Grupo Catalana Occidente, S.A. (GCO) Earnings Call Transcript & Summary

It is a pleasure to be here once again with all of you to talk about the evolution of GCO in this first 9 months of the 2021 year. My name is Francisco Arregui, CEO of the group. And here with me, as usual, we have the CFO, Carlos Gonzalez; and Director of Investor Relations, Nawal Rim. First of all, as usual, I would like to thank you not only for being here remotely, but also for the follow-up, you -- conduct of our business and the GCO stock. You can, of course, ask any questions you have online. We will answer all the questions we can at the end, and the rest of questions will be answered via the usual methods. As I said, we will tell you about how things have been going in the third quarter of 2021. Without further ado, I will let you know that. In a still difficult concept in which economic reactivation, at least, in Spain, is not complete, things are going honestly well for us. So with the growth, we will see in a minute, of a turnover of 7%, an increase in results of 74%. And before we start with the usual presentation, I would like to mention something. You may have seen the relevant event notification that we published. The Board of Directors, at the proposal of the Remuneration Committee, has approved in the meeting today the appointment of Hugo Serra as new CEO of the group, replacing Ignacio Alvarez, who has resigned for personal reasons after almost 10 years as the chief executive of the group. The replacement will be made effective on January 1 next year, 2022. And it is the beginning of a turnover process in the group after the current CEO presented his resignation. And his efforts and dedication have been essential to meet the goals of the group in the past few years. Of course, the appointment of Hugo Serra, until now Assistant General Manager and Vice President of the Board of Directors, will convey continuity to the strategy of the group that will, I assure you, continue to be based on the 3 main pillars: growth, profitability and solvency. At any rate, any doubts you may have will be answered by the usual channels -- by the use of channels. And now we will share information about the performance of our business in the past few months. As always, we will deal with the topics that you can see onscreen, starting with the kind of economic and sectoral environment, very briefly, because it's better than myself. We've had many years of continuous growth since the end of the crisis of 2008, 2009 in an environment of high volatility due to globalization and characterized by very low interest rates in the context of very low inflation as well. All of that changed. We don't need to tell you about it. All of that changed properly last year due to COVID, which caused the top of supply, festive month of 2020. And we had the lockdown in March, approximately, and the privatization of industry. And these led to a significant drop of economy, globally speaking, over 3% distributed, as you can see onscreen; deeper crisis in the Eurozone, minus 6.3% drop; and unfortunately, a deeper crisis in Spain, with 10.8% drop of the GDP. And as you well know, the latest forecast for 2021, you can see onscreen the forecasts of October of the International Monitory Fund, the IMF. And they speak of a virtually complete recovery, 5.9% growth; but also an equal in the U.S., a growth of 6% versus the 3.4% drop last year; more growth in emerging and Asian countries; and in Europe, we have not quite recovered yet, with an estimated growth of 5% versus the 6.3% of the year before. And of course, far from recovery, in Spain, where, well, you can see the forecast of the IMF, 5.7%, far from the first estimations and forecasts. And unfortunately, the current forecasts are somewhat lower. You very well know the financial markets. A bit of a pickup of inflation, but some long-term rates with discrete recovery and a bullish market. The insurance sector in Spain, which is 2/3 of our business, however, as you can see, due to the historical cycle and an exemplary growth in 2008, 2009, during the crisis, they have been growing uninterrupted until the drop of 8% last year. And in this first 9 months of the year, it is growing. It's growing well, as you can see, according to MSCI, in October, 4.1%. And it grows by 5.7% in Life, but also 3.2% in Non-Life, and a growth in all areas, well, except for Motor, a slight decrease of 0.9%. We already talked about these on other occasions. The Motor business, in an extraordinarily competitive context, such as the Spanish insurance market, and with claims levels that are still very low, well, growth is very difficult. And in the context described, we said at the beginning that things are going