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

This is Clara Gomez Bermudez, Financial and Risk Management Officer at GCO. And just like on previous occasions, I'll be here with you during this results presentation. And here with me as usual, we have Carlos Gonzalez, Chief Financial Officer of the group, and Nawal Rim, Director of Investor Relations, who, as on other occasions, will group together all of the questions that you ask throughout the presentation so that we can answer them at the end of it. First of all, I would like to thank all of you who are here with us online. And of course, I would like to show our appreciation for your interest in the performance of our business and the performance of our shares. Before we start with the performance of the business, I would like to say that, as was notified to the CNMV who a relevant event notification, the Board of Directors of GCO in the session of today agreed to accept Mr. Serra Farre's resignation in his position as per the proposal made to the Remuneration Committee and having informed this committee. Mr. Jose Maria Serra Farre will continue as Chairman of the Board of Directors and the AGM as a Proprietary Director. And in a different order of things, as we anticipated in the presentation of results of the first quarter of this year, 2023, as per the amended text of the Capital Societies Act, half-year financial statements are compulsory. The current financial statements have been reviewed by our auditors and we report on them as per the accounting standard that we've always used and that you know very well. This is the regulation that we all know as IFRS 4 or IFRS 39 for financial investments. And all of that is the accounting standard that the group and the Societies that depend on it manage its businesses. This is the accounting method we use for our decision-making and it allows us to maintain the consistency vis-à-vis previous years, not just 2022-2023, but also vis-à-vis previous years. And having said that, and despite that, and even if the basis of this presentation is based on our management information, as we said, due to IFRS 4 and IFRS 39, additionally to that, in this presentation, we include a breakdown of the impact of IFRS 17 and IFRS 9, not only of June 2023, but a comparison with June 2022. And all of that in order to maintain the transparency that we've always had with the market and with investors. To that effect, we have prepared specific slides that we will be discussing during the presentation. So now, starting with the evolution of the business. Here you can see on this slide the first 6 months of 2023. Truth is that they've been marked by a complex geopolitical environment. You all know that very well, the Russia-Ukraine conflict that we can all follow through the media and it is prolonged over time, and unfortunately, we're getting used to in this geopolitical environment, the confrontation between China and the U.S. as well, and in a different order of things, an inflation which is actually diminishing with a reduction rate which is a bit quicker now as compared to the first quarter of the year, but still at high levels, especially in the main Eurozone countries. I think in this context, we can say that the results of the group of this first half year are very positive in the 3 strategic pillars of growth, profitability, and solvency. At the top of the screen, on the growth line, you can see the turnover that has increased very favorably until 11.4%, well exceeding the EUR 3 billion for a period of 6 months. So we continue along the trend that we saw in the first quarter, thanks to the sustained growth of the traditional business, the very positive evolution of the credit business, and the incorporation, as you all know, due to previous presentations, of the Memora Group within the group. You know that 5 months of the Memora Group, both in terms of turnover and results, because the acquisition was finalized on February 9th, 2023. And the bottom line, at the center of the screen, we've already talked about the positive evolution, EUR 344 million results in this first half year of 2023, almost 20% above 19.8% above the previous year. And we'd like to stress the very favorable evolution of the credit business and the improvement in results as compared to the first presentation of the year in the traditional business. In traditional business, we equaled the results of the year 2022, which were truly exceptional, with EUR 135 million results, with a slight decrease, not even 2%, thanks to the measures that we've implemented in the past few months, among other reasons, and still with a combined ratio below 92%, 91.8%, well below the rest of the insurance sector. The credit business, again, this quarter, with extraordinary results, EUR 212 million results, favored by increases in turnover. We see some slowdown in the economic activities, and we continue to see a moderate income of claims, but with a slow modification of claims ratio, which is coming nearer to pre-pandemic results. And in the credit business and traditional business, we see a positive impact due to the credit positive evolution of financial performance that we'll talk about later. And additionally, and as I already mentioned, in the first few months of this half year, we incorporated a EUR 1 million results of the funeral business, corresponding to the five months since the incorporation of Memora into the group. Finally, in solvency, that you can see at the bottom of the screen, we confirm our solid position, a robust position, which allows us to face future challenges with the solvency ratio that we anticipated of 247%, which drops, but not significantly, with the acquisition of the Memora Group, acquired completely with own resources, at around 230%. You can also see on screen the positive