Good afternoon, and welcome to Poste Italiane first quarter 2024 results conference call. Matteo Del Fante, our CEO, will take you through some opening remarks, and then Camillo Greco, our CFO, will cover the financials. This will be followed by Q&A session, where you can ask questions either via phone or to our webcast platform. Please limit yourself to two questions. Over to you, Matteo.
Thank you, Giuseppe. Good afternoon, and thank you for joining us. I'm pleased to report that Poste Italiane had a strong start of the year, with overall group revenues at over EUR 3 billion, with all business segments in line or above targets. Our cost base management remains a key focus as we continue to successfully mitigate inflationary impacts. EBIT for the quarter is at EUR 706 million, up 14% versus last year, if we exclude the higher contribution of Active Portfolio Management revenues in the first quarter of 2023. Commercial trends have been supportive in all businesses, as customers continue to see Poste as the safe haven for their savings, and the go-to place for the majority of their daily needs.
We continue to see positive net flows in asset management and insurance products, while retail deposits remain resilient in a challenging environment. We deliver solid results while maintaining a strong balance sheet. At the end of June, we will pay the balance of the 2023 dividend for EUR 729 million, for a total of over EUR 1 billion dividends paid on 2023 results, equivalent to EUR 0.80 per share, per share. I'm also pleased to announce that the Board of Poste Italiane and CDP have approved a term sheet outlining the key terms of the renewed Postal Savings contract. The agreement covers 2024-2026 three-year period, and is fully in line with our targets, as well as our aim of preserving a stable stock of savings over the plan. Let's move to group financial results on slide four.
Total revenues are over EUR 3 billion, up 6% year-on-year, excluding Active Portfolio Management. Total cost came up EUR 2.3 billion, up 3.7% year-on-year, reflecting business growth and benefiting from actions to mitigate inflation impact. As a result, for the quarter, EBIT is at EUR 76 million, and net profit is at EUR 51 million, up 14% and 16% respectively, excluding APM. On slide five, you can see a healthy underlying revenue progression across all our businesses. In Mail , Parcels and Distribution, revenues were driving. Were driven, sorry, by growing parcel volume, as well as stable Registered Mail volume and repricing actions, more than offsetting a Registered Mail volume decline.
In Financial Services, revenues were up 5% in the quarter, excluding APM, supported by strong NII and Postal Saving fees, as well as positive underlying business momentum in consumer loan and asset management fees. Insurance services revenues were in line with guidance, with a resilient Life investment and pension businesses, growing volumes, and improving profitability in Protection. We continue to record positive Life net flows, outpacing a challenging market, and our lapse rate remains well below market levels. PostePay services continue to grow double digits, supported by increase in card and digital payments, and our leadership in e-commerce transactions. All products of this business unit are contributing to revenue growth, including our successful new energy business. Let's go to slide six, and EBIT evolution by segment.
Mail, Parcels and Distribution shows a EUR 71 million EBIT improvement compared to the first quarter of 2023, excluding APM, supported by a strong revenue momentum. Financial Services, operating profitability is resilient and reflects revenue trend and higher distribution network cost. Insurance Services EBIT is in line with our plan, representing the lion's share of group EBIT. Finally, PostePay Services, double-digit EBIT growth is driven by strong top-line performance. Let's now move to a more detailed review of our numbers, by our CFO. Over to you, Camillo, please.
Thank you, Matteo, and good afternoon, everyone. Let's move to slide number eight. Mail, Parcel, and Distribution revenues are up 5% to EUR 934 million. Mail revenues at EUR 535 million were up 3% year-on-year, thanks to ongoing repricing actions as well as favorable product mix, supported by stable volumes of higher value Registered Mail. Let me remind you that our business plan embeds EUR 100 million lower mail revenue every year. So far, we have not yet experienced such a decline. Parcel revenues were up 10% to EUR 368 million, supported by healthy B2C business, with increasing volumes compensating the reduced contribution from the COVID logistics mandate, as well as the Sennder Italia deconsolidation. Adjusting for these items, parcel revenues are up 14% in Q1 2024.
