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Edited Transcript of GCO.MC earnings conference call or presentation 25-Feb-21 3:30pm GMT

·38 min read

Full Year 2020 Grupo Catalana Occidente SA Earnings Presentation Barcelona Feb 26, 2021 (Thomson StreetEvents) -- Edited Transcript of Grupo Catalana Occidente SA earnings conference call or presentation Thursday, February 25, 2021 at 3:30:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Carlos Felipe González Bailac Grupo Catalana Occidente, S.A. - Financial Director * Francisco José Arregui Laborda Grupo Catalana Occidente, S.A. - Director General & Secretary * Nawal Rim Barange Grupo Catalana Occidente, S.A. - Head of Analysts and Investors Relations & Rating Agencies ================================================================================ Presentation -------------------------------------------------------------------------------- Francisco José Arregui Laborda, Grupo Catalana Occidente, S.A. - Director General & Secretary [1] -------------------------------------------------------------------------------- Good afternoon. It is a great pleasure to be here with you again to talk about Grupo Catalana Occidente. I'm Francisco Arregui, CEO of the group. And I'm here as always, with the CFO, Carlos González; and Rim Nawal, responsible for Investor Relations. I also want to thank you in advance for your remote attendance to this event and the attention you always deliver to our group, and I want to encourage you to ask all the questions that you want telematically. We will answer as many as we can at the end of the presentation. I was telling you that we're going to talk about how things have gone this year, 2020, a difficult year. The accounts have just been formulated by the Board of Directors this morning, and we have just made public through the CNMV website and our own website. I want to anticipate that as could be advanced in the third quarter in a complicated context with health and economic crisis, things have gone reasonably well, very well in traditional business, we will see this. And not as well in credit insurance, which is much more linked to the cycle. And there is a certain stagnation of turnover and a significant reduction of the results. But still clearly positive results as we will see. We'll continue and follow the agenda you see on the screen. We will start with the environment. The reality is that for years now, I've been saying that we develop our activity in a difficult economic environment, basically because of the volatility of globalization, everything that happens in the world has an effect in our business immediately. But the common denominator within this certainly long period of time was economic growth in all geographic areas. It is true that in recent times, with a certain slowdown of growth essentially in Europe and in Spain. But the reality is that all that landscape is brought down with the crisis, with the appearance of COVID. You all know that this starts at the end of last year in China. There is a lack of supply in production chains and it reaches the rest of the world with lockdowns and the stagnation of industry and commerce. And we're still on to that with a hope that vaccines help us overcome this reality that we currently have, but still with the uncertainty of how long this will last for, the supply of vaccines, the rollout, efficiency, et cetera. The truth is that the only reality is that the economy has dropped in 2020, globally speaking. You can see it on screen, 3.5%, and practically in all geographical areas, 3.5% in the U.S., too, 7-point-something in the Eurozone, and in Spain, that 11.1%. Because we have -- we're record breakers in developed countries, and the forecast for 2021, well, they logically interest us depend on the evolution of the crisis during the second half of the year, although you do see that practically the forecast trusting in a certain recovery more in the second half of the year than in the first are positive of significant growth, but less fast as would have been said at the beginning. Financial markets. Well, you know them very well. I'm not going to tell you something new. The insurance industry in Spain had an exemplary behavior during the crisis. And then after the financial crisis of 2008 and 2009, it's been growing uninterrupted since 2015. And this last year, it dropped minus 8.2%, promoted by the decrease of over 25% of life-saving but also with a slight decrease in the nonlife branches of 1.7% with this distribution that you can see on screen at the moment. So in this context, I was saying, for starters, that things have gone relatively well, honestly, very well in traditional business despite the extraordinary competitive character in nature of the insurance industry in Spain, the adverse weather events, we've had the incidents at the beginning of 2020 of Gloria, which for us was the greatest disaster in our multi-risk story, EUR 29 million in its net impact of reinsurance in our accounts has been only EUR 9 million. And in the COVID crisis, well, naturally is marking the year from the month of March. And less good in credit insurance, as I was saying, more linked to the cycle with some results that we will see subsequently. So first-line income and then results. First, we grow 0.3% in turnover. In traditional business, 4.1% growth, which is 6.5% in recurring premiums, given that we are decreasing 11.5% in single premiums life. And also, growth in practically all groups with the exception of motor, where we are there having a draw -- that growth has an inorganic reason because in 2020, we were integrating the month of January Atradius, which was integrated in February of 2019. So it's not included in the comparison. And