Good afternoon, everyone, and welcome to MAPFRE's Results Presentation for the First Quarter of twenty twenty one. This is Felipe Navarro, Head of Investor Relations and Capital Markets. We have the pleasure of having here with us Fernando Mata, our CFO, who will walk us through the main figures and highlights of the quarter. Additional information can be found on our website, including the MD and A, the 2020 embedded value presentation as well as the usual spreadsheets. At the end of the presentation, we will open up the Q and A session.
You can submit questions using the Ask a Question link on the bottom of your screen. We'll try to answer all your questions as time allows. The IR team will be available afterwards to answer any pending questions. Before we start the presentation, I would like to give you an update regarding MAPFRE's response to the pandemic. We have maintained our focus on the three main priorities.
First, the health of our employees and collaborators. Second, business continuity, guaranteeing the commitment to our clients and shareholders. Third, our solvency and capital strength. As the vaccination process continues, we have initiated a return to the office, always keeping in mind the highest health standards. Currently, around 89% of our employees in Spain and 39% in The United States are working on the premises.
In Brazil, due to the negative development of the pandemic, one hundred percent of the workforce are currently working remotely. We'll 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. Hopefully, you and your families are coping well during the pandemic and staying safe and healthy. First of all, I'm pleased to present strong first quarter results that are confirming that we are on the right track to reach the guidance announced at our AGM.
Top line performance is excellent, taking into account the impact of the pandemic on the macroeconomic situation as well as the drag from currency movements. On the bottom line, motor frequency is still below pre pandemic levels and mitigating COVID related claims. Performa has been especially strong in Iberia where we are outperforming the market in key segments while maintaining best in class technical performance in Non Life. In The United States, thanks to the reorganization that started several years ago, Underlying results are strong, especially in the Northeast, although the top line is still reflecting this streamlining process. The impact of COVID in Latin America is especially relevant with a strong increase in cases and mortality with further mobility restrictions.
Furthermore, the vaccination process has been slower than expected in many countries. We've seen a higher level of life protection and health claims across the region, especially Brazil, Mexico and Peru, although in the latter, these claims were compensated by other positive effects. Brazil is still benefiting from excellent top line performance in agro and there has been a change in trend in motor with a return to growth in local currency. The life protection business is deeply affected by lower branch activity due to a semi lockdown situation, which started in mid March. Since the onset of the pandemic, strategy has managed headwinds from lower economic activity, mobility restrictions and currency movements.
This quarter, MAPFRE is again delivering recurring and stable profitability metrics with limited impacts from COVID. I would like to comment that the group recently received approval from the Spanish supervisor for use of the longevity risk internal model, bringing the Solvency II ratio to around 193% at twenty twenty year end. Finally, we're happy to announce that the final dividend will be paid on May 24, '1 month earlier than other years, which is proof of our commitment with both institutional and retail shareholders while injecting helping inject cash in the real economy. Now I'll take you through the main figures of the first quarter. At constant exchange rates, premiums are up around 3.2% with outstanding performance in Non Life up 3.5 and Life premiums up a little under 2%.
In Euros, they're down around 3% due to currency depreciation mainly the Brazilian real as well as the U. S. Dollar and the Turkish lira. The group combined ratio is in line with twenty twenty full year figures and stands at 94.3%, a six point decrease compared to the pre pandemic first quarter of twenty twenty and below the 2021 target of 95%. I would also like to highlight the significant one point reduction in the expense ratio, thanks to strict implementation of our cost contention plan.
Combined ratio for insurance units remains low at 93.8%. And MAPFRE's net results amounts to over €173,000,000 up over 36% and in line with our guidance for adjusted net income for 2021 of €700,000,000 Assets under management are up around 0.2% with the investment portfolio slightly down but compensated by growth in pension and mutual funds. Lastly, embedded value was down 0.5% to over €7,800,000,000 mainly due to the impact from currency depreciation in Latin America during the year. You can see the full disclosure of our embedded value at our website. Please turn to the next slide.
On this slide, I'll take you through the breakdown of the adjusted attributable result. First of all, due to the offsetting nature of the different COVID impacts at insurance operation, we have not considered this in the adjusted result as the final effects would be neutral. In addition, winter storms in Spain are not being considered extraordinary because they have been recurring for the last three years. Nevertheless, the Filomena snow storms in January has been one of the largest events in Spain with over 40,000 claims and a €20,000,000 net impact for the group. Regarding other nat cat claims, has been a quiet quarter fortunately with nothing to report.
As a reminder, last year, was a €54,000,000 net impact from the earthquake in Puerto Rico. Financial gains and losses are down over €28,000,000 due to a real estate gain on MAPFRE USA last year with approximately €14,000,000 net impact as well as lower gains on the actively managed portfolio as a result of our decision to accumulate gains this year in line with a prudent approach. Excluding these impacts, the adjusted net result reached €163,500,000 up over €20,000,000 Please turn to the next slide. On this slide, we show the main trends this quarter. Performance at the insurance units is remarkable with a combined ratio below 94%.
