to depend on the level of inflation that we're going to see. So we are still a little bit cautious on the inflation level.

We clearly see massive rate changes coming especially in the U.S., but also in Europe. There is a lot happening.

But clearly nobody can really predict how influential will continue to develop in 2020. But clearly we expect to have a different level of performance for 2020.

And if you ask me I would say that by 2021 I would definitely expect that we are going to be below 100. And indeed I personally stick to my idea that we should be able to get to 97 combined ratio by 2021, which was more or less the old plan.

So I think, the market is just supportive right now. I think everybody is recognizing their issue and I believe this is going to help to get to a very different performance moving forward.

The last question, honestly speaking, I did not…

I can help. Otherwise I'm getting bored anyway.

Because of the technical detail by the first 10 sentence was, its noise in the fourth quarter Michael, forget it. On the Solvency II earnings, it's 8% over the year.

That's why we want actually no more quarterly earnings. I'm just kidding aside.

Sorry, one of the thing you asked what the 80 outages have cost us and I think this is within the normal course of operations. Sometimes the computers don't work including at Amazon and others.

But that, on a more serious note we had in August and October in Allianz partners and Allianz Germany, significant outages just that we have been in the process of addressing and the consequences for our customer satisfaction and cost have to be taken serious. The recent trends have been very good and very positive and we need to keep on working on them.

But it's not something that creates massive disruption on expenses or any other items. It's more a concern for customer and employee motivation than most other things.

I've got three questions please. Firstly, starting with AGCS, looking at Slide B42, this is the comment that the portfolio restructuring is ongoing.

I just wonder if you could give a little bit more color about that in terms of where we are in the process and what the parameters are? And whether this is just a question of getting business past renewal dates, et cetera?

And then second question, AGCS. I just wonder if you could give a little bit of color in terms of how you've got confidence.

You clearly seem to have in terms of where the reserves are set down, particularly some of the trends you were talking about in London before the New Year break in terms of some of the stuff and I think German local as you mentioned this morning. And then just finally all of the beginning in your preamble you made an interesting comment about the store business units within the group There aren't any accept returns.

I wonder if you can give us a little bit more information on that? And are there any particular areas we might not find obvious to see from the disclosures?

Thanks.

Yes. That fits very much with your question.

I start with that, that's AGC&S of course. By the way unfortunately not just 2019, but we have now had a number of years of - and that's the real issue.

So the question is not are we comfortable with the reserves now or not. The cleanup we need to do there is more fundamental and it attaches many items, it attaches first and foremost portfolio appetite.

What industries want to be. Do we want to be exposed to.

What lines of net lines are we offering these? What type of wordings are we offering?

I think there has been a lot of negative inflation that we need to get out of the system. And therefore would be not just about price increases, but really changing wording, changing portfolios and getting rid of over exposures.

You just mentioned of one examples, so for in Germany and Germany, we had liability portfolios that are overall excellent. But when you go deeper and deeper you'll find that we had a huge market share in automotive suppliers and anybody with a brain should have thought through that if the industry is in trouble.

And while we don't cover a recall for OEMs there is recall exposure in the automotive suppliers, and that has been mismanaged. So there is a lot of work going on.

The other area that I'd like to mention is reinsurance. I think we have a number of piece of homework to do on how do we protect our earnings better and that then feeds into the question of capital efficiency, how do we do that in a way that is capital efficient.

And last but not real efficiency. When you look into the model.

Let's take an example for a quarter share you got between 26% and 28% seating commission. If your own cost ratio was north of 30, your incentive to reinsure is zero.

So we need to make sure that the productivity levels get to a level that reinsurance with market prices actually makes sense. So we need to have a different level of productivity.

Now why are we confident that we are going to get that. We've put one of our best managers on top Joachim Muller who has transformed the German business.

We have one of our most talented finance people that in that was Claire Murray. We have put Thomas up and so we've systematically been changing the team.

And now we need to move into more consequential execution. Now last comment I'd make, it's not just AGC&S.

I think as an industry we need to really work hard on commercial lines. It's both in terms of process still a bit archaic.

You know we have a joke, all the brokers drive the Ferraris and the shareholders do not get a proper return. And I think that's something we need to address.

