Operator: Ladies and gentlemen, welcome to the Allianz Conference Call on the Financial Results of the Second Quarter 2021. For your information, this conference call is being streamed live on allianz.com and YouTube. A recording will be made available shortly after the call. At this time, I would like to turn the call over to your host today, Mr. Oliver Schmidt, Investor Relations.

Please, go ahead, sir.

Oliver Schmidt: Thank you, Spacey [ph]. Yes, good afternoon from my side as well, and welcome to our conference call. Today, I'm joined by our CEO, Oliver Bäte; and our CFO, Giulio Terzariol. As always, Giulio will guide through the details of the quarter, but before that, Oliver is going to share some personal thoughts with you.

Oliver, over to you.

Oliver Bäte: Yes. Good morning, good afternoon, good evening, wherever you are. Thank you for joining us for this call. This has been an extraordinary quarter, actually an extraordinary week and an extraordinary day today.

And I wanted to speak direct to you as our investors and our analysts and share a view on the health and the performance of our company as we stand today. As you've seen, Allianz reported very strong results that really reflect the resilience and power in delivering our strategy and I think it's very important to note that this is not a one-off that is the outcome of continuous investment in resilience and earnings power that you are seeing -- and I'll talk about the drivers of that in a second. Demand for our products as you seen in services, growth, income, profit flow, cash flow are on the rise everywhere and I think that's very, very important to understand. As is, customer and employee satisfaction, very important. And as you may remember, November 2018, we said we're not just targeting financial outcomes, they are the result of our unwavering focus on our customers and employees, their needs and their ability to deliver.

Now the last 18 months have been incredibly tough period for our customers -- you, all, you are also customers and our employees and throughout, we have tried to dedicate ourselves to your success and your well-being. And let me just give you a couple of examples. In the property casualty insurance, we have been really, really, really hit as an industry with substantial natural catastrophes. Less individual, very large ones, like we had them a few years ago, but now what we're seeing out of climate change, the number and severity are increasing across the board. Second, the demand for our life and health products is extremely strong.

Dynamic revenue growth is seen everywhere and the margins are great. If you'd asked me three years ago, can we really -- given the interest rates that we are operating at today, not the one we are envisioning in November of 2018 -- get a new business margin about 3%? That is coming out of really new products that are protection-oriented and they have the right balance between what customers need and want and get as benefits and the returns for shareholders. I would have found that a tall order. Today is a reality, even in markets that are structurally-challenged, like for example, France, we've been able to innovate and come up with products that are outstanding in demand and in margin. Our asset management business continue to grow and reach again, a new historic high, not just in terms of assets under management, also in profitability.

So, we have momentum in all our business segments. And beyond that, our capital position remains strong. People focus a lot on solvency, too, and I think that's totally fine. By the way, we called the RT1 bond early in order to get flexibility, made a lot of money on doing that despite that we are 206, well above the 180 target and what we really need to operate. And cash flow generation from the businesses to the holding is extremely strong.

So, that's why we've moved the outlook to the other half of our target range and that's why we've also been honoring our promise to do the second half our 1.5 billion share buyback program that because of COVID we need to pause last year and we are delivering on our promise, and we will continue to deliver on our promises to you, our customers and our employees. Now, Giulio, our CFO would speak to you in detail about these outcomes, but before we move into the numerical discussion -- I know you need to focus on all the numerics to think about what the valuation points are -- I'd like to address three topics. The first one is customers. I want to address for example, the storms and the floods in Europe and express our solidarity and support with the people that have been affected. This is not a cynical move on 'Oh, now we're going to make more money.

Sell more flood cover at higher prices.' That really highlights the role our industry in Allianz particularly play in helping to rebuild homes, helping to rebuild the lives of our customers and keep on highlighting to policymakers that climate change is not a problem in terms of the warmth of the air. It is actually affecting our lives in a very negative way. Second, regarding the support of our employees. Allianz is doing a lot to continue to support our people under COVID restrictions. Remember, Europe may be doing better; many parts of Asia are not yet out of the woods and are suffering; Africans are suffering and we need to continue to put our emphasis on also making vaccination efforts much more successful there and we need to make sure that in Europe, we don't stop the vaccination efforts.

Allianz is actually part of a corporate participation in the federal vaccination campaign and we need to continue. Last, of course, I would like to provide you with a brief update on the context and perspective related to the disclosure earlier this week regarding the reassessment of risk related to the AGI U.S. structure. Alpha Funds as mentioned in our release, these things are highly sensitive from a legal standpoint. So, there's very limited things that we can say about this at this point in time.

I'm sorry for that, but you all know how U.S. litigation works. Now, I can spend a lot of time in terms of what are we doing for the flood victims in Europe -- by the way it's not just Germany, it's also in the Benelux countries. We've had storms earlier this year, particularly in June in all parts of Europe, for example in France and in Eastern Europe. We're doing our best to support our clients wherever we can, not just by the way by paying money, but getting drying machines, organizing logistics, bringing things that really help people deal with that.

The second part, I've just mentioned the vaccinations. Pretty pleased. I say that also in terms of you potentially being clients, make sure the only answer to COVID is not lockdowns, it's not policy, it is about getting vaccinated. And we need to convince the people that have doubts that this is the only way out. It is the only way out.

At least that's what we believe. And think about it, in Allianz alone, in Germany, we have been given more than 23,000 COVID shots in terms of first and second vaccinations to our people. That is including their relatives and we believe that is what has to be happening. If you think about the fact that we have about 45,000 people in Germany, that's a pretty encouraging rate of things that we have done. Now, third, and as you're probably waiting for this, I want to address the disclosure in terms of what we actively announced Sunday evening after a reassessment of risks related to the structure of Alpha Funds at AGI U.S.

LLC. Trust me, this was not an easy week for us and it was not an easy decision. We really, really moved and spent hours on the board of management, we consulted with our supervisory board. But because of new information obtained on very short notice at the end of the week, with respect of the pending regulatory proceedings, particularly the involvement of the U.S. DOJ and our reviews, we had to reassess the risk associated with restructured Alpha Funds.

In light of the investigation and litigation, please do understand I cannot go into details, but rest assured that the underlying issues will be thoroughly reviewed and we would like to address them in due course. And any conduct by individual employees that was not in-line with our ethics, our standards, will not be tolerated and would trigger consequences for those who potentially violated them. These reassessments of risk caused us to publish our ad-hoc disclosure which you have seen on Sunday evening, For the non-Germans, you need to understand the difference to the U.S., we have to go out immediately whenever we hear something that may be material for a purchasing or a sale decision and we recognize that taking the step on a week impact on our share price. But, we have to be absolutely committed to being transparent with our shareholders and not just follow the rule of law by line but also in its heart and we made this disclosure therefore in accordance with the applicable laws. Particularly here in Germany, given what has always been happening the last few years, incredible early communication is fully in-line with our principle of transparency in our culture.

It's not just a legal necessity and our decision to inform the market immediately about important developments therefore was both legally-driven but also reflective of what we would like to stand for. Now please recognize that it is in the interest of our shareholders and the company to respect the integrity of the reviews and the process of these authorities. We're not just fully cooperating, we have actively reached out and partnered with the authorities in charge of the structure outside investigations -- the DOJ and the SEC. And with respect to our civil proceedings, which we disclosed early last year, we will continue to defend the interests of our shareholders with both discipline and vigor. Now, it is important to put our most recent disclosure, however, into perspective, especially in the context of Allianz's very strong global operations and our strong track record.

