UnipolSai Assicurazioni S.p.A. (UNI) Earnings Call Transcript & Summary

[Interpreted] Good afternoon, ladies and gentlemen. This is the Chorus Call operator, and welcome to the Q&A conference on the consolidated results end of June 2020, Gruppo Unipol. The group CEO, Mr. Carlo Cimbri, will go through a short introduction. He will then be available. And of course, he will take questions and answer them. Dr. Cimbri, please the floor is yours.

[Interpreted] Good afternoon, ladies and gentlemen. So as usual, I'm sure you must have read and gone through the, well, presentation -- press release. And it is August 7. So let me now go straight to your questions without further ado.

[Interpreted] [Operator Instructions] Question number one is from Gian Luca Ferrari from Mediobanca.

[Interpreted] I have 3 questions, if at all possible. The first one was on the tax rate of Unipol Gruppo, which was very low, I mean, 80%, so much lower than UnipolSai. And can I have some more color, I mean, the reasons why this is happening? Question number two. This question is on the holding costs. So from Unipol, I can see here that management costs were 74 million versus 95 million last year. So what's happening? I mean maybe last year you had one-off costs, or maybe something, or other one-offs concerning some specific operations or maybe costs have become a little bit more effective. So once again, please, some color on this question as well. The third and last question is on the investment yield in the 6 months on UnipolSai or Unipol Gruppo, so both life and non-life, once again, some more color on the 6-month yield, please?

[Interpreted] Well, Gian Luca, first of all, thank you for your questions. Now as for question number one, tax rate Unipol Gruppo. Well, I have to say that there's an effect or a consequence, I mean, a specific consequence on this first half of the year, so H1, and the reason is the following. So what we have is tax back. So this kind of tax back payment is EUR 85 million. So this concerns, I mean, the transfer operation, which is what took place last year, of course, I'm talking about Unipol Banca. So maybe you remember we had a capital loss. So on that CL, or capital loss, of course, we paid taxes. So once again, this was not, if you will, a liability in terms of taxation. So once again, we pay taxes and levies on the EUR 85 million because, once again, together with our experts, we just wanted to make sure that it was actually possible to deduct, I mean, this item from the -- well, financial statements. It has taken a while. So once again, we were right. And well, by that time, the 2019 financial statements had already been drafted, okay? So the money is being given back right now. So once again, there was capital loss on the transfer of Unipol Banca. So once again, it was impossible to deduct the taxes about this last year. So again, of course, we were forced to pay taxes on this amount. And this year, they will be given back to us. Once again, this is EUR 85 million. Now back to your question number two. So your question was on the Unipol management costs. Now as for Unipol, so can you just tell me if it's on a Unipol or UnipolSai?

[Interpreted] Yes. I mean the holding company, yes, the holding costs once again.

[Interpreted] Okay. So the question is on Unipol. Well, maybe on UnipolSai, it is even bigger or even more significant. So this is the effect, of course, of the lockdown months that we just went through. Because if you take into account the holding item, well, into this item, you can also see all of the so-called diversified business companies. I mean in terms of consolidation techniques. And so once again, these are not Unipol Gruppo holding company costs. But once again, this is a consolidated data. So you have the so-called diversified business. I mean companies being controlled by UnipolSai. And the most significant one with a striking cost reduction is UNA Hotels. Because as you may be aware of this, I mean, with the lockdown or because of lockdown, hotels have been closed. And of course, we had basically no direct costs, so we didn't have any staff costs because, of course, they have received unemployment benefits from the central government, okay? So just that item is worth EUR 20 million. You also have to consider another key point. I mean Unipol Gruppo has now significant items or costs in terms of staff. For example, we couldn't take advantage of the lockdown-related cost reduction, which is what you can see in UnipolSai because, in that case, we have saved around EUR 50 million, this is due to the -- well, absence of staff, I mean, functioning or operating costs and we also have taken into account all of the previous holidays that our employees didn't use last year. And once again, this has a major impact on UnipolSai’s financial statements, okay? Thank you. Now as for question number three. So the reinvestment rate, the floor goes now to Matteo Laterza.

[Interpreted] Well, thank you, first of all. Now the reinvestment policies that we have here are aimed at a bigger diversification of the portfolio than we currently have. I'm talking about the life, but also the non-life business. And I have to say that around 50% of reinvestment flows will be invested into bonds or, let's say, core govies. And the other part, I mean, the other 50%, so these are the loans. And of course, we have high rating levels. So from A upwards. Now this means that on the life business, what we expect is to reinvest them into flows at rates that will be included between 1% and 2%. If you consider the non-life business, well, we are well under 1%, okay, well below 1%, okay? So these are the rates we have in the market right now. Of course, this figure may change, and it depends exactly on the future developments of the market itself.

