Assicurazioni Generli Adr

Good afternoon. This is the Chorus Call Conference Operator. Welcome and thank you for joining the Generali Group Half Year 2023 Results Presentation Conference Call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Fabio Cleva, Head of Investor and Rating Agencies Relations. Please go ahead, sir.

Thank you, operator. Good afternoon and welcome to Assicurazioni Generali First Half 2023 Results Presentation. Here with us today, we have our Group CEO, Philippe Donnet, our Group General Manager, Marco Sesana, and our Group CFO, Cristiano Borean. Before starting, a quick housekeeping note. As we progress through the implementation of IFRS 17 and 9, we have made some minor updates to our 2022 preliminary comparative numbers. While the changes are negligible for the sake of completeness and accuracy, we've published an updated version of the financial supplement that we share with you on our website, and we added a dedicated slide in the backup of the results presentation. Before we open the Q&A session, let me hand it over to our group CEO for some opening remarks. Philippe, the floor is yours.

Thank you, Fabio, and thanks to all of you for joining this call. Today, we published our financial results for the first half of 2023, which are being presented under the new IFRS 17 and IFRS 9 accounting standards. These figures confirm once again that Generali is an increasingly profitable, diversified, and resilient group, and that it enjoys a strong financial position. I'd like to focus your attention on five key messages. First, our gross return premiums rose to €42.2 billion, up by 3.6% versus the first half of 2022. This was thanks to the robust growth in the property casualty segment, which rose by 10.6%, while premiums in life remained stable. Focusing on the property casualty segment, non-motor premiums improved significantly by 10.7%, achieving widespread growth across all main areas in which our group operates. It is worth highlighting that Europe Assistance premiums grew by 44% thanks to the continued increase in the travel business. The motor line rose by 11% across all the main geographies thanks to the tariff strengthening we implemented, the selective volume growth, and also the hyperinflation in Argentina. Life net inflows were minus 877 million euros, with positive net inflows in both unit length and protection, thanks to our proprietary agent distribution network, partially compensating net outflows from savings. This is in line with our strategy to reposition the life business portfolio towards more profitable capital-like products, and it also reflects the industry trends observed in the banking channels in Italy and France. Second, we recorded excellent growth both in terms of operating results and adjusted earnings. The operating result rose to over €3.7 billion, up by 28% from half-year 2022. This was driven by the strong contribution from the property casualty segment whose operating results recorded an 85.7% increase, rising to 1.85 billion euros. On the technical front, the combined ratio improved by 5.4 percentage points to 91.6%, driven by a lower loss ratio. Property casualty operating investment income increased by 26.2%, also benefiting from the acquisitions closed during 2022. The life segment was solid at 1.81 billion euros, and the new business margin was excellent at 5.81%, up by 0.31%. Let me highlight that over 40% of our new business value is generated in the highly profitable protection segment, which continues to show healthy growth rates. Furthermore, the operating results of the asset and wealth management segment rose to €498 million, up by 1.3%, with Banca Generale improving by 41.2%. Focusing on the earnings, the adjusted net result saw a substantial increase to over €2.3 billion, up by nearly 61% from half-year 2022, translating into a 64.6% rise in the adjusted earnings per share. This was driven by the improved operating results, which benefited from diversified profit sources, together with the non-recurring capital gain of 193 million euro net of taxes related to the disposal of a London real estate development. It also reflects the impact from 97 million euro impairments on Russian fixed income instruments recorded during the first half of last year. The net result also improved to €2.2 billion, up from €864 million at half-year 2022. Third, we confirmed our extremely solid capital position with the solvency ratio at 228%, up from 221% at full-year 2022. The 7 percentage points increase mainly reflected the robust contribution of the normalized capital generation at 2.7 billion euros, up from 2 billion euros at half-year 2022. Fourth, as you know, we recently announced two key acquisitions that will strengthen our market position both in the insurance and in the asset management space. The acquisition of Liberty Seguros will help generally enhance its growth profile, further develop the property casualty business, and confirm its leadership in the European insurance sector. It also underlines our commitment to Spain, where, as a result, we will reach the fourth position on the property and casualty market, and Portugal, where we will consolidate our number two position. Besides these two key markets, we will enter the Irish property casualty retail market for the first time. The transaction will also generate additional economies of scale thanks to cost reduction, IT optimization, and the opportunity for cross-selling of Generali products. On the asset management side, with Koning Holdings Limited and its affiliates, we are adding a leading global asset manager with a strong customer base in the U.S. and Asia. Koning is known for its longstanding expertise in serving insurance and other institutional clients, which makes it highly complementary to our asset management culture. The integration of Koning and its affiliates into our ecosystem, we create a combined platform with 650 billion euro in assets under management and high quality diversified capabilities across many asset classes. This acquisition is therefore key to reinforce Generali's positioning as a leading global asset manager while significantly scaling its third party business. Finally, As we have now passed the halfway mark in the execution of our strategic plan Lifetime Partner 24, Driving Growth, I confirm that we are fully on track to reach all the key financial targets we announced in December 2021. This is further proven not only to be the quality of the results we are presenting today, but more broadly by what we achieved in 2022-21. even with all the challenges and the external environment has and continues to pose. We will keep you fully updated on the progress of the plan in the upcoming month, and we are pleased to inform you that on January 30, 2024, we will be hosting an investor day. Thank you very much again for your continued interest, and generally, the floor is now open for all your questions.