First, we want to underscore that this outcome is not reflective of our ethos, of our culture, and certainly not of our performance. As investors ourselves, as one of the largest in the world, we understand our clients' displeasure -- what happened around the structure outside investment and for some that may have not met their expectations on performance. As a company that prizes integrity, we do not measure the impact of this outcome in terms of financial terms along. We are clear that confidence and trust are affected and that it is paramount for us to restore that as quickly as possible. In light of the pending investigation and litigation, again, please understand that I cannot go into details, but be rest assured that the underlying issues will be thoroughly reviewed, again in full cooperation with the authorities.

And last but not least, I would like to say that we are above all, a meritocratic organization that will take every opportunity to learn from every lesson that can be improved further in terms of what we do. Now, we also wanted to say that what has happened in the structure out of [ph] sphere is no indication of the performance, the ethics, or anything that happens at Allianz Global Investors. It's a very small part, they specialize part of what Allianz Global Investors does and they have made enormous programs since that fall and winter of 2019 when we decided together with our board here that we want to overhaul the structure, organization and leadership team of Allianz Global Investors. That success has been extremely strong and that starts with investment performance that is now so much better than what it was in prior years. 77% now outperform in terms of one year views, 69 in three years, 48% of the mutual funds are now in the top docile of the three-year Morningstar peer ranking.

Numbers that we hadn't seen for a long time before. From that flow, much better net inflows and from those we have seen very strong financial results. You saw that this quarter and we believe it's going to continue into the future and we want to make sure that everybody understands, Allianz Global Investors is core to what we do our activities in the U.S., are core to what we do. And that then leads me to the last comment in this regard. Asset Management is a core pillar of what Allianz does, a core pillar of our business model and a core part of our value proposition to customers.

In fact, life insurance offerings and SMR management offerings are integrated and are converging. Whether you today buy a product that is called Life Insurance, or Asset Management Pro, a product is often nomenclature and we really believe we are uniquely positioned to get the best out of combining both. And that only shop in our industry that is so strong both in life and asset management. With that, I'm basically through with my comments. The numbers speak for themselves.

I think we have the confidence to move forward. And when people say, 'Well, are you not afraid about the potential financial impact?' Yes, it will leave a scar on our skin, but it will make us stronger. Just think about the numbers. The next three years at a minimum we should be generating every about €9 billion plus, growing 5% earnings. We'll talk about that end of the year, but that's what the market says.

That gives us €27 billion of cash, lots of buffer, lots of ability to face not just the challenges from this one, but be able to invest in our future, to invest in our people, to invest in our clients, and to invest in you. And with that, I'll hand over to Giulio. Thank you.

Giulio Terzariol: Thank you, Oliver, and good afternoon to everybody. As Oliver said, the numbers are speaking for themselves, but I will still go through the numbers and explain the numbers.

So, if we go to Page 3, as you can see, the results for the six months have been very strong with a good revenue growth of 5%. Also, the operating profit is a €6.7 billion level, which is not only better in the last year, but also is significantly ahead of our outlook €13 billion [ph] divided by two. And that's also the reason why we upgrading our guidance for the 2021. The shareholders' net income is very strong with €4.8 billion [ph], then when you look at the contribution by segments, you can see that all segments did a good job at delivering operating profit and also delivering strong operational KPIs. The combined ratio in property casualty is much improved compared to last year and this is basically in-line with our 93 targeted new business margin is at a target level of 3% in the revenue business is worth €1.2 billion.

Very, very good. And then the cost to income ratio is below the 60% level with inflow number of about €65 billion for the six months. So, very strong operational KPIs which are supporting clearly the operating profit delivery. If you go to Page 5, the second quarter is basically a representation of what happened during the six months. As you remember, we had a very good first quarter, the second quarter has been basically the same level like the first quarter.

In dates in the second quarter, we can even see an improvement on the revenue side. As you'll see, our revenue grow by 12.6%. And those segments have contributed to the growth of the revenue. This applies to Life/Health business, to Asset Management, but also to Property-Casualty. If you remember in the first quarter, the growth in Property-Casualty was slightly negative, but now you can see a good plus of 3.6%.

The operating profit stands at €3.3 billion. So, that's pretty much consistent with the operating profit that we had also in Q1. And then a net income with €2.2 billion is a very solid number, and also in the second quarter, you can see that the operational KPIs are pretty strong. But I'm going to speak about those KPIs more in details in the rest of the presentation. At Page 7, the solvency ratio is solid at 206%.

We have a drop of about four percentage point compared to the level of March, but that's also expected because we perform the purchase of 1.36 billion [ph] hybrid otherwise, as we're going to see in a second, the operating capital generation is very, very strong and the sensitivities are more or less in-line with the sensitivity that we show to you for the end of March. Now if you go to Page 9 and that's the good news. The operating capital generation is coming pretty strong. As you remember, we had a first quarter with a capital generation about 4% in the second quarter, where you remove from the capital generation the dividend and the taxes, we are at 3%. We see now a little bit more growth coming in the Property-Casualty side compared to what we've had in Q1.

So, this is clearly taking down a little bit operating profit generation, capital generation, but overall we are at 7% for the six months. And we have therefore also upgraded our guidance today to a number which is in excess of 10 percentage points of capital generation. Otherwise under Capital Management and Management Actions, you can see the impact or the dividend or the normal regular accrual of the dividend and also you can see the impact of having repurchase €1.6 billion of Hybrids. So, all in all, this leads to a comfortable solvency ratio of 206%. Now coming to the Segment and starting from P/C, starting from the growth in P/C.

We have achieved internal growth of 3.6%. You can see that we had a nice development in Germany, we had a nice development in Australia, also in Eastern Europe and then clearly, you can see a strong recovery at Allianz Partners. Obviously, Allianz Partners was affected last year by the COVID situation especially in travel. Now, we see a recovery. We are not at the level of 2019 yet, but especially in the United States, we are seeing a recovery.

So, we expect to see premium growth also in the remainder of the year. In the entities [ph] where we see a negative growth, this is driven either by the underwriting actions that we have undertaken in the course of 2020. This applies to AGCS. So, you can see the effect on the underlying action that have been taken throughout the course of 2020, also in the second part of 2020. And then in other cases like Spain or to a certain degree, also the UK or France, we're really focused on keeping profitability.

So, sometimes we see there is some pressure on the rates, but we try to keep our profitability and preserve the margin. All in all, it's a good picture and then also when you look at the price momentum is stable. So, for the time being, we also say that the prices that we are able to get in the market are also consistent with the last trend that we are experiencing. So, a good picture for our underwriting performance to date. At Page 13, the operating profit has increased by about €200 million.

That's driven by the improvement in the combined ratio. Here, you can see there are a lot of moving pieces. On the one side, the natural catastrophe load is significantly higher compared to last year. The expense ratio is also higher, but you might remember that last year, we had a one-off, pushing down policy one-off, pushing down the expense ratio for the quarter. But when you look at it, 26.4% for the second quarter is definitely better compared to the 27% that we had for the full year 2020.

Then you can see that in the second quarter this year, the run off has been a little bit more elevated, 4%. When you look at the six months view or the run-off, we are at 2.5%, which is pretty much in-line with what could be a normal expectation. Last year, we had a COVID impact, this year the COVID impact is basically neutral. So, when you put all together and when we run our analytics, we can say that the level of performance, underlying performance is pretty much consistent with the level that we had last year and more importantly is on target with the 93% of combined ratio. You can see these even easier if you look at the six months number.

Now at Page 15. The combined ratio for the entities, clearly in Germany, the combined ratio is elevated. That's because of the significant amount of natural catastrophe. If you adjust for that, you can see that there is a very strong underlying performance in Germany. We have also a little bit of positive and run-off [ph] setting the load for the natural catastrophe.

