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Edited Transcript of UNI.MI earnings conference call or presentation 8-Nov-19 11:00am GMT

Q3 2019 Unipol Gruppo SpA & UnipolSai Assicurazioni SpA Earnings Call

Bologna Nov 9, 2019 (Thomson StreetEvents) -- Edited Transcript of Unipol Gruppo SpA earnings conference call or presentation Friday, November 8, 2019 at 11:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Carlo Cimbri

Unipol Gruppo S.p.A. - Group CEO, MD & Director

* Matteo Laterza

UnipolSai Assicurazioni S.p.A. - General Manager

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Conference Call Participants

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* Andrea Lisi

Equita SIM S.p.A., Research Division - Research Analyst

* Elena Perini

Banca IMI SpA, Research Division - Research Analyst

* Michele Ballatore

Keefe, Bruyette & Woods Limited, Research Division - Equity Research Analyst

* Niccolo Cornelis Modesto Dalla-Palma

Exane BNP Paribas, Research Division - Research Analyst

* Peter Eliot

Kepler Cheuvreux, Research Division - Head of Insurance Sector Research

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Presentation

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Operator [1]

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Good afternoon. This is the Chorus Call operator. Welcome to the Q&A session on the results of the first 9 months of 2019 Gruppo Unipol. Manager and Director, Mr. Carlo Cimbri, will go through a short reduction. After doing this, you can ask questions. Mr. Cimbri, the floor is yours. Thank you.

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Carlo Cimbri, Unipol Gruppo S.p.A. - Group CEO, MD & Director [2]

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[Interpreted] Good afternoon, ladies and gentlemen. As usual, well, my introduction is a very short one. This is just to say, well, good afternoon, because I'm sure that you must have read already the press release and the presentation this morning. So once again, without further ado, please do start asking questions.

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Questions and Answers

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Operator [1]

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The first question is from the conference in English from Peter Eliot, Kepler Cheuvreux.

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Peter Eliot, Kepler Cheuvreux, Research Division - Head of Insurance Sector Research [2]

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I had 3 quick numbers questions, please. And that was for Unipol, you showed a EUR 30 million profit in the other segment for Q3 stand-alone. I was wondering if you could just explain what that was, what the moving parts of that were?

Secondly, the expense ratio in Q3 stand-alone, looks like just backing it out from the 9 months, it's like 24.9%, up 1.5 points from the same time last year, which seems quite a big acceleration over the gap since H1. So I was just wondering if you could explain what was happening there?

And finally, on the Solidarity Fund charge, I wonder if you could just confirm that, that is the last bit that we've seen in this quarter?

And then if I can perhaps just add one non-numbers question, just if you could comment on the current motor pricing trends you're seeing and how these compare with what you said before?

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Carlo Cimbri, Unipol Gruppo S.p.A. - Group CEO, MD & Director [3]

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[Interpreted] Thank you for your questions. Now as for the profits made by Unipol Gruppo in Q3, let me tell you the reason why this is happening now. As you know, since the beginning of the year, I mean, we redefined that the transfer (inaudible) sale of Unipol Banca now in tangible terms that this is what happened in July. But once again, the agreement was basically signed at the beginning of February.

So once again, the fact of, let's say, sellings of the bank has given us an opportunity, and we will have the same opportunity in the future. So we will be able to manage the business of Unipol Gruppo without that "source of risk." So this means that we would become even more proactive.

And when I say so, I mean, the management of the liquidity, so the cash flows of Unipol Gruppo.

And the reason is the following. So when the bank was included in our portfolio, also in terms of managing the liquidities or the investments of the group, our policy was very conservative in terms of Unipol as a group.

And this is what we wanted to do because, of course, we wanted to protect our results, our dividends, basically. And we didn't want to have too many additional risks.

And in some cases, I know we have lost some opportunities for investment because the bank was in our portfolio. Now the bank is no longer in the portfolio. So now we are free and a little bit more agile in terms of managing our investment loss. And in a way, we have a much more proactive, let's say, management style.

