Hannover Rück Stock

Well, good morning, everyone, and welcome from Hannover to our earnings call on our results for the first 9 months of 2026. And today's speakers are, as always, Clemens Jungsthofel, our CEO, and Christian Hermelingmeier, the CFO of Hannover Re. For the Q&A, they are joined by Claude Chèvre and Sven Althoff.

And with that, I hand over to you, Clemens.

Yes. Thank you, Karl, and good morning, everyone, from Hannover. So let's dive into it. So in essence, we are very pleased with the business performance in the first 9 months of 2026. The underlying profitability is very strong in both business groups and furthermore, our balance sheet and the resilience have been further strengthened and will, of course, support future earnings growth.

The overall loss environment in P&C reinsurance has been benign and together with the overall increase in reinsurance capacity in the market, this has clearly intensified competition in P&C reinsurance. Nevertheless, reinsurance rates do remain risk adequate on a broad basis. We have, therefore, continued to expand our portfolio on a diversified basis, highlighting our strong ability to grow the business. Our strong client relationships are a key driver of this growth and underpin demand for Hannover Re as a reinsurance partner.

So let me return to our overall performance in the first 9 months of 2026 with the group net income of EUR 2.1 billion. We are well on track to deliver on our group net income target for the full year. In P&C reinsurance, the combined ratio of 83.7% is comfortably within our target range, which is below 87%. And in line, as you know, with our usual approach, we have booked a full large loss budget for the period despite actual large losses coming in significantly lower. Furthermore, the strong underlying profitability gave us room to further increase our reserve resiliencies in the first 9 months.

So P&C revenue growth has clearly improved in the third quarter, in line with our expectations, as you will recall from the calls in Q2 and Q1. So overall reported top line growth remains affected by currency effects, lower volumes in structured reinsurance and changes in commissions and in non-distinct investment components. However, the momentum in our traditional business has clearly picked up. As we expect this positive trend to continue, the lower end of our 2026 growth target remains within reach.

The new business CSM of EUR 2.3 billion reflects our successful renewals in 2026. The very small new business loss component confirms the continued high quality and the attractive profitability of the new business that we've been writing. On the Life & Health reinsurance side, this also continues to perform well, confirming the positive trend in recent quarters. The new business CSM generation of EUR 503 million supports our business plan and the outlook. The reinsurance service result of EUR 717 million reflects healthy underlying profitability, and we are well on track to achieve our full year target.

The investment performance was again very strong. The return on investment of 3.7% is comfortably above our 3.5% target, and it was not driven by any material extraordinary items. Finally, our capitalization remained excellent with a solvency ratio of 242%. Operating capital generation was strong at around EUR 2.1 billion in the first 9 months of 2026. At the same time, the capital requirements increased by around EUR 1 billion, more than offsetting the positive impact from capital generation on the solvency ratio.

Importantly, this increase reflects attractive growth opportunities and therefore, successful capital deployment in a still favorable market environment. Turning specifically to the third quarter, the capital requirements increased particularly strong as they do reflect for the first time our planned growth for 2027. At the same time, the own funds generation was below average. That is due to, firstly, in P&C reinsurance, new business contribution is seasonally low in Q3 as a smaller share of business is renewed during this third quarter.

Secondly, assumption changes in Life & Health reinsurance had a negative impact. Overall, operating changes in own funds and capital requirements reduced the solvency ratio by 7.5 percentage points in the third quarter. Together with the quarterly dividend accrual, this explains the decrease in the ratio. The shareholders' equity rose by 5.7%. In addition to the positive contribution from our 9 months results, currency effects were also positive.

The CSM grew by 8%, mainly reflecting our successful new business generation across both business groups. The risk adjustment increased by 4%, driven by new business written in P&C. The significant value creation shown on this slide is confirmed by the strong return on equity of 21.1%, which compares favorably with our reinsurance peers despite booking the full large loss budget and the additional increase in reserve resiliency.

And on that note, over to you, Christian.

Yes. Thanks, Clemens, and good morning, everyone. So looking closer at our P&C results, you can clearly see the high quality of our diversified portfolio. Despite an increase in the frequency of large losses in the third quarter, the overall impact of large losses was EUR 470 million below our budget for the first 9 months. But as usual, and you know that, we booked the full year-to-date budget. And furthermore, the 9 months result with a strong combined ratio of 83.7% includes a material increase in reserve resiliency.

And this highlights the even better underlying profitability of the portfolio. And looking ahead, we have significant scope to maintain reported combined ratios at attractive levels below our target. Clemens has already mentioned the main drivers of developments in the reinsurance revenue. Looking at the details here, higher commissions and contract features such as profit and sliding scale commissions had an impact of 1.6 percentage points on reported revenue growth in traditional business.

This effect is smaller than at the half year stage. And together with the healthy underlying growth from our successful renewals, this contributed to a marked improvement in revenue growth as we indicated in our last earnings call. And this positive trend is expected to continue towards year-end. And furthermore, we recorded additional growth in structured reinsurance and ILS, partly offsetting the reduction in volume from large individual treaties renewed at the beginning of the year we've spoken about.

The strong operating cash flow continues to increase also our asset base and together with higher interest rates boosting the ordinary return on our fixed income portfolio. This has driven the increase in our investment result. The other result does not include any noticeable items. The currency result was minus EUR 40 million. So overall, EBIT increased by 20%. And as a reminder, the 9 months result in 2025 included more than EUR 300 million in actively realized hidden losses in our fixed income portfolio.

Looking now at the IFRS 17 components of the P&C service result. The main contributor is the CSM release, fueled by successful renewals in 2025 and '26. And our prudent reserving approach is again the reason for the negative runoff result and explains a large part of the negative experience variance. Without the increase in resiliency, the runoff result would have been materially positive. The underlying combined ratio is, therefore, significantly below the reported 83.7%.

And going forward, this means that we have significant scope to offset the impact of lower reinsurance rates if markets would continue to soften, initially, just by adding less to reserve resiliency and then subsequently by maintaining it at a stable level. The increase in CSM is mainly driven by new business written in the successful 2026 renewals with a diversified contribution from different regions and lines of business. The new business CSM amounted to EUR 2.3 billion. And compared with the previous year, this is a decrease of around EUR 300 million. Slightly more than half of this reflects the combined effect of price and volume changes in our portfolio. The remainder is attributable to currency and discount effects.

Let's now move on to Life & Health. And here, the reinsurance revenue increased by 9.5% adjusted for currency effects. This positive development is driven by U.S. Financial Solutions and diversified growth opportunities in traditional business. Due to the structure of some of the deals, the large part of the gross revenue contribution from U.S. Financial Solutions is not showing up in net revenue to the same extent. The overall performance in Life & Health reinsurance remains strong. The experience variance stays clearly positive despite some claims volatility in our Australian disability business. The contribution from Financial Solutions and many parts of our traditional portfolio were favorable. So altogether, the reinsurance service result of EUR 717 million for the first 9 months, including another good result in Q3, puts us well on track to achieve our full year target.

The investment result mainly reflects a good ordinary result from our fixed income portfolio, but also includes a negative impact from the valuation of an equity participation. The currency result here was minus EUR 52 million, driven by a broad mix of currency movements against the euro. Looking again at the IFRS 17 profit drivers, the main contribution comes from the CSM release. This is slightly above our expected range, mainly driven by our Financial Solutions business, including some deals with a relatively rapid release pattern compared to the rest of the book.

The risk adjustment release is also ahead of expectations, mainly driven by a higher release in the third quarter. In this third quarter, we reviewed also the assumptions for larger parts of our Life & Health portfolio in greater detail. The outcome also affected these components shown on this slide. The main driver of the loss component is updated assumptions for onerous business, mainly in morbidity and to a lesser extent, in mortality. These assumption updates include a prudent increase in the risk adjustment and should also be viewed in the context of the overall favorable underlying profitability, including clearly positive experience variance.

The higher risk adjustment release should also be viewed in the context of these assumption reviews. We do not generally expect the release to exceed the indicated range of 6% to 8%. The favorable new CSM generation of EUR 503 million is driven by diversified contributions from Financial Solutions and traditional business and is supporting the positive outlook for our Life & Health business. Given the transactional nature of the business, fluctuations between individual periods are, as you know, normal and the performance in 2025 was exceptionally strong on this metric.

Changes in estimates are mainly driven by model updates in longevity and including positive currency effects, the CSM increased by 4%. Also, our investment performance was again very satisfactory. The return on investment of 3% (sic) [ 3.7% ] is comfortably ahead of our 3.5% target. The growth in ordinary investment income mainly reflects the continued growth in asset volume and the increase in interest rates over the course of this year. And additionally, the active realization of losses in our fixed income portfolio in the previous year supported a sustainable increase in our portfolio yield. Given the significantly higher level of unrealized losses shown at the bottom of the slide, this will again be an option to consider in the fourth quarter of this year if the large loss experience remains benign.

And to conclude my remarks, the first 9 months of 2026 have been very successful for us. Our strong underlying profitability puts us in an excellent position to deliver on our full year target with an even stronger balance sheet.

And on that note, I will hand back to you, Clemens, to discuss the outlook.

Yes. Thank you, Christian. So yes, as you said, Christian, so well on track to deliver on our targets 2026. As for our growth target in P&C, we do believe the lower end of our target range should still be achievable. More importantly, the profitability of our P&C portfolio is strong with a combined ratio of 83.7%. And as explained, this does include additions to the reserve resiliency and does not recognize the benefit of large losses coming in EUR 470 million below the budget.

Furthermore, our return on investment is comfortably ahead of target and the reinsurance service results in Life & Health, as mentioned, well on track to meet our full target of around EUR 925 million. So altogether, the benign large loss experience and the strong investment performance are increasing the likelihood that earnings will land ahead of our targets for the full year. This gives us additional flexibility to further strengthen our balance sheet, either by adding to the reserve resiliency or as we did last year by actively realizing hidden losses in our fixed income portfolio and reinvesting at higher yields.

Both measures would support our ambition to deliver continued earnings growth in the coming years. Against this backdrop, we have decided to maintain our guidance for the current year with a clear ambition to meet expectations. We will share the details of our earnings outlook for 2027 and our midterm outlook at our Investors Day on the 25th of November.

So this concludes my remarks and happy to answer your questions.

[Operator Instructions] The first question comes from the line of Shanti Kang from Bank of America.

The first one was just on the new business CSM, which was down EUR 300 million year-on-year, you said, and about half of that was attributed to softer conditions. I was just wondering if you could help us characterize how much of that was rate coming off versus lower volumes versus mix shifts. I'm just curious to get your thoughts on what that drift year-on-year is actually telling us.

And then the second one was just on the traditional P&C revenue growth target. Obviously, you said that you'd reiterate the low end of the mid-single-digit guide. I was just curious if there's anything you could pinpoint us to specifically to support that pickup in Q4? Because obviously, we're expecting a bit of that in Q3, but if there's anything specific we could look to for Q4, that would be helpful.

It's Sven. So on the second question, the underlying premium growth on the traditional business is at around 3.5% higher compared to where we were after the first half of the year, and we expect that trend to continue. If you look at our main renewal dates, you will remember that the growth we have shown at 1st of April was significantly over and above the growth we have shown at 1/1, and also for the midyear renewals, we had a higher growth rate to 1/1. So therefore, the earn-through from the later renewals of the year will influence the premium development also in the fourth quarter.

And as we had the positive catch-up now in Q3, we expect that there will also an incremental catch-up in Q4 in order to then reach the lower end of our full year guidance. When it comes to CSM creation, I mean, as we said in the past, the rate decreases we have seen across the entire book, so approximately at around minus 4% for the full year for the traditional P&C business, should be roughly 2 percentage points of combined ratio. So that's the most significant driver for the lower CSM generation in 2026. Volume plays a much less significant role given that the traditional premium actually grew year-on-year by 7%. So when it comes to new business generation, that gave us tailwind rather than headwind in the CSM generation.

The next question comes from the line of Will Hardcastle from UBS.

Just coming back on the solvency. Can you talk me through the incremental capital requirements in P&C for growth? I think you said capital requirements has gone up about EUR 1 billion year-to-date, which is a really big number. I guess trying to understand there really the expectations on growth, how much growth you're going to be assuming in P&C maybe? And I guess just to put it into context, would this imply consensus is maybe too shy on 2027 revenues or not? I'm trying to think about the earnings uplift from that and any given that level of SCR deployment.

Second question, just on larger man-made losses, 2 specific losses just to call out. Largest loss was Colombia earthquake. Is there potential to recover more than what you've assumed from retro protections there? Or is it falling shy of where those perils or attachment points are? And then there's 2 credit losses in the quarter. Anything specific to call out? Or is it any danger that this risk is a bit more systemic?

Will, it's Sven again. So let me start with the loss question. Right now, we only have some of our retro protection responds on the Colombian loss given its size. In case that this should move out on a gross basis, there will be additional recoveries also from our event tower. So from that point of view, the development on a net basis should be slower compared to the gross basis, but only in case it does further develop. The 2 losses shown as credit, that's 2 very different losses. The one is coming from a potential insolvency from a retailer in South America. And the other one is a potential government debt topic coming out of Africa, which may or may not be restructured and therefore, may not produce losses in the end, but we decided to take a prudent approach and book at least some of the potential losses into our Q3 number in case the restructure should not be successful.

Yes. And let me take the solvency question, Will, Christian speaking here. So indeed, the EUR 1 billion SCR increase shows the successful deployment of capital. But let me give you a broader view as this also reflects the profitable growth in P&C and Life & Health that we are already seeing this year. And also, you have to take into account that the assets under management are significantly growing, and we see a very healthy operational cash flow of around EUR 5 billion after just 9 months in 2026.

And in Q3, as we already indicated, there is in addition, the uptick in capital deployment with our look forward as we take the full plan, for example, nat cat capacity into account for the next 12 months' renewals. So therefore, it's more pronounced. Looking at details here, and you also asked for guidance looking forward, I have to ask for a bit more patience as we will talk about that at the Investors Day on November 25, of course, in much more detail and being specific.

Just as a real quick follow-up to that on the nat cat component. You said that's a new thing. Do you normally take the next 12 months at Q3 though for nat cat? Or is that new you normally only take the next quarters?

No, that's the usual Q3 plan update after doing the planning process here and aligning on that, then we take it into account in Q3. That's a regular procedure.

We now have a question from the line of Andrew Baker from Goldman Sachs.

First one, I appreciate interest rates are a bit of a moving target, but how should we be thinking about the discount benefit for next year in the P&C Re combined ratio? And then can you just remind me your approach for setting up an interest rate reserve as I believe that's something you've done previously?

And then secondly, just on the investment side, you just give us a quick update on the current reinvestment yield versus portfolio yield?

Yes, happy to answer your questions, Andrew. So maybe starting with the last one. The reinvestment yield at the end of Q3 was around 5 percentage points. So of course, significantly up compared to the last quarters. And the book yield now stands at around 3.8 percentage points. So also an increase as you would have expected. Looking at the discount, I mean, when we go back 12 months, we planned and indicated with a discount of around 8% or 9% to 10%. And now we are at 12%.

And you have to see, and this relates also to your last question with the IFIE versus the discount, so the reinsurance finance result or the unwind of the discount. Looking forward, I would see this not materially moving. And why is this? Because we have the high interest rates, that's true. So we should not see the 9% or 10%, but more. But you have also to take into account that in the 12% we see today, there is also an impact from our prudent reserving actions.

So where do we book the resiliency reserve, a substantial or the most substantial part is booked in long-tail lines like casualty. And so there, you have a positive or an extra impact because the volume goes up of reserves with a long-tail and therefore, the discount is increased. So we have effects going forward. This will be positives and negatives. So you should not expect overall substantial movement of that.

And just to add to that on the combined ratio outlook for 2027, so the guidance, we will give a bit more detail during the Investors Day, and that would include also an indication on the discounting factor that we are going to apply to the combined ratio 2027.

Perfect. Just to clarify, when you say not substantially move, do you mean versus the 12% or the 9% to 10%?

No, I intended to say we give that on the Investor Day, but I clearly talk where we are today as a starting point.

But that should not deviate a lot, Andrew, just to complete that.

The next question comes from the line of Vinit Malhotra from Mediobanca.

For me, one on P&C, one on life, please. So just on P&C, there was a commentary somewhere in your prepared remarks that looking forward, you expect significant scope to maintain combined ratio below target. Now obviously, when we see the runoff in Q3, which you remind me the quarterly guidance on runoffs. But when I look at the number, it's probably EUR 200-odd million at least on the prudency. When we see all that, we can square this comment. But I'm just curious whether you could add a little more to that sort of, let's say, positive outlook today.

Second thing is on the growth on solvency. I think last year, it was 6 points of growth taken in the Q3. And this year, you said about half of the 7.5%. So it's kind of fair to assume that a similar kind of growth could be expected next year versus this year? And I appreciate if you can only comment at Investor Day, but just because this came up.

And lastly, on the life re assumption changes, this is, this also happened in 1H. And I'm just curious whether the timing for taking those assumption changes in morbidity, are they because of conservative approach in a quarter with low cash, or was there some trend you have seen which prompted now maybe 2 or 3 quarters of additions to this line here?

Yes. So Vinit, thanks for the question. And yes, I basically can reiterate on the runoff result. And you're right, we gave the guidance of maybe EUR 150 million to EUR 200 million would be, let's call it, a normal expected runoff result. Of course, there are always moving bits and pieces. And yes, as we already indicated, we used the room to maneuver the opportunity to strengthen the resiliency reserve, and we also are quite conservative on parts of the portfolio like casualty to name that, but there's also some motive we talked about and this is in addition to the resilience buildup.

So your expectation going forward should be reconfirmed. And to the solvency, maybe just a comment. It's, to be honest, it's a bit hard to compare really quarter 3 2026 with 2025. There is a lot of moving bits and pieces. And if I remember correctly, for example, the economics impact was a quite different one last year, and there have been special things like payback of hybrid bonds and things like this. So to the growth assumptions, I'm afraid I have to ask for some patience as we will talk about 2027 then in detail at the Investors Day.

Vinit, this is Claude on your Life & Health question. I mean, first of all, maybe I would like to reiterate that with the reinsurance result of EUR 717 million, we're well on track to achieve our full target in Life & Health. And also the experience, the changes in estimates, if you look at them over the 9 months, they remain positive and it's all good. In Q3, and that's what you're talking about the Q3 stand-alone, you need to see the various movements that you have observed on the loss component, the change in estimates and also the risk adjustment together, they're all driven by our assumption updates and prudent assumption strengthening of our traditional business, mainly, as Christian said, on the morbidity side and on the mortality side, obviously also.

Your question is, is there a trend that we observe? I can tell you there is no trend that we're observing at all. We usually perform these updates often in Q3. We have done this also already in the past. So the Q3 stand-alone quarter is maybe a little bit misleading if you look at it in terms of the full year performance that we're going to see on the Life & Health side.

The next question comes from the line of Kamran Hossain from JPMorgan.

First question for me is on reinsurance revenue. And I know you're not going to give us any numbers ahead of the IR Day in a couple of weeks' time. But if I think back to this time last year, the revenue guidance you put out, I think for the first time that I can remember, excluded structured. Clearly, structured has been a pretty kind of huge, sorry, headwind to your revenues this year. Do you think for the guidance you give us in a couple of weeks' time, you'll be able to set the revenue guidance on an all-in basis like it has been historically? I guess at this stage of the year, I would assume that you know whether structured will still be a kind of headwind, tailwind, et cetera.

And the second question still on the revenue point. On the NDIC impact, if we see lots of terms changing next year and maybe they will, maybe they won't, would that be, would that make the NDIC a continuing drag on revenue if that, if terms did change? So just 2 there, sorry, very theoretical.

Kamran, this is Clemens. Thanks for the question. So again, we will provide details on the Investors Day on the revenue guidance. However, let's just be clear today, it will be a guidance that will include both traditional and structured reinsurance P&C business as we did in the past. So we will give you a growth expectation that includes structured and traditional business, even if there were special impact or whatever from structured or from traditional, we will provide details on the underlying growth expectations there, but expect one number at the Investors Day.

And on the second one, I'll just give that to probably to Sven or Christian.

Yes. Unfortunately, it's really early days when it comes to the renewal. So we don't have any, at least not enough data points to make any comments. Theoretically, of course, it could be a renewal where NDIC topics continue to be a feature. On the other hand, I mean, NDIC is not necessarily a bad thing when it comes to negotiating terms and conditions because it's the results-dependent commissions. So they only have to be paid if the underlying profitability is good versus increases in sliding commissions, which you have to pay regardless of how the underlying profitability is. So this is not implying that we see any trend for more NDIC, but just a general comment if you compare the 2 streams of commission.

We now have a question from the line of Iain Pearce from BNP Paribas.

The first one was just on the capital deployment topic again. Just thinking about mix and the potential impact of mix on the higher capital. Is there anything that you want to flag in terms of sort of more expected growth in cat or particularly any changes in retro assumptions that you're making that's leading to potentially higher capital deployment or higher capital intensity in your new business assumptions for 2027?

And then on the Life assumption update, can you just provide a bit more detail around the areas within morbidity? I mean, clearly, we've had some challenges in some of your Asian businesses in the recent past. Is it in that particular area again where you're seeing this? And are these assumption updates based on any observed experience? Or are they just prudent positions based on the positive experience variances in CSM release that you flagged in the quarter?

Yes. Thanks, Iain. On your first question, let me start with retro. We are planning to place very similar retro structures in line also with the underlying growth of our business. So no changes intended on that side. When it comes to future growth on the nat cat side, we have created the headroom to potentially have further growth on the nat cat side. But given that we don't know how the renewal is turning out at this stage, it's not an area which we will definitely grow. We have only created the headroom in case we find the market conditions attractive to have further growth on the nat cat side, but it's too early to give you an outlook on that side.

And maybe on the Life & Health question, this is Claude again. I mean the assumption updates, as I said, the major part of the assumption updates are for morbidity, but there is also part for mortality, obviously. And when you look into the morbidity book, as you correctly said, the major part of these morbidity updates are coming from our APAC portfolio that hasn't changed. Is there a trend, a negative trend? Not at all. We did this for prudency really in Q3 and for nothing else.

[Operator Instructions] We now have a question from the line of Ben Cohen from RBC Capital Markets.

I just wanted to ask, I guess, more qualitatively in terms of the discussions that you had with clients or potential clients at Baden-Baden, if you could just give us some indications in terms of how much new demand they're talking about, kind of where the pressure points are for clients, the sort of things that you might be thinking where you can provide additional help or maybe less help going into next year?

And the second question was just I saw that you increased the gross loss for your Iran war estimate. Just wonder if you could remind us, is that now essentially all going to third parties if that increases? And could you maybe talk about where the drivers of that increase were to give us some sense in terms of if there's maybe more to be taken?

Yes. Thank you, Ben. On the second question, up until Q2, this was all really IBNRs, which we have booked. And when we book IBNRs, we are booking a gross for net position. So where we have seen the first client reserves is coming from the political violence side of the potential losses. And given the overall benign loss environment, we have decided to keep the net loss unchanged at EUR 200 million and have just booked the client advices as additional gross losses in order to reach that point.

So obviously, with being contract specific, we can start allocating to our retrocessions and that has created the gap between gross and net, but not really a new view on the loss itself and the amount of information coming from our cedants is still rather limited. And therefore, the absolute majority is still booked as loss-specific IBNRs.

When it comes to your first question, well, we were not given a lot of details during Baden-Baden and prior conferences when it comes to the additional demand question. We have the feeling that there will be some particularly if you compare that to the underwriting year 2026, where most clients decided to keep the savings they have achieved on the renewals to improve their net profitability. In 2027, we have heard more often that clients are minded to reinvest at least some of the anticipated savings. But how they do that is very client specific. Some are talking about buying more vertical limits, others are talking about trying to lower their retention levels, and the third category would talk about buying a little more on an aggregate basis. So from that point of view, there seems to be a little more demand growth compared to 2026. But how exactly that will materialize, we will only know in a few weeks' time.

Anything to call out from a sort of geographic basis?

Well, I mean, the bulk of the business that is renewing at 1/1 is certainly from Europe. Almost all European business renews at 1/1. So the conversations, of course, were more European and in part also North American specific. So really the bigger part of our portfolio we are talking about when it comes to 1/1.

The next question comes from the line of Henry Heathfield from Morningstar.

I was just wondering if you could give us an update on the negative experience variance in total and permanent disability cover in Australian group life, whether that's deteriorated since the second quarter and whether you've been able to reprice that portfolio?

And then just on the investment portfolio, I noticed that the unrealized losses on fixed income have moved up quite heavily. And just wondering if there's any of those losses concentrated in near-term bonds.

Thanks for the question. On the TPD Australian experience, it hasn't deteriorated since the second quarter, and we're about to reprice the business as soon as it comes. This is mainly group business which reprices through the whole year and also into the next year. So we will see these price increases coming through.

On the investment question, so there's no specific concentration on a specific bond class or an issuer. So it's really throughout the book in line with the overall interest rate movement.

The next question comes from the line of Roland Pfäender from ODDO BHF.

Two questions from my side, please. Firstly, could you provide us an update on your inflation linkers? Do you expect here more positive impact next year, looking at higher inflation rates?

Secondly, looking at asset quality in your investment book, do you need to test valuations on real estate exposures, infrastructure exposures or private equity in the recent market environment? Do you see some risk of write-downs coming through?

