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

Good morning. This is Clara Gomez Bermudez, Managing Director of Finance and Risk, GCO. And as on previous occasions, on previous presentations over the past few quarters of this year, that is ending. Now I'll be with you in this presentation of results for year-end 2023. This presentation is the first one in which we operate in traditional business through our unified brand Occidente. As usual, here with me is Mr. Carlos Gonzalez, Chief Financial Officer of the group; and Nawal Rim from Investor Relations. She will collect all of the questions that you make throughout the presentation and group them together, so they'll be answered at the end.

First of all, I wanted to show appreciation to all those of you who joined us online, and I would like to thank you for the interest you always show on the performance of our share price and the evolution of all of our businesses. As we anticipated on previous presentations of results, a brief comment about the basis. For this presentation, the financial statements that we present here are in keeping with our management information, the accounting of all of the latest years IFRS 4. And additionally, and as usual, in half year statements. We already did this in June 2023, and we will again give you additional information based on IFRS 17, the new international accounting both of results and equity and the main indicators. So the truth is that the macro context, the geopolitical context has been marked by the different world conflicts, Ukraine and Russia to which we need to add Middle East with the uncertainties that this generates and in the economic fear, a slowdown of the economy with generalized downward trends, a moderate decrease of inflation, still at high levels, though. And all this has had an impact on company costs. And in this context, I think we can say the results of the group are very satisfactory, not only the consolidated results, but also with a favorable performance in the 3 lines of business and in our strategic pillars of growth, profitability and solvency. In growth that you can now see on the screen. The turnover of total business has increased very favorably, up to 9.7%, almost EUR 5.7 billion revenue. And I would add that in the traditional business, we continue with the upward trend that we've seen throughout the year and also the positive evolution of turnover in the credit business despite the slowdown in commercial activity and the incorporation of the funeral business. In profitability, you can see at the center of the screen. We've already mentioned. It's positive evolution. We should stress the diversification of our business. It's resilient and the growth capacity of our business model. We have exceeded EUR 600 million consolidated results, EUR 615.5 million, as you can see on screen, a growth of 13.4%, almost 13.5%. And in traditional business, I think we should stress that we have managed to contain a combined ratio, 92.6%, that you can see on the presentation, all of that despite inflammation tensions. We will discuss this in greater a little later, but at any rate, well below the combined ratio of the sector in motor. And to talk about the second of our business, the credit business, we are growing in results in the bottom line, more than 10%. And the truth is that we have had another exceptional year in this area. And finally, you cannot see that on screen, but a very good performance of the financial result, growing by almost 19% as compared to last year, up to EUR 153 million of the ordinary financial result. I will not stop to talk about the last pillar solvency because as usual, as we've done in our presentations, we have some specific slides about this, but it is true that we've had an excellent performance of permanent resources at market value rating agencies confirm our rating as A and with a solvency ratio of 232%, very much in line with the solvency ratio of the Spanish insurance sector and better than many of our competitors. You're all very familiar with the graphs that we present on the right-hand side. I think they speak for themselves. Turnover x 10, results x 18, permanent resources at market value x 17. I will not stop to talk about this slide because in the end, these are the same trend and keys that I just mentioned in the previous slide. So we can jump straight into the global economic environment. We've already mentioned this, a geopolitical environment marked by the Russia and Ukraine conflict and Middle East with uncertainty worldwide economies that are decelerating, but showing resilience and drastic in the soft landing after the monetary policies of interest rate increases of central banks, inflation that is becoming more moderate. The PSV information currently in Spain is 8% better than previous quarters, and it's true that, that inflation has had an impact on company costs. Regarding the main indicators that you can see on screen, we continue to see some upward or positive trend in keeping with the publications of the IMF in January in the United States. Employment is going up. GDP data that you can see here are better than on previous presentations, 2.5% in 2023 versus the latest date from June that forecasted 1.8%. The Eurozone with a lot of disparity among countries with a better behavior in Spain as compared to other European peers. This 2.4% end of 2023, 1.5% forecast. And the estimations for 2023, all of them foresee moderate growth still marked by the political and economic situation. Regarding financial markets, nothing new that you don't know of. After many years of interest rates that I would call abnormally low, economic policies of central banks have set a trend of constant increases. The Spanish 10-year bond closes at 3% below