C _ Group Management Report In this outlook, the downside risks predominate. First and Asset management industry outlook foremost, the COVID-19 pandemic itself is by no means "defeated" yet: The lack of herd immunity, especially in poorer countries, may allow Ongoing supply chain disruptions and higher inflation around the new variants to emerge at any time, leading to more waves of globe have led investors to become more cautious. As described, 2022 contagion. At the same time, economic policy faces the difficult is likely to be another year of great volatility, and the asset challenge of managing the transition to a "post-pandemic" world – management industry will have to navigate a complex environment. that is, the normalization of monetary policy and the scaling back of Adding to this, profitability in the asset management industry fiscal crisis support – smoothly, without causing any major market continues to be affected by ongoing flows into passive products as distortions. Add to this the fact that, after two years of the COVID-19 well as margin pressure in traditional active investments. The pandemic, its burdens are unevenly distributed among population strengthening of regulatory oversight and reporting will be an groups, social peace appears increasingly fragile in many countries additional burden on profitability across the sector. In view of these and, last but not least, geopolitical tensions have further increased developments, we expect the trend towards industry consolidation to across the board. persist, accompanied by growing cost awareness. On the other hand, we see ample opportunities in the area of active asset management, particularly in alternative and ESG (Environment, Social, Governance) Insurance industry outlook investment strategies. Digital channels, such as robo-advisory platforms, will also continue to gain traction. All told, we expect The global insurance market is expected to develop positively overall further nominal growth in the asset management sector, along with a in 2022. Essentially, the same drivers are still at work as in 2021: the continued focus on efficient operations and strong investment continued economic recovery (especially in the industrialized performance. countries), increased risk awareness among households and companies, and rising prices, especially in commercial lines. At the same time, the investment environment remains very challenging due Overview: outlook and assumptions to stronger market movements; although the expected slight rise in 2022 for the Allianz Group interest rates could be a first step out of the low-interest-rate trough and lead to an improvement in investment returns. Outlook 2022 2022 will also be marked by accelerated digitization, with the aim ALLIANZ GROUP Operating profit of € 13.4 bn, plus or minus € 1 bn. of simplifying and scaling up processes, and offering customers simple, Protect shareholder value while continuing to provide attractive returns fast, easy-to-grasp solutions. In the context of sustainability, social and dividends. aspects will play an increasingly important role, not least against the Selective profitable growth. backdrop of growing inequality due to the COVID-19 crisis. This offers PROPERTY-CASUALTY Revenue growth of 3 % to 5 %, of which 1 % will come from our acquisition of Aviva in Italy and Poland. the insurance industry opportunities to position itself as a partner for Operating profit of € 6.0 bn, plus or minus 10 %. strengthening social resilience. At the same time, it is important to pay Combined ratio of approximately 93 %. more attention to the potential reputational risks arising from growing Pressure on operating investment income (net) to continue, due to social, political, and cultural demands on companies in general and reinvestments in a consistently low interest rate environment. on insurance companies in particular. LIFE/HEALTH Continue to focus on profitable growth; keep developing capital-efficient products; expand to new markets. Revenues expected to be in the range In the non-life sector, premium growth will probably continue of € 70.0 bn to € 80.0 bn. slightly below the previous year's level. Commercial lines should Operating profit of € 4.8 bn, plus or minus 10 %. continue to benefit from rising prices, albeit to a lesser extent; RoE between 10.0 % and 13.0 %. investment income could increase slightly, although financial market Pressure on investment income due to low interest rates and continued capital market volatility. risks should not be underestimated. Also, the gradual return to ASSET MANAGEMENT Moderate increase in AuM driven by slight positive market return normality will allow claims volumes to return to pre-crisis levels, combined with third-party net inflows at PIMCO and AllianzGI. especially in the motor business. Operating profit € 3.4 bn, plus or minus 10 %. In the life sector, the recovery in premium income is also expected Cost-income ratio around 60 % to continue in 2022, although it is unlikely that the previous year’s growth levels will be reached again. As before, a key driver of this outlook is a greater awareness of the need for risk protection and increased savings in the wake of the COVID-19 crisis. The expected Our outlook assumes no significant deviations from our underlying slight rise in interest rates could also stimulate the demand for savings assumptions – specifically: products. Profitability should improve as well, considering the expected slight improvement in investment income as well as the − continuation of global economic recovery, decline in excess mortality that will follow the successful vaccination − interest rates to remain at the current level, campaign. − The impact of a 100 basis point increase (decrease) in interest rates would be largely neutral on the expected operating profit in the first year that follows the rate change. − no major disruptions in the capital markets, Annual Report 2021 − Allianz Group 87