This year, 2019, in compliance with a view of the market that we have, we've been able in Unipol Gruppo to invest in Italian govies when the spread was on a very high level. It was around 280 frankly it's up to 300 points. So this is when we made investments.

And thanks to this, we've been able to get the benefits of this strategy when quite recently, the spreads dramatically went down and it was around 140, maybe 130 points.

So we felt that the risk was no longer, let's say, acceptable, and this is why we have sold these facilities, and we made the capital gains, which is what you can see in the financial statements of the holding company today.

So once again, this is, once again, strengthening the positive result of the holding company.

Now of course, but this doesn't change or doesn't impact our programs and our plans because we do have our results and we do have our objectives and especially dividends. Especially, on the holding company, we want to comply with this, this year, but also in the future in the terms and conditions that we have communicated to the market when we have revealed our industrial plan or business plan.

So EUR 200 million dividend, which is what we would like to have on the Unipol Gruppo, and you will see this with the financial statements in 2019.

Okay. That was for your first question.

Now second question was on the ER. So the expense ratio on the Q3, and then will give the floor to Mr. Laterza.

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Matteo Laterza, UnipolSai Assicurazioni S.p.A. - General Manager [4]

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Thank you so much for the question. As for the expense ratio, which, as you correctly said, is going up. Well, the reason is the following: Well, it is almost exclusively due to the product mix, I mean, the products that we sold. As you have seen, we went down so much on the basic, let's say, areas are no flat, no growth, so flat situation on the automobile business.

And commissions are higher in many other sectors versus the commissions on the car business, and all the rest is in line with our budget. I mean, there's a slight increase also in terms of costs, which are slightly going up once again.

This was one of our expectations. This is due to the fact that this year, we have planned plenty of things. For example, the advertising campaign that we have launched this September. Of course, it's a major investment. And of course, we had to consider this cost in the total aggregate

cost.

Peter, there was another question on the average premium on the MV, on the motor vehicle. Now as for the 9 months approach, there's a reduction. So it's a little bit more than 1%, 1.5% negative, of course.

So this means that there's a specific stability of this context because the competitive scenario is quite important. But we also know that in terms of claim term and even in terms of claim trends, well, this trend is going down.

So this means that the frequency forecast for this year as well will be going down, again, if you make a comparison with 2018.

So based on this context that the increase of the average premium will be flat. So Stable versus the current situation, so it will not increase.

If I'm not mistaken, there was also another question on the so-called Solidarity Fund. It's been totally paid? Yes, the answer is yes. Because, once again, in the accounts of the third quarter, basically, we have EUR 67 million.

So these EUR 67 million can be found on -- in the financial statements. And this is the total amount that we have paid that you know that to manage a 600, let's say, redundancies of the group.

I mean, we think we will be able to comply this target. So around 600 units, but there's a little bit more time. So people can opt-in within the end of this year. Anyway, EUR 67 million, which is what we needed to, let's say, manage 600 heads, all of this amount can be included into the 9 months financial statements.

Let me go back for one second to my previous answer. I mean, when I talked about the result that we expect, I mean, Unipol Gruppo, I was calling about the average dividend. So EUR 200 million a year, which is included into our business plan. So the total would be EUR 600 million cumulative dividends. So based on the, well, transfer evolutions we're going through today, we are absolutely in line and in compliance to comply with this.

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Operator [5]

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(Operator Instructions) Next question is from the original conference from Elena Perini from Banca IMI.

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Elena Perini, Banca IMI SpA, Research Division - Research Analyst [6]

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[Interpreted] My question is the following. What is the cash position of the holding company at the end of September? And I also have a question because I have read, I mean, a report some weeks ago on a possible merger between UBI and BPER.

So can you give me some color about this? I mean some further comments on this possibility and on your possible position based on this merger hypothesis?

