Assicurazioni Generali S.p.A. (G) Earnings Call Transcript & Summary

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Generali Group 9 Months 2022 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Fabio Cleva, Head of Investor and Rating Agency Relations. Please go ahead, sir.

Good morning. Thank you, and thanks, everyone, and welcome to our conference call for the 9 months 2022 financial results. The call will be hosted by the Group General Manager, Marco Sesana, and by the Group CFO, Cristiano Borean. Before opening the Q&A session, let me highlight that the focus of today is on our results, and that the call will last approximately 1 hour. Operator, we are now ready to take questions.

[Operator Instructions] The first question is from David Barma of BNP Paribas Exane.

The first one is on Life. So you mentioned in the press release some one-off reserving dynamics in the life segment. Can you talk a little bit about what those are, please? My second question is on P&C and motor specifically, where the top line is up only a few percentage points in the quarter. I know your main value focus is more on the other lines. But can you please talk a bit about the trajectory for motor premiums and when we'll start to see the effect of the price increases we've been talking about in the last few quarters. And then lastly on cash, can you maybe update us on the holding cash flexibility where you expect to line that at year-end.

Thank you, David. Cristiano, would you like to take the first question on Life and the third question on the holdco cash and then Marco, the question regarding the development of the top line of the motor business in P&C?

So first, thanks for the question. So what we start from the beginning to clarify the bit and do the anatomy in the Life operating result. I will start from the end, and then I'll give you more detail. Having the assumption that the interest rate curve stays as it is from the point of view of its actual level and the forward implicit of EUR 514 million bit of compared to 9 months '21 increase of the Life operating result. I would say that something around almost 70% of it is recurring, hence related to real uplift stemming from the new environment. The other part is not. Let me try to give you some examples in the different geographies of example of nonrecurring effects. One is related, for example, from Italy, where you have some reserve release related through some local reserving calculation, which are then released because of the higher interest rate environment in a form of a kind of automatic way. Another one is related to the fact in France, for example, that we have a twofold effect on one side, due to the fact that there has been some changes in the opportunity for our customers to move from a mutilation in pension products towards lump sum offer. When this happened, the longevity risk reserve has been accordingly released, and this is clearly a one-off effect, which has a positive benefit. And at the same time, you have some interest rate cost reserve and expenses reserve were basically due to the higher rate environment, the coverage of the guarantees plus the expenses in any specific segregated fund is guaranteed and some of that are released. With regards to Germany in specific, you have, for example, the fact that there are some specific one-off elements related in particular to the fact that you have some lower amount of [indiscernible] allocation, which, going forward, you should even think of a possible [indiscernible] release. With regards the different aspects of this, this higher risk result. For example, in Germany, from that regard the specifics here, which are running, not one-off, I would like to recall you that we have decided to stop the production of pension product called reserve, which had some so-called riders. But in this reserve, there were higher acquisition costs. So going forward, you will see lower acquisition cost because of the closing of this product and the steering towards the other. So to make it simple, almost 70% is recurring and the nonrecurring effect are the ones linked to what I was telling you before in these geographies. Overall, we see an increase in the investment result, especially in the region which are with different profile of liabilities like Central Eastern Europe where you can observe a faster pickup of investment result on the real asset side, because of shorter liabilities due to the specificity of the higher protection business. Now on the holdco cash, as you know, we have always commented about what is available financial resources to be used for capital deployment which at the year-end and as of today, will stay around EUR 1 billion. On the other side, we always keep EUR 1 billion of cash buffer on top of this. Then there are other form of cash, which, for example, in the 9 months, we have EUR 2.5 billion, but we're only treasury operations, short term of money that the companies are just for a shorter-term using, which you should not consider as available for us. So we have EUR 1 billion plus EUR 1 billion for the liquidity buffer. Don't forget, but I'm already canceling the EUR 500 million which will be deployed [indiscernible] calling the December 12 bond, which is already public information, we will come back. Marco?