evolution of our permanent resources and market value, well exceeding the EUR 5 billion, with this EUR 5.3 billion that you can see on screen. And all of that, well, we have a specific slide for that, and you know this very well due to previous presentations. This has been confirmed by our rating agencies, both AM Best and Moody's, for the operational entities of the credit business. After talking about the keys of the period, a few comments about the global economic environment, especially in the areas that we can see that can greatly impact the evolution of the business. Without stressing all of the things that we've already mentioned, a geopolitical institution inflation slowdown of the economy, uncertainty of the markets. In the year 2022, the truth is that 2022 ended with a slowdown, but with positive growth in the U.S. and the Eurozone, and with a better behavior of Spain with that 5.5% as compared to our European peers. And regarding the main confidence indicators in 2023, I think, we can state that we are starting to see a modest expansion in the U.S. We can see a striking business creation rate. The GDP data of this quarter are looking -- if we look at that, we're looking at some increases, certain parameters, such as acceleration of inflation, mainly affecting underlying inflation, which you know is more persistent, and also due to the drop of energy prices. And in the Eurozone, it is true that there's a lot more disparity amongst countries. Germany is still closed or in very modest growth ratios. And in Spain, the data of the second quarter suggest more favorable economic growth than in previous estimates. You can see that 2.5%, and we come from previous estimations of 1.5%. And in Spain, Spain is still at the head of reduction of inflation as compared to our European peers below 2%. It is true though that we believe we will need to wait until the second half of the year to see whether this trend consolidates. And regarding markets, nothing new, nothing that you don't know of. After many years of abnormally low interest rates, the financial policies of central banks that are inflation corrective produced a sustained increase of interest rates, closing the year with the Spanish bond at 10 years at around 3.7%. Throughout the first 6 months of the year, interest rates are still clearly above 3%, with some volatility at 3.5%. And at the end of June 2023, the Spanish 10-year bond was at 3.4%. The stock markets that you can see at the bottom of the screen have been marked by a certain destabilization that characterized 2022, but with growth in the main indexes. At the bottom of the screen, you can see the growing evolution of Ibex and European and American indexes, all of that mainly as a consequence of the evolution of the big techs. And as usual, a few comments about the evolution of the insurance industry in Spain. Along the lines of the evolution of 2022, it grows in all lines of business. You can see on screen a 2-digit growth in turnover with this 23.7% mainly pushed by life savings, almost 70% growth due to the attractive situation of interest rates as compared to what we had been observing in the past few years. But also we see, and you can see that at the bottom of the screen, the good turnover performance in non-life, 6.7% growth if we consider all lines pulled together, and 7.5% in the mass lines such as motor and multi-risk, and all of that, of course, due to the sectorial combined ratios that we know of in motor and home, which are close to 100% in this year and with the data of the first quarter of the year. All of that with a growth very comparable to what we see in turnover in GCO except for single premiums. And, well, you know very well that we keep a more moderate growth strategy. We prefer recurring premiums that we consider contribute more value. And now moving on to the group, the results of this first half year of GCO, and as usual, you can see on screen 2 summarized P&L, income and results. Very favorable growth in turnover in all lines of business, 8.3% growth in the insurance business considering jointly the traditional business and credit business, and exceeding the border of EUR 3 billion in just the 6 months of the year. And I would like to stress, as we did in the first quarter, the more than EUR 100 million turnover of the funeral business. As we mentioned at the beginning of this presentation, in this slide, we include 5 months of turnover and results of the Memora Group, and with all of that, the truth is that the volume of the group's business grows above 10%, 11.4%, as you can see on screen. The traditional business at the top of the summarized P&L that you can see on screen grows with recurring premiums, which are the ones that we already said we consider to be the ones contributing more value, 5%, well along the lines of what we said about the growth of the sector. Also to stress the growth of non-recurring premiums, 52.7% in single premiums live as a consequence of the guaranteed rate premiums, which offer a good opportunity to our clients inside of the evolution of interest rates and growth of the traditional business as a whole of 8%, 8.2%. As to the evolution of the credit business, it continues with a good performance in terms of premiums, 7.8%. We do see some pause in the increase of turnover due to less commercial activity as compared to 2022 and the first few years of 2023. They made the CFO of the group, Carlos Gonzalez, will throughout the presentation give you more details about the evolution of turnover and the evolution of results, which I'm going to give you a brief overview of. Regarding results, I will give you a brief overview. Very favorable growth in the bottom line, the consolidated results, EUR 343 million, 19.8% growth as compared to the previous year, which translates into