[Interpreted] Is there a special reason why you are, let's say, you have a short mismatch on the life and you have a long mismatch on the non-life? I mean is there a key reason behind this?

[Interpreted] Well, no, not something different versus what I just told you. In terms of the portfolio component, the so-called whole life. Well, of course, the whole life, well, has an impact due to the, well, life of the insured and even the estimates we have in terms of buyback. So this is basically on the underwriting, which is what is used by our actuaries, I mean, to make -- I mean to establish the duration. So basically, we try and be, let's say, a little bit short in terms of duration in terms of life-related liabilities because based on the changes of the, well, of these assumptions, I mean, the duration of the life liabilities may change. So let's say that we are a little bit more conservative on that. In terms of non-life, you're right, I mean, there's -- well, bigger change. I mean the duration is longer in terms of the assets versus liabilities. But if you consider, well, basically, this is a very small well, amount of money. So it's something that we can almost neglect, if you will. So I mean there's no reason why -- I may tell you that a special reason why we have this kind of duration-related strategy.

[Interpreted] Next question is from Andrea Lisi from Equita.

[Interpreted] I do have some questions, if possible. Question number one. Now going back to the technical performances that you have in the non-life business. So in this combined ratio that you have created in H1. What about the reserve or provision release versus last year's? I mean are you working on a very prudent, cautious, if you will, attitude? Or are you going to sort of copy and paste the work we have already seen last year? And what about the frequency concerning, I mean, the past months, I mean, soon after the lockdown, so basically, June and July? My third question is the following. Are you feeling some pressure maybe from the regulators in order to increase, for example, the behavior that you have versus the insurer, for example, discounts? And do you see an increase of competitive dynamics in terms of motor vehicle, MV, pricing? Question number four. The question is on dividend. Can I have an update and some color concerning Unipol’s dividend policy? And what about the regulator approach so far about this?

[Interpreted] Well, Andrea, first of all, thank you for your questions. As for the release, if you will, of reserves or provisions, well, the answer is no. We haven't released any such provision or reserves in H1 2020. Now from the -- well, accounting point of view, there's only one way. So what we have recovered is now written into the, well, financial statements. So basically, you know that if you read slides, you will see reserves release as an item, but this is not something that we have done in terms of a specific item. So this means that the -- well, 2019 -- sorry, 2020, of course. I mean H1, if you compare H1 2020 to H1 2019, well, basically, the difference is 2.4% and this means the so-called reserve or provision release, but it's basically a sort of a recovery. We had the 6.4 in 2019. So this means that we have 4 different points. And this means that we have actually released or unlocked the last reserve and the value is around EUR 160 million, okay? So this is what you can see is a negative difference, I mean, '19 to 2020. Your question on the frequency? Well, basically, we are not seeing any kind, if you will, of indicator or signal that encourages us to think that there's a recovery or maybe our growth, if you will, of the frequency. Well, rather, the opposite is happening because, I mean, from our observation point, and I'm really talking about all the kinds of business. I mean I'm talking about MV, but I'm also talking about health. So MV, health, even in the post-lockdown period, which is this one. Let's say that -- well, we closed it end of May. So we now have, let's say, 2 months where we have observed the market, I mean, June and July. And basically, well, there was no restriction, no constraint whatsoever in terms of using cars or even in terms of, well, personal movements. So we have a history that dates back to 2 months ago. So there are no changes whatsoever. I may share with you just some figures. And for example, between, again, June and July, so the 2 months that we've taken into account. I mean, if you compare this with previous years, so June, July 2019, what we see is minus 20% of claims, in this case, of course, I'm talking about MV, motor vehicles. And in terms of health, UniSalute shows now a reduction of, let's say, payments. So let's say, around 20%, once again, in June and July, once again versus 2019. Well, we tried and -- well, understand why this is happening. Well, our own, well, explanation is the following. So once again, even if the restrictions or mandatory restrictions are over, if you track what's happening in terms of labor market or employment, many different organizations, including Unipol, well, we have kept smart working, as we say here. So working from home or work-from-home measures, especially, this is what we started doing at the very peak of the pandemic. So once again, in June and July, we may not do this. But of course, as far as we are concerned, I mean, we still have work from home and many organizations have done the same thing. And of course, this means much less people driving, using their cars, so walking in the city. Let me also tell you that our -- the number of black boxes now is 4 million. Now 4 million black boxes, well, this accounts for 10% of the total, well, car fleet in Italy. So I say that the sample is quite significant. So once again, data from 4 million black boxes tell us that in June, for example, okay, let me check. This is what we are seeing right now. So once again, there's on average, minus 20% cars on the road, in the streets. And have the same piece of data for July. In July, things are going up. For example, in July, we have minus 10% of mileage or kilometers, I mean, driven, this is, once again, one piece of information coming from black boxes. This means there's an impact on circulation. And again, it's a comparison, if you will, with, I mean, same time, so June and/or June and July 2019. So if you take into account all of these indicators, I mean, this is not just a gut feeling, this is scientific and even quantitative set of data. So once again, they do confirm that -- I mean, frequency is not yet going up. So let's see what happens after the August, well, summer holidays. But there's one thing we imagine and we think may happen. So let's say that, well, people don't really like to, let's say, to access or to go to hospitals these days. So they just procrastinate to just delay some checkups or visits, so they are sort of delaying the fact of going to clinics or hospitals. And there's also another -- well, comparison we can do. For example, in terms of work from home, once again, work-from-home measures or systems will be used also in the near future. So many different organizations will have an impact because of all of the work from homers, well, maybe not as much as it happens, I mean, during the lockdown, but this will continue in a way. Do not forget, once again, that all of the restrictive measures that we have implemented during lockdown, for example, the use of masks and then the fact of going shopping or going into the stores and then standing in line, queuing, I mean, all of these, if you will, are behaviors that do not encourage people to spend money to go shopping or to maybe we're telling us don't go to the city center to the high streets, maybe they just don't go to the shopping center. We don't go to the shopping mall. So once again, we are using our cars much less frequently than we used to. So once again, we think that until possibly the end of the year, people won't go back, if you will, to their -- well, traffic behavior or car use behavior. So of course, all of this will become more and more normal, so to say, it will stabilize. But of course, if you make a comparison with the pre-lockdown months, I mean, there won't be any -- I mean things are not changing now. Once again, we have no pressure to give money back to customers. We are the only company having given back 1 month of insurance premium to our insured. We've been pioneers in doing this. I mean we've been the first company, giving money back. So I don't think our competitors did the same. I mean maybe some competitors, maybe 2 competitors are, if you will, adopting some measures, which are similar to ours. But I don't think they're really doing what we are doing. So in terms of the regulation, there's, well, so many different insurance companies, you may want to go to, if you really want to get, let's say, nonconventional, not traditional, if you will, services. Anyway, we decided to do this some months ago. We've been pioneers in doing this. And once again, we think that this was one of the things to do as quickly as possible. Okay. Matteo will answer other questions.

