Good day, and welcome to UNIQA Group results for the first to third quarter 2023. Today's call is being recorded. At this time, I'll now turn the call over to Kurt Svoboda. Please go ahead, sir.
Thank you, and welcome to all of you for UNIQA's result presentation for Q3 2023. I'm starting on page 5 with the result overview of UNIQA after nine months, ending up with an earnings before tax by EUR 305 million. Starting with a very good development on insurance revenue, which are more or less on the same level as the gross written premium, but I will come to that later. 9.3% growth in the first nine months. Of that, a very stable development of the CSM release, coming predominantly from life and from health, with a EUR 238 million impact. Impact on the technical result have been the weather-related claims.
On group level, after nine months, we record here around EUR 150 million in Austria, on a stand-alone basis, around roughly EUR 130 million, especially in August and September. Carinthia, Styria, and Upper Austria have been the regions that have been hit with mostly. On the other hand, we have a very good result on the investment income, which is the so-called result coming from the current income of EUR 441 million, ending up on an financial result. That means that the deduction of unit- linked, index-linked of 111 million, in comparison to a minus in the year 2022. This came from the interest shift, from a strong interest shift in 2022.
With this, we end up on a EUR 305 million EBT. Last information that, the operation in Russia, the first time we present this after in the profit of discontinued operations, with EUR -19 million coming from a running result of EUR -4 million, and the rest is the equivalent of the consolidation of the company. With this, we end up also on a combined ratio of gross 92%. Impact of the weather-related claim is the main driver, on the other hand, with a good new investment yield of 4.5% in the first nine months, 2023. Status of sale of the Russian business, on page six.
I think all of that, you know, what is for us new is that, as I told you, we present this as a line of discontinued operations, and so far, we are on good track with regard to Russia, that is at least in the first quarter 2024 is then the done deal. And we can, in that case, also make the last consolidation steps, and the effect on UNIQA will be around -EUR 92 million expected for the whole year. Group CSM, page number seven. The assumption changes that jump to the average EUR 780 million. Three drivers on that. First, increased interest rates.
Second, the premium adjustments in the health business led to a profitability that is growing and less lapse risk that we count and see also in the profitable business in the health side, leads to these assumption changes and to a very favorable sustainability ratio on the health side. That means the correlation between CSM release and new business by 1.1 in the health business and 0.4 in the life business. The solvency ratio on the next page is stable at 244%. We expect a little bit an increase by the year-end. The same for the return on equity, close to 14% here. Also, we expect a stable position and slightly better by the year-end, but I come to that in the end.
P&C and health business remain very strong on the growth side, page number nine. Besides the numbers you see here, I give you also the recurring, the referring, gross written premium growth. So in the P&C side, 14.4 is the growth on gross written premium. On the health side, 8.2, and on the life side, -1.5. So, UNIQA has a very favorable growth in the first nine months and also a very profitable growth in that respect. In all of our markets, that means Austria and international-wise, the business, the life business in Austria has high outflows, and with this, so we cannot compensate. This is the new business. Page number 11, cost ratio, nothing new on that. We are a little bit better than planned in relation to the previous years.
Of course, inflation drives the increase, and also investments in our core IT system. That brings me to the three segments. First, on P&C, on page 11. Despite the numbers and description, again, here, the impact of the weather-related claims in Austria by EUR 130 and, on group level, EUR 150. You see the impact on the combined ratio by 3.1% only up from the Austrian business. The total amount of EUR 150 million impacts UNIQA's combined ratio by 5.2% exactly. And we have a very little reinsurance coverage on that, because all these claims are in the range between EUR 3,000-EUR 10,000 each, and this is far below the reinsurance net retention. Page 12, the life business.
Here we see, on the one hand, the good development on the net investment income on the one hand, a part of it goes to the P&L on the financial result. Stable position on the CSM. We release more than we grow, and the growth comes, predominantly from Poland, from Czech Republic, and Slovakia, with a significant amount of EUR 21 million, including the focus on the unit-linked products. In Austria, again, the high outflows cannot be compensated, and that's the reason why 14.2% is only from Austria in that respect. Differently than in health, on the next page, here we have a very strong growth, also profitable growth.