the rates that we saw in the last quarter of the year in October, rates went below 4% -- above 4%, excuse me. And in the 2 months of 2024, rates have picked up seeing the forecasts of dropping rates by central banks that have extended over time and they are around 23.4%. At the bottom of the screen, you can see the behavior on the stock markets. The entire year has been marked by the destabilization, the geopolitical situation and monetary policies of central banks. At the bottom, you can see the very good performance of IBEX, 22.8%, as you can see, also good performance of European indexes and very good performance of the American indexes very much impacted by the evolution of technological companies or big tech. As in other presentations, we will talk briefly about the evolution of the insurance industry in Spain, with very positive increases in turnover, not the usual in the insurance industry in Spain, you can see the percentage across all businesses, very much impacted by the growth of Life and specifically growth in Life Savings. And this happened mainly due to the issuances of Life Savings products that took place rather on the first half year of 2023, with a good growth in non-life as well. It's not useful to see the 6.8% growth in non-life or motor is 6.6%, 6.8% in multi-risk. You know that the Spanish insurance industry is a very competitive industry, very mature, and it's not easy to see these rates of growth in the mass lines. It is -- it has been very much impacted by the situation of Sectorial combined ratios that in the end has led to better growth than usual in the Spanish insurance industry. In Life risk, it is true that -- or well in Life, the performance of GCO has been a bit different than what we've seen in the industry, less impacted by the increase in Life Savings. You know we attach more value to recurrent premiums rather than single premiums that are one-offs. We prefer the recurring business over time. You will see this in the following slides and better in Life Risk than the industry. The industry in Life Risk dropped 2.7% and we grow by 3.5%. And once we have explained the keys and the trends, the macroeconomic keys and trends and after talking about the evolution of the industry -- the insurance industry in Spain, Talking about GCO, you can see the 2 summarized P&Ls that we usually show income and profit starting with income, very positive growth on all lines of business. In traditional business, we've exceeded EUR 3 billion in premiums, EUR 2.5 billion in the credit business and the funeral business amounts to almost EUR 130 million. And it is not the entire year. It accounts for 11 months because the acquisition took place in February 2023. 7.8% growth in traditional business, 5.2%, very similar to the industry in recurring premiums. And I would like to stress not only the good performance of turnover, but also the good retention of the portfolio in the traditional business. Regarding single premiums, you can see that we're growing by 36.7%, EUR 323 million because of the issuances in the Elite and capital products with a guaranteed rate for our customers, which were very welcome amongst our customers. Regarding the credit insurance business, EUR 2.5 billion turnover with this 4% growth that you can see on screen. We already mentioned this, the credit insurance business, especially in the last quarter of the year, we saw a slowdown of commercial activity. But it is true that we understand that this slowdown has stabilized and allows for this growth of 4% that you can see on the screen. At this, the CFO, Carlos Gonzalez will give you more information in his slides, not only about credit insurance business, but also the traditional business. And I would like to divert your attention towards the results of the funeral business -- sorry, the turnover of the funeral business contributing EUR 227 million that you can see on the screen. And now going down to profit to results, I'll give you a brief overview, very favorable growth in consolidated 13.4% at EUR 615 million and attributable discounting externals, EUR 551 million, you can see on screen. And if we look at each of the lines in traditional business, we continue with the positive trend that took place mainly in the second half of the year. We've gone from less to more slight increase of the ordinary result as compared to the year before, 1.2% exceeding EUR 260 million ordinary profit. We will give you more detail later, but a combined ratio of 92.6% below the average of the industry in all of that despite the inflationary situation and whether against that, as you know, we have experienced this year. So in the end, the measures that we have taken both in terms of sustained increase in premiums and cost contagion, looking into being swift in all of our processes. And of course, hand-in-hand with technology have contributed to maintain the profitability in the different lines. We will later give you more information but a combined ratio of 96.3% in motor as compared to the losses in the industry with around 102% in multi-risk, 91.3% versus 97.3% in home in the industry. And we have not only closed a favorable year in Credit. But if the macro situation allows it, next year, we will see an even better performance, thanks to the performance of the acquired premium, the insurance premium comes a bit earlier than the claims ratio, and we contain technical costs is one of the producers, and we improve technical efficiency, thanks to all of the measures we have taken. The merger, of course, gives us more swiftness more agility. And as you know, the voluntary dismissal plan, thanks for the effort and contribution of all of our employees. And now Clara Gomez will give you more details about the evolution of our combined ratio.