This is the Chorus call conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchtone telephone. To remove yourself from the question queue, please press star and 2. We kindly ask you to use the handset when asking questions. Anyone who has a question may press star and 1 at this time. The first question is from David Burma from Bank of America. Please go ahead.

Yes, hello. Three questions for me, please. The first one on the P&C combined ratio. So if I exclude the effect of discounting of prior year releases and of NATCATs, the underlying has iterated from the first quarter. Can you give us some color on this and what your outlook is for the rest of the year, please? Secondly, on life, so you've booked a charge in the second quarter for higher lapses in France and Italy. Is this a forward-looking measure, and what were your lapse rate levels in the second quarter, please? And then lastly, on operating capital generation, so it normalized a bit in the second quarter but remains very strong, and it puts you way ahead of your cumulative 12 billion targets. My question relates to remittances, and so should we expect the cash conversion payout that you set out at your last CMD to remain valid in this new OCG environment? Thank you.

Thank you very much, David. I think the first question is for Cristiano on the numbers side, and clearly Marco could intervene also in the business dynamics. Regarding the question on the charge for lapses is for Cristiano. And then the question on the capital generation and the link to forward-looking remittance, that is for Cristiano as well.

Hello, David. So, first of all, fair point to be said on the evolution on the second quarter versus the first quarter. But please, I would like to highlight that the second quarter was also impacted by a higher amount over the average on man-made so-called, which are part of the attritional, are not the pure attritional part, but they are part of that, which was basically more than double than the average. This is also reflecting something in the order of less than €40 million for riots, for example, in France, which is clearly something uncommon from this point of view. Regarding the effect, I do agree with you that there is on the undiscounted current year combined ratio after adjustment for natural catastrophe, a small deterioration. For sure, if I look at the second quarter of 23 versus first quarter of 23, There are effect which are compensating when I look this translating into Euro terms because on one side the Euro term effect is basically zero but because it's the joint effect of a higher amount of revenues because of the very large growth we obtained. And it was still obtaining in the perspective collection that we are seeing also going forward. And there's more deterioration on the operational part of a 0.4 percentage point. On the second question, charges for lapses France and Italy, they are the combination of two effects. And if I would like to comment on the slightly more than 700 million euro operating variances you've seen in the first half of CSM movement, those charges are almost evenly split between what is the value of the exited experienced policies versus another charge for a more prudent lapse behavior going forward, notwithstanding the fact that we have observed in the last part of the second quarter and in the beginning of the third a small delay of this dynamic, so I mean a reduction of the speed of these exits. maybe also related to the different kind of client now moving because clearly the fastest moving client were already the one moved out. Regarding that part, I would like to say forward looking, this is embedding also this prudency and there are many actions that we are doing in order to have this under control and maybe I will let Marco comment also on the product. Just to conclude the answer on the remittance when I hand over back to Marco, capital generation is strong, capital generation is absolutely helped also by the higher interest rate which are seen in the discounting, you know capital generation the capital has to be discounted by mathematical terms, and which means a better development, especially also in the PNC world when you look at the solvency. And by the way, I would like to profit to give some more guidance looking on the effect on the remittances going forward as well as some capital management one-off that should be conducive and improving compared to what I've seen so far projected. I hand over now to the general manager on the product effect for life.

Hi, David, and I have everyone on the call. Great to have you here. I will start with the BNC underlying core. So just to say that you have seen the development on the average premium that we have in the first semester. I think it's something that we discussed previously. It's unfolding. It's clearly something that we are seeing. So our average premium for the different line of business is increasing. And so especially on motor, we should expect, we will see an improvement on the underlying combined ratio of motor. That is something that we expect. In terms of non-motor, we are protecting really well our profitability, so that's something that you already can see. But in terms of motor, all these improvements on the different geographies where we are pushing for price increase, quarter after quarter are materializing and you would see a benefit coming up in the in the combined ratio attrition of the current year. So one additional comment on your second question on life. So we have seen I would say in the second quarter a better environment in terms of lapses and as we see as we go into the third quarter we see even a slight improvement still on the on the lapses, bringing an improvement also on net inflows. We are now unfolding, you know, part of, you know, all of the different products that we plan and we design for reacting to these environments, both on the retention side and also on the new business side. So this is coming up. The first, you know, the product were introduced in the market in June. So we should see the first result in probably in mid of July and then coming up in September. So we are positive on this. And so we will see, I believe, a better environment going forward to the third quarter.

Thank you.

Next question, please. Yes, please, David. Please go ahead.

Yeah, just to quickly follow up on the last point. So you're saying half of it is more forward-looking and it's split between France and Italy. If I take 300 million... split between the two countries and I put that next to your liabilities, we're only talking about a few basis points. And if I look at the industry data for Italy, for instance, the lapse rates are up 100 basis points in the first quarter. So does this mean we should expect more to come in the second half? Or are you saying that in Q3, the lapse rates are already back to 21, 22 levels?

