Good afternoon, everyone, and welcome to MAPFRE's Results Presentation for the First Half twenty twenty one. This is Felipe Navarro, Head of Investor Relations, Capital Markets and Treasury. As usual, Fernando Mata, our CFO, will walk us through the main figures and highlights of the quarter. We also have the pleasure of having here with us Jose Manuel Nintjauski, CEO of Iberia, who will give us an overview on the main highlights and outlook for the Spanish business. As a reminder, additional information can be found on our website, including the MD and A as well as the usual spreadsheets.
As requested by many of you, we have included further quarterly stand alone figures in our financial supplement. At the end of the presentation, we will open the Q and A session. You can submit your questions using the Ask a Question link on the bottom of your screen. We will try to answer all the questions as time allows. The IR team will be available to answer any pending questions after the call.
Before we start the presentation, I would like to give you an update regarding the pandemic situation for our markets. On the positive side, European markets, including Spain, continued to improve, thanks to the constant increase in vaccination rates. The new variants have had a strong impact, especially in The UK and the Iberian Peninsula, although the increase in cases has not led to the increase in the death rates. In Latin America, the situation is still quite complicated, although most countries seem to have passed the peak. However, there is still a high level of stress in the hospital systems in some countries, including Colombia and Guatemala.
We are also carefully monitoring the pandemic and social political situation in Peru and taking adequate mitigating measures. As vaccination rates accelerate, we continue to implement gradual return to the office, always keeping in mind the highest health standards. Currently, around 94% of the employees in Spain are working on the pandemic situation, which is still complicated sorry, on the premises with rotations and 54 of employees in The United States are back in the office. In Brazil, the pandemic situation is still complicated and 99% of the workforce are currently working remotely. We will continue adapting to the changes in conditions in every country.
Now let me turn the call over to our CFO, Fernando. The floor is yours.
Thank you, Felipe, and thank you, everyone, for being here with us today. Before I go into the details, let me start by saying that we are very satisfied with our second quarter results. We show that we are on track to meet the guidance announced at our AGM, underpinned by improving trends and successful restructuring measures. We have successfully adapted our operations to the new market context with COVID. Regarding P and L impacts, direct claims at insurance units, mainly in the Life Protection and Health in Latin America, should be offset by lower auto frequency across regions, although there may be some volatility from one quarter to another.
The pandemic situation in Latin America remains challenging, especially impacting MAPFRE in our largest operations like in Brazil, Mexico, Peru, Colombia and The Dominican Republic, with April being the peak. On the other hand, the outlook seems more positive for markets more advanced in the vaccination process. Top line performance is strong and premiums have reached a turning point, returning to growth in the second quarter, which is outstanding considering the impact of the pandemic and the drag from currency movements. While vaccination rates are advancing quickly in mature countries, there is some lag in emerging countries, leading to an asymmetrical economic recovery. In any case, we should see further consolidation of recovery trends and we should expect more premium growth in the second half of the year.
In Iberia, we continue to outperform the market in key non Life segments with a return to growth in Life while maintaining strong underlying technical margins. Reinsurance and global risks are also consolidating positive trends on the back of tariff increases with limited impact from large events. In The United States, underwriting results were strong, especially in the Northeast, thanks to the streamlining process over the last few years. And Brazil is also well positioned to bear the fruits of the restructuring process. Finally, I would like to highlight our strong capital position with the Solvency II ratio over 200% at the March and our equity base has been stable in 2021 at around €8,500,000,000 Furthermore, Standard and Poor's recently affirmed our financial strength rating at A plus Now I will take you through the main figures of the first half of the year.
Before we discuss the top line, I should mention that we renewed the large multiyear Pemex policy in Mexico for $563,000,000 equivalent to €469,000,000 Currency movements were still on track compared to last year, although to a lesser extent than in the first quarter. In euros, premiums are up over 6%. At constant exchange rates, premiums are up over 11%, seven % excluding this large policy. Non life premiums continue to consolidate strong trends and life premiums are up nearly 10% with good performance in local currency in Spain and Brazil. The group combined ratio of 95% is in line with our guidance with a similar result as insurance units.
There was a provision for early retirement in Iberia booked in the second quarter. And excluding this, the combined ratio would have been around 94% and the expense ratio will have improved proportionally. Jose Manuel will comment on this in more detail later in the presentation. MAPFRE's net result is €364,000,000 up over 34% and in line with our guidance for 2021. The ROE excluding goodwill write downs is close to 9%.
And assets under management are up over 1% with the investment portfolio slightly down compensated by strong growth in pension and mutual funds, nearly 9% in total. On this slide, I will take you through the breakdown of the adjusted attributable results. As many of you have requested, we have included quarterly stand alone figures as well. As a reminder, in line with previous quarters due to the offsetting nature of the different COVID impacts at insurance operations, we have not considered this in the adjusted result as the final effect should be roughly neutral, although there could be some volatility from one quarter to the next. Regarding other nat cat claims, has been a quiet quarter with nothing relevant to report.
As a reminder, last year, was a €61,000,000 net impact from the earthquake in Puerto Rico. And regarding COVID claims at MAPFRE RE, there was a €14,000,000 impact mainly related to claims occurring in 2021. There had been two large impacts in Iberia during the quarter. There was €56,000,000 negative impact from an early retirement provision and a twenty two million euros gain from the release of an earn out provision. Financial gains and losses are relatively stable on the year.
Finally, other impacts include a net gain of €25,200,000 due to the market valuation of a building transfer to a new joint investment vehicle with Swiss Life. There were also realized gains from several asset sales, including Rastriador, Prominent and Industrial Re for a little under €17,000,000 In 2020, other items included a provision for restructuring. Excluding these impacts, the adjusted net result was €352,000,000 down around 9.8%, mainly as a result of lower financial income and absence of €11,000,000 profit contribution from Banquia in the second quarter. The adjusted result is up over €19,000,000 compared to the first quarter due to seasonality. On this slide, we show the main trends this quarter.