In credit, as you can see on the screen, we have results slightly above EUR 365 million, 3% growth. It's true that the claims ratio has slowly normalized. We consolidate our cautious provisions strategy, but we've also maintained after the -- we've maintained it very strongly after the pandemic crisis. We've seen some deceleration in terms of commercial activity. But after the data we have observed in these first 2 months of 2024, we understand that this deceleration has stabilized, and we foresee a 2024 in which claims ratio will go back to pre-pandemic level, but with good results that we will obtain in 2024 also. I would also like to stress the incorporation of the funeral business results, EUR 13.6 million profit, which is not the total year. It is 11 months of -- 11 months of results. The acquisition took place, as I said, in February, and these good results in consolidated EUR 615 million are less impacted by nonrecurrent results as compared to the previous year. This year reflects this EUR 25 million negative because of our investment in the Occidente brand, some corporate transactions and incorporation of technology projects. And regarding -- the distribution of our business, we always talk about it in our presentations of results. Nothing new. It's a very diversified business to which we have added almost 4% of the funeral business, 53% traditional business, 43% credit insurance business. And what's relevant is not only that it is diversified in terms of business; it is also diversified in the different products inside the different lines. I would like to stress the weight of motor, 12% less than our competitor, multi risk is 14.3% and life is at 20% that you can see on this slide. And as well as being diversified in products and lines; we're also diversified in terms of our international presence. We -- this is mainly due to the credit business, and we have more presence in Spain than in other European countries, with 63% in Spain. We have also increased our diversification internationally. The Memora Group is the first largest funeral business group in Portugal. This allows us to be the top funeral business group in the Iberian Peninsula we are 6 in the ranking, we dropped 2 positions as compared to the previous year, we were fourth. But as we said before, regarding the performance of the Spanish insurance industry this year, especially in the first half year, there were issuances of significant savings, nonrecurring premiums and this means due to this context, there are ups and downs in the ranking. And as you know, in terms of sustainability, you have all of the details, both in the sustainability document the nonfinancial statement of 2023 that are available on the website and has been verified by our external auditors to this is continuous trend as compared to the information we've given you on previous quarters in 2023, rating agents in sustainability is Sustainalytics, and they have allocated 16.9 points to us - a low risk rating. We are amongst the top 30 companies of the industry in ESG rating out of the 300 that participate. And here, you can see the different initiatives we participate in. We've mentioned them before, so I will not talk about it. But as an insurance company, we have a component per sale being sustainable in contributing to society. This year, we contributed with more than EUR 3 billion of payments to our customers, but we have been working on sustainability. We published the 2024-2026 sustainability plan. I will not discuss in detail because it has been presented publicly. And I would like to stress that we continue to promote sustainable investment. We invest more than 10% in sustainability, and we continue to go for, and to invest in our foundation with an increasing share of the budget. As to share price performance, you know this even better than ourselves. Almost -- we've had a very good share price performance this year, especially in the last quarter of the year better than the previous year. It is true that worse than Ibex. So you're going to see on screen. Ibex has been very positive throughout this year. You know that we prefer to look at the share price in the long term. And in the period that you can see on screen from 2002 to 2023, the GCO share price has increased by 10.7%, so better than reference indexes. And I would like to mention our dividend payout. You know that our dividend payout policy is a policy of growing dividends with a clear commitment to remunerate our shareholders. In this year, we have increased dividend July, October, February, 7.5%; we've EUR 64 million in May 2024 million, a proposed increase in the interim dividend versus the year before. So EUR 134 million charged to results of 2023, which means an increase of 8.67%. This means a dividend per share of almost 1.12 that we have doubled in the past 10 years, which confirms the commitment of the group with its shareholders a commitment that we have been able to maintain even during the crisis, both that of 2008 and in the recent crisis 2020. And without further ado, I'll pass the floor over to the CFO, Carlos Gonzalez, who you know from having heard him on previous presentations, he will tell us about the evolution of the year, the main indicators broken down by lines of business.