[Interpreted] Well, this is directly linked to the, well, points and considerations from Carlo 1 minute ago. So we started this, let's say, campaign. Basically, we've given back 1 month worth of insurance coverage. We started the campaign back in April and, well, I think that this is kind of favoring and fostering the renewal campaign concerning our policies. I mean the situation we have today is an increase of the retention of our portfolio. And I guess that this is an important element. I mean as of today, that I know, if you will, that there's no competitive pressure, which is as important as to, let's say, change in our mind or thinking we made a mistake. Now if the evolution of the trend is very favorable, there may be some little competitive pressure coming from competitors. But for the time being, competitors are not reacting or doing what we are doing. So once again, I just have to share with you the data of our portfolio, just tell what's happening. So this is once again, based on the insights and information we can currently count on. Back to your question on dividends. Okay. Allow me to, well, share with you some information, it will take some minute. So I'm sure you are aware that Unipol Gruppo, so Unipol as a group is definitely able to payout the dividend this year. You know that there was a sort of a suspension, so a discontinuation because of that specific IVAS (sic) [ IVASS ], or IVASS, recommendation in the month of March. And of course, we comply with this recommendation because, of course, we are -- we had our 2019 results. And you can see here the results. So we have H1 2020. So as for the, well, financial statements, of course, I'm talking about the ordinary financial statements that we have here in Unipol Gruppo. So basically, we collect dividends. And of course, we pay costs to the companies we control. And then, of course, we pay interest on the debt. So if you consider that Unipol Gruppo, 2020, I mean, the balance sheet, if you will, is sort of already ready. And I think that, as you can see here, net profits are around EUR 300 million. This is what we foresee for 2020. Basically, this is what "we already have in our pockets” because this is what we have done in H1. Now as for the, I mean, solvency of Unipol Gruppo, nothing has changed versus the situation we had at the end of December. So even if we went through the pandemic and then the financial shocks, so financial outbreaks that had taken place in March and April. So a part of this has been, let's say, taken back or reabsorbed after some months, I mean, our solvency ratio is 188. So if you go back to the business plan, we should be having EUR 200 million for Unipol Gruppo. And again, this represents basically 5% solvency, if you will. So this is only for Unipol Gruppo, I mean, the dividend would be EUR 183 million. So once again, EUR 200 million account for, let me check, 2.7% of the own funds of Unipol Gruppo and 5.8% of the capital excess of Unipol Gruppo at the 30th of June 2020. So some weeks ago. So I have to say that all the figures available and all the trends that I have shared with Matteo a few minutes ago. So based on what we expect for H2, but also based on the quality level and why not also on the quantity of the H1 accounts. As I said before, answering another question versus last year, we don't have EUR 120 million provisions. We have -- we do have EUR 120 million, let's say, reserves, but this is for the so-called un mese per te initiative cost. Un mese per te means 1 month for you, which is the 1-month insurance coverage that we are giving back. As I said before, 1-month worth of premium. So this kind of provision, this is something that you can see in riserva premi, so in the premium provision, if you really, really need to, I mean, reclassify different items. You can also see here EUR 20 million donation. Now this is something that we have decided to allocate during the pandemic. So as you can see here, these are very bold, sturdy results. And well, this means that if you consider UnipolSai, I mean, the targets we have for 2020. And of course, I'm talking about the business plan. I am really sure we will be able to hit the 2020 business plan targets. And possibly, we can do better than this. Okay. So based on this long introduction, we will be ready to convene the general meeting in order to payout the 2019 dividend. So within this context then, on July 31, so just a few days ago from IVASS, we received a recommendation. I mean all the Italian companies have received this recommendation. They are asking us not to payout the dividends or not to pay a variable cost or purchase own shares. Now as you know very well, this is not something that IVASS decided itself. But IVASS received some EIOPA, the European supervisor. For example, the Bank of Italy received, I mean, the same recommendations from the European Central Bank. So once again, this doesn't really come from the European Central Bank or from EIOPA, but it comes from the European Systemic Risk Board, ESRB. Now ESRB is a supranational organization with the participation of central banks and all the governors of the Eurozone area. So once again, it's a broad general recommendation for all companies and all the banks we have in Europe. Now of course, we do have our own opinion on this kind of recommendations coming from, let's say, the top floors. So just like every single recommendation, this very kind of recommendation is, in our opinion, wrong. I mean in terms of -- and the way it is written or drafted for 3 different reasons. First of all, it is, let's say, overarching of systems, I mean, a general one. So it means that supervisors, or regulators, for example, IVASS in Italy cannot, let's say, really -- well, sort of customize or personalize, I mean, the recommendation. And this is due to the different features of every single insurance company that you have in one country. Now this recommendation requires the entire financial business, I mean, investment companies, banks and, well, insurance companies like ours. But in terms of EIOPA, so on a European level, we have some companies having some problems on business interruption. This is due to the pandemic. Now business interruption, or BI, is a risk. And of course, we do not insure, we do not cover here in Italy. So we don't have any exposure on business interruption. Very possibly, this is something that's really hurting northern European companies. Okay. So point number one, this is an overarching, generalized measure. So in our opinion, this shouldn't happen. Now the second reason is that it generates a gap in terms of treatment. I mean you have an inconsistent behavior. The first recommendation was a sort of a very kind invitation not to do something. Well, this one is a real ban. So for example, if you have complied with every single recommendation that came from the surveillance bodies, it is now impossible to reach the situation of many other companies. We have had some European companies that have just ignored the previous invitation. So they did payout the dividends or maybe they just paid it out on partly or in a reduced way, but they did it. Now we also did it in terms of UnipolSai. But the UnipolSai is a company that we control. So we have 85% of the capital. So all the resources basically of UnipolSai were held within the group. So there was no dividend being paid. So this is the reason why we think this is some mistake. I mean it generates an uneven inconsistent behavior. The third reason, so it is, if you will, a macroeconomic reason. So right now, we're looking for -- I mean we're trying to reignite economies to recover economies after the pandemic. Well, this measure basically freezes billions of euros of financial resources. These are basically the benefits or even the profits that should be redistributed or paid out. So this should be going to investors. And there, once again, this should go to families or companies making investments. So this would be, if you will, money that would circulate inside the economy and especially into the, if you will, industrial economy, that's been sort of shocked by the economy. So this is the reason why we think that there are 3 big mistakes. Now depending on our habit, behavior and culture, we are -- okay, we are now much more than a company. So we are a group. But let's say that we are an institutional group, so we will never fight against our regulators because, of course, so we don't want to do this, against, if you will, our regulators or the European regulators. And of course, we will just comply without complaining. But at the same time, I need to tell you that dividends, I mean, the profits that we have for 2019 are still held within the company, and for the reasons I said before. So I mean, the same goes for dividends. We can say that we have already fulfilled the conditions in order to reach the 2020 dividend target. So we will pay Unipol shareholders as soon as we can. And by this, I mean, at the end of the bans. So as soon as the ban will be lifted by European regulators. Thank you so much.