this is a month of high seasonality, premiums in January, around EUR 119 million, as you'll see, subsequently. But without that effect, we have a growth of 1.2%, 1.3%. And in credit insurance, as you can see, turnover has been worse, more linked to the cycle, minus 5% in turnover. If -- will you look at it in terms of acquired premiums, only 1.8%, but the decrease has been bigger in Spain with a 5% of decrease. The causes for these trends are the same as we were saying in the last quarter. On the one hand, there's been a reduction of commercial activity. The sales in terms of policies have been around 50% over those of the previous year. And sales have been affected. This is the first time in several years with negative regulations in the sales of our policyholders. All this despite the annulation rate has behaved fairly well around 7% levels. And increases on average of almost 6%, 5.8%. And as for results, as you can see there on screen, too, the consolidated result drops by 36.4%; 32%, the attributable result; and the nonrecurring results do not help us quite a lot. They damaged the year by almost EUR 19 million, as you can see. With also and you have in your documents, with negative results, a very negative result in financial recurring results, EUR 27.8 million in -- between impairments and realizations with losses and all this despite the fact that we have an extraordinary income of EUR 12.2 million, given the -- having won over the claim that we had regarding the tax deductibility of the amortization of Groupama goodwill. And as for operational results of both businesses, as we were saying, frankly, the result is very good in terms of traditional business, with an increase of 12.5% on our result, that for us was a record-breaking result in the previous year. And this has led to a fantastic result in all groups, in all branches, but with 3 keys, which are the ones that we talked about in the last quarter, on the one hand, the good behavior of multi-risk with the growth results of over 9% despite the accidental Gloria event in the first of the year. Then secondly, a very good result, as you'll see, in the motor branch with a growth of 60.9% based on accumulated claims ratio of 60%, 3.7 points less than the previous year. As a consequence, greatly to the lockdown period and mobility restrictions and all this despite the group's portfolio defense measures that we have taken on throughout the year, which we'll also talk about. And finally, health that more than doubles its results for several -- for those reasons. And a result, which is much less than in credit insurance with a rate reduction of over 78%, but positive at the end of the day, EUR 50.4 million. If we only look at the period of the fourth quarter, we've had a positive result of almost EUR 8 million. The reality is that the claims ratio has gone from 42.8% in 2019 to 58.6% in 2020. And as for the reasons for the claims ratio at the second quarter, there was an increase of the claims ratio frequency in Spain. Also in the rest of the world, we've had some claims, and that claims, 82.9% of reinsurance. The governmental schemes to support commerce through credit insurance and reinsurance also give us a negative result. We'll speak about that EUR 245 million involved there. And there's no doubt that we have provisioned very cautiously. We have a global system for the calculation of provisions that anticipates the claims ratio from the moment the sale is produced with the different parameters that we introduced and are just depending on the circumstances. So we understand that we're, frankly, fairly well provisioned. We will hear greater detail by Carlos González later. The truth is that we cannot stop talking about the amount of actions of support to our stakeholders that we have done in the context of the COVID-19 health crisis, all essential for the maintenance of the business and some of them you can see on screen: employee protection and operational support going through many maintenance of customer service, supporting society, where, of course, we can see our contribution of over EUR 2 million to the health care professionals fund. No news as for the general overview on the composition of our business. The credit insurance has a great weight as a consequence of Atradius, which is the second global operator in credit insurance, practically 60-40. And then on the other hand, we are international, although it's limited to credit insurance. In over 50 countries and Spain continues to represent, as you see, over 2/3 of our business. But if you look at the lower part of the box, we see that it's basically an essentially European business, only 6.3% is outside of Europe. And finally, I want to highlight that, although it's obvious that in the current economic context, which is so difficult, we're focusing on the regular management of the business. We're not losing focus on strategic items and topics that, with no doubt, will be essential for our future, among them, innovation. We are now focusing as a priority on this. And secondly, sustainability that we are seeing here on screen. We have underwritten the main sections of the agreement of the United Nations deal. We have renewed the analysis of materiality. During this year, we have prepared a new master plan for sustainability. Lots of things -- detailed things that you will find in the memoirs of sustainability, which is at your disposal through our website. And third message, where we have a sound solvency position. We will talk about this later on. And then fourth message, we must insist on our dividend policy, which is cautious. But absolute dividends that are growing in absolute terms, and we have our commitment to remunerate shareholders even in