almost 18%, 17.8% to be precise, if we're talking about the attributable results after discounting those attributable to external partners. And as I already mentioned at the beginning of the presentation, the evolution of the bottom line in light of the international accounting centers is very positive. The result actually improves by almost EUR 60 million, but at any rate, I will give you the entire breakdown in the slide we have prepared for that purpose. Regarding the results of the traditional business, almost the same results as in the previous years, barely a 2% growth. It is true, though, that in motor, we will give you more detail about this, there is a drop and increase of combined ratio, but with a behavior much better than the rest of the insurance business. And if we look at the entire traditional business and comparatively to the first few months of the year, we go from less to more. We have taken many measures. We have adopted many measures in terms of inflation contention, through cost control, promoting efficiency, a clear bet on digitalization and automatization of processes. Even in some of them, we have incorporated AI techniques. And all of that combined with state increases as the rest on the sector has done. And we hope that all of those measures together will confirm the positive trend of the traditional business during the second half year. And the ordinary results of the traditional business that we can see on screen also have a positive impact as well as in the other businesses, the credit business as well, due to the better financial performance that we will give you greater detail on later. The evolution of combined ratios will be discussed later and explained by Carlos Gonzalez. And finally, I would like to stress also the incorporation of the final business results, EUR 8 million, the growth of which is, of course, due to the incorporation of the Memora Group. And even if we cannot see it here, I would like to say that we can see a sustained EBITDA result around EUR 35 million, if we pool all of the businesses together and 27% in percentile terms. Very similar to what we experienced in the previous year, despite the fact that during the first half year, we've had less mortality than during the first 6 months of 2022. And finally, in the credit business, as I said in previous presentations, we continue to maintain and we insist on this, that even maintaining a very cautious provision booking system in the complex environment we are, we have very positive results above EUR 200 million in 1 half year and growing by more than 40%. I think we can clearly see that that's exceptional. And this growth rate, we maintain it not only during these first 6 months of the year, we also kept it during the year 2022. And all of that, of course, is due to the good performance of our turnover, a claims ratio which grows in a sustained manner and comes closer to pre-COVID levels, but continues to yield very positive results. And our forecast for this end of 2023 is that the claims ratio of the credit business will grow, even if in a gradual manner. But we will, of course, get to very good results at the end of 2023, taking into account the evolution of this first half year. I will not stop to talk about the non-ordinary results, minus EUR 11 million, comparing to minus EUR 1 million in 2022, which are mainly due to extraordinary expenses, amongst other reasons, due to the adaptation to the new international accounting standards and the advertising campaigns that we've carried out due to our new brand oxidants. And regarding -- and now moving on to the next slide, regarding diversification of the business, nothing really to stress, except for what we've said in previous presentations, we maintain a very diversified portfolio between traditional and credit business. In credit insurance, almost 46% and 54% in traditional business and within traditional business, very diversified amongst the different lines of business and products. You can see it on the screen, with multi-risk 15%, or not even 15%, and motor a bit short of 13%. And this diversification of the business, of course, helps us in controlling profitability and the positive results of the entity, as compared to businesses which are more exposed to the motor line, which, as you know, is under a lot of pressure in the insurance business. And regarding our international presence, this already, but we are mainly present in internationally in the credit business. Spain has the greatest weight, almost 63%. And additionally, we can already say that with the incorporation of the funeral business, we also have a presence in Portugal, which, of course, contributes to greater diversification of the business. So all in all, we consolidate our position as the fourth largest insurance group in Spain and the second largest credit insurance group in the world. And we should stress, as we already set our position regarding the funeral business, we are the first, the top funeral business in Spain, or the largest. And as on previous occasions, we incorporate here our sustainability information. You know that our 3 strategic pillars of growth, profitability, and solvency over the years have gotten us to be a very sustainable business. And the different sustainability actions are included first in the master plan of 2021-2023, a plan that we will renew at the end of this year for 2024-2026. At the bottom of the screen, you can see the main milestones that we wanted to stress in terms of sustainability. In terms of sustainability, on the one hand, we have published all of our sustainability information, the sustainability reports, the non-financial information report, all of it verified by our auditors, independent experts, and it is available on the website of the group, as you very well know. And