Good afternoon. This is the Chorus Call Conference operator. Welcome, and thank you for joining the Generali Group first quarter 2026 results presentation. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Fabio Cleva, Head of Investor and Rating Agency Relations. Please go ahead, sir.
Hello, everyone, and thank you for joining our first quarter 2026 results call. Here with us today, we have the Deputy Group CEO, Giulio Terzariol, the Group General Manager, Marco Sesana, and the Group CFO, Cristiano Borean. Before opening for Q&A, let me hand over to Giulio and Cristiano for some opening remarks.
Hello, everyone. Good morning, and thank you for being with us today. The first quarter 2026 results mark another step forward in the successful delivery of our Lifetime Partner 27. We are now in the second year of our plan. Our focus on excellence in core capabilities continues to deliver tangible value for our customers, employees, and shareholders. We have reinforced the role of the group centers in the implementation of key initiatives, especially when it comes to technology and artificial intelligence. This approach allows us to scale best practices more effectively and reap the benefit of our fully integrated group. Overall, we have delivered strong growth in both operating and adjusted net results, thanks to contribution from all segments. Let me highlight a few achievements from the first quarter that clearly demonstrate the success of our strategy.
Starting with P&C, gross insurance revenue grew by EUR 575 million, or almost 7% year-on-year. This top-line growth has a lot of quality in it. While revenue growth continues to be mainly driven by price effect in both motor and non-motor, volume growth is increasing its positive contribution, with volumes in written on motor growing 1.8%, and we need even faster growth in accident health and disability at 3.4%. Let me also mention that Europ Assistance has increased its consolidated gross turnover to EUR 1.2 billion in the first quarter, marking almost 15% year-on-year growth. Looking at motor, following two years of deep pruning and the recovery in profitability achieved in 2025, we saw positive development with risks in force growing about 1%. Let me tell you that we could have achieved a higher volume growth in motor by expanding the book through more aggressive pricing.
As we have said previously, we are squarely focused on cycle management. We deliberately have made a strategic decision not to grow the numbers of contracts faster at a time where price is going down and without further clarity on the implication of the Middle East situation, the cost of claims. In this context, we are disciplined and continue to explore additional growth opportunity only in very selected markets. A quick comment on the Nat Cat load, which has been rather significant in this quarter. This was mostly related to the heavy storms that hit the Iberian Peninsula, and particularly Portugal, which represented almost 70% of our gross Nat Cat losses. This is broadly aligned with the most recent insured industry losses for case reserve before IBNR that amount to approximately EUR 1.3 billion for Portugal only.
In this context, our underlying performance was very healthy, with a more than 1 percentage point improvement in the attritional current year loss ratio, thanks to both motor and non-motor. As highlighted in the press release, the amount of man-made losses was almost double that of last year at around EUR 65 million, amounting to 0 percentage point of the loss ratio. Therefore, the underlying improvement of the attritional current year loss ratio, excluding man-made, is close to 150 basis points year-on-year. As you know, our target for P&C efficiency is the GEX ratio, which improved by 60 basis points year-on-year to 13.7%. This ratio represents the productivity improvement journey in a more targeted way than the full expense ratio, capturing what we are doing to transform our core function, including claims, IT, customer operation, and underwriting.
We have a strong focus to push forward the extensive deployment of AI agents that automate workflows, augment employee decision-making, improve service quality, and drive operational efficiency at scale. The reported expense ratio, 29.3, is up 40 basis points, reflecting high acquisition cost and also the business mix. If you look at the expense ratio excluding Europ Assistance, it would be basically flat year-on-year at 28.7%. Look at acquisition cost in isolation, the reported 21.2% of the first quarter would be 20.3% excluding Europ Assistance, the year-on-year change would be in the order of 20 basis points, as opposed to the reported 60 basis point increase. As we mentioned previously, we are implementing action that will enable us to achieve not only a better GEX ratio, but also an improved expense ratio.
Let's move now to Life, where we have achieved very strong net inflows of EUR 4.3 billion, driven by contribution from all lines of business and benefiting from further improvement in lapses. Compared to the first quarter last year, we recorded higher inflows in traditional savings. This has been achieved with a strong level of new business margin and enable us to record a very healthy growth in new business value. The first quarter production is fully aligned with our underwriting discipline. The weight on non-guarantee business is 75%. The overall guarantee is stable at 0.73%, and the share of capital life business is 83%. The overall development in new business value is clearly very satisfying. To be noted, the first quarter benefits from positive seasonality. I would caution not to extrapolate these numbers for the next quarters.
The key message here is that the life business continue to grow profitably and is growing without compromising our underwriting discipline. I'm also very pleased that protection, health and accident, one of our key strategic drivers of profitable growth, showed a premium increase of 6% year-on-year, while recording also a better profitability. In asset and wealth management, you have already seen a few days ago the very good numbers from Banca Generali, where we continue to deploy the joint insurer bank initiative with a positive initial development. In asset management, as we indicate in the press release, there is a positive contribution for non-recurring fees of around EUR 15 million. They reflect the successful business positioning of our infrastructure business.
