Good morning. This is the Chorus Call Conference Operator. Welcome, and thank you for joining the Unipol Gruppo nine month 2024 results conference call. 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. Matteo Laterza, CEO of Unipol. Please go ahead, sir.
Good morning to everyone, and thank you for participating in this call. As usual, before opening the floor to the questions, let me make some comments on the presentation that you saw this morning. It was, again, a very solid quarter, both in P&C and in life. On P&C, on top of the usual remarks that I do on the good performance in terms of top line in health and in the bancassurance distribution network, I can say that also at UnipolSai level, we are combining our target of increase of premium with our ambition of reducing our risk where we think there is an overexposure in terms of line of business or in terms of geographic areas.
We are on track on achieving this target, and you can see by looking at the numbers at September 2024, but you will see also, I guess, a positive evolution also in the next quarters, both in motor and in non-motor. In life, we had also a very good performance, above all driven by bancassurance business, in particular, I'm talking about the Arca Vita performance. We had also, on top of that, a very good and positive contribution coming from the protection area at UnipolSai level, and also there was a positive contribution coming from the investment component in the life business area. Talking about investments, again, the third quarter was a very good number. You have to look at, above all, the yield coming from coupons and dividend, the current yield at 4.3%, way above the same number that we achieved in September 2023.
On top of that, as you can see in the presentation, we had also a positive component coming from unrealized gain booked at P&L, a little bit less than 2%. Of course, it is a consequence of the positive evolution of financial market in 2024, and as a consequence of that, are not replicable going forward. You have to focus only on the 4.3% that, as a matter of fact, is a very positive number in terms of asset yield. Finally, the solvency, we close at 224%. That is a very solid number. We added in the presentation also the solvency of the insurance group. That is a new number that makes reference to the business coming from insurance, beyond insurance, and what we define diversified area, at which we add only the dividend coming from our investment in banks.
That, in a sort of sense, gives you an idea of what is the cash remittance of our groups in terms of cash generation. Looking at this perimeter, and so without considering the consolidation of the banking stakes in our numbers, our solvency would have been 286%. It means that we consider the equity stakes as equity investments and, as a consequence, have an effect on the market risk and as opposed to the approach based on the consolidation of the banking stakes as we do in the number represented at 224%. That is the representation with the consolidation of the two banks. I close the remarks.
As you know, in the numbers, you have also an impact gross of tax of a little bit less than 150 million coming from the Solidarity Fund that we signed with the trade unions a few months ago, and as a consequence, we decided to make a provision of this entity, and of course, it has an impact net of tax of well about EUR 100 million in our numbers. Having said that, I am here with the General Manager, Enrico San Pietro, and I open the floor for the question. Thank you very much.
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 touch-tone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. Anyone who has a question may press star and one at this time. The first question is from Alberto Villa of Intermonte. Please go ahead.
Hi, and thanks for the presentation. I have a couple of questions. One is they're both on P&C. I wanted to understand how is going the evolution of the average premium and in terms of also impact on number of clients, if there is any decrease, and how do you think the pricing in motor will evolve in the coming months. Having seen that the combined ratio is still above 100% in motor, maybe you can elaborate a little bit on the expectations for the coming months on the combined ratio of the motor business. The second one is related to the target of the plan in terms of combined ratio for 2024. Do you think it's doable given the trends you are seeing in the fourth quarter of this year?
Finally, on the pre-tax profit of the P&C, wanted to understand apart from the provision for the redundancy plan that hit the results, especially in P&C, if there are any other, let's say, one-off or any other factors we have to consider when we look at the nine-month pre-tax profit for P&C? Thank you very much.
Thank you, Alberto. I will leave the floor to Enrico to comment more precisely on the aggregates of motor business, and I will start from the last question that you mentioned. In the pre-tax profit of the P&C, there is, as you said, the effect of the Solidarity Fund, but on top of that, there are some costs. One of them is the cost of the merger between Unipol Gruppo and UnipolSai that, by definition, are one-off. There are some negative effects coming from some area of business of what we call the beyond insurance. One of them is our initiative of Unipol Move, where we decided to invest in the developing of the business, also taking advantage of the very positive competitive landscape that was created in the middle of the year.
As a consequence of that, we pushed in our commercial initiative in order to improve the number of clients in UnipolMove, and I have to say that these initiatives were quite successful in the sense that, as of today, we have a number of clients that are above 1.8 million clients. I remind that one of our targets was to reach within the end of the industrial plan, that means within the end of the year, 2 million clients. I don't know if we will reach this number, but we are quite ahead to be in the position to deliver this target.
There is also, of course, some initiative in order to push the development of the business also in the long-term rental business, Unipol Rental, and so that if you want to reconstruct the pre-tax profit of P&C business, you have to take into consideration all these three items.