additionally, on June 30th, we published our adverse incident report for insurance-based products. And in terms of products, the second milestone that we stressed and that we have here on this slide, you know that we have adapted our mutual fund offering to SFDR Article 8, and we will also update and adapt our EPSV and pension funds. We also mentioned the repair - the vehicle repair service that we offer through OtoPresto, which is the first in Spain to receive the certification of a sustainable workshop network by [ Centro Zaragoza Center ] that certifies the commitment of our workshops to sustainability, and it also certifies the development of their activities following care of the environment criteria. And finally, we also incorporated here the NACTIVA initiative. We are one of the partners of NACTIVA, an entity created to promote cultural, ecological preservation through design and funding and implementation of projects for natural capital projects, and it focuses on natural resources of the Mediterranean region, forest, water, et cetera. And with all of that, we also really mentioned it at the end of 2022 and also in the first presentation of this year, but we've been considered low-risk by Sustainalytics. We're among the top 15 entities among the 300 day rate, and we have received the stamp of industry top-rated. A few brief comments about the share price evolution. You know these almost better than ourselves. This half-year with 474% has not been good. It's been worse than in the previous year and worse than our reference indexes, Ibex and Eurostar Insurance, but you also know also that in the past few days, we've seen the price increase of the share. We consider that the share price performance should be measured in the long term, and this is what we can see on the screen. The performance from 2002 until the first half-year of 2022, the performance of the share has been positive with an almost 10% improvement and better than our reference indexes. And regarding distribution of dividends, you know that we maintain a dividend-payer policy which is very stable with a clear commitment of the group in terms of shareholder remuneration and a growing dividend policy throughout the years. And I would like to stress here the stability that we've been able to maintain even at the worst times and in the worst financial crisis, both 2008 and the recent crisis of 2020. In 2022, we paid out dividends of EUR 123.5 million against 2022 results, an increase of 8.7% as compared to the dividends of the previous years. And in the current year, an increase of 7.5% in July 2023 as compared to the dividend of the previous year, July 2022, with EUR 23.1 million as compared to EUR 21.5 million that you can see on the slide. And without further ado, I will pass it over to the CFO, Carlos Gonzalez, who you know very well from previous presentations, who will be telling us in more detail about the evolution of the year and the main indicators. And he will give us a breakdown of each of the lines of business.

Good afternoon, everyone. As Clara Gomez announced, my purpose here is to go a bit deeper into each of the lines of business. You know them very well, traditional business, credit business. And as usual, we will give you a brief overview about the funeral business. We're starting with traditional business. Here, our diversification and the high retention of our customers continues to allow us to maintain this growth in turnover with the increase of premiums of 8.7% written premiums, which becomes 5% if we talk about recurrent premiums. We would like to stress the growth by 7% in multi-risk or 8% in other, although there are also significant increases in other areas of the business, as you will see later on during the presentation. The technical result drops by 15.9%. The general insurance business, the combined ratio is above 90%, specifically 91.8%, mainly due to the performance of motor and multi-risk, which we will talk more about later. We continue with the -- of the technical financial result of life with a growth of almost 30%. And now on to the analysis by lines. We'll start with multi-risk, EUR 443.8 million premiums, still with a strong growth of 7%, somewhat better than the business, which is growing at 6.1% by June. In the case of GCO, we grow in the mass lines premiums because of the growth of the premiums in mass lines premiums because of good customer retention and with an abolition of the average premiums, which has had a partial but an impact on the cost of claims. The combined ratio is at 92%, 3.6 points above last year as a consequence of the combination of several impacts, mainly, and as we may remember, there is an increase of the cost of claims due to inflation. We will repeat this throughout the presentation. But also in the case of multi-risk, it's also due to key claims in industrial and low intensity weather events. These impacts did not take place or not so much in the first half year of last year, but in the second half year, they did. So we could compare better in terms of ratios. And as you can see at the bottom of the screen, here we can see the combined ratios, the stagnant combined ratios, and the comparison is favorable. In the end, the result has dropped by 26.8%, going to EUR 30.8 million. Now on to Motor with an increase in turnover, 5.5%, EUR 368 million total. It is identical behavior to that of the sector. And here we could say that, the environment is still competitive with rising prices at the moment. And in our case, this is combined with a good or it's balanced by a good customer retention. The demand ratio is at 95.3%, 4 points above 2022. 