Mapfre Sa Reg Shs

Good afternoon. Welcome to MOPFRE's earnings call for the September 2024 results. This is Leandra Clark, head of investor relations at MOPFRE. Joining us today are key members of our management team. Fernando Mata, CFO and third vice chairman. Jose Luis Jimenez, deputy CFO. And Felipe Navarro, deputy general manager of the finance area and treasurer. We appreciate you joining us for today's call. We will provide an overview of our financial performance for the third quarter and business trends. And after, we will open the floor for Q&A. You can use the Ask a Question link at any point during the call. I will now hand the floor over to Fernando Mata.

Good morning, everyone. Thank you, Leandra. Thank you all for joining us today. I'm pleased to present our results for the third quarter. Their income is up 39% and stands at 654 million after a 90 million in permanent goodwill in Verti, Germany. Without this effect, we will have posted an excellent $744 million for the first nine months, over $280 million in the third quarter, and an adjusted ROE of 12%. Growth remains strong, although we're facing a drag from currencies, and tariffs are normalizing in some markets. Premiums are up 4.6% and at 6% at constant exchange rates. Profitability was driven by improvements in technical management across all markets. The balance sheet is stronger, both on the asset side, with the goodwill write-down, as well as the liability side, with an even more prudent approach to reserving. The write-down of the Verti Germany goodwill, 70% of its book value, was a result of the challenging situation in Germany and Verti's lack of diversification. MAFRE continuously monitors and reviews the goodwill of its different operations, writing down over 800 million through P&L or reserves over the last six years. Our balance sheet is now much stronger, with only 1.2 billion of goodwill remaining, of which 600 million is from the U.S. business and 400 million from Spanish life and bank assurance businesses. We are confident in the future of the German business, and we will further invest in its digital capabilities. A 30 million capital increase was approved by the Board and will be dedicated to IT as well as strengthening the capital base. Non-life continues to improve with a combined ratio of 94.8%, 92.9% in the third quarter. General P&C contributed the most to this reduction in the absent or relevant cut events. In addition, there was a significant contribution from recurring financial results. Our capital base remains strong with shareholders' equity up 4.5% to over 8.4 billion and the Solvency II ratio at 197% at June. These robust results have allowed us to increase the interim dividend to 6.5 cents per share, representing an increase of over 8% compared to last year. Our diversified business models allow us to leverage the most profitable segments. Life and General P&C lines are performing exceptionally well. We have seen a significant channel run in the motor segment in North America and across Latam. In Iberia, recent figures are showing the changing trend, although not as fast as expected, and the business is clearly on the right path. In EMEA, we are still facing pressure on claims costs in Germany, which was mitigated by the significant improvement in Turkey. In Iberia, profit is up 15.5% to $283 million, over 30% when excluding extraordinary impacts. In North America, results have improved by $89 million on the back of technical measures. LATAM, including Brazil, remains the largest contributor to the group's profit, providing 305 million, a nearly 8% increase, with technical improvements as well as strong contribution from financial income. Lastly, our insurance and global risks business delivered a solid result of 207 million, up 9%, supported by premium growth and the absence of significant net cut impacts. Now I will hand the floor over to José Luis to walk us through the main figures.