The main drivers of the improvement are technical measures implemented in previous years, mainly in Brazil and U. S. A. And lower motor frequency from the pandemic. In Iberia, premiums are up 3% with excellent performance in Non Life.
Motor premiums are up over 1% mainly due to a good contribution from renewals along with new business from Santander. The total number of vehicles insured increased by around 56,000 units year to date and up nearly 3% year on year. MAPFRE is outperforming the market in the most relevant lines showing solid growth in Health 8%, Condominium 5.5% and Homeowners 3%. The two table result is up 5%, contributing over €108,000,000 with excellent technical performance reflected in a combined ratio of around 93%. In Brazil, currency headwinds were relevant with average real exchange rates down 23%, while premiums are up 13% in local currency.
The net result is down €14,500,000 as the strong improvement in the combined ratio now at 88% was not able to compensate COVID claims, particularly in life protection and a reduction as well in financial income. Premiums in LATAM South grew 3.9% in euros, offsetting currency effects. On the other hand, premiums in LATAM North are still down mainly due to the depreciation of the Mexican peso. Local currency growth in both regions was remarkable with Colombia up 29%, Chile up 27%, Peru up nearly 11% and Mexico over 8%. Combined ratios in both regions remain at good levels with a slight deterioration in LATAM North but still at 93% due to COVID related health claims.
Performance in North America was excellent with a 15% increase in the net result and a five point reduction in the combined ratio, not at 96.6, mainly due to the earthquake in Puerto Rico that I already commented last year. The region shows remarkable stability with recurring profits after restructuring. In Eurasia, premiums 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 have to be adapted to the new business model. At MAPFRE RE, premiums are also up supported by positive pricing trends.
The combined ratio was 95% in line with previous quarters with excellent performance both in reinsurance and global risks. And in the assistance business, results are up nearly €10,000,000 and last year was strongly affected by travel cancellation claims. Volumes are down 46% as we continue with our streamlining process. Please turn to the next slide. On this slide, I would like to comment on the Life business at insurance units.
In Iberia, premiums are performing well despite the challenging market context with Life Protection down only 1% and Life Savings down 2%, but in line with market growth in both segments. As I already mentioned, bank activity in Brazil has been hurt by the pandemic situation, which has taken stall on life protection premiums, which are down 7% in local currency in the banking channel. Life savings premiums are also down in Mexico and Panama. Regarding results, performance in Iberia was stable despite lower business volumes and lower financial income. In Brazil, the result is down due to the COVID related claims, lower financial income and currency depreciation.
This slide includes disclosure of the breakdown and variations of the investment portfolio and total assets under management. Spanish sovereign debt continues to be our largest exposure, now a little over €12,000,000 and Italian debt with around €2,600,000,000 is the second largest. Both SOVIs are mainly allocated to immunized portfolios. The fall in the investment portfolio is due to higher deals 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 €22,000,000 in pension funds and €98,000,000 in investment funds at the March.
Please remember that this figure do not include Banquet and MAPFRE EBITDA portfolios. Please turn to the next slide. On the top left are the details of our Euro Area actively managed fixed income portfolios. Market value of these portfolios is around €13,000,000,000 The accounting yield is around 1.6% in loan life and 3.6% in life, well above, I mean, the market yields. Realized gains and loss serves in these portfolios were around €7,000,000 down €22,000,000 compared to the previous year.
As right now, as I mentioned, we prefer to accumulate unrealized gains in order to compensate the falling value of fixed income portfolios. On the bottom left, you can see the details of the fixed income portfolios in other main markets. Counting yields in LatAm and also in The U. S. Are still well above those in Europe.
And we have even recently seen rising rates in some markets like Brazil, for example. Please turn to the next slide. Shareholders' equity stood at €8,300,000,000 down around 3% during the year. The most relevant changes are a decrease in net unrealized gains on the available wholesale portfolio with a two seventy one million euros negative impact due to rising rates, which especially impacted the Spanish Non Life business with a €96,000,000 impact, euros 53,000,000 in North America, U. S.
And Puerto Rico and around €42,000,000 in both Brazil and LATAM South. On the other hand, the impact in the Spanish Life portfolio was very limited, 13,000,000, and it was due to the high share of Inmonite's portfolios. As you can see on the slide, unrealized gains are completely matched by shadow accounting adjustments in portfolio in Monite's portfolio. Currency convergence differences had a positive net impact of €79,000,000 during the quarter, mainly due to the 4% appreciation of the U. S.
Dollar, which offset the depreciation of emerging market currencies, especially the Brazilian real. The breakdown of currency differences and also the sensitivity analysis are shown in the table on the right. On the chart of the left, you can see the breakdown of the capital structure, which amounted to €12,600,000,000 of which over two thirds is equity. Leverage is slightly up at 23.7%, but we are comfortably at this level, which supports our current financial needs. On the right, you can see the Solvency II provisional figures for twenty twenty year end.