Distribution revenues from other business units are up 9% in the quarter, excluding impact of Active Portfolio Management, reflecting positive commercial trends and compensating for higher network costs. Let's look at volumes and tariffs on slide number nine. Parcel volumes were up 21% in the quarter, driven by healthy B2C growth, with 38% of items delivered via the postal network. Looking at pricing, the slight reduction in parcel tariffs in the quarter is related to a mix effect with increasing volumes, with lower tariffs, as well as lower delivery unit costs, with items delivered through our third-party network increasing over 20%. Moving to Mail, lower margin on Registered Mail volumes continued to decline in the quarter, driving the overall 9% volume reduction.
However, stable volumes of higher margin Registered Mail and effective repricing actions have led to the strongest increase of average tariffs in 2016, +12% year-on-year. Moving to Financial Services on slide 10. Gross revenues for the quarter came at EUR 1.6 billion, up 4%, excluding the impact of Active Portfolio Management. Net interest income came at EUR 590 million in Q1, up 8%, supported by growing asset yields, resilient retail deposits, and low cost of funding. Postal Savings distribution fees amounted to EUR 430 million, up 1% year-on-year and in line with business plan target. Transaction banking fees were impacted by lower current accounts repricing applied from April 2023, leading to EUR 186 million revenues, down 8% year-on-year.
Consumer loans distribution fees reached EUR 62 million, up 41% versus Q1, driven by higher volumes coupled with increasing upfront fees in a stabilizing interest rate environment. Asset management delivered another remarkable quarter, reaching EUR 45 million revenues, up 54% versus Q1 2023, supported by strong inflows. Finally, EBIT came in at EUR 199 million, reflecting a revenue trend and higher distribution network costs. Moving to slide 11. TFAs reached EUR 586 billion, up EUR 5 billion since the end of 2023. Let's look at each component. Insurance net inflows were at EUR 0.5 billion, continuing the outperformance in a challenging market. Deposits were up, benefiting from higher balances from PA clients, while the retail deposits were resilient at EUR 56 billion, confirming the stickiness of our customer base.
Postal Savings outflows were related to lower Postal Bonds gross inflows, while we recorded new liquidity in Postal Books. Finally, let me highlight the impressive EUR 1.3 billion net inflows in Mutual Funds, the highest ever quarterly inflow we have reported on this product. Let's move into slide number 12. Insurance Services revenues amounted to EUR 397 million in the quarter, in line with our plan. We continue to have positive net inflows in Q1 2024, with a lapse rate of 5.5%, still well below market levels in a tough environment for Life insurance investment products. Life investments and pension revenues are slightly down 3% to EUR 363 million in the quarter, driven by a lower release of risk adjustment as a result of lower maturities, partially compensated by higher CSM release.
Protection revenues were up a strong 78% in the quarter, supported by higher GWP in Protection and Net Insurance consolidation, which represents an accelerating enabler for the growth of our Protection business. In fact, Protection GWP were up 29% to EUR 312 million in Q1, of which EUR 50 million from Net Insurance. The combined ratio was 85% for the last quarter, in line with our guidance and improving versus last year. EBIT of EUR 349 million is up 4% compared to Q1 2023. At present, we are not accounting for systemic charges related to the insurance guarantee fund, as we are still waiting for the implementation details. As a reminder, these charges are not included in our EBIT targets over the plan. On slide number 13, we show the CSM evolution in the quarter.
Normalized CSM growth is + 0.4%, with new business and expected return more than compensating the quarterly release. Group CSM at the end of the quarter was up to EUR 13.8 billion since December 2023, providing strong visibility on the division's sustainable profitability going forward. Let's look at the solvency ratio evolution on slide 14. Poste Vita Group Solvency II landed at 313% at the end of March 2024, up 6 percentage points from December 2023, and well above the managerial ambition of circa 200% through the cycle, already embedding the new remittance ratio of 100% to the parent company.