The drivers are continuous improvements in technical management as well as still lower mobility levels affecting mainly Motor. I would like to highlight the positive performance in Iberia, which Jose Manuel will discuss in more detail later. In Brazil, currency headwinds are still relevant with average real exchange rates down 14%, but much less than in the first quarter. Premiums are up over 15% in local currency with strong growth in agro and improving motor issuance. The attributable result of €36,000,000 is down mainly due to COVID related life protection claims and currency movements.
The combined ratio remains strong at 86%, down nearly three points with improvements in general P and C. Economic outlook has slightly improved with SELIC rates up at the currency improving but with high volatility. Premiums in LATAM South grew 4% in euros offsetting currency effects. In addition, premiums in LATAM North are up over 50%, in that case driven by the large multi year policy in Mexico as well as strong trends in most segments. Excluding this policy, premiums in the region will have been slightly down to currency depreciation.
Local currency growth was also remarkable in Colombia, up 33% and Peru, up over 14%. Combined ratio in both regions remained at good levels with a slight deterioration in LATAM North, but still under 94% due to COVID related claims. Performance in North America has been affected by currency depreciation with average dollar exchange rates down around 7%. The combined ratio has improved year on year at 97%, mainly due to the earthquake in Puerto Rico last year. The region shows remarkable stability with recurring profits after restructuring, with the combined ratio in The U.
S. Northeast at 96.5%. In The U. S, new business is still being hurt by a lack of economic activity, but both the economy and mobility are starting to recover and this trend should accelerate in the second half of the year. In Eurasia, premiums are up sorry, are down due to the nonrenewal of the dealership channel in Italy as well as the depreciation of the Turkish lira.
All countries have contributed positively to results except Italy, where expenses, as we mentioned as of March, still need to be adapted to the new business model. And MAPFRE RE premiums are also up, supported by positive pricing trends. The combined ratio was below 95% with excellent performance both in reinsurance and global risks. It was a quiet quarter for large losses. In the system business, results are up over €11,000,000 as last year was strongly affected by travel cancellation claims.
Volumes are down 27% and we continue with our streamlining process. Regarding results, we're close to the breakeven point and it's remarkable finally that we have reported small profit in the second quarter. On this slide, I would like to comment on the Life business at insurance units. In Iberia, premium performance has been outstanding, thanks to successful sales campaigns and rollover of product maturities. I will leave the numbers for Jose Manuel's presentation.
In Brazil, premiums have been affected by currency depreciation. There has been a return to local currency growth, up 4% in the bancassurance channel with improved trends in the second quarter and sales campaigns. In other markets, premiums are up in Malta, offsetting a small decline in Mexico. The Life attributable result is down by €22,000,000 mainly due to a strong impact from COVID related claims in LATAM, where the Life Protection attributable result is down by €50,000,000 five-zero million euros Average cases and number of death figures are beginning to come down and we seem to have passed the peak, particularly in April was the hardest month. It was mitigated by improving results in Iberia that Jose Manuel will comment on now.
Jose Manuel, the floor is yours.
Thank you very much, Fernando, and good morning to everyone. I start saying that premiums are up 6.9% year on year, thanks to a strong performance both in Life and Non Life. I would like to highlight the growth in Health at 10% and in Commercial Lines where premiums are up nearly 9%. Motor is growing 2.7%. It is worth mentioning the strong performance in both Berti and Santander businesses.
Life premiums are up nearly 13% with strong trends in retail lines both in life protection and 6% and in savings up 34%. The net result is $2.00 €6,000,000 down 7% on the year explained by an increase in claims experienced in motor, health and homeowners due to a pickup in economic activity. It also reflects a provision for a voluntarily early retirement scheme for €75,000,000 which was compensated with other positive one offs with an overall neutral impact. The combined ratio is 96.3%, two point four point higher than June 2020, reflecting the impact of the voluntary early retirement scheme. The ratio will be a half will be three points, I'm sorry, three points lower excluding this.
An increase in motor claims due to higher vehicle use during the quarter, the ratio in general property casualty has improved six points with lower average claim cost in the Boreal segment compared to 2020. This was partially offset by homeowners and condominiums, where claims continue at high levels due to an increase in frequency from people spending more time at home as a result of the COVID crisis affecting water, glass and handyman covers. The data for the Spanish market as of June 2021 was recently published and is proof of MAPFRE's outstanding performance. MAPFRE is growing two percentage points above the total market, outperforming in most key business lines. Life and Health are worth highlighting, which are growing six points more than the market.
Also, business lines are growing five points more than the market. MAPFRE places clients at the center of our strategy, designing products, covering new needs with excellent service quality and digital capabilities, giving clients the power to act whenever and wherever they want. A differential value proposition has been designed for our main clients based on these pillars in order to foster long term loyalty. These strategies have helped build the best insurance loyalty program in Spain with more than 3,000,000 members. MAPFRE is also designing tools to improve retention from the moment the policy is sold and increasing year after year the Net Promoter Score from our clients, which is now the best in the market, higher than 38.
Iberia now has more than 7,100,000 clients who are even more loyal with record low churn rates. MAPFRE recognizes the importance of families, so we have become the reference insurer for Spanish households with more than 400,000 families, allowing us to offer personalized products and value propositions. Our strategy is focused on growing the number of policies and MAPFRE is now giving health insurance coverage to more than 1,000,000 people and with over 6,100,000 vehicles insured. One of our main targets is to continue fostering and accelerating our digital transformation in Spain. To reach this goal, we have created the client digital experience area and the digital transformation office to foster digitalization and leverage synergies within the group.
