Welcome to the UNIQA Group Results for the first to third quarter 2024 conference call. My name is Alan, and I'll be your coordinator for today's event. Please note this call is being recorded, and for the duration, your lines will be on listen only. However, you will have the opportunity to ask questions at the end. This can be done by pressing star one on your telephone keypad. If you require assistance at any time, please press star zero, and you'll be connected to an operator. I'll now hand you over to your host, Andreas Brandstetter, to begin today's conference. Thank you.
Thank you. Hello and welcome to our call on the first three quarters results 2024. Well, a couple of weeks ago, we would have said it's a quite unspectacular result of those first nine months because we saw a very linear and positive development of our business in our two core markets. But then, as you know, we had to digest the impact of Boris, the flooding in six of our countries, which of course left some impact. But let's walk through the P&L line by line. So first, very positive, we keep the constant growth in both of our markets, CEE and Austria, plus in our business segments, retail, corporate, and bank, plus in all three broader groups. This means P&C, health, and life in the same speed, basically, as we told you about the first quarter and the second quarter.
This means in concrete that in Austria, altogether, we have been growing by more than 9% on base of the gross written premium. In Austria, by roughly more than 4.5%, and in the international segment, nearly 14%. So this means sales is fine. We have definitely no issue to sell our products at reasonable and profitable prices for us. If you switch into the new IFRS 9/17 regime, you see that the insurance revenue corresponding to this was growing by also roughly 10% compared to the first three quarters 2023. This is the first very positive element. Second topic, I mentioned Boris. So the P&C combined ratio moved up to 93.3%, which means it's worse than the first three quarters 2023. Just the pure impact from Boris alone, and Kurt, our CFO and COO, will come back to it in a couple of minutes.
Just the pure impact from Boris alone on the gross base amounted or went up to 5.6 percentage points, which is quite a lot. Good thing is, and also this will be taken by Kurt out afterwards, that the relief coming from the external reinsurance was quite significant in those first nine months. Everything around Boris, frankly spoken, net basis is already digested in this result of the first three quarters. Adding a very positive development from the net investment income, which improved quite significantly around EUR 170 million compared to the prior year, and accompanied by average net new investment yield, which decreased just slightly down to 4.4%. This led to a very good development as far as the profit before tax is concerned, which stayed stable or went up just by 1% and amounted to EUR 340 million compared to EUR 336 million from the year 2023.
Why we are satisfied with this? Because we see how robust our business model is in both of our markets. We see that we have been able to digest a nat cat such as Storm Boris because the remaining quality of the portfolio of our P&C portfolio was so robust and so stable that we easily managed to digest such an impact. It's quite relevant because in this part of the world, we have to deal with such nat cat events, of course, also in the upcoming years. The profit after tax increased by EUR 16 million, up to EUR 264 million. And at the end, before I hand over to Kurt, let me make one comment about our country portfolio. You might have read today that we decided yesterday to decrease the number of countries in which we are present in CEE.
You know that till the day before yesterday, we have been present in 17 countries after we left Russia successfully in September this year. Now, we had a look in a very careful way on our sources of profits. We looked very carefully which countries in which size need which span of management attention. And so we decided yesterday finally to step out from Albania, North Macedonia, and Kosovo, not because those countries have not been successful on country. They always contributed profitable results to our group results. But frankly spoken, even if you take all of them three together, they just represented something like 1.5% of the total company's top line. So if we had to balance about our management resources, if we thought about, okay, which countries will be more important in future, then it's very clear.
It's, of course, Poland, it's Czech Republic, it's Slovakia, plus all those countries whom we really brought together under one regime. We call it Southern and Eastern Europe Six, meaning all the Balkan countries, but however, we said, let's leave those three countries and send it back to basically the founder and our co-investor who currently has a local businessman who currently still owns 10% of the company. Meaning also that with those 14 countries in which UNIQA is present now, after the sale, we are happy, so this is also the base for the new strategy program, which we're going to present to you on December 11th in London, and we will not exit any other further markets. Having said so, this was a snapshot on the first nine months, and Kurt, I may hand over to you.
Thank you very much, and welcome also from my side. I'm on page six of the presentation talking about Boris in more detail. Besides the impact on the combined ratio across the net, which you can see here, the information to give is that the gross impact was more half-half Austria and International business. So in total, from the EUR 184 million, EUR 90 million belongs to Austria, EUR 94 million belongs to the International business. Within the International business, Czech Republic was most hit, and Poland, the second most hit from Boris in Q3, and this will also stay for the year-end. Keyword year-end, we expect that on a maximum this gross amount goes up by the year-end from EUR 184 million to EUR 230 million, which on a net basis would then have an impact of plus EUR 4 million, which is concerned the reinstatement premium from the reinsurance contract.
The maximum amount of impact we expect to fall by EUR 86 million by year-end 2024. For the next year, more generally, we expect the winding up of the complete Boris loss within the next 12-18 months. That means the payments, that means also those claims which are not clear. That means by the end of 2025 maximum that we can say if we have a gain or a loss out of the reserves. So far, no impact for 2025 we expect at the moment. Page seven, the key financial indicators following the development of the profit. One thing that jumps to the eye is the return on equity, which goes down by - 4.4 percentage points. This has to do with changes in the equity. It's on the one hand, interest rate and the impact on the equity.
We had then changes in adaptation in the year 2023. So this to be clear by reading the ROE, it's 22% on a very stable, still high position on 262 percentage points. CSM, page number eight, I think two things are worth mentioning here. UNIQA has a growing CSM, which comes from two elements. A, from a very profitable business in the health segment, especially coming from Austria. And on the other hand, the CSM generally is growing because of the strong performance on our financial result, which then, especially in health and in life business, goes then directly to the CSM, and this then in that case allocated over the lifetime of the contracts generally or the USDCs. The reason why the solvency ratio went down a little bit, but no worry from an operative perspective.
This has the impact on the one hand from higher income performance and on the other hand from the good new business that we write in the health business. The release is generally the same, 247-245 in the last year, so in that case, a very sustainable development on the release. Talking about growth on page number nine, a little bit deep dive property and casualty. Austria grows by around 5% in P&C, internationally more than 14%. Health, Austria 10%, International business, I think we can in that case neglect. Life business completely different, Austria - 3.7, International business + 11%. This is also the reason why the life profitability is that high. This is mainly driven by the International business. Costs, page 10, are under control. Nothing worth mentioning in that case, so we stick to our programs. We have no overshoots within our project.
Therefore, I can directly jump on page 11, which is the P&C result. On the first glance, it looks like that the result is driven by the financial result. But just have in mind that the technical result is impacted by EUR 82 million from Storm Boris. And that's, I think, in relation like by like a quite tremendous effort, especially coming from the basic claims and from the solid development on our portfolio. Then looking on the life business, page number 12, I mentioned the development on the International business that drives the growth in the insurance revenue. CSM stable, so nothing special to report on that. The same for the health business, which I also explained in my introduction. That brings me to the page number 14, the so-called new values on the growth.
The contractual service margin in the new business is constantly high at around 10%, 9.9% in total, which is for us quite good and important. This means also that we expect the contractual service new business value also by the end of the year higher than 2023. We have a stepwise increase of roughly EUR 55 million per quarter. This is, you can see on the right-hand side from this graph. Adding EUR 55 million to nine months, we will end up around EUR 230 million roughly by the end of the year, which is then also positively impacting the CSM. Core markets and overview, page number 15. I think this has been reflecting what I said in the beginning. The 104.5% combined ratio in Czech/ Slovakia is impacted by the gross effects of Boris, around EUR 53 million, sorry, which is in that case to report.
Same visible in Poland, a jump from 86% to 90% coming from a EUR 40 million impact from Boris, and Austria jumping from 99% to 93.3% with the impact of around EUR 90 million on a gross basis. So this is an add-on, the impacts on the combined ratios on Boris in the main countries that are affected. Still, I can report that the basic claim or the additional claims development is quite good here. We are running a loss ratio of less than 53% in nine months. In the end, a look on the investment result, which is on the one hand driven by stable development on the ECL development. So we see here no big movements, which is okay.
For you, the development on the 10-year Austrian government bond curve, which is going down from 3.0 to 2.63 by the end of nine months, which had a little bit of impact in some economic perspective, but with good unrealized gains, plus the contribution of STRABAG, plus also some realizations we did, especially before the U.S. elections. We managed a financial result, which is EUR 182 million, and here also to report no changes in our strategic asset allocation. I would like to stop here my presentation and would now open up the conference call for the Q&As before we then come in the end to our outlook before we close the meeting.
Thank you. If you'd like to ask a question or make a contribution on today's call, please press star one on your telephone keypad. To withdraw your question, please press star two. You'll be advised when to ask your question. We will take our first question from August Marčan. UBS, your line is open. Please go ahead.
Hi, thanks for taking my questions. I've got two or three topics. First one on reinsurance. Have you already had your talks with your reinsurance about 2025 renewals? How does the pricing and terms look on that? And also, did you use the automatic reinstatements in the past, and did you stop using them, or you never used that tool? Then the second one would be on the CSM. It looks to me that in the three Q standalone, there was about EUR 120 million of negative variances. What is driving that? And then finally, on P&C, how has the claim environment and weather been in 4 Q so far? Thank you.
Thank you. Please understand that for financial compliance reasons, I cannot give you a target answer on the reinsurance negotiations for the year 2025. But what I can state so far is that we are below that what we expected in our budget. So no impact for 2025 regarding our internal outlook, which we'll then present on the Capital Markets Day in London. An add-on question to that was that you said if you use automatic reinstatements, yes, we do. So we have an automatic reinstatement contract, which means that we have coverage all of the year, no matter when the contract goes due. The next question I wrote down is the P&C development so far on weather-related claims in the fourth quarter. I can tell you that, knock on wood, nothing so far to report out on a negative basis. Austria is stable. Our core markets are stable.
So, no impact neither from storm nor from rain. And Spain, which was hit heavily the last weeks, is UNIQA not present. Your CSM questions, we did not get quite okay. Can you repeat it again, please?
Yeah, sure. So on the 3 Q standalone, if we look at group CSM, it seems to be about EUR 120 million of negative variances. I was just wondering what's driving that.
So honestly speaking, at the moment, I cannot quite see these numbers. So can we agree that you get the direct feedback from our team that we can then make a deep dive with you? So honestly speaking, we do not see this, but maybe we have a different view on that. We'll come up to you afterwards directly on a written basis. Okay?
Sure. Thank you.
We will take our next question from Rok Stibrič , Raiffeisen Bank International. Your line is open. Please go ahead.
Hi, good afternoon, and thank you for the presentation. I would just have two questions. And the first one is on profitability, technical profitability in life segment. Could you please elaborate a bit on what is driving the claims expenses? And my second question is on solvency/M&A topics. Following your ad hoc release yesterday, could we expect UNIQA back in the M&A game with some acquisitions going forward, or would you rather use this strong solvency position for other purposes? Thank you.
Thank you, Rok. I'll start with the first question so the profit or the claims development in the life business, what you see is coming mainly from high claims payment or payments that we have to do because of high maturing portfolio, which is coming especially from Bank business 10, 15 years ago, this is at the moment also the reason why we are not growing in the life business so our new business is much more or less than the new business. Therefore, the - 3.7%, and this pays also then in because we have high payouts out of maturing portfolio. Second question about M&A, Andreas will give you another one.
Yeah, it's a good question, Rok. Thank you for asking this. You know it's a tricky one because we have been hunting this AXA acquisition, which we then conducted, I think, in Q3 2020 for a couple of years. So now, in the industry, you need patience. And yes, we want to keep the buffer for being ready for potential acquisitions in our market, right? So if then in our core markets where we are now, so please don't expect us to enter new markets. What options do we have there? Basically two. First, to hunt classical insurance companies such as ours, like P&C, life health insurance companies being present in retail and corporate business. So we call it like classical insurance companies. The other options which we are always checking is what about vertical integration? We see consolidation in broker business.
We see some digital attackers coming around, which makes it maybe more easy to basically cross existing national borders. So those options we do have. Here is the but. The but is we're just looking and then for M&A opportunity with a relevant size. Because if you had the chance to compare our figures on two markets, you saw that in the first three quarters this year in our international segment, we have been growing by more than EUR 300 million, EUR 300 million on the gross written premium. And now, as I told you a couple of minutes ago, Andreas and me that we are divesting in Albania and we lose our EUR 100 million, okay? In the same way or in the same time, we win within one year, EUR 300 million. Having said so, we would not go for a kind of mini Mickey Mouse acquisition.
So it would be if something which is really meaningful and which improves in a significant way our market position, especially in the big countries. Do we currently see such an option? Not really. But of course, we are always constantly checking the market. We think our time will come. As I said before, at AXA, it might take some time, but we are positive that we can increase our positions on the markets also via M&A.
Thank you very much. Yes, I like the answers. Thank you very much.
Okay.
We will take our next question from Antoine Bouchetoux, Alpha Value. Y our line is open. Please go ahead.
Yes. Hi, good afternoon. Two questions for me, please. My first question would be on P&C. The International businesses recorded a strong 14% increase in P&C insurance revenues in the first nine months of the year. And I was wondering if you could give us an indication on the split between volume and prices. And maybe looking ahead, how you see prices evolving in full year 2025. Do you think that maybe the recent events will have an impact on pricing trends next year? And my second question is on health. I was wondering if you could give us more details on the drivers of insurance service expenses so far this year, and maybe give us an indication of what we could expect for the fourth quarter and maybe next year also. Thank you.
Okay. Let's start with the first question. So pricing generally is in the International business at the moment, I would say twofold. We have, as UNIQA, a USP in Poland, especially in the motor business. We have here, I think, a very data-driven and very flexible and variable pricing tool, which allows us in all segments, no matter if online, if this is sales broker, if this is sales via our agents, to adapt the prices also according to the customer need. This is why the reason we have a great profitability in this business. So keep the loss ratio low. Also, we run the other business on a combined ratio below 90%. The second thing is in the other countries, especially in the CEE countries, which we define as Czech Republic, Slovakia, Hungary, and the rest in that case from Poland, differently.
Hungary is coming back with a good development on growth. I think this new regime with the tax is okay and accepted. It means that customers also then have to carry on a part of the tax. Differently in Czech Republic at the moment, so motor business, especially in the leasing and in Motor Casco, is coming under pressure. This has to do a little bit with inflation. This has to do also with market competition. So here, I would say we have the greatest development and pressure for the rest of the year and also for the year 2025. And generally, my answer would also lead to we see no worries in the year 2025. So worries have no impact to us. And the pricing segment and the markets relating to them, what I explained to you, we expect also to keep in the year 2025.
You ask also for the growth and what is coming from volume and what is coming from prices. The answer is not that easy because it hangs together because pricing and volume is something, especially in the International business, where you have one year contract is one decision. But if you say how many people or how many customers out of our around 15 million customers in the International business are prolonging year by year, I would say one-third is coming from customers that stay at UNIQA and constantly pay the prices. Two-thirds is coming from improvement in the pricing. The other question to the drivers that you ask on the insurance expense, which are increasing from EUR 819 million to EUR 929 million, this is because of the good growth. If I remember, I stated 10% growth in Austria, that means people are also then taking care for them.
That means hospitals, that means surgeries, that means also especially for stationary and for outpatient tariffs, we pay their needs, let's call it like that, and if you look on the profitability, that's good because reflecting what we increased the new business on CSM, which gives us then also on the long-term perspective a sustainable release of the CSM, we expect in Q4 the same proportionally as in the first nine months.
Okay. Thank you very much.
Once again, if you'd like to ask a question, please press star one on your telephone keypad now. We'll take our next question from Thomas Unger, Erste Group. Your line is open. Please go ahead.
Yes. Hello. Good afternoon. Thank you also for taking my question. I have several. I would like to start with the disposal that you announced yesterday in the Western Balkans, and if you could specify the financial impact that you'll see upon closing in 2025, and then, remaining with the geographical footprint and your portfolio, in the beginning of the introductory speech, you didn't mention, or I might have missed it, but you didn't mention Hungary as one of your core countries. How do you view it strategically? What do you expect for 2025, and if you could also talk about the sector taxes for the coming year, and then I'd like to move on to the outlook 2024, but maybe also something that you could give us for 2025. What is your expectations for the revenue dynamics? Do you think this is what you saw thus far in 2024?