They are provisional because we had to report and also to be approved by the Board in mid May, but which now reflect the approval for the longevity risk internal model for the Spanish Life business. This brings the ratio to 193% comfortably within our range. And keep in mind that we estimate a 6% uplift from the Banca exit assuming no change in eligible loan funds. The final figures with a full disclosure will be released on May 20. Please turn to the next slide.
Better value was down 0.5% to over €7,800,000,000 mainly due to the impact from currency depreciation in Latin America during 2020. Embedded value attributable to the parent company is up 7%. There was a positive contribution from new business during the year, especially life protection. Furthermore, the life savings environment is still challenging due to the low interest and a lack of fiscal incentives, particularly in Spain. There was also a positive impact from the fall in risk free rates.
On the right, you can see the sensitivity analysis. This year, we have included the impact from the exit of Banquia related Life business, which will imply a reduction of €715,000,000 At this point, I would like to make a few comments on the current status of the bank assurance agreements with Banquia. As you are aware, we have communicated all developments in a timely manner. The process began September of last year with the approval of the proposed banking merger of CaixaBank and Banquia, which was the latter approved at the AGM of both entities in December. After receiving all necessary regulatory approvals, the merger was finalized on March 26, being the trigger for the change of control of Banquia.
MAPFRE informed CaixaBank that the put options stipulated by contract for MAPFRE's fifty one shareholding in Banquia MAPFRE Vida as well as termination of the agency contracts for both life and non life insurance distribution were effective March 31. The change of control also triggered the established procedures to assess the compensation for the termination of the bank insurance agreements, defined as 120% of market value of MAPFRE BIDDA's fifty one shareholding in Banquia MAPFRE BIDDA and the Non Life Insurance business, excluding the value of the insurance portfolio. Any results earned by Banquilla Mafre Vida as of April 1 will correspond to Caisse Bank. Finally, the process of appointing an independent appraiser has been initiated in April. And as we mentioned, MAPFRE will inform the market of any new developments as they arise.
Before moving on the Q and A session, I would like to make a few closing remarks. First of all, in Iberia, growth is excellent and we are outperforming the market in our main segments while maintaining strong technical margins. Our leading position and strong brand recognition is helping us to come out of this crisis even stronger than before. Underlying results are robust in The United States, especially in the Northeast Region and we continue making progress in the restructuring process. In Latin America, the pandemic and economic outlook remain challenging and we are monitoring this closely.
The impact of COVID in Latin America has been especially relevant with a strong increase in cases and mortality with further mobility restrictions. The vaccination process has been slower than expected in many countries. A reduction in COVID related losses and full economic recovery will depend on the speed of vaccination. At MAPFRE RE, results have been robust, excellent and both the Reinsurance and Global Risk segments are on the right path to more normalized profitability levels supported by tariff increases. We expect similar trends to continue in the second quarter, assuming no significant changes in the pandemic context, proving that MAPFRE is able to adapt to this constantly changing environment while delivering solid results.
Regarding our former bank insurance agreements with Banquia, right now we're focused on completing the procedures and formalities of the exit process. And finally, continue to prove our strong commitment to shareholders reflected in the dividend payment that has been advanced from June to May, which is supported by a strong financial position. Thank you. I will now hand the call over to Felipe to begin the Q and A session.
You very much, Fernando, for this thorough presentation. We start with the Q and A. The first question is coming from Andrew Sinclair from Bank of America Merrill Lynch. And it's related with Life and Health business that I have that's called COVID related claims in Brazil and LatAm. And he's asking what was the cost of fees in the first quarter.
And even Bokhov from Barclays, what was the COVID impact The COVID impact of €109,000,000 remain substantial in the first quarter twenty twenty one with most of it coming through the Life and Health business. Can you explain how long may that impact persist? And what are the key indicators on your monitoring that respect? There's also another question related with this topic, which is Paco Riquel from Altantra. Can you comment on the losses of the Life risk business in Brazil?
And what shall we expect for the coming quarters in this segment and from Brazil overall? Finally, Jonathan Denham from Morgan Stanley is asking what in LatAm offset the Life Protection COVID losses? And do you expect this positive to continue into the second quarter? So there's a lot of interest on the situation in Latin America for the COVID related losses. Fernando?
Yes. Thank you very much. Quite comprehensive series of questions. First of all, we haven't disclosed the information of COVID losses by regions. We only have included in the financial report by line of business.
But on the text, some of them, I'm going to get you to the page, but, we have put by regions. And the reason for this lack of disclosure, probably we increased information at June. But the thing is that some of the impacts are happening in some of the countries, in countries in which we're holding business with minority interest, particularly in Brazil. And since Bebe Seguridad, Banco Brasil Seguridad, is a listed company, haven't published results yet. It wouldn't be fair, I mean, just to disclose this information that they're affecting as well their accounts.
