Unipol Grupo Spa

Good afternoon, ladies and gentlemen. This is the Coral School operator, and welcome to the Q&A conference on the consolidated results end of June 2020, Gruppo Unipol. The group CEO, Mr. Carlo Cimberi, will go through a short introduction. He will then be available, and of course, he will take questions and answer them. Dr. Cimberi, please, the floor is yours.

Good afternoon, ladies and gentlemen.

So, as usual, I'm sure you must have read and, you know, gone through the presentation press release. And, you know, it is August 7th. So let me now go straight to your questions without further ado. So if you want to ask a question, please dial star followed by one on the keyboard of your telephone. If you want to get out of the booking list, please dial star followed by two. Please ask your questions by using the receiver of your telephone. Once again, if you want to ask a question, please dial star followed by one now. Question number one is from Gianluca Ferrari from Mediobanca, please. Good afternoon, everyone. I have three questions, if at all possible. The first one was on the tax rate of Unipol Grupo, which was very low. I mean, 18 percent. So much lower than Unipol said. And can I have some more color? I mean, the reasons why this is happening. Question number two. This question is on the holding costs. So from Unipol, I can see here that management costs were 74 million versus 95 million last year. So what's happening? I mean, maybe last year you had a one-off costs or maybe something or other one-offs concerning some specific operations or maybe costs have become a little bit more. effective. So, once again, please, some color on this question as well. The third and last question is on the investment yield in the six months on Unipol-Sci or Unipol-Gruppo. So, both live and non-live. Once again, some more color on the six-month yield, please. Thank you. Well, Gianluca, first of all, thank you for your questions. Now, as for question number one, tax rate, Unipol-Gruppo. Well, I have to say that there's an effect or a consequence, I mean, a specific consequence on this first half of the year, so H1. And the reason is the following. So what we have is tax back. So this kind of, you know, tax back payment is 85 million euros. So this concerns, I mean, the transfer operation, which is what took place last year. Of course, I'm talking about Unipol Banka. So maybe you remember we had capital loss.

So on that CL or capital loss, of course, we paid taxes.

So, once again, this was not, if you will, a liability in terms of, you know, taxation. So, once again, we paid taxes and levies on the 85 million euros because, once again, together with our experts, we just wanted to make sure that it was actually possible to deduct, I mean, this item from the, well, financial statement. So, it has taken a while. So, once again, we were right. And well, by that time, the 2019 financial statements had already been drafted. Okay, so the money is being given back right now. So once again, there was a capital loss on the transfer of Unipol Banker. So once again, it was impossible to deduct taxes about this last year. So again, of course, we were forced to pay taxes on this amount. And this year, they will be given back to us. Once again, this is 85 million euros. Now back to your question number two. So your question was on the Unipol's management costs. Now, as for Unipol, so can you just tell me if it's on a Unipol or Unipol site? Yes, I mean, the holding company, yes, the holding costs, once again, thank you. Okay, so the question is on Unipol. Well, maybe on Unipol's side, this is even bigger or even more significant. So this is the effect, of course, of the lockdown months that we just went through. Because if you take into account, you know, the holding item, well, into this item, you can also see all of the so-called diversified business companies. I mean, in terms of consolidation techniques. So once again, these are not Unipol Group holding company costs. But once again, this is a consolidated data. So you have the so-called diversified business. I mean, companies being controlled by Uniposai. And the most significant one with a striking cost reduction is Una Hotel. Because as you may be aware of this, I mean, with the lockdown or because of lockdown, hotels have been closed. And of course, We had basically no direct costs, so we didn't have any staff costs because, of course, they have received unemployment benefits from the central government. So just that item is worth 20 million euros. You also have to consider another key point. I mean, only Polo Grupo has no significant items or costs in terms of staff costs. For example, we couldn't, you know, take advantage of the lockdown-related cost reduction, which is what you can see in Unipol SAI, because in that case, we have saved around 50 million euros. This is due to the, well, absence of staff. I mean, functioning or operating costs. And we also have taken into account all of the, you know, previous holidays that our employees didn't use last year. And once again, this has a major impact on Unipol's size financial statements. Okay, thank you. Now, as for question number three, so the reinvestment rate, the floor goes now to Matteo La Terza.

Well, thank you, first of all.

Now, the reinvestment policies that we have here are aimed at some bigger diversification of the portfolio that we currently have. I'm talking about the life but also the non-life business. And I have to say that around 50% of reinvestment flows will be invested into bonds or, let's say, core GOVIs. And the other part, I mean, the other 50%, so these are the loans. And, of course, we have high rating levels, so from single A upwards. Now, this means that on the live business, what we expect is to reinvest them in the flows, at rates that will be included between 1 and 2%. If you consider the non-live business, we are well under 1%, well below 1%. So these are the rates we have in the market right now. Of course, this figure may change, and it depends exactly on the future development of the market itself. Is there a special reason why you are, let's say, you have a short mismatch on the life and you have a long mismatch on the non-life. I mean, is there a key reason behind this? Well, no, not something different versus what I just told you. In terms of the portfolio component, the so-called whole life, well, of course, the whole life, well, has an impact due to the, well, life of the insurer that and even the estimates we have in terms of, you know, buyback. So this is based basically on the underwriting, which is what is used by our actuaries, I mean, to establish the duration. So basically, you know, we try and be, let's say, a little bit short in terms of duration, in terms of life-related liabilities, because based on the changes of the, well, of these assumptions, I mean, the duration of the life liabilities may change. So let's say that we are a little bit more conservative on that. In terms of long life, you're right. I mean, there's, well, bigger change. I mean, the duration is longer in terms of the assets versus liabilities. But if you consider, well, basically this is a very small, well, amount of money, so it's something that we can almost neglect, if you will. So, I mean, there's no reason why. I may tell you that there's a special reason why we have this kind of, you know, duration-related strategy. Okay, well, thank you so much. Thank you. Next question is from Andrea Lisi from Equitas. Good afternoon, and thank you so much for this opportunity. I do have some questions, if possible. Question number one, now going back to the technical performances that you have in the non-live business, so in this combined ratio that you have created in H1, What about the reserve or provision release versus last year's? I mean, are you working on a very prudent, cautious, if you will, attitude, or are you going to sort of copy and paste what we have already seen last year's? And what about the frequency concerning, I mean, the past months, I mean, soon after the lockdown, so basically June and July? My third question is the following. Are you feeling some pressure maybe from the regulators in order to increase, for example, the behavior that you have versus insured, for example, discounts? And do you see an increase of competitive dynamics in terms of motor vehicle MV pricing? Question number four. The question is on dividend. Can I have an update in some color concerning Unipol's dividend policy, and what about the regulator approach so far about this? Thank you.

Well, Andrea, first of all, thank you for your questions.

As for the release, if you will, of reserves or provisions, well, the answer is no. We haven't released any such provision or reserves in H1 2020. Now, from the, well, accounting point of view, there's only one way. So what we have recovered is now written into the, well, financial statements. So basically, I know that if you read slides, you will see, you know, reserves released. as an item, but this is not something that we have done in terms of a specific item. So this means that the, well, 2019, sorry, 2020, of course, I mean, H1, if you compare H1 2020 to H1 2019, well, basically the difference is 2.4%. This means the so-called reserve or provision release, but it's basically a sort of a recovery. We had the 6.4 in 2019. So this means that we have four different points. And this means that we have actually released or unlocked the less reserved. And the value is around 160 million euros. OK, so this is what this is a negative difference. I mean, 19 to 2020. Your question on the frequency. Well, basically, we are not seeing. any kind, if you will, of, you know, indicator or signal that encourages us to think that there's a recovery. Or maybe a growth, if you will, of the frequency. Well, rather, the opposite is happening because, I mean, from our observation point, and I'm really talking about all the kinds of business. I mean, I'm talking about MV, but I'm also talking about health. So MV, health, even in the post-lockdown, period, which is this one. Let's say that, well, we closed it end of May. So we now have, let's say, two months where we have observed the market, I mean, June and July. And basically, well, there was no restriction, no constraint whatsoever in terms of using cars or even in terms of, you know, well, personal movements. So we have a history that dates back to two months ago. So there are no changes whatsoever. I may share with you just some figures. And, for example, between, again, June and July, so the two months that we've taken into account. I mean, if you compare this with previous years, so June, July 2019, what we see is minus 20% of claims. In this case, of course, I'm talking about MVD. And in terms of health, all needs salute shows now a reduction of, let's say, payments, or let's say around 20%, once again, in June and July, once again, versus 2019. Well, we tried and, well, understand why this is happening. Well, our own, well, explanation is the following. So once again, even if the restrictions or mandatory restrictions are over, if you check what's happening in terms of, you know, labor market or employment, many different organizations, including Unipol, well, we have kept, you know, smart working, as we say here. So working from home or work from home measures, especially this is what we started doing, at the very peak of the pandemic. So, once again, in June and July, we may not do this. But, of course, as far as we are concerned, I mean, we still have, you know, work from homeless. And many organizations have done the same thing. And, of course, this means much less people driving, using their cars, or walking in the city. Let me also tell you that the number of black boxers now is 4 million. Now, 4 million black boxes, well, this accounts for 10% of the total, well, car fleet in Italy. So I think that the sample is quite significant. So once again, data from 4 million black boxes tell us that in June, for example, okay, let me check. This is what we are seeing right now. So once again, there's On average, minus 20% cars, you know, on the road, in the streets, and I have the same piece of data for July. In July, things are going up. For example, in July, we have minus 10% of mileage or kilometers, I mean, driven. This is, once again, one piece of information coming from black boxes. This means there's an impact on circulation. And, again, it's a comparison, if you will, with, I mean, same time, so June and or June and July 2019. So, If you take into account all of these indicators, I mean, this is not just a gut feeling, you know, this is a scientific and even quantitative set of data. So once again, they do confirm that, I mean, frequency is not yet going up. So let's see what happens after the August, well, summer holidays. But there's one thing we imagine and we think may happen. So let's say that, well, people don't really like to, let's say, to access or to go to hospitals these days. So they just, you know, procrastinate to just, you know, delay some checkups or visits or, you know, they are sort of delaying the fact of, you know, going to clinics or hospitals. And there's also another, well, comparison we can do. For example, in terms of work from home, once again, work from home measures or systems will be used also in the near future. So many different organizations will have an impact because of all of the work from homers. Well, maybe not as much as happened, I mean, during the lockdown, but this will continue in a way. Do not forget, once again, that all of the restrictive measures that we have implemented during lockdown For example, the use of masks and then the fact of, you know, going, you know, shopping or going into the stores and then standing in line, you know, queuing. I mean, you know, all of these, if you will, behaviors do not encourage people to spend money to go shopping or to, you know, maybe, you know, Italians don't go to the city center, to the high street, etc. Maybe, you know, they just don't go to the shopping center. We don't go to the shopping mall. So once again, we are using our cars much less frequently that we used to. So once again, we think that, you know, until possibly the end of the year, people won't go back, if you will, to, you know, their, well, traffic behavior or car use behavior. Of course, all of this will become more and more normal, so to say. It will stabilize. But, of course, if you make a comparison with the pre-lockdown months, I mean, there won't be any. I mean, things are not changing now. Once again, we have no pressure to, you know, give money back to customers. We are the only company having given back one month back. of insurance premium to our insured. We've been pioneers in doing this. I mean, we've been the first company giving money back. I don't think our competitors did the same. I mean, maybe some competitors, maybe two competitors are, if you will, you know, adopting some measures which are similar to ours. I don't think they're really doing what we are doing. So in terms of the regulation, there's, well, so many different insurance companies you may want to go to if you, you know, really want to get, let's say, non-conventional, non-traditional, if you will, services. Anyway, we decided to do this some months ago. We've been pioneers in doing this. And once again, we think that this was one of the things to do, you know, as quickly as possible. Okay, Matteo will answer other questions. Well, this is directly linked to the, well, points and considerations from, you know, Carlo one minute ago. So we started this, let's say, you know, campaign. Basically, we've given back one month's worth of insurance coverage. We started the campaign back in April. And, well, I think that this is kind of, you know, favoring and fostering the renewal campaign concerning our policies. I mean, the situation we have today is an increase of the retention of our portfolio. And I guess that, you know, this is an important element. I mean, as of today, there are no, if you will, there's no competitive pressure, which is as important as, you know, to, let's say, changing our mind or thinking we made a mistake. Now, if the evolution of the trend is very favorable, there may be some little, you know, competitive pressure coming from competitors. But for the time being, competitors are not reacting or doing what we are doing. So, once again, I just have to share with you the data of our portfolio just to tell you what's happening. So, this is, once again, based on the insights and information we can currently count on.

Back to your question on dividends. Okay, allow me to, well, share with you some information. It will take some minutes.

So, I'm sure you are aware that the Unipol group, so Unipol as a group, is definitely able to pay out the dividends this year, you know that there was a sort of a suspension or discontinuation because of a specific IVAS or IVAS recommendation in the month of March. And of course we complied with this recommendation because of course we had our 2019 result. You can see here the results. So we have H1 2020. So as for the, well, financial statements, of course, I'm talking about the ordinary financial statements that we have here in Unipol Grupo. So basically, we collect the dividends and, of course, we pay costs to the companies we control. And then, of course, we pay interest on the debt. So if you consider that Unipol Grupo 2020, I mean, the balance sheet, if you will, is sort of already ready and ready. I think that, as you can see here, net profits are around 300 million euros. This is what we foresee for 2020. Basically, this is what, in inverted commas, we already have in our pockets because this is what we have done in H1. Now, as for the solvency of Unipol Grupo, nothing has changed versus the situation we had at the end of December. So even if we went through the pandemic and then the financial shocks, financial earthquakes that have taken place in March and April, so a part of this has been, let's say, taken back or reabsorbed after some months. I mean, our solvency ratio is 188. So If you go back to the business plan, we should be having 200 million euros for Unipol Grupo. And again, this represents basically 5% solvency, if you will. So this is Unipol Grupo. I mean, the dividend would be 183. So once again, 200 million euros account for Unipol. Let me check, 2.7% of the owned funds of Unipol Grupo and 5.8% of the capital excess of Unipol Grupo at the 30th of June 2020, so some weeks ago. So I have to say that all the figures available and all the trends that I have, you know, shared with Matteo a few minutes ago, So based on what we expect for H2, but also based on the quality level, and why not also on the quantity of the H1 accounts, as I said before, you know, answering another question, versus last year, we don't have 120 million euros provisions. We do have 120 million euros provisions. let's say, reserves, but this is for the so-called un mese per te initiative cost. Un mese per te means, you know, one month for you, which is the one month insurance coverage that we are giving back. As I said before, one month worth of premium. So this kind of provision, this is something that you can see in riserva premi, so in the premium provision. if you really, really need to, I mean, reclassify different items. You can also see here 20 million euros donation. Now, this is something that we have decided to allocate during the pandemic.

So, as you can see here, these are very bold, sturdy results.

And, well, this means that if you consider only Paul Tsai and the targets we have for 2020, and, of course, I'm talking about the business plan, I am really sure we will be able to hit the 2020 business plan targets. And possibly we can do better than this. Okay, so based on this long introduction, we will be ready to convene the general meeting in order to pay out the 2019 dividends. So, within this context, on July the 31st, so just a few days ago, from IVAS, we received a recommendation. I mean, all the Italian companies have received this recommendation. They are asking us not to pay out dividends or not to pay variable costs or purchase own shares. Now, as you know very well, this is not something that IVAS decided itself. But, you know, IVAS receives, you know, AOPA, so the European supervisor, you know, for example, the Bank of Italy receives, I mean, the same recommendations from the European Central Bank. So, once again, this doesn't really come from the European Central Bank or from AEOPA, but it comes from the European Systemic Risk Board, ESRB. Now, ESRB is a supranational organization with the participation of central banks and all the governors of the Eurozone area. So once again, it's a broad general recommendation for all companies and all the banks we have in Europe. Now, of course, we do have our own opinion on this kind of recommendations coming from, let's say, the top floors. So just like every single recommendation, this very kind of recommendation is, in our opinion, wrong. I mean, in terms of the way it is written or drafted for three different reasons. First of all, it is, let's say, overarching systems. I mean, a general one. So it means that supervisors or regulators, for example, IVAS in Italy, cannot, let's say, really, well, sort of customize or personalize, I mean, the recommendation. And, you know, this is due to the different features of every single insurance company. that you have in one country. Now, this recommendation requires the entire financial business. I mean, investment companies, banks, and, well, insurance companies like ours. But, you know, in terms of AEOPA, so on a European level, we have some companies having some problems on business interruption. This is due to the pandemic. Now, business interruption, or BI, is a risk that, of course, we do not ensure, we do not cover here in Italy, so we don't have any exposure on business interruption. Very possibly, this is something that's really hurting northern European companies. Okay, so point number one, this is an overarching, generalized measure. So, in our opinion, this shouldn't happen. Now, the second reason is that it generates a gap in terms of treatment. I mean, you have an inconsistent behavior. You know, the first recommendation was a sort of a very kind invitation not to do something. Well, this one is a real ban. For example, if you have complied with every single recommendation that came from the surveillance bodies, it is now impossible to reach the situation of many other companies. We have had some European companies that have just ignored the previous invitation, so they did pay out dividends, or maybe they just paid it out partly or in a reduced way, but they did it. Now, we also did it in terms of Unipolsai. But you know that Unipolsai is a company that we control. So we have 85% of the capital. So all the resources basically of Unipolsai were held within the group. So there was no dividend being paid. So this is the reason why we think this is a mistake. I mean, it generates an uneven, inconsistent behavior. The third reason, so it is, if you will, a macroeconomic reason. So right now we're looking for, I mean, we try to, you know, reignite economies, to recover economies after the pandemic. Well, this measure basically freezes billions of euros of, you know, financial resources. These are basically the benefits or even the profits that should be redistributed or paid out. So this should be going to investors. And then once again, this should go to, you know, to families or companies making investments. So this would be, if you will, money that would, you know, circulate inside the economy and especially into the, if you will, industrial economy that's been sort of shocked by the economy. So this is the reason why we think that there are three big mistakes.

Now, depending on our habits, behavior,

and culture, you know, we are, okay, we are now much more than a company, so we are a group, but let's say that we are an institutional group, so we will never fight against our regulators, because, of course, we don't want to do this, you know, against, if you will, our regulators or the European regulators, and, of course, we will just comply without complaining. But, you know, at the same time, I need to tell you, that, you know, dividends, I mean, the profits that we have for 2019 are still held within the company. And, you know, for the reasons I said before, so, I mean, the same goes for dividends. We can say that we have already fulfilled the conditions in order to reach the 2020 dividend target. So we will pay Unipo shareholders as soon as we can, and by this I mean at the end of the ban, so as soon as the ban will be lifted by European regulators. Thank you so much. Next question from the conference in English, from Peter Elliott from Kepler. Show the world, please.

Thank you very much. I'm trying to work out which of my questions weren't just asked by Andrea. If I could have three of my own, please. Firstly, I guess your agents are rewarded on the profitability of the business. So I'm just wondering if you could help us understand whether we should expect higher commissions in the future given the level of profitability now or how that might flow through. Second question, I believe that Solvency 2 and IFRS are not quite on the same reserving basis so the strengthening in your reserves would have boosted your solvency ratio. I'm just wondering if you can say how much of the solvency ratio increase was due to the better reserving position or if you put it another way, what would the solvency ratio be if markets reversed back to where they were at the end of Q1. And maybe the third question, maybe I can come back on the tax situation. Just looking forward, you've still got a tax asset at the holding company. Could you update us on how and when you think you might have the ability to use that?

Thank you very much.

Okay, so without further ado, let me answer question number one that's concerning the commission level or commission profile of agents. So as I said, well, previously, we have a sort of a general framework agreement with our agents. And, you know, it includes the fact that we share the so-called technical profits and technical losses on the TP on motor vehicle. We also have other agreements on incentives, if you will. So it goes without saying that one part of the technical profit or the technical benefit that we have reached in this H1, of course, it has to be reconfirmed at the end of the year. So this will definitely be shared. with the distribution network in terms of, I mean, the ways with which this agreement has been drafted. Don't forget that in the motor vehicle DP, we have a fixed rate, which is now 9% today, plus one variable percent rate, which is inversely proportional to the claim premium ratio of every single agency. This benefit has, if you will, a delayed effect. I mean, you sort of have to wait for two years because, you know, this kind of parameters is calculated on the average of the previous two years. So, you know, starting from 2021, so next year, Well, provided that the technical benefit is reconfirmed at the end of this year. So in that case, there will be an increase, as you said, of the commissions concerning MV for our agents. The same will happen to the non-MV, and it depends on how we will, you know, control, you know, the remuneration of our agents. Because once again, also in this case, they are paid not only on the basis of the production of every agent, But we also measure the quality. So if they have a claim premium ratio, which is low, well, if this is low, I mean, the package, if you will, will be higher. Okay. So this is the incentive or the remuneration for our agents. Once again, also in this case, we do have a sort of, I mean, we split, I mean, the benefits on the longer term. So the timeline is a little longer, if you will. And you will be able to see this in 2021 only. Well, we have to say that there's one part of this benefit which will also be paid for, I mean, 2020. So there will also be some partial payments already in 2020.

As for your question on solvency.

Well, I have to say that if you consider the improvement or, let's say, increase of solvency, I mean the ratio, there is no impact from or even onto our provisioning policy. By this, I mean the following. At the end of December, we had almost 1 billion euros, which is what we call excess capital. Of course, this was a consequence to our, if you will, you know, I mean, it was a delta between the best estimate, which is the solvency-based calculation system, and the provisions that we have in the balance sheet. Okay, so we had 1 billion euros. We haven't released or used any reserve or provision, so that 1 million euros is still there. It's unchanged. So it doesn't increase, if you will, solvency. And by the way, this is what happened between March and today. So, the increase of solvency ratio, which is what we have seen starting from March, well, this is due to many efforts that we have implemented. And then, of course, this is also due to market moves. If I'm not mistaken, I mean, the increase was around 30 points. Now, 50% of this was due to the increase of our funds. And the other 50% is due to a reduction of the solvency capital requirements, SCR. So the increase of owned funds in many, many cases is due, if I'm not mistaken, 10 points out of 14. This is due to the year result. So the profits generated in H1. And then the other small points are market moves. So once again, 10 points out of 14 is due to this. Four points are due to market moves on own funds, so the value of assets. So this is, once again, something that we can almost neglect. As for the change in terms of the solvency capital requirements, SCR, well, this is the consequence of many different actions in terms of management. This is what we have done, for example, on the portfolio. For instance, we have reduced shares. We have also, I mean, risk covered some shares and stakes. So we've carried out plenty of activities. We have, let's say, re-engineered our live portfolio. So, so many different activities that were able to reduce SCR by 16 points. So, these are the main components, you know, generating the growth of SCR starting from March and until today. You are right. We do have a very strong, bold provisioning or reserve policy. I mean, just make a comparison with our competitors on the, well, domestic or Italian market. And, of course, this is really very clear and self-explanatory. Well, it is one of our features, if you will. I think that, well, this feature is important for us because it means that we can really trust that we have plenty of confidence, if you will, in the future. Of course, there may be surprises or unexpected behaviors, I mean, just like the 2020 pandemic, but... we are absolutely able to use this kind of buffer. So these reserves or these provisions are really helping us. And we can really boldly state that the objectives we have for 2020, but also the business plan objectives, including the business plan for next year, 2021, well, these objectives will be hit and reached. Of course, it will take efforts, but we are pretty sure we can hit I mean, at least in terms of the industrial margin that we will be able to produce. Now, as for your final question, I mean, the question was on the, well, okay, the situation on the tax position of the holding company. Well, we have tax assets, I mean, gross tax assets, whose value is 350 million euros. If you, well, really want to have, let's say, a very specific assessment as of today, so the theoretical value as of today, well, this is now worth 300 million euros.

If I could quickly follow up on that, my question really was just more about when you expect to be able to use it and if your view on that has changed at all.

Yes, okay, so how much we think we can use in 2021?

Well, actually, starting from 2021, no, well, I couldn't say now because You know, it depends on the results that we will have. And so, once again, we have, you know, around 340 million euros. Well, I may share with you, well, sort of an estimate, I mean, on the flight, if you will. So, once again, 350 gross million. Well, let's say around 10% may be used next year, so 2021, because again, You know, it depends on the year, but, I mean, there are different policies. So you may have some, you know, so-called vintage policies. So the, you know, recover, you know, percent may change year after year. Anyway, in 2021, for the time being, we know that we will recover or use 35 million users. And, okay, let me be even more complete. We will continue with between 10% and 13% a year in the following years. Once again, there are minor changes, minor differences year after year. But in general, we may say 10% of use a year because, well, this is what the regulation says, okay? So this is not our choice. I mean, we are not free to decide, okay? It's the regulation that's imposed onto us.

Great. Thank you very much.

Next question is from the regional conference from Alberto Villa from Intermonte, please. Thank you, and good afternoon. I have some quick questions. The first one. can you tell us about the net tax position of the holding company? Can you also give us some color on how you are investing cash? The second is on the de-risking on the second quarter. Are you thinking that you're considering to continue with this, or are you happy with the current positioning of your investments? And the third question concerns the Intesa Unipol BPER operation. What can you tell us as of today about the possible impact of the, well, expansion, I mean, the acquisition of the, I mean, some live businesses or insurance businesses from UBI Group or UBI for Unipol? The fourth question is on the live business that's been sort of weak in terms of results in the first quarter. half of the year, including premium income. So what do you expect starting from July? So do you think that the situation will improve thanks to the restarts of the commercial activities from banks? And also, I mean, what do you think the result will be for H2 2020? Thank you. Thank you for the four questions. As for the holding company net financial position, NFP, It is negative 1.5 billion euros. And it is represented by 2.3 billion euros, the debt of which 1.8 billion euros are notes that we have on the market. And we have 0.5 billion euros. This is an intra-group debt that we have towards UnipoSci. Okay, so 1.8 billion, these are notes on the market. 500 million euros intragroup, and the total is minus 2.3 billion. Now, on the other side, if you will, we have around 800 million euros, well, a little bit more than this. So 800 million euros assets in the holding company, excluding the stakes. So We don't consider, you know, 85% Unipol site, 10% BPER, and then we also have Unipol REC, R-E-C. So we have 800 million euros of, let's say, you know, sort of liquid or semi-liquid securities. And the difference between 2.3 and 800, the result is 1.5 billion euros net financial position I talked about before. Now, as for the de-risking, so your second question. And, okay, I will try to answer, and then Matteo will give you further insights. Now, let me tell you that, of course, you are listening to us, but in the group of listeners, we also have economic and financial reporters and journalists.

Well, I have to say that during the pandemic, what we've seen is the following.

I mean, there's been an abrupt, I mean, a movement, I mean, a sort of a shock or an earthquake on the market on every asset classes. I mean, you know, well, rates, credit rates, spread levels, corporate spread levels, coffees spread levels, and so on and so forth. So, you know, I have to say that what we've seen in the You know, considering, of course, the market moves and even the solvency moves. So, of course, the solvency depends on market movements. Well, I have to say the solvency is based on a very specific, you know, a behavioral model that the so-called, I mean, technicians know very well. So solvency, if you will, produces highly distortive, you know, effects on markets. on our business. I mean, they really created distortions because, I mean, this standard highlights the mark-to-market philosophy for long-term investors. You know, they have long-term liabilities. And, of course, wait a second, this is a personal opinion, but, of course, solvency should be used based on cash flows, batching, instead of, you know, highlighting or emphasizing Mark to market. Anyway, that's been said that we have to comply with the current regulation in force. So if you just move away from this regulation, so if you do not comply, if you will, with the solvency parameters, I mean, in terms of, you know, rate curve. or the breakdown and the make of asset classes or even the, you know, assets investment. So if you move away from this, if you do not comply with this, well, you increase the risk of having, you know, well, some ups and downs or, you know, oscillations or even distortions on the market. And of course, this will also have an impact on the choices of our company. So within this context, we've seen that, There have been many, if you will, pro-solvency policies instead of, you know, financial risk policies, if you will, in terms of the re-makeup or recomposition of our assets. Of course, we will continue with those policies also in the future. And, well, let me say I'm sorry because, you know, as a manager director of an Italian company. So the consequence would be reduction of investments in Italian GOVIs. And this would be an advantage for GOVIs from other countries because, you know, the main aim is to, you know, keep down or mitigate the high volatility of spread curves or rate curves. Of course, I'm talking about the volatility of solvency. There is no other way out because this is what we are supposed to do. I mean, we are managing an Italian company. So, of course, we have to manage at best the money of our insured and shareholders. So, once again, this being said, I have to consider that, you know, this country is, I mean, is strongly indebted. I mean, we have a heavy debt. There will be even more debt because we are now implementing so many support and encouragement measures which is what is necessary to do in the post-COVID-19. I know we can count on some, let's say, European funds with low rates, but of course, well, most of this money, you know, has to be given back to Europe. So maybe for our country, it would be more useful to, let's say, use, you know, and exploit, I mean, the savings of Italians. And of course, we are one, if you will, broker country. So we should be investing, you know, on our country. So in terms of, you know, securities of our country, instead of forcing people, you know, to purchase investments, you know, well, of course, I mean, this is not formal, but of course, you know, at the same time, we feel forced to purchase, you know, securities from other countries. I mean, 55% of our bonds are now invested in Italian bonds. We have had, you know, rates even higher than this in the past. But unfortunately, these rates will have to be cut because, again, we need to reach the objectives I talked about before. So a lower volatility of solvency. And so once again, you know, we have to do this because this is included. into what we are supposed to do. Okay, so in the future, what about the, I mean, percent rate of Italian and non-Italian copies? It would be around 40, 40% of the bond portfolio. So again, this is the main component, if you will, of the de-risking activities that we are carrying out. Okay, sorry to take some minutes. I mean, I just wanted to share with you some general But it is a unique opportunity, in my opinion. It would be very useful to have a debate in this country about this topic, because this concerns, I mean, the system-wide, I mean, systemic solidity or strength of the country. I mean, this goes well beyond, if you will, the scope of insurance companies. Now, back to your question. In TESA BPER operations, As far as we are concerned, it will produce no consequences in this financial year because what we have to do in this financial year is the completion of the acquisition by BPER of all the branches that they promised, I mean, to take over from Banca Intesa. And there will be a capital increase in order to do this. I cannot quantify the capital increase right now. Of course, we will, you know, follow suit, well, based on our duties. In 2021, so next year, Bank Intesa will repurchase, I mean, the minorities of the insurance joint ventures, which are now held by UBI, we will buy the part of the portfolio which is around 1 million customers that they will, I mean, they will be, you know, transferred into BP ER. Okay, so I don't have, you know, details on this operation right now, because as you are aware, you know, this is an offer that was not, you know, agreed upon, you know, between Bank Intesa and UBI. So, of course, we don't have details now. We have to wait. And of course, we have to wait until Banca Intesa really starts managing the bank that they are acquiring. Maybe I can share with you an estimate. Let's say that the BPER operation, they will buy masses from Bank Intesa, which are equal to more or less one-third of the total UBI flows. So let's say the UBI basically will be quantitatively split in the following way. Two-thirds into Bank Intesa, one-third will go to BPER. I'm talking about the total masses, the total money management. So, right now, one-third of the UBI customers will become BP customers. So, once again, if I'm not mistaken, the collection from UBI was 5 billion euros in the live business in 2018 and 2019, if I'm not mistaken, once again. So, what we expect is that it should have a new mass, I mean a new quantity of customers. So this should be their production capacity between 1.5 billion and 2 billion euros live business a year. With debts, you know that the live production changes a lot depending on the rates, so it changes a lot for everyone year after year. Anyway, if the benchmark year is 2019, I think that their volume may be between 1.5 and 2 billion euros. Now, as for the provisions that, of course, we have to bring into the group, and, of course, that they have to do with products that have already been distributed to UBI customers, well, I think that it should be around 8, maybe 9 billion euros.

So this is the total of reserves or provisions.

Okay, so this is the general size of the business that we think will happen, and anyway, it will happen mid-2021. As for the live business figures of H1, Matteo will give you some insights. Now, as for the H1 live profits, well, they have been deeply impacted by the de-risking activities Carlo talked about before. In particular, we have reduce the part of our stocks exposure on some sectors or businesses where, you know, we don't want to have exposure any longer. We have also cut or reduced one of the credit components characterized by the lowest level, as I said before, because, of course, we want to invest much more on the higher rating business. You know, this means that we have had losses. So we already had the so-called latent capital losses, 110 million euros. So this has basically cancelled the profits of the live business in terms of technical matters. So the management fees and the mortality fees and then expenditure reserves. I mean, our profitability is basically similar or aligned to the more than 100 million euros a year, which is what we had in 2019. I may also tell you more about the live business investment policies. I mean, we have done another operation. We have now longer portfolio durations because this is another point that has impacted, I mean, solvency all over Europe. I mean, the absolute level of interest rates is now negative all the way to the 30-year-long deadlines or maturities. So now this means that we have to take into account, I mean, the passive flow rates, to very long, you know, deadlines or maturities. I mean, the quantity now is not very important, but anyway, there was a consequence. I mean, we needed to make longer durations, which is what we have done by investing onto the GOVIS component, especially the core. GOVIS, for example, on Germany, once again, the values on Germany are negative now. And we have done this with some investments on the shortest path of the curve, in some credit notes characterized by very high rating levels. So we have kept the same selection policies of the issuers. But anyway, the reinvestment rates, as I said before, more than 1%, well, let's say between 1% and 2%. The negative evolution of production is something that we wanted to have. I mean, we had already, you know, in our budget, a strong containment of traditional policies production because based on our habits, I mean, we have quotas on traditional policies and those that can be reassessed based on the, if you will, capacity level of every single segregated account. So, year after year, because there's been a further decrease of interest rates, we also decided, I mean, to slow down in terms of producing the so-called re-accessible policies. It's negative in terms of premium, but this is something that we wanted to do because, of course, we want to enhance the profitability of the portfolio. So, this is why we want to focus on, let's say, high actuarial risk policies, for example, you know, some specific types of policies. Once again, this is not a headache for us, rather the opposite. I mean, it's something that we definitely wanted to have and we planned to have. Next question from the conference in English is from Sudarshan Bhutara from Societe Generale.

Hi there, thank you for taking my question. Just a few questions from my side. The first one is on the Unipol group stake in Unipol SAI. Now you've been increasing the stake for the last few quarters now. So I just wanted to get an understanding of what is the level that you want to go to or you can go to with your current resources and what is the maximum regulatory limit in place before which you might have to make a bid for full ownership. So, I mean, what is the strategy behind that increasing the stake? That's the first question. The second one is on the impact on solvency to ratio from the reduced equity exposure. Can you just quantify what was the sort of benefit that is there in the Q2 solvency ratio from the reduced equity exposure? And my third question is on the expense ratio improvement in PNC. Can you just provide some more color on that? Thank you.

Thank you so much for your questions. Now, as for the stakes in Unipol's side, as I, you know, said at the last conference, if I'm not mistaken, or maybe even previously. Anyway. You know, some time ago, we said that the rate was 80, 80 percent. So, our, let's say, best level or optimal stake. Then, you know, the situation changed. I mean, the value of Unipol, in our opinion, was under appreciated so it was sort of you know underestimated and this is the reason why we decided to increase our stake the stake is now around 85 percent so for the time being we have no limit if you will so we didn't decide to have any limit so far about, I mean, the possible stake level in OnlyPoSci. Now, for us, OnlyPoSci is the best possible investment because, of course, we know the potential of that company and we also know, I mean, how much income this may generate in the future. So if I see some UnipoSci value losses situations, well, we will, you know, get that opportunity. But once again, no, we have set no limits. And, you know, at the same time, we have no specific strategy looking at the future. So it's a sort of an assessment that we do, you know, day after day, depending on the market conditions. Now, as for the expense ratio ER, the floor goes to Matteo. Sorry, sorry. There is no limit which is required by the regulator concerning this business. Well, in this case, the regulator name is Comsob, C-O-N-S-O-B. The limit actually is 90%. If you do more than 90%, just like the OPA entails on UBI, if it's more than 90%, some forecasts have to be implemented. from the regulatory point of view. But once again, if you don't reach 90%, there are no obligations, or I mean, nothing is imposed, if you will, onto us by the regulator. Okay, back to the expense ratio question here. So this is steady. It doesn't change in terms of costs. I mean, Carlo talked about the cost reduction that we have experienced during the first six months. I mean, following the 4% premium reduction. So the expense ratio ER is basically unchanged, which is what also happened to the commission level. As I said before, by the way, at the commission level, so let's say the remuneration to the distribution network will follow exactly the agreements that we have signed with our agents. This means that we will pay a quota, so a part of the technical profits that we have, once again, as long as it is confirmed at the end of the year. So this is what we will pay our agents. And now because there may be a technical benefit, possibly there's one part of commissions for the distribution network. This part may increase. So commissions may become higher starting from 2021, as I said before, provided that one part of provision concerning 2020 has already been done. As for the other question on solvency or solvency ratio, I have already answered in my previous question, but of course you need some details. So what about the value of these rates?

This afternoon we will be

You can talk about this with our investor relators this afternoon. They will be able to give you all of these details.

Sure, sure. Thank you.

Next question from the original conference is from Elena Perini from Intesa, Sao Paulo. Mrs. Perini, I think you can ask your question now. Thank you. Thank you.

Next question is from the English conference, from Peter Elliott from Kepler.

Thank you very much. I just had one remaining question, actually. I don't know if it's still the case, but certainly back in May, you were doing weekly reporting of your solvency ratio. This may not be something you could tell us, but I'm just wondering, are you able to tell us what the low point of your solvency was when you were doing those weekly reportings?

Thank you very much.

Thank you for your question.

Now, as for our solvency ratio, so even during the lockdown months or so, in the worst moments of the pandemic, it was between 140 and 150. So once again, this was the negative peak.

Great. Thank you very much.

This is to remind you that if you want to ask a question, you can do it now. You just have to dial star followed by one on your telephone. Mr. Chamberlain, for the time being, this is it with questions. Well, thank you so much. Thank you for sharing this conference with us. And thank you for all of your questions. So, well, enjoy some holidays. And, of course, we will have another call in the month of November. Once again, thank you so much. Bye-bye.