The most relevant KPIs for the digital business reflect the success of this strategy. Online transaction ratio has improved continuously over the last two years, five and nine points for MAPFRE and VERTE respectively. New policies captured through digital channels have grown 21% as of June. Verti continues outperforming the market with policies up over 11%, reaching a total of three and thirty eight thousand policies. And lastly, after lockdown, there was higher demand for health services offered by SaviA, which are complementary to our insurance products.
Going to the next slide, our priorities for 2021 are gaining market share across key line of businesses, defending our portfolio and cost containment. Trends are slowing both on Non Life and Life. Frequency trends will depend on mobility and economic recovery. However, we are already very close to a normalized level. New vehicle sales will remain at low levels due to the economic situation and a lack of government subsidies, but with an improving outlook and as long as rates remain low, the life savings environment will continue to be challenging.
The Non Life combined ratio is expected to be around 95% with Motor between 9193% for 2021. We will continue managing the low interest rate environment and continue to implement our alternative investment plan. Lastly, Iberia continues to boast extremely strong solvency levels while providing a recurring high level of dividends to the group. MAPFRE Iberia has carried out a careful analysis to adapt our operating model to changes in our clients' channel and the market context. This new model is the result of advances in digitalization and automation across the company as well as the need to centralize several operation.
Taking advantage of new technology, this will allow us to work with more efficient structures and centralized management that can be accessed from everywhere in Spain. These developments have also helped streamline processes and require new strategic employee profiles. The end of the agreement with Banquia has also accelerated this process. In order to implement these necessary changes, we have set aside EUR75 million provision for the voluntary early retirement for employees from different business areas in 2021. MAPFRE is not only focused on digital transformation, but we are also carrying out an important operational transformation plan geared to increasing operating efficiency with more than €12,000,000 transaction optimized with a total cost saving for more than €7,000,000 this year to date.
The main pillars of this plan are digitalization, process automation, using technologies like robotics and artificial intelligence and the change in the operating model that I already mentioned. Improving technical management is also a priority for MAPFRE Iberia. The main initiatives include: market pricing, which is focused on adapting the final price to each customer. This is currently being used in auto, homeowners and multi risk, and advances are being made in other segments. Progress is being made in the use of artificial intelligence with digital verification for our clients and distributors.
In the case of Motor, this allows for automatic underwriting and loss adjustment and allowing for a policy to be taken out even with a smartphone. During the pandemic, this helped streamline the loss adjustment process for homeowners and condominium claims. Another important challenge has been the use of data for decision making and the possibility of creating new products and services using advanced analytics. The main action had been optimization of sales activity and process automation. In Iberia, we are also expanding our product offering, adapting it to our clients' changing needs with a focus on electric and personal mobility service vehicles as well as the development of onoff motor products.
In Life Savings, we are focused on unit linked products and successfully boosting the asset management business. On the next slide, I would like to comment on the current status of our main bank assurance agreements. The company is making positive advances in the bank exits process. The independent appraiser was appointed at the July, and we expect the transaction to be completed by year end, but the final time line will depend on the pertinent regulatory and administrative approvals. We have also implemented our portfolio retention plans in our MAPFRE network.
Regarding our agreement with Santander, it has been a great success with high growth potential while leveraging several opportunities for further collaboration, for example, Portugal, cyber insurance and Azure banking. MAPFRE continues to meet important milestones, reaching over 100,000 policies as of June and over €24,000,000 in premiums in Spain. In conclusion, in Iberia, we continue outperforming the market with a strong underlying technical margins. Our leading position, a strong competitive advantage and linear business model will help us come out even stronger as the economy gradually normalizes and we will continue to leverage opportunities for growth and improve profitability. Thank you for your time.
And I will now hand the call back over to Fernando. Thank you, Jose Manuel. A pretty comprehensive presentation and quite clear explanation. Thank you again. Now I will move on to the balance sheet and capital.
This slide includes a full disclosure of the breakdown and variation of the investment portfolio and total assets under management. Spanish sovereign debt continues to be our largest exposure with a little over €12,000,000,000 and Italian debt with €2,700,000,000 is the second largest. Both SOVIs are mainly allocated to immunized portfolios. The fall in the investment portfolio is due to higher yields with the Spanish sovereign up over 35 basis points year to date. And pension and mutual funds have had strong performance both due to market movements as well as positive net contributions of €70,000,000 in pension funds and €212,000,000 in investment funds at the June.
On the top left are the details of our Euro managed fixed income portfolios. The market value of these portfolios is a little under €13,000,000,000 The capital yield is around 1.6% in Non Life and 3.5% in Life. The fall in yields is consistent with the reduction in duration. As a reminder, Non Life includes burial expense business, which is a long tail business. Excluding this portfolio, Non Life duration will be closer pretty down closer to four years.
On the bottom left, you can see the details of the fixed income portfolios in other markets with portfolio yields significantly up in Brazil, now at 6.5% and relative stability in North America. Realized gains and losses in these portfolios were around €14,000,000 down €14,500,000 compared to the previous year. At the June, and this is very relevant, very important, there were €161,000,000 of unrealized gains in equity and investment funds in our actively managed portfolio in Iberia and MAPFRE RE. So it's a big cushion for MAPFRE for the second half of the year. Right now, we prefer to accumulate unrealized gains in order to compensate the falling value of fixed income portfolios.
Shareholders' equity stood at €8,500,000,000 up €217,000,000 on the quarter. The main driver for this increase was the net profit for the quarter with stability in comparison differences and unrealized capital gains in the available for sale portfolio. The most relevant changes during the year are a decrease in net unrealized gains on the available for sale portfolio with a €281,000,000 negative impact due to rising rates with only a €10,000,000 deterioration on the quarter. And conversion differences had a positive net impact of €120,000,000 during the period, improving around €40,000,000 in the quarter, mainly due to the appreciation of the U. S.