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Carlo Cimbri, Unipol Gruppo S.p.A. - Group CEO, MD & Director [7]

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[Interpreted] Thank you for the questions. Let me check. At the end of September, we have roughly EUR 1 billion in terms of cash. And of course, I mean, cash investments, and I mean govies which is what we can sell whenever we want to. So this is in the hands of the holding company right now.

And then we also have the debt now. We have 2.3 -- 2.38 exactly billion euros, this is the final total depth of the holding company at the end of September. Most of this is represented by bonds that we have on the market. So EUR 1.5 billion, due between 2025 and 2027.

We also have EUR 300 million. So the deadline is 2021. And the rest is the intra-group debt. Okay. This is set in terms of cash, as you said before.

As for the second question, now I have also right now this on financial newspapers. And I really have no comment about this. Once again, the media, the newspapers, I mean, tell so many possible combinations of things that may happen. But once again, as of today, we have absolutely nothing to say about this and nothing to assess. If BPER, so if the bank has new ideas, they may want to share this because, but for the time being, that there are no assessments, no, let's say, such ideas going on right now.

In general, I may say that I can once again reconfirm what I have always said, which is what I still think today. I mean, sooner or later, the Italian banking system, especially concerning mid-sized banks. So excluding the 2 big banks that we have in Italy right now. So once again sooner or later, the system, in general, will need to consider mergers or aggregations.

You know that once again strengthen or consolidate, I mean, the banking business, I said that the current Italian banking system needs this. And I mean, current, I mean, banks have to be bigger.

I mean, in some cases, we have big banks. So they don't have niche markets. In many other cases, they are too small. So they cannot compete effectively in today's market, but also in the market for the future.

Now this being said, this is a thought of a very general macro consideration. I really don't know which kind of combinations are able to generate value for shareholders or how to create stronger, higher-performing banks either both or this is the job of banks and managers.

I mean, they have to look for the best solutions. I mean, in terms of shareholders, of course, we would favor and encourage the right ideas in order to create stronger, bigger, more solid organizations possibly performing better than the current ones.

I mean, better than the one in which we have an investment, which is, in this case, it's exactly BPER.

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Operator [8]

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Next question is from Andrea Lisi from Equita.

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Andrea Lisi, Equita SIM S.p.A., Research Division - Research Analyst [9]

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[Interpreted] Is it possible to have some figures on the combined ratio of the motor vehicle business. Is it changing? What about the impact after the release of reserves on the CR, combined ratio? What about its possible evolution in the next quarters? What about investment yield on Life and Non-Life business? And once again, what about the evolution or the possible evolution over the next years?

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Carlo Cimbri, Unipol Gruppo S.p.A. - Group CEO, MD & Director [10]

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[Interpreted] Thanks for your questions. Now once again, our IS net. Now Combined ratio on the MV is 98.2%. On the non-MV, it is 89.3%. As for the -- well, the release of the provisions or reserves now in general and throughout the 9 months, we have released reserves for EUR 317 million, of which a little bit more than EUR 100 million on MV or cars.

As for the investment yield, Life and Non-Life, well, I have to say that the market rate structure, well, I'm sure you are familiar with this. You know the current situation very well.

So in general on the Non-Life, we reinvest between 0.5% and 1%. On the Life business, let's say, between 1.5% and 2%. Now it goes without saying that this depends on market opportunities and the development of interest rates. Anyway, what I just told you is the situation as is today.

So it all depends on the evolution and developments in terms of tax, in terms of rates, but also in terms of the possible new investments that may come up in the next month or so.

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Operator [11]

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Next question from the conference in English. So this is a follow-up from Peter Eliot from Kepler Cheuvreux.

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Peter Eliot, Kepler Cheuvreux, Research Division - Head of Insurance Sector Research [12]

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First one was, in Q4, I was just wondering if you can help us in our modeling or help us guide to what to expect in respect of BPER. And I'm just wondering that will you include restructuring charges? And is there any sort of true-up for Q3? Or if you can give us any guidance there, that would be great?

The second thing is the solvency ratio went up by more than your sensitivities would have implied. I guess that's good that the sensitivities are a little bit out of date, nonlinear and nice and et cetera, et cetera. But I was wondering if you could just give us an update as to what -- how we can think of the sensitivities today in the current economic environment?

And finally, I just wanted to follow-up on your answer to my first question, thank you very much for that. I mean, it sounded like perhaps we should expect further speculative -- not speculative, wrong word, but further investment (technical difficulty) I mean, just that, that maybe -- that strategy is maybe a little bit in contrast to some of your peers who take the view that shareholders like them to more invest in them for underwriting profits rather than for investment profits. And it sounded like maybe you're taking a slightly different view on that. So I was just wondering if you could comment there?

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Carlo Cimbri, Unipol Gruppo S.p.A. - Group CEO, MD & Director [13]

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[Interpreted] Thank you for the questions. Once again, as for BPER or B-P-E-R, I mean, the bank, well, Peter, this is sort of an unanswerable questions. Because, I mean, what can we expect from BPER for Q4. Well, I mean, in terms of results, well, of course, I -- well, I should ask, well, BPER itself.

And then personally, I haven't had enough time to go through the results of BPER because would have been communicated yesterday to the market. And once again, I have just read some bits and pieces of the results.

Anyway, based on this I can say that BPER is just continuing with the implementation of the plan, that they decided to have. And I mean, some of the objectives are very challenging.

So they would like to reach very good objectives, for example, in terms of derisking of their portfolio. They try to do this, well, a little earlier than what they thought.

And I think that they would like to reach, I mean, this target with a 1-year advance. So they would like to have an NPL ratio, which should be around 9%. And actually, this was one of the targets included into the business plan.

But once again, they would like to reach 9% next year. So without waiting too long with the possible other operations of NPL, let's say, transactions, and this is one of the things they have in their pipeline.

Now as for the, let's say, capital indicator or solvency ratios of BPER can be confirmed? Once again, they're among the most solid and the strongest ratios on the market. In terms of liquidity, so cash, this happens for all the banking system.

It's the key focal point for every single bank in Italy, including BPER. But I think that if you consider their results, even if you remove some costs represented, for example, by (technical difficulty) that will on the recent acquisition of Unipol Banca. So-net, if you will, of the, let's say, accounting components that have no value or just a little substantial value, I think that if you do this, their economic results are in line with the plans they had.

And once again, I do think this trend is reconfirmed. I think that the normalized profit is around EUR 140 million. This is the normalized profit. And well, I think and I hope they can keep having good results around EUR 200 million within the end of the year. This is what I think will happen.

And this means that we will have the opportunity to pay and remunerate, I mean, the shareholders, which are, let's say, helping BPER throughout this industrial, let's say, a venture and -- okay, so in a nutshell, this is what we expect from BPER.

Okay. Let me give the floor to Matteo for your -- for the other questions.

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Matteo Laterza, UnipolSai Assicurazioni S.p.A. - General Manager [14]

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There was a question on solvency. And which, in my opinion, aims, as they say, rebuilding a little bit the 9 months evolution. There was also another question on the sensitivity now. As for the quarter, we can say that it was characterized by very positive trends from the financial markets, in particular, the BTP spread is around 100 basis points. So even credit is, let's say, shrinking.

I mean, everything is going very well. So the recovery of solvency is based on the regeneration of capital, which played a major role. But of course, another key role was the financial component around 14 points due to the BTP effect. So the spreads going down or shrinking. But then you have the effects of many other components from the financial markets. And in total, this means a 5% recovery.

As for sensitivity, well, I know that this is a major critical point that we have to consider. So we started from 130 basis point. So an increase by 100 basis points is not, let's say, activating the so-called volatility adjustment on a national level.

So if there was an increase by 100 basis points, well, we think with a negative effect in terms of sensitivity maybe around 10% in terms of increase.