Although transaction fees can be less regular in terms of frequency than recurring management fees, they are indicative of sound investment capabilities and also reflect the success of our infrastructure business in originating and executing deals. Before I hand over to Cristiano, some closing remark on the overall macro environment. Financial markets have been pricing in an increase in short-term inflation indicators due to higher oil prices. While we are monitoring the situation very closely, we are confident in the strength of our business model. On the life front, the business is capital light and the high quality investment portfolio, combined with disciplined ALM ensure stability and resilience. Additionally, we have proven many times that we are capable to adjust to different cycles and match consumer needs in all kinds of environment, also thanks to our strong distribution footprint.
For P&C, we are very focused on preserving the excellent level of profitability. We are watching very closely the development of severity and frequency. In some cases, we are already preparing to take pricing actions. Also, please keep in mind that two-thirds of our P&C book is non-motor. Of this, 60% is inflation indexed. In addition, investment yields are higher than originally projected, which also benefits the P&C operating results. Lastly, an environment of high inflation is also likely going to support the P&C pricing cycle towards a new hardening phase. Of course, this overall context creates an even stronger reason to push ahead with our key initiative on digitalization and automation. To summarize, the Lifetime Partner 27 plan execution is progressing very well and showing tangible results.
Looking ahead, we remain fully committed to delivering on our plan objectives, maximizing profitable growth in P&C, leading life through quality production, and expanding assets and wealth management. We are proactively managing the cycle to ensure strong performance enabled by an effective central steering combined with disciplined local execution, with a focus on technical excellence and productivity improvement. Thank you for your attention, and let me now hand over to Cristiano.
Thank you, Giulio. Good morning, everyone. Thank you for joining us today. As Giulio mentioned, our first quarter 2026 results demonstrate continued strong momentum in the execution of our Lifetime Partner 27 plan. We are delivering robust growth across all segments with a clear focus on quality, resilience, and profitability. This exemplifies our ability to navigate a complex environment while advancing our strategic priorities. Let me share some key highlights before we open the Q&A. Giulio spoke about the life new business production. Let me focus on the life CSM, which recorded a 1.4% normalized growth. The end of the first quarter marked a peak in financial market volatility and a low in equity markets. As a result, the CSM recorded slightly more than EUR 900 million of economic variances.
The key drivers of this EUR 900 million movement were the widening of sovereign and corporate bond spreads, accounting for around EUR 400 million, the increase in interest rate by around EUR 200 million, which impacted in particular Germany and Italy, the decline in equity markets around EUR 200 million. Finally, higher volatility, especially in the equity markets with around EUR 100 million impact. Clearly, the economic variances in the quarter were also a reflection of the single measurement day. If we were to apply the disclosed sensitivities and use financial market level of May 15th, the CSM would be around EUR 500 million higher than the EUR 33.2 billion shown in the press release. Moving to P&C, Giulio has already mentioned the improvement in the attritional current year loss ratio.
Let me emphasize that this improvement was achieved while maintaining the conservative booking of initial loss peaks, which was a key feature of our 2025 results. Concerning Nat Cat, Storm Kristin exceeded our per-event reinsurance protection set at around EUR 300 million. This means that in the second quarter we will book around EUR 19 million as reinstatement premium, which will be recorded in the current year attritional loss ratio. I would like to elaborate on the prior year development. Last year, at the nine months 2025 call, I emphasized how a dynamic interplay between Nat Cat and prior year development is the sensible approach for managing the business over the long term. This is why I indicated that we would calibrate our prior year development dynamically, always within the boundaries of the best estimate approach. This approach enhances earnings predictability and mitigates the year-on-year P&L volatility throughout the year.
The first quarter has seen significant Nat Cat events. As a result, you saw a higher contribution from prior year development in our numbers. I feel very comfortable with our ability to manage the combination of Nat Cat and prior year development this way in the long term. This confidence stems from the very strong level of reserving from the ongoing conservative initial loss peaks. It is also reinforced by the new reinsurance structure that we negotiated at the last renewals, where we used the favorable market conditions to significantly strengthen the contractual features of our CAT aggregate program. Staying with P&C, let me also highlight that the investment result growth was led by high quality factors and also thanks to the volume growth recorded last year. As you have read in the press release, this quarter is impacted by around EUR 50 million one-off tax component.
This stems from the new French finance law that extended through 2026, the so-called surtax, which is based on the average taxable basis of 2025 and 2026. As such, the accounting rules requires us to recognize the 2026 surtax in the first quarter 2026, considering the whole amount of the 2025 related surtax component. We expect that the residual component of the surtax will affect the group by less than EUR 10 million per quarter for the remainder of 2026. Moving to cash and capital. As you know, we schedule most of our remittance inflow into parent company coffers ahead of the dividend payment. We have already received around EUR 4.5 billion of remittance so far in 2026, and as a result, the cash of the holding company, after the EUR 2.5 billion dividend payment we made yesterday, stands above EUR 5 billion, of which slightly more than EUR 3 billion is available.
