Ladies and gentlemen, good morning. This is the Chorus Call operator. This is the Q&A session on the rationalization of the Unipol Gruppo, together with the preliminary consolidated results at the 31st of December, 2023, Gruppo Unipol. Managing Director, CEO UnipolSai, Matteo Laterza, will go through a short introduction, and he will then be available for taking your questions. Mr. Laterza, please go ahead.
Good afternoon, ladies and gentlemen, and thank you so much for being virtually with us. Now, I'm sure you know the most important piece of news of today, which is the streamlining or rationalization of the group, thanks to the merger of UnipolSai into Unipol Gruppo. Now, we will be considering the exchange rate. So 0.3 Unipol shares, UnipolSai exchanged per one share Unipol Gruppo. At the same time, Unipol Gruppo is now launching a voluntary cash-based offer or tender.
The price is EUR 2.70. Again, at the same time, we have announced the results of last year, 2023. These results are, in my opinion, very good, also considering the difficulties typical of 2023, especially considering natural catastrophes that have impacted heavily on the last year's business, plus all the inflation-related implications. And this is something we saw in the motor vehicle MV business. So despite these difficulties, our result, the group level, is EUR 1.3 billion, or 766 million for UnipolSai. So there's been a strong resiliency from our non-life business, and again, many other areas which are as important, including the contribution of the health business, which is bigger and bigger business, plus the contribution of bancassurance.
So health and bancassurance, these are two of the key pillars of our business plan, without forgetting the life business, giving a major contribution to the comprehensive overall results of the group. Now, in terms of solvency, and this is my last point before getting questions, total solvency is 200%. Now, it includes the consolidation of BPS, Banca Popolare di Sondrio, which is what we didn't have last year, September the 30th. It also includes the distribution of dividends. Now, as you have seen in the presentation, we have EUR 0.37, sorry, EUR 0.38 for Unipol Gruppo and EUR 0.165 for UnipolSai. Of course, I'm talking about euros. There's been sights. I'm here with Enrico San Pietro to take your questions. Thank you. If you want to ask a question, please dial star followed by one on your phone.
If you want to get out of the booking list, please dial star, followed by two. Please use the receiver of your phone. If you want to ask a question, please, you can dial star, followed by one now. The first question is from the line of Alberto Villa from Intermonte, please.
Good afternoon, thank you. Good, good afternoon, Matteo. I have some considerations I'd like to share with you, plus some questions on this operation. My first question is the following: what will be the post-merger solvency level? Because the current UnipolSai minority shareholders may take part in the cash offer, but also in those cases where there may be equity or shares exchanged.
So based on this solvency level, which may be the considerations concerning the distributions or the dividends in the future, so what about the possible solvency level for the group in the future? I mean, as the right range, so as to carry out your business. Of course, this concerns this extraordinary operation. The other point, the other consideration, is on the initiatives that you are putting together in order to improve the profitability of the normal life business, so the combined ratio.
Can you tell us more about the tariff policies? Can you also tell us more about any possible change in the coverage level that you offer customers, for example, hailstorms that have impacted negatively on 2023? Thank you.
Now, as for your first question, Alberto, now, as you correctly said, the solvency of the combined entity depends on the percentages of participation to the public offering.v So basically, the starting point is quite similar to the situation we had at the end of last year. So figures you saw, let's say that in case of total, complete, participation into the offer, well, this has an improving effect.
Of course, we haven't quantified it yet. So in those cases where there's no total participation all the way to, let's say, 0% in terms of accepting the offer. Anyway, final figure, if you will, goes from the current number upwards. Now, we know that, in terms of this company, on a combined level, now, from the structural point of view, we do generate capital. So in the future, this organization, will be able to, improve its solvency position. Now, it is too early to talk about, you know, possible dividends or paying dividends on the new organization. Of course, there will be, you know, evaluations and assessments done, in the future. Now, as for the normal life business, let me ask Enrico to take this question.
Sorry to take the floor. This is Mr. Cimbri. Now, before giving the floor to Enrico on the normal life business, I'd like to share an important point with you concerning solvency. Now, of course, so we keep, you know, talking about the consolidated solvency level, the way you can see it, you know, in printed documents. Anyway, I'd like to share a key point with you. Now, this point has to do with a very special, if you will, situation here. We are an insurance group, so we consolidate, you know, 20% of two banks, in our, you know, equity.