Yes, thanks for spotting. First of all, as you know, the embedded lapsation is, so we are talking about a deviation from the projected one, so we are putting more prudence in the projection, okay? It is a matter between intensity and duration. The action that we are seeing so far, especially, for example, in Italy, the emotional movement happened mainly in the month of February which is behind us so far with all also the let's say system solution found around is bringing a different trend. We put this part as an effect also it's like allow me to make a physical example. We have the fastest the faster animals running out of the door when you open the door the client moves so far then you have the others which are moving in a in a different way and then we are also seeing the dynamic from the offer that we are pushing for which is unfolding so what is projected is for duration and intensity, what so far compared to the normal projected effect is what could be expected before also having the final outcome of all the action that also Marco was explaining. So I hope this clarifies that it is gaining the, let's say, path work to normality.

Okay, thank you. Next question, please.

The next question is from Steven Haywood from HSBC. Please go ahead.

Thank you very much. Three questions from me. Just following on from the lapse trend, there was a six percentage points negative impact on the Solvency II ratio from a non-economic assumption. Can you tell me how much of this was from the change in the lapse assumption or the lapse experience? Thank you. Secondly, you've given the tariff changes by product on 1H23 versus 1H22. Could you provide us the tariff changes by country as well for Italy, France, and Germany? That would be very helpful. And then thirdly, you mentioned in your slide commentary that you'll see other tariff increases that are scheduled in the second half of this year. Can you tell us how much these are for which countries and which products. Thank you very much.

So thank you very much, Stephen. I think the first question is for Cristiano, while the second and the third are for Marco.

Yes, Stephen, so the effect of the solvency movement, looking at the half year movement, so from year end to year, the six percentage point, half of it is explained that this hypothesis is related to the lapses we were mentioning, including the experience.

Thank you. Marco, then we have the question on change changes and the second half of 2022.

Yes. So I would start by saying that in all geographies that we see, we are projecting tariff changes. So what we show in terms of average price increase, it's really coming from a broad range of geographies. And all of the geographies are showing positive signs. So I couldn't mention any geography that is behind or not doing the type of increase that we think is important to close the gap. And the gap that we are seeing, that we typically see, when we think about profitability, it's really the difference between our average price increase and our risk premium increase. So I have to tell you that we still see a frequency that is lower compared to 2019. So that is still a good effect that we are enjoying. And we are also seeing, I would say, across the different geographies, a more predictable claims inflation. So something that is in the range of what we projected last year. So we do not have major surprises in terms of inflation. So I would say that probably in Italy is where we have the lowest inflation and frequency. So we are seeing price increase that are, you know, completely closing the gap of these. In Germany, we have a significant price increase and You mentioned, and I'm mixing also your third question, because in reality, for example, in Germany, we already had an additional tariff increase in June, so in the end of the first semester, in the first half, because we have seen the need of updating that. So we will go in updating the tariff where we see a strong need. I don't have in mind a major need in terms of price increase. What I also would like to underline is that we are also leveraging on portfolio pruning, claims management, so all of this is acting on restoring our profitability and keeping, in terms of non-motor, our profitability. So that's overall what we see in terms of price increase and adjustment that we need to do.

Okay. Thank you very much. Can I just follow up with a quick question on your combined ratio target? Do you foresee meeting the below 92% combined ratio target next year and on what basis?

Yes, Stephen, I will take this one. Just for the sake of completeness, I think it is useful for you to receive the full explanation of the 6% negative impact on the non-economic assumption, where half, I told you, was all the parts related to the lapses, and the vast majority of the other 3%. is explained by the buyback we exploited in the first quarter of the year in order to have the long-term incentive plan served going forward. And the rest minor is really zero points, few percentage points related to the growth in our Chinese business. So relating to the combined ratio target, reiterating the 95% undiscounted guidance which is the most important one to look at because clearly the discounting is more volatile depending not only of ourselves because ourselves is the part on the discounting on higher volumes as we experienced in the second quarter which helped having a better discounting as well not only the interest rate but the largest component to driving it is the industry development the undiscounted part is confirmed because I think that the action that Marco told you before will progressively unfold and if you look also on the technical parameter part of the acquisition average premium and the evolution through progressively In the balance sheet, don't forget that there is a kind of J-curve effect as well in inflation dynamic pricing claims versus pricing because you take the time to see it unfolding progressively. So it is confirmed, Modulo, clearly some jiggling around. We had, for example, I can anticipate in July some higher natural catastrophe event, which is the typical also part happening in the third quarter. in the third quarter, which is one of the most impacted one, which could entail something of the order of 250 million impact of what has been observed on top of the half-year number so far on the projection, which is still well within our budgeted part also on an average basis.

Next question, please. Thank you very much.

The next question is from Peter Elliott from Kevlar Shiver. Please go ahead.

