Good afternoon, this is the Chorus Call conference operator. Welcome, and thank you for joining the Unipol Group Preliminary 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 the 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 very much for participating to this call. As usual, let me make some remarks on the number that we disclosed this morning. We are here, of course, to comment on the 2024 results, but we are also at the end of our industrial plan, and this is, of course, an opportunity to share with you the last three years' results. In the last industrial plan named "Opening New Ways," we had to face two very important headwinds. As you know, the first one was an inflation rate that was way higher than expected, with a significant impact on the average cost of claim in general in the P&C business. The second headwind was the huge impact coming NatCat in 2023.
Notwithstanding these two headwinds, we were able to overdeliver all our economic KPIs in terms of net profit and dividends, and also our KPI in terms of solvency. Secondly, except for the combined ratio, we were short of less than 1%, mainly because of the two headwinds that I mentioned before. We also overdelivered all our industrial KPIs. Passing to 2024, which is the subject of this call, 2024 was a very good year for top-line growth, where we were growing in all our business lines, above all in bancassurance and in health insurance, as we have been achieving for a very long time, above all in the last three years. We had also a further improvement in technical profitability, with motor reaching technical equilibrium with 100% of combined ratio, and with a significant improvement coming also from the non-motor business.
In life, we continue to achieve net inflows that allowed us to invest the cash flows at the current interest rate yield that we have in the financial market. We had CSM coming from new business, again higher than the CSM released, and we achieved a new business margin at 3.7%, above the 3.5% that was one of our KPIs of the past Industrial Plan. Very solid was also the investment income, as usual, even if the pace of the fourth quarter was a little bit lower than the first three quarters that were actually very strong. And passing to solvency, of course, there has been in the number of 213%, there has been the impact coming from the deduction of the proposed dividend, but nevertheless, the numbers continue to be very solid in absolute value.
I conclude with the dividend, the total amount of a little bit less than EUR 610 million, have to be compared above all to the number of the insurance group number, that net number, the insurance group net result that is in the EUR 815 million area. This number gives to you, as I said in the last meeting, the idea of the cash remittance of the group and consequently the maximum dividend that theoretically we can pay. To conclude, it has been a very good year, I think, but nevertheless, I also think that there is still room for improvement in the next three years, and this will be the main topics that we will discuss the next 28th of March when we will disclose to the financial community the new industrial plan.
Having said that, as usual, I am here with Enrico San Pietro to answer to your question, and so I open the floor for the Q&A. 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 the touch-tone telephone. To remove yourself from the question queue, please press star and two. We kindly ask to use the handset when asking questions. Anyone who has a question may press star and one at this time. We will pause for a moment as participants are joining the queue. First question is from Elena Perini in Intesa Sanpaolo. Please go ahead.
Yes, good afternoon, and thank you for taking my questions. I've got four questions. The first one is about the pro forma pre-tax P&C result, so excluding the solidarity fund and the one-off cost, if you can provide us with a figure on this. Regarding the one-off impairments on Unipol Rental, were they recorded in the financial results or in other costs, just to understand about the classification? And then my third question is again about the P&C business and in particular the combined ratio in motor, if you can give us some outlook on how it is going in terms of frequency and cost of claims. Finally, I've got a technical question on the exchange offer announced by BPER on Banca Popolare di Sondrio.
Should it occur that you go up even temporarily over the 20% of the hypothetical new entity, would you have any extraordinary impacts in negative terms on your solvency ratio? How would it work? Thank you very much.
Thank you to you, Elena, and I tried to answer to the first question concerning the progress of the P&C business. These are all one-off items that we achieved in the fourth quarter 2024 in the item other cost. We decided to make a devaluation of the vehicle fleet of Unipol Rental and the total amount gross of taxes in the EUR 90 million area. Then there is an update of the component that we allocated to the solidarity fund for EUR 23 million more on top of the number that we achieved in September 2024. And then we have some items that were allocated in the item other and has been reallocated in the P&C that concern general expenses for EUR 33 million in the fourth quarter of 2024. And there is the component of cost related to the merger between Unipol Group and UnipolSai for EUR 10 million.