This triggers a major, you know, consequence or effect on solvency, just because I mean, when I say solvency, of course, I'm talking about the percentage rate. This is due because of the nature of the solvency level, so the regulatory capital of banks, because, of course, their percentages are much lower than those characterizing the insurance sector. So, for banks, we have 14%, 16%, even yes, 16%. So Monte Paschi, they have 18%. Now, this is a unique case. Once again, this factor generates a sort of an optical effect, that doesn't really allow you to understand, you know, the solvency, of, you know, the group. Now, I'm sharing this with you for the following reason. Now, for any reason, if we decided to slightly reduce our stake in the banks, we wouldn't be obliged, I mean, to do the consolidation in that case.
So our solvency now, this is not an exact figure, okay? This is a very, very close proxy. So it would be very similar to the solvency level of the insurance business. So when Unipol I mean, we consolidated 200, so the insurance solvency would be 239. So 239, if we want to go there, we just tend to sell some percent, if you will, of the two stakes in the banks. So we do no longer consolidate them. And sort of like magically, you know, the solvency would go up to 239. Okay? So once again, sorry to interrupt you, but I heard about solvency. I really needed, you know, to share this point with you. Okay? Let me let me take advantage of having you there. So in your opinion, what would, so the right range of solvency may be for the post-merger group?
Well, if you consolidate, in a stable way, well, let's say between 200 and 220. So this is, you know, our objective.
Thank you.
Okay then. So let me talk about the industrial development or evolution. And Alberto, once again, good afternoon. So in terms of MV, so let's say elementary business, which is basically the guarantee against, you know, the CVT, so the catastrophes. Now, in terms of motor vehicle, so MV, we already talked about this on the previous conference calls. So we started major repricing policies some months ago. And month after month, as we announced, the tariff increases get into the premium. So today, well, actually, in 2023, average premiums went up by around 10%. And the selectivity, if you will, of our tariff generates a more than proportionate, let's say, high risks together with an improvement of claim rate.
So in the final part of the year, we have to add the consolidation of two other elements, so they have a positive impact on the average claim cost. So this is the consolidation of the reduction of the incidence of claims with interest. In this case, average costs are higher out of the number of total claims, and an incidence which is lower than last year on serious or severe claims. Now, these two items impacted positively on the combined ratios concerning MV business. So even if, you know, in different technical forms, they also impacted, I mean, the IFRS 17. So I have to say that, let's say, the journey, if you will, has been started some time ago. We keep traveling along that journey because we want to, you know, to complete the recovery of margins, which is one of our targets.
As for the non-MV business, well, you know very well what happened on the Italian market. It's been heavily impacted by the, you know, atmospheric events, so natural catastrophes. Now, they took place in 2023 in a real extraordinary way. And again, they represent, you know, a trend. All insurance companies have to take into account this negative trend. We are doing this in a very bold way because we started massive actions on hundreds of thousands of policies we have in our portfolio, especially those located in northern Italian regions. So this means increasing prices significantly sometimes. But we also have decided to change or amend the regulatory conditions, and particularly by including and increasing the percent of the damage that's not paid. So this is an operation that we do for the first time, as the first company doing this in the market.
I'm sure this may help us rebalance the area, in the non-motor vehicle claim. I have to say that we this is where we had the worst results. While on other businesses, for example, injuries and health and many other businesses, we keep having extremely positive results.
Thank you.
Next question is from the conference in English, from Michael Huttner from Berenberg, please.
Thank you. Certainly surprised me on the timing and also the decisiveness of this announcement. I have a few questions. The first one, following from Alberto Villa question, can you talk a little bit more about a little bit about the potential, in here, is there in particular, is there a tax benefit or are there cost cutting? But the tax would be of interest to me. The second is on the combined ratio, which in non-motor is stunning. And even I know you might say not stunning is the wrong word, but below 100% given the loss you've suffered is very good. I just wondered if you could maybe share whether there have been any reserve releases which helped smooth the results?
Then on the third point, you just now explained that you've increased the deductibles, increased the pricing in non-motor. Can you say a little bit on the reinsurance side, so where you hedge your risks? What's happened in terms of coverage? Does the reinsurance contract, it covers do they now also cover losses on motor-owned damage? And what's happened to the limits and maybe give a feel for how the pricing has changed.