Good morning. As Clara Gomez was saying and as usual, I will go a bit deeper into each of the lines of business, starting by traditional business. I always say that our product diversification in this case, in a market that is recovering its turnover levels has allowed us to maintain a relevant growth in income with recurring premiums with a growth of 5.2% up to EUR 2.741 billion. I would like to stress here the growth of multi-risk and other, around 7% and 9% in each case. The technical result drops 6.6%. In general insurance, the combined ratio is above 90%, specifically 92.6%, basically because of the behavior of motor that we will develop later. On the other hand, we continue with the favorable evolution of the technical financial result of Life with a growth of 23%. -- we will now analyze this information broken down by lines multi-risk with EUR 827.5 million in premiums, strong growth of 7%, similar to the industry at 6.8%. And we should stress here the increase of the premiums of the mainlines, multirisk, home, homeowners associations with these growths are above 9%. An important part of this growth is as a consequence of good customer retention. And of course, we've also have to increase the average premium to cover at least in part the increase in cost. Combined ratio is at 93.1%, 0.3% above the year before. Both years with impacts due to several effects, a combined impact, especially we've mentioned it, and we will continue to talk about it in all lines, but the increase of claims costs due to inflation. In the case of multi-risk, there's another effect as well which is weather events, low-intensity weather events, more marked in the year 2023 than in 2022. The volatility that you can see in quarterly ratios at the bottom of the screen is mainly due to the occurrence of these weather events with higher lower intensity. And due to the cost contention, increased income ratio, the result has been stable at EUR 25 million with a growth of 2.1%. We a growth of EUR 55 million with an increase of 2.1%. Then in motor here slightly below the industry, with in premiums of 690. And as a consequence of a cleanup of our less profitable policies here, we should stress a competitive environment with an upward trend in pricing. In our case, we are also working on a good retention of customers. Combined ratio is at 96.3%, 3.6% above 2022. -- year 2022, which was still impacted or at the beginning of the year with the lack of mobility due to COVID. But obviously, the main component of this increase is due to the higher cost of claims due to inflation, which we are already seeing since the last quarter of 2022. At the level of the quarters, as we forecast that, it seems that we have stopped the impairment of the margins with a stagnant ratio, which is below in this past quarter as compared to the 2 previously reported quarters. It is also true that cumulatively, the line has had a negative impact, and we've seen a drop of almost 50% in results. As to Other premium by 8.7%, but excellent levels of combined ratio, which in a sustained manner over time, reach figures of or below 85%, which leads to high and stable levels of technical results, which means that this line is a line of bases, which is good in general insurance. In terms of Life, earned premiums increased our 2.3% single premiums stabilize there we are now offering products that are interesting to our customers. The technical financial result improves by 23.2%, up to EUR 185.3 million with an improvement of the technical result, but mainly a significant improvement in the technical margin increasing by EUR 28 million due to the current capacity to reinvest at higher rates due to the rate structure that we observe in the market. And as a summary, for the traditional business, the increase in turnover is almost 8%, including single premiums and the important improvement of the technical result allows us to contain the impact on the production of technical margins, mainly caused by the effects of inflation on claim costs. So in the end, the ordinary result is EUR 261 million, with an increase of 1.3%, whereas the total result is positively impacted by the high volume of nonrecurrence in 2022, where I would like to remind you, we booked a provision of EUR 120 million for the voluntary dismissal plan, amongst other items, and this plan has been executed in 2023, and it will start to cause positive impacts in the P&L starting 2024. The credit business acquired premiums earned premiums go up to EUR 2.279 billion, with a growth of 2.4% and a deceleration as compared to previous periods because the good performance of the turnover of our customers, deriving in this case from inflation effects that had a positive impact on their businesses has dropped as the growth on CPI's and the economic deceleration is more patent at least in Europe. On the other hand, there's still a downward pressure in renewal prices with still, with a still favorable impact on the claims ratio. We end up with almost EUR 414 million of net technical results to pre-COVID levels all of these due to a moderate claims ratio and the improvement in reinsurance costs. As to geographical distribution, the growth rate of income drops in all geographical areas. And we already observed a slight drop in this case, 1.7% in Central and Northern Europe, where the economic slowdown is more evident. In terms of profitability, the gross combined ratio continues with its good performance, 74.1%. And claims ratio stable, below 24%, whereas the number of claims increases. I would like to say at this point that we continue with our cautious and conservative provisioning strategies. I mentioned in previous presentation and mentioned by Clara Gomez as well. As the risk exposure increased in line with the growth of premiums. And here, I would like to say in this point that we are maintaining our strict selection criteria. As a summary, I would like to go through the drivers of the years, an increase in revenue, although we can see a slower turnover in our customers, sustain change in claims ratio, we -- or inflow of claims, sorry. We improved results because in 2022, there were still negative runoffs from the government agreements canceled in 2021. And on the other hand, the financial result also improved substantially almost EUR 15 million, basically as a consequence of the reinvestment of short-term investments, both in fixed income and liquidity to the new market rates. Without that, the ordinary result is EUR 365.6 million, and the total result increases by 10.6% as a consequence of the fact that in 2022 results were penalized in the nonrecurrent side by the sale of the Russian subsidiary which materialize finally in 2023. Finally, we would also like to give you separate information of the Funeral business, incorporated -- after the incorporation of the Memora group, we expect it will provide a stable increase in the business with high margins. As usual, we are giving you the history with the evolution of turnover and margin in 2019, where you can see the growth of these parameters, both in turnover internally and through acquisitions of federal business companies. And you can see the margin over EBITDA, which is stable at around 25%. You can also see that this margin on EBITDA has been lower, 24%, 23.9% as compared to the 24.7% that we closed the previous year with. And this is, as a consequence, both of a lower number of debts and the impact of CPI on costs. And finally, and we've mentioned this before, Memora has only been contributing results since February 2023. So for 2024, we will incorporate 1 more month in this business, comparatively speaking, the month of January, which is normally quite favorable for the funeral business. And I'll now pass the floor over back to Clara.