Summing up all these items, we can arrive to a total of EUR 150 million, more or less, that is the impact in the fourth quarter coming from these items that were in the P&C business line. Concerning the merger in the proposed exchange offer, Banca Popolare di Sondrio and BPER Banca, of course, it will depend on the final result of the transaction. If there will be a 100% acceptance of the offer, of course, we will remain with our 20% stake. If there will be a lower acceptance, we will have a higher stake in BPER Banca as a consequence, and consequently, we will have to reduce as soon as possible the stake that we have today that is lower than 20%. Anyway, the impact in solvency in both the alternatives is not significant for our numbers.
So we are talking about percentage points that can be counted on the fingers of one hand. And then I leave the floor to Enrico for the question concerning technicality, technical average cost of claim and motor.
Thank you. Good morning, Elena. And so the combined ratio on motor we reported is 100%. The market is still in a period in which we need to recover average premium to offset the increase of the average cost of claim due to the new scheme issued by the Milan Court on personal injury claims. So what happened for us in 2024 was an increase in the average premium exceeding 4%, a slight decrease in loss frequency, but a relevant impact not on the average cost of the claims paid in which we were able to perform a good around 3% increase, but of course, a relevant strengthening in our outstanding claims reserve.
This, of course, determined also a minor impact on prior year reserve release. We think we are in a good equilibrium, technical equilibrium. We think to be able to increase even in 2025, also in 2025, the average premium and to maintain a level of profitability that is in line with our targets.
Next question is from Gianluca Ferrari, Mediobanca. Please go ahead.
Yes, hi, good afternoon, everyone. Three for me. The first one is if you can explain why the coupon and dividends went up in 2024 vis-à-vis 2023. The second is the release ratio in the CSM went also up in the fourth quarter, so I was wondering if there is a technical explanation for that, and the third and final one, if you can remind us the level of PYDs in motor in 2024 vis-à-vis 2023 in order to calculate a normalized accident year loss ratio and to understand the trajectory of the technical performance in motor. Thank you.
Thank you to you, Gianluca. C oncerning dividend, I tried to express the position before opening the Q&A. The decision on the coupon depends on how the business has performed in 2024. The performance was very strong, as I said, above all in the insurance business, where we had a very strong support coming from an improvement of the technical profitability and also a strong contribution coming from investment income. On top of that, we had also an increase of the dividends that we got from our main stakes that we have in the two banks, Banca Popolare, BPER Banca, and Banca Popolare di Sondrio.
S o having reached a number of insurance group results that was very good, but also impacted by some one-off items that were the one that I mentioned before, we were in the condition to pay a dividend that can allow us to be competitive with our main peers at the European level. With EUR 0.85 of dividends, we have a dividend yield on the market close of yesterday above 6%. That I think is very competitive. As I said before, it is a number in which we have room for improvement, and the way in which we have in mind to improve our business will be the subject of the presentation that we will have at the end of March concerning the industrial plan. And taking in consideration all the remarks that I said, we decided to pay EUR 0.85 of.
Sorry, Matteo, sorry to interrupt. I was referring more on the investment portfolio, so the fact that coupons and dividends in the investment portfolio went up 20 basis points in non-life and 10 basis points in life.
Sorry. Sorry.
Il cedolare. Thank you.
Okay. No, no, I understood. I suppose that we were talking about our dividends payment.
Sorry for not being clear.
No, no, no problem. No problem. Yeah, yes. During 2024, we tried to diversify our portfolio, taking advantage of the fact that the absolute level of interest rates allow us to diversify out of Italian government bonds versus corporate credits above all, mainly focused on the higher segment of the ratings just to approach as much as we can the benchmark portfolio according to which the way is calculated. On top of that, we had also a quite significant contribution coming from the real asset in which we invested quite consistently, even if, of course, it is not the majority of our investment, but the contribution to the yield in terms of coupon and dividend is very important. On top of that, there is also the contribution coming from dividends that we got in our equity portfolio.
I'm not talking about just BPER and Banca Popolare di Sondrio, but all the investment portfolio that contributed to support and to corroborate the number of investment yield. Sorry, I misunderstood the...
No, no worries. No worries. Very clear. Thank you.
Concerning the release ratio in CSM in the fourth quarter, actually, I have no particular comment to make on that. I consider it a quite normal evolution of the aggregate respect of the number related to the creation of CSM that we achieved.
Okay.
I leave Enrico to answer to the final question.
Yes, Gianluca, as I told you to Elena, the reserve release in motor in 2024 was really small, so the number is 0.3 percentage points of positive prior year development, so much lower than usual, of course, due to our really conservative approach to that.
Thank you very much.
Next question is from Michael Huttner, Berenberg. Please go ahead.