Dollar and the Brazilian real. The breakdown of currency differences and currency movements are shown in the table on the right along with the current sensitivity analysis. On the chart on the left, you can see the breakdown of the capital structure, which amounted to €13,000,000,000 of which over three quarters is equity. Leverage is stable in the quarter, slightly under 24%. After closing the transaction with Banquet, we could reevaluate our financial needs, but for the time being, we are quite comfortable with the current debt levels.
On the right, you can see the Solvency II figure for March 2021, which were released last month. The ratio sits at over 200% at the midpoint of our range. The improvement during the year is due to lower mathematical provision due to higher risk free rates in Turkey and Latin America, especially in Colombia and Panama. Before moving on to the Q and A session, I would like to make a few closing remarks. First of all, as Jose Manuel has already explained quite in-depth, in Iberia, we continue extremely well positioned for profitable growth.
Underlying results are robust in The United States, especially in the Northeast, and we are also beginning to see the fruits of a successful restructuring process. In Latin America, the pandemic and economic outlook remains, I will say, challenging and we have adapted our business model to the new environment and we are monitoring the situation closely. MAPFRE RE continues to consolidate normalized profitability trends, thanks to tariff increases, prudent underwriting and the absence of significant cat loss so far. As for Banquia, as Jose Manuel already mentioned, right now we focus on completing the exit process. Regarding capital allocation, we are moving ahead with restructuring and transformation with significant advances during this quarter.
We sold Rastriator and Premium Price Comparison business as well as Industrial Re. At MAPFRE ASISTENCIA, we have exited 13 countries since 2016 and have recently classified several insurance and assistance operations in Europe and Asia as held for sale. This includes the Insure and Go operations in Australia and The UK, which are both in final stages. We will continue to simplify the assistance business to improve profitability with a focus on countries where MAPFRE has insurance business. Regarding business expansion, we have a preliminary agreement to buy the minority stakes in Peru Life, which will be a 32% stake.
This is an excellent growth opportunity with an operation that has proven successful for almost for more than thirty years contributing to premium growth, profit and dividends. In conclusion, has been another positive quarter showing growth in premiums and results in a more positive scenario, but not without COVID related uncertainties. We are on the right path to meet our 2021 commitments and return to a sustainable dividend path. Thank you. And we'll now hand the call over to Felipe to begin the Q and A session.
Thank you very much, Fernando. Thank you very much, Jose Manuel. We have a number of questions coming now from the different analysts asking I mean, the first ones are related with COVID situation. Paco Riquel from Alantra asks for the net impact of and the net attributable profit for the COVID losses in the Life Protection business for both Q1 and Q2. Fernando?
Thank you, Paco. Good interesting question. I don't have the proper disclosure of both effects. I will tell you in terms of the gross value of the claims, approximately onethree during the first quarter and twothree in the second quarter. And the total Latin America was like €50,000,000 for both quarters.
But unfortunately, we can't disclose. I mean, bear in mind that a significant impact is being allocated to Banco do Brasil, and they haven't published their results yet. So we should be very prudent in this respect. But let's say that the onethree was the first quarter and second onethree was for the second quarter,
roughly talking. Okay. Thank you very much, Fernando. Next question is related with losses that we recognized in the second quarter twenty twenty one related with the COVID. And this is coming from Ivan Bokhmat from Barclays and Pato Gueda from Bacconcert Sabadari is asking a similar question.
Is that given the scale of the pandemic, how do you see that playing on the second half twenty twenty one?
Well, I will discuss on the first half of the year because what is going to happen in the second half of the year is still unknown. But let's say that out of these two thirds impact in the second quarter that I already commented, the peak was April, the month of April, with gross value for incurred losses of close to €65,000,000 And but let's say that the curve is flattening and with a lower impact in claims in May and also a descending amount coming down in July sorry, in June. So I wouldn't like to extrapolate this flattening of the curve. I mean, we know that there is a lot of uncertainty regarding the COVID in LatAm. But the outlook remains challenging.
But as I mentioned, I mean, we are quite positive. And let's say that we had to be optimistic. I mean, the pace of vaccination is moving ahead, particularly in the largest countries, Mexico, Brazil, Peru and Colombia. And also, our operation is very well adapted, I mean, to this tough context and even working from home, I mean, we're able to provide and to deliver the best quality for our clients and also just to try to mitigate the potential impact in our accounts.
Thank you very much, Fernando. We have now some questions related with this early retirement scheme. This coming from Andrew Sinclair from Bank of America Merrill Lynch. He's asking for the Iberia early retirement scheme you have completed, what will be will the longer term impact on the expense ratio? Should we expect a reduction?
A similar question is coming from Paco Riquel from Alantra. Can you give us an indication of the expense of the expected payback in years of €75,000,000 reconstruction program in Spain? Jose Marcelo will
take this question, yes. Of course, Paco, it will be depending on the profile that we are speaking at, we could calculate between three and five years the returning.
Okay. Thank you very much. There were similar questions related with this question coming from Alex Evans that was very similar. And there's another extension of the question coming from Ivan Bokhmat from Barclays. He's asking he wants to know what is the rationale on the voluntary retirement scheme in the Non Life?
What impact should we have in the ongoing combined ratio next year?
Okay. I have talked a little about the rationale. On one side, we are streamlining our processes. I think that technology allows a different distribution of the workload, which cannot be the same than years ago. And last, I think centralized operations give us more flexibility and more efficiency as a company.
And the impact on the ratio and the expense ratio, nowadays are three points. And in the future, we expect, of course,
a less a minor expense ratio, but we are calculating it in the next strategic planning. So that's very important. And we already mentioned that for Iberia business, this expense is impacting dramatically our combined ratio. And as Jose Manuel said, the net impact in the combined ratio is a three percentage points reduction sorry, increase. So if you adjust the current combined ratio, eliminating this impact from the redundancy scheme, it will be a little bit higher than 93%.
It's a quite it's our standing combined ratio in the current circumstances for Iberia.
Okay. Thank you. Thank you very much, Jose Mourinho and Fernando. There's more questions related with this scheme. Next one related with how many people are involved in this scheme.
That is coming from Mario Ropero from Invest Inber. And Paco Jeda would like to from Banco Sabadelf, would like
to know which is the time frame of this operation. Thank you. It will be more or less two fifty people. And everybody these people will leave the company up until the end of the year.
That's very important. I mean, number the final number, we will know in the future, I mean, because the probably I mean, the pace of the employees that they're becoming eligible, I mean, is growing. I mean, it has been very well accepted. I mean, we're quite generous for our employees. And with the number what we're seeing currently in July, probably we will hit this number of two fifty employees that Jose Manuel has mentioned.
We're happy. I mean, let me tell you that it's not the first internal redundancy scheme, but for the last five years has been early retirement plans, not that size. I mean, is very important. It's what is relevant. That is affecting a big group of employees.
But MAPFRE has other large entities. I mean, we are trying to give I mean and also to reduce our payroll, particularly for those employees that has devoted more of his professional time, lifetime, I mean, to MAPFRE. So so let's say it's nothing new, but this size, let's say that it is very important. So in this transparency commitment that MAPFRE has, I mean, we decided just to make it then public, and that's basically my view.
Thank you very much. We go back to the COVID. And now Paco Riquel from Allanto is asking about of the losses in MAPFRE RE in the second quarter and what is left for the second half. I mean, I think that the question was almost answered. He is interested as well with what could be the potential losses for the extraordinary floods in Germany and Belgium in July as MAPFRE RE and MAPFRE Germany.
And Asig Moushadi from JPMorgan is asking a similar question of the outlook of reinsurance business given the recent floods in Europe.
Well, as I mentioned, Banco, thank you, Asik, for the question. I mean, it's extremely difficult to extrapolate any conclusion for the second half of the year. But let's say that the curve is flattening and also it's flattening as well for MAPFRE RE because there is some accepted business from LATAM that there is been is in MAPFRE RE accounts. Let's say that most of the impact was in April and the amount that net of taxes is €16,000,000 that was affected in MAPFRE RE was basically due to 2021 occurrence year. So let's say that it will report an amount last year approximately €60,000,000 This half of the year's twenty sixteen million as a net impact in the result.
Let's say that the second half should be a smaller amount for sure, but it's difficult to foresee. Regarding Germany losses, you're right. It was the extraordinary floods in Germany and in Belgium. And just last week, we saw on TV as well, again, flood in Belgium. This is we are in a very early stage, and we have not received any written or oral communication from the seasoned entities.
But from a top down analysis from MAPFRE RE, let's say that it would be probably a midsized nat cat event for Europe.
Okay. Thank you very much, Fernando. Coming back to Spain, Alex Evans asking about motor. Please, could you talk about the Spanish motor market as vehicle growth, premium growth looks strong, but you are now missing your 91%, ninety three % combined ratio target with 93.1 in first half and 97.8% in Q2. How do you think about the provision between the different MAPFRE Espana business lines?
Matti Ropero from Best in Bear would like to update you an update, sorry, on how you see the motor insurance price competition for the rest of the year. Patojeda from Banco Sabadellos as well is asking about the combined ratio, this 93% underlining in Iberia and what can we expect on the second half twenty twenty one?
Okay. Regarding the first question, the our combined ratio of the first half of the year is influenced by three points as well as the general combined ratio. So it's the underlying combined ratio is three point less. It's very difficult to estimate a combined ratio for the second half of the year. The first half of the year will be fulfilled if we eliminate the early retirement program.
And for the second, what we have seen is a very big increase on competence between companies in the market. Companies are decreasing prices, reducing prices and are investing more in marketing. So it is not easy to estimate how far we'll go this process, but it will be perfectly we could have seen that at the end of the year. Yes.
If I may add something, I mean, we're pretty happy with the current or the underlying combined ratio for automobile in Spain. I mean, it's like 93%. If we apply proportionally this three percentage point reduction, it will be in the lower 90s. So I mean, it's I mean, this is a fantastic combined ratio. The same for the Non Life combined ratio of Iberia.
It will be in the lower 93%. So they're very good and in the proper line in order to meet the guidance for both MAPFRE Group and also for MAPFRE Espana. Regarding the allocation of the 75% Jose Manuel, you got the numbers?
Yes, yes, yes. It's €65,000,000 in MAPFRE Espana and €10,000,000 goes to MAPFRE Vida.
Yes. And the question from Mario Ruperov, the motor insurance price compare Mario, it is as usual. I mean, there is nothing new in this country. Extremely competitive, perhaps Jose Manuel can give us more color, but nothing has changed in Spain. I mean, everybody wants to get the largest piece of the cake and the piece of the pie.
And MAPFRE is we're defending our position. And, with the help of MAPFRE Santander, which is very good in new business, and we are extremely competitive too.
Yes. Especially in the direct business,
in the digital
business, we have seen an increase in competency because we have a special sensitivity when we are competing with other companies in comparison with and it is very difficult to be one of the top three prices best prices for our digital company, which is Berti. Nevertheless, I would like to say that Berti is increasing its premiums by 7%, so much more than the market and other digital companies.
Thank you very much, Jose Manuel. Now we have a question related with the proceeds of the Banquia sale. Andrew Sinclair is asking what options would you consider? And Assim Mushari from JPMorgan as well is asking is there an update on the cash flows from Banquia? Fernando?
Yes. Thank you, Andrew. We haven't changed our statement regarding future allocation of the consideration to be collective from Caisse. I mean, we
will decide on this particular transaction when we finish and we get the money, I mean, from Caixa. So meanwhile, I mean, we're analyzing different opportunities. But so far, we haven't reached any conclusion. We'll try to allocate more capital to our strategic distribution channels, particularly Bancassurance in Spain, where we there is a lack of power. I already mentioned, I mean, has been two relevant transactions that we lost because of the restructuring financial institution in Spain and also on the digital business.
And regarding our geographical footprint, again, Spain is key and also The United States. And in that case, as we mentioned, and perhaps on dot state that we operate in close to the AAA, the Matto Club, and also Brazil. We mentioned some in a couple of meetings as well that Mexico could join the list of strategic countries as well. But so far, I mean, we haven't reached, as I mentioned, any conclusion regarding the future allocation of the consideration from Banque.
Thank you very much, Fernando. This Mario Ropero from Investing Verics is on the same subject. How fast do you plan to substitute your joint venture with Banquia, if you're willing to do so? Yes. I know, Mario,
that there are a lot of people gossiping, particularly in Spain with entities. I'm not gonna name any any potential future development from MAPFRE. They're on the papers and that but the decision will be made once we finish the we are involved, which is the exit of the current discussion with the Caixa and Assid. Thank you. I would like
to add that part of the loss of a part of the Banquia loss will be covered with other distribution channels. We have implemented homeowners, especially our homeowners increase program in other in different channels. And I also want to highlight that the cooperation with Banco Santander is increasing. We have some products in our pipeline. We will be launching an important business line product by the end of the year, and we have another product to be launched in 2022.
Yes, that's very good. I mean, we usually discuss on M and A growth, but we forget the organic growth, which is very important, particularly on the digital side. As Jose Manuel mentioned, we're putting some of the money and having I mean, the Banquia money in the future on the digital business and particularly Homeowners. Homeowners will be the line of business the most hot because of the BANKIA exit and because it was key, I mean, for Homeowners' new business. That's right.
Thank you very much. Excellent answer. Mario Ropero from Investing Ver, he's interested in the solvency ratio. We increased the solvency ratio in the second in the first quarter. And he's asking about our expectations by the end of the year.
Well, let's say that we quite Mario, thank you. We're quite comfortable with the current position, and it's just at midpoint of the range. And we probably will see further improvements if there is an, let's say, an upwards movement of the free risk curve, particularly in some Latin American countries. Because the higher the movement is, the lower mathematical provision we have to book. So basically, it's an external factor affecting our Solvency II ratio.
But it's fine. I mean, we can we should keep this 200% Solvency II ratio as a reference, means that we will have some idle capital additional capital in order to grow organic and inorganic our business. So that's a good situation.
Okay. Paco Rico from Allantro has a similar question related with the unwinding of Banca JV that has reduced the solvency impact from six percentage points to four percentage points. I think that you already explained why. And there was another one, Riccard, related with capital requirements that are lower in proportion of the rest of the group and how it's going to be impacting this. Yes.
Paco, as you
can see, I mean, the Banquia weight on our SCR is lower because there is a reduction of both premiums and also assets compared to other units and regions. They're growing, I mean, significantly. So in the end, I mean, it will be a lower impact from the exit of Banquia. That's basically our understanding on this question.
Okay. Alexander Evans from Credit Suisse is asking what internal dividends has the group received year to date. I can tell you, Alexander, that we have received what was already projected and that these dividends are being booked on our accounts as they were distributed, and we are quite happy with the even now streaming that we have received up to now. So we don't see any kind of risks for the rest of the month and for the rest of the year should be continuing going in the same direction. There's another question related with coming from Ivan Bokhmat from Barclays.
Can you help us to understand the underlying profitability of the Spanish Life business after excluding the contribution of Pankeya Mafe Vida? What is the run rate? And how does it compare with your expectations?
Well, I'll give you just the number, and then Jose Manuel can probably can give us more color. I guess the amount is €11,000,000 as I disclosed. It's the let's say, it's the profit that was booked in the let's say, in 2020, and we missed this quarter. And but what we're seeing is a decrease in the business in Banquilla and Mafre Vida, probably because of the current situation and also the lower level of assets. Is that right, Jose Mourinho?
Taking out any extraordinary results from Life Insurance, our Life Insurance results is growing at a rate of 3%. Banquet Amafrevida is not performing so well as the last year this year. So taking out Banquillaume Afrevida, our evolution will be much better even than the evolution I have said. And on the other side, I would like to highlight that risk the Protection Life combined ratio is 75%, which is a very good combined ratio. So we expect a good profitability from the Life business. TRONCHETTI
Excellent news, Jose Mouro. Thank you very much. Sorry, related there's a question coming from Bank of America. You've talked about returning to sustainable dividend path, but not yet the level. Does this include a rebasing from the loss of Biancona JV?
Or you think that you can get back to the historic €0.45 per share is a recurring question that we were receiving on how the dividend path is going to be in the future.
Yes. Thank you for the question. I mean, the profit contribution on the Banquilla JV is not that significant in order to force us to change our dividend policy. As I mentioned, it's more or between 10,000,000 and €11,000,000 per quarter. So I'm pretty sure that we can offset this decrease with other operations.
And so let's say that you should understand when I mentioned that we want to come back to the sustainable dividend path is for many, many years, it was the dividend amount was EUR 14.5. And as the President our Chairman said, and also I mentioned as well in some meetings in the past, is that we would like to come back to this dividend position of €0.45 as soon as possible. So and it won't depend, I mean, this return to this dividend path on the Banquia consideration. This is a completely different business. I mean, we should come back to $0.01 €45 by recurring profits.
That's pretty clear from my side.
Thank you very much, Fernando. We come back to MAPFRE RE, which is I think that the main the biggest change on the accounts this year. Mario Ropero from Investing Veri is asking, let us know your views on the combined ratio for MAPFRE RE going forward. How it's going to perform? What should could we expect from a free rig combined ratio?
Well, let's say that so far has been a quiet quarter and also quite half of the year in terms of big nat cat events. We have only reported two nat cat events. The one was the snowstorm Uri on in the Southern states of The US, and the other was a phenomena in the Central Spain. And both they were, let's say, lower than mid sized nat cat events. And the other impact was, as I mentioned, the COVID-twenty twenty one occurrence claims, and it was the impact was €16,000,000 net.
Regarding the second half of the year, we know that the Germany heavy rains and flood, they will impact our combined ratio. We're not sure so far how big it will be this impact. Probably, it's a midsized event. And but let's say that in the long run, as we already mentioned, combined ratio for MAPFRE should be a little bit lower than MAPFRE Group. And so in this range, between 94%, ninety five % in a normal standard year should be the underlying combined ratio for MAPFRE On the global risk line of business, let's say that we're quite happy.
I mean, it was a significant profit for the first half of the year in absence of any man made losses significant losses. And let's keep our finger crossed. I mean, the retention has been reduced to practically 15% of premiums. So let's say that we have lower exposure on global risk. So let's say that the profitability level should remain quite unchanged for the second half of the year.
Okay. I don't know if Filomena you may just mention Filomena as a big claim and
But it wasn't a big. I mean,
it was that big. No. I mean but how did we service this on number of claims, I mean,
that's correct. In terms of retention, it was, let's say, lower than mid sized event. The cost was approximately €20,000,000 for the group. Most of the group most of the cost was split between MAPFRE Espana. It was like €10,000,000 before taxes, and the remaining was for MAPFRE RE.
Let's say that the Filomena is now the second largest Nat Cat event Ever. In ever in in Spain. I after Claus, it was a hurricane one that that entered Galicia, the North Of Spain and exited Spain in Euron, I mean, the Mediterranean Coast. And but Filomena, in terms of climb adjusters and the additional resources that allocated to this storm has been huge with over 53,000 claims open. Most of them, they're already adjusted and paid.
And in terms of the gross amount was €80,000,000 Perhaps Jose Manuel can give us more color, but has been a claim that with a lot of work done in order to give the better quality to our policyholders. Is that right, Jose Manuel?
Yes, is that right? It has been in terms of gross losses, the most important event that we have had in Spain and in terms of claims declared, the second one after Claus. And it has been a big huge effort in terms of logistic with providers, etcetera, of course, to attain as best as possible the number of customers that will be that was affected by the storm. We are very happy with the results. And fortunately, we could increase our NPS, Net Promoter Score figures during these months.
So we are very extremely happy with the way in which we have attained our customers.
Thank you very much, Jose Manuel. We have another question related with MAPFRE RE impact on the COVID losses that we booked on this event. Based on the 2021 events, what percentage of the portfolio would have responded to COVID losses in early twenty twenty still offers coverage after 2021 renewals. How it's been changing the wording of these contracts and
Well, let's say that the way we change and we mentioned in the past, I mean, we're not working on this particular line of business. I mean, we don't give, I mean, business interruption other than those that are linked to property damage. And the only thing we made is that we put in the conditions, I mean, a clear wording in order to set a red line to those to these coverage that they are provided by the policy and thus that they're not provided. So but we haven't changed our policy regarding those this coverage that they're not in the risk appetite of MAPFRE RE.
Thank you very much. Philippe Ross from Mediobanca is asking about Maresistencia. Can you say more on the Insure and Go disposals? Are U. K.
And Australia the worst performing assistance segments?
Yes. We disclosed that we are at the final stage of to get the two operations sold. And the one in The U. K, we are currently at the end of the information process. I mean, we filed with the FCA and also with even we disclosed as well the name of the potential buyer.
So let's say that there is just some formalities from the regulatory perspective, but the amount, the buyer and everything is in a proper way in order to complete this transaction in any time soon. Regarding Australia, currently, we have a binding offer from a quite serious potential buyer. So let's say that we are working on the final details in order to have it. First, we need to get approvals as well from the supervisors. But let's say that everything is in the proper way, and we believe that we can finish this transaction as well by year end.
Other, in the end, and we mentioned that it's like seven assistance operations across the globe that they're currently categorized in the balance sheet as held for sale. Most of them, they are nonstrategic countries. And some of them, they're generating profit, other than losses, particularly Insure and Go. And I guess it's the right decision, probably at the right time as well, and that because that's the moment that the market reacted to these proposals. And hopefully, we'll finish this transaction by year.
And this is a very good news for MAPFRE and also for our shareholders.
Thank you. Thank you very much, Fernando. Jacques Lusser from UBS is asking about our ESG strategy. I mean, he's asking if we consider ESG as a risk or as an opportunity. And on the short and medium futures.
So is today going to be a risk or an opportunity? What was going to happen in the medium term?
Well, it's neither risk nor an opportunity. It's a reality in MAPFRE. And that the first, let's say, ESG statement approving MAPFRE was back in the 1950s and many, many years ago when everybody was even thinking of just a business. And at that point, the former executives of the MAPFRE Mutualidad, they published an statement regarding corporate finance and corporate business. So let's say that it's a reality, it's very well rooted, it's part of our DNA and it's an opportunity.
I mean, it's a necessity. We have to give back and give part of our business, part of our profit and part of the quality of the all the things that we've done to the society. So it's something very well rooted in MAPFRE.
Thank you very much, Fernando. I mean we reiterate this kind of commitment with the stakeholders and with the society every time that we are in public. Carlos Peixoto was asking about our €700,000,000 net profit guidance for the full year 2021. Do we reiterate this guidance, these I
didn't hear you. Sorry, Felipe.
So yes, Carlos Peixoto from Caixa BPI is asking about the €700,000,000 net profit guidance for the full year 2021? And should we reiterate this after these six months results? Yes. Thank you. I mean there is
no evidence or any potential risk that could jeopardize the current seven hundred million guidance that we published. We're pretty happy. But now for the performance of this first and second quarter. I mean since 06/30/2020, we're reporting quite stable and consistent quarters. I mean we said that MAPFRE has adapted very well to this scenario.
We're not happy with the situation that this planet is living, but fortunately MAPFRE recurring in terms of business profit and also premium growth, I mean, is quite outstanding. So let's say that nothing is wrong, that nothing should be wrong, we will meet this guidance by year end.
We come back to Spain. Mean, Pato Gueda from Banco Sabadell is asking, apart from competition, could you elaborate on frequency and average cost? For example, is claims frequency already similar to pre COVID levels? And can there be more to come? And on severity, is inflation pickup impacting repair costs?
Okay. Regarding frequency, it's still lower than 2019 levels, but frequency is evolving quickly to the same level, especially from May as far the restrictions in mobility are lifted by the government. And regarding average cost, we don't have we haven't seen a significant increase. It's mainly because we are taking a bigger part of our claims redirected to our preferential repair shops. So we haven't seen any tension coming from inflation on this average cost.
Thank you very much, Jose Mourinho. Those are very good news. Paco Riquel from Alantra is asking, can you comment on the financial impact of the buyout of minorities in the Life business of Peru, expected net profit contribution for 2021, '20 '20 '2 and impact on solvency ratio? Thank you, Paco. We shouldn't expect a significant impact on the Solvency II ratio.
As you know, for the eligible capital, I mean, we consider it
for Solvency II purposes, I mean, also a minority interest. So let's say that the level of capital that we hold in MAPFRE, Peru Life is quite similar to the minimum. So let's say that the full amount of minority interest is fully booked for the Solvency II ratio. So let's say that we shouldn't expect any impact on our Solvency II ratio. Regarding the information, I mean, at the second events caption of the financial report, there is a full disclosure of numbers and figures from MAPFRE EBITDA been MAPFRE Peru EBITDA has been a quite profitable entity for almost thirty five years.
I mean, just I'll give you just one number. When we bought these operations back in 1986. We bought a 62% current stake by €16,000,000 So considering the current value that we apply, I mean, for the transaction, the increase in value has been huge. And also another thing, I mean, we reviewed the number of dividends paid by this subsidiary. And for the last five years, the average was €10,000,000 of dividend.
So let's say that the flow of dividend is pretty good.
That makes totally sense. I mean Carlos Peixoto from Caixa BPI was asking similar questions about Peru, telling that the 20x implied price earnings for 2020 was seen demanding? And could you elaborate on the rationale expecting on the return on investment, payback and its impacts on in the solvency? Those are similar, and I think that you already answered those questions. I don't know if you want to elaborate something more or
Yes. Thing I forgot, Paco. I mean, for IFRS accounting purposes, I mean, the way we're going to treat these transactions is quite similar to the one in Brazil back two years ago. So the excess of our equity that we paid for this transaction will be fully deducted from reserves. So it won't be any goodwill nor VOVA in our balance sheet out of this transaction.
I mean, it will we paid an extra amount above net equity, but they will be deducted from reserves. So that it will be neutral for Solvency II and also for IFRS net equity.
Carlos Peixoto from Caixa BPI is asking about the release of provisions on this quarter. Should we expect more releases in the coming quarters? Think
Well, it was a one off, definitely, Carlos. And perhaps Jose Manuel can give us more color. Let's say that we have some announced provision and other commissions to pay our partners for business plan fulfillment. And what we've made I'm not going to disclose any name, as you may imagine. And but what we've done is just to adjust the current liabilities to the current circumstances.
And due to the COVID or whatever other circumstances, let's say that some of our partners, they're not going to meet the business plan, so we adjust we have adjusted the earn outs and other contingent liabilities in that way.
Thank you. Thank you very much. Andrew Sinclair from Bank of America Merrill Lynch is asking on Brazil protection loss. And he's asking if on how much was this of this loss provisioning for future periods? And if he was asking if the increase in the losses were adjusted to the quarter?
Yes. Thank you, Andrew. We're booking an IBNR reserve in the region in particularly in LATAM region and across the countries based on the number of days delay between the occurrence day and the reported day. Let's say that the range varies between twenty two days and one point five months. So let's say that it's quite logical, I mean, this range, assuming that some of the business are coming from financial institution, and there is usually a lag between the day that the claim is being reported to the financial institution and the subsequent reporting to the insurance operations.
So let's say that we're booking and as a conclusion, we're booking an IBNR in order to cover future reported losses based on triangles and also the loss estimate for this particular line of business.
Thank you very much. It seems that there are no more questions. So we are going to close the session right now. I don't know if you want to say something.
Yes. Thank you again for your presence. As I mentioned, it has been another robust quarter, quite stable. This is the good thing of MAPFRE. Let's say that for three quarters in a row, we're reporting and we're delivering what we promised at the June, that we will adapt our operations to the current circumstances.
We're quite happy. And let's say the second half of the year, which is quite promising, but not COVID related, free of uncertainties. So thank you very much for your presence. And above all, we wish you the best for this summer holidays. And above all, please remain safe.
And Felipe, the words for
you. Jose Manuel, do you want to say something for the closing?
No, but Iveria for sure will report a similar performance in the second part of the year. I mean, they're quite recurring business and is a region is the most relevant unit and region in terms of business and profit contribution.
Thank you very much both of you for being here and especially for Jose Manuel who is not really usually present in meeting. So thank you very much, Jose Manuel. Thank you. Before closing the call today and moving to on to logistics, I'm sure that most of you have received the invitation. But tomorrow, Tuesday on the twenty seventh, we will be hosting two group meetings.
First, there will be a group in Spanish at 09:30 a. M. Central European Time followed by another group in English at 02:30 p. M. Central European Time as well.
Both meetings should be lasting around forty five minutes to an hour. Please get in touch with the IR team to confirm your attendance. You have the contact details in the presentation. Thank you for being here and being with us, and please stay safe. Thank you very Thank you again.
Bye bye.