Then the final point, and I'm really sorry for that many questions. So you talked about solvency and said, "Yeah, if you reduce the banking stakes marginally, you, you'd some get this huge jump in solvency." You also said that pro forma as a deal if the deal is accepted by shareholders or they subscribe, then solvency goes up. Can you explain the mechanism? My feeling is it's very simply because the EUR 2.7 offer price or tender price is slightly below the Solvency II own capital value. Sorry for many questions. And yeah, congratulations. This is great news.
Thank you. Thank you so much for your questions. Now, as for the first part of your question, the one concerning the, you know, cost synergies, well, of course, we do have some cost synergies having to do with the merger between the two organizations.
Well, I'm talking about operating costs, but of course, I mean, the size here is not really significant, even if, you know, but this is, let's say, the, you know, a running perspective. You're right. We also have the tax or fiscal effect because this means that, we won't have to consider the goodwill. Now, this means that, there may be perspective fiscal benefits in the future. There's an upfront payment to be done. So the comprehensive final effect is around EUR 176 million. Once again, this is the total, you know, benefit considering the payment first plus future benefits. Now, this concerns the merger. Now, as for the CR or Combined Ratio in the non-motor business, so, you said that, it is surprising to see that this is very good, despite that natural events.
This is what I understand from your question. And of course, Enrico will also give you other insights and considerations. Anyway, the effective, you know, natural catastrophes, yes, there's a runoff or provisions to be used, but also some recoveries in terms of reinsurance, which are quite high. So this means we've been able to close, you know, the numbers with the results that I have just shared. Now, as for bank solvency, which is once again the point raised or explained by Carlo Cimbri, let me be a little bit more specific on this point. Now, when you consolidate bank stake into, you know, the capital equity, now this stake is no longer considered the equity in terms of SCR, but it is consolidated. So basically, we consider all the risk-weighted asset components.
So this is, you know, the list of elements that are part of the capital. And all of this is done in a Solvency II ratio point of view, which is kind of different versus, you know, the bank tiering systems. So this type of process, if you will, leads to, let's say, the de facto of, you know, increasing the capital that becomes bigger, heavier. But of course, at the same time, the solvency index is less volatile, I mean, the index that you will have, you know, over the years in the future. Now, again, this is what happens if you do the consolidation on the net, you know, equity.
If you don't do this, if you don't do the consolidation, which is what would happen if we sold a small stake and this is what Carlo Cimbri just said, well, we would go back to the previous situation. So no consolidation. You don't consider the risk-weighted assets. You don't consider the bank capital level. You would only consider the equity investments of the, bank stake. And again, this would lead to an absolute value benefit. And again, this means that the solvency scope, when you consider the insurance element, it would go to 239% we mentioned before, which is also what you can find in the analyst presentation.
Thank you. Let me let me go back to what you said about the EUR 2.7. I, I didn't I didn't get the, the, the question, Enrico. Maybe you want to, to complete, I mean, the, non-motor vehicle business part. Okay.
Yes. Michael, good afternoon. Thank you, Matteo. Yes. Let me go back to your question on reinsurance. Now, of course, this year, the contribution was positive and, well, a big one on our end-of-year accounts because we think we may recover more than EUR 500 million, thanks to reinsurance, and especially based on those agreements or treaties considering or concerning, you know, natural catastrophes and the so-called multiple aggregator that was the name. So what happened to those renewals? Well, conditions were not met to renew the aggregator, so the multiple has not been renewed. Well, vice versa, on the other side of the business, if you will, we have increased the coverage of the property per event treaty. We have also included the CWT events. So today, we have the same level of priority, which is EUR 150 million.
Well, into the events, we will have property damages, but we will also have the so-called C, you know, BT, damages. So these have been the most important, changes of the insurance programs. So some of them have been a little bit less important and more technical. But because we now have no multiple aggregator, let's say, priorities of the other vertical treaties have been lowered, for example, fire because of risk.
Just to understand, the reinsurance includes motor-owned damage?
We can't hear you. We haven't heard the question. You, we cannot hear you.