difficult moments. The evolution of the share price, you know it perfectly well. Just as a comment, it's doing very well in the long term since 2002, that you see on screen, with internal profitability rate that is much better than our closest peers and competitors, 12.24% annually. In the short term, not too good. In 2019, we had a drop of over 4% in high environment and good behavior in 2020 with the defensive behavior with a reduction of 6.4%, but much better than those indexes that are closest to us. And from the shareholder remuneration standpoint, we were mentioning before, that cautious policy of stable and growing dividend that was already shown in 2008, 2009 with financial crisis that affected the credit insurance business despite -- of which we were capable of increasing dividends, and we've had sound and consistent payouts of dividend since 2010, up-to-date in the last years, between 6.5% and 7%. However, as you all know perfectly well, in dividends against results in 2019, we were forced and following the recommendation of supervisors, OPA and the General Insurance Authority to reduce the dividend, complementary dividend that we pay out in May 2020 by 45%. So the total dividend against result of 2019 was EUR 81.5 million, which was a reduction of 17% as compared to the one of the previous year. Against the results of the year 2020, which is the one were analyzed, we have paid out 3 interim dividends already. As you can see on screen, same amount as in the previous year, EUR 19.06 million each. And the Board of Directors celebrated this morning has agreed, as you've probably seen on the documents, to take to the general shareholders meeting the payout of an interim dividend of EUR 48 million, which is exactly the double amount as on the same date last year, which will be a total dividend for 2020 of EUR 105.85 million, with an increase on the total of the previous year of almost 30%, specifically, 29.86%. We understand that we are a solvent group. Even in the context of this crisis, we want to maintain our firm and sound commitment to remunerate the shareholder. Carlos, you can continue. -------------------------------------------------------------------------------- Carlos Felipe González Bailac, Grupo Catalana Occidente, S.A. - Financial Director [2] -------------------------------------------------------------------------------- Yes, perfect. Okay. So as is frequent and now regular in these presentations, I will be focusing on the explanation of the income statement in each one of the businesses where we work, and we'll start with the traditional business that you now see on screen. Generally speaking, the commercial activity of prior periods, we couldn't maintain that. But in our diversification of products and high retained -- retention of our customers had allowed us to continue growing our turnover with these EUR 2.50 billion, which means an increase of premiums of 6.5%, 1.2% in terms of recurring premiums. Once we eliminate the inclusion of Antares, which was mentioned before, the results also positive pathway with an increase of 21% in terms of technical results, which has meant improving the recurring result at 12.5%, up to EUR 238.6 million. And all this the base of the increase of this technical result and recurrent results is focused on a positive evolution of the results of general insurance and also the health branch affected by the reduction of mobility and the lockdown period because of COVID. The combined ratio has improved by 1.7 basis points at 88.6%. So maintaining our positive difference as compared to the industry. Let's now move on to talk about the main businesses in the traditional business. Let's talk about multi-risk first, where we grow at 3.8% in terms of written premiums, higher than the sector, 3.1%, given the high retention of our customers. The combined ratio is at 88.9%, 0.6% less than last year with 2 effects that are different. On the one hand, in the first quarter, there's a negative effect as for the occurrence of the Gloria weather event, which has been mentioned previously with an impact of over EUR 9 million net in our accounts. And then the COVID effect, which has led to a different result in terms of the claims. On the one hand, there is a more intense use of the household which has led to claims related to their home, but less claims and other typology of risks such as robberies, for instance. So finally, the technical result improved EUR 9.3 million up to EUR 75 million, a record in the last 5 years. As for motor, the turnover reduced by 0.5%. So though we positively compared with the reduction of the sector, which has been 2%. And the turnover is EUR 654 million with a net increase of the number of policyholders, despite the reduction of the number of vehicle registrations that have taken place this year, the combined ratio is reduced by 3.7% to 9.3% with a reduction of the same line of points, 3.7% of the technical cost, where we observe less number of claims in the lockdown period. Given the COVID, that is being normalized in recent months, although we're still not at the same levels as the ones assimilated in periods that were prior to COVID. This has allowed us to increase the technical result by 61% to EUR 63.7 million that you see on screen and that you can also see is much higher than the profitability levels that we had in previous years. As for others, the turnover has been affected with a slight increase of 0.2% with decreases in businesses more linked to economic activities or liability or accidents. Whereas in results, the excellent combined ratio is maintained 84.6% and the technical result of EUR 48 million, which is also above the results obtained in the last 4 years. Finally, the business of