Thanks, Cristiano. And let me take your second question, David, on motor premiums and pricing. Let me say that what we see in the PSC segment overall is a really strong growth, and this is mainly supported by non-motor premium. I just want to remember that our non-motor premium growth was one of the core element of our strategy. So we said we wanted to grow more than 5%, and we are on that target, and we are growing really well. On motor, again, we are looking for more profitability than a specific growth on premium and so we are working on injecting price increase, but also working on portfolio pruning. So we are really looking to make sure that our portfolio is healthy and we can face the next months in a really profitable way. We are injecting price increase. We do see already coming in some of the country fronts is up while in some other country, we will see that coming in the next months, especially in a country like Germany, where we will have the rate increase in January, and we are pushing for a high rate increase in that market. So we are confident that motor premium will increase, but also keep in mind that the bottom line and profitability is what we are looking for. And so there are also a measure of portfolio pruning that will act in a different trend.

The next question is from Andrew Sinclair of Bank of America.

Three for me as well, please. Firstly, just really with rates moving higher, what does this mean for Swiss reserve strengthening both in 2022 and beyond. Secondly, kind of just thinking a bit more into P&C pricing, again, just really wondering if you can unpack the premium growth in DMC and to how much of that is really coming from pricing versus how much is coming from volume growth and kind of just sticking on that, how much pressure are you seeing these days from an underwriting competition from rates going higher? And third question is just on the combined ratio, really, if you can pull out the details on how much is [indiscernible], how much is PYD versus current year?

Cristiano, I think the first and third questions are for you, and the second one is for Marco.

So Swiss reserves strengthening. In 2022, so far, we are reserving something which is EUR 70 million less than compared to last year because of the one side, lower speed and on the other side, higher rates. We still keep a very prudent expense notwithstanding the fact that there is this better level of rate in order to manage the volatility. What is beyond. Beyond , it will be a new word. It is the IFRS 17 word where in the reserving, you have the natural translation of the profits against the guarantees, which is released on a revenue recognition basis, more like a kind of value in-force view than the actual approach on reserving. So what I'm saying is that this is going to be less. The impact will be strictly related to the inner profitability portfolio, and there will be no further end. You will see potentially even positive effect going forward on the Swiss part. Third, combined ratio detail. For sure, I give you all the elements of the combined ratio at group level. We have a loss ratio of 65.2%. What we call the attritional current year loss ratio, which is excluding the large man-made claim impact above EUR 5 million, and excluding the natural catastrophe, was at 64.3%. And we had a prior year loss ratio movement of minus 3.1%. I recall you that all these numbers are embedding the Argentina figure, which has a negative effect of about 0.6 percentage points higher than last year and this is quite relevant. To me, the most important number that you should look at is the attritional part at 64.3%. And excluding the Argentina effect, you should see only a 0.1 percentage point increase, net of the man-made effect and net of the natural catastrophe, which is a good example of the mix effect entering on the profitability of the non-motor component versus the one-off motor, which, as we know, has [indiscernible] due to the inflation.

Thank you, Andrew, and let me comment on the premium growth on P&C. As I said before, we see a very strong growth in P&C, especially in non-motor, basically across the different areas and across the different line of business. So if we take out for a second, Europ Assistance, where it is benefiting from new contracts. So it's really new business coming and the growth of Europ Assistance is super strong, thanks to this new contract that we have. If you take out our core market on non-motor, we see a strong increase, both on retail and SMEs, and it's mainly driven by price increase versus volume. So we do have -- we are pushing on the market price increase. We are benefiting from some of the portfolio that is, as we discussed a few times ago, is linked to inflation. So we do have about 40% of our P&C portfolio that is linked to inflation. So we are seeing the growth of this portfolio, thanks also to this measure.

The next question is from Peter Eliot of Kepler Cheuvreux.

And a couple for me, please, especially on asset -- the asset manager. The management fee is pretty resilient in Q3 [indiscernible] compared with the drop in the year. Just wondering if there's any comments you can give on that, whether that's sustainable or any one-off, et cetera. And then secondly, I was wondering if you could just give us an update on your outlook for private equity gains and dividends. I appreciate it's been a bit more difficult year than we might have thought at the outset. But we're also expecting a bit of a catch-up on the dividend, which we don't seem to be seeing. So [indiscernible] plus in last year. So [indiscernible] net result that we had last year is not turning into dividends at this stage. Should we expect that? And maybe you could give us an update on your outlook.

Cristiano, they are both for you.