And there was also another final fourth question, I think Mr. Cimbri can answer.

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Carlo Cimbri, Unipol Gruppo S.p.A. - Group CEO, MD & Director [15]

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If I'm not mistaken, Peter, there was a final question on -- I mean, it was a follow-up question on my first answer concerning the strategies that we are implementing right now in terms of investments for the holding company.

And maybe you want to know if this is, I mean, consistent or even inconsistent versus the current market dues? Okay. So if I'm not mistaken, this is the meaning of your question.

So the answer, in this case is, no. I mean in terms of the holding company's investment strategies are very opportunistic opportunities. And we don't have exactly the same strategies that we implement for UnipolSai where I know we have liabilities in this case. So because we have liabilities, we have an [LNM] that we have to comply with. And of course, we do some assessments depending on that kind of situation.

On the holding company, the -- well, let's say, the assessment, if you will, is much more pragmatic than this. Because in this case, we have interesting margins. And these margins will give us the opportunity to comply with the objectives that you can find in the business line in terms of profits, but also in terms of dividends of the holding company.

At the same time, we do have the liquidity. We have cash. We have removed a source of answer that we all risk, which once again, I mentioned before, and it was, of course only for banker.

So it was a sort of constrained in terms of investment. This is because Unipol Banca, as such, deserves to have a much more flexibility, which is what they had in the past when some coverage operations were necessary.

Now we got rid of that situation. The holding company, as you know, very well, is a very, well, straightforward, simple holding company. I mean we have 2 major parts in our portfolio, both of them are listed.

And then we basically almost totally controlled UnipolReC R-E-C delivering excellent results. Recovery rate on NPL is around 30%. So this produces positive margins right now.

When we see possible sources of value, for example, the BTP when the spread was EUR 300 million, as I said before, once again, we have an opportunistic attitude. We'll look for opportunities. So in some cases, we open positions that we sell them, trying to make profits out of this.

This is a nonstructural business, which is UnipolSai. So once again, this is an opportunistic, let's say, behavior that so far was very positive for us.

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Operator [16]

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Next question from the original conference call is a follow-up question from Elena Perini, Banca IMI.

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Elena Perini, Banca IMI SpA, Research Division - Research Analyst [17]

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[Interpreted] My question is the following. When you have drafted the plan, of course, the market scenario was different, especially in terms of rate. So if this -- I mean, if the current scenario continues, do you have some, let's say, flexibility margins that will allow you anyway to reach your targets? And which kind of targets?

So are you considering a so-called technical profitability or are you working on other scenarios that you may want to share with us, if possible, please?

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Carlo Cimbri, Unipol Gruppo S.p.A. - Group CEO, MD & Director [18]

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[Interpreted] Well, thank you for the question. This is my perspective, maybe Matteo will follow-up and share with you his personal point of view.

You're right. Some time ago, the scenarios were different. This is what usually happens. I mean, every time you draw a business plan, which I remember, I mean, the starting scenario changes unavoidably, inevitably over the years in terms of rates, but also in terms of the so-called technical or even industrial variables that you have on the market.

Now this being said, back to the current situation. Well, I think that, yes, we do have wide flexibility margins on old single perspective. You know that we comply with the target, that we wanted to have.

And in terms of investments, so back to your questions, what I can tell you that we have a major profitability. So I mean, in terms of coupons, this is 3.2%, maybe 3.3%, if I'm not mistaken.

And again, we have a wide gap concerning most investments. Even though, basically, that most investments have to do with the Life business. So once again, there's a huge gap between guaranteed rate in our portfolio on the one side and the profitability of our business, the gap is more than 2%.

Maybe if you look at what happened in the past, so we have progressively reduced the guaranteed component. So the guaranteed part of the portfolio, but the profitability also in terms of segregated accounts. It's always been between 3.5% and 3.6%.

No matter what the scenarios were, especially in terms of rate curve. We also have a stock of, well, maintenance capital gains, which is a significant amount of money because of the current, I mean, spread situation on Italian govies, in particular.