2022, especially in January and February, we still were somewhat affected by the restrictions of mobility due to COVID. But it is true that the main component of this increase of the ratio is the increase due to claims, the increase of claims costs due to inflation, which was already showing the last few quarters 2022. So in the end, the result, which is EUR 15.6 million with a reduction of 43.7%. Regarding other, almost 8% increase in turnover, 7.9%. In terms of results, we maintain the good levels of combined ratio, still well below 90%, specifically 84.9%. And this means there is a technical result of EUR 27.5 million. So this line of business stabilizes other lines in general insurance. And then life continues with a growth in periodic premiums of around 2%. There's a reactivation of single premiums due to how commercially attractive the products are at interest rates, which are now interesting for policyholders. As to the result, the technical financial result improves by 20.2% up to 87.7 million, with a maintenance of the technical result, but with a significant improvement of the financial margin, which increases by EUR 19 million due to the current capacity to reinvest at higher interest rates and not conditioned by any extraordinary events of disposal of assets or any other matter that, as you know, we report in different lines. So as a summary, for the traditional business, the increase in turnover, this 8.7%, including single premiums that we mentioned, and the significant improvement of the financial result related to a new environment of interest rates allows us to contain the impact of the reduction of technical margins impacted by inflation to claims costs. Proportionally, the ordinary result is at EUR 135 million with a minimal reduction of 1.9%. And as I said before, these results are not conditioned by any especially relevant events in the non-ordinary results. Now, on to the credit business, acquired premiums, written earned premiums in credit insurance go up to 1.17 billion with a growth of 7.4% with some slowdown as compared to previous periods. The good performance of the turnover of our customers due to the inflation effects is dropping as the increases on CPI become more moderate. There's still downward pressure in renewal prices in this environment with a favorable impact of incoming claims. As to the technical result of the business, it continues to improve with a growth of 32.6% up to EUR 242 million almost as a consequence of moderate claims ratio and the improvement of reinsurance costs that we will talk about later as well. Regarding geographical distribution, here I would just like to mention that the growth rate of revenue is distributed among geographical areas, less relative growth in Central and Northern Europe. Here you can see, a growth of almost 2%. Regarding profitability, the growth combined ratio continues with a good performance with a ratio of 71.4%. The important growth of turnover allows us to maintain a low cost ratio below 33%, whereas the claims ratio is below ratios before COVID. We already mentioned the number of claims is increasing, and I would like to mention here that we continue with our cautious provisioning policies described at the end of 2021 and at the end of 2022. Regarding risk exposure, if we compare to June last year, the growth is of 10%. The growth rate drops to 2% as compared to December along the lines of the reduction of the rate of growth of premiums. We are maintaining our strict selection criteria as usual. As a summary, we'll go through the main drivers of this half year. Income continues to increase significantly although in a decreasing manner mainly due to the increase in the turnover of our policyholders. A technical result before reinsurance improves as a consequence of a better cost ratio and controlled claims ratio with a controlled increase of claims and maintaining our cautious provisioning policy. Regarding reinsurance, it improves as compared to last year because in the first half year of 2022, there were still negative run-ups as a consequence of government agreements that were cancelled already in 2021 and the impact, the comparative impact as compared to this half year of 2023 is approximately EUR 32 million, with a negative impact in 2022 but no negative impact in 2023. In terms of reinsurance, we continue with the same level of transfer on both years but this year without the impact of government agreements. On the other hand, the financial result also improves by EUR 20.5 million basically as a consequence of the reinvestment of short-term investments both liquidity and fixed income and with an increase, a very relevant increase of almost 4% with the total result of the business being a bit lower, although reaching this growth of 40% with these non-ordinary results already mentioned deriving from exceptional expenses. As to the funeral business and as we said previously, we will also inform separately on the evolution of the business which after the incorporation of the Memora Group, we expect for it to provide a stable increase of the business with high margins. As a historic base, we are providing turnovers in 2019 where you can see this growth that has happened both internally and due to acquisitions. We are also providing here a historical evolution of one of the most relevant parameters for the management of the funeral business which is both EBITDA results and EBITDA margin, which is at around 25% in this historic series. As you can see in the data of the end of this half year, the margin over EBITDA is slightly lower than the year before 25.9% as compared to 27.8% of the previous year as a consequence both of a lower number of deaths, remember the impact of COVID and the impact of CPI on the expenses of this activity. And finally, I would just like to remind you and Clara Gomez already mentioned this, that the information that we provide regarding Memora only includes their results starting February 2023. Clara?

