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

Good morning. It is a pleasure to be here with all of you to tell you about the results of the first quarter of GCO, the accounts of which were approved by the Board of Directors yesterday, 27th of April. This is Clara Gomez Bermudez, Financial and Risk Management Officer of the group. And just like in the February presentation of year-end, I will be here with you in this results presentation. And here with me, as usual, I have Carlos Gonzalez, Chief Financial Officer of the group; and Nawal Rim, Director of Investor Relations, who as in other occasions, will compile all of the questions that you ask during this presentation, so that we'll be able to answer them as usual at the end of the presentation. First of all, I wanted to thank you all for being here, online remotely, and the interest you always show on the performance of our businesses and the follow-up and performance of the share price. Before we start with the evolution of the business, I would like to mention a couple of general issues that were approved in the Board of Directors meeting yesterday on the 27th of April as we said a couple of months ago, and following our streamlining strategy, which unifies the traditional business under one single entity Occidente. We're also shortening the corporate brand of the group to the acronyms GCO. In this way, the group aims at better feed of the brand for our international environment and also contain easier recognition and pronunciation. And we equaled the name of the brand to the stock ticker that you are all familiar with. And the architecture of brands is structured under 3 big pillars. First, the traditional business under Occidente brand. It is also present in the credit business through our trade use, you know this because we've told you about this in our presentations through 50 countries and in Spain under the Crédito y Caución brand. And finally, the funeral business under Memora and Asistea brands. Additionally, in a different order of things, on the 23rd of April, 12 years of the independent director [indiscernible] met the maximum churn established under the Capital Societies Act. So the Board of Directors held yesterday approved the appointment of Beatriz Molins Domingo as new member of the Audit Committee and the Appointments and Remuneration Committee replacing Mr. Juan Ignacio Guerrero and also the appointment of Francisco Perez as new Chairman of the Audit Committee, replacing Mr. Juan Ignacio Guerrero. I would like to thank Mr. Juan Ignacio Guerrero Gilabert for all of the years of commitment and devotion both in the Audit Committee and the Appointments and Remuneration Committee. Regarding the performance of the business, I would like to confirm that the basis of the results presentation of this first quarter of 2023 is still the international accounting that we are used to, in previous occasions and presentations, this is International Accounting that we all know as IFRS4. And it will not be until the first half year of 2023 when we will stop reporting under IFRS17 accounting protective provision, IFRS9 for financial investments. Starting now with the evolution of the business, the truth is that 2022 was a complex year, amongst other things, as you know, due to the Russia-Ukraine conflict, the energy crisis, the supply chain disruption and all of this is a situation that has consolidated over time. These first few months of 2023 still are under these circumstances. And in the month of March and more specifically in the first half of the month, the first been strengthened by the turbulences of the banking industry. In this complex scenario, I would say that the results that we can be on screen, the evolution of the consolidated results of the group are very positive. The results still support the good performance of the Grupo main 3 pillars that you know; growth, profitability and solvency. In the line of growth, the business volume has increased very favorably. You can see it on screen more than 12.4%, thanks to the sustained growth of the traditional business, the very positive evolution of the credit business and the corporation, as you know, due to previous presentations of the Memora Group. And since the acquisition took place in February 2023, the consolidated results of the group in this first quarter incorporate 2 months of business turnover and later on, we will be giving you greater detail of the results and the corporation of the Memora Group. In terms of results, we already mentioned the positive evolution, EUR 159.3 million results in this first quarter of 2023, 9.2% above the previous year. And the evolution of the results has been diverse between traditional and credit business. In traditional business, results dropped by 10.8% as a consequence, in a summarized manner of the inflation, greater impact in weather-related claims, which compares to the first quarter of 2022 with no weather event claims. And all in all, the combined ratio of the sector and the last information available that of the end of 2022 because ICEA has not yet provided the combined ratio for the first quarter is 2 points above ours, that 91.7% that you can see on screen. And specifically in the motor combined ratio, which is around 100% in the industry, that it is quite higher than ours, if we look at the combined ratio of the sector 94.8%. The credit business has had an extraordinary quarter, marked by the increase in turnover and an inflow of claims that grows slowly but surely, but still below pre-pandemic levels. We've also incorporated the Memora Group, as I already mentioned, which in this first quarter gives us results of EUR 5 million. Continuing with the third pillar, solvency. This also confirms our robust position that allows us to face future challenges with a ratio of 247% more than 25 points above that of the previous year. And of course, all of this is ratified also by the rating agencies, which, as you know, give us stable A in A.M. Best and in operational entities of the credit business we stay at A2, but we go from stable to positive outlook as we already mentioned in the year-end presentation. Once we've explained the keys of the period. A few comments about the global economic environment, especially in the areas that can have a greatest impact in the performance of our business. Regarding the environment and without stressing the things that you already know, and that we just mentioned Russia inflation uncertainty in the markets. 2022 was closed with deceleration, but with positive growth both in the United States and the Eurozone with a better performance of Spain. This is due to this 5.5% as compared to our European peers and the truth is that the focus for 2023 and 2024 have been corrected downwards. They have veered away from the most pessimistic forecast, but we now see moderate growth forecast as compared to last year. If you look at Spain on the right-hand side and according to latest focus of the IMF of April has been we expect growth of 1.5%, which is above the rest of the countries of Eurozone. Regarding the market, nothing new, nothing that you do not know after many years of abnormally low interest rates, economic policies of the central banks, which have been restricted and inflation corrective show a sustained growth of interest rates and in the year with a Spanish 10-year bond at around 3.7%. And during the first few months of 2023, interest rates are still above 3% with a small drop. The 10-year Spanish bond that you can see on screen at the end of March was around 3.5%. At the bottom of the screen, you can see the stock market performance marked by the destabilization of 2022, but with growth in the main indexes at the bottom, you can see the evolution of Ibex and the European and American indexes. A few words as on previous occasions about the insurance industry in Spain, along the lines of this -- of its constant evolution, growth in all lines of business, growth in life in 2023 a very significant growth, 57.4%, promoted by the savings business in spite of the increase of interest rates and nonlife, 6.4% growth across the Board, you can see it on the screen. I would stress the notable growth of motor is 4.7%, well above the usual in a line of business, which is very competitive in the Spanish insurance sector and all of these as per the ICEA data foreseen for March this year. And regarding the group here on the screen, you can see the summarized P&Ls at the top income and at the bottom profit and loss. We see 10% growth in the insurance business. If we consider credit [ and regional ] business jointly. And we would like to stress because it's the first time we're presenting the accounts of the group, the growth of the funeral business. As I said at the beginning, during the first few months of the year, we have incorporated into our consolidated group accounts, the 100% of the funeral business from Memora, 48.2% turnover volume. The volume of the group rose by 12.4 percentage -- rose by 12.4%. And if we look at the recurring premiums, which are the ones that contribute more value, they grow by 5% along the lines of the sector. And as you can see on screen, nonrecurring premiums show the growth, we can see on screen mainly due to the matched products that offer good opportunities to our clients inside of the evolution of interest rates. As a summary growth in traditional business, very positive 8.2%. Regarding the evolution of the credit business, we continue to see a good performance in premiums, 13.2% due to the good commercial activities and the impact of inflation, the CFO of the group throughout the presentation will give you greater detail about the turnover evolution. Regarding the other table on screen regarding results. I will give you an idea of the evolution and the CFO will give you greater detail. An increase by 9.2%, EUR 159.3 million, translating into 7.3% in the attributed result after expanding attributables to externals. There's been a disparity between traditional and credit business. In the traditional business, there is a drop in results by 10.8%. In this sense, on the one hand, we need to bear in mind that we are comparing against a first quarter, which was absolutely exceptional. As I said, with 0 impact from weather events and the frequency in motor in the first quarter of last year was still far from pre-pandemic situation. This first quarter of 2022 has been the exact opposite. It has been impacted by weather events that due to their volume and geographical areas have not been derived to the insurance compensation consortium or reinsurance. And as a consequence they have had a greater impact on the P&L of the group. And on the other hand, the inflation effect, both in multi-risk and motor, which has increased the average costs of both businesses in such a way that the combined ratio is at 91.7%, not reaching 92%, 3 points above that of the previous quarter, but significantly lower than the combined ratios of our competitors, which stress the fundamental impact has been seen in the first few months of January -- the first 2 months, January and February, with better performance in March April. We foresee this will continue during the second quarter of this year as a consequence of inflation contention and the measures that we have taken over the past few months regarding premiums. Carlos Gonzalez will give you a greater detail of the evolution of our combined ratios. I would also like to stress in results, the incorporation of the funeral business, the growth of which is, as I said, due to the incorporation of the 2 months of results of the Memora Group, this gives us EUR 5 million. Regarding the credit line, we still maintain a very conservative provisioning policies. And despite that and the complex environment we're in, we have results in the first quarter of above EUR 100 million, growing by 27%, which can only be considered exceptional. We are also comparing versus the first quarter of 2022 where we already obtained very satisfactory results, almost EUR 80 million comparing to EUR 100 million this year. And this is all due to the good turnover and a claims ratio, which increased this in a sustained manner, but is still below pre-pandemic levels, which we could consider the regular. Our forecast for 2023 is that the claims ratio of the credit business will increase, but in a sustained manner, and it will stay -- it will be placed at normal levels in the second half year. I will not to talk about ordinary results -- or nonordinary results because they are not material and they do not deserve comment, but they do not have an impact on the consolidated results of the group of EUR 159 million. And as to the diversification of our business, well, there isn't much distress here. Nothing that you don't know. Basically, we maintain a completely diversified portfolio between credit and traditional business and also distributed amongst the different lines of business and products. Here, you can see the balance between motor and multi-risk on the left-hand side of the screen, and you know and you will see this on the next slide that our international presence is based on the credit business with Spain carrying the greatest weight. So in summary, we consolidate our position as both largest insurance group in Spain, second largest group in the world, and we should stress our greater diversification of the business, thanks to the acquisition of the Memora Group, which places us as the first largest funeral business in Spain, a different order of things. And now going into sustainability. You know that in the group, we have a basic strategic pillar, which is a long-term perspective and sustainability is, of course, a key part of this vision. In the past few years, we've made the effort to adapt, which has been notable. We have involved the entire organization. We will continue to involve the entire organization in a cross-sectional manner. And all of this frame within our 2021, 2023 sustainability plan, which will be updated this year for 2024, 2026. The milestones in sustainability are many. I would just like to stress some of them are group adheres to the world, the Global Compact and the Principles committed to the development goals. We are also on the radar of PSI and PRI, Principles for Responsible Investment. We are working on meeting the decarbonization goals of our portfolio by 2050. And in 2023, we will publish a greater detail of these goals. As to our products and as we already said at year-end, at the beginning of 2023, we received the authorization by the CNMV to adopt our investment -- our mutual funds to sustainability criteria of article. And in December 2022, this was confirmed. The sustainability agencies reviewed our sustainability ratio and gave us 15 points, which is an improvement of 0.5 points versus the previous rating, and we are within the low risk range amongst the first 15 entities of the sector of a total of 300. And on the left-hand side on the screen, you can see we received the industry top rated stamp. On the website of the group, you have all of the sustainability information and all of the milestones which we merely summarized on this slide. Regarding share price performance, you know this may be even better than we do, very good in the long term, better than our reference indexes in the period from 2022 to the first quarter of 2023, ending the quarter with a loss of 1.69 was an Ibex and EuroStoxx, but with performance better than the year before and very stable in the past few days. Regarding the dividend payer, you know that we have a stable policy with a clear commitment of the group towards shareholder remuneration that we have maintained even during crisis years. In 2021, you can see on screen, we paid out a total dividend of EUR 113. 6 million. And on 2022, this first 3 dividends charged the reserves increased by 7.5%. The amount you can see on screen EUR 21.5 million, and we are also seeing an increase of 10% for the complementary dividend in May since the board in February approved to propose to the AGM, which was held yesterday and approved an increase of the complementary dividend in May. All in all, dividends of EUR 123.4 million which is a growth of 8.7% versus previous year dividend. And without further ado, I'll pass the floor over to Carlos Gonzalez, Chief Financial Officer of the group who you know very well, and he will give you greater detail about the evolution of the year and the main indicator is broken down by each of the lines of business.

Okay. Thank you very much. Good morning, everyone. As usual, and as Clara Gomez already said, I will go a bit deeper into the different lines of the P&L of the businesses that we participate in. We start with the traditional business. And as I always say, our diversification of products and the high retention of our customers has allowed us to maintain the very important growth in turnover with an increase of recurring premiums of 5% up to EUR 885 million. And here, I would like to stress the growth of 6.6% in multi-risk and 10.2% in other. Significant growth in motor as well as you will see later. Regarding the technical result a drop of 20.7%. This is true in the general insurance business, the combined ratio is above 90%, specifically 91.7%. And the behavior -- due to the behavior of motor and multi-risk that Clara Gomez already mentioned, but that we will develop in subsequent slide. Due to the evolution of the -- with a positive evolution of the technical result of late with an increase of 10%. Now we will talk about each of the lines of business individually, starting with multi-risk EUR 229 million in premiums, still strong growth, 6.6% that you can see on screen, a bit higher than the sector. The sector is growing at 6.2%. We are growing in premiums in the main lines due to a good retention of customers and evolution of the average premium, where the increase of claims costs have been transferred partially. Combined ratio is 92.2% above last year due to the 2 impacts already mentioned, the cost of the claims due to inflation, the first and most important one. And it is true that in this first quarter of 2023, there have been weather event claims of low intensity that did not take place in the first quarter of the last year. Actually, in the first quarter of last year, we did not see such an effect of inflation or such weather events. So I think that it is also fair to compare the combined ratio, this combined ratio of 92.2% with the combined ratios obtained in the last half year of 2022, that did have this to affect weather and inflation. As you can see at the bottom, we are comparing favorably to those orders. In terms of the technical results of this line of business, we obtained EUR 15.2 million. And with this reduction of 26.6% that you can see on screen. And now on to motor. Here, motor accelerates the growth of previous quarters in terms of turnover with an increase of 5.7%, up to EUR 204.6 million. This increase in turnover is comparable, compares positively with the growth of the sector at 4.7%. It is true that the competitive environment of the sector is favorable. They are rising prices, but we should also stress that in our case, we've seen commercial activity that has allowed us to increase the number of customers as well. Regarding the combined ratio, it is at 9.4% 2.8 points above 2022, although very much below the currently published ratios in the market. Here, we should stress that as compared to the comparable quarter of 2022, this previous quarter was affected by the lack of mobility due to COVID, but it is also true that the greatest proportion of the increase is deriving from the increase of claims costs due to inflation. These inflation effects, as I said, in multi-risk, we're already being observed in the second half year of 2022. And once again, if we compare to the combined ratios of the orders starting from the second half year of 2022, we again compare positively. And final results EUR 10.9 million. And it is true that here, we also see a decrease as compared to the same quarter of 2022 of around 27%. In other, an increase in earned premiums by 10.2%, and we maintained a good level of combined ratio still below 90%, specifically 87.4% as you can see on screen and with a technical result of EUR 11.3 million. Not much more to say here. I would rather talk about the life business. Life continues with its growth in premiums with a reactivation of single premiums as a consequence of the better interest rate environment which makes it easier and more successful to market these products. As has also been said and it is fair to say that these types of products are not the ones that give us the greater margin, but they do bring us volume. The technical financial result increases by 10.4% amounting to EUR 30.9 million, with some reduction in the technical result, which is more than offset with the financial margin increasing by more than EUR 7 million. And now on to a brief summary of the traditional business with the key ideas that we conveyed before the increase in turnover, 8.2%, including single premiums 5% without them. And the important improvement of the financial result. This is what allows us to contain the impact of the reduction of technical margins due to, amongst other aspects and mainly due to the impact of inflation on claim cost, the ordinary result is at EUR [ 53.6 ] million with a moderate reduction of 10.8%. And in terms of the total results it is around EUR 54 million because the nonordinary result does not have a significant impact. And now on to the credit insurance business. Here, the earned premiums amount us EUR 600.5 million, a significant growth of 15.2% mainly due to the good performance of our customers' turnover due to the economic growth that we've been carrying from previous quarters and mainly due to the effects of inflation on their turnover. And inflation has a positive impact on us here. There is also a greater commercial activity, although in a selective manner. So it does not have such an impact on this growth. On the other hand, there is still downward price pressure in renewals. And there is an increased perception of risk by our customers, which has allowed us to moderate this pressure in the renewals of 2023. And all in all, we are reducing our prices much less than in 2022. As to the technical result of the business, it continues to improve with a growth of 16.9% amounting to EUR 124.3 million as a consequence of the moderate claims ratio and the better cost of reinsurance. Regarding geographical distribution, nothing remarkable and improved income rate, improving in all geographical areas. Well, with the lower relative growth in Spain, 4.4% growth. And now we move on to profitability of the credit insurance business. The gross combined ratio continues with a good performance, 74.3% combined gross ratio, the increase in turnover allows us to maintain a low cost ratio. Again, if we compare with the levels obtained in the last quarter of 2022, the comparison is a lot more favorable. The number of claims increases. This is a consequence of the low starting level of the year before. And we are still, as we already say, set our claims ratio slightly below pre-COVID periods, which are the ones we should be using as a reference, as a more stable reference over time. I would like to say here that we continue with our prudent provisioning criteria described at the year-end of 2021 and 2022, and these are features already characteristic of our credit business. As to risk exposure, it increases by 11.6% as compared to the first quarter of 2022 along the lines of the increase in turnover of our customers. And it's also to that the growth rate of risk exposure is dropping as compared to December. I would like to say here that we are maintaining our strict selection criteria as well. And now on to a summary of the main ideas of the credit business. Income has increased notably mainly due to the increase in the turnover of our policyholders related to the inflationary environment. Here, there is a direct and positive relation. The technical result has normalized with maintenance of costs and similar claims ratio to the fourth quarter of 2022 with a moderate increase of the inflow of claims and maintaining our cautious provisioning policy. Regarding reinsurance, results improved as compared to 2022 because in 2022, there were already what we call negative runoffs in insurance. We saw losses for the company as a consequence of the government agreements, which were canceled in 2021, but there were revaluations of the claims until basically the first quarter of 2022. On the other hand, the financial result also improved by EUR 9 million, basically as a consequence of the reinvestment of short-term investments, be it fixed rate or due to liquidity in and of itself, and these are the consequences of the new interest rate environment. There is an increase of 26.9% in the ordinary results that our General Manager already qualified as exceptional this EUR 101 million. Finally, in starting this quarter, we will inform separately on the evolution of the funeral business, had there been incorporation of Memora into the group, we expect it to contribute a stable growth with high margins. As a historic track record, just for you to know -- get to know the business, we are showing the evolution of the most relevant parameters of the business, be it turnover, where you can see that since 2019, there is a relevant growth due to internal growth and also the acquisitions that the Memora group has carried out over time. And on the other parameter margin over EBITDA, you can see that it is around -- slightly above 25% in all of the periods that you can see on screen. Regarding the results of this first quarter of 2023 specifically. Here, you can see that the margin over EBITDA is above what we just mentioned. Specifically, this 28.4% that you can see on screen. And this is basically as a consequence of the seasonality of passings as you may guess, is higher in the wintertime, so this better margin over EBITDA is not as a consequence of the management of Catalana Occidente, when acquiring the Memora Group, but it is the dynamic of these type of industry. Of course, we have not yet had the time to introduce synergies in this business. And just to finish, I would just like to remind you, this has been mentioned already, but I would just like to remind you that the information that we are providing in the first quarter of 2023 and Memora, only incorporate results starting in February. And this is all from me. I'll pass the floor over to Clara Gomez, our General Manager.

As in previous occasions, we are showing now the evolution of the Capital and the Solvency of the group. On screen, you can see the evolution of the resources incorporating the capital gains of property, which is not included in the balance sheet, which amounts to EUR 542 million. So on permanent resources of market value are at a level of EUR 5.2 billion, growing by 6% as compared to year-end, mainly as you know, due to the positive evolution of the fixed income capital gains, interest rates and evolution of the market, which has also caused capital gains in variable income and net of tax and accounting asymmetries. And all in all, the evolution of permanent resources that we show on the right-hand side, as we've said on other occasions, can only be considered extraordinary, is multiplied x15 since the end of the century. And this is mainly due to 2 main factors, sustained results of the group over the years and also the stable and growing remuneration to shareholders. All of this has allowed for the group to expand, as you know, through corporate transactions. In solvency, you can see on screen that we closed 2021 with a solvency of 220% with a very good performance this year with an increase of more than 20 percentage points, reaching 247% that you can see on screen. Better than our competitors, our own funds are of the top credit quality, more than 90% at Tier 1. And in keeping with all of the adverse scenarios, stress scenarios, we would maintain a solvency of 220% even in adverse scenarios. And even if the solvency figures refer to the end of 2022, we have made a calculation of the solvency impact of the acquisition of the Memora Group, and we can already say that this purchase, which, as you know, was financed completely with own resources barely impact the solvency of the group, 20% of points, but we are still at a solvency of around 230% of the solvency ratio post acquisition. You still you know that all of the details of solvency, we audited figures will be provided in the report published shortly in May 2023, the report on the financial and solvency institution, which, as always, will be available on the website of the group. In keeping with that, you know that rating agencies acknowledge the robustness of our business model. I will not stop to talk about this because we've already mentioned this in A.M. Best, they confirmed rating A with a stable outlook and in Moody's A2 with a positive outlook. And finally, you could also see on screen our investments with EUR 15.073 billion managed funds, an increase of 0.5% as compared to year-end. I will not stop to talk about each of the details of the investments. You know that we have a very conservative investment policy. We consider assets and liabilities together. And our asset per excellence is fixed income. More than 50% of our investments. We have over EUR 7 billion in fixed income, and we still have a very strong treasury position you can see on screen, a drop of 18.5% as a consequence of the acquisition of the Memora Group already mentioned extensively during this presentation. And our treasury position is still above 15%. And that 16% that you can see on screen. And we finish this presentation. And as in other occasions, we will answer to the best of our ability all of the questions that you've made throughout the presentations. I know there have been many questions. So first of all, thank you again for your interest and Nawal Rim has been grouping together all of the questions, we will try to answer them in a combined manner and knowing that if any, unanswered, you can subsequently contact Investor Relations, and we will answer the questions in the usual way. Thank you very much.

Thank you very much Clara Gomez and Carlos Gonzalez for your presentations. As Clara said, we will start now with the Q&A. First questions are about the traditional business. This one specifically about multi-risk. After Carlos' explanation, can you give us a bit more detail about the evolution of this line of business and what measures you are applying to solve this? Carlos?

Yes. As I already said in the presentation, I will simply try to -- I already given answer during the presentation, so I'll try to give you a bit more insight into motors. There are several reasons which the combined ratio is conditioned, basically due to the home product. And this line has deteriorated during this quarter, mainly when we compare it to the same quarter of 2022. 2022 was especially low year in terms of claims ratio. So as we said, maybe not be the quarter to compare with. In this quarter, we've also already mentioned that we've had advanced weather events, especially one in Catalana of hail and also winded and that are not included in the compensation consortium. Just to give you an example, this wind episodes are only covered by the insurance compensation consortium. If they exceed 120 kilometers per hour, and this has not been the case in this episode. As total the weather events this quarter have amounted to EUR 12.2 million. And we should also say here that in this industry since the second half year last year and in 2023, the big challenge is managing inflation. On this perspective at GCO, we are managing inflation through 2 levers, the rates and contention of ratios. Regarding the first one, rates, we are adjusting the premiums to a new reality, a reality adopted to the average cost of claims in this way. What we've had to do is to increase premiums in a sustained manner, and this can be seen in the inter quarter evolution of the line of business in turnover. Regarding the average cost of claims, we are managing these, as we've said on previous occasions through our surveyor network. We have a very efficient surveyor network, which helps us contain inflation. But when inflation is persistent, it is normal that there's also an increase in the average cost of material claims. Our main priority here is to give an excellent service to our customers. And for this, we have to maintain a very good relationship with our repair network. And with all of that, just to finish, I would like to mention that the measures adopted to tackle inflation will not have an impact on the results of the claims ratio due to the clash between -- the way we see increases in turnover in the P&L -- in the acquired premiums. The earned premiums that are the ones that go to the P&L. There is a time lapse of several quarters. This is why we expect that during the year, we'll see an improvement of these ratios whenever inflation does not go back to figures as high as the one seen in 2022. And finally, as our General Manager said, we see some evidence both in the increase of turnover and the claims ratio behavior that are EBITDA in the past few months.

Thank you, Carlos. We'll continue now with another question for the CFO on motor specifically, saying the profitability of motor is impairing, what measures are you implementing to mitigate inflation in this line of business? Do you foresee a reduction of the gap with the sector?

Well, I think it's not news that motor will be one of the most damaged lines of business in terms of profitability and insurance, historically in unfavorable macro environment, such as the current one, the prices increased -- with prices increased due to inflation such a competitive line of business will suffer more than others. Bearing in mind that there is no longer a restriction of mobility and that frequency has gone back to a lot of pre-COVID levels, the pressure on this line of business is even greater. In this context, we continue with the combined ratio well below that of the sector. We've already had compared to year-end plus 5 points and this gap seems to have increased with the information we have received from the end of this first quarter of 2023. I think this is due to several reasons. On the one hand as we said in multi-risk due to our preferred network of workshops and the excellent relationship we have with them and we should also mention because this is also one of the important levers. The quality of the underwritten risks, the retention of our more profitable customers and the conservative rate policy. As to the rates, both us and in this sector, what we are doing is increasing the average premium. In our case, just like in motor, and as we've seen in multi-risk, in motor, turnover increases quarter-on-quarter. In this last quarter, the turnover is 5.7%. We are already renewing the prices policies with a gradual adjustment to our average claim costs and we expect that these increases will show their impact throughout the year. As to the average cost of claims, as we've explained in past presentations, we have to close the claims of bodily damage and the material damages in terms of bodily damage. The scale -- the tariff has increased by 8.5%. And in material damage, the lever we have here is managing these costs through our preferred workshop and network, as we said before. As a summary, we expect a 2023 with a more contained inflation, which will lead to the line of business after implementing all of these levers that we've mentioned over the quarters will lead the line of business not to suffer from significant impairments.

And now on to the credit insurance business with the following question for the Clara Gomez. Credit Insurance has shown a very different behavior as compared to the first quarter of 2022 with a great increase of the combined and claims ratio, given the financial context -- economic context, are you comfortable with this?

Well, I understand that the question being asked about credit insurance is about the 2 parameters, both turnover and results, I will try to answer both. And as you know, and we mentioned in the previous presentation of results after a few years which were completely atypical in credit insurance, we do see a normalization of claims ratio. I already mentioned the growing trend of the inflow of claims and in the second half year of 2022, but we ended at a combined gross ratio around 72% and [indiscernible] did not amount to 39% and always maintaining our cautious provisioning policy. What happened in this first quarter, which is what you're asking about. We do see maintained trends towards the normalization of the inflow of claims. We have a combined ratio, which is 74.2% and a claims ratio doesn't amount to 43%, but it is true that we continue below normalized levels as -- below -- before the pandemic. And regarding the second component you were asking about -- talking about premium payments continue to grow more than 12% total turnover. This is partially due to inflation, but also due to the greater activity of our policyholders, but still we maintain and a very cautious underwriting policy. And we feel very at ease with the current exposure. The quality of our buyers portfolios, you know this because we've said this on previous occasions, and we use it to measure the fitness of our underwriting has improved versus previous periods. So it's completely true that we are more exposed, but we -- but it is exposure of more quality. You have all of the detailed information of the exposure of our portfolio in the annexes. You know this is a very diversified exposure in terms of sectors and countries. And we expect that as inflation normalizes, and we increase the premiums accordingly and the total exposure it will all normalize.

We'll continue now with one more question at this time about the funeral business. For the first time, you included a breakdown of the funeral business and the results. Can you analyze in greater detail the Memora business.

Well, both Carlos Gonzalez and myself throughout the presentation, we have talked about the acquisition of the Memora Group and its impact on these presentation of results of the first quarter. The 100% acquisition took place on February 9, 2023, and I will not repeat myself that the current figures of the presentation includes the results of Memora of February and March 2023. And from here on out, in all of the information, we will provide to you both of the Memora and Asistea, you will see the funeral business information. The Memora Group includes cemetery management, burial services, incineration services in Spain and Portugal, and it's completely complementary to the funeral business that we already had through assets there due to the acquisition of Previsora Bilbaína and all of the acquisitions in the future will focus on geographical areas where we will be completely complementary. As you can see or as you have seen in the presentation, the margin understood EBITDA over income is relevant and stable over time, more than 30%, and it is a profitable and growing business, albeit with some internal seasonality as the CFO mentioned in detail, especially in the winter months. In the coming quarters and since the dynamic of this business is different from what you are used to in the insurance business, we will inform you on the specific costs of this business as well as the different KPIs so that you can do an adequate follow-up of it.

We have one question about the new accounting standard IFRS17 is already in force. Other companies have published results under this accounting standard. When will you publish? Can you indicate potential impact of it?

Well, these are 2 questions in one, I will try to start by answering the first one, the one about our publication date. The standard for compulsory financial statements comes into force in January 2023. And as you know, as per the CNMV and the Capital Societies Act establishes as compulsory the publication for quarterly -- for half year. So in the first half year of 2023 is when we will start reporting under IFRS17 for provisions and IFRS9 for financial investments. And all of these with figures already verified by our auditors. So in this first quarter of 2023, as I mentioned at the beginning, in order to maintain transparency in the regular information to our investors and analysts, we have maintained the previous accounting criteria, both for financial investments and others. And going now into the second part of the question, regarding potential impacts, we already set in the presentation of results at the end of the year that is available on the website, we already informed that from the point of view of equity, we do not expect significant impact. It does not have an impact on general insurance or life risk and the new parameter coming up in the new accounting standard, CSM, contractual service margin, that we already mentioned in the previous presentation, the future implicit profit of our portfolio and fundamentally refers to the savings -- life savings business and credit insurance will be very positive. But [indiscernible] of that, it will confirm the robustness of our business model.

And if we -- do we expect changes as compared to local accounting?

Yes. there will be changes. On the one hand, due to the different time allocation of results over time, even if it does not affect the general profitability of the business. And on the other hand, due to different treatment of variable income in mutual funds. Capital gains and losses of mutual funds will have a direct impact on the P&L and the realizations of the P&L will on the contrary, only have an impact on equity.

One final question for Clara Gomez. We've seen on the press that you've gone to the second stage of transaction in the second, can you give us more details about that?

Well, yes, we have seen and followed as you -- the interest that a corporate transaction has generated in the press. You know this, and I'm sorry, I cannot give you details about this. As you know, we never talk about specific acquisition transactions. In case any corporate transaction materializes, you will receive all of the information with the transparency and the details we've always provided to you through relevant event publications and in the different presentations of results. You already know this that GCO will maintain a stable and growing dividend policy, even maintained during the years of the financial crisis of 2008, and this has allowed us to increase our capitalization, our market cap, which would allow us to face potential corporate transactions. And just like we said during the presentation, our solvency ratio at the end of 2022 incorporating Memora is around 230%. So I think we conclude that we have a comfortable solvency more than 2.3x above that for the regulator demands with EUR 2.5 billion also backed by the rating agencies. So this will allow us to make a significant acquisition. And if the opportunity were sizable in groups, the group could use the accrued capital without compromising our financial independence or [ solvency ] our interest is to continue paying attention to the market, analyzing any potential opportunity.

Okay. So with this answer, we close the presentation of results of the first quarter of 2023. I would like to thank Clara Gomez and Carlos Gonzalez for their presentation and answers to all of the questions received. And as usual, the pending questions will be managed directly via the Investor Relations team over the coming days. I would like to take this opportunity to invite you to the next presentation of results on the 27th of July 2023, where we will present the results of the first half year. Finally, I would like to remind you that you can visit our website where you will be able to find all of the financial and sustainability information that may be of your interest. As usual, we would like to thank you for your attention and participation and see you soon. [Statements in English on this transcript were spoken by an interpreter present on the live call.]