Yes. Sorry. Sorry, sorry, sorry. Hang on. Wait, wait. I'll use my phone. It's a bit noisy here. Sorry. Is this better? Hello? Hello? Can you hear me? My question is if you can hear me, otherwise, please ignore me. Wonderful.
It was just on the reinsurance to understand how the exposure or the cover of the reinsurance treaty has changed. So I understand the aggregates is no longer. And on the per-peril, does the per-peril now include or in addition to property, motor own damage, which I believe was not covered before? Is that right?
Next question from the original conference is from Gianluca Ferrari from Mediobanca, please.
Good afternoon, everyone. Okay. Can I go back to the improvement of combined ratio, motor vehicle, especially the current year loss ratio? I see a 10-point improvement versus the previous half-year. Matteo mentioned that the runoff. Is it possible to have the runoff numbers at the end of the year, but also some information on the fourth quarter? The second question is on the operating variances. So EUR 188 million, can you give us some color just to know what they are due to? The third question is on these operations. Can I have some insights on the timeline, so when the offer will be opened, when it will be closed, and when the, you know, effective date will be? Thank you.
Thank you, Gianluca. Let me let me start with the operating variances question because, as you must have seen, the impact is really significant. And by the way, this is this is due to the updates of the policyholder behavior in terms of, you know that the increase of interest rates has had a big impact in terms of foreseeing the behavior of customers. And, of course, this has impacted negatively on the operating variables of the CSM. So, well, basically, you know, this is the key reason.
Now, as for your question on the timeline of this operation, of course, so we have to approve the merger project. We also have to ask the relevant authority in order to launch the purchase offer. It still has to be defined, of course, that this will be communicated officially, as soon as we are sure about the launch date of the offer. Then, of course, we have to consider that, you know, the IVASS, I-V-A-S-S, authorization time. It depends on how much time they will need in order to receive the authorization. So once again, we need to stick to the standard time to be defined by the regulation. In general, unless there are, you know, difficulties, we should be ready within the end of the year. As for the runoff question, maybe Enrico?
Good afternoon, Gianluca. As we said before on MV insurance, in the last months of the year, we have had some positive effects. I mean, some of them had already been announced. For example, the increase of average premium that we have, you know, collected or applied. We also said that the incidence of, you know, severe claims and claims with injuries, they also were positive. Again, the impact of these was positive on this business together with the beneficial effect on the loss component, I mean, the future of the margin of the business. And again, this has had quite an important effect. You need to add, you know, in the past, in the balance sheet, of course, we had the so-called release of the LIC.
Now, basically, this means that at the end of the year, we have to pay attention to the evolution of the claim, reserves or provisions. So this means that the value is basically, concentrated in the fourth Q, which is, by the way, what also happened in the previous years. This is worth four points yearly of the combined ratio of the MV business.
Thank you.
Next question is from Andrea Lisi from Equita, please. Go ahead.
Thank you so much for taking my questions. So question number one, it's a personal reflection on a strategic level, concerning, you know, this operation. If I remember correctly, in the past, you said that so these operations, are required to have, you know, strategic flexibility from UnipolSai in case of possible operations. So don't you see any possibility, on this, topic? And then, did you check your strategy? So can we can we have some color on this?
There's another question on the flexibility on the dividends, but you have partly answered already, saying that there will be specific communications about this in the future. I have a third question. What do you expect in terms of the 2024 trend? So what about the financial results for 2024? Any, you know, insight or color on your reinvestments and what do you expect in the future?
Andrea, thank you so much for your three questions. Yes. Well, I have to say that, you know, this is the strategic framework that we've always supported in the past years. We kept a holding structure. Of course, we knew about the costs of this structure, because we wanted to, to have, to maintain, if you will, the financial flexibility required in order to take advantage of possible growth opportunities, externally.
So this was the, you know, underlying, you know, reason behind this behavior, which is what we have, you know, repeated and reenacted in the past years. Now, on the one side, once again, recently, there were no, no opportunities that may, you know, generate value. So conditions were not met in order to present our shareholders integration operation. So let's say a few opportunities from, from that point of view. And, well, especially, I have to say that the context has completely changed in the past 12 months. I mean that this cost of course, once again, we knew about the cost. And basically, I'm talking about the cost of maintaining a holding structure, also considering debt. Now, debt cost was not very much significant because of the interest rate level that we had until 12 or 18 months ago. So that was almost close to zero.