Matteo, it's possible to have some indications about the amounts of these items?
Yeah, I don't have it in front of me today, but I can refer you to our IR for more disclosure on that.
Thank you.
Sorry about that. You were talking about before the industrial plan, the target of combined ratio. Then, Enrico, we will elaborate more, but I have to say that we are on track to deliver our target of profitability of the industrial plan. And after this quarter, I'm more confident to say that we will deliver it. Of course, at the moment, I can say the combination with which we will deliver these numbers, if we will do and we will meet the target of combined ratio or not, but no way that the trend in terms of average premium in terms of claims in motor are quite favorable in general. And also in non-motor, there are the condition to say that 2024 will be a positive year, above all if you compare to 2023 that was not absolutely the same case.
Having said that, in order to go through more in depth in the numbers that you asked in motor, I leave the floor to Enrico.
Hi, Alberto. So basically, the market situation for motor third-party liability is in a period in which every company needs to increase tariffs, prices, depending on all the previous issues we discussed in the past years. So inflation on average cost, but also loss frequency going back to normal after the long-term of the pandemic effect. But this year, there was the effect that we discussed three months ago about the Milan Court tables for compensating bodily injuries that drove some additional costs that we decided to put into our reserves, both on current year and on previous years, and so we are, as usual, and maybe more than usual, very prudent on that.
You have to take into account the effect of the current year business that is going well for us. So the average premium is increasing. We will increase at the end of the year around 5% the average premium. Loss frequency is going well. And of course, we have this increase in the average premium, but nevertheless, combined ratio is on the current year not something really concerning. Of course, we have the one-off effect of the prior year reserves that we strengthen for the Milan Court new data on bodily injuries. So in this market situation, since basically also our competitors need to increase their prices, we have stabilized the number of clients. Also, this issue was discussed three months ago.
So we had the first half, the second half of the past year, and the first half of this year in a period in which our price increases were higher than the market, in which the number of customers decreased. But now, it's basically since the spring that we are stable in terms of number of customers.
Thank you very much. If I can add one question on the dividend, probably too early to ask, but any additional thoughts on that item?
On dividend, as you said, it's quite early, but as I said several times when we met, you had to start. Let me make some remarks on that. You have to consider Unipol Gruppo not anymore as a holding company, but as an operating company, an insurance operating company. This is the context with which you have to look at our entity going forward. As I said before, we are on track to deliver our target of the industrial plan in terms of profitability. We have a very long track record that we delivered over the years of delivering a dividend policy that is competitive with the insurance sector, and we have no intention to change this line going forward. Having said that, these are decisions that we will take later on, but the guidelines are the one that I mentioned. It's up to you to make the forecasts.
Okay, thank you, and congratulations for the appointment at Unipol l evel.
Thank you very much.
The next question is from Michael Huttner of Berenberg. Please go ahead.
Thank you so much, and yeah, congratulations as well to your appointment. That is great news. I had basically follow-up questions on Alberto. It was really interesting to hear about the prior year reserving additions for the Milan Court Tables. Could you give us a number, and could you say whether it's now all done as of nine months, or is there still some to come in Q4? Just to give you a feel, my guess is that it's costing you about three points at the six-month stage and nine-month stage, and so my hope is that if it's not needed as a full year, then the Combined Ratio in motor can drop three points just mechanically, but maybe you can give an indication, and then the other question is, I think the very traditional one, what happened to reserve releases?
Maybe you can break it down between motor and non-motor, but that's all. I think it was 90 basis points in motor in the first half. I can't remember the figure for the non-motor, but that would be very helpful. And then my final question is, I saw that and AXA mentioned it, that they may be selling their joint venture with Monte dei Paschi back to Monte dei Paschi for quite a big amount. I think they're hoping for EUR 1.5 billion or something. Can you explain how you would potentially capitalize on this situation? Thank you.
Okay. Concerning the Tribunale di Milano, if I understood the question, the additional provision in the technical reserve that we made in June will not repeat in the next quarter so it is a one-off of 2024, and it's enough for the information that we have today. Of course, it doesn't mean that next year our combined ratio will go down three percentage points because it depends on if our reservation policy is correct, and in this case, it will remain as a reserve, and then when we will pay the claim, we will release the reserve and so you don't have to expect that after this appointment, our combined ratio will go down by three percentage points, if I understood well your question.
Concerning Monte dei Paschi, several times I said, me and our president, that we consider banc assurance one of the main drivers of growth for the distribution of the insurance business, both above all in non-life, and we have a very strong agreement, a very profitable agreement with BPER and Banca Popolare di Sondrio through our joint venture in Arca. But in general, we look at, with interest, all the opportunities that could create value for our stakeholders coming from other possible distributors. If there are interesting opportunities, we will look at it, and this is all what I can say on that.