But there are many other things. We've always had this -- an active management. Of course, we do not necessarily have to follow the market. So we've never been always followers, in some cases, between pioneers and leaders and in many cases, I mean, this was very satisfactory.

For example, some years ago, I remember that we decided, I mean, to overweight our financials investments. And in that case, well, let's say, a private, let's say, paid back a lot.

And that was a highly satisfactory strategy, the problem is that, I mean, most of the market, did the same thing. And then the same on BTP's. Just remember, the recent behaviors that we have implemented, well, once again, we have reconfirmed that our active management.

We have good capital gain. So we have a strong portfolio, the portfolio is highly profitable. So as for the financial objectives in the next 3 years, we are absolutely sure, we can absolutely hit the targets, the way we have shown that view.

On the technical side, once again, well, I have no new developments to share with you because, for example, in the past, and in many of the previous years, we've always been very careful in terms of provisioning.

And as a consequence, I mean they see us. So the reported combined ratios that we have had, gave us the opportunity to put together large provisioning stocks.

Now if I had to translate this, when you go to the solvency list, so to say, you can see excess of capital, and this is due to an over or to an excess of, once again, reserves or provisioning.

If you consider, for example, the strong competition in the MV business and basically, this means that the markets are starting, I guess, of 2016, I mean, the situation is basically quite a good technical balance, or in some cases, a technical loss on the market.

A complex scenario, a very competitive one.

There's been a decrease of the average premium. It went down by 20% to 25% in the past 5 years. So in this scenario, our results have been flat. And once again, if you see that we have even too many provisions in terms of solvency.

You can really prove that our provisioning system is very steady and solid. So on the technical side, this means that we can really be very open to, let's say, attract the market and face the future.

We -- we've always been serious. We have worked hard. And we have always reached the results of the business plan.

As I said before, in terms of Unipol Gruppo, these results can be reconfirmed. I think this is feasible in terms of the Gruppo side.

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Operator [19]

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Next question is from Michele Ballatore from KBW.

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Michele Ballatore, Keefe, Bruyette & Woods Limited, Research Division - Equity Research Analyst [20]

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[Interpreted] I have a couple of questions. The first one, concerns with the CR, combined ratio. I would like to know which impact -- the losses, because at a time, some -- of course, I'm talking about end of June. So which impact did they have on the third quarter?

So can you, I mean, quantify this in terms of the 3Q 2018, so we can make a comparison in terms of impact?

Then because of reassurance played a very important role, well, in the business plan, you said that there was a sort of a new setup of the reassurance business. So I would like to have once again some color on this. So what do you mean when you say that reassurance played a key role in Q3? Can I have some extra details about this?

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Carlo Cimbri, Unipol Gruppo S.p.A. - Group CEO, MD & Director [21]

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[Interpreted] Well, thank you for the questions. The impact of atmospheric events on 3Q '19, including MV, but also non-MV, is around EUR 200 million. Of course, this is on top of what we already had in the first 6 months of the year.

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Michele Ballatore, Keefe, Bruyette & Woods Limited, Research Division - Equity Research Analyst [22]

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Okay. So this is the result of the third quarter?

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Carlo Cimbri, Unipol Gruppo S.p.A. - Group CEO, MD & Director [23]

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Yes, it is. So MV and non-MV. So this is the total around EUR 200 million. Now of course, in terms of reassurance, now this is a property that have to be dealt with in general. So we have a very complex structure in terms of reassurance treaties and agreements.

Then in terms of our business plan, we identified them in some, let's say, new policies in order to be protected against atmospheric events. And this is sort of a study, I mean, some insights on how to face this phenomenon from the reinsurance point of view.

And this phenomenon can be seen in Italy more and more often. So this is why we, let's say, activated some protection. So it would take too long, to talk about all the technical aspects concerning reassurance contracts, but we also have a special coverage on, once again atmospheric events.