There you can see a lot of strong performance at the OE listed below like UK, Australia, France, Italy -- especially Italy, Eastern Europe and Spain. And then as always, Latin America and Turkey, they tend to have higher combined ratio, but here we should keep in mind that the interest rate level is much higher. So, you can run at a combined ratio of 100% and still generates value for the shareholder. AGCS is at 97%, which is in-line with the 98% that we want to achieve by the end of the year. And then what is clearly a little bit of an outline, if you want is that the combined ratio Euler Hermes is at 63%, but I think you know by now that the development of claims in the credit insurance is extremely favorable.

So, from that point of view, we achieve a combined ratio, which is exceptionally good. We are also exiting the state schemes in most of the country. So, moving forward, we are very encouraged to see this kind of performance coming out of Euler Hermes. So, overall a good quarter, clearly with a significant amount of natural catastrophe. But despite that, we've been able to achieve a 93.9% combined ratio and also when you look at the six months, we are the level of 93.4% which is very close to our target to 93%.

At Page 17, we are showing the investment results which is up compared to the prior period. These might appear surprising because usually there is an expectation that the investment results is going to go down. But what happened this quarter, we had a stronger performance from dividend, from our also private equity funds. There was the opposite last year because of the COVID situation. So overall, the dividend income has been very strong and it is supporting clearly our operating investment results.

We are running now where you look at six months figures at €1.3 billion of operating investment results. Our assumption in the plan was about €100 million to €150 million low-watt [ph] index so, this is definitely a positive compared to the assumption that we have put in our outlook. And now, let's come to Page 19, Life business. Very pleased with the performance of our Life operations and this is a strong performance across all KPIs, but we're going to start from present value of new business premium, which is up 70%. Here, we have a couple of effects, which I'm going to explain in a second, but even if you remove these effects, the growth rate for the present value of new business premium is 36%.

Now, you might say, 'That's easy, because last year, we had the COVID situation, which was bringing down the production.' But I can also tell you that the adjusting number is higher compared to the production that we had in 2019. So, I know your concern was always, 'Are you going to be able to do the product changes after you get the production in the system?' And this is a proof that we have been able to do so. On top of it, we are managing very aggressively our in-force business. So, in Italy, we have been able to renegotiate a large contract or €2.6 billion with better condition and also in France, we are offering to our customer, the no Prada within the No Prada [ph] is more suitable to the current environment. So, we are basically bringing first customer into the new solution; that's also a good event.

When you look at the new business margin for the quarter, above our target of 3% and in all segments have contributed both to the growth or the production also to the improvement of the margin. So, that's a pretty good performance across all business line within the Life segment. At Page 21, the operating profit is 30% above the prior period level. Here we have basically two main drivers. One is the increase or the loading and fees of 6% and this reflects the growth also in a unit-linked business.

We've been able to grow reserves significantly in our unit-linked business. On top of it, investment margin is over €1 billion. There is a part of a stablization compared to what we saw last year, but also I will say this level of investment margin is even better than our expectation. That's because the markets are extremely favorable, benign at this point in time. Also, you don't see these in the numbers because we are always including the commission in our expense picture but if you remove the commission from the expense line, in reality, we are managing expenses on a flat level.

So, basically, we have a combination. We increase in load and also better investment margin, the expenses are flat. So, this is definitely good for the operating profits' development. And then on the right-hand side of the chart, you'll see that whole lines of business contributing to the growth in operating profit. So, a very good picture for the segment.

At Page 23 we are showing as always the numbers for the selected entities overall the new business margins, increasing or stable. The majority of these were just a few exceptions and then when you look at the operating profit, we see a nice [indiscernible] operating profit as early at Life USA, this is not surprising. Last year the volatility was higher, this year the volatility is very low. So, automatically, you see a very strong performance in the United States. Italy, it's a very good story, we are approaching the €100 million of operating profit per quarter and that's because the unit-linked business is really doing very nicely in Italy.

And then in Asia Pacific as always, you'll see that there is fundamentally a growth trajectory, not only in the production or in the VMB [ph], but also the operating profits. So, overall a strong feature as when you look at the delivery for the single entity. And now at Page 25, the investment margin is strong at 21 basis points. You know that our expectation was to have a new business investment managing between 70 to 75 basis point for the year. So, we are running definitely highest index.

You can see the current yield is very strong at 95 basis points. Here, we have the same explanation like for the P/C business, the dividends that we're getting out of our equity investment is pretty strong and stronger compared to what we had last year. You can see the cost of current yield, it's in the guarantee level. So, overall, this translates in a good investment margin, even if we didn't have any meaningful contribution coming for the net harvesting [ph]. You see the net harvesting is very low.

It's at 1 basis point. So, I think the number of 21 basis point is a good number. The call to the number is even better, because basically there is no support coming from net harvesting. So, overall very good performance in the Life segment, both with respect to the new business and also to the operating profit and especially, I think we are getting confirmation that the action that we put in place are playing off and we see that [Technical Difficulty] forward. At Page 27, Asset Management.

Also, the underlying performance is strong. We had again a quarter with the record level of assets under management. We decided not to use the headline again. What is more important is that all asset classes and regions are contributing to the growth of our third party assets under management. So, that's a stronger picture that shows also that our strategies are performing and when you go down to Page 29, on the inflows, we had we had for the quarter €26 billion of inflows.

This time, you see very strong inflows at AGI and that's the highest level of inflows for a quarter at AGI and AGI has been able, over the last six months to record €30 billion of inflows. In the case of PIMCO, the inflow is in €9 billion. They look relatively small compared to what we are used to. But here, we'll need to recognize that we had an outflow of a large mandate of about €18 billion with very low fee. So fundamentally, there is no real impact on the revenues or on the on the profitability, and we are just -- basically the inflows of PIMCO for these outflows, you're back basically to the €25 billion plus of inflows that we are used to.

When you look at the composition of the inflows by asset class or region, you see also that every class has contributed to the development and also you see that we are getting more inflows in the mutual fund, which is usually good from a performance point of view, because we have a higher fee margin in the mutual funds business. The final comments; over the last 12 months, I'd like to see sometimes things on 12 months perspective, on a rolling perspective. We have been able to record €120 billion of inflows, which is a very strong, strong number. And also if you look at the quarterly development in total, was pretty much a consistent quarter-per-quarter. So, a good trend for the Asset Management operation.

And now coming to Page 31. Clearly, when the assets under management and the inflows are doing well, you're going to see also an increase in the revenue which is a 16% if you adjust for the fixed affair, we are even over the 20% level, and both PIMCO and AGI had contributed to the nice growth in revenue. One driver as I was saying before is clearly the increase in assets under management, but the other drivers also at least for the quarter, you see an improved fee margin as a consequence of the better business mix. And then at Page 33. As always, when the revenue are growing, you get also extra additional growth right in the profit, we don't get adjusted growth because of the revenue increase, but also because of the operational leverage.

So, all in all, we are getting to a very good growth rate of 29% for Asset Management. And if you remove the exchange rate, which has been kind of negative because of the U.S. dollar depreciation, we would have had even about 40% growth. Both in PIMCO and AGI are contributing to the growth in operating profits. The cost income rate for the segment is about 59% and one of the major driver also for the improvement is the big reduction in the cost incurred ratio of AGI.

In total, the segment is posting €1.6 billion of operating profit for the six months. If you remember, the outlook was at €2.8 billion. So, at this point in time, if the markets are staying stable, we are going clearly to expect to see in the second part of the year at least the performance that we saw in the first part of the year because you're also starting from a higher assets basis. So, a very good news regarding the underlying performance of our Asset Management operation. And now moving to Page 33.

It's enough to say on the corporate operating profit that the numbers are better than prior periods and they are also better compared to our expectation. And then at page 37, as always, we are showing the non-operating items. There are no major development. Maybe just a couple of comments. The impairments are very low.