And again, this means that we could, you know, pay this cost, well, relatively easily. Now, well, as you know, the entire context I have described has basically changed in the past 12 months or, well, maybe also 18 months because the interest rate structure has completely changed. So now, on the one side, there were and there are no opportunities to continue, you know, in-depth analysis on possible combinations being able to generate value. On the other side, you know, maintaining this structure today, but also mid-long term, will entail, you know, bigger costs, much bigger and higher than the costs we had until some months ago. So this is the reason why we, you know, decided to make this decision. Now, this is what we announced today, but of course, we've been thinking about this for quite a long time.
Again, this is, you know, leading, if you will, to, you know, a higher level of flexibility, also in terms of the cost structure. Well, you have to know that a combined identity that turns into an operating insurance company, well, basically, this company doesn't need to do senior funding operations, which is what happens in other companies, for example, holding companies based on, you know, stakes. So we are now much more, if you will, and better ready to take up the challenges of the future considering that the interest rates are now on a different level. So let me go back to your question, talking about interest rates. So the question of investments, by the way. Now, we haven't changed, you know, our investment policies. We have reached an exposure level to Italian securities or Govies that, in our opinion, is a well-balanced situation.
We've also diversified on other government bonds from the euro zone. We've also invested heavily in the credit world on the medium to high rating buckets. And we have also built quite a good position on, well, alternative assets, basically real assets and infrastructure. So in terms of size, this is not very significant, I mean, versus the investments on fixed income securities. But anyway, that part is becoming bigger. And again, it strengthens and, you know, boosts the total portfolio yield level. Now, the context today, you know, the interest rates also on the short part of the curve are between 3.5% and 3.75%. So I have to say that the curve, if you will, is quite flat.
But in terms of absolute levels, today's interest rates give us the possibility to take into account the financial management components, in a more optimistic way versus the assumptions we had in the plan, I mean, some time ago when we, you know, created the plan, which is in force today. Of course, well, based on the interest rate developments and evolutions, there may be this kind of, you know, reduction of the rates. So we may want to reconsider how to position ourselves. But for the time being, we don't think there will be major changes to our portfolio composition.
Thank you.
Next question is from Elena Perini from Intesa Sanpaolo. Please go ahead.
Thank you so much. I have a couple of questions on this operation and also a follow-up request on one of the comments that you have just shared and another a final question. Now, as for this operation, my question is, you have just talked about interest rates. So, can we have some insights or some more information on one of the main aims of the operations, which is what I've read in the press release?
You want to optimize the funding level. Now, as for solvency, based on the indications you've given us, you said at least 200% also in case of total participation or acceptance to the offer. Is this because there will be a benefit of minorities? This is what I imagine. So, I just need you to confirm this assumption of mine. And can you please go back to the fiscal benefits of the release of the goodwill? Because my line was a little unclear before. And then what about the life business in 2023? And then what about the traditional policies? Because in the first nine months, you were one of the few companies on a positive level. Well, basically, the only one with a positive behavior in the list of listed companies. Thank you.
Oh, thank you for your questions, Elena. Now, question number one, interest rates. You know, this is one of the rationales of the streamlining or rationalizations operation. Well, the main point is the one I have just mentioned. I mean, now, because Unipol Group will become an insurance company, so as a consequence, a so-called operating company, of course, we have access to the markets on a privileged way. So, much, much better, if you will, than a holding.
For example, if you issue bonds, maybe senior bond or subordinated bond as a holding company, well, basically and usually, what you have is a premium on the yield to be offered to investors, which is different than the one of an operating company. So as a consequence, the fact that there will be a merger gives you the opportunity to have an improvement of market access conditions. Now, this being said, operating insurance companies typically do not issue senior debt. Only some have done this. We don't want we won't issue senior debt as Unipol Assicurazioni S.p.A. But in general, you know, the merger between the two companies will lead to a major benefit. Now, as for 200%, so this this 200% level, well, I have to say that this level is an approximate one. I mean, it's between 200% and 220% as Carlo Cimbri said.