So for MAPFRE, sorry, for Brazil, the information is on page 24. And the impact of COVID-nineteen for this region, both mainly is health and life, but particularly life, is €33,600,000 Page 24. And it's for both, I mean, the Bancassurance channel and also MAPFRE channel. For LATAM North, the disclosure is on Page 26. And in that case, the impact of COVID-nineteen is €31,400,000 In case of LATAM North, it's affecting mainly Mexico and but also health, particularly in The Dominican Republic.
In that case, health business, as you well know, there is a JV with a BHD, it's a financial institution, so this is an institution regulated. So we do not consider fair, I mean, just to publish the impact. And for LATAM South, sorry, Spanish, on Page 28, in that case, the impact of COVID-nineteen is €19,500,000 In that case, it's affecting both health and life business, but we run-in life business as well with minority shareholders. So so we will see. I know that this information is quite important for you and and quite sensitive, but, perhaps, you know, as of June, we were able to give you a full disclosure by line of business and also by regions or countries.
Regarding more question, I mean, it's extremely difficult to foresee what is going to how big is going to be the impact in the following quarters. We know that Brazil I mean, we've been hit in particularly March in Brazil because of the lockdown measures and the amount of life losses. But April looks, I wouldn't say much better, but better. And we should expect, I mean, in most of the regions with different intensity and frequency, a sort of decrease in impacts. On the other hand, other line of business, particularly P and C, automobile as well, we should expect an increase, moderate increase in combined ratio and lower profitability, but moderate, I will reaffirm moderate since lockdown measures are being lifted and also there is an increase in mobility.
On the long run, for Non Life, I will say that the 95% combined ratio that was given by our Chairman at the AGM, it was just in March, we feel comfortable with this guidance. Now it's a little bit lower, but there is a seasonal impact as well, seasonal reason for this situation, particularly in automobile. And we believe that we will finish this year if there is no significant change in the pandemic below this 95%. And in the rest of regions, Spain compared to Latin America looks more promising. I mean, the pace of vaccination is increasing day by day, and, hopefully, we'll we will have a a high percentage of the population fully vaccinated by by summer.
We've seen some increases in mobility, particularly in the big cities. I mean, we are seeing traffic jams in Madrid, which is good, I mean, because means are revamping of the economy, But it's extremely difficult to foresee where we're going face in the future. I mean, I'm not sure this is the fourth or the fifth wave of the pandemic, but, fortunately, I mean, April looks better, more promising. I any any any question? I mean, we have an answer.
I don't Felipe, please help me. And
I think that I think that we completed we covered we covered the part of the questions related with the Life and Health business because the main the main interest was was on on the impact in Latin America. As you said, we are going to try to do some kind of disclosure on the June results.
Okay. I promise. I will try to do our best in order to increase our disclosure regarding COVID-nineteen by regions.
Okay. Thank you very much, Fernando. We move now to another topic, which is the Motor business. We have several questions, and I'm going to read them as I did on the previous one, so we can give a broad answer on all the topics. The first one is coming from Paco Riquel from Lantra.
And he's saying the motor premiums in Spain rose by 1.3% gross, but the net premiums earned fell by 2.8%. Can you please explain to these friends? The next one is asked by Alex Evans at Credit Suisse. Reported premium growth in Spain Motor at 1.3% versus a fall in the market of 1.8%. What is driving your outperformance here?
Have you been more competitive on price in the quarter? And Ivan Bokhmat on from Barclays saying is asking about is asking the following question. Spain Motor business increased number of insured vehicles by 2.9% year on year, suggesting that the market share again. What do you think helped you most?
Yes. Thank you. Thank you for the question, Felipe. I mean, we're quite happy, I mean, with this premium growth in this first quarter. Probably in the next quarter, we see this catch up of premiums earned.
Basically, STO, if you remember if I remember well, it was the third quarter when it was a significant drop in the average premiums because we started implementing discounts on individual basis to our best drivers in order to transfer part of this decrease in frequency to rates. And so we'll see probably in the next quarter, I mean, this catch up in premiums earns. Regarding this increase in units, frankly, I mean, this quarter has been was extraordinary in terms of both distribution channels, bank assurance. I mean, we had Banquia that came to an end at the March, and we had as well Santander that the net premiums for Santander exceeded €10,000,000 I mean, it's a big chunk of new business. And also, well, the Red Mafre performed extraordinary well during this period.
I mean, the churn ratio is quite good, even lower than in the standard periods, showing that what we mentioned that the brand recognition of MAPFRE is a must and is a plus in this moment. Regarding a number of units, it goes parallel to the increase of premiums, and it's a strong contribution from Banco Santander. And also, there is a small increase as well in fleet, no relevance. We overall, I mean, we're quite happy. We are performing the market in both premiums and units.
And we see what we mentioned what I mentioned in the past. And during these hard times, the brand of MAPFRE, I mean, it weighs a lot. And when we've seen even net promoter NPS, net promoter score, I mean, is quite good for MAPFRE. And when we ask shoppers and they say that MAPFRE is a guarantee of solvency, a good quality of services in these difficult moments.
Okay. Now we are going to move to some questions related with Banquia. Marina from JP Capital is asking, could you please elaborate more on the valuations you presented on the impact of the exit of the JV in Banquia? Don't think that we presented anything, but I mean you will have been able to answer. And there's another one related coming from Andrew Sinclair from Bank of America.
And he's asking what is the carrying value for of both the life and nonlife entities of Banquet JV that, is now set aside for this for the sale?
Yeah. Marina, as Felipe said, as as far as I know, and I'm the one you presented the numbers, and there is no any valuation published by MAPFRE regarding this potential transaction. Just it was just the other way. We mentioned in previous presentations back in September and due to the new merge presentation, I mean, it was some information regarding any potential valuation of the exit of the JVs. But MAPFRE, from our side, we haven't published any valuation.
Obviously, we are expecting, I mean, the as I mentioned, next step we're working with Caixa is just to appoint an independent appraiser that they will assess he will assess the value of the business to be transferred and also the 20% penalty, I mean, for the change of of control. Regarding other information on the carrying value, Andrew, we do not publish. I mean, we do not disclose this information. The financial report, the management discussion analysis on Page five, there is a disclosure, the main metrics for Banquilla and MAPFRE EBITDA. In that case, those are the statutory, let's say, the numbers from the statutory accounts.
And from Banquilla and MAPFRE EBITDA, its premiums, results and net equity and also balance sheet metrics for the full year 2020 and also for the first quarter. But we do not publish the carrying value of our business with Banca.
Ule? Together linked, always linked with the same topic. Andrew Sinclair from Bank of America is asking just to get the latest update on the PC side. Has distribution of MAPFRE products now ceased? And what was and what renewal experience are you seeing so far for customers previously sourced through Banque?
Well, this is, this is a path that we worked before, Andrew. This is a very interesting question. And, because we we have terminated because it wasn't our wish, but we have terminated because of the circumstances and reasons other bank assurance agreements. And, let's say that MAPFRE is very well prepared. It happened with, originally with BBVA, with our coinsurance agreement to sell, automobile and also with Kaisa and then later with, Duero.
I mean, we have a lot of power, I mean, ready to reinforce our retention procedures in order to keep the portfolio. This is a business that we paid and we will retain in our in our books. So far, I mean, it's that we are in an earlier stage and even we do not have figures, I mean, for April. But let's say that we are quite positive. And so renewals for portfolio and portfolio means non life policyholders till March 31 will protect because it's our business.
Okay. Thank you very much, Fernando. Marina from JB Capital is asking where do you see your solvency to at the end of the year? Is there any indicative impact that we should be factoring in going forward?
Thank you, Marina. We should expect the Solvency II ratio to move between, yes, my guess, between one hundred and ninety and one hundred and ninety five. The only, if you call, extraordinary or let's say, recurring on a quarterly basis is the transitional effects for provisionals. That is like a one point something, remember, 1,500,000, I guess, that we will book in the first quarter. But and also, as you know, we published as well, I mean, the exit of Banquia will have a significant impact on Solvency II.
We already know it, but only the exit or the reduction of the SCR will be like a six points uplift in the Solvency II ratio. But we have to know this before any speculation.
Okay. To sum up, there's no negative impact that we are
expecting of No negative. I mean, it will be positive in any case. But in this range between 190, one hundred and 90 five, I will highlight that this is not included, this six point uplift from Bankia.
Okay. Thank you very much, Fernando. Alexander Evans, Alex Evans from Credit Suisse is asking, so obviously, route to ratio is now back towards the middle the the middle end of your range. I mean, it's in fact is in the right in the middle. Where do view yourself an adequate level of capital at this current environment?
Is there any need to hold more because of impacts like we have seen in LATAM this quarter? We're quite comfortable in
this range and the target is not a target. It's a framework of 200% with a 25 percentage points tolerance, higher and lower and higher ends. We don't see any additional capital needs from Latin America. Even some of the countries, particularly in Colombia, for instance, in which we have a reduction on business, we're holding quite, let's say, prudent solvency ratios. And let me say as well that the which is key for us is keeping the current rate is at the at this level, at a plus.
And let's say that we fix the 200% Solvency II ratio based on maintaining, I mean, the current ratings for financial strength. And so far, let's say that we shouldn't expect any change in both as long as there is no change in the capital models of both rating agencies, I mean, Fitch and Standard and Poor's.
Okay. Thank you very much, Fernando. Now we're going to move to to MAPFRE RE, which had an outstanding quarter, I mean, going back to good profitability. The first one is coming from Paco Riquel from Alantra. And he's asking, can you update the business interruption losses at MAPFRE RE?