life continues increases in periodic premiums around 4%, whereas single premiums and supplementary premiums dropped. But essentially due to the little appealing environment with the interest rates -- current interest rates, they're not too appealing for our policyholders and even us. So in health, we've already said that the effect of the inclusion of the turnover of Antares in January 2020 causes this leap in the health care business over EUR 80 million and EUR 120 million for the total of the group. As for results, the technical results improved significantly, 27% to EUR 74.2 million, given the good behavior of claims in health, with a combined ratio of 84.1%. This business, and this branch has been positively affected in the COVID crisis, given the reduction of nonserious medical activities. Whereas in funerals, we have seen an increase in accidents and our claims, but less commercial expenses. So the combined ratio is very acceptable, the one that you see on screen of 84%. So as a summary for the traditional business, the maintenance of written premiums and the reduction of 1.7% of the combined ratio, given the less frequency and the good behavior of life claims with the contribution of the health branch and the inclusion of Antares and full operation in 2020 has allowed us to increase the technical result by 21.7% to EUR 160 million, showing the resilience of the business. EUR 2.2 billion, sorry, in the financial result is affected also apart from the low interest rate environment, but less amount of dividends collected and drop of profitability in rentals. And as a result, the recurrent result has increased by 12.5%, as we said before, to EUR 238.6 million to EUR 128.3 million in terms of total results. So let's move on to talk about the evolution of the credit insurance business. Here, we've already mentioned the written premiums reached a volume of EUR 1.727 billion with a drop of 1.8%, given the effect of the COVID crisis. And at the end of the day, it has affected for the first time, as Mr. Arregui said, in the drop of commercial transactions, so the turnover of our own policyholders. And on the other hand, as a consequence of a less risk appetite on our behalf, these negative effects have not been offset by the increase of the prices of our policies of the new accepted risks that, as we've already mentioned, in terms of increase of portfolio premiums represent 6% and in these last months, something above 6%. As was expected, this COVID crisis has affected the profitability of the business with a relevant drop of result. The technical result, EUR 109 million. And this drop has -- could not be otherwise, is also transferred to the recurring results. Here, you can see the split of the turnover in the different geographical areas. I'm not going to go through each and one of them because the drop of the increase or growth of turnover is obvious. Around 4% in Europe and greater incidence, as you can see there, in Spain and Portugal. As for profitability of the combined ratio, it has increased up to 94.1%, 15.4 points of the technical cost, basically, but not exclusively, given the increase of claims ratio frequency shown in Spain, but also observable in other countries. Also, we must stress and highlight that this increase of frequency has been of less intensity than initially expected. As a consequence, on the one hand, given exogenous factors given tax policies that have been expensive and the support of the economy by the governments and central banks. And then on the other hand, and this is something internally -- something internal, given the measures carried out by the company that have allowed us to reduce by 4.3 points, the claims ratio of the second half of the year as compared to the first and it's been a reduction of over 8 points. If we'd excluded a peak claims ratio that took place in the last month of the year, that has been practically covered in total by governmental contracts. As the measure of the management of risks that I was talking about, additional to the increases of price that have already been mentioned, you can also observe in the graph below that we have reduced our exposure to risk around 9%, 8.6% in accumulated results in the year. And finally, I want to mention at this point that we continue to have our criteria for provisioning, where we see future impacts of increases of claims ratios. This policy is shown in the increase of technical provisions of over 200 million. And as a summary, we go through the drivers of the year. The income has been reduced, especially in Europe with the stagnation. As a consequence, or at least partially, are the actions of the portfolio management carried out the technical result before reinsurance has been affected by the increase of frequency of claims ratio given the COVID crisis. And essentially our cautious provisioning policy, although at the level of the claims ratio has been a reduction in the second quarter given the actions that have been taken. On the other hand, we continue to have relevant reinsurance policies in our standard contracts of session, and we also have, at least for half of the portfolio, governmental agreements that cover additional increases of claims ratios, although in 2020, these levels have not been reached. So they have damaged our profitability in almost EUR 45 million. On the other hand, the financial result is slightly reduced. Apart from the low interest rate environment, also a drop in the results of associated companies. So the summary of all this is a recurrent result that although it's reduced by 70-something percent, it continues to be positive with this EUR 50.4 million in the results. -------------------------------------------------------------------------------- Francisco