We are basically now seeing impairments in the system and the stature experiences are more or less in-line with the amount of stature experiences we had last year and then finally, the tax rate at 25% is in-line with our expectations. So, the combination of the strong operating profit and also other favorable below-the-line development is leading to a net income of €2.2 billion for the quarter. So, all-in-all on Page 39, I -- I think we have really a strong delivery for the six months. It's also nice to watch that the delivery is being consistent between Q1 and Q2, so we're not jumping up and down. So, there is a consistency of delivery.

That's basically something that if you go back and look at our performance last year, you will try to adjust where the COVID noise was already developing, about a year ago. So, that's definitely a reflection of the strong action that we have been putting in place over the last years. And our strategy is clearly delivering also the operating profit performance that we would enter the event better than what our expectation was at the beginning of the year. We have upgraded our outlook, as you know, to the upper half of the range, you're going to ask me why not the upper end? We start with the upper half and then we see as we go where we are going to end up and then also, we have today announced a buyback. This is something that we committed to do few -- about two years ago; 2020 was last year, so we committed to do last year.

Then because of the COVID situation, we had to clearly stop it, but there was always something that we wanted to return to you guys. There was a commitment, so today we are coming true to our commitment. We had a capital strength and also the underlying performance and so we are happy to stay true to our commitment. And with that, I would like to open up to the questions to myself [ph].

Operator: Thank you.

[Operator Instructions] We will now take our first question from Peter Eliot from Kepler Cheuvreux. Please, go ahead.

Peter Eliot: Thank you very much. I guess the first question, Oliver, you were quoted on the wires [ph] this morning, saying that you'll do everything to put this issue, the Alpha Funds issue behind you as quickly as possible. I guess DOJ inquiries can typically take years.

I'm just wondering, is it realistic to think that we can get clarity quickly? And maybe related to that, can we have any idea when you might be in a position to make a provision for it? Secondly, just in terms of maybe providing some help on the numbers that we're dealing with, you've given us a €13 billion figure for the value of the funds at their peak and we know there are also $6 billion of claims. I'm just wondering if there's anything else you can give us in terms of numbers to help narrow down a little bit what we're looking at. Maybe what were the funds at the trough, for example? Or anything else that you can give us there to help us? And then to provide some relief from the structure of funds issue, I was very interested in the back-book or the end force [ph] management, the two things that you've done. I was wondering if you could say, what impact if any, they might have on capital P&L balance sheet in either within these results or going forward in the future? Thank you very much.

Oliver Bäte: Thank you very much.

Let me answer it right away, and then I'll hand over for the details of back-books. We can make a general comment on them. So, unfortunately, we are so strictly guarded by U.S. law that I'm not asked, but ordered not to comment on anything. And we are following the proceedings of the DOJ.

We are not driving them. They drive it and it can take their time. But we are an active participant, we're not just following it. We are in there and working with them very closely, so we'll do whatever can be done to create clarity. The second thing, we cannot make any comment on the numbers.

It's just not possible. But remember, there are two components to it. There's the civil litigation and there's the DOJ investigation, and that may have different timelines. So, if and when we have anything to say, we're going to do that as much as possible. We know how difficult your job is to be done, I but again, I would like to put that into perspective.

And that sounds a bit odd and I'm no more the CFO, so Giulio will forgive me for my bit crude math. Okay, before this thing happened, Allianz was not, in my opinion, fully-valued close to where it should be valued. So, any decent analysis, analysis shows that our PE has not expanded the last two or three years, even though we've been outperforming operationally almost any peer [ph]. So, when you then look at sort of what the market has discounted in terms of value, you may say that is correct, or that is too much, but you have to say what level it actually came down from and that was not a very high level -- the first one. And if you compare that to a number of the KPIs you see in the current six months result, we have a 13% ROE in Life insurance.

Can you tell me any company with this book, and this size, and this performance that has 30% ROE Life insurance? I don't know any. Do you have any other insurance company that has a world-leading Asset Management franchise, who were probably the number two active asset manager on the world now? This is not reflected in our numbers. Sales is subdued by natural catastrophes and still have the run of the commercial lines' performance. This is the strongest fortress that exist in Europe. That's not in our share price.

So, if you think about what's happening and even what happens, the cash flow generation power is up to €30 billion the next three years, whatever it is. So, what the heck are we talking about? I understand the nervousness and I know some investors can't invest as long as we have an investigation. But if you think about the underlying value power -- and we are starting a process where this industry will consolidate -- and I'm absolutely convinced with the strategy that we are pursuing what you see the additive growth in the segments is very strong. The second thing I'd like to say, the concern that people have was the Life insurance business. When interest rates went down last year, I said, 'Oh, another shock for Life insurance and these people will make no more money.

The product will be horrific for clients, they will be horrific for shareholders because of the capital requirement.' It's nonsense. It's true for the average temperature of the hospital. That's very true, the weak competitors have a problem to meet the guarantees, they have a problem to produce good results, but ask some of your peers, Allianz is not just giving great margin. It is also offering in many markets the best value that you can get as a consumer, and that will make us win. Sorry for being very confident.

But that is what is required at this point in time. So, when you're filling your spreadsheet, remember, we're not starting with a 15 PE than we are coming down from. We are starting with a 12 PE. And that's why I have a lot of optimism and I'm not ignoring the downside there's such an investigation, but I'm just trying to put it into perspective, sorry to say. And therefore, the relief on the back-book is a specific question.

We have said a number of years ago with the launch of the strategy that we are fundamentally changing the do [ph] business into products that are more capital-efficient, but also better for consumers and you see this in the cycle, because we can offer higher upside and diversification into new asset classes. Those are probably one of the leading investors in alternative assets that provide different sources of income than fixed income or buying -- I don't know what -- Tesla offers you in the short term. So, getting decent long term sustainable returns, that's one thing. We've also said that we are going to address the enormous capital consumption on the guaranteed business. Now, you can say and go out and say, 'Hey, I'm selling a back-book.' Huge run to somebody and we're getting rid of the problem now.

Small problem. You have clients in there that we promised to many years ago, that we would be their partner. So, we're not taking this lightly, number one. Number two, as we've just seen in Italy with the transaction, it takes much longer but it's much more economically-successful if you renegotiate contracts, not sell them at a loss and say, 'Oh, I just sold my loss.' And this is what we've done in Italy, taking a traditional product with a 1.5% guarantee, which is not high by the way, by Italian standard, but still far too high relative to what is economically sustainable. And move it to a zero guarantee and these things generate hundreds of millions of additional value and Giulio give you the number.

So, we are pursuing the strategy and we are committed to lift capital out of these back-books, but in a way, that makes sure that all stakeholders as much as possible are being dealt with in a fair way. And with that, I hand over to Giulio.

Giulio Terzariol: Thank you, Oliver. With your questions, specific on what we did in the second quarter in Italy, it's the negotiation of a €2.6 billion of the group business. Just to give you an idea, we broke down the guarantee for 1.5 to 0 [ph].

So, that's a big change. Clearly, there is always a trade out. We allow now to put some new business for the next two or three years. But fundamentally, it's very, very positive transition. And when you look at Italy and France, we are basically offering to our first customers the new products, and they knew product has more unit length component compared to the old products.

It's a win-win situation from our standpoint. Clearly, there is a nice race, but also from a customer point of view, it's not necessarily good to build at a product with zero guaranteed credit and basically very, very later. So, from their point of view, also the customers, they like now solution where they can get more exposure to unit in business. When you look at the impact on our numbers, I'll tell you the present value of profit or I will say, more correct to say the present value of VVA [ph] because every time we speak about VMB or some similar measure we are speaking our present value VVA is about €100 million. Why you say EVAs [ph] instead of profit? The profitability might not change significantly, but the risk is very different and then when you look at this release, you'll speak to about €15 million of ECA [ph] release when you combine Italy and France.

We are going to pursue similar initiative as we go into the future. So, we are clearly looking for a similar negotiation. In Italy, we are clear this action in France is going to be performed also for the future quarters. And then in parallel, we are still working on the more traditional back-books, but the message here is when we speak about back-book, it doesn't necessarily mean that we need to sell a back-book. There is also rework.

That's the way we call it that we can do in order to improve the performance or to mitigate the risk that we have in our in-force business. This said, I like to stress again the point of Oliver better, we are making 13% ROE. So again, we have anyway very good performing Life business. Clearly, we want to make sure that these businesses perform as best as possible, so we want clearly to create as much sustainability as possible. But the fact is that our Life business has generated double-digit ROE over the last years.

Peter Eliot: That's great. Thank you very much, Giulio and Oliver. Could I just very quickly ask what the other side of the Italy deal is? What you're giving away to get that guaranteed reduction?

Giulio Terzariol: The only guaranteed we allow the counterparty to put new business for a few years.

Oliver Bäte: But it has a cap per annum. That is clearly capped, so they cannot put a huge amount of premiums in that.

Now, the reason you will ask why is this possible, in the Italian pension law, there's an explicit provision that says if interest rates drop into a certain point in market conditions is you can renegotiate, and you can even exit the contract. So, this is a highly valuable set of clients, but we wanted to make sure that we get to a more even distribution of upside and downside. Now, the other point I'd like to mention is that we'll discuss probably more intensively at the Capital Markets Day, that with what we're doing, we're not just looking at increasing ROE or reducing risk capital. We're actually also trying to reduce the volatility and the potential volatility of the capital requirements, which is super important because today, investors are spooked by the Life back-books for

two reasons: one, the very low ROEs, which by the way, in our case is not the case, like many others, but because of the volatility in the solvency [ph] two models that you constantly see out of these liabilities, they're often in my opinion, a bit mathematical fake, but they are real because we show them -- not because they are there, but they are part of the model. Now, with that, we have the intention over the next years to systematically reduce the risk capital consumption and the volatility while growing earnings.

That has been our vision for a while and every time I thought we're turning the corner, interest rates dropped yet again. Wait for the end of the year and this is where we are on route to really totally decouple capital consumption from the growth of the underlying earnings and that is the objective we are pursuing. So, this will become over time more protection business and more an asset management business rather than a strongly capital consumptive business that you're used to. This is the strategic objective and it has taken more time because every time you improve, you get another hit on rate. But that's it.

This year, we'll show you the turning point. Now with that, let's go, if it's okay, to the next question?

Operator: We will now take the next question from Andrew Ritchie from Autonomous. Please, go ahead.

Andrew Ritchie: Hi there. Also, appreciate you're restricted to what you can say.

You did make comments at the press conference this morning just about the process of investigation on the structured Alpha. Could you just clarify comments this morning and in the footnote of the report, that an investigation has been ongoing since July or the footnote implies you've just started a new investigation internally post the DOJ intervention? I'm just trying to understand -- to give us a sense of timing, how long you have been internally investigating this topic? That's my only question on that topic. Second question, I'm just trying to interpret the buyback of being switched back on, you talk about it in terms of fulfilling a promise, which essentially was related to the 2019 financial year. But should we assume that we are back on to -- I get bolt on plus buyback as the kind of ongoing capital deployment strategy? Or is that over-interpreting the message? And just the final topic is Giulio, just give us an update on frequency and severity trends in non-life in your in your core markets. Thanks.

Giulio Terzariol: Yes. So, maybe I start from the first one, which was the request about our investigation review. We started the review already last year. So basically, we set up a cross functional team last year. It was with the support of the external legal and economic advisor to look into the product performance.

So, the reviews have been ongoing, but recently, we started a forensic [ph] review, but clearly we will be looking into this issue now for a long time and now we are doing a forensic review. So, we will not be sitting here just watching and waiting past the status of what we've been doing and we are going to continue clearly to do the review, forensic review and then clearly we are cooperating also with the DOJ and with the SEC. So, that's about what we are doing from our side. And on the buyback, I can tell you at the end of the day, nothing is changing the sense of we're not going to make forward-looking statement about when the next buyback might be, but as always, we look at our underlying performance. We look at the capital position that we have and the capital position is a function of the underlying performance market development.

We might have also [

inaudible 53:22] some impact coming from the issue we are talking about. But based on where we are going to be, we're going to clearly decide our capital deployment. So, there is no change in our philosophy moving forward. I think the positive is you're generating strong capital. We have a capital generation per annum of I will say 10 percentage points.

So, from that point of view, I think this is clearly something that gives us flexibility. Also, as Oliver said before, we have been calling some hybrid, which means now we have also flexibility on the financial hybrid point of view. So, there are a lot of things we can deploy clearly from a capital point of view and also from a liquidity point of view. So, again, nothing is changing and we are going to evaluate the situation as we go through the next quarter, we go through next year. On the frequency severity, I can tell you, motor is always a little bit complicated to look at the statistics in the sense of last year.

What we saw was basically that as the frequency was coming down, the severity was going up and now you see a little bit of reverse as the frequency clearly is going up. Because we see higher frequency you can see the severity coming down. If you ask me for a forward-looking statement of frequency severity, the overall expectation will be once COVID is behind us, you're going to see a reality lower frequency in general because there are a lot of things pushing frequency down, improvement in the driving assistance system. And on the other side, the severity is going to go up because clearly, tasks are becoming more expensive. But as of now, I will say you basically almost see that as frequency is going up again, the severity is coming down.

When I look at the property, the line of business, I tell you that I was looking statistics in Italy, France and also UK. I couldn't see a lot of increasing severity. One country where we see some increasing severity is in Germany and that's related to the fact that overall value of the house is going up and also right now the cost of wood or even the cost of getting a repair is going up. So, we see a little bit of severity going up in Germany [ph] that we are watching. You need to keep in mind that there is automatic system of adjusted inflation in the price.

Clearly, you might have a basis risk effect. Fundamentally, the price of the property policy knows this kind of automatic adjustment if inflation is going up. So, all-in-all, when I look at frequency severity, I will say that it's rare to see a situation where both frequency severity are going up at the same time causing problems. So, most of the time you might see offsetting situation and I will say there is at this point in time not a significant pressure coming from the loss trends in our different stores [ph].

Oliver Bäte: Is the question properly answered on the investigation? Because that's very important for you to understand, Andrew.

Andrew Ritchie: Yes, I think so. I'm still a bit confused as to why there was an ongoing investigation. But clearly…

Oliver Bäte: Let me repeat. Yes, that's why it's important that I follow up on your question. So, when the lawsuit came in, we immediately started an investigation because the lawsuit assumes or pretends to say that the fund underperformed relative to expectations because it was not clear, it was as risky as it turned out to be.

So, we hired experts into the economic assessment, but also the legal assessment from the very day and very quickly, the SEC came in. And we have been working side-by-side -- not in addition -- with the SEC, on all of these things. And then as of May, the DOJ came in and looked at some additional items and we've also been working with them side-by-side voluntarily on these items side-by-side. It's also important. And based on that and also these items, we have additionally launched internal forensic review and a number of additional methods that go beyond the economic performance, and I think that's wise [ph].

So, we have neither been complacent, nor late, no other. It's just that the matter and the viewpoints have changed and we have done additional items on top of the additional work. I'm looking at my Chief Legal Counsel who's sitting next to me, and I'm looking, and he says, 'Yes, but now shut up.'

Andrew Ritchie: That's great. Thanks. Could I just follow up? Are you formally changing the guidance on capital generation from 8% to 10% plus?

Giulio Terzariol: No.