Finally, a word on solvency. As I mentioned this morning during the press conference, the estimated Solvency II ratio increased around 2 percentage points as of May 15 compared to the end of March. Let me provide you the moving parts during the first quarter. We benefited from healthy normalized capital generation, adding 4 percentage points. This is basically stable year-on-year as the higher contribution from life and financials is offset by the impact from Nat Cats. The known economic variances include both the prior year development effect as well as the Solvency Capital Requirement increase from business growth and SAA optimizations. The end of the grandfathering period reduced the own funds by EUR 1 billion, with a 4 percentage points impact on the Solvency II ratio. Capital movements in the period shed 2 points, including both the accrued pro rata dividend and the subordinated debt operations.
Finally, market variances impacted solvency for around 5 percentage points. This reflected, of course, the movement of equity markets and the widening of sovereign and corporate spreads, as well as higher volatilities. Similarly to the CSM, the Solvency II ratio is also a reflection of the single measurement day. March 31st was close to the bottom of financial market during the recent bout of volatility. Looking ahead, during the second quarter, you should factor in three elements on top of the normalized capital generation and the dividend provision for the period. First of all, we expect to receive the regulatory approval for the EUR 500 million share buyback with a 2 percentage point impact.
As we indicated at full year 2025, you should factor in 2 points stemming from the higher SCR following the SAA optimization. Finally, please consider that the downgrade of the Belgium sovereign from AA to A occurred in April and will have a 0.5 percentage points impact on our Solvency II ratio. In summary, this quarter's performance highlights the strength of our diversified business model and our ability to generate profitable growth. I am particularly pleased by the quality that I see in the numbers when I look through the quarterly noise of Nat Cats and the financial market movements. This quality makes me very confident in the ongoing delivery of our plan. Thank you for your attention, now we are happy to take all your questions.
Thank you. This is the Chorus Call conference operator. We will now begin the question- and- answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. To remove yourself from the question queue, please press star and two. We kindly ask to use handsets when asking questions. Anyone who has a question may press star and one at this time. The first question comes from Andrew Baker with Goldman Sachs. Please go ahead.
Great. Thank you for taking my questions. The first one, just on the life insurance service result, are you able to tell us how much of the 1Q result was from experience variances and other? Then, I guess if possible, are you able to break that out by the portion that you wouldn't necessarily project going forward and any items that you would expect to repeat? I believe the PAA business runs through this line. Then secondly, again, thank you for the additional detail on the higher acquisition costs in P&C. I guess, should we assume that there's a broadly offsetting impact from the higher acquisition costs in the current year attritional loss ratio from these same mix effects, and any comments around that would be really helpful.
Thank you very much, Andrew. The first question is for Cristiano and the second for Giulio.
Hi, Andrew. Breaking down the operating insurance service result into the CSM release at EUR 828 million, which increased by EUR 55 million compared to the first quarter 2025, you should then have a couple of extra elements which create a movement. We had a slightly higher amount of loss components, EUR 31 million loss components with negative impact versus EUR 11 last year. EUR 20 million more, which reduced by EUR 20 million the result, as well as the experience variance and other technical results had a EUR 32 million positive contribution up going to the EUR 97 million amount in the operating insurance service result. In end, the other operating income and expenses decreased to, in positive sense, at -EUR 37 million, which is an improvement of EUR 17 million versus previous year.
I would tell you that there are no particularly one-off in the first quarter 2026 number, apart from slightly higher sensitivity on some loss components of interest rate up coming from our country, Italy. There is a very healthy contribution in the other operating income and expenses of the so-called contribution from the investment contract under IFRS 17 accounting. I would say pretty much a good quality, as was I hinting in the initial speech.
Andrew, to your question, whether there is an offset in the loss ratio, I would say it depends. If you look at the numbers, including Europ Assistance, definitely. In that case, you see an increase in the expense ratio, and there is an offset in the loss ratio. When we remove Europ Assistance, actually the expense ratio is relatively flat. In that case, I would say there is not much of an offset. It depends how you look at the numbers.
Great. Thank you.
Thank you, Andrew. Next question, please.
The next question comes from Michael Huttner with Berenberg. Please go ahead.
Fantastic. Thank you very much, congratulations. I've got two, if I may. The first one is 93%, the new, I think you have 94.5% as an undiscounted combined ratio target. It feels like you're there, and you're protecting margins. I would say yes, but you're probably going to say no, but who knows? On the cash, thank you so much for the explanation, Cristiano. I just wanted to add the EUR 4.5 Billion you've collected so far. I've forgotten the figure from last year. I just wanted to ask if you could help me on that'd be amazing. Then, oh, I'm being greedy. Can the Cat aggregate cover? I'm really interested in that. I think you did mention it at the full year, but I can't remember the details and how much more protection it provides. I'll stop here. Thanks.
Thank you very much, Michael . The first question is for Giulio, the second one is for Cristiano, the third one is for Marco.