Thank you, Carlos. As we said at the beginning of this presentation, we would also like to add the impact in this half year accounts of 2023 and with the new international accounting standards, we also have the impact on the consolidated results of the group due to the coming into force of the new accounting standards. We already mentioned it in previous presentations. The new accounting standards have 2 main impacts on insurance entities on the one hand on certain financial investments and on the other hand on the calculation of technical provisions. In the case of financial investments, you can see it at the bottom of the screen, the names changes are due to the fact that mutual funds incorporate capital gains and capital losses capital gains and capital losses into the P&L and not against equity as in the previous accounting standard and variable income has a different treatment as well and always charged to equity as you can see. And on the next screen, you will see the impacts on the different lines of results where you will be able to see what we just mentioned. At the end of 2022, we worked on our mutual fund portfolio precisely to prevent the volatility that this would bring into the P&L due to the new accounting standards, not due to a change of strategy but mainly due to the fact that mutual funds are now considered to be directly managed. As to technical provisions, you have that at the top of the screen, technical provisions. In the end, the main change is that they now tend to be calculated basically in the life and life-saving business and credit business. They are now calculated with techniques similar to the ones that you know very well because we have told you about in the solvency regulation or the embedded value which is evaluation technique that is very typical of the insurance business. So, in the end, they are calculated with hypothesis and estimations and they incorporate a series of additional elements, the calculation of technical provisions regarding life savings and great insurance. They incorporate the explicit profits in the life portfolio through the CSM, the contractual service margin that will then be released over time and will have an impact on the periodification of results. And additionally, there is a new concept in provisions which is the risk adjustment similar to the risk adjustment existing in the solvency regulation that is included in life and credit business. So, all in all, the changes in general insurance are less significant, provision concepts are similar to current provisions, but there are 2 elements that have an impact both on the balance sheet and the P&L. On the one hand, that provisions even in general insurance have to be discounted. In the current accounting standard, there is no discount for short-term provisions. And as we already mentioned, we have this risk adjustment in the calculation of provisions. And on this screen, you can see the main changes in the consolidated result of the group that we already mentioned throughout this presentation due to the new international accounting standard. In the ordinary result, you can see the EUR 444 million ordinary result that we have mentioned throughout the presentation, which translates into EUR 410 million, more than EUR 400 million in the result of one-half year based on the new international accounting standard. So, a difference of EUR 77 million with a new accounting standard. We've also incorporated a breakdown by section. You see, you know, this is the way we manage our accounts. On the one hand, the impact on technical results of our expenses and on the other hand, on the financial result. And so, in the technical result of your expenses, you can see an increase of EUR 58 million above what we have attributed as technical result of your expenses in the current accounting. And this is a combination of the 3 businesses, international accounting anticipates results, because of a faster allocation of those than the current standard. And this happens both in life and in general insurance and also in credit. Additionally, you know that the new international accounting demands that technical provisions both of general insurance and credit insurance are calculated with best estimate criteria. So, without incorporating additional prudency margins, which means higher allocation results because there's a lower allocation of claims ratio because of its periodification. So, EUR 28 million more results in life, mainly due to the allocation of acquisition costs that you know are fundamental in life savings at the time of the disposal. In the current accounting, they are considered to be directly against the P&L. And in the new accounting standard, they have to be accrued throughout the life of the policy. So, high result with the current accounting, mainly because of a quicker allocation of results and because the claims ratio are incorporated in a more gradual manner, the