very well in the past 9 months in Traditional business, with growth both in turnover and in results. We will see this in a minute. Despite the very competitive characteristics of the Spanish market and the adverse weather conditions during the entire year, especially at the beginning of the year, with Hortensia and Filomena, and despite the fact that in 2020, the first quarter was still pre-COVID. In credit insurance, exceptionally well, with growth in premiums and a very low claims ratio, which means our result is honestly very good. And this is just an overall view. In generic terms, we see this summarized P&L, the first line income -- the top line income and the bottom line results. We are growing, as you can see, by 7%; traditional business, 3.5%. It is true that's partially promoted by the 17.2% increase in single premiums. And Carlos Gonzalez, the CFO, will tell us about that later. These are the ones that do not contribute the most value to the business, especially with low interest rates, where there is basically no margin for brokerage. But we are growing by 2% in recurring premiums, and we are additionally growing in all businesses, in all fields, except for motor. You will see a slight drop, slightly above the market, as we said, exceptional results, very low claims ratio and a very competitive market with premiums going down. In credit insurance, you know that in the frame of the crisis, turnover dropped by 5% last year for several reasons, but basically because of a reduction in sales in the context of the crisis of our policyholders. And now, as you can see, turnover is growing by 2.2%, an increase of 8.2% in acquired premiums and very different growth. You will also see this geographically. And the foundation of this, the rationale of this is an obvious increase of new production, not yet pre-COVID like. And secondly, cancellations rates, for us, 6%, and some increase in the average rates in renewals, in crude terms. But these excellent results are pressuring prices downward, and we're seeing this in the past few months. The average rate is dropping slightly and mainly an increase in sales of our policyholders, which is in contrast with the drop that took place in 2020 that I just alluded to. As to results, our consolidated result increases by 74.2%, EUR 392.2 million versus EUR 225.1 million last year and 66% in terms of attributed result. It is true that nonrecurrent results help us this year. It was about time, for several years, we've had a significant negative burden from nonrecurring results, specifically this year, EUR 14.3 million that you can see onscreen. Most of that, we'll talk about this later due to, as compared to last year, that minus 11.5% because of negative financial results because of the poor performance of the markets. We will hear about this more later. But what I wanted to stress is that what is truly significant is that, once again, we are seeing an improvement in operational results in both businesses. Traditional business, growing by 4.3% in recurring results, generally speaking, with a very good performance in all lines of business. And I would like to stress -- as I think I did in the half year presentation, I would like to stress the exceptional behavior of the Motor line with an increase of 34.6%, still, in the first half year, affected by mobility restrictions versus the first quarter of 2020, which was still pre-COVID. Whereas, the increase in results has been included over the past few months as a consequence of a traffic going back to normal and, therefore, more claims. And the second aspect I wanted to mention is a reduction by 11% of Multi-risk, results of Multi-risk, as a consequence of an increase in claims that we have already alluded to in previous presentations because of the greater use of the home and the impact of weather events that Carlos Gonzalez will also talk about. At any rate, the behavior of the line, we think, should normalize towards the end of the year. And looking at this minus 11.5% last year, now, at the end of the quarter, the results of Multi-risk were growing by 22%. And very good results, exceptional, EUR 175.5 million in paid insurance business, more than triple that of last year, with the first quarter of 2020, which was still pre-COVID. And this excellent result is based on a very low number of claims. Gross reinsurance claims ratio is at 29.2%. And what I can assure you, as I said in the previous presentation, is that we continue to book provisions very cautiously. In the moment, all -- in case there's a change on all governmental aids, and I've said this on numerous occasions, we have a global provision calculation system, which anticipates claims ratios from the moment the sale from the