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

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Unipol IFRS-17 and 9 Guidance Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Matteo Laterza, CEO of UnipolSai, General Manager of Unipol. Please go ahead, sir.

Good morning, and thank you very much for participating to this event. I'm here with Mr. Luca Zakerivi, our Group CFO. And before leaving the floor to him to comment the presentation, let me do a very brief introduction. I personally think that the introduction of the IFRS 17 and 9 is a very important step forward for the accounting framework of an insurance company because it will enhance on one end, the level of transparency and visibility of the balance sheet and the P&L that starting from the current year will be at fair value, both on the asset side and on the liability side. And on the other hand, it will improve the level of comparability between entities. Nevertheless, the introduction of the new principles is not the bread-and-butter subject because it gives the possibility to the single entities to adopt different options depending on the peculiarity of the single business model and the structure of the assets and liabilities. We are here to explain and comment with you, which kind of options we adopted in our accounting models, in the transition in defining the discount rate and risk margin, and finally, in our allocation of investments in the single categories of the IFRS 9. As I said, it is a too complicated subject to be commented by CEO. And so I leave the floor to Luca for the comment of the presentation. I will be back to you to comment on the implication of our business model and the industrial plan, and then we will open the floor to questions. Please, Luca, we can start.

Good morning, everyone, also from my side, and thanks again for joining the Unipol guidance on IFRS 17 and 9. We will not repeat the theory of the new standards, but the aim today is to update you on the expected impact on the transition for Unipol Group in terms of financial statements, disclosures and KPIs. We will start by analyzing the main choices we made and the rationale behind them. We will then investigate the financial and economic impact of these choices with a preliminary disclosure of the effects of the transition on 2022 numbers on the following years and of course, on the targets of the business plan. Finally, we will provide the timing of reporting under the new principles and the key messages or their impact on us. Let's start with IFRS 17 and 9 choices and the related rationale. In terms of accounting models, the premium allocation approach will be applied to the vast majority of our Non-Life contracts as it is mostly an annual business. On the Life side, the variable fee approach models refer to 94% of contracts, with the remaining being evaluated using the building block approach. The underlying rationale here is to maintain coherence with the nature of our business. In particular, within Non-Life, the premium allocation approach should ensure substantial continuity with the current accounting regime. Now let's move to our transition approach. If retrospective application is not applicable, the standards provide for the option between 2 simplified approaches to set the amount of accounting items related to insurance contracts that are modified retrospective approach and fair value approach. As a consequence, we showed the modified retrospective approach as our elective approach for Life business and fair value approach for Non-Life business. The main idea mostly in relation to Non-Life is to adopt an approach to ensure the recognition of profitability over the remaining life of contracts. One of the crucial innovation of the standard in order to ensure a closer alignment in the assessment of assets and liabilities is the introduction of reserve discounting. Here, we choose to adopt the bottom-up approach, starting from the free risk rate. We then add any liquidity premium following a logical framework coherent with solvency regime. Besides, we adopted the OCI option to mitigate potential volatility to the P&L. Risk adjustment is another innovative element prescribed as the principle. In this respect, our choice consists of a prudential approach based on the 75th percentile for both Life and Non-Life businesses with a range up to the 98 percentile in Non-Life, in order to avoid potential negative impacts due to an uncertain market environment. On the investment side, the vast majority of financial assets will be booked at fair value through OCI according to IFRS 9, with equity instruments being measured without recycling to P&L. Again, the choice is dictated by the willingness to mitigate market volatility. Let me now deep dive into each one of these areas. Talking about accounting models, in Non-Life business, the premium allocation approach is applied to almost the entire portfolio with coverage close to 12 months. On the other hand, the building block approach model is applied to the multiyear component of the portfolio. In Life business, the variable fee approach model is applied to almost the entire portfolio, including segregated accounts and units with significant insurance content. The building block approach model, however, is applied to the residual part of the Life portfolio related to protection business; for example, term life insurance and long-term care. In Non-Life, the choice of a predominant application of a value approach over modified retrospective approach stems from our traditional prudence in determining claims reserves in application of IFRS 4. By using fair value approach, we have been able to recognize the marginality related to the implied prudence of IFRS 4 results versus undiscounted best estimate liabilities of Solvency II over the life of the insurance service and more closely related to the actual payment of claims. However, it's important to highlight the guidance that in Non-Life, we do not expect significant quantitative impact on the shareholders' equity stemming from the transition. The alternative solution seems less prudent to us as it would have led to a direct increase in shareholders' equity against the uncertainty of the actual payment of claims in economic environment characterized by high volatility, for example, inflation. In Life instead, we have witnessed a slight reduction in shareholders' equity. The reason behind this is quite intuitive and twofold, CSM recognition and unrealized gains losses that were previously recognized directly in the available for sale reserve. In Life, the fair value approach is applied for minor segregated funds and for those with a high level of financial guarantees and pure risk collective contracts. Moving to Slide 8. Insurance liabilities will be at current values by applying a discount rate based on the so-called bottom-up approach. This approach starts from EIOPA risk record. Then it adds a liquidity premium consistent with Solvency II framework for volatility adjustment, considering the characteristic of the assets portfolio underlying the insurance liabilities. The liquidity premium will be differentiated by business type and built on the basis of the yield of the specific underlying asset portfolio. Changes in the discount rate will be absorbed by the contractual service margin for any contracts under variable fee approach and booked at OCI for the other contracts. Talking about risk adjustment. This is calculated using metrics derived from the Solvency II framework, assuming the same probability distribution for lower risks, the cash flows are subject to and also taking into account the diversification benefits between different units of accounts. The diversification effect is applied by considering insurance portfolios within each legal entity, but never between legal entities nor between segments. Base calibration is set on the 75th percentile on both Non-Life and Life businesses with an extended range for Non-Life up to 98 percentile to factor in the uncertainty of the content environment. For example, in defining our best estimate liabilities, we have applied a level of inflation that we consider it appropriate, but the current situation is so volatile that the actual level in the coming years could be even higher. This percentile level should also protect us from these risks. From a conceptual point of view, risk adjustment is similar to the risk margin under Solvency II, even if under a principle-based approach, having said that transition, the overall amount of risk adjustment is equal to EUR 1.1 billion is close to risk margin, it is EUR 1 billion. Given the different calculation methodologies applied in the market, an indicator to measure the level of prudence of the risk adjustment will be the ratio risk adjustment over liabilities for incurred claims that for Unipol is around 8.1%. Once again, we think this proves our historical prudent reserving approach. The application of such a calibration of risk adjustment could result in a part of the loss component accounted for when the counter is underwritten, but not translating into an actual loss when claims are paid. We look now at the changes both in by IFRS 9, which is the new accounting standard for investments. The chart gives an overview on the changes from IAS 39 to IFRS 9. First of all, the vast majority of the assets will be booked at fair value through OCI and a minor size of the portfolio will remain at amortized cost. And there is going to be an increase in the shares of assets booked at fair value to profit and loss due to IFRS 9 mandatory criteria. The mark-to-market volatility will not directly impact on the P&L for investments related to the [indiscernible] portfolio as it will be absorbed by changes in the CSM. Worth to remember is that since 2022, the group has gradually and heavily reduced the exposure to instruments valued at fair value to profit and loss, not related to segregated funds from EUR 5.3 billion to EUR 2.5 billion nowadays. The aim is to go on with this reduction also in the next month in order to protect the P&L from the financial market volatility. We then expected credit loss, not material, given that 88% of our bond portfolio is investment grade. Now, we turn to our shareholders' equity. With the application of IFRS 17 and 9, it will be more stable in the future, although decreasing by 9% compared to the one calculated with the previous standards. To get the full picture of the bridge between the 2 shareholder equities, starting from the previous accounting rules, we have, first, a slight decrease due to the first application of IFRS 9 to financial assets. Then we move to the IFRS model changes. First, we see a small decrease when we de-recognized intangibles related to insurance contracts. Secondly, we have the chance to reserve from IFRS 4 to IFRS 17 with estimate cash flows and discounting of insurance cash flows. Thirdly, the risk adjustment impact and finally, the CSM component transition. The CSM provides an indication of the expected profit of insurance contracts that would be released on the income statement, in line with the delivery of insurance services. The CSM amounts about EUR 3.2 billion, of which EUR 1.1 million is Non-Life at 2.1 is Life. In the end, we expect to have a shareholders' equity transition equal to EUR 8.9 million with a slight reduction resulting from recognition of a significant amount of CSM. The logical follow-up to the previous slide is to understand our shareholders' equity under the new accounting principles relates to the difference between assets and liabilities according to Solvency II. I am now going to compare shareholders' equity under the new standards equal to 8.9% and all funds on Solvency II amounting to EUR 9.7 billion. In order to achieve Solvency II own funds started from the shareholder equity, we had CSM to be recognized over the residual life of the contracts, then the impact of the intangible recognition and the effect of mark-to-model for Non-Life reserves and for Life reserves. Furthermore, there is a minimal impact from other adjustments relating to the treatment of the strict Tier 1 capital instruments qualified as shareholders' equity in the consolidated financial statements and also the effect of mark-to-market and some investments. In addition, deferred tax liability and finally, the Solvency II adjustment on subordinated debt, accrue dividends and other reductions. This slide is on 2022 pro forma profitability. With the implementation of IFRS 17, we expect an uplift in earnings before tax versus the old standards. This is due to our approach and transition. Then we must not forget the impact from IFRS 9 valuation changes, which is expected to be negative compared to the previous accounting standards as a consequence of security measured at fair value to profit and loss. Please bear in mind that at that time, we had EUR 5.3 billion of assets valued at fair value to profit and loss, whereas we currently have EUR 2.5 billion. And therefore, the effect on IFRS 9 on 2023 will be significantly lower. Overall, 2022 earnings before tax pro forma would have decreased compared to the figure calculated with the old standard. In the next year, it is expected to convert on the historical results shown under the previous accounting standard with a moderate increase in the volatility of the financial results coming from the application of IFRS 9. This slide focuses on the insurance service results expected better within the new framework. In Non-Life, we have chosen to account 92 of our business using the premium allocation approach. Therefore, we expect only limited changes compared to IFRS 4. We will still publish gross rating premium as a top line KPI, but in P&L, it will be replaced by the insurance contract revenues, which are similar to gross earned premiums. On the expenses side, we exclude the significant changes between allocated and unallocated expenses. The result of the current year is expected to improve slightly due to the combination of some effects such as benefit from one side from the reserve best estimate, reserve discounting and CSM relief from transition. And on the other side, the negative effect from onerous contract and risk adjustment on current year claims. In relation to previous year runoff, the liability for incurred claims and the undiscounted best estimate Solvency II will be aligned. Therefore, we do not expect the same runoff magnitude as in the past, implying then a slightly worsening effect. Nevertheless, the insurance services result is expected to be substantially stable. The combined ratio calculation will change, and this would lead to a slight deterioration due to the increase in the denominator that is gross insurance revenues in IFRS 17 versus net premiums in IFRS 4. Looking at Life profitability, it is not envisioned to be materially impacted by the implementation of the new accounting principle. The transition to IFRS 9 and 17 represent a huge improvement for the insurance industry as the new accounting standard will provide a more predictable view on the Life result since Life profitability arises mainly from the CSM release. The financial results include the return on assets related to the free capital and pure risk contracts as well as the impact of the so-called unwinding of discount rate of these contracts. Insurance results, which also include changes in technical items linked to the expenses and claims and furthermore to the release of risk adjustment. Linked to the hybrid portfolio profitability in scope of IFRS 9 and expenses with no significant change in allocation will complete the P&L. The convergence on the historical results shown under the previous accounting standards is expected with a slightly higher volatility of the financial result coming from the application of IFRS 9. I will now hand you over to Matteo for the final remarks.

Thank you, Luca. And just concerning the -- our target of the industrial plan, let me say that since the last decade, we have been using market consistent instruments when we decide our capital allocation, capital management, profit testing, and so our reference point is the Solvency II balance sheet. The introduction of the new accounting principle, get the balance sheet and the P&L of the company much closer to the Solvency II balance sheet. And so what I want to say is that the introduction of the new principle doesn't change the KPIs that last May we disclosed when we disclosed our industrial plan concerning the financial KPI and the issuance KPI. And so concerning the cumulative net profit of EUR 2.3 billion that we disclosed last May, I have to confirm that we are on track on delivering them within the end of 2024, considering the application of the new standard starting from 2023. Also, we are on track to deliver dividend target as well, both in Unipol Gruppo and in UnipolSai. Moving to insurance KPIs. As regards gross written premium in Non-Life, there will be no impact on this figure, which will be maintained for the purpose of transparency in our disclosure, together with insurance contract revenues. The Non-Life combined ratio net of reinsurance is expected to increase, as Luca said, due to the new methodology, but without any effects on the insurance service results. Third part, we will continue to disclose also Life premiums and the new standard won't impact on that target. And finally, with respect to present value of future profit margin, again, no impact expected and target go further with respect the 3.5 figure we disclosed in May 2022 for the 3-year period. We have a time table concerning the disclosure of the IFRS 17 and 9 numbers in the sense that, in May, when we will publish the first quarter result, we will disclose the first quarter result on the new -- with the application of the new accounting principles. And of course, the first quarter of '22 will be restated with the new principles as well. The same thing will be executed in August when we disclose the first half of the year restated with the 2022 and we will go ahead also in November concerning the first 9 months of results. So summing up, just the final message before opening the floor to questions. As I said, it is the new accounting framework that is getting closer to how we have always managed the business and with the same metrics, we will continue to manage the business. So this is the reason why we don't see any kind of impact on group insurance strategy, dividend policy and our capital management and consequently, the reaching of the targets in terms of Solvency II ratio. Financial disclosure will improve, as I said, in the sense that starting from this year, both the asset and the liability side will be at fair value, and it is a very important step forward in terms of transparency and predictability of the future earnings with particular evidence in Life. In Non-Life, actually, we don't see a lot of change in variations compared to how the business is represented today. Concerning the shareholder equity, we will start with a slight reduction, but Luca explained very well how the other component of the liability side of the balance sheet is articulated. And we expect much more stability of the shareholder equity in the future as a consequence of the application of the new accounting principle. Finally, as I said before, insurance and financial targets of the industrial plan opening new ways '22-'24 are confirmed. Having said that, I open the floor to the questions. Thank you very much for listening to us.

[Operator Instructions] The first question is from Elena Perini of Intesa Sanpaolo.

Thank you for your presentation, which is very, very detailed. I've got some questions. The first one is on your Slide #13, so the shareholders' equity. What do you exactly mean, first of all, for total shareholders' equity, which are the elements that are -- that results in this EUR 9.7 billion as a starting point? And then regarding the reduction, the 9% reduction, it is mainly due to the CSM this drop. But considering that you are saying that you -- basically, you do not have any significant impacts in Non-Life, while do you have a reduction in Life, I was wondering which are the other elements of the business that are weighing on this reduction? So this is the first question. Then the second question on the combined ratio, if you could explain the numerator and denominator too because we have seen from your competitors at European level some different calculations. So I know that the metric -- the principle is the same, but then each company has different items, and these are the 2 most important ones. But if I may add, are you going to provide us with some sensitivities of the CSM, for example, if you change the discount rate? And finally, you said that you will see a reduction in terms of earnings before taxes at consolidated level. So considering that, if I understand well, you do not see any significant changes in Non-Life. Is this mainly due to Life or to other elements, for example, other businesses, real estate and so on?

Thank you, Elena. I will answer to the final two questions, and then I will leave the floor to Luca for the first two. Concerning the sensitivity, actually, we are just at the beginning of the introduction of the new principles. We have to test the reliability of the sensitivities going forward. So at the moment, we don't expect to give the disclosure of sensitivities on CSM. Having said that, of course, during the course of the year, if we will have -- we will consider reliable the sensitivity that we are crunching in this period, we will think about the disclosure also of sensitivities. Concerning the operating -- the net results of 2022 that we disclosed in the chart, the impact is mainly driven by the application of IFRS 9, and 2022 was a very bad year in terms of financial performance. And the entity -- the quantity of securities classified in the fair value through P&L was EUR 5.2 billion. That is a number is completely different to the numbers that we have today. And so the reason why there has been a negative impact on net profit come from the financial and investment component of the P&L. Of course, 2023 is a completely different story. Of course, we have no disclosure on the performance of financial markets in 2023. But as Luca said, we have less than half of that amount today classified as fair value through OCI . And so the sensitivity of P&L to performance of financial market is much lower. Then I leave to Luca to answer to the other two questions.

Yes, you are right. The decrease in shareholder equity, it depends mainly from Life. And In Life, we have higher CSM recognition for us, EUR 2.1 billion. And the other item is the unrealized gains and losses were previously recognized directly in the available reserves, so in the P&L in the shareholders and now is recorded in the liabilities. So these 2 elements comes from this decrease. Relating to combined ratio is a mathematical result. And we will have the result of reinsurance in one line in the future in the new P&L. So the revenues was net of this reinsurance. And the new one will not be netted by the reinsurance effort. So the denominator will be higher. And mathematically, the combined ratio can be higher, too. It's a mathematical element.

I'm sorry to interrupt you. But coming back to this point, well, actually, if I have a higher denominator, I would expect, from mathematical point of view a lower ratio. So I imagine that also in the numerator, there are elements that are impacting the combined ratio in a negative way.

If you look at the formula in the slide, the combined ratio is defined as 1 less the insurance service result divided by insurance contract revenues. So if you imagine that the insurance service results remained the same, the denominator, in this case, can lead you to a slight deterioration in combined ratio because the denominator increase because the insurance service are gross of reinsurance.

Okay. Okay. So it is due to the new formula for the calculation.

Yes. It's all this reason, why.

Okay. And then if I may, coming back to the shareholders' equity to the initial one that I saw in the Slide #13, the EUR 9.7 billion, is this -- because I have some problems in reconciling the figures with the balance sheet that you published. I don't know if there are any elements that are because, actually, if I look at this is the net shareholders' equity of Unipol Group or UnipolSai?

Yes, it's Group first. And it's the total of the amount of the shareholder equity.

Okay. So including the minority component, too.

Yes, of course.

The next question is from Michael Huttner of Berenberg.

Thank you as Elena said, for the very clear presentation. I have lots of little questions on all numbers. On the real estate, I just wondered how is that valued now? Is that -- and the second question is, you've given us the numbers for equity on Slide 13 of Unipol Group. I wonder if you can tell us what the impact would be at UnipolSai? And the third one, you have in the CSM EUR 1.1 billion, which relates to Non-Life. In all the other presentations I've seen on IFRS 17 from your peers in Europe, all of the CSM came from Life. So I just wondered which business this is? And then the -- on the combined ratio, you said the directional change, but I just wondered if you could say the magnitude of change how much different would be the combined ratio. If before, you had 95%, would the new number be 96%? Or just to give a feel for it? And then on the excess reserves, so -- this is a difficult one because I don't know how to define it. But you now have for the risk adjustment a kind of corridor of 75% to 98% in terms of percentile. And you also say in the slides that the reserves will be higher than the claims -- likely higher than the claims, so there will be some excess. This -- the reserve releases, how -- where will they appear?

Let me give some color on the range that we decided to adopt in defining the risk margin in P&C because how Luca said we decided to adopt an approach that is driven by prudence by affecting this range and positioning ourselves at the top of the range starting from 1st January 2022 because the context is so uncertain in Non-Life that above all considering the possible future evolution of inflation compared to the assumption that we have that we consider prudent to put ourselves at 98 percentile. Having said that even and if the scenario would evolve favorably, we have the possibility to reset the percentile at a lower number among and between the range. And possibly if the situation gets better and better, we can position ourselves at 75%. Concerning the runoff of the reserve, of course, we are here to give some guidance, and we don't give numbers concerning that. You can expect that if the technical reserve, IFRS 17 will be the [ LIC ] plus the risk margin, which is a number lower compared to IFRS 4. Overall, you can expect, as Luca showed in the slide, that the effect and the impact of the runoff reserve will be lower compared to the average runoff that we disclosed in the past few years. On the other hand, you can see and you will see a positive effect on the current year, and the total implication of the combined ratio is a slight deterioration like it is shown in the formula that Luca said. And then I leave to Luca to answer to the other question.

Thank you. You see in this slide that the current result is slight improvement because of, first of all, the best estimate evaluation that we are obliged to use. So in relation to the past, when we can use more prudence in evaluating the current year, now the best estimate imply that you use the best evaluation you can do. And then about the CSM release that derives from the transition that we applied at fair value, this amount of EUR 1.1 million goes to the P&L in relation to the service that we give on the insurance contract. So you can imagine that, in 3, 4 years, this amount go down in the P&L, and this can help the current result.

And what business does it relate to? Is there a particular business line, is it sales or something?

No, no. It's in Non-Life in general, because the vast majority of Non-Life is evaluated by U.S.A. in fair value approach in transition. And then this amount of CSM goes down in the P&L in the next 4 years in relation to the insurance service. And therefore what can concern the combined ratio -- I can imagine around 1% can deteriorate this number, but you will see in particular in the next month.

And UnipolSai Equity.

Can you repeat the question, please?

So on the Slide 13, this is Unipol Gruppo equity, so 9% decrease. Should I apply the same thinking for UnipolSai equity?

Yes, yes, yes. It comes all from UnipolSai.

It comes all...

Because it's a Life business that would give you this effect. So it's UnipolSai balance sheet.

The next question is from Sudarshan Bhutra of Societe Generale.

My first question is regarding the time line. So I just want to -- this is a clarification. Would you be providing the FY '22 pro forma numbers anytime sooner? Or is it going to come only at the time of FY '23 results? That's the first question. The second one is on the Life CSM. So can you just give an indication of what is the annual rundown rate for the Life CSM?

Okay. Considering the first question, as I said, at the moment, we foresee the statement and disclosure of the fiscal year '22 just concerning the quarter. So the first quarter versus the first quarter and going on. This is the first -- and so you will have a full disclosure of fiscal year '22 when we will disclose the balance sheet of -- for the first time in 2023. And, yes, in Life, the percentage of runoff is in the whereabout of 10 years.

Okay. So sorry, just to follow up. So the IFRS 17 P&L for FY '22 will not be available at the -- will that also be available at Q1? Or will that be available later date?

No, no. At present, the schedule is that we will disclose the fiscal year '22 when we will disclose for the first time the 2023.

Okay. Okay. And sorry, the follow-up on the Life earnings. So basically, you said that 10 years is the runoff, so that amounts 10% per annum. And at EUR 2.1 billion, that is about EUR 210 million per annum, approximately.

Yes, yes, approximately.

And then in your slide on the Life earnings, you said that there is no major change in Life earnings. So I'm just sort of trying to tie the two because under that old IFRS regime your Life earnings guidance is more around EUR 230 million to EUR 250 million kind of a number. So I'm just trying to sort of tie the two together. So any comments on that would be very helpful?

Yes. As I said, we don't expect major changes. So as Luca showed in the Slide #18 -- yes, #18, you can see that the main component of the P&L is the D segment, which is the CSM release. The other one are very small. And so I actually don't expect a significant impact from the transition because of that. Having said that, of course, you have to take into consideration that it is very important the volatility of the financial component of the CSM. And so it will be very important the variation of interest rates and whatever in order to have a clear picture on how the Life insurance profit will evolve over the single year.

Okay. And sorry, just one last follow-up. I mean, as we enter into the new regime, what is the sort of the level of onerous contracts that currently sit? I mean, any guidance or any sort of color on that in terms of the P&C business?

Transition, we have EUR 40 million.

At around EUR 40 million, okay.

But it can relates also to the level of risk adjusted that we choose in Non-Life. So the more risk adjustment you have, you can have some contracts that are in loss component, but it's not so sure that it will be the same when we pay the Non-Life contract. It's a sort of prudence also this can be.

The next question is from Peter Eliot of Kepler Cheuvreux.

First question I had was on Slide 16, actually, the positive IFRS 17 impact. I wonder if you could say how much of that is due to the fact that interest rates have just increased? And I'm assuming that, that benefit should decline over time, and therefore, sort of thinking that the positive impact should get smaller over time. So I'm, therefore, struggling a little bit to understand why we should get convergence over time from that chart. So if you could clarify those moving parts, that would be very helpful. And second question was -- sorry to come back on the 98%. So I just wanted to check because you say a range up to 98%. I wasn't clear from the previous answers how much of the business is being modeled at 98%? So yes, if you can clarify that. And then finally, maybe just a comment basically, but I guess it's going to be quite difficult for us to model your Q1 earnings if we don't have the '22 numbers ahead of that or template. So I guess, I thank you for the very detailed presentation. I appreciate that. But I guess, I was wondering whether you've got any more tips for us so if you are in our shoes to help us model the business starting from -- without that information?

Okay, Peter. So just on 2022 because we have this several questions on that, I already told twice our schedule. Anyway, I take note of your request, and we will think about how can we sort out to this question. Having said that, I leave Luca to answer to the other questions.

The first one is IFRS 17 impact. For us, it's not the fact of the interest rate that have the major impact. The major impact derived from our transition at fair value in all the Non-Life business that give us this positive income on the P&L. And for what concerned the risk adjustment at 98%? It's all the Non-Life business that nowadays is modeled with this percentile, and I think that's all.

Could I just clarify quickly the point on Slide 16? Because, as I understand it, the fact that interest rates have gone up means that the current year is going to be discounted at a higher rate, whereas earlier years are going to unwind at the lower locked-in rates. So that's why the thought that we've just seen interest rates go up should be positive. Is that not the case?

No, no, no. You are correct. But it's not the main portion of the positive income -- the positive impact. The main portion is related to transition, but you are correct that it's only included the discount rate because we have to discount all our reserves.

The next question is a follow-up from Michael Huttner of Berenberg.

And just on real estate, how is this valued now? And the second is, I understand that, say, on the 12th of May, we will have 2023 earnings and 2022 earnings for Q1. But when will we have the actual balance sheet, the -- I guess, December 2022 balance sheet or we have to wait for that balance sheet until December 2023?

For what concern the real estate, they are continuing to well evaluated by amortized cost. So we don't see any impact on that. And on the other question, I know it's important to have this kind of information. We will try to give you as soon as possible, maybe in the first half of 2023.

Gentlemen, there are no more questions registered at this time.

Okay. Thank you very much for attending this very important event, and we will meet together in May to discuss on the first quarter results. And we will have the opportunity to go through again this item with the real numbers of -- actual numbers of 2023 first quarter. Thank you very much.

Thank you all.

Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones. Thank you.