The improvement was mainly related to the positive impact from economic variances, driven by the declining BTP spread in the last quarter, while the internal capital generation of the business fully covers the foreseeable dividend, even with the higher remittance ratio. Solvency II ratio continues to be strong and is currently between 295% and 310%. Moving to PostePay Services on slide 15. Revenues continue to rise double digits, reaching EUR 379 million in the quarter, up 17% year-on-year. Payment revenues grew by 14% to EUR 283 million in the quarter, as we lead the continued structural shift from cash to card-based and digital payments, and confirm our leadership in e-commerce payments, up 15% in Q1 2024.
Telco revenues grew 2% in the quarter versus last year, supported by the fiber offer . Finally, positive commercial trends in our energy business are confirmed, with EUR 15 million net revenues in the quarter, a substantial growth year-on-year. Yet again, thanks to strong revenue growth, EBIT grew a remarkable 32% to EUR 170 million in Q1, supported by all businesses. Let me highlight that the comparison Q1 2023 is now fully on a like-for-like basis, as LIS was consolidated since September 2022. On slide number 16, we look at our workforce evolution. Since the end of 2023, the average headcount decrease to 118,000, as we continue to renew our workforce with 2,200 new hires in the quarter.
HR cost per FTE are up over 4% to EUR 47,400 as a result of salary increases and other items, such as variable compensation, with the value added per FTE growing over 2%, now at almost EUR 84,000 per FTE. Moving to group HR costs on slide number 17. Overall, ordinary HR costs are up 3% in the quarter to just under EUR 1.4 billion, with higher compensation partly mitigated by lower FTEs. In the quarter, ordinary HR costs on revenues are stable at 42%. Moving to slide number 18. Non-HR costs increased by EUR 62 million year-on-year. In particular, costs were up EUR 70 million, mainly driven by EUR 51 million of additional variable costs, reflecting our higher business volumes and EUR 30 million inflation impact, while non-inflation related fixed costs decreased by EUR 11 million.
More in general, our focus on cost discipline remains laser sharp, and protecting the bottom line profitability remains our top priority. Thank you for your time. Let me hand over to Matteo for a wrap-up.
Thank you, Camillo. At our Capital Markets Day, two months ago, we set out our strategic plan, the Connecting Platform, aiming at reshaping our business to continue generating substantial growth. We have established ourselves as the largest phygital platform company in Italy, committed to serve the largest client base in the country, catering for both long-term and everyday needs. This is our first progress report against our journey, and it is a strong one. We deliver high quality results across the board and from each of our business units, supported by positive commercial trends in our products and services. We are executing our plan with a continuous focus on cost discipline, mitigating inflationary impacts. We continue to invest in automation and technology with objective to constantly improve customer experience and loyalty.
Thanks to our rock-solid capital position and sustainable profitability from our well-diversified business model, we're well on track to meet our financial and shareholders remuneration targets. Giuseppe, over to you for the Q&A. Thank you.
Thank you, Matteo. Let's start our Q&A session. Let me remind you that to ask a question, you need to press star one, and to remove yourself from the question queue, you need to press star two. The first question is from Giovanni Razzoli at Deutsche Bank. Go ahead, Giovanni.
Thank you, Giuseppe. I have two questions. The first one is on the CDP agreement, which, if I'm not mistaken, envisages a remuneration of EUR 1.6 billion-EUR 1.9 billion. Can you remind us what was the assumptions that you have incorporated in your business plan? Because it seems to me that you have the possibility to exceed the target of this business plan. And as usual, seems like you have been prudent on this. And in order to achieve the top of the range, what would be the targets in term of inflows? I mean, if you can share with us if something has changed compared with the previous scheme of remuneration.
The second question refers to the quality of your revenues in the Financial Services division, because we have seen that the banks have reported very strong fee generation in the Q1, mainly thanks to the upfront contribution, which seems to me that are a very low portion of your revenue stream. Can you share with us any details on this so that we can, you know, compare the performance apples to apples? Thank you.