José Arregui Laborda, Grupo Catalana Occidente, S.A. - Director General & Secretary [3] -------------------------------------------------------------------------------- Thank you very much, Carlos. I think that the income statements regardless of what you want to ask is more or less explained. Some words regarding capital solvency investment from the standpoint of the soundness of the company. Well, this graph, we can explain it. We do it in every presentation. It gives you an idea of the soundness of the evolution in the long term of this company. During this century, the permanent resources in favor of market, 332,000 to 4,000-something this year. So multiplied by 13 -- over 13. This has been possible without asking money from shareholders without diluting dividends. Thanks to the fact that we have a significant part of the results. Cautious policy that you have allowed to have this period of expansion. And this is what has happened this year. You see it to the left where we see the permanent resources increase by 1.7% as a consequence of the retained result. And despite the fact that the variation of adjustments is damaging, as you can see, by EUR 77.5 million. The net balance of capital gains and capital losses are the positive effect and the accounting asymmetries of the participants of our policyholders in the capital gains and capital losses. If we go and move forward, it is -- we are half enforced to talk about solvency. This is an important magnitude. You see that as for solvency ratio the closure of 2020, which is still not final. It is still pending an audit process, but we can advance an estimate of 216%, 3 points than the solvency ratio in 2019. So improving the estimate that we had advanced in the third quarter of rates in maintenance. Once the audit is over and we publish the report on the solvency situation of the company, each one of the companies, we will give you all details, of course, regarding solvency and the improvements. And what I can anticipate is that the factors contributing the most, generally speaking, is the retained profit. And the second one that affects a lot, the ratio of the group, and that in relative terms, is still much more important for the credit insurance, which is a reduction in the exposure, the total potential exposure that the CFO just mentioned of 8.6% and also a selective one. And secondly, the incidence of governmental agreements for reinsurance with the main European countries that have been, as you know, extended to halfway through this year, June 2021. So I only want to point out that we are very satisfied with the solvency ratio. It's very good, better than our peers. And the ratio is maintained in 175, even in adverse scenarios with high-quality equity. Tier 1 mostly, and we believe that, that solid equity situation of the group linked to our business model, which has allowed us in all the departments of the group to maintain that excellent rating ratio, A and A2 in the context of the economic and health crisis we are going through. Just a flash on investments. Just to close and finish, you have on screen all our investments. EUR 14.7589 billion, with an increase of 2.7% compared to the funds managed at the end of the year 2019, which is very good in this economic and market context. I don't want to give you more details on the composition because you have all details not only on this screen, but also in the memoirs of the year and the appendixes. And I just want to remind you that we have an investment policy, which is cautious and stable, diversified, as you see on screen. And the appropriate assets to our liabilities as an insurance company that we earn in terms of liquidity, duration, profitability and, generally speaking, in all terms of the joint management of assets and liabilities. And nothing more. We will now have our questions. We will answer some of the questions that you have asked more repeatedly. Nawal? ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Nawal Rim Barange, Grupo Catalana Occidente, S.A. - Head of Analysts and Investors Relations & Rating Agencies [1] -------------------------------------------------------------------------------- Yes, thank you very much, Francisco and Carlos, for your presentation. Now we will start with the questions that we have received. As is frequent, they've been grouped by topics. So we will start with the traditional business questions. The traditional business has had a very good result. As for combined ratio, do you think that it will become normalized in 2021? This sector is being very competitive in price in the motor sector. Will this affect the turnover? -------------------------------------------------------------------------------- Francisco José Arregui Laborda, Grupo Catalana Occidente, S.A. - Director General & Secretary [2] -------------------------------------------------------------------------------- Well, somehow, I believe that this question was unavoidable as it already was in the last quarter. The claims ratio in -- it has improved a lot, 3.7 points as compared to the previous year. In the motor branch, because the level of claims has reduced by 17% as a consequence of the mobility restrictions within the framework of the COVID-19 crisis, the truth is that in the last presentation, myself -- I, myself, expected a normalization of that ratio regarding the end of the year because levels were being recovered. But as you know, this last quarter has also been very good in terms of claims ratios because there's no restrictions in place in different regions that have generated no doubt a reduction of the frequency of accidents and claims. And as for the effect on turnover, I have to repeat what I said last quarter. But