Assicurazioni Generli Adr

Good afternoon. This is the Coruscant Conference Operator. Welcome and thank you for joining the Generali Group full year 2025 results presentation. 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 Agency Relations. Please go ahead, sir.

Hello, everyone, and thank you for joining our full year 2025 results call. Here with us today, we have the Group CEO, Philippe Donnet, the Deputy Group CEO, Giulio Terzariol, the Group General Manager, Marco Cesana, the CEO of General Investments, Woody Bradford, and our Group CFO, Cristiano Borean. Before opening for Q&A, let me hand it over to Philippe for some opening remarks.

Thank you, Fabio. Good afternoon to all of you, and thank you for joining us today. These results mark a successful first year of our strategic plan Lifetime Partner 27, Driving Excellence. I'm very pleased by the strength and consistency of our performance. This clearly demonstrates that we have the right strategy, that we are executing it with total conviction, and that we are generating value for our stakeholders. We are also continuing to reinforce our already strong balance sheet. And this is going to be even more important in a world of greater geopolitical uncertainty. Furthermore, these numbers reflect the key initiatives being rolled out by our expert teams across business lines and geographies with hands-on guidance from head office and from the fantastic management team that presented the plan with me last year and that is here with me today, Cristiano, Giulio, Marco and Woody. I would like to share with you five key messages which underline the strength, quality and momentum of our results. First, the Group has delivered a very strong performance in 2025. We achieved a record operating result of €8 billion with a 9.7% increase year-on-year. Our adjusted net result exceeded €4.3 billion, also reaching a new record high. This translated into adjusted earnings per share growth of 16.2%, well ahead of our 8 to 10% compound annual growth rate target. Thanks to this strong performance, we will propose a dividend of 1.64 euro per share at our upcoming annual general meeting on the 23rd of April. This is almost 15% higher than last year and fully in line with our commitment to grow the dividend per share by more than 10% per year over the planned horizon. When I took the role of Group CFO, the dividend per share of Generali was 80 cents and I'm very proud that we more than doubled it since then. We will also propose a 500 million euro share buyback reflecting our strong capital position. We will implement it this year once we receive the relevant approvals. All of these highlights are clear commitment to profitable growth, disciplined capital management and increasing shareholder remuneration. My second message is about the excellent performance of our property and casualty business. Excellence in our core capabilities is one of our three key strategic priorities and it translated into a 20% increase in property casualty operating result. Such strong growth clearly demonstrates the positive effect of our disciplined strategic focus and of the many technical actions we have implemented in the last 18 months across pricing, risk selection, pruning, and claims management optimization. These actions enabled us to achieve a very strong underlying technical profitability with a 1.6 percentage point improvement in our undiscounted combined ratio. This was achieved together with very prudent reserving. Going forward, we have three key priorities in Property Casualty. One, we will further grow our non-motor book to shift our mix towards products and business lines with higher underlying profitability. Our franchise is very well positioned to capture growth opportunities in the countries in which we operate. Two, we will concentrate on preserving our excellent loss ratio in our key geographies, ensuring it is resilient across the cycle. We will also continue to execute the turnaround in Switzerland and at Genertel in Italy, as well as the successful integration of Liberty Seguros, which is proceeding very well. And three, we will improve the expense ratio through efficiency and productivity, supported by our widespread implementation of AI and automation across the insurance value chain. My third key message is on life. Net inflows rose to 13.5 billion euros, the highest level seen across the European insurance industry. This reflects the attractiveness of our product offering, the effectiveness of our distribution, and the significant investments we have made to improve customer experience. Our retention rate in 2025 was close to 90%. We have extremely loyal customers because they trust us and they like the services and products we provide. Our preferred business lines drove most of these inflows with 4.5 billion euros coming from protection and health and 6.6 billion euros from hybrid and unit linked. We achieved this while fully maintaining our underwriting discipline, with the share of capitalized products in our new business production at a very high 84.5%. The new business margin improved throughout the year, from 4.75% in the first quarter to 6.88% in the fourth quarter. This led to a full year new business margin of 5.66%, close to our 6% target for 2027. The interest rate environment is currently very favorable for the live business, and our product offering clearly appeals to customers. This gives us confidence in our ability to continue to deliver growth in new business value, leading to a higher contractual service margin and a growing live operating result. It is worth underlining the depth of the transformation we delivered in our live book. Ten years ago, this was primarily a spread business with high guarantees, exposure to capital market fluctuations and high capital intensity. Today, almost 80% of life new business comes from protection and unit linked activities that are most closely aligned to property casualty and asset management in terms of profit signature. And when it comes to traditional life, we now have a running yield on our portfolio that is 220 basis points above our guarantees. This translates into a profitability that comes more and more from fees and underwriting, and a business that is capital-light, less reliant on financial markets, and much faster in converting results into cash. I'm very proud of this transformation and the structural and sustainable improvement in the quality of our earnings. My fourth key message is on asset management and wealth management. Today, the Group has 900 billion euros of assets under management. We manage around 385 billion of those on behalf of third-party clients. A decade ago, this figure accounted for less than 50 billion. In 2025, asset and wealth management generated 15% of our overall operating result, meaning the contribution has more than doubled since 2016. I am particularly pleased with the strong performance results we have delivered for our clients and the underlying trend in net flows for asset management, which rose to over €16 billion last year, the highest figure we have ever recorded. Asset management generated over 1.6 billion euros of revenues, of which over 600 million came from external clients. Its operating result is up 7.5% on a year-on-year basis. This also reflects strong performance fees generated across a range of different asset classes, which in turn reflect our expanding and solid investment capabilities. We are very positive about our prospects for 2026 and beyond, boosted by several new initiatives, including the acquisition of MGG, which we concluded last October. We also continue to benefit from the synergistic relationship between our life and asset management businesses. As evidence of it, two-thirds of 2025 Unilink inflows are managed by our internal teams. In wealth management, Banca Generali once again recorded very strong flows of €6.8 billion, surpassing €110 billion of total assets. These results are excellent, and you can expect additional performance in 2026 from the integration of Intermonte and the Insure Banking Initiative with Alleanza Assicurazioni. My fifth and last message is about our strong progress across the three strategic foundations of our plan. These are people, artificial intelligence and data, and sustainability. Capturing the opportunities that AI digitalization and automation offer, including agent productivity and enhanced customer experience, is a key priority. We are working relentlessly on this, and I am truly impressed by the results our AI team is bringing. The research collaboration we began in 2024 with MIT is advancing rapidly, with three high-impact use cases nearing delivery and new streams already on track for this year. Another proof of our strong focus on innovation and technological transformation is Generali Cortec, a new AI-powered software factory for our insurance activities that we announced last month. At the same time, we are continuing to optimize our internal processes. For example, our AI initiatives are truly transforming the way we manage claims. This gives generally the strongest possible foundations for the years ahead, while already delivering tangible financial benefits today. When we developed our lifetime partner 27 driving excellence plan, we targeted around 300 million euro of efficiency gains thanks to AI implementation. Execution is progressing ahead of our original assumption, giving us the confidence to raise our 2027 ambition to more than 350 million euro. Our significant investment in AI across the entire insurance value chain will benefit generally beyond our current planned horizon. In fact, we see clear upside potential to grow the top line, designing better products, delivering them faster, growing our customer base, increasing agents' productivity, and gaining further efficiencies. Moving to sustainability, we set very ambitious targets as part of our current plan and we are very pleased with the progress achieved in 2025. Our results confirm that championing societal resilience and supporting the green transition are not only the right choices, they are also drivers of sustainable and profitable growth. We are proud that our leadership continues to be recognized and we remain fully committed to sustainability-driven excellence and long-term value creation. In conclusion, these results confirm the excellent start of our ambitious strategy. We are well on track against the planned trajectory and we see clear growth opportunities for our businesses. We are fully focused on creating even greater value for all our customers as their lifetime partner and for our shareholders. We also continue to reinforce our balance sheet as an important area of strength for the Group, with prudent reserving, conservative asset allocation, low leverage, and focus on cash generation. We close 2025 with an extremely solid Solvency II ratio, and this will go up by 15 additional percentage points with the upcoming Solvency II review. I believe this is very important also considering the current macro environment. We are fully focused on delivering and potentially exceeding our lifetime partner 27 driving excellence targets, and we are confident in our ability to do it once more, just as we have done for our three previous strategic cycles under the leadership of this management team, which I thank for the outstanding work. Thank you for your attention and for your interest in Generali. And we are now happy to take all your questions.

Thank you. This is the Coruscant 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. Please pick up the receiver when asking questions. Anyone who has a question may press star and 1 at this time. The first question is from David Barma of Bank of America. Please go ahead.

Hello. Thank you for taking my questions. First two questions are on P&C, please, and somewhat related, one on more top line and one on expenses. On the expense ratio, we've seen a take-up in the acquisition cost, I suppose, due to a stronger growth in non-motor. You're now, I believe, almost 100 basis points above your planned starting points. So can you explain how you see the bridge from here to your 2027 targets of a flat expense ratio, please? And then secondly, on the underwriting, you've already pretty much reached your underlying loss ratio targets. So can you talk about how you plan to balance further pricing versus volume growth in 2026, please, and whether in motor particularly you wish to further improve margins? And then lastly, on cash, could you give us the level of free cash at the end of the year, please, and what the underlying level of remittances was in 2025? Thank you.

Thank you very much, David. The first two questions on the P&C expense ratio and on the loss ratio moving forward are for Giulio, while the third one on the cash is for Christiane.

Thank you, David. On your first question about the expense ratio, I would say the following. First of all, we didn't have a target for the expense ratio. Actually, we had a target for the JAX ratio and then for the cost-income ratio. So when we look at the JAX ratio, the improvement that we wanted to achieve in the plan over the three years was 150 basis points, and I think you can see that in the comments. There is an improvement, let's say, of about 50 basis points in the JAX ratio. So from that point of view, Things are going in the right direction. What we see, however, is an increase of the other acquisition expenses. This is part due to mix, but that's also part due to the point that the incentives over the premiums are going up. Part of it is a consequence also of the fact that the profitability of the business is getting better. And to this point, there are incentives related to the profitability of the business. This said, we are not 100% happy, honestly speaking, with the development. So as we discussed already a few times, we are going to put more focus moving forward also to the development of the expense ratio overall. We are very confident that we are going to get the JAX ratio down. As we discussed, and I can tell you, we see that it's also in the plan for the next two years. And now we're going to put more focus on making sure that also on the acquisition expense ratio, we're going to see stability. So once we get stability on that part of the expense ratio and we add improvement on the operational expenses, then we should see in the future a picture where you're going to see a decrease of the overall cost. expense ratio. So that's something where we're going to put some more emphasis moving forward because so far our point of attention was more on the JECs and on that we are delivering definitely according to what we said last year. On the other point about the underwriting and how we see the development in 2026, I can tell you that starting from non-motor, where we have a very good combined ratio, we see stability somehow. So we are going to continue to have a pricing which is following inflation. We know that a lot of business has indexation, so from that point of view you can expect stability. As always, we are going to do pruning. We see portfolios where we need to do some pruning. So that's a normal activity that we do. So you can imagine that we are going to produce high quality results in non-motor. When we come to the motor side, on the one side, clearly, we are going to see an increase in average premium, which is lower compared to what we saw in 2025. But we still expect to see an average increase in premium which is ahead of inflation. So just to give you an idea, we expect the average earned premium to increase by 4% to 5% in 2026. The inflation or the risk premium this year was 1.6% of increase. Even if you assume lower frequency, maybe we see something higher frequency compared to what we saw this year. and you look at our risk premium evolution in 2024, then you get to 3%. So even if you take a situation in 2026 similar to 2024, we still have a spread of about 1 to 2 percentage points that we can realize on the motor side. So from that point of view, we would expect to see some improvement in the motor combined ratio. compared to what we have right now. And we should not forget that the motor profitability is now very strong. So when you normalize the combination motor for, you know, night cats and, you know, the more, let's say, A higher level prior period, we are getting to a combined ratio and discounting model, which is slightly below 96 already. So from that point of view, I would say very strong results, and there is still some room for improvement as we go into 2026.

Hi, David. It's Cristiano. So on the cash at year end 25, the stock of cash in all the accounts is 5.1 billion. But don't forget that there are elements of treasury which we don't account because they're part of the cash pooling. So the real... available cash is 2.9 billion, which should entail both capabilities to do M&A on one side, as well as the amount to be refinanced of debt, which was pre-financed. It is also part of this number, together with a usual precautionary cash buffer that we want to take in order to manage any potential unexpected level. The underlying remittance trend. I would say that the recurring component is likely a growth of the remittance from 25 to 24. And when I speak about from 25 to 24, I'm always referring to the cash view, which means that you need to go one year behind when you look at what is the actual dividend or remittance stemming from is slightly above four percent on the recurring component so in 2025 we collected the dividend from the results of 2024 which were having such level of growth going forward there is a good level of growth which is expected, which is consistent with on one side the business as well as the confidence on getting above our minimum level of 11 billion of cumulated net holding cash flow that we announced last year. So on that we are for sure confident because the first year start is ahead of it and the momentum is keeping.

Next question, please.

The next question is from Will Harcastle of UBS. Please go ahead.

Well, hi there. Yeah, the first one is just on the solvency and debt leverage. It's a bit of a conundrum, essentially. It's exceptionally strong. It's a good one to have. And there's low debt leverage. I'm assuming that's not at the most capital efficient level at the moment. I guess, can you sort of think about some of the dynamics that you might be thinking about in that regard? That would be helpful. The second one is big picture. Can you discuss if you've thought about or thought into how credible the recently discussed large language model distribution models could be? And could you see this changing distribution in European marketplaces, essentially becoming a bit more price comparison website-like, and how you think Generali would be positioned if that's a major impact? Thank you.

Thank you very much, Will. The first question, of course, is for Cristiano, while the second one is for Marco.

I will, yes. I think that not only the level of solvency is high, what matters a lot to me is the sensitivity of solvency getting really, really down. And I give you just proactively an example. You remember in 2018 when we presented 2019-21 plan, we were showing some stress tests we were making on our group solvency. On those same level of hypotheses, now we basically halved the sensitivity of the group, which is getting to a very good level of confidence in the capability to project and diversify both the profit and the capability to have the remittance. Why I'm saying this? Because clearly, as Philippe was mentioning, the 15 to 16 percentage point of improvement of solvency from the solvency to review, clearly upon regulators' approvals, we will give far more leeway about that. So for sure the question is and has been tackled. We have a very low level of leverage, which is giving us strategic flexibility in capturing all possible opportunities on one side and on the other side gives a lot of leeway also to manage down the cost of that because not necessarily you need to put subordinated debt going forward. So we have this level of flexibility. We are pretty pleased in any case by the level of spread that we can achieve on our issuance because of this very low level. So we are managing this balance. But for sure, As you correctly pointed out, we are pretty much in a very good sweet spot on flexibility and cost of future debt, also on funding for future growth, which is there. The solvency will also be put at work through, on one side, investments, as well as business. business growth so with this level we can also internally fund the solvency through solvency our business growth which is good and you have seen it is already happening in our capital generation which has some strain solvency capital requirements so it is really a growing recurring investment and business result going forward coupled with strategic flexibility

Hi. I will give you an overview starting from the speech that Philippe just gave. So we are really working on artificial intelligence use cases. We are working to introduce new way of using artificial intelligence through agentic AI. So we are working on every part of our value chain, in particular also on distribution. So this is really important because I think it's always very important to give a context to what we are doing as the technology that we talk about is at the early stage and we don't see completely all the usage that can come up. So it's important to stay in the game and experiment and see what are the potential development of the technology. using several providers and, I would say, making sure that we have an intelligent application in terms of process review and efficiency gains. Now, when we talk in particular of LLM and distribution, I would go back to what we discussed during our strategic plan. And there are a couple of points that are super important. So the first is we do see application in artificial intelligence and LLM that can boost the productivity of our distribution. So we see a huge potential for our distribution to do more, to be better, to increase the time spent with the client. So really reduce the back office activity and improve the quality and the amount of time spent with the client. The second point that it's always important to mention is that we are working to make sure to give the client all the choices on how to interact with Generali. So there are many different channels that we have available to the customer. And I think we are working on our customer experience to make sure that the customer has the free of choice on how to interact. We strongly believe, as we said, that the agent is going to be part of the picture of this interaction in a way, if you want, a three-way interaction. So the agents, the company, our customer center. So there are many ways in which we can interact with the customer. The customer has the choice on how to do this. I think this has been very visible, so for the one of us who participated in the deep dive in Mallorca, how we are transforming the distribution, how we are leveraging this tool to make sure that our distribution is way more effective and way more present into the client face time. The last point that I want to add is that clearly we are doing a number of initiatives because we realize we have to own much better the digital space compared to the past because the LLM can clearly influence the steering of the new business. So we are working to, I would say, occupy and own more of the digital space.

Next question, please.

The next question is from Farquhar Murray of Autonomous. Please go ahead.

Just two questions, if I may. Firstly, a slightly geeky question, but could you explain to me the yield curve sensitivities of the CSM to me, and in particular, why they seem to have switched sign and moderated over the year? And that might obviously take us back to the answer you had to Will on sensitivities. And then secondly, a more open question on AI. I was very interested in the long-run potential outlined on claims management on slide 19, namely the 40% productivity gain. So my simple question is really, how far away is that kind of long-run potential? And perhaps the more complex parts of that are, what are the key steps to there? What are the bottlenecks potentially? And in particular, how difficult will it be to scale out those into the businesses? Thanks.

Thank you very much, Farquhar. The first question, of course, is for Cristiano, while the second one is for Marco.

Hi, Farquhar. So for the inversion of the sign, it is pretty much a driven effect from two large countries, which are Italy and Germany. As you have seen, the sharp interest rates increase of 2025 very much concentrated in the long end part of the curve, so much more in 20-year swap than in 10-year swap, affected the portfolio, which are mainly fixed fee product part, as correctly Philippe in the introduction was mentioning, with the huge transformation. of the live portfolio now is getting more on the fee-based component, which is getting on such portfolio a much better and lower dependency from the market. Clearly, in such situation, when you are able to extract a certain fixed amount of fees, When interest rates go up, you are a little bit sensitive on the opposite side, which is happening both for the traditional and the hybrid products in Italy for the structure of the liabilities that we're explaining, as well as for the unit-linked increased weight in Germany. As you know, we are the largest collector of unit-linked in Germany on that point, especially also in the mix. So this is the underlying effect and this is even more also combined with the larger weight of the protection business in the VFA part. by the way i think this could be an interesting topic that we can deep dive on the 19th of march in our exploring generally session on finance but i think you exactly got it and i hope i gave you vision thanks

Hi, so let me give you an interesting question. Claims management is actually one of the top potential areas that we see in terms of benefit and productivity gains. Just to mention the other one is really software development where we see a huge potential at the moment. So just to go on your specific question, so it all depends from what do we mean by long-term and short-term. So if long-term we mean like 10 years, no, it's going to be much, much shorter than that. So we do see with the current technology that we have in our hand, potential to gain more significant efficiency much before that. So I would say even in the range of the three, five years, this is going to be something that you might see coming up in our disclosure. So what is going to take a little bit more, it's probably scaling. What do I mean? So, clearly, one of the most advanced applications that we are developing, which is agentic AI in claims we are starting from material damage, means going and building algorithm and agentic, I would say, orchestration and flow for a specific country. Clearly, we are doing more than one experiment at the time, and so it's going to take some time to generalize and give common tool to all the business you need to implement and transform. So, some of these benefit you will see clearly in this plan. much more you will see probably in the next plan. So we do have a huge sense of urgency in doing this application. Also, if I can highlight one topic, probably a little bit lateral. So in all the managerial transformation, The technology and technical part is one component of the transformation. There is change management on the people. There is learning new tool. There is getting used to variability in the outcome that, you know, are there already at the moment with the human component, but it's going to be different with the AI component. And I would say we're going to see, so lastly I would say, so this is a transformation that for the whole group is going to take some time, but not a super long time. Probably the last part of your question, okay, so it's the benefit, when we're going to see the benefits, I would say probably between this plan and the next plan. That's it, so probably the overview.

Next question, please. Go ahead.

Sorry, just as a follow-up there, I mean, in terms of the scaling discussion, what were the bottlenecks that slowed that down a little bit, just to understand?

No, there is no bottleneck. It's really developing AI algorithm that are good for one situation and can be reused for other situation. It's really a natural development of the technology. So there is no really bottleneck. By the way, the pilot that we are doing are really nicely developing. We are doing a couple in Eastern Europe and a couple in Iberia. in Spain and Portugal, so it's very nice what we are doing, and I don't see any different bottleneck than any other application that we are doing across the group.

Very nice.

Next question, please.

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

Hi, thanks. My first question hopefully is for Philippe. So the commentary that you made about partnerships in Italy, so you talked about the unit credit partnership working well and expanding it and then maybe expanding into other partnerships. Could you give some of your thoughts around this and what would make this attractive and what potentially upfront costs qualitatively would be involved? My second question is on the non-operating costs. So you obviously put quite a lot of costs very much forward into 2025 to accelerate your plans. But what does this mean for 2026 and 2027? Because obviously, you know, we talk a lot about operating, but a large part of your target is the non-operating. And that's been very noisy for the last decade. And my last question is on the investment margin outlook in both life and P&C. You make some comments in the slides and in your presentation around reinvestment rates and, you know, slower growth in IFE. Are we to expect a wider margin in P&C and maybe the same in life over a longer timescale?

Thank you very much, Farquhar. Of course, the first question is for Philippe, the second one for Cristiano, the third one are for both Marco and Cristiano, as there is the reinvestment yield, but also the IFI trajectory going forward.

Hello, Farouk. I will not be too specific on answering your first question. Definitely, we have an existing cooperation with Unicredit, both in bank assurance in Central and Eastern Europe and also already in asset management. Definitely, we would be available to investigate other industrial cooperation opportunities with them as long as they create value for all stakeholders. But there may be also, in Italy, other business opportunities, bank assurance agreements, asset management agreements as well. So we are looking at all attractive opportunities for us. We have a wide range of products in the insurance field, but also in the asset management field where we have extended significantly our area of competence. So we are definitely a good candidate for partnerships in Italy and out of Italy.

Hi, Farouk. For the non-operating components, so first of all, yes, got it. We are accelerating. There was the room, the capabilities, the speed, especially of execution, which allowed us to get there. What does this mean? First of all, for 26 and 27, I think something we will comment also again next week, but a small spoiler of staying around the 100 million euro running restructuring charges, also IAS 19 definition of severances, which are sometimes individual negotiation, not only large restructuring. This is the rate. What does it mean on profit? On profit, for sure, the restructuring we did in 2025 book on the balance sheet will materialize in Italy, in Germany, and Spain and Portugal, especially the latter related to the liberty integration. The speed is slightly different, while in Germany is a much faster conversion of the payback, slightly longer in liberty for Spain and for the integration, and the longest one is in Italy. In any case, accretive for our profit. Overall, I would say that if you sum all of them from 2028 onwards, these should contribute slightly more than 100 million euro pre-tax benefit. So it's more creating the room also for the future and the future speed and efficiency. We are pretty much focused, and your comment on the jittering non-operating is very well known and catch. This year was taken this opportunity, but the focus you have seen in reducing it, materially reducing the negative non-operating result, materially reducing the net other non-operating expenses, putting much higher discipline, putting up 80 million euros starting from this year from non-operating, putting back into operating, affecting both the life and the PNC ratios. It is the trajectory we are taking. And this is pretty much a very bigger commitment to reduce the so-called evaporation from operating to earnings before taxes. So this is part of what we will discuss also next week. I hand over to Marco for the investment margin.

Yeah, so again, I would start going back to what Philippe said. At the moment, we see a very favorable interest rate environment. So this is... interesting because we see the spread between our average book yield and our investment yield being positive both in life and in PNC. Probably we see more in PNC at the moment than in life so we expect 20 to 30 basis point improvement next year in life and more up to 120 basis point in PNC. For the non-VFA, so live non-VFA investment result, I would expect more in line as this year, while I would probably expect higher PNC investment result for 2026.

If I can complete also on the EFI and in general giving some guidance on the trajectory. On the PNC EFIs, we are guiding for around 600 million 2026 effect. But all in all, I think what matters most is if we look at the life operating investment result guidance on 2026, we will keep a 900 million euro guidance for life. For PNC, we are going to the 1.1 billion guidance for 2026 in the PNC investment operating result, which I think could give you some hints for your projections.

Thank you very much.

Next question, please.

The next question is from James Shark of Citi. Please go ahead.

Hi there. Good afternoon. Good morning. I had the first question on the PMC general expense ratio. So thank you for the new disclosure, which shows 14.4% falling down to 13.9%. I guess my question is, is that a kind of view of admin expenses and admin expense ratio? The reason why I ask is because I think Alliant shows a number that's about 6%. So you've got about 14% on that number. Obviously, that shows a lot more potential to drive it down over time. So just curious what's included in that. Then I just wanted to try another question on the AI topic. Okay. I can clearly see some of the potential efficiency gains as you start implementing agentic AI and ultimately kind of through to orchestration of those agentic AIs. I'd like to focus a little bit more on the hyper-personalization journey. So if you kind of think about a typical Italian retail customer, how will the service of that customer kind of evolve? Up to now, we've had you know, pretty basic kind of implementation of AI. Over the next kind of couple of years, that's going to get a pace of orchestration that's going to take hold. And then probably we're going to get to artificial general intelligence by around 2030, which is only a few years away from now. So if you can just help me understand that hyper-personalization journey, that'd be really helpful. And then just one final one, if I may. I'm just curious about the remittance ratio from others. That seems, I don't have the number, yeah, 457 in 25. It just seems very low if I think about what's included in those other businesses, so the asset and wealth management, group holdings, your persistence, et cetera. So the remittance ratio on whatever you want to assume for the op profit just seems very low, and therefore the potential to grow that seems quite significant. Perhaps you could help me understand that a bit better. Thank you so much.

Thank you very much, James. Let's start with Marco on the hyper-personalization journey, and then Cristiano will take the question on the administrative expenses as well as on the remittance from other.

Yeah. So, very interesting. So, James, I'm not sure. I know a lot about what is going to happen in 2030 on... on this topic because I see news coming up every month. So it's not easy to understand how this is going to evolve. So also for ourselves, I think we need to make sure that we are very pragmatic and structured in applying the technology that we have at the moment in our end. and be ready to do more with the news that we see and that are available to ourselves. Just a word on the hyper-personalization journey. So I think it's an interesting topic, especially for a retail and SME, so for a group like ourselves that has most of the business in retail and sme so i do see a journey of personalization especially in the service and in the way the customer use and research for our services so the overall topic of cut of the customer experience i think it's going to be It's going to evolve in a really personalized journey where every customer is different and can approach ourselves in a very different way and use our services in a very different way. Also, I have to say, when we talk about more technical condition, typically in our product you can have pricing, but also technical condition. There, I think that the pricing is typically like already very personalized. If you think about the motor pricing algorithm that we have at the moment is very much personalized. That doesn't mean they can further be selective and probably even more technical than we see today. On the other side, on the condition of the product, we'll see. So I'm not sure that all the conditions are there to be sliced and taken because some of them are based also on a principle of mutualization. So it's interesting if they stay slightly large and not flexible to make sure that there is also some mutualization across the different risk. But I agree with you that in term of service, the way the client is going to use the the service or our product, we are going to see a lot more compared to what we see at the moment. That's why, and I want to reconnect with one of the questions that have been asked at the beginning, we are a lot into implementing also this technology in distribution because we see a great value for distribution and client to upgrade to this tool.

Thank you. I appreciate the tricky topic.

Thank you, James. So going to the so-called jacks over insurance revenues, gross insurance revenues, in general, expense ratio. Let's start from the expense ratio number. So our expense ratio admin contribution within admin expense ratio within the expense ratio is 7.2%, decreasing by 0.3 percentage points from previous year. If I look within this number, how much of this is general expenses, which is part of our JEX ratio, 5.1% of the JEX ratio, 5.1% of the 7.2% goes also in our JEX ratio. Then there are other elements outside the admin in other expenses which accounts for another 3%, which is explaining not a very different level if you just look and compare on the structure. I hope this gave clarity. I think you were mentioning Allianz, if I'm not wrong, they have 6% around as a number. Getting to the next topic of the remittance ratio from other. It is low. It is in 2020... Four, there was a one-off capital management action that we did in Malaysia from the integration and the excess capital repatriation after the acquisition, which is non-repeatable and accounts through something around 35 million euro. What is it on top? The major contribution on this is clearly the asset management component, which if I look in total, considering not only the general investment holding component, but as well the other component, it is slightly decreased by 9 million euro. Then we have the effect of consolidation where we present it, because as you can imagine, since especially the general investment holding shares are not all held into ,, some of them are held in the perimeter of other countries. And this is accounted as a result for the countries, but then it is netted out as a consolidation. So there is a negative number which netted out to give you the fully consolidated view and avoid any form of double counting, to be extremely precise. I hope this gave you some insight. The consolidation went down accordingly to the lower amount of dividend paid by general investment holding, which is also reflected in the other holding result of the operating result we were mentioning.

Yeah, makes sense.

Thank you so much. Thank you, James. Next question, please.

The next question is from Ian Pearce. of the end paper, Ibar. Please go ahead.

Hi, thanks for taking my questions. A couple on P&C. Firstly, on the attritional loss ratio in Q4, there was quite a big improvement in the Q4 number versus the nine-month number. Just wondering if we need to normalize for anything in particular in Q4, or that should be a good starting point for the 2026 combined loss ratio. The second one is just on the capital generation number from P&C, which again is very, very strong. I'm just trying to understand the moving parts, particularly in relation to how you treat NatCat and PYD in that capital generation number. I think PYD isn't in that number and that's why you're benefiting and it's not in the non-operating, but if you could just give me some clarification there, that would be very useful. And then just a quick third one. It's just on the comments on motor versus non-motor and the desire to sort of prioritize growth in the non-motor segment. And if I look at the combined ratios that you're delivering in motor and think about normalizing for NatCat and then the pricing sort of expectations that you've given for 2026, the motor and non-motor combined ratios are going to be pretty close to one another. So I'm just wondering why you continue to want to prioritize the non-motor segment versus the motor segment if they're delivering similar levels of profitability.

Thank you, Ian. The first and the third question are for Giulio, while the second one on capital generation is for Cristiano.

No, thank you, Jan. I would always suggest that, you know, you don't put too much emphasis on a quarterly slice, so I would always state the information year-to-date as the most relevant information. So to your point, when you look at the combined ratio 94.3, that's, in my opinion, a good guidance of what is the status quo, considering that there is a lot of quality in this figure. So if you ask me what is the point of reference is this combined ratio for the 12 months, and consider that, as we said a few times, that's based on prudent assumptions. So that's on your first question. On the difference between motor and non-motor, I would tell you the following. Yes, the combined ratio in motor is getting closer to the combined ratio in non-motor. So from that point of view, you could say why you have a different set of priority. The point is the motor market tends to be a little bit more competitive. So from that point of view, at the end of the day, the reality is that right now we might have, let's say, less push on like we had in the previous years on pushing up the prices and we were also willing to lose volume. So now this balance is changing, but we need to be realistic. with the dynamics that we have on the motor side. So we will expect that our risk in force will not go down, but we will not have a substantial increase in risk in force. On the non-motor side, the competitive environment is different. So from that point of view, we think that there is more space for growth. That's also due to the fact that there is more demand also for the solution that we offer on the non-motor side. So it's a reflection of the competitive environment as opposed to being

a reflection of us having a different appetite for one area versus the other okay and for what regard a capital generation this allows me to to to explain a couple of uh topics first one is uh the treatment of prior year development as we told you the the best estimate uh movement of the priority is taken off from from the capital generation so this year when we applied what we told you already at the nine months, which is a kind of interplay between the natural catastrophes and a lower prior year, lower natural catastrophes, lower prior year development for the best estimate, we have an asymmetric view in the capital generation. So you are showing a benefit of lower NatCat without showing the reduction that is seen in the non-operating variances in the non-operating variances related to the solvency component. All in all, the two put together created a net effect which is around 0 positive 1 billion euro. Itself, it creates something in the order of 0.4 billion euro of higher capital generation. This is why you should not in such specific case, I think it is a drawback of the choice, projecting the cash conversion, the full benefit of this 400 million euro, because part of it is erased from a lower prior year development. And this is, I think, something I wanted to hint. It is the net effect between the benefit of lower net cut and the lower prior development is in reality a 0.1. So please also take this into account.

I'm still very clear. Thank you.

Thanks to you. Yeah, next question, please.

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

Hello, everyone. Thank you for taking the questions. Longer term, how do you feel about the 8% to 10% EPS CAGR? I think for some people there's a fear that this is the best you can do and this is a cyclical industry, so at some point you may even have an earnings dip, not just lower growth. On the other hand, even though you say you're managing your earnings, you've just blown through that 8% to 10% with 16% growth. So I'm kind of wondering, is 8% to 10% still achievable from the 2025 base? And how do you think about the long-term glide path of how you can be growing your earnings over time, please? Secondly, how should we now think about the outlook for the new business margin? You've just done that 5.7%, which in rounding terms is already around the 6% that you're targeting for 2027. So on the margin side, is the goal to improve further or are you roughly where you are on the margin and it's now all about growth? And around that, I'm still not quite sure how you think about the glide path growth in new business volume for Generali. Is it a 5% anchor, a 10% or what? And then lastly, please, sorry, you've already touched on this slightly, but I did just want to come back on the non-operating investment income, which was the minus 214 this year. I mean, I've got in mind that that number... over time should be a more sustainable larger positive figure because you get fair value items earning through and you get realized gains coming through so there may be a question about the size but i would assume that it should be a net positive over time am i right in that or have i totally misunderstood how how the accounting works below the line thank you thank you very much william the first and third question are for cristiano while the second one on you miss this margin is for julio

Hi, William. I think this is a pretty much fundamental point, because clearly, if you ask us, are you going to be repeating 2025, it is not feasible in a sustainable way. We were before answering to Ian saying that in the end, we took 100 million net benefit from lower net cut versus higher prudency in prior year. So there is already this effect to be taken into account. There is also an effect of some positive tax thing which were shown in the fourth quarter. So you have seen the taxation fourth quarter which is potentially positive. So for sure this is not the number which can be sustained. In the eight to ten, don't forget that the The reason why we got to this number was because at least 1% contribution was coming from the integration of Liberty. Clearly, so the more you are able to redeploy capital for M&A and the more you have strategic flexibility from your combination of cash, capital, debt in order to do it, that could be potentially manageable. Let's say that we take it out. That would have been a 7 to 9 without liberty. What does this mean? In a capability for us to create a net holding cash flow growing with higher cash conversion, recurringly at a level where we have spare cash on top of the dividend, to have always a buyback, which is a form of remuneration, you have, in any case, a support which could be from capital management of 1.5 point, let's say. So if you are able to produce slightly more than 4% operating result growth, knowing that you will work, to try to anticipate also the second question, On the non-operating component, you can reach a 6% run rate of earnings growth, as well as EPS, adding 1.5. So there is a component of M&A. Without it, you should decrease one point, but clearly, This is also the objective that we need to be able to sustain in order also to exploit all what Philippe, Giulio and especially Marco were telling you about the coming of AI and also what I was telling you before about the coming of the profit benefit from the restructuring charge we had. On the non-operating investment income, you are perfectly spotted on the discussion that I'm having with the team, because for sure the accounting non-operating investment income is impacted by fair value through profits and loss effect. Some of them, for example, if you see the difference from the reported net result and the adjusted net result, where fair value for profits and loss movement, stemming from effects change, for example, on our private equity and other non-Euro denominated asset, that we can have. So there is some of this effect in this year. On average, you should stay around zero out of this fair value movement. And in general, we have realized gains that we can manage to compensate versus a normal level of, let's say, run rate impairments, which is part of normal good and bad, which happen. So for sure targeting that, I would say net of some ECL which could jitter in case of, let's say, change the muted macroeconomic situation, going closer to the zero on a run rate, it is something which should be achieved on average over term, over the cycle, with some, let's say, small potentially negative bias for some small cleanup of impairments. But it is not far from that. Hope I gave you the vision.

No, thank you, William. First of all, I agree with your math. For me, too, 5.7 is very close to 6, so from that point of view, we are at the level of new business margin that we'd like to have. Moving forward, so our priority is not necessarily to improve the new business margin to get exactly to 6% also, because if you think about that, the implication of doing that would be that any opportunity of a product with a new business margin even of 5% would be diluted. So from that point of view... that would clearly exclude a lot of possibilities. So our focus is in reality maintaining this kind of marginality. If there is an improvement marginality, that would come from mix rather than improving the margin of a specific segment. And then the idea is to grow the new business value. So actually our emphasis is to try to get growth in new business value. And that's, you know, the bathtub of Cristiano needs some very new business to get into the bathtub to make the profit run. So that's the focus. And keep in mind also that our marginality is pretty strong across all the different lines of business. Also on the saving, you see now a marginality which is not far away from the marginality we have on hybrid. So from that point of view, The capital efficiency that Philippe was referring to and also Cristiano before is now also present in most of the savings business that we have. So bottom line is marginality is at the place where we like to see it, and we are going to push on profitable and capital efficiency growth.

Thank you.

Next question, please.

We have time for a last question that comes from Michael. Hartner of Barenburg. Please go ahead.

Sure, I just made it. Thank you so much. I've got three, if I may. I'm being a bit greedy. So, Philippe, you mentioned a sort of payback period in life. I just wondered if you could expand and give us, I know you're not a big fan of figures, but maybe give us a kind of timeline so when we might see it in measurable numbers. The second is for Cristiano. It's always, you know, money for money, money back to money, I think, from Switzerland. When will that be? Basically, I'm thinking that you've understated your over $11 billion target because this was excluding the one-off you got this year, which wasn't Switzerland. So I guess you've already understated it by maybe 15%. And the last one is for Philippe, and I don't know how to ask it politely, but, you know... You own a big asset in Italy in kind of asset management. Your colleagues have been talking about benefits of M&A. Is this something you're thinking about? Thanks a lot.

Thank you very much, Michael. Before we answer the question, can you please repeat and clarify a bit the first and the third question for Philippe because we really didn't catch it from the line.

So Philippe, when you spoke, sorry, hang on, let me see. Is this better?

It is much better, Michael. Thank you.

Yeah, sorry about that. So benefit of a shorter payback period in life, when would we see it noticeably in the numbers? I'm guessing it will come through acceleration or rise of the release rate out of the CSM, but who knows. The second and the third one is basically I wanted to know about the asset management or the wealth management business you partly own. given that you're integrating it more and more with the group, you know, with the Allianz kind of cross-selling thing, would this be something you'd be thinking about in more strategic terms? Thank you.

Thank you very much. It's clear now. Maybe, Cristiano, would you like to start with Switzerland and then Filippo will answer the other two.

Absolutely. I confirm you that 2026 entail remittance from Switzerland, money are coming back from Mama, and this is part also of the component of the plan that we are getting. For sure, the better the situation will be, the more we can get, especially I'm referring to the good start of the restructuring that we are observing in Switzerland, with a high level of prudency also in the way we have seen so far the P&C number, which is allowing to further benefit. So yes, it is underway. Money are coming. It will be progressive, starting from a certain amount in 2026, below 100 million, but then getting faster as the company will complete the turnaround.

Namely, on Banca Generali, we announced recently the Insure Banking Initiative, which means that Banca Generali will cooperate more with the Italian insurance companies, both Generali Italy and Alleanza. This is going to create additional value for both Banca Generale and Italian life insurance companies. So this is good for the group overall, I would say.

And on the payback?

The first one, you know, we said that we are further increasing the share of protection and health business in our new business, in our new business mix, which obviously accelerate the cash conversion compared to the traditional savings business.

Thank you.

Am I still on? No, thanks to you, Michael. Thanks for the question. I think we have finished the time for today. So thank you very much to everyone for dialing in to today's call. If there is any follow-up, please feel free to reach out to IR and enjoy the rest of your day.

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