Yes. We published in the financial report, Paco, there is just a 4% increase in the cost in the accumulated cost of the COVID-nineteen losses. And, I mean, it's a negligible increase, and it's based on just an update of the provisions. Also, we have published as well the amount of provisions, outstanding provisions as of March. You see numbers practically there is no payment, so practically it's the same, the COVID losses from last year and also this €4,000,000 increase.
And that there is no any significant change. And there we assume that there are losses, there are claims that they're gonna last in in our balance sheet for more than months. And, you know, there are a lot of different interpretations and and probably some litigation as well, and we had to weigh some rulings as well. But so far, the good thing is that there is no any negative impact on on both. I mean, the valuation of the expectations of any negative run off.
Okay. Another question related with Maffre Rieh coming from JPG Capital from Marina. And she says that we had a solid set of results. Should you should we assume positive dynamics will continue for 2021? And even Alex Evans is asking what would be a fair run rate for yearly nat cat losses.
I mean, it's mostly related with the activity of MAPFRE RE.
Yeah. Thank you, Marina. The expression, I mean, it comes from my heart to say MAPFRE RE, finally. I mean, some of you, you mentioned me that that we need a quarter without any extraordinary, I mean, topic on MAPFRE REFINALLY. I mean, we had one, and this is the first quarter of of twenty twenty one.
And the solid performance is based on of, let's say, stricter underwriting processes. We're retaining less risk on global risk, so less exposure. And also, as you know, the market is hardening, particularly in reinsurance on those geographies that were affected by cat losses, not cat losses. I will mention, obviously, Puerto Rico, but as well The U. S.
And also Japan in the past. So let's say that unless keep our finger crossed. MAPFRE RE will keep this performance across the regions and also across line of business. And, hopefully, I mean, we have a very good return to stable profitability for this unit.
That's our hope, of course. There's a comment or a Paco Jide is asking us from Banco Sabadell. She's asking us to do some comments on the performance of the Northeast region that seems a little bit, for her, a little bit weak, but with strong deterioration in the combined ratio. What is related of is this related to one offs?
Let's say thank you. Thank you, Pat. Let's say that North America, I mean, there are different interpretation. I mean, first, on top line, on premiums, we're not satisfied. They're both effects.
I mean, first is currencies, but the second is the lack of new business. And practically, NordViz is being in a lockdown permanent situation. There is no new cash holds in the in in this territory. So let's say there are premiums is being hurt by this situation. On the combined ratio, I wouldn't say that.
I mean, we're happy. I mean, it's, let's say, it's a very good number, a very good ratio. And if you compare, I mean, with recurring combined ratios as well for the last quarter of twenty twenty, it's quite similar. And the only unit in which there is a difference and the seasonality explanation as well is Brazil, in which there is a slight increase in combined ratio, but the remaining units is quite similar. The first quarter is quite similar to the fourth and the third, and we should expect a similar trend for the second, at least, quarter of twenty twenty one.
I mentioned as well and Felipe said that the first quarter twenty twenty should consider as a peak COVID quarter. So let's say the comparison is now apples to apples, say, when we put the 2021 numbers and compared with the previous quarter.
Okay. We have a question coming from Alex Evans of Credit Suisse. Have been any remittances back to the group in the quarter?
You mean dividends from subsidiaries?
Coming from the dividend flow from subsidiaries coming back to the to the main company, I think that there was no declaration of main dividends in the first quarter, but the second quarter is acting as expected. So probably most part of not in the totality, the dividend that we are announcing and we're going to pay against 2020 financial year is going to be paid with dividend coming naturally from the rest of the group. See, most
of the dividend will be paid in April this year and this month, sorry. And also, it's important to mention as well we hedge U. S. Dollar for the dividends coming from The U. S, and we book a good profit as well.
And well, let's say, we offset part of the loss.
We stabilize the profit from The U. S. And the change from The U. S. To the euro.
Marina from JP Capital, she's asking, could you update us on the contract with Pemex in Mexico? How is it going? Is it been renewed?
Yes. This is a two year policy. Thank you, Marina. Spires in June, if I remember well. It will be the fourth time that we are attending if we are, I guess, that the the I guess, we will participate in the tender.
And and also, we will be more than honored if finally, I mean, we are the company that cover damages from Pemex. I mean, it's a quite it will be the four renewal. I mean, this is very important for MAPFRE. It give us a lot of confidence and also, let's say I mean, it's a good flagship policy, I mean, for MAPFRE in LATAM.
Okay. Good. There's a question coming from Jonathan Denham from Morgan Stanley. And he's asking about Linea Director. I mean, he's asking that if the listing of the of the company will change the competitive environment in Spain.
I I I don't expect, Jonathan, any gain any change in the in the, particularly in the motor line business in Spain, I mean, is very good. I mean, to have rather than two, three entities listed in the Spanish stock market, we're happy. I mean, having another peer, you know, being public and also gives a lot of transparency as well to the market. But I don't see any change in the strategy coming from Linea Diretta in that way.
Thank you very much, Fernando. We have now a question coming from Alex Evans of Credit Suisse, and he's related with the Assistencia business. And, Assistencia, is it possible to give some details on the losses as a lot of companies are now reporting positive travel results from the lower rate? There is Not a lower travel, sorry.
Sorry. Yes, there is a disclosure on the page I'm going through, Page 35. We disclose by losses by regions and also by coverage. As you see you could see, I mean, out of this €2,000,000 net loss for the entire unit, 5,400,000.0 are coming from travel insurance. And I can say that most of them, 3,700,000.0 is in the chart, is coming from The U.
K. And also France and Africa. We practically, I mean, closed this business, so most of this is coming from The U.
Okay. Thank you very much, Fernando. Ivan from Barclays is asking that saying that the interim report also talks about other disposals, annuity portfolio in Chile, Industrial Re, Rastriatro and Pembinem, how substantial could these transactions be if completed to you on 2021 result?
Yes. Thank you, Ivan. There minor disposals. Regarding MAPFRE but I can give you more information regarding this. Regarding Industrial Reef, it's a small subsidiary, practically with no activities, like 35, if I remember well, total assets.
So if there is a profit that the we expect a profit, but it will be extremely small. Regarding Rastriator and Preminen, I mean, the two subsidiaries with business. With Admiral, let's say that, in that case, we should expect a higher gain, and and probably we can we can get it, I mean, one of these days, I mean, anytime soon since we've been told by Admiral that it's practically come to a to an end, I mean, discussions. So probably we'll see one of these days. It will be a little bit higher probably in the two digit area.
Regarding other in Chile, Chile is the project that I mean, probably is one of the project that is taking longer time. I mean, for MAPFRE M and A department, I guess, it's more than two years. In that case, it's like €115,000,000 assets to be transferred to the potential buyer. And in that case, the result will be probably, I mean, since this is some unmatched annuities and we don't like to have to hold it in our balance sheet. Probably, we will report a small loss, but one single digit loss in any case.
But all in all, I mean, those small transaction, we want to, let's say, improve our capital allocation. Those are nonstrategic activities, and we will keep on this streamlining processes in order to have allocation. The one that will be important is what we will focus on is the Pantia exit, obviously.
Thank you very much, Fernando. Now we have a number of questions related with the impact of the COVID in the frequency motor and the motor activities in the combined ratio. First one is coming from Ivan from Barclays and he's asking motor combined ratio across the business has improved by 2.4 percentage points in first quarter twenty twenty one year on year, which appears reasonably low to the for the substantial drop in driving globally, including Spain and The U. S. As the world comes back to from the lockdown, what run rate do you expect for the remainder of the year?
Andrew Sinclair from Bank of America, he's asking, can you provide an update on the latest trends for motor frequency benefits? How much do you allow it for your €700,000,000 of net income guidance for the year? Marina Massuti from JB Capital, could you please touch more on the claim ratios? Do you expect claim ratios in Non Life to normalize? Do you expect the speed to be different across regions?
How do you see the combined ratio for Motor evolving during the second half twenty twenty? And Alex Evans from Credit Suisse, how would you categorize the net impact you have seen from lower mobility versus COVID losses in the quarter?
A lot of questions. And believe me, even in the best moment of my life, I will be able to answer these questions. I mean, as I mentioned at the beginning of the Q and A, let's say that the increase of mobility and economic recovery will depend of the pace of vaccination, basically, across the regions. What we see is a sort of asymmetric trends, different countries, hopefully. I mean, particularly in The US, we've seen a nice bounce in in recovery in the economy.
And and also we'll see as well in Spain, but in other countries, extremely difficult. What I can say at the moment is that the with the information we have and, we stick to the 95% combined ratio for the non life business, for the non life lines that we published at at the AGM. But what we should expect is a sort of variation, fluctuation in trends across the regions and also across the line of business. And one one quarter ago, I mean, nobody in MAPFRE expected a dramatic increase in life protection combined ratio as the one we published at this quarter. On the other hand, I mean, combined ratio on other nonlife line of business is performing quite well because of the lack of economy.
Everybody wants to have a full recovery, and, but we're gonna see quarter by quarter is a is a sort of catch up of activity and also an increase of mobility. But so far, the longest scenario I can give you is just the 95% combined ratio for this year. Sorry about that.
Okay. Thank you very much, Fernando. It's done perfectly well. There is a question related to the emerging markets. Maruna Massutti from JP Capital is asking how do you see the outlook evolving of the emerging markets, which have been heavily impacted by the pandemic?