[Interpreted] Next question from the conference in English from Peter Eliot from Kepler Cheuvreux.

Trying to work out which of my questions weren't just asked by Andrea. If I could have 3 of my own, please. Firstly, I guess, your agents are rewarded on the profitability of the business. So I'm just wondering if you could help us understand whether we should expect higher commissions in the future given the level of profitability now or how that might flow through? Second question, just -- I believe that Solvency II and IFRS are not quite on the same reserving basis, so the strengthening in your reserves would have boosted your solvency ratio. I'm just wondering if you can say how much of the solvency ratio increase was due to the better reserving position? Or if you put it another way, what would the solvency ratio be if markets reversed back perhaps to where they were at the end of Q1? And maybe -- yes, maybe a third question, maybe I can come back on the tax situation. Just looking forward, you've still got a tax asset at the holding company. Could you update us on how and when you think you might have the ability to use that?

[Interpreted] Okay. So without further ado, let me answer question number one, this concern the commission level or commission profile of agents. So as I said, well, previously, we have a sort of a general framework agreement with our agents and it includes the fact that we share the so-called technical profits and technical losses on the CP on motor vehicle. We also have other agreements on incentives, if you will. So it goes without saying that one part of the technical profit or the technical benefit that we have reached in this H1, of course, it has to be reconfirmed at the end of the year. So this will definitely be shared with the distribution network in terms of -- I mean, the ways with which this agreement has been drafted. Don't forget that in the motor vehicle CP, we have a fixed rate, which is now 9% today, plus one variable percent rate, which is inversely proportional to the claim premium ratio of every single agency. So this benefit has, if you will, a delayed effect. I mean you sort of have to wait for 2 years because this kind of parameters is calculated on the average of the previous 2 years. So starting from 2021, so next year, well, provided that the technical benefit is reconfirmed at the end of this year. So in that case, there would be an increase, as you said, of the commissions concerning MV for our agents. The same will happen to the non-MV, and it depends on how we will control the remuneration of our agents. Because once again, also in this case, they are paid not only on the basis of the production of every agent, but we also measure the quality. So if they have a claim premium ratio, which is low, well, if this is low, I mean, the package, if you will, will be higher, okay? So this is the incentive or the remuneration for our agents. Once again, also in this case, we do have a sort of -- I mean, we split, I mean, the benefits on the longer term. So the time line is a little longer, if you will, and you will be able to see this in 2021 only. Well, we have to say that there's one part of this benefit, which will also be paid for, I mean, 2020. So there will also be some partial payments already in 2020. As for your question on solvency. Well, I have to say that, if you consider the improvement or, let's say, increase of solvency, I mean, the ratio, there is no impact from -- or even onto our provisioning policy. By this, I mean, the following: at the end of December, we had almost EUR 1 billion, which is what we call excess capital. Yes, of course, this was a consequence to our, if you will, I mean, it was a delta between the best estimate, which is the solvency based calculation system and the provisions that we have in the balance sheet, okay? So we had EUR 1 billion. We haven't released or used any reserve or provision. So that EUR 1 billion is still there. It's unchanged. So it doesn't increase, if you will, solvency. And by the way, this is what happened between March and today. So the increase of solvency ratio, which is what we have seen starting from March. Well, this is due to many efforts that we have implemented. And then, of course, this is also due to market moves. If I'm not mistaken, I mean, the increase was around 30 points. Now 50% of this was due to the increase of own funds, and the other 50% is due to a reduction of the solvency capital requirements, SCR. So the increase of own funds in many, many cases is due -- if I'm not mistaken, 10 points out of 14, this is due to the year result. So the profits generated in H1. And then the other small points are market moves. So once again, 10 points out of 14 is due to this, 4 points are due to market move on own funds, so the value of assets. So this is, once again, something that we can almost neglect. As for the change in terms of the solvency capital requirements, SCR. Well, this is the consequence of many different actions in terms of management. This is what we have done, for example, on the portfolio. For instance, we have reduced shares. We have also, I mean, risk covered some shares and stakes. So we would -- we've carried out plenty of activities. We have, let's say, reengineered our live portfolio. So many different activities that was -- that we're able to reduce SCR by 16 points. So these are the main components, generating the growth of SCR starting from March and until today. You are right, we do have a very strong both provisioning or reserve policy. I mean just make a comparison with our competitors on the -- well, domestic or Italian market. And of course, this is really very clear and self-explanatory. Well, it is one of our features, if you will. And I think that -- well, this feature is important for us because it means that we can really trust that we have plenty of confidence, if you will, in the future. Of course, there may be prices or unexpected behaviors, I mean, just like the 2020 pandemic. But we are absolutely able to use this kind of buffer. So these reserves or these provisions are really helping us. And we can really boldly say that they are the objectives we have for 2020, but also the business plan objectives include the business plan for next year, 2021, well, these objectives will be hit and reached. Of course, it will take efforts, but we are pretty sure we can hit the target. I mean at least in terms of the industrial margin that we will be able to produce. Now as for your final question, I mean, the question was on the well, okay, the situation on the tax position of the holding company. Well, we have tax assets, I mean, gross tax assets, face value is EUR 350 million. If you -- well, really want to have, let's say, a very specific assessment as of today. So the theoretical value as of today, well, this is now worth EUR 300 million.