You know, this is our target. This is the target we would like to reach. It is a trend that we would like to hit. Now, as for your point on minorities, well, the impact of minorities depends on the percent of, you know, acceptance of the offer. If there's a total 100% participation or acceptance to the offer, so if you consider the excess of capital of minorities, so this is a positive difference, if you will, well, it is basically offset by the disbursement, so the payment we have to have in terms of public offer. Now, because we have 100% of the company, so this means that we have paid, you know, this consideration to UnipolSai shareholders, all of the future capital generation will be a benefit for the shareholders who will remain.
Once again, this is an element that, in my personal opinion, strengthens and also boosts, you know, the offer rationale for Unipol Group shareholders. Now, as for the tax benefits that you mentioned, you may talk about this with our investor relations because there are technical details, and I cannot dwell on them. I am not an expert in that matter.
I was talking about life collections.
Yes, life business. You're right. There was another question. As for the life business income, this is what we have done by focusing it especially on the first level or first branch policies because we need to strike a balance of the cash flows between, you know, incoming flows and outgoing flows, which is what you've seen. We are with a positive net collection level.
This is due basically to the good performance of the bancassurance. channel, including agents. I mean, agents did quite well as well. But once again, bank assurance was the key channel. And it was, if you will, a big help in order to, you know, offset the, let's say, releases or exits. This is normal. I mean, interest rates go up. So, you know, people want to, you know, have their capital stock. But once again, we need to have the right balance in terms of general comprehensive cash flows.
Okay. Thank you. Thank you so much.
Next question is from the conference in English, from Louis Miles from Morgan Stanley. Please go ahead.
Hi. Good afternoon. Thanks for taking my questions. My first one is on how you're going to fund the deal. I think you said in the slides you're going to pay up to EUR 1.1 billion in your own cash. I noticed in the slides that you said that you had EUR 1.5 billion of liquid assets at the holding company. So how much cash do you think is reasonable for you guys to have at the holding company after you've paid for the remaining stake of UnipolSai? Is EUR 400 million enough? Would be good to get some color on that.
My second question is on the Solvency II debt held at UnipolSai. So will this get moved to the new entity? Will it get moved to Unipol Gruppo? And do you need any form of consent solicitation to move it, or can you do that without permission from the bondholders? And then finally, just one more question on the debt. So I think you're kind of suggesting that the new, consolidated group won't be issuing any more senior debt, because you simply, you know, you don't have need for it anymore, really. Does that suggest that you're going to pay back the senior debt that's outstanding early? And what is the debt leverage of the entire company post-transaction? Thanks.
Thank you. Now, as for your first question, now, the value of the offer refers to own funds of the company. So you can see the situation as of 31st of December 2023. Now, this is, you know, February 2024. So the situation has improved versus what you can see, once again, at the end of December 2023. So once again, we have plenty of resources to fund, you know, the tender of Unipol Group towards UnipolSai.
We also have, you know, underwritten a cash confirmation just to confirm total availability, in our accounts. Now, as for your second question, there won't be any changes in terms of bonds issued by UnipolSai. By this, I mean that all the bonds issued by UnipolSai will be included into the combined identity. Her name will be Unipol Assicurazioni S.p.A. The bonds from UnipolSai, in terms of trigger, of course, I'm talking about the subordinated, bonds. They depend on the solvency of UnipolSai but also on the solvency of the group. So, as a consequence, I don't see any major change or amendments to the reasons that they're bondholders of UnipolSai, on this kind of operation. So I would say, no, no type of, consent is required from UnipolSai, bondholders concerning this point.
As for Unipol Gruppo's bonds, now, as I have said before, we will become an operating insurance company. So in the future, we won't have an interest in issuing senior debt because, once again, an insurance company, I mean, collects premiums. Then we pay claims. So basically, we don't need to be funded. We will hold the bonds. Of course, I'm talking about Unipol Gruppo's bonds. We will hold them in our assets together with, you know, the cash that we collected when we issued bonds. Once again, we do not foresee any liability management operations, well, as of today. Now, it depends on market conditions. If market conditions change, well, there may be interesting, you know, debt-related operations. We will take them into account, and we will communicate this to you.
For further questions, please dial or start followed by one on your telephone now. Thank you.
Mr. Laterza, for the time being, we have no other questions booked.
Thank you so much. So we will see you in May. Thank you. Thank you. Bye-bye. Have a nice rest of the day. Bye.
This is the chorus call operator. The conference is over. You can now disconnect your telephones. Thank you.