referring to the current moment, there's no doubt that the Spanish insurance industry and especially in the branch of motor is very competitive, as you know, and we're seeing this in these states. So personally, I have no doubt that the reduction of claims in the industry will be transferred to the consumer. We, ourselves, have applied for many months now portfolio defense measures through our agency network related to the premiums and additional services to maintain customer satisfaction and ensure they stay with us. The customer is at the center of our strategy, as you know, so their satisfaction and the service that we provide is for us, vital and essential. -------------------------------------------------------------------------------- Nawal Rim Barange, Grupo Catalana Occidente, S.A. - Head of Analysts and Investors Relations & Rating Agencies [3] -------------------------------------------------------------------------------- The second question is related to multi-risk business. Multi-risk has behaved very well in 2020 despite the pandemic and Gloria. Have there been no more claims regarding lockdown? And what is the impact of Filomena? -------------------------------------------------------------------------------- Francisco José Arregui Laborda, Grupo Catalana Occidente, S.A. - Director General & Secretary [4] -------------------------------------------------------------------------------- Well, something -- I said something about this on my first intervention. And Carlos González has explained a bit more about the factors that in 2020, the multi-risk branch made this to have a behavior that was better-than-expected combined ratio of 0.6 over the one of the previous year, 2019, despite the Gloria event, which has an impact -- or had an impact of EUR 9 million after reinsurance. The claims ratio stemming from a greater use of the household, given the lockdown, has not conditioned the downward result, the technical result of the business, given the fact that the claims ratio has been of an average cost that is lower than the normal. And logically, if this has been reduced. It is true as for the impact of Filomena, that 2021 has not started too well. With a great climate events such as Filomena and some others, such as Hortensia. In the first place as compared to the first one in the snow storm, we were not expecting such a big effect as we saw after this appearance of the snow. The global impact of both claims is similar to -- of around EUR 9 million in income statement as Gloria, so it won't condition the result of 2021. -------------------------------------------------------------------------------- Nawal Rim Barange, Grupo Catalana Occidente, S.A. - Head of Analysts and Investors Relations & Rating Agencies [5] -------------------------------------------------------------------------------- Let's continue with questions on credit insurance. In credit insurance, the company has managed to manage the company successfully. How do you think the economic uncertainty will condition the effect of 2021? Should we expect a higher impairment as compared with 2020? -------------------------------------------------------------------------------- Francisco José Arregui Laborda, Grupo Catalana Occidente, S.A. - Director General & Secretary [6] -------------------------------------------------------------------------------- Well, I remember no doubt that in the last presentation that we did in the third quarter, we explained all the different measures that we had taken to face the crisis stemming from COVID in credit insurance is measured had been applied, and they continue to be applied basically in 2 specific lines, supporting our customers on the one hand through multiple matters, such as the increase of the time for claims and the advice of the level of solvency of the customers. And another one aimed at defending our portfolio, which is the risk management part. However, risk management has been done by countries, by industries, by buyers, taking into account the impairment of the insolvencies, but also the reinsurance provision that we have in each one of the places and times. All these factors condition or a level of tolerance to risk. We've also explained that at the end of the day, in several occasions, the reinsurance agreements with governments require maintenance of general exposure, although it's true that it is allowed to reduce credit with some debtors. And as a result, the measures is that credit exposure has been reduced as compared to the closure of the previous year by 8.6% and selectively, it varies a lot depending on countries. Specifically, if you look at the figures that we published by countries, Spain is the country where risk exposure has been reduced the most around 19% because on the other hand, up until the end of the year, the coverage -- the coverage reinsurance contract was not signed. And the combined ratio is, as we've seen, 94.1%, which is 15 points above the closure of 2019. And as for the forecast and whether to expect greater impairment for 2021? Well, it's the opposite. I'd say, we expect to see an improvement as a result of credit insurance in 2021. All public measures to support commerce and economy, generally speaking, that were delivered last year have given us time to take on new measures to improve the selection of risks and our result has been reduced. While risk exposure has been reduced a lot, and selectively, the condition of contracts have been adjusted not only in price. But also in terms of other conditions and there's been an extension up until June, all the government supports to commerce, as we've said. And finally, I want to remind you that I stressed that we have some provisions that are very cautious and that at