policyholder to the customer is produced and then we adjust based on the circumstances. The second piece of data that I wanted to share, and you will see it in the P&L of credit insurance, is that reinsurance has a very high cost, a bit over EUR 400 million, of which EUR 267 million come from the government reinsurance agreements to protect trade, which, as you know, were extended and came to end -- at the end of the first half year on June 30 of this year. So it is logical, given that the business is giving very good profit. We've presented positive results to the government. But having these agreements came with the advantage that we did not need to take more drastic underwriting measures, which improves our relationships with customers in the mid- to long term. And you all have a list of actions that we conducted during 2020 and 2021 to support the stakeholders during the health care COVID crises. All of them were basic and essential to maintain the business. Many of them are onscreen. We've already discussed them on previous occasions. And from the point of view of the big numbers, the makeup of the portfolio shows no significant changes at the end of -- versus the end of last year. Of course, a weight off credit insurance in our business side, it's almost 60-40, as you can see onscreen. And from the territorial point of view, we are international, with the presence in more than 50 countries, even if it's limited to credit insurance. But I would like to stress, as I've done on previous occasions, that Spain is almost 2/3 of our business, almost 66%, 65.8%. And the rest is mainly, as you can see in the breakdown at the bottom right, you can see it's basically in Europe. And between 6% and 7% of our turnover is outside of Europe. And finally, I would like to stress that -- and I also did that in the previous presentation, that, whereas, in the current context, the economic context that we are exiting, we've been very focused on the ordinary management of the business' operational aspects, production and claims ratio, but we have continued to focus on strategic aspects as well, aspects that are basic for our future development. Of course, the first one is innovation, but also sustainability, which, as of today, is not only a legal requirement, which it is. And these, we can see in all of the nonfinancial information, equality plans, et cetera. But it is also a demand of the market of those who invest in our group and, in the near future, also our customers. Third message that we saw in the initial snapshot, we maintain a solvency position that I will later talk about. And finally, we have a cautious, conservative dividend policy, but with growing dividend in absolute terms. And we maintain our shareholder remuneration commitment even in hard times. The share price evolution, you know it very well, very good in the long run. As you can see onscreen, better than that of the indexes, with an annual revaluation rate of 12%, 18%. And in 2020, we dropped less on the indexes. And at this moment, we are very much in line with the growth of Ibex companies. As to dividends, what can I tell you? You know very well that, between the year 2008 and '09, we had very significant increases of the dividend. In 2008, 2009, which was the year of the financial crisis, which mainly impacted the results of credit insurance. And in the group, we were able to maintain and even slightly increased the dividend. And from 2010, we've had consistent increases of the dividend, which has been between 6% and 7.5% in the past few years. And you may remember that, as to dividends charged to results of 2019, we were forced, as per the recommendations of the European insurance supervisor and DG insurance to reduce the complementary dividend of May 2020 by 45%. So the total dividend charged to 2020 was reduced and charged to results of the last year -- of last year 2020. We distributed 3 interim dividends, EUR 19.6 million (sic) [ EUR 19.06 million ], the same amount as last year. And in the last shareholders' meeting, we distributed a complementary dividend of EUR 48.68 million, twice as much as the year before, which meant a total dividend of EUR 105.85 million, with an increase of almost 30%, 29.6%, the greatest increase in the history of GCO. So I think this proves that despite the crisis, we are a solvent group. And we are determined to maintain our shareholder remuneration commitment, as I said, a minute ago. And this year, you can see onscreen, you know that in July and October this year, we have distributed the first 2 dividends. We've paid out investor dividends, EUR 20 million each, with an increase of 5% vis-à-vis those of the same dates of last year. Carlos would like to continue talking about the P&L.