Yes, you're very familiar with these slides, permanent resources at market value, which have shown an excellent behavior at year-end, more than EUR 5.7 billion, as you can see on screen, a growth by 16.7%, and the reasons are mainly the results, a very good consolidated results that we have obtained, which has been mentioned abundantly during the presentation. and which comes along in this case with the positive evolution of capital gains in fixed income and equity. Here, we can see the EUR 360 million, adding to the net -- total net equity and the capital gains, not included in the balance sheet, EUR 568 million. So with all of that, we come to the more than EUR 5.7 billion of permanent resources at market value. On the right-hand side, I think this is a graph that you're very familiar with and it speaks for itself, visually. At the beginning of the century, we had permanent resources market value of EUR 332 million. And at the moment, it's EUR 5.739 billion. We've already mentioned it at the beginning of the presentation. It is the first year that we closed with an international accounting under IFRS 17 for provisions and 9 for financial investments. So in the end, this new accounting standard, which has an impact mainly on provisions and within provisions, mainly life savings and the credit business. In the end, what it does is an assessment of provisions more from the economic point of view, very similar to what applies to solvency, very similar to the embedded value that we usually see in the life business. And in the end, the impact it has is on the periodification of results over time. In the end, the results of the insurance business or the results we managed by paying premiums and getting results, but what cant is how we extended over time how we consider it over time. It does not have impact on our generation of treasury or the way we pay a dividend or the tax treatment that continues as per the rules of each country. Summarizing, going to impacts, we have obtained our result, the EUR 615 million as per the current accounting system, and it improves with the international accounting EUR 645 million, as you can see on screen, almost EUR 30 million. And this is precisely due to what we talked about. There's a different accrual of the results over time. The new accounting foresees provisioning criteria, which are more best estimate with a different caution level than in the older accounting and in life savings and in credit business, it allows us to accrue results over time and it has a similar impact in the income, the net income that you can see on screen, EUR 5 billion and the EUR 5.6 million that you can see with the new international accounting with an additional EUR 600 million net equity that what this accounting does is consider provisions with a best estimate system consolidating them in the net income, and this is what generates this difference. And as usual, amongst our strategic pillars, we have solvency. We closed with the solvency position of 232%. These are figures that haven't been audited yet. This our estimations. All of the solvency information will be provided in the financial statements and solvency information of 2024, all of the entities of the group, April 2024, and it will be verified as usual by our external auditors. You can see here a drop from EUR 247 million to 232. Actually, this drop is due to the acquisition of the Memora Group. You know that acquisitions are penalizing in the solvency ratio because the goodwill is considered to be 0 here. So these 20 points more or less are due to Memora and if we started -- or if we had incorporated Memora fully in the year, we would see an increase of 5 points in the solvency ratio. It is a solvency ratio that is usual and is very solid and similar to that of our competitors and also similar to that of the rest of the industry, even better than that of some of our competitors with a rating of own funds of the top quality, more than 90% of Tier 1 and capable of facing adverse situations according to all of the stress tests, adverse scenarios, et cetera, that we will give you great detail of in the financial insolvency report. All of these confirmed by our credit rating agencies. As we already mentioned, AM Best has granted us an A, and Moody's improved our rating for the main -- for the operating entities of the credit insurance business raised us to A1 with a stable perspective. And they highlight the strong competitive position through capitalization, low financial leverage and conservative investment portfolio and precisely talking about investments. Here, you can see this one screen, more than EUR 15.3 billion managed funds, a growth of 3.4% as compared to 2022. We already stressed the importance of financial performance in this year 2023 and with distribution of investments, very similar to the one we had in the past, very conservative portfolio. Fixed income is our top asset, 54% increasing as compared to last year due to the fixed income capital gains that we already mentioned. And with more investment in fixed income, making good use of the interest rate situation of 2023. Also a strong treasury position, the 15% that you can see on screen, which drops as compared to the previous year. We have had an excess of treasury for a few years inside of interest rate situation and these changes also due to the acquisition of Memora, which has been funded with own funds, as you know, as to variable income growth of 22%. That gets us to the 15.6% due to the variable income capital gains. We've made no more investments in this area. And we've also proceeded to realizing, part of our portfolio because it was very volatile under international accounting. We have not changed our strategy. We've only changed the vehicle, and we've invested directly in variable income. And with this, we come to the end of the presentation, as another occasion, we will now proceed to the Q&A. And before that, I would like to thank you again for your interest. I know there's been a lot of interest because of the amount of questions we have received Nawal has gripped the questions that we have received, and we will try to answer them all knowing that if any of them are left unanswered, you can afterwards address them to the Investor Relations department, and we will answer them through the usual means. Thank you very much.