I just want to follow up, if I may. I probably didn't put my question very precisely, but it's difficult. I sit in London, you sit in Bologna, and the communication is not even, and the culture is also a little bit different. I think really what I was trying to get to is Alberto's underlying question, which is whether you will meet the 92.6% combined ratio target for the year, and the impression I have from the answers is the answer is no. I just wanted to understand if my conclusion is correct. Thank you, and I understand it's a one-off and court tables, but it is important for my numbers and my model. Thank you.
Thank you for your question. The answer is not no. It's not no. The answer is it will depend on the evolution of the aggregates in the next quarter. We are very close to this number. I don't know if it will be 92.6, it will be 93.5, or 92.1. It is very difficult to make a forecast today on an environment in which we still miss one quarter of numbers. What I can say is that combining all the area of business in which we are involved, P&C, life, investment, combined the three each other, I can say that I am in the position to say that we will deliver the target of profitability, overall profitability of the industrial plan.
That is, I think, one of the most important information that you can get in order to make assessment on the profitability on the dividend policy and others. I don't know if in the next future we will meet exactly the number that we mentioned, but I don't think it is material in the economy of the total numbers of the group. This was the main message that I wanted to tell to Alberto and to all of you. I will leave the floor to Enrico for the next part of your question.
Oh, yes, Michael. So you want to know if the one-off strengthening in prior year release in motor third-party liability for the Milan tables is complete? Yes, it's complete.
Yes. Yes. So it's all done. So it's done as of 30th of September. There's no more to come.
Yes.
Okay. Cool. Great. That's really helpful. Thank you.
The next question is from Gianluca Ferrari of Mediobanca. Please go ahead.
Yes. Hi, good afternoon, everyone. Sorry to come back on the divi. How should we interpret your statement that you are not anymore a holding company but an insurance company? Or let's be more clear. Should we consider you an insurance company from 2024 already, i.e., the 2024 dividend will reflect the fact that you are now an insurance company and not anymore a holding company? The second question for Enrico is the cat load in Q3 was a bit below what I was expecting, given floods, secondary perils, and all the things we saw in Italy. Do you have any potential load from events occurred in Q3 potentially to be booked in Q4? And the final one is on the senior bond, EUR 1 billion, expiring in March 2025. Am I right if I assume that you have capacity on the tier two instruments?
Given that you are an insurance company right now, it makes sense to replace the senior with the tier two issuance. Thank you.
Okay, Gianluca. What I want to say, and I will be more clear on that, saying that we are not anymore, and you don't have to consider anymore Unipol Gruppo an holding company, means that when we were an holding company, the dividend was based on the local GAAP numbers of an holding company. The holding company has a unique source of revenue, the dividends that we get from the stakes that the holding company has. And in this case, it was UnipolSai. Now UnipolSai is owned at 100%, but before it was 85%. And on top of that, there was a 10% stakes in BPER and Banca Popolare di Sondrio. From these numbers, you have to deduct the cost that were above all the cost of debt, more or less EUR 80 million.
And on top of that, there were the costs of the structure that were more or less between EUR 20 million and EUR 30 million. So at the end, you had a distributable income capped to the amount of dividend that you could get from your stakes. And so there was this sort of cap. And under this environment, of course, we have discussed for a very long time, a very boring discussion on how much would have been the discount of the holding company. Starting from the balance sheet and P&L at December 24, Unipol Gruppo will have a structure of an insurance operating company, taking consideration the merger between UnipolSai and Unipol Gruppo.
The number that you must have in mind is for having an idea of the dividend distribution capability, the number that we disclose in the presentation that we defined insurance group, that taking into consideration the business that we directly manage, insurance, of course, and on top of that, beyond insurance, diversified companies like the hotel, and the dividends that we get from our stakes in the strategic banks, BPER and Banca Popolare di Sondrio. That, by the way, gives to you, as I said in my introduction, an idea of the cash remittance of the group. We disclosed the number at September 24. As I said, on top of that, as I said before, we are on track to deliver the total profitability target that we disclosed in the industrial plan.
And I said also, and I remark, that we have a very solid track record of delivering a cash remuneration of our stocks competitive with the European insurance sector, and we don't have in mind to change this line going forward. So the decision that we will take on the dividend that will be taken, of course, much later on, we will take in consideration the remarks that I exposed to you now. I don't know if I was clear enough.
No, no, very clear, very clear, Matteo. The only point is already for the 2024 exercise, you will have this kind of reasoning.
Yes.
Fantastic.
