UNIQA Insurance Group AG (UQA) Earnings Call Transcript & Summary

Welcome to UNIQA Group Results of the First Quarter 2024. My name is Allan. I'll be your coordinator for today's event. Please note, this call is being recorded. [Operator Instructions] I will now hand you over to your host, Kurt Svoboda to begin today's conference. Thank you.

Thank you very much, and welcome, everybody, to UNIQA's Q1 2024 results on the group level. I'm referring to the slide deck that is visible via our website, and start on Page #5 with the overview on the UNIQA Group which delivers an earnings before tax result after 3 months of EUR 145 million. That is a plus of 70% -- 17% roughly in comparison to the year 2023. We have an outstanding growth with around slightly 11% on a gross written premium basis, I'll come to that in a minute, what's the composition on the 3 segments, P&L, P&C, Life and Health is about. This is also reflected in the insurance revenue on IFRS basis. And what you can see is that P&C and Health is driving the growth of UNIQA in both segments, Austria and in the International business. We have a stable release of the CSM, which is also reflecting the good profitability and the good financial results that UNIQA has after 3 months and with EUR 82 million is in line with this what we expected. We have to state, but I will come to that in detail later on that the first quarter was driven by more or less a very favorable development on the claims side. And this leads to a gross combined ratio of around 86.7 percentage points after 3 months in comparison to 88.7 percentage points in the last year. So good growth, a favorable development on the gross, honestly, on the claims side and costs that are in line with what we have planned is the driver for this good result. Then we'll move on to Page #6, we see the split of the development of the CSM, which has slightly grown over the first couple of months in 2024. New business CSM is around 69%, coming predominantly from the health business. We have assumption changes that are reflecting the interest rate environment on the markets. And this leads up by a stable CSM of EUR 5.3 million. And what I can state here also is that the new business margin on CSM basis is 9.4 percentage points after 8.8 percentage points in 2023. Key financial indicators on the next page, Page 7. Two things that are jumping to the eye, first one is a jump on the regulatory capital position from 255% up to 265%, is again strong development on our capital position. Still we know that we are far away from our target Solvency level. But this is on the one hand, reflecting the interest rate development on the market. Secondly, the profitability of our business. And we always stated that a little bit of excess capital is for us fine, especially to be prepared for M&A activities or for sensitivities that come up from the capital market. Second thing is the return on equity. On the one hand, 15.6% is a quite good number, on the other hand in comparison to 2023. It's a drop. This is mainly driven -- or this is driven from equity development on IFRS basis. Growth, Page #8. In that case, I would like to give you also a split between the lines of business are -- on gross written premium. So it's more or less reflected also in the insurance revenue. So when we say 14.5% is the growth on insurance revenue, the comparable data on gross written premium is 13.7% health, 16% on insurance revenues or 11.8% on gross written premium. And the life business is 5.1% on insurance revenue and 2.1% in the gross written premium equivalent. On Life business, we have a good growth in the international business, in Austria. We have a situation like the whole market that a huge sum of insurance and the premium is expiring and the new business is okay, but cannot cover the outflows from all expiring contracts. Cost situation of UNIQA on Page #9 is in line with this what we have planned and what we -- on what we have -- so this year budgeted, so no extraordinary spendings and also no extraordinary items to be reported. Everything in line, inflation is also part of the cost driver as well as in the international business as last year even that inflation goes down, but still it has a huge impact on our expenditures. Page #10. The P&C side, I mentioned in the beginning that we have no capital worth mentioning big claims. This is true for Austria and as well as for the international business. So when we talk about big claims, we have to report around 2 or 3 big claims in the amount of EUR 2 million in the Austrian business, which is in comparison to our premiums or to our revenues neglectable. And this lead to this extraordinary good P&C combined ratio in Austria. Still up to today, we can also report that no major events have changed. So it seems that this year is quite okay. Anyhow, we have to state that we are in the starting season of Austrian Cat event. And with this, we can expect that in June or July, things will raise. And therefore, we do not see that this favorable development on the claims side, especially on the cap side is sustainable for this year. We have also reported about the P&C combined ratio of discounted and undiscounted. So 2 percentage points is the effect of the discounting on IFRS. Life and Health is driven by the CSM. The assumption changes are reflecting the capital markets, meaning interest rates and the changes. New business in the health segment is good and is driving the CSM. On the life side, of CSM is driven by the releases from the portfolio in Austria, which is more or less expiring. Investment portfolio on Page #12, are with a stable development on the expected credit loss development. That means also the financial result, the investment result after 3 months are extraordinary good. We have no worth mentioning impairments. We have a very good yield, which is around 4.2% on the money yields, where about 2.8% on average that the yield is contributing to the P&L. And with this, we can also say that the capital market is also in a very stable position and leading to a very good result at UNIQA. One major event in the capital or the financial result is described on Page 13. When we talk about the contribution from our STRABAG participation, accordingly, to the capital increase that STRABAG made and with our shares and the participation in this capital increase, we had a uplift of around EUR 30 million in comparison to the year 2023. This has to do with the valuation of the new shares. And this led to this extraordinary result in Q1, also positive year adjustments from STRABAG from the last year contributed to this effect. UNIQA at the moment is holding 16.5% at STRABAG. Finally, I come to the outlook of the year 2024. So on the one hand, as I stated, we do not see that very favorable development on the claims side overall in Europe for the rest of the year. We still -- we are in the beginning of the summer season, which is always very risky about regional Cat claims and general Cat claims. And I think this will also be per case for the year 2024. Of course, we have taken care in our budget and plans. But I think we have to have an eye that the combined ratio will slightly go higher. But still, with this, we are in line with the targeted profitability of the year 2023. Update on UNIQA's new strategy from 2025 onwards, we will be announcing in autumn. Information will follow soon. And our general assembly will take place on the 3rd of June 2024, and we will propose EUR 0.57 to the general assembly, as already noted. Thanks so far for your attention, and I'm now happy to take your questions and your topics and open the line for that.

[Operator Instructions] We will take our first question from Thomas Unger, Erste Group.

My first one would be on the outlook. I know you've spoken about that. You've talked about the combined ratio that might go up in the coming quarters. But from today's perspective and what you've delivered in Q1, EUR 145 million in pretax earnings. And I understand we shouldn't extrapolate this for the full year. But if you did, you'd come out slightly below EUR 600 million, which is far above last year's level. And if you adjust for the positive effect that you had on your STRABAG stake as well as weather-related claims, you're probably still regard the outlook as conservative. Can you give us maybe a few more details on what you expect for the coming quarters? I understand that, of course, the Nat Cat events are unpredictable, but anything that you could give us some more insight in your thinking here and your projections for the full year? And then my second question would be, if you could give us an update on your efforts to exit the Russian market. What is the progress there?

Thank you, Thomas. First of all, we have several topics to consider in the remaining 3 quarters. First of all, as you mentioned, and as I also stated is, we have a very favorable combined ratio with 86.7% at the moment. We calculate around roughly 90% is a good position for the whole year. So that means we are 4% at the moment ahead of this. And if you take this 4% to the whole premium of the insurance revenues, you get the number which is quite significantly reducing your EUR 600 million something that you calculated. Secondly, we also have a very favorable development on the capital -- on the financial market so far. So that means no impairments. We have no situations, no significant valuations on the [ FX ]. And this also is something that we do not believe that this stays over the year in that context. We have to consider that we have some elections all over the world. We have to consider that stock market is in a very positive development at the moment. And all of this will impact here or there, the P&L of UNIQA. The third thing is that accordingly to generate many projects we are running and many, many activities we are doing on the IP side, but also on the new fields of business side that expands loading at UNIQA always the highest in the fourth quarter. And all this around, Thomas, brings us to the situation that we are still believing that around the year-end result [ 2003 ] is, at the moment, the best outlook that we can give. Second topic is around Russia. Russia, we can report that from our side, we have done everything and also the regulator that means the Austrian and the Russian regulator, so far has signed all papers. We're waiting now for the final okay from the Russian regulator, which is not in our hand. And we hope in that case that we can finalize this in the second quarter.

[Operator Instructions] We'll take our next question from Michael Huttner, Berenberg.

Fantastic. I had three. On the first one is the runoff. Could you -- you provide -- you said EUR 31 million, I think, or EUR 32 million this quarter. Could you give us the figure for the previous quarter and maybe a feel for how you see that developing? The second is the risen solvency, so from 255% to 264%. I wonder if you could break it down between the normal capital generation, market effects and anything else? And then the last one is on cost. So I noticed your costs are almost -- but at low -- at the lower end of what I was hoping for 31%, well below the 32.5%, which is the target you set yourself. Can you talk a little bit more about this? I know you mentioned projects, but the premium growth is so strong. It looks as if you might be able to absorb this quite easily.

Okay, Michael. So can you repeat the first question? I didn't get it on a technical perspective.

So it's the runoff. So you have a runoff in Q1 of EUR 31 million or EUR 32 million. And I just wanted to understand what the comparative figure is and also how you see the runoff as a normal run rate for the rest of the year.