Peter, so asset management operating result is relieving, especially in the performance component. The performance component that you've seen in the 9 months still are EUR 38 million, stable at the half year results that we were more accurate in the first part of the year, and there were some form of, I would say, one-off related. So you should not expect a much larger movement in the last quarter. With regard to the other component, we speak also with the internal capacity to have on the own managed asset to extract the value. And at the same time, there was a strong attention on the operating cost trend of the asset management, not related to the third party in order also to keep track of the operating revenues versus the operating expenses. Going forward, this for sure, will reflect in lower fees because of the lower value of the asset. But as I told you, that will be a little bit focused on the especially internal part cost. Second element on the private equity on the private equity side and the FX. Let me try to highlight you a couple of, in my opinion, important messages. The first one is related to how should we look at Lion River contribution in the quarter and in the year. For sure, you recall that last year, we had some one-off, more than EUR 100 million benefit from our Unicorn investment, which is not repeatable, and that should be immediately stripped out. Part of it has been seen in this quarter because it was a split half from last quarter and this quarter. So we had a drop in the operating result contribution at group level from Lion River of EUR 137 million, I would say part of it, almost half coming from the Unicorn second and the rest is just a delay of realization. As you said, private equity managers are delaying the realization from with regards the impact on the dividend and the number on the impact of the dividend, you have seen that for sure, there has been a slowdown in the number. We have so far are located in the first -- in the third quarter, the number of dividend paid to buy Lion River to participants were mainly EUR 153 million in Life, EUR 103 million in P&C and EUR 30 million in asset management. This is related to the distribution so far. Going forward, I would like just to recall you that starting from next year, IFRS 9 will apply. Hence, private equity contribution will not be any longer presented in the segment other business. It will be a purely investment in the financial asset class of the line of business Life, P&C and some dividend received in asset management. But at the same time, you will see a fair value movement contribution compared to the operating result contribution we have seen so far, which is only when realization arrived.

The next question is from Andrew Ritchie of Autonomous.

Just a question to follow up on claims trends in Motor, I guess. What are you seeing on frequency? I mean, I'm guessing severity is running up a bit. But what are you seeing on frequency? I think there's some anecdotal suggestion that the frequency is down again in Italy. And maybe you can just confirm that and give us some explanation as to why that might be. The second question is a broader question on what impact the uncertain macro environment is having on sales, Life sales and/or surrender experience. It seems benign so far, but I wonder if you've done any extra work to look at what might happen, what kind of products have been popular or what increased risks there might be with respect to surrender risk?

Marco, these are both for you.

Yes. Thank you, Andrew. So let's start from the claims trend in motor. Clearly, you asked about frequency. So let me say that the frequency is not yet at recovered level. So it's still down. We have seen the frequency moving up slightly during the last -- during the last months after COVID. But it clearly had a slowdown in the recent weeks and probably months. So clearly, we are not yet at pre-COVID level. So the frequency is still down. We do think that the energy prices are impacting frequencies. So we do -- we tend to see less use of vehicles, and that is clearly moving, supporting the decrease in frequency. So in particular, you asked for Italy. This is clearly something that we see. Going forward, I think it depends a lot on where we are going to head in terms of energy prices and supporting measures from the different governments. So it's difficult to say. But we do see that the frequency is still not yet at a pretty pandemic level, but let's say this way. Then I would start the second question, and then maybe, Cristiano, if you can add. So clearly, Life sales are impacted overall from the macro conditions. Some of our markets are clearly -- the overall market, not ourselves, it's -- there is a clear trend on less volume on sales. I would say that we do believe that our focus on this type of product that we are selling. So hybrid product combined unit-linked traditional product protection and leveraging on our distribution, which is on some market its agent distribution, but anyway, there is a strong partnership within our sales and the distribution. We think that we can maintain some good level in our hybrid product going forward. So if you think about some of the market, clearly, like Italy, we have been moving from Life traditional savings to a more composite product in the hybrid product. We will continue to do so going forward because we think this is really healthy in terms of underwriting discipline that we have going forward. So Cristiano, up to you.