So commercial lines overall, to answer your question or where the returns have to be and they're often hidden in national portfolios where the retail side is hugely profitable and we have some cross subsidy to commercial and we're working also on that. So this is not about.

Okay, the U.K. makes more or less money than the other guys, but also inside of the countries we have portfolios to fix that have been cross subsidized by a largely very well performing portfolio.

So I would like to also reiterate in AGC&S we have many portfolios that are actually making very good money, but we need to make sure that we focus on those and stop doing the nonsense.

Couple of questions. First of all, Giulio, could you just update us on what your current view is on the saga which is the Solvency II review and the latest permutations on that?

And what your current view on potential impact would be, given most recent discussion? Secondly, what's going on in terms of further redesign of life products given the move down in interest rates.

I think, Q3 and the insight Allianz that you said you were looking particularly at a further new permutation of products in Germany to align with an even lower yield curve environment. Can you just update us on that and kind of feasibility of keeping the new business margin over 3%, while still generating sales growth.

The follow-up question, Oliver, you've referred several times to commercial lines as a whole. I mean, is that being subsidized by retail.

I'm forgetting ACGS for a minute. I'm talking about the rest of your commercial lines, which I think is about 30% to 40% all the rest of the book.

What was differential in terms of combined ratio between that and retail? Thanks.

Okay. Maybe I could start with the Solvency II review.

So if we look now at, say, the idea to go with the last liquid point from 20 to 30, the impacted here and on our Solvency II ratio will be a little bit north of 20 percentage points. So there will be a significant impact.

Clearly, we first we don't think this is going to happen as you know there is already a different potential approach, the Dutch approach. We also believe that the last liquid should stay at 20, but somehow between 20 and 30 there are other potential ideas that are more benign clearly.

Also in the case we get a change in the last liquid point, we have always the possibility to change our duration mitigate the impact. In general there are things that we can do.

But also we are - since there is a lot of uncertainty around what could happen, we also are clearly thinking about the potential use of transitional because especially if we have a change which is massive like going from 20 to 30, clearly we can change the portfolio to mitigate the impact, but it is going to - we don't do these in one quarter, right? Is going to take a little bit of a while to change our asset portfolio.

So from that point of view clearly mitigation action that we are definitely discussing is also the potential use of transitional. What is very important as we think about the new business there was your question is to make sure that there no business production is as good as we had in the last year.

Under the no conditions, so we are taking a lot of action. In the case of France we are going to introduce by the media a product - I will not uses as a marketing statement but between us we can say with a negative guarantee.

So at the end of the day the guarantee are going to be less than less than zero. In the case of Allianz Life, we are working - as always life you will say that definitely north of zero.

They are still working on the play book with interest rates zero and this should give them the possibility to have a new business margin of 3% even in a very tough environment. Therefore for Allianz Leben and clearly we have the same kind of conversation and we are going to make broader changes, but also is going to be a lot about managing the mix.

We have already products -hybrid products that clearly have, if you want a very low, extremely low guarantees, more a sort of protection. And what we are going to do is clearly continue to see how we can steer their mix in that direction.

Are we going to be able to sell this by the broader changes? I strongly believe in Germany for sure.

I have no doubt that's our German organization can definitely sell a different set of products, so no doubt on that. And when I look also the rest of the European markets, I think that's absolutely doable because everybody is in this same situation.

I would - and also in the U.S. I've been there for many years and we have always been able to manage to get to a broader portfolio which is suitable to the environment.

So you might have clearly a drop in production in a single year. But eventually you know the market and the system is adjusting.

So I am pretty positive that we are going to be able to have good production also in a new environment. And then you had a question on commercial lines, that was a question to Oliver, but I can pick it up.

You know, at the end of the day you really need to look at company by company. If I just put all the numbers together and I remove the AGCS on the picture.

We might even argue that the differential between commercial lines and personal lines is not huge, but that's because maybe there is a country where the commercial line operations can be profitable and they have the entire segment to look. But I can just tell you what we definitely have room for improvement is in France.

That's a significant block of commercial business and definitely in France we are operating at a combined which is very higher compared to what we have in retail. In Germany, we had this same situation until last year, so 2018, but we made a lot of progress in 2019.

So I would say the gap between commercial lines and personal lines is relatively small, so it's not significant. So if you ask me, its a lot about getting the portfolio in France to operate it at a different level making sure that it portfolio in Germany is going to be performing as it is performing 2019.

And also I would say in Spain also - there is also some room for improvement. But in totality I would say the gap is not huge.

So you can't just give us the Solvency II, there is various other aspects for discussion now and potentially, apparently rolling back on risk margin, as well as - I mean have you had your view on some of the other aspects?

There are many other things happening there. Clearly, potentially the risk margin could be a positive.

Also there are conversation about volatility adjusted. So -but clearly they're moving from 20 to 30.

Last liquid point, there will be a big impact compared to what the benefit could be from the other. Realities, we don't know what is the final proposal that Europe is going to come up with.

I believe that it's most likely the proposal is going to be a reasonable proposal. But you know we need always to be prepared for all kinds of possibilities

And maybe I can have what we get in on. Andrew, the issue is very simple.

The modeling only ends at the end of June. Then during the German presidency people will look at the numbers and discuss what the numbers mean.

So they're still in the data gathering phase and then they will trade on various items as they're reading for example, the change in interest rates and we'll talk about last liquid points and they will talk about volatility adjust us. And then they will look at the fact that credit spreads at an all time low.

Who would have thought you know the Greek Republic can finance short term money at negative rates. Give me a break.

So people need to really look at the data and then we know that under the Portuguese presidency, which is in the first six months of 2021, the things come on us. So now speculating on what the outcomes may be, I think is reading tea leaves.

I'm guessing the mics been handed over, can you hear me?

Yes.

Yes thanks very much sorry, Peter Eliot, I had three questions, please. The first one was on the Life margin.

I was very pleasantly surprised to see that the basis points guidance hasn't been sort of downgraded from last year. And I take your comments Giulio on the AuM supporting sort of the absolute level of the margin.

But I was just wondering if you could give us a bit more color on your thinking behind the sustainability, the basis points. And I mean, perhaps that ties in a little bit with Andrew’s question, but that will be great?

And the second question was on asset management. And I saw sort of the comments on the tape, that I mean potentially that the coronavirus shouldn't be negative could even be a positive impact - obviously nobody likes to benefit from things like this.

But I was wondering if you could just give a little bit more color on you're thinking there and how asset management is sort of, started the year right when I saw comments good inflows in January. I was wondering if you could just elaborate a little bit that'd be great?

And finally, I saw recently that you struck a deal with Microsoft to provide ABS services through the cloud through other insurers. I'm just wondering if you could sort of elaborate on your thinking there and the opportunity.

I mean I guess at first sight, it looks like you're sharing digital edge, but maybe people are going to get this anyway and you want to benefit. But just wondering if you, could talk about that space a little bit?

Thank you very much.

Yes okay. So I can start from the investment margin, as you see our guidance for 2020, 75 to 80 basis point, which is kind of stable compared to the guidance that we had also for 2019.

And the point is, we definitely see more stability we are working clearly on making sure that we can get a quality spread that we like to achieve. And for example, in the United States, if you remember, at the beginning of 2019, we had some drag on our investment management, our spread and somehow we have been working during the course of 2019 to restore the kind of spread that we like to see.

Clearly when we also work with our European companies, we are making sure that we can secure the amount of investment manager after profit sharing that we think is adequate. Keep in mind that we are not necessarily at a minimum profit sharing.

So this gave us some flexibility. So overall, we had a sort of push to see what we can do to keep the margin as stable as possible despite the challenge coming from the low interest rate environment.

Also think about that that’s clearly the low interest rates environment has an impact on them on our investment income, but it is going to come also a little bit over time so we are trying to react [technical difficulty]. The right decision on the no business that's critical to make sure that we see stability also beyond 2020/2021.

On the asset management, my remark, about the coronavirus that could be helpful for asset management because that's a little bit of a cynical remark, but just a technical consideration. Clearly if you have a sort of tension in the capital markets, you might argue that in this case the interest rates are going to go down.

Also you might see an appreciation of the U.S. dollar so when you combine the two things.

There might be a positive on the asset management. I will not anyway over emphasize this as a main driver and that's definitely not a wish.

So that's just a consideration because the question was what happens to your asset management in the case of coronavirus. And I will say that asset management will not be necessarily impacted by the coronavirus and potentially might even be a slight positive but don't do too much out of that.

On the Microsoft yes and the idea that to - have ABS which is a dispose of our companies which are not Allianz’s. There is definitely something that we are pursuing because we think we can also create additional revenue out of it.

What is important is when you look at ABS there are different components. So, there is a core component and then you have all the customization that you can do.

So, we are not necessarily given the entire ABS to potential non-Allianz insurance company is just part of the ABS solutions and clearly what is the customized part is going to stay just with us.

Happy Friday, everybody. And just going back to some of the comments you made on combined ratio in 2020.

In the notes, you've written strong progress expected in the U.K. in 2020.

Is there some more guidance you can give yes with some examples on what to expect in the U.K. I am strictly synergies?

And secondly, the massive growth you've had in new business in the Life business. So across the board and capital efficient products protection, what's going on there that's better than your peers and how does that lead into 2020?

And then on the restructuring of AGCS going forward what have you baked in for potential reserving risk and what about topline? Thank you.

Yes so starting from the U.K. - clearly starting 2020 we're going to add now the full consolidation of the LV and also the business of legal in general.

So, our expectation for 2020 have a combined ratio close to 95. And that's very important when you look at the combined ratio of 2019 which is just the Allianz U.K.

You need to normalize that combined ratio for a few effects. So in reality, we are starting already from something closer to 96.

As I was saying before, and then when we combine also the other two businesses we should be able to get to 95 combined ratio at least this is the plan for 2020. In terms of synergies, you're not going to see necessarily the synergies flow in 2020.

They're going to come later. So in 2020, we're going to have rather some integration costs.

But the idea will be that between LV and legal in general, we should be able to realize 50 million of synergies, and in my opinion, these number is even a little bit conservative. So I think that we can do better than that.

But I will say at the moment, we are operating with a potential synergy of at least 50 million. Then you had a question on the AGCS, right and the reserving what is the reserve risk.

I will say the reserve risk that we have on the AGCS is the development of inflation. You saw that we made a big moment at the end of 2019.

And you also saw that somehow we were not expecting that level of inflation when we had just our meetings or the conference call - at the end of October beginning of November. So now we think that we made a good move to the flat inflation, but you never know what could happen.

That's also very important there is new business is going to be most likely exposed to differently to inflation because when we speak about new business. We are not just changing price, we are also changing deductible we are changing limits.

So from that point of view and we are also getting rates of some accounts or some books or you might see some different trends in our new business compared to what we have in Air Force. But overall, we feel that we made a strong move in 2019 with a reserve strengthening which is very high with 600 million.

So today we're going to see what inflation is going to how it's going to play out. On the life growth, I will say the main difference is the balance sheet that we have and makes a bit difference clearly if you have significant so called hidden reserves, if you will.

So how much unrealized gains you might have in your statutory account. I'm referring to Germany.

How big is the level of participation is that you have - how what kind of room you had today minimum pretty depending on fixed - the German business works as a portfolio. If your overall portfolio is stronger, you can definitely do more than what competition can do.

They said clearly, we need to make sure that we continue to make the right decisions. Over time to make sure that we are the same kind of portfolio, but don't neglect that.

Three, four years ago, Allianz label has made a significant change to the product portfolio. And you can see this is serving us well right now, and now I think we are in a situation where we need to make other changes.

But history has shown that we can be successful and I believe that's history in this case is going to repeat itself.

Can I ask one question quickly and so AGCS reserving that you've done. Have you added reserves to lines and books where you may not have seen the deterioration, but you've kind of guessed systemically there may be areas of risk?

No, we booked reserve where we saw that the trends were getting out of line otherwise we didn't book reserves for potential things that we are not - we are not seeing. Let’s put this way 600 million was a good number rating.

So we had to take a look at what we see. And again, I really believe the environment is very supportive.

So, I will display that as we go into 2020/2021/2022 the price strength is going to be very significant.

So, it's two quick ones on AGCS please and one on Life again very quick follow-up, thank you. First one on AGCS I mean if you go back say 10 years or 12 years This used to be the 3 billion n portfolio 90% 90 is combined, and a lot of business businesses have been transferred to AGCS of course, including Fireman's Fund but even others through the last decade.

Would you say then AGCS has sort of been treated like a bad bank. And now, that's why the problems are becoming much bigger or would you say that that's really not the case.

AGCS has whatever issues everybody else has as well. So that's literally just a desktop just question to ask that?

Second question would be again on AGCS specifically, would you consider that in the U.S. for example, any [indiscernible] behaviors could potentially pose a risk for yourself for AGCS in this coming year or next year.

And if that business not relevant please I would love to hear that as well. And last thing is just that we mentioned the Life growth coming from loading and fees and business mix.

But also, I would like to just understand the capital efficient product it obviously growth very strongly for many years. But we still have that, say 200 million normal run rate quarterly operating profits from this segment.

It is said and in the past you said that this could increase, but is that still a few years away this increase or are we getting to that stage where we should expect more numbers from this? Thank you.

Yes, maybe I start with a bad bank noise AGCS is not a bad bank, not at all. And what we're seeing right now, it’s sense that you can see also in other competitors.

So we're not the only one being exposed to the trends we're seeing. So from that point of view, now AGCS is very far away from the bad bank.

I want also because I was thinking the other day, you mentioned 10 years ago AGCS was a very good company now it looks to be very different and still a good company. By the way, I was thinking the other day 10 years ago, Allianz Life didn't know to be a very good company and we had to put a lot of capital now is going to pay 750 million U.S.

dollar dividend as we speak. So I strongly believe that AGCS is going to return to a better level profitability it’s far away from being a bad bank.

The only thing we know the industrial business tend to be more challenging than other businesses and also the volatility might be higher. But I'm pretty confident that we have a good asset we just need to have a more supportive environment and also making sure that we made the right choices but no, no, concern about the viability of the business.

On the liability side in the U.S. our booking in the U.S.

honestly speaking it’s not so big so from that point of view I will say any development will be relatively muted. Also we see in the U.S.

massive rate increases. So from their point of view reality that U.S.

book is a book where fundamentally when you look at the situation it might be that profitability is going to be restored pretty quickly then clearly every time you speak about the United States you need to be generally cautious. Because we know the environment tend to be very, very litigious, but what we see right now from a rate increases point of view is extremely comforting.

So and also another point is not for liability but financial lies in the United States, our numbers have been, indeed not that bad at all. So I wouldn't say that the U.S.

must be a main source of concern for us. On the capital efficient product the issue that we had there, I don't want to bore Oliver because he doesn't like longer accounting conversation.

The point is how our German colleagues are somehow also splitting the profitability and operating profit between capital light products and if you want the old products. You could argue it could be done in a different way we had the situation of the way the deck accounting is done.

So we have a sort of drag happening, you will not expect to have a dragon in IFRS, but the way they do the calculation leads towards the same effect that you could see in a statutory accounting in where you can now really defer the commission. And so that - since we are growing that business in a substantial way you can see this track there.

We could change the methodology and just allocate a profit based on the asset under management. And then you will see that will be a better result in the operating profit line.

First question you've decided on this already Giulio but just to clarify, in the combined ratio, your confidence on improving the Spanish results next year. You sound confident throughout 2019 but the ratio has sequentially deteriorated through the courses.

Maybe you're just cleaning up the book for 2020, but if you could clarify that? And also then on France could you talk more generally about your ability to improve, you've already talked about commercial versus retail.

But that just seems to be an embedded issue in your portfolio. And the French moderator has actually been deteriorating for the past three, four years.

And there are some players that are getting that ratio down to the low 90s. So I appreciate what you said about commercial versus retail.

But will be interesting to hear if you've actually got a solution to that. I mean for example, why wouldn't you just be doing a significantly less French commercial business?