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Michele Ballatore, Keefe, Bruyette & Woods Limited, Research Division - Equity Research Analyst [24]

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So this means that, that component was not there before?

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Carlo Cimbri, Unipol Gruppo S.p.A. - Group CEO, MD & Director [25]

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That component was activated only on the 2019, together with many other contracts to take into account many other aspects concerning atmospheric phenomena within the general reassurance agreements.

Of course, this has given us the opportunity to recover and all of these, if you will, recoveries are summarized in the combined ratio that you must have seen in the presentation.

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Operator [26]

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Next question is from Niccolo Dalla-Palma from Exane BNP Paribas.

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Niccolo Cornelis Modesto Dalla-Palma, Exane BNP Paribas, Research Division - Research Analyst [27]

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[Interpreted] I have 3 questions. The first one is on the Life products. So are you still selling traditional products? Will you continue to do so or maybe you have the intention to gradually increase hybrid products, which is what many competitors of yours are doing both in Italy and abroad?

And as for pension funds, did you mainly deal with private products, corporate products, so once again, some more color about -- I mean, where this -- the big difference that comes from in terms of these products, I mean, between this year and last year?

As for Solvency II, so the metric you have for the 9 months, does it contain the dividend because I know that we have some PIR and that with the accrual, with some dividends and profits from the previous year?

The last question. The question is on debt. Would you consider liability management operations in terms of Unipol or UnipolSai because of the current rate level? Could you do this to improve the coverage in these market conditions?

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Carlo Cimbri, Unipol Gruppo S.p.A. - Group CEO, MD & Director [28]

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[Interpreted] As for the Life question, and okay, let me take advantage of this. So I can't talk about the reinvestment. So now in terms of plan, we've always done this. We have planned the financial flows of the Life business. So as to minimize investments on the segregated accounts, so planning, what is allocated to the so-called traditional component is based on our expectations in terms of deadlines and maturity dates of the old policies. So the collection businesses.

So back to your question, will we sell traditional products in the future or not? Well, we do this considering that in our segregated accounts, we do have the right capacity. This means that we can sell products up to a specific amount. Now the evolution of interest rates versus the forecasts, that you can see in the plan, sort of full singles for 2020 to slightly change the future capacity of selling the traditional products.

Now this may be standalone or hybrid products that we also sell. Now this is part of the, let's say, product allocation strategy that we will sell with the traditional channel, I mean, agents or through the bancassurance, which is basically sold, thanks to Arca Vita. And of course, again, this depends on the possible combinations, that we will reach, once again in an effort to minimize the flows to be reinvested next year.

As for pension funds, they are, let's say, negotiable. I mean, this is the kind of negotiable. Yes, this is something we got from third parties. They give us pension funds to manage. And of course, in some cases, they are guaranteed. We only guarantee the capital. In some cases, they are not guaranteed, depending on the conditions of the pension fund.

We also distribute, let's say, the so-called PIP. This is called Open Pension Funds from Unipol, but this is a very small component, a very small part, if you consider, I mean, the total business.

As for Solvency II, that this is a gross of dividends. So it includes the dividends. At the end of the year, you will have the net figure once we decide how much dividend we will distribute or pay.

There was also another question, Niccolo, on whether or not we would consider our liability management?

Well, the answer is, yes. Well, potentially, yes. So we do take every single hypothesis into account. So all of those cases, where we see the opportunity to, well, generate value for our shareholders, including liability management operations, we are not doing any such operation right now for the time being and as per our tradition. If we want to do this, we will only tell you after we did it.

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Operator [29]

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Mr. Cimbri and ladies and gentlemen, we don't have other questions for today.

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Carlo Cimbri, Unipol Gruppo S.p.A. - Group CEO, MD & Director [30]

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[Interpreted] Thank you so much for spending your time with us. Thank you for your attention and again for your questions. Thank you. Bye-bye.

[Portions of this transcript that are marked Interpreted were spoken by an interpreter present on the live call.]