Yes. Thank you, Roland, for the questions. And let me start with the second one. So the strategic asset allocation stays rather unchanged. No big moves or thoughts around that and looking at the illiquid part, I mean, you know that that's not the tactical play we do there, and that's not the place to do that at all. So this stays rather continued reinvesting in line with what we've done in the past. But having said that, of course, we look closer and the real estate book is under monitoring.

But just looking at the Q3 results, there are positives and negatives from revaluations. But as you can see in the overall numbers, it's not really significant. And we see quite a good level of comfort also going forward as the biggest part of our real estate investments is on our direct balance sheet. So there is some valuation headroom that buffers market impacts that might come, but let's see how that develops.

This brings me to your second question on the inflation linkers. So also here, we are sticking to our principles and our hedging of the parts of the inflation risks of the liabilities. So the overall volume has not really changed. I think we are close to EUR 5 billion on a nominal base. And of course, when inflation, and we are already seeing this is getting upwards, then the amortization will be a positive one. But as this is a hedge and not an investment part, so this will be part of the ALM going forward and bringing us to a more balanced position to the inflation environment wherever it might go.

[Operator Instructions] We have a follow-up question from the line of Will Hardcastle from UBS.

I'll try again. On the fixed income exposure, Slide 23, it looks like there's a material shift from Asia to rest of the world quarter-on-quarter. Is that just a classification change or any actual material shift in allocation? And I guess, are you able to give us what reinvestment yields have been for you in Q3?

Yes. So actually, I would have to, so, let me start with the first one. So there is no asset allocation shift, also not in the fixed income directed to Asia. I'm not aware of any significant movement there. Maybe we have to get back to that for details, but that's not happened. And the reinvestment yield, to repeat that, is the 3 -- no, is around 5%, and the book yield after Q3 is 3.8%.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Clemens Jungsthofel for any closing remarks.

Yes. So thank you all very much for your questions and the debate. So as mentioned, we are well on track to deliver on our 2026 targets. And furthermore, we have taken the opportunity to strengthen -- further strengthen our balance sheet, strengthen our resiliency reserves. And as mentioned, the likelihood that we will do so and add to that even in Q4 is very high.

Overall, that clearly underpins our ambition to grow our earnings also going forward and to deliver that earnings growth with less volatility, even in a more challenging market environment, even if there are headwinds. This is a clear ambition, and we will talk about that in our strategy update, which we will talk about at our Investors Day. And again, so we will also give details on the guidance 2027 on our Investors Day.

And with that, we very much look forward to seeing you in London in about 2 weeks for our Investors Day. Have a good week. Thanks again, and speak soon.

Good morning, everyone, and welcome from sunny Hannover to our earnings call on our results for the first half year of 2026. Today's speakers are, as always, Clemens Jungsthofel, our CEO; and Christian Hermelingmeier, our CFO. And for the Q&A, we are joined by Claude Sabre and Sven Aerso. With that, I hand over to you, Clemens.

Thank you, Carl, and good morning, everyone, from Hannover. So let's start with Slide 4. So Hannover's business performance has been very satisfactory in the first half of 2026. We have seen, I'd say, a continuation of the positive developments from recent quarters, particularly the underlying profitability in the business was very pleasing in both business groups.

Our balance sheet and the resilience have been further strengthened. The market environment in P&C reinsurance was characterized by benign losses from natural catastrophes. Nevertheless, I think it's fair to say this is simply good luck, if you like, for the insurance industry, the earthquakes in Venezuela, recently in Japan as well as extreme weather with heavy rain, heat waves, wildfires, they all serve as a reminder that this does not reflect any change in the risk landscape. On the contrary, risks are increasing driven by rising insured values, by climate change and by geopolitical uncertainty. And this clearly highlights the need for protection and reinsurance protection can only be offered at a price that adequately reflects the risks.

But despite the softening of reinsurance rates, this still holds true on a broad basis for the current underwriting year. Hence, we have been able to broaden our footprint in P&C reinsurance, supported by higher shares on programs with existing clients as well as new business. I'm therefore pleased to report year-to-date premium growth of plus 7.2% in the compound renewals in 2026.

Looking ahead, I do remain confident that we will see continued growth while strictly adhering to our margin-oriented underwriting approach. Our competitive position is well supported by our strong client relationships and a lower cost ratio compared to our peers. So let me come back to our overall performance in the first half of 2026. With the group net income of EUR 1.4 billion, we are well on track to deliver on our group net income target for the full year.

In P&C reinsurance, the combined ratio of 83.2% is well within our target range, below 87%. In line with our usual approach, as you know, we have booked the full large loss budget for the period. So despite actual large losses coming in clearly lower. On top of that, the strong underlying profitability gave us room to further increase our reserve resiliency. The top line growth in P&C has been impacted by currency effects and the lower volume in structured reinsurance. And as explained already in our Q1 earnings call, this is really mainly driven by the anticipated reduction in recession rate for some individual large reinsurance programs.

While currency-adjusted revenue in our traditional business was broadly stable year-on-year, the underlying premium grew by around 4%. Looking ahead, the additional premium growth achieved in the 2026 renewals will increasingly feed through into the reported revenue during the second half. So our internal projections compared to the revenue development in 2025 do give us confidence that the lower end of our target range for growth in traditional business in '26 remains within reach. The new business CSM of EUR 1.7 billion mainly reflects our successful renewals in 2026 and fully supports our planning for the year. The very small new business loss component confirms the continued high quality and attractive profitability of the new business we've been writing.

The business performance in Life and Health reinsurance is in line with the positive trends seen in recent quarters. We were successful in further growing our portfolio and the new CSM generation of EUR 385 million increased compared to the previous year. The reinsurance service result in Life & Health of EUR 478 million is moderately ahead of the 50% of our full year target, which also reflects the healthy underlying profitability of the business.

So the investment performance also was, I'd say, really satisfactory. The ROI, the return on investment of 3.7%, comfortably above our 3.5% target, and it was not driven by any material extraordinary items. Finally, capitalization remained excellent with a solvency ratio of 254%. Operating capital generation was strong at around EUR 1.8 billion in the first half of 2026. This was sufficient to cover both the increasing capital requirements from the successful expansion of our business and the quarterly accrual of the dividend. The moderate decrease in the solvency rate compared to year-end 2025 can be explained by movements in foreign exchange rates.

On the next slide, the shareholders' equity rose by 2.6%. In addition to the positive contribution from our half year results, currency effects were also a positive. The CSM grew by 11.4%, mainly reflecting our successful new business generation across both business groups. The risk adjustment increased by 5.8%, driven by new business and assumption changes in Life & Health.

Altogether, developments on this slide really show continued positive value creation for our shareholders and an improved foundation for future earnings growth.

And on that note, I'll hand over to you, Christian.

Yes. Thank you, Clemens, and good morning or good afternoon, everyone. Our P&C result is based on the strong quality of our diversified portfolio. And as we fully booked the half year large loss buffer, this result does not reflect the benign cat environment.

On the loss reserves booked so far this year, I would also add that, in particular, the initial estimates for potential losses in connection with the Iran war and the earthquake in Venezuela are deliberately prudent with no meaningful claims notifications received to date.

Furthermore, the combined ratio of 83.2% includes a further increase in our resiliency reserves. And as you know, we can only provide exact figures and numbers based on the full reserve analysis at year-end. But what I can say today is that the underlying runoff result was again positive and our decision to add additional prudence is the reason why the reported runoff result is negative at minus EUR 62 million. Therefore, the underlying combined ratio is clearly better than the reported 83.2%. And Clemens already explained the main drivers for the reinsurance revenue. So to a certain extent, this is simply a reflection of IFRS 17 accounting. In a softening market environment, the likelihood of upward trends for commissions and other contract features such as profit or sliding scale commissions is naturally higher. And under IFRS 4, this did not affect the premium. Under IFRS 17, though, it directly reduces reported reinsurance revenue growth in addition to the price changes. And this can be meaningful as we see for our traditional business. This is the main driver of the difference between the around 4% premium growth and the flat revenue development.

Importantly, we are successful in growing our traditional treaty portfolio. The expansion recorded in the recent renewals will also support the revenue growth becoming increasingly visible in the remainder of the year. The investment result increased mainly driven by a higher contribution from our fixed income portfolio. And the other result does not include any unusual items. The currency result was neutral.

Looking now at the IFRS 17 components of the P&C service result. The main contributor is the CSM release fueled by the successful renewals in 2025 and 2026. And our prudent reserving approach is the main reason again for the negative experience variance and the negative runoff result. Additional prudence for business earned from recent underwriting years is reflected in the experience variance, while additional prudence for prior underwriting years shows up as a negative runoff result. The very low new business loss component confirms that rates remained adequate on a broad basis despite the rate decreases in the recent renewals. And the increase in CSM is mainly driven by the new business written in the successful '26 renewals with a diversified contribution from different regions and lines of business. The new business CSM amounted to EUR 1.7 billion. And compared to the previous year, this is a decrease of EUR 265 million. Around EUR 175 million can be explained by different foreign exchange rates and interest rates. The rest, so close to EUR 100 million reflects the combined effect of price and volume changes in our portfolio.

So compared to the Q1 numbers, this is a clear improvement. And apart from the successful growth, the Q2 number is also supported by an updated and more positive reflection of our retrocession program, which was not entirely included in Q1. In Life & Health Reinsurance, recorded a strong top line growth of 12% adjusted for currency effects. This positive development mainly came from U.S. Financial Solutions and diversified growth opportunities in traditional business.

A large part of the gross revenue contribution from U.S. Financial Solutions does not end up in the net revenue. Furthermore, the revenue contribution might be lower in the coming year due to its shorter-term nature. The reinsurance service result of EUR 478 million for the first half is slightly more than 50% of our EUR 925 million target for the full year.

Hence, we are also very well on track with regard to the profitability of our portfolio. And looking at the details, the contribution from our Financial Solutions book was particularly strong and our traditional portfolio also performed well in many areas, leading to a positive experience variance. As usual, not all trends are developing in the same direction. Within the overall positive experience, we have recorded some negative effects from claims volatility in our Australian disability book in the second quarter. And I would like to point out that this is connected to business, which can be repriced regularly, generally allowing us to react rather quickly to any development. The investment result mainly reflects the ordinary income from our fixed income portfolio, but also includes a negative impact from the valuation of an equity participation. The currency result was minus EUR 47 million, driven by a mix of currency movements against the euro.

Looking here at the IFRS 17 profit drivers, the main contribution comes from the CSM release. This is actually slightly above our expected range, mainly driven by our Financial Solutions business, including some deals with a rather quick release pattern compared to the rest of the book. The risk adjustment release was in line with expectations. And as mentioned, the experience variance is overall positive. The main reason for the loss component are assumption changes for onerous business and the prudent increase in the risk adjustment for morbidity business. A larger part of this can be attributed to critical illness business in China, but other regular assumption reviews also contributed to the overall number. Business growth is well reflected in new CSM generation of EUR 385 million with a diversified contribution from financial solutions and traditional business. Changes in estimates are mainly driven by some model updates for longevity and regular in-force management actions for the traditional business. And including positive currency effects, the CSM increased by 6%.

The development of our investments was again very satisfactory. The return on investment of 3.7% is comfortably ahead of our 3.5% target. The increasing ordinary investment income reflects the continued rollover in a higher yield environment. And as you know, we accelerated this with active loss realizations in 2025 and are now benefiting from these actions.

So to conclude my remarks, the first half of 2026 has been very successful for Hannover. Group net income provides a strong basis for delivering on our full year target. The further strengthened balance sheet provides additional confidence in future earnings and more than EUR 200 million of unused large loss budget is a significant buffer for large losses with the peak hurricane season ahead of us.

On that note, I hand back to you, Clemens, for comments on the outlook.

Yes. Thank you, Christian. So before we have a look at the outlook, let's just briefly look at the renewal slide on Slide 15. So the successful conclusion of all major treaty renewals in 2026 is another reason to be positive about the future based on our strong market position and the long-term client relationships we were able to further expand our traditional treaty portfolio. Year-to-date premium growth, as you can see here, is plus 7.2%.

Despite increased competition and clearly pressure on pricing, reinsurance remain -- rates remained at least adequate on a broad basis. Hence, we are providing -- willingly providing capacity to our clients and programs that do meet our margin requirements. The mid-year renewals, I'd say, fit well into this picture. The premium volume of our traditional treaty portfolio increased by 12.3%. The growth is rather broad-based with good contributions from the Americas, from Australia and within the specialty lines from credit and surety and our digital business. The volume of dedicated cat business up for renewal in June and July was broadly stable, reflecting continued underlying exposure growth for well-priced risks.

The volume in Asian markets decreased as a result of our disciplined underwriting approach in mostly competitive markets. Competition continued to center around pricing with moderate discussions on terms and conditions. The overall risk-adjusted price change for our diversified portfolio was minus 4.5%. Rate reductions were most significant for loss-free property cat business. As in previous renewals, price pressure in other parts of the portfolio was less pronounced. So on a year-to-date basis, this brings the price change for our traditional portfolio to minus 3.9%.

So based on the business performance in the first half year and the outcome of recent renewals, we do confirm our guidance for 2026 without any changes. As explained, delivering on our IFRS growth target in P&C will be ambitious, but the lower end of our target range remains achievable. More importantly, the strong quality of our P&C portfolio with a combined ratio of 83.2% in the first half, including the fully booked large loss budget, as Christian mentioned, puts us in a very good position to deliver on the combined ratio target of below 87%.

Finally, even based on a normal large loss experience, we should remain in a position to build additional resiliency reserves in 2026. Also in Life & Health, we are well on track to achieve our target for the reinsurance service result of around EUR 925 million. And the target for return on investment remains at 3.5%. So altogether, we are confident that we will deliver earnings growth in 2026 and in the following years.

This concludes my remarks, and we would be happy to answer your questions now.

[Operator Instructions] And the first question comes from Will Hardcastle from UBS.

Just coming on to that new business CSM. You touched on a few of the key moving parts there. But if only EUR 100 million or so is the year-to-date impact, that's sort of 5%. And perhaps given where premiums have come in this year maybe implies just less than 1 percentage point of a combined ratio impact year-to-date. It seems maybe a little generous given the pricing declines. And how do I comp that with the risk-adjusted price change of minus 3.9%, recognizing that's not quite apples for apples on timing.

And then just thinking about 12% premium growth in that midyear renewal. I guess if I -- we can paint this in a couple of different lights. If I -- some might question that from a cycle management perspective, I guess. And can you help us to understand why you guys are so comfortable with the extent of that growth into what with the price declines, it looks like diminishing margins, perhaps discussing which of the competitive advantages you're really leaning on here, that would be helpful.

Thank you, Will. So let me start with the second question.

So as you can see, the majority of the growth has come from renewal business, so business we know really, really well. So we are obviously very comfortable pricing that business. So it's clear that given how the market is developing, the pricing levels are not as attractive as they were last year. And last year was a deterioration on the year prior.

But still, I mean, despite the fact that the attractiveness of margins has reduced, it's still attractive in the sense that it's making our hurdle rates. And therefore, growing in these lines of businesses is value accretive also in a softening market environment. We also have to keep in mind that the extent of the softening is not happening to the same extent everywhere. So Clemens already highlighted that property cat is the area where we see most softening and that many other parts of our portfolio are significantly more stable when it comes to the terms and conditions. So therefore, when it comes to new business, I mean, it has been a diversified picture. We have written some more cyber nonproportional business, for example, which was new demand. So business that was not previously purchased to give you one example. Same goes for credit and surety, where the surety products become more prominent in some of the more emerging country environments. And both businesses certainly not subject to the kind of pricing pressure we see on the NatCat side.

Still on the NatCat side, we are also growing a little bit, but we are doing that with strict profitability criteria. So whatever we wrote new despite the rate reductions is making our hurdle rates, and we were also prepared to write letter positions on business where the pricing did not work so well any longer. And the reason why we still find some new business in NatCat attractive, of course, has to be seen in the context that our relative market share in natural catastrophe business is significantly lower compared to our average market share across all lines of business. And as we explained on previous occasions, we are prepared to engage a little more capital to write property catastrophe business. So if you take that all together, we are comfortable in growing in this market environment as we still see that as an attractive market environment. And you can also see that by the still very limited loss component we are showing after the first half of the year, which clearly demonstrates that the growth will be value creative over time when we release the CSM.

On your first question, yes, you're right. I mean, what we said on previous occasions, we reckon that with the pricing reductions that we have experienced to date and there was a little bit of an acceleration quarter-to-quarter that the impact on our combined ratio should be roughly 2% on the entire portfolio. So that is certainly holding true. And I guess the reason why in the new business generation, you are not seeing that so directly is also has to do with the growth we are showing because that growth comes with a positive CSM margin, as I have just explained.

So therefore, somewhat reducing the effect from the dilution of combined ratio on the renewal book of business. And then on top of that, as Christian has explained, there was also some interest rate and foreign exchange movements, which give us certain volatility quarter-to-quarter to the new business generation number.

The next question comes from Andrew Baker from Goldman Sachs.

First one, can you just help me just pick apart your confidence in, I guess, the catch-up of the growth in P&C reinsurance for the second half? Is it purely the strong renewals? Or are there also some base effects at play given all of the noise around the NDIC in particular last year? And I guess more specifically in the current period, were the year-on-year NDIC headwinds on revenue growth higher in 1Q or 2Q this year? And then secondly, on the Life & Health Re side, are you able to help us think about the growth outlook for U.S. Financial Solutions? And given obviously the strong growth that you've achieved here so far, should we expect an uptick in the CSM release rate going forward? Because I believe Financial Solutions has a faster runoff profile than the rest of the traditional business.

Yes. Christian speaking. Thanks, Andrew, for the questions. So let me take the first one on the catch-up effect that we expect for our traditional P&C Re top line. And you're absolutely right. The main reason is the strong renewals and the volume change that we saw.

So the year-to-date 7%. It's clearly above the 4% in premium that we saw. So this will help us to move upwards. And secondly, indeed, there is also a baseline effect as the second half of 2025 was a bit weaker last year. And together, this will have a positive impact and supports our unchanged guidance. And part of that is the NDIC component that is not completely stable over the year in the earned pattern. So in 2026, the NAIC effect, so the downside effect was a bit stronger in Q1 than in Q2. That also is part of the positive momentum we see in the figures.

Maybe on your Life & Health questions. On the U.S. Financial Solutions, we don't expect to see further stronger growth on Financial Solutions business in the U.S. because the competition is quite strong over there. You also mentioned the CSM release uptick that we have seen from Q1 to Q2 right now. Also there, we don't expect further upticks because when you look into the new business generation that we have done, the new CSM of 3 Hive, I can tell you that the biggest part this time is not coming from U.S. Financial Solutions, but it's coming from our traditional business across the world, including LatAm, France and also traditional business from the U.S.

The next question comes from Ivan Bokhmat from Barclays.

I've got a few questions. Maybe the first one, I'll just start with about the third quarter large loss experience. I think Clemens, you mentioned that there is a fairly high frequency of events. But I'm just wondering if that actually filters through the the insured losses given the benign hurricane season? And how do you think about this kind of potential benefit from -- if there is one from the hurricane season? Is that another opportunity to add the buffers over the second half?

And my second question is actually related to large losses. I think on your slides, you booked those losses almost gross to net. So I can only calculate the recoveries at about 7%, which I think is the lowest since COVID. Why is it so low? And how do you expect this to develop later in the year? Maybe you can expand a little bit here and talk about the changes to your outwards and inwards book. How should we think about your retro spend and retro recoveries?

Thank you, Ivan. Well, when it comes to third quarter loss experience, it's certainly a very busy quarter with quite a number of wildfires almost on every continent, you could say, flood events. We had a recent earthquake in Colombia and typhoon hitting China. So from that point of view, clearly, a busy quarter. And when it comes to the U.S. hurricane season, I mean, let's wait and see, I would say. Maybe the forecast on frequency is down, but it only takes 1 category 5 hurricane to make landfall in the U.S. to change the picture completely.

So from that point of view, I wouldn't like to talk about buffer building in the context of Q3 excellent quarter experience as of yet. So from that point of view, as Clemens highlighted, we have definitely enough losses in the system to highlight what the macro drivers for our products are and why having risk adequate pricing remains very, very important.

When it comes to your second question on the major losses, I mean, in the context of retro, I mean some of the losses happened relatively late in the quarter. So look at Venezuela that happened very late in June. Therefore, we have taken a more prudent approach. And as part of the prudent approach, we have decided that we have booked a gross for net number. You can also see that elsewhere in the major loss list like our position we have taken on Iran. So this is not saying that there will not be any retro recoveries on those losses in the end. But as we knew when we closed the books that we are well within the major loss budget, which we are booking in any case, we just decided to take a more prudent approach here and there.

On the other hand, it's fair to say when you look at all the natural catastrophe losses, they will be too small for us to make recoveries on our event tower for them individually. So from that point of view, the main retro vehicle that will come into play is going to be our K facility. And as you will remember, K is not covering on a global basis, but it's covering on a peak scenario basis. So the territories where we do have the protection from K is North America, it's Europe, it's Japan, it's Australia. It's not everywhere in the world.

Probably one addition on the large losses and on the budget. Just to remind everyone that we don't evenly distribute the large loss budget of EUR 2.3 billion to the quarters. So there is an allocation of roughly EUR 1 billion for the third quarter. And as [indiscernible] rightly said, way too early to speak about that. But let's just look at it the underutilized budget for the first half year plus the remainder of the year leaves us with EUR 1.5 billion of remaining large loss budget for the remainder of the year.

The next question comes from Kamran Hossain from JPMorgan.

Two questions from me. The first one is on, I guess, the part of the P&C insurance revenue where you don't have guidance. Clearly, traditional, you've explained the underlying growth there. It doesn't look quite as good on a reported basis. But structured was really one of the really big headwinds for you in the first half of the year. Can you talk about whether we should expect the reduction for '26 to continue at kind of high teens levels in structured? And can you just confirm, I think it should be, but does the drag completely disappear from structured in 2027? Or does it continue slightly further than kind of end of the year?

The second question is for Sven. Clearly, kind of everything seems to be going in the wrong direction from a good starting point in P&C. Do you think when we get to Monte Carlo, brokers will push for kind of improved T&T cedents? I guess it feels a little bit easier to go back to your boss and say price declines weren't as big as last year. And then kind of forgetting to mention kind of T&T softening. So just interested in whether you think that will be a key battleground and kind of what the outcome might be at Monte Carlo, I guess, kind of more importantly at 1/1.

On the structured side, Kamran, I mean, the development we have in this calendar year is that we have a very few clients reducing their session rates. Those clients have to see big volumes of premiums. When we look at the entire portfolio, we can say we have added to the number of contracts, we are growing on the new business. So we don't have to show all the reduction in the premium that we would have on just the renewal book. So we are compensating a good part of those reduced sessions. And in general, the pipeline for surplus relief solutions and also earnings volatility protections is still very good and positive and our number of contracts continue to grow. So in that sense, we remain positive when it comes to the development of our structured portfolio. It's too early to make any comments on where will this go when it comes to the '27 calendar year. As I said, this year's development is driven by less than a handful of individual decisions at the client level. So we have to wait and see where they will go with their decisions, and we are not in a position to guide you in that respect yet.

Hopefully, that gets a little clearer when we meet for our Investors Day in November when we will certainly talk about that development. When it comes to what to expect for 2027, and you mentioned Monte Cardo, where the industry is meeting. I mean, our experience with the softening of the market so far has been that it's really concentrating on price only. The very few discussions we have on terms and conditions in general are client specific, so very bespoke discussions -- it may be an hours clause here. It may be the reintroduction for strike right promotion coverage there. But really individual cases, no trends, no general pressure that reinsurers are now supposed to cover something which they didn't cover before in a very broad sense.

So from that point of view, price only retention levels are holding at nominal 2023 levels, also very little pressure here. And when it comes to the aggregate protections, yes, some clients are buying a little more than they did in the past. But it's very often clients that have always purchased aggregate protection. So again, the market is not a wash with this kind of product. And quite frankly, as we talk today, that's the general picture we would expect also going into 2027. And of course, we would say, particularly on the property cat side, the base level from which we are starting in many cases is now through 2 renewal cycles with meaningful discounts. So therefore, the room for further discounts is certainly no longer the healthy 2023 levels. And therefore, logic would tell you that we would see a certain deceleration.

Can I just ask on where clients have asked for slightly widened terms conditions, house clauses, et cetera. Have those been things that you've maybe accepted? Or you just we've given you enough price. We just like kind of broaden the terms.

Well, the discussions often enough happen in the context of property cat reinsurance, which will not surprise you. And our response has been different case to case depending on what exactly it was.

Next question comes from Iain Pearce from BNP Paribas.

The first one is just on the development of the P&Ls in H1. Obviously, you've had quite a bit of growth in NatCat, but expansion in the retro program at the start of the year. So just trying to get a feel for how you see PMLs trending over the first half of the year now the renewals are all done. And the second one is just on the impact from the equity participation in the life book. Can you just give us a bit more details about what that is and if this is something we need to look out for going forward?

Yes. I mean on the property side, our PMLs keep increasing. I mean, as I said earlier in the call, we have identified natural catastrophe business as an area where we can still grow our market share. We have done that very successfully since 2023, also in 2026, we are being a stable to slightly growing portfolio, not everywhere in the world because the cycle from a pricing point of view is giving us more opportunities in certain territories, whilst we are happy in others. But the underlying trend is still that the P&Ls are going to increase also in 2026.

And coming to your question around the equity participation. So what I can give you is that's a nonstrategic participation we hold and this is a one-off effect. So going forward, you should not expect any more material movements here.

The next question comes from Vinit Malhotra from Mediobanca.

Very good presentation. Just a few maybe clarifications or queries, if you like. First one, just on the premium underlying growth, 4% in 1H. Could you also provide how 1Q was just to get a sense of whether it's stable, worsening or better than 1Q? Then just on the reserve resilience buildup, could you confirm that should we assume that same 200 to 250 runoff positive per quarter, which would make it between 400 to 500 and we have the number we have on the side. So could that be used as well this quarter? Just -- and if I can throw in one on the large losses, there seems to be a little bit more frequency type of events as a more number of events, smaller losses here and there in the quarter, I know your threshold is EUR 10 million, which is lower than some of the peers. Would you think that is the reason that the numbers are looking different from peers? Or would you just say that this was luck -- or would you say this is part of the business? And when you're saying that you're trying to emphasize that the risk scenario hasn't changed just because of low hurricane clients insurers are your insurance clients sympathic to that view? Or do you think there will be some pushback there? -- loads of questions, but maybe 3 topics really.

Vinit, can you explain this last question in what sense?

The last question is we talked about wildfires, floods and we said -- or you said that it's not that just because hurricanes are milder. So the risks have gone away. So you're trying to create the business scene for the risk still being out there. How sympathetic do you think clients are to that from what you know or what you think they will say...

Well, I'm not aware that clients really have made that argument that we should take this very short-term perspective into account when pricing their business. I mean, as I just said, I mean, the El Nino effect does most likely have an impact on the observed frequency at the end of the day, but it doesn't say a lot about the intensity of those maybe fewer, but still hurricanes that will make landfall at the end of the day.

So from that point of view, it's very difficult to have a positive view on this. The flip side is also true. I mean, in a linear year where we expect the frequency to be higher, clients are also not volunteering to pay more for their reinsurance. So from that point of view, we are looking more at the long-term development of those exposure and how does climate change impact them over the longer cycle. When it comes to your major loss question, yes, you're absolutely right.

I mean our threshold reporting the losses is certainly lower compared to some of our peers. So it's only EUR 10 million. If you look at the distribution of the natural catastrophe losses, which is a total of 10 losses. 6 out of the 10 is in the band EUR 10 million to EUR 20 million. So a lot of frequency in that respect. And therefore, we wouldn't read anything unexpected into this number. As you know, I mean, we are looking at our major loss budget year-on-year, and we are from a direction of traveling point of view, increasing the number year-on-year given the underlying growth of our portfolio. And that, of course, also takes into account that we will have, given the growth of the portfolio have to expect more losses exceeding the threshold of EUR 10 million compared to previous periods.

So from that point of view, nothing surprising for us in that respect. And very often climate change related, the kind of losses we are talking about. So also clearly demonstrating that this is an exposure trend the industry needs to take into account when setting retentions and setting pricing for the product. And on your first question, Vinit, I don't have the equivalent number of the 4% underlying earned premium number for the full half year when it comes to Q1 stand-alone. We would have to get back to you on that.

Yes, -- and then let me take your question on the resiliency reserves. So in general, the logic or the view I talked about also last time is still correct. So we expect a positive runoff result and taking a direction of EUR 200 million would be a fair number. But -- and the second half -- the second quarter in this year was not different. But of course, there is also moving parts below that and a lot of accounting details.

So you should maybe not take a completely 100% for your estimate looking forward, but we could in Q2, again, substantially add to the resiliency reserves. And as we also mentioned already in our introduction, of course, we have the full picture only once a year when we have the full actuarial analysis.

The next question comes from James Shuck from Citi.

I had 3 questions, please. The first one, I often think we kind of focus a little bit too much on the higher return periods when it comes to what pricing is doing in nat cat. Could you comment a little bit around what pricing is doing in the lower return periods? I'm particularly interested in how the retention levels, which, to some extent, even if they're not being increased, are being inflated away, how do they translate into return periods this year versus last after the latest renewal period? Then second question, I'm going to try on this, but I appreciate some of it is going to be competitively sensitive. But I'm very keen to understand where you are in terms of current year technical pricing in P&C Re, ideally kind of with a view of NatCat, non-NatCat property and casualty. I think earlier on, you said a comment, I wasn't quite sure what you meant by it. But are you saying that overall, we're kind of back to 2023 levels overall? And do you mean that in terms of kind of return on risk capital? Is that the best way to look at it?

And then final, just a quick question. Just interested if you actually are deploying capital in P&C Re. So when I look at the underwriting SCR in '26, is that actually growing? And are you confident that you continue to grow that into '27 even if the cycle does maintain its current course?

Yes. Thank you, James. Well, -- when you look at the lower layers of natural catastrophe protections, you're, of course, absolutely right. The market has managed to keep the retention levels on a nominal basis, which were achieved in 2023.

Sometimes clients are volunteering higher retentions because they feel that the risk transfer as they have to pay a high rate online is not so very attractive. But in general, I would say it's nominally stable, which you are spot on by saying that over time, given underlying inflation, this, of course, means that there is a certain dilution in the quality of this nominal retention, therefore, also somewhat reducing the return period from which the program is then starting to allow for recoveries.

That's one of the reasons why the development in pricing on the lower layers is a little more of a mixed bag when it comes to the property cat at large. So it very much also depends on the loss experience of the client and at the lower level, there are losses from time to time or at least losses that approach the existing retention, which would lower the reductions in the pricing. And secondly, you can also say that if you look at the industry at large, the risk appetite from the industry is getting bigger, the higher up in the program you are.

So there is clearly enough capacity also for the lower end of programs. but the oversupply is not quite as dramatic and therefore, dampening the price reductions a little bit, but still there are price reductions also on lower layers. I hope that gives you a feel. When it comes to your technical pricing question outside cat, I mean, that's, of course, a super complex one because you really have to look at the lines of business on a regional basis. And therefore, I would say that the pressure on pricing is nowhere else as high as on the property cat side. There are 1 or 2 lines of business in the specialty space where we have seen similar price reductions.

Marine, for example, would be one line of business, which also have the same oversupply dynamics. But everywhere else, demand and supply are still much more in equilibrium. And whilst we see some reductions, the absolute bulk of our business is comfortably above our capital hurdle rates. And that's why we don't have to go into cycle management mode yet on the bulk of the business. And again, you can also see that in the loss component, which is small -- a relatively small number for the first half of the year. I don't think I can go into more details when it comes to what does that mean exactly for which line of business in which region.

And James, let me comment briefly on capital deployment. So when we look where we are standing midyear 2026, I can fully confirm that we could successfully deploy the capital. So Clemens already mentioned that the operating capital generation of around EUR 1.8 billion, and that was supporting our business growth or covering our business growth and the accrual of the dividends. And the SCR is increasing in line with the premium numbers and exposure that Sven already talked about. And you have to see that it's not only P&C Re, of course, using the capital, but also the favorable growth in Life & Health and also the volume of our assets under management contribute here to the deployment.

Looking forward, it's, of course, too early to talk about 2027 and beyond. But our last indication we gave is that we think it will trend slightly down. And within the planning process, we have to see if this slightly has to be adjusted, but that's too early to comment on.

The next question comes from Chris Hartwell from Autonomous.

A couple, if I may. Firstly, just thinking about the investment book. It seems to be quite a few moving parts quarter-on-quarter. I mean if anything, it looks like the quality of the portfolio has actually improved. I don't know how much of that is market, but the duration has also extended. And I guess coupled with what you said before on the realized loss harvesting, I'm trying to sort of think about how all of this sort of fits together and sort of thinking about the potential improvement or further improvement as we go through 2027 on the overall investment yield. And I think to some extent also, if you could sort of touch upon -- I mean you just talking about capital deployment in operation in P&C, but what about how you're thinking about sort of the risk in the investment book and potentially deploying more capital into that?

And then secondly, apologies, I didn't quite catch the comment in the opening remarks on CSM release in life. So that was quite a bit better in Q2 versus Q1. I think I sense that you were saying there's sort of one-off in that. So should we be thinking more what sort of the average sort of releasing through 2024, 2025? And if I may just sneak in a third as well. Just on sort of the loss environment currently. I've been getting questions on potential insurance implications from the heat wave. I mean obviously, we all know about the risks from fire. I'm sort of thinking about sort of broader sort of drought and we're in however many number of heat waves that we've had so far in Europe. I was sort of wondering about potential risks coming through sort of the agriculture book or non-damaged BI and that sort of thing if any help you could give me on that?

Maybe I'll start with the investment questions. So of course, there's also a bit every time a bit of movement in the portfolio. But overall, I think we've been very consistent in our asset allocation. And I can also confirm that I look also at the quality of the book like you stated it. So Sven mentioned that before, no extraordinary item. Actually, on the impairments, it was zero included in that numbers. We cannot expect this every quarter to happen, but I think it shows we are really conservative and high-quality focused in our book here. losses have increased again a bit in the balance sheet. That's not a surprise because of the interest rate movement and the loss harvesting, we might talk about later in the year if there is room to maneuver to comment on the influence of the active realizations from last year.

So you see or I can give you the numbers for our book yield. So we are now at 3.7%. That's roughly 30 basis points higher than 12 months ago. And that's not a very exact figure, but roughly half of that, so close to 15 basis points, I would attribute to the realizations we took last year. And looking forward, the reinvestment yield is now -- or at the end of Q2, it was 4.4%. Actually, today, it's even a bit higher. So you see there is still a meaningful gap and every fresh money or maturing capital that we redeploy here and reinvest will help moving upwards some basis points during the year just by the normal portfolio roll over. And for the last question on market risk, I don't see any change in strategy here or any movement except the reflection of business growth on the P&C and the Life & Health side that is coming also with higher provisions and reserves that we have for our asset management then.

Yes. And when it comes to the European heat wave, Chris, I mean, outside the direct impact from the fires for the physical damage that is caused by the fires, we are expecting relatively limited direct impact from the losses at this stage. I mean when it comes to nondamage BI, that is still a coverage where the market is very careful to provide the coverage at all. And if it does, it normally does only do this on a name supplier basis with small limits.

So from that point of view, in order to trigger BI, we still for the absolute majority of the exposures need a direct physical damage impact for the policyholder. And when it comes to agriculture, yes, we do expect some losses coming out of the heat wave. But the way we have built our portfolio, we are underweight in Europe. The bulk of our exposures would be in the Americas and in parts of Asia. So from that point of view, nothing that would make us concerned at this stage.

And then maybe on your question on the Life & Health side. I mean, you're right that the CSM release, if you compare it from Q1 to Q2 increased slightly. The reason for this increase was the FS business we have been written -- we have been writing in Q1, but you shouldn't expect this CSM release to increase until the end of the year. And what I expect -- what I explained in the last -- in the first question that we got -- the reason for that is that the new CSM generation of 385 that we have produced in the first half of this year is mainly coming from the traditional business. And the traditional business has a much less fast release pattern of the CSM than the FS business. And that's the reason why I wouldn't expect a higher release pattern into the future.

The next question comes from Henry Hatfield from Morningstar.

Just a couple from me.

I was wondering if you could talk a little bit about or just provide a little bit more color on the property losses within the large losses. So that's gone from around, I think, in the first quarter, amounting to around EUR 12 million, up to EUR 7 million and amounting to EUR 148.6 million. That seems it's gone up quite a bit. And I was wondering if you could just elucidate a little bit on that. And then the second question is, I think you mentioned in the opening remarks that -- well, I can see that the experience variance in Life and Health has deteriorated a bit between quarter 1 and quarter 2. You mentioned disability in Australia, critical illness in China, longevity assumption updates. And I was just wondering what relates to what...

I'll start with your questions on the man-made losses. You're right. I mean, we have seen a frequency of fire-related losses in the second half of the year. I mean it's coming from different types of industries, but there is a certain concentration coming from the downstream onshore energy segment where we have seen a few fires and explosions. So in that respect, we are watching this carefully, whether Q2 has just been a quarter where we have seen an unusual amount of frequency or whether there are any underlying trends. At this stage, we are not seeing any trends in that respect yet. But you're right to highlight the frequency of fire losses.

Then on your question on the negative experience variance that we have experienced in Q2 stand-alone, this is, as Christian already said, this is really due to the Australian disability business. More concretely, it's related to the total and permanent disability cover that we are having in the group life portfolio.

And as you know, and Christian alluded to it, the group life portfolio is regularly repriced. So it is nothing that we should be worried about. This is on the experience variance Q2. Then you were mentioning also model change in longevity or I mentioned model change in longevity. This is related to the changes, the positive changes in estimates that we have seen over the first half of the year. They are not only coming obviously from longevity, but also, as I said already, from assumption changes in the traditional side from the U.S., from France and also from Latin America. And last but not least, you were mentioning the critical illness business in China. This is reflected in our loss component that we have already covered in the first quarter of this year.

The next question comes from Ben Cohen from RBC Capital Markets.

I just wanted to ask on the P&C business, sort of now that the major renewals have completed and ahead of Monte Carlo, what is your message going to be to the brokers and insurers in terms of your risk appetite looking into next year? And I guess, specifically, in terms of markets where as the portfolio has moved this year, where you still see yourselves as underrepresented against the sort of longer-term plans that you've talked about in the past. And maybe -- and I guess because you've not talked about it on the call, I think, at all, in terms of how you see casualty markets globally at the moment. I know that's an area where you have a long-standing underweight.

Well, I mean, we will certainly talk about the macro drivers we continue to see and climate change frequency of loss is one topic. I mean we have a very dynamic and at times, unstable geopolitical situation and inflation and in the context of casualty exposure, social inflation remain topics which do ask for risk adequate pricing.

So we would certainly stress that. We also certainly confirm that we will continue to have the approach that we want to have long-term partnerships with our clients. We want to help them to support their growth trajectory. So nothing really surprising really in that respect when it comes to messaging. And yes, casualty in itself, this is, of course, a situation we are observing very carefully. I mean we do see signs that the level of rate increases in the U.S. have slowed down. So depending on who you ask, some would say they are now at trend loss cost trend.

Some would say they have now fall below loss cost trend. If the later is the case, then, of course, this would be very concerning because this is certainly part of the global portfolio where I have yet to meet anyone who is bullish enough to say that they feel that there could be rate reductions or only rate increases below loss cost trend to remain a profitable situation. So that's certainly a space we are watching very carefully.

And sorry, and areas where you think you're still underrepresented going into next year where you want to grow?

Well, we expect that 2027 will continue to be a year where we find growth opportunities. But it will be very diversified. I mean if you look at the growth we had at Hannover Re over the last 10 years, I mean, it was truly global. It was truly across many, many product lines. So we expect the future to be exactly the same. As I said, it's our ambition to build long-term partnerships with our existing clients and make them deeper and broader. So it also depends a little bit on where do our clients see growth opportunities, and we will try to be a good partner for them on that business. So we don't have a wish list where particularly we want to grow. It's just following the growth trajectory of our clients.

The next question comes from Will Hardcastle from UBS.

Just thinking about the long-term outlook on structured reinsurance, primaries are well capitalized. We read and hear about other reinsurers with a greater focus on this area. So pointing to a bit of intensified competition. Is this a downside risk, be it on demand or on pricing on this marketplace? Or is there something a material shift that you're really confident that this marketplace is going to grow beyond the traditional market in coming years? And then there's a couple of very quick clarifications, if that's okay. On a specific loss, first of all, just on the European storm, it really increased from the first quarter. Anything specific we need to think about there? And then the second one, in your new new business that you talked about from renewals, you mentioned cyber and nonproportional. I didn't know if it was cyber nonproportional growth or there were 2 separate things, cyber and then nonproportional.

No, it is cyber nonproportional. It's not too different topics. So our cyber proportional portfolio remains very stable, but we do see additional demand on the nonproportional side. So that's where a little bit of a growth is coming from. It comes to the long-term prospects of structured reinsurance. I mean, our experience to date is that the demand for the product continues to be strong. The number of contracts we can write is increasing. Even though clients are reducing sessions from time to time, our percentage share on the remaining session tends to go up rather than down. So from that point of view, we would still see the structured portfolio as one of the engines of potential growth for the business group P&C for the foreseeable future, and we are not concerned that given capitalization levels and primaries that demand will just disappear globally. And so from that point of view, we continue to be positive. It comes to the Q1 loss, and I guess you are referring to the situation in Spain. We have reassessed the claim after more information became available -- so the Q1 number was clearly too low.

The Q2 number is showing the best view on the risk. So we would not expect any further movement in that respect. And of course, at the same time, the market loss has, of course, also increased. So the market overall was more optimistic at the end of Q1 than it would be today.

The next question comes from Jochen Schmidt from Metzler.

Just a broader question on non-life reinsurance pricing as far as you want to answer. What is your expectation where we are currently standing in the pricing cycle when might prices start to stabilize on average? That's my question.

Well, as I implied on the property cat side, we had 2 rounds of significant rate reductions over the last 24 months. So the base is significantly lower. So therefore, there is less room for further price reductions. And therefore, we do expect a decelerization of the price reductions.

Everywhere else, we would say, well, the softening has not started as early as on the property cat side, it's significantly lower compared to what we have experienced on the property cat side. So therefore, I mean, there is no change in sight. And at the end of the day, it all depends on the loss experience of the clients. I mean if that is very positive, reinsurers will be minded to take that into account. If there have been losses, then even today, we also see rate increases. So therefore, there's less of a general trend outside property cat.

The next question comes from Roland from ODDO.

Two questions from my side, please. I would like to come back to the P&C CSM new business. It was quite solid, with EUR 600 million in the second quarter going up by more than 30%. It's clear you had renewal growth, but also lower pricing. Is the rest attributable to your retro book? Or how can you square this? Then secondly, Life CSM new business was quite a low number in the second quarter. Is it just quarterly volatility? Or can you point to something else? Maybe you can also describe a little bit the competitive situation in Financial Solutions in Asia. And I think you are shooting for more traditional business growing the mortality book. So where do you stand here?

Thanks for your questions, Roland. Let me start with the P&C Re CSM new business. And it's right that as said, retro update was one of the drivers that this looks quite positive. And on the other side, it's also a different impact of FX and discount between Q1 and Q2. So there was a meaningful drag from these 2 components in Q1. And in Q2 stand-alone, this was rather stable, even slightly positive. So that made the big change between Q1 and Q2.

And then on Life & Health, you're looking at the CSM new business.

Obviously, this changes quarter-by-quarter because it is very volatile when you write the business. Some of these business which has huge CSM new business is bulky, and it depends when you write it. So there is nothing to be interpreted in the volatility of the new business CSM overall. The EUR 385 million are a good number, and we're very happy with it. It's even higher than what we have been able to do in the first half year in '25. So all good on that side. The competition on FS is, in general, is increasing. I said it already before, not only in the U.S. and as you said, also in Asia, we see quite a bit of competition, but we're still writing new business CSM also on the financial institutions side across the world, so Asia, U.S. and also Europe, by the way. You mentioned that we're looking into traditional business. We have always been looking into the traditional business. It's just right now, so far, we have been creating more new business CSM on the traditional side and on financial solutions, but this can change during the course of the year.

There are no more questions at this time. I would now like to turn the conference back over to Clemens for any closing remarks.

Yes. Thanks a lot really for the very good discussion and for your questions. Just to round off the discussions, we spoke a bit about the large losses and the reserving, et cetera. I just want to comment on this. So -- and as we also spoke about the loss component. So we have clearly not changed our prudent reserving approach, neither when it comes to our initial loss picks and Sven alluded to the loss component.

So this is really a reflection of our unchanged reserving approach in our initial reserving, but also as we spoke about the large losses, also when it comes to the large losses. As you know, we do book the large loss budget anyway. So we -- I would say, we have rather taken a more prudent approach when it comes to our large loss reserving, just to be clear on that.

On the growth opportunities, as Sven said, I mean, it's really -- we do remain positive due to the fact that we have built a very diversified portfolio, that long-term partnership approach that we've taken is giving us comfort to grow with our clients. But one thing to mention also is when it comes to technical pricing, as you -- as a lot of questions directed to that is our lower cost ratio, the low cost ratio coming with a lean operating model clearly helps to maintain and support the margin in the business, just to be clear.

So overall, that underlying profitability, that growth outlook, together with our very strong balance sheet, and you've heard, we keep even building resilience in the quarter gives us comfort to grow our earnings also in the future. So thank you again for your time, for your interest and for the questions.

Good morning, everyone. Welcome to our earnings call on our results for the first quarter of 2026. Today's speakers are Clemens Jungsthofel, our CEO; and Christian Hermelingmeier, CFO of Hannover Re. For the Q&A, they will be joined by Claude Chèvre and Sven Althoff. With that, I hand over to you, Clemens.

Thank you, Axel, and good morning from Hannover. So let's dive into it. I think it's fair to say that we had a strong start into the year 2026. We've seen a continuation of the positive trends from recent quarters. Underlying profitability was very pleasing in both business groups and the balance sheet and the resilience of Hannover Re have clearly been further strengthened.

This will support sustainable earnings growth and will help to manage volatility going forward. We are operating in an unstable geopolitical environment. The Iran war with its severe implications for people across the region as well as for global economies is contributing to elevated uncertainty. The impact on insurance and reinsurance from these ongoing events also remains uncertain.

As it is not yet possible to come up with reliable estimates, we have not yet booked any precise amounts as a large loss estimate. So far, we have received only, I would say, a minimal number of claims notifications from our clients. We do expect to have some exposure. However, we feel comfortable that any losses that may potentially have occurred will be more than covered by the unused part of our large loss budget in the first quarter.

So let me come back to Hannover Re's overall performance in the first quarter 2026 with a group net income of EUR 711 million. We had a very good start to the year. In P&C reinsurance, the combined ratio of 83.6% is well below our target of 87% and in line with our usual approach, as you all know, we have booked the full large loss budget for the quarter despite actual large losses coming in clearly lower.

Additionally, the strong underlying profitability allowed for a further increase in reserve resiliency. The top line growth in P&C has been impacted by currency effects and a decreased volume in structured reinsurance, which is a bit lumpy, as you all know. This is mainly driven by the anticipated reduction in the cession rate for some individual large reinsurance programs.

In fact, based on our strong relationship, we were able to even increase our share on this business, partially mitigating the underlying reduction in ceded reinsurance volumes. In the traditional business, the FX adjusted growth was 2.1%. This is slightly below the target range for the full year, supported by strong growth opportunities in the April renewal, our full year growth target does remain achievable.

The slightly weaker growth in Q1 can partly be explained by the impact of IFRS 17 accounting. Changes in commissions and particularly in the structure of profit and sliding scale commissions had a visible impact on the growth, not necessarily on the gross written premium, but on reinsurance revenue.

So here, it is important to mention that the higher amount being directly deducted in the top line does not filter through 1:1 to the bottom line. The impact on earnings is expected to be a lot lower. The underlying premium growth was approximately 2 percentage points ahead of the revenue growth. The new business CSM of EUR 1.1 billion mainly reflects our successful January renewals and fully supports our planning for the year, and Christian will provide some further details on the new business CSM.

The business performance in Life and Health reinsurance confirmed the positive trends seen in recent quarters. We were successful in growing our portfolio. The new CSM generation of EUR 249 million increased compared to the previous year. In combination with the reinsurance service result of EUR 254 million, the business group is well on track to deliver on our targeted profitable growth.

The investment performance was very satisfactory. The return on investment of 3.6% is slightly above the target and is based on a strong ordinary income from fixed income securities. Finally, the capitalization remains strong with a solvency ratio of 254%. This figure includes foreseeable dividends based on a quarterly accrual of dividends to be paid for 2026. And apart from this, the decrease compared to year-end '25 is mainly driven by market movements and the successful capital deployment for growth with a corresponding increase in required capital.

On the next slide, shareholders' equity increased by 7.3%. Apart from the positive contribution from Q1 earnings, currency effects were also positive. The CSM increased by 9.7%, mainly reflecting the new business generated by both business groups. And as you know, the new business contribution from P&C is seasonally high due to the recognition of the January renewals. The risk adjustment increased by 5.2%. This is also driven by new business and some assumption changes in Life & Health. Altogether, the developments on this slide show a continued positive value creation for our shareholders. And on that note, I'd like to hand over to you, Christian.

Yes. Thank you, Clemens, and good morning, everyone. I'm now on Slide 7. Our P&C result is based on the strong quality of our diversified portfolio. And as we booked the full large loss budget for the quarter, the result did not benefit from the benign cat environment in the first quarter. And additionally, the combined ratio of 83.6% includes a further increase in reserve resiliency. As usual, we do not provide exact numbers for the change in resiliency without the full reserve analysis, which is only available at year-end.

But what I can say is that the underlying runoff result was clearly positive and our decision to add additional prudency is the reason why the reported runoff result is negative at minus EUR 48 million. Therefore, the underlying combined ratio is even better than the reported 83.6%.

As Clemens already explained, the reasons for the decline in reinsurance revenue, our mid-single-digit growth target for the traditional business remains achievable. We continue to see growth opportunities in the current market environment, but we will not pursue top line growth just for the sake of growth. The accounting impact from changes in sliding scale and profit commissions is having an impact on reported growth figures. But altogether, the likelihood of ending at the lower end of our target range is probably higher than at the upper end. The investment result increased mainly driven by a higher contribution from our fixed income portfolio. The other result does not include any unusual items.

The currency result was fairly neutral. The main contributor to the P&C service result is the CSM release, reflecting recent renewal trends. Our prudent reserving approach is the main reason for the negative experience variance and also, as explained, the negative runoff result. Additional prudency for business earned from recent underwriting years is reflected in the experience variance.

Additional prudence for prior underwriting years shows up as a negative runoff. The very low new business loss component confirms that rates remained adequate on a broad basis despite the rate decreases we've seen in recent renewals. The increase in CSM in the first quarter is mainly driven by our successful January renewals with a diversified contribution from different regions and lines of business.

The new business CSM amounted to EUR 1.1 billion. It should not come as a surprise that this number has decreased compared to the previous year as the reinsurance industry and also Hannover Re reported decreasing reinsurance rates for the January renewals. Furthermore, our volume in structured reinsurance has decreased. Those 2 effects account for roughly EUR 250 million of the decline compared to previous year.

The rest can be explained by currency and also discounting effects. As those factors were largely anticipated, the level of CSM at the end of the first quarter fully supports our targets for 2026. In Life & Health Reinsurance, we have recorded strong top line growth of plus 15% adjusted for currency effects. Main drivers for the growth are larger deals in U.S. Financial Solutions and also expansion of business in our Australian subsidiary. Large part of the revenue contribution from U.S. Financial Solutions is connected to short-term deals.

The revenue contribution from these deals may well be lower again in the coming year. The reinsurance service result of EUR 254 million provides a very good starting point to meet our full year target of EUR 925 million. This result does not include any larger extraordinary items. The experience variance was clearly positive, whereas assumption changes and the prudent increase in risk adjustment had a negative impact on our results. The investment result mainly reflects the good ordinary income from fixed income, but also includes a negative impact from the valuation of an equity participation. The currency result was minus EUR 25 million. The 2 latter effects are the reason for a slightly weaker EBIT performance compared to the reinsurance service result. Looking now at the IFRS 17 components of the service result, the CSM release is the main profit driver and the release in Q1 is slightly above our expected range. We have been quite successful in financial solutions in recent quarters and some of the deals have a rather quick release pattern with a visible impact on the overall release pattern. The risk adjustment release was in line with expectations.

As mentioned, the experience variance is clearly positive based on a diversified contribution across our traditional business. This mitigates the negative impact from the change in loss component of EUR 133 million. So altogether, a diversified experience compared to initial expectations and not unusual for a diversified portfolio.

The main reasons for the loss component are assumption changes for onerous business and a prudent increase in risk adjustment for morbidity business. Larger part of this can be attributed to critical illness business in China, but also other regular assumption reviews contributed to this overall number. CSM development on the right side shows that the new CSM generation, which includes extensions on existing contracts and the [indiscernible] are nicely ahead of the regular release, supporting sustainable earnings growth in our Life and Health business group. The contribution to the new CSM generation comes from Financial Solutions and traditional business. Changes in estimates did not have a material impact in the first quarter. Additionally, supported by positive currency effects, the CSM increased by 3% -- the development of our investments was again satisfactory. The ordinary investment income reflects the continued rollover in the higher yield environment. And as you know, we have accelerated this with active loss realization in 2025, and we are now benefiting from these actions.

Distributions from alternative assets were below average in the first quarter. By contrast, though, the fund valuation for alternative assets recognized at fair value through P&L had a positive impact, hence the P&L contribution in total from alternative assets was very solid. Realized gains are mainly driven by the sale of some real estate.

So all in all, the ROI of 3.6% marks a good start to the year and is slightly above our 3.5% target. Our investment portfolio is well positioned to deliver a resilient performance in volatile times. Also with respect to private credit, the risk is very manageable. Our exposure in the narrower end, meaning private credit funds is around 1% of our assets under management and highly diversified, even including exposure to direct infrastructure debt and highly rated CLOs, the total exposure to private debt is in the low single-digit billions. This is not at all a concern from a risk perspective. At the bottom of this slide, you can see that interest rate movements led to an increase in unrealized losses in our fixed income portfolio.

In the next slide, as the annual reserve review by Willis Towers Watson has been concluded, I'm more than happy to provide you with their final view on our reserve adequacy at year-end 2025. The final number is EUR 3.2 billion and in line with our initial indication provided in March. In relation to total undiscounted reserves and including the risk adjustment, the total resiliency has increased from 7.7% to 8.6%.

Generally, we feel very comfortable with the current reserving position, and there remains flexibility around the level. So going forward, our unchanged reserving approach for new business and the in-force book should fuel further growth in our reserve resiliency in absolute terms, reflecting the increase in business volume. Considering the generally uncertain claims environment, recently increased risk around inflation trends and the softening market environment, we prefer to be on the cautious side.

The developments in 2025 are also visible in the loss triangles for 2025, which we have published on our website today. The increase in prudency is clearly visible, particularly in the long tail lines. The underlying trends in the development of our loss ratios are largely positive, but specific underwriting years in the liability segment also include an increase in our best estimate reserves. And now to conclude my remarks, the first quarter 2026 was a good start to the year. We reported strong earnings and strengthened again our balance sheet at the same time.

On that note, I hand over back to you, Clemens, for some comments on the outlook.

Thank you, Christian. So let's start with a view on the April renewals, which you can find on Slide 17. I think it's fair to say the renewals were characterized by a market environment quite similar to the January renewals. Reinsurers are well capitalized and continue to see reinsurance market as an attractive place to deploy capital.

And as a result, the competition has led to continued price pressure in the April renewals. However, the competition does remain rational. The rates are softening from attractive levels and reinsurance rates remain risk adequate on a broad basis. In this environment, our strong market position, including our low cost ratio enabled us to act on selective growth opportunities. The overall strong growth was predominantly driven by our digital business and an expansion of our footprint in India. Furthermore, we grew successfully in specialty lines. The overall risk-adjusted price change for our diversified portfolio, as you can see here, was minus 3.6%.

Rate reductions were most pronounced for loss-free property cat business. Other areas renewed more stable. In U.S. casualty and loss-affected nonproportional business in aviation, we could achieve price increases. Overall, the volume weighted growth in '26 renewals is at 5.6%, so in line with the targeted growth for our traditional business.

So based on the business performance in the first quarter and the outcome of recent renewals, we do confirm the guidance for 2026 without any changes. As explained, the growth target in P&C remains achievable. The strong quality of our P&C portfolio with a combined ratio of 83.6% in the first quarter puts us in a good position to deliver on the combined ratio target of below 87% based on a normal large loss experience, we should additionally remain in a position where we can build resiliency reserves in 2026. Also in Life & Health, we are well on track to achieve our target for the reinsurance service result of around EUR 925 million. The return on investment is expected to reach around 3.5%. So altogether, we are confident to deliver on earnings growth in 2026 and in the following years. This concludes my remarks, and we would be happy to answer your questions now. Thank you.

[Operator Instructions] The first question comes from the line of Will Hardcastle from UBS.

First question is whether you could just help us break down a little more the details in numbers on the reduction in structured reinsurance year-on-year? And how do you expect that to develop as the year progresses, recognizing it's a bit lumpy, but any guidance there would be helpful. And if there's a materially different margin between structured and traditional? And just on the reserves, forgive me, I've only looked at the total reserves so far and recognize a lot of distortion on the mix, which you highlighted.

It's really evident for me in a way that you tucked away stuff last year, as you said, which goes on top of the $3.2 billion, I believe, because it's presumably the latest year looks to have the highest IBNR to ultimate you booked in that for a decade. Does that ring true to yourself? And when you discuss that reserve build in the current year, the '26 that you mentioned, is that beyond sort of a book growth level? Is that as a percentage of premium you expect it to grow as well?

Yes. Will it's Sven, I will answer your first question. On the structured side, we have lost a mid-single -- yes, mid-triple-digit revenue number at the 1st of January renewal. I mean the 1st of January renewal was remarkable in the sense that all the contracts we are aware of where clients are reducing their cession rate are all at 1/1 renewal.

So from that point of view, the reduction in top line revenue is a little tilted. And we are confident that in the remainder of the year, we will have less of a reduction and the colleagues are also working on a pipeline -- so from that point of view, we are confident that the revenue on the structured side will stabilize more throughout the year. And when it comes to the margin of the business, it's nominally less when you look at revenue. On the other hand, when you look at the capital efficiency, it's very comparable to the traditional business.

Well, then, Christian here again. I would comment on your reserves question. So for 2025, I think the EUR 3.2 billion are pretty fair view on the resiliency. But as you already said, we tend to have a rather conservative reserving philosophy also in case of events or the younger underwriting years. So I think it's a conservative view that's correct. Looking forward to 2026 and the first quarter, as I said, I cannot provide precise figures here. But if you would just remind that we indicated some time ago that the regular runoff release undistorted by reserving actions or other items should be around EUR 200 million or EUR 250 million positive. You have a rough indication of the growth of the resiliency also in 2026 first quarter. And I think that's rather in line with what we saw as increase last year.

The next question comes from the line of Shanti Kang from Bank of America Merrill Lynch.

So Solvency today was a little bit softer than I was expecting, and you mentioned that was because of a higher required capital. Could you just walk us through the moving parts on that? And what was driving that higher required capital? Was that a particular growth area that we should be mindful of for the rest of the year? And then I know that you've reiterated the mid-single-digit growth guide, albeit at the lower end of the guide for this year. What's really the execution risks for that as we move into the next part of the year?

Shanti, I will take the Solvency II question. So as already briefly mentioned by Clemens, the decline can fully be explained by some market movements, so FX and interest rates. The operating capital generation was, I would say, quite healthy around EUR 800 million. And as you indicated in your question, exactly the capital was deployed to growth. It's rather a broad growth. There is a traditional business.

There's also the planned growth in life and health traditional included. So I would say there's not a very specific area. And you should have in mind that the reserving actions, meaning the buildup of prudency and resiliency has also an effect on the reserve risk. So also consuming a slight part of the own funds here.

And on the revenue side, I mean, when it comes to the traditional business, we have by now renewed more than 70% of the business that is up for renewal this year. The remainder will mostly follow at the June 1 and July 1 renewals -- as you have seen, the growth as measured in premium after the April renewal has increased from 3.3% to 5.6% year-to-date. And as we also said that when it comes to the revenue growth in traditional business, which was 2.1% for the quarter, would have been 2% higher if it was not for the IFRS 17 features we explained.

So from that point of view, those are the numbers I can mention to you. The execution risk, of course, is uncertain when it comes to potential acceleration of the softening of the market, which we are not seeing at this moment in time, but we have to wait for the outcome.

We now have a question from the line of Kamran Hossain from JPMorgan.

My first question is coming back to the kind of reserving and how that plays into the combined ratio. From -- I know you kind of -- you're not going to give us the exact number on the kind of amount of resilience you had in the quarter. But if I take the minus 48 million, I think you said EUR 200 million to EUR 250 million, getting us to EUR 250 million to EUR 300 million resilience in the quarter. Is that the big driver of the discounting hitting 11%? Or is there something very different going on, on discounting because it's above maybe where I would have expected it to be and above kind of what you've kind of guided to there?

The second question is on renewals later this year. Clearly, kind of renewals at April saw an acceleration in prices coming down relative to January. What do you expect -- and it's probably a question for Sven. What do you think will happen to Florida? Do you think it gets worse than what we've seen? Or is there something else to help stabilize prices still down, but not down more than we saw April or Jan?

Kamran, thanks for the question. Let me briefly comment on the discount of the reserves. So the reserving actions, and it's really a rough figure is around 1% of the change you have seen. So yes, it's impacting the discount, of course.

Yes. And Kamran, when it comes to the Florida-specific renewals, as explained in the past, we are not really a significant player in this market as we are distributing our U.S. wind capacity mostly to global U.S. nationwide and super regionals. So from that point of view, the outcome of the Florida renewal is less relevant for our portfolio. But I have no indication why they specifically should see any other trend compared to what we have elsewhere seen when it comes to property cat businesses here.

We now have a question from the line of Chris Hartwell from Autonomous Research.

First one is just really coming back to the resilience reserve. I mean I appreciate what you're saying about continued ability to add some resilience and you've done that in Q1. But I'm just sort of wondering if you can sort of help me sort of think through how the resilience reserve can change given the degree of softening that we're seeing in the market. I mean, in effect, when should we start to think about you actually drawing down if the profitability of the industry carries on deteriorating, I suppose, current rates?

And then second question, if we can sort of pivot to the life side. The experience variance and the loss component changes sort of broadly cancel each other out, but they're both quite sizable numbers. And again, you talked about China critical illness. So I was wondering if you could just give a little bit more color on the sort of the key components within those numbers and how close do you think we are to the end of this China CI issue?

So Chris, let me again give some comments on reserving and resilience. So I don't see any limitations to build further resilience like resilience yet. So we are flexible, as also said in my introductory remarks. I would expect, and I think we indicated this also with the annual results already that if there is no large distortion in the market or any unusual extraordinary large loss situation, we would think that we can again add a substantial amount of resilience reserves at least growing with the business. And the market environment was already roughly anticipated then.

So talking about what could change and Sven indicated already an acceleration of pricing trends, of course, is a risk, but this would mean that we just would not build up that much additional amount. So we are far from drawing down reserves, so using them. And I don't see this for the near future independent of slight changes in pricing environment.

Yes. And maybe on your question, it's Claude speaking on Life & Health.

You're right, the experience variances and the loss component, they level out pretty much. Obviously, what you don't see in the experience variance is that we have also positive experience variance from Chinese CI business, which shows that our assumptions are pretty, I would say, pretty conservative on this topic. We're always talking about the best estimate assumptions. So what we have right now is the best estimate case, which means there is obviously a probability that we will see further strengthening, further prudency on the CI business. But right now, we're on a best estimate basis.

The next question comes from the line of Paris from BNP Paribas.

The first one is just on your own cession rates. So I noticed the net insurance revenue fell slightly more than the gross insurance revenue. If you could just give us some guidance on how you expect that to trend over the year and if that's been impacted by the structured business at all?

The second one was just on the new business CSM movement. Thank you for providing the sort of breakdown between FX discounting and the renewals. Is it possible you could give us a breakdown of the EUR 250 million, how much comes from traditional and how much comes from structured in terms of that decline?

And then if I could just ask a third one as well. On the outlook for the structured business, you sound pretty confident that that's going to improve over the course of this year, but you flagged reducing cession rates from primaries as a driver for the reduction at -- are you expecting that trend to reverse and primary is going to start increasing cession rates again or buying more reinsurance? Or is there something else that gives a more confident outlook for the structured volumes going forward?

Yes, I'm happy to take your questions. Let me start with the last question. I mean the number of contracts we are talking about the clients have reduced cessions is maybe 1% or 2% of our entire portfolio. So therefore, I would not read any trend into this fact. It was just individual cases, which all happened at the 1st of January renewal but it's not a general trend we are seeing that cession rates are reduced across the portfolio we are currently writing.

When it comes to your first question, yes, you're right. The slight change in the net to gross ratio has to do with the reduction on the structured side as we are not buying any reinsurance on our structured business. And therefore, this translates more 1:1 into also reduced net numbers. And then thirdly, when it comes to the EUR 250 million, the way how to think about that is we renewed roughly EUR 10 billion worth of premium at the 1/1 renewals.

As we said before, what we've seen on the rates would indicate combined ratio deterioration of roughly 2%. So that would explain EUR 200 million out of the EUR 250 million and the remainder would come from the reduced volume written on the structured side.

We now have a question from the line of Andrew Baker from Goldman Sachs.

Just 2 clarifications really on the structure side.

Firstly, I think you said that margin less on revenue structured versus traditional, the capital intensity broadly similar. Does that mean the ROE is lower on the structure side? Or am I misinterpreting what you're saying there? And then secondly, probably on the structured growth Q1 versus your outlook, are you able just to give us a sense of sort of what the year-on-year growth rate you're expecting for 2026 is given there's a lot of moving pieces there.

On the first question, the structured business is less capital intensive compared to the traditional business. So whilst the nominal margins are somewhat lower compared to the traditional business from an ROE perspective, it's equally attractive. So that's what I wanted to say.

And on the year-to-year growth expectation on structured overall, we have not really guided for that. And given that this is a very lumpy business, so one single transaction could change the entire situation altogether, good or bad, that is we would continue not to give any guidance when it comes to the top line development.

The next question comes from the line of Vinit Malhotra from Mediobanca.

So most of my questions have been addressed. I would just raise one topic. The commentary around the April renewals was interesting. If you could just clarify a few more things there.

For example, you mentioned in specialty lines, you found some growth. I can see credit and surety where you're noting an attractive environment. I can see digital business being noted. Is that cyber really? Or is it something else? If you could just comment a bit more about the growth elements you saw in April renewals, that will be very helpful. And I just wanted to just follow up one more thing. The resiliency reserve, sorry to come back to that. I understand that there's no limitation to build it up more.

But I'm just curious about the motivation to do it. are you -- I mean, is it that you're just using the very strong profitability to weather out the cycle even better or to ensure more growth later on? Or what's the thinking behind that? That would be also very helpful.

Yes, Vinit, let me start with the first question. So the 2 main drivers for the growth at 1st of April were on the specialty side, the digital business and on the traditional side, our business, which has renewed in India.

So when it comes to digital business, this is not cyber business, which would be a separate specialty bucket for us. but it's a business we are writing behind ceding companies that distribute their business via more an insurtech platform. So from that point of view, I hope that clarifies. Otherwise, it was a mixed picture on the specialty side. Aviation saw some rate increases. Marine is still a very competitive environment. And most of the credit and surety growth really came from underlying growth of our ceding companies. So a mixed picture, but overall, a growing part of the portfolio at this 1st of April renewal.

I think we had the second part.

So Vinit, you asked also on the motivation for building up a more resilience. And I can confirm that our philosophy and view here is unchanged. So we built this resiliency in hard market times and good profits to mitigate any volatility from our business and show stable earnings growth.

So the resiliency next to also our high retro program is there to cover extraordinary events that may happen, but also the reinsurance pricing cycle. So with stable and solid margins. you should expect that we take away some more resiliency to use it later when we might come to a soft market.

And I would also mention that we always want to have flexibility to step in after any market dislocation to use attractive opportunities that may arise as we have done in the past.

We now have a question from the line of Jochen Schmitt from Metzler.

I have one question on the April renewals, please. Apart from prices, the terms and conditions remain broadly stable? Or do you see any signs of softening here in individual lines of business? That's my question.

No. As Clemens already said, the picture at 1st of April was very similar compared to January. So terms and conditions are, for the most part, still very stable and the same goes for retention levels. So from that point of view, the market is characterized with competition on mostly price only.

[Operator Instructions] We now have a question from the line of Darius Satkauskas from Keefe.

The first question is, those 1% to 2% of clients that reduced cessions appear to have had a large impact to really large accounts. Do you have any visibility on why they reduced the cessions? And is it surprising to you at all or just a function of the soft market that you sort of expected?

And my second question is just on the April renewals. We're clearly in a softening market, and you grew a lot. So can you provide some reassurance on the mix of that growth? I mean how much of that is coming from your existing accounts versus purely new business because the figure is just so much higher than what your peers have reported?

Let me start with your second question. You can see from Slide 17 that only a small part of the growth actually came from new business. So EUR 83 million out of the EUR 250 million -- EUR 350 million of growth and the bulk really came from existing client and contract relationships where we managed to increase our shares at still attractive terms and conditions. So from that point of view, not that much new business. And when it comes to the reasons why we have seen reduced cessions on the structured side was basically 2 main reason.

One had to do with merger and acquisition, where the new entity buying the expiring client of ours did not see any need to buy surplus relief quota share any longer. And the second reason is improved capitalization of the existing client itself. So after a number of years of very attractive terms and conditions also in the primary space, of course, some clients have also accumulated net retained earnings. And therefore, the reason -- the main reason why they did buy the contract originally, i.e., surplus relief was less relevant compared to previous years.

The next question comes from the line of Ben Cohen from RBC Capital Markets.

I just wanted to ask just on the April renewals. In terms of the price movement, I was maybe slightly surprised there wasn't a bigger negative effect maybe given the nat cat in the mix compared to the January renewals. Was there something else going on there? Is that due to the price rises that you saw in U.S. casualty in particular? And looking forward, could you give a comment as to how you see the inflationary environment developing generally kind of post the Iran war? Are you looking to kind of price for that? Do you think that's being captured adequately in the kind of pricing environment in some of the longer tail classes globally?

Well, on the first question, again, I mean, we have a very diversified portfolio. So the weight of the property cat business in itself is meaningful, but it's only a fraction of what we are renewing.

So from that point of view, it's one of the -- or the main driver why the rate development is as negative as we have shown. But we also have a lot of other business, the bulk of the business, indeed, which is renewing at much more stable prices and terms and conditions compared to what you see in the headlines when it comes to property catastrophe business. And when it comes to inflation, we have adjusted our inflation adjustment -- inflation expectation when it comes to the pricing of the business, -- but of course, we have to wait and see whether the increase in expected inflation we have taken is going to be in line with reality at the end of the day that we have decided to be more conservative in light what we are seeing resulting out of the conflict in the Middle East.

[Operator Instructions] We now have a question from the line of James Shuck from Citi.

Can I just return to the P&C new business CSM. I heard your explanation earlier that EUR 250 million or so was from margin and volume and you rationalize that by 2 points price on EUR 10 billion of volume given EUR 200 million and the rest due to the reduction in structure volume. However, the EUR 10 billion kind of is a January number. If I include April, then I get EUR 12 billion. And the price reductions that you posted in excess of 3 points. So.

I'm kind of looking at 3 points on EUR 12 billion to give you EUR 360 million, which is difficult for me to then bridge to what the impact was from the reduction in structure. So perhaps you can just help me with some of the math there, that would be helpful, please.

And then secondly, I know the run-off result that you normally expect is in the region of EUR 200 million to EUR 250 million. Would you mind telling me what the risk adjustment release was and the run-off result in P&C Re in Q1? And does that EUR 200 million to EUR 250 million include the risk adjustment release as well?

Let me start with your first question, James. I mean, the Q2 impact, you will, of course, see also in our Q numbers from the April renewals. When it comes to your math, of course, the rate reductions you need to apply to the underlying loss ratio rather than the full combined ratio. That's why the impact is not 1:1. -- to the combined ratio impact. But when it comes to the traditional business, given that it's now EUR 12 billion, we have to expect that there is also some element of lesser new business CSM compared to what we saw previous year.

And Christian here again on your question on the runoff result. And yes, the risk adjustment is part of this figure and the release was within our usual expectation of 6% to 8% release.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Clemens Jungsthofel for any closing remarks.

Yes. So just to conclude and round up the call a bit. So you can sense we still see and view this as an attractive market environment. And the Q1 results, particularly when you look at factors like the loss component or the resiliency build that we've been able to build in the first quarter is an indication of the underlying profitability.

Christian alluded to it, when you look at the runoff result versus an expected runoff result, you get an idea of the potential resiliency that we've been able to build. So we do remain confident that we can build resiliency going forward, that we can, as Christian also said, manage volatility but also manage earnings growth and manage the cycle to manage earnings growth throughout the cycle. We still look at the strong pipeline, both in traditional business and in structured as well as in Life & Health, and we are confident to pursue that growth potential cautiously as we look forward.

Thank you for your questions, and speak soon. Have a good day.

Ladies and gentlemen, welcome to the conference call on Annual Results 2025. I'm Sergen, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] At this time, it's my pleasure to hand over to Karl Steinle. Please go ahead, sir.

Well, good afternoon, everyone, and welcome from sunny Hannover to our analyst and investor call on our full year results for the year 2025. As announced, our CEO, Clemens Jungsthofel; and our CFO, Christian Hermelingmeier, will provide a brief overview of the business development in '25 and the outlook for the current year. For the Q&A session, they will be joined by Claude Chevre and Sven Althoff. And it's now my pleasure to hand over to you, Clemens.

Thank you, Kark, and good afternoon from Hannover. So let's start with our business performance '25, which was indeed very satisfactory. The group net income of EUR 2.64 billion is a record result for Hannover Re, reflecting a sustainable increase in the earnings power of the group. The proposed dividend of EUR 12.50 for 2025 is a significant step-up of almost 40% compared to the previous year.

Furthermore, the result is based on a very strong underlying profitability. Our deliberate actions to strengthen the balance sheet increases our confidence in future earnings growth. We have achieved this by adding around EUR 700 million to resiliency reserves and by actively realizing losses of almost EUR 600 million in our fixed income portfolio. The sum of these effects is clearly higher than the total tailwind from the benign large loss experience, positive currency effects and a lower-than-expected tax rate.

We have continued to grow in 2025. The underlying revenue growth in P&C was around 10%, clearly ahead of our 7% growth target. Including the impact of the refinement in the calculation of the non-distinct investment component, the FX-adjusted growth was 3.8%. In Life & Health, we recorded favorable FX-adjusted growth of 6.8%. Moreover, the new business CSM increased in both business groups, providing a good basis for further earnings growth. Also, our total investments have grown by 0.7%, driven by a strong operating cash flow of EUR 5.7 billion. The fact that assets increased despite negative currency effects of around EUR 4.5 billion and the redemption of a hybrid bond is remarkable.

The impact of large losses in P&C was clearly below our budget, driven by an overall benign NatCat experience. As previously indicated, we have used this opportunity to continue to realize losses in our fixed income portfolio and to add resiliency reserves also in the fourth quarter. Altogether, the EBIT of EUR 2.6 billion and the combined ratio of 84% in P&C reinsurance are based on a strong underlying earnings power.

In Life & Health reinsurance, the profitability has been satisfactory as well. The reinsurance service result of EUR 903 million came in above the targeted level of at least EUR 875 million. The new business generation increased by 22% to EUR 755 million, including a favorable contribution in the fourth quarter.