And then secondly, please could you help me understand the 4.4 billion guidance that, you've given for Life how that breaks down between the investment margin and the other business? I mean, I appreciate you've given an investment margin guidance, but it strikes me that I need to take the worst case for your investment margin 75 bps and assume that all the other business doesn't grow to get to 4.4 billion.

So either you're punching that 4.4 to very low level or I've missed some element to the equation. And then lastly, so just to clarify I am sorry if I can get this from somewhere else, but your 600 million reserved challenge in AGCS what were the total reserves in AGCS?

And what were the reserves for liability and financial lines before you added 600? Thank you.

Yes maybe the - let's me start with AGCS, the total reserve for AGCS at about 10 billion and the reserve for the liability line are about two point. I sum up liability line and financial lines because I don't want to give too many details, but we are about close to €5.5 billion.

That's on the reserve and for AGCS. On France, you know, what we see in France is - and we saw that in 2019 and also in 2018, we see that - when we add up all the large losses weather-related we have - let's say, in 2019 we had about a load of about 13 percentage points.

When we do our plan we are more at 11. So if we believe that the two percentage point gap is just volatility then we could say we are actually in a better spot compared to the 98 that we see.

But we are also, I share your points, we are kind of reluctant to say 11 that I number 13% is just bad luck, also because in 2018 the situation is not being - it's been also kind of negative. So definitely in France we want to take a closer look at what we can do to improve the performance.

And that's what we are doing indeed with the management team of France and then we will see where we land. A major driver of improvement anyway for France is supposed to be the expense ratio.

We want to bring the expense ratio down further. And they had to say that on this, the French colleagues being very good also in the last year.

So now we want to continue to push on the productivity element and clearly we are going to take a closer look at the performance in commercial lines, but also we are going to take a closer look at what is the amount of loading that we need to port for net CAD and weather related and large losses and making sure that our pricing is going to maybe reflect a higher level compared to what we have assumed in the past. On Spain, yes, we are we are confident that we we're going to get to a better result in 2018 and 2020 and I would say combined ration should be below 95.

I just want to tell you Q1 might be challenging because of the few large losses. But when we look at the underlying accident year, I'll say, TI in 2019 we see that there is a good strength in the accident year.

So we would definitely expect to see better results in 2020 compared to what we saw in 2019, but just for the first quarter we had just a couple of large losses that you may now see the improvement fall in the first quarter yet, but you are going to see these in that as we move to our 2020. On the investment margin, Okay, the way I'm looking at our Life business, we had an operating profit of €4.7 billion in 2019 and I would say if you remove by Banco Popular because you need to remove that.

We are at 4.6. And then we had a deck of set which is 150.

And then I would adjust another 150 for the investment margin. So then you start from a basis which is about 4.3 and this is how somehow I'm thinking about the starting point.

So you need somehow to remove Banco Popular. You need to remove 150 which is a deck issue.

And then you need also to adjust the investment margin towards the 80 basis point. So that will be the starting point for any kind of extrapolation to the future.

So it's 25 minutes past. So we have time for one last question please.

If there's any.

Just a few questions. First of all can we get some color on the U.K.

P&C outlook. What are we hearing?

Because most of the companies who have reported U.K. motor U.K.

home, I mean there is a clear message that claims inflation is still running about say 3%, 4% ahead or maybe more ahead of pricing. So how should we think about the U.K.

motor, because if I look at your guidance you are saying 96 your portfolio and 95 including the acquired business. So it feels like you are talking about 93, 94 for the acquired portfolio.

Are you comfortable with that number given what's happening here and given the pressure from FCA reserving -sorry the review that they are doing? So that's the first one.

Secondly, on AGCS, can we get some color as to what - how should we think about net price increase, like clearly 9.5% or 10% price increase we are seeing. What would you say, is a recurring say claims inflation at the moment?

Or is it just hard to say that because you only learn about that over the year because it just volatile at the moment. So that would be the second one.

Thirdly, I was a bit surprised to see that your reinvestment yield in Life and P&C is both more or less same even though one is half duration, the life business. So can you just explain that dynamic a bit?

These three would be really helpful. Thank you.