Fantastic. Thank you very much, and congratulations on lovely results. I've got lots of little number questions. On the pricing in motor, I'd be interested. You said that the average premium was expected to rise. I just wanted to know the background. Are you raising prices or is the market raising prices or is this just a mechanical effect from previous rate rises? The second is on the natural catastrophe. I note the significant exposure in Q4 NatCats. i just wondered what would be a kind of normal run rate to use for the portfolio in motor? It seems 2.5% is right, but in non-motor, I'm not very clear what should I use, 12% or 6% or 18% like last year, I don't know, or 21%, sorry, like last year.
And then I suppose maybe you can explain how the reinsurance impacts your view of natural catastrophe costs. And then two extra questions. One, again, going back to motor, I was speaking to an investor who highlighted the increased competition from the direct writing insurer called Prima. I just wondered if you could comment what you see in the market. And then finally on tax, I'm not clear what tax rate I should use for the insurance unit. It seems to be sometimes low, sometimes high. I'm using 27% average, but I think in 2024 you had a much lower rate. Thank you.
Thank you to you. I will answer to the final question and then I will leave the floor to Enrico for all the questions concerning the technical margin in motor and non-motor NatCat. the tax rate was quite supportive above all in the fourth quarter because of some, again, positive one-off. The first is a positive one-off coming from the application of the new patent box that allow us to save almost EUR 35 million, but it is not repeatable, of course, in the next years. We had also a positive impact in the EUR 68 million area of positive item due to anticipated tax paid for IRAP, paid for the post-merger transaction. Of course, also the merger between UnipolSai and Unipol Gruppo, and this is also a not repeatable number.
So I'm aware that it is a very volatile number year by year, but it is just the application of the rule that we are allowed to apply in our country.
Thank you.
Hi, Michael. So the first question was about motor pricing. So the prices are going up. Of course, all the market need to offset the increase in the average premium, in the average cost of a claim on personal injuries, as I told. And what is expected is a further increase that is, for the most part, mechanic. So we reported more than 4% increase in 2024, and the increase in 2025 will be lower, but will continue to grow. The second question was NatCat. so as far as results are concerned, in the fourth quarter, we had a flood, and the total cost of the flood was around EUR 40 million of cost.
But I also take the chance to give another information to you that during 2024, we did a relevant reinsurance activity in our portfolio that was able to reduce by a double-digit figure our average aggregate loss in probabilistic calculation. So we are less vulnerable than we were in 2023 NatCat events. This is something that was very useful for us also to renew our insurance treaties. And I come to the third question. So we have this year, of course, 2024, sorry, was basically free of loss for insurers. So it was a good year. And the renewal was better than expected for us, being able to cover our exposure like we were able to do in 2024 with no additional cost. The last question, if I remember properly, was about the increasing competition in motor from Prima.
Prima is an MGA, a direct company that is not an insurance company. Now they were able to report a relevant growth in the last years, and as you probably know, they are for sale now. They are searching for a buyer and also probably need to find new carriers to underwrite their risk since the Swiss Re iptiQ insurance company that was writing their business decided to basically leave this kind of business.
That's so clear. Thank you so much, Enrico. Thank you.
Next question is from Andrea Lisi, Equita. Please go ahead.
Hi, thank you. Just one question remaining for me. Is it in particular related to the dynamic of premiums in life, which was in some way lower in terms of growth? Actually, there was a decrease versus the previous quarter, and if you can explain the trends behind, if also there was a theme of commercial activity, if there was something that is related to promotion or your decision and so on, and what are you expecting going on over the next year as regards to the growth in GVP and also in particular with the focus on the bank assurance business? Thank you, and yeah, if you don't think that the process of BPER, so in the short run, could in some way focalize the banking entities from the commercial activity on the insurance business? Thank you.
Thank you, Andrea. The dynamic on premium in life has been, in my opinion, very solid in 2024 and also in the fourth quarter. The main reason why you notice a slowdown maybe is due to the fact that the comparison with 2023 is very tough because in 2023, we had a very strong production above all coming from pension funds where we got two very important mandates in 2023 that allowed above all Unipol Assicurazioni to grow very consistently over the last year, but excluding the effect of this business that is very strongly impacted by the mandate, and if there is a year in which there are not mandates that have to be assigned, of course, you have consequently a negative impact coming from that. The performance of our agents has been very strong, and also the performance of the bank assurance business.
Above all, the BPER bancassurance distribution network performed very well. Nevertheless, also in this case, in the bancassurance, there is still room for improvement in both the distribution network. If you look at the productivity per branch in life, there is still a gap that has to be filled, in my opinion, in life, and this is where we are working very proactively in order to explore the possibility to fill this gap in the next three years.
Many thanks.
Concerning the merger, I think no. I don't think that will be the focalization of the business coming from the merger. It is the opposite. It is the merger that will incentivize a much more focus on the business, not only in bancassurance, but in all the business that the new entity will create. On this, I think that the press release that we disclosed this morning gave a very clear position of Unipol Group on how we see this transaction.
Super. Thank you.
Next question is from Alberto Villa in Intermonte. Please go ahead.
Hi, good afternoon. Just a couple from my side. One, you already answered the question about eventually going above 20% because of the proposed offer between BPER and Banca Popolare di Sondrio. I was wondering if there is any chance you may consider to ask regulators to be allowed to go above 20% in the future on your banking stakes. And the second one refers to some press articles about potentially the opportunity to evaluate the disposal of the hotel business. I was wondering if you can give us any comment on that. And in this case, what would eventually be the perimeter management of the hotels or also real estate assets? Thank you.
Thank you to you, Alberto. Concerning the first question, the option to go over 20% is not on the table today. So it is not an option for us at the moment, of course. And the second, we make assessment quite frequently above all before an industrial plan on how we will have in the future manage our most important asset. And one of these is the business of the hotel. The business of the hotel is performing very well. It gave a very important contribution to the P&L of 2024 with the net profit above EUR 20 million and EBITDA in 40 million area. So it is a very strong business, and we are very happy to manage this business also in the future. But we have to take in consideration all the opportunities that we can have on the table.
The first one is, as I said before, to continue to manage the business. And of course, you have to take in consideration the setup of a new industrial plan. You have to take in consideration the CapEx that you have to spend to restore the real estate asset that cover the hotelier business. We are talking about an asset value of more than EUR 500 million. You can take in consideration also the possibility to do commercial or strategic partnership, and also the possibility to dispose of the asset. It is an option, one of the three. And we are just sounding the market in this extent. And we are in this stage. No commitments there are on Unipol side. So we will see how to proceed. We didn't take any kind of decision yet. It is just the sounding of the market.
Okay. Thanks.
Next question is a follow-up from Michael Huttner Berenberg. Please go ahead.
Really brief question. It was on actually two. One is Eurovita and the other one is health. Eurovita, I think Q3 is expected to be the final transfer of assets to the various participants. I just wondered, I think the amounts are small. It's about EUR 1.5 billion each for the life funds. But I just wondered if there's an impact on solvency. And then the second question is health continues to grow at amazing rates. Unisalute, I think was it 27% or something. And I just wondered, is that kind of like a one-off due to pricing, or is that the normal trend in Italy? Thank you.
Yeah. Thank you, Michael. I will answer to Eurovita, and then I will leave the floor to Enrico for the health business. Yes, we expect to finalize the transaction on Eurovita in September 2025. We are talking about, yeah, EUR 1.5 billion of technical reserve to be transferred to Unipol. This is the carve-out that are in Unipol. And we don't expect impact from solvency, actually, because we already recapitalized quite strongly the company. So it is very well capitalized already because we put more than EUR 50 million of capital increase on Cronos. And so I don't see a negative implication coming from the solvency on Cronos.
Thank you.
Enrico on Unisalute.
Yes, Michael. So our growth in the health business is really relevant and at the same time remains profitable since we reported, roughly speaking, around 90% combined ratio in 2024. And growth comes from two main streams. On the bulk of the traditional business of Unisalute that are large collective deals, there is mainly a price effect. So we are able to update our prices to what is the current, of course, need for the increasing use of the contracts of the people insured. So there is a relevant part of the growth that is price effect. But there is also another relevant part. It is the growth of the retail distribution channels. So bancassurance business that has a very good result in 2024, and also our retail agent network that is growing.
S o we reported our relevant growth, and we think that also in the future we can continue to grow in health business.
That's very clear. Thank you, Enrico. Thank you. And thank you, Matteo.
For any further questions, please press star and one on your telephone. Mr. Laterza, there are no more questions registered at this time.
Okay. Thank you very much for attending this meeting, and I hope to see all of you the next 28th of March. We will give to you the details of logistics later on. Thank you very much. Have a good day.
Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones.