Unipol Assicurazioni S.p.A. ($UNI)

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Unipol Group First Quarter 2026 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Matteo Laterza, CEO of Unipol. Please go ahead, sir.

Thank you very much, and good morning to everyone, and thank you for connecting to this call regarding the Q1 '26. You saw the presentation and the press release. So there will not be a presentation on my side, but only a few remarks on how the quarter was. And by comparing Q1 '26 with Q1 '25, I can make only a couple of remarks. First of all, a significant improvement in the technical profitability in Life and Non-Life. In particular, in life, the improvement was spread in all the line of business, traditional product, but also Unit Linked and Pension Funds. And also in Non-Life, the improvement was very important in Motor and Non-Motor. Notwithstanding, we maintained a very high level of prudence in our approach in reservation as usual. Nevertheless, as you have seen, the combined ratio reached a 90% level. That is a very important number in terms of KPI for us in comparison to what are our target in our industrial plan. So on one side, a very important improvement in technical profitability that more than offset a lower contribution coming from investment income. Q1 '26 was a quite soft quarter in terms of performance of financial market. Q1 '25 was a very positive quarter in terms of performance of financial markets. And consequently, the contribution coming from investment was lower, more or less EUR 50 million less than what we got in 2025. Nevertheless, the quality of the number in 2026 in terms of investment contribution was very positive, in the sense that the contribution coming from a coupon and dividends in 2026 was stronger than what we got in 2025. We missed the contribution coming from financial assets that are marked at fair value to P&L that in 2025, gave a contribution of more or less EUR 80 million. And in 2026, the contribution was close to 0. And consequently, the overall contribution coming from investment income was lower than EUR 50 million, as I mentioned before. Very good position in terms of solvency, not only due to the issuance of the restricted Tier 1 that we did in January of EUR 1 billion, but also thanks to the contribution coming from the organic capital generation that also in the quarter was quite important and in line with our target of the industrial plan. Having said that, I will stop with my remarks and as usual, I am with Enrico San Pietro, ready to answer to your questions. Thank you very much.

[Operator Instructions] The first question is from Tommaso Nieddu, Kepler Cheuvreux.

I have a few. The first one is on the attritional loss ratio, which rose to 69% at group level from almost 68% of last year. Can you walk us through the drivers of that? How much of this reflects a more prudential initial loss pick approach? How much is from mix shift towards sales? And how much is from underlying claims trends? So should we read this as a temporary or just a structural step up? The second question is on the health premiums, which in Q1, seem to be decelerating a bit from prior quarters. Also here, is this seasonality mix related or some kind of sign of more competitive market dynamics? At the same time, the bancassurance channel was very strong. So also there, how sustainable are these growth rates? And if this represents the first signs of the integration of BPER Sondrio, and that's it.

Yes. I missed to comment on the performance of the top line business, in particular, in health, there is nothing that can be worrying on our side in the sense that health insurance has three main drivers of growth. The first one is the traditional one coming from the big contract that we have with large corporation or funds, that in the quarter was flat because we did not have new contract coming in, and so it is a sort of consolidation in the quarter, but I expect in the next few quarters to establish a single-digit growth in that line of business. Regarding the bancassurance. The bancassurance was very strong. Growth in the first quarter was higher than 30%. And so it is in line and it accelerated in the health insurance business. And so there is nothing that in a sort of sense created a drag in the growth of bancassurance as a consequence of the integration with Banca Popolare Sondrio. It was the opposite. The growth coming from bancassurance was very strong, as strong was the growth coming from the agents, higher than 20%. So the slowdown in health, I can say, is driven by the softness in the traditional area that I expect to improve in the next few quarters. And in the attrition, I ask Enrico to answer.

Good morning, Tommaso, so as far as the attritional loss ratio is concerned, basically, we have no issue about increasing number of claims reported, both in Motor and Non-Motor. And basically, we are usually very prudent and this time, we were even more prudent in estimating the future amount of claims, but we don't see any issue about the profitability of the attritional loss ratio and the current insurance business.

The next question is from Michael Huttner with Berenberg.

Just if you can hear me. I'm outside at the moment so I'm struggling. Two quick question. The first one is on the -- it was a question I asked your wonderful IR. I said if I take the profit for the quarter, including the bank, EUR 430 million something, why can't I multiply it by 4 to get a full year number? Because the consensus is actually EUR 1475 million. I'm sure there's an easy answer to this, but it's basically a way of asking something, is there seasonality in the business. Second question is on the solvency ratio, it's it feels like it's extremely high, nearly 300% in the insurance, nearly 250%, including the bank. And how can you leverage this strength? I know you going more in the business and make acquisitions. It's just a question. And then the last one, if I -- and I'm being critical here, but I don't mean to be critical, to understand. If I exclude from the Non-Motor, the part which is bancassurance, which sells fantastically, the other part sells a little bit soft. Is there something to note here?

Okay. Considering the first question, unfortunately, Michael, it doesn't work in this way. It's not so easy. The evolution of the quarters, you should not multiply by 4, the number. You know that Nat Cat events are more impactful in the -- mainly in the third and fourth quarter, sometimes also in the second. But usually, the first quarter is light in terms of Nat Cat impact. And so consequently, first quarter number is a very good number, but you should not expect an evolution of the full 2026 by multiplying by 4. It will depend on the trend in terms of Nat Cat events in the second half of the year, even if you know that we invested a lot in reinsurance protection. And so we are ready to face any kind of event in terms of Nat Cat by maintaining very solid our target -- our industrial target at the end of the industrial plan. Concerning the solvency, yes, we are in a very solid solvency number, both individually and consolidated and concerning the insurance group. You have always to consider that we are in a situation where financial markets are close to the top. Equity market, credit market, also the spread of BTP versus Bund is, I think, close to a lower number after the Lehman crisis. But you have to prepare yourself to face any kind of scenario in financial market, also in the prospect that there could be a risk of stage, and you must have enough capital to face this kind of scenario, first of all. Secondly, of course, we have -- we can spend the capital that we have, when and if we would have to grow in some line of business more than the assumption of the industrial plan. I'm thinking about the bancassurance business, health insurance business. We have not yet a clear picture on the evolution of the compulsory Nat Cat insurance protection in our country, and we have to be prepared to employ capital. And we must have enough capital to do it. And this is the second purpose that we have. Concerning the M&A activity, of course, if there would be a possible target in terms of M&A, you must have enough capital to take the opportunity. We don't have opportunity on the table today. But if we would, we would have also enough capital to take into consideration this possibility. And then there is the final question concerning the trend in Non-Motor, and I will leave Enrico to elaborate on it.

Yes, Michael. So as you have seen, the growth in Non-Motor overall was 0.8%. The vast majority of our business line are going according to the plans. And the figure, you can read is related, in particular, to the Marine Insurance business that, as you can see -- Siat, at our Marine Insurance Company suffered a reduction of 28% of premium written related to the Strait of Hormuz blockade that is slowing down this kind of business, heavily slowing down. And a couple of big corporate accounts, we did not renew according to our disciplined growth strategy. And so basically, I think that the vast majority of our business is going according to our plan.

The next question is from Gianluca Ferrari, Mediobanca.

Three for me, please. On top line, on the opposite side of Non-Motor, Motor is progressing very well in TPL and Other Motor. Actually, it is accelerating Motor TPL, which is a bit counterintuitive considering that tariffs are slightly normalizing according to Eurostat. So what is driving this? Second question is on expense ratios that are worsening a bit in both Motor and Non-Motor. I remember you were flagging to us that acquisition costs are linked to the loss ratio. So an agent is remunerated more if the technical profitability of the agency is better. I was wondering if this deterioration in the expense ratio is coming from the admin or the acquisition cost? And if you can remind us if the acquisition costs are linked to the accident year loss or the loss ratio itself? And the final one is on the tax rate, both Life and P&C improved significantly, in the Life business, in particular, from 32% tax rate to 23%. I was wondering how we have to read this sharp improvement in the 2 tax rates.

Okay. I will start, Gianluca, from the final question. Yes, the -- you should compare '25 with '26. First of all, in Q1 '25, we were quite conservative in considering not deductible some items that then impacted in the tax rate in 2025 should be misleading because you could expect an increase as a consequence of the increase of the IRAP tax that is effectively in power in the first quarter '26, but we had some items that more than offset this negative contribution, in particular, the positive contribution in tax coming from some devaluation that we did in 2025 in some assets that have a positive impact in 2026. Concerning the other two questions, I ask Enrico to elaborate.