the end of the day, we provision in a global system that anticipates the claims ratio from the moment of the sale, and we do it with some parameters that are adjusted depending on circumstances. So as I said, we have a level of provisions that we believe is very cautious to face with ease this year. So as a consequence, we believe that we're in a better position than the position we had at the beginning of 2020, and we expect we're going to improve our results in credit insurance. -------------------------------------------------------------------------------- Nawal Rim Barange, Grupo Catalana Occidente, S.A. - Head of Analysts and Investors Relations & Rating Agencies [7] -------------------------------------------------------------------------------- Also on credit insurance. In the presentation, you talk about the negative impact of governmental agreements. Can you please explain this? Will there be a coverage in 2021? I think you've already answered this last one. -------------------------------------------------------------------------------- Francisco José Arregui Laborda, Grupo Catalana Occidente, S.A. - Director General & Secretary [8] -------------------------------------------------------------------------------- Well, this is clear. In 2020, there was an agreement signed with different European governments, Belgium, Luxembourg, Germany, U.K., France, Norway, Italy and, finally, Spain. You have it in the management report and in all the documents with the different basic characteristics of each one of them. Each of the agreements is different, but generally speaking, it's about reinsurance, proportion of reinsurance, where there's a proportion of premiums and claims ratios that are given up and the government agreements for Atradius have meant a greater cost, negative results, whatever you want to call it, of EUR 45 million to our group. As a consequence that the claims ratio has been below the fees level. So despite the increase of claims ratio, we continue to have a business that has provided a profit. So what we've seen from the different governments is a part of our profit, and this means a cost of around EUR 45 million. And as for coverage for 2021, we've already anticipated this. I think we already did it, that the agreements have been extended. Most of the agreements, I think all except one, are extended until the month of June of 2021. And from that moment on, I cannot anticipate anything more. -------------------------------------------------------------------------------- Nawal Rim Barange, Grupo Catalana Occidente, S.A. - Head of Analysts and Investors Relations & Rating Agencies [9] -------------------------------------------------------------------------------- We have a question on investment. As for the investment portfolio, the variable income in 2020 has behaved relatively well. But given the exposure to properties, can you say how the crisis is impacting on real estate? -------------------------------------------------------------------------------- Francisco José Arregui Laborda, Grupo Catalana Occidente, S.A. - Director General & Secretary [10] -------------------------------------------------------------------------------- Well, I think the question -- well, the pillar of variable income in real estate, well, the variable income seems to be an affirmative claim that it has gone well. Well, we have a conservative and cautious policy. The fact that Grupo Catalana Occidente, we have almost all our investments helps us to apply the investment criteria that we consider most appropriate. And despite the drop in financial markets, the amount of our variable income has been maintained. I think it has reduced -- has been reduced by 1% regarding real estate. It is true that they represent a significant part of our investment, almost 13% of the total of our investments. And they have increased their value as compared to the previous year by 3.4%, reaching EUR 1.7 billion. And additionally, given that we always manage this type of investment in the long run, this allows us to obtain an average profitability that is better off than in other investments. I mean that from the defensive nature of real estate investment that our properties are mainly buildings of offices in prime places, both in Madrid and Barcelona in a very, very significant percentage, bearing in mind our long-term management. Our goal will always be to favor a close relationship with our tenants and our teams already lived the crisis since 2008 to negotiate with our clients so that the relationship is not deteriorated, but you already know that Grupo Catalana Occidente needs to do a valuation every 2 years of each one of the properties. And in this last year, we have carried out a small impairment of around EUR 4.5 million, impacted by the life of the nonrecurring result corresponding to the assets acquired in more recent dates. -------------------------------------------------------------------------------- Nawal Rim Barange, Grupo Catalana Occidente, S.A. - Head of Analysts and Investors Relations & Rating Agencies [11] -------------------------------------------------------------------------------- The next question is related to the share. The value of the share in the market has had a notable recovery after the drop in the first half of 2020. As for the dividend payout policy, what can we expect this year? -------------------------------------------------------------------------------- Francisco José Arregui Laborda, Grupo Catalana Occidente, S.A. - Director General & Secretary [12] -------------------------------------------------------------------------------- Well, this has 2 parts, too. One is related to the evolution of the share price and the payout of dividends, I think