We see no impact from inflation on the sales side, also no impacts on the lapse ratio. What we see is that insurance service expenses are increasing. This comes from COVID effects that are now compensated. That means more of our clients get use of the stations and on our hospitals, and this leads to more payments in that respect. Page 14, about the new business, in relation to new business value, 4.3 percentage points, for all of you is the new personal lines new business margin, which is also in expectations of that what we see in the market. EUR 97 million is the new business value in that respect, so this is more or less in line with CSM.
Leading to the last information, it's about the investment result. We have, on the one hand, a very stable development of the expected credit loss provisions, so around EUR 160 million, very stable. We have, in that respect, also a stable position on the other comprehensive income, close to EUR 2 billion for the whole portfolio. Out of that, bonds have a rather stable position with around EUR 1 billion, and we have been also calculating the pull to par effect. So when are these negative impacts caught up by a temporary pull to par calculation? And we can tell you that around, in five years, more than 60% of these negative OCI is covered. Investment activities in total, this is the last page before we come to your questions and answers.
Again, a 4.5% new investment yield is the basis for that. Our average rating on the portfolio is an A rating all over, completely, portfolio, Austria and international wise, and no news on STRABAG, high impact on the results of UNIQA. Before we come to outlook and these topics for the future, I'm now opening the Q&A sessions for you. Thank you.
Ladies and gentlemen, if you'd like to ask a question, please press star one on your telephone keypad. We'll take our first question from Rok Friedrich from Raiffeisen Bank International. Your line is open. Please go ahead.
Hi, good afternoon, everyone. Thanks for taking my question. I'll start with the weather-related claims. You mentioned that, in the nine months, that was EUR 153 million on group level, out of which in Austria, EUR 130 million. My question here is, is this the full amount that was contributed to the Q3, or there is some number that relates to previous quarters?
So this is the whole amount for nine months.
Mm-hmm.
I can give you first guessing that around two-thirds is coming only in the third quarter.
Okay, thank you. My next question is related to the net investment income, and here I'm speaking about Q3 only. I noticed that the amount decreased to around EUR 116 million in the third quarter year-on-year, and I was doing some back of the envelope calculations, and I think there were realized losses of around EUR 30 million. And I was wondering if there was something else that I'm missing here that could explain the drop year-over-year in the third quarter in the net investment income.
Yeah. So the only answer is that we did not do realizations in the third quarter on a stand-alone basis. So we had in that case more on trading deals in first and second quarter. A, because there is no need of cash so far for us, so with the cash management is fine, and B, also the opportunities have been less than in the first six months. So this is the answer for a little bit of a reduction on a stand-alone basis.
... Mm-hmm. Okay, thank you. Moving on to Russia, you referred to EUR 19 million that was booked in nine months. And my question here is only if this is the full amount that is solely related to Russian business, or is there something else included in this EUR 19 million?
No, no, this is only Russia. As I said-
Mm-hmm.
The composition is around EUR 4 million, minus EUR 4 million from the running business, so from the operational business, and the rest, around EUR 15 million comes from the consolidation effect, deconsolidation effect.
Mm-hmm. Mm-hmm. Okay, great. Great. Yeah, that's very helpful. My last question would be in terms of the year-end expectations, and I don't know, do you perhaps have some earnings targets that you could share since there's only a few weeks until the year-end? That would be extremely helpful with regard to forming dividend expectations, et cetera.
Yes, so I will come to that, especially in the end, when we talk about the outlook, so I can take it now also. Taking into consideration that on the one hand, yes, you're right, it's just a short time to go by the year-end. On the other hand, we have, especially European-wide, high uncertainties about politics, about economic impacts out of the politics. But data is valuable and no other nat cat events, we see that UNIQA is in a stable position to achieve at least that what, on average, we had the last two years. And this is, for us, the outlook that we say very positive and optimistic for the year end.
Thank you very much, Kurt. That was really helpful, yeah. Now I have no further questions, and, yeah, thanks a lot again.
Thank you.
We will take our next question from Michael Huttner from Berenberg. Your line is open. Please go ahead.
Fantastic. Thank you so much. I had only two questions, and they're a little bit generic, and they're about the impact of natural catastrophes on your business. The first one is, and I can't remember whether you use the budget for natural catastrophes, but if you do, how are you reflecting this increased cost in at the nine-month stage, it's 5% in terms of Combined Ratio, whether you're including that going forward or including a portion, saying yes, it's higher.
And the second is also related to that, is on the reinsurance cost, how you mentioned that your reinsurance program, and I can't remember whether you still had an aggregate cover and whether you know, going forward, the structure of your reinsurance might change. And then the last question, of course, is on pricing. Do you believe the market will price these increased natural catastrophes as if they're regular events, or will treat them as one-offs and ignore it? Thank you.
Thanks, Michael. I'll start with the reinsurance topic. The nat cat program of UNIQA is at the moment, with an entry point of EUR 50 million, 50. So, everything between 0 and 50, we take on our book, and everything that is, 50 million up, is covered by reinsurance in different layers. We have, for this is a nat cat event. Nat cat, in that case, also technical explanation is defined as an event within 72 hours, and taking into consideration on a typical region or in a row. So that means everything that was, visible in July, August, and in September have been classified as non-nat cat events.
Because, A, not in a row of 72 hours, and B, are far below on a single claim basis of this EUR 50 million. Therefore, we carry this on our own book. Your second question is about pricing or in the relation, how do we reflect in the pricing or general of the market, in the pricings of: A, the reinsurance companies are taking into account this increasing cat or weather-related claims, and in that case, also increase their prices, A. And B, are forcing the primary insurer to take more on their own, in relation to previous years. So we expect generally at UNIQA proposed the market, that the entry points are going up in the future. Your first question, how do we deal with this, in UNIQA, generally in the future and in our budget?
Of course, we have a so-called Nat Cat buffer or Nat Cat plan buffer in our group. In 2023, we are a little bit below this, so we're exceeding this by EUR 15 million-EUR 20 million. And we have in our plans for 2022, 2024 and 2025, increase also the amount of weather-related and cat events by around EUR 40 million on average. So this is how we calculate this in our books and how we treat this also within reinsurance and the pricing. And the last thing, and that is because it's always a discussion also on the market: Do we give these prices over to our customers? Yes, to a certain extent. So that means it's based on the indexation.
This is one thing. On the other hand, we also have the opportunity, and we do this here or there, that we increase the prices, especially to those risks that have been heavily hit in a row or in the recent years. Up to the situation that we are canceling policies which are visible, that they are loss-making on a stable position over the years.
That's very clear. Thank you so much.
Once again, ladies and gentlemen, please press star one to ask for a question. We'll pause for just a quick moment to allow everyone an opportunity to signal for question. We will take our next question from Thomas Unger from Erste Group. Your line is open. Please go ahead.
Hello. Hi, thank you very much for taking my question also, and thank you for the presentation. I'd like to follow up or begin with two follow-up questions. Firstly, on the outlook, 2023, so last month or last quarter. You said that you would like to achieve at least what you had on average the last two years. What exactly are you talking about? Are you talking about the earnings before taxes now, or what exactly were you referring to? And anything more specific would be greatly appreciated for the fourth quarter. And here, I'd also like to know if you expect any one-off, any negative or positive one-offs in Q4, especially in the financial result.
Is there anything that you feel has to be done about your bond exposure, especially to the real estate sector? And then secondly, as a follow-up on what you mentioned about Russia, the results, the negative result of discontinued operations, minus EUR 19 million, you took EUR 15 million negative, as I understand, as a non-recurring effect. Does that mean that there's nothing else to be expected from Russia once it's deconsolidated, so no one-offs left? And then lastly, I'd like to ask you about the group cost ratio and how you feel about the level of the cost ratio now compared to last year, and where you see it going in 2024. Thank you.
Thank you, Thomas. Starting with your first question, yes, I'm talking about EBT, before tax, without Russia, and referring to the last year's IFRS 4, but I think you know that, but still, we take this as a range where we see us by the end of 2023. I hope that's clear for you. Can give the numbers, but I think we have them. What we achieved 2022 was EUR 421 million, and the year before, EUR 382 million, IFRS 4 results, EBT.
Thank you.
Second question, Thomas, is any one-offs that we see for the fourth quarter so far not. Are there any risks in the line? Of course. So first of all, it's about real estate, especially in Austria, discussion on the rental basis and things like that. The second topic is the SIGNA bond that UNIQA holds. So for both topics, we are carefully watching the market, and for both topics, we have internally mitigation methods that lead to a situation that if both things came, would come through, the hit on UNIQA would be, I wouldn't say negligible, but not giving the proposed EBT range in danger.