Thank you very much. Carlos Gonzalez, Clara Gomez for the presentation -- we'll start now with the Q&A that, as you know, is grouped by topics. We've received a couple of questions about motor. I'll read them as they are. What are exactly the reasons for the increase of the combined ratio? How do you get to maintain a gap of almost 5 percent points with the sector in a sustained manner and what can be expected of this line in 2024. So as a summary, reasons for the increase of the combined ratio comparative with the industry? And what do we foresee for this business in 2024. So Carlos, if you will.

Well, we've already discussed this throughout 2023. We've been managing the impact of inflation in the claims ratio of the Motor line. And basically, this is the consequence of an increase in the combined ratio. But -- this has happened in the entire industry this impact has been felt by the entire industry and the entire industry has managed it based on -- or using similar tools, selection of risks, managing claims costs and selective price increase. The difference in the management of the different companies is related to the timing and the intensity of application of these levers. It is true the combined ratio of the industry is above 100%, 102% almost. And in our case, we've ended 5 points below the industry. What's important here is that these 5 points are, 5 points that we've been able to maintain historically. And in order to answer the second question, as to why this margin compared with the industry, we should again think of the levers that all companies have to manage the line. We, in our case, have a very strict selection of risks and adequate pricing strategy, which allows us to retain our customers and thorough management of cost of claims and quality of service, in this case, thanks to our preferred workshop network. I also mentioned that aside from these 5 margin points as compared to the industry, we believe, as we had announced that we have already surpassed the peak of the combined ratio. We were at 97.8% past semester. And at this year-end, the combined segment combined ratio is at 96.7%. So we've dropped by 1.2 points. And this is also quite interesting news that can set the trend of what will happen in 2024 with the intention of the sentiment that the combined ratio is a bit under control, what we can expect now is an increase of revenue coming from these accrual of the premiums that will be earned in 2024. And these make us foresee that this combined ratio will continue to drop. As we did with Motor for multi-risk, we will do the same thing.

We have received several questions specifically. What is the reason for this 93% combined ratio, which is historically high. How have you been able to mitigate the effect of inflation in this line? And one final question about weather events. It says it seems like weather brands are becoming increasingly common, how are you facing this situation?

Well, the multi-risk line is very relevant, has been relevant historically for the group lines such as home or lines in which we have very high profitability. And these thanks to the fact that we differentiate ourselves in terms of quality of service and product design. It is a key line for us. But just like in motor, we have had to face inflation effects. And what we've done here is we've been especially careful about the premium increases, which allow us to mitigate part of the inflation, but also maintain -- retain our customers. How have we been able to mitigate inflation, well, thanks to our professional manager networks, in this case, a repair network then that in an environment of coordination in the mid- to long term has allowed us to distribute the task of reducing the impact of inflation. But aside from inflation and as we heard in the question in simple multi risk, we've had the impact of weather then almost EUR 60 million in this line of claims due to weather events and almost EUR 80 million in the traditional business, which are not covered by the consortium. So it appears that in the past 3 years, we've seen more and more weather events, especially the southern rainfall events, which are not covered by the consortium. And the recurrence of these events is increasingly included in our pricing. And in the end, our customers also perceive this risk, and this desire to be covered. In the end, I think we feel comfortable covering these risks. This is the essence of our business, and it is the way in which we can contribute to society by covering these types of claims that are becoming increasingly common.