And maybe starting from as well kind of rate increases we are seeing and again, as I said in the last quarter and Q4 when you look at rate increases not just in new also new business on a return basis, you'll see across the portfolio something very close to 20%. So rate increase that we see and now massive and so it's all about what kind of inflation assumption you make.

If you're making the assumption that inflation is zero then you're going to have very healthy and nice combined ratio. But that's clearly not a realistic assumption.

When we look at assumptions for inflation, it depends on the different countries. And I would say, in the U.S.

we still thinking that inflation could be at a level of about 7%. So we are thinking that the inflation could be pretty elevated.

In the case of euro we think inflation is going to be more towards to 2%. So then you can combine these.

And for our portfolio we'll say there will be something closer to 4% to 5% inflation. But again, so it's hard to predict how this speed in inflation might change for the better or for the worse.

On the U.K., I will say that, we saw what you are referring to and we had those conversations with the local management team and what they are telling us is that they are getting rate increases that should be enough to offset the inflation, their claims inflation. So from their point of view, there is confidence that at this point in time we are getting the needed rate increases that were actually pretty healthy.

So this is where the kind of confidence is coming that we should be able to offset the inflation. In the case of Life and P&C, I think the main difference is that their contribution of emerging markets in P&C is stronger compared to what we have in the life business.

The life business is mostly and we speak on investment is mostly dominated by Europe. In the case of P&C we have growth coming also from emerging markets.

So Turkey and this makes a difference. The reason why reality.

You need to adjust the yield for the different geographical mix.

That's very clear and very helpful. Thank you.

I just would like to remind us something when you think about the outlook. I would like to go back to 2020 and 2021.

So the first one is we believe we are on track to 2021. Also because we really do have strong diversification in the portfolio.

Now as a critic you could say we've been benefiting from very strong investment markets. I would just like to point out to the fact that probably and we don't know the numbers for Fidelity, Allianz is by now the world's largest active asset managers dominated by fixed income, which is almost 70% of what we do where we have had the strongest record on history in terms of investment performance and that is unlikely to abate.

So Giulio has nicely said, we obviously don't know whether that will continue. So we are more market exposed.

But that gives us a very strong bench. So when people thought about us 10 years ago as a P&C insure attached with some distribution financing life businesses and then some startup called an asset management I think that picture has dramatically changed.

Now, why do I say that? Because at the time when the commercial lines industry and P&C is struggling has to rebooted and we are on track.

We have enormously strong and vibrant that we've build. Second observation our life business now, this is the third time we are transforming.

First time was 2011, can 2011 after the financial crisis an interest rates coming down after the euro crisis 2012 and 2013 and we've been doing that working on the back book, is like we didn't talk about that today. We are still working on the in-force book massively, not just on the new business.

We are going to address the new business by the way it gets ever more difficult with consumers because with negative rates as Giulio has said. And I wouldn't call that a negative guarantee.

I would basically say, the question, how do you think about protecting capital after you've subtract cost. So one of the things we'd really have to look at is whether distribution cost for the product not just how do you address distribution cost alone but - and guarantee cost alone, distribution and cost will really matter.

And that allow us to really work hard on the P&C portfolios that we have. And you know you can get from - if your nervous to look at the picture is there something beyond the AGC&S.

Again I'd like to reiterate, we are working on commercial lines. There's lot of more work to do.

But the Spanish issues and a number that you have seen are really one-offs, so you call them a trepid. Now first quarter this year, there's a lot of nat cat activity, that's already happened.

Australia, you've seen. You have seen U.K.

coming. You have seen Sabina I don't know why storms always have a female name.

I think is men putting the names on it. Yes.

We had clouds, that's right. But recently - something has pick this name, but anyway I was wondering - by the way do we have any female analyst on the phone.

Anyway different discussion, but kidding aside, the key thing is would one really needs to believe in, that you are on board of one of the strongest ships that exist in our industry, that we are not pumping on one cylinder but on many. And that we have both the will and ability to deliver on what we set ourselves and I think you've seen the track record over the last five years and beyond.

And actually dividend is seven years up. So you make your pick.

We are confident that we can do what we've been promising. Thank you very much for listening.

All right. Thank you very much.

We wish everybody a very nice remaining afternoon and relax weekend. Good bye.