Yes.
Thank you.
Enrico.
Hi, Gianluca. So the combined ratio this year is good so far, not only because of the events, but also because of our actions. And so the result is solid. We had a couple of minor events in September and October, you remember, Boris, and in October 15 around Bologna area. Both of them are at this time non-material events. And on that, we put a very, very prudent IBNR estimation. So we don't expect at all any worsening in our results of the third quarter.
Thank you.
The next question is from Andrea Lisi of Equita. Please go ahead.
Hi. Thank you for taking my question. Honestly, just one remaining is more a comment, a high-level comment on strategy in particular. If you can provide us your thoughts about strategy that several banks are adopting regarding the use of the insurance component with the Danish Compromise to making deals, and so if you think that these represent a threat, not for you and for the insurance as a whole, the insurance sector, not in terms of the companies, the banks where you already own a stake, but also in the strategy maybe of further growth in the future, so just a comment on that. Thank you.
Thank you, Andrea. I remember that I missed one of the questions of Gianluca. If you don't mind, I answer to this last question, and then I will come to you for the Danish compromise. We will reimburse the senior unsecured debt of Unipol Gruppo in March 2025, EUR 1 billion. Yes, we have capacity in terms of tier two, but our point is that we will issue a tier two if we think it is worth to reinforce our capital position. Today, we are at 224% in terms of capital position of Unipol Gruppo. We are a capital-generating entity, and so going forward, we think to reinforce this number going forward.
At the moment, we don't have in mind to substitute the senior unsecured with a tier two because, yes, you add and you reinforce your capital, but you have a cost on top of that, of course, that is not worth to be spent at the moment given the very solid capital position that we have today. Coming to the question on Danish Compromise, I don't think it is a threat for us. It is an issue of unlevel playing field in the regulation of financial market in the sense that for banks, there is an advantage, and the fact that there are some transactions that are being executed in the market is a proof of that. On the opposite, this advantage could not be taken by an insurance company who has an interest to buy banking stakes.
Having said that, our strategy does not depend on the regulatory framework, but depends on how much we think to create value or to remunerate the capital that need to make strategic investments. And so for us, this is a number, a data that we take. If we succeed to produce a return on equity that is superior to the return on equity of the company in general, usually we tend to adopt the investment decision in case not. In the case of banking stakes, we are requested to put more capital than the capital that is requested to a bank to buy an insurance stake. It is a question of uneven playing field, and it is a point that sooner or later will have to be addressed by the political institution that are in charge to take care of this issue.
Okay. Thank you.
The next question is from Elena Perini of Intesa Sanpaolo. Please go ahead.
Yes. Thank you, and hello, everybody. Well, I've got only one residual question that is about the taxation and the potential changes being introduced by the financial budget, the fiscal budget, or other rules that are potentially changing in the usually very complex Italian fiscal environment. Thank you.
Thank you, Elena. Usually, the most complicated question comes from you. And on tax, it's a very tough issue. But anyway, concerning the last budget law, it is a financial effect. Above all, it is not an economic effect as it concerns for the insurance business. So I don't think it's a material issue to be discussed. Concerning another topic of the tax regulation, you remember that when we announced the merger between Unipol and UnipolSai, we had also a positive benefit coming from the goodwill in the whereabouts of EUR 200 million. There is still an act that is going to be approved, but it has not been approved yet, in which apparently, if it is approved, this benefit would not be any more possible to be implied in the numbers of the merger.
Having said that, we didn't do the merger just because there was this positive item, and so, as usual, we will apply the law as it will be at the time in which we will execute the merger.
Okay. Thank you. Very, very clear.
For any further questions, please press star and one on your telephone. Mr. Laterza, sorry, there is one follow-up from Michael Huttner of Berenberg. Please go ahead.
Thank you so much. And on the pricing, you mentioned a 5% average rate rise in motor. Can you say what the average has been or would be in non-motor, please, and whether it is now sufficient in your view to cover natural catastrophes? Thank you.
Okay. So in non-motor, we started last year to have some quite aggressive actions on property business, of course, because of the cat risk involved. So we are increasing prices, and basically, what you can see in the premium growth of that business line is made of price increases. And there is also an additional benefit on our action that we are not increasing our risk. We are decreasing our risk. So on the part of our portfolio in which we are increasing more tariff, of course, retention rate is going down, and also the underlying risk is decreasing. So I don't know if the information is enough, but basically, you can take the property business price increase and take it as a price effect, basically.
Brilliant. Very helpful. Thank you.
Mr. Laterza, there are no more questions registered at this time.
Okay. Thank you very much for attending the conference, and we will meet again together next February for the final year results. Thank you very much.
Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones. Thank you.