Michael, your question whether we are better than 94.5%. Yes, we are better than 94.5%. I would tell you that already at year-end 2025, we were better than that number. What we see right now is still very strong performance.
We always say we want to run as fast as possible, knowing also that the environment is going to become more challenging moving forward. From that point of view, we know that as we move forward, inflation and risk premium is going to be more aligned with the average premium. From that point of view, we are very well positioned, and moving forward, we will try to get additional improvement coming from actions that we can take as always on the portfolio and also the productivity improvements that we can realize. To your question, are we better than 94.5%? Yes, we are definitely well below the 94.5%, and I would tell you we're also below the 94% level.
Brilliant.
Hi, Michael. I'm happy to give you some additional detail on the aggregate cover. As you remember, our aggregate retention is at EUR 1.2 billion, in the range of 3.2 points of combined ratio, and we have a capacity of EUR 550 million. At the moment, what we have seen is clearly we are commenting the first quarter where there was one big event. I would say we still have a lot as a coverage in the aggregate. At the moment, we have just seen the first quarter. Clearly, it's a first quarter that is higher, significantly higher compared to the first quarter that we had in the last years. The first two months of the second quarter are in line with expectations. I would say that at the moment, we are still fine with our aggregate cover.
Okay.
Michael, regarding cash, if I just take the picture as of today, compared to last year, we have already remitted around EUR 200 million more, compared to the same period of last year as of today. I think we are between 90%-95% total remittance. If you make some math, you should expect compared to last year, slightly more remittance contribution in the second half of 2026 than what we had in 2025. This I think it is good news for you.
Brilliant. Thank you.
Thank you, Michael. Next question, please.
The next question comes from Gabriele Venturi with Banca Akros. Please go ahead.
Good morning, and thanks for taking my question. Could you please provide more detail on any changes in the scope of consolidation that might have affected the volumes and life gross written premiums on a year-on-year basis, if any? Because when I divide the life gross written premiums for the first quarter of 2026 by those of 2025, I obtain a growth rate of 6.2% compared with the reported growth of 7.5%. Second, given the strong first quarter results, do you see scope for an acceleration in the coming quarters that could lead to an upgrade of the full-year guidance? Thank you.
Thank you, Gabriele. The first question is for Cristiano, while the second one is for Giulio.
Overall, the only perimeter consolidation change is related to the IFRS 5 allocation on our Irish activity, but it is as a branch, so you should not have any impact in the GWP, as you are trying to hint. In my personal opinion, I don't really probably catch the point. It is a true like for like for what regards the GWP look, maybe I kindly ask if you can follow up with the IR team to better maybe grasp what is your question, because I just would like to confirm, no change of perimeter when you look at the GWP. There is no material effect in the consolidation.
To your question about expectation top line growth for the second part of the year, I would tell you the following. If I look at volume, let's set aside price increases. Volume in, as I said also in the introduction, in the speech, volume in motor was +1 %. I don't expect this number to get stronger, considering that we are prone to really manage technical profitability. This number will stay at this level. Potentially, if we need to increase prices, we are even willing to lose a little bit of growth to protect the profitability. When we look at no motor, we see a very strong development, both in no motor without accident health and in accident health. If you ask me, I would expect that we're going to see this momentum continuing. Maybe we can accelerate a bit, but fundamentally, I don't expect a much different outcome.
Coming back to motor, we see what kind of rate increases might be needed, maybe more towards the end of the year, and that might influence a little bit the trajectory of growth on the motor side. Fundamentally, the answer to your question is I would expect to see more of the same as we go into the second part of the year.
Gabriele, maybe just if I add on the first question, just to be sure, if you ask, when we define like for like, our definition embeds as well a constant exchange rate versus the first quarter 2025. I don't know if that could help you in making your exercise, but is the standard approach. Very clear. Thank you.
Thank you, Gabriele. Next question, please.
The next question comes from Fahad Changazi with Kepler Cheuvreux. Please go ahead.
Thanks very much for taking my questions. Thank you for providing the detail on P&C and motor and non-motors. I was just wondering in terms of Motor and the outlook, what was the price effect just for Motor in Q1, and how you expect that to develop? On the Life business, could you possibly break out the impact on margin from the higher interest rates? I'm sure it's in your comprehensive finance deep dive Investor Day, but could you remind us again when you strike the updated assumptions, is it H1 or is it at full year? Thank you.
Thank you, Fahad. Could you please repeat the first question? Just to make sure, the second question is when we update interest rates in the new business margin of Life.
Yes. When are you updating those market assumptions? Do they get updated H1 or full year? The first question was just looking for the price effect in motor in Q1 2026.
Yes. Perfect. The first question on the price effect on motor is for Marco, while the other question is for Cristiano.
Hi. As Giulio was saying, we had still a positive development of motor on the price effect. I would say overall, we look at the growth that we are having on motor, mainly on price. There is this time also around probably one third of the growth would come also from volume. Around that. We are seeing these, the more we go into the year, we see that these increase in average price are broadly in line with what we see on the risk premium development. We are there. We don't see tailwind, we don't see headwind. We are more or less in line overall, country by country, there are differences, but overall, we see that the average premium is developing in line with the risk premium.