Let's say that the more promising that the one quarter ago. And even today, I mean, there is a nice rebound as well on the or this this month this week by Brazilian Real that it was the one that hit our our top line, basically, top line, our net equity during this first quarter. But but the male the most relevant and as to as you know, is the the Mexican peso, Colombian peso, Peruvian peso, and and above them, the Brazilian real and the US dollar. As long as the US dollar remains in a range between a hundred and 20, a hundred and 22, we're fine. But, and also as you see as well in the in the I mean, they're not emerging countries, but this is the one that moves really the equity base, for MAPFRE.
And, and the real between this range of six point four and six point seven, we find as well. Other, emerging countries' currencies such as Turkish lira doesn't have a significant event a significant effect. And, because, after a year by year depreciation, the base for devaluation or depreciation is much lower.
We have a question related on the outlook. It's coming from Paco Rito Riquel of from Alantra and Alex Evans from Credit Suisse. They're asking on the same topic. If we annualize the first quarter net profit, will you you will fall short of the €700,000,000 of net profit target for 2021? And the Banca joint venture will be deconsolidated from second quarter.
Do you think that the target is challenging? And if not, what levels do you see to improve profits in the coming quarters?
Thank you, Paco, Alex. I said that we're happy with, let's say, with the current result for this quarter. As extraordinary, there is only 10,000,000 capital gains, and it was the normal peaks rotation, frankly. And we got plenty of leeway to realize extraordinary. We didn't do it, and we're not gonna do it.
But let's say that the why we're happy and that we stick to the 700 net equity guidance for the entire year. Usually, the first quarter, I mean, is lower than average profit contribution quarter. As I mentioned, Gloria, last year and this year, Filomena, we didn't consider extraordinary. We we I'm sure we know how we're not gonna have the same storm over Madrid in the second quarter, not in the third quarter. And, also, the third quarter usually is by far and historically is the the best quarter in terms of a profit contribution for MAPFRE.
So I I don't think it would be fair just to multiply by four the recurring profit for the first quarter. So let's say that so far, and if there is nothing extraordinary, mainly from COVID, and we will stick to we stick to the 700,000,000 recurring net profit for the entire year. Regarding Banquia, you asked for the contribution. Was it smaller than last year? I mean, the net contribution and let's say that there was this profit from Banquia was already included in the €700,000,000 net income as a guidance.
Okay.
Thank you very much, Fernando. That clarifies very much the situation. Ivan from Barclays is asking, when looking at the gross PC premiums, which were down 2.6% year on year in first quarter twenty twenty one, how much of that is lower exposure and how much is lower price? Now that the economics are recovering and some regions are seeing inflationary pressure, how do you think about your ability to increase pricing?
Sigir and Renwick, because I don't have numbers, I mean, for each region, not for this, for any country, Ivan. But let's say that we've seen an increase on number of risks, as I mentioned, particularly in Spain because of our brand recognition, also as well in some countries in Latin America. But on the other hand, there is a decrease in premiums and also in units in The U. S. And also in Italy because we decided to quit this car dealers' distribution channel.
On average premium, let's say that we've seen a reduction, which is lower month by month on Spain and was based on this strong effort to protect our portfolio. And in the remaining regions, particularly in The U. S, I mean, there is no changes in the tariff. So let's say there is no any change in the average premium. And in the rest of countries, I don't see I don't remember any relevance.
So let's say most of the growth is coming from for an increase on risk number.
Okay. Thank you very much. We have a question now related with the M and A activity coming from Pafo Gera of Banco Sabadell. This is related with Italy activity. There have been a lot of M and A operations around Aviva and Allianz, Bank Assurance, etcetera.
Could MAPFRE consider at some point this business as noncore? She's referring
to Italy. Thank you for the question. But regarding Italy, I mean, focus on digital business. When we decided to quit the car dealerships is because we want to concentrate because it was a loss making channel, obviously. First, it was an 8020 decision, and and we decided to focus on the digital channel.
Obviously, we're selling as well the digital business with white brands as well in other countries, particularly in Germany, when we have agreements with some carmakers, and probably we can do as well. I mean, we will be quite active in looking for digital business growth in both countries. But I don't see, let's say, any standard bank assurance agreement because we have a digital business just in Italy.
And no disposal of
the No disposal, no disposal, absolutely.
Okay. Thank you, Laurent. It seems that there are no more questions. So we come to the end of the meeting. Thank you very much.
Thank you, Fernando. Before we close the call today and moving on to logistics, next Wednesday, the fifth, We will be hosting two group meetings during the afternoon. First, there will be a group in Spanish at 04:00 Madrid time followed by another group in English at quarter past five Madrid time. Both meetings would last around forty five minutes. And as we published an updated provisional Solvency II figures applying the partial internal model as well as our 2020 embedded value disclosure.
These meetings will be a good opportunity for any questions you may have on these on those topics. Please get in touch with our Investor Relations teams to confirm your attendance. You have the contact details in presentation. And that's it. Thank you very much for your time, and, please stay safe.
Yeah. Thank you.
Thank you. Thank you, everybody, for your presence. And as, Felipe said, stay safe and healthy. Bye bye.