Thank you. No, I think that it was very important to find an agreement with CDP and having a three-year agreement allow us to start this plan and this journey with the right contract in place. In terms of the upside versus the top of the range and what we had in our figures in the plan, I can tell you that from the targets the range of targets we agreed in the plan, I would not anticipate to be close to the top of the range. Okay?
So I think, you know, having a book for 2023, at EUR 1.73 billion, all we can say is that we are in a continuity/marginal improvement over last year. The more important objective we achieve in the new agreement was finding the right support in terms of product offering, which, as you have seen in the last two years, is coming from CDP with a lot of quality and commitment, and this has been reestablished in the new agreement. And second item, it was also important for us, given the very significant amount of redemption maturities and early redemptions, to have targets that are feasible for us.
Because clearly, in the current, market environment, with strong, redemptions, we need to have, realistic, targets, which was the reason, you know, it took a bit, you know, a few extra weeks, versus, you know, our Capital Market Day to find, the agreement. In terms of fee generation, I think, you know, Camillo mentioned, you know, our asset management, results, in the quarter, but maybe Camillo want to add something.
Yeah. Yeah, so, so what you can see in the slide, in Financial Services, we increased the fees in asset management from EUR 29 million -EUR 41 million, an increase of sixteen million euro in absolute terms, against EUR 1.3 billion of net inflows. At plan for 2024, we have put a 0.2% of number for that line of business, and that equates to approximately 1% on the underlying asset base.
Thank you.
Okay, thank you. The next question is from Gian Luca Ferrari, Mediobanca. Go ahead, Gian Luca.
Yes. Hi, good afternoon. The first one is on the commercial performance, page 11. It seems to me that most of the deposit growth is coming from public administration. If we isolate retail, deposit and Postepay, and we put together with the inflows you reported in Postal Savings, Asset Management, and Life, there are little positive flows in the quarter. I was wondering if you can elaborate on the commercial activity only of retail clients. And linked to that, the new business CSM is down kind of 20% year-on-year. If we can have also the new business premiums and the new business margin generated by the Life Insurance business in the quarter. And the second is on the lapse rate.
It seems to me that in general, lapse rate is kind of normalizing in the sector, is, reducing. You are definitely much lower than the industry, but the 5.5% is, increasing compared to the 4.4% you closed, 2023. So, what's going on with the lapse, rate in, again, in Life? Thank you.
Okay, I can start so that Camillo can prepare himself with the lapse rate, which is the last question. Thank you, Gian Luca. Yes, it's above the historical 2%-3% we were used to in the low-yield environment, but that's when the market was at 6%. So if I look at 2023 number, official figures from the insurance association, the average for Italian insurance, including Poste Italiane, is 10.4%. So I think we're happy with keeping our 50% target versus the market. And that's, I think, you know, quality of the investor base.
You know that we have much lower activity of changing and churning portfolios than our competitors, and that's, you know, reflected in the lower lapse. The first two questions on retail and margin of the new business in insurance. Please, Camillo.
Yeah. So for the question on the margin in new business, I guess the best way to look at it is to look at the bridge of the CSM from 31st of December 2023 to the 31st of March 2024, which is page 14 of the presentation, where you can see that the new business contributed EUR 228 million of value to the CSM, CSM stock. So I would look at that as a reference point. And with respect to the first point, which is the evolution of the retail deposits, I think that it's fair to say that the first quarter we have not seen growth in deposits, but that's frankly something that we had at plan.
And if you look at what we had communicated at the end of March, we already expected to have the deposits relatively stable. I would look at it in a positive way, also noting that we have been able to with that liquidity on our NII target, which is up EUR 45 million from Q1 2023.
If I can rephrase a bit, the first question: Where are the EUR 2.7 billion outflows from postal products going?
Well, I think that you have seen an increase of EUR 1.3 billion in other asset management we have talked about. So we have seen, we're seeing that. And then in general, if you look at the Italian market, you see that the liquidity on deposits have been going down, and I would argue that we have been performing quite well against those benchmarks.
Partially insurance, we still have, you know, positive Net Insurance flows, which is again against the opposite market trend.
Okay, thank you.
Okay, the next question is from Farooq Hanif, JP Morgan. Farooq, please go ahead.
Hi, everybody. Thank you so much, and good afternoon to you all. Just going back on the CSM, the annualized growth rate of 0.4%, it just seems, you know, really quite low compared to what you appear to be planning. So can you explain why that is? Is it because the release is just really high in this quarter, and that we should assume a lower level going forward? Is it the new business profit, which could be a higher margin going forward? You know, going back to Gian Luca's question as well, because the margin of new business on new business sales. So if you could talk about that, that would be really helpful. And then also going back to fees in the banking, in Financial Services.
I mean, I thought the consumer loans growth and financial, you know, asset management fees were, was very impressive, you know, it was well above my expectations. So, are you seeing... Are we seeing a trend here that we can sort of annualize, you know, in terms of growth? Can you talk about the background behind these flows? Thank you.
I think, you know, as far as the growth of 0.4% of the CSM, Farooq, and thank you for the question. One has always to remember our business model. You know, we're not here to push products, but we're here to basically offer time after time to clients the best, you know, products that suits their investment appetite. Which means that this specific quarter we had an outstanding demand which is part of your second question on mutual funds which was a record quarter. And those products were much better received by the market in the quarter. The fees related to those products are still in our obviously income statement.
And, do we think, and I'm jumping into the second question, do we think that this is a trend to stay on the Asset Management? I think only partially. There is an effect of seasonality, so it's also a matter of when you offer the new fund in the quarter or in the semester, when you offer the new class one or multi-class products. So I think, you know, one should expect over the rest of the year, a reversal, a partial reversal of this trend. But we're fully aware, going back to question number one, that the lower CSM in, you know, in our estimate is mainly coming from a slightly lower new business production than anything else.
As far as the fees business of loan distribution, I think the answer is positive. We're growing in terms of market share, specifically in the salary and pension-backed loans space. We're marginally growing our market share, but the reason why one can be more optimistic for the rest of 2024 is because there is some, as you probably know, Farooq, some basic discounting factor effect which has helped us in the quarter, i.e., the fees that we generate in this business in a lower yield environment even with the same amount of loans so that we distribute is providing a higher upfront for for post.
So if you assume that rates will be stable to, you know, declining for the rest of the year, you can be more comfortable on that trend than, you know, in other spikes that we have seen in this quarter.
Okay. Just if I may quickly follow up, and I think this partly answers the previous question from Gianluca, but just, you said the new business sales were down. Can you give a percentage drop or a number that we could reference?
No, I didn't say that it's down. I say that we had anticipated probably less of this shift from insurance to funds. And you know, this is explaining the lower contribution to the CSM of the new business. Camillo, you want to add?
No, that's correct. Shifted, not down.
Yeah, exactly. We have an increase, and I think we are—we don't have official data from the market, but certainly we were, last year, the only or certainly one of the, the only among the reporting large life companies to have a positive inflows. It was a couple of billion EUR last year. It's only EUR 0.5 billion this quarter. Could have been more, yes, and if, if it had been slightly more, you would have seen a slightly higher business generation contribution in the CSM, but you would have not seen the fees on the Asset Management side that, you know, were part of your second question. Okay?
Thank you so much. Thank you.
Let me also add that we also have EUR 70 million more on gross written premium on P&C in the insurance business, which also has value here, and that is growing quite nicely, as the trends are exactly the one that we disclaimed and discussed last month on the capital markets day, where we showed that, where we said that we expected revenues in Life to be stable to GDP growth and more vibrant growth in P&C, which is exactly what we're seeing.
That's really kind. Thank you so much.
Thank you, Farooq.
There are no further questions, so thank you very much.
Thank you, everybody.
Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.