Yes. As usually, in our presentations, I will start giving you the breakdown of the performance of the traditional business and credit business. We will start with traditional business, as usual. And here, I would like to start with a comment related to the distribution of our products. We have this diversification that you can see on the chart, which is quite stable in the traditional business. And this is what allows us to maintain our growth rate. And we do not depend on what happens in a specific line. In this case, the growth of traditional business is 2% in recurring premiums, EUR 1.883 billion. Whereas, the result also follows the trends of previous quarters, with an increase of technical result of 1.5%, which is translated into an improvement in recurring results, with EUR 202.4 million, which means plus 4.3%. The reason for this increase is a positive performance of the general insurance business, especially in Motor, as we already mentioned, with a positive impacts of the reduction of mobility as compared to pre-COVID quarters. The combined ratio has also improved 0.3 basis points due to the improvement of the technical costs, 88.1% and therefore, maintaining our positive spread vis-à-vis the industry. And now on to the different businesses, different lines. Here, Multi-risk growing by 4.7%, therefore, in line with the sector, which is around 5%, whereas the combined ratio is at 90.1%. This is a ratio above that of last year. As a consequence, as we've said before, of a more intense use of the home and a greater impact of weather, of low-intensity weather events. In this comparison, year-to-year, the impact of weather events, Filomena in the case of 2021 versus Gloria in 2020, does not carry relevant weight since the quantitative impact, net of reinsurance, was around -- a bit over EUR 10 million in each. And these impacts did take place at the beginning of the year on both years, therefore, this is diluted as the year lapses. Finally, regarding Multi-risk, I would like to say that the technical result, it is true that it drops, but it stays above EUR 50 million, EUR 52 million in this case. Now on to Motor, with a reduction of turnover by 2.8%, EUR 481 million, almost, in written premiums. Here, we are doing somewhat worse in the sector, which is dropping by around 1%, 0.9%. And it is true, and we should note that we continue with a net increase of number of insurance holders. The combined ratio is at a comfortable 87.4%. And the technical cost stays at a low ratio, 63.2%, where we can see, on accrued terms, a reduction of claims as compared to pre-COVID. It is true that in the past few months after the summer, the situation is normalizing. And all of that has allowed us to notably increase the technical results up to EUR 61.5 million, with this very relevant increase of almost 35%. Here, [indiscernible] or Other, an increase in premiums of 5.3%. It cannot be compared with the industry because what the sector includes is very difficult from what we have here. But it is true that this is quite a significant growth, and this growth is achieved mainly due to the recovery of the Spanish economy that we are all experiencing at the moment. In terms of results, we continue with excellent combined ratio, around 85%. And this means that we can maintain a technical result, which is very positive, around EUR 35 million. Life, better growth in health. Funeral life risk, around 2%. And here, I would like to mention, and we already mentioned before that single premiums, despite the fact that they are still not commercially attractive because of low interest rates, but have notably increased due to a one-off transaction. It is a [ bailout ] of a collective policy that has been reinvested, and therefore, has generated turnover without increasing managed funds for that policy. But at a commercial level, the [ punch ] of these activities is still low. Results. The technical financial result improves by 3.2%, up to EUR 88 million, but we've already absorbed the annual provision that we had planned in order to adapt to the new biometric tables. Additionally, the business continues to show a good behavior in terms of claims, especially in health, with a combined ratio of 80%, or funeral with about 80% as well. Therefore, and as a summary of traditional business, the increase of turnover and reduction of 0.5 combined ratio due to the lower frequency in Motor is allowing us to increase the technical result by 1.5%, up to EUR 215 million, showing, therefore, the resilience of the business versus the COVID crisis. And the financial result increases by EUR 4 million despite the extension of low interest rates and as a consequence of the mix of investment that we have actually -- currently, an increase of 4.3% in result, up to EUR 200 million. And an additional comment -- that's in recurring results. And in nonrecurring results, it compares very favorably with the minus EUR 10 million last year, affected by impairments in some equity positions in COVID. Whereas, in this year, most of this nonrecurring result is due to -- on the financial side of things, due to opportunistic sales with capital gains in equity or one-off dividends that have also taken place. And that since they are extraordinary in nature, we do not think they will happen in future periods. Now on to credit insurance business. And premiums in credit insurance amount to EUR 1.410 billion, growth of 8.3%, therefore, breaking the downwards trend of last year of around minus 5%. There are 3 factors, basically, explaining this good performance in turnover. On the one hand, the new tariffs of the portfolio during 2020 and first quarter of 2021, the repricing -- with prices more adapted to risk. And as we've already said in these later renewals, we've observed price tension, which means we cannot be as positive in terms of upward repricing. Secondly, the rough situation of the economy, which has a positive impact on the turnover of our customers, and therefore, ours because we ensure their turnover. And the third component is a change in risk appetite on our side, with greater commercial activities and increases in the total potential exposure that we will later talk about. And now I will about the result, the technical result has gone up to EUR 210 million, especially as a consequence of the low claims ratio. And part of this profit is transferred to our reinsurance, be it government schemes or the 37% that we still maintain currently with a private panel. This good technical result allows us to see growth in result, EUR 175.5 million, going back to levels similar to those we had around these dates on 2019. Geographically speaking, the improvement in revenue, as you can see on the graph, is very significant in Central and North Europe, with double-digit growth, aided by the better perspectives in that area and the capturing of new global customers. On the other side, in Southern Europe, where we include Spain now, we still see lower growth as compared to the rest of Europe. And in this case, it is around 2%, 2.2%. Spain and Portugal are growing by 2.2%, quite far from this 14% that we see in the center and north of Europe. Now talking about the profitability of the business. The gross combined ratio continues to drop below 60%, with 34 points drop. The reasons for that we mentioned on previous occasions. On the one hand, external reasons that you all know about. And the rapid application of expansive tax policies and policies to support the economy by governments and central banks has aided the economy to come out of the risk caused by COVID, and on the other hand, internal measures that we have conducted of risk management, both in repricing that we've already mentioned and risk selection. At the bottom you see the total potential exposure, which is the KPI or the indicator that indicates our risk appetite. In 2020, you saw a significant reduction, and this year 2021, you see we're going back to 12%. And you can see on the graph that this EUR 688.8 billion (sic) [ EUR 688.8 million ] is already above the closing figure of 2019. So we could say that, on this area, we are back to pre-COVID levels. And in risk exposure, this reduction, with a subsequent increase of risk exposure, has allowed us to also change our exposure to conduct a significant rotation towards quality that we've conducted over the past 18 months. And now, as a summary, my final words. Here, we have the different components of the credit insurance business P&L. And due to repricing, the total income has increased. The technical result before reinsurance has been impacted by lower claims. We still follow our provisioning policy after reinsurance. We already mentioned better perspectives for the direct business, which translates into the transport business with this loss of EUR 403 million or this transfer of EUR 403 million of our results, of which EUR 267 million are of government contracts, an amount that we expect will not be substantially modified in the coming periods. And as we said, at the end of the half year, the group has decided not to extend those government agreements, and we maintain our reinsurance coverage with 37% of transfer to the usual reinsurer panel. The last item of the P&L. Financial result also improves, basically, as a consequence of the positive results obtained by our associated companies, which also do credit insurance. So they are also experiencing these better results that we mentioned in the direct business. And finally, the recurring total business result, EUR 179.9 million, with good perspectives for the rest of the year. That's all I wanted to share on my side. Well, we'll continue now with a few more ideas besides the P&L. We continue with the same structure that we used in previous presentations. And I always talk about this slide because the evolution of permanent resources at market value has been honestly very good. During this century, since the year 2000, from some [ EUR 317 million ] to EUR 5 billion, it has multiplied times 15. And as I always say, this has been possible without using capital with that, asking money from shareholders without diluting just by retaining a significant part of results by means of the application of a conservative dividend distribution policy, even if it's with a growing dividend. Our shareholders have allowed us to do this to fund all of these expansive period. And this is what is happening on the table on the left-hand side. You can see quite clearly, we see a consolidated result of EUR 392 million, dividend paid out of EUR 107 million. And in this year, we're aided by the evolution of the markets, meaning that we had a positive variation in change of valuation adjustments of financial assets that, as you know, is 70 -- amounts of EUR 74.7 million in the balance sheet, going from EUR 4,600 million to EUR 5,015 million, or EUR 5.015 billion, which is a 7.5% increase. And in terms of solvency, I'm not saying anything new. Just like we did last time, we're showing you the consolidated ratio at the end of 2020, 216%, 3 points, as you can see onscreen, better than the end of 2019 and better than the forecasts that we had given you. And you have all sorts of details regarding consolidated ratio by company, the main drivers of the improvement in the report on the financial situation and the consolidated and individual reports that you can find on the corporate website. And this improvement in 2020 has impacted, on the one hand, on the retention of profit that I mentioned a moment ago. And secondly, in credit insurance, the reduction of risk exposure that took place last year and the government reinsurance agreements that -- since they expired in 30th June this year, they will not be operational from the calculation of solvency for the next year. But other than that, as I said on previous occasions, I think we're very comfortable with the ratio of 2016 (sic) [ 216% ]. It's very good. It's better than that of most of our competitors. All entities are around 170%. Even in adverse scenarios, we're there. And in own funds, as we see onscreen, our own funds are of high quality. And we believe that this robustness of the equity of our group, together with the robustness of our business model, makes rating agencies, especially AM Best and Moody's, give us an excellent rating for operations: AM Best for credit insurance; Moody's, A and A2, respectively. And I don't want to bore you with the makeup of the investment portfolio. You have all the information onscreen, in the consolidated report of the group and in the annexes. The investment policy has not changed. We always follow a stable and conservative policy. Investments are diversified, as you can see on the screen, with the breakdown that I mentioned. And I should stress that, as a company, as an insurance group, the main thing is that we have adequate resources vis-à-vis our liabilities in terms of liquidity, duration and profitability and in all terms of joint management of assets and liabilities. And I think with that, well, up next, you have a series of annexes. I think we have given you an overview, even if it's brief overview, of how things are going for us. And Nawal, please, if you could give us the questions, the most significant and repeated questions, we'll try to answer them.

Thank you very much, Francisco and Carlos, for your presentation. As usual, we'll start with the Q&A. We have grouped the questions received by topic. Traditional business, specifically speaking Motor, the combined ratio of Motor improves vis-à-vis that of the third quarter of 2020, an improvement of 3.7 percentage point in claims ratio. So if we have gone back to the normal levels of driving this is significant, could you explain the results of -- the reason for this result in Motor?

I think we've discussed this, and we did so in the presentation of all quarters. And we've discussed this today, both myself and afterwards, the CFO. At any rate, it is obvious that the combined ratio of Motor is still impacted by mobility restrictions, although it is also obvious there's been an increase in technical cost vis-à-vis the first half year of this year. At this point, EUR 63.2 million versus EUR 61.8 million. And this, as I said, due to the fact that we start to see a normalization of traffic, road traffic, and the claims ratio goes back to previous levels. And as we said, to explain this drop in claims ratio, we need to bear in mind that, last year, aside from the fact there was a pre-COVID quarter, in the accounts, we had some compensatory measures for our customers to defend our portfolios due to the low claims ratio. This is why, in 2020, probably in comparison with Other, and it is our combined ratio did not improve in the same proportion, and this impact is no longer here this year. So the improvement of last year, in our case, was in between last year and this year.

The second question is more general, and I understand it applies to all lines of business. This seems -- it seems that a change in inflation is possible. How can this impact the insurance business in your results?

It is not a usual question because it seems we're seeing the beginning of a period of upwards inflationary pressure. We do not know if it will be temporary. At any rate, sharp movements, [ brusque ] movements are not good for any business. In our case, we should stress the different lines. For example, in credit insurance, it shouldn't have a relevant impact at first because the -- well, we ensure our commercial transactions, if inflation were to go up, transactions will be of a higher amount. A different thing would be if there were a change in the policies of central banks, which would need to restrictions to the liquidity of companies with an increase in defaults. As to the traditional business, specifically Non-Life, mainly Motor and Multi-risk, a significant inflation could translate into a higher cost of claims. And we understand that, given that we have a very close relationship with our repair network, we would have enough mechanisms as to try and mitigate that effect. And in Life, persistent inflation. If it were to cause a change in the policies of central banks vis-à-vis increase of interest rates, well, if it's not something too drastic and too quick, I think it would have a positive impact in the profitability of Life products. And other than that, as to general costs and staff costs, they are not that linked in the short term to an increase in inflation. But if it were permanent, then yes, it would have an impact.

And now questions about the credit insurance business. At the end of June, you presented a combined ratio in credit insurance of 60.5% at a historical low. In this quarter, it improves almost by 1 point, and the claims ratio drops by 1.3 percentage points. Since were you retaining more business after the end of government agreement, is it expectable to expect the result close to 2019 for 2021?

In 2019, credit insurance showed a result of approximately EUR 220 million. It was a record-breaking result, an exceptionally good year, with a gross combined ratio of 70.87% and a transfer to private reinsurance, as you all know, of 37%. The context at the moment is different. We have a significant improvement in claims ratio, as we saw, coming due to the lack of new claims. And the average premium we have at the moment is above that of 2019 since the accepted risks are priced as per the circumstances and the uncertainty in the markets. It is true that a normalization of claims ratio is to be expected, but we do not believe that will increase. It may increase somewhat, but we do not believe it will normalize during 2021, rather next year. And bearing in mind that we continue to book provisions for claims in a conservative manner, with a system that anticipates claims from the moment the sale is made by our customers, so I believe -- I must say, it is reasonable to expect year-end results that are similar to those reported in 2019.

Also about credit insurance and government agreements, we have a question, which says, despite the fact that in the previous [ prestigious set ] of results, you informed about the end of these government agreements, we see an increase of cost disagreements this quarter. Could you explain that? How much more deviation should we expect for the end of 2021 in this item?

Honestly, I believe that we have explained these on previous occasions, but the topic is significant enough for us to talk about it again. As you know, since March 2020, we started doing business via the reinsurance agreements, basically, with European governments, with the aim of working thoroughly on selecting accepted risks during the health care crisis so that no drastic actions of risk exposure management were needed, and therefore, maintaining a robust relationship with our customers, which, as you know, is a long-term relationship. With the results presented today, I think it is obvious that we now have normalized levels of risk exposure. And without a doubt, our portfolio is well classified. And from now on, we are not transferring anything via government agreements because the agreements ended on June 30. But the truth is that the risks underwritten before June 30, 2021, are subject to that transfer. So in as much as the risks is described, the Other region before June expire and the risk item may see modifications one way or another. If in direct business, we see an improvement in claims ratio, it's natural that all the part of the improvement in the results of the business will be transferred to the government. Having said this, and I think Carlos Gonzalez also talked about this in his presentation. We do not expect significant deviations in the future because risks are estimated as per the new forecasts. And we continue transfer, at the moment, 37% of our business to the user reinsurance panel. So we continue to protect our business from potential impacts in the face of a relevant increase of claims ratio.

There's a question about the expense capital and solvency levels with it. That is also solvency you're accumulating. Are you still not planning on any actions so that this excess capital is returned to shareholders in any way? What are the future plans regarding the dividend?

We usually get questions around the dividend linked to the solvency level of the entity. And I should answer as I did a minute ago. Regarding the dividend policy of the group, we have a dividend policy -- a growing dividend policy in absolute terms. And I think we have always proven, also during the 2008, 2009 crisis, we've always proven -- and in 2020 as well, we have proven our strong commitment to shareholder remuneration. It's also true, as I said, that we retain a significant part of the result, and this is what has allowed us this -- to fund all of these expansion period, thanks to the permission granted by our shareholders. The only thing I can say at the moment is that we continue with an eye on the market and on potential opportunities. But for now, there have been that none have acted our interest. The solvency ratio has increased by 3 points. It's now at 216, as we saw, but we understand we are not at solvency levels high enough so as to propose any special actions.

And the final question goes as follows. Going through the consolidated results, we are surprised by nonrecurring results. What are these positive nonrecurring results due to?

I'll clarify it with pleasure. I think Carlos Gonzalez explained it in detail a moment ago. And recurrent results at the end of the third quarter contributed a positive result of EUR 14.3 million, of which EUR 9.9 million come from the traditional business and EUR 4.4 million from credit insurance, as we saw in the presentation. And of this amount, there are EUR 12 million due to nonrecurrent financial results coming from several sources, but basically 2. One is positive realizations of the portfolio. These are discretionary managed portfolios managed by a manager. And secondly, some one-off dividends received, specifically that of [ Vivendi ]. But if I remember correctly, in our case, was around EUR 10 million. And the other item coming from tax, this is due to a favorable resolution, favorable to GCO, which allows us to improve our situation due to our double taxation in previous years.

Thank you very much, Francisco, with these answers, we conclude the presentation of results of the third quarter of 2021. As usual, I remind you that pending questions will be managed via the Investor Relations team in the coming days. And I would like to encourage -- or to invite you to the next presentation of results on Thursday, 24th February 2022, with the results of year-end of 2021. And finally, I would like to remind you that you can always visit our corporate website, where you can find all of the financial and sustainability information that may be of your interest. As always, I would like to thank you for your interest and participation.