Is that sustainable next year? And also, how do you view costs, cost ratio, and efficiency evolving? And then maybe specifically on the 2024 outlook from your press release, you mentioned that there's pressure on earnings from rising insurance service expenses in property as well as in health business and costs. If you could talk about this, I'd really appreciate it. Thank you.
Thank you, Thomas. We'll start with the financial impact of the disposal of the so-called out-of-core countries. We will show these countries by the end of the year in the discontinued operations. The positive effect we expect there is around EUR 12 million- EUR 13 million on an IFRS basis coming from the equity contribution plus the recurring result from the Q4. That means by beginning of 2025, done. Also, the reinsurance contracts between these countries and UNIQA Re are closed by the end of the year. Second thing is a little bit of outlook Andreas will then tackle in the end of this call. For 2025, Thomas, let me give you a little bit of time. You know that we are organizing the Capital Markets Day in London, as Andreas already stated in December.
And here, we will give you the full guidance for 2025 to 2028, the new strategy of UNIQA with all details, also with the colleagues from the International business, Austria, and from the personal lines. So please apologize that we do not do this upfront. Just one sentence. We do not expect big changes in the economic performance of UNIQA, but more to come then in London. About Hungary.
Yeah. I think we can do it together, right? So Thomas, about Hungary, Kurt and me touched on that briefly. The country portfolio, we want to be present and frankly spoken. It's a question where do we earn our cost of capital, how much management attention do we think certain countries should deserve, and stuff like this, and what kind of growth potential will certain countries have? And frankly spoken, we talked very carefully about Hungary because we saw some political risks there. Kurt touched briefly before the topic of tax. And so we didn't understand if there are kind of politics around which will further boost any kind of national tendencies there in Budapest under the Orbán regime. So as mentioned by Kurt, this changed. So we made a clear decision staying in Hungary, restarting the business, looking for profitable growth.
And we're very confident that Hungary will deliver significant value means on the top line, but also bottom line to our overall exposure and profit development in CEE. So once again, of course, the largest country as far as profitability are concerned in Eastern Europe will remain by far Poland, followed then by Czech Republic and Slovakia, clear. But we will stay in Hungary. We will stay in Ukraine. And as mentioned before, the remaining countries on the Balkans, we already basically brought together a couple of years ago, I think two years ago, under one common umbrella. As I mentioned, we call it SEE6, having the big idea in mind, how can we bring down admin costs there? How can we steer the region consisting out of many small markets in a better way?
But this will be in a nutshell and just summarizing, adding and underlining what Kurt said before the rest. And please, I hope it's okay for you, the rest to follow then in the Capital Markets Day on December 11th in London. Is this okay for you, Thomas, for the moment?
Yes. Yes. Thank you very much.
Thank you. Turning to the colleague from UBS who started in the beginning with this question. The open topic was the negative variance Q3 standalone to Q2, so finally, we found what you meant. I may answer the question in terms of the main impact comes from the interest shift from Q2 to Q3, and this led to these negative variances on the EUR 120 million you pointed out.
As a final reminder, if you'd like to ask a question, please press star one on your telephone keypad now. We'll pause for a quick moment to allow everyone an opportunity to signal for questions. There are no further questions on the line, so I'll now hand you back to your host for closing remarks.
Thank you so much. The closing remarks you find on slide 19, it's about the outlook, which was addressed before by Kurt, so based on a very solid core business with a very high ROE, very high underwriting discipline in our two core markets, CEE and Austria, which proved to be robust and resilient even in difficult times and challenging times of natural catastrophes, we remain positive. We remain positive, not only as Kurt mentioned for the full year 2024, which we expect to be in line as far as profitability is concerned with the previous year, so with 2023, but we remain also positive for the year 2025 and further on, and about all those plans in detail, we are very happy and proud to inform you on December 11th in London. I hope you have time to come by. It would be a big pleasure.
Thank you so much. Thank you for your attention. Have a good day and a good week. Bye-bye.
Thank you for joining today's call. You may now disconnect.