same thing in the credit business with a higher result than we saw in the traditional accounting. And finally, at the center of the screen, you can see the better financial result as compared to the ones that we've seen in the current accounting. This EUR 14 million difference mainly due to the capital gains in this first half year from the mutual funds that we still maintain in our portfolio. So, more than EUR 16 million results, EUR 410 million based on international accounting. You can see at the bottom of the screen a comparison with 2022. In the end, this translates into the almost 20% growth in the results that we mentioned at the beginning of the presentation. If we look at the international accounting, it's almost 30%, EUR 29.5 million growth as you can see on screen. So, we are very happy with the evolution of results, not only with the current accounting standard, but with the international accounting standard that translates into the figures that you can see on screen and also have a positive impact in the net equity, which is also positive. We will see it up next in terms of permanent resources at market value, but also with the positive evolution in the international accounting standard. And here you can see our permanent resources at market value with a very positive performance with these EUR 5.322 billion that you can see on screen. A growth of 8.3% as compared to year-end. And as you know, we incorporate capital gains not included in the balance sheet. This EUR 562 million from real estate capital gains due to the positive evolution of fixed income capital gains net of taxes and accounting asymmetries. So, in the end, an evolution of permanent resources at market value that, as you can see at the bottom of the screen, can only be considered very favorable. It has multiplied times 15 since the end of the century. And as you know, this is as a consequence of the sustained results of the group throughout the years, sustained and with a very positive evolution of -- and the retention of which, due to the cautious and growing shareholder remuneration policy, all of these leading to an expansion of the group through corporate transactions. And along the lines of permanent evolution -- permanent resources evolution, the solvency position of the group, 247% solvency ratio at the close of 2022, which you know dropped barely 20 points with the acquisition of the Memora Group. We are still at a solvency ratio which is very positive, very clearly above 200%, even in adverse scenarios that we -- you know, we carry out these exercises in our stress tests. And it is better than that of the rest of the insurance business or the average of the insurance business with own funds of top quality, 95% of them are considered to be Tier 1 for equity. So, well, this has been ratified by our rating agencies, as you know. AM Best gave us an A rating with a stable outlook and A2 in the case of Moody's, which gives us rating for credit insurance business. In this case, A2 with a positive outlook, as we said in previous presentations. And on screen, you can also see our investments. The managed funds exceed EUR 15 billion, EUR 15.1116 of managed funds, with an increase of 0.8% as compared to the managed funds at the end of 2022. I will now stop to talk about all of the details of the different investments. You know that we maintain a very cautious investment policy. Our top asset, as you can see, is fixed income with more than 50% of our total investments, more than EUR 7 billion fixed income, and with a very strong treasury position. You can see on screen that it drops as compared to the latest presentation with this 27.4% drop that you can see in the presentation in cash and monetary assets. This is due to the acquisition of the Memora Group, as was discussed during this presentation, and we're also using investment opportunities in fixed income due to the positive evolution of interest rates. And with that, I think we can close this presentation. As on previous occasions, now we will answer the questions posed throughout the session. We would like to thank you for your interest throughout the presentation. We know there have been many questions, and now Nawal has grouped them together so that we can try and answer them, knowing that if any are left unanswered, you know that you can afterwards contact investor relations and we will answer your questions via the usual channels.

Thank you very much, Clara Gomez and Carlos Gonzalez, for your presentations. As usual, we will start with the Q&A session. We've received questions during the presentation and we've grouped them by topic. The first block is on the traditional business, this one specifically about multi-risk and for the CFO, Carlos Gonzalez. This quarter there's still impairment in multi-risk. Could you give us a bit more detail about the evolution of this line? What measures are you applying to solve this? Carlos?