As Giulio was saying, looking forward, we will adjust our posture portfolio by portfolio, making sure we maintain the level of profitability that we like to have in every different market. We will look at the sign of inflation if they are going to appear. We are going to look at the different effect of frequency, all the component of the risk premium. We are going to decide portfolio by portfolio in the second part of the year, what is the posture that we need to take, making sure that, and I want to reiterate that we manage each portfolio for technical margin and not for any component of it. Not for growth or not for premium.
Fahad, regarding the methodology, our new business value is calculated with the beginning of period assumption. The number you have seen here reported for the first quarter 2026 is the year-end 2025 actual number. Just for you to be aware, had we had the benefit which this first quarter reflected because of the improvement of the market condition was 26 basis points in this quarter. If I take the end of period of March 31st, and we calculate the new business margin for first quarter 2026 backward, let's say, there would be another 15 basis points. I hope this helps. Every quarter, we use the beginning of period.
Great. Thank you very much.
Thank you, Fahad. The next question, please.
The next question comes from James Shuck with Citi. Please go ahead.
Thank you. Good afternoon, and good morning. Both my questions are on AI/technology related areas. The first one really was to I just wanted to get a bit more insight into the productivity of the agents. I know the acquisition costs are very high, including or excluding Europ Assistance. Are you able to share any productivity metrics amongst those agents? Also what the pipeline is in terms of rolling out AI related CRM tools and perhaps any expectations there. My second question, forgive me if you discussed this already, but I know you have digital investment plan of EUR 0.5 billion-EUR 0.7 billion over the plan. Can you just remind me what your total technology spend is in the group? I'm not sure that EUR 0.5 billion-EUR 0.7 billion would be included in it.
If you're able to split that into kind of keeping the lights on versus other, that would be very helpful. Thank you very much.
Thank you very much, James. Both questions are for Marco.
Yeah. Maybe before going specific into one part of the topic, I would remind the effort that we are making on AI. It's broad and deep on any area of the group. We are working a lot on scaling our use cases. What we have presented in our strategic plan, the 16 use cases, and that's a big effort because we wanna make sure that we get scale. One big topic for us is getting scale in everything we do. This is an effort that we constantly do. At the moment, I can say we are around 55%, 60% of implementation of those use case, and we plan to go to more than 90%. Some of the use cases are technically related to the productivity in the agency.
We want to make sure that we decrease the time spent by agents or by people in working for the agent, so inside the agency, on back office activity, on reconciliation, on discussing with us the different topic of a specific claim or something similar. What we are doing, we are also improving the productivity of the agency. Now, some of this is going to be a direct impact for the agency. Some of these use cases are going to be inside our company. We are going to make sure that in the end of the year, when we are planning to have a full deep dive on AI here in the whole group, we are going to discuss more in depth also about this topic.
One thing that it's really promising, by the way, it's also all the development that we are having on claims, because this is actually helping the agency in managing the claims much, much better, and therefore talking to the client much better. For the overall total technology budget for the plan, I think this is one big topic that we are tackling. We see a lot of potential for reducing the development activity, in particular coding that we do inside the group. This is one of the big item that we have in our cost base. We are targeting a significant improvement on this spending. Even here, probably we can give you more detail by the end of the year when we do the deep dive.
Thank you.
Thank you, James. Next question, please.
The next question comes from Gianluca Ferrari with Mediobanca. Please go ahead.
Yes. Hi, good afternoon. A couple of questions for me, please. One is on the EUR 4.3 billion inflows in life. I think if it's not the best result ever for a quarter, it's very close. I was wondering if you can give us a bit of color on how Q2 is going, if you're keeping the same pace or slightly lower than that. The second, I think Cristiano already gave a bit of an anticipation. I was wondering if you can share with us a guidance for new business margin for full year 2026, considering the current level of interest rates. Thank you.
Thank you, Gianluca. Both questions are for Giulio.
Maybe I start to also give you some color on the first quarter on the inflows. The question was on the inflows. We saw strong inflows in France, where we are up 45% compared to last year. We see that in our unit-linked, we sell a lot of unit-linked as part of the hybrid. We are outperforming the market, that's a nice development. From an inflows point of view, a good trajectory in Germany, where we are double the inflows of 2025, the first quarter. CE, Eastern Europe is not a major contributor to the inflows, we see positive inflows also there. Asia is always contributing to the growth, being clearly a growth area. That's the picture that you see in the first quarter.
Italy has been relatively flat, a little bit negative, which is also the reflection, clearly, of the strong quarter that we had at the end of the year. There is always some sort of seasonality. If you ask me what we're going to see in the second quarter, it's similar, but clearly there is some seasonality, as I said before. Usually Asia tends to be less strong as we go into the second quarter. France, I would expect to be more of the same. Germany, the same. Italy, also for the second quarter, don't expect to see much of a different trajectory. Where we expect to see a different trajectory in Italy is towards the end of the year. Bottom line is you're going to see something similar, but clearly need to adjust a little bit for the inflows because of the seasonality coming from Asia.