Thank you, Carlos. Now on to a question related to credit insurance and REITs. In the grid Insurance business, you have obtained more than EUR 360 million, more than 10% increase as compared to last year, a historic record. And with the macro uncertainty that we're experiencing, especially in Europe, what can we expect in 2024?

If you'll allow me, I would like to take this one. We've already mentioned it in the presentation, credit insurance starts to normalize with a ratio of 74.1% that we reported. The inflow of claims is still slightly below pre-pandemic levels. And what we expect is that in 2024, the combined ratio will follow a controlled upward evolution of this ratio. We do not expect a significant impairment of results. As to turnover, after the positive effects obtained due to the inflation effect, the increase of premiums has normalized as well, as well as the increase of risk exposure. We can say that in terms of the evolution of premiums and risk exposure, we are at a growth environment similar to the world's GDP. Having said this, despite the current environment, we feel comfortable with the risks that we have in our portfolio at the moment. We have been improving over the years, the quality of the portfolio and the active risk management that we carry out. This has been observed by third parties. For example, rating agencies, Moody's has increased our rating, for example, in the second half year of 2023 from A2 to A1. So we are not only comfortable with this quality of the portfolio ourselves. We have also managed to convince our rating agencies that our position is adequate. So summarizing, in the short run, we do not expect a significant impairment of the results of credit insurance. And given the level of comfort that we have with our credit insurance, we've decided effective January 2024 to increase the retention of the business by 2 percent points with a proportion of reinsurance contract dropping the transfer proportion. And we think this makes sense. And after the improvement of the risk portfolio, it is logical to stop the share of business that we expect to continue to be profitable.

Okay. We'll continue with several questions for Clara Gomez about the funeral business. Memora business is very different from the insurance business, which is your core business. What difficulties have you faced -- we've also had a question about the results of the acquisition. And there's also a question about whether there is any other acquisitions planned.

Several questions. And one, I will try to answer each of them individually. Regarding the first couple of questions about the Funeral business, the acquisition of the Memora Group. We were very happy at the time of acquisition. And of course, we continue to be very happy about the purchase. We believe it's a strategic transaction, which allows us to give better service to our customers and customers who choose Memora as a provider. In this year, we've had an ordinary result in Memora of EUR 13.6 million. As you know, we acquired it in February 2023. So it does not cover the entire year only 11 months. And I think by answering that second question, if I remember correctly, it was about the -- how the acquisition is turning out. While it's still early to foresee the future results of the funeral business. We do believe that it will give us very positive and stable results throughout the year. And we've also analyzed in detail the costs of the Memora Group, and we are creating a plan of improvement of operational measures. It is true that the funeral business has suffered from inflation, and there have been less passings in the year 2023 as compared to 2022. And this has led to the EBITDA over income, which is a bit below 24%. I think it was around 23.9% is a bit lower than we should expect in normalized levels, which should be around 25%.

And I think the last question was about whether you foresee any future acquisitions?

No acquisitions. You know that we do not talk about specific projects. You also know that from GCO, we're always actively looking for opportunities. We analyze all opportunities that present to us, but we're in no hurry. Right now in the Spanish business in December 2023, we have a market share which allows for growth organically inorganically. It's a profitable market, a market that we know in a market where we could obtain many synergies. This does not mean that we will limit ourselves in terms of future opportunities in the Spanish market. We're not limited to the Spanish market. We are looking at the international market as well. But in order for us to invest in the international market, a series of situation should take place or should be -- there should be a certain context, and it should mean that we become relevant with certain market share in the new market.

The next question is on investments, and it says regarding investments, what is the impact of the new interest rate environment. Carlos, would you like to answer?