that we have given some clues. And the answers to both questions throughout the presentation, but I'm going to try and clarify both questions as much as possible. Firstly, as for the stock market evolution, it is true that during the first year of the year, there was certainly a significant drop in markets above the reference indexes. But it's also true that in the last quarter, it had a notable recovery. And if we look at the entire year, we saw it in one of the screens, the value of Grupo Catalana Occidente has behaved better than reference indexes with a drop of 6.4% as compared to E-recs, which had a drop of 35% -- 15% or euro stock insurance, which dropped by 19%. So at the moment, the share is around EUR 31. I haven't seen the share price right now, but it's basically around that. We continue to have some penalties given our exposure to credit insurance and the uncertainty of the markets, but the truth is that I think that it's been proven these years that taking into account the long term, the entire cycle of credit insurance is highly profitable in the mid and long run. So we want to believe that as long as these uncertainties are reduced, the market will acknowledge the value of the management that we are carrying out in credit insurance and that it will be shown in the price of our shares going forward, and this is reflected in the consensus on the value of our shares done by analysts. The second question is related to the dividend payout. I think that, that has been overly analyzed. We have a strong commitment to remunerate the shareholder through a dividend that has been shown to be stable and growing in absolute terms throughout times. We managed to maintain and even grow in the 2008 financial crisis in a forced manner. The dividend was reduced as a consequence of the recommendations of the European Authority for the supervision of insurance as for the dividends or taking these results for 2019. And we have ratified during this year, 2020, maintaining the amount of the 3 interim dividends and taken an increase of 100% of the complementary dividend to the General Shareholders' Meeting that will take the total amount to EUR 105.8 million, with 29.9% of increase as compared to the one that we paid out against results in 2019. -------------------------------------------------------------------------------- Nawal Rim Barange, Grupo Catalana Occidente, S.A. - Head of Analysts and Investors Relations & Rating Agencies [13] -------------------------------------------------------------------------------- Okay. Just a lot of questions related to solvency. As for your solvency positions, do you estimate solvency ratio of the end of 2019 -- well, we were expecting an impairment of the ratio, so can you explain the improvement in your solvency position? -------------------------------------------------------------------------------- Francisco José Arregui Laborda, Grupo Catalana Occidente, S.A. - Director General & Secretary [14] -------------------------------------------------------------------------------- Well, in truth, I think that I've also spoken about this topic in one of the last parts of the presentation. The truth is that at the moment, we have not finally closed our solvency. We are still awaiting the audit process, and we will explain this with the consolidators of each one of the companies with the corresponding reports of the financial situation and the solvency situation and one of the operational companies. At any rate, it is true that -- in the economic crisis, it is true that at the beginning of the year, the financial markets are more deteriorated, but then they recovered. And at the moment, we have announced a forecast of solvency ratio of 216%, 3 points over the 213% that we had at the closure of 2019 and better even than the one we could anticipate 1 quarter ago when we spoke about the possibility of maintaining the ratio. When we publish the report on the financial situation and the solvency situation, we will deliver all sorts of explanations of all the parameters affecting the calculation of that solvency ratio. The only thing I can at the moment is to anticipate, as I've already said, that the main drivers for that improvement are, on the one hand, the retained result for the year; and secondly, a factor that affects the solvency of the group that in relative terms affects solvency much more, the credit insurance, Atradius, credit and surety insurance, which is the reduction of 0.6% of exposure to risk selectively. And we cannot forget that credit insurance is the greater consumer of our solvency. And then the extension of the governmental agreements up to the 30th of June, that are also taken into account at the calculation of solvency. -------------------------------------------------------------------------------- Nawal Rim Barange, Grupo Catalana Occidente, S.A. - Head of Analysts and Investors Relations & Rating Agencies [15] -------------------------------------------------------------------------------- Thank you very much, Francisco. So with these answers, we finish the presentation of results of the year 2020. As always, all the pending questions will be answered directly through the Investor Relations team in the following days. We invite you to the next presentation of results on the next Friday, 30th of April, with the presentation of results of the first quarter of 2021. Finally, I want to remind you that you can always visit our website, grupocatalanaoccidente.com, where you will find all the financial and sustainability information at your disposal. Thank you very much for your attention and your participation. See you soon. [Statements in English on this transcript were spoken by an interpreter present on the live call.]