Gianluca, so about Motor business, yes, we have interesting growth in MTPL. As you are imagining, it's not only about the retail business that is growing related to the average premium growth, but it is something around 3%, more or less. The rest is an increase related to fleet business. And also on Motor Other Damages, we have a growth on the retail business still related to increase of prices on the coverages are needed some additional increase in price. But like we explained in previous meeting, we are seeing last year and also this year a significant increase in growth related to important distribution agreement with Stellantis that is driving both growth and profitability so far. So this is about motor expense ratio. The main explanation of the increase of the expense ratio is what you just said about the commission ratio that is related to the technical profitability of the business. This correlation works with a delay and so basically reflects the year after or in some cases, a couple of years after fully what's happening on our technical profitability.

Sorry, the technical profitability is the underlying without PYD, I guess? Or it's the overall?

No, no, no. It's the overall, but this is a very complex issue. Basically, we have several form of remuneration related to technical profitability in Motor and Non-Motor. So in Motor, for instance, we take into results 2-year of the technical profitability of every single agency. And so when we report the profitability of a year, for instance, the 2025 profitability will be reflected from the 1st of July 2026 into the commission ratio we are giving to our agents. So basically, depending on the previous 2 years of the results. Something similar, there is for non-motor for the individual results of the single agent, this arrives, of course, with a delay -- a significant delay. And also, there is an important scheme that is related to the overall company profitability that is shared for some part with our agents, and this works year-by-year. So a few months of delay in seeing that. So basically, we are still seeing effects of the improvement of the technical profitability of the last 2 years.

Sorry, Enrico, you said you got some fleet contracts explaining the plus 5.5% in Motor TPL. Is that maybe explaining the deterioration in the accident year loss ratio or it has nothing to do?

No, no, no, not at all.

The next question is from Andrea Lisi, Equita.

The first one is, again, on technical profitability, in particular, this quarter, we saw that was quite benign in terms of Nat Cat. On the other hand, we had prior development that provides a stronger contribution to the combined ratio versus last year. So my question is how do you intend to manage the -- if you intend to manage an integrated way, the evolution of Nat Cat with prior development, and in particular, the margin of prudence that you are still adopting in reserving. The second question is on the financial results, in particular, how do you expect the evolution of rates could impact the financial results based on what the current curve is discounting. The -- then I have two other questions. One is on capital. So you have indicated why you could -- you want to preserve a significant high level of capital. If another element that was not indicated is the distribution. So just wondering to understand clearly, it is quite early, but if you see some room to improve the distribution and if there is any scenario where you could consider a share buyback. And the very last one is on BPER, in particular, we saw that BPER will launch a share buyback. So far, it has indicated that it will not cancel shares. But if we assume that at some point could cancel the shares, then there is a possibility for Unipol to overcome the threshold of 20%. Could you consider going above this threshold? Or you will keep the threshold also selling eventually the shares in the market?

Okay. Thank you to you, Andrea. And I would start from the question concerning the level of capital. As I said before, I argue, in general, the concept of excess capital. We are in a position in which we have a very strong position of capital in the prospect of facing any kind of scenario, financial market or financing the extra growth that we should have in some area of business like health or bancassurance. As I said several times, if at the end, neither of these two scenario should realize, we could think about the possibility to distribute more capital. And actually, we already did it because in the announcement of the dividend that we will pay in a few days, we increased our target in terms of capital distribution to more than EUR 800 million. And we have also set this number as a sort of floor for the next distribution. Having said that, we are still in the first half of the year, it's very early to think about what we could do in 2026. Everything is all set for a good profitability also in 2026, but I would postpone the discussion on capital distribution at the end of the year. Having already increased the target of the industrial plan in terms of dividend to at least EUR 2.4 billion in the 3 years versus EUR 2.2 billion that we disclosed in May 2025. Concerning the -- our stake in BPER. As you know, we have an exposure of less than 20% in BPER. We will, of course, be compliant with the rules with any decision that BPER would take in terms of canceling or not canceling the shares. We will be compliant to what the regulation says in terms of authorized shareholding that we can have in BPER. We will respect what BPER will decide to do with their shares. Concerning the first one, I will leave Enrico on reserve release and Nat Cat.

Andrea, so starting with Nat Cat. The first quarter was quite benign, so the amount of the claims reported was lower than the last year. But of course, the first quarter is not that relevant in the overall results of the year, as you know, is the third quarter that is the most relevant to one. So as you remember, we took a very prudent approach on this kind of business line. And at the year-end 2025, we introduced a relevant strengthening of our risk adjustment calculation, using a probabilistic approach estimating the average loss that could be reported in -- related to our book. So we are not going to release this kind of prudence soon because the idea is to keep it and strengthen it until something relevant happens. And so when a relevant event will happen, we will have this amount of money to use to absorb a part of this issue. As far as the prior year development in claims, it was a good quarter. Basically, you have to expect a prior year release quite significant since we are very prudent in reserving in the current year. And so as you can see from the presentation, the increase was in Non-Motor. The main reason is that last year, in the first quarter, we accounted a relevant amount, around EUR 30 million, on the book of the loss results in the active reinsurance book. So it was a one-off to strengthen and it proved to be even more prudent than it was needed. But definitely, this is not going to repeat this year or in the future.

Sorry, Andrea, I missed to answer on the share buyback. I see it was one -- part of the question. We don't plan to do share buyback. As you know, we only focus our capital distribution in cash dividends.

The next question is from Antonio Gianfrancesco, Intermonte.

Just one from my side, and it is on labor cost flexibility. I was wondering if you could give us a bit of color on the impact on the potential renewal of insurance national labor contract under discussion currently in ANIA. if I'm not wrong, Unipol still applies an additional labor contract. So given the proposed salary increase of EUR 280 over 2026, 2028, and the 1,000 one-offs for 2025, should we expect any visible impact in terms of cost base or expense ratio? Or is this already fully embedded in your planned assumptions?

Yes. Thank you to you. Yes, we participated to the discussion concerning the renewal of the contract. There is this agreement to EUR 280 per month for the 4th level. That is a number that match our forecast. And so we already considered the impact of the renewal of the national contract in the evolution of the numbers that we have concerning 2026 and mainly all 2027. So it is -- this renewal does not impact in any way on the evolution of the investment that we do in human resources in this industrial plan.

The next question is from Elena Perini, Intesa Sanpaolo.

Yes. I've got one question about your cost of claims. I was wondering whether you already perceive some inflationary impacts on this? And considering that the tariffs were softening -- were expected to soften this year, if you are ready to respond in case you feel any tensions on this?

Yes. And actually, it's very early to make an assumption on the evolution of the increase of the oil price on the domestic inflation. Of course, it is not a good news. It is not a good news in terms of possible evolution of inflation in our country. We are working on trying to do some forecast concerning an adverse scenario where the increase of the oil price can have an implication on the claim inflation. Generally, I don't think this could create a similar scenario to what we did in 2022, 2023 after the COVID, because it is true that the implication on inflation will be negative, but it is a sort of supply side driven increase of inflation. It is not an increase of inflation driven by a stronger demand as it happened in 2022, where the level of interest rates was negative across the board until the 10-year maturity. Today, the absolute level of interest rate is quite high, on one hand. On the other hand, there are some forces that are working on the opposite side in a more -- much more structural way. You can consider the contribution coming from investment in artificial intelligence in order to improve the productivity of the workforce that is working in the opposite side. So I don't expect actually this could be a structural increase of inflation rate that could driven a new hardening stage in prices in Motor. Having said that, in the assumption of the average cost of claim in the first quarter, we were conservative also in consideration of the possible implication of inflation in 2026. And so we are already in a sort of sense, pricing this supply side, increase of inflation that we can have this year. But nothing expected to be structural in order to set up a new hardening period for prices, at least for the moment, considering the information that we have today.

The next question is from Qian Lu, UBS.

It's Qian Lu from UBS. Just a couple of clarification questions on the results prudency. So you said that you were more prudent with estimating future claims this time. So what's driving that increased prudence, please? Is that mainly related to the potential inflationary risks from the Middle East conflict? And then I think you mentioned that you strengthened the risk adjustment back end of last year and you intend to maintain this trend. And just to clarify that the PYD this quarter was one-off in nature and the underlying reserve strength is intact, if not stronger.

Yes. This is a position that we have for a very long time, the prudence in the reserving policy. In particular, we underline this point when we commented the final year result, where we decided to position ourselves in the top percentile in terms of assessing the risk adjustment that we have to post in the reserving approach in general. In particular, we did it in 2025 in the property area and concerning the probabilistic expectation of the impact of Nat Cat events. But in general, we have the positioning of the risk adjustment in the IFRS 17 approach is focused to position ourselves in the top percentile in terms of risk adjustment. And it is a way to manage the -- what we call the prudence in the reserving approach. This is the point. Concerning the inflation is more or less the same in assuming the average cost of claim in the first quarter of the year, we have posted also a very prudent -- we have adopted a very prudent approach that considers also the possibility that there could be a spillover of the increase of the oil price in the average cost of claim in Motor.

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

Just two. One's clarification on pricing. I think in Motor, you said Motor TPL at 3%? And you said Motor Damage was high. I just wondered if there's a figure there. And then the second, you spoke about strong operating capital generation in the context of the strong solvency. I just wonder if you can remind us if the target is and how much higher or lower you are than that target?

Yes, Michael, concerning the capital generation, I leave Enrico to answer to the other question. Yes, I said that we had, again, a quite strong contribution coming from organic capital generation in the quarter. We usually do disclosure in the first half result. And you will have a full disclosure when we will talk about the first half results. But on a qualitative way, we had an organic contribution positive of a couple of hundred million in the first quarter. We had a negative contribution coming from economic variance because of the negative performance of financial market in the quarter. You can see negative performance of equity market, even if that was quite muted in the quarter, but the BTP-Bund spread widen a little bit. The credit market was not in a good shape. I'm talking about the first quarter. After the first quarter, financial market performance improved a lot. We had a positive contribution coming from noneconomic variance, thanks to the different performance coming from our portfolio compared to the assumption of the industrial plan. And then you have, in terms of capital contribution, the contribution coming from the issuance of the restricted Tier 1. But overall, I can say that the organic capital contribution in the quarter was in the whereabouts of EUR 200 million. I'm not sure that I understood fully the question. I guess is about Motor, it's about growth or about...

Motor Damage. I think you said -- excuse me if I misunderstood, but you raised the pricing in Motor Other Damage...

Yes, yes, yes. Okay, okay. So when you look at our figure in the other damages, the growth is very strong. And there are two main reasons. On the retail business, the reason is that we are completing repricing of some Motor Other Damage coverage, especially CASCO and natural events. And still, we are seeing an increase in the average premium. But the most relevant part is related to the growth of production in the distribution agreement with Stellantis. Stellantis, of course, in Italy is very important as a market share. And basically, the new vehicles, the new cars that are sold with some kind of financing scheme are also issued in a good percentage of this kind of sales and are insured for Motor Other Damages. And so Stellantis dealers are very good in selling this kind of coverage, that, of course, is driving our growth.

The next question is a follow-up from Qian Lu, UBS.

Just a quick one on pricing and claims inflation. Could you please update us on the current trends in Italy, both in Motor and Non-Motor, please?

Okay. Will I start with Motor? In Motor, pricing is basically slowing down. We had a period in which, as a market, we had to face the increase of the cost of the claim related to the update of the Milan Court table about body injury compensation for claims. This phase is basically over, and that's why the average increase of the price is now quite small, let's say, around 2%, 3%. Of course, the main concern is what can happen in case of a new inflation increase related to Hormuz Strait blockade and cost of the price of oil. And in that case, of course, it's quite easy to forecast a new phase of the market in which the price could increase to offset the effect of the increase of inflation. So far, on the cost of the claim, we are not seeing yet an impact of a new phase of inflation. But it is something that we are looking very, very carefully to understand what's happening and to be able to correspond in the most proper and fast way. So about Non-Motor, we are in a period of the cycle in which, especially for property business, we had a spike after 2023 atmospheric events for our pricing, but also for the market pricing that had a significant increase. This phase is definitely over. Nowadays, what we are seeing is prices are stable or also for some kind of business, decreasing in Non-Motor. In Non-Motor, we have so far, a very benign situation both for loss frequency and also for the average cost of a claim.

[Operator Instructions] Gentlemen, Mr. Laterza, there are no more questions registered at this time. I turn the conference back to you for any closing remarks.

Okay. No closing remarks. Thank you very much for attending this conference, and we will meet again for the first half results. Thank you, and have a good day.

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