Thank you, Fernando. As Fernando mentioned, premiums are up 4.6%, supported by the non-life tariff updates and the positive performance of the life business, but with headwinds from the Brazilian real and other Latin American currencies. The U.S. dollar is also slightly down. By market, Iberia, Latam and reinsurance continue performing positively. Non-life premiums, which are 80% of our business, are growing at 4.3%, reaching nearly $17 billion. There is noteworthy performance in the accident and health line, plus 6.4%, and a significant improvement in auto, plus 4.4%. The general P&C business is up 1.1% due to the slowdown of agro in Brazil and the depreciation of the real estate. The live business, which is 20% of premiums, has grown by 5.6%. In life savings, premiums are up 8.2%, supported by Iberia and other Latin. Life protection is up 6.8%, with notable growth in Mexico and Spain. At cost and exchange rates, premiums are up 6.1%, with non-life and life up 5.7% and 7.3% respectively. I will now discuss the key trends by region. In Iberia, net profit has reached 283 million, up 50% with an ROE of 13%. Last year's results included a net impact of 46.5 million due to arbitration following the breakup of the alliance with Bankia, as well as high net realized gains. Excluding these extraordinary impacts, profit growth was more than 30%. Non-life premiums have grown over 6%, driven by homeowners, condominiums, and health. Life premiums are up 6%, with a recovery in savings and solid trends in protection. LATAM continues to be a significant contributor to profit, generating $305 million, with an ROE of slightly under 18%. Non-life profitability has improved across the region, and both the life business and financial income are performing very well. In Brazil, we continue to see exceptional profitability with an ROE of 24%, and the net result has risen to R$ 188 million, despite the drag from the Brazilian real estate. The non-life combined ratio improved nearly four points to 74%, with improvements in general P&C and motor. Life protection has also made a strong contribution to these figures. The rest of LATAM continue to show strong profitability, contributing $118 million with improvements in technical results in most markets and tail wheels from financial income. North America, the net result was 71 million, up nearly 90 million compared to losses the previous year. This is driven by underwriting measures and significant tariff increases, which will continue to positively impact our P&L. The combined ratio has decreased by over eight points, now at 98.5%. In Puerto Rico, net profit was nearly 15 million. In EMEA, Turkey posted a profit of 24 million, with a strong improvement in the combined ratio down over 13 points and high financial income. The active sector remains challenging in Germany and Italy, bringing the losses in the region to around 19 million by showing a 12 million improvement compared to last year. Net profit and mastery is excellent. up over 9% to 207 million. The combined ratio remains stable at 95.5%. The most significant event in the third quarter were the storms in Europe with no of the major catastrophes. However, we continue to reinforce our prudence in reserve due to the ongoing rise in secondary perils and the recurrence of cat events due to an atypical hurricane season. This reserve in exercise added 1.5 points to the combined ratio. Modi continues to grow, posting a net result of 5 million euros. I would like to address two specific items. First, the positive tax adjustment had a 35 million impact. And second, the 90 million goodwill write-down for liberty Germany is recorded in the holding and adjustment line. Last year, in the same line, was the 75 million from the write-down of the U.S. business. On the right, you can see the combined ratios by segment. General P&C, our main line of business, both by premiums as well as profit, has delivered outstanding performance. Premiums are up over 1% and the combined ratio has improved 6 points to 81%. The net result stands at $307 million, a $136 million increase. In Brazil, premiums have decreased by 7% with nearly six points from currency depreciation and the rest due to the slowdown in agriculture issuance as a result of the high interest rate environment. The net result is 170 million and the combined ratio remained excellent under 65% with no relevant events during the quarter. In Iberia, premiums have risen by 6.6, fueled by ongoing tariff adjustment in homeowners and condominiums. The result has more than doubled to 121 million, and the combined ratio has improved by nearly five points to 93.4%. It has been a benign year so far regarding weather, as more events were covered by the Spanish consortium compared to last year. In North America, the net result reached 37 million compared to breakeven in 2023, with an excellent combined ratio of 85%, supported by tariff adjustment in homeowners and benign weather. Ode La Tam has also increased its contribution to the result by nearly 40 million. In summary, General PNC continues to be highly profitable and diversified. The third quarter results for the motor segment confirm the trend seen in previous quarters, already reaching break-even during the last three months. At the group level, the average premium is increasing more than 11%. Premiums are up 4.4% with sand drag from currencies, especially in LATAM, and in sweet units are down by nearly 7% due to selective underwriting. The losses year on year have been reduced by more than 25 million euros to 17 million, with a combined ratio around 104%. This reflects an outstanding turnaround in North America, while Brazil and the rest of Latin America are operating at combined ratios near 100% or below, which is satisfactory given the interest rate environments in this market. The profit contribution from motor in Brazil and other Latin has exceeded 30 million. In Iberia, premiums have increased by 6%. Our portfolio is down 3.2%. We are focusing more on retail in line with our risk appetite. A half of the portfolio reduction during 2024 is due to the fleet premium. The average premium has risen by over 9% of pace in the market, 7.2% increase. We are confident that the pricing is now ahead of expected claims inflation. The combined ratio improved nearly two points during the third quarter, reaching 102%. This was slightly higher than we were expecting in order to achieve the 100% for the second half of this year that we have guided to in June. However, the trend is clearly positive and further improvements should be visible in the coming months. In North America, premiums are up 6%, with units down 5.5%. In local currency, the average premium is up nearly 12%. During 2024, we have failed over 11 increases, including the most recent one that will come through in December. This adjustment, together with prior year hikes, which will continue to fit into P&L and improve the combined ratio. In 2025, rate hikes will converge with expected claims inflation. The combined ratio is down to over six points, reaching 100.8% in September and close to 100% in the third quarter, which was excellent considering the mileage and frequency increase during the summer month. The turnaround has been noteworthy with a net profit of $28 million, improving over $50 million compared to 2023. In Brazil, premiums are down 7.6%, around 2% in local currency. The vehicle portfolio is relatively flat year on year, as the fleet printing has already been executed. In Brazil, the combined ratio has decreased 1.7 points to 101.1%. In conclusion, Latam and North America are already consolidating profitability trends, while Iberia is on the right path. and we expect a strong third-quarter reduction in the combined ratio to continue in future quarters. The live business remains a key driver of profitability. Direct insurance premiums are up 7.5%. Both saving and protection have contributed significantly, growing near 8% and 7%, respectively, especially in Latam and Iberia. In Averia, life protection premiums are up 4.3%, outpacing the market with a combined ratio standing under 68%. The financial result was strong, with net realized gains up from 1.6 to 31.1 million, supported by real estate sales mainly in the second quarter. In Brazil, life protection premiums are down 1%, but growing almost 5% in local currency. There is some slowdown in investment and lending in the economy due to the recent rate hikes. This is a very profitable business, and the combined ratios stand at an excellent 84%, although up 4.5 points due to higher acquisition expenses. Across the rest of LATAM, volumes are up by over 30%. Mexico is not worth growing 49% in life protection. The table result for the life business has reached over 233 million in line with the previous year. And now I will hand over to Felipe to discuss the main balance sheet items.

Thank you very much, José Luis. Shareholder's equity stands strong at over 8.4 billion, up 4.5% on the back of the excellent result achieved in this third quarter. The strong valuation of the investment portfolio has partially mitigated the negative currency conversion differences from the depreciations of the Brazilian real and the Mexican peso, 11.6% and 14.5% respectively. Net unrealized losses in the portfolio were reduced by 194 million in the year. Leverage remained stable at 22%, reflecting our disciplined approach to capital and debt management. At the beginning of the month, we renegotiated and renewed our revolving credit facility, which was set to mature in February next year. reducing from 1 billion euros to 500 million with identical conditions as the previous one. The cost is linked to the fulfillment of ESG targets. Asset allocation has been relatively stable during the year, increasing corporate bonds and reducing GOVIs. The reduction in government was mainly due to Brazil as a result of the dividend upstreaming and currency depreciation. The Spanish Soviet remains our largest exposure, with 9.7 billion. Our portfolio is defensive and well diversified. Falling yields have reduced the unrealized losses in our portfolio, giving us more flexibility. We have over 13 billion in third-party assets, making us one of the leading non-bank players in Spain, with an exceptional increase in pension funds this year, up 7%. Our 45 billion investment portfolio, together with the AM business, brings total assets under management to nearly 59 billion, up 3%. On the right, you can see our main fixed income portfolios. As a reminder, a large portion is immunized or matched. I will focus on the actively managed portfolios, which are the main profit contributors. Regarding the euro area, yields are up over 25 basis points during the year, and 10 to 15 basis points in Iberia. If we exclude linkers, yields are even 20 basis points higher. All portfolio yields are still significant below current market levels. In other markets, yields are up nearly 30 basis points in other LATAM and over 10 basis points in North America. In Brazil, they are down around 90 basis points during the year, but with a high portfolio yield over 9% and 30 basis points improvement in the quarter due to rate hikes, which are expected to continue next year. Duration was stable during the quarter. These growing portfolio yields are contributing to financial incomes. The 576 million contribution to non-life, excluding goodwill write-downs, increased 1.7%. Iberia is up 14% despite lower realized gains. Mafra-Ri continues to grow, while North America has been stable. In Brazil, financial income is down over 5% due to currency depreciation. In EMEA, financial income is sharply down compared to 2023, as there were high forex differences due to the lira depreciation in the second half of last year. The financial result is expected to remain stable due to high interest rates. There were over 34 million of net financial gains between live and non-live portfolios, proof of MAFRA's ability to generate alternative sources of income. I will now hand the floor over to Fernando to make a few closing remarks.

Thank you, Felipe. MAFRE's board of directors approved a 6.5 cent interim dividend for 2024, 8% higher than last year, to be paid on November 29th. This was the second increase in the year, bringing total dividends paid to 15.5 cents, over $477 million fully in cash. This is the highest dividend paid in the calendar year ever. During the last five years, Maffra has paid out more than 2.2 billion euros to our shareholders. The average dividend yield for 2024 was 6.6% and close to 8% over the last six years. To wrap up, we have now reported three quarters in a row of excellent results, confirming the success of our new strategic plan. Financial targets are on track, although we're seeing a slowdown in growth in some markets due to the normalization of tariff increases and currency movements. The adjusted ROE was 12% compared to a target range of 10 to 11%. The combined ratio was 94.8% compared to a target of 95 to 96%. Premium growth, excluding life savings, was 4.2% and 5.8% at cost and change rates, in line with the target. These already strong figures will continue to be supported by the ongoing recovery of the auto business, especially in Spain and the U.S., as well as the already strong contributions from Latin America and reinsurance. Furthermore, financial income should continue to support results. The interim dividend announced this morning is proof of these solid results. Our confidence in the future and our commitment to shareholders. Thank you for your attention. I will now hand the floor over to Leandra to begin the Q&A session.

Thank you, Fernando. As a reminder, you can use the Q&A tool at the bottom of your screen. We will organize questions as usual by topic, and the IR team will be available for any pending questions after the call. So now let's start with the first question. The first question comes from Juan Pablo at Banco Santander regarding investment income. He sees the accounting yield has increased quarter on quarter and would like to know how we see this evolving in a lower rate environment in Europe and the U.S.

Thank you. Regarding the content yield, I think we still have some margin to improve. If you look at the book yield of our portfolio and the market yield, there is some, I would say, trend that we would like to cover. So we expect an equal increase in the coming quarters, perhaps not as much as it did in the past, but still we have some margin of money to continue improving on the income side. Regarding the interest rates, probably we don't have this view. I think that interest rates in Europe should stay probably in levels around 3, 3.5. So that's, I would say, for insurance and especially for us, these are very good news.

Thank you, José Luis. The next question comes from David Barma at Bank of America. He would like to know what we've done to strengthen the balance sheet in the quarter, referring both the reinsurance business as well as the Spanish business.

Thank you, David, for your question. Well, we have done probably two things. One, on March 3, we have increased 1.5 combined ratio the reserve. And this is due because on the NACAP, we are below budget, but on the secondary periods, we are slightly up compared to budget. This is something that we are seeing on a regular basis that secondary periods are growing. So in terms of prudent, we have decided to increase. The other point is related to the Spanish auto insurance, where we have increased around one percentage point of combined ratio in order to cover the cost of the bodily injury claims.

I may add, in order to clarify the impact of mafiori, it was approximately 50 million euros gross basis, I mean before taxes and minority, and it's equivalent to 1.5%. impact on the combined ratio, the net combined ratio. Is that right, Felipe?

No, no, it's correct. In fact, it was a two-fold effect on this reinforcement of the balance sheet. As José Luis and Fernando have already mentioned, and this was quite accurate and correct, it was a reinforcement of the reserves. And as well, there was this write-down of the goodwill that makes our balance sheet more clear, more accurate, and more adequate to the business that we are underwriting right now.

Thank you, Felipe. Thank you, José Luis. I think we're going to continue on the reinsurance business. We have another question from several analysts, both at Bank of America, JB Capital, and Sabadell. They would like to know how active is the fourth quarter so far at Mapfre-Ri from a NatCat perspective? They make reference to the Hurricane Milton as well as French floods. And how do we see this market developing in pricing? Sorry.

Well, in terms of pricing, we have just come from the last beating of reinsurance. I think prices will stay flat or probably slightly up. It will depend on the regions. On those regions where they had, I would say, severe not-cut events, probably prices could increase. But on those parts of the world where there were no major catastrophes, probably they will keep as they are. But from our side, and regarding the events that you have mentioned before, I think for us, as we say, we are below budget. We have no big impacts. And these are secondary events for us.

For the fourth quarter, I mean, there's no major event that is being reflected in our accounts, on top of the ones that you were mentioning, but none of them has a significant impact. As we were mentioning before, I mean, there was this reinforcement of the reserves of Maffrerie, and it is coming mainly from a NATCAT season that was... below what we expected and how the evolution of the secondary peril is slightly above the budget. So all in all, the trend is quite positive. And as we said, MAFRE is keeping a very, very prudent approach on the reserving. So these 1.5 percentage points on the combined ratio are going to be enough for these events for the moment.

Thank you. We had just a few more questions regarding just a little more color on if we are within the NACAP budget for the year overall, and if we could remind them how much is the total NACAP budget.

Okay, as I just said, for the moment and as far as we know, no major impacts from the hurricanes or even the floods that we saw in Europe during this year. And what we can say is that... Once again, what we are seeing as the evolution of the reserves is that we should be on the high side of the margins. So if we should be reserving up to a 90% of confidence level, we are right now at this level already. And we are going to continue taking this approach. But for the moment, as I said, Nothing significant that we should mention as NatCat events. So for the moment, we are quite well.

If I may add as well, the only two, and I will qualify both as a mid-size event, one was the heavy rains in the south of Brazil that was already reported in the second quarter. And in the third quarter, the only perhaps remarkable mid-size event, obviously, it was the heavy rains as well in Western Europe. But both are similar events. And regarding NADCAT in the U.S., both the most relevant, Helene and also Milton, for MAFRE exposures, it will be interesting. in the high single digit, frankly talking. So, fortunately, we avoid this season. This is still one month ahead. I mean, the Atlantic Basin is quite quiet, but this is still one month, November. But fortunately, this year has been practically a year with nothing regarding large net cut events.

Thank you. We're going to move on to the Iberia business. The first question is regarding the life business in Iberia. It comes from Max at JB Capital. What is the reason for such a boost to life savings premiums in Iberia in the third quarter of 2024? Do you expect this growth to continue in coming quarters?

Thank you. I mean, the growth in the light business was related to what we call million bidder. So we were very active in providing saving solutions to our customer base. Probably we have less competition from banks right now. So we want to seize up this opportunity in order to offer competitive price to our customers. Also, we had as well some corporate pensions. We were very competitive as well on that business line. And this is a trend that we trust will continue in coming quarters.

Thank you, José Luis. We've also received some questions from David Barma at Bank of America, continuing with Iberia, regarding the general PNC lines that had an excellent third quarter with an 86% combined ratio compared to the mid-90s in all the recent quarters. Was this due just to a lack of bad weather, or is there anything else we need to flag?

Nothing to flag, to be honest. The only thing that probably this year we have more events related to the consortium compared to previous years, but nothing significant and probably this will continue.

Thank you, José Luis. Moving on to motor in the Iberia business, our first question is from Max at JB Capital. He would like to know our expectations for the evolution of the motor portfolio in Iberia. And both Max and David Barma from Bank of America would like to know whether this acceleration in average motor premiums will continue or if the price increases will revert in line with inflation to protect our portfolio.

Okay, some words regarding the auto business in Spain. I would say frequency is still moderate, but also we have seen an increase in gas consumption. as well as raw fatalities have risen during the year. We see that there's more claims are decreasing. Meanwhile, several claims involving bodily injuries are up. So these are the trends that we are seeing right now. And bodily injury claims, which accounts for around 30% of total claim costs, will continue to have an impact in the combined ratio. So for this reason, I wouldn't say that we will reduce tariff. We will continue with the current trend, trying to adjust the tariff to the cost. And I see as well that the competition remains high and moving in the same direction. It's important to say that we are confident that the four-point reduction in the combined ratio between Q2 and Q3 is proof that we are taking the right measures and going in the right direction. So probably we will continue in the same line.

Thank you, José Luis. We have another question in the same line from Juan Pablo at Santander, and he would like to know if we confirm the 100% combined ratio guidance for motor in Iberia for the second half of 2024, or are we seeing anything that could change our outlook?

We are working hard to achieve that goal. If it happens in November, December or January, I would say it doesn't matter. The important thing here is the trend and the trend is quite positive to achieve the goal.

Thank you, José Luis. We also have another follow-up question in Iberia regarding the previous question in general P&C, is do we expect the current level to be a normalized level going forward, or was this last quarter in general P&C in Iberia an exceptionally good quarter?

I think it's an unstable rate. We do not expect big swings in one way or the other. So if nothing happens, we will continue with the current trend.

Thank you, José Luis. Moving on. So we have one more question that just came in on Spanish Motor. I think it's from Alex McKenzie in Exxon. I think it's been more or less answered. I'm going to read it out loud and you can decide. I think we've just answered it right now. It's how do you feel about the tradeoff between profitability and growth? You're still shrinking while some peers show willingness to grow. And how easy has it been to pass on price increases with the combined ratio target you want to target? I think we could elaborate on how we're seeing the reception of our clients to the price increases.

Probably here I would like to say that our retention and conversion rates remain high and we are seeing a very low impact from coverage reductions, which makes us confident that we can continue with adjustment. This is a general trend that we are seeing in the market. It is important to remark that when we look at the bagel portfolio, we have reduced fleets from 10% to more or less 6.6% of our total portfolio. And this could be as well a tailwind for profitability, as the fleet business has combined ratios as much as 15 or 20 points higher than individuals. So that's what we see, and probably we will continue with the same.

Thank you, José Luis. We're going to move on to a different region. We've received a few questions regarding Brazil. The first comes from Carlos Peixoto at CaixaBank. He's asking about the life insurance business in Brazil. The margin seems to have deteriorated. Could you give a reason for this? And how do you see it evolving in the end of this year into 2025?

As we have said before, when we have an economy with high interest rates, almost 11 percent, they have pros and cons. On the pro side, we see more financial income coming quarter after quarter. But on the business side, we see a reduction in premiums because with these high interest rates, you know, credit is not flowing as good as it did in the past. So what's the trend? Probably in the short term, we will see more hikes coming from the central bank from now till the end of the year. And for the next year, we will see. It will be expected some kind of reductions in the rates from the SELIC. And this will help as well to the business. But in the short term, probably this trend will continue.

If I may add something, I mean, regarding the life protection business in Brazil, we are seeing that we already mentioned that we increased the commissions that were paid for the distribution of this business to our partner, which is Banco do Brasil. So what we saw in the first half of this year should continue because, I mean, this composition of the combined ratio that is going to include a higher acquisition part of the acquisition costs. And it's going to continue. But nevertheless, I think that we are still posting excellent combined ratios for the life protection business in Brazil. And they're going to continue delivering exactly the same levels, as José Luis said, maybe with more or less success on distributing this kind of business because of the highest interests that are going to consider or to reduce the activity in Brazil. But in any case, this is going to continue an excellent source of profit with combined ratios that are going to continue to be excellent in the future.

Thank you. We have two more questions regarding the Brazil business. In particular, one related to the slowdown in gross written premiums and another one related to the historically low combined ratio. I think both of these are very much driven by the agricultural insurance business. So I think I'm going to ask the first question. What was behind the slowdown in 3Q and could you expect a recovery in the fourth quarter?

First, we have to comment on the currency, which is on average is around 6% down. But if we take year to day, probably it's around 12%. So in some of the businesses that we are growing, even in local currency, but when we convert this into euros, we have a lower unit. But on the other hand, when we look at about the future and see what will be the trend, You know, the ratio is really, really good and probably it will continue at the same level. Probably it's difficult to say that we are going to be better off. But last year we had the same view. We thought probably 2024 could be maybe slightly worse off than 2023. And here we are. So probably we don't have any clue in order to see that this kind of business could deteriorate. unless something happens which is not on the cards.

Great, thank you. I think we've answered these questions then. The next set of questions is regarding EMEA. Juan Pablo from Santander would like an update on our strategy in the region and if we have plans to grow the business either organically or inorganically.

Okay. EMEA is a very diverse region. I mean, we have four different companies in four different markets that could have a totally different behavior. If we look at Turkey, Turkey is right now going out from a situation that was – I mean, the measures that have been taken by the government are positive, and we think that they can feed into the full economy and to move in the right direction. We are seeing already less volatility in the currency. We are seeing that the remuneration of the deposits is enough in order to cover the the depreciation and the cost of the currency. And we are quite happy to continue in the market, as we said. Inorganically, we should not be increasing our exposure to Turkey because it's not one of the key drivers that we mentioned already. Looking at the rest of EMEA, we have Malta, which is performing very well, and it's no news, so it's still one of the best, but it's still a very small market for Mafre. And looking at the two other companies that are monoline or almost monoline, like Verti in Germany and Italy, we already mentioned that, first of all, we continue... thinking that organically we are going to continue moving forward in our activity and inorganically that Germany could be a country that we could see with a better approach if needed in the future, since it's one of the main markets in Europe and we have already a presence and we have been known by the regulator for a long period of time. We have a small company, a small activity that doesn't compete with other big companies in the market. And we think that in the consolidation of the medium-sized companies, we may find opportunities in the mid or long term. Nothing immediately, but I mean, this is something that we have been considering.

Yes, Felipe. In both countries, Italy and Germany, I would like to remark that we are fully focused on reverting the current situation in our automobiles. So we do not have any appetite to grow our fleet, the number of units, but to focus on tariffs in order to achieve as soon as possible the turnaround in both operations.

Thank you, Fernando. Thank you, Felipe. The next set of questions is regarding the North American and U.S. businesses. I would just like to clarify before we move into the questions. During the presentation, we mentioned that the tariff increases that have taken place this year are an 11 percent accumulated increase. The last approval, which will be coming into force at the end of the year. And David Barma from Bank of America asked about the USA motor business and about the improvement we've seen in recent quarters. He thought he would see the third quarter ratio already go below 100 percent due to these already mentioned price increases. And he would like to know whether there was anything in the claims experience that was unhelpful during the quarter.

Okay, David, thank you much for your question. I think motor in the US is behaving much better than expected. Although there is always some kind of volatility, the trend is clearly positive. The average motor premium is up around 17.5%, considering premium growth in local currency around 12% and vehicles down 5.5%, as we said before. We are confident that these underwriting measures that we have taken in that market will continue to deliver a new mode of control in a new mode of control in the environment, very good results. So that's what we see. It is true that we have originally guided to hit 100% in the last quarter of the year, and everything suggests that we should reach that level soon.

Thank you, Josuis. That was very clear. And the last question for the U.S. business is regarding the home insurance. What we report is general PNC, that it was very strong, that it was, sorry, 85 percent versus 90 percent in June. This performance, the question is if this performance was driven by very favorable weather conditions and what could be a sustainable level?

Well, in this case, I think there are two factors. One is that we have increased tariff. We have to adjust the tariff to the market situation. And secondly, it's true to say that the weather was more benign than expected.

Thank you. We finished with the questions regarding the business units, and we're going to move into questions related to the dividend and strategy. The first question is from Max at JB Capital, and he would like to know if we have any update on our M&A ambitions.

No update. The ambitions of M&A are quite stable in the group, and we are looking exactly for the same ambitions that we had in the past. So, as I said, I mean, the first point is to go back or rebuild the bank assurance exposure of MAFRE in Liberia, mainly in Spain. Second would be to try to find out a way of growing in Europe, in the countries that we are already, so that would be Germany or Germany mainly. The third one should be how to grow in a market that is already very important for us in LATAM, which is Brazil, which is, I remind you, two-thirds of the LATAM GDP. and where we have an excellent presence and an excellent partnership with Banco do Brasil. But if we can find something that doesn't jeopardize our relationship with Banco do Brasil, we'll be very happy to deploy some capital there. Mexico is another opportunity for us. We think that we are underrepresented in the Mexican market and we'll be happy to increase our exposure. And last, and taking into account the stability of the U.S. dollar, is to find quite a niche opportunity that could help us to go into another state, nothing to be nationwide. or nothing that will expose us to any kind of casualty perils or similar in the U.S., but something that we could manage and we could add into our operations. And that is the last opportunity. I remind you that what we are looking at right now is that our organic growth and our delivery of the present operations is the one that we are concentrated and the one that we want to continue moving forward.

Thank you, Felipe. We have a question from Paz Ojeda at Banque Sabadell regarding the underlying ROE at 12 percent. She comments that this is significantly above our 2026 target. And do we think this is sustainable?

Well, we are working hard to try to achieve that return on equity. And it is true that, as Fernando has said before, we are in the middle of the hurricane season and we have to wait to the end of the year. But it is true that all the business and all the geographies are doing pretty well. So if the trend continues, we expect to get around 11% or above.

Thank you, Jose Luis. And now we have several questions for the end of this Q&A session regarding the dividend. I think I'm going to include them together, and then we can go over them again. Maxim J.B. Capital wants to know, one, why increase the interim dividend and not the final dividend? Two, what kind of payout ratio should we expect in the coming years? Question three from Farquhar. Does this increase of the interim suggest a similar increase for the final dividend? And the question four is, what would need to happen for Montfrey to feel comfortable increasing the total dividend by a full cent for the full year?

Well, I'll take the first one. Max, what was taken to the board and was approved was the increase of the interim dividend. It was the perfect timing. Whether or not it will be a stable dividend at the final, it will be approved at the board in February and then at the AGM. It's not the time to discuss what the final dividend will be at the current moment.

Okay, on the rest, I think that our message has been quite clear in the past. First, that there will be at least a distribution of 50% of the profits of the company. Second, that there is an upper limit or there should be an upper limit that we already have broken several times, which is a 65% distribution, but that was broken several times in the past. And I think that what is more important is that what we are, or what the board tried to send as a message, is that there is some kind of commonality. with the situation. I think that the board is proud of the results that we are delivering already and is a kind of a message of hope into the future of the company. So at the end of the day, what is going to happen in the month of February when the board is going to propose to the AGM the new dividend is is still unknown. It will depend very much on how the three months that remain in order to fit into the profit and loss account are going to move forward and how the trends are going to be for the future. So nothing to say for the future, but I mean, I think that we are quite clear on the appetite that this company has for the distribution of dividends.

Thank you, Felipe. We have no further questions. I'd just like to comment. We did receive a few questions to the platform that were quite technical, and we would prefer to look into them and get back to you after the call. If not, please contact us directly. And just a few comments on upcoming events. We'll be holding two in-person meetings with analysts and investors, one in Madrid on November 5th. and the other in London on November 11th, you should have already received the invitation. We're also planning on being in Paris November 19th to 20th. If you're interested in meeting with us, please reach out and contact us directly. And I guess if you have any remaining questions, we're available after the call. Thank you for your time today. I'll hand the floor back to Fernando for him to make a few closing remarks.

Well, thank you, everybody, for your attendance. Thank you, Leandra, for your logistics. I mean, extremely helpful as usual. Thank you, Felipe and José Luis, for your answers and comments. Pretty clear and comprehensive as well. I would like to conclude this presentation saying that, again, MAFRE is delivering. We have reported an extraordinary quarter in terms of profitable growth. The fundamentals of our results are pretty robust, and there is still room for improvements in some areas, particularly in Spain. So we remain pretty positive for the rest of the year, and that's all from me. Thank you again for your attendance and goodbye.

Goodbye.