Well, we've already discussed this briefly during the presentation. There are several reasons for this ratio to be comparatively higher to last year, because in this period last year, there were no weather events or key claims, which means that the ratio of that year was especially low. During this year, we've had adverse weather events for a value of around EUR 24 million. Last year, they were below EUR 17 million. Additionally, we also had pick events in industrial multi-risk. Both effects have a clearly random behavior. They did not happen last year, they happened this year and they had this effect. At any rate, and well, the main reason and the sectorial challenge for 2023 is managing inflation. The combined ratio of the sector in the first quarter is at 98.5%. GCO, despite the increase of the combined ratio, maintains a positive gap in the sector of more than 6 points. Things on the one hand, and as usual here in this company, it was always a differential fact that differentiates us. So, I think we should say that one of the main reasons is the strict selection of risks. But also specifically, we are managing inflation through 2 levers, both the rate setting and the control of claims ratio. First, in terms of rate setting, we are adjusting premiums to the new reality of the average cost of claims. This is as it should be. We have increased premiums in a gradual manner, always protecting our policy holders and especially looking into retaining them. And we can justify these increasing rates with the increasing rates in the industry of around 7%. And the second tool for claims ratio contention, well, here the tool is the adjustment of average cost of claims. And we are doing that through our repair network, which helps us somewhat contain inflation. However, it is obviously natural that we cannot transfer 100% of the cost increase to this repair network. In the end, we have to provide excellent quality to our customers. And this excellent quality is achieved through these collaborator networks. So, we need to take care of our relationship with them in the long term. And finally, and if we want to detect trends, the evolution of the line as compared to the first the line as compared to the first quarter has been positive. The combined ratio in the stagnant quarter, in this stagnant quarter has dropped despite the fact that there has been random impacts, so to speak, as I said, both weather events and key industrial claims. So, the measures we've taken in terms of premiums and average costs are observed in the evolution of the line, a trend that we expect will increase in the second half year.

Thank you, Carlos. We'll continue now. Also for the CFO, a question on motor. The most impaired line is motor due to inflation. Do you expect to maintain its profitability? Do you foresee that the gap with the sector will shorten?

Well, I think it's not nothing new that the motor line is one of the most negatively impacted in inflation environments. In other events of inflation, motor has always suffered more than other lines. However, and as we can detect from the question, we have managed to maintain a combined ratio well below that of the sector, specifically 5.6 points below if we can compare with the first quarter of this year, which is the latest one published. So, aside from the intense use of our repair network that we already mentioned, similarly to when we talked about multi-risk and as a difference with the rest of the sector, we maintain the gap due to our technical management in areas such as the quality of underwritten claims, the loyalty for customers and the cautious tariff or rate-setting policies. These are the tools we've historically defended ourselves with and we believe that we can continue to defend this. As to our rates, since margins are being squished, we are increasing our average premium. Our increase of the average premium is done looking after the long-term relationship with our customers and looking into these retention levels, which are historically low. And this is so because it's a lot easier to maintain retention levels well below the retention levels with an agency network, which is our own, as we do have in GCO. This increase of rates will increasingly have more impact in acquired premiums or earned premiums. So, we expect 2023 with more contained inflation, which will allow us to have our impact, our policies have a greater impact on profitability.

Okay. And now on to the credit insurance business with the following question. In credit insurance, what is the reason for the improvement in the combined ratio? Will you be able to maintain profitability in this line throughout the year, Carlos?

Well, here we would need to talk about the historic context that we've talked about in previous presentations. After a few atypical years in credit insurance, claims ratio normalizes in this line. If you remember, as I mentioned in the second half year of 2022, the income of claims started to increase after being at minimum levels. And with that, we ended 2022 with a gross combined ratio of 72.3% and a claims ratio of, if we underscore it, with 35%. So, now we have a normalization of claims with a combined ratio, which is similar, 71.4% and a claims ratio also similar to that of the end of the year. However, we are still below, although close to the normalized pre-pandemic levels. We understand that during the second half year of this year, claims ratio will go towards pre-pandemic levels, but we foresee a total result of credit insurance above expected levels in the end. The results of this half year are already consolidated and they will help us with getting to a very good result in 2023 for this line. In terms of turnover, both premiums and risk exposure are increasing at normalized and more normalized ratios, because inflation is being contained and a significant part of this growth will be due to these inflation effects. We maintain a strict underwriting policy, and therefore, we are comfortable with the current exposure. And here I would like to stress that the quality of the buyer's portfolio has improved. We have more exposure, but this exposure is of better quality, and therefore, I think we're better fitted, better equipped for the normalization of these claims. So we do not expect claims ratio, significant claims ratio, leaps in following quarters.