Overall, I would say we are very pleased with the development. I would like to point it out also to the growth in value on new business, which is 19% in the strong new business margin. I would say that once again, we deliver good results on aggregating the life side.
Thank you.
The other one is?
The guidance on new business margin.
New business margin. Yeah, sure. You know our guidance, 5.5%. I would say based on where we are right now, it's not difficult to imagine we might be better than 5.5% by the end of the year. This said, look, it's really not important whether we are going to be a 5.6% or even a 6%. I cannot even exclude that we are going to end up there. We are very much focused on growing the value of business. Clearly we want to keep a high level of new business margin. Fundamentally, when we make our decision, it's about making sure that the value of new business is growing. You saw that this quarter, and when you look at the CSM normalized growth, we are north of 5% for 2026 if you do a sort of run rate.
That's clearly a good level, because eventually this is what is sustaining the operating profit growth. To your question, guidance, we feel very good about m eeting or exceeding a 5.5%, the focus is on growing valuable business in a consistent manner.
Thank you very much.
Welcome.
Thank you, Gianluca. Next question, please.
The next question comes from William Hawkins with KBW. Please go ahead.
Hello, everyone. Thank you for taking my questions. Expenses, please. KBW's been doing work on admin expense leverage across the European insurers. One of the things I've noticed is that the loss ratio component of your GEX ratio is only about EUR 800 million from the presentation you gave a bit earlier this year. As I understand it, that is only claims handling expenses that are not allocated to specific claims. My question from that is, why would you take such a narrow measure? Because presumably allocated claims handling expenses are just as addressable, if not more so, as what is central. Secondly, if you were to take an all-in claims handling expense ratio consistent with the 7% or so admin that you've got in your normal expense ratio, what would that figure be, please? Secondly, if I could ask a strategic question.
Could you gauge for me Generali's long-term interest in London and global specialty business? Sorry if it's a bit left field, but at the moment, your business there is negligible, and I've always assumed that it's completely off the agenda because your focus is more European personal lines and maybe Asia. I just wanted to make sure I'm not missing something in terms of your portfolio ambitions for that part of the business. Thank you.
Thank you very much, William. Both questions are for Giulio.
On the GEX ratio, I will tell you, it is pretty normal to allocate the unallocated loss expenses to the loss ratio. Anything which is different will be totally new to me, honestly speaking. That is what usually is done in accounting. When we look at our GEX ratio, we include in the GEX ratio the unallocated part of expenses, and this is usually 2 - 3 percentage point of our GEX ratio will be that. We are capturing the unallocated loss expenses in the trajectory, the GEX ratio, which is going down. By the way, in this quarter, we are 20 basis point of improvement in the GEX ratio, which belongs to the loss ratio. If you talk about normal accounting, to the best of my knowledge, I am 100% confident, without hesitation, that you need to put the loss adjustment expenses in the loss ratio.
Somebody's not doing that, I don't know what to tell you, but that's what account has always been, by the way, so it's not even a new development. That's on that problem. On the question about the specialty business, London, you say we have a negligible presence. I would say we have zero presence, actually, at the moment in the Lloyd's market. What is important for us, we have a company called GC&C, which is basically a virtual entity, but we are running a GC&C operation. It's about EUR 3 billion of operations. They are delivering very good results, so we are very pleased with the performance that the company is getting. We want clearly to expand the company, diversify this business, which means we are clearly going to look also the opportunity.
They don't need to be in the Lloyd's market, but they could also potentially be in the Lloyd's market, knowing, however, that the Lloyd's market is a very peculiar market, which is very much prone to specialty, maybe complex specialty, and also with a lot of U.S. business. We definitely don't have appetite for that kind of business. To your question is, in reality, it's more our intention to try to strengthen our commercial business, to diversify that business, but it's not that we are targeting the Lloyd's market in a specific way.
That's very helpful. Thank you.
Thank you very much, William. Next question, please.
The next question is from Iain Pearce with BNP Paribas. Please go ahead.
Hi. Thank you for taking my questions. The first one was just on Banca Generali, and they were flagging in their results that the Alleanza partnership has been performing very well. Could you just touch on what you're seeing from your side in terms of the Alleanza benefits, how that's impacting, and how that is performing, and if the sort of run rate in Banca Generali that you're seeing is sustainable? The second one was just on your comments on if you see higher inflation, you expect or anticipate seeing a hardening of P&C markets again. I'm just trying to understand what you think and what you're trying to say there. Do you mean that you expect to be able to price for that inflation, or would you expect that would lead to stress in the market again and pricing ahead of inflation? I just want to understand those comments.
Thank you.
Thank you, Iain. Both questions are for Giulio.
