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Original Source: FD (FAIR DISCLOSURE) WIRE
OPERATOR: Welcome to the AMB Generali first-half 2003 conference call. We are really glad you have found the time to join us. The major speaker during this conference call will be our chief financial officer, Mr. Dietmar Meister. He will talk about the highlights of the first half year results that have been released this morning. His remarks will be based on our analyst presentation that now will be presented to you live on our website. For those who have not yet been able to dial in, you'll find a presentation on amb.de\share\investorrelationsun. I would also like to remind you that this call, including the Q&A session, is being recorded and may be downloaded afterwards from our website.
Let me now hand it over to Mr. Meister.
DIETMAR MEISTER, CFO, AMB GENERALI HOLDING AG: Thank you for the kind introduction. Ladies and gentlemen, let me all also welcome you to AMB Generali's first conference call. It is our intention to give you as much information as we can regarding the figures for the first half of the year 2003. Please feel free to ask questions after a short presentation of roughly 20 minutes. Just follow then the instructions of the operator.
Well, let's start now with the main developments in the first half of the year 2003. I would like to point out three main tendencies which mostly influenced our results. The first one is that we feel that our structural and operational measurements are leading to a positive development of our technical results, mainly in P&C. So you see an operational improvement of the combined ratio by about five percentage points. The second item is our situation regarding assets and investment income. We see the results of our strict application of the IS impairment rules, the standard IS 39, a full write-down was taken for unrealized stock market losses.
On the other side, the investment income improved significantly. I want to mention here already that there are impacts from unrealized capital gains and losses from unit link without any effect on the results. The third major item are taxes. Due to German GAAP, we have a substantial tax burden under our current rules in Germany. So as expected and already told, the return in the second quarter is not yet positive; but it is substantially improved, coming from a -87 million in the first quarter to only 28 million in the second quarter, which makes it EUR150 million in the first half of the year.
During the whole presentation, I will always come back to these three major items I just mentioned. So on slide 3, you see the developments regarding fully consolidated figures is overall pretty stable. There are some differences by the lines of business. I will come to that. You see the improvement of the investment income by 165 million to over EUR1 billion, and further down, you will see the high tax burden of roughly EUR600 million, which leads to the negative result of 115. But let me point out here that for the first time since December 2000, we see again an increase in the shareholders' equity. Whether you compare it with December 2002 or with Q1 2003, it rose from 2.7 billion to 2.9 billion.
On page four, we illustrate the development of premium a bit more in detail. You see that we improved a bit on the life side regarding life regular premium income; in the first quarter we had a plus of 1.7. Now it is a plus of 1.9 percentage points. This is from our point of view not good enough, but we saw a reduction of unit link policies due to the development at the capital markets. In P&C, I think everyone was waiting for a minus, because of the pool of our motor portfolios and the withdrawal from industrial business. So we see a minus of 5.4 percent here. We see a very good development on the health side. We have high growth rates in the new business and we had premium increases in the portfolio, so this leads to a plus of 9.8 percent.
The improvements of our technical results are shown on page 5. You see an improvement of the combined ratio of 7.3 percentage points. This is even a bit better than in the first quarter, when we have a minus of 6.7 points. This comes mainly from a slight improvement in the expense ratio, which was up 2.1 percentage points in the first quarter; now, it is only 1.4 percentage points. We see this development because there are some extraordinary effects. I want to point out two of them.
Due to the already-announced cancellation of motor business, especially in Munich, with [its] lower expense ratios at high claims, we see an increase of the expense ratio. An additional effect comes from higher retentions from reconcessionaires (ph), which leads to lower received commissions and so to a higher net cost. These are the reasons why we state at this time of the year an operational improvement by approximately five percentage points, looking for more improvements until the end of the year.
On the next slide, beginning with number 6, we shall illustrate where we stay regarding our second big item, investment income and/or unrealized capital gains and losses. The net investment income increased significantly, both if you compare it with the first-half of the preceding year, or if you compare the first and second quarters …