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Edited Transcript of UNI.MI earnings conference call or presentation 8-Nov-19 10:59am GMT

Q3 2019 Unipol Gruppo SpA Earnings Pre-Recorded Presentation

Bologna Nov 28, 2019 (Thomson StreetEvents) -- Edited Transcript of Unipol Gruppo SpA earnings conference call or presentation Friday, November 8, 2019 at 10:59:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Gianluca Santi

Unipol Gruppo S.p.A. - General Manager of Business Development and Corporate Communications

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Presentation

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Gianluca Santi, Unipol Gruppo S.p.A. - General Manager of Business Development and Corporate Communications [1]

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Good morning. My name is Gianluca Santi, and I'm the General Manager of Business Development and Corporate Communications at Unipol Group. I'm going to take you through our 9 months results released today.

At Unipol level, the actual results were affected by 2 nonrecurring items that I would like to highlight in order to clarify the reported figures. The first item is the positive impact of the consolidation of BPER already booked in the first semester and then adjusted to reflect the change in BPER equity. The second one is the cost of Solidarity Fund accounted for in the last quarter and disclosed in our strategic plan presented in May, which affects UnipolSai accounts as well.

Let's start with the consolidated results that we first present as normalized, that is net of both nonrecurring items. Unipol pretax normalized result showed a growth increase, going from EUR 727 million at September '18 to EUR 796 million at September '19, especially owing the good result in Non-Life and holding other (sic) [Holding and other] businesses. These areas more than offset the decrease recorded by the Life sector, which benefited less from the realized gains.

The net consolidated normalized result was EUR 577 million, almost 15% higher than last year. This figure at UnipolSai was very similar, EUR 576 million with a small increase compared to the same period last year.

Analyzing the reported results, which include the extraordinary effects, Unipol actual consolidated net result at September '19 is EUR 923 million. This result was impacted by the first consolidation of BPER for EUR 413 million and by the negative one-off item of the Solidarity Fund of EUR 67 million.

The September '18 consolidated net result, EUR 843 million, was impacted by the gain on the sale of Popolare Vita for EUR 309 million and other minor effects.

As regards UnipolSai, the actual consolidated net result at September '19 was EUR 509 million, only affected by the Solidarity Fund charges. September '18, actual net result of EUR 862 million was positively impacted by the gain on Popolare Vita and other changes in the business of consolidation.

Total Non-Life premiums increased by 2.7% to EUR 5.7 billion. Motor premiums increased slightly by 0.1% while non-Motor continue to show a year-on-year remarkable growth by 6%. Splitting up premiums into the 3 ecosystems recently disclosed in our strategic plan, mobility recorded a 1.2% growth, property 2.2% increase and welfare a brilliant plus 9.5%. Along with EUR 4.3 billion of Life collection, the welfare volumes stood at EUR 5.3 billion.

Remarkable was the performance of Incontra, our bank insurance agreement with UniCredit. Now focusing on health, which recorded an increase of 81%. No significant changes are recorded in the distribution channels where agents still collect more than 80% of total income.

Combined ratio after reinsurance stood at 94.1%. This ratio includes a 3.4 percentage points impact from atmospheric events, in particular, hailstorm occurred at the end of June and partly reported in Q3. Worth mentioning is that reinsurance offsets a notable part of this impact, thus maintaining the loss ratio rather stable. Combined ratio from direct business stood at 96%.

In Motor business, technical indicators remain good with frequency still decreasing and cost of claims under control, helping to mitigate the effects of the competitive pressure on average premium.

On the Life side, total premiums grew by around 40% to EUR 4.3 billion. UnipolSai and Arca Vita continued to grow at a strong pace, 39.5% and 44.1%, respectively, year-on-year. Traditional products continue to make up the majority of the portfolio, along with pension funds that performed very well.

In terms of Life yields, we continue to register a good profitability with the gap between average yield and minimum guaranteed on segregated accounts remaining strong and steady at 210 basis points. The guaranteed yield across the back book is consistently decreasing, given that the majority of the new products are sold with a 0% minimum guarantee deal.

Total investments are EUR 58.9 billion at the market value. In terms of asset allocation, bonds represent 87% of the portfolio with Italian govies weighting 52.7% of total investments. The increase of these percentages compared to the first half is mainly due to the positive effect of the mark-to-market evaluation following the 100-basis-point reduction of the BTP bond spread. Financial yields remain solid.

The duration of assets is 3.6 years in Non-Life and 7.7 years in Life with a very low mismatch. The total value of the real estate portfolio stand as EUR 4 billion, of which 53% allocated to Non-Life sector, 37% to real estate and the rest between Life and other sectors. Sales for EUR 180 million were recorded in the first 9 months of the year.

Turning to the NPE business. We represent, for the first time, figures included in the portfolio acquired from BPER for a total amount of gross loans of EUR 3.6 billion.

In the first 9 months, UnipolReC reduced gross loans by to EUR 266 million with collection for EUR 83 million, thus maintaining a satisfactory recovery rate of 31%. At September '19, net debt loans amounted to EUR 536 million with a coverage of 85%. UnipolReC reports a good trend in profitability with a net result of EUR 11 million in the period.

In terms of solvency, the ratios at both Unipol and UnipolSai remain solid. The ratio for Unipol using the partial internal model was 179%. UnipolSai consolidated ratio on economic capital basis was 249%, that is plus 210 basis points compared to June. The ratio for UnipolSai solo using the partial internal model was 278%, increasing by 140 basis points over June. These improvements are mainly associated to spreads shrinking.

Coming to conclusion, the first 9 months of the year proved to be satisfactory despite the extraordinary amount of net cat claims, and results are in line with the targets set forth in our Strategic Plan 2019-2021. This is the end of my presentation. Thank you for listening.

Let me remind you that our CEO and General Manager, will be pleased to take any questions from financial analysts and institutional investors during the conference call scheduled today at noon CET.