Coming from Banca Generali and Alleanza, I can tell you the insurer banking is going actually pretty well. We are very encouraged by the results that we are getting, the targets for 2026 are to achieve EUR 500 million Stile Unico, which is the product that is an Alleanza product, but sold through this platform of Banca Generali to achieve 15,000 current accounts. Right now, we are extremely confident that we are going to hit both targets. To your question, what are the specific benefits for Alleanza, because the benefits for Banca Generali are pretty clear. I would tell you the following. Of the EUR 500 million Stile Unico, we estimate that 40% is additional.
There is always an element of cannibalization, and if you ask us how much of this EUR 500 million just replacing other solution and how much is on top. We will say that 40% of what we sell in Generali is on top. The second point, I was personally in the agency of Alleanza, and I tell you that the conversation you can have with the clients are very different because they are really holistic. You can give more and more a sort of 360-degree advisory. I will tell you that, in my opinion, the midterm, this is going to create more of a binding the customers even more. It's a shared wallet kind of things because we can access a shared wallet that we don't have, and this is benefiting also Alleanza. Then also, I believe customer retention is going to be even stronger.
I saw that with my own eyes, and it was actually pretty impressive. On the other one, on the inflation leading to the new hardening price. Yeah, it might happen. We will say that if inflation is going to increase, I would assume that the market is going to react. We cannot speak for others, but we can speak for us. As Marco was saying before, our posture is to always first is about technical profitability, making sure that we are achieving the marginality that we like to achieve, and we are even willing, to a certain degree, to forgive volume. Keep in mind that right now on motor, we have a positive balance. From that point of view, we have even some cushion before we go into negative territory.
The bottom line is, yes, if we need to increase prices because inflation is going to go up, we are going to do that. I tell you that in some cases, we are already doing this, not necessarily on the motor side. I can tell you in Germany, on the non-motor side, we are increasing prices. In Eastern Europe, we are going to be more cautious. We are already preparing that direction. Then we are going to, as Marco was saying, watch the situation and act accordingly.
Thank you, Iain. Next question, please.
The next question comes from Andrea Lisi with Equita. Please go ahead.
Hi. Thank you for taking my questions. The first one is on P&C reserving. If you are already factoring in your reservation in P&C, a level of inflation that is higher and consistent with the current market expectations. The second question is on the rate effect that could have on the inflows in Life. We are observing that the curve is projecting a higher level of rates. Just wondering what are your expectations there and if you do think that at some point, we will see a higher competition, for example, Govies. Very last question, if we have seen that UniCredit was quite vocal in referring to you as a potential partner, and there are potential discussions for developing a partnership in both insurance and asset management. Any indication that you could provide on this point, on this topic would be super helpful. Thank you.
Thank you, Andrea. The first question is for Cristiano, the second is for Marco, and the third one is for Giulio.
Hello, Andrea. Regarding the higher inflation, we are not seeing a specific spike in inflation versus the normal trend observed so far. By the way, I recall you that our reserving technique embeds a pretty prudent inflation. As you know, the difference between insurance inflation and CPI or HICP is different, and usually it is higher, the insurance inflation. We start already from a higher level. In the spare parts, what we are monitoring most, we are not seeing it. In the bodily injury, the vast majority of the increases happened already because of the change, mainly because of judicial and tribunal rules, that put them, which were an inflationary factor.
I would tell you that the huge prudence that we kept in 2025, and we are still keeping in 2026 on our current year number, coupled with the historical level of prudency in the insurance inflation projected in our reserves, make us extremely confident to manage it. Our reserving level has never been so high, and I think the proof of our interplay in the first quarter is a pretty much good demonstration out of that. I can confirm you, this is pretty much stronger.
Hi. In terms of the effects of higher rates on Life, I think it's interesting to go back to what happened a couple of years ago. When higher rates were there and inflation was there. We have seen that the overall portfolio of the Group was pretty resilient in terms of development in that situation. Clearly, it might be that we see higher rates. As we have seen in the past, there could be more competition, especially on the short term, investment from, for example, Italian saver due to the issuing of more Italian debt on the short term.
I would say unit-linked is more linked to equity more than interest rate, I would say protection has proven to be pretty resilient in different environment. It's probably what we have taken away, that there is such a strong demand for protection product that this will continue to go, and will keep on growing in a nice way. In the way we are seeing developing in the last quarter, even in different condition. I also have to say that the type of business that we do, which I remind you, is typically multi-line, so it's traditional unit-linked protection, is developed mainly through proprietary distribution. This is pretty resilient in different type of scenarios.
We have seen that in low interest rate, we have seen in higher interest rates. We are pretty confident that even after what happened in 2022, 2023, this is going to be the case. Consider also that until we don't see a significant increase in interest rate, what we have seen in 2023 already protect us from some of the lapses that already happen at that level of interest rate. Overall, I would say we feel that our inflows and our life business, it's pretty resilient in different external condition.