Thank you very much. And first of all, thank you very much for changing your reporting date to avoid some of your peers. Very helpful move. Thank you. In terms of questions, I wanted to focus, I guess, on a couple of the sort of big surprises today in terms of the non-life investment income and the discounting effect. On the investment income, I think it's probably fair to say that it was a bit higher than you had been sort of expecting or guiding us towards. Assuming you agree with that statement, I'm just wondering if you can explain what drove the surprise compared with what you were expecting. And on the discounting, I'm still struggling a little bit with the seasonality, to be honest. I know you say it's nonlinear. But you seem to be saying for this year that you expect basically one-third in Q1, one-third in Q2, and then one-third across the whole of H2. Bearing in mind that H2 should have some relative tailwinds, I think, from scope, volume, and interest rates, that final bit just seems quite low to me. So I'm just wondering if you can help me understand that at all. And then finally, one quick one on the asset management. Just wondering if you could clarify the outlook for the cost-income ratio. You talk about the strengthening of the operating machine, but I'm not quite clear whether that's a one-off or whether that's the sort of ongoing investment we should expect. Thank you very much.

Thank you very much, Peter. All the three questions, Cristiano, are for you.

Yes, thank you, Peter, also for re-acknowledging the flexibility, not overcrowding a single day. So on the non-life investment income, the sustainability is pretty much there because the improvement observed in the first half, 23 versus 22 of 164 million euro, could be split in three important drivers on top of the average also increase of the reinvestment rate, you need to be aware that we enlarged our perimeter through the embedding of the recent acquisitions, which means something in the order of 60 million positive effect. We had also some further dividend from private equity for the order of 53 million euro, and we are clearly the improvement also coming from our South America, Argentina, which is related to inflation. On top of that, which is explaining, I would say, 80% of this delta, also the rest, our 20%, is more recurring as well in the nature. So all of it could be explained because we enlarge the perimeter, we have some private equity which is nearly volatile as a seasonality but has some capability to be repeated going forward. And as well, there is the normal behavior in Argentina. So this is the combination of the three. In fact, higher volumes, higher rates of reinvestment, higher perimeter.

On the discounting part... Could I very quickly... Sorry, that's very helpful. I missed the private equity dividends, the number. I don't know if you're able to repeat that.

Yes, 60 million perimeter enlarger, 53 million from private equity dividend and 24 million from Argentina are explaining almost already 80% of the movement. The rest is normal as well increasing also due to the reinvestment rate at higher rate of the existing as well book and the enlargement. This is why we deem this as recurrent, okay? Perfect. Hope this clarifies.

It does. Thank you very much.

Okay. Discounting. So, first of all, you have seen that we raised a little bit the guidance from the previous one, 650-700 to 750-800. This is the joint effect of two things. Slightly higher effect of interest rates and slightly higher volumes, which put together, translating in Euro terms, means something else. It is very important to remember that when we speak about discounting, there is also a discounting of the prior year, so if I just spent out the prior year discounting, which is more erratic in nature because it's depending on what is happening on the release and the effect on the best estimator, the current year only was discounting $250 million in the first quarter, $509 million in the first half. And this, let's say, similar effect but slightly higher is explained by higher rates and higher volumes. This is consistent to the projection. So it's almost a linear because of this effect and not because it is not linear. There is non-linearity but this effect has been polluting this non-linearity bringing it to looks like similarly linear. On the asset management part Yes, the cost to income ratio is higher for two reasons. First of all, last year we had a higher amount of performance fees which were not repeated this year because we had 34 million Euro higher performance fees compared to this year. some IT investment. I would like to give you a couple of examples. We are investing in the evolution for anti-money laundering reasons of the Favre Check. We are investing in all the update of the information on the ESG feature, which is extremely important also for the future compliance reporting towards the European directives, as well as the importance for us to better select the investment we are making according to our sustainability strategy. And this means that the decrease of asset management revenues is bringing the joint effect. Going forward in the second half of the 23, the guidance is for tighter control in the business unit on the expenses, especially on the IT and the consulting one, which will bring a better development provided that we are able to revamp the revenues. Hope this clarifies.

It does. Thank you very much.

Thank you, Peter. Next question, please.

The next question is from Farouk Hanif from JP Morgan. Please go ahead.

Hi, everybody. Thank you very much. I just want to go back to your 95% undiscounted guidance. You said and admitted that there was some deterioration in loss ratio in 2Q, even if you allow for man-made losses. So is the implication here that you will have, you know, slightly higher loss ratio, but offset by reserve releases? And then can you comment on the COVID-19 reassurance recoveries and whether there's any other potential COVID-related reserve leases that we can look forward to in the next period. Secondly, going back to your comments about tariff increases accelerating, I mean, are you implying here that we could see higher than, you know, the growth rate that we saw in 1H in the second half, or at least the same in premiums? Last question is, you've talked about the kind of discounting effect, but you also have the unwind. I know you provided a slide on it. I don't want to go through that now because it's quite complicated. But if we look at the net of investment income and the ISE, the insurance finance expenses, should we expect that this is going to be quite a stable net margin going forward? Or will the way the curve is working... mean that there might be a squeeze in the next few years between investment income and IFE. Thank you very much.

Thank you very much, Farouk. I would say, Cristiano, the first question and the last question are for you while the second one with the tariff increases and the impact on premiums is both for you and Marco. So if you would like to start with the first question.