The ordinary investment performance was very satisfactory. Against the backdrop of the overall strong profitability, we have realized another EUR 270 million of fixed income losses in the fourth quarter, bringing the total loss realization to almost EUR 600 million for the full year. Hence, the return on investment of 2.5% is deliberately below our target to improve further future investment returns and increase the flexibility in our investment portfolio.

The capitalization of Hannover Re remained very strong with a solvency ratio of 256%. This number reflects a strong operating capital generation of EUR 3.7 billion, and a successful deployment of capital for growth. In addition, the strong capitalization allowed us to reduce the level of hybrid capital and to pay a significantly increased dividend to shareholders. The moderate decrease in the solvency ratio in the fourth quarter was mainly driven by our prudent reserve build. In the solvency regime, this was more pronounced in the fourth quarter compared to previous quarters.

Finally, we were able to keep our group cost ratio flat at a very low 3.2%. This will continue to provide us with an important advantage in a competitive market environment.

The dividend proposal of EUR 12.50, on the next slide, is a significant increase compared to the previous year. In line with our adjusted dividend strategy, the full amount will be paid as a regular dividend. Furthermore, according to the targeted progressive growth of our dividend, this is also the new minimum level for the next year, reflecting our strong confidence in future earnings growth. At 57%, the payout ratio is in line with our target of around 55%. The retained earnings of slightly above 40% will support future growth opportunities in a continued attractive market environment.

Shareholders' equity increased by 10%, driven by the strong 2025 results. A mitigating factor is a negative impact from currency translation within the OCI, the other comprehensive income.

The CSM decreased by 3.1%. The healthy level of new business generated by both business groups has been offset by negative currency effects. FX adjusted, the group CSM would have increased by 4.4%.

The risk adjustment decreased by 6.6%, mainly driven by some model refinements in P&C and again, by negative currency effects.

Our long-term ROE performance highlights our ability to consistently provide shareholders with attractive returns, significantly above cost of capital. Our ROE performance also screens favorably compared to peers. On top, we have achieved this outperformance with less volatility. And as you can see in the chart on the right-hand side, Hannover Re is well placed in the top left quadrant. Comparing the 10-year ROE performance, we have reported the highest ROE with the lowest volatility. This will continue to be our ambition.

Altogether, 2025 was another strong and successful year for Hannover Re, confirmed by the return on equity of 21.4%. And just as a reminder, our successful participation in Viridium has contributed around EUR 500 million to the equity position over time without affecting the IFRS net income.

Given that the balance sheet has been further strengthened to support future earnings growth, the underlying performance for 2025 was even better.

And on that note, Christian, I'll hand over to you.

Thank you, Clemens, and good afternoon, everyone. As you can see, our P&C business is growing nicely on a diversified basis, including a strong contribution from structured reinsurance. The underlying growth is around 10%, well ahead of our 7% target. The reported top line growth is masked by the refinement in our accounting, resulting in a one-off effect when comparing the 2025 revenue to the previous year. The reported FX adjusted growth was lower at 3.8%. As a reminder, the NDIC effect has no impact on earnings due to corresponding effects in the service expenses.

The combined ratio of 84% is comfortably within the target range below 87%. The impact from large losses was EUR 375 million below budget. As explained in previous earnings calls, we have used this strong earnings position in 2025 as an opportunity to increase our reserve resiliency. Based on preliminary internal estimates, we expect the reserve resiliency to stand at around EUR 3.2 billion at year-end 2025. This means that the increase in reserve resiliency was significantly higher than the benefit from benign large losses. Hence, the underlying combined ratio is better than the reported 84%.

To complete this picture, this combined ratio also includes the strengthening of reserves for the Russia-Ukraine aviation loss and the prudent reaction to uncertainty around loss trends in U.S. casualty. Together, I am highly satisfied with the profitability of our property and casualty portfolio. It enabled us to take a more prudent position on certain prior year developments to significantly increase the reserve resiliency and to report a combined ratio well below our target.

Finally, the combined ratio includes a discount effect of around 10%. One reason why this number is higher than initially assumed is the increasing reserve volume in long-tail lines with a corresponding higher discount effect. The investment result reflects an increased ordinary income and our deliberate decision to realize losses in our fixed income portfolio. The vast majority of these losses is allocated to the P&C reinsurance segment.

The currency result was significantly positive at EUR 233 million, driven by the weakening of the U.S. dollar over the course of the first half year. And just as a reminder, since Q3 2025, we have implemented an accounting hedge for the IFRS currency result, so you should not expect larger impacts from recent movements in the exchange rates.

The main contributor to the P&C result is the CSM release, reflecting the recent renewals in a very attractive market environment. The experience variance includes our prudent reserving on the business earned from current underwriting years. This has mitigated the positive experience from benign large losses. The runoff result has been positive in most regions and lines of business. But as explained, we have used the strong underlying profitability and the overall strong earnings position to add significantly to reserve resiliency, to strengthen the reserves for the Russia-Ukraine aviation loss and to react prudently to the uncertainty around loss trends in U.S. casualty.

Putting this together, the runoff result was minus EUR 603 million, although the underlying runoff was positive. Finally, the loss component from new business is quite low, confirming the attractive rate environment in P&C reinsurance. The growth in new business CSM of 12% reflects the favorable market environment and our success in the renewal period in 2025, resulting in a strong new business CSM of EUR 3 billion.

In Life & Health, reinsurance revenue increased by 6.8% adjusted for FX. The growth is on a diversified basis as well. The step-up in growth in the fourth quarter is driven by new business in U.S. financial solutions. The reinsurance service result of EUR 903 million is above our target and based on favorable underlying profitability. The experience variance was positive in 2025, mainly driven by financial solutions. Assumption updates for onerous business and a more cautious position with regard to our mobility business had a negative impact in the reporting period. The investment result is based on a good ordinary income from fixed income. The recognition of an equity participation had a negative impact of EUR 36 million. The active loss realization in our fixed income portfolio amounted to EUR 20 million. Putting this together again, the EBIT contribution from our Life & Health business group was EUR 886 million.

Looking now at the IFRS 17 components of the service result. The CSM release is the main profit driver and within the expected range. The same is true for release in risk adjustment. The experience variance is clearly positive, mainly driven by financial solutions. In traditional business, we have recorded positive and negative developments with an overall limited impact, a quite normal picture for a diversified portfolio. The main drivers for the loss component are assumption changes for onerous business in morbidity. This is particularly driven by the critical illness business in Greater China, where we have updated our assumptions and took a more cautious positioning reflected in an increase in the risk adjustment mostly already in Q3.

The CSM development on the right side is clearly impacted by currency effects. The CSM generation, which includes the new business CSM and extensions on existing contracts, amounted to a favorable EUR 766 million based on a diversified contribution from financial solutions and our traditional business. Changes in estimates were overall positive, driven by updated assumptions for our longevity business. In the isolated fourth quarter, changes in estimates were negative, largely due to model updates for U.S. mortality, not driven by a changed view on U.S. mortality assumptions. Altogether, the total CSM would have increased by 3.4%, excluding the currency effects, so ahead of our 2% target.

The development of our investments was also very satisfactory. The ordinary investment income reflects the continued rollover in a high-yield environment and the strong operating cash flow. In addition, the contribution from alternatives was very solid. As mentioned, we have used the overall strong earnings situation to accelerate the realization of losses in our fixed income book in the second half. In total, we are looking at realized fixed income hidden losses of EUR 593 million for the full year. The corresponding higher locked-in interest rates will support a further increase in investment income in the coming years. With a modified duration of slightly below 4, the positive impact is somewhere between 10 and 15 basis points. Please bear in mind that this is not the only factor having an impact on the development of our portfolio yield. Movement in yield curves and FX needs to be considered as well and the development of those 2 factors in 2025 has been slightly negative for our yield projections.

Finally, the impact from the change in ECL and fair value of financial instruments remained moderate. Excluding the loss realization in our fixed income portfolio, the return on investments is at 3.4%, higher than our initial target of at least 3.2% for the year. As a result of yield curve movements and our active loss realization, the level of unrealized losses on our balance sheet is still material at around EUR 2 billion, but significantly lower compared to year-end 2024.

To conclude my remarks, the business performance in 2025 was highly satisfactory. The earnings position was strong enough to clearly outperform the initial group net income guidance and to strengthen our balance sheet with the aim to invest into future earnings growth. And on that note, I'll hand back to you, Clemens, for some comments on the outlook.

Thank you, Christian. So future earnings growth brings us actually directly to the guidance for the financial year 2026. Based on the strong performance of our business in 2025 and the outcome of the January renewals, we confirm the guidance for 2026 without any changes. We do expect further growth in our business. The strong quality of our P&C portfolio puts us in a good position to deliver on the combined ratio target of below 87%.

Based on a normal large loss experience, we should remain in a position where we actually can build resiliency reserves also in 2026. The target achievement is not linked to a change in our prudent initial reserving approach. Based on the successful new business generation in 2025 and a healthy pipeline looking forward, we anticipate an increase in reinsurance service result to around EUR 925 million in Life & Health reinsurance. Furthermore, our strategic midterm target for the CSM growth of around 2% remains valid.

The return on investment is expected to reach around 3.5%. Christian explained the major factors having an impact on this number, and we do feel comfortable to confirm it. Altogether, the balance sheet of Hannover Re is the strongest in history, and we are confident in future earnings growth even in a more competitive market environment.

So this concludes my remarks, and we would be happy to answer your questions.

[Operator Instructions] And the first question comes from Andrew Baker from Goldman Sachs.

The first one, just on P&C reserving. Was the update to your Russia-Ukraine reserving, was that -- did you take more in the fourth quarter? Or was that comment related to action taken earlier in the year? And I guess on the reserving for the uncertainty for the U.S. liability trends, are you seeing a deterioration in data points? Or is this just prudence?

And then secondly, just on the topic of longevity, so I can see, obviously, it drove the positive CSM estimate change in 2025. When we speak to some of the primary companies, they are saying that the reinsurers generally have a more favorable view on longevity than they do. I guess, firstly, curious whether you would agree with that statement. And then secondly, we saw sort of -- in the U.K., we saw the CMI 2025 mortality tables released earlier this week. They're showing an improvement in life expectancy and that's over '24, which was already an improvement over the past couple of years. So how do we square that sort of improving mortality trends in the data that we're seeing with Hannover Re, I guess, releasing reserves related to longevity?

Yes. Thank you, Andrew. It's Sven. I will start with your first 2 questions. So when it comes to Russia-Ukraine, we have increased our reserve position throughout the full year '25. So it was not a specific exercise, which we only did in Q4. On the other hand, we added a low triple-digit number also in Q4. The main reasons are coming from the aviation side, where we had the high court ruling early in the year, but now that more ceding companies are reporting their loss positions to us, we also see that the amount of money that is spent from a legal point of view dealing with the topics at hand is higher than we originally anticipated. So those were the 2 main drivers for us putting the Ukraine reserve to a higher confidence level.

When it comes to U.S. casualty, it's really 3 factors we are looking at. First and foremost, we can see a higher frequency of loss activity in the younger underwriting years. It's still difficult to do a full interpretation of what the triangles are telling you. We, as you know, had the situation where the courts couldn't really make any decisions for an extended period due to the COVID lockdowns. We expected a certain period of catching up with the cases that could not be heard during that time. But the data points we are now seeing seems to indicate that there is a little bit more of a trend over and above catching up than maybe originally expected. So as we were in the position to have a more conservative view this year, it was really the combination of the data points we are seeing using partially also the more conservative actuarial methods. So we were moving more to the outer bound of the best estimate range. And thirdly, it was, of course, also an area where we did build new resiliency.

Yes. And maybe on your question on longevity, I wouldn't say that we see the longevity business more aggressively than our clients. We have a pretty conservative approach to longevity. And you can see that in the new business CSM. And you will see, and you will have seen that in the past 2 years, our new business CSM hasn't been growing because of longevity because we were having quite conservative view on the longevity trends. Now obviously, the fact that we have released a little bit of the CSM, this is related to our initial assumptions when we wrote the blocks, and these assumptions were still more conservative than our current assumptions. And that's the reason why we have been able to release year-by-year some of the CSM into longevity, but our view on longevity, I can tell you, is definitely a bit more conservative than what our competitors are doing right now.

The next question comes from Kamran Hossain from JPMorgan.

I've got 2 questions. The first one is just on the dividend, which clearly hugely up from last year, increase to the payout. It's a really good yield. So my question, please take it in the light that I'm delighted with the dividend, but just wondering why it's not up more when you -- at the Investor Day, you talked about an extraordinary result potentially leading to special dividends. Just trying to understand how 2025 is not extraordinary. You've had a much better return on equity than your target. I think if you added back the kind of things that have dampened the result, you probably would have doubled your return on equity target. You've got this really strong balance sheet. If 2025 is not extraordinary, what would be?

The second question is, given kind of the news flow at the moment, just really interested in kind of war impacts on kind of anything that you can talk about? And are we safe to say, apart from the conflict in the Middle East, it's probably been quite a light quarter so far?

Yes, Kamran, starting with the first question on the dividend, asking for the extraordinary definition, as we also discussed, I remember at the Investors Day. So our target is to deliver attractive returns in terms of ROE and of dividends. Therefore, we increased already this year the payout ratio. And this is a really good year for Hannover Re. But as you know, we want to deliver also stably and continuously increasing results, and this is also true and stays true for the dividend. And I would refer back to the guidance that Clemens already elaborated a bit on. So our outlook on the earnings for 2026 is also positive and increasing. And if this comes as Clemens talked about and reconfirmed, and we are quite confident with the balance sheet and all the resilience, we could add also the dividend will go up again. But of course, it's early in the year, but this to give you a bit of flavor of the outlook also for dividend.

And Kamran, probably in addition, just take it also as a view on our outlook for business opportunities, for opportunities to deploy capital into P&C, Life & Health and probably into investments. So it's a bit of a balanced view between what Christian referred to as delivering attractive dividends, but at the same time, making sure that we put the capital to work and deploy it for further growth.

Well, then as regards Q1 to date and the war, you're right that the loss experience in Q1 to date has been relatively light. We, of course, will give you the number in May and the quarter isn't over, but I would say from where we -- what we see today would speak for quite some underutilization of the budget for the quarter. That, of course, does not include any assumption on the war yet. Really too early to have a view here. There's obviously a lot of things going on. Commercial shipping and commercial flying has more or less come to a standstill in that part of the world, and we have to wait and see what the market is prepared to offer from a war coverage point of view when that situation is safer again and is changing again. So from that point of view, I mean, you know the heads of cover that are exposed. So next to aviation and marine, of course, we have political violence, we have war on land. The longer the conflict lasts, classes like trade credit or political risk may come into play. So from that point of view, we are watching the situation very carefully. But what we have learned so far from a damage point of view, it looks more like quite a bit of minor damage to various assets, but nothing very significant to date. But that, of course, can change any second.

And maybe, it's Sven, so maybe talking about Life & Health because as you probably know, we're a market leader in the traditional business in the whole region in the Middle East, including the Gulf region. We also have a subsidiary, by the way, in Bahrain with 60 employees. And they're all well, by the way, just for information, we're obviously in constant contact with these guys. But we don't expect too much of claims out of the Life & Health portfolio, even though we have an exposure, we do not cover active war. And we cover passive war, obviously, with our life policies, but with a certain limit, kind of a 28 days limit. So it really limits our exposure then in the Middle East, even being market leader. So no issues from the Life & Health side so far.

The next question comes from Shanti Kang from Bank of America.

Just on P&C, for the full year new business loss component, I actually noticed that was better year-on-year, which was a bit of a surprise. And I was just wondering what was the driver of that? Was that like a flight to quality? Or could some of the retro be playing into that? So just good to get your thoughts on how conditions are impacting that. And then on the Life & Health side, the EUR 903 million print that you've done today makes the '26 guide of EUR 925 million look pretty breezy. Do you think there's some conservatism in the '26 guide, for example?

Yes, Shanti, on the loss component, I don't have a very big answer for you here. I mean it is slightly lower compared to 2024. And that has to do with, of course, us continuously portfolio pruning where we don't like the going-forward profitability of the business. But these are individual transactions. It's not a trend I can talk about. It's the sum of many little pieces.

Yes, on the Life & Health side, I mean, yes, we came in with EUR 903 million. We planned EUR 875 million. Now the new plan is EUR 925 million. I would say it's slightly -- maybe slightly on the conservative side. But as you know, and I showed it, I think you were probably at the Investors Day. I showed you the Life & Health result is made of many, many assumption changes, model changes, et cetera, et cetera. So I would say the EUR 925 million, I feel comfortable with it, but becoming better would be great.

The next question comes from Iain Pearce from BNP Paribas.

The first one is just on the reserve resiliency. At the Investor Day, you sort of alluded that the reserve resiliency was heading towards a peak level if you looked at it on various different metrics, but particularly sort of as a proportion of net reserves. And clearly, the EUR 700 million move we've seen this year is faster than the growth in the reserves. So just sort of thinking where that is as a proportion of net reserves, and how you expect that to trend as a proportion of net reserves would be very useful?

And the second one is just on the operating capital generation, the EUR 3.7 billion pre-strain. Could you just give us a sort of indication of how much that is a clean number? Anything we need to consider in that related to, say, the realized losses and so on? And again, sort of tying that into the capital distribution and the solvency movement as well because that's a very strong number and EUR 1 billion net capital generation post dividend. So if you could just talk to those moving parts as well, that would be very useful.

Yes. Thanks, Iain, for your questions. Happy to take them. So starting with the reserve resiliency and to start with an indication where -- and as said, this is a preliminary estimate, our own estimate. So in May, we will, as usual, give you the result of the Willis Towers Watson review. So this might change a bit, but we would lie at above 8%, including the risk adjustment that we also book as kind of a prudent reserve in addition to the loss reserves. And as said, and you're right, of course, in a very attractive and good market environment, we would consider to add a bit more to reserve resiliency and looking for the cycle to come, this might then go down. And we are, as also indicated before, happy to -- when the time might be -- when it might be necessary in a given time to use some of the resiliency. So we don't have a limit there. So if 2026 is according to plan, there might be another addition. But as I said, it's quite early in the year. So let's see where we land in the end.

And Iain, just to add to that, don't take the realized losses in the investment portfolio of EUR 600 million, not as an indication that we have reached the ceiling, as Christian said, it's more to have both in the toolbox, and we actively use both as indicated in the Investors Day, and this is also the fact going forward.

Absolutely. And elaborating a bit on the solvency ratio. So the operating capital generation at around EUR 3.7 billion is clearly reflecting the very favorable margins and the new business. You could see this also in the CSM development, especially in the new CSM buildup. Of course, the reserving actions are also reflected here. So in the fourth quarter, the development might not be as positive as you would expect just from the running business. And the reason is exactly that under solvency, the full model update and the update of the reserving view is done in the fourth quarter. So it's a bit more pronounced building up the prudencny here reflected in the operating movements in the solvency ratio. And of course, there is also a higher foreseeable dividend as we increased. As we also talked about substantially, the dividend that has to be already to be reflected as foreseeable dividend in the solvency ratio, and we talked about this also earlier, looking at the 12 months movements. We also repaid the EUR 500 million hybrid bond in summer. So putting this all in the mix, I think that's a good explanation for where we stand at year-end 2025.

The next question comes from Chris Hartwell from Autonomous.

So I just wanted to come back to the question around the life insurance service result or reinsurance service results. I understand what you're saying about maybe being slightly sort of conservative. But can you sort of just elaborate a little bit on the onerous element that we saw in Q4? I mean that was much, much lower than what we've seen in previous quarters. So that's sort of question number one.

And I guess a little bit of a random question number 2, just going back to last January in the California fires. I noted in your -- in the Q4 movements, the gross loss has gone up, the net loss has gone down. I wonder if you could sort of comment a little bit about -- a little on that. But moreover, sort of thinking about the prospects for subrogation, which I guess is a subject that's gone a little bit quiet, but there are still companies in the U.S. that have a substantial subrogation benefit already embedded into their own loss assumptions. So I was wondering sort of what your latest thoughts are on that? And if so, sort of any likely timing of when you would expect to see any of that loss reserve reversed?

Yes. Maybe let me start with your first question on Life & Health with the loss component. I mean the main component of the loss component as we were writing, it is really coming from the Greater China morbidity business. And as you probably recall, it's -- we took the biggest hit up to the third quarter. This is why, in the fourth quarter, we had quite a little add-on to the loss component. The way we look into that, and I showed it at the Investor Day, you remember, we're looking into all these businesses throughout the year, and we decided to look into the morbidity business, but -- in Q3, mainly in Q3, and that's where we had all these model changes and assumption changes. This is mainly the reason why we have a very little add-on on the loss component in Q4 because we didn't do too many analysis in the fourth quarter. That's all.

What you should look at is really, on an average, add-on of the loss component quarter-by-quarter. And that's what I was showing you last time. Remember in -- we were in Frankfurt, yes, sorry, I forgot about it. I think we said it's around EUR 80 million per quarter. So you end up more or less at the same level. And this is also our assumption going forward. We simply don't know where it's going to come from because if we knew it, we would have to take the hit already in principle.

And then on the wildfires, the composition of the loss has slightly changed over the year. So we are showing a little bit more from our ILS fronting activities, which is increasing our gross number. But as you know, we are not having any retention on this. So that's, therefore, not increasing the net position on the fires. And when it comes to subrogation in general, we are, of course, observing that situation, but our approach has been that we would only book subrogation when received by the ceding companies. And so from that point of view, we have not taken any general subrogation haircut when we look at that loss. And so hopefully, over time, there will be a little bit of an improvement.

The next question comes from Henry Heathfield from Morningstar.

Just a couple. On the investment yield, I was wondering if you could give us an update on the running and the reinvestment yield. And then kind of related to that, the guidance of 3.5% ROI for 2026 and then the remaining kind of EUR 1.6 billion of unrealized losses, is there a chance that we're going to see something similar to what we've seen in 2025 in 2026? And then on the risk capital for U.S. hurricanes, I just noticed there's a slight decline there, and I was wondering if that's kind of cycle management or something else?

Yes. Thanks for the questions. And to start with the investment yield. So the reinvestment yield is currently slightly above 4%. And the book yield is just shy of 3.6%, of course, also driven by the realization actions, and we talked about that already in the Investors Day a bit more in detail. Looking at 2026, I mean, I feel quite confident with the 3.5%, but there's a lot of dynamic in capital markets, and we need to see how it develops, and therefore, it's far too early to talk about additional actions. Of course, the optionality to realize even more hidden losses from our investment portfolio is always there, but it's far too early to really consider this.

And on the capital allocation for U.S. hurricane, I don't have the full answer for you on that question. I mean we have grown in U.S. hurricane. On the other hand, we have grown other country -- other combinations more quickly. So therefore, I would assume that we have positive diversification effects. We also did buy a little more retrocession on the nonproportional covers last year. And then, of course, you have to be mindful of the exchange rate development. So I would assume it's a combination of the 3.

The next question comes from Ben Cohen from RBC Capital Markets.

It's really a question and a clarification, both on the Life & Health side. The first question was just in terms of how you see the competitive environment going into this year in terms of, I guess, in particular, the new lines that you're looking to grow in? And the second, the clarification was, coming back on the CSM, the change in estimate number, it was positive for the full year, but it looks like, in the fourth quarter, that has -- that positive element has come down. So could you just describe was that a negative element relating to a longevity charge? Or is there something else going on there? Or have I got it the wrong way around?

No, no, you got it the right way around, absolutely. There was a negative element in the fourth quarter on the CSM, which is a change in estimates and this negative element came from the U.S. I mean, as I told you before, we're looking into our models. We're refining our models every now and then, and we're fine-tuning them. And usually, when you do that, in big portfolios, these model changes, they have positive and negative impacts. And it happens just that in the fourth quarter, in the U.S., we -- our model changes that we have then had all a negative impact. It is not that we're changing our view on the assumptions on mortality in the U.S. at all, by the way. It is really just the fact that we had 2 or 3 model changes that we implemented in Q4 with a negative impact on the CSM. So there was no problem at all, by the way.

On your second question. The first question, the competitive environment on the lines where we think that we can grow, I mean, the life and health market is competitive. And I don't want to tell you again what I was telling you many, many times in the Investors Day. It is competitive. Where do we see potential to grow? We see potential to grow where we're not already market leaders. And I would say this is in the traditional business in the U.S., U.K., we see potential to grow, but there is obviously competition. We see potential to grow in longevity outside of the U.K. for what I just told you before, U.K. is highly competitive. And we're probably a little bit less competitive than our competitors over there. So longevity out of the U.K., we see possibilities to grow. And then last but not least, we also see possibilities to grow in financial solutions, in particular in Europe. These are the areas where we do see potential to grow. But I tell you the truth, life and health is competitive because we're competing against professional reinsurers. There's only a handful of them. The market is small. So we will see how it goes. But I'm positive.

The next question comes from Vinit Malhotra from Mediobanca.

Great set of results. So one question is more on the dividend and the signal it sent. And the other question is on P&C regrowth. So on the dividend, you mentioned, Clemens, the 40%-odd growth, which is obviously not a new strategy since the last few months now, but the growth you said shows your confidence about future earnings. Now just from the outside, I mean, I can realize the 82% underlying combined ratio is pretty strong, and we've talked about that. But -- so given where the cycle -- pricing cycle is, the terms and conditions movements, the market dynamics and reinsurance, I mean, how should we think about this strong dividend growth? And what you're trying to tell the market about -- or what you're trying to tell your equity investors about the state of the market and Hannover Re's position in it? I presume it's positive, but just a little bit more on that would be very helpful.

Second question, as I said, was on growth. So when I see, say, 9%, 9.5%, 10% kind of growth coming in on an underlying basis a few quarters and also ex FX in 4Q, and I'm just wondering if your kind of mid-single digit, excluding structured ambition target for '26, could that be a bit conservative? Could that need a bit of review given how strong 4Q was? So just on that, please.

Vinit, I'll start probably with the first one on the dividend and then let Sven complement on the outlook for P&C. So generally, and probably alluding to Kamran's question on 55% -- well, in this case, 57%, why not more? And that is basically the reason that we still believe that this is an attractive market environment, both in P&C and that we have also a healthy pipeline on the Life & Health side. So it's really that view. I mean, you will not see us chasing top line. We're clearly committed to our underwriting -- to our disciplined underwriting approach here, but it's more that we still consider this to be an attractive market environment. It's still a rational market.

As you know, we were quite happy with the outcome of the 1/1 renewals overall. So there is plenty of growth out there. We do believe, and just to reiterate, Vinit, that our lean operating model, which does come with the lowest cost ratio of 3.2%, that it gives us room to grow our book to capture business opportunities even in a more challenging market pricing environment. So that gives us a competitive edge where we do believe that we still can gain market share. And that's basically all feeding into our thinking about the dividend policy that clearly we didn't want to change now from October. So no need there, and we will see how the year plays out. We will always, of course, consider that in light of the dividend for the 2026 year.

When it comes to the growth guidance on the P&C side, Vinit, please remember that this is a 2026 number. So with us renewing 60% of our business at 1/1, we achieved a growth of 3.3%. We were talking about the clients basically taking the savings and keep them to themselves. They are not translating this at this moment in time into more buying, lower buying, wider buying. So from that point of view, we would still stick to the mid-single-digit range we have given for the traditional business for the year. Over the cycle, we would be more bullish than that, but we are guiding only for 2026 in that respect. So from that point of view, you should not expect us to change the guidance.

The next question comes from James Shuck from Citi.

I just wanted to ask firstly about Russia-Ukraine reserve additions and I think some other large losses that were included as well. I mean it looks like you've added at least EUR 1 billion in 2025. So just keen to know if any of that has gone into the resiliency reserve of EUR 3.2 billion?

Then in terms of the P&C new business CSM outlook for 2026, you've obviously got a lot of the business on your books already, and you should have line of sight of the outlook for that new business CSM, including kind of reduction in retro as well. So are you confident that the 2025 number, you can grow that in '26?

And then finally, if I may, and I'll try and phrase this as best I can. But I'm just interested in kind of not so much how AI can enable you to do lots of things internally and drive efficiency. I'm more interested in how AI and hyperscalers, for example, are kind of redefining other industries and that's likely to gather pace over the coming years. What kind of impact do you see that having in terms of the kind of provision of integrated risk solutions from reinsurers?

Well, let me start with the first 2 questions, James. So on the CSM development, I mean, you've seen the growth of 3.3%. The corresponding risk-adjusted rate reduction we were reporting is minus 3.2%. So that would imply that the CSM development, of course, neutralizing currency effect should be relatively stable year-on-year when it comes to the new CSM generation.

On Russia-Ukraine, I didn't fully get your question because the movement we are talking about here is outside of what we are talking about when it comes to the EUR 700 million on the resiliency build side. So as I said, in the fourth quarter, we added a low triple-digit number to this claims complex, but maybe you can repeat the question if that does not meat...

So I mean, across the year, you've added EUR 1 billion, at least EUR 1 billion for Russia-Ukraine. And I was keen just maybe to know if any of that was included in the resiliency reserve? Or is it effectively all claims related as opposed to increased conservatism on IBNR?

No, thanks for clarifying that. And we have not added EUR 1 billion in 2025. We have added a mid-triple-digit number, but far away from the EUR 1 billion on a net basis and none of this is forming part of our resiliency numbers.

And then I'm happy to start on your AI question, but I'm also inviting colleagues to add. I mean, when it comes to P&C business, I mean, you know that the time horizon of what we are doing is 12 months. So from that point of view, of course, we are following how AI is changing industries and what may that mean from a risk landscape point of view. But given the time horizon of our business, we don't have to look 5, 10 years into the future to come to decision-making today. So things clearly will change and the risk landscape will look a little different. Whether that is translating into other products that we can sell our clients, I would say time will tell. But of course, our clients, the insurance companies, expect us to be a strong partner also when it comes to having a good understanding of what AI is all about and how we can introduce that into our discussions and/or products if that is what is required.

I mean I can add on. I think it's going to change the insurance landscape, probably much more than the reinsurance landscape. For us, there is an add-on or, let's say, a positive value of AI, which is that we can ingest unstructured data much easier. This improves, obviously, our modeling. This improves also our ability to do real-time monitoring of our business and makes us simply much, much better, I'm absolutely convinced. So AI has a positive impact on our risk management and risk selection, definitely. But I invite also my colleagues. I'm looking at Clemens and Christian.

James, any specific question on what we are doing on AI? I mean, as Sven said, we are in very close contact with our clients on this, what they are doing on AI, both in their existing portfolios, on new products. I mean you would have seen some of the sort of second order impact on data centers, for example, or on cyber. Clearly, I mean, that will have an impact on some of the existing products. But as Sven said, this is an ongoing topic. And for our operations, I think we spoke about that briefly also on the Investor Day. I mean, we look at AI as clearly -- yes, it's clearly, as Claude alluded to, it will be a game changer in some of the areas, but we don't do AI for the sake of it. We try really to integrate AI into our digital journey. Clearly, as you mentioned, James, on the operational side, it gives us, given that we have the focus on reinsurance, a bit of an edge to really try to implement AI as part of our digital journey when it comes to infrastructure, data, et cetera. And I think the amount of homework that one has to do before you actually can effectively use AI is probably underestimated. So doing that foundational work is very much top of mind at the moment.

[Operator Instructions] Next question comes from Will Hardcastle from UBS.

Just coming back to the reserve provisions. You mentioned they were in there for U.S. casualty and Ukraine. It sounds like, to your answer to James, none of the Ukraine reserves have gone into that resiliency addition. But presumably, most of the U.S. casualty ones has, it's in the EUR 700 million addition year-on-year unless it's coming in the 2025 underwriting year. Or are you saying because it's adverse news, it's not boosted it? And then when the reserve data comes out, will the Ukraine addition be shown in aviation? And the reason I ask is that, that would put the [ '22 ] ultimate loss ratio at more than, say, 200% for that line. And I had thought in that reaction there have been a steeper payback. I'm just sort of trying to wonder why it hasn't happened.

It's a bit of a stretch, but second question. In your projections, it sounds like there's potential for more resiliency build in 2026 given your guidance. And yet you've got a really strong solvency. You've got really strong reserves. At what point do we see the profits that's really underneath the bonnet is really what I'm trying to get to?

Yes, I'll start with your first line of questioning, Will. So when it comes to Ukraine, I mean, as I said, none of the increases form part of our resiliency build. So this is our best estimate what we are talking about here. Not all of the increase, but quite a bit of it is in the aviation line of business. So when you look at it from a segment loss and combined ratio point of view, I'm afraid your assumption is correct. The reason why this has not yet translated into more payback also has to do that when you look at it from a reinsurance point of view, relatively little of that loss is yet paid and it took ceding companies a relatively long time to present their loss position. So from that point of view, we are in the midst of having those discussions with clients. But on the overall loss number, to just give you an idea, only 30% of this is paid for our portfolio at this stage. So still a relatively low number. So that maybe is an explanation on Ukraine.

When it comes to U.S. casualty, I mean, as I said, it's -- the development was spread between moving the best estimate, moving to more conservative actuarial method and building prudency. So therefore, it's in the various buckets, it's not all in the resiliency. Partly it has ended up in resiliency, but the bigger part is just the best estimate movement including the more conservative use of actuarial model, which we have not put towards the resiliency bucket. And by the way, it's also spread between older underwriting years, but also the younger underwriting years. So therefore, part of that development is also in the current service result.

Well, I'll take the question on the resiliency build. And thank you for the question because it gives us the opportunity to clarify probably how we think about the P&C earnings 2026. So the way we've looked at the combined ratio and when we say we are going to build further resiliency, it was just a reiteration of the fact that despite it might be a bit more challenging market environment, we will and have not changed our approach to our initial prudent reserving on the P&C side. Hence, in absolute numbers, with the growth of the book, we will build further resiliency in relative numbers, and Christian alluded to it, the 8 point plus, we don't know exact number yet, but it's in relative terms, if you include the risk adjustment, it's above 8%. We feel comfortable with that level.

Same is true for -- and to reiterate again on the investment side, it's more an opportunistic toolbox that we are using. And I mean, we are fully committed to deliver on the guidance 2026. Having said this, if we have an extraordinary good year like we had in '25, we are also willing to adjust or lift our guidance as we did for '25. So don't take this as an absolute message, more in the sense of we will see how it goes and how the years -- how 2026 plays out, and we'll make a final decision in Q4. But as always, we will be very transparent about it.

There are no more questions at this time. I would now like to turn the conference back over to Clemens Jungsthofel for any closing remarks.

Yes. I think we've covered everything. I don't want to reiterate the message that -- I mean, this was not only an extraordinary good year 2025, but I think we've really taken the opportunity to build a very, very rock-solid balance sheet to increase the resiliency further and particularly to be able to show and demonstrate further earnings growth in the future. Thank you all for your questions, and have a good day. Stay safe and stay healthy. Bye.

Good morning, everyone, and welcome to our call presenting the outcome of Hannover Re's 1/1 renewal dates and information on the P&C treaty reinsurance book. And today's speakers will be Clemens Jungsthofel, our CEO; and Sven Althoff, our coordinator for the P&C business.

And with that, I hand over to you, Clemens.

Thank you, Karl. Good morning from snowy Hannover. So a couple of overall messages to start with. The January 2026 renewals were characterized by a continuation of the trends observed in 2025. So the good profitability of the reinsurance sector is the main driver for an increase in reinsurance capacity. Market participants continue to see reinsurance market as an attractive place to deploy capital, and this has accelerated competition and price pressure heading into the January 2026 renewals. However, the competition is, I would say, rational. Rates are softening from attractive levels. Reinsurance rates remained risk adequate on a broad basis.

So, before looking at our renewal results, I'd like to comment further on the general market environment, which you will find on Slide 4. One element of this market cycle is clearly that competition is mainly between incumbent players. Apart from inflow in the ILS space, we are not observing any meaningful inflow of new capacity into reinsurance markets. Retained earnings are the main driver for the increase in reinsurance capacity. Demand for reinsurance increased as well, but less pronounced than anticipated. Inflationary pressure has stayed on lower levels. The overall healthy capitalization of the primary insurance sector is another factor.

In several instances, clients buying approach had the target to reduce reinsurance spending instead of buying more limits with an unchanged budget. On the one hand, this was negative for the overall demand. But on the other hand, this clearly confirms that reinsurance pricing is not at a level where clients would buy more opportunistically.

Altogether, the described supply-demand dynamics resulted in increased competition, which mainly centered around price negotiations, so terms and conditions as well as attachment points stayed largely at the healthy level achieved in the previous hard market years. Furthermore, the willingness to provide capacity for aggregates covering frequency losses remained muted.

Reinsurance price changed varied by region and line of business. So most significant price reductions could be observed in property, and of course, in particularly property cat business as well as parts of the specialty markets. These trends were further accelerated by the overall benign large loss situation in the second half of 2025. As a reminder, there are areas where rate increases in the years '23 and 2024 have been most significant.

Prices are coming down from attractive levels. The price development in other lines of business has been more stable. Pricing in U.S. casualty, for example, was overall flat. This confirms that pricing remains rational. Historic loss developments or individual client performance has been reflected in the price setting. So much in our view on the market. So reinsurance markets remain attractive and do provide Hannover Re with continued profitable growth opportunities.

So this brings me to the results of our renewals on Slide 6. We are satisfied with the outcome of the general renewals. The quality of our portfolio remains strong. Our long-standing client relationships and our consistent approach towards clients resulted in favorable demand for Hannover Re's capacity. As explained, we continue to view the level of pricing as adequate, providing us with an expected return at or above our cost of capital. This also means that the necessity for active cycle management remains limited in the current market environment. Furthermore, it's particularly pleasing that we could largely defend or even increase our shares on reinsurance programs. We clearly can say that we are perceived as a preferred business partner from our clients even in an increasingly competitive environment. In addition, our broad client relationships resulted in clients offering us attractive participations on new business coming to the market.

For our portfolio, this led to an overall growth in premium volume of 3.3%. Our strong market position and the growing underlying portfolios support the expansion of our proportional business. With regards to our guidance for the financial year 2026, this 3.3% growth supports a target achievement in the mid-single-digit range.

Risk-adjusted pricing for our traditional treaty portfolio was down by 3.2%. The price decrease for proportional business was less pronounced than for the nonproportional business. The quality of our P&C portfolio remains strong, and we continue to feel comfortable with our combined ratio target. Needless to say that we have prepared ourselves to deliver on earnings growth in the following years, but I'll touch on this a bit later.

Last but not least, we have successfully renewed our retrocession program. The overall structure remains unchanged. In a softening retro market, we've purchased an increased level of retrocession at improved pricing. Altogether, our renewals were successful, both in terms of prevailing good quality of our portfolio and the growth we captured in a competitive market environment.

I'm now pleased to hand over to Sven, who will dive into the specific geographies and segments. Sven, over to you.

Well, thank you very much, Clemens, and a very good morning also from my side. With EUR 10.2 billion, we have renewed 61% of our traditional treaty reinsurance business at the 1st of January, which equates to roughly 38% of the total P&C business in force. With the exception of the EMEA region for which 1st of January is the main renewal date with more than 80% of the business renewing, there are still significant renewal dates for the other regions and the specialty business later in the year.

With the 3.3% growth that Clemens has already mentioned, we continued to grow in an attractive market environment. The growth is coming from two main components. Firstly, when you look at our new and restructured business versus the business we have canceled and restructured that gave us an additional income of EUR 160 million. But also on the renewed business, we could show an overall growth of 1.7%. On the renewed business, the overall risk-adjusted price change is a minus 3.2%, but there is a positive effect from the underlying volume of the transactions and the development of our shares, which is overcompensating the change in price also on the renewed business. When it comes to our shares in general, you can see in the appendix that we grew our shares in the nonproportional business. The slight reduction you can see in the proportional business mostly results from lesser sessions of the ceding companies where normally, our share in the remaining cession has increased after that reduction in shares.

The next two slides gives you a little more detail of the development in our reporting lines. So, on Slide 10, you can see that the growth areas are mainly driven by the Americas with 6.5% and parts of the specialty portfolio, which grew by 5.8%. However, all reporting lines contributed positively to the overall growth rate of 3.3%, which is a good indication that we continue to have a very strong and good diversification in our overall portfolio.

The growth was balanced between proportional business growing by 4.2% and nonproportional business. The risk-adjusted rate decrease on the nonproportional side was mainly driven by property catastrophe business and parts of the specialty portfolio. In nonproportional, we started to see a few limited areas where we decided to cut back our shares due to the price change. But overall, as the portfolio came from very attractive levels, the quality of the portfolio continues to be strong and also allowed us to grow on the nonproportional side.

When you look at Slide 12, you can see that the profitability of the nonproportional portfolio remains at an attractive level above the long-term average. As a reminder, on this slide, we are showing the risk-adjusted rate changes as reported at the time. We are not bringing the historic numbers to today's view on risk. But you can clearly see that with the last two underwriting years and the minus 2.8% last year and the minus 6.4% this year, we are nominally below the very strong improvements we have seen in the years '23 and '24.

So, let me come to a little more detail in our reporting lines, starting with the Americas. As already said, the Americas grew by a total of 6.5% despite an overall risk-adjusted rate movement of minus 4%. The development on the pricing side was very bifurcated between property and casualty. We saw an increased level of softening on the property classes. Casualty, on the other hand, continued to be stable or even slightly improving. The competition was on price only. Terms and conditions are stable across the regions and retention levels were at last year's level.

In EMEA, we could maintain the profitability at a good level and safeguard our strong market position despite a competitive environment, particularly also in nat cat. The overall price reduction was a minus 2.9%. We could take advantage of diversified growth opportunities across the regions. On the other hand, some of our larger clients decided to increase their retention levels, which translated into the growth being more muted than the average with 0.4% growth. Like in the Americas, the renewals focus mainly on price discussions with structures and terms and conditions remaining largely stable.

In APAC, we could grow by 1.9% despite a reduction in risk-adjusted rate of minus 2.8%, but we could use the strong client relationships to take advantage of some growth opportunities, particularly also coming from those parts of the Asian market, which did see losses last year, and those losses translated into increased demand for natural catastrophe capacity. However, in a few of the markets where we did not see the losses, we also decided to reduce our positions somewhat due to the combination of weaker pricing and at times, also widening of terms and conditions.

On the specialty side, we have seen a very diverse picture in the various specialty classes, leading to an overall risk-adjusted rate reduction of minus 3.2%. This was ranging from positive numbers in, for example, aviation to negative numbers similar to the natural catastrophe business in Marine. Particularly pleasing was the development in credit, where we could show double-digit premium growth in a still very attractive market environment.

In marine and aviation, we have overall reduced our volume somewhat on the aviation side. We have seen overall stable pricing with some increases on the nonproportional business. But in Marine, the pressure on rates was higher, which subsequently also increased in us reducing positions in a few instances.

On the agricultural side, overall, we could continue to grow at a continued good quality in particularly the major markets like Brazil and in the U.S.

Also in digital and cyber, we could slightly grow our position and defend our market shares and also had some limited opportunities for new business. in cyber, particularly also on nonproportional structures. So, overall, this led to a good level of growth with 5.8%.

For the sake of completeness, let me also spend a few words about the other P&C business, starting with the natural catastrophe business in total. The natural catastrophe business is included in the regional reporting you have seen in the previous lines. But if you look at it globally, as Clemens already said, I mean, we had ample capacity in the market, leading to more supply than increase in demand. This translated into risk-adjusted rate reductions between 10% and 20%, depending on the loss history of the regions. But overall, the natural catastrophe business was still adequately priced, which allowed us for somewhat diversified growth whilst maintaining underwriting discipline by also reducing capacity where required, for example, in Asia, as already mentioned.

Last but not least, we can also report that our new sidecar vehicle, Hannover Re Capital Partners was successful in attracting first investor and started writing some business already at the 1st of January renewal.

In structured reinsurance, we could again broaden our portfolio based on our disciplined underwriting and the strong alignment with our clients when it comes to their requirements. The positioning we have on the traditional side helped with internal cooperation to secure renewals and also find new opportunities. In parts of our incoming structured business, we could see a decrease in cession rates on some existing larger contracts overall impacting the volume despite the very favorable demand for the new business. In general, we are very positive about the pipeline for the remainder of the year.

On the facultative side, we could see and observed the similar trends compared to the treaty business. So in the property classes, in particular, we had abundant capacity, which led to increased retentions and the rates softening, which was most pronounced in property business. Nonetheless, overall, we could renew most of our portfolio with overall risk adequate rates and could also find some new business opportunities. As a side note, we continue to see positive increases in risk-adjusted rates for U.S. casualty business.

This brings me to my last slide being our retrocessional program. We had strong support for our retrocessions. Overall, no change to our structure on the property side. We continue to buy our two nonproportional towers, the one being event, the other one being aggregate. And of course, we have increased -- we have renewed our proportionate K quota share was our ambition to renew a similar cession rate compared to the previous years, which is in the low 30s due to the underlying growth of the portfolio, this meant that we had to increase the capacity behind the K vehicle, and you can see the numbers on the slide.

What we have seen on the incoming business also applies to our retrocessional business. So there was improvement in pricing. both on the proportional and on the nonproportional side, in line with the inward market trend, which led us to buy slightly more limit on our nonproportional towers. We have also placed a new parametric earthquake cover, which at this stage is coming with a relatively small limit, but it's a nice addition to our overall property buying. What was particularly pleasing is that all placements have seen an increased number of participants, which, of course, is helpful from a diversification point of view when we think about future renewals.

And with that, I hand over to Clemens.

Thanks very much, Sven. So, let's move on to our guidance for the financial year 2026. As the outcome of the renewals was broadly in line with our planning for the financial year 2026, there is no need to change the guidance we have provided in November 2025. The prevailing strong quality of our P&C portfolio should bring us in a good position to deliver on the combined ratio target of below 87%. And as explained at our analyst call in November, the underlying combined ratio in '25 is running well ahead of the 88% target and the new 87% target for 2026, and that clearly leaves room for some price reductions in '26. Therefore, the developments in the January renewals do not contradict our underlying assumptions in any way.

To complete the picture, the target achievement is not linked to a change in our prudent initial reserving approach. But the option of adding less to resiliency reserves compared to '25 adds even further confidence in the ability to deliver on target. Furthermore, I can confirm the targets for life and health and investment returns. Hence, our group net income target of at least EUR 2.7 billion remains unchanged as well.

As long as the profitability of the sector is healthy and large losses remain broadly within expectation, we anticipate a prevailing competitive market environment in P&C reinsurance. In such a competitive environment, it is most important to have competitive advantages. Our lean operating model with lower administrative costs than our competitors will clearly help us to provide us with business meeting our margin requirements. Combined with our pure-play reinsurance model and our strong client relationships, it will support further growth. So we are entering this softening market phase with a very strong or let me say, an exceptionally strong balance sheet. If needed, this provides further comfort in our strong ability to manage volatility and to grow earnings over the cycle. I'm convinced we have the right recipe to remain successful over the coming years.

Now let me take a first glance at the preliminary figures for the 2025 financial year. Full details will be disclosed on the 12th of March. So, reinsurance revenue reached EUR 26.8 billion, which is a currency-adjusted increase of 4.7% compared to the previous year. Taking the NDIC, so the non-distinct investment component accounting effect into account, our growth in property and casualty reinsurance was well ahead of our 7% target. Our group net income of EUR 2.64 billion is fully in line with our increased guidance and represents a strong earnings growth of about 13% compared to the previous year.

Operating performance stood at EUR 3.5 billion with both business groups performing well. P&C contributed EUR 2.4 billion and life and health contributed EUR 0.9 billion. In P&C Re, we have benefited from the strong underlying profitability of our portfolio, positive currency effects and an overall benign large loss environment.

We have used this as an opportunity to add to our reserve resiliency and to actively realize hidden losses in our fixed income portfolio also in the fourth quarter. We will provide full details in March, but with the actions taken in '25, we have further improved our ability to deliver on earnings growth in the coming years. So we've met our group net income target in '25, and we are very well positioned to repeat this in 2026.

I will now open the floor to your comments or questions.

[Operator Instructions] The first question comes from the line of Shanti Kang from Bank of America.

So was just curious what surprised you about the renewals this year, and you cited that 3.2% rate decline today. I'm just curious to help us understand where you see margins sitting relative to your hurdle rates? Are there any lines where that spread is really narrowing that we should be thinking about?

And then on the nat cat rate declines that you cited down between 10% and 20%, do you guys have a new kind of clearing price that you're thinking about? And how sensitive is your appetite for growing that if pricing weakens further at midyear renewals?

Well, when we talk about surprises, Shanti, I guess we were expecting a little less pressure on the nonproportional pricing. And at the same time, we were expecting some more demand coming from our ceding companies, either through slightly reduced retention levels or additional buying on other property products. So, in a nutshell, the pricing or the pressure on pricing was a little stronger than expected. but it didn't translate into additional buying. That would be the main surprises.

When it comes to the question of excess profitability, I mean, as we have highlighted, there were only a few areas where we had to start reducing our positions. So, from that point of view, the quality of the portfolio after the renewal is still very sound. No particular area to highlight, which is under pressure on a forward-looking basis. But of course, with another round of reduced prices on the nonproportional side, the level of excess margins is a reduced one.

On the nat cat side, we have a very diversified picture, which is pleasing. So overall, despite the pressure in pricing, we could still find good excess profitability in quite a number of the areas, and we were willing to take advantage of those and clients were willing to give us more limit where offered. On the other hand, and I mentioned Asia as an example, there were also pockets where we felt that we should reduce our positions. But overall, the growth we are talking about comes from a globally diversified basis with no particular region being very overweight in this.

And on a forward-looking basis, our approach to nat cat business and how we look at profitability has not changed. So, from that point of view, as explained during the Investors Day, we have identified the nat cat business as an area of structured growth given that we feel that we are still underweight from a market share point of view, but we will grow when we find the profitability. And if we don't, we are also happy to consolidate.

The next question comes from the line of Andrew Baker from Goldman Sachs.

First one, so just in Germany, you highlight the impact of increased retention at some of the larger clients. I guess, do you have a sense of what's driving this? Is there anything to do with any of them developing their own sort of in-house reinsurance structures? Or is there something else going on there? And I guess, why do you see this happening in Germany and not elsewhere? Any views on that would be really helpful.

And then secondly, on structured re. I know you previously flagged the sort of reduced sessions and but a strong pipeline and you're sort of saying the same things today. Do you have -- now that we're into 2026, do you have a better line of sight into how we should be thinking about premium growth for 2026? I know previously, you've said sort of lower than previous levels, but should we still be thinking positive? Or should we be expecting premiums to decline on the structured side in '26?

Yes. Thank you very much, Andrew, for those questions. When it comes to the German business, it was a combination of factors. So with the underlying profitability in their business, clients are naturally more comfortable with their portfolios also from a profitability point of view. And this, at times, did translate into higher retention levels. But you also mentioned internal reinsurance vehicles, and we have also seen that development in the German context. So it was a combination of the two. And the only reason why we have mentioned it in the EMEA context is that this was one of the drivers why the growth in EMEA was a little more muted compared to the global growth number.

When it comes to the structured business, yes, I mean, you have already repeated our main messages. Given that the reduced sessions from ceding companies are coming from our bigger existing client relationships after the 1/1 renewal season, we are talking about a somewhat reduced premium volume. But as I highlighted, the pipeline is looking strong, and it's only the beginning of the year. And structured reinsurance is not necessarily so 1/1 focused. So from that point of view, we continue to be optimistic for the remainder of the year without me wishing to give you a number for guidance.

We now have a question from the line of Will Hardcastle from UBS.

You mentioned that you're happy to write the business because it's at or above cost of capital. But where do you think these renewals lead yourselves relative to cross-cycle return on capital? I'm thinking on an economic basis, not accounting. And I'd love to know where you think it leaves the industry in that regard.

And something of a bit of a follow-up. while there still seems to be plenty of headroom between your guided combined ratio and, let's say, the underlying adjusted for these pricing decreases still, there was something similar yesterday as well. I guess, should we not assume a base case of similar price decreases next year and likely further T&C reductions as a result? I guess maybe put another way, what stops or slows this rate of price decline from here?

Well, when I look at the 1st of January renewals, well, I think the 1st of January renewals will be accretive when it comes to cross-cycle profitability. So, given that all of our business, which we have renewed is still making cost of capital or even above, it should be a year where we are -- given the guidance we have given, hopefully, we'll continue to build balance sheet strength, maybe not at the same level like we have done in '24 and '25. But in our view today, we should still be able to talk about the underwriting year 2026 as one that helped building resiliency, if that is answering your question.

When it comes to the profitability for the financial year, I mean, even though we were slightly surprised by some of the dynamics in the renewal season, the when we were reflecting on our guidance for 2026, the development was nonetheless baked into our [ 87% ] number. So, from that point of view, there is no reason to change.

And when it comes to your question, okay, what will stop the market going in that direction. Of course, volatility is the answer at the end of the day. And the industry enjoyed a good number of quarters now with very strong profitability, which translates into accumulation of capital and into the desire to write more market share.

As long as the profitability is at such a high level, this trend will continue. And then it depends on volatility, whether that comes from major losses or whether it comes from capital market volatility in order to change the sentiment in that respect.

And lastly, when it comes to that question, I mean, with our lean operating model and our cost structure, we feel comfortable that we will be able to write the business profitably for longer compared to the average peer.

The next question comes from the line of Kamran Hossain from JPMorgan.

Two questions from me. The first one is on the direction of travel for the remainder of the year. Just really intrigued kind of following on from Will's question. If we look at how things have developed this year, prices came down a bit more than they did last year, and that was probably inevitable given kind of what was going on in the industry, the amount of money people have made. When I think about the upcoming April renewals, last year, you saw double-digit declines in Japan or I guess what [indiscernible] did on a reported property cat basis. What do you think the direction of travel should be for something like Japan, where you've already seen that kind of correction happen last year?

And the second question is just coming back to the kind of discussion around like guidance and mid-single-digit growth. From your comments, it sounds like you're a little bit surprised on the lack of kind of new or increased demand out there. How should we get comfortable that the mid-single-digit constant FX, excluding structured is still the right number to think about?

Well, when it comes to the remainder of the year question, we expect that the remainder of the year is rather similar compared to what we have seen 1/1. You're absolutely right when you are talking about Japan, in particular, that the Japanese renewals at 1st of April last year saw more of a reduction in rates compared to the 1/1 renewals. So, from that point of view, we do expect that this will be taken into account when it comes to the pricing for this year because in relative terms, it comes from a slightly lower base. But outside Japan or just in general, we would expect a rather similar picture compared to the 1st of January renewals also for the rest of the year.

When it comes to top line for the remainder, I mean, we feel we have a very robust portfolio. So, if our experience repeats itself, what we have seen at the 1st of January renewals, we will be able to grow where we want to grow. Our clients gratefully have been very good with us allocating our shares that we have offered to us. So if the quality of the pricing remains sound like we have found at 1/1, we're optimistic that we will be able to at least keep our position on programs, if not grow that.

I mean one way of looking at it, and Clemens already alluded to that, the lack of additional demand where we were expecting a little more should also be seen as a sign that the quality of the pricing we can achieve is seen by our clients in a way that it's not the time to start buying opportunistically now because it's still all at a sound level. So with their improved capital positions, this translates into keeping a stable program or even a little less at times. But overall, as we sit here today, with the starting point of 3.3%, we still feel positively that our guidance for a mid-single-digit premium growth for the entirety of the year is definitely in reach.

We now have a question from the line of Chris Hartwell from Autonomous.

I just wanted to come back to the question of demand. I mean you said several times, it was subdued. I was wondering how much of that could be related to terms and conditions that obviously still seem to be pretty tight. I think you said that that's been quite stable. And I guess if we're thinking sort of through the rest of the year and you're seeing clients have already banked good price reduction. I mean, how much pressure do you think there could be on terms? Or do you think the sort of reset that we've seen over the last couple of years could be a little bit of a recalibration by the reinsurance carriers? So that's the first question.

And second question, I just wondered if you could maybe say a few words on your strategy in capital partners. And I guess if we do think that the reinsurance market can continue to attract third-party capital, where do you think capital partners could be in a few years' time?

Yes. Thank you, Chris. On the terms and conditions, I mean, it's one of the ingredients, of course, which clients take into account when they're thinking about the demand for the product. And at 1/1, I mean, we have seen that it was more important for clients to improve the pricing rather than also do something on the terms and conditions at the same time, which would have a more stabilizing impact on the pricing if you are working on both sides of your placements. So it's difficult to predict what the future will bring. And so from that point of view, if this should be a dynamic where clients should feel that they should concentrate a little more strongly on improving the terms and conditions, then this will have an impact on how much price reduction they can achieve because obviously, both is taken into account when reinsurers are looking at the renewals.

When it comes to Hannover Re Capital Partners, I mean, we are very pleased that we did get this off the ground and could start transacting some first business. What we have done so far with the investor is writing a relatively traditional property catastrophe portfolio on a globally diversified basis. And of course, with the first success, we hope to find additional investors. And we will listen very carefully to what their risk appetite is. So from that point of view, it's not so easy to look into the future. We're optimistic that given our relations we have into the capital market, also from the other ILS activities we are doing that we will find more investors but where exactly their risk appetite is then needs to be discussed on a bespoke basis. So I would hesitate to give you numbers where we want to be in three or five years.

The next question comes from the line of Iain Pearce from BNP Paribas.

It's just on the growth of K I'm just trying to understand the sort of impact on some of the other financials. I mean, looking at the growth of K up sort of 30-ish percent year-on-year and a flat cession rate. Just trying to sort of understand what the impact we should read into that on potential P&L movements, particularly in the U.S. and also potentially cat budgets. And then also thinking, looking at the insurance revenue seeing K grow that much on a proportional basis, is this just -- is the growth in K from a sort of renewal point being offset by FX and pricing, and that's why you're not seeing that sort of implied growth associated with K come through the renewal number?

Well, on both questions together, I would say you will see hardly any impact from our K placement. I mean we kept the proportional cession the same, which means from the underlying growth we have in our nat cat portfolio, we will share that equally between our net position and the just above 30%, we are seeding with K investors.

The only reason why the capacity has grown behind K is the underlying growth of the business in '24 and '25, which translates into more capital being required to have the same default probability behind the K portfolio. But from a P&L point of view, we are not sharing more of our incoming business in relative terms compared to what we did in previous years.

If anything, and that would be a positive for our net position is we could improve the terms and conditions of our K retrocession when it comes to some of the commission terms.

We now have a question from the line of Vinit Malhotra from Mediobanca.

My first question would be on structured. I hear the comment on cession rate. But could you also please just share some thoughts if there was more competition. We heard one of your peers yesterday talk a lot about that line. So I'm just curious whether you're just seeing more competition as well in structured.

And secondly, just back to the cession rate. I mean, is it a risk that you could probably manage with a bit more give way on P&C, you think? Or I mean, obviously, the game would be to manage the risk such that the overall profits are better underwriting-wise. But I'm just curious just to hear your thoughts once again, please if you don't mind, how big a risk is this to your targets? Is it a trend that you're observing? And how do you -- what do you think is the best way to meet this new development, let's say?

Thank you, Vinit. So, on the structured side, yes, clearly, the market has become more crowded on the structured side. On the other hand, what we can report is that on those transactions, which have not renewed, see they just stopped buying. So we didn't lose that to competition.

On the new business, we could write, we can still write the shares we want to write. So, from that point of view, we don't feel impacted by the increase in competition. And most importantly, on those few of the bigger programs where the clients have decided to reduce their cession rate, our share of the remaining section in all cases has increased, which means that our relative market share in those transactions has increased rather than reduced. So, from that point of view, yes, it's a more competitive environment also on the structured side, but we are so far satisfied with our journey on that class of business.

When it comes to cession rates in general, we are not particularly concerned that what we have seen from our clients at this 1/1 renewal will necessarily repeat itself also in future years. I mean some of them have decided to reset retention levels given the underlying profitability of their portfolios and others may follow, but I don't see a general shift in a higher proportion of the business being remained net by our clients, more the opposite to the extent they continue to do well and grow their own portfolios, this over time will lead to more rather than less reinsurance buying.

The next question comes from the line of James Shuck from Citi.

First question was just to get a little bit more insight into the mid-single-digit growth again expectation for '26. Apologies for returning to this. What I'm doing is I'm just looking at the '25 underwriting year premium that's disclosed in the pack today. And that showed that traditional treaty was down 6% year-on-year, facultative down 8%. Your January renewal premium today is plus 3%. And obviously, the '26 year is going to be a blend of all of those things. So just help me understand and talk through how those kind of fit together to still give you confidence in that 3%. I appreciate you gave an answer early on, but it's really the '25 development earning through that causes me to question that a little bit.

Secondly, on the proportional rate increases, so down 1.7% at Jan. That was pretty flat versus the 1.8% last year. Americas though got a lot better in terms of -- I think it was down 2.8% last year and only down 1% this year. And the delta between the two must be specialty re that must have got a lot worse. So just keen to understand some of the dynamics on the proportional side, what's happened in Americas and Specialty Re. And then just finally, if I may, you've written about the sort of half of your new business CSM in Q1, rate up a bit, volume -- sorry, rate down a bit, volume up a bit. Are you able to give any indication of what the Q1 CSM has done year-on-year, even if directionally?

Yes. Let me start with the third question, James. I don't have an indication for a CSM number for you today, I'm afraid. So I guess we will be able to give you an outlook when we do our March earnings call at the earliest. So I would have to ask you for a little patience.

On your first question, I am not so certain where your negative premium numbers are coming from, particularly, as you mentioned them in the context of our 2025 year, where when Clemens talked about our preliminary numbers for the financial year, we were talking about ignoring the end effect for a second that we have come from a situation of good growth, definitely in line with our 7% target for the year. So that is the basis from which we are also starting the financial year 2026. So from that point of view, maybe you can clarify where the negative numbers you were referring to are coming from. And then -- yes, please go ahead.

I can hear that. So I'm just looking at Slide 8 and then the traditional treaty, this business by underwriting here. So Slide 8 shows traditional treaty EUR 16,702 million and I'll ignore fact for now, but the previous year same slide showed EUR 17,378 million. So that's down 6% year-on-year before the renewals.

Yes, that's, of course, solely currency effect. We, of course, have -- we adjusted to year-end currency numbers and the numbers you saw in last year's presentation, of course, was year-end 2024, FX.

Sure. That makes sense.

So that is a driver. And then on the proportional side, as you will appreciate, I mean, it's always difficult to talk about trends in proportional business because solutions are so bespoke to individual clients. So the reason why it's up and down also has to be seen in the historic context of the client profitability and what have they already achieved maybe when it comes to ceding commission increases in the last year's renewal and the sky is not always the limit. So, from that point of view, if you had success increasing your ceding commission last year, maybe it was flat this year.

So I don't see any overarching trend of the proportional side, but it's very much driven by the historic profitability of that individual treaty plus effect, what is happening in that underlying insurance portfolio when it comes to rate development.

[Operator Instructions] We now have a question from the line of Roland Pfaender from ODDO BHF.

I would like to come back to the specialty business. Could you maybe explain what is the attractiveness of the credit business? To my knowledge, insolvencies might peak in '26. So is it pricing or maybe other things you might elaborate a little bit on?

Second, digital and cyber. What is the overall appetite of Hannover Re for these business lines? Also knowing that cyber pricing is down since several years now. So what is your intention to grow here?

Yes. Thank you, Roland. On the trade credit side, as you're referring to that, in particular, of course, we are seeing the increased level of insolvencies, and this is partially also translating into slightly higher loss ratios for the industry compared to the previous years. But what is making this line very attractive for us is not only the historic levels of profitability in that class of business, which you have seen in previous reports, but also the fact that we are dealing with very sophisticated seeding companies that have very advanced methods in risk selection and building their portfolios. And despite the general increase of insolvencies for economies, this does not necessarily always translate in a one-to-one basis into deteriorating results for the insurance portfolios, given all the diligence our clients are putting into how they structure their portfolios. So, from that point of view, we are very comfortable with our incoming portfolio, and we're even more pleased that we could further strengthen our position in that market.

Cyber is a little bit more complicated. Yes, you're absolutely right. We are observing reductions in the insurance pricing for some time now. So when we look at the cyber renewal at the 1st of January, I would say on the proportional business, which is still the bulk of what we are doing, we can say that we have increased our position in some cyber quota shares where we are satisfied with the risk selection and the historic performance of those clients, but we have also been willing to deemphasize some other positions where we feel that the historic performance has not been so strong and where we, therefore, are more concerned about where the trend is going from an insurance pricing point of view.

And the other area to mention, but that will be a slower process as we are working on improving the diversification in the cyber portfolio, deemphasizing pro rata in general a little bit and building more of a nonproportional portfolio on the cyber side. And we have done some very good first steps, but it will take time for the weight in the portfolio from the nonproportional business to get stronger over time. So, overall, if we add it all up, cyber was a slightly growing class for us, but only with those clients where we were very comfortable with their historic track record and coming from the nonproportional side.

The next question comes from the line of Ivan Bokhmat from Barclays.

Three small questions for you, please. One, perhaps on the motor business. And sometimes you give color on the U.K. motor, sometimes on Germany. But maybe you can talk a little bit about how you feel the outcome of the renewals and the underlying business is developing for 1st of January.

Second question is related to casualty business. I think this is one where price pressure has been a lot less than property cat. But I'm just wondering how you think about the technical profitability in it overall? Is it deteriorating? Or is it more unchanged? Does that influence the attractiveness of the business in your view?

And the final question, sorry, it's a bit general, but we've been hearing over the past few weeks a lot about growing demand from certain insurers and certainly the brokers for tailored products related to data center CapEx, AI-related coverage. Just wondering if you have any general thoughts of how important that might be in 2026 for you? What's the upside for you and the appetite here?

Yes. Thank you, Ivan. On the motor side, yes, let me talk about Germany and the U.K. So the profitability journey on the German motor business is in place again after the rate increases done by the primary markets. And so from that point of view, we were happy to continue with our motor portfolio in Germany in general. In the U.K., the situation is slightly different. You, of course, remember that we had the change in the Ogden rate not that long ago given that we are now talking about a positive discount effect again rather than a negative. This, of course, translated into some reductions on the motor excess of loss portfolios, which we are writing. They were not so severe that we had to reduce our positions in general on those programs, but it was clearly leading to some softening for good technical reasons, but still softening.

And on the proportional side, we have seen less demand for motor solutions here. And one of the drivers for that was also M&A in the U.K. indigenous market.

On the casualty side, I would say that from a technical profitability, we can say that it is unchanged compared to the previous underwriting year according to our assumptions and risk assessment. And data centers, yes, that's definitely a very interesting topic right now. And we have a lot of discussions with ceding companies about the topic given insured values. This is certainly an accumulation topic where the reinsurance industry still needs to understand the accumulation aspects more fully. Most of the discussions we had with ceding companies were in the context of their normal property renewals where data center, data centers are part of the portfolio they are writing. And we only had rare opportunities so far, but that may change in the future when it comes to data centers as a bespoke reinsurance solution. We had one client engaging with us on that side. And yes, that was certainly a nice way of us growing with that client on their data center initiative.

Of course, on the facultative side, data centers are also presenting opportunities for us. But I was referring to the traditional treaty business when you asked about how much of an opportunity is that? Given that it's an accumulation risk, we, in my view, will see more bespoke opportunities in the future, but a lot will also just be catered for in normal property renewals.

We now have a question from the line of Jochen Schmitt from Metzler.

I have one question on the preliminary figures for '25. Reinsurance revenue increased by EUR 0.5 billion, while it was virtually unchanged in nine months. Could you provide some details on the development in Q4?

So, on the top line numbers, Q4 and for the full year, I'll ask for your patience. We will do all the details. We provide the details really in March. What I can say that the growth generally has been positive and not only in P&C, but also in life and health, and that has actually provided some tailwind for the growth also in the fourth quarter.

We have a follow-up question from the line of Vinit Malhotra from Mediobanca.

Sorry to come back. Just one very quick one. In the fourth quarter, which you just mentioned, the -- you also mentioned, I think, that the underlying combined ratio was very strong. Could you just comment a little bit just so we get a sense of where this strength could have been coming from? Is it just better P&C? Is it just better attritional? Just a little comment on fourth quarter underlying would be very helpful.

Yes, Vinit, again, we ask you for a little patience. We, of course, will disclose all the details in our March earnings call, as you would have expected, given the more benign cat environment in the second half of the year, we have come in below our major loss budget and that has translated in Q4 into us continuing to realize some losses on the fixed income side to also build some further resiliency in the fourth quarter, but also have some of the underutilized nat cat budget fall into the P&L. And so from that point of view, a very strong underlying technical results. But details, we will talk about in our March earnings call.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Clemens Jungsthofel for any closing remarks.

So, yes, as you can hear, we are satisfied with the outcome of the renewals. The quality of our portfolio remains strong. We look at the healthy pipeline for the remainder of the year, given our strong sort of long-term relationships, client relationships and also our consistent approach towards our clients that I hear in pretty much all conversations that I have with our business partners. But also in terms of our lean operating model, and Sven alluded to it, which does allow us to write business for longer on a profitable basis as the average peer.

So we do remain optimistic and very confident to meet our guidance 2026, both in terms of growth, efficient growth, but even more so in terms of growing our earnings throughout the cycle, given our exceptionally strong balance sheet coming out of 2025.

So, thank you all for your interest this morning, and have a good day. We'll speak soon.

Good morning, everyone, and welcome to our earnings call on our results for the first 9 months of 2025.

And as usual, our CEO, Clemens Jungsthofel; and CFO, Christian Hermelingmeier, will provide a brief overview of the business development so far in '25. And afterwards, Clemens will present the updated outlook for the current year. And as usual, we'll provide an initial guidance for the financial year '26. For the Q&A, we will be joined by Claude Chèvre and Sven Althoff.

And with that, I hand over to you, Clemens.

Thank you, Karl, and good morning from Hannover.

So on the first slide, the business performance in the first 9 months was very satisfactory. The group net income of EUR 1.96 billion reflects a strong underlying profitability and additional positive tailwind from currency translation and from tax, adding up to more than EUR 400 million. The low tax rate, particularly in the third quarter, is mainly connected to the newly enforced change in the German corporate tax, resulting in a corresponding release in deferred tax liabilities.

This not only left us in a comfortable position to increase the group net income guidance to around EUR 2.6 billion for the full year. In addition, we used the extra level of profits to further strengthen our company's balance sheet. We have added significant prudency to our P&C reserves. We've taken a more cautious view on certain pockets in our Life & Health portfolio, and we have realized more than EUR 300 million losses in our fixed income portfolio. All of this improves our already strong balance sheet and our confidence in future earnings growth.

In P&C reinsurance, we have continued to grow our portfolio in an attractive rate environment. As in the first half, the refinement in the calculation for the non-distinct investment component does have a negative base effect on reported growth numbers. As it does not impact earnings, this is no cause for concerns at all, also not when comparing to our 7% growth target. So on an adjusted basis, the growth is close to 10% and therefore, clearly ahead of the 7% mark. The favorable underlying growth is also reflected, as you can see, in the increase in our new business CSM to now EUR 2.6 billion.

The large loss experience in Q3 was rather benign, particularly on the nat cat side. Hence, the overall impact from large losses was well below our budget for the first 9 months. But as you know, as usual in this situation, we have booked the full year-to-date budget. Therefore, the reported combined ratio does not reflect the benign large losses. On the contrary, we have actually used the overall positive results situation to add further prudency to our P&C reserves with a corresponding effect on the reported combined ratio. Nevertheless, the reported 86% is well in line with our target, pointing to an even better underlying number.

In Life & Health reinsurance, the revenue is growing moderately. The new business generation increased by 16% to EUR 575 million, including a favorable contribution in the third quarter. The Reinsurance service result of EUR 671 million reflects the overall positive business development and confirms that we are well on track to deliver on our target for 2025. The ordinary investment performance was very satisfactory against the backdrop of another strong quarter, including the positive tax effects, we have decided to accelerate the loss realization in our fixed income portfolio. After around EUR 60 million in the second quarter, we have realized another EUR 260 million in the third quarter to improve future investment returns and to increase the flexibility in our investment portfolio. Hence, the return on investment of 2.8% is deliberately below our target for the full year.

Finally, the capitalization remained strong with a solvency ratio of 259%. In the third quarter, the operating capital generation was slightly above EUR 1 billion. We have also been successful in deploying capital. So the recognition of planned growth for 2026 had an impact of around 6 percentage points on the solvency ratio. Furthermore, the quarterly accrual of foreseeable dividends, including the update of our dividend strategy impacted the solvency ratio by minus 4.5 percentage points. Model changes had a minor positive impact.

On the next slide, the shareholders' equity increased by 2%, driven by the strong 9 months results. A mitigating factor is a negative impact from currency translation within the OCI. The CSM increased by 2.1%, mainly reflecting the new business generated by both business groups, again, also here partly mitigated by negative currency effects. The risk adjustment decreased by 7.8%, mainly driven by some model refinements in P&C as well as a negative currency effect and a new retrocession in Life & Health.

Altogether, the performance of both business groups and our strong balance sheet, including the CSM and including the risk adjustment, gives me considerable confidence in current and future earnings growth. The return on equity of 22% is a further confirmation of our success.

And on that note, I hand over to you, Christian.

Yes. Thank you, Clemens, and good morning, everyone, also from my side.

So on the next slide, our P&C business is growing nicely on a diversified basis, including a strong contribution from structured reinsurance. The top line growth in the first 9 months is marked by the refinement in our accounting, resulting in a one-off effect when comparing the 2025 revenue to the previous year. Excluding this base effect, the FX adjusted reinsurance revenue would have increased by 9.5%, clearly supporting the target achievement. Importantly, there is no impact on earnings due to corresponding effects in the service expenses. Furthermore, the accounting impact on reported growth should decline in the fourth quarter.

In the third quarter, the NDIC refinement continued to have an impact. Additionally, the timing of bookings for some larger treaties had an impact on the reported Q3 revenue. In this respect, we expect some catch-up effects in the fourth quarter. The combined ratio of 86% is well within the target range below 88%. The impact from large losses was EUR 459 million below budget, which has nevertheless been booked in full as usual. The unused budget should be sufficient to cover the expected losses from Hurricane Melissa, meaning that full Q4 budget is available for other losses in the fourth quarter.

As Clemens explained, the underlying profitability was even stronger in light of the additional balance sheet strengthening with an increase in reserve prudency. However, we have added less to the reserve resiliency in Q3 compared to the previous quarters and have instead decided to use the better-than-planned result for active loss realization in our investment portfolio. The reason is that we feel very comfortable with the current level of reserves and saw a good opportunity to lock in higher interest rates to improve the contribution from investments in the years to come.

Finally, the combined ratio includes a discount effect of around 9.5%. As usual, the increase in prudency for our reserves is biased towards long tail lines with a higher level of discounting. Overall, the discount effect is still higher than the interest accretion in the reinsurance finance result, but we continue to be very prudent on the reserving side as an offset. The investment result reflects an increased ordinary income and the loss realization for fixed income of around EUR 320 million. The currency result was significantly positive at EUR 219 million, driven by the weakening of the U.S. dollar over the course of the first half year.

The main contributor to the P&C service result is the CSM release, reflecting the recent renewals in a very attractive market environment. As in 2024, the CSM release includes smaller catch-up effects due to a prudent release in previous periods. The experience variance includes our prudent reserving on the business earned from current underwriting years. The run-off result has been positive in most regions and lines of business. But as explained, we have used the strong underlying profitability and the overall strong result situation to add additional prudency to our reserves. This is the main reason why we are reporting a negative run-off result of minus EUR 465 million.

Apart from this, the runoff result also includes our updated view on the Russia-Ukraine aviation loss and the moderate increase in the best estimate for some pockets of U.S. liability business. The loss component from new business is quite low, confirming the attractive rate environment in P&C reinsurance. The CSM growth of 7% reflects the favorable market environment and our success in the renewal period in 2025, resulting in a strong new business CSM of EUR 2.6 billion.

On the next slide, in Life & Health, reinsurance revenue increased by 2.2% adjusted for FX. The revenue increased in Financial Solutions and longevity. In traditional business, revenue moderately decreased mainly in Greater China. The result for the 9 months of 2025 is based on favorable underlying profitability. Furthermore, the experience variance was positive in all reporting categories. Assumption updates for onerous business and a more cautious position with regards to our morbidity business had a negative impact in the reporting period. Altogether, the reinsurance service result of EUR 671 million is fully in line with our full year target. The investment result reflects a good ordinary income from fixed income and the negative impact of an equity participation of around EUR 30 million in the third quarter. Altogether, the EBIT contribution from our Life & Health business group was EUR 645 million.

On the next slide, looking at the IFRS components of the service result, the CSM release is the main profit driver and within the expected range. The same is true for release and risk adjustment. The experience variance is clearly positive based on a diversified contribution by line of business. The main drivers for the loss component are assumption changes for onerous business and morbidity. This is particularly driven by the critical illness business in Greater China, where we have updated our assumptions and took a more cautious positioning, reflected in an increase in the risk adjustment.

As Claude highlighted at our recent Investors Day, one should focus here on a more holistic and economic view on assumption changes and experience variance. Adding up the positive assumption changes in the CSM and the change in loss component as well as the experience variance, the total deviation from initial assumptions of our diversified portfolio is positive year-to-date. The CSM development on the right side is clearly impacted by currency effects. The CSM generation, which includes the new business CSM and extensions on existing contracts, amounted to a favorable EUR 585 million based on a diversified contribution from financial solutions and our traditional business. Changes in estimates are driven by updated assumptions for our longevity business. Altogether, the total CSM would have increased by 5.2%, excluding the currency effects, nicely ahead of our 2% target.

On the next slide, the development of our investments was very satisfactory. The ordinary investment income reflects the continued rollover in a higher yield environment and a strong operating cash flow. Inflation-linked bonds contributed EUR 110 million. Additionally, the contribution from alternatives was very solid. And as explained, we have used the overall result situation to accelerate the realization of losses in our fixed income book in the third quarter. In total, we are looking at the realized fixed income loss of EUR 324 million for the first 9 months.

The corresponding higher locked-in interest rates will support a further increase in investment income in the coming years, and the lower level of unrealized losses will increase the flexibility for our asset managers, both helpful in the overall trading environment. The impact from the change in ECL and the fair value of financial instruments remained moderate. All in all, the return on investments of 2.8% is deliberately steered below the initial 3.2% target due to the realization of losses in our fixed income portfolio. So no concern at all as the main group target for 2025, the net income is not only maintained, but has even been increased, including an adjusted lower target for the ROI.

At this point, I would like to point out that depending on the business development in the fourth quarter, I would not rule out further opportunistic steps with an eye on the remaining level of unrealized fixed income losses of more than EUR 2 billion on our balance sheet shown at the bottom of the slide. Apart from the strong movement in fixed income, you can see that the unrealized gains within the OCI have changed materially in the category others. This reflects the sale of our stake in Viridium, concluding a highly successful financial investment for Hannover Re.

To conclude my remarks, the business performance in the first half of the year was very satisfactory. The positive impact from currency and tax has been used to further strengthen our balance sheet and improve future investment returns. We are well positioned to deliver on our increased target for 2025.

And on that note, I'll hand back to you, Clemens, for the comments on the outlook.

Thank you, Christian. So despite the significant increase in reserve prudency and the realization of fixed income losses, the reported group net income of close to EUR 2 billion after 9 months is running nicely ahead of our plan. Consequently, we have increased the target to EUR 2.6 billion. The new target assumes a full realization or full utilization of our large loss budget at year-end. As of today, we do have significant budget available to cover potential losses in the remainder of the year. In case not all of this is used by year-end, this might provide the option to continue realizing some fixed income losses and additional flexibility for the assumption setting in our annual reserve review. These comments also need to be considered looking at the updated target for the combined ratio, which is expected to come in below 87% and the ROI target, of course, of around 2.9%.

The expectation for the Life & Health service result remains unchanged. And as explained, the FX adjusted growth in P&C revenue is influenced by the refinement in the NDIC calculation. Excluding this effect, the 7% target remains unchanged. And again, this effect does not have any impact on earnings, hence, no reason for any concern here. Altogether, we are confident that we will achieve a net income of EUR 2.6 billion, higher than initially anticipated for the year. Furthermore, I'd say there are probably more upside risks than downside risks for the delivery on our guidance, potentially also providing options to further improve the basis for future earnings growth.

So future earnings growth brings us directly to the guidance for the financial year 2026. The new group net income target for 2026 is at least EUR 2.7 billion. This is an increase of 12.5% compared to the initial guidance for 2025. So you can see this as a strong commitment to continued earnings growth also in a slightly more challenging market environment.

Looking at the underlying drivers, we expect further growth. Our P&C business, excluding structured reinsurance, is expected to grow in the mid-single-digit percentage range. The reason why we have excluded structured reinsurance here in our guidance is the transactional character of the business. So individual treaties can be a bit bulky. And for 2026, we have an indication for some reductions in session rates on the one hand. And we do continue to see a strong pipeline for new business on the other hand. The combined effect is not easy to predict, and hence, we have decided to exclude this part of our activities from our top line guidance.

All in all, it is possible that the revenue development in structured reinsurance might be less dynamic in 2026 than the average of previous years. The combined ratio target for the total P&C business is below 87%. This is an improvement compared to the below 88% target for this year despite the expectation of some softening of rates in the underwriting year 2026. One reason for this is the discount effect, which is expected to be around 9% to 10% in 2026. This is rather stable compared to this year, but higher than initially expected for 2025, so providing some uplift compared to the previous target. Furthermore, the pricing environment is expected to remain on an attractive level overall. So this means that the quality and the profitability of our portfolio will remain strong.

As explained earlier, our underlying combined ratio is running well ahead of our target in 2025. This means that also the new target of below 87% does leave room for some pricing pressure, not only in 2026, but also going forward.

With regards to our reserving, we feel very comfortable with the overall confidence level of our reserves. The option of adding less to reserve prudency compared to previous years adds further confidence in the ability to deliver on our target. Based on the successful new business generation in 2025 and a healthy pipeline looking forward, we anticipate an increase in reinsurance service result to around EUR 925 million in Life & Health reinsurance. The assumed CSM and risk adjustment release remains unchanged compared to this year at around 11% to 13% for the CSM and 6% to 8% for the risk adjustment. Furthermore, our strategic midterm target for the CSM growth of around 2% remains valid. The return on investment is expected to reach around 3.5%. So altogether, the new guidance highlights Hannover Re's successful and lean business model, our ability to grow and our very strong balance sheet.

So this concludes my remarks, and we would be happy to answer your questions.

[Operator Instructions] The first question comes from the line of Shanti Kang from Bank of America, Merrill Lynch.

So the first one was just on the Q3 model refinements that you made in P&C. Could you just give us some color on what was driving those for this quarter? And then my second question is just going into the renewal period in January, what you're sort of expecting from conditions there?

And then my last question is just on the guide for 2026 of that less than 87% combined ratio, and that's got the higher discount rate between 9% and 10%, as you mentioned. What's really driving that assumption? Has the duration of the book changed? Or are you assuming continued long-tail reserve releases? I'd expect that to come down with rates. So any color there would be helpful.

Yes, thanks for the question. So I'll take the first one, the Q3 model refinement in the P&C book that relates to the risk adjustment. So there have been some seldom combinations of contracts where the risk adjustment just by the methodology that is applied in the data was larger than the expected losses and the cash flow for the losses. And so we refined that in capping the risk adjustment to the maximum amount of the lost cash flow, so to erase the outliers that we figured out we have here and there in the book. That's basically everything. So no reference to the underlying business itself.

And when it comes to the renewals, Shanti, I mean, as we said on previous occasions, we are expecting a broadly similar market momentum compared to what we have seen in 2025. We have not seen too many firm order terms from the renewals yet. So there are too few data points to give you an update on that expectations. So from that point of view, we are still expecting similar momentum, as I said, which would be mostly on price and stable on retention levels and terms and conditions.

Shanti, it's Clemens here. So on the last one, on the underlying drivers for the 87% combined ratio guidance for 2026, a couple of points here. One is the discount rate, as you mentioned, but there are a couple of other drivers that have led us to go for a slightly lower combined ratio. One is that we -- and it's not that we expect portfolio composition. So we do expect growth rather on a diversified basis also as we go into 2026. It's a reflection on that, we still believe that the quality and the profitability of our portfolio will remain strong even if there is more pricing pressure as we go into 2026.

So it's also not led to the fact that we have changed or will change our reserving approach. The prudent reserving approach is unchanged. However, just adding a bit less to the overall confidence level will already have an impact on our -- on the combined ratio. So overall, this is basically a reflection also of the fact that we have seen that the underlying combined ratio was strong in '25, and that has led us to that decision.

The next question comes from the line of Andrew Baker from Goldman Sachs.

First one, sorry, just to go back to the combined ratio target for '26. I guess, if I look at the '25 original guidance, sort of the less than 88%, you add back in the discounting of 6% to 7%, you get to sort of less than 94% to 95% undiscounted. And my understanding was, and correct me if I'm wrong here, this was sort of a through-the-cycle assumption. And then if I look at the updated guidance, so the less than 87%, you add back in the 9 to 10 points for the discounting, you're sort of less than 96%, 97%.

So I guess a couple of points deterioration on the undiscounted. I hear what you're saying in terms of some of that pricing. But I guess I thought that was in the original target. So maybe just help me think through or should I be thinking about that undiscounted combined ratio or not? And then I guess, as you're looking at the 9% to 10% discounting for next year, is this still in excess of the [ iffy ]? And if so, should we expect sort of further prudent building within the less than 87% for next year?

Andrew, just briefly, I'll start and then probably Christian can also complement. And that is, in fact, the discount and the, let's say, the management of the volatility of the discount, which we have done in the past, also have a compensating effect. So that had an impact on our underlying combined ratio last year. As you know, we -- it was a tailwind when you compare the discount impact versus the unwind of that discount. And we have also -- we've always taken the approach to not take advantage of that tailwind, but increase our loss assumptions in roughly in the sort of size of that delta. That has also fed into our 2026 combined ratio assumptions. So there is -- and I'm just looking at Christian, there is still expected to be a slight tailwind. So therefore, that will also have an impact on the combined ratio in our assumptions. So there is a smoothing impact overall if we look at the combined ratio.

Yes, Andrew, and I can absolutely confirm this view going forward. So as Clemens also briefly mentioned, we think with our combined ratio guidance more over the cycle and midterm, so this has not changed here. So this is no short-term impact from changing interest rates. This is really just the overall balance of profitability and the positive impact that we currently still see. We are in 2025, around 2% of this tailwind. This is well covered by our very prudent and conservative reserving.

We now have a question from the line of Kamran Hossain from JPMorgan.

Two questions. The first one is just on the decision-making process around some of the financial steering in the quarter. I hear what you're saying on taking -- adding a little bit less prudence into the reserves and doing more on kind of realizing losses and therefore, allowing the fixed income to, I guess, returns to pick up going forward. What's the decision-making behind that? Was there really -- is it an either/or? Could you do kind of more -- could you have done more reserving and less realized losses? Or is this a sign that you're reaching the top of what might be like an acceptable level of prudence in your reserves to auditors so you can't really add that much more, so you're choosing to do other things.

The second question is just on the guidance on the [ HA ]. This is not a complaint at all. I can't remember in all my years when you've guided above consensus, so clearly very positive. But why now? You talked about -- over the course of the last couple of years, you talked about keeping the combined ratio stable. I think earlier in the year, we heard it might have been 88% for the medium term, and now it's moving to 87%. Just trying to understand kind of why now. And is the 87% now the medium-term guidance of it's not going to get worse than that for the medium term?

Yes. Thank you, Kamran. Christian here. I'll take the first one. So you asked for the decision-making process, and there is no fixed rule. There is no automatism and there's also no either/or. So we have to assess the business, look at the development, and we can pronounce one measure over the other or we could balance both, and I would explicitly not rule that out for the future. So here, as we are already at a quite comfortable reserving level for our P&C business, we decided to focus more and act a bit opportunistically to lock in the higher interest rates. But this is -- and I want to emphasize this, there is no sign at all that we reach the maximum level of reserves or something like this. So there is still room to continue with our very prudent reserving approach also in the future, and we will see how this is used also for the rest of the year.

Kamran, just on the overall guidance for 2026 and to add a bit of color here. So you should still see this guidance, the way we come up with the overall guidance has not changed at all compared to previous years. So you should still see this guidance in light of having built in some resilience, some level of prudency into that overall guidance also for 2026. I think this is a reflection of a strong underlying result, both coming [indiscernible] and Life & Health. It has allowed us, particularly in the third quarter, as you would have noticed come to realize some losses on the fixed income side, as you said, that will, of course, come through over the next 1 or 2, 3 years. So given the duration of the portfolio, we will see some of that increased run rate in our fixed income portfolio already into next year. So that has driven a bit our overall guidance for 2026.

On the combined ratio, in particular, this is also a reflection of that we've seen a strong underlying combined ratio this year. Then we have the discount impact again, which is smoothened to some extent by way of not taking full advantage. And overall, we wanted to bring it, in fact, to a more realistic combined ratio. Still no change in prudency when it comes to our reserving approach, but we do this consider as a more stable combined ratio, a consistent combined ratio also over the midterm. So through the cycle, that's how you can read it.

The next question comes from the line of Chris Hartwell from Autonomous Research.

Just a couple of quick questions. First one is on the Life side. New business appeared quite strong in the quarter. Just wondering if you could give a little bit more color on that. And secondly, probably a little bit of an extension to the previous question from Kamran. You commented that the target for 2025 is not a reflection of the loss benefit so far. And I guess I was a bit intrigued by your comment around more upside risk than downside for forward earnings guidance, particularly given, I guess, the historical nature of finding either realized losses or prudence or so on. So I was just again wondering on your sort of thought process if Q4 does or doesn't throw up anything particularly exciting on the loss front?

And if I can have a sort of part B on that second one. You also sort of commented about Melissa being sort of contained within budget. But given how much budget you have still available from the first 9 months, that seems to put a number in the range of like 0 to almost EUR 500 million. So I was wondering if you can give a little bit more color on your Melissa exposure.

Yes. Maybe let me -- it's Claude here. Let me start with the Life & Health question on the new business. This is really, as Christian already alluded to, it's the result of one -- mainly the result of one bigger transaction that we have written in Q3. And as you know, the new business CSM Life & Health is transactional, and this is really depending on some bigger transactions. This is the case here in Q3.

Chris, on the guidance for 2025. So if we were observing another benign fourth quarter, mentioned there's still quite some budget left for the fourth quarter. So if that would be the case, as Christian said, I think there are mainly 2 things that we will consider at year-end. One is, of course, further realization acceleration of fixed income unrealized losses, which will support future earnings growth. Second, we do feel comfortable with our reserve level now. I think we significantly built reserve resiliency over the last couple of years, but there's still some room to increase those further. At the same time, I wouldn't fully rule out that some of that potential tailwind that we might see touch wood on Q4 would also have an impact on the P&L. But again, that's something to consider late in the year.

Yes. And then on Melissa, Chris, it's Sven, I don't have a number for you yet. It's still early days. So we are still gathering all the information. But to narrow the range a little bit for you, if you look at the EUR 450 million unutilized budget for Q3, we are not expecting Melissa to use all of this EUR 450 million. On the other hand, we expect this to be a 3-digit loss for our share. And Jamaica, from a territory point of view, is where we have a slightly above average market share. So I hope that gives you a little bit of color, but we don't expect that the EUR 450 million unutilized budget is fully used for Melissa.

We now have a question from the line of Darius Satkauskas from KBW.

Can you tell us what was the market impact in the quarter in your Solvency II ratio? And then the second question is, I know you sort of carried the reserves in Life & Health as best estimate. But obviously, you're quite conservative in your assumptions. So I'm just wondering how much of the new business loss component impact in Life & Health would you attribute to building prudence in regards to China morbidity and what was needed due to the underlying trends?

Darius, Christian, I'll take the first one. On Solvency, if I got you right, you asked for the impact of the -- market impact on the Solvency ratio. And there, I can say that the impact of risk-free rate and spreads together were rather neutral.

And this brings us to your question on the Life & Health loss component. I mean the new business loss component, as we said, is very small. It's just about EUR 10 million. And the rest of the loss component that you were referring to the Chinese morbidity business, Greater China morbidity business is approximately 50% of this is coming from the Chinese morbidity business.

So my question is more, should we see it as sort of reserve strengthening? Or is there an element of prudence in that number? And how much...

Sorry, I got you. No, it's really an element of prudence. We did it via the risk adjustment. So it is pure prudency.

The next question comes from the line of Iain Pearce from BNP Paribas.

The first one was just on the insurance revenue in P&C. Obviously, that was quite a big miss. But if you could just give us a walk so we can understand sort of the different contributing factors because how much was NDIC, how much FX and how much was due to some large contract impacts that I think you flagged? And also, can you give us some guidance for how much NDIC impact you would expect in Q4? And if there's any expected to roll into Q1, Q2 next year as well?

And then the second one was just on the discounting benefit, obviously slightly higher discounting benefits for next year. Could you just explain sort of why you're expecting that given where interest rates are? And then the third one, just on the tax rate in the quarter, that was obviously very low. Could you just give us a bit of an expectation as to what drove that and if anything to go forward to think about with tax rates?

Okay. Iain, I'll take the 3 questions here. So first, on the insurance revenue in P&C, just to give you the walk again. So we had an FX impact of roughly 2%, and the NDIC impact was year-to-date around 7.5%. And I mean, you can do the math yourself, I know, but it's roughly EUR 1 billion of impact. And I would expect that we see not the same amount for the fourth quarter. It will go down substantially. And for Q1 and Q2 the next year, I would virtually expect that it's just -- yes, not substantial or relevant anymore. And the last impact that I mentioned was the timing of booking of some larger contracts. And this is an amount of a bit more than EUR 100 million, so 0.5 impact on the gross rate in P&C.

The next question was regarding the discount rate. And here, yes, you referred to the capital markets and where rates currently are. But here, you have to see that we are talking about the earn-through of the interest rate. So we look not just at the very current renewals, but we look at more or less 2 to 3 underwriting years that we see here in the earnings pattern. And so we still see some catch-up for the interest rate environment.

The last question referred to the high -- or the low tax rate, so a high one-off impact here. And this is the coming reform of the German corporate income tax. So to remind you all, starting in 2028, the corporate income tax in Germany will be lowered by 1 percentage point each year for consecutive 5 years. And this is the reason why we could release a substantial amount from our deferred tax liability that we carry under IFRS. And so this is a bit more than 8 percentage point positive one-off impact. And yes, as I said, it's a one-off.

The next question comes from the line of Vinit Malhotra from Mediobanca.

Some hopefully, 3 quick ones, sorry. In the combined ratio, I'm just curious, the slightly lower prudence in 3Q, where obviously, 3Q was also as, let's say, good a quarter as 2Q. And maybe it's a little bit of a follow-up here. But you said, obviously, you had no compulsion, no restrictions on reserving and prudence. And I'm just curious, was there any reason that you kept the prudence a bit lower in Q3? So that's the first question.

Second question is on the top line for next year. I mean, from your comments about structured, which I understand is hard to predict. But if you could just comment what's changing in that area? Why is it that -- why do you think that this is becoming a little bit of a may be a headwind even to the growth, if my understanding of your comment is correct. And lastly, this kind of step-up in realizing bond losses, I think in the CMD or Investor Day of last month, we talked about maybe 10 basis points of pickup in yield. With these measures, could we expect that to kind of go up a little bit because that's hopefully the motivation behind that?

Yes. Thank you, Vinit, for your questions. And I'll comment on the first one. So you asked for the lower prudency reserves in Q3 stand-alone. And I can see there are no restrictions that drove our decision here. But I would look more for the full 9 months of the year. And as you know, this already increased our resiliency in the reserves substantially. So from the overall view, it was a good opportunity to now shift a bit more to focusing on the investment side and use opportunistically the realization of hidden losses to increase the resiliency here and fuel a bit the future earnings by that measure.

And maybe I directly jump to the third one and take that also. So as you said, and I elaborated on that on the Investors Day, we expect just from the rollover from our investment book, roughly 10 basis points increased running yield each year going forward. And you are completely right with your assumption by the over EUR 300 million of realizations we did in the 3 months. This will give another upside of around 7 to 8 basis points would be my rough guess. And this is already also reflected in the new guidance on the ROI. We started in 2025 with a guidance of 3.2%, and now we face 3.5% for 2026. And one of the drivers here is exactly the realization of losses.

Yes, Vinit, and then on the structured side, and please keep in mind, the guidance we have given is for '26 only. It's not an over-the-cycle statement we are making on the structured side. But I mean, some of the buying when it comes to risk remote reinsurance can be transitional. So when we have looked at the guidance for next year, we had a few clients telling us that they will reduce their sessions. That does not necessarily mean that our market share will reduce more the opposite, very often in a situation where a client is reducing the session, our signed line is protected better compared to the average. But nonetheless, given reduced sessions, we have a little bit of a headwind.

On the other hand, we can say that the demand for structured products is still strong. So we have a very good pipeline. We have already closed a few transactions, but as part of the pipeline, there are still quite a number of deals where the negotiations are not such that we can say with 100% confidence that we will close the transaction. And therefore, given the bulkiness of the business, to be on the cautious side, we have decided to let you know that the guidance is for the traditional business only, and that we have to wait and see the outcome on the structural side of things.

The next question comes from the line of Will Hardcastle from UBS.

The first one is coming back, I'm afraid, on the uplift in discount rate, 3 percentage points year-on-year. It's a really large uplift. I appreciate you said to Iain's question, it's a 3-year rolling on locked-in rates. Is there anything else underneath that's caused that? It seems like a huge jump.

The second one is it's really tough to unpick the combined ratio guide year-on-year. I guess you're saying it's more of a cross-cycle guide almost. Is that right? And you're willing to say -- are you willing to say essentially that you'd be operating better than that cross cycle underneath the bonnet at the moment and for 2026? I'm just trying to work it out because you've improved at 1 point. There's 3 points more discounting benefit. You're suggesting that reserving prudency won't need to be as much additions either. So you might have something like 5 points of improvement year-on-year just from those things. So I'm trying to back out essentially what's the year-on-year deterioration that you're assuming in it from an underlying level. Are you able to help us out on that?

Yes. Thanks, Will. And let me start looking at the discount again, and that's absolutely true. That's a substantial move if we just compare the numbers. But as I said, there are different elements here driving this. And one is the earn through we see here, I already mentioned from the different up to 3 underwriting years. And of course, we also see the reserve increases and the reserve actions here. So as we added and not just expect this for 2025 and the numbers on reserve and prudency buildup also for 2024, this is predominantly done in the long tail and very long tail lines as there is also the most substantial portion of the reserves.

And of course, this also drives the duration of the overall portfolio a bit and gives another increase a bit like self-feeding on the discount increase. So it's not the one driver. It's really a composition of that. And last, I would also mention that as we now have quite some experience on IFRS 17 and IFRS 9, I think we are also bit more confident in doing forecasts and trying to utilize our models and our predictions with the methodology here.

Will, and on the combined ratio, yes, as you mentioned, it is a mix of certain factors that are all meant together when we looked at it to bring us, in fact, to a running combined ratio, a guided combined ratio that is to be viewed over the cycle, really midterm to bring us to a more stable number. Again, one of the driving factors is the discount rate, yes, but also potential pricing and rate movements as we go into 2026. So it's also a reflection on the quality diversification of the book, of course. So hence, the underlying combined ratio has been very strong in 2025. So you should also see this combined ratio being, again, a bit more realistic. However, it gives also room for pricing dynamics as we go into 2026 or even beyond that.

So I guess just to verify on that, do you think 2026 is likely a better than cross cycle, all else equal?

On the combined ratio, you mean or?

Yes, on that versus 87%.

Yes. I mean the underlying combined ratio is expected to be below the 87%, of course. But again, it allows for some prudency depending on how the renewal goes, how the pricing environment will change.

We now have a question from the line of Roland Pfaender from ODDO BHF.

Two questions on Life side, please. You had quite solid results on the Life new business in this quarter. Could you talk a little bit about the composition? Was it more mortality, longevity or financial solutions in the end? Then secondly, reinsurance service result, you added EUR 50 million towards '26 in your guidance. Is this entirely fueled by a better loss component? And maybe you could elaborate a little bit about your expectations regarding loss component going into next year?

Yes. Thank you very much. It's Claude talking. So you talk about the new business CSM and in particular about Q3, I guess. Again, I said it before already, it's driven by one larger transaction, and this transaction is coming from the financial solutions business. So that's the question to your first -- the answer to the first question.

Then afterwards, the increased reinsurance services of EUR 50 million is mainly driven by the increase of our business in general. As I told you probably in the Investors Day, I don't know whether you were there, with the size of our portfolio, you always have to expect some loss component, additional loss component, the same as you can expect some experience variances and changes in estimates. We have obviously included some prudency in this figure that we have shown there, but still it's coming really out of the growth of the Life & Health business.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Clemens Jungsthofel for any closing remarks.

Yes. Thank you very much for your interest this morning. Just to reiterate, I guess, overall, the new guidance highlights Hannover Re's successful and lean business model. That lean business model will support further efficient growth in the future, together with our strong -- very strong balance sheet, I'd say, that will allow us to grow our earnings throughout the cycle. And together with these capital returns, this will sustainably create value for our shareholders.

And with that, thank you again, and speak soon.