If I could quickly follow-up on that. My question really was just more about when you expect to be able to use it, if that -- your view on that has changed at all.

[Interpreted] Yes. Okay. So how much we think we can use in 2021? Well, actually, starting from 2021. No, well, I couldn't say now because it depends on the results that we will have. And so once again, we have around EUR 340 million. Well, I may share with you, well, sort of an estimate. I mean, on the flight, if you will. So once again, EUR 350-gross million, well, let's say, around 10% may be used next year, so 2021 because it depends on the year, but I mean, there are lot of different policies. So you may have some so-called vintage policies. So the recover percent may change year after year. Anyway, in 2021, for the time being, we know that we will recover or use EUR 35 million. And okay, let me be even more complete. We will continue with between 10% and 13% a year in the following years. Once again, there are minor changes, minor differences year after year. But in general, we may say 10% of use a year because, well, this is what the regulation says, okay? So this is not our choice. I mean we are not free to decide, okay, it's the regulation that's imposed on to us.

[Interpreted] Next question is from the original conference from Alberto Villa from Intermonte.

[Interpreted] I have some quick questions. The first one, can you tell us about the net tax position of the holding company? Can you also give us some color on how you are investing cash? The second is on the derisking on the second quarter. Are you thinking that you're considering to continue with this? Or are you happy with the current positioning of your investments? And the third question concerns the Intesa Unipol BPER operation, what can you tell us as of today about the possible impact of the, well, expansion, I mean, the acquisition of the -- I mean, some life businesses or insurance businesses from UBI Gruppo, UBI, for Unipol? The fourth question is on the life business. That's been sort of weak in terms of results in the first half of the year including premium income. So what do you expect starting from July? So do you think that the situation will improve, thanks to the restarts of the commercial activities from banks? And also, I mean, what do you think the result will be for H2 2020?

[Interpreted] Thank you for the 4 questions. As for the holding company net financial position, NFP, it is negative EUR 1.5 billion. And it is represented by EUR 2.3 billion, the net of which EUR 1.8 billion are notes that we have on the market, and we have EUR 0.5 billion. This is an intragroup debt that we have towards UnipolSai, okay? So EUR 1.8 billion is our notes on the market, EUR 500 million intragroup, and the total is minus 2.3 billion. Now on the other side, if you will, we have around EUR 800 million, well, a little bit more than this. So EUR 800 million of assets in the holding company, excluding the stakes. So we don't consider 85% at UnipolSai, 10% BPER and then we also have UnipolReC, R-E-C, so we have EUR 800 million of, let's say, sort of liquid or semiliquid securities. And the difference between EUR 2.3 billion and EUR 800 million, the result is EUR 1.5 billion net financial position I talked about before. Now as for the derisking. So your second question. And okay, I will try to answer, and then Matteo will give you further insights. Now let me tell you that, of course, you are listening to us, but in the Gruppo listeners we also have economic and financial reporters and journalists. Well, I have to say that during the pandemic what we've seen is the following. I mean, there's been an abrupt, I mean, a movement, I mean, a sort of a shock or an earthquake on the market on every asset classes. I mean well, rates, credit rates, spread levels or corporate spread levels, govies spread levels and so on and so forth. So I have to say that what we've seen and considering, of course, the market moves and even the solvency moves, of course, solvency depends on market movements. But I have to say the solvency is based on a very specific behavioral model that so-called, I mean, technicians know very well. So solvency, if you will, produces a highly distortive effects on our business. I mean they really created distortions because, I mean, this standard highlights the mark-to-market philosophy for long-term investors, so they have long-term liabilities. And of course, wait a second, this is a personal opinion. But of course, solvency should be used based on cash flows batching instead of highlighting or emphasizing mark to market. Anyway, this being said, we have to comply with the current regulation in force. So if futures move away from this regulation, so if you do not comply, if you will, with the solvency parameters, I mean, in terms of rate curve or the breakdown and the make of asset classes or even the assets investment. So if you move away from this, if you do not comply with this, well, you increase the risk of having, well, some ups and downs or oscillations or even distortions on the market. And of course, this will also have an impact on the choices of our company. So within this context, we've seen that there have been many, if you will, pro-solvency policies instead of financial risk policies, if you will, in terms of the re-makeup or recomposition of our assets, of course, we will continue with those policies also in the future. And well, let me say, I'm sorry, because as a Managing Director of an Italian company. So the consequence would be reduction of investments in Italian govies. And that this would be an advantage for govies from other countries. Because the main aim is to keep down or mitigate the high volatility of spread curves or rate cuts, of course, I'm talking about the volatility of solvency. There is no other way out because this is what we are supposed to do. I mean we are managing an Italian company. So of course, we have to manage at best the money of our insureds and shareholders. Once again, this being said, happy to consider that this country is -- I mean is strongly indebted. I mean we have a heavy debt. There will be even more debt because we are now implementing so many support and encouragement measures which is what is necessary to do in the post COVID-19. I know we can count on some, let's say, European funds with low rates. But of course, well, most of this money has to be given back to Europe. So maybe for our country, it would be more useful to, let's say, use and exploit, I mean, the savings of Italians. And of course, we are one, if you will, a broker. So we should be investing on our country, so in terms of securities of our country instead of forcing people to purchase investments. Well, of course, I mean, this is not formal, but of course, at the same time, we feel forced to purchase securities from other countries. I mean 55% of our bonds are now invested in Italian bonds. We have had rates even higher than this in the past. But unfortunately, these rates will have to be cut because, again, we need to reach the objectives I talked about before. So a lower volatility of solvency. And so once again, we have to do this because this is included into what we are supposed to do. Okay. So in the future, what about the, I mean, percent rate of Italian and non-Italian govies? It would be around 40%, 40% of the bond portfolio. So again, this is the main component, if you will, of the derisking activities that we are carrying out. Okay? Sorry, to take some minutes. I mean I just wanted to share with you some general considerations. But it is a unique opportunity, in my opinion. It would be very useful to have a debate in this country about this topic because the business sense, I mean, the system-wide, I mean, systemic solidity or strength of the country. I mean this goes well beyond, if you will, the scope of insurance companies. Now back to your question, Intesa BPER operation. As far as we are concerned, it will produce no consequences in this financial year because what we have to do in this financial year is the completion of the acquisition by BPER of all the branches that they promised, I mean, to take over from Banca Intesa. And there will be a capital increase in order to do this. I cannot quantify the capital increase right now. Of course, we will follow suit, well, based on our duties. In 2021, so next year, Banca Intesa will repurchase, I mean, the minorities of the insurance joint ventures, which are now held by UBI Banca, UBI, we will buy the part of the portfolio, which is around 1 million customers that they will, I mean, that will be transferred into BPER. Okay. So I don't have details on this operation right now because, as you are aware, this is an offer that was not agreed upon between Banca Intesa and UBI. So of course, we don't have details now. We have to wait. And of course, we have to wait until Banca Intesa really starts managing, I mean, the bank that they are acquiring. Maybe I can share with you an estimate, let's say, that the BPER operation, they will buy masses from Banca Intesa, which are equal to more or less 1/3 of the total UBI flows. So let's say, that UBI basically will be quantitatively split in the following way: 2/3 into Banca Intesa, 1/3 will go to BPER. I'm talking about the total masses, the total money managed. So right now, 1/3 of the UBI customers will become BPER customers. So once again, if I'm not mistaken, the collection from UBI was EUR 5 billion in the life business in 2018 and 2019, if I'm not mistaken, once again. So what we expect is that it should have a new mass, I mean, a new quantity of customers. So this should be their production capacity between EUR 1.5 billion and EUR 2 billion life business a year with debts. The life production changes a lot depending on the rates. So it changes a lot for everyone year after year. Anyway, if the benchmark year is 2019, I think, that their volume may be between EUR 1.5 billion and EUR 2 billion. Now as for the provisions that, of course, we have to bring into the group. And of course, that they have to do with products that have already been distributed to UBI customers, well, I think that it should be around EUR 8 billion, maybe EUR 9 billion. So this is the total of reserves or provisions. Okay. So this is the general size of the business that we think will happen. And anyway, it will happen mid-2021. As for the life business figures of H1, Matteo will give you some insights.

[Interpreted] Now as for the H1 life profit, well, they have been deeply impacted by the derisking activities Carlo talked about before. In particular, we have reduced the part of our stocks exposure on some sectors of businesses where we don't want to have exposure any longer. We have also cut or reduced one of the credit components characterized by the lowest level, as I have said before, because, of course, we want to invest much more on the higher rating business. And this means that we have had losses so we already had the so-called latent capital losses, EUR 110 million. So this has basically canceled the profits of the life business. In terms of technical margin, so the management fees and the mortality fees and an expenditure reserves, I mean, our profitability is basically similar or aligned to the more than EUR 100 million a year, which is what we had in 2019. I may also tell you more about the life business investment policies. I mean we have done another operation we have now longer portfolio durations because this is another point that has impacted, I mean, solvency all over Europe. I mean the absolute level of interest rates is now a negative all the way to the 30-year long deadlines or maturities. So now this means that we have to take into account, I mean, the passive flow rates to very long deadlines or maturities. I mean the quantity now is not very important, but anyway, there was a consequence. I mean we needed to make longer durations, which is what we have done by investing onto the govies components, especially the core govies, for example, on Germany, once again, the values on Germany are negative now. And we have done this with some investments on the shortest part of the curve in some credit notes characterized by very high rating levels. So we have kept the same selection policies of the issuers. But anyway, the reinvestment rates, as I said before, more than 1%, well, let's say, between 1% and 2%. The negative evolution of production is something that we wanted to have. I mean we have already, in our budget, a strong containment of traditional policies production because based on our habits, I mean, we have quotas on traditional policies and those that can be reassessed based on the, if you will, capacity level of every single segregated account. So year after year because there's been a further decrease of interest rates, we also decided, I mean, to slow down in terms of producing the so-called reassessable policies. It's negative in terms of premium, but this is something that we wanted to do because, of course, we want to enhance the profitability of the portfolio. So this is why we want to focus on, let's say, a high actuarial risk policies, for example, some specific types of policies. Once again, this is not a headache for us rather the opposite. I mean, it's something that we definitely wanted to have and we plan to have.

[Interpreted] Next question from the conference in English is from Sudarshan Bhutra from Societe Generale.

Just a few questions from my side. The first one is on the Unipol Group stake in UnipolSai. Now you've been increasing the stake for the last few quarters now. So I just wanted to get an understanding of what is the level that you want to go to or you can go to with your current resources? And what is the maximum regulatory limit in place before which you might have to make a bid for full ownership. So I mean what is the strategy behind that increasing the stake? That's the first question. The second one is on the impact on Solvency II ratio from the reduced equity exposure. Can you just quantify what was the sort of benefit that is there in the Q2 solvency ratio from the reduced equity exposure? And my third question is on the expense ratio improvement in P&C. Can you just provide some more color on that?

[Interpreted] Thank you so much for you questions. Now as for the stakes in UnipolSai, as I said at the last conference, if I'm not mistaken or maybe even previously, anyway. Some time ago, we said that the rate was 80%, 8-0 percent. So our, let's say, best level or optimal stake. Then situation changed. I mean the value of the UnipolSai in our opinion was underappreciated. So it was sort of underestimated and this is the reason why we decided to increase our stake. The stake is now around 85%. So for the time being, we have no limit, if you will. So we didn't decide to have any limit so far about, I mean, the possible stake level in UnipolSai. Now for us, UnipolSai is the best possible investment because, of course, we know the potential of the company, and we also know, I mean, how much income this may generate in the future. So if I see some UnipolSai value losses situations, well, we will get that opportunity. But once again, no, we have set no limit. And at the same time, we have no specific strategy, looking at the future. So it's a sort of an assessment that we do day after day depending on the market conditions. Now as for the expense ratio, ER, the floor goes to Matteo.

Sorry, sorry. There's no limit, which is required by the regulator concerning this business. Well, in this case, the regulator name is Consob, C-O-N-S-O-B. The limit actually is 90%. If you do more than 90%, just like the [ OPA ] Intesa on UBI, if it's more than 90% some forecasts have to be implemented from the regulatory point of view. But once again, if you don't reach 90%, there are no obligations or, I mean, nothing is imposed, if you will, on to us and by the regulator. Okay. Back to the expense ratio question. Yes. So this is steady. It doesn't change in terms of costs. I mean Carlo talked about the cost reduction that we have experienced during the first 6 months, I mean, following the 4% premium reduction. So the expense ratio, ER, is basically unchanged, which is what also happened to the commission level. As I said before, by the way, at the commission level, so let's say, the remuneration to the distribution network will follow exactly the agreements that we have signed with our agents. This means that we will pay a quota. So a part of the technical profits that we have, once again, as long as it is confirmed at the end of the year. So this is what we will pay our agents. And now because there may be a technical benefit possibly there's one part of commissions for the distribution network, this part may increase. So commissions may become higher, starting from 2021, as I said before, provided that one part of provisions concerned in 2020 has already been done. Now as for the other question on solvency or solvency ratio, I have already answered in my previous question. But of course, you need some details. So what about, I mean, the value of these rates. This afternoon, we will be -- you can talk about this with our investor relators this afternoon, they will be able to give you all of the details.

[Interpreted] Next question from the original conference is from Elena Perini from Intesa Sanpaolo. Next question is from the English conference from Peter Eliot from Kepler Cheuvreux.

I just had one remaining question actually. But I don't know if it's still the case, but certainly, back in May, you were doing weekly reporting of your solvency ratio. This may not be something that you can tell us. But I'm just wondering, are you able to tell us what the low point of your solvency was when you were doing those weekly reportings.

[Interpreted] Thank you for your question. As for our solvency ratio, so even during the lockdown months or so vary in the worst moments of the pandemic. It was between 140 and 150. So once again, this was the negative peak.

[Interpreted] [Operator Instructions] Mr. Cimbri, for the time being, this is it with questions.

[Interpreted] Well, thank you so much. Thank you for sharing this conference with us. And thank you for all of your questions. So well, enjoy summer holidays. And of course, we will have, well, another call in the month of November. Once again, thank you so much. Bye-bye. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]