Yes, Marco. Just to add, Andrew, a couple of quantitative and trends view, especially on the surrender component. Be aware that hybrid products by definition, having been started in 2016, mainly in the largest part of production, have a 5-year tunnel of let's say, surrender, which means that starting from 5 years after you see the possibility to exit and by design, they have a normal exit forecasted by actuaries in the model and in the business value and the small trend of higher surrender what you can observe is related to the feature of the product and not to a trend of the customer. This is a very important point I want to tell you because, as you know, starting from next year, trends and variances on the experience of the customer goes through the contracted service margin variances and flows through according to revenue recognition through P&L, which means that we are not observing deviations from what the actuarial projections we had when we sold the product were designed. This is, in my opinion, a key message I wanted to convey. And then we have some self-inflicted surrender because we did some in-force management. For example, in Italy, changing the offer of products, moving out from probably higher capital intensity to lower capital intensity and better design of the need of the client, which allowed us, by the way, also to improve in a recurring way our investment margin.

The next question is from Will Hardcastle of UBS.

Just digging a bit deeper into one of the questions there on motor and the claims trends. Just really trying to get the key differentiating features that's going on because we hear quite a lot from market participants [indiscernible] marketplace. The trends are very different to Italy and Germany. Just trying to get any color on that, what you're seeing? And I guess we're heading into quite an important renewal period here for Germany. Any early indications of what you'd be hoping for or expecting? Are you looking at price? Or is there a term and condition type discussion here?

Marco, the question is for you.

Yes. So deep diving a little bit more on motor, I think you're right. So we see different trends and different situations in our core markets. So clearly, you mentioned France, Italy and Germany. These are clearly I would say, undergoing different dynamics. So in Italy, we do see that there are pressure on price increase. We are going on that pressure. Again, if you want to deep dive a little bit more on the different line of business, we see more pressure in MTPL compared to MOD, which is growing at a bit better also in Italy, but this is true everywhere in Europe. So while we've seen trends some already price increases taking effect and the business going on. In Italy, this will come. MOD is coming a little bit better. You mentioned Germany. I think we will have an important season in January on price increase. I think you have seen some projection in the market and forecast on how might take this price increase on motor. Just to give you some guidance, I think we will be in the upper part of the price increase for Germany. So we are pushing for a significant price increase in Germany in line with the market, but probably in the upper part of the markets.

And just a follow-up, does that imply affecting the inflation environment in Germany is significantly high than let's say in France, if that's why you're demanding that pressure point? And what part of the inflation is so different?

Yes. So I do -- we do see that inflation rates are different across Europe. We go from clearly Germany where inflation impacted a little bit more from Italy, where we see less of an impact on claims. And again, if you want to deep dive even more, we see these more on material damage than on bodily injury, especially in Italy, where this is really a clear differentiator.

The next question is from Farooq Hanif of JPMorgan.

Just again on non-life and then some kind of question on M&A as well. But just going back to what you're saying, you've got a situation where you're seeing inflation, albeit controlled in some markets and you're not priced for it yet. So I'm just wondering what is the reserving catch-up implication here for you, where will we see that? And then taking all the comments that you made, for the second question, taking all the comments that you've made to everybody so far. If you look at your discrete third quarter combined ratio, it's pretty high, 94-point-something. And even if we unpack Argentina and look at man-made losses, it just feels to me that you're potentially tracking here above your 92%. I'm just wondering what you think about that 92% number now for the next couple of years, obviously, assuming IFRS 17 doesn't exist. And then my last question is on M&A. So you talked about the EUR 1 billion budget that you have statically today. But of course, you're going to accrue more. Can you just remind us what that accrual is? And at what point do you make a decision to say, "Guys, we're going to give it back to our shareholders."

Cristiano, I think they are all for you.