Your question about UniCredit. First of all, I would like also to say we're already working with UniCredit in Eastern Europe, so we have a successful relationship there. Based on the collaboration that we have, clearly we always touch point with UniCredit. It's a great institution. If you take the metro in Milan, you are familiar between Tre Torri and Porta Garibaldi, they are just five stops, it's easy to have conversation with them. I think, anyway, it's pretty common that a bank and the insurance companies have a conversation about what kind of cooperation we can do on the asset management side, insurance side, I would not read more than that. It's normal that there is a conversation going on, this is not the only conversation we have.
Thank you very much.
Thank you, Andrea. Next question, please.
The next question comes from Farquhar Murray of Autonomous Research. Please go ahead.
Just two questions if I may, both on non-life and actually mainly in elaboration on Iain's questions earlier. You mentioned further potential pricing actions in non-life, and you at least partly link them to the macro backdrop in the Middle East. The first question is just to double check that the linkage there is predominantly coming from claims inflation or are there frequency and perhaps even economic consequences you're keeping an eye out for there? Second question, what are the triggers for moving to implement those pricing actions? It sounds like some geographies have obviously already gone through them. Thanks.
Thank you, Farquhar. Both questions are for Giulio.
Regarding the pricing issue because of the situation in Iran. We need to see first what is going to be the impact because of the Iran situation. For the time being, we don't see inflation yet. According to some analysis, one might assume that if oil prices stay up 25% or 30% over time, we might see an increase, let's say, in the loss ratio before we take any actions in motor 1%-2%. If this is going to happen, we are going to see this kind of increase, we are going to react. As we said before, right now we don't see severity going up. For the time being, we are watching, preparing. In some cases, we are taking actions, but because of other reasons, but we are not, at the moment, in a situation where claims inflation is going up.
I would like to highlight that on the non-motor side, a substantial part of our business is index. From that point of view, there will be a natural, if you want, offset in the case inflation is going up. Coming back to what we said before, we are monitoring situation. We are going to take action case by case based on what we see. Since you are asking anyway about the impact coming from the Iran situation, one thing, because we saw also from calls with other competitors on the travel side, we do not see major impact so far. Actually, Europ Assistance in total was up 15% on revenue, and this despite clearly softening, especially in Australia. The business was very strong in America.
For the time being, also, we have been able to more than offset the weakness in Australia because of this situation, and we are going to continue to look at the evolvement on the revenue side. It's more a revenue side issue, potentially on travel, but I can tell you that might be a little bit of a headache, but not something that can change our delivery, not even for Europ Assistance. Bottom line, for the time being, so good so far. Yeah. If I can have one topic, I think the phases that we went through in the last year of inflation.
Made us learn a lot about where the first sight of inflation comes up and show up. We have a very good monitoring at the micro level of peril, and also going market by market, portfolio for portfolio. If you think about, for example, material damage, we are able to look at the different spare parts brand by brand, portfolio by portfolio, or also the aggregation of those affecting to perils. I think this is also a good way of looking, leading indicators of where inflation might come up. As you know, when we talk about inflation, one thing is to think about the general inflation, one thing is to think about the claims inflation, which is completely different.
Thank you very much, Marco. Next question, please.
The next question is a follow-up from Michael Huttner with Berenberg. Please go ahead.
Thank you very much for this opportunity. I had two, and you may have answered one, but I wasn't sure. On frequency, I think in the past it's been declining, but from the way you've been talking, it sounds like it was flat. I just wondered if you can maybe comment. Remind me, on Solvency, you gave us basically the kind of Q2 figure pro forma as of today. What is the impact of Solvency II review which comes early next year? Thank you.
Thank you very much, Michael. The first question is for Giulio, and the second on solvency is for Cristiano.
When we look at the frequency in motor, we need to adjust for Portugal, because in Portugal, we are picking up some attritional frequencies and frequency that is for sure related to the weather event that we had over there. If we remove Portugal, actually frequency across the portfolio is relatively stable. We see a little bit of a different nuance compared to last year. Last year, we saw frequency going down across the portfolio, and now we see countries where frequency is going down. In Central Eastern Europe, and Central Eastern Europe includes also Germany, we saw frequency going up. We think this is related to the winter, because 2026 winter was colder compared to the winter of 2025. We see a little bit of a different trajectory depending on the country.
When we look at the total portfolio, frequency is adjusted for Portugal, is basically in line with the prior period level and also consistent with our plan assumption.
Good.
Thank you, Michael. I'm not commenting again, you are already done valuation so far for the second quarter. Referring to the Solvency II review, we can confirm that we are around the 15 percentage points. The important thing is do not forget that it will come into practice at the end of January 2027. Any decision that has to be taken in beginning of 2027 will already embed this already at the end of January, which is also positive and conducive for resiliency, environment, and security of cash flows, since I know that both of us cares a lot.
Thank you so much, Cristiano.
Next question, please.
As a reminder, if you wish to ask a question, please press star and 1 on your telephone. Gentlemen, there are no more questions registered at this time.
Thank you very much for listening to our call. Of course, should you have any further follow-up questions, the investor relations team is at your full disposal. Have a great rest of the day. Bye-bye.
Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones. Thank you.