Andrew Ritchie: Or is that just for this year?

Giulio Terzariol: I will say that there is a high likelihood that we are going to change the guidance also for next year, because this year, we're going to be about 10%. And I will say next year, assuming that -- so we're going to see higher growth in Property-Casualty compared to what we saw this year. I will not go about 10%, but I think there is a high likelihood that we are going to lean to a 10% capital generation. I can also tell you that on the Life business, basically there is zero capital increase because even if we put a lot of new business there, this is very low capital intensive and the capital intensity is completely offset. Just talk to the SCR, let's forget about the VNB which is definitely then helping the capital generation.

Just become SCR [ph], I'll to tell you that they increase the SCR [ph] because new business is completely offset by the release of the in-force.

Oliver Bäte: And this is a very important point, Andrew. What our objective is for the next few years is really to make Solvency II overtime less, and less, and less of a relevant issue for us to really guide. It will always be important as a regulatory standpoint in terms of capital distribution, the objective is to become less and less dependent on the number and the volatility of it. That is helping the objective now, that the plumming rate to end COVID hasn't really helped to achieve that objective faster, but it's a very important objective for us now because we really believe it's a key part for the valuation of this company.

Andrew Ritchie: Okay, thanks.

Oliver Bäte: All right. Very good.

Operator: We will now take our next question from Michael Huttner from Berenberg. Please, go ahead.

Michael Huttner: Fantastic. I'll stay away from the obvious. On cash, you get some really interesting kind of numbers. I think €9 billion a year or €10 billion a year and last figures we've seen, I think was €7.2 billion or €7.3 billion average. So, just wondered if you can say where is this increase coming from? And then the second question is on the asset flows.

We have to one-offs, one negative, I think in PIMCO and one positive in AGI. I wonder if you can give a little bit more detail about the AGI positive? What is the nature or the profitability? I know you can't say the client, but anything which would help here. And the last point, you said severity and property, but net cats are a lot higher and I know you don't include a kind of budget figure. You just say, well, historically, it's been around that level. But are you going to be raising pricing? Because I imagine, you'll be paying your reinsurers more.

For example in the €400 million figure for the funds who've got €100 million reinstatement premium. Thank you.

Giulio Terzariol: Okay, so maybe starting from the first point. I think Oliver was referring to an income of €9 billion from a cash point of view, but you know our numbers and usually, you can use a sort of proxy that 80% of our net income is going to translate into cash. So, this will be the relationship that you can hold if you want to use a rule of thumb.

As we come into the second question, which was the plus at AGI, I can tell you it's pretty widespread. So, we say for example, good plus come in fixed income and equity and those in monthly assets. So, from that point of view, when you look at the different asset classes, all are contributing. Plus, when you look at the regional contribution, you see a good contribution coming from Europe, but also from the US and Asia Pacific. And we see also because sometimes you can look at flows from a production point of view where the strategies are developed and you can look at flows where the distribution is taking place.

So, we see also from a distribution point of view, good growth in in Asia. And regarding the profitability, I cannot give you the number, but it's overall very profitable flows. We had maybe a larger mandate where clearly the fee is going to be lower, but fundamentally, when we are located profitability on the flows, I will say it's really good. And then your third question about increasing premium because of natural catastrophe. That might happen, then as always, it's a matter of you know what the competitive environment might be.

But I will say from a technical point of view, one might argue that that's definitely something that we're going to look to do to a certain degree. But at the end of the day, as always, price increases are also a financial watch; in general, the market is going to do.

Michael Huttner: Thank you so much. On the net inflow at AGI -- I suppose what I'm really saying is what's the number I can model or put it another way, what is the figure now as of kind of almost mid-Q3?

Giulio Terzariol: Well, I can tell you that in the month of July for AGI was about €2 billion net flows for AGI.

Michael Huttner: I can't find them.

I'd better leave it then. Thank you.

Giulio Terzariol: Yes.

Oliver Bäte: Okay, Michael, are you fine with the answers or anything else?

Michael Huttner: I didn't hear the PIMCO figure. It says €1 billion.

Oliver Bäte: Sorry. What is the question?

Michael Huttner: The question. The inflows and PIMCO into Life?

Giulio Terzariol: Okay. That was literally before the end of July. There was about €5 billion.

Michael Huttner: Okay. That's it.

Giulio Terzariol: Basically, you can almost say, where you add up AGI and PIMCO, you can almost say it's about €8 billion.

Michael Huttner: €8 billion? That's fantastic. Thank you very much.

Operator: We will now take our next question from William Hawkins from KBW. Please, go ahead.

William Hawkins: Hi, thank you very much. First of all of interior, the SCR in your Asset Management business is about €1 billion and in light of what's going on, that feels like an extremely low number against €1.8 trillion of funds under management and you seem to be allocating also operational risk, not much for market risk. Clearly, for a fund manager, there's going to be a gray area between market risk and operational risk.

But I'm just wondering, can you remind us how you get to the €1 billion figure and do you think that may be a number that you need to review particularly in the context of the current experience? And then secondly, please. You highlighted in your Life business is another quarter of an incredibly strong investment margin. I think still officially, we're talking about sort of 70 to 75 basis points. I think that was the last thing you said and you're still at sort of mid-80. So, you're significantly above that.

Again, you said something in the call, but can you just remind us, are we at this more elevated-level structurally? Or is it going to normalize down to that 70 to 75 this year or next year? And if it doesn't normalize down, what's the driver of that? And then lastly, please, you flagged in the presentation, the 9 percentage points impact on the Solvency II ratio from the various transactions you've been doing. Could you just remind us how much of that comes from the SCR going up and how much from the eligible loan funds going down? Thank you.

Giulio Terzariol: Yes. So, maybe starting from the third question. First of all, the way we do the calculation of the SCR for the growth, we are using the Solvency II -- according to the Solvency II, by the way, principle is for the sectoral on fund in SCR, so which means basically what is non-insurance, you use whatever regulation you have applied to those sectors.

So, for the banking, we're going to use basically what is the regulation for banking and in the case of Asset Management, we are using whatever regulation is for Asset Management, which is DCI's [ph] percentage of the expenses. So, it's not that we are coming up with any kind of special model. We have any kind of Allianz way to calculate SCR for Asset Management. This is coming from the framework Solvency II, the test to include the Asset Management with whatever regulation, therefore the Asset Management. So, that's the way it was and then clearly, we are going to hold a reality more capital compared to what the requirements is.

But again, it's not something that is up for deliberation, or matches you're going to include in your Solvency II model. The second question was on the investment manager on the Life side. I will say that we'll be running out for a couple of quarters at performance, which is higher compared to our original expectations 70 to 75 basis points. We need anywhere to consider also the volatility in the United States is pretty, pretty low. So, they might have a little bit of a lift that I will not necessarily always consider in that KPI.

But I will tell you that at least, I will say that it's realistic to expect that we will be at the upper end of the range of 70 to 75 basis points as we move forward. So, that's something that I would feel comfortable to say today. Whether we are now at 80 basis point, I think that's what I would like to see more evidence as we go through more quarters to make a statement like that, but they have 75 basis points; their planes [ph] might be more indicative of what the range might be. And then, when I think about the impact on the 9% coming from the acquisition that we do, the majority is coming in reality from their own fans [ph]. There is not a lot of SCR that we are going to add there but if I should tell you with respect to be like two-thirds coming from their own fans and one-third even less, maybe coming from the SCR increase.

William Hawkins: Great. Thank you. If I could come back, Giulio. I appreciate what you said about the SCR for Asset Management being largely a regulatory figure. Correct me if I'm wrong, the eligible loan funds [indiscernible]; I think they're still only about €2 billion.

So, it's not as if you have disproportionate coverage to allow for risk that isn't taken in the regulatory model. So, I'm wondering, have I correctly understood that €2 billion of eligible loan funds? And if I have, is that a reflection of the capital and the cash position of your asset management business? Or is there sort of somehow bigger capital or cash position in your Asset Management entities?

Giulio Terzariol: I will say with the €2 billion; you are correct. I would like to say that's also what you need to keep, for SMP to have a AA rating. So, you can debate whether it is only €2 billion; it just tell you it's twice the SCR and that's also what basically gives you a AA rating on the S&P.

William Hawkins: Got it.

Thank you very much.

Giulio Terzariol: Welcome.

Operator: We will now take our next question from Farooq Hanif from Credit Suisse. Please, go ahead.

Farooq Hanif: Hi, everybody, and congratulations on the role-play [ph].

Just going to your investor capital markets day, how you going to frame targets in this day? Have you decided whether it's going to be from IFRS, cash or Solvency II? I only asked because on the comments that you made about how you believe you're undervalued, should we be really sharpening our focus on Solvency II numbers here to try and understand that? Secondly, going to your debt headroom, can you just give us an update if you needed it for whatever reason, what that headroom would be? And lastly, going back to AGCS and the very strong volume decline, we just got over 20%, obviously. Is this still just pulling out of liability lines? Or is it something else and when does it end? Thank you.

Giulio Terzariol: First question about the capital market. Clearly, we're still going to be focused on IFRS' number because at the end of the day, these are the numbers that we will discuss every quarter. So, clearly there is a little bit of a challenge because of the IFRS 9017 implementation.

Within that, we are now going to see major changes because of that. So, IFRS is going to be away how we communicate our targets. We are going to end with also to put focus on cash generation at the end of the day. That will count how much cash are you able to generate or capital that you can generate and deploy it, and buybacks on M&A. So fundamentally, we are going to add [ph] definitely a session related to capital and cash generation and especially on the Life side, we want to show also like for example, the answer Lebanese capable to produce very stable cash flow and cash flow generation and also growing cash flow generation.

So, this is going to be something that we're going to talk about in the capital market day. Then the other question was on the debt capacity. I will say we have definitely significant debt capacity. So, as of now, as of today, I think our leverage ratio is about 22%. And clearly, you can go easily to 25%-26%.

We have been just a few years at 27%-28% leverage ratio. So, from their point of view, the financial flexibility that we have on the financial leverage is pretty high. We also like to preserve it, but in the case we need to use it, we are going to use it. And then on AGCS, I think your question was specifically on liability, but I can give you a little bit more color in general on AGCS. I will say as of now in liability, we are not really growing.

But that's an area where clearly, cautiously, we're going to look at growth again. Also, I would say an area where we see less growth, but that's because of the strong re-underwriting that we did last year is [indiscernible] where we see growth and we are very encouraged by what we are seeing is in financial life and also in property. And just to give you an idea, in these lines of business in the six months we have been able to post combined ratio even below 90% on the property side, is also because the NetCat's load has been pretty, pretty benign. So overall, with see some growth in some area, but clearly there are other areas where the underwriting was extremely, extremely strong. As we move forward, we are definitely going to look also at potential for additional growth.

At this point in time, we believe rates are pretty, pretty good and you need to be always selective. Clearly you need to have always strong underwriting, but fundamentally, we are at a point where we believe that the underwriting action and our cleansing has been successful. The management team is getting more and more confidence as the numbers are flowing through. So, I will say that as we move forward, as we go into 2022, we are going definitely also to have a growth agenda. And that's also consistent with what we always said.

We always said, 'Look, before we start growing, we want to have a good degree of confidence that the level of profitability is going in the right direction.

Oliver Bäte: Yes, let me reiterate what Giulio just said. It's not about numbers, it's about confidence. We are very pleased with the progress that we've seen in AGCS, and that's a bit masked by two factors. We had some follow-on on COVID from last year and some policies that are only tapering off in the first half of the year, sort of entertainment, for example.

And the other part is they also have some effects this year from natural catastrophe. So, some of the flood exposures, they will also get hit by. I'm still confident that they will make their 98% [ph] target unless we have sort of brutal second half of the year, which is no small achievement, given what we've seen. And just to reiterate what Giulio said, we may now need to change the tech and make sure after we've cleaned the portfolio that we take advantage of one of the hardest markets that we've seen probably in a decade. But we wanted to make sure that before we write something, we know exactly what to write and how to write it.

But they're making a very, very good progress.

William Hawkins: Thanks, if I just quickly return on your comment on the CMD [ph] targets. You said that IFRS 17 won't make a big difference. Do you mean philosophically or numerically?

Giulio Terzariol: I don't think it's going to make a big difference. So, we are already doing runs based of IFRS 17.

So, we don't see a significant difference, but I wanted just to say fundamentally, the IFRS 9017 might represent a complication because you need to think on a different accounting standard. But based on what we have seen so far, we will not expect in our case to have a significant difference. But you learn everyday something. That's the reason why I tend to be cautious and always say there is no standard coming up. So, that's creating some complexity.

But fundamentally, I think that should be manageable.

William Hawkins: Good luck with that. Thank you very much.

Giulio Terzariol: Thank you.

Operator: We will now take our next question from Vinit Malhotra from Mediobanca.

Please, go ahead.

Vinit Malhotra: Yes, good afternoon. Thank you very much. Just the two questions I would raise is one, is just on the topic of growth and confidence. We are here all these very positive, we are still -- Life and Health and Solvency rate [indiscernible] growth in Q2.

And I can see where they're coming from. But, last year, I think the messaging was like, growth will be a bit subdued this year. I think it's coming back a bit more definite and other insurance reporting on the U.S. as well, the economy as such. So, of course you talk about EGFR but generally should be the feeling more bullish about P/C growth as such, this year, maybe even a bit more next year? I'm just curious to get our 2021 P/C good? Second thing is, you -- the AGCNS target, but also Germany had a fantastic combined ratio supported by runoff in Q2.

Can you comment a bit about that as well? I'm sure there are other things as well positive in Germany. But where are these runoffs coming from? And even the Q3 flooding for example. Just any idea [ph]. And lastly, give me a follow up and I apologize for not being attentive enough. But by the way, did you just say that the DOJ investigation or requests for documents both received in May, from the press release we read last Sunday, we thought or I thought it just came in.

I'm just curious. Just as a follow up from the timing of these events, please? Thank you.

Oliver Bäte: And thank you for your question. As I said earlier, I have a really, really strong and really, really, really, really strict Chief Legal Counsel next to me and he says, 'Whatever we said earlier is the only thing we can say.' I do apologize. But there's no delay, no, nothing.

We're just following through. All right?

Vinit Malhotra: Okay.

Giulio Terzariol: On your question, maybe I'll start from the growth rate. First of all, sure, we're going to see more growth also coming from Allianz Partners. To a certain degree, maybe more on the NPA basis; not so much on the gross basis, also from Euler Hermes.

And when we're looking at the geography, I will say that yes, as the situation is further stabilizing, we might see also more growth in other geography. When we speak about growth in Property-Casualty, I'm always saying we're very cautious. It's very easy to grow and then you can regret it one day. So, it's all a matter of whether you have quality growth or not and quality growth is always going to be a function of their pricing environment. So, from that point of view, I will say the trends, I will expect that we are going to go back to the growth that we had before COVID.

If you remember, we were running a 3% to 4% growth. I believe that's our natural growth capacity or capabilities. But again, at the end of the day, growth for me is always a function of the other pricing environment. Coming then back to your question on Germany. Yes, I'll tell you, Germany has a very strong balance sheet.

And it's also the consequence that we are being kind of cautious. So always told you also last year, that we are being very cautious in working our reserves. You remember last year we didn't release a significant amount of runoff. It was a very loss of fundamentally, there is a balance sheet and Germany is definitely one of the company where we have a lot of quality in the balance sheet. But even more important, Germany is being one of our subsidiary, having one of the strongest developments on the underline over the last year.

So, I'm always very pleased when I have meetings with our German team because they're very structured, they're very focused on driving our strategy, our agenda, they have embraced that strategy. You can see that the combination of the target is much better compared to the combined ratio that we had a few years ago. I can also tell you, always also spending always a lot of quality time with Germany, to play with them and spend time with them. So, I get to say it's a nice development that's important for us because Allianz Germany, at the end of the day is almost 20% of our MPE on the Property-Casualty side. So having a strong German businesses is clearly a very good starting point for the profitability of our Property-Casualty segments.

Vinit Malhotra: All right. Thank you very much.

Operator: We will now take our next question from Ashik Musaddi from JPMorgan. Please, go ahead.

Ashik Musaddi: Yes, thank you and good afternoon, Giulio, good afternoon, Oliver.

Just a couple of questions I have if I may. First of all, the €750 million buyback, how do we think about this? Was it just coming as a regular Capital Management exercise? Or was it done to showcase your confidence on the capital regulators, confidence on the capital? So that would be one? The second thing is, Giulio, you mentioned that we are going to ask you why not towards the €13 billion? Why €12 billion to €13 billion? Clearly the current run rate is giving you €13.5 billion. So, what are the elements that will take it down from €13.5 billion? One is clearly flood losses, but is there any other things that you would flag that was very supportive in first half, may not happen in the second half -- second. And the third one is the 93% combined ratio guidance you have for P/C versus 93.5% you're running at first half and then you have the European furloughs. So, I mean would you say that 93% is still achievable? Or would you say that might be on the optimistic side? Thank you.

Giulio Terzariol: Okay. So, first of all on the buyback or the €750 million. If you remember, we talked about also the buyback in the call for the first quarter. Indeed, one of you even put a headline 'the buyback is back'. So, from that point of view, you can see this is not something that we have been thinking between Sunday evening and Thursday night.

So, that's something that was basically in our thought process for a while. And as I said before, there was positive €1.5 billion that we committed. So, no, there was not any sort of spontaneous decision a couple of days ago. On your question about the projection for the remainder of the year. Fundamentally on the P/C side, it's a little bit about the amount of natural catastrophe that we're going to say so.

And also, I will say, so we need to clearly having started the second quarter with the event of burns, we're a little bit cautious because we still have the hurricane season in front of us. And then also we'll say that the investment income is going to be higher than planned, but seeing the second part of the year, we don't expect to run with the same level of investment income [ph] that we had in the first part of the year. So, fundamentally, I will not necessarily take the €2.9 billion of the first quarter, therefore the first half and two times two for the property casualty side, and we're going to see clearly what happens. But there we'll be cautious in doing that. On the Life side, we have been running €2.5 billion of operating profit.

Now, you can do this line, too, if you believe that the markets are going to be always stable. We need to be able to be cautious in thinking that we might get at some point in time some volatility source on that one. I will not necessarily do 2x. And in Asset Management, the reality, very good reason to do 2x. I still wouldn't do that just because of being a little bit prudent.

But at the end of the day, I will say yes, definitely. There is a possibility if markets are very stable, if natural catastrophe -- they are pretty much frightening as we move forward, there is a possibility that we're going to end up with the second part of the year, which is across the first part of the year. But you need to make the assumption that we're going to have the other six months of very, very stable markets. And based on my experience, at some point in time, you'll get a little bit of volatility. And these can take away €100 million or profit from our life [ph], and these can dampen a little bit their development in the Asset Management.

So, from that point of view, I will say we had a very good first half, you can look at the numbers, you can definitely say there is strength in underlying and then at the end of the year, we see where we are, but it looks like we are heading for a good operating performance in 2021. On the 93.4 combined ratio versus 93. First of all, my comment will be if you just look at the natural catastrophe at 3.1% for the for the six months, you just normalize that to the normal level, too. You can see that we are better than the 93. So, from an underlying point of view, I feel very confident about our ability to achieve the 93 and then the amount to natural catastrophe clearly can create a little bit of noise up and down.

This doesn't change for me the fundamental fact that on the underlying basis, we are in IT field for sure, and then, if we're going to add a few more basis point because of natural catastrophe, in my opinion, this doesn't make any difference.

Ashik Musaddi: Great. Thank you.

Oliver Bäte: Okay, before we continue, it's half past. We have time for one last question and then we have to close the call.

Tracy, one last question, please.

Operator: We will now get the last question from Kevin Liang [ph] from Morgan Stanley. Please, go ahead.

Unidentified Participant: Thank you. I'm lucky I got the last one.

Sorry, I got the only three very quick questions. The first one is your U.S. Life business. Obviously, new business growth, very, very strongly. I just wonder.

Are you actually taking shares in the market? And what specifically after you do, if you are kind of increasing your shares there? And then secondly is just very quickly, we know that you wanted to actually expand your footprint in the U.S. especially in the P/C side, but will the kind of DOJ thing affect or change your views, change your risk assessments on the U.S. market in general? And then last one is the Solvency II market movement was zero actually, today for the first half, which means the movement in the second half negatively can wipe out the whole kind of positive movement in the first quarter. Actually, but if I look at the interest rate, it's better than the beginning of the year. The equity market is better than the beginning of the year.

And then the credit spread is also kind of very stable. I just wonder actually, why we shouldn't see a positive year-to-date kind of market impact and what they actually have I missed in those market movement? Thank you.

Giulio Terzariol: Maybe starting from the last question. When we look at what happened in second quarter, in reality, the market movement is just slightly negative. If you look at the slide at Page 9, we have minus zero if you run the calculation and you access on their own funds, that will be a negative impact of about 50 basis points.

And the point is, yes, rates have been kind of stable and also the equity market has been okay. But we have also sensitivity to credit spread and reality, there was a slight widening of the credit spreads, or the government bonds, and there was a little bit of a narrowing on the credit spread on the corporate bonds, and we are exposed to negative to positive spread widening in the corporate bonds. But we are really speaking all the very minor amount. So basically, almost spread widening in the corporates. slightly negative and if you're looking for this financial why, it's not being completely neutral.

It's because of the credit spreads development. For your question about appetite in the United States for acquisition. I don't think there is any change fundamentally to our strategy. I think we need to separate our strategy, our underlying performance compared to the situation that we are discussing. But I wouldn't say that because of X that we are to do Y and Z.

And then to your first question, it's about the market share in the United States. In order to see whether we are growing or not in the United States, we need to wait to get the statistics for the second quarter, which are not available yet. I'll tell you anyway about what happened in the prior quarter, we are not necessarily growing market share and fixing this annuity. There's also a line of business where we continue to be strong, but that's not where we are putting the primary emphasis. We are emphasizing the IAVA business or which basically this [indiscernible] or registry index annuity.

And in that line of business, we will see definitely good progress and as we are putting even more focus, I will expect that we are going to be one of the key players. We have also launched a product for the advisory channel. So, I'm pretty confident that we're going to see a good growth trajectory in our Life business in the United States. But with respect to your specific question, whether we are gaining market share right now, we need to wait for the statistics of the market.

Unidentified Participant: Thank you.

Giulio Terzariol: Welcome.

Oliver Schmidt: Okay, this concludes our call. Thanks to all of those who have joined. We wish you a very nice remaining day and a nice weekend.

Giulio Terzariol: Thank you, guys.

Oliver Bäte: Thank you very much. Have a nice weekend. Thank you and bye-bye.

Operator: This concludes today's call. Thank you for your participation.

You may now disconnect.