Yes, good morning Farouk. So going back to undiscounted combined ratio guidance 95, clearly when you say a number we are not talking about the perfect bending line at the very single digit after the comma, but for sure this is the range which we are keeping and confirming. the direction also because of the uncertainty in natural catastrophe. In general, the deterioration of the second quarter is, as we explained, driven by this higher amount versus the average of man-made. Going forward, we have to remember that the third quarter is the most intense, as usual, and it is confirmed from the evidence on the natural catastrophes but we need also to recall that in the second part of the year there is the progressive unfolding of the tariff strengthening measure and the pruning that we are doing and there are some portfolios as well which are accounted in as a loss component, which will revert back in the second part of the year, which is, again, a little bit more conducive. Regarding the COVID-19 reserve release and outlook, that was a kind of conservative approach towards this, which unfolded positively. And as you know, it is something which is not something you can reproduce. On the contrary, the guidance we gave over the cycle on the two percentage point of prior year is still confirmed, where basically it's evenly split between the risk adjustment release and the best estimate prudency that we are putting, especially, allow me to say, in very good years, which prudency should be higher, like these ones. Then I hand over to Marco on the tariff increase, and then I will answer the first.

Yeah, hi, also on my side. So let me probably give you a broader answer. So when we think about the increase in tariffs, the way we think about is really protecting the profitability of the business. So when you have inflation going on, you know, at 3%, 5%, 6%, or even 20% as we have in Hungary, What we really think is not a one-off measure, but an ongoing exercise that we keep on doing at the portfolio level where we see the need of updating our premium to keep them in line with our risk premium, so to keep them in line with the frequency and claims inflation. We have seen as... As we have commented multiple times, we have seen claims inflation, especially, let me reiterate, on a material damage. So the real part of inflation is on material damage. And we think this is going to be present also in the next year. So we would not stop price increase overall this year. But for us, it's an ongoing exercise that we keep on doing to maintain profitability overall. of our portfolio. Going back to what we expect, so we clearly expect this tariff increase, especially for motor, where there is a time lag in seeing the result of our price increase, moving up in the second part of the year. But again, I think it's important to remind that this is a Now we see 3.2% at us here. We were seeing 2% in the first queue. We were seeing 0.9% in the end of 2022. So we will see this tariff increase going to the level of inflation multiplied by frequency that we think it's the right level to offset the overall movement in our claims. So this is how we think about this. And it's important to see that also we think that inflation is not gonna disappear in 2024. So you're gonna see price increase constantly over time in the next month, because that's the way we think about maintaining the profitability of our business. Back to you, Cristiano.

Thank you, Marco. Farouk, on the unwinding, clearly, yes, it is complicated, but the key message is this. There is a different speed between the discounting impact and the unwinding impact. And we have shown it, I think, also in the Becker slide. You have seen that the full impact of seeing a locked-in rate unfolding up as an unwinding as the unwinding is much slower than what you see as an effect when you look on the discounting. You have seen that you need basically six years to get 80% of the impact that you can find on a single generation on the implied discounted rate curve, which is explained, I think, in our presentation properly, which means That, yes, you have a deteriorating effect. This effect is, in any case, counterbalanced by the asset allocation. On the asset allocation, you have higher amount of growth. And as well a risk premium which you think you can earn over the long term above the risk free rate because for sure to close this gap we could invest everything in government bonds. But since we are not investing everything in government bonds because we want to earn over the cycle a higher premium because we have capital to be allocated to take this risk and remunerate higher, we think that the effect could be depending on the different timely recognition of this excess premium in periods. I take an example. Real estate. Real estate, we are observing an increase of the rents, both in life and in P&C, because of higher quality of our prime location of real estate, which clearly started with a little bit of lag compared to the speed of the increase of rates, which is unfolding. On private equity, for example, where we also have and we receive dividend, it is depending on interest rates. When the interest rates are so high, like this, usually the exit from the private equity funds delays and wait for a stabilization of rate. So, over the cycle, this is not squeezing. On the shorter period, yes, we could expect this to further be enhanced compared to the dynamic. But over the cycle, this is going, it is a pure effect. Don't forget that we also have private debt, which is a floating class spread, which is compensating also partially this. So it is really an asset allocation decision, the speed of closing this gap versus the business growth. I hope this gives the the combination of this interaction.

Thank you very much. Thank you.

Next question, please.

The next question is from Michael Hartner from Burenberg. Please go ahead.

Thank you very much. And I'd like to address these questions to Philippe because it's lovely to listen to the boss, if I may say. But I don't know if that's true, of course, and it's such an honor to hear him. So I hope these are addressable to the boss. So the first one is on dividend growth. would be on deals and how happy you are with them, and on the third is on the remaining $500 million and whether you kind of think, oh, I could buy something with this, or no, actually, I'll give it to a shareholder. So on the dividends, so we've heard these extraordinary net income and EPS growth numbers, I mean, some 28%, some 60%, some 65%, which is huge, and of course it's half-year, but it does give a feel for the full year as well. And I just wonder if that means that your ambition or flexibility or how you call it for dividends, which at the moment is constrained by your plan, 5.4 to 5.6 billion, whether there might be a little bit of room for maneuver there. The second is on the deals you've done, how happy you are with them. The reason I ask is for an analyst, deals are really complicated. We have to adjust every single number, and we kind of get a little bit lost in the details. And I just wondered how would you, you know, you're sitting and you've got all this stuff, you know, you have a fairly good view of what's happening, whether you're done with the deals, how much more there is yet to come in the next business plan, just a feel for where we are on track. And then the final little question is 500 million. Thank you.

Thank you. Thank you, Michael. So on the dividend, I can confirm that we will pay growing dividends in the next few years, consistently with what we have announced when we presented our planned lifetime partner 24. So this is the basic commitment. Dividends will be growing. We gave a range on the amount of dividend that should be paid during the course of the plan. Of course, if we can do more, we will be happy to do more, but I will let our CFO comment on this. Yes, maybe, Christiane, you should remind our dividend policy for this plan.

Yes, Philippe, I remind that the 5.2 to 5.6 billion euro are well on track and we are on the mid-high range and there is a ratchet policy. So, as Michael, you will know, we will never get to a proposal lower than the previous year, which is also pulling up after the 2023 paid dividend on the 2022 result. So, for sure, this is a point of focus together with the improved remittance and cash flow generation capacity I was commenting before.

On M&A, Michael, of course, I'm very happy with the deals we made, not only the last two run, which I will comment, All of them, Catolica, for example, was also a great deal, both on the strategic and financial standpoint. I mean, we've been very selective in the past few years in making acquisition. We've been always very consistent with the strategic and financial framework we disclosed. As you know, We don't do an acquisition if there is no strategic and cultural fit. And if it doesn't fit with our financial discipline, we prefer to give up. And we've been giving up many opportunities. So we've been very selective, very consistent with our strategy, and we are very happy with all our acquisitions. The Liberté, c'est gros. it's very important to increase our property casualty business, to improve significantly our footprint in Spain, which is a very good market, and we needed to upscale our business in Spain. This was very important. On top of this, we are also increasing slightly, but still significantly our business in Portugal, and we are entering the Irish market, which is very different from the UK market, which is a good market for us. And we also have an opportunity with this transaction to upscale our direct business, which is, as you know, also part of our strategy. So it's definitely a good opportunity for us. It's also a great opportunity for us to further strengthen our leadership in the European market, which is important, very important to us. As you know, one of the keys of the success of this transaction will obviously also be the quality and the speed of our integration. But as you know, we have already showed that we are very good at integrating the companies we are acquiring and good at extracting all the synergies. And we will do it once again with the Liberty Seguros. We are also happy because it was important for our M&A team, not only for the M&A team, but for the whole management team and for the board of directors, it was also important to show that we are able to make a good deal, a good transaction, even in a very competitive process, because the process for Inverti Ségurons was quite competitive. The deal, the coming deal is completely different. It was born as a competitive process, but very soon we entered in a bilateral discussion. As you know, it's a no-cash deal. We have a very good partner in Taiwan who is another life insurance company, and they own 60-point-something percent of the total combined asset management company. It's a no-cash deal. We've been paying this acquisition with... with paper, not with a paper, but with a general investment paper. And thanks to this deal, we are not only upscaling our LDI business, we are a strong player in the LDI business in Europe. We are now becoming a strong player in the LDI business also in the U.S., and we are also acquiring a like Octagon, which bring us more capabilities on very interesting asset classes. So this is a great opportunity for us to continue building our global asset management platform, acquiring both third-party clients distribution capabilities and asset management capabilities as well. So I confirm that we are very happy with those deals and we would not have done this deal if we were not very happy with them. The third question. Yes, yes. Okay, so we've been using $2.3 billion for Liberti Seguros. We've been using also $500 million for the closing of the Catolica deal and to also acquire the control of both our Indian joint ventures. So we've been using a significant amount compared to what was available for M&A. As you know, we also have an excess capital of 300 million in Liberté Grosse. We still have something like 200 million left for acquisition. So we have, as you said, a 500 million buffer. I don't know if we will be able to use this for other acquisitions. As you know, it takes a lot of time to make a good acquisition. These deals, these very good deals we've been doing, needed a very long time to become mature. So I don't know how we're going to use this capital by the end of the plan. The end of the plan is quite close anyway. As I said, we are more than half way of the plan. The maturation of deal is quite long. And we stick to our commitment to... return the unused capital to shareholders at the end of the plan. So please leave us this flexibility until the end of the plan. As you know, we will not go for silly acquisition. We will go for acquisition only if they create value for all shareholders, but we will We definitely have in mind that share buybacks is now part of our capital management policy.

That's super. Thank you so much.

Thank you. Thank you, Michael.

The next question is from William Hawkins from KBW. Please go ahead.

Hello, thank you very much. Christiana, you've got your breath back, I hope, because I'm back onto you, I'm afraid. Coming back to the combined ratio, I would just like to touch on that again. I think you've confirmed that it's the undiscounted headline combined ratio which you're primarily managing towards, and we've just had 95% for that. How do you think that figure's trending into 2024 and 2025? You know, to me, there's big moving parts here in different directions. You've got inflation that's negative, pricing that's positive. business mix, which I think is probably positive. And then you've got massive investment income, which may mean you don't need to make the same combined ratio that you would have done in the past to hit the combined rate, to hit the ROE targets. So how are we thinking about the direction for that 95 over time? Is it going down or going up? Related to that, if I may, are you guys moving into a world where there is a connection between the impact of discounting and how you're setting the undiscounted combined ratio, because you're talking like it's not, which personally I like. But there are quite a few companies that are now saying, look, we're getting such a benefit from the discounting that we might as well use that as an opportunity to make more conservative undiscounted loss picks. I don't know if that's featuring in your thought process. And then lastly, on the combined ratio, if I may, sorry, but you made reference on this call to it kind of being obvious that NAT caps are seasonal in the third quarter. Maybe I misunderstood, but To me, that's not obvious. If you're an American business, the hurricane season comes in the third quarter. But if you're a European business, it's normally November, December, January, February when we get the bad weather and the knockout season. So maybe I've misunderstood, but if you could talk about that. Then secondly, can you just confirm, what were the total dividends in the first half for the second quarter for the non-life business? You kind of gave us the private equity figure, but I'd like to know the total dividends. just so I can figure out how much of that 788 million is recurring in the second half. And then lastly, please, you may have been directly touched on it, but I got confused. In the life result, you've got in the profit 138 million of negative experience variances. I'm not really sure what those were or how they broke down, because when you look in your financial supplement, that figure actually included a positive from Italy and then a negative from a couple of other markets. So I'm confused about what those experience variances were. in the first half. And I don't know if in the future I just plug in a zero because experience variances should gravitate around zero or if we're discovering that they should be structurally negative or maybe positive. Thank you.

Thank you very much, William. There are several questions here, more than three, but I would say that the combined ratio guidance is for Cristiano together with the setting of the undiscounted core as, let's say, a target for the business. And on the third quarter nut cut, Marco could comment. And the dividends contribution to the P&C investment result for Cristiano together with the last question on the negative experience values in life.

Hello William, thanks. So, clearly I confirm why we are managing the undiscounted combined ratio so far, because it is a process of managing in the end the final cash flow that can be paid out to the group head office through remittances in the results. So far, very few geographies are adopting these principles as local gap. Local gap principles are not taking the discounted combined ratio as a result. One driver of future potential change when this could happen is in the logic of when everybody will adopt locally. And we know that there are some big geographies that will never happen. Some will progressively get it. But it is important, and I'm linking also to the question of going forward in general or how to look at other approaches in giving more of the discounted result. We would like to avoid to give the discounted combined ratio as a target because when positive effect comes in the interest rates, There are two ways to stay within this number. One is being prudent and the second one is allowing the business to deteriorate the underlying technical profitability, which is something we do not want to do and we do not want to move into cash flow underwriting, which is the potential risk if you manage the discounted element. The undiscounting is protecting you in the real underlying technical soundness and the capacity of managing this. Because also from the point of view of a business, it is a little bit much more complex to manage a pricing of products at the same speed of the movement of the market interest rates, as you can imagine, also for steering the full business. which is more technically aligned to that. Going forward, 24, 25, is it 95 the magical number? So we do think that we are obtaining a mix. where for sure we are improving more and more the weight of non-motor due to the growth of non-motor, and which is getting to more healthier loss ratio, for sure, at the expenses of higher expenses. Allow me the joke. But for this is getting to more, let's say, sound behavior around this. In order also to have 24 and 25 unfolding fully the benefit of the motor tariff and the motor pruning done, it looks like to be pretty much a good direction of travel to be confirmed. We go on the third part, on Marco, on the natural catastrophe. I ask him to comment.

Yes, Cristiano, maybe I can add also one comment on the number two, because I think clearly you stated what we are willing to do, and I reiterate the fact that technically it's very difficult to move pricing, claims, all these industrial levers according to what is the interest rate externally. So in a way, the more we are prudent on the underwriting side, the better we feel protected, you know, against the different context of the market. So I would say, clearly, we would like, as I always reiterate, to have a sound and prudent underwriting policy in terms of combination. So coming to your questions on the NACAP, so I would say, So when we talk about forecasting, NATCAT is always a difficult topic, right? But if I look at our experience in the past years, our experience is showing a concentration of NATCAT in Q2 and Q3. with normally a Q4 that is better than, it's more benign than the other quarters. So that's the type of experience that we have. It's not a prediction, but that's the experience that we have in the past, in several years. We are not exposing the Northern Europe countries, so the Q1 Eurostorm probably worries us less than other players. while what happened in July, for example, in Italy, in Greece, in other Eastern European countries, something that we will experience going forward. And we will see in the numbers in the second half. Cristiano, back to you, I think, for the fourth quarter, right?

Yes, the fourth question, the second quarter dividends of PNC. In isolation, PNC collected dividend in the second quarter were 99 million, while overall on high fear 2023, the full six months is 125. So just to clarify these numbers on the equity and equity-like instruments. So what are the negative variances in the life component we are saying? It is exactly related to the experience of the change we had on the one-off effect. We were commenting on the generally employee benefit business where the accepted reinsurance has been modeled once and forever in a new way in order to capture the full effect, which is affecting just for this one-off 60 million. If you take this out, And then there are, these are number gross, then there are some reinsurance intermediate parts, so this part is gross. And then there is the net effect is the 60 million I was commenting to you, is just to let you appraise the fact that taking out this one-off effect, which is not going to be repeated anymore, the life is, as we said, more predictable and unfolding exactly with the sensitivities which we were showing.

Fantastically helpful. Thank you.

Thanks to you, William.

We apologize, but due to lack of time, the next question will be the last question. The next question is from Ian Pierce from Exxon BNP Paribas. Please go ahead.

Hi, thanks for taking my question. Hopefully two quick ones. The first one was just at the start of the call. You mentioned you were making some changes and taking some action on product to help insulate you from lapse risk, and you think that would be beneficial in the second half. I was just hoping you could provide a bit more detail on what you're actually doing now, particularly on the product side, to sort of help on lapse risk, and if that's baked into your assumptions around the CSM move that you saw from the non-economic variances. And the second one was just on the cost ratio in P and C obviously picking up sounds like a mix effect. Do you expect that to continue going forward? And do you expect that to be more than offset by the improvements in the loss ratio going forward? Thank you.

So thank you very much Ian. I think the first question is for Marco and maybe Cristiano if you want to add a color regarding the implications for the CSM while the cost and expense ratio trends in P and C are for you Cristiano.

Yeah, so I can add a couple of points to what I said before. So we expect benefit from the product that we are launching. And, you know, I would divide, as I said, into, you know, conceptions to different set of actions. So one, we have some action on, you know, on the retention side. So when we have to limit lapses, when we have to retain customers, so we can put in place some action, like, for example, giving a little bit more benefit on the yield of the segregated fund to the customer and making sure they can have an option to stay in with us. And And, you know, there are a set of, you know, actions that we can put on the table to retain customers, including making switch on, for example, other segregated funds which can provide a little bit better yield. In terms of new business, we are updating all of our offerings. I typically mention one product that has been launched in June, so a product with two segregated funds. One is larger, stable, with lower yields. The other one is a smaller segregated fund in terms of size, but it can provide you a little bit better yield. So overall, we are making our product more competitive in these environments. trying to capture more volume that are in the market at the moment. Clearly, this depends from the different geographies. What is very important on the different geographies, as we typically state, is the type of distribution that we have, the type of segment in the market that we have, and the type of, typically the mass market, It's something where you can have a better value proposition while the high net worth is more looking for yield. So that's kind of different. And the third element that we typically mention is really the type of product we can put in the market. It's bundled with insurance value proposition. That is very important in our value proposition. So... This is one element. The other element clearly is the external context. So if you look at the spread between our segregated fund, for example, or the goal is five years or ten years of the specific market where we operate, that difference is going to give you some change in the last experience that we have. Of course, Germany is different than France and different than Italy. So that is overall what we expect. So we expect some material benefit from this type of action in the second half. Already, you know, if we look at, as I said, if I look at July, it is better than, you know, probably one of the best months in the year in terms of net inflow. So we do expect benefits from this.

Cristiano? Yes. Thank you, Marco. In completing what is embedded, clearly there are, for example, retention campaign which are embedded in the CSM and some commercial actions. In general, apart from these cases, there are no direct link between the future new business. I'm not speaking on the existing one, but new business in the assumption included in the CSM which relates only to the book which is in force. Clearly, those actions might affect in the future slightly lower margins as we were saying has been embedded. Then it is a matter also of data and also common sense in understanding what we were saying before. Clearly, the most sensitive animals exited from the fence when the door was open. And now you are left with a different dynamic. It's like having two different temperature of your gas in the room. So you need to take into account what you have now in the book. I think this is the way it is embedded. To complete on the cost expense ratio in PNC. Clearly, we have a change of a threefold effect in 2023, which is more visible. We had M&A and embedding on the acquired entities, which, for example, for India, when we did the step-up consolidating it, India is a market where commissions are pretty high. As well, we developed very fast in the second part of 2022, and now it's fully visible in the 2023, the travel business of Europe assistance, which as well has a very high acquisition cost with a healthy other component there. on the loss ratio. In Italy, there are campaigns which are squinting more towards the non-motor, and within the motor, a huge push towards the motor other damages, which is the healthy, more valuable part that you can create also in a competitive market like Italy. So, all these trends put together say that basically are bringing to a different balance and also thanks to the higher overall growth of non-motor, there is a rebalancing in the mix between acquisition cost and loss ratio, which is in any case is being considered as well on the positive side as a reduction higher acquisition costs, but also administrative expenses are expecting to be managed and managed down, especially also when we complete fully the integration of Cattolica with the full synergies that we've seen, knowing the P&C book of it. So I stop here and end over.

Yes, before we close the call, the group CEO would like to make some opening remarks, closing remarks.

Yes, thank you. Thank you, Ron. First of all, I would like to thank all of you for attending this call on the 9th of August, and I would like to give you a few messages. Definitely, these are very good and very strong results, both in terms of capital position, profitability, and growth of the of the business. And definitely the last two acquisitions will further strengthen our group. I think it's very important that we were able to achieve such good results despite a very challenging and changing environment and we were able to do so because of the quality and the experience of the management team who was very much focused on implementing our strategy. As you can see, our strategy is working very well in any kind of environment. So not only I'm able once again to confirm that we will be able to achieve all the financial targets of our plan lifetime partner 24 driving growth but i think that beyond this we can be very positive on confidence for the next strategic cycle because this success the success of implementation of this plan will make possible a new ambitious plan. So we are not only delivering good results, but we are also preparing a bright and exciting future for Generali. So thank you once again for being with us today. Bye-bye.

Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones.