Unipol Grupo Spa

Good afternoon, this is the Coruscall Conference Operator. Welcome and thank you for joining the Unipol Group First Half 2025 Results Conference Call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star N2 on their telephone. At this time, I would like to turn the conference over to Mr. Matteo La Terza, CEO of Unipol. Please go ahead, sir.

Good morning to everyone and thank you for participating to this call. Before opening the floor to the question, let me make some remarks on the number that we disclosed this morning. They were very solid numbers above all in terms of top line revenues and in terms of improving technical profitability. Starting from PNC, we achieved a premium growth at 4.5% driven by all the line of business above all, as usual, Health with a growth of 12% and bank assurance above 17%. Also in terms of technical profitability, the improvement was quite consistent with the combined ratio. at 92.7%, driven above all by motor, but also no motor, even if the comparison versus the first half of 2024 was negative because of a very tough comparison, we are on target compared to the numbers that we disclosed in the industrial plan. In life, also very solid premium growth, more than 22%, also due to some very important contracts we achieved in the second half of 2025, but also normalizing this number, the growth was above 8%, that is a very good number in terms of top-line growth. Also in terms of technical profitability, the numbers were very solid with a very high and consistent CSM release in the second half of 2025. Concerning investment, the first quarter was, as you remember, very strong due to an unrepeatable positive effect of some assets that we marked to market through P&L. In the second quarter, in the P&C area, we had, on the contrary, some negative effects, not repeatable as well, coming from the same category of assets. But Nevertheless, the number overall is above the target that we have in our industrial plan, and so also in terms of contribution coming from investment, we are on track on delivering our target. Finally... In terms of solvency, the number is 222%, driven by organic capital generation that was quite consistent in the first half of 2025, and also in this case on track compared to the number that we disclosed in our industrial plan. Before opening the floor to the question, let me say that with me there is Alberto Zoya that since last month is in charge of investor-relator. He takes the place of Adriano Donati. Adriano was investor-relator for a very long time. He did a very wonderful job in promoting the equity story of Unipol and Zoya. if the result in terms of high performance are the one that we have is also due to the effort that he dedicated to this job. I ask Adriano to take another very important role in our organization. I hope that Alberto will be in the position to continue the heritage of Adriano and hopefully to do better in his job. Having said that, I am here with Enrico San Pietro and I open the floor for the question. Thank you very much.

Thank you. This is the Coruscant Conference Operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star N1 on their touch-tone telephone. To remove yourself from the question queue, please press star N2. We kindly ask you to use the handset when asking questions. Anyone who has a question may press star N1 at this time. The first question is from Tommaso Niedu Kepler-Schwerer.

Hello and thank you for taking my questions. I have three. The first one maybe I missed would be on the known life net financial results. I was a bit surprised to see those numbers in realized losses in the quarter. So perhaps you can help us on these. My second question is on CSM. In the quarter you had quite a strong release but at the same time a bit softer new business. So how do you see this evolving over the full year? And then do you expect CSM to grow as new business picks up in H2? And then still on that, is the pace of CSM release in line with your expectations? And then the last one is on the other segment in Q2. Can you help us understand the strong performance there? Also, still in the segment, some color on the breakdown from UNHOTEL, Unipod REC, and healthcare would be great. Thank you very much.

Thank you to you. Just to be more precise on the contribution coming from investment in P&C, I talked about the negative effect coming from some assets that are mark-to-market through P&L. In this case, if you remember in the call for the first quarter, I announced a forward sale transaction on B per share as a consequence of the possible results of the share tender offer. And so on one side, the B per share performed very well in the last few months, fortunately. And so on one side, we have the unrealized gains in the stock price that are not mark to market on one side. And on the other side, we have the derivative forward sale that is marking a loss. And this loss has been marked at P&L at the 30th of June. And the net effect after tax is more or less 70 million euros. In the third quarter, when we will disclose the third quarter numbers, you will see the positive effect coming from the tender offer of Banca Popolare di Sondrio. after which we realized a net gain as a consequence of the fact that we exchanged each Banco Popolare Isondrio share with 1.45 shares of BIPER and 1 euro on top of that. And as a consequence of this transaction, we estimate a net positive effect in the consolidated balance sheet in the whereabout of 170 million that you will see in the third quarter of 2025. So in the numbers of investment income, just to sum up, you have embedded in the numbers the 70 million after-tax income concerning only the forward sale of the share price and all the positive components of the transaction will be seen in the third quarter 2025. And this is the main explanation of the soft number in the P&C investment income that we achieved in the second quarter of 2025 and overall in the first half of 2025. Concerning the CSM, yes, the CSM release is a little bit above what we produced in the first half of 2025. If you see the representation, the economic variance is quite consistent as a consequence of the fact that financial markets performed overall very well. And it is quite normal that in this context, the effect of the CSM release incorporate part of this positive component. in the overall number. But I consider this a technical effect that depends on the contribution coming, the economic variance quarter by quarter. So I don't think it's material in the consideration of the quality of the CSM that we produce in the same time period. Concerning the other segment, they performed very well because of the positive performance of some investment and assets that we have in what we call Beyond Insurance, in particular Centri Medici Sant'Agostino and some other companies. asset that we account in the in the other in the other business and we have also a positive f yeah and then we have these explain 13 million positive versus 5 million negative in the first half of 2024. And this is the main explanation of the difference.

Okay, thank you. Very clear.

Next question is from Elena Perini, Intesa San Paolo.

Yes, good afternoon and thank you for taking my questions. I've got three questions. The first one is on the life business because with 180 million pre-tax in the first half, it seems that you are doing better than before. It was in your minds, even with the plan. So I don't know if you can update us with the guidance for the second half of the year and on the main drivers. The second question is a follow-up to the previous one on the financial income for the PNC. And in particular, a clarification about the 170 million you mentioned as positive impact from the offer on Banco Popolare di Sondrio. Is it only a balance sheet item or are we going to see something in the P&L too? And then the third question on BIPER is, through the for-sale agreement, you downsized your PR position again below 20%, but you still have another derivative for potential other, I think, 4 or 4.5% of the capital. Can you elaborate a bit on this? Thank you very much.

Thank you. Thank you, Elena. Concerning the first question, the good result in life, is in part due to the quality of an improvement of technical profitability, above all concerning the investment product component of our portfolio. And a part is due to the contribution coming from investment in the financial portfolio that is not covered in segregated account, gestioni separate. And this second item is not repeatable in the second half unless also the second half of the year will be repeated. as positive as the first half has been. So at the moment it is not prudent on my point of view to multiply by two the net result in life, but it will depend on above all on financial market performance in the second half of the year up to now the performance of financial market as you have seen is quite positive but we never know what will happen until the end of the year The second question, again, the 170 million is the positive impact that we will book in the P&L of the company in the third quarter. that represent the positive effect concerning the tender offer of the Banca Popolare di Sondrio shares. in exchange of BIPER shares and the one euro of the bump that was disclosed by BIPER a few weeks ago. And concerning the derivative, of course, the 170 million plus takes in consideration also the mark-to-market of the derivative as it was a couple of days ago. So it It is an updated number. Concerning the long position that we have, if I understood well the question, the long position is booked in the life portfolio, and so it is completely mirrored in the portfolio. So you will never see neither the positive contribution nor the negative contribution of the share price because there is the mirroring that can allow us to rebate the positive or the negative contribution. to the policyholder, of course, until the coverage of the guarantee that we give to the policyholder. But it will not be a number that we mark to market to P&L as we did in the forward sale. And I forgot the third question. There was not a third question. Okay. Thank you. Thank you.

Next question is from Michael Hatner, Berenberg.

Thank you very much. Actually, one is on what AXA said about the acquisition of Prima. They seem to think that this was the real disruptor, I think 10% market share in motor in Italy, really strong margins. AXA was implying in their comments and their presentations last week that effectively the incumbents are losing out here. And obviously you're so big that that could probably include you, not directly in their thinking what I mean, but clearly there's margin and market share going away. So I just wondered how you see that. The second is all still on motor. Whether you can give us a little bit of an update on the pricing of premiums versus the claims inflation versus frequency. Where is the margin moving to? What kind of outlook do we have? And the final one is really still in terms of combined ratio. I'm really sorry. It's the only number I can think of. So Q1, I remember motor 92%, half-year 94.4%. kind of mathematically that the Q2 is about 96.8, I guess. I just wondered, is this the normal volatility or is there something here that's changing? Maybe you're being more prudent or deserving or something. Thank you.

Thank you to you, Mark. Before leaving the floor to Enrico for the question on motor in general, concerning the Prima acquisition is quite early to see how and if the market context in motor will change or not. Of course, to me, the positive news is that in this case, Prima, that is a manufacturing agency, has been acquired by an insurance company who has a Prior target the remuneration of the shareholder capital and so they will pay, I expect they will pay attention to the total profitability of the business not only in the manufacturing agency but also in the underwriting result. But, as I said before, it's quite early to make a forecast or a provision on how the motor business will change. If it will change in the next future, we will see going forward if there will be some change in the market context in motor. Having said that, I leave the floor to Enrico for all the questions on motor. Thank you.

Good morning, Michael. So as far as motor third party liability is concerned, things are evolving well. So basically, the market is still in a market phase in which prices are increasing. The last data from the control authority related to the first quarter of the year report above 4% of the average growth of the average premium. We are in the condition to have a little less increase in premiums since we have done our homework before the other competitors, and now we can enjoy a situation in which basically We have the average cost per claim perfectly under control and also a slight improvement in loss frequency. And so basically everything is fine. There is, of course, as you noticed, a difference between the first quarter and the second quarter result, but it depends on how much we release on prior year reserves. And so basically the underlying trend remains positive, remains in line with our targets.

Next question is from Gianluca Ferrari, Mediobanca.

Yes, hi, good afternoon and welcome to Alberto. Three for me, please. On the P&C financial income, but I'm referring here more to coupons and dividends. There is decline year on year at same perimeter. Last year was 176 million. This year is 159 million. Can you explain the decline, considering that the investment portfolio went up significantly over the same period? Is the reason because last year you probably had some very high field corporate bonds or some inflation linked or stuff like that? The second question is on what you just said, Matteo, on the financial income of the life segment that was particularly strong in Q2. You said it is not repeatable. But I was wondering if you can give us more detail on which asset class or investment drove this very strong performance in the live financial income. And the third and final one is you reported a pretty high above 7%, if I am right, large losses in non-motor. Can you tell us a bit more what are those large losses? I think it's not NATCAT, but really large losses. If you can elaborate a bit more, what are these components? Thank you.

Thank you to you Gianluca and as I said during the presentation of the industrial plan, our assumption in 2025, 26 and 27 that the is that the investment yield is lower compared to the number that we had in the past, just because there is a – even if quite smooth, but there is a reduction of interest rate going forward. A part of – Our investments that are in runoff, that are very high-yield investments, are related to the fiscal credit that we bought over time after the release of 110% tax credit. This is a portfolio that is in runoff, and the contribution... of the yield of this asset, that is in the whereabout of 6%, 7%, is reducing, of course, quarter by quarter. And so the contribution is lower, and we cannot invest, as you can imagine, at this yield in the government, fixed income government area or sector. in the in the in the corporate and so there is a very small decrease i i have to say that it is much lower than what we expected in the context of the industrial plan you have seen in the number that the current yield is still in the whereabout of 4.5%. And so it is quite resilient to this trend of reduction of interest rate. Concerning the life financial portfolio, the contribution comes overall from the fixed income portfolio and again, in this case, corporate in particular and also from the contribution coming from the dividend component of the equity portfolio in the free financial asset portfolio of life. If financial markets will perform in the same extent in which they have performed in the first half, of course, we can say that It could be repeatable in the second half, but we are still in the middle of August and so it is not prudent to make a forecast on how this performance can be.

Sorry, Matteo, but this is cedolare, no? So this is, in theory, running income regardless of equity market.

It's a coupon and dividend also. And the dividend component is not... Yes, so this should be structural, no? Yeah, it depends on the disclose of the dividend that the company will do in the second half.

Of course, of course.

Yeah, there is not very high volatility in this. You have some component of financial asset that are mark to market through the P&L. And in this case, you had a positive contribution in the first half of the year. But if financial market perform bad or very bad, you can have also a negative component, you know.

On the market, yes.

Then I guess there was a question on large losses in non-motor. I leave the floor to Enrico.

Yes. Hi Gianluca. As you have seen, there is on the overall portfolio a figure that is not that different. It's a little better in motor and a little worse in non-motor. And in NotMotor, it depends on a couple of medium-sized claims that affects around 20 million, the overall result. But nothing to be particularly concerned about.

Very clear. Thank you so much.

Next question is from August Markan, UBS.

Hi, thanks for taking my questions. First one's on P&C. Can you talk about the expense ratio? It seems to have ticked up a bit year over year. And second question is just taking a step back from the results. From Unipol's perspective, what do you see as potential operational benefits or synergies from the BIPER and Sondra deal, apart from the profits and dividends, of course, you get from the entity? Thank you.

Okay, I will answer on BIPA and Sondra, and then I will leave the floor to Enrico. There are two main sources of synergies we can take advantage of. The first one is as shareholders of the combined entity. We are 20% shareholder of an entity whose market cap is 70%. 17 billion and with an earning power combined above 2 billion. There are a lot of synergies that have been possible synergies that have been disclosed by BIPER in its tender offer document, I think that there is the possibility to take advantage of all these synergies and we will take advantage of it as a shareholder of the new entity at 20%. But we are much more interested to the second kind of synergies, as a distributor of insurance product to BIPER and Banca Popolare di Sondrio. With BIPER, we did in the last years a very good job in terms of increasing the productivity of the BIPER branches over time. And today, BIPER have a productivity that is... state-of-the-art in terms of new production in P&C compared to the industry. And I think that by merging the two entities, there is a lot of room for improvement in terms of productivity of Banco Popolare Sondrio branches in terms of distribution of bank assurance products. Through this channel, that is also one of the most important drivers of profitability of the bank, we can take advantage in order to enhance further what is for us a very strategic distribution channel of our product, that is bank assurance. I think that the next few years The effort of BIPER will be on all the items that they disclose in terms of synergies, but above all in bank assurance. I leave the floor to Enrico for the expense ratio.

Hi, as you notice our expense ratio has increased and the main reason is about the commissions to our agents. Our agents' compensation scheme is related to technical profitability, so this is for us very, very important and some of those incentives are related to a two-year average. So, for instance, when we discuss about motor third party liability, last year the result was based on the average of 2023, that was very bad, and 2024, that was very good. This year we expect to have an average that is much better because 24 was good and 25 we hope and so far is good too. So this means that there are some relevant impacts on our commission, our incentives. And this is the explanation both for motor and also for non-motor.

Can I just follow up on that quickly? So if the technical profitability remains, let's say, as is or gets better, is this expense ratio that you printed a good kind of baseline for going forwards?

So, yeah, I think that is correct, since, of course, the most important schemes are related to those two years. So if you combine two good years, you probably have a good estimation of a level of commission related to a good profitability period for us.

Thank you.

Next question is from Alberto Villa in Termontesim.

Good afternoon. A couple of questions from my side. The first one is if you can provide us some more granularity on Your underwriting stance going forward, you mentioned in the past and you are doing a lot of selection on the property lines and I was wondering if you are done with that, what you are seeing and what you are, let's say, doing. to address your intention to reduce the exposure to some kind of risk if we can expect that, let's say, a review to continue or you completed it. And on the other lines as well, if you can provide some color on what are your expectations. Also on the health aspect. that has been growing double-digit if you expect it to continue this trend also in the future quarters. The second one is on the contribution you are getting in the third quarter from the bid of BIPER on popularity, so the $170 million. Is that going to be included in the calculation of the dividend payout for 2025? Thank you.

Thank you, Alberto. It will be a positive component of the net result of the company. even if it is an extraordinary item. So in terms of contribution to the net profit, of course, it will be part of the net profit and so consequently also part of the possible pot that we will use in the payment of the dividend, but we have to consider that it is not an item that is repeatable over time. And so... Of course, it is very supportive, but it is not an ordinary item. Having said that, we are still in August, so talking about the dividend of 2025 is very early up to now.

Hi, Alberto. Okay, basically, on property, we have done the hardest part of the homework, pruning portfolio, reducing costs. our exposures and our concentration. Now we are careful not to fall again in the same situation, but we are growing prudently, as you can see by the figures. We have a 2.3% increase in the first half. And, of course, we are going on to increase Look very carefully to the development of this line. On the other side, as you mentioned, we have very good growth and very good profitability coming from health. The market is growing double digit. We are market leader. We have different channels to rely on. And in particular, we are very confident to be able to continue to grow double digit on agent and market assurance channel.

Thank you.

Next question is from Andrea Lisi, Equita.

Hi, everybody. Thank you for taking my question. Honestly, most have been answered, but just some clarification. I'm referring to the slide 22 of the presentation. Just understand in non-life, the line above the pre-tax results, the other revenues and costs, that was $17 million in the first half. It was minus $14 million in the first quarter. So just understand that. what drove the progression, the development of this line. And the second one, I think that the question was made before, but I did not understand well the answer. If you can provide visibility on the other revenue component of the other segment that accounted for 42 million in the first half. So they are the main drivers of that. Thank you.

Thank you to you, Andrea. And yes, there is a positive contribution coming from the positive result that some assets of the Beyond Insurance area are released in the first half of 2025. But in 2024, there were also the cost of the merger between Unipol and UnipolSci that, of course, are not repeatable in 2025. So the combined effect of the two contribute to the positive contribution to other revenues in the life.

And regarding the other segment, if you can repeat.

The other segment, there are also some assets that are located in Beyond, that are located in... in non-life like Unipol Rental, for instance, but there are other assets like Centri Medici Sant'Agostino and other investments that we have that are located in the others. And so there are two components of the so-called beyond insurance that are in 2025, finally, contributing positively to the pnl and in the 2024 we're giving a negative contribution that are supporting the profitability of the business both in non-life and in the other sector don't ask me why one some assets are in non-life and some in others because it's a a an issue that is covered by the guys of accounting and so it's quite complicated to give you an answer about this thank you just just a follow-up if there is some other business with the exception of una where we know there is a strong seasonality where

we can find a seasonality, let's say, stronger in some quarters versus others, so that to imagine that something is not repeatable, just understand that.

Yeah, no, Una released a net profit of more than 8 million euros. And more or less is a number that is in the middle concerning the full year results. So there are not so many seasonality between first and second half overall of the Beyond Insurance asset. Thank you. Welcome.

Next question is from Michael Hattner, Berenberg.

It's my lucky day. Thank you so much. Just two questions, the numbers. One is you were talking, I think, about operating capital generation. I'm really sorry, I don't have that metric in my model. I wonder if you can remind us of a number, both in H1 and maybe the guidance you've discussed in the past. I don't have it. And then the second question is, following Sandhya and Deepa, et cetera, what is the total cash you will get which will be released out of all this? And obviously, what will you do with it? Obviously more than 170 million games, but I can't figure it. Thank you.

Thank you to you, Michael. In terms of operating capital generation, as I said, our solvency is at 222%. So there is an increase of four percentage points compared to the number in the Q1. Overall, concerning the capital generation, we produced normalized capital generation in the first half in the whereabout of 700 million. But be aware, don't multiply by two the number because here there is seasonality. We had some economic variances of more or less 350 million. And we, of course, net of the capital movements at the end, the organic capital generation net growth. of capital movements is in 350 million area. As you remember, during the presentation of the industrial plan, we disclosed a target of 1 billion in the three years net of dividend of capital generation, and we are on track in order to get this number. Concerning the public tender offer, the only cash that we got is the one euro for share that was offered by BIPER on top of the 1.45 BIPER shares. And so at the end, the cash remittance has been in the whereabout of 90 million euros.

Thank you so much.

Thank you.

Next question is from Elena Perini, Intesa San Paolo.

Yes. Thank you for taking my follow-up questions. They are all about the slide number 10. I would like to elaborate a bit on the improvement of the undiscounted attritional loss ratio, which is quite significant in the first half, 2.7 percentage points compared to last year, which are the main drivers of this improvement. Second question is about the discount effect, which was down to 2.4 from 3.8 last year. So if you can give us guidance for the full year. And the third point is about the unwinding effect. How much was it in the first half and a potential guidance for the full year? Thank you very much.

Okay, Elena, I give you the final one and then I will leave Enrico to elaborate on the attritional. The outwinding in the first half of the year was in the way about of 90 million versus 110 million of the discount effect. Having said that, it's quite difficult to make a forecast of the the discount rate all the year because it will depend on the trend of interest rate in the second half of the year. The reason why it is lower than in the first half of 2024 is because the yield curve went smoothly down in the timeframe between the two first half. But, of course, I'm not aware on where the interest rate will be at the end of the year. So up to now, there are no main changes compared to this number, but I'm not sure that I can confirm it at the end of the year. Then concerning the attritional, I leave Enrico to elaborate. Thank you.

Okay, so we have two different effects on attritional loss ratio in motor and non-motor. Motor is improving, so motor third party liability particularly is improving. The improvement is significant both because we have back a normal level of reserve release, prior reserve release, And last year, we had the impact of the Milan-Court scheme on bodily injury compensation that reduced a lot this effect. And we also have an improvement in the current year attrition-loss ratio in motor, since, of course, the increase of premiums that we discussed last year finally arrived to have the full effect of on earned premium and so since the average cost of a claim is under control, loss frequency is slightly declining and also on the motor other damages, results are good. This is the part in which the attritional loss ratio is improving. On the other side, in non-motor, we have a negative effect Last year we had a significant positive pre-oreal development coming from our reserve related to the summer 2023 atmospherical events that proved to be more than sufficient. And this is... The main reason, because when you look at non-motor, there are attritional results that are a little worse. On the overall effect, as you can see, we have good results, and still we are confident to be on track on what are the targets of our plan, that I remember are around 95% of combined ratio in motor and around 90% for non-motor.

For any further questions, please press star N1 on your telephone. Mr. Latterso, gentlemen, there are no more questions registered at this time.

Okay. Thank you very much. Let me say that again, we did a very solid quarter. I listened in the past few days some of my colleague CEOs making some remarks on their numbers as the best of their history, the most important in their history. We are not in the condition to say this, but just because for us, the best numbers in our history has yet to come. And if you trust in us, as you did in the past, you will see it. Thank you very much and have a good vacation. for all of you who will do it.