Yes. Well, the truth is I could summarize it in one word. And the new rate environment is having a very positive impact on us. You've seen the good financial performance obtained in this year. And comparatively, if we compare with the previous year, there have been many years of tough interest rate times. They were abnormally low. And in 2023, we've seen a significant increase in the rates, not only with the contribution of the policies of central banks with continuous improvements, but I think we should also say that our investment policy has also had a positive impact. We've maintained a conservative investment portfolio diversified as well. And in the past few years, with treasury levels above usual, which in the end have allowed us to make use of the interest rate increases. We've mentioned it in the last slide of the presentation. Our main asset is fixed income. And you know that it amounts to more than 50% of our portfolio, and we have increased it with a better investment in fixed income as compared to last year. You know that our investment policy pays a lot of attention to matching assets and liabilities, focusing a lot on financial margins. And thanks to investment management through these ALM techniques. We've normally had a clear improvement this year with an increase going up to EUR 153 million in ordinary result. But in the coming years, there are actions that will allow us to make better use of profitability scenarios. And these regarding investments I already said we could summarize it by saying that it has been very positive, but there's also a component on the side of our insurance products. It has allowed us to reactivate our life savings products commercially, both in single premiums and recurring premiums, and we've been able to offer attractive interest rates to our customers and transfer profitability to them. You've seen it in the body of the presentation. We've grown by almost 40% in single premiums, which in the end has allowed us to offer our customers attractive interest rates in Life savings products.

Due to the merger of traditional business entities, we've also received a few questions about this, you've merged the main operating entities of the traditional business in Occidente. What are the benefits of this transaction? What can we expect? Have you had any difficulties in this transaction? Have you faced any risks? And may there be future risks deriving from this merger.

But I think we've already mentioned this. We've started this presentation precisely saying that in the -- that was the first year in which we have been operating under the merger under our unified Occidente brand. And we will finalize all of the mergers in 2024 incorporating our Northeast [indiscernible] to the merger. And I think in terms of positive outcomes, well, a lot of work had been done already. We started a few years ago with an integration process of our main operating platforms, which, of course, allowed us to be more efficient, simplify, optimize processes and in the end, reduce costs, which is a competitive edge, both against our competitors and in providing better service to our insurance holders, our policyholders. And we continue then with the integration of our platforms, which made us swifter and able to provide better solutions to our customers. And in the end, the unification of the traditional business companies under Occidente is the summit of all of this process. And with the goal of becoming swifter, more agile, streamlined organization, which can quickly adapt to the advance of the market I think amongst the questions, someone mentioned the difficulties, or I don't know setbacks, I don't know if we can actually talk about setbacks. We have not had any setbacks as such. But what is true is that as in any merger process, we've had many processes, execution, operations that we've had to be very much on top of it couldn't be otherwise. But I do think that we have executed a very cautious and conservative strategy where we presented our Occidente brand to our policyholders and they probably got large throughout last year so that they would become familiar with the new brand and maintaining our quality of service for policyholders and maintaining their relationship with their mediator they trust.

Okay. So we'll close the Q&A here with one final question about the solvency position. With such positive results, we were expecting an increase of the solvency ratio. However, we see that as compared to last year, it drops by more than 10 points. Could you tell us the reasons that?

Well, talking about a drop of the solvency ratio when we are at 232%, which means 2.3x above what regulators request? Yes. Well, it is true, but it is not significant in terms of the robustness of the solvency ratio of the group. But we already discussed this, the drop, which is indeed taking place and that is not in keeping with the increase in results that we have this year is due to the acquisition of Memora that took place at the beginning of 2023 that had an impact of more than 20 percentage points. And if we were to discount the impact of Memora acquisition solvency ratio of the group would have increased by between 5 and 7 points. And in the end, this is due to the better results of the profit of the group. And the CFO, Carlos Gonzalez also mentioned this when he talked about current insurance, we've made a decision of increasing our retention of the business, which also has an impact on the solvency ratio and all of that can be maintained, thanks to the robustness of our results and the ratio. And having said this, I think that 232% is a more than comfortable ratio to face not only our current commitments in any adverse situations we may experience, but also in order to carry out future relevant acquisitions if and when the opportunity comes up.

With this answer, we close the presentation of results of 2023 and we thank Clara Gomez and Carlos Gonzalez for your presentation and the answers to the questions received, which have been many this time. Any pending questions will be managed directly via the Investor Relations team over the coming days. And I would like to take this opportunity to invite you to the next presentation of results on the Friday 26th of April 2024 for presenting the first quarter of the year. You can also visit our website, gco.com, where you can find all of the financial and sustainability information that may be of interest to you as usual. We would like to thank you for your attention and your participation, and we will talk to you soon. [Statements in English on this transcript were spoken by an interpreter present on the live call.]