So I think we need -- for the first question on the inflation impact on reserving. To look at in perspective also of the Solvency II best estimate liability impact we put so far, which is different from what you observe also on the IFRS accounting. As you know, we have a huge amount of reserve adequacy in the book, but which will disappear from year-end because we will enter the new standard. On the economic underlying assumption, we decided to have our enforcement of around EUR 600 million -- EUR 630 million in the first 9 months of the inflation effect on the P&C reserving, which will be and has been reflected in something which is similar. This is before taxes. So 2 percentage points of solvency ratio, which is exactly in the way of looking things safely going forward and to allow us to manage next year, where everything would be looked in a fully economic way in a safe and controlled environment. With regard to the second point on the 92% target. I have to, first of all, say two things. First, you asked me to make the assumption that IFRS 17 will not exist. I will speak to that. But for sure, we need to see the refined definition when we will meet in December. So we will show you the market agreement we had and the principle as we are doing the small changes in the definition. But apart from that, say that it is not going to exist. When we created a plan, we were not assuming a different behavior of Argentina inflation, which was at the order of 47% in that moment. So the effect of Argentina, which was large is not embedded in these numbers. So the deterioration of 0.6% further compared to what we did is not embedded. And this should be taken out of the control scope of what we should look at. So I would look at the group ex Argentina to manage because it is something under our control, that would have not been under our control, plus the perimeter. I recall you that the calculation was made with the existing perimeter of the group and not embedding the effect of both the acquisition we had like Cattolica, India, Malaysia, that we completed, including even in Medicale, which is clearly changing a little bit the scope. So for sure, we are acting to get close to this number, but there are some perimeter effect that you should think that could bring a kind of one percentage point higher effect of the target because of the perimeter and the region where we are acting. I recall you that the market in India is above 100% of combined ratio per se, but as a positive result, thanks to the investment. Regarding the third question of M&A, I recall you one very important number. This group is in the capacity to create EUR 1 billion of free cash on a yearly basis after having paid the dividend. How long this is keeping to accrue. When I'm saying -- when I told you -- I told you before in the previous answer, the EUR 1 billion by year-end, you have to be aware that we are accruing the dividend in the first quarter or eventually at the latest in April, the vast majority of next year. So by -- at the latest date end of the next year, we will have, for sure, accrued another EUR 1 billion on top of what we had already accrued and we have some internal bridging because we received all the dividend and the cost and the financing is delayed. So we have a lot of flexibility around this. What is the number? We confirm that we will be able to generate something between EUR 2.5 billion to EUR 3 billion of M&A capacity. And we confirm, as we said at the presentation of the plan that we will stick to exactly the same discipline that we had in the previous plan that in case this amount will not be deployed for capital deployment, we will act as we are doing in these days, and we are more than 80% of buyback completed, also giving it back to the shareholder in the form of a buyback, but at the end of the time period.

The next question is from William Hawkins of KBW.

Thanks for the clarity you gave in your first comment about the higher Life results. Could you just also explain why would it be that some of the trends you described suddenly become apparent in the third quarter because bond yields have been rising pretty smoothly and steeply from the beginning of the year. So just help me understand the timing a bit, please. And whilst you've been very helpful about the one-off figure, sometime one-offs can recur if you've got other reserve reviews and the rest of it. So do I just take that EUR 150 million, the 30% you referred to and say that's it? Or could there be other issues to come? Secondly, please, could you give any hint. Again, the 9 months Life operating profit is EUR 3.5 billion, if I strip out that one-off. A lot of companies are now saying that their IFRS 17 and 9 numbers are going to be amazingly similar to their historical figures. Could you give me some comfort that, that EUR 2.5 billion is a working number I can plug in to the new world? Or is there a great risk that Generali's number could be massively different? And then thirdly, please, could you help me with the numerator and the denominator of your 223% solvency ratio? And if it's quick and easy, just tell me what the market impacts were on available and required capital in the third quarter?

Cristiano, I think they are all for you.