Because, if further depreciations on the valuation of real estate would come through, most of our real estate portfolio is allocated to the personal lines, means life and health, and the IFRS 9 and 17 effect in this of underlying item is more or less neutralizing all ups and downs. That's the reason why you look, for example, on the health business side, you have the financial result more or less zero, because it covers from underlying item, which is then shown on the CSM level. So there-
So basically, no threats in the P&C portfolio?
Rather small amounts is in the P&C portfolio, which is then neglectable. And here we have different valuation models, because here we have the valuation at cost.
Mm-hmm.
Second thing is the SIGNA bond. UNIQA holds around EUR 74 million in a bond and a little bit more than 1 million in a fund. Here we have taking some actions on the ECL basis and on the OCI level. The P&L effect is negligible and less than EUR 5 million. Same story like on the real estate side. Most of the allocation of the SIGNA bond is to life and to health business, and same effect on IFRS 9/17 lead to a situation that it's, with this, more or less protected by an amount of, in a maximum of, at the moment, 28 million, if the complete bond would be depreciated and is not, and is allocated like the moment.
In the first nine months, the effect is of around EUR 1 million. Twenty-two million euros is the OCI, and the expected credit loss coverage we have of EUR 12 million. So that's the answer to those biggest risks that we are foreseeing at the moment, real estate and SIGNA bond. Third is Russia. No one-off is expected in that case. So what comes again in the first quarter, Thomas, is the fourth quarter operating profit. So in that case, we expect one or two millions, which would then be added to this EUR 19 million. This is then the complete deconsolidation effect, and that's it. About the last topic, cost ratio. So look, yes, we feel with that what we have comfortable. So that means for 2023, this is what we have, and this is what we also plan.
For the upcoming years, Thomas, we are working constantly on improving and also on managing the costs better than in the past. Meaning, so that, of course, at least from 2025 onwards, you can expect that UNIQA is showing better cost ratio results than in the history.
Very good. Thank you very much. It's highly appreciated. Thank you.
Once again, ladies and gentlemen, please press star one to ask for a question. We'll take our next question from Michael Huttner from Berenberg. Your line is open. Please go ahead.
Thank you, and thank you for this opportunity, and really well done for really giving the challenge very strong results. Can you give us a little bit more update on Poland? I'm always curious because that's the business you bought a while back from AXA. I see the PZU share price has been fantastic this year, and I just wondered, of course, PZU is also a bank, so it's not just insurance, but I just wondered if you can give us a feel for the trends there. Thank you.
Did I understand you correct about Poland?
Yes, please.
Yeah, okay. So a little bit of a guidance for you, Michael. So UNIQA has a growth of 12%. The market has a growth of 10%. So we have a share of 6.1%, and we are ranked on the 6th marketplace in Poland. We have a P&C combined ratio, gross basis, and this is for us one of the USPs of UNIQA and for us also a competitive advantage of 86.3 percentage points. 86.3 gross combined ratio, P&C. Even that we are working in a market with high motor and motor hull portfolio. Why that? Because we have from AXA also brought high knowledge on pricing, on dynamic pricing, on behavioral pricing.
We can react, I wouldn't say within minutes, but in a very short time on the demand curve, online and offline. And this leads also that our net insurance service result is by EUR 70 million. So that means if you look on our EBT, which is EUR 64 million in Poland, this comes more or less only from the insurance service results. So that means no big impact from one-offs or from other things. So a real very good development on this technical result. The transformation project generally is giving us more synergies than all, than in the history plan. So we have the synergies at the moment by EUR 20 million running, up and running. And this is much more than the deal calculated.
So for us, Poland, but also Czech Republic and Slovakia, the same in that case, is a very successful story, and the integration is more or less done. Some things to do on the IT and on the product side, but then, we have really, done the deal, and as I said to you, very successfully integrated into UNIQA. But also on the non-financial basis, on know-how, on people's management and culture, we have here, a showcase on how to do, integration.
Fabulous. Thank you very much.
There are no further questions on the line, and I would like to turn the call back over to speaker for additional or closing remarks.
Yes, ladies and gentlemen, thank you for joining UNIQA's group results, nine months 2023. Outlook, I already explained. Russian entity is on track so far. What stays is the reduced uncertainty, even if there is just a small path to go by the year-end, but we look optimistic for that. And with this, I end up the call. Thank you for this, and have a remaining successful week. Thank you.
Thank you for joining today's call. You may now disconnect.