So Life result. It is not an effect of all of a sudden in the sense that some of them were related to some period of observation. There are only windows, which are activated and they're different in every country. So when this rolling will happen sometimes at 12 months, sometimes at 24 months and times are perspective, and you need to see in that moment when they will be released. Some of the effects I was mentioning were also present in the half year, take the case of the longevity, for example, effect in France was already a little bit present there. So are we expecting something else going on with this level? I would expect some further small potential benefit of one-off also, again, in Italy due to this effect. And for what regards, I think the other countries, the vast kick in is there, but we have a supportive trend in some other small pieces of the balance sheet, which I would like to give you some guidance would be supported for the fourth quarter, again, on the Life result. And going to the second question, which is the [ EUR 1 billion of EUR 2.5 billion ] question on the IFRS 4 versus IFRS 17. First of all, we will not comment on the future number until they will be completely audited. But I would like to give you some things on what you should think about. The Generali Group has an important component of its Life business coming from business which is not with the deferred acquisition cost, so has an immediate impact of acquisition cost in the P&L versus other form of accounting. For sure, IFRS 17 is putting this deferred acquisition cost or equivalent into revenue recognition. So broadening them and making them around a lifetime of the contract. So I would expect that at least this is a positive phenomenon towards what is the regular representation of the group. Having said that, we will deep dive progressively, and we will start talking about this in December in our Investor Day dedicated also to IFRS 17 and 9. Then regarding the solvency ratio, numerator and the denominator, the 9 months 2022, we had EUR 46.6 billion of own funds, EUR 21 billion of solvency capital requirement and the market effect in the 3 months, so from half year to 9 months, the economic variances were linked to minus 3.6-percentage-point effect and they were mainly related to a positive effect of interest rates and negative effects of the spread of the [indiscernible]. But I would like to highlight that there is an effect related to volatilities, which only in the third quarter accounted for minus 3% effect in the solvency ratio, which is important because the volatility of interest rates, thanks to the huge movement we had and uncertainty of the Central Bank behavior increased massively. And so a factor which was not there before as a measurable one because we're always sufficiently in line or within a band has some hit. I would like to profit to give you also some guidance going forward since you asked about the sensitivity. I think it is important to notice that the sensitivity on interest rates at the 9 months of this group compared to the year-end 2021 are very materially different. So at year-end 2021 for a 50 basis point down of interest rate, we would have lost 10 percentage points. And today, the sensitivity would be 4 percentage points of a loss. Instead, if rates goes up of a further 50 basis points, at year-end 2021, we would have a sensitivity of 9 percentage points. And today, we would have had the sensitivity of 3 percentage points, which is explaining you that we are getting in our book of business quite far away from the strike price of the cost of the guarantees, which is a very healthy seasonal that we like to convey.

The next question is from Michael Huttner of Berenberg.

Three, but they're really short. So on pricing, maybe could you possibly give a little bit more -- give a bit more color. So on Italy, as I understand it, the government has increased bodily injury tariffs by 6%. And I'm just wondering if that is also the pricing figure in MTPL. In Germany, I didn't -- I'm sorry, I didn't follow the answer for the year, and I'm sure you were commenting guided. But are you saying that it's likely that the rate rises will be over 10% or around 10%. And the third is more on capital generation. So EUR 2 billion at the 6-month stage versus up 9%, last year 3.8%, if I had 9%, I get to EUR 4.1 billion. And I just wondered whether there's anything else I should be thinking of?

If okay for you, Cristiano, we start with the capital generation question. The third one that Michael asked for you. And then Marco, if okay for you, you take the question on the pricing in Italy and as well as on the outlook for the German renewal. Cristiano, over to you.

Yes. Thanks, Michael. So allow me to look at -- I would concentrate in the third quarter capital generation compared to the overall yearly one, but -- you have seen it is EUR 2.9 billion in the first 9 months, concentrated in 2.2 Life, EUR 1 billion of P&C and then minus EUR 0.3 billion of all the multinational because also of the effect of the holding cost. What I would like to highlight is that the capital generation in the third quarter 2022 was more than EUR 800 million -- EUR 860 million compared to EUR 622 million of last year, and there was a positive contribution stemming as well from some discounting effect also in the nonlife and as well to some higher contribution of the financial. So this is, all in all, what you should look at. And in general, the capital generation of life compared with the previous quarter was broadly stable, slightly lower also because of the new business value, total mix and unwinding. So there is margin release. For what is important for me, just to close this point is that the group is in line to get the capital generation and this environment has to be conducive with regards to the capacity generated in higher margin. But clearly, we need to focus also on the volumes to keep the new business value keep steering.

So let me jump in with the other two question here, and I would start from Germany. So I wouldn't give you a specific number that on January renewal. But let me state that the message that we want to convey is that as we said before, we care for our overall profitability, and we have managed the business to keep our profitability. So when you think about price increase and given the type of inflation we have seen in Germany, we will be on the higher side of the price increase. So that being said, I think it's very clear that we will try to push for a significant price increase in the January path. Let me go back now to Italy. And I think you are referring. So if I can get you well, I think you are referring to what it's calling in Italy on micro lesions and small part of body injuries. So that I think is what you are referring to. It's clear that we have seen a price increase around that number that you said. So it's 6%, 7% is around that number. On the other side, what we have experienced in Italy on bodily injury in the last few months, it's not a terrible increase. So inflation has not hit bodily injury in a dramatic way compared to other parts of Europe. So overall, I think the business is keeping up with the pricing increase we have pushed in the last months, and we will push in the next months.

The next question is from Steven Haywood of HSBC.

Just a couple of quick questions for me. In the nonlife investment income, can you give an indication of what your reinvestment rate is currently versus what it was at the start of the year? And then secondly, can you remind us on your ambitions in asset management, particularly with respect to M&A in Europe and the U.S. and any other regions after you've seen some best reports recently?

So Cristiano, would you like to take the first one on the P&C reinvestment rate? And Marco, the second question.

Steven, so the P&C, the reinvestment rate in the first 9 months on the direct invested business is 2.55%. And this should be compared to the previous 9 months, '21 of [ 1.26% ] of the reinvestment yield on the direct bond. The amount reinvested on the direct purchases was EUR 3.2 billion compared to last year, which was EUR 2.5 billion. This is also because of the higher growth of the portfolio. And in general, it is important to note is that we have a good mix, especially due to the growth of our Central Eastern Europe business where rates are higher. Going forward, this number could be further increased because of the actual rate we are observing. So in the last in the last quarter, we should get a higher projected reinvestment rate with the positive inflow of the good momentum we are having, especially in motor.

And I'm taking up the second question just to say that we will restate that we don't comment on price articles. So we would not add anything else to this.

The next question is from Andrea Lisi of Equita.

Just a clarification on the investment rate. You talked about the P&C, if you can provide an update also where investment is also in Life and just to understand if this is the average level for the 9 months or if it is actual. And if you can provide increase at the level of the actual investment and investment yields. And the second question is on your expectation on the Life business premium evolution going on, especially with this interest rate environment and also of deferment value in business premiums and how this can impact the business value. And if you -- obviously, when you will provide us [indiscernible] in December, but do you think that IFRS 17 can impact your strategy on investment in your asset and private equity.

Cristiano, the first question and the third question are for you, while the second one is for Marco.

Yes. So the investment rate in Life average in the first 9 months as the number I gave before for P&C, which was the average in the first 9 months is 2.28% compared to 1.46% in 2021. Again, I stress this is the direct investment and other investments to private debt funds, for example, which is drier. If I have to project today, what is the reinvestment rate we can achieve in the mix, we are closer to the 4.5% level due to the mix between [indiscernible] we can achieve. Third question, what is the impact of IFRS 17 on our real asset strategy. Well, first of all, I think that the impact of IFRS 17 on investment should not be driven because what is -- what matters is the asset liability management. Fortunately, asset liability management in IFRS 17 are extremely well connected from the fact that you need to have more and more equilibrium in the portfolio to be seen in the way you represent it in a kind of Solvency II we view like the contractor service margin. So I'm expecting that there is no difference. The only difference related to the fair value for profit and loss movement of assets, which are not in the so-called variable fee approach, so Life backing with profit policies. But either in shareholder equity or in non-life business, that is not impacting because in agreement with many of our colleagues in the CFO forum, we are always focusing on a kind of adjusted net result view going forward and we say I can anticipate, the profit and loss are in a certain sense white noise against a long-term view that you should put. So we are focused on the long-term value creation of instruments, for example, like real asset could be private equity or the private debt fund investment, but in life are not operator basis. I just recall you that real estate is treated with funds in fair value but -- when in life, but when it is in P&C, we keep it at the historical cost. So it is even a favorable asset because it's not creating fair value volatility unless for impairments as it is today as a treatment.

Let me start the second your second question, and then I will give the word to Cristiano to integrate. Especially, I would like to comment on the evolution of the Life business premium. Clearly, we see an environment that might continue for the next month. So at least when we are talking about between the 9 months and the 12 months, we do see that the condition will more or less stay the same for the business -- for the Life business. So as I stated before, we will stick to our underwriting discipline on selling on the market hybrid product, and we will continue, especially in France and in Germany, this trend of moving toward a more balanced product, more hybrid balance products. So with more unit linked and less segregated fund. We do see the opportunity in Italy to have some tactical measures because the business is very healthy. As you know, we sell even traditional fund with no financial guarantees. So we do see that the conditions are good even for -- to get a little bit more volume on a tactical basis. So let me restate that, overall, we will stay in our disciplined underwriting also on Life, but we can do some tactical measures, especially in Italy to get a little bit more premium in the next months. Cristiano, do you want to comment on the cost value?

Yes, Marco. Yes, the new business value, the driver in the new business margin from the 9 months 2021, 4.76% to 5.42% of 9 months 2022, the economic variances accounted only for 31 basis points increase. What was relevant for me is the fact that the company mix. So a company with higher [indiscernible] are growing in a more profitable way. And on the other side, there are factors positive because of the mix and the contribution of some long-term guarantees -- in the long-term product like pension, which are bringing a better mix, which do not have guarantees, but they are long term in their nature, increasing the new business margin. I just had one important thing that we will be focused in the next quarters, as Marco said, to mix and balance because we are not interested in the new business margin as an item per se. What we are focusing is the new business value, which is the key driver that we are putting into also our CEOs of business unit balance scorecard to focus on the contractual service margin going forward in view of value accretion, value production and from next year also result combination.

The next question is from Sudarshan Bhutra of Societe Generale.

I have two questions from my side, please. First is on the non-life non-motor products. Can you just provide some sort of split between [indiscernible] and if premium increases, what is the volume versus pricing. And just give us sort of an understanding on the [indiscernible] demand for such products as pricing continues to increase significantly. So that's the first question. And the second question, again, is on Swiss reserves. So you mentioned that the Swiss reserve in your EUR 70 million less than what you did in 9 months 2022. Just back of numerous calculations, this means that you are still going ahead with your plan to do EUR 200 million reserve addition for 2022, as you had previously guided. Is that correct? And if yes, why? I mean, given the rising interest rate environment, why is that still important?

Sorry, Sudarshan, the line was not very good, especially concerning the first question, would you be so kind to maybe repeat it for us, please?

Sure. For the first question, this relates to the non-life, non-motor products. So with regards to the premium increases, can you just provide some sort of a split between volumes versus pricing and the risk on the demand for such non-motor products given the steep price increases that the customers are facing for such products?

Cristiano, I would suggest to take the second question on the Swiss reserving and then Marco, the first question that came from the call.

So I confirm you on the Swiss reserving that we are in line to say, close to the EUR 200 million. There will be no increase due to the environment. As I said, it is extremely prudent the approach we are keeping. It is lower than last year. And going forward, you should think about not having increase in the reserving because of the structure of the already [indiscernible] amount, and it will be more natural in the new IFRS 17 environment to reserve along the line of the product the inner profitability of the products per se without having a negative impact on top of what is the value that we can produce. So I confirm that we will not absolutely exceed the EUR 200 million this year. We are very close to that level, and we are EUR 72 million less than the previous year. I hand over to Marco.

Yes. So let me dive a second on P&C non-motor. Clearly, we do have seen a good growth of the business. And as I stated before, we have -- so our business is indexed to inflation in, of course, different type in terms of line of business, retail SME. So everyone has a different percentage of indexation. But as we said, the overall P&C is 40% -- 40% of the portfolio is linked to inflation. And as we are seeing, especially if you take out, as I said, if you take out large partnership that we are doing in Europ Assistance, the core markets are increasing more pricing effect versus volume. Having said that, I think it's interesting, the question on the customer behavior, which is facing this price increase. So let me say that we are not the only one doing this. So we see the market upward list, and we are part of the competition that is doing this price increase. So we are not seeing as the only one doing this thing. We do see how can I say? We do see the need of being super compelling on the value proposition of our products. So on being more efficient, more customer centering and giving more I would say, effectiveness on our value proposition. So we do see that we need to make sure that we justify this price increase with even more efficiency and effectiveness on the value proposition that we present to the client. Overall, in the market, we do see appetite for this type of product on different line of business, whether it is for SMEs, that is really growing well and it's a focus of our strategy or retail, we do see an appetite to grow the business.

Mr. Cleva, there are no more questions registered at this time.

So thanks very much, operator. Thanks to everyone for dialing in to the call and the Investor Relations department remains at your full disposal for any other questions you